TIDMPIN
RNS Number : 8543U
Pantheon International PLC
04 August 2022
For immediate release
The information contained in this announcement is restricted and
is not for publication, release or distribution in the United
States of America, Canada, Australia (other than to persons who are
both wholesale clients and professional or sophisticated investors
in Australia), Japan, the Republic of South Africa or any other
jurisdiction where its release, publication or distribution is or
may be unlawful.
PANTHEON INTERNATIONAL PLC (the "Company" or "PIP")
ANNUAL REPORT FOR THE TWELVE MONTHSED 31 MAY 2022
The full Annual Report and Accounts can be accessed via the
Company's website at www.piplc.com or by contacting the Company
Secretary by telephone on +44 (0)1392 477500.
Pantheon International Plc (the "Company" or "PIP")
Pantheon International Plc, a FTSE 250 investment trust that
provides access to an actively-managed global and diversified
portfolio of private equity-backed companies, today publishes its
Annual Report and Accounts for the twelve months ended 31 May
2022.
Annualised performance as at 31 MAY 2022
Since inception
1 yr 3 yrs 5 yrs 10 yrs (1987)
NAV per share
(stated net of
fees) 31.0% 17.7% 15.6% 14.8% 12.4%
------ ------- ------- -------- ----------------
Ordinary share price 8.6% 9.9% 10.5% 14.7% 11.3%
------ ------- ------- -------- ----------------
FTSE All-Share,
Total Return 8.3% 5.8% 4.1% 8.1% 7.6%
------ ------- ------- -------- ----------------
MSCI World, Total
Return (Sterling) 7.8% 13.2% 10.8% 13.9% 8.4%
------ ------- ------- -------- ----------------
NAV per share relative performance
Versus FTSE All-Share,
Total Return +22.7% +11.9% +11.5% +6.7% +4.8%
Versus MSCI World,
Total Return (Sterling) +23.2% +4.5% +4.8% +0.9% +4.0%
-------- ------- ------- ------- -------
Share price relative performance
Versus FTSE All-Share,
Total Return +0.3% +4.1% +6.4% +6.6% +3.7%
Versus MSCI World,
Total Return (Sterling) +0.8% -3.3% -0.3% +0.8% +2.9%
------- ------- ------- ------- -------
HIGHLIGHTS - TWELVE MONTHSED 31 MAY 2022
Performance update
-- A record year of performance as NAV per share grew by 31.0% to 451.6p.
-- Net assets at 31 May 2022 increased to GBP2,427m (31 May 2021: GBP1,865m).
-- PIP's share price increased by 8.6% and Total Shareholder Return (5Y) was +64.8%.
-- Disappointingly, in line with the wider listed private equity
sector, the share price discount to NAV has widened and was 35% at
the end of the period.
Portfolio update
-- Strong (pre-FX) valuation gains of 26.2% overall in the
portfolio was achieved across all investment types, stages and
regions.
-- Weighted average uplift from fully realised exits was 42% and
the average cost multiple on exit realisations was 3.1 times,
demonstrating the embedded value in PIP's portfolio.
-- Highest ever level of distributions of GBP419m during the
financial year, equivalent to a distribution rate of 25% of the
opening attributable portfolio, resulting from realisations
primarily to strategic buyers and to other private equity managers.
After funding GBP187m of calls, this resulted in record net cash
inflow from the portfolio of GBP232m.
-- PIP actively manages the profile of its portfolio with the
objective of receiving cash from the more mature assets as they are
realised, while at the same time refreshing the portfolio with
younger assets. The average age of PIP's assets at the financial
year end was 4.9 years (31 May 2021: 5.2 years).
-- As a result of PIP increasing its allocations to
co-investments and single-asset secondaries, approximately 45% of
PIP's portfolio was invested directly in companies at the end of
the period.
-- PIP has a full deal pipeline and during the period, GBP496m
was committed to 70 new investments, of which GBP160m was funded at
the time of purchase. During the year, the Company invested GBP10m
in buying back 3,400,830 shares.
Financial position update
-- PIP had access to total liquid resources of GBP227m net
available cash as at 31 May 2022 combined with its undrawn
multi-currency revolving GBP300m credit facility that was due to
expire in May 2024.
-- PIP's undrawn coverage ratio, which measures PIP's undrawn
commitments of GBP755m as at 31 May 2022 against the sum of its
available financing and 10% of the value of its private equity
portfolio, was 100%.
-- Since the period end, PIP has announced a new GBP500m
five-year multi-currency revolving credit facility to replace the
existing credit facility. The new facility has the effect of
increasing PIP's undrawn coverage ratio to a pro forma level of
126%.
Company update
-- The 10 for 1 sub-division of PIP's Ordinary shares, approved
by shareholders at the Company's AGM, took effect from 1 November
2021.
-- Susannah Nicklin retired from the Board at the conclusion of
the Company's 2021 AGM and Mary Ann Sieghart took over the role of
Senior Independent Director.
Commenting on the full year, Sir Laurie Magnus CBE, Chair of
PIP, said: "PIP's outperformance of the MSCI World and FTSE All
Share indices over the past 35 years, and over more recent
timeframes, comprehensively demonstrates the value of investing in
a diversified portfolio of growth companies led by some of the best
private equity managers in the world. PIP offers shareholders
privileged access to the increasing share of capitalist economies
financed by private capital."
Commenting on PIP, Helen Steers, Partner at Pantheon and lead
manager of PIP, said: "PIP's diversified portfolio is resilient and
focused on high-growth sectors, benefitting from long-term, secular
tailwinds that will continue despite the prevailing macroeconomic
environment. We believe that PIP's access, through Pantheon, to
many of the best private equity managers and deal opportunities
globally, its conservatively managed balance sheet and experience
navigating market cycles, will enable the Company to continue to
provide healthy returns for PIP's shareholders over the long
term."
A video of the team at Pantheon discussing PIP's full year
results and a series of case studies showcasing some of our
portfolio companies are available on our website at www.piplc.com
.
Capital Markets Event
PIP will host a Capital Markets Afternoon on 7 September 2022
during which there will be presentations from Pantheon and some of
PIP's underlying private equity managers. Institutional investors
and analysts wishing to attend should contact the Pantheon team at
pip.ir@pantheon.com for further details.
LEI: 2138001B3CE5S5PEE928
For more information please contact:
Pantheon
Helen Steers / Vicki Bradley +44 (0)20 3356 1800
pip.ir@pantheon.com
Montfort Communications
Gay Collins / Pippa Bailey / Nita Shah +44 (0)7798 626282
PIP@montfort.london
Follow PIP on LinkedIn:
https://www.linkedin.com/company/pantheon-international-plc
Important Information
A copy of this announcement will be available on the Company's
website at www.piplc.com Neither the content of the Company's
website, nor the content on any website accessible from hyperlinks
on its website for any other website, is incorporated into, or
forms part of, this announcement nor, unless previously published
by means of a recognised information service, should any such
content be relied upon in reaching a decision as to whether or not
to acquire, continue to hold, or dispose of, securities in the
Company.
STRATEGIC REPORT
CHAIR'S STATEMENT
PIP is one of the longest established private equity investment
companies listed on the London Stock Exchange. This year we
celebrate its 35(th) anniversary, having been launched with GBP12m
NAV in 1987 and grown its NAV to GBP2.4bn at the end of 31 May
2022.
Over that period, PIP's NAV per share has outperformed annually,
net of fees, both the FTSE All-Share and MSCI World (Sterling)
indices by an average of 4.8% and 4.0% respectively. This is a
tribute to the work and skill of PIP's manager, Pantheon, over so
many years, and I would like to thank them on behalf of all
shareholders. I should add that PIP has also outperformed these
indices over the most recent 1, 3, 5 and 10-year periods.
Performance in the year
For the year ended 31 May 2022, I am pleased to report that
PIP's NAV per share has grown by a remarkable 31%, of which 24%
arose from portfolio gains and 7% from favourable currency
movements. PIP's share price, however, has grown at a more modest
9% reflecting the turbulent market conditions at the financial
year-end. This has resulted in a significant widening of the
discount to NAV from 21% at the end of May last year to 35% at the
end of May this year, and further to 43 at the time of writing.
35 years of outperformance: A compelling investment success
story
KEY STATISTICS
31.0% Record NAV per share growth in the year
----------------------------------------------------
64.8% Total shareholder return (5Y)
----------------------------------------------------
8.6% Share price increase in the year
----------------------------------------------------
11.3% Average annual share price growth since inception
----------------------------------------------------
12.4% Average annual NAV growth since inception
----------------------------------------------------
GBP2.4bn Net asset value
----------------------------------------------------
26.2% Portfolio investment return in the year
----------------------------------------------------
GBP232m Record portfolio net cash flow in the year
----------------------------------------------------
25% Distribution rate for the year
----------------------------------------------------
This widening of the discount in bear markets was also seen in
2008 and is a common feature across almost all listed private
equity vehicles. Over the longer-term, however, the share price
return tracks that of the NAV per share closely, and we therefore
consider the NAV per share to be a more consistent and less
volatile measure of performance.
Undervalued share price, embedded value in portfolio
PIP's longevity and proven track record suggest that its current
share price significantly undervalues the investment portfolio and
that, in keeping with the past, the discount will narrow once the
economic outlook and market sentiment improve. Furthermore,
experience shows that PIP's underlying private equity managers
value their portfolios conservatively when applying fair valuation
accounting standards to the measurement of NAV per share.
42% Average uplift on exit realisations in the year
The value-weighted average uplift on exit realisations in PIP's
portfolio was 42% during the 12 months to 31 May 2022. In the 11
years during which this measure has been tracked, the average
uplift on the sale of investments has been 31 % above the NAV of
those investments 12 months prior to realisation.
Share buybacks
The Board remains disappointed with the discount of PIP's share
price and considers the current elevated level relative to the
value and prospects of its portfolio to be unwarranted.
Accordingly, it intends to buy back shares actively to enhance
shareholder returns, while optimising long-term capital growth
within a balanced portfolio in line with its investment policy.
In addition, the Board has initiated with Pantheon a concerted
marketing effort to promote the contribution that PIP can provide
to an investor's portfolio and thereby attract new investors. This
has included the recent appointment of a new PR agency, a refresh
of the website and capital markets events planned for the autumn.
The Board believes that private equity is under-owned in many
investors' portfolios and that PIP is an ideal solution for
shareholders who thereby benefit from the liquidity available
through a listed company.
Performance net of fees and costs
The level of fees charged by private equity managers is
considered to be excessive by many commentators and prospective
investors. Nevertheless, the evidence is that the best private
equity funds generate returns net of fees which significantly
outperform the equity indices, and this is reflected in PIP's
outperformance over the years.
Pantheon is one of the most experienced investors in selecting,
working with and investing in private equity funds, and over 40
years has built up privileged relationships with the best managers
through both fund and direct investments. In many cases, new
investors are unable to access the best funds since they are only
made available to existing, trusted investors.
Private equity managers build specialist, skilled teams to
source, evaluate and secure good investment opportunities, and then
work with their portfolio companies to add value in a variety of
ways, examples of which are demonstrated in our case studies.
This work includes the realisation of investments, typically
after a number of years, though private sale or IPO, followed by
the distribution of the proceeds to investors including PIP. The
fees are high in relation to those typically charged by fund
managers in the liquid markets because of the additional work
involved. They reflect the underlying resources required and are
deemed acceptable by the most sophisticated institutional investors
who have had portfolio exposure to private equity for many
years.
The Board believes that the acid test of a private equity fund
is that it should outperform net of fees, such that investors
achieve a higher return than if they had invested in lower cost
funds or indices. Pantheon's key role in this is to secure
investments in and work with the best private equity funds for the
benefit of PIP's shareholders as well as its other client
investors.
Positive cash flow and balance sheet strength
PIP receives cash distributions through the sale of its more
mature portfolio assets while also making commitments to new direct
company investments, and to funds, which are often drawn down by
the fund managers over time. This year, PIP benefited from a record
level of distributions including proceeds from EUSA Pharma, the
largest sale of a single company in its history. EUSA Pharma is a
specialty pharmaceutical company focused on oncology and rare
diseases and was acquired by Italian pharmaceutical company
Recordati in December 2021. This was a co-investment alongside one
of our long-standing private equity managers and was sold at
approximately 5.0 times multiple of cost. The case study can be
found in the company's full Annual Report.
During the year, PIP received distributions of GBP419m and
disbursed GBP187m in capital calls from existing fund commitments.
As a result, PIP generated net cash flow of GBP232m and ended the
year with GBP227m in net available cash, which combined with its
GBP300m multi-currency credit facility provided a total of GBP528m
to meet future capital calls and make new investments .
GBP500m new credit facility expiring in July, 2027.
I am delighted to report that, since the year end, PIP has
agreed a new GBP500m five year facility to replace the GBP300m
facility described above. This extended and enlarged facility
further strengthens our financial resources and provides the
Company with greater flexibility in managing its asset base to
achieve an optimal investment exposure, including in difficult
market conditions. Further details on our cash cover may be found
in the company's full Annual Report.
The unlisted Asset Linked Note ("ALN") of GBP39m, which is due
to mature on 31 August 2027, is now relatively small and is
continuing to be repaid from cash distributions received uniquely
from a portfolio of older investments.
An actively-managed portfolio
PIP has a well-diversified portfolio of private equity
investments, sourced through Pantheon's extensive platform and
longstanding relationships with many of the best private equity
managers globally. This portfolio includes investments in new funds
raised, secondary purchases of assets being sold by investors in
existing funds and, increasingly, direct investments by invitation
in companies alongside our private equity managers. The mix of
investment between categories is actively managed by the Board and
Pantheon over time, most recently resulting in an increase in the
portion of direct co-investments.
GBP496m committed to 70 new investments in the year.
During the year, PIP made commitments to 70 investments for a
total of GBP496m, comprising GBP262m to 25 primary funds, GBP123m
to 30 co-investments and GBP111m to 15 secondaries with the latter
including a GBP55.6m (US$ 75.0m) top-up commitment to the Pantheon
Secondary Opportunity Fund ("PSOF"). Combined with PIP's commitment
to PSOF during the last financial year, PIP's total commitment to
PSOF amounts to GBP164.3m (US$ 225.0m). PSOF is focused on
manager-led single-asset secondaries, a sub-segment of the
secondaries market that typically comprises prized businesses in
private equity funds portfolios which the managers know well and
believe have excellent potential to grow in value beyond the life
of their fund. Nine such investments were completed during the
period.
In recent years the Board and Pantheon have adopted a policy to
increase portfolio concentration in a smaller number of managers
and companies while continuing to mitigate risk through
diversification. This focus has included a tilt towards sector
specialists focused on long-term secular trends that are likely to
continue to offer growth opportunities whatever the prevailing
economic environment. Themes such as digitalisation and automation,
ageing demographics, energy efficiency and environmental
sustainability have tilted the portfolio towards high growth, more
resilient sectors such as information technology, comprising
companies providing business-critical software and infrastructure
with recurring revenues and cash generation, as well as healthcare,
consumer staples and consumer services. PIP has relatively low
exposure to early-stage venture capital funds focused on
technologies in which valuations have recently pulled back
significantly.
"Themes such as digitalisation and automation, ageing
demographics, energy efficiency and environmental sustainability
have tilted the portfolio towards high growth, more resilient
sectors." Sir Laurie Magnus (Chairman)
ESG and responsibility
Pantheon became one of the earliest private equity adherents to
ESG by signing up to the UN Principles for Responsible Investment
14 years ago. Your Board fully supports Pantheon's longstanding
commitment in this area which covers oversight and influence upon
private equity managers as well as their underlying portfolio
companies. The Board has an ESG sub-committee which meets formally
with Pantheon executives at least twice a year as well as more
frequently on an ad-hoc basis.
In addition to maintaining rigorous adherence to ESG principles,
the Board believes that Pantheon has an open and inclusive internal
culture which is evident in its attitude towards clients as well as
the way in which it interacts with the managers with whom it
invests.
Board changes
After 10 years of service, Susannah Nicklin retired from the
Board following the AGM in 2021 and has been replaced as Senior
Independent Director by Mary Ann Sieghart.
Tamara Sakovska, who joined the Board on 1 March 2022, resigned
as a Director of the Company with effect from 22 July 2022. Tamara
accepted the role before the onset of the Russia-Ukraine conflict
and subsequently indicated that her voluntary relief efforts meant
that she had limited capacity to fulfil her obligations as a
director of PIP. The Board is grateful to Tamara for her brief
contribution as a Director and would like to extend its best wishes
to her for the future. The Board will be starting a process with
external search consultants to appoint a new director in due
course.
Having served as a Director since 2011 and as Chair since 2016,
I will be retiring from the Board upon the conclusion of the
forthcoming Annual General Meeting in October. Following a
selection process led by Mary Ann Sieghart, I am delighted that the
Board has agreed that John Singer will succeed me as Chair. A
Director since 2016, John is a private equity and financial
services professional with over 30 years' experience. He has been a
consistently thoughtful and energetic contributor to the Board and
will provide experienced leadership for PIP during the years
ahead.
Outlook
The global recovery from the COVID-19 crisis has been upset by
rising geopolitical tensions, including the tragic war in Ukraine.
The combination of rising inflation (particularly for energy,
minerals and food), rising interest rates and uncertain supply
chains has materially altered the outlook for the economy and
raised the spectre of recession. The valuations of businesses in
public markets have already come under pressure and we are likely
to see some follow through into PIP's NAV, although we expect this
to be cushioned in part by the embedded value in the portfolio that
I discussed earlier.
It is impossible to foresee how all the current economic and
geopolitical challenges will play out, particularly the war in
Ukraine and the sanctions on Russia. PIP has no direct exposure to
investments in Ukraine or Belarus and the valuation of its tiny
exposure to Russian assets has been reduced to zero.
Pantheon monitors carefully the level of debt in PIP's
underlying investee businesses and seeks assurance that appropriate
and manageable capital structures are in place. A large proportion
of PIP's portfolio companies are "asset light" and orientated
towards growth capital backed businesses, which carry little or no
debt. Small and mid-market buyouts, which are a significant
proportion of PIP's portfolio, typically have lower levels of debt
than those at the larger end of the private equity market. In
addition, many of PIP's private equity managers employ dedicated
debt specialists who are disciplined and experienced in their use
of leverage and in negotiating terms with lenders.
The Board is confident that PIP's private equity managers will
continue their proven track record of managing their companies
through difficult times. It also has confidence in the experience
of Pantheon, built up over 40 years, in navigating through several
previous crises and economic cycles. Since I joined the Board in
2011, the availability of private equity capital for growing
businesses has increased substantially and now constitutes a core
source of long-term investment funding. It is clear that this trend
will continue as entrepreneurs and business managers find
themselves constrained by the ever-increasing regulation in listed
markets, together with the focus on short-term results. Private
equity investors are also increasingly preferred as owners by
senior executives for their sector knowledge, operational
expertise, and strategic guidance.
PIP's outperformance of the MSCI World and FTSE-All Share
indices since inception, and over more recent timeframes, is a
testament to the value of having exposure to a diversified
portfolio of growth companies led by some of the best private
equity managers in the world. Through the long-term relationships
that Pantheon has built up with leading managers, PIP offers
shareholders privileged access to a broad selection of private
equity investments. Whereas investing directly in funds requires
high minimum levels of commitment and illiquidity, PIP brings
private equity within reach of small institutions and retail
investors while providing immediate exposure to a well-established
and diversified portfolio of growth companies.
All of PIP's Directors collectively own a total of 2.6shares in
the Company valued at the time of writing at GBP7.0m. In
addition,15 Partners of Pantheon collectively hold a further c.2m
shares.
I shall be leaving the Board confident that PIP is well placed,
with a resilient "all-weather" portfolio of companies, a strong
balance sheet, an engaged Board of Directors, a very experienced
Manager, and an expectation of continuing outperformance over the
long term. I shall remain a shareholder and extend my best wishes
for the future to PIP, my fellow directors and the Pantheon
management team.
PIP's Strategic Report has been approved by the Board and should
be read in its entirety by shareholders.
Sir Laurie Magnus
Chairman
3 August 2022
Key Performance Indicators
What this is 5-year How PIP has performed Link to our strategic Examples of related
cumulative objectives factors that we
total monitor
shareholder
return
------------ ----------------- ------------ ---------------------------------------------------------- ----------------------------------------------------- -----------------------------------------------------
Performance
5-Year Total 31 May 2020
cumulative shareholder 61.3% * PIP's ordinary shares had a closing price of 295.5p * Maximise shareholder returns through long-term * Rate of NAV growth relative to listed markets.
total return at the year end (31 May 2021:272.0p(1) ). capital growth.
shareholder demonstrates 31 May 2021
return the return to 109.2% * Trading volumes for the Company's shares.
64.8% investors, after -- Disappointingly, -- Promote better
taking into 31 May 2022 d iscount to NAV market liquidity
account 64.8% widened to 35% and narrow the -- Share price
share price as at the year discount by building discount to NAV
movements end (31 May 2021: demand for the
(capital growth) 21%). Company's shares.
and, if
applicable,
any dividends
paid during the
period.
The Board's
strategy
is to deliver
returns for
shareholders
through growth
in NAV and
generally
not through the
payment of
dividends.
NAV per NAV per share 12M to 31 -- A record year -- Investing flexibly -- Valuations
share reflects the May of NAV growth with top-tier provided by private
growth attributable 2020 with NAV per share private equity managers.
during value of a 4.0% increasing by equity managers -- Fluctuations
the year shareholder's 106.8p to 451.6p globally to maximise in currency exchange
31.0%(2) holding in PIP. 12M to 31 during the year long-term capital rates.
The provision May (31 May 2021: growth. -- Ongoing charges
of consistent 2021 344.8p)(1) . -- Containing relative to NAV
long-term NAV 19.6% costs and risks growth and listed
per share growth 12M to 31 by constructing private equity
is central to May a well-diversified peer group.
our strategy. 2022 portfolio in a -- Tax efficiency
NAV per share 31.0% cost-efficient of investments.
growth in any manner. -- Effect of financing
period is shown (cash drag) on
net of foreign performance.
exchange
movements
and all costs
associated with
running the
Company.
Portfolio Portfolio 12M to 31 -- Strong performance -- Maximise shareholder -- Performance
investment investment May in the underlying returns through relative to listed
return return measures 2020 portfolio. long-term capital markets and private
26.2%(2) the total 3.9% -- PIP continues growth. equity peer group.
movement 12M to 31 to benefit from -- Valuations
in the valuation May robust earnings provided by private
of the 2021 growth in its equity managers.
underlying 36.0% underlying portfolio
funds and 12M to 31 and from the favourable
companies May exit environment.
comprising PIP's 2022 -- Weighted average
portfolio, 26.2% revenue and EBITDA
expressed growth of 24.9%
as a percentage and 25.4% respectively
of the opening for PIP's sample
portfolio value, buyout companies(3)
before taking , versus -3.6%
foreign exchange and 25.0% respectively
effects and for companies
other that constitute
expenses into the MSCI World
account. Index.
Net Net portfolio 12M to 31 -- PIP's portfolio -- Maximise long-term -- Relationship
portfolio cash flow is May generated a record capital growth between outstanding
cash flow equal 2020 GBP419m (31 May through ongoing commitments and
GBP232m(2) to fund GBP110m 2021: GBP319m) portfolio renewal NAV.
distributions 12M to 31 of distributions while controlling -- Portfolio maturity
less capital May versus GBP187m financing risk. and distribution
calls 2021 (31 May 2021: rates by vintage.
to finance GBP199m GBP120m) of calls. -- Commitment
investments, 12M to 31 -- In addition, rate to new investment
and reflects the May the Company made opportunities.
Company's 2022 new commitments
capacity GBP232m of GBP496m (31
to finance calls May 2021: GBP240m)
from existing during the year,
investment GBP160m (31 May
commitments. 2021: GBP76m)
PIP manages its of which was drawn
maturity profile at the time of
through a mix purchase.
of primaries, -- At 31 May 2022,
secondaries and PIP's portfolio
co-investments had a weighted
to ensure that average fund age
its portfolio of 4.9 years(4)
remains (31 May 2021:
cash-generative 5.2 years).
at the same time
as maximising
the potential
for growth.
Undrawn The undrawn 31 May 2020 -- The current -- Flexibility -- Relative weighting
coverage coverage 107% level of commitments in portfolio construction, of primary, secondary
ratio ratio is the is consistent allowing the Company and co-investments
100% ratio 31 May 2021 with PIP's conservative to select a mix in the portfolio.
of available 122% approach to balance of primary, secondary -- Level of undrawn
financing sheet management. and co-investments, commitments relative
and 10% of 31 May 2022 -- In line with and vary investment to gross assets.
private 100% historical experience, pace, to achieve -- Trend in distribution
equity assets the Company expects long-term capital rates.
to undrawn undrawn commitments growth. -- Ability to
commitments. The to be funded over access debt markets
undrawn coverage a period of several on favourable
ratio is an years. terms.
indicator
of the Company's
ability to meet
outstanding
commitments,
even
in the event of
a market
downturn.
Under the terms
of its current
loan facilities,
PIP can continue
to make new
undrawn
commitments
unless
and until the
undrawn coverage
ratio falls
below
33%
(1) Adjusted for the 10 for 1 share split which was implemented
on 1 November 2021.
(2) Excludes valuation gains and/or cash flows associated with
the ALN.
(3) See the Alternative Performance Measures for sample
calculations and disclosures.
(4) Excludes the portion of the reference portfolio attributable
to the ALN
Our Strategy
Our investment strategy is to build a resilient portfolio that
can deliver long-term outperformance.
The Board regularly reviews PIP's overall investment strategy
and it has formed part of Board discussions throughout the
year.
Through the ongoing dialogue between the Board and the Manager,
Pantheon, the Manager reports to the Board on progress and
highlights any obstacles or changes in market conditions which may
impact the Company's ability to achieve its strategic goals. In
cases where this may occur, the Manager will propose solutions for
which it will seek the support of the Board. Equally, the Board
maintains the flexibility to propose amendments to the strategy as
it deems necessary.
In addition, the Board reviews individual investments that
exceed exposure limits, which are set at appropriate levels to
reflect a diversified approach. At times, the Manager may make
recommendations to the Board and seek approval for certain
investments that fall outside of any limits expressed in the agreed
strategic approach, but which the Pantheon believes to be a good
investment opportunity for PIP. The Board maintains its
independence at all times and robustly challenges such
recommendations to ensure that they are in the best interests of
shareholders. The Manager also reports to the Board on PIP's
marketing and investor relations activities, considering new
initiatives that could help to increase PIP's profile, and to reach
potential new shareholders in the Company. As part of this, on 1
November 2021, each of PIP's existing shares was split into 10
shares. The aim was to make PIP's shares more accessible to a range
of investors and to improve the marketability of PIP's shares.
Investment type: Focus on maturity profile and potential to
boost performance
Primaries, secondaries and co-investments all have attractive
characteristics, as highlighted in the Business Model above. PIP's
transparent and direct investment approach gives it the flexibility
to take advantage of prevailing market conditions and to maximise
control over the Company's financing risk, including its ability to
generate positive cash flows.
As the weighting towards co-investments has been increased over
time, the three different investment types have intentionally taken
on more equal weightings. These weightings do not represent hard
caps; however, the Board and the Manager believe that this is the
optimal mix to benefit from the cash generated by the more mature
assets in PIP's portfolio while rejuvenating the portfolio with the
younger vintages offered by primaries and co-investments. In
addition, we have been steering PIP's secondary investment strategy
towards single-asset secondaries which form a fast-growing part of
the secondary market and are attractive for several reasons as
highlighted below.
With an increased weighting towards co-investments and
single-asset secondaries, we expect the number of underlying
managers and portfolio companies to which the Company is exposed to
continue to reduce over time. As a result, the potential for the
Company's overall NAV to be impacted by the performance of
individual assets should be increased while maintaining the
benefits of a portfolio that is well diversified by type, stage,
geography and sector.
The Board believes that there are several benefits to this
investment approach: risk is effectively managed through
diversification while the improved transparency of PIP's underlying
portfolio and increased investment flexibility, should create a
clearer link between the strongest performing companies in the
portfolio and the potential to boost NAV growth in the future.
Also, Pantheon can remain highly selective and disciplined when
assessing deal flow, while at the same time reducing the risk of
PIP being excluded from exciting opportunities due to investment
constraints.
During the year, while maintaining its disciplined approach, the
Board and the Manager identified that there was an opportunity to
increase the Company's investment pacing to take advantage of the
exciting deals emanating from its private equity managers.
Fund Maturity(1)
2021 and later 16%
2020 8%
2019 13%
2018 14%
2017 13%
2016 11%
2015 10%
2014 4%
2011-2013 6%
2010 and earlier 5%
Investment type(2)
Primary 38%
Co-investments 31%
Secondary 31%
(1) Maturity chart is based on underlying fund valuations and
accounts for 100% of PIP's portfolio value. Excludes the portion of
the reference portfolio attributable to the ALN.
(2) Fund investment type and maturity charts are based upon
underlying fund valuations and account for 100% of PIP's overall
portfolio value. The charts exclude the portion of the reference
portfolio attributable to the Asset Linked Note.
Investment stage: Focus on mid-market and growth
PIP's portfolio is diversified by stage, which ranges across
venture, growth, small/mid buyout and large/mega buyout
opportunities, as well as those classified as special situations.
While the Company's strategy is to maintain a healthy mix of all
stages, Pantheon favours the growth and buyout segments, with a
particular focus on the mid-market. The mid-market offers distinct
characteristics, when compared with large deals, such as:
- More attractively priced assets which tend to have lower
levels of leverage than the broader market average;
- Greater visibility of the value drivers and the levers to pull
to improve operational efficiency to better drive growth, both
organically and through buy-and-build strategies; and
- More routes to exit including strategic acquisitions, sales to
other private equity managers or initial public offerings ("IPOs").
In PIP's case, it should be noted that the majority of exits has
consistently been to strategic buyers and other private equity
managers.
While late stage venture opportunities remain attractive, it is
our view that the return profile of early stage venture can often
be too protracted to be suitable for PIP's portfolio. Therefore,
any investment activity by PIP in early stage venture funds is
focused on investing with top-tier venture managers, mainly through
primary fund investments, who are able to identify innovative
opportunities with the potential to generate significant
outperformance. While special situations include assets with unique
characteristics which can offer potential for outperformance, it is
the Board's intention that special situations investments will only
be a small minority of the overall portfolio.
Fund Stage(1)
Small/mid buyout 39%
Large/mega buyout 26%
Growth 24%
Special situations(2) 7%
Venture 4%
1 Fund stage chart is based upon underlying fund valuations and
accounts for 100% of PIP's overall portfolio value.
The chart excludes the portion of the reference portfolio
attributable to the Asset Linked Note.
(2) Special situations investments can include distressed debt,
mezzanine, energy/utilities and turnarounds.
Sector and geographic exposure: Global outlook, with a focus on
high-growth and niche areas
The Board is committed to offering investors a global portfolio
with investments in North America, Europe, Asia and Emerging
Markets. It takes an active approach towards the weightings of
those geographies in response to market conditions but supports the
majority of the Company's capital being invested in the USA and
Europe where the private equity markets are well established.
The Board relies on Pantheon's investment teams around the world
that are on the ground locally, to take advantage of proprietary
information flows and access to opportunities through their
extensive networks of relationships.
It is Pantheon's objective to identify managers globally that
are able to take a thematic approach and focus on high-growth
sectors, many of which may not be fully represented by the public
markets. In addition, Pantheon has a deliberate strategy of
targeting sectors experiencing dislocation, as well as niches where
underlying growth is less correlated to GDP growth. Recent examples
of this have been within the Information Technology and Healthcare
sectors. For more information on the sectors in which PIP is
invested, see below.
The Board believes that its oversight of the Manager's
activities, while at the same time allowing Pantheon the
flexibility that it needs to make the appropriate investment
decisions on the Company's behalf, ensures that PIP is able to
deliver on its strategic objectives for shareholders over the long
term.
Culture and Purpose
It is a requirement for all companies to set out their culture
and purpose. The Company's defined purpose is relatively simple: it
is to deliver our investment strategy led by a Board that promotes
strong governance and a long-term investment approach that actively
considers the interests of all stakeholders.
The Directors agree that establishing and maintaining a healthy
corporate culture among the Board and in its interaction with the
Manager, shareholders and other stakeholders will support the
delivery of its purpose, values and strategy. The Board seeks to
promote a culture of openness and integrity through ongoing
dialogue and engagement with its service providers, principally the
Manager.
Company Sector(1)
Information technology 33%
Healthcare 18%
Consumer 14%
Financials 11%
Industrials 9%
Communication services 7%
Energy 4%
Materials 2%
Others 2%
Fund Region(2)
Weighted towards the more developed private equity markets in
the USA and Europe while Asia and EM provide access to
faster-growing economies.
USA 51%
Europe 28%
Asia and EM(3) 11%
Global 10%
(1) The company sector chart is based upon underlying company
valuations as at 31 March 2022, adjusted for calls and
distributions to 31 May 2022. These account for 100% of PIP's
overall portfolio value.
(2) Fund region is based upon underlying fund valuations and
accounts for 100% of PIP's overall portfolio value. The chart
excludes the portion of the reference portfolio attributable to the
Asset Linked Note.
(3) EM is Emerging Markets.
Our Business Model
We aim to deliver consistent returns over the long term
OUR INVESTMENT PROCESS
1. Investment opportunities in funds and companies are originated via Pantheon's extensive and well-established platform.
2. We invest in many of the best private equity managers who are
able to identify and create value in their businesses.
3. Cash generated from the sale of those companies is returned
to PIP and redeployed into new investment opportunities.
What we do
PIP invests in private equity funds and co-invests (alongside
selected private equity managers) directly into private companies
worldwide.
- An investment in PIP offers shareholders exposure to a growing
market worth over US$5.3tn(1) globally where the best private
equity managers might
otherwise be inaccessible to shareholders.
We aim to deliver attractive and consistent returns to
shareholders over the long term, and at relatively low risk. The
Board remains committed to its policy of maximising capital growth
and therefore, as in previous years, is not proposing the payment
of a dividend.
Why we do it
Through Pantheon, we have an opportunity to invest with many of
the best private equity managers globally based on the trust and
experience built up over the almost 40 years during which Pantheon
has been making investments.
-- It is our aim to bring the strong credentials of private
equity and its track record of outperforming public markets to a
wider set of investors.
It is our mission to generate sustainably high investment
returns through an actively managed, institutional grade portfolio
of funds and companies built by investing with the best managers
globally.
How we do it
PIP's Manager, Pantheon, has a well-established platform built
on three strategic pillars of investment: primary, secondary and
co-investments, with each offering their own merits.
We believe that by combining the three ways of accessing private
equity investments, we are able to:
- Build and maintain a well-balanced portfolio in a combination
that we monitor and manage with the aim of maximising capital
growth;
- Manage the maturity profile of our assets so that our
portfolio remains naturally cash-generative on a sustainable basis;
and
- Ensure that the vehicle remains as cost-effective as possible
for our shareholders by reducing any potential drag on returns.
(1) Source: Prequin Global Private Equity Report 2022.
INVESTMENT STRATEGIES
Primary
We invest in a new private equity fund when it is
established.
-- Captures exposure to top-tier, well-recognised managers as
well as to smaller niche funds that are generally hard to
access.
-- Targets leading managers predominantly in the USA and Europe,
with a focus on funds which are unlikely to become available in the
secondary market.
Limited Partner Secondary
We purchase the interests of an investor in a fund or funds
typically late into, or after, the investment period.
-- Targets favoured funds and companies at a stage when the
underlying assets' performance is visible and the funds are
realising investments, returning cash to PIP more quickly.
-- One of the advantages of investing in secondaries is that
earlier fees will have been borne by the seller so total expenses
are lower.
Manager - led Secondary
We invest in a company directly, alongside a private equity
manager, that the manager has already owned for a period of time
and therefore knows well.
-- We partner with high-quality private equity managers to
acquire, as single transactions, their most attractive portfolio
companies via a continuation fund.
-- Allows the private equity manager to hold onto a prized
asset, which they believe has potential for further growth, when
the fund in which it is held comes to the end of its life.
Co-investments
We invest in a company directly, alongside a private equity
manager.
-- Direct investment in individual companies, which have
attractive growth characteristics and have effectively passed
through a "double quality filter", alongside PIP's leading private
equity managers.
-- This boosts the performance potential because there are
typically very low or no fees, making it a cost-effective way of
capitalising on the high value added by PIP's selected
managers.
-- Co-investments are through invitation only and are therefore
not accessible to most investors.
For more information on the commitments that PIP has made during
the year, see the full Annual Report.
What sets us apart
Track record
For 35 years, PIP has been able to adapt quickly and effectively
to changing market conditions. This flexible and proactive approach
means that PIP is well placed to continue to deliver on its
strategic objectives. PIP's NAV has outperformed its public market
benchmark indices since the Company's inception in 1987.
Broad and deep relationships
With investments in North America, Europe, Asia and Emerging
Markets, PIP provides a carefully constructed, broad-based
portfolio for investors. The presence of Pantheon's team of 417
people, including 121 investment professionals(1) in its 10 offices
around the world means that they are on the ground locally, working
with their extensive networks of relationships with private equity
managers and taking advantage of proprietary information flows and
access to opportunities. These relationships enable Pantheon to
source and respond quickly to the best deal flow in those regions.
In addition, through its participation on over 560(2) advisory
boards globally, Pantheon actively engages with its General
Partners ("GPs") on portfolio monitoring issues on a continuous
basis .
Independence
PIP has the opportunity to participate in all the private equity
investments sourced by Pantheon. The majority of the Company's
investments are made directly in private equity funds and companies
rather than via Pantheon's collective vehicles, which offers
several benefits to PIP and its shareholders, including:
- Control of investment strategy, overseen by the Board;
- Reduction of financing risk by being able to accept or decline
investments offered to it by Pantheon according to its financial
resources at the time;
- The flexibility to vary the size of its commitments as
appropriate and in line with any adjustments to its investment
strategy; and
- Lower cost than investing through intermediate vehicles, due
to the elimination of management fees and related expenses.
Culture & Transparency
Pantheon has a strong culture of collaborative and inclusive
teamwork, transparency and diversity, as well as a long history of
investing its clients' capital responsibly. PIP is supported
strongly by a global workforce of 417 people(1) and a large and
experienced team of investment professionals, many of whom have
been at Pantheon for over 20 years. In keeping with its
collaborative culture, Pantheon avoids investments in private
equity managers with 'star' individuals giving rise to a higher
degree of key person risk.
PIP is committed to being transparent with its investors and
publishes a monthly NAV and newsletter to ensure the market is kept
updated on developments in the portfolio.
(1) As at 30 June 2022.
(2) As at 31 March 2022.
For more information on PIP's strategic objectives, see
below.
Our Investment Policy
Our investment policy is to maximise capital growth with a
carefully managed risk profile.
The Company's policy is to make unquoted investments. It does so
by subscribing to investments in new private equity funds ("Primary
Investment"), buying secondary interests in existing private equity
funds ("Secondary Investment"), and acquiring direct holdings in
unquoted companies ("Co-investments"), 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, from time to time, hold quoted investments as a
consequence of such investments being distributed to the Company
from its fund investments as the result of an investment in an
unquoted company becoming quoted. In addition, the Company may
invest in private equity funds which are quoted. The Company will
not otherwise normally invest in quoted securities, although it
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 schemes.
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:
-- No holding in a company will represent more than 15% by value
of the Company's investments at the time of investment (in
accordance with the requirement for approval as an investment trust
which applied to the Company in relation to its accounting periods
ended on and before 30 June 2012).
-- 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's 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 future
cash flows alter.
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.
RISK MANAGEMENT AND PRINCIPAL RISKS
The Company is exposed to a variety of risks and uncertainties.
The Board, through delegation to the Audit Committee, has
undertaken a robust assessment and review of the principal risks
facing PIP, together with a review of any new and emerging risks
that may have arisen during the year to 31 May 2022, including
those that would threaten its business model, future performance,
solvency or liquidity. A summary of the risk management and
internal control processes
be found in the Statement on Corporate Governance in the full
Annual Report.
Investment risk
Type and Potential Impact Risk Management Outcome for the
Description Year
of Risk
Market factors -- Impact of general economic -- Pantheon's investment -- PIP continues
such conditions on underlying fund process incorporates an to
as interest rates, and company valuations, exit assessment of market risk. adopt a
inflation and opportunities and the availability -- Investing alongside private diversified
equity of credit. equity managers with experience approach to
market performance of navigating economic cycles, portfolio
can affect the while achieving diversification construction.
value by geography, stage vintage -- Exposure to
of investments. and sector, helps to mitigate quoted
the effect of public market companies was only
movements on the Company's 12% as at 31 May
performance. PIP invests 2022.
in private assets and only -- In historical
gains exposure to public periods
markets by companies being of significant
taken through an initial public
public offering. market volatility,
private equity
market
valuations have
typically
been less affected
than public
equity market
valuations.
--------------------------------------- ----------------------------------- -------------------
Insufficient -- Investment losses and reputational -- PIP has a mature portfolio -- PIP has access
liquid damage arising from the inability that is naturally cash generative. to a GBP300m loan
resources to meet to meet capital call obligations. -- In the event that cash facility that
outstanding balances and cash distributions expires
commitments are insufficient to cover in May 2024.
to private equity capital calls, PIP has the Together
funds. ability to draw funds from with PIP's net
a credit facility. available
-- Pantheon manages the cash balances of
Company so that undrawn GBP227m,
commitments remain at an total available
acceptable level relative financing
to its portfolio assets as at 31 May 2022
and available financing. stood at GBP528m.
-- The Board conducts a Total available
comprehensive review of financing,
the Company's cash flow along with the
modelling forecasts under private
different scenarios on a equity portfolio,
regular basis. was greater than
outstanding
commitments by a
factor
of 3.7 times.
-- The Company
renewed
its multi-currency
revolving credit
facility
after the year
end.
The new GBP500m
secured
facility, which is
due to expire in
July
2027, remains
completely
undrawn at the
time
of writing.
--------------------------------------- ----------------------------------- -------------------
Lack of suitable -- Change in risk profile as -- Pantheon has put in place -- During the
investment a result of manager, fund or a dedicated investment management year,
opportunities company exposures that are process designed to achieve PIP has invested
to meet strategic materially different from the the intended investment within
diversification Company's intended strategy. strategy agreed with the strategic limits
objectives. Board. for
-- The Board regularly reviews vintage year,
investment and financial geography
reports to monitor the and stage
effectiveness allocations,
of the Manager's investment as well as within
processes. concentration
limits
for individual
managers,
funds and
companies.
--------------------------------------- ----------------------------------- -------------------
Private equity -- Potential decline in realisation -- PIP pursues a flexible -- The Company's
investments activity which may affect portfolio investment strategy, combining flexible
are long term in performance. secondary investments which investment
nature and it may typically have shorter exit strategy
be some years horizons, with co-investments has resulted in a
before and primary commitments. portfolio with a
they can be healthy
realised. mix of likely exit
horizons.
--------------------------------------- ----------------------------------- -------------------
Investments in -- Liquidity of underlying -- As part of its investment -- Robust
unquoted assets may have an adverse process, Pantheon assesses realisation
companies carry effect on realisations and the approach of its managers activity during
a higher degree portfolio performance. to company illiquidity as the
of liquidity risk well as projected exit outcomes. year, with a
relative to record
investments level
in quoted distributions
securities. of GBP419m and a
distribution
rate equivalent to
25% of opening
portfolio
assets.
.
--------------------------------------- ----------------------------------- -------------------
Gearing, whether -- Potential impact on performance -- PIP's Articles of Association -- Cash flow
at the Company, and liquidity, especially in and investment policy impose forecasts
fund investment the event of a market downturn. limits on the amount of under normal and
or portfolio gearing that the Company stress
company can take on. conditions were
level, could cause -- The principal covenant reviewed
the magnification of the loan facility ensures with the Board.
of gains and that the Company is limited Downside
losses to a maximum gearing (excluding scenario modelling
in the asset value the ALN) of 34% of adjusted indicates that the
of the Company. gross asset value (excluding Company has the
the ALN). available
-- The Board conducts regular financing in place
reviews of the balance sheet to meet investment
and long-term cash flow commitments, even
projections, including downside in an environment
scenarios that reflect the characterised by
potential effects of significant large
declines in NAV performance, NAV declines and a
adverse changes in material reduction
call/distribution in distribution
rates and restrained liquidity activity.
sourcing in a distressed -- There was no
environment. gearing
-- As part of its investment at the Company
process, the Manager undertakes level
a detailed assessment of as at
the impact of debt at the the end of the
underlying fund level and financial
underlying company level year.
on the risk-return profile -- Debt multiples
of a specific investment. in PIP's buyout
portfolio
remain at
reasonable
levels as at year
end.
-- Since the
period
end, the Company
has
announced
that it has agreed
a new revolving
credit
facility,
totalling
GBP500m which is
due
to expire in July
2027.
-- The principal
covenants
that apply to
PIP's
credit facility
ensure
that the Company
is
subject to maximum
loan to value and
liquidity ratios.
--------------------------------------- ----------------------------------- -------------------
Non-sterling -- Unhedged foreign exchange -- The Manager monitors -- Foreign
investments rate movements could impact the Company's underlying exchange
expose the Company NAV total returns. foreign currency exposure. had a positive
to fluctuations -- As part of its investment impact
in currency process, the Manager takes on performance
exchange currency denominations into during
rates. account when assessing the the year.
risk/return profile of a
specific investment.
-- The multi-currency credit
facility is a natural hedge
for currency fluctuations
relating to outstanding
commitments.
--------------------------------------- ----------------------------------- -------------------
Reliance on the -- Risk of errors in financial -- The valuation of investments -- No material
accuracy of statements and NAV reporting. is based on periodically misstatements
information audited valuations that concerning the
provided by GPs are provided by the underlying valuations
when valuing private equity managers. provided by GPs
investments. -- Pantheon carries out and
a formal valuation process the existence of
involving monthly reviews investments
of valuations, the verification during the year.
of audit reports and a review
of any potential adjustments
required to ensure reasonable
valuations in accordance
to fair market value principles
under Generally Accepted
Accounting Principles (GAAP).
--------------------------------------- ----------------------------------- -------------------
Possibility that -- Counterparty defaults can -- PIP invests in high-quality -- During the
another investor have unintended consequences funds alongside institutional year,
in a fund is on the remaining investors' private equity investors. funds in which PIP
unable obligations and investment -- A considerable proportion is invested did
or unwilling to exposure. of PIP's investments are not
meet future in funded positions. suffer from any
capital limited
calls. partner defaulting
events.
--------------------------------------- ----------------------------------- -------------------
Changes in the -- Failure to understand tax -- Pantheon's investment -- Taxes had a
Company's risks when investing or divesting process incorporates an minimal
tax status or in could lead to tax exposure assessment of tax. effect on overall
tax legislation or financial loss. -- The Manager reviews the NAV performance in
and practice. appropriateness of an investment's the year.
legal structure to minimise
the potential tax impact
on the Company.
--------------------------------------- ----------------------------------- -------------------
Non-investment risk
Type and Description Potential Impact Risk Management Outcome for the Year
of Risk
PIP relies on the services -- Business disruption -- The Board keeps the -- The Board has approved
of Pantheon as its Manager should the services services the continuing appointment
and other third-party of Pantheon and other of the Manager and of the Manager and
service providers. third-party suppliers third-party other service providers
cease to be available suppliers under continual following an assessment
to the Company. review. of their respective
-- The Management Agreement performance during
is subject to a notice the year.
period -- Pantheon now operates
of two years, giving the a hybrid working model
Board and is confident of
adequate time to make being able to continue
alternative to meet PIP's needs
arrangements in the event through this model.
that
the services of Pantheon
cease
to be available.
---------------------------- ---------------------------- ----------------------------
High dependency on -- Significant disruption -- Pantheon has a -- No material issues
effective to information technology comprehensive to report for the year.
information technology systems, including from set of policies, standards -- Pantheon's systems,
systems to support key a potential cyber attack and procedures related to processes and technologies
business functions and may result in financial information have been thoroughly
the safeguarding of losses, the inability technology and tested and are fully
sensitive information. to perform cybersecurity. operational.
business-critical -- Ongoing investment and
functions, regulatory training
censure, legal liability to improve the reliability
and reputational damage. and resilience of
Pantheon's
information technology
processes
and systems.
---------------------------- ---------------------------- ----------------------------
Global geopolitical -- Market and currency -- Pantheon continuously -- Pantheon's established
risks (including the volatility may affect monitors Risk, Legal and Tax
Russia-Ukraine war) returns. geopolitical developments functions have ensured
and the resulting economic -- Geopolitical and compliance with local
uncertainty may affect undercurrents societal issues relevant to laws and regulations.
the Company. may disrupt long-term its business. -- An assessment of
investment and capital geopolitical risk is
allocation decision-making. embedded in Pantheon's
investment process.
-- PIP's exposure to
high risk countries
is minimal.
-- PIP's de minimis
legacy exposure to
Russian assets were
reduced to zero during
the financial year.
---------------------------- ---------------------------- ----------------------------
Retail investors advised by independent financial advisers
The Company currently conducts its affairs so that its shares
can be recommended by independent financial advisers to retail
private investors in accordance with the FCA's rules in relation to
non-mainstream investment products.
The shares are excluded from the FCA's restrictions which apply
to non-mainstream investment products because they are shares in a
UK-listed investment trust.
Viability statement
Pursuant to provision 31 of the UK Corporate Governance Code
2018, and the AIC Code of Corporate Governance, the Board has
assessed the viability of the Company over a three-year period from
31 May 2022. It has chosen this period as it falls within the
Board's strategic planning horizon.
The Company invests in a portfolio of private equity assets that
is diversified by geography, sector, stage, manager and vintage; it
does so via both fund investments and by co-investing directly into
companies alongside selected private equity managers. The Company
invests significantly in the private equity secondaries market as
this allows the Company to maintain a more mature portfolio profile
that is naturally cash-generative in any particular year.
The Company seeks to maximise long-term capital growth by
investing with top-tier private equity managers that are focused on
generating outperformance against the broader private equity
market. As an investment trust, the Company's permanent capital
structure is well suited to investing in private equity, a
long-term asset class. The Company's Manager has a long-standing
culture that emphasises collaboration and accountability,
facilitating open dialogue with underlying private equity managers
that help the Company to anticipate market conditions and maintain
a conservative approach to balance sheet management. The resilience
of the Company, positioning of the portfolio and durability of the
private equity market are detailed in the full Annual Report.
In making this statement, the Directors have reviewed the
reports of the Investment Manager in relation to the resilience of
the Company, taking account of its current position, the principal
risks facing it in a low case scenario due to a disrupted recovery
in the wake of COVID-19, the geopolitical uncertainties as a result
of the Russia-Ukraine conflict including the disruption to the
supply chain and increases in the cost of living as a result of
this conflict, inflationary expectations, interest rate rises, the
impact of climate change on PIP's portfolio as discussed in Note 1
of the financial statements, the effectiveness
of any mitigating actions and the Company's risk appetite, all
of which were considered as part of the various downside liquidity
modelling scenarios carried out, after which the Directors came to
the conclusion that there is no significant impact on
viability.
As part of the assessment this also included a combined reverse
stress test that analyses the factors that would have to
simultaneously occur for the Company to be forced into a wind-down
scenario where the Company's business model would no longer remain
viable. These circumstances include a significant peak in the
outstanding commitments called within a 12-month period, combined
with a significant decline in the portfolio valuations and
distributions. Overall, the reverse stress tests are sufficiently
improbable as to provide a low likely risk of impact to the
Company's viability and medium-term resilience.
Commitments to new funds are controlled relative to the
Company's assets, and the Company's available liquid financial
resources are managed to maintain a reasonable expectation of being
able to finance the calls, which arise from such commitments, out
of internally generated cash flow. In addition, the Company has put
in place a revolving credit facility to ensure that it is able to
finance such calls in the event that distributions received from
investments in the period are insufficient to finance calls. The
Board reviews the Company's financing arrangements at least
quarterly to ensure that the Company is in a strong position to
finance all outstanding commitments on existing investments as well
as being able to finance new investments.
In reviewing the Company's viability, the Board has considered
the Company's position with reference to its investment trust
structure, its business model, its business objectives, the
principal risks and uncertainties as detailed above and its present
and expected financial position. In addition, the Board has also
considered the Company's conservative approach to Balance Sheet
management, which allows it to take advantage of significant
investment opportunities, and the appropriateness of the Company's
current investment objectives in the prevailing investment market
and environment.
Since the period end, the Company has announced that it has
agreed a new multi-currency revolving credit facility to replace
the existing one that was due to expire in May 2024. This new
currently undrawn facility, totalling GBP500m is due to expire in
July 2027.
On behalf of the Board
Sir Laurie Magnus CBE
3 August 2022
Manager's Review
Our Market
Targeting highly resilient businesses, benefiting from positive
long-term secular trends, in an uncertain macroeconomic
environment
Against a backdrop of heightened geopolitical tensions and the
uncertain outlook for the global economy, Helen Steers, Partner at
Pantheon and manager of PIP, discusses how the private equity
sector and PIP are well-positioned to navigate this challenging
environment.
While many countries are still grappling with the aftermath of
the COVID-19 crisis, the tragic war in Ukraine has generated
further turmoil. Global supply chain issues, which were triggered
by successive lockdowns during the pandemic, have been exacerbated
over the past few months by rising energy prices and difficulties
in sourcing certain essential raw materials. As a result, there
have been shortages of vital industrial components, logistical
challenges when transporting merchandise and increasing concerns
about food security and energy supply, particularly in Europe. The
consequent rise in inflation, fuelled by higher food prices and
energy costs, means that many household budgets are being squeezed
and consumer confidence has been dented. Although GDP in many
regions rebounded in 2021 from the COVID-induced lows of 2020,
global growth expectations have been revised down dramatically for
2022 and fears of a global recession are increasingly becoming a
reality. One of the immediate consequences of these developments
has been the sharp fall in public markets in the first half of
2022, with economic forecasters struggling to identify many causes
for optimism on the horizon.
Private equity is not immune to geopolitical and macroeconomic
events; however, our private equity managers had been preparing for
a downturn for some time and taking action to prepare their
portfolio companies for more difficult economic times. Furthermore,
assessing our managers' track records in steering their portfolios
through previous crises forms a key component of our due diligence
when considering new deals for investment. History has shown that
the best private equity managers are able to adapt to volatile
market conditions, working closely with their portfolio companies,
and have outperformed the public markets throughout economic
cycles. In addition, they are able to respond nimbly and capitalise
on periods of market dislocation and disruption, which can often
generate compelling new deal opportunities.
These may present themselves in a variety of ways such as the
creation of investments at more attractive pricing levels, or
assisting companies to build market share through consolidation and
add-on acquisitions of weaker competitors.
Following a slowdown in fundraising in 2020 during the COVID-19
pandemic, the global private equity industry had a record year in
2021, raising US$749bn(1) of capital.
(1) Source: Preqin Private Equity. Excludes secondaries, funds
of funds, and co-investment vehicles to avoid double counting of
capital fundraised.
Investment activity was also very buoyant with $837bn(2)
invested in buyout deals with managers also completing a large
number of add-on acquisitions during the year. Although fundraising
strength has continued into 2022, we expect to see a moderation in
the coming months as the bifurcation between the top-rated private
equity managers, who are able to raise capital quickly via
oversubscribed funds regardless of the macroeconomic environment,
and those managers who may find fundraising more challenging,
becomes even more pronounced.
(2) Source: Preqin Private Equity.
Managers have raised significant capital in recent years and dry
powder, which is capital raised but not yet invested, stood at
US$1.32tn as at September 2021(3) . We expect the levels of dry
powder to continue to drive deal flow, especially in secondary and
tertiary buyouts, although there are signs that market volatility
may impact new investment activity during the course of 2022.
(3) Source: 2022 Prequin Global Private Equity Report
Nevertheless, since dry powder is concentrated in the larger
global buyout funds, which often target secondary buyouts of
smaller, high-growth businesses, PIP's weighting towards the
small/mid-market buyout and growth segments of the market positions
it well to continue to benefit from this exit route. The majority
of the managers with whom PIP invests focus on selling their
portfolio companies to trade buyers, progressing their own
strategic and M&A objectives, as well as selling their
portfolio companies to other private equity managers. In other
words, they are not reliant on the IPO markets being open in order
to realise their investments. During the financial year, 49% of
exits in PIP's portfolio were to trade buyers, 42% were to other
private equity managers while, despite a strong year for IPOs in
2021, only 7% of PIP's underlying portfolio companies were exited
by them being taken public.
In the current environment, it is more important than ever to be
highly selective when assessing deals for investment. We will
continue to back high-quality private equity managers who are
sector specialists and equipped with sufficiently resourced and
experienced operational teams to support their portfolio companies
through uncertainty. While it is possible that there may be some
pressure on the valuations of certain private equity-backed
companies, we expect this to be very dependent on the subsectors in
which those businesses operate and whether they require significant
new capital expenditure. PIP's portfolio is weighted towards
resilient and high-growth sectors such as Information Technology
and Healthcare, which held up well through the pandemic and are
benefiting from long-term secular trends that we believe are here
to stay. We focus on managers who are targeting non-cyclical
companies for investment that have defensible business models and
offer a differentiated product or service, giving them a
competitive advantage and pricing power in their respective
markets. While we note the stark declines in the share prices of
many technology stocks in the public markets, the
technology-related businesses in PIP's portfolio are primarily
profitable high-quality software and business infrastructure
companies providing essential "need to have" products and services
as well as those supporting the digitalisation and automation of
processes that are occurring across many different sectors. In
healthcare, which is the second largest sector in PIP's portfolio,
we are backing managers who are tapping into the opportunities
arising from the needs of ageing populations in developed
economies, the increasing demand for better quality healthcare
services in developing countries and the prevalence of chronic
diseases everywhere. A common theme linking these businesses is
that they have stable, recurring revenues and the characteristics
to produce sustainable positive earnings growth. Private equity
managers control the businesses in which they are invested and
therefore are able to respond effectively to changing market
conditions and implement necessary operational and strategic
changes. Finally, it should be noted that private equity managers
are not under pressure to sell their assets, therefore they will
only do so when the time is right and they are confident that they
can achieve an attractive return on exit. The embedded value in
PIP's portfolio has been demonstrated by the consistently positive
average uplifts that have been achieved since 2011, when we started
tracking this metric. During the period, the weighted average
uplift in PIP's portfolio was 42%.
As part of our detailed due diligence process, we not only
assess how our managers create the right operating models for their
portfolio businesses, but also appraise our managers' ability to
construct appropriate capital structures for their investee
companies, that can withstand increases in interest rates and any
potential pressure on margins. PIP's portfolio is tilted towards
asset-light companies, which typically have no debt (in the case of
companies in the growth capital stage), or lower levels of debt (in
the case of small and mid-sized businesses), compared with large
and mega sized firms.
Private equity secondaries are playing an increasingly important
role in the private equity universe
Increasingly, the global secondaries market is establishing
itself as an active portfolio management tool for a wide range of
investors in private equity funds who are seeking liquidity for
their investments. As a result, it has continued to experience
strong growth with transaction volumes reaching record levels of
US$134bn(4) in 2021. Of this total, 54% comprised traditional
secondary transactions, which is when the investor in a fund
initiates a sales process to another investor, while 46% were
manager-led deals, which is when the private equity managers
themselves instigate deals in order to provide liquidity options
for investors in their funds. We have seen an increase in the size
and complexity of deals coming to market and also in the quality
with some of the most sophisticated, top-ranked private equity
managers now actively participating in the secondaries market. This
has fuelled unprecedented growth in manager-led deals, which can
consist of either multi-asset portfolios or single-asset
secondaries. Single-asset secondaries accounted for approximately
half of the manager-led transactions in 2021(5)
(4) Source: Greenhill Cogent - Global Secondary Market Review,
January 2022.
(5) Source: Lazard Private Capital Advisory, Sponsor-led
Secondary Market Report 2021, January 2022
Managers are reluctant to sell high-quality portfolio companies,
which they believe still have scope for further value creation,
therefore single-asset secondaries occur when a private equity
manager moves an individual company out of an older fund, which is
in the process of being liquidated, into a continuation fund. This
allows existing investors in the fund to exit their positions in
the older fund while at the same time the private equity manager
can continue to invest in the company and build value. Selected
investors, such as PIP, are offered the opportunity to invest in
the new investment vehicle and to benefit from the company's future
growth. The management teams of the underlying companies are
invariably supportive of this approach as they can avoid the
disruption that a change in ownership can sometimes bring. We
believe that this area of the secondaries market is particularly
attractive because:
-- Typically these are the managers' star assets that they
believe are likely to generate significant value but require more
time beyond the life of the existing fund or additional capital,
which the existing fund does not have, to achieve it;
-- These transactions provide strong alignment with the private
equity managers who roll their interests into the continuation fund
and, in many cases, increase their own existing investment;
-- These transactions tend to have an attractive risk/return
profile as they offer the opportunity to invest alongside
knowledgeable owners and benefit from the continued success of the
company; and
-- It is a very specialised part of the secondaries market and
therefore tends to be less competitive.
Pantheon was a pioneer of the secondary market and has both the
expertise as well as the significant resources required to carry
out the necessary detailed due diligence on manager-led deals. In
many cases, we are able to work with the private equity manager to
assist them with price discovery and help them to shape the deals
themselves. PIP's total commitment of US$225.0m to the Pantheon
Secondary Opportunity Fund ("PSOF") allows it to deploy capital
efficiently in these high-quality assets on favourable terms. PIP
gains access to single-asset secondaries both directly and through
PSOF, and during the period, invested in nine single-asset
secondaries.
While the current elevated macroeconomic risks call for a more
cautious approach, the quality and volume of deal flow remain high
in the secondaries market and we expect this to continue. The
mid-market, which can often be overlooked by less experienced
secondary investors, forms a significant part of PIP's portfolio
and we believe that it should continue to provide attractive
opportunities for PIP.
The best private equity managers are becoming increasingly
restrictive, meaning that only those investors who have established
deep, long-standing relationships with such managers are given
priority access to their investment opportunities. Pantheon has an
almost 40-year history of investing in the secondaries market and,
with its flexible and highly selective approach, has established
itself as a partner of choice for many private equity managers. Our
sizeable secondaries team is led by seven Partners who have an
average of around 23 years of investment experience each. The
recent appointment of a new Global Head of Private Equity
Secondaries at Partner level will further strengthen our deal
origination and investment capabilities, which we can put to work
on behalf of PIP.
PIP continues to benefit from high-quality co-investment deal
flow
Pantheon had a very active year in terms of both deal
origination for co-investments, generating record deal flow in
2021, and exit activity which was also strong. Co-investments are
attractive for PIP as they enable the Company to invest directly in
exciting high-growth companies on the same terms and conditions as
the private equity manager, while they are also typically free of
management and performance fees. PIP benefits from Pantheon's large
global network of primary and secondary relationships from which we
are able to source co-investment opportunities. In many cases, the
strength of our relationships has resulted in us being offered
proprietary deals whereby we are the only party to be invited to
co-invest alongside a manager.
The co-investment market has become increasingly competitive;
however, we believe that Pantheon has a distinct advantage and is
an attractive co-investor for our managers because:
-- We do not compete against them and are viewed as a desirable
investment partner; as a result, we believe that we see a large
proportion of co-investments on offer from our core managers around
the world;
-- Our consistent reliability in co-underwriting transactions
means that we have become a "go to" partner for many of our private
equity managers;
-- We have the scale to deploy substantial capital quickly into
new deals and follow-on investments; and
-- We have proven our willingness to step in at an early stage
to help our managers to secure and execute upon exciting
opportunities through co-underwriting transactions.
Pantheon continues to assess each co-investment opportunity on
its own merits with each co-investment passing through a "double
quality filter", since each opportunity has first been evaluated by
one of our best private equity managers, who themselves have
already passed our rigorous manager selection hurdles. The
opportunity is then subjected to our own detailed due diligence
process, carried out by our dedicated co-investment team. Our
disciplined and selective approach means that we will typically
only invest in companies that display the following attributes:
- We focus only on compelling opportunities with the
highest-quality managers that we believe are able to meet our
return expectations;
- The business must be a good fit for the manager's
geographical, sectoral and stage expertise and experience;
- There are multiple and clear value creation levers that our managers can pull;
- We focus on attractive, resilient sectors that are
experiencing long-term tailwinds and have the potential for strong
organic growth through the launch of additional products and
services;
- The business has the ability to maintain revenue and margin
stability even in an economic downturn; and
- There is the potential for add-on acquisitions that can help
the business to build scale and grow its market share.
Co-investments represented 31% of PIP's portfolio at the period
end and we expect them to continue to be a significant area of
investment. During the period, PIP received GBP49.5m from the sale
of EUSA Pharma, a UK-based specialty pharmaceutical company
focusing on oncology and rare diseases. PIP co-invested in EUSA
Pharma alongside EW Healthcare in 2015 and it represents the
Company's largest single company exit in its history. See the case
study within the full Annual Report.
Outlook
The impact of substantially lower economic growth globally,
coupled with supply chain issues, higher energy, food and input
costs, and the lingering effects of the COVID-19 crisis, is
creating an unenviable mix of challenges which are being faced by
both individuals and businesses.
While we are cautious in these difficult times, we believe that
our industry will continue to experience significant growth in the
coming years.
Private equity benefits from a long-term investment horizon,
still comprises a relatively small part of the wider global
investment universe and investor appetite for the asset class
remains strong - in a recent survey of institutional investors, 95%
of the participants indicated that they intended to maintain or
increase their allocations to private equity investments(6) .
Indeed, in its most recent report, Preqin forecasted that the
assets under management in the global private equity and venture
capital market would reach US$11.1tn in 2026, which compares with
the private equity market being worth US$5.3tn at the end of
2021(7) .
(6) Source: Preqin H2 2022 investor outlook survey.
(7) Source: 2022 Preqin Global Private Equity Report.
Private equity offers access to subsectors that are generally
under-represented in the public markets and that continue to
innovate and offer compelling long-term investment
opportunities.
It is our view that PIP's diversified investment approach and
robust financial position will serve it well through uncertainty.
Its approach to mainly investing directly into the companies and
funds that are sourced for it by Pantheon, means that it has the
flexibility to tilt the portfolio towards where we see the best
opportunities. PIP's portfolio has been deliberately positioned to
be resilient in times of stress while at the same time we are
seeking investments with strong sector tailwinds behind them to
drive growth. The dispersion of returns in private equity is wide,
therefore having access to and selecting the highest-quality
managers is key. Private equity managers have evolved their teams
enormously in recent years to include operational, strategic and
capital markets experts that they can dedicate to improving the
prospects of a portfolio company in a variety of market conditions.
Over the long term, this hands-on approach has resulted in the
companies in PIP's portfolio consistently reporting significantly
stronger revenue and earnings growth when compared with companies
in the MSCI World index.
In addition, investors should note that for more than three
decades, Pantheon has managed PIP throughout different economic
cycles to deliver long-term outperformance over the FTSE All-Share
and MSCI World Indices. We believe that our experience, PIP's
access to many of the best private equity managers globally, its
conservatively managed balance sheet and the exciting opportunities
in PIP's full deal pipeline, provide the vital ingredients for
being able to weather the storm and to continue to secure healthy
returns for PIP's shareholders over the long term.
Performance
Overall, PIP's underlying portfolio continues to deliver robust
returns. The cash-generative profile of the portfolio, and the
portfolio's tilt towards high quality assets and more resilient
sectors has helped underpin performance during the year.
Private equity portfolio movements
-- Excluding returns attributable to the ALN share of the
portfolio, PIP's portfolio generated returns of 26.2% during the
year.
-- Including returns attributable to the ALN share of the
portfolio, PIP's total portfolio generated investment returns,
prior to foreign exchange effects, of 25.3%.
Valuation gains by type(1)
* Impressive performance across all strategies over the
year, with primaries producing particularly
attractive returns.
Return Closing
(%) portfolio
NAV
(%)
Primary 34.8 38
Co-investment 20.4 31
Secondary 22.3 31
Valuation movements by stage(1)
-- PIP experienced strong performance across its portfolio.
Return Closing
(%) portfolio
NAV
(%)
Growth 27.3 24
Venture 33.7 4
Large/mega-buyout 26.2 26
Small/mid-buyout 23.2 39
Special situations 33.6 7
Valuation gains by region (1)
-- Impressive performance across all regions driven by exits and
favourable valuation movements.
Return Closing
(%) portfolio
NAV
(%)
Global 23.3 10
USA 28.6 51
Europe 23.6 28
Asia and EM 25.8 11
(1) Portfolio returns include income, exclude gains and losses
from foreign exchange movements, and look through underlying
vehicle structures to the underlying funds feeders and
funds-of-funds to the underlying funds. Portfolio returns exclude
returns generated by the portion of the reference portfolio
attributable to the ALN, and are calculated by dividing valuation
gains by opening portfolio values.
DISTRIBUTIONS
PIP had a record year for distributions, receiving more than
850(1) distributions during the 12 months to 31 May 2022, with many
reflecting realisations at significant uplifts to carrying value.
PIP's mature portfolio is expected to continue to generate
significant distributions.
(1) This figure looks through underlying vehicle structures.
Distribution by Stage and Region
PIP received GBP419m in proceeds from PIP's portfolio in the
year to 31 May 2022 (31 May 2021: GBP319m), equivalent to 25% of
opening private equity assets (31 May 2021: 22%). The USA accounted
for the majority of PIP's distributions, where market conditions
supported a good level of exits, particularly from buyouts.
Distribution by stage
for the year to 31 May 2022
Small/mid buyout 48%
-------------------- ----
Large/mega buyout 22%
====
Growth 20%
====
Special situations 8%
====
Venture 2%
====
Distribution by region
for the year to 31 May 2022
USA 53%
------------- ----
Europe 26%
====
Asia and EM 14%
====
Global 7%
====
Quarterly Distribution Rates(1)
Strong quarterly distribution rates throughout the year reflect
the maturity and resilience of PIP's portfolio.
(1) Distribution rate equals distributions in the period
(annualised) divided by opening portfolio value.
Distribution Rates by Vintage
With a weighted average fund maturity of 4.9 years(1) at the end
of the period (31 May 2021: 5.2 years), PIP's portfolio should
continue to generate significant levels of cash.
(1) Calculation for weighted average age excludes the portion of
the reference portfolio attributable to the Asset Linked Note. Fund
age refers to the year in which a fund makes its first call or, in
the case of a co-investment, the year in which the co-investment
was made.
Cost multiples on exit realisations(1)
The average cost multiple on exit realisations of the sample was
3.1 times, demonstrating value creation over the course of an
investment.
(1) See the Alternative Performance Measures section within the
full Annual Report for sample calculations and disclosures.
Uplifts on exit realisations(1)
The value-weighted incremental average uplift on exit
realisations in the year was 42%, consistent with our view that
realisations can be significantly incremental to returns.
The method used to calculate the average uplift is to compare
the value at exit with the value 12 months prior to exit.
(1) See the Alternative Performance Measures section within the
full Annual Report for sample calculations and disclosures.
Exit realisations by sector and type
The portfolio benefited from good realisation activity,
particularly in the healthcare and information technology sectors.
Trade sales and secondary buyouts represented the most significant
source of exit activity during the year. The data in the sample
provide coverage for 100% (for exit realisations by sector) and 97%
(for exit realisations by type) of proceeds from exit realisations
received during the period.
Exit realisation by sector
For the year to 31 May 2022
Healthcare 27%
Industrials 22%
Information technology 18%
Consumer 11%
Communication services 11%
Energy 5%
Financials 4%
Materials 2%
Exit realisation by type
For the year to 31 May 2022
Trade sale 49%
Secondary buyout 42%
Public market sale 7%
Sale to management 2%
Calls
Calls during the year were used to finance investments in
high-quality businesses globally.
Calls by Region and Stage
PIP paid GBP187m to finance calls on undrawn commitments during
the year (31 May 2021: GBP120m). Calls were predominantly made by
private equity managers in the growth and buyout segments.
Calls by region
USA 38%
Europe 34%
Global Asia & EM 21%
Asia & EM 7%
Calls by stage
Small/mid-buyout 30%
Growth 30%
Large/mega-buyout 22%
Venture 13%
Special situations 5%
Calls by Sector
A large proportion of calls were for investments made in the
information technology and healthcare sectors.
Calls by sector
Information Technology 30%
Healthcare 22%
Industrials 14%
Consumer 12%
Communication services 10%
Financials 7%
Other 3%
Materials 1%
Energy 1%
Quarterly Call Rate(1)
The annualised call rate for the year to 31 May 2022 was
equivalent to 35% of opening undrawn commitments (31 May 2021:
22%). The increase in call rate has been mainly due to PIP's
commitment to single asset secondaries through the Pantheon
Secondary Opportunity Fund ("PSOF"). Commitments to PSOF have an
accelerated drawdown over a period of 18 to 24 months.
(1) Call rate equals calls in the period (annualised) divided by
opening undrawn commitments. All call figures exclude the
acquisition cost of new secondary and co-investment
transactions.
New Commitments
PIP committed GBP496m to 70 new investments during the year (31
May 2021: GBP240m, 33 new investments). Of the total commitments
made, GBP160m was drawn at the time of purchase. Since the period
end, PIP has committed a further GBP76m to five new
investments.
New Commitments by Investment Type
New commitments during the year reflected the attractiveness of
opportunities across the spectrum of PIP's investment activity.
Primary 53%
Co-investment 25%
Secondary 22%
New Commitments by Region
The majority of commitments made in the year were to global and
US private equity opportunities.
USA 37%
Global 31%
Europe 19%
Asia and EM 13%
New Commitments by Stage
Buyout and growth investment activity was robust during the
period.
Small/mid buyout 37%
Growth 23%
Large/mega buyout 16%
Venture 13%
Generalist 11%
New Commitments by Vintage
Primaries, co-investments and manager-led secondaries, which
accounted for 97% of total commitments during the year, offer
exposure to current vintages.
2022 43%
2021 52%
2020 and earlier 5%
NEW COMMITMENTS
Primary Commitments
GBP262m committed to 25 primaries during the year
Investing in primary funds allows PIP to gain exposure to
top-tier, well-recognised managers including smaller niche funds
that might not typically be traded on the secondary market.
Our focus remains on investing with high-quality,
access-constrained managers who have the proven ability to drive
value at the underlying company level, and to generate strong
returns across market cycles. In addition, we target funds with
market-leading specialisms in high-growth sectors such as
healthcare and information technology.
2022 examples
FUND STAGE DESCRIPTION COMMITMENTS FOR
THE YEAR (GBPM)
Advent Global
Private Equity
X USD Large/mega
Stage buyout Global large buyout fund 21.5
------------ ------------------------------ ------------------
Global growth fund focusing
on
Index Ventures disruptive technology
Growth VI Growth companies 20.5
------------ ------------------------------ ------------------
North American growth
equity fund
focused on the healthcare
Oak HC/FT V Growth sector 18.2
------------ ------------------------------ ------------------
Global buyout fund focusing
Apax Global Impact Small/mid on
Fund I buyout ESG-friendly companies 17.8
------------ ------------------------------ ------------------
European buyout fund
Large/mega focused on the information
Hg Saturn 3 buyout technology sector 14.9
------------ ------------------------------ ------------------
European buyout fund
Small/mid with an
Summa Equity III buyout ESG-focused strategy 14.5
------------ ------------------------------ ------------------
Indian growth fund investing
in the
ChrysCapital IX Growth small-mid market segment 14.0
------------ ------------------------------ ------------------
North American buyout
Sentinel Continuation Small/mid fund targeting middle
Fund I buyout market companies 13.7
------------ ------------------------------ ------------------
North American buyout
Veritas Capital Large/mega fund targeting technology
Fund VIII buyout investments 13.7
------------ ------------------------------ ------------------
Asian growth fund focused
LYFE Capital Fund on
IV Growth healthcare AI investments 11.5
------------ ------------------------------ ------------------
Secondary commitments
The private equity secondary market has grown significantly over
the last 10 years, both in scale and complexity. Despite strong
competition, PIP continues to originate compelling opportunities
derived from Pantheon's global platform and its market-leading
expertise in sourcing and executing complex secondary transactions
over which it may have proprietary access.
Manager-led secondary commitments
GBP101m committed to 11 manager-led secondary transactions
during the year.
Top-tier private equity managers are increasingly transferring
some of their most attractive portfolio companies into continuation
vehicles, mainly in the form of single-asset secondaries. By
holding companies for longer, private equity managers are able to
participate in the companies' next phase of growth.
2022 examples(1)
REGION STAGE DESCRIPTION COMMITMENTS FUNDED
GBPM % (2)
---------- ------------ -------------------------- -------------- ---------
Pantheon fund (PSOF)
focused on single-asset
Global Generalist secondary transactions 55.6 0%
Transaction involving
Small/mid two companies in the
USA buyout healthcare sector 6.4 71%
Provider of governance,
risk & compliance
and human capital
management software
Small/mid to the healthcare
Europe buyout sector 6.1 88%
Secondary fund commitments
GBP10m committed to four secondary fund transactions during the
year.
Secondary fund investments allow the Company to invest in funds
at a stage when the underlying companies are ready to be sold to
generate cash distributions.
2022 examples(1)
REGION STAGE DESCRIPTION COMMITMENTS FUNDED
GBPM % (2)
---------- ------------ ------------------------- -------------- ---------
Portfolio of 22 high
Small/mid quality middle market
USA buyout assets 5.7 52%
------------ ------------------------- -------------- ---------
Two buyout technology
Large/mega sector specialist
Global buyout funds 4.9 55%
------------ ------------------------- -------------- ---------
Follow-on investments
in portfolio companies
of a North American
USA Growth growth equity fund 2.8 99%
------------ ------------------------- -------------- ---------
(1.) Companies and funds acquired in secondary transactions are
not named due to non-disclosure agreements.
(2) Funding level does not include deferred payments.
Co-investments
GBP123m committed to 30 co-investments during the year.
PIP's co-investment programme benefits from Pantheon's extensive
primary investment platform which has enabled PIP to participate in
proprietary deals that would otherwise be difficult to access.
PIP invests alongside private equity managers who have the
sector expertise to source and acquire attractively priced
companies and build value through operational enhancements, organic
growth and buy-and-build strategies.
27 out of 30 commitments to co-investments were alongside
investment managers that PIP had already invested with in the
past.
New co-investments by Region
USA 56%
Europe 22%
Asia and EM 18%
Global 4%
New co-investments by Sector
Information Technology 27%
Consumer 19%
Financials 18%
Industrials 17%
Healthcare 15%
Communication services 4%
New co-investments by Stage
Small/mid buyout 41%
Large/mega buyout 36%
Growth 23%
Financing our Undrawn Commitments
Prudent balance sheet management supports PIP's long-term
investment strategy.
We manage PIP to ensure that it has enough liquidity to finance
its undrawn commitments, which represent capital committed to funds
but yet to be drawn by the private equity managers, as well as to
take advantage of new investment opportunities. We monitor and
closely control the Company's level of undrawn commitments and
future calls. A critical part of this exercise is ensuring that the
undrawn commitments do not become excessive relative to PIP's
private equity portfolio and available financing. We achieve this
by managing PIP's investment pacing as well as constructing its
portfolio so that it has the right balance of exposure to
primaries, secondaries and co-investments.
Managing our financing cover(1)
PIP's undrawn commitments were GBP755m as at 31 May 2022 (31 May
2021: GBP528m).
At 31 May 2022, PIP had net available cash(2) balances of
GBP227m (31 May 2021: GBP198m). In addition to these cash balances,
PIP also has access to a wholly undrawn GBP300m multi-currency
revolving credit facility agreement ("loan facility") that expires
in May 2024. Using exchange rates at 31 May 2022, the loan facility
amounted to a sterling equivalent of GBP301m (31 May 2021:
GBP277m).
At 31 May 2022, the Company had GBP528m (31 May 2021: GBP475m)
of available financing which, along with the value of the private
equity portfolio, provides comfortable cover of 3.7 times (31 May
2021: 4.1 times) relative to its undrawn commitments.
Another important measure is the undrawn coverage ratio, which
is the ratio of available financing and 10% of private equity
assets to undrawn commitments. The undrawn coverage ratio is a key
indicator of the Company's ability to meet outstanding commitments,
even in the event of a market downturn, and was 100% as at 31 May
2022 (31 May 2021: 122%).
On 2 August 2022, PIP announced that it has agreed a new
five-year GBP500m multi-tranche, multi-currency revolving credit
facility agreement (the "Loan Facility") arranged by Credit Suisse,
AG London Branch, Lloyds Bank Corporate Markets plc and State
Street Bank International GmbH. The Loan Facility, which replaced
the GBP300m loan facility agreement due to expire in May 2024, is
comprised of facilities amounting to $512.9m and EUR89.2m and is
secured by certain assets of the Company. The new Loan Facility
will expire in July 2027 with an ongoing option to extend, by
agreement, the maturity date by another year at a time. The new
facility has the effect of increasing our undrawn coverage ratio
from 100% as at 31 May 2022 to a pro forma level of 126%. The
enlarged and extended Loan Facility will be instrumental in
supporting the Company's growth ambitions while maintaining a
resilient balance sheet..
(1) Includes undrawn commitments attributable to the reference
portfolio underlying the ALN.
(2) The net available cash figure excludes the current portion
payable under the Asset Linked Note, which amounted to GBP2.8m as
at 31 May 2022.
Undrawn Commitments by Region(1)
The largest share of undrawn commitments is represented by
investments in the USA and Europe, which highlights the Company's
investment focus on more developed private equity markets. PIP's
undrawn loan facility is denominated in US dollars and euros to
match the predominant currencies of its undrawn commitments.
USA 46%
Europe 27%
Global 17%
Asia and EM 10%
Undrawn commitments by Stage(1)
PIP's undrawn commitments are diversified by stage with an
emphasis on small and mid-market buyout managers, many of whom have
experience of successfully investing across multiple economic
cycles.
Small/mid buyout 34%
Large/mega buyout 28%
Growth 24%
Venture 9%
Special situations 5%
Undrawn Commitments by Vintage(1)
The rise in more recent vintages is a result of PIP's increased
allocation to direct investments in recent years. Approximately 20%
of PIP's undrawn commitments are in funds with vintage years which
are 2016 or older. Generally, when a fund is past its investment
period, which is typically between five and six years, it cannot
make any new investments and only draws capital to fund follow-on
investments into existing portfolio companies, or to pay expenses.
As a result, the rate of capital calls by these funds tends to slow
dramatically.
2022 31%
2021 24%
2020 6%
2019 9%
2018 7%
2017 3%
2016 3%
2015 3%
2014 1%
2011 - 2013 4%
2010 and earlier 9%
(1) Includes undrawn commitments attributable to the reference
portfolio underlying the Asset Linked Note.
OTHER INFORMATION
The Largest 50 Managers by Value
% OF TOTAL
PRIVATE EQUITY
RANK MANAGER REGION(1) STAGE BIAS ASSET VALUE(2)
------- --------------------------- ------------ ------------------- ----------------
1 Insight Partners USA Growth 8.1%
2 Index Ventures Global Venture, Growth 5.0%
3 Providence Equity Partners USA Buyout, Growth 3.6%
4 Advent International Global Buyout 2.5%
Baring Private Equity Asia and
5 Asia EM Growth 2.2%
Asia and
6 LYFE Capital EM Growth 2.1%
7 Apax Partners Europe Buyout 2.0%
8 Veritas Capital USA Buyout 1.8%
9 Parthenon Capital USA Buyout 1.8%
10 ABRY Partners USA Buyout 1.7%
11 Water Street USA Buyout 1.7%
12 Mid-Europa Europe Buyout 1.7%
13 Oak HC/FT USA Growth 1.6%
14 Hellman & Friedman USA Buyout 1.5%
15 Investment Partners Europe Buyout 1.5%
16 Searchlight Global Special Situations 1.4%
17 Hg Europe Buyout 1.4%
18 Apollo USA Buyout 1.2%
19 Quantum Energy Partners USA Special Situations 1.2%
20 Lee Equity USA Growth 1.2%
The Energy & Minerals
21 Group USA Special Situations 1.1%
22 Charlesbank USA Buyout 1.1%
23 HIG Capital USA Buyout 1.1%
24 Altor Group Europe Buyout 1.1%
25 TPG USA Buyout 1.1%
26 Calera Capital USA Buyout 1.0%
27 Onex Global Buyout 1.0%
28 Warburg Pincus Global Growth 1.0%
29 Chequers Capital Europe Buyout 1.0%
30 Growth Fund(3) USA Growth 1.0%
31 BC Partners Europe Buyout 0.9%
32 Ares USA Buyout 0.9%
33 Main Post Partners USA Growth 0.9%
34 ECI Partners Europe Buyout 0.9%
35 NMS Management USA Buyout 0.8%
36 Francisco Partners USA Buyout 0.8%
37 Ergon Capital Partners Europe Buyout 0.8%
Asia and
38 Madison India Capital EM Buyout 0.8%
39 Sageview Capital USA Growth 0.7%
40 Gemini Capital Europe Venture 0.7%
41 Growth Fund(3) USA Growth 0.7%
42 Nordic Capital Europe Buyout 0.7%
43 Equistone Europe Buyout 0.7%
Asia and
44 IVF Advisors EM Buyout 0.7%
45 PAI Partners Europe Buyout 0.7%
Asia and
46 Allegro EM Special Situations 0.7%
47 Altamont Capital Partners USA Buyout 0.7%
48 3i Europe Buyout 0.6%
49 Capiton Europe Buyout 0.6%
50 Shamrock Capital Advisors USA Buyout 0.6%
------- --------------------------- ------------
COVERAGE OF PIP'S PRIVATE EQUITY ASSET VALUE(2) 70.6%
----------------------------------------------------------------------- ----------------
(1) Refers to the regional exposure of funds.
(2) Percentages look through underlying vehicle structures and
exclude the portion of the reference portfolio attributable to the
ALN.(3) The private equity manager does not permit the Company to
disclose this information.
The Largest 50 Companies by Value(1)
% of PIP'S
COMPANY COUNTRY SECTOR Public/Private Investment DESCRIPTION NAV
type
--- ----------------- ------------ -------------- ---------------- -------------- --------------- -------------
Leading
Secondary; healthcare
1 LifePoint Health USA Healthcare Private Co-Investment provider 1.0%
Primary; Mobile phone
Secondary; insurance
2 Asurion USA Financials Private Co-Investment company 0.9%
Provider of
enterprise
Information Primary; software
3 Visma Norway Technology Private Co-investment solutions 0.8%
Specialist eye
Omni Eye treatment
4 Services USA Healthcare Private Secondary provider 0.8%
Primary; Cybersecurity
Information Secondary; software
5 Recorded Future USA Technology Private Co-investment company 0.8%
Natural gas
Secondary; and oil
6 Ascent Resources USA Energy Private Co-investment producer 0.7%
7 Vistra Hong Kong Financials Private Secondary; Provider of 0.7%
Co-investment trust,
fiduciary,
fund and
corporate
services
Health
insurance
8 Star Health India Financials Public Co-Investment provider 0.7%
9 Chewy USA Consumer Public Co-Investment Online 0.7%
distributor of
pet food and
supplies
Primary; Managed IT
Information Secondary; services
10 Logic Monitor USA Technology Private Co-investment provider 0.7%
Security
management
Software Information solutions
11 Company(2) USA Technology Private Co-Investment provider 0.7%
IT services
Information management
12 Perspecta USA Technology Private Co-Investment company 0.7%
Provider of
Information Primary; broadband
13 Genesys USA Technology Private Secondary solutions 0.6%
Non-food
discount
14 Action Netherlands Consumer Private Secondary stores 0.6%
Specialist
pharmaceutical
15 KD Pharma Germany Healthcare Private Secondary company 0.6%
16 Revolut UK Information Private Primary; Fintech 0.6%
Technology Secondary company
offering
banking
services
Flynn Restaurant Primary; Restaurant
17 Group USA Consumer Private Co-Investment franchise 0.5%
Ice cream and
frozen food
18 Froneri UK Consumer Private Secondary manufacturer 0.5%
19 Project USA Healthcare Private Secondary Commercial 0.5%
Fusion(2) services
platform for
the life
science sector
Content
provider to
Communication Secondary; the legal
20 ALM USA Services Private Co-investment industry 0.5%
Mobile data
Information Secondary; analytics
21 CallRail USA Technology Private Co-investment company 0.5%
22 Act Fibernet India Communication Private Co-Investment In-home 0.5%
Services entertainment,
education and
interactive
services
provider
Developer of
Information Primary; coding
23 Sonar Switzerland Technology Private Secondary software 0.5%
Manufacturer
of premium
hair
24 Olaplex USA Consumer Public Primary treatments 0.4%
Entertainment,
Communication media and
25 CAA USA Services Private Secondary sports agency 0.4%
26 Arnott USA Consumer Private Secondary; Manufacturer 0.4%
Co-investment of vehicle
suspension
products
27 MRO USA Healthcare Private Primary; Provider of 0.4%
Co-investment disclosure
management
services
Commercial
insurance
28 Confie USA Financials Private Co-Investment broker 0.4%
29 24 Seven USA Industrials Private Secondary Digital 0.4%
marketing and
recruitment
services
provider
Business
Information intelligence
30 Confluent USA Technology Public Primary provider 0.4%
Operator of
Nord Anglia Primary; educational
31 Education Hong Kong Consumer Private Co-investment institutions 0.4%
32 Kilcoy Australia Consumer Private Secondary Producer of 0.4%
beef and other
animal protein
products
33 K2 Claims USA Financials Private Co-Investment Provider of 0.4%
Services specialty
insurance
products
34 GraphPad USA Information Private Primary; Developer of 0.4%
Technology Secondary software for
scientific
research
Biotechnology
35 IMEIK China Healthcare Public Primary company 0.4%
36 Eagle Investment Australia Industrials Private Co-Investment Provider of 0.4%
Trust(2) transport and
logistics
services
37 Cotiviti USA Healthcare Private Primary Provider of 0.4%
risk
assessment
services to
the healthcare
industry
38 doit Israel Information Private Co-Investment Provider of 0.4%
Technology cloud
consulting and
engineering
services
39 Prelude USA Healthcare Private Secondary; Provider of 0.4%
Co-investment fertility
preservation
services
Offers
software
Information development
40 JFrog Israel Technology Public Primary platforms 0.4%
Primary;
Secondary; Commercial
41 Shawbrook UK Financials Private Co-Investment bank 0.4%
Digital
Information Primary; security
42 digicert USA Technology Private Secondary company 0.4%
43 Personio Germany Information Private Primary Developer of 0.4%
Technology an HR
management and
recruitment
platform
44 Infovista France Information Private Primary; Provider of 0.4%
Technology Secondary; unified
Co-investment network and
application
performance
management
45 Regina Maria Romania Healthcare Private Secondary Operator of 0.4%
hospitals and
healthcare
clinics
Healthcare
service
46 Devoted Health USA Healthcare Private Co-Investment provider 0.4%
Satellite
Project Communication communication
47 Phoenix(2) France Services Private Co-Investment provider 0.4%
48 CaptiveResources USA Financials Private Secondary Provider of 0.4%
advisory
services to
insurance
companies
Supermarket
49 Profi Romania Consumer Private Co-Investment chain 0.4%
Life insurance
50 KYOBO South Korea Financials Private Secondary company 0.4%
---------------- -------------- --------------- -------------
COVERAGE OF PIP'S PRIVATE EQUITY ASSET VALUE 25.9%
---------------------------------------------------- ---------------- -------------- --------------- -------------
(1) The largest 50 companies table is based upon underlying
company valuations at 31 March 2022 adjusted for known call and
distributions to 31 May 2022, and includes the portion of the
reference portfolio attributable to the ALN
(2) The private equity manager does not permit the Company to
disclose this information.
Portfolio Concentration
70 managers and 597 companies account for 80% of PIP's total
exposure.
(1) Exposure is equivalent to the sum of the NAV and undrawn
commitments.
THE DIRECTORS
The Directors in office at the date of this report are:
Sir Laurie Magnus* (Chairman)
Mary Ann Sieghart* (Senior Independent Director)
David Melvin* (Audit Committee Chairman)
John Singer*
John Burgess*
Dame Susan Owen DCB*
* Independent of the Manager
EXTRACTS FROM THE DIRECTORS' REPORT
Share capital
The rights attaching to the Company's shares are set out in the
Company's Articles of Association. Further details can be found in
Note 14 of the financial statements.
Authorities given to the Directors at the AGM on 27 October 2021
to allot shares, disapply statutory pre-emption rights and buy back
shares will expire at the forthcoming AGM. During the year
3,400,830 shares were bought back and subsequently cancelled.
As at 31 May 2022 and as at the date of this Report, the Company
had shares in issue as shown in the table below, all of which were
listed on the official list maintained by the Financial Conduct
Authority ("FCA') and admitted to trading on the London Stock
Exchange. No shares were held in Treasury at the year end.
Share Capital and Voting Rights Number Voting rights Number
at 31 May 2022 of Shares attached of shares
in issue to each share held in
treasury
Ordinary shares at 6.7p each 537,493,640 1 -
Total voting rights 537,493,640 - -
Going Concern
The Company's business activities, together with the factors
likely to affect its future development, performance, and financial
position, are set out in the Strategic Report and Manager's
Review.
The Directors have made an assessment of the going concern,
taking into account both the Company's financial position at the
Balance Sheet date and the expected performance of the Company,
considering the disrupted recovery in the wake of the COVID-19
pandemic, the geopolitical uncertainties as a result of the
Russia-Ukraine conflict, including the disruption to the global
supply chain, increases in the cost of living as a result of this
conflict, persistent inflation, interest rate rises and the impact
of climate change on PIP's portfolio using the information
available up to the date of issue of the financial statements.
The Directors have also considered the Company's position with
reference to its investment trust structure, its business model,
its business objectives, the principal risks and uncertainties as
detailed in the full Annual Report and its present and projected
financial position. As part of the overall assessment, the
Directors have taken into account the Manager's culture, which
emphasises collaboration and accountability, the Manager's
conservative approach to balance sheet management, and its emphasis
on investing with underlying private equity managers that are
focused on market outperformance.
At each Board meeting, the Directors review the Company's latest
management accounts and other financial information. The Company's
commitments to private equity investments are reviewed, together
with its financial resources, including cash held and its borrowing
capability. One-year cash flow scenarios are also presented and
discussed at each meeting.
PIP's Balance Sheet is managed to ensure that the Company can
finance its undrawn commitments, which are carefully controlled
relative to its assets and available liquidity.
This disciplined approach enables the Company to withstand
periods of volatility such as those experienced as a result of the
COVID-19 pandemic and the Russia-Ukraine conflict.
The Directors have considered downside liquidity modelling
scenarios with varying degrees of decline in investment valuations,
decreased investment distributions, and increased call rates, with
the worst being an extreme downside scenario representing an impact
to the portfolio that is worse than that experienced during the
2008-2009 global financial crisis.
In the event of a downside scenario, PIP can take steps to limit
or mitigate the impact on the Balance Sheet, namely drawing on the
credit facility and pausing on new commitments. In addition,
subject to the prevailing market environment, it could raise
additional credit or capital, and sell assets to increase liquidity
and reduce outstanding commitments.
Since the period end, the Company has announced that it has
agreed a new multi-currency revolving credit facility to replace
the existing one that was due to expire in May 2024. This new
currently undrawn facility, totalling GBP500m is due to expire in
July 2027.
After due consideration of the Balance Sheet, activities of the
Company, its assets, liabilities, commitments and financial
resources, the Directors have concluded that the Company has
adequate resources to continue in operation for at least 12 months
from the approval of the financial statements for the year ended 31
May 2022.
For this reason, they consider it appropriate to continue to
adopt the going concern basis in preparing the financial
statements.
Directors' Responsibility Statement
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable laws and
regulations in accordance with FRS102. Company law requires the
Directors to prepare financial statements for each financial year.
Under that law they have elected to prepare the financial
statements in accordance with applicable law and UK Accounting
Standards (UK Generally Accepted Accounting Practice). Under
company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the Company as at the end of each financial
year and of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are
required to:
-- Present a true and fair view of the financial position,
financial performance and cash flows of the Company;
-- Select suitable accounting policies in accordance with United
Kingdom GAAP and then apply them consistently;
-- Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- Make judgements and estimates that are reasonable and prudent;
-- State whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- Prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are also responsible for preparing the Strategic
Report, the Directors' Report, the Directors' Remuneration Report,
the Corporate Governance Statement and the Report of the Audit
Committee in accordance with the Companies Act 2006 and applicable
regulations, including the requirements of the Listing Rules and
the Disclosure Guidance and Transparency Rules. The Directors have
delegated responsibility to the Investment Manager for the
maintenance and integrity of the Company's corporate and financial
information included on the Company's website ( www.piplc.com ).
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Each of the Directors, whose names are listed above, confirms
that to the best of their knowledge:
-- The financial statements, prepared in accordance with
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit of the Company;
and
-- The Strategic Report contained in the annual report and
financial statements includes a fair review of the development and
performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that it faces.
The UK Corporate Governance Code requires Directors to ensure
that the Annual Report and financial statements are fair, balanced
and understandable. In order to reach a conclusion on this matter,
the Board has requested that the Audit Committee advises on whether
it considers that the Annual Report and financial statements fulfil
these requirements. The process by which the Audit Committee has
reached these conclusions is set in the full Annual report. As a
result, the Board has concluded that the Annual Report and
financial statements for the year ended 31 May 2022, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
Signed on behalf of the Board by
Sir Laurie Magnus
Chairman
3 August 2022
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the year ended 31 May 2022 and
period ended 31 May 2021 but is derived from those accounts.
Statutory accounts for 2021 have been delivered to the Registrar of
Companies, and those for 2022 will be delivered in due course. The
Auditors have reported on those accounts; their report was (i)
unqualified, (ii) did not include a reference to any matters to
which the Auditors drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
Section 498 (2) or (3) of the Companies Act 2006. The text of the
Auditors' report can be found in the Company's full Annual Report
and financial statements at www.piplc.com .
Income Statement
Year ended 31 May 2022
Year ended 31 May 202 2 Year ended 31 May 2021
Note Revenue Capital Total(1) Revenue Capital Total(1)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
===== =========== ========== =========== ========== =========== ===========
Gains on investments at fair value
through profit or loss 9b - 570,049 570,049 - 341,802 341,802
===== ----------- ---------- ----------- ========== =========== ===========
Losses on financial instruments
at fair value through profit or
loss - ALN(2) (305) (3,123) (3,428) (976) (11,571) (12,547)
===== ----------- ---------- ----------- ========== =========== ===========
Currency gains/ (losses) on cash
and borrowings - 19,564 19,564 - (18,452) (18,452)
===== ----------- ---------- ----------- ========== =========== ===========
Investment income 2 19,169 - 19,169 16,418 - 16,418
===== ----------- ---------- ----------- ========== =========== ===========
Investment management fees 3 (23,115) - (23,115) (18,544) - (18,544)
===== ----------- ---------- ----------- ========== =========== ===========
Other expenses 4 (1,274) (1,326) (2,600) (1,417) (1,340) (2,757)
===== ----------- ---------- ----------- ========== =========== ===========
Return before financing and
taxation (5,525) 585,164 579,639 (4,519) 310,439 305,920
===== ----------- ---------- ----------- ========== =========== ===========
Interest payable and similar
expenses 6 (3,967) - (3,967) (3,488) - (3,488)
===== ----------- ---------- ----------- ========== =========== ===========
Return before taxation (9,492) 585,164 575,672 (8,007) 310,439 302,432
===== =========== ---------- =========== ========== =========== ===========
Taxation (paid)/recovered 7 (3,075) - (3,075) 3,533 - 3,533
===== ----------- ---------- ----------- ========== =========== ===========
Return for the year, being total
comprehensive income for the
year (12,567) 585,164 572,597 (4,474) 310,439 305,965
===== ----------- ---------- ----------- ========== =========== ===========
Return per ordinary share(3) 8 (2.32)p 108.38p 106.06p (0.83)p 57.40p 56.57p
===== ----------- ---------- ----------- ========== =========== ===========
(1) The Company does not have any income or expenses that are
not included in the return for the period, therefore the return for
the period is also the total comprehensive income for the period.
The supplementary revenue and capital columns are prepared under
guidance published in the Statement of Recommended Practice
("SORP") issued by the Association of Investment Companies
("AIC").
(2) Includes currency movements on investments.
(3) The comparative return per ordinary share figures have been
restated using the new number of shares in issue following the ten
for one share split that was implemented on 1 November 2021. For
weighted average purposes, the share split has been treated as
happening on the first day of the accounting period. See note 14
for further details.
All revenue and capital items in the above statement relate to
continuing operations.
The total column of the statement represents the Company's
Statement of Total Comprehensive Income prepared in accordance with
Financial Reporting Standards ("FRS").
No operations were acquired or discontinued during the
period.
There were no recognised gains or losses other than those
passing through the Income Statement.
The Notes form part of these financial statements.
Statement of Changes in Equity
Year ended 31 May 2022
Capital
Capital Other reserve on
Share Share redemption capital investments Revenue
capital premium reserve reserve held reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Movement for the period
ended
31 May 2022
Opening equity
shareholders' funds 36,240 269,535 3,325 976,685 679,736 (100,290) 1,865,231
Return for the year - - - 590,025 (4,861) (12,567) 572,597
Ordinary shares bought back
for cancelation (228) - 228 (10,364) - - (10,364)
---------------------------- ---------- ---------- ------------- ---------- ------------- ---------- ----------
Closing equity
shareholders' funds 36,012 269,535 3,553 1,556,346 674,875 (112,857) 2,427,464
---------------------------- ---------- ---------- ------------- ---------- ------------- ---------- ----------
Movement for the period
ended
31 May 2021
Opening equity
shareholders' funds 36,240 269,535 3,325 842,675 503,307 (95,816) 1,559,266
Return for the year - - - 134,010 176,429 (4,474) 305,965
---------------------------- ---------- ---------- ------------- ---------- ------------- ---------- ----------
Closing equity
shareholders' funds 36,240 269,535 3,325 976,685 679,736 (100,290) 1,865,231
---------------------------- ---------- ---------- ------------- ---------- ------------- ---------- ----------
The Notes form part of these financial statements.
The NAV per ordinary share at 31 May 2022 was 451.6 pence per
share (31 May 2021: 344.8 pence per share).
During the year ended 31 May 2022, 3,275,830 ordinary shares
were bought back in the market, to be held in Treasury (year ended
31 May 2021: nil) at a total cost, including stamp duty, of
GBP10.0m. The 3,275,830 shares that were held in Treasury, were
subsequently cancelled prior to the end of May 2022. In addition,
during the year ended 31 May 2022, 125,000 shares were bought back
for cancellation (year ended 31 May 2021: nil), at a total cost,
including stamp duty, of GBP0.3m.
As a result, there were 537,493,640 ordinary shares in issue as
at 31 May 2022 (of which none are held in Treasury; year to 31 May
2021: 54,089,447 ordinary shares and no Treasury shares).
Balance Sheet
As at 31 May 2022
31 May 2022 30 May 2021
Note GBP'000 GBP'000
----------------------------------------------- ------- ----------- -----------
Fixed assets
Investments at fair value 9a/b 2,238,608 1,713,724
----------------------------------------------- ------- ----------- -----------
Current assets
Debtors 11 2,123 8,215
Cash at bank 231,458 199,118
----------------------------------------------- ------- ----------- -----------
233,581 207,333
----------------------------------------------- ------- ----------- -----------
Creditors: Amounts falling due within one year
Other creditors 12 6,138 9,039
----------------------------------------------- ------- ----------- -----------
6,138 9,039
----------------------------------------------- ------- ----------- -----------
Net current assets 227,443 198,294
----------------------------------------------- ------- ----------- -----------
Total assets less current liabilities 2,466,051 1,912,018
----------------------------------------------- ------- ----------- -----------
Creditors: Amounts falling due after one year
Asset Linked Loan Note ("ALN") 13 38,587 46,787
----------------------------------------------- ------- ----------- -----------
38,587 46,787
----------------------------------------------- ------- ----------- -----------
Net assets 2,427,464 1,865,231
----------------------------------------------- ------- ----------- -----------
Capital and reserves
Called-up share capital 14 36,012 36,240
Share premium 15 269,535 269,535
Capital redemption reserve 15 3,553 3,325
Other capital reserve 15 1,556,346 976,685
Capital reserve on investments held 15 674,875 679,736
Revenue reserve 15 (112,857) (100,290)
----------------------------------------------- ------- ----------- -----------
Total equity shareholders' funds 2,427,464 1,865,231
----------------------------------------------- ------- ----------- -----------
Net asset value per Ordinary share(1) 16 451.63p 344.84p
----------------------------------------------- ------- ----------- -----------
(1) The comparative NAV figures have been restated using the new
number of shares in issue following the ten for one share split.
Restating the NAVs following the share split allows the reader to
see how the NAVs have evolved. See note 14 for further details. The
Notes form part of these financial statements .
The financial statements were approved by the Board of Pantheon
International Plc on 3 August 2022 and were authorised for issue
by
Sir Laurie Magnus
Chairman
Company No. 2147984
Cash Flow Statement
Year ended 31 May 2022
Year ended Year ended
===== ============ ============
31 May 2022 31 May 2021
===== ============ ============
Note GBP'000 GBP'000
===== ============ ============
Cash flow from operating activities
===== ------------ ------------
Investment income received(1) 19,157 16,311
===== ------------ ------------
Deposit and other interest received 28 87
===== ------------ ------------
Investment management fees paid (22,637) (18,416)
===== ------------ ------------
Secretarial fees paid (300) (263)
===== ------------ ------------
Depositary fees paid (254) (225)
===== ------------ ------------
Directors' fees paid (307) (338)
===== ------------ ------------
Legal and professional fees paid (1,707) (1,544)
===== ------------ ------------
Other cash payments(2) (804) (978)
===== ------------ ------------
Withholding tax (deducted)/recovered (3,626) 3,602
===== ------------ ------------
Net cash outflow from operating activities 18 (10,450) (1,764)
===== ------------ ------------
Cash flows from investing activities
===== ------------ ------------
Purchases of investments(3) (352,620) (226,205)
===== ------------ ------------
Disposals of investments(3) 402,700 344,559
===== ------------ ------------
Net cash inflow from investing activities 50,080 118,354
===== ------------ ------------
Cash flows from financing activities
===== ------------ ------------
ALN repayments (13,786) (24,286)
===== ------------ ------------
Ordinary shares purchased for cancellation (10,360) -
===== ------------ ------------
Loan commitment and arrangement fees paid (2,853) (4,888)
===== ------------ ------------
Net cash outflow from financing activities (26,999) (29,174)
===== ------------ ------------
Increase in cash in the year 12,631 87,416
----- ------------ ------------
Cash and cash equivalents at the beginning of the year 199,118 130,091
----- ------------ ------------
Foreign exchange gains/(losses) 19,709 (18,389)
----- ------------ ------------
Cash and cash equivalents at the end of the period 231,458 199,118
----- ------------ ------------
(1) The investment income received is comprised solely of
dividend income.
(2) Includes interest paid during the year of GBP96,000 (2021:
GBP66,000).
(3) Purchases and disposals do not include investments actioned
by Pantheon International Holdings LP and also exclude the non-cash
intercompany transfer of assets.
The Notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting Policies
PIP is a listed public limited company incorporated in England
and Wales. The registered office is detailed in the full Annual
Report. A summary of the principal accounting policies and
measurement bases, all of which have been applied consistently
throughout the year, is set out below.
A. Basis of Preparation
The Company's financial statements have been prepared in
compliance with FRS 102 as it applies to the financial statements
of the Company for the year ended 31 May 2022. They have also been
prepared on the assumption that approval as an investment trust
will continue to be granted. The Company's financial statements are
presented in sterling and all values are rounded to the nearest
thousand pounds (GBP'000) except when indicated otherwise. The
investments in the subsidiaries, which are valued at NAV, are as
financial assets, and held at fair value through profit or
loss.
B. Going Concern
The financial statements have been prepared on a going concern
basis and under the historical cost basis of accounting, modified
to include the revaluation of certain assets at fair value.
The Directors have made an assessment of going concern, taking
into account the Company's current performance and financial
position as at 31 May 2022. In addition, the Directors have
assessed the outlook, which considers a disrupted recovery in the
wake of the COVID-19 pandemic, the ongoing geopolitical
uncertainties as a result of the Russia-Ukraine conflict including
the disruption to the supply chain and increases in the cost of
living as a result of this conflict, persistent inflation, interest
rate rises and the impact of climate change on PIP's portfolio
using the information available up to the date of issue of the
financial statements. As part of this assessment the Directors
considered:
-- Various downside liquidity modelling scenarios with varying
degrees of decline in investment valuations, decreased investment
distributions, and increased call rates, with the worst being a low
case downside scenario representing an impact to the portfolio that
is worse than that experienced during the Global Financial
Crisis.
-- The Company manages and monitors liquidity regularly ensuring
it is adequate and sufficient and is underpinned by its monitoring
of investments, distributions, capital calls and outstanding
commitments. Total available financing as at 31 May 2022 stood at
GBP528m (31 May 2021: GBP475m), comprising GBP227m (31 May 2021:
GBP198m) in available cash balances and GBP301m in undrawn,
sterling equivalent, bank facilities (31 May 2021: GBP277m).
-- PIP's 31 May 2022 valuation is primarily based on reported GP
valuations with a reference date of 31 March 2022, updated for
capital movements and foreign exchange impacts. As the longer-term
impacts of COVID-19, the ongoing geopolitical uncertainties as a
result of the Russia-Ukraine conflict and the impact of climate
change may not be fully apparent, the Directors have considered the
impact that declining valuations could have on the Company's going
concern assessment.
-- Unfunded commitments - PIP's unfunded commitments at 31 May
2022 were GBP755m (31 May 2021: GBP528m). The Directors have
considered the maximum level of unfunded commitments which could
theoretically be drawn in a 12-month period, the ageing of
commitments and available financing to fulfil these commitments. In
these scenarios PIP can take steps to limit or mitigate the impact
on the Balance Sheet, namely drawing on the credit facility,
pausing on new commitments, selling assets to increase liquidity
and reducing outstanding commitments if necessary. In addition,
subject to market conditions, the Company could also seek to raise
additional credit or capital. Since the period end, the Company has
announced that it has agreed a new revolving credit facility,
totalling GBP500m which is due to expire in July 2027.
-- The Directors have also considered the impact of climate
change on PIP's portfolio and have come to the conclusion that
there is no significant impact on the Company as a result of
climate change. Please see the Viability Statement for further
details.
Having performed the assessment on going concern, the Directors
considered it appropriate to prepare the financial statements of
the Company on a going concern basis. The Company has sufficient
financial resources and liquidity, is well placed to manage
business risks in the current economic environment, and can
continue operations for a period of at least 12 months from the
date of issue of these financial statements.
C. Segmental Reporting
The Directors are of the opinion that the Company is engaged in
a single segment of business, being an investment business.
Consequently no business segmental analysis is provided.
D. Valuation of Investments
Given the nature of the Company's assets which comprise
predominantly unlisted fund investments, while the Company operates
a robust and consistent valuation process, there is significant
estimation uncertainty in the underlying fund valuations which are
estimated at a point in time. Accordingly, while the Company
considers circumstances where it might be appropriate to apply an
override, for instance in response to a market crash, this will be
exercised only where it is judged necessary to reflect fair
value.
Similarly, while relevant information relating to but received
after the measurement date is considered, the Directors will only
consider an adjustment to the financial statements if it were to
have a significant impact and is indicative of conditions present
at the measurement date.
The Company has fully adopted sections 11 and 12 of FRS 102. All
investments held by the Company are classified as "fair value
through profit or loss". As the Company's business is investing in
financial assets with a view to profiting from their total return
in the form of interest, dividends or increases in fair value,
investments are recognised at fair value on initial
recognition.
The Company manages and evaluates the performance of these
investments on a fair value basis in accordance with its investment
strategy. For investments actively traded in organised financial
markets, fair value is generally determined by reference to stock
exchange quoted market bid prices at the close of business at the
Balance Sheet date. For investments that are not actively traded in
organised financial markets, fair value is determined using
reliable valuation techniques as described below:
i Unquoted fixed asset investments are stated at the estimated
fair value.
In the case of investments in private equity funds, this is
based on the net asset value of those funds ascertained from
periodic valuations provided by the managers of the funds and
recorded up to the measurement date. Such valuations are
necessarily dependent upon the reasonableness of the valuations by
the fund managers of the underlying investments. In the absence of
contrary information, the values are assumed to be reliable. These
valuations are reviewed periodically for reasonableness and
recorded up to the measurement date. If a class of assets were sold
post-period end, management would consider the effect, if any, on
the investment portfolio.
The Company may acquire secondary interests at either a premium
or a discount to the fund manager's valuation. Within the Company's
portfolio, those fund holdings are normally revalued to their
stated net asset values at the next reporting date unless an
adjustment against a specific investment is considered
appropriate.
The fair value of each investment is derived at each reporting
date. In the case of direct investments in unquoted companies, the
initial valuation is based on the transaction price. Where better
indications of fair value become available, such as through
subsequent issues of capital or dealings between third parties, the
valuation is adjusted to reflect the new evidence, at each
reporting date. This information may include the valuations
provided by private equity managers who are also invested in the
Company.
ii Quoted investments are valued at the bid price on the
relevant stock exchange.
Private equity funds may contain a proportion of quoted shares
from time to time, for example where the underlying company
investments have been taken public but the holdings have not yet
been sold. The quoted market holdings at the date of the latest
fund accounts are reviewed and compared with the value of those
holdings at the period end.
iii Deferred payment transactions
The Company may engage in deferred payment transactions. Where
the Company engages in deferred payment transactions, the Company
initially measures the financial liability at the present value of
the future payments discounted at a market rate of interest for a
similar debt instrument. The difference between the present value
and the undiscounted value is amortised over the life of the
transaction and shown as a finance cost in the revenue column in
the Income Statement.
E. Asset Linked Note
As part of the share consolidation effected on 31 October 2017,
the Company issued an ALN with an initial principal amount of
GBP200m to the Investor. Payments under the ALN are made quarterly
in arrears and are linked to the ALN share (c.75%) of the net cash
flows from a reference portfolio which consists of interests held
by the Company in over 300 of its oldest private equity funds,
substantially 2006 and earlier vintages. The Company retains the
net cash flows relating to the remaining c.25% of the reference
portfolio.
The ALN is held at fair value through profit or loss and
therefore movements in fair value are reflected in the Income
Statement. Fair value is calculated as the sum of the ALN share of
fair value of the reference portfolio plus the ALN share of
undistributed net cash flow. The fair value movement is allocated
between revenue and capital pro rata to the fair value gains and
income-generated movements in the reference portfolio.
A pro rata share of the Company's total ongoing charges is
allocated to the ALN, reducing each quarterly payment ("the Expense
Charge") and deducted from Other Expenses through the revenue
account in the Income Statement.
The ALN's share of net cash flow is calculated after withholding
taxation suffered. These amounts are deducted from taxation through
the revenue account in the Income Statement.
See Note 13 for further information.
F. Income
Dividends receivable on quoted equity shares are brought into
account on the ex-dividend date.
Dividends receivable on equity shares where no ex-dividend date
is quoted are brought into account when the Company's right to
receive payment is established. The fixed return on a debt security
is recognised on a time apportionment basis.
Income distributions from funds are recognised when the right to
distributions is established.
G. Taxation
Corporation tax payable is based on the taxable profit for the
period. The charge for taxation takes into account taxation
deferred or accelerated because of timing differences between the
treatment of certain items for accounting and taxation purposes.
Full provision for deferred taxation is made under the liability
method, without discounting, on all timing differences that have
arisen but not reversed by the Balance Sheet date.
The tax effect of different items of income/gain and
expenditure/loss is allocated between capital and revenue on the
same basis as the particular item to which it relates, using the
marginal method.
Dividends receivable are recognised at an amount that may
include withholding tax (but excludes other taxes, such as
attributable tax credits). Any withholding tax suffered is shown as
part of the revenue account tax charge.
Deferred tax is not provided on capital gains and losses arising
on the revaluation or disposal of investments because the Company
meets (and intends to continue for the foreseeable future to meet)
the conditions for approval as an investment trust company,
pursuant to sections 1158 and 1159 of the CTA.
Deferred tax assets are only recognised if it is considered more
likely than not that there will be suitable profits from which the
future reversal of timing differences can be deducted.
H. Expenses
All expenses are accounted for on an accruals basis. Expenses,
including investment management fees, are charged through the
revenue account except as follows:
-- Expenses which are incidental to the acquisition or disposal
of an investment are treated as capital costs and separately
identified and disclosed in Note 4;
-- Expenses of a capital nature are accounted for through the capital account; and
-- Investment performance fees.
I. Foreign Currency
The functional and presentational currency of the Company is
pounds sterling ("sterling") because it is the primary currency in
the economic environment in which the Company operates.
Transactions denominated in foreign currencies are recorded in the
local currency at actual exchange rates as at the date of
transaction. Monetary assets and liabilities denominated in foreign
currencies at the period end are reported at the rates of exchange
prevailing at the period end. Any gain or loss arising from a
change in exchange rates subsequent to the date of the transaction
is included as an exchange gain or loss in the revenue or capital
column of the Income Statement depending on whether the gain or
loss is of a capital or revenue nature. For non-monetary assets,
these are covered by fair value adjustments. For details of
transactions included in the capital column of the Income Statement
please see (Jand (K) below.
J. Other Capital Reserve
The following are accounted for in this reserve:
-- Investment performance fees;
-- Gains and losses on the realisation of investments;
-- Realised exchange differences of a capital nature; and
-- Expenses of a capital nature.
Capital distributions from investments are accounted for on a
reducing cost basis; cash received is first applied to reducing the
historical cost of an investment, and any gain will be recognised
as realised only when the cost has been reduced to nil.
K. Capital Reserve on Investments Held
The following are accounted for in this reserve:
-- Increases and decreases in the value of investments held at the year end and the ALN.
L. Investment Performance Fee
The Manager is entitled to a performance fee from the Company in
respect of each 12 calendar-month period ending on 31 May of 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 calculation
period ended 31 May 2022, the notional performance fee hurdle is a
net asset value per share of 461.2p.
The performance fee is calculated using the adjusted net asset
value. The net asset value per share at 31 May 2022 is 451.6p.
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.
M. Significant Judgements and Estimates
The preparation of financial statements requires the Manager to
make judgements, estimates and assumptions that affect the reported
amounts of investments at fair value at the financial reporting
date and the reported fair value movements during the reporting
period. Actual results may differ from these estimates. Details of
how the fair values of unlisted investments are estimated and any
associated judgements applied are provided in Section (D of this
Note and also within the Market Price Risk section in Note 20.
N. Derecognition/Recognition of assets and liabilities
Financial assets and financial liabilities are recognised on the
Company's Balance Sheet when the Company becomes a party to the
contractual provisions of the instrument. In accordance with
FRS102, financial assets are derecognised when the contractual
rights to the cash flows from the instrument expire or the asset is
transferred and the transfer qualifies for derecognition. Financial
liabilities are derecognised when the obligation is discharged,
extinguished or expired.
2. Income
31 May 2022 31 May 2021
GBP'000 GBP'000
------------------------------- ------------ ------------
Income from investments
Investment income 19,137 16,331
------------------------------- ------------ ------------
19,137 16,331
------------------------------- ------------ ------------
Other income
Interest 28 89
Exchange difference on income 4 (2)
------------------------------- ------------ ------------
32 87
------------------------------- ------------ ------------
Total income 19,169 16,418
------------------------------- ------------ ------------
Total income comprises
Dividends 19,137 16,331
Bank interest 28 39
Other interest - 50
Exchange difference on income 4 (2)
------------------------------- ------------ ------------
19,169 16,418
------------------------------- ------------ ------------
Analysis of income from
investments
Unlisted 19,137 16,331
------------------------------- ------------ ------------
19,137 16,331
------------------------------- ------------ ------------
Geographical analysis
UK 306 3
US 14,345 12,345
Other overseas 4,486 3,983
------------------------------- ------------ ------------
19,137 16,331
------------------------------- ------------ ------------
3. Investment Management Fees
31 May 2022 31 May 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management
fees 23,115 - 23,115 18,544 - 18,544
----------------------- --------- --------- --------- --------- --------- ---------
23,115 - 23,115 18,544 - 18,544
----------------------- --------- --------- --------- --------- --------- ---------
The investment management fee is payable monthly in arrears at
the rate set out in the Directors' Report within the full Annual
Report.
During the year, services with a total value of GBP23,977,000
(period to 31 May 2021: GBP18,896,000), being GBP23,115,000 (period
to 31 May 2021: GBP18,544,000) directly from Pantheon Ventures (UK)
LLP and GBP862,000 (period to 31 May 2021 GBP352,000) via Pantheon
managed fund investments were purchased by the Company.
During the year, services with a total value of GBP23,977,000
(period to 31 May 2021: GBP18,896,000), being GBP23,115,000 (period
to 31 May 2021: GBP18,544,000) directly from Pantheon Ventures (UK)
LLP and GBP862,000 (period to 31 May 2021 GBP352,000) via Pantheon
managed fund investments were purchased by the Company.
The value of investments in, and outstanding commitments to,
investment funds managed or advised by the Pantheon Group
("Pantheon Funds") are excluded in calculating the monthly
management fee and the commitment fee. The value of holdings in
investments managed by the Pantheon Group totalled GBP897,332,000
as at 31 May 2022 (31 May 2021: GBP24,344,000), including
GBP812,172,000 from the new Pantheon managed Pantheon International
Holdings subsidiaries (31 May 2021 GBPnil). Please see note 17 for
further details. In addition, the Manager has agreed that the total
fees (including performance fees) payable by Pantheon Funds to
members of the Pantheon Group and attributable to the Company's
investments in Pantheon Funds shall be less than the total fees
(excluding the performance fee) that the Company would have been
charged under the Management Agreement had it invested directly in
all of the underlying investments of the relevant Pantheon Funds
instead of through the relevant Pantheon Funds.
At 31 May 2022, GBP2,124,000 (31 May 2021: GBP1,646,000) was
owed to the Investment Manager in respect of the investment
management fees. No performance fee is payable in respect of the
year to 31 May 2022 (31 May 2021: nil). The basis upon which the
performance fee is calculated is explained in Note 1(L) and in the
Directors' Report within the full Annual Report.
4. Other Expenses
31 May 2022 31 May 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- -------- --------
Secretarial and
accountancy services 312 - 312 243 - 243
-------- -------- -------- -------- -------- --------
Depositary fees 238 - 238 233 - 233
-------- -------- -------- -------- -------- --------
Fees payable to
the Company's Auditor
for the
- audit of the
annual financial
statements 105 - 105 115 - 115
-------- -------- -------- -------- -------- --------
Fees payable to
the Company's Auditor
for
-------- -------- -------- -------- -------- --------
* audit-related assurance services -Half-Yearly report 35 - 35 35 - 35
-------- -------- -------- -------- -------- --------
Directors' remuneration
(see Note 5) 311 - 311 331 - 331
-------- -------- -------- -------- -------- --------
Employer's National
Insurance 34 - 34 25 - 25
-------- -------- -------- -------- -------- --------
Irrecoverable VAT (47) - (47) 117 - 117
-------- -------- -------- -------- -------- --------
Legal and professional
fees 317 1,326 1,643 315 1,245 1,560
-------- -------- -------- -------- -------- --------
Other 701 - 701 706 95 801
-------- -------- -------- -------- -------- --------
ALN Expense Charge
(see Note 1 (F))(1) (732) - (732) (703) - (703)
-------- -------- -------- -------- -------- --------
1,274 1,326 2,600 1,417 1,340 2,757
-------- -------- -------- -------- -------- --------
(1) A pro rata share of the Company's total ongoing charges is
allocated to the ALN, reducing each quarterly payment.
The Directors do not consider that the provision of non-audit
work to the Company affects the independence of the Auditors due to
the half year review being an assurance service.
5. Directors' Remuneration
Directors' emoluments comprise Directors' fees. A breakdown is
provided in the Directors' Remuneration Report in the full Annual
Report.
6. Interest Payable and Similar Expenses
31 May 2022 31 May 2021
GBP'000 GBP'000
--------------------------------- ------------ ------------
Negative bank interest 96 66
Loan commitment and arrangement
fees 3,871 3,422
--------------------------------- ------------ ------------
3,967 3,488
--------------------------------- ------------ ------------
On 1 June 2018, the Company agreed a four-year GBP175m
multi-currency revolving credit facility agreement, arranged by
Lloyds Bank and NatWest Markets. This replaced the four-year
GBP150m loan facility agreement, with the Royal Bank of Scotland
plc and Lloyds Bank plc, which was due to expire in November
2018.
Upfront fees of GBP1.6m are being amortised from 1 June 2018,
over the four-year life. A commitment fee of 0.94% per annum is
payable quarterly, in respect of the amounts available for
drawdown. Interest payable on any drawdown amount is payable for
the duration of the drawdown period.
At 31 May 2022, the total available facility with State Street
Bank and Trust Company is GBP300m. The aggregate loan facility of
GBP300m is split into two tranches of US$269.8m and EUR101.6m,
retranslated to GBP301m as at 31 May 2022 (2021: GBP277m).
In February 2021, the Company agreed to extend the facility end
date for a further two years, to 31 May 2024. Upfront fees of
GBP2.2m, in relation to this extension agreement, are being
amortised over the remaining life of the loan, until 31 May
2024.
On 2 August 2022, the Company announced that it has agreed a new
five-year GBP500m multi-tranche, multi-currency revolving credit
facility agreement arranged by Credit Suisse AG London Branch,
Lloyds Bank Corporate Markets plc and State Street Bank
International GmbH. The Loan Facility, which replaced the GBP300m
loan facility agreement, which was due to expire in May 2024, is
comprised of facilities amounting to $512.9m and EUR89.2m and
secured by certain assets of the Company. The new facility will
expire in July 2027 with an ongoing option to extend, by agreement,
the maturity date by another year at a time. The new facility will
have a blended commitment fee of 0.95% per annum on available
commitments, pricing equivalent to the relevant benchmark rate plus
2.350% to 2.575% depending on utilisation, and is subject to loan
to value and liquidity ratios.
This loan facility provides a margin of additional assurance
that the Company has the ability to finance its unfunded
commitments in the future. At 31 May 2022 and 31 May 2021, the loan
facility remained fully undrawn.
7. Taxation
31 May 2022 31 May 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- --------- --------- ---------- --------- ----------
Withholding tax
deducted/(recovered)
from distributions 3,075 - 3,075 (3,533) - (3,533)
------------------------ --------- --------- --------- ---------- --------- ----------
Tax charge
The tax credit/(charge) for the year differs from the standard
rate of corporation tax in the UK (19%). The differences are
explained below:
Net return before
tax (9,492) 585,164 575,672 (8,007) 310,439 302,432
-------------------------- -------- ---------- ---------- -------- --------- ---------
Theoretical tax
at UK corporation
tax rate of 19%
(31 May 2021: 19%) (1,803) 111,181 109,378 (1,521) 58,983 57,462
Non-taxable investment,
derivative and currency
gains - (111,433) (111,433) - (59,238) (59,238)
Effect of expenses
in excess of taxable
income - 252 252 - 237 237
Expenses disallowable
for tax purposes - - - - 18 18
Carry forward management
expenses 1,803 - 1,803 1,521 - 1,521
Withholding tax
deducted/(recovered)
from distributions 3,075 - 3,075 (3,533) - (3,533)
-------------------------- -------- ---------- ---------- -------- --------- ---------
3,075 - 3,075 (3,533) - (3,533)
-------------------------- -------- ---------- ---------- -------- --------- ---------
The tax charge for the year ended 31 May 2022 is GBP3.1m (31 May
2021: tax credit of GBP3.5m).
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.
During the prior year to 31 May 2021, and included within the
above, there was a tax credit, resulting from a refund of prior
years' taxation, amounting to GBP6.1m, from the US Inland Revenue
Service. As this tax credit was due to a build up of previous
claims that have now been recovered, a recoverable amount will not
recur going forward as recoverable amounts are now claimed and
received through a regular process.
Factors That May Affect Future Tax Charges
The Company is an investment trust and therefore is not subject
to tax on capital gains. Deferred tax is not provided on capital
gains and losses arising on the revaluation or disposal of
investments because the Company meets (and intends to meet for the
foreseeable future) the conditions for approval as an investment
trust company.
No deferred tax asset has been recognised in respect of excess
management expenses and expenses in excess of taxable income as
they will only be recoverable to the extent that there is
sufficient future taxable revenue. As at 31 May 2022, excess
management expenses are estimated to be in excess of GBP227m (31
May 2021: GBP249m).
At 31 May 2022, the Company had no unprovided deferred tax
liabilities (31 May 2021: GBPnil).
8. Return per Ordinary Share
31 May 2022 31 May 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Return for the
financial period
in GBP'000 (12,567) 585,164 572,597 (4,474) 310,439 305,965
Weighted average
ordinary and redeemable
shares 539,896,863 540,894,470(1)
Return per ordinary
share (2.32)p 108.38p 106.06p (0.83)p(1) 57.40p(1) 56.57p(1)
(1) Restated to reflect the subsequent 10 for 1 share split.
There are no dilutive or potentially dilutive shares in
issue.
9a. Movements on Investments
31 May 2022 31 May 2021
GBP'000 GBP'000
------------------------------------- ------------ ------------
Book cost brought forward 1,003,796 973,761
Opening unrealised appreciation
on investments held
-Unlisted investments 709,712 521,565
* Listed investments 216 363
------------------------------------- ------------ ------------
Valuation of investments brought
forward 1,713,724 1,495,689
Movements in year:
Acquisitions at cost 979,764 226,205
Capital distributions - proceeds(1) (1,024,931) (349,972)
Capital distributions - realised
gains on sales(1) 571,790 153,802
(Decrease)/increase in appreciation
on investments held (1,739) 188,000
------------------------------------- ------------ ------------
Valuation of investments at
year end 2,238,608 1,713,724
------------------------------------- ------------ ------------
Book cost at year end 1,530,419 1,003,796
Closing unrealised appreciation
on investments held
-Unlisted investments 706,707 709,712
-Listed investments 1,482 216
------------------------------------- ------------ ------------
Valuation of investments at
year end 2,238,608 1,713,724
------------------------------------- ------------ ------------
Fair value of investments:
Unlisted investments 2,235,639 1,713,508
Listed investments 2,969 216
------------------------------------- ------------ ------------
Valuation of investments at
year end 2,238,608 1,713,724
------------------------------------- ------------ ------------
(1) On 31 December 2021, the Company transferred several
investments, at a fair value of GBP627.1m, to its wholly owned
subsidiary Pantheon International Holdings LP, in return for a 99%
investment in Pantheon International Holdings LP, being GBP620.8m
and the remaining 1% in Pantheon International Holdings GP LP,
being GBP6.3m.
Further details in relation to the structuring arrangements are
included in Note 17.
9b. Analysis of Investments
Further analysis of the investment portfolio is provided in the
full Annual Report.
Transaction costs (incurred at the point of the transaction)
incidental to the acquisition of investments totalled GBPnil (31
May 2021: GBPnil) and to the disposals of investments totalled
GBP4,000 (31 May 2021: GBP12,000) for the period. In addition,
legal fees incidental to the acquisition of investments totalled
GBP1,326,000 (31 May 2021: GBP1,340,000), as disclosed in Note 4,
and have been taken to the capital column in the Income Statement
since they are capital in nature.
Included in investments are also investments that the Company
holds in its subsidiaries. Please see note 17 for further
details.
31 May 2022 31 May 2021
GBP'000 GBP'000
Realised gains on sales 571,790 153,802
Amounts previously recognised
as unrealised appreciation on
those sales 216 363
(Decrease)/increase in unrealised
appreciation (1,955) 187,637
Revaluation of amounts owed (3) -
in respect of transactions
Gains on investments 570,049 341,802
Sterling
Unlisted investments 872,089 67,451
872,089 67,451
US dollar
Unlisted investments 1,083,342 1,266,123
Listed investments 2,969 216
1,086,311 1,266,339
Euro
Unlisted investments 247,749 337,522
247,749 337,522
Other
Unlisted investments 32,459 42,412
32,459 42,412
2,238,608 1,713,724
9c. Material Investment
At the period end, the Company held the following material
holdings in an investee undertaking which exceeds 3% of any class
of capital.
Investment % ownership Closing net
asset value
GBP'000
Zenith 1 LP 5.88 2,001
Gemini Israel V 4.65 16,145
LYFE Capital Fund II 3.36 16,110
Balderton Growth Fund I 3.19 6,982
10. Fair Value Hierarchy
The fair value hierarchy consists of the following three
levels:
Level 1 - The unadjusted quoted price in an active market for
identical assets or liabilities that the entity can access at the
measurement date. The Level 1 holdings include publicly listed
holdings held directly by the Company from in specie distributions
received from underlying investments, but does not include listed
holdings held indirectly through the Company's underlying private
equity managers which are classified under Level 3 holdings;
Level 2 - Inputs other than quoted prices included within Level
1 that are observable (i.e. developed using market data) for the
asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices); and
Level 3 - Inputs are unobservable (i.e. for which market data is
unavailable) for the asset or liability.
Financial Assets at Fair Value Through Profit or Loss at 31 May
2022
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------- ------------ ------------
Unlisted holdings - - 2,235,639 2,235,639
Listed holdings 2,969 - - 2,969
--------------------- --------- --------- ------------ ------------
2,969 - 2,235,639 2,238,608
--------------------- --------- --------- ------------ ------------
Financial Assets at Fair Value Through Profit or Loss at 31 May
2021
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------- ----------- ------------
Unlisted holdings - - 1,713,508 1,713,508
Listed holdings 216 - - 216
--------------------- --------- --------- ----------- ------------
216 - 1,713,508 1,713,724
--------------------- --------- --------- ----------- ------------
Financial Liabilities at Fair Value Through Profit or Loss at 31
May 2022
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------- ---------- --------- ---------
Asset Linked Note - - 41,374 41,374
------------------- ---------- ---------- --------- ---------
- - 41,374 41,374
---------- ------------------------------ --------- ---------
Financial Liabilities at Fair Value Through Profit or Loss at 31
May 2021
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------- ---------- --------- ---------
Asset Linked Note - - 53,015 53,015
------------------- ---------- ---------- --------- ---------
- - 53,015 53,015
---------- ------------------------------ --------- ---------
11. Debtors
31 May 2022 31 May 2021
GBP'000 GBP'000
-------------------------------- ------------ ------------
Amounts owed by investment
funds 595 5,656
Prepayments and accrued income 1,528 2,559
-------------------------------- ------------ ------------
2,123 8,215
-------------------------------- ------------ ------------
12. Creditors Amounts Falling Due Within One Year
31 May 2022GBP'000 31 May 2021GBP'000
------------------------------- ------------------- -------------------
Investment management fees 2,124 1,646
Amounts owed in respect of 4 -
transactions
ALN repayment to the Investor 2,787 6,228
Other creditors and accruals 1,223 1,165
------------------------------- ------------------- -------------------
6,138 9,039
------------------------------- ------------------- -------------------
13. Creditors Amounts Falling Due After One Year - Asset Linked
Note
31 May 2022 31 May 2021
GBP'000 GBP'000
------------------------------ ------------ ------------
Opening value of ALN 53,015 65,386
Repayments of net cash flows
received (13,786) (24,286)
Fair value movement through
profit or loss 3,428 12,547
Expense charge and ALN share
of withholding taxes (1,283) (632)
------------------------------ ------------ ------------
Closing value of ALN (see
Note 1 (F)) 41,374 53,015
Transfer to creditors due
within one year (2,787) (6,228)
------------------------------ ------------ ------------
38,587 46,787
------------------------------ ------------ ------------
14. Called-up Share Capital
31 May 2022 31 May 2021
Shares GBP'000 Shares GBP'000
------------------------- ------------ -------- ----------- --------
Allotted, called up and
fully paid:
Ordinary Shares of 6.7p
each (2021: 0.67p)
Opening position 54,089,447 36,240 54,089,447 36,240
Cancellation of shares (3,400,830) (228) - -
Shares issued through 486,805,023 - - -
share split
------------ -------- ----------- --------
Closing position 537,493,640 36,012 54,089,447 36,240
------------------------- ------------ -------- ----------- --------
Total shares in issue 537,493,640 36,012 54,089,447 36,240
------------------------- ------------ -------- ----------- --------
At the Annual General Meeting of the Company held on 27 October
2021, shareholders approved a resolution for a ten for one share
split such that each shareholder would receive ten shares with a
nominal value of 6.7 pence each for every existing share held.
These new shares were listed on 1 November 2021.
During the year ended 31 May 2022, 3,275,830 ordinary shares
were bought back in the market, to be held in Treasury (year ended
31 May 2021: nil) at a total cost, including stamp duty, of
GBP10.0m. The 3,275,830 shares that were held in Treasury, were
subsequently cancelled prior to the end of May 2022. In addition,
during the year ended 31 May 2022, 125,000 shares were bought back
for cancellation (year ended 31 May 2021: nil), at a total cost,
including stamp duty, of GBP0.3m.
As a result, there were 537,493,640 ordinary shares in issue as
at 31 May 2022 (of which none are held in Treasury; year to 31 May
2021: 54,089,447 ordinary shares and no Treasury shares). Each
holder of ordinary shares is entitled, on a show of hands, to one
vote and, on a poll, to one vote for each ordinary share held.
15. Reserves
Capital
Capital Other reserve
Share redemption capital on Revenue
premium reserve reserve investments Reserve(1)
GBP'000 GBP'000 GBP'000 held GBP'000
GBP'000
------------------------------------------- ---------- ------------- ---------- ------------- -------------
Beginning of period 269,535 3,325 976,685 679,736 (100,290)
Net gain on realisation of investments(2) - - 571,790 - -
Decrease in unrealised appreciation - - - (5,077) -
Transfer on disposal of investments - - - 216 -
Revaluation of amounts owed in respect - - (3) - -
of transactions
Exchange differences on currency - - 19,709 - -
Exchange differences on other capital - - (145) - -
items
Legal and professional expenses charged - - (1,326) - -
to capital
Share reorganisation and share buybacks - 228 (10,364) - -
Revenue return for the period - - - - (12,567)
---------- ------------- ---------- ------------- -------------
End of period 269,535 3,553 1,556,346 674,875 (112,857)
------------------------------------------- ---------- ------------- ---------- ------------- -------------
(1) Reserves that are distributable by way of dividends. In
addition, the Other Capital Reserve can be used for share
buybacks.
(2) Net gain on realisation of investments includes a realised
gain of GBP372,987,000 following the transfer of several
investments at fair value during the year, to its wholly owned
subsidiary Pantheon International Holdings LP.
16. Net Asset Value per Share
31 May 2022 31 May 2021
------------------------------ ------------ ---------------
Net assets attributable in
GBP'000 2,427,464 1,865,231
Ordinary shares 537,493,640 540,894,470(1)
Net asset value per ordinary
share 451.63p 344.84p(1)
------------------------------ ------------ ---------------
(1) Restated to reflect the subsequent ten for one share
split.
17. Subsidiaries
The Company has formed three wholly owned subsidiaries, to
provide security for future financial lending arrangements.
Pantheon International Holdings LP ("PIH LP") was incorporated on
29 March 2021 with a registered address in the State of Delaware
(National Registered Agents, Inc., 209 Orange Street, Wilmington,
Delaware, 19801), and is wholly owned by the Company.
The Company holds an investment in PIH LP. In accordance with
FRS102, the Company is exempted from the requirement to prepare
consolidated financial statements on the grounds that its
subsidiary is held exclusively with a view to subsequent resale as
it is considered part of an investment portfolio. The subsidiary's
value to the Company is through fair value and it holds a basket of
investments rather than to carry out business on the Company's
behalf. Investments held within PIH LP are based on the fair value
of the investments held in those entities.
On 31 December 2021, the Company transferred several
investments, at a fair value of GBP627.1m, to its wholly-owned
subsidiary Pantheon International Holdings LP in order to provide
security for the new GBP500m multi-currency facility agreed 2
August 2022. The aggregate amount of its capital and reserves as at
31 May 2022 is GBP820,800,000, and the profit or loss for the
period ended 31 May 2022 is GBP164,000.
The General Partner for PIH LP is Pantheon International
Holdings GP Limited ( "PIH GP"). PIH GP was incorporated on 17
March 2021 with a registered address c/o Maples Corporate Services
Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman
Islands, and is wholly owned by the Company. The Company is not
exempt from consolidating the financial statements under FRS102,
however the highly immaterial (GBPnil) balance of PIH GP Limited
would produce accounts with almost identical balances to the
Company. Furthermore, with reference to the CA, section 405 (2), "A
subsidiary undertaking may be excluded from consolidation if its
inclusion is not material for the purpose of giving a true and fair
view".
The aggregate amount of its capital and reserves as at 31 May
2022 is GBP1 and the profit or loss for the period ended 31 May
2022 is GBPnil.
The General Partner and the Limited Partner formed an exempted
limited partnership, named Pantheon International Holdings GP LP
("PIH GP LP"). PIH GP LP was incorporated on 17 March 2021 with a
registered address c/o Maples Corporate Services Limited, PO Box
309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
The Company holds an investment in PIH GP LP. In accordance with
FRS102, the Company is exempted from the requirement to prepare
consolidated financial statements on the grounds that its
subsidiary is held exclusively with a view to subsequent resale as
it is considered part of an investment portfolio. Therefore, the
Company's investment in PIH GP LP will be recognised at fair value
through profit or loss.
Any investments made by Company into PIH LP, generally invest at
99% directly into PIH LP, with the remaining 1% investing into PIH
GP LP. PIH GP LP will then, in turn, wholly invest those funds into
PIH LP, so no funds remain in PIH GP LP.
18. Reconciliation of Return Before Financing Costs and Taxation
to Net Cash Flow from Operating Activities
31 May 31 May 2021
2022 GBP'000
GBP'000
------------------------------------------ ---------- ------------
Return before finance costs and
taxation 579,639 305,920
Withholding tax (deducted)/recovered (3,075) 3,533
Gains on investments (570,049) (341,802)
Currency (gains)/losses on cash
and borrowings (19,564) 18,452
Increase in creditors 483 215
(Increase)/decrease in other debtors (29) 3
Reduction of financial liabilities
at fair value through profit or
loss (ALN) 3,428 12,547
Income, expenses and taxation associated
with the ALN (1,283) (632)
------------------------------------------ ---------- ------------
Net cash outflow from operating
activities (10,450) (1,764)
------------------------------------------ ---------- ------------
19. Contingencies, Guarantees and Financial Commitments
At 31 May 2022 there were financial commitments outstanding of
GBP755m (31 May 2021: GBP528m) in respect of investments in partly
paid shares and interests in private equity funds. We expect 22% of
the financial commitments outstanding to be called within the next
twelve months.
Further detail of the available finance cover is provided in
Note 20.
20. Analysis of Financial Assets and Liabilities
The primary investment objective of the Company is to seek to
maximise long-term capital growth for its shareholders by investing
in funds specialising in unquoted investments, acquiring unquoted
portfolios and participating directly in private placements.
Investments are not restricted to a single market but are made when
the opportunity arises and on an international basis.
The Company's financial instruments comprise securities and
other investments, cash balances and debtors and creditors that
arise from its operations, for example sales and purchases awaiting
settlement and debtors for accrued income.
The principal risks the Company faces in its portfolio
management activities are:
-- liquidity/marketability risk;
-- interest rate risk;
-- market price risk; and
-- foreign currency risk.
The Company also has exposure to credit risk through its bank
balances with the exposures being to banks with a minimum credit
rating of A. The Manager monitors the financial risks affecting the
Company on a daily basis, and the Directors regularly receive
financial information, which is used to identify and monitor
risk.
In accordance with FRS 102, an analysis of financial assets and
liabilities, which identifies the risk to the Company of holding
such items, is given below.
Liquidity Risk
Due to the nature of the Company's investment policy, the
largest proportion of the portfolio is invested in unquoted
securities, many of which are less readily marketable than, for
example, "blue-chip" UK equities. The Directors believe that the
Company, as a closed ended fund with no fixed wind-up date, is
ideally suited to making long-term investments in instruments with
limited marketability. The investments in unquoted securities are
monitored by the Board on a regular basis.
There are times when opportunities for the Company to acquire
secondary unquoted portfolios of interests or co-investments may be
limited due to the cyclical nature of their occurrence. As a
result, at times of low investment opportunity, some funds may be
held on deposit or invested in gilts and other fixed interest
government bonds. It is the nature of investment in private equity
that a commitment (see Note 19 for outstanding commitments as at 31
May 2022) to invest will be made and that calls for payments will
then be received from the unlisted investee entity. These payments
are usually on an ad-hoc basis and may be called at any instance
over a number of years. The Company's ability to meet these
commitments is dependent upon it receiving cash distributions from
its private equity investments and, to the extent these are
insufficient, on the availability of financing facilities.
On 1 June 2018, the Company agreed a four-year GBP175m
multi-currency revolving credit facility agreement, arranged by
Lloyds Bank and NatWest Markets. This was further extended to
GBP300m on 31 May 2020. This replaced the GBP150m loan facility
agreement which was due to expire in November 2018, of which GBPnil
was drawn down as at 31 May 2022 and 31 May 2021. (see Note 6 for
further information). In February 2021, the Company further agreed
an extension to the facility end date to 31 May 2024.
The principal covenant that applies to the loan facility is that
gross borrowings do not exceed 30% of adjusted gross asset value.
The facility is available should the Company have the requirement
to cover any shortfalls in meeting its commitments.
Total available financing as at 31 May 2022 stood at GBP528m (31
May 2021: GBP475m), comprising GBP227m (31 May 2021: GBP198m) in
cash balances and GBP301m (31 May 2021: GBP277m) (sterling
equivalent) in undrawn bank facilities. The available financing
along with the private equity portfolio exceeded the outstanding
commitments by 3.7 times (31 May 2021: 4.1 times).
On 2 August 2022, the Company announced that it has agreed a new
five-year GBP500m multi-tranche, multi-currency revolving credit
facility agreement arranged by Credit Suisse AG London Branch,
Lloyds Bank Corporate Markets plc and State Street Bank
International GmbH. The Loan Facility, which replaced the GBP300m
loan facility agreement, which was due to expire in May 2024, is
comprised of facilities amounting to $512.9m and EUR89.2m and
secured by certain assets of the Company. The new facility will
expire in July 2027 with an ongoing option to extend, by agreement,
the maturity date by another year at a time. The new facility will
have a blended commitment fee of 0.95% per annum on available
commitment and pricing equivalent to the relevant benchmark rate
plus 2.350% to 2.575% depending on utilisation. The principal
covenants that apply to the loan facility require: (i) that gross
borrowings do not exceed 34% of the borrowing base; (ii) that gross
borrowings do not exceed 45% of the adjusted borrowing base in the
first year of the facility, and 40% thereafter; and (iii) the
liquidity ratio does not exceed 3.0x undrawn commitments.
Interest Rate Risk
The Company may use gearing to achieve its investment objectives
and manage cash flows and uses a multi-currency revolving credit
facility for this purpose.
Interest on the revolving credit facility is payable at variable
rates determined subject to drawdown. Variable rates are defined as
RFR, dependent on the currency drawn. The interest rate is then
fixed for the duration that the loan is drawn down. At 31 May 2022,
there was the sterling equivalent of GBPnil funds drawn down on the
loan facilities (31 May 2021: GBPnil). A commitment fee of 0.94%
per annum is payable in respect of the amounts available for
drawdown in each facility.
Non-Interest Rate Exposure
The remainder of the Company's portfolio and current assets are
not subject to interest rate risks.
Financial assets for 2022 and 2021 consisted of investments,
cash and debtors (excluding prepayments). As at 31 May 2022, the
interest rate risk and maturity profile of the Company's financial
assets was as follows:
Fixed
interest
No Matures Matures average
maturity within after interest
Total date 1 year 1 year rate
31 May 2022 GBP'000 GBP'000 GBP'000 GBP'000 %
--------------- ---------- ----------- ---------- ---------- ----------
Fair value no interest rate risk
financial assets
Sterling 891,350 891,350 - - -
US dollar 1,262,083 1,262,083 - - -
Euro 269,786 269,786 - - -
Other 47,446 47,446 - - -
--------------- ---------- ----------- ---------- ---------- ----------
2,470,665 2,470,665 - - -
--------------- ---------- ----------- ---------- ---------- ----------
The interest rate and maturity profile of the Company's
financial assets as at 31 May 2021was as follows:
Fixed
interest
No Matures Matures average
Maturity within after interest
Total Date 1 year 1 year rate
31 May 2021 GBP'000 GBP'000 GBP'000 GBP'000 %
--------------- ---------- ----------- ---------- ---------- ----------
Fair value of no interest rate
risk financial assets
Sterling 74,668 74,668 - - -
US dollar 1,428,217 1,428,217 - - -
Euro 356,593 356,593 - - -
Other 53,364 53,364 - - -
--------------- ---------- ----------- ---------- ---------- ----------
1,912,842 1,912,842 - - -
--------------- ---------- ----------- ---------- ---------- ----------
Financial Liabilities
At 31 May 2022, the Company had drawn the sterling equivalent of
GBPnil (31 May 2021: GBPnil) of its committed revolving
multi-currency credit facility, expiring 31 May 2024, with Lloyds
Bank and Natwest Markets. Interest is incurred at a variable rate
as agreed at the time of drawdown and is payable at the maturity
date of each advance. At the year end, interest of GBPnil (31 May
2021: GBPnil) was accruing as the facilities were unutilised.
At 31 May 2022 and 31 May 2021, other than the ALN, all
financial liabilities were due within
one year and comprised short-term creditors. The ALN is
repayable by no later than
31 August 2027.
Market Price Risk
The method of valuation of the fixed asset investments is
described in Note 1(D) above. The nature of the Company's fixed
asset investments, with a high proportion of the portfolio invested
in unquoted securities, means that the investments are valued by
the Directors after due consideration of the most recent available
information from the underlying investments.
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.
If the investment portfolio fell by 20% from the 31 May 2022
valuation, with all other variables held constant, there would have
been a reduction of GBP447,722,000 (31 May 2021: GBP342,745,000) in
the return before taxation. An increase of 20% would have increased
the return before taxation by an equal and opposite amount.
Foreign Currency Risk
Since it is the Company's policy to invest in a diverse
portfolio of investments based in a number of countries, the
Company is exposed to the risk of movement in a number of foreign
exchange rates. A geographical analysis of the portfolio and hence
its exposure to currency risk is given in the full Annual Report
and in Note 9b. Although it is permitted to do so, the Company did
not hedge the portfolio against the movement in exchange rates
during the financial period.
The investment approach and the Manager's consideration of the
associated risk are discussed in further detail in the Strategic
Report and the Manager's Review in the full Annual Report.
The Company settles its transactions from its bank accounts at
an agreed rate of exchange at the date on which the bargain was
made. As at 31 May 2022, realised exchange losses of GBP145,000 (31
May 2021: losses of GBP63,000) and realised gains relating to
currency of GBP19,709,000 (31 May 2021: realised losses of
GBP18,389,000) have been taken to the capital reserve.
The Company's exposure to foreign currency excluding private
equity investments is shown below. In relation to this exposure, if
the sterling/dollar and sterling/euro exchange rate had reduced by
10% from that obtained at 31 May 2022, it would have the effect,
with all other variables held constant, of increasing equity
shareholders' funds by GBP21,936,000 (31 May 2021: GBP20,497,000).
If there had been an increase in the sterling/dollar and
sterling/euro exchange rate of 10% it would have the effect of
decreasing equity shareholders' funds by GBP17,948,000 (31 May
2021: GBP16,770,000). The calculations are based on the financial
assets and liabilities and the exchange rate as at 31 May 2022 of
1.26 (31 May 2021: 1.42155) sterling/dollar and 1.17625 (31 May
2021: 1.16255) sterling/euro. The Company's investment currency
exposure is disclosed in Note 9b.
An analysis of the Company's exposure to foreign currency is
given below:
31 May 31 May 31 May 31 May
2022 2022 2021 2021
Assets Liabilities Assets Liabilities
GBP'000 GBP'000 GBP'000 GBP'000
------------------- ------------------- -------------- ---------- --------------
US dollar 176,090 497 166,508 455
Canadian dollar 1,375 - 18 -
Euro 22,036 201 19,071 203
Swedish krone 240 - 3,219 -
Norwegian krone 136 - 1,712 -
Australian dollar 13,236 - 7,480 -
213,113 698 197,558 658
------------------- ------------------- -------------- ---------- --------------
Fair Value of Financial Assets and Financial Liabilities
The financial assets of the Company are held at fair value.
Financial liabilities are held at amortised cost, which is not
materially different from fair value, apart from the ALN portfolio
which is held at fair value.
Managing Capital
The Company's equity comprises ordinary shares as described in
Note 14. Capital is managed so as to maximise the return to
shareholders while maintaining a capital base that allows the
Company to operate effectively in the marketplace and sustain
future development of the business.
The Company considers its capital to be comprised of called up
share capital and net available cash. As at 31 May 2022 and 31 May
2021, the Company had bank debt facilities to increase the
Company's liquidity. Details of available borrowings at the period
end can be found earlier in this Note.
The Company's assets and borrowing levels are reviewed regularly
by the Board of Directors with reference to the loan covenants.
The Company's capital requirement is reviewed regularly by the
Board of Directors.
21. Transactions with the Manager and Related Parties
The amounts paid to the Manager, together with the details of
the Investment Management Agreement, are disclosed in Note 3. The
existence of an Independent Board of Directors demonstrates that
the Company is free to pursue its own financial and operating
policies and therefore, under the AIC SORP, the Manager is not
considered to be a related party.
The Company's only related party transactions during the year
pertain to the Directors Fees paid to the Company's Board and are
disclosed in the Directors' Remuneration Report in the full Annual
Report.
The Company has also formed three wholly-owned subsidiaries.
Please see note 17 for further details. The Company also holds an
investment in PSOF. Please see the full Annual Report for further
details.
There are no other identifiable related parties at the period
end.
22. Post Balance Sheet Events
On 2 August 2022, the Company announced that it has agreed a new
five-year GBP500m multi-tranche, multi-currency revolving credit
facility agreement arranged by Credit Suisse AG London Branch,
Lloyds Bank Corporate Markets plc and State Street Bank
International GmbH. The Loan Facility, which replaced the GBP300m
loan facility agreement, which was due to expire in May 2024, is
comprised of facilities amounting to $512.9m and EUR89.2m and
secured by certain assets of the Company. The new facility will
expire in July 2027 with an ongoing option to extend, by agreement,
the maturity date by another year at a time. The new facility will
have a blended commitment fee of 0.95% per annum on available
commitments, pricing equivalent to the relevant benchmark rate plus
2.350% to 2.575% depending on utilisation. The principal covenants
that apply to the loan facility require: (i) that gross borrowings
do not exceed 34% of the borrowing base; (ii) that gross borrowings
do not exceed 45% of the adjusted borrowing base in the first year
of the facility; and (iii) the liquidity ratio does not exceed 3.0x
undrawn commitments.
ANNUAL GENERAL MEETING
The Company's Annual General Meeting ("AGM") will be held on
Tuesday, 18 October 2022 at 10.30 a.m. A separate circular
containing the AGM notice will be published and made available
towards the end of August 2022.
NATIONAL STORAGE MECHANISM
A copy of the Annual Report and Financial Statements and the
separate circular containing the AGM notice will be submitted
shortly to the National Storage Mechanism ("NSM") and will be
available for inspection at the NSM, which is situated at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
S
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on this document (or any
other website) is incorporated into, or forms part of, this
announcement.
LEI: 2138001B3CE5S5PEE928
For more information please visit PIP's website at www.piplc.com
or contact:
Helen Steers or Vicki Bradley
Pantheon Ventures (UK) LLP
020 3356 1800
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FR PJMMTMTIMTBT
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August 04, 2022 02:00 ET (06:00 GMT)
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