TIDMPIN
RNS Number : 6220H
Pantheon International PLC
05 August 2021
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is not for publication, release or distribution in the United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 2021
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 a global and diversified portfolio of private
equity companies, today publishes its Annual Report and Accounts
for the twelve months ended 31 May 2021.
Annualised performance as at 31 may 2021
Since inception
1 yr 3 yrs 5 yrs 10 yrs (1987)
NAV per share 19.6% 12.6% 14.7% 12.6% 11.8%
------ ------- ------- -------- ----------------
Ordinary share price 31.7% 10.6% 15.9% 13.4% 11.4%
------ ------- ------- -------- ----------------
FTSE All Share,
Total Return 23.1% 1.9% 7.0% 6.3% 7.5%
------ ------- ------- -------- ----------------
MSCI World, Total
Return (Sterling) 37.6% 14.9% 16.8% 13.3% 8.6%
------ ------- ------- -------- ----------------
Share price relative performance
Versus FTSE All
Share, Total Return +8.6% +8.7% +8.9% +7.1% +3.9%
Versus MSCI World,
Total Return (Sterling) -5.9% -4.3% -0.9% +0.1% +2.8%
------- ------- ------- ------- -------
HIGHLIGHTS - TWELVE MONTHSED 31 MAY 2021
Performance update
-- PIP performed strongly during the period as NAV per share grew by 19.6% to 3,448.4p.
-- Net assets at 31 May 2021 increased to GBP1,865m (31 May 2020: GBP1,559m).
-- PIP's share price increased by 31.7% and Total Shareholder Return (5Y) was 109%.
-- The discount to NAV, which the Board believes is unwarranted, was 21%.
Portfolio update
-- Strong (pre-FX) valuation gains of 36.0% in the portfolio
demonstrate the growth orientation of PIP's private equity
investments.
-- PIP's portfolio is tilted towards the more resilient industry
sectors such as information technology, healthcare and consumer
staples, with very low exposure to those areas that have been
hardest hit by the pandemic.
-- Distributions received during the year to 31 May 2021 were
GBP319.0m, equivalent to a distribution rate of 22% of the opening
attributable portfolio. After funding GBP119.9m of calls, net cash
inflow from the portfolio totalled GBP199.1m.
-- PIP actively manages the profile of its portfolio with the
objective of receiving cash from the more mature assets as they are
realised, thereby releasing funds for investment in new and growing
opportunities. The average age of PIP's funds at the financial year
end was 5.2 years (May 2020: 5.1 years).
-- PIP has a full deal pipeline and during the period, GBP239.5m
was committed to 33 new investments, of which GBP75.6m was funded
at the time of purchase.
Financial position update
-- Undrawn multi-currency revolving GBP300m credit facility
amended to extend the term to May 2024, with a further provision
that allows the Company to increase its committed facilities to
GBP350m if required.
-- PIP's financing cover, which measures the sum of PIP's
undrawn commitments of GBP528m as at 31 May 2021 against its
available financing and the value of its private equity portfolio,
was 4.1 times.
Company update
-- Senior Independent Director, Susannah Nicklin, will retire
from the Board at the conclusion of the Company's 2021 AGM and Mary
Ann Sieghart will take over the role of Senior Independent
Director.
-- Proposed sub-division of PIP's shares to improve accessibility for a range of investors.
Commenting on the full year, Sir Laurie Magnus, Chairman,
said:
"The Board believes that PIP's actively managed "all weather"
portfolio offers an attractive entry point for investors seeking
access to high quality, fast growing companies around the
world."
For more information please contact:
Vicki Bradley
Pantheon
+44 (0)20 3356 1800
Follow us on LinkedIn: https://www.linkedin.com/company/pantheon-international-plc
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
.
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
CHAIRMAN'S STATEMENT
IN SUMMARY
Strong valuation gains in PIP's underlying portfolio demonstrate
the resilience and growth orientation of our private equity
investments.
PIP's portfolio is tilted towards the more resilient industry
sectors such as information technology, healthcare and consumer
staples, with very low exposure to those areas that have been
hardest hit by the pandemic.
Proposed sub-division of PIP's shares to improve accessibility
for a range of investors.
KEY STATISTICS
31.7% Share price increase in the year
109% Total shareholder return (5Y)
19.6% NAV per share growth in the year
11.8% Average annual NAV growth since inception
GBP1,865m Net asset value
36.0% Portfolio investment return in the year
GBP199m Portfolio net cash flow in the year
Resilience, growth and opportunity
PIP's NAV at 31 May 2021 reached GBP1.9 billion, equivalent to
GBP34.48 per share, an increase of 19.6% during the year covered by
this report.
This increase, which exceeded 30% before foreign exchange
adjustments, demonstrates the resilience and growth orientation of
our private equity investment portfolio. The valuation gains have
included some very impressive results from specific company
investments such as JFrog, an end-to-end software solutions
provider, and Allegro, Poland's largest online marketplace, both of
which had very successful IPO's during the period. As at PIP's
financial year end, both JFrog, which listed on the NASDAQ in
September, and Allegro, which was the largest European e-commerce
IPO in history when it listed on the Warsaw Stock Exchange in
November, were held at significant multiples of their respective
cost.
Since PIP was formed in 1987, its NAV per share has grown on
average by 11.8% per annum, outperforming the FTSE All-Share and
MSCI World indices over the same period. The Company has delivered
a total shareholder return of 109% over the last five years, with
minimal adverse impact from the COVID-19 crisis. Despite this,
PIP's shares continue to trade at a material discount to NAV (24%
at the time of writing). The Board considers that the Company's
consistent, superior performance over 33 years and the value of its
Manager's experience and connections is insufficiently recognised
in its share price.
Shareholders should note that the returns achieved by PIP are
stated in the Annual Report after deducting all charges. Private
equity investment management typically incurs higher costs than
those generally applicable for managing a conventional listed
equity portfolio. PIP's total annual expense ratio, including
financing costs, amounted to 1.43% in respect of the year under
review. Whilst the Board is vigilant in its efforts to control
expenses, it considers that PIP's cost ratio is acceptable when
measured in the light of the consistently strong returns delivered
by its investment portfolio since the Company's inception.
PIP's Strategic Report within the full Annual Report and
Accounts, has been approved by the Board. The full Annual Report
includes case studies which showcase some of our investments and
also a discussion between two of our Directors, John Singer and
John Burgess, covering their perspectives on the private equity
sector and PIP in particular. Messrs Burgess and Singer have had
very successful careers in the private equity world and
shareholders should particularly note their evident confidence in
PIP given their respective investments in the Company's shares
which have a combined value of approximately GBP6m.
Cash flow and balance sheet liquidity
The Board is managing PIP's balance sheet to ensure that it can
comfortably meet the Company's undrawn commitments while at the
same time being able to invest for the future. During the financial
year, PIP received GBP319.0m in distributions, equivalent to a
distribution rate of 22% of PIP's opening portfolio value. Calls
from existing commitments to private equity funds during the period
amounted to GBP119.9m, equivalent to 22% of PIP's opening undrawn
commitments. As a result, PIP generated net cash flow of GBP199.1m
before taking into account the funding of new investments.
Repayment of the unlisted GBP200m Asset Linked Note ("ALN"),
which is due to mature on 31 August 2027, is made only from cash
distributions received from a reference portfolio of older
investment assets. As at 31 May 2021, the ALN had a remaining value
of GBP47m.
During the period, PIP agreed an amendment to its GBP300m
multi-currency revolving credit facility. The entire facility,
which was due to expire in June 2022, has been extended to May
2024, with a further provision that allows the Company to increase
its committed facilities to GBP350m if required. The wholly undrawn
facility, which has been denominated as to US$269.8m and EUR101.6m
to match the principal currencies in which PIP's undrawn
commitments are denominated, was equivalent to GBP277m by reference
to exchange rates prevailing as at 31 May 2021. Including its cash
balance of GBP198m and the credit facility, PIP had available
liquid resources of GBP475m at the period end. PIP's financing
cover, which measures the sum of PIP's undrawn commitments of
GBP528m as at 31 May 2021 against its available financing and the
value of its private equity portfolio, was 4.1 times.
Portfolio positioning
PIP manages the profile of its portfolio with the objective of
receiving cash from the more mature assets as they are realised,
thereby releasing funds for investment in new and growing
opportunities. The average age of the funds in PIP's portfolio was
5.2 years as at 31 May 2021. The cash-generative nature of its
portfolio has enabled PIP to build a strong cash position which can
be used to finance new deal activity as well as its outstanding
commitments.
The Board regularly reviews its overall investment strategy and
has held a number of meetings (in addition to its scheduled board
meetings) for this purpose during the past year. The Board and our
Manager, Pantheon, remain cautious in an environment of high
valuations and potential interest rate rises, but see opportunities
to increase PIP's investment pacing to secure exciting
opportunities in particular growth sectors. The Board intends that
PIP's portfolio should continue to reflect a mix of investment
types, geographies and industries which appropriately mitigate risk
through diversification while, at the same time, increasing
concentration in individual assets to provide a potential boost to
NAV growth. The Board is seeking to achieve this by increasing
allocations to
co-investment and single-asset secondaries opportunities.
The GBP138.9m committed to seven secondaries during the year to
31 May 2021 included a GBP108.7m commitment to the Pantheon
Secondaries Opportunities Fund ("PSOF"). PSOF seeks to partner with
high quality private equity managers to acquire, as single
transactions, their most attractive portfolio companies with the
goal of jointly participating in such companies' next phase of
growth. In addition, PIP invested GBP52.6m in 19 direct
co-investments and committed GBP48.0m to seven primaries. Overall,
during the period, PIP committed GBP239.5m to 33 new investments,
of which GBP75.6m was drawn at the time of purchase. Since the
period end, PIP has committed a further GBP13.6m to 5 new
investments.
PIP's portfolio is tilted towards the more resilient industry
sectors such as information technology, healthcare and consumer
staples, with very low exposure to those areas that have been
hardest hit by the pandemic. Pantheon had already identified many
thematic trends, such as the digitalisation of business services
and consumer products, which were well underway before the advent
of COVID-19 and have been accelerated by the pandemic. Most of
PIP's underlying private equity managers are sector specialists
with track records in their respective fields. This is an important
pre-requisite to ensure effective due diligence and subsequent
monitoring of investee companies.
The Board remains alert to opportunities to buy back shares for
investment purposes in line with its longstanding policy to
consider such purchases in the context of its financial position at
the time. No shares were bought back during the period under
review. At the forthcoming AGM, the Board will be recommending that
shareholders vote in favour of the resolution, put annually, that
authorises the Company to undertake share buybacks. The Board
believes that retaining the ability to buy back shares is in the
best interests of shareholders as a whole.
Pantheon management experience and culture
Pantheon's large, global team of experienced investment
professionals are able to utilise their extensive networks of
relationships with many of the world's best private equity managers
to ensure that PIP has a pipeline of high quality deals. These
relationships, which can provide Pantheon with valuable and
privileged information, are not built overnight but have been
cultivated over many years. The private equity managers themselves
benefit from Pantheon's open and collaborative approach to sharing
market observations and in helping to shape transactions. In
addition, they have worked with Pantheon in formulating the
important environmental, social and corporate governance policies
and principles which are intrinsic to Pantheon's own investment
approach. Environmental sustainability, diversity, inclusion,
standards of high integrity and close teamwork are embedded in
Pantheon's culture. The Board expects Pantheon to seek those same
qualities in the selected private equity managers and in their
investee companies. The Board also expects Pantheon to undertake
detailed due diligence on each investment opportunity, assessing
the risks and opportunities from both an ESG and investment
standpoint, and to be ready to decline an investment if it is not
believed to be a good fit for PIP's portfolio.
Board changes
Susannah Nicklin, our Senior Independent Director and a member
of the Board since November 2011, will retire following the
conclusion of this year's AGM. The Board has benefitted enormously
from Susannah's commitment and unfailingly thoughtful and
constructive contributions to our deliberations. She will leave
with our gratitude and warm wishes for the future.
Mary Ann Sieghart, who was appointed to the Board in October
2019, will take over the role of Senior Independent Director upon
Susannah's departure.
The Board will commence the search for a new Director in the
autumn.
Proposed sub-division of PIP's shares
PIP's share price has grown strongly over recent years, from c.
GBP13.00 per share 5 years ago to GBP26.20 at the time of writing.
Whilst this growth is clearly positive for shareholders, the
Directors recognise that the high share price might be a barrier to
investment for certain investors including regular savers who may
wish to invest smaller amounts and buy smaller quantities of
shares. Accordingly, in order to make PIP's shares more accessible
to a range of investors with a view to improving the marketability
of PIP's shares, the Board proposes to split each share into
10.
Shareholders will be invited to vote on these proposals at the
forthcoming AGM in October. If shareholder approval is received for
the proposals, each shareholder will receive 10 new ordinary shares
for every one ordinary share held. The new ordinary shares are
expected to be admitted to the Official List and to trading on the
Main Market of the London Stock Exchange on 1 November 2021. It is
important to note that the proposed share split will not alter any
investor's shareholder rights and shareholders will hold the same
proportionate interest in PIP following completion of the share
split as before.
Further details of these proposals, including a detailed
timetable, will be provided in the Notice of AGM Meeting that will
be published towards the end of August.
Outlook
The rollout of the vaccination programmes and the gradual
lifting of lockdowns has brought considerable relief to many parts
of the world. There are, however, some significant uncertainties
ahead. These include the prospect of rising inflation, concerns
about how governments will manage their massive fiscal imbalances,
tensions between the global super-powers and continuing
cyber-related terrorism.
PIP's investment portfolio is certainly not immune from these
uncertainties, but its performance over its 33-year history,
including its results for the year under review, demonstrate the
resilience of its long-term investment horizon and of Pantheon's
active portfolio management. Private equity managers, with their
unrestricted access to their investee companies, are able to
monitor the performance of their investments at all times. This is
a distinct advantage, particularly during times of uncertainty,
compared with managers of listed equities, where access is often
restricted by regulation.
The Board believes that PIP's actively managed "all weather"
portfolio offers an attractive entry point for investors seeking
access to high quality, fast growing companies around the world.
The increasing proportion of dynamic businesses which are supported
by private equity investors relative to public markets only serves
to increase PIP's appeal in this context. The Board and Pantheon
recognise that there is a considerable hurdle to overcome in terms
of misunderstanding and distrust of private equity amongst both
financial and non-financial commentators. We are therefore working
on measures to increase PIP's profile with the investment
community, particularly retail investors, and also with stock
market analysts and the media.
PIP's strategy is very simply to continue to deliver long-term
growth for its shareholders. We believe that Pantheon is well
equipped to manage our investment portfolio to maximise returns
from our existing assets and to secure attractive new
opportunities. Our balance sheet and liquidity underpin our
financial strength and provide the flexibility to adapt swiftly to
changing circumstances. The Board is confident that PIP has a
promising future.
Sir Laurie Magnus
Chairman
4 August 2021
At a glance as at 31 May 2021
31.7% Share price increase in the year
GBP1.5bn Market capitalisation
19,6% NAV per share growth in the year
+11.8% Average annual NAV growth since 1987
GBP1.9bn Net asset value
1.22% AIC ongoing charges(1)
(1) Including financing costs, PIP's total ongoing charges would
be 1.43%.
Our investment strategy is to build a resilient portfolio that
can deliver long-term outperformance
Investment type(2)
Flexible approach to portfolio construction increases potential
for outperformance.
Primary 35%
Co-investments 33%
Secondary 32%
Fund Stage(2)
Well diversified across different investment stages with a
particular focus on small/mid-market buyout and growth funds.
Small/mid buyout 38%
Large/mega buyout 28%
Growth 23%
Special situations 7%
Venture 4%
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 50%
Europe 29%
Asia and EM(3) 12%
Global(4) 9%
Maturity(2)
We actively manage PIP's maturity profile to maximise the
potential for growth and generate cash. This is achieved through a
mix of
primaries, secondaries and co-investments. As at 31 May 2021,
PIP's portfolio had a weighted average fund age of 5.2 years.
2020 and later 9%
2019 12%
2018 14%
2017 15%
2016 14%
2015 14%
2014 4%
2011-2013 9%
2010 and earlier 9%
Company Sector(5)
Portfolio weighted towards high growth and resilient
sectors.
Information technology 29%
Healthcare 20%
Consumer 15%
Financials 11%
Industrials 11%
Communication services 7%
Energy 4%
Materials 2%
Others 1%
(2) Fund investment type, region, stage and maturity charts are
based upon underlying fund valuations and account for 100% of PIP's
overall portfolio value. The charts in the full Annual Report
exclude the portion of the reference portfolio attributable to the
Asset Linked Note.
(3) EM: Emerging Markets.
(4) Global category contains funds with no target allocation to
any particular region equal to or exceeding 60%.
(5) The company sector chart is based upon underlying company
valuations as at 31 March 2021, adjusted for calls and
distributions to 31 May 2021. These account for 100% of PIP's
overall portfolio value.
Key Performance Indicators
What it is How we have Link to our Examples of
performed strategic related
objectives factors that we
monitor
----------------- ----------------- ----------------- ------------------------ ----------------- ----------------
Performance
5-Year Total 31 May 2019 -- PIP's ordinary -- Maximise -- Rate of
cumulative shareholder 95.2% shares had a shareholder NAV
total return closing returns growth
shareholder demonstrates 31 May 2020 price of 2,720.0p through relative
return the return to 61.3% at the year end long-term to listed
109.2% investors, after (31 May 2020: capital markets.
taking into 31 May 2021 2,065.0p). growth.
account 109.2% -- Discount to -- Trading
share price NAV was 21% as -- Promote volumes
movements at the year end better for the
(capital growth) (31 May 2020: market Company's
and, if 28%). liquidity shares.
applicable, by building
any dividends demand -- Share
paid during the for the price
period. Company's discount to
shares. NAV
The Board's
strategy
is to deliver
returns for
shareholders
through growth
in NAV and
generally
not through the
payment of
dividends.
NAV per share NAV per share 12M to 31 May -- NAV per share -- Investing -- Valuations
growth during reflects the 2019 increased by 565.6p flexibly provided by
the year attributable 14.7% to with top-tier private
19.6%(1) value of a 3,448.4p during private equity
shareholder's 12M to 31 May the year. equity managers managers.
holding in PIP. 2020 to maximise
The provision 4.0% long-term -- Fluctuations
of consistent capital growth. in currency
long-term NAV 12M to 31 May exchange
per share growth 2021 -- Containing rates.
is central to 19.6% costs and risks
our strategy. by -- Ongoing
constructing a charges
NAV per share well-diversified relative to NAV
growth in any portfolio growth
period is shown in a and private
net of cost-efficient equity
foreign exchange manner. peer group.
movements and
all costs -- Tax
associated efficiency
with running the of investments.
Company.
-- Effect of
financing
(cash drag)
on performance.
Portfolio Portfolio 12M to 31 May -- Strong performance -- Maximise -- Performance
investment investment 2019 in the underlying shareholder relative to
return return measures 12.9% portfolio. returns through listed
36.0%(1) the total long-term markets
movement 12M to 31 May -- PIP continues capital and private
in the valuation 2020 to benefit from growth. equity
of the 3.9% robust earnings peer group.
underlying growth in its
funds and 12M to 31 May underlying portfolio -- Valuations
companies 2021 and provided by
comprising PIP's 36.0% from the favourable private
portfolio, exit environment. equity
expressed managers.
as a percentage -- Weighted average
of the opening revenue and EBITDA
portfolio value, growth of 12.8%
before taking and 20.2% respectively
foreign exchange for PIP's sample
effects and buyout companies,
other versus -9.9% and
expenses into -20.8% respectively
account. for companies
that constitute
the MSCI World
Index.
----------------- ----------------- ----------------- ------------------------ ----------------- ----------------
Liquidity
Net portfolio Net portfolio 12M to 31 May -- PIP's portfolio -- Maximise -- Relationship
cash flow cash flow is 2019 generated GBP319m long-term between
GBP199m(2) equal GBP170m (31 May 2020: capital growth outstanding
to fund GBP228m) of through commitments and
distributions 12M to 31 May distributions ongoing NAV.
less capital 2020 versus GBP120m portfolio
calls GBP110m (31 May 2020: renewal while -- Portfolio
to finance GBP118m) of calls. controlling maturity
investments, 12M to 31 May financing risk. and
and reflects the 2021 -- In addition, distribution
Company's GBP199m the Company made rates
capacity new by vintage.
to finance calls commitments of
from existing GBP240m (31 May -- Commitment
investment 2020: GBP245m rate to new
commitments. during the year, investment
GBP76m (31 May opportunities.
PIP manages its 2020: GBP109m)
maturity profile of which was drawn
through a mix at the time of
of primaries, purchase.
secondaries and
co-investments -- PIP's portfolio
to ensure that has a weighted
its portfolio average fund age
remains of 5.2 years(2)
cash-generative (31 May 2020:
at the same time 5.1 years).
as maximising
the potential
for growth.
Undrawn coverage The undrawn 31 May 2019 -- The -- Flexibility -- Relative
ratio coverage 90% current in portfolio weighting
122% ratio is the level of construction, of primary,
ratio 31 May 2020 commitments allowing secondary
of available 107% is the Company to and
financing consistent select a mix of co-investments
and 10% of 131 May 2021 with PIP's primary, in the
private 122% conservative secondary and portfolio.
equity assets approach to co-investments,
to undrawn balance and vary -- Level of
commitments. The sheet investment pace, undrawn
undrawn coverage management. to achieve commitments
ratio is an long-term relative
indicator capital growth. to gross
of the Company's -- In line assets.
ability to meet with
outstanding historical -- Trend in
commitments, experience, distribution
even the Company rates.
in the event of expects
a market undrawn -- Ability to
downturn. commitments access debt
to be funded markets
Under the terms over on
of its current a period of favourable
loan facilities, several terms.
PIP can continue years.
to make new
undrawn
commitments
unless
and until the
undrawn coverage
ratio falls
below
33%
(1) Excludes valuation gains and/or cash flows associated with
the ALN.
(2) Excludes the portion of the reference portfolio attributable
to the ALN.
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. Within our diversified portfolio, we back the best managers
globally that are able to identify and create value in growing
companies.
3. Cash generated when those companies are sold is returned to
PIP and redeployed into new investment opportunities.
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 rarely available in the secondary market.
Secondary
We purchase the interests of an investor in a fund or funds
typically late into, or after, the investment period. We also
acquire interests in individual companies through secondary sales
by the existing owner.
-- 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.
Co-investments
We invest in a company directly, alongside a private equity
manager, during the investment period of a fund.
-- Invests in the securities of individual companies with
attractive characteristics at the invitation of PIP's leading
private equity managers.
-- This boosts 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.
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.
(1) Source: Preqin, July 2021.
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.
Private equity managers take controlling or influential
positions in companies where they believe they can create value,
with a view to exiting their position at a multiple to their
original investment. As portfolio companies are sold by the
managers, PIP's share of the cash that is generated from those
sales is deployed into new investment opportunities.
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 over 33 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
benchmark indices over multiple periods and since the Company's
inception in 1987.
Culture
Pantheon has a strong culture of collaborative and inclusive
teamwork and diversity, as well as a long history of investing its
clients' capital responsibly. PIP is supported strongly by a global
workforce and a large and experienced team of investment
professionals, many of whom have been at Pantheon for over 20
years. In addition, Pantheon's approach is to avoid investments
with private equity managers whose own cultures are focused on the
profile of an individual and that may encounter key person
risk.
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 383
people(2) in its nine 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 485(2) advisory boards globally, Pantheon
actively engages with its General Partners ("GPs") on portfolio
monitoring issues on a continuous basis.
(2) As at 30 June 2021.
Independence
PIP is offered the opportunity to participate in the full range
of private equity investments that Pantheon sources, and it invests
alongside other Pantheon managed funds into third-party funds and
companies rather than as a feeder into Pantheon's other investment
vehicles. The Board believes that this 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.
For more information on PIP's strategic objectives, see
below.
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 has held a number of additional meetings for this purpose
during the past year.
Through the ongoing dialogue between the Board and the Manager,
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 also 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 Manager 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. In addition, the Manager 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. At the forthcoming AGM,
the Board will propose a split of each existing share into 10 with
the aim of making PIP's shares more accessible to a range of
investors and with a view to improving the marketability of PIP's
shares.
Maintain a carefully diversified approach while increasing
potential for outperformance
As Manager of PIP, Pantheon focuses on investing with the best
private equity managers worldwide, through both funds and direct
co-investments, and thoughtfully constructing and maintaining a
cash-generative portfolio that has exposure to different parts of
the investment life cycle. PIP's portfolio is carefully diversified
by manager, investment type, stage, geography, fund age (vintage)
and sector. One of the key advantages of this approach is that it
reduces the risk of any individual underperforming company or fund
having a disproportionately material adverse effect on the
Company's overall performance. Nevertheless, as a result of the
selections made by the Manager through its investment activities,
the mix of PIP's portfolio naturally emphasises investments that
offer appropriate levels of downside protection as well as the
potential for long-term growth.
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, and
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 within the full Annual Report.
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
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.
The Board recognises that, on occasion, the discounts at which
the Company's shares trade may make them an attractive investment
proposition for PIP when considered alongside other new investment
opportunities. The Manager reports to the Board on a regular basis
on the investment market conditions and, on those occasions, the
Board may authorise the Company to buy back a specified amount of
its own shares. No share buybacks were completed during the year
ended 31 May 2021.
Investment stage: Focus on mid-market and growth
PIP's portfolio is diversified by stage, which ranges across
venture, growth, small/mid 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;
-- More routes to exit including strategic acquisitions, sales
to other private equity managers or initial public offerings
("IPOs").
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 spot innovative
opportunities with the potential to generate significant
outperformance. While special situations include funds 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.
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. The Board is confident that
these relationships enable Pantheon to source and respond quickly
to the best deal flow in those regions to optimise risk-adjusted
performance.
It is our objective to seek 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 the full
Annual Report.
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.
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 Board believes
that, as an investment company with no employees, this is best
achieved by working in partnership with Pantheon, our appointed
Investment Manager. Further details of the Company's Business
Model, including statements on what the Company does and why it
does it, can be found above.
Culture
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, debate and integrity through ongoing
dialogue and engagement with its service providers, principally the
Manager.
PIP has a number of policies and procedures in place to assist
with maintaining a culture of good governance, including those
relating to diversity, Directors' conflicts of interest and
Directors' dealings in the Company's shares.
The Board assesses and monitors compliance with these policies
as well as the general culture of the Board through Board meetings,
and in particular during the annual evaluation process which is
undertaken by each Director (see the Statement on Corporate
Governance within the full Annual Report for further details of the
evaluation processes).
The Board seeks to appoint the best possible service providers
and evaluates their service on a regular basis as described in the
full Annual Report. The Board considers the culture of the Pantheon
and other service providers, including their policies, practices
and behaviour, through regular reporting from these stakeholders,
and in particular during the annual review of the performance and
continuing appointment of all service providers.
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 2021, including
those that would threaten its business model, future performance,
solvency or liquidity. A summary of the risk management and
internal control processes can be found in the Statement on
Corporate Governance in the full Annual Report.
Investment risk
Type and Description Potential Impact Risk Management Outcome for the Year
of Risk
Impact of the COVID-19 -- COVID-19 has had a wide -- PIP's close relationships -- Pantheon's risk
crisis on the global and adverse impact on with its private equity assessment process
economy and businesses managers allows the Company reviews potential
underlying portfolio around to obtain timely valuation impacts
companies. the world and the full indications on underlying of corporate insolvency
impact portfolio companies. and valuation declines
on the global economy is on performance
still of the Company and
unclear. going concern status
This could potentially cause (refer to Going Concern
portfolio companies to assessment in the
become full Annual Report).
insolvent
and ultimately impact PIP's -- PIP's diversification
valuations and cash flows. and emphasis on sectors
with resilient demand,
such as information
technology and healthcare,
could help to mitigate
the long-term impact
of COVID-19.
----------------------------- ----------------------------- ---------------------------
Market factors such -- Impact of general -- Pantheon's investment -- PIP continues to
as interest rates, economic process incorporates an adopt a diversified
inflation and equity conditions on underlying assessment of market risk. approach to portfolio
market performance, fund construction.
can affect the value and company valuations, exit -- Investing alongside
of investments. opportunities and the private -- Exposure to quoted
availability equity managers with assets was below 10%
of credit. experience as at 31 May 2021.
of navigating
economic cycles, while -- In historical periods
achieving of significant public
diversification by market volatility,
geography, private equity market
stage, vintage and sector, valuations have typically
helps to mitigate the effect been less affected
of public market movements than public equity
on the market valuations.
Company's performance.
----------------------------- ----------------------------- ---------------------------
Insufficient liquid -- Investment losses and -- PIP has a mature -- PIP has access
resources to meet reputational portfolio to a GBP300m loan
outstanding damage arising from the that is naturally cash facility that expires
commitments to private inability generative. in
equity funds. to meet capital call May 2024. Together
obligations. -- In the event that cash with PIP's net available
balances and cash cash balances of
distributions GBP198m, total available
are insufficient to financing as at 31
cover capital calls, PIP May 2021 stood at
has the ability to draw GBP475m. Total available
funds from a credit financing, along with
facility. the private equity
portfolio, was greater
-- Pantheon manages the than outstanding
Company so that undrawn commitments
commitments remain by a factor of 4.1
at an acceptable level times.
relative
to its portfolio assets
and available financing.
-- The Board conducts a
comprehensive review of
the Company's cash flow
modelling forecasts under
different scenarios on a
regular basis.
----------------------------- ----------------------------- ---------------------------
Lack of suitable -- Change in risk profile as -- Pantheon has put in place -- During the year,
investment opportunities a result of manager, fund or a dedicated investment PIP has invested within
to meet strategic company management strategic limits
diversification exposures that are process for vintage year,
objectives. materially designed to achieve the geography and stage
different from the Company's intended investment strategy allocations, as well
intended strategy. agreed with the Board. as within concentration
limits for individual
-- The Board regularly managers,
reviews funds and companies.
investment and financial
reports to monitor the
effectiveness
of the Manager's investment
processes.
----------------------------- ----------------------------- ---------------------------
Private equity investments -- Potential decline in -- PIP pursues a flexible -- The Company's flexible
are long term in realisation investment strategy, investment strategy
nature and activity which may affect combining has resulted in a
it may be some years portfolio secondary investments which portfolio with a healthy
before they can performance. typically have shorter exit mix of likely exit
be realised. horizons, with horizons.
co-investments .
and
primary commitments.
----------------------------- ----------------------------- ---------------------------
Investments in unquoted -- Illiquidity of underlying -- As part of its investment -- Robust realisation
companies carry assets may have an adverse process, Pantheon assesses activity during the
a higher degree effect on realisations and the approach of its year, with distributions
of liquidity risk portfolio performance. managers to company of GBP319m and a
relative to investments illiquidity distribution
in quoted securities. as well as projected exit rate equivalent to
outcomes. 22% of opening
portfolio assets.
----------------------------- ----------------------------- ---------------------------
Gearing, whether -- Potential impact on -- PIP's Articles of -- Cash flow forecasts
at the Company, performance Association under normal and stress
fund investment and liquidity, especially in and investment policy impose conditions
or portfolio company the event limits on the amount of were reviewed with
level, could cause of a market downturn. gearing that the Company the Board. Downside
the magnification can take on. scenario modelling
of gains and losses indicates that the
in the asset value -- The principal covenant Company has the available
of the Company. of the loan facility ensures financing in place
that the Company is limited to meet investment
to a maximum gearing commitments, even
(excluding in an environment
the ALN) of 34% of adjusted characterised by large
gross asset NAV declines and a
value (excluding the ALN). material reduction
in distribution activity.
-- The Board conducts
regular -- There was no gearing
reviews of the balance sheet at the Company level
and long-term cash as at the end of
flow projections, including the financial year.
downside scenarios that
reflect the potential -- Debt multiples
effects in PIP's buyout portfolio
of significant declines remain at reasonable
in NAV performance, adverse levels as at year
changes in call/distribution end.
rates and restrained
liquidity
sourcing in a distressed
environment.
-- As part of its investment
process, the Manager
undertakes
a detailed
assessment of the impact
of debt at the underlying
fund level and underlying
company level on the
risk-return
profile of a specific
investment.
----------------------------- ----------------------------- ---------------------------
Non-sterling investments -- Unhedged foreign exchange -- The Manager monitors -- Foreign exchange
expose the Company rate movements could impact the Company's underlying had a negative impact
to fluctuations NAV total returns. foreign currency exposure. on performance during
in currency exchange the year.
rates. -- As part of its investment
process, the Manager takes
currency denominations
into account when assessing
the 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 -- The valuation of -- No material
accuracy of information financial investments misstatements
provided by statements and NAV is based on periodically concerning the valuation
GPs when valuing reporting. audited valuations that and
investments. are provided by the existence of investments
underlying during the year.
private equity managers.
-- Pantheon carries out
a formal valuation process
involving monthly reviews
of valuations, the
verification
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 -- During the year,
another investor have unintended consequences high-quality funds in which PIP
in a fund is unable on the remaining investors' funds alongside is invested did not
or unwilling to obligations and investment institutional suffer from any limited
meet future capital exposure. private equity investors. partner defaulting
calls. events.
-- A considerable proportion
of PIP's investments are
in funded positions.
----------------------------- ----------------------------- ---------------------------
Non-investment risk
Type and Description Potential Impact Risk Management Outcome for the Year
of Risk
Changes in the Company's -- Failure to understand -- Pantheon's investment -- Taxes had a minimal
tax status or in tax tax risks when investing process effect on overall NAV
legislation or divesting could lead incorporates an assessment performance in
and practice. to tax exposure or of tax. the year.
financial
loss. -- The Management Agreement
is subject to a notice
period
of two years, giving the
Board
adequate time to make
alternative
arrangements in the event
that
the services of Pantheon
cease
to be available.
---------------------------- ---------------------------- ----------------------------
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
service providers. third-party suppliers third-party the Manager and other
cease to be available suppliers under service providers following
to the Company. continual review. an
assessment of their
-- The Management Agreement respective performance
is subject to a notice during the year.
period
of two years, giving the -- As a result of the
Board adequate time to make COVID-19 pandemic,
alternative arrangements in Pantheon has enacted
the event that the its business continuity
services of Pantheon cease plan, which has resulted
to be available. in Pantheon
staff operating entirely
remotely. Pantheon
had tested its own
business continuity
plans as well as those
of its third-party
service providers in
advance of this
eventuality,
and
is confident of being
able to meet PIP's
needs.
---------------------------- ---------------------------- ----------------------------
High dependency on -- Significant disruption -- Pantheon has a -- No material issues
effective to information technology comprehensive to report for the year.
information technology systems may result in set of policies, standards
systems to support key financial losses, the and procedures -- Pantheon's systems,
business functions and inability to perform related to information processes and technologies
the business-critical technology. have been
safeguarding of sensitive functions, thoroughly tested and,
information. regulatory censure, -- Ongoing investment and are fully operational.
legal liability and training
reputational damage. to improve the reliability
and resilience of
Pantheon's
information technology
processes
and systems.
---------------------------- ---------------------------- ----------------------------
Global geopolitical -- Market and currency -- Pantheon continuously -- Pantheon's established
risks and the resulting volatility may affect monitors Risk, Legal and Tax
economic uncertainty returns Geopolitical geopolitical developments functions have
may affect the Company. undercurrents may disrupt and ensured compliance
long-term investment societal with local laws and
and capital issues relevant to our regulations.
allocation decision business.
making. -- An assessment of
geopolitical risk is
embedded in Pantheon's
investment process.
-- PIP's exposure to
high risk countries
are minimal.
---------------------------- ---------------------------- ----------------------------
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, the Board has assessed the viability of the Company over a
three-year period from 31 May 2021. 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 and 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 and
Accounts.
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 severe low case scenario due to COVID-19, the
effectiveness of any mitigating actions and the Company's risk
appetite.
Commitments to new funds are restricted relative to the
Company's assets and its available liquid financial resources to
maintain a reasonable expectation of being able to finance the
calls, which arise from such commitments out of cash flow that is
internally generated. 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 be 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 within the full
Annual Report and Accounts 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.
The Board regularly reviews the prospects for the Company's
portfolio and the opportunities for new investment under a range of
potential scenarios to ensure it can expect to be able to continue
to finance its activities for the medium-term future. Based on its
review, the Board has a reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as
they fall due over a three-year period.
On behalf of the Board
Sir Laurie Magnus
4 August 2021
Manager's Review
Our Market
Sustained growth during an unprecedented chapter
Helen Steers, Partner at Pantheon and manager of PIP, reflects
on the strength, flexibility and resilience of the private equity
sector which have served the industry well through the
pandemic.
During the last eighteen months, the turbulence caused by the
COVID-19 health crisis has reverberated through every region of the
world, resulting in vast social and economic damage and generating
extraordinary movements in financial markets.
At the time of writing, many countries are beginning to emerge
slowly from the pandemic, supported by the unprecedented policy
actions of their governments, and the accelerating rollout of
vaccination programmes. The major economies are showing initial
signs of a sustained rebound, driven by increased consumer and
business confidence. Forecasts for the global economic recovery
continue to tick higher, primarily driven by the USA, which
reported stronger than expected growth in the first quarter of
2021. The release of pent-up demand in the developed world is also
likely to be a contributing factor. China has continued its
recovery and growth expectations for 2021 and 2022 have been
revised up slightly while the picture is more mixed in the rest of
Asia. Of course, many economies still face significant challenges
in combatting the social and economic damage wrought by the
COVID-19 crisis and this cautiously positive outlook may be
threatened by the emergence of new variants of the COVID-19 virus,
a potential slowdown in consumer spending and the withdrawal of
government support. In addition, inflation concerns are taking hold
and the public markets are already pricing a potential rise into
their assumptions, although it is unclear whether inflationary
pressures may be transitory or longer lasting. These are factors
that we consider as we manage PIP's portfolio and assess new deal
opportunities.
The indications are that private equity has been left relatively
unscathed by the COVID-19 crisis, with deal activity, exits and
fundraising all recovering strongly in the second half of 2020, and
into 2021. Furthermore, private equity performance through the
crisis has been robust, and the asset class has demonstrated lower
volatility than public markets. Although private equity valuations
dipped in the first half of 2020, as a result of the onset of the
COVID-19 crisis, they did not fall as far as the public markets and
rebounded strongly in the second half of the year. After a hiatus
in deal and exit activity during the second quarter of 2020,
private equity bounced back to end the year only slightly behind
2019. Fundraising activity was also strong overall, although there
was a bifurcation between the most in-demand, invitation-only
funds, which closed rapidly and at their caps, versus less popular
vehicles.
PIP's portfolio is tilted towards the Information Technology,
Healthcare and Consumer Staples and Services sectors, which have
been resilient throughout the pandemic, with certain sub-segments
such as enterprise application software, education services,
internet retail and interactive home entertainment benefitting from
existing social and business trends that have been significantly
accelerated. We remain alert, however, to the relatively high
valuations in the market particularly in Information Technology and
Healthcare, and are focused on targeting the most promising
sub-segments within these broad sectors. A critical component of
our due diligence process is identifying clear evidence of
significant growth drivers in the target companies of our private
equity managers, or General Partners ("GPs"), and that the GPs
themselves have a track record of long-term value creation through
implementing sustainable strategic and operational changes.
There is now an estimated US$1.6tn(1) of dry powder (capital
raised and available to invest but not yet deployed) globally. As
this capital is concentrated in larger global buyout funds, which
often target secondary buyouts of smaller, but high growth
businesses, this points to a healthy exit environment for companies
in PIP's portfolio which is predominantly invested in the
small/mid-market buyout and growth segments of the market.
(1) As at December 2020. Source: Preqin, July 2021.
We are able to access the highest quality assets in the private
equity secondaries market
In line with the private equity sector overall, deal volumes in
the global private equity secondaries market, which were lower in
2020 (US$60bn(2) ) compared to 2019 (US$88bn(2) ), rebounded
strongly in the second half of 2020, and continued to expand in the
first half of 2021. Against a backdrop of more certainty around the
economic recovery, we expect volumes in the secondaries market to
return to pre-COVID-19 levels in 2021. This deal flow is likely to
be driven primarily by sponsor- or "manager-led" sales, which are
deals where the private equity managers themselves are actively
involved in providing liquidity for investors in their funds. While
the manager-led market had been growing prior to the COVID-19
crisis, the acceleration in deal flow in the wake of the pandemic
means that manager-led deals accounted for 44% of all transactions
in 2020(2) . We believe that the highly attractive return profile
of these kinds of deals will continue to drive growth in this area
of the secondaries market. The number of single-asset secondaries,
which form part of the manager-led activity, has been rising and
growing at a faster rate than any other segment of the manager-led
space. Single-asset deals occur when the private equity manager has
carved an individual company out of an older fund that is coming to
the end of its life and moved it into a continuation vehicle. These
deals allow the existing investors in the fund to exit their
positions while offering an opportunity for other investors to
invest in the continued success of the portfolio company. Single
asset secondaries are attractive to us because:
-- They are typically highly prized companies which offer
potential for further significant growth; it should be noted that
most of the deals in 2020 were in COVID-19-resilient sectors;
-- They offer an opportunity to invest alongside knowledgeable
owners in their top performing assets; and
-- The market is under-capitalised and less crowded, due to
there being a lower number of market participants that have the
required capabilities to operate in this highly specialised area of
the secondaries market.
Pantheon, which is an experienced and well-established player in
the secondaries market, has the resources and skills to invest
effectively in single-asset secondaries and has already been able
to selectively source compelling opportunities for PIP through its
vast network of relationships that has been built up over many
years. PIP's US$150m commitment to the Pantheon Secondary
Opportunity Fund ("PSOF") allows it to access these high-quality
assets on favourable terms.
(2) Source: Greenhill Global Secondary Market Review, January
2021.
We provide value in the co-investment market with our funding
and co-underwriting capabilities
Co-investments, which are typically free of management and
performance fees, enable PIP to invest directly in portfolio
companies on the same terms and conditions as the private equity
manager. PIP benefits from Pantheon's ability to source significant
co-investment deal-flow from its managers, due to its very large
installed base of primary and secondary relationships across the
world. Pantheon has an experienced, dedicated team which carries
out detailed and extensive due diligence on each co-investment
opportunity, effectively applying a "double quality filter" on
deals which have already been thoroughly scrutinised and approved
by the underlying managers. We are an attractive co-investor for
our GPs because we do not compete against them, we are reliable,
responsive and have the scale to deploy capital quickly and
efficiently, and we have the flexibility to co-underwrite
transactions alongside our private equity managers if
appropriate.
We are concentrating on deals where the private equity
manager:
-- Has high conviction in the target company, taking into
account how it has performed through the pandemic and its
positioning for the future;
-- Can apply specialist sector experience and drive significant
value by implementing operating capabilities;
-- Has a convincing ultimate realisation strategy, ideally with multiple exit routes; and
-- Is not faced with factors that are out of their control such
as the impact of wider macroeconomic conditions, regulatory
uncertainty or market segments where private equity has
historically had challenges.
Each co-investment is assessed on its own merits but our main
investment themes and selection criteria are:
-- Focus on the most compelling opportunities presented by our
highest quality managers, which meet our exacting return
expectations;
-- Only invest where the targeted business is a good fit for the
manager in terms of their sector, stage and geographic
expertise;
-- Target attractive, resilient sectors offering clear prospects
for high organic growth through differentiated product or service
offerings;
-- Concentrate on businesses which are benefiting from long-term
tailwinds, such as digitalisation and the move to the cloud, that
are occurring across multiple sectors; and
-- Seek strong platform companies that can pursue add-on
acquisitions to build scale in existing businesses and consolidate
fragmented end-markets.
We have seen co-investment deal flow return to pre-COVID-19
levels and co-investments form a significant and attractive part of
PIP's deal pipeline.
Outlook
The US$5.3tn(3) global private equity market has more than
doubled in size over the last 10 years and is expected to continue
to benefit from the increase in supply of private company
investment opportunities, and the demand for private capital.
Private equity managers often invest in family-owned or founder-led
firms where they can help with formalising organisational
structures in addition to helping them grow internationally or into
new markets. Institutional investors have been increasing their
allocations to private equity as they target higher returns, a more
diverse set of opportunities and the ability to tap into the growth
phase of a company's development before it goes public, if indeed
it does IPO at all. Through Pantheon's platform, investors in PIP
can access carefully selected high-growth, exciting privately-owned
companies around the world. The hands-on approach of our private
equity managers has consistently resulted in significantly stronger
revenue and earnings growth in the underlying companies in PIP's
portfolio when compared to those of the MSCI World index.
In the short to medium term, it is expected that global economic
growth will be propelled by the return of business confidence and
the strength of consumer spending across the developed world as
households wind down excess savings that have been built up over
the last 12-18 months. However, we have all lived through the
unpredictability of the pandemic over the past 18 months, and there
still remains the threat of new waves and strains of the COVID-19
virus. Over the years our top private equity managers have
demonstrated their ability to be flexible and innovative while
steering their portfolio companies through various crises and
periods of uncertainty. Equally, Pantheon's own experience - with
almost 40 years in the business and over 33 years' experience of
managing PIP through several cycles - has been reflected in PIP's
resilience and strong performance during the last 12 month period,
and underpins our measured but confident outlook for PIP in the
future.
(3) As at December 2020. Source: Preqin, July 2021.
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 36.0% during the
year.
-- PIP's total portfolio generated investment returns, prior to
foreign exchange effects, of 35.8%.
Valuation movements by stage(1)
-- PIP experienced strong performance across its portfolio.
-- Buyout and growth segments performed well, helped by strong exits and valuation gains.
-- Venture performance was driven primarily by a successful
initial public offering of a portfolio company in the information
technology sector.
Return Closing
(%) portfolio
NAV
(%)
Growth 57.1 23
Venture 54.4 4
Large/mega-buyout 44.1 28
Small/mid-buyout 24.2 38
Special situations 11.3 7
(1) Portfolio returns include income, exclude gains and losses
from foreign exchange movements, and look through 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.
Valuation gains by region
-- Strong performance in Global, US and European investments
during the year, driven by favourable exits and large valuation
movements in certain portfolio companies.
-- Asia and EM performance weighed down by a handful of companies.
Return Closing
(%) portfolio
NAV
(%)
Global 49.0 9
USA 40.0 50
Europe 30.1 29
Asia and EM 27.4 12
Valuation gains by type
-- Strong primary and secondary performance underpinned by successful exits.
-- Co-investment performance driven by public market valuation
gains after successful IPOs, strong operational performance and a
number of exits at significant uplifts to carrying value.
Return Closing
(%) portfolio
NAV
(%)
Primary 52.9 35
Co-investment 31.3 33
Secondary 27.2 32
Sector Themes
Pantheon assesses deals across a range of sectors and over the
past year has seen particularly interesting investment
opportunities in Information Technology and Healthcare, as well as
attractive deal dynamics in certain Consumer, Financials and
Business Services sector transactions. PIP focuses on investing in
companies with exposure to sub-sectors where durable long-term
demographic or secular trends underpin demand growth. For example,
accelerated digitalisation of processes in many end markets is
providing a significant tailwind to the technology sector. The move
to remote working, necessitated by the COVID-19 crisis, has only
emphasised and hastened certain trends. Investing in, or alongside,
managers who have the expertise to identify and capitalise on
shifting developments gives PIP access to the most promising
segments within these sectors.
Company Sectors(1)
Information technology 29%
Healthcare 20%
Consumer 15%
Financials 11%
Industrials 11%
Communication services 7%
Energy 4%
Materials 2%
Other 1%
(1) The company sector chart in the full Annual Report is based
upon underlying company valuations as at 31 March 2021 and accounts
for 100% of PIP's overall portfolio value.
DISTRIBUTIONS
PIP received more than 1,000(1) distributions during the year,
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 feeders and funds-of-funds.
Distribution by Region and Stage
PIP received GBP319m (31 May 2020: GBP228m) in proceeds from
PIP's portfolio in the year to 31 May 2021 equivalent to 22%(2) of
opening private equity assets (31 May 2020: 17%). The USA accounted
for the majority of PIP's distributions, where market conditions
supported a good level of exits, particularly from buyouts.
(2) Including distributions attributable to the Asset Linked
Note, the distribution rate for the year was 23% (31 May 2020:
18%).
Distributions by region
USA 48%
Europe 38%
Global 6%
Asia and EM 8%
Distribution by stage
Small/mid buyout 40%
Large/mega buyout 28%
Growth 23%
Venture 6%
Special situations 3%
Quarterly Distribution Rates
-- Distribution rate equals distributions in the period
(annualised) divided by opening portfolio value.
-- Strong quarterly distribution rates reflect the maturity of PIP's portfolio.
-- Recovery in annualised distribution rate in the latter half of the financial year.
Distribution Rates by Vintage
With a weighted average fund maturity of 5.2 years(3) (31 May
2020: 5.1 years), PIP's portfolio should continue to generate
significant levels of cash.
(3) 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 for the year to 31 May
2021(1)
The average cost multiple on exit realisations of the sample was
2.3 times, highlighting value creation over the course of an
investment.
Uplifts on exit realisations for the year to 31 May 2021(1)
The value-weighted average uplift on exit realisations in the
year was 26%, 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 benefitted 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
Healthcare 33%
Information technology 24%
Consumer 13%
Communication services 11%
Financials 8%
Industrials 7%
Materials 3%
Energy 1%
Exit realisation by type
Trade sale 60%
Secondary buyout 33%
Public market sale 5%
Refinancing and
recapitalisation 2%
Calls
Calls during the year were used to finance investments in
businesses such as application software, education services and
specialty pharmaceutical companies. In addition, our managers
sought to make attractively priced add-on acquisitions for existing
platform companies.
Calls by Region and Stage
PIP paid GBP120m (31 May 2020: GBP118m) to finance calls on
undrawn commitments during the year.
Calls were predominantly made by private equity managers in the
growth and buyout segments.
Calls by region
USA 49%
Europe 27%
Asia & EM 13%
Global 11%
Calls by stage
Growth 34%
Large/mega buyout 27%
Small/mid buyout 23%
Special Situations 11%
Venture 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 34%
Healthcare 21%
Consumer 12%
Financials 10%
Industrials 10%
Communication Services 9%
Energy 2%
Materials 2%
Quarterly Call Rate(1)
The annualised call rate for the year to 31 May 2021 was
equivalent to 22% of opening undrawn commitments (31 May 2020:
23%).
(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 GBP240m to 33 new investments during the year (31
May 2020: GBP245m, 44 new investments). Of the total commitments
made, GBP76m (31 May 2020: GBP109m) was drawn at the time of
purchase. Since the period end, PIP has committed a further GBP14m
to 5 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.
PIP committed GBP109m to manager-led secondaries via the
Pantheon Secondary Opportunities Fund ("PSOF").
Secondary 58%
Co-investment 22%
Primary 20%
New Commitments by Region
Regional splits during the year reflect PIP's commitment to
PSOF. We continue to see strong deal activity across PIP's core US
and European markets.
Global 48%
USA 35%
Europe 15%
Asia and EM 2%
New Commitments by Stage
The majority of new commitments made in the year were in the
generalist segment as a result of the commitment to PSOF. Growth
and buyout investment activity was robust during the period.
Generalist 46%
Growth 21%
Small/mid buyout 18%
Large/mega buyout 15%
New Commitments by Vintage
Primaries, co-investments and manager-led secondaries, which
accounted for 96% of total commitments during the year offer
exposure to current vintages.
2021 78%
2020 18%
2019 and earlier 4%
NEW COMMITMENTS
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
GBP129m committed to five 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 company secondaries. By
holding companies for longer, secondary managers are able to
participate in the companies' next phase of growth.
2021 examples(1)
REGION STAGE DESCRIPTION COMMITMENTS FUNDED
GBPM % (2)
---------- ------------ ---------------------------- -------------- ---------
Small/mid Radiopharmaceuticals
Europe buyout company 7.2 76%
Small/mid Manufacturer of fire
Global buyout protection products 5.0 88%
Pantheon fund focused
on single asset secondary
Global Generalist transactions 108.7 5%
Secondary fund commitments
GBP10m committed to two 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.
2021 examples(1)
REGION STAGE DESCRIPTION COMMITMENTS FUNDED
GBPM % (2)
---------- ----------- ---------------------- -------------- ---------
Small/mid UK mid-market buyout
Europe buyout fund 5.0 74%
Portfolio of eight
USA Growth US-based funds 4.7 49%
(1.) Funds acquired in secondary transactions are not named due
to non-disclosure agreements.
(2) Funding level does not include deferred payments.
Primary Commitments
GBP48m committed to seven 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 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.
2021 examples
FUND STAGE DESCRIPTION COMMITMENTS GBPM
Balderton Growth Technology-focused European
Fund I Growth growth fund 15.1
------------ -------------------------------- -------------------
Hellman & Friedman Large/mega US-based large buyout
X buyout fund 10.9
------------ -------------------------------- -------------------
Shamrock Capital North American growth
Growth Fund V Growth equity fund 9.8
------------ -------------------------------- -------------------
US growth fund established
Insight Venture to make follow-on investments
Partners X Follow-On in predecessor fund portfolio
Fund Growth companies 7.2
------------ -------------------------------- -------------------
Co-investments
GBP53m committed to 19 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. The information technology
sector offered compelling investment opportunities during the
period.
New co-investments by Region
USA 72%
Europe 18%
Asia and EM 10%
New co-investments by Sector
Information Technology 59%
Industrials 16%
Healthcare 8%
Materials 7%
Financials 6%
Consumer 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 its
ability to finance 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.
As a result of this careful management, PIP entered the COVID-19
crisis well prepared for the expected volatility in market
conditions. In the end, the spike in calls did not materialise and
PIP's portfolio continued to distribute cash. This has left PIP in
an even stronger financial position and allowed it to continue
investing through the pandemic.
Managing our financing cover(1)
PIP's undrawn commitments were GBP528m as at 31 May 2021 (31 May
2020: GBP541m).
At 31 May 2021, PIP had net available cash balances of GBP198m
(31 May 2020: GBP121m). 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 2021, the loan facility
amounted to a sterling equivalent of GBP277m (31 May 2020:
GBP310m).
At 31 May 2021, the Company had GBP475m (31 May 2020: GBP431m)
of available financing which, along with the value of the private
equity portfolio, provides comfortable cover of 4.1 times (31 May
2020: 3.6 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 122% as at 31 May
2021 (31 May 2020: 107%).
(1) Includes undrawn commitments attributable to the reference portfolio underlying the ALN.
Maturity(1)
We actively manage PIP's maturity profile to maximise the
potential for growth and generate cash. This is achieved through a
mix of primaries, secondaries and co-investments.
As at 31 May 2021, PIP's portfolio had a weighted average fund
age of 5.2 years.
2020 and later 9%
2019 12%
2018 14%
2017 15%
2016 14%
2015 14%
2014 4%
2011 - 2013 9%
2010 and earlier 9%
(1) Maturity chart in the full Annual Report 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.
Undrawn Commitments by Region(2)
The largest share of undrawn commitments represents 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$ and Euros to match the predominant
currencies of its undrawn commitments.
USA 45%
Europe 38%
Global 10%
Asia and EM(3) 7%
Undrawn Commitments by Vintage(2)
The rise in more recent vintages is a result of PIP's primary
commitment and co-investment activity in recent years.
Approximately 21% of PIP's undrawn commitments are in funds with
vintage years which are 2014 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.
2021 13%
2020 15%
2019 18%
2018 16%
2017 7%
2016 5%
2015 5%
2014 1%
2011 - 2013 5%
2010 and earlier 15%
Undrawn Commitments by Region(2)
The largest share of undrawn commitments represents 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$ and Euros to match the predominant
currencies of its undrawn commitments.
USA 45%
Europe 38%
Global 10%
Asia and EM 7%
Undrawn commitments by Stage(2)
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 42%
Large/mega buyout 27%
Growth 20%
Special situations 8%
Venture 3%
(2) Includes undrawn commitments attributable to the reference
portfolio underlying the Asset Linked Note.
(3) EM: Emerging Markets .
Asset Linked Note (ALN)
As part of the share consolidation effected on 31 October 2017,
PIP issued an ALN with an initial principal amount of GBP200m to a
single holder (the "Investor"). Repayments under the ALN are made
quarterly in arrears and are linked to the ALN share (approximately
75%) of the net cash flow from a reference portfolio which is
comprised of interests held by PIP in over 300 of its oldest
private equity funds, substantially 2006 and earlier vintages. PIP
retains the net cash flow relating to the remaining c.25% of the
reference portfolio.
The ALN is unlisted and subordinated to PIP's existing loan
facility (and any refinancing), and is not transferable, other than
to an affiliate of the Investor. The ALN is expected to mature on
31 August 2027, at which point the Company will make the final
repayment under the ALN.
As at 31 May 2021, the ALN was valued at GBP47m (31 May 2020:
GBP65m). For more information on the ALN, refer to the full Annual
Report and Accounts.
OTHER INFORMATION
The Largest 50 Managers by Value
% OF TOTAL PRIVATE
EQUITY ASSET
RANK MANAGER REGION(1) STAGE BIAS VALUE(2)
------- ----------------------------- ------------ ------------------- -------------------
1 Insight Partners USA Growth 7.1%
2 Essex Woodlands USA Growth 3.7%
3 Providence Equity Partners USA Buyout, Growth 3.1%
Venture,
4 Index Ventures Europe Growth 2.8%
5 Apax Partners SA Europe Buyout 2.7%
Asia and
6 Baring Private Equity Asia EM Growth 2.6%
7 Veritas Capital USA Buyout 2.5%
8 Advent International Global Buyout 2.1%
9 Mid-Europa Partners Europe Buyout 2.0%
10 BC Partners Europe Buyout 1.9%
Asia and
11 LYFE Capital EM Growth 1.8%
12 Parthenon Capital USA Buyout 1.7%
13 Hg Europe Buyout 1.7%
14 ABRY Partners USA Buyout 1.6%
15 Warburg Pincus Capital Global Growth 1.4%
16 Hellman & Friedman USA Buyout 1.3%
17 Ares Management USA Buyout 1.3%
18 Searchlight Capital Partners Global Special situations 1.2%
19 Gemini Capital Europe Venture 1.2%
20 Calera Capital USA Buyout 1.2%
21 Clearlake Capital Group USA Buyout 1.2%
22 Summa Equity Europe Buyout, Growth 1.2%
23 Energy Minerals Group USA Special situations 1.1%
24 Texas Pacific Group USA Buyout 1.1%
25 HIG Capital USA Buyout 1.1%
26 Oak HC/FT USA Growth 1.1%
27 Quantum Energy Partners USA Special situations 1.0%
28 Shamrock Capital Advisors USA Buyout 1.0%
29 Francisco Partners USA Buyout 1.0%
30 IK Investment Partners Europe Buyout 1.0%
31 Lee Equity Partners USA Growth 1.0%
32 NMS Management USA Buyout 1.0%
33 Equistone Partners Europe Europe Buyout 1.0%
34 Altor Capital Europe Buyout 1.0%
35 Growth Fund(3) USA Growth 0.9%
36 Charlesbank Capital Partners USA Buyout 0.8%
37 Apollo Advisors USA Buyout 0.8%
38 PAI Partners Europe Buyout 0.8%
39 ECI Partners Europe Buyout 0.8%
40 Horizon Capital Europe Buyout 0.8%
Asia and
41 IVF Advisors EM Buyout 0.8%
42 Growth Fund(3) USA Growth 0.7%
43 Sageview Capital USA Growth 0.7%
Asia and
44 TPG Asia EM Buyout 0.7%
Asia and
45 Madison India Capital EM Buyout 0.7%
46 Ergon Capital Partners Europe Buyout 0.6%
47 Marguerite Europe Special situations 0.6%
48 Idinvest Partners Europe Growth 0.6%
49 Avenue Broadway Partners Europe Buyout 0.6%
50 Chequers Partenaires Europe Buyout 0.6%
------- ----------------------------- ------------ ------------------- -------------------
COVERAGE OF PIP'S PRIVATE EQUITY ASSET VALUE(2) 71.2%
------------------------------------------------------------------------- -------------------
(1) Refers to the regional exposure of funds.
(2) Percentages look through feeders and fund-of-funds and
excludes 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 DESCRIPTION NAV
--- -------------------------- ------------ ----------------------- --------------------------------- -----------
Develops and licenses oncology
1 EUSA Pharma(2) UK Healthcare products 3.0%
2 Chewy(2,3) USA Consumer Pet food manufacturer 1.3%
Provider of ophthalmology
3 Omni Eye Services USA Healthcare services 0.9%
4 Asurion(2) USA Financials Mobile phone insurance company 0.9%
Provider of business software
5 Visma(2) Norway Information technology solutions 0.8%
Security management solutions
6 Software Company(2,4) USA Information technology provider 0.8%
7 Recorded Future(2) USA Information technology Cybersecurity software company 0.7%
Offers software development
8 JFrog(2,3) Israel Information technology platforms 0.7%
9 Olink(3) Sweden Healthcare Biotechnology company 0.7%
10 Ascent Resources(2) USA Energy Oil and gas exploration company 0.7%
Communication
11 Marlink(2) France services Satellite communications company 0.6%
12 Allegro(2,3) Poland Consumer Online marketplace 0.6%
13 Star Health(2) India Financials Health insurance provider 0.6%
Ice cream and frozen food
14 Froneri(2) UK Consumer manufacturer 0.6%
Developer of content management
15 Squarespace USA Information technology systems 0.6%
Manufacturer of fire protection
16 svt Germany Industrials products 0.6%
Provider of trust and fund
17 Vistra(2) Hong Kong Financials services 0.6%
Atria Convergence Communication
18 Technologies India services Broadband and cable TV provider 0.5%
19 Kaspi Bank(3) Kazakhstan Financials Commercial bank 0.5%
20 Kyobo Life Insurance South Korea Financials Life insurance company 0.5%
Communication Content provider to the legal
21 ALM Media(2) USA services industry 0.5%
22 Action Netherlands Consumer Non-food discount stores 0.5%
Alion Science and
23 Technology(2) USA Industrials Systems engineering company 0.5%
24 LogicMonitor(2) USA Information technology Managed IT service provider 0.5%
Developer of software for
Virence Health healthcare
25 Technologies USA Healthcare applications 0.5%
Manufacturer of vehicle
suspension
26 Arnott Industries(2) USA Consumer products 0.5%
27 Imeik Technology China Healthcare Biotechnology company 0.5%
28 CallRail(2) USA Information technology Mobile data analytics company 0.4%
29 Profi Rom(2) Romania Consumer Supermarket chain 0.4%
Provider of digital platform
30 WalkMe USA Information technology integration solutions 0.4%
31 KD Pharma(2) Germany Healthcare Pharmaceutical company 0.4%
Apollo Education Provider of continuing education
32 Group(2) USA Consumer programmes 0.4%
Manufacturer of building
33 CPG International(2) USA Industrials products 0.4%
Flynn Restaurant
34 Group USA Consumer Restaurant franchise 0.4%
Operator of wireless
infrastructure
35 Mobilitie(2) USA Industrials networks 0.4%
Developer of educational
software
36 Renaissance Learning(2) USA Consumer products 0.4%
Burning Rock Biological
37 Technology(2) China Healthcare Biotechnology company 0.4%
38 OWP Butendiek Germany Utilities Offshore wind farms 0.4%
Provider of disclosure
management
39 MRO(2) USA Healthcare services 0.4%
Human resources software
40 Paycor(2) USA Information technology developer 0.4%
Payment management solutions
41 Cotiviti USA Healthcare provider 0.4%
Prepaid debit and credit card
42 Marqeta USA Information technology platform 0.4%
43 Shawbrook Bank(2) UK Financials Commercial bank 0.3%
Provider of infrastructure
44 Ports America USA Industrials solutions for ports 0.3%
Software solutions for the
45 Charles Taylor(2) UK Financials insurance industry 0.3%
46 Software Company(4) USA Information technology Insurance software provider 0.3%
Provider of medical and
behavioural
47 Correct Care Solutions(2) USA Healthcare health services 0.3%
48 nCino USA Information technology Cloud banking platform developer 0.3%
Southern Dental
49 Alliance(2) USA Healthcare Dental service organisation 0.3%
Property and casualty insurance
50 HUB International(2) USA Financials company 0.3%
--------------------------------- -----------
COVERAGE OF PIP'S PRIVATE EQUITY ASSET VALUE 28.1%
---------------------------------------------------------------------- --------------------------------- -----------
(1 The largest 50 companies table is based upon underlying
company valuations at 31 March 2021 adjusted for known call and
distributions to 31 May 2021, and includes the portion of the
reference portfolio attributable to the ALN.)
(2 Co-investments/directs.)
(3 Listed companies.)
(4 The private equity manager does not permit the Company to
disclose this information.)
(.)
Portfolio Concentration
70 managers and 600 companies account for approximately 80% of
PIP's total exposure.(1)
(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)
Susannah Nicklin* (Senior Independent Director)
David Melvin* (Audit Committee Chairman)
John Burgess*
John Singer*
Mary Ann Sieghart*
Dame Sue 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 22 September
2020 to allot shares, disapply statutory pre-emption rights and buy
back shares will expire at the forthcoming AGM. No shares were
issued or bought back during the year.
As at 31 May 2021 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 of
at 31 May 2021 of Shares attached shares held
in issue to each share in treasury
Ordinary shares at GBP0.67 each 54,089,447 1 -
Total voting rights 54,089,447 - -
Going Concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position,
including its financial position, are set out in the Strategic
Report and Manager's Review.
The Directors have made an assessment of going concern, taking
into account both the Company's financial position at the Balance
Sheet date and the expected performance of the Company, which
considers the impact of the COVID-19 pandemic, 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 above 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 generating
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 the Company's
borrowing capability. One-year cash flow scenarios are also
presented at each meeting and discussed.
PIP's Balance Sheet is managed to ensure that the Company can
finance its undrawn commitments, which are themselves 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.
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
global financial crisis. This also included a combined reverse
stressed scenario that analyses the factors that would have to
simultaneously occur for the Company to be forced into a wind-down
scenario, the effectiveness of any mitigating actions and the
Company's risk appetite.
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.
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 as at 31 May 2021.
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. 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 United Kingdom Accounting Standards (United
Kingdom 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 2021, 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
4 August 2021
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the year ended 31 May 2021 and
period ended 31 May 2020 but is derived from those accounts.
Statutory accounts for 2020 have been delivered to the Registrar of
Companies, and those for 2021 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 2021
Year ended 31 May 2021 Year ended 31 May 2020
---------------------------------------- ----- ------------------------------------ -------------------------------
Revenue Capital Total* Revenue Capital Total*
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ----- ---------- ----------- ----------- --------- --------- ---------
Gains on investments at fair value
through profit or loss** 9b - 341,802 341,802 - 72,264 72,264
(Losses)/gains on financial instruments
at fair value through profit or
loss - ALN** (976) (11,571) (12,547) (502) 277 (225)
Currency (losses)/gains on cash
and borrowings - (18,452) (18,452) - 1,403 1,403
Investment income 2 16,418 - 16,418 11,198 - 11,198
Investment management fees 3 (18,544) - (18,544) (17,674) - (17,674)
Other expenses 4 (1,417) (1,340) (2,757) (730) (1,719) (2,449)
---------------------------------------- ----- ---------- ----------- ----------- --------- --------- ---------
Return before financing and taxation (4,519) 310,439 305,920 (7,708) 72,225 64,517
Interest payable and similar expenses 6 (3,488) - (3,488) (2,223) - (2,223)
---------------------------------------- ----- ---------- ----------- ----------- --------- --------- ---------
Return before taxation (8,007) 310,439 302,432 (9,931) 72,225 62,294
Taxation recovered/(paid) 7 3,533 - 3,533 (1,616) - (1,616)
---------------------------------------- ----- ---------- ----------- ----------- --------- --------- ---------
Return for the year, being total
comprehensive income for the year (4,474) 310,439 305,965 (11,547) 72,225 60,678
---------------------------------------- ----- ---------- ----------- ----------- --------- --------- ---------
Return per ordinary share 8 (8.27)p 573.94p 565.67p (21.35)p 133.53p 112.18p
---------------------------------------- ----- ---------- ----------- ----------- --------- --------- ---------
* The Company does not have any income or expense that is 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").
** Includes currency movements on investments.
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 2021
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 2021
Opening equity
shareholders' funds 36,240 269,535 3,325 842,675 503,307 (95,816) 1,559,266
Return for the period - - - 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
Movement for the period
ended
31 May 2020
Opening equity
shareholders' funds 36,240 269,535 3,325 735,104 538,653 (84,269) 1,498,588
Return for the year - - - 107,571 (35,346) (11,547) 60,678
Closing equity
shareholders' funds 36,240 269,535 3,325 842,675 503,307 (95,816) 1,559,266
The Notes form part of these financial statements.
Balance Sheet
As at 31 May 2021
31 May 2021 30 May 2020
Note GBP'000 GBP'000
----------------------------------------------- ------- ----------- -----------
Fixed assets
Investments at fair value 9a/b 1,713,724 1,495,689
----------------------------------------------- ------- ----------- -----------
Current assets
Debtors 11 8,215 1,259
Cash at bank 199,118 130,091
----------------------------------------------- ------- ----------- -----------
207,333 131,350
----------------------------------------------- ------- ----------- -----------
Creditors: Amounts falling due within one year
Other creditors 12 9,039 10,030
----------------------------------------------- ------- ----------- -----------
9,039 10,030
----------------------------------------------- ------- ----------- -----------
Net current assets 198,294 121,320
----------------------------------------------- ------- ----------- -----------
Total assets less current liabilities 1,912,018 1,617,009
----------------------------------------------- ------- ----------- -----------
Creditors: Amounts falling due after one year
Asset Linked Loan 13 46,787 57,743
----------------------------------------------- ------- ----------- -----------
46,787 57,743
----------------------------------------------- ------- ----------- -----------
Net assets 1,865,231 1,559,266
----------------------------------------------- ------- ----------- -----------
Capital and reserves
Called-up share capital 14 36,240 36,240
Share premium 15 269,535 269,535
Capital redemption reserve 15 3,325 3,325
Other capital reserve 15 976,685 842,675
Capital reserve on investments held 15 679,736 503,307
Revenue reserve 15 (100,290) (95,816)
----------------------------------------------- ------- ----------- -----------
Total equity shareholders' funds 1,865,231 1,559,266
----------------------------------------------- ------- ----------- -----------
Net asset value per Ordinary share 16 3,448.42p 2,882.75p
----------------------------------------------- ------- ----------- -----------
The Notes form part of these financial statements.
The financial statements were approved by the Board of Pantheon
International Plc on 4 August 2021 and were authorised for issue
by
Sir Laurie Magnus
Chairman
Company No. 2147984
Cash Flow Statement
Year ended 31 May 2021
Year ended Year ended
31 May 2021 31 May 2020
Note GBP'000 GBP'000
Cash flow from operating activities
Investment income received 16,311 10,356
Deposit and other interest received 87 952
Investment management fees paid (18,416) (17,623)
Secretarial fees paid (263) (219)
Depositary fees paid (225) (219)
Legal and professional fees paid (1,544) (1,913)
Other cash payments* (1,316) (1,517)
Withholding tax repaid/(deducted) 3,602 (1,776)
Net cash outflow from operating activities 17 (1,764) (11,959)
--------------------------------------------------- ---- ----------- -----------
Cash flows from investing activities
Purchases of investments (226,205) (239,251)
Disposals of investments 344,559 267,126
--------------------------------------------------- ---- ----------- -----------
Net cash inflow from investing activities 118,354 27,875
--------------------------------------------------- ---- ----------- -----------
Cash flows from financing activities
ALN repayments (24,286) (28,023)
Loan commitment and arrangement fees paid (4,888) (1,816)
Net cash outflow from financing activities (29,174) (29,839)
Increase/(Decrease) in cash in the year 87,416 (13,923)
Cash and cash equivalents at beginning of the year 130,091 142,773
Foreign exchange (losses)/ gains (18,389) 1,241
--------------------------------------------------- ---- ----------- -----------
Cash and cash equivalents at end of the period 199,118 130,091
--------------------------------------------------- ---- ----------- -----------
* Includes interest paid during the year of GBP66,000 (2020:
GBP31,000).
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 2021. 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.
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.
COVID-19 presents the biggest risk to the global economy and to
individual companies since the 2008 global financial crisis and
unprecedented nature of the COVID-19 outbreak has resulted in
uncertain financial markets and disruption of global commerce.
The Directors have made an assessment of going concern, taking
into account the Company's current performance, financial position
and the outlook, which considered the impact of the COVID-19
pandemic, using information available to the date of issue of these
financial statements. As part of this assessment the Directors
considered:
-- Various downside liquidity modelling scenarios with varying
degrees of decline in investment valuations, 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 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 2021 stood at
GBP475m (31 May 2020: GBP431m), comprising GBP198m (31 May 2020:
GBP121m) in available cash balances and GBP277m (31 May 2020:
GBP310m) (sterling equivalent) in undrawn bank facilities.
-- PIP's 31 May 2021 valuation is primarily based on reported GP
valuations with a reference date of 31 March 2021, updated for
capital movements and foreign exchange. As the impacts of COVID-19
are still not fully apparent and there has been significant
volatility in asset prices and foreign exchange rates, 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
2021 were GBP528m (31 May 2020: GBP541m). 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 available to fund 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.
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 and 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. AIC SORP
The financial statements have been prepared in accordance with
the SORP for the financial statements of investment trust companies
and venture capital trusts issued by the AIC, other than where
restrictions are imposed on the Company which prohibit specific
disclosures , as noted in the full Annual Report.
D. Segmental Reporting
The Directors are of the opinion that the Company is engaged in
a single segment of business, being an investment business.
E. 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.
F. 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.
G. 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.
H. 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.
I. 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.
J. Foreign Currency
The functional and presentational currency of the Company is
pounds sterling ("sterling") because this is the primary economic
environment in which the Company operates. Also, the Company is
registered in England & Wales. 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 (K) and (L) below.
K. 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, any gain will be recognised as
realised only when the cost has been reduced to nil.
L. 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.
M. 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 in each
year. The performance fee payable in respect of each such
calculation period is 5% of the amount by which the net asset value
at the end of such period exceeds 110% of the applicable
"high-water mark", i.e. the net asset value at the end of the
previous calculation period in respect of which a performance fee
was payable, compounded annually at 10% for each subsequent
completed calculation period up to the start of the calculation
period for which the fee is being calculated. For the calculation
period ended 31 May 2021, the notional performance fee hurdle is a
net asset value per share of 4,184.20p. The performance fee is
calculated using the adjusted net asset value.
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.
N. 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
any estimates are provided in section (E) of this Note, in the
Valuation of Investments policy and also within the Market Price
Risk section in Note 19.
O. 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 2021 31 May 2020
GBP'000 GBP'000
------------------------------- ------------ ------------
Income from investments
Investment income 16,331 10,267
------------------------------- ------------ ------------
16,331 10,267
------------------------------- ------------ ------------
Other income
Interest 89 919
Exchange difference on income (2) 12
------------------------------- ------------ ------------
87 931
------------------------------- ------------ ------------
Total income 16,418 11,198
------------------------------- ------------ ------------
Total income comprises
Income distributions 16,331 10,267
Bank interest 39 919
Other interest 50 -
Exchange difference on income (2) 12
------------------------------- ------------ ------------
16,418 11,198
------------------------------- ------------ ------------
Analysis of income from
investments
Unlisted 16,331 10,267
------------------------------- ------------ ------------
16,331 10,267
------------------------------- ------------ ------------
Geographical analysis
UK 3 367
USA 12,345 8,862
Other overseas 3,983 1,038
------------------------------- ------------ ------------
16,331 10,267
------------------------------- ------------ ------------
3. Investment Management Fees
31 May 2021 31 May 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management
fees 18,544 - 18,544 17,674 - 17,674
----------------------- --------- --------- --------- --------- --------- ---------
18,544 - 18,544 17,674 - 17,674
----------------------- --------- --------- --------- --------- --------- ---------
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 GBP18,896,000
(period to 31 May 2020: GBP18,102,000), being GBP18,544,000 (period
to 31 May 2020: GBP17,674,000) directly from Pantheon Ventures (UK)
LLP and GBP352,000 (period to 31 May 2020: GBP428,000) 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 GBP24,344,000 as
at 31 May 2021 (31 May 2020: GBP13,634,000). 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 or equal to 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 2021 GBP1,646,000 (31 May 2020: GBP1,518,000) was owed
for investment management fees. No performance fee is payable in
respect of the year to 31 May 2021 (31 May 2020: nil). The basis
upon which the performance fee is calculated is explained in Note
1(M) and in the Directors' Report within the full Annual
Report.
4. Other Expenses
31 May 2021 31 May 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- --------- --------- --------- ---------- --------- ----------
Secretarial and
accountancy services 243 - 243 246 - 246
Depositary fees 233 - 233 221 - 221
Fees payable to
the Company's Auditor
for the
- audit of the
annual financial
statements
- current auditor 115 - 115 105 - 105
- audit of the annual
financial statements
- previous auditor - - - 3 - 3
Fees payable to
the Company's Auditor
for
* audit-related assurance services
- Half-Yearly report
- current auditor 35 - 35 35 - 35
Directors' remuneration
(see Note 5) 331 - 331 324 - 324
Employer's National
Insurance 25 - 25 32 - 32
Irrecoverable VAT 117 - 117 112 - 112
Legal and professional
fees 315 1,245 1,560 194 1,719 1,913
Printing 107 - 107 128 - 128
Other* 599 95 694 436 - 436
ALN Expense Charge
(see Note 1 (F)) (703) - (703) (1,106) - (1,106)
----------------------------------------------- --------- --------- --------- ---------- --------- ----------
1,417 1,340 2,757 730 1,719 2,449
----------------------------------------------- --------- --------- --------- ---------- --------- ----------
The Directors do not consider that the provision of non-audit
work to the Company affects the independence of the Auditor.
* See Note 9b for detailed information.
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 2021 31 May 2020
GBP'000 GBP'000
--------------------------------- ------------ ------------
Negative bank interest 66 31
Loan commitment and arrangement
fees 3,422 2,192
--------------------------------- ------------ ------------
3,488 2,223
--------------------------------- ------------ ------------
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 4 year GBP150m
loan facility agreement, with the Royal Bank of Scotland plc and
Lloyds Bank plc, which was due to expire in November 2018.
The terms of the facility was materially the same as those of
the previous facility but was due to expire in June 2022 with an
option after one year to extend, by agreement, the maturity date by
another year.
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 drawn down amount is payable for
the duration of the drawdown period.
During the year to 31 May 2020, the Company agreed a further
GBP125m accordion facility, with a new partner in the lending
syndicate, State Street Bank and Trust Company, increasing the
total facility available to GBP300m. The aggregate loan facility of
GBP300m is split into two tranches of US$269.8m and EUR101.6m,
retranslated to GBP277m as at 31 May 2021 (2020: GBP310m).
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.
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 2021 and 31 May 2020 the loan
facility remained fully undrawn.
.
7. Taxation
31 May 2021 31 May 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- --------- ---------- --------- --------- ---------
Withholding tax
(repaid)/ deducted
from distributions (3,533) - (3,533) 1,616 - 1,616
---------------------- ---------- --------- ---------- --------- --------- ---------
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 (8,007) 310,439 302,432 (9,931) 72,225 62,264
-------------------------- -------- --------- --------- -------- --------- ---------
Theoretical tax
at UK corporation
tax rate of 19%
(31 May 2020: 19%) (1,521) 58,983 57,462 (1,887) 13,723 11,836
Non-taxable investment,
derivative and currency
gains - (59,238) (59,238) - (14,050) (14,050)
Effect of expenses
in excess of taxable
income - 237 237 - 327 327
Expenses disallowable
for tax purposes - 18 18 - - -
Carry forward management
expenses 1,521 - 1,521 1,887 - 1,887
Withholding tax
(repaid)/deducted
from distributions (3,533) - (3,533) 1,616 - 1,616
-------------------------- -------- --------- --------- -------- --------- ---------
(3,533) - (3,533) 1,616 - 1,616
-------------------------- -------- --------- --------- -------- --------- ---------
The tax credit for the year ended 31 March 2021 is GBP3.5m (31
May 2020; tax charge of GBP1.6m). Tax charges are 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. In addition, during the year ended 31 May 2021,
GBP6.1m of taxation was recovered from the United States Internal
Revenue Service, relating to prior years' taxation, which resulted
in an overall tax credit of GBP3.5m in the period.
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 2021, excess
management expenses are estimated to be in excess of GBP249m (31
May 2020: GBP240m).
At 31 May 2021, the Company had no unprovided deferred tax
liabilities (31 May 2020: GBPnil).
8. Return per Share
31 May 2021 31 May 2020
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 (4,474) 310,439 305,965 (11,547) 72,225 60,678
Weighted average
ordinary and redeemable
shares 54,089,447 54,089,447
Return per share (8.27)p 573.94p 565.67p (21.35)p 133.53p 112.18p
-------------------------- ---------- ---------- ------------- ----------- --------- ------------
There are no dilutive effects to earnings per share.
9a. Movements on Investments
31 May 2021 31 May 2020
GBP'000 GBP'000
-------------------------------------- ------------ ------------
Book cost brought forward 973,761 892,083
Opening unrealised appreciation
on investments held
-Unlisted investments 521,565 551,852
* Listed investments 363 5,699
--------------------------------------
Valuation of investments brought
forward 1,495,689 1,449,634
Movements in year:
Acquisitions at cost 226,205 239,251
Capital distributions - proceeds (349,972) (265,462)
Capital distributions - realised
gains on sales 153,802 107,889
Increase/ (decrease) in appreciation
on investments held 188,000 (35,623)
-------------------------------------- ------------ ------------
Valuation of investments at year
end 1,713,724 1,495,689
-------------------------------------- ------------ ------------
Book cost at year end 1,003,796 973,761
Closing unrealised appreciation
on investments held
-Unlisted investments 709,712 521,565
-Listed investments 216 363
-------------------------------------- ------------ ------------
Valuation of investments at year
end 1,713,724 1,495,689
-------------------------------------- ------------ ------------
Fair value of investments:
Unlisted investments 1,713,508 1,494,944
Listed investments 216 745
-------------------------------------- ------------ ------------
Valuation of investments at year
end 1,713,724 1,495,689
-------------------------------------- ------------ ------------
9b. Analysis of Investments
31 May 2021 31 May 2020
GBP'000 GBP'000
----------------------------------- ------------ -------------------
Sterling
Unlisted investments 67,451 49,930
67,451 49,930
----------------------------------- ------------ -------------------
US dollar
Unlisted investments 1,266,123 1,121,246
Listed investments 216 412
1,266,339 1,121,658
----------------------------------- ------------ -------------------
Euro
Unlisted investments 337,522 288,474
Listed investments - 333
337,522 288,807
----------------------------------- ------------ -------------------
Other
Unlisted investments 42,412 35,294
----------------------------------- ------------ -------------------
42,412 35,294
----------------------------------- ------------ -------------------
1,713,724 1,495,689
----------------------------------- ------------ -------------------
Realised gains on sales 153,802 107,889
Amounts previously recognised
as unrealised appreciation on
those sales 363 5,699
Increase/(decrease) in unrealised
appreciation 187,637 (41,322)
Revaluation of amounts owed
in respect of transactions - (2)
----------------------------------- ------------ -------------------
Gains on investments 341,802 72,264
----------------------------------- ------------ -------------------
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 2020: GBPnil) and to the disposals of investments totalled
GBP12,000 (31 May 2020: GBP14,000) for the period. In addition,
legal fees incidental to the acquisition of investments totalled
GBP1,245,000 (31 May 2020: GBP1,719,000), as disclosed in Note 4,
have been taken to the capital column in the Income Statement since
they are capital in nature.
9c. Material Investment
At the year end, the Company held the following material
holdings in an investee undertaking which exceeded 3% of any class
of capital.
Closing net asset
value
Investment % ownership GBP'000
----------------- ------------ ------------------
Gemini Israel V 4.7% 19,996
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;
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
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 Assets at Fair Value Through Profit or Loss at 31 May
2020
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- --------- ---------- ----------
Unlisted holdings - - 1,494,944 1,494,944
Listed holdings 745 - - 745
------------------- --------- --------- ---------- ----------
745 - 1,494,944 1,495,689
------------------- --------- --------- ---------- ----------
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
---------- ------------------------------ --------- ---------
Financial Liabilities at Fair Value Through Profit or Loss at 31
May 2020
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------- ---------- --------- ---------
Asset Linked Note - - 65,386 65,386
------------------- ---------- ---------- --------- ---------
- - 65,386 65,386
---------- ------------------------------ --------- ---------
11. Debtors
31 May 2021 31 May 2020
GBP'000 GBP'000
-------------------------------- ------------ ------------
Amounts owed by investment
funds 5,656 305
Prepayments and accrued income 2,559 954
-------------------------------- ------------ ------------
8,215 1,259
-------------------------------- ------------ ------------
12. Creditors Amounts Falling Due Within One Year
31 May 2021 31 May 2020
GBP'000 GBP'000
------------------------------- ------------ ------------
Investment management fees 1,646 1,518
ALN repayment to the Investor 6,228 7,643
Other creditors and accruals 1,165 869
------------------------------- ------------ ------------
9,039 10,030
------------------------------- ------------ ------------
13. Creditors Amounts Falling Due After One Year - Asset Linked
Note
31 May 2021 31 May 2020
GBP'000 GBP'000
------------------------------ ------------ ------------
Opening value of ALN 65,386 94,449
Repayments of net cash flows
received (24,286) (28,023)
Fair value movements through
profit or loss 12,547 225
Expense charge and ALN share
of witholding taxes (632) (1,265)
------------------------------ ------------ ------------
Closing value of ALN (see
Note 1 (F) 53,015 65,386
Transfer to creditors due
within one year (6,228) (7,643)
------------------------------ ------------ ------------
46,787 57,743
------------------------------ ------------ ------------
14. Called-up Share Capital
31 May 2021 31 May 2020
Shares GBP'000 Shares GBP'000
------------------------- ----------- -------- ----------- --------
Allotted, called up and
fully paid:
Ordinary shares of 67p
each
Opening position 54,089,447 36,240 54,089,447 36,240
Closing position 54,089,447 36,240 54,089,447 36,240
------------------------- ----------- -------- ----------- --------
Total shares in issue 54,089,447 36,240 54,089,447 36,240
------------------------- ----------- -------- ----------- --------
Du ring the period there were no ordinary shares bought back in
the market for cancellation. (31 May 2020: nil).
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*
GBP'000 GBP'000 GBP'000 held GBP'000
GBP'000
----------------------------------------- ---------- ------------- ---------- ------------- -----------
Beginning of year 269,535 3,325 842,675 503,307 (95,816)
Net gain on realisation of investments - - 153,802 - -
Increase in unrealised appreciation - - - 176,066 -
Transfer on disposal of investments - - - 363 -
Revaluation of amounts owed in respect - - - - -
of transactions
Exchange differences on currency - - (18,389) - -
Exchange differences on other capital - - (63) - -
items
Legal and professional expenses charged - - (1,245) - -
to capital
Other expenses charged to capital - - (95) - -
Revenue return for the period - - - - (4,474)
End of Year 269,535 3,325 976,685 679,736 (100,290)
----------------------------------------- ---------- ------------- ---------- ------------- -----------
* Reserves that are distributable by way of dividends. In
addition, the Other Capital Reserve can be used for share
buybacks.
16. Net Asset Value per Share
31 May 2021 31 May 2020
------------------------------ ------------------------------ ---------------------------
Net assets attributable in
GBP'000 1,865,231 1,559,266
Ordinary shares 54,089,447 54,089,447
Net asset value per ordinary
share 3,448.42p 2,882.75p
------------------------------ ------------------------------ ---------------------------
17. Reconciliation of Return Before Financing Costs and Taxation
to Net Cash Flow from Operating Activities
31 May 2021 31 May 2020
GBP'000 GBP'000
------------------------------------------ ------------ ------------
Return before taxation and finance
costs 305,920 64,517
Withholding tax refunded/(deducted) 3,533 (1,616)
Gains on investments (341,802) (72,264)
Currency losses/(gains) on cash
and borrowings 18,452 (1,403)
Increase/(decrease) in creditors 215 (216)
Decrease in other debtors 3 65
Losses on financial liabilities
at fair value through profit or
loss (ALN) 12,547 225
Income, expenses and taxation associated
with ALN (632) (1,265)
------------------------------------------ ------------ ------------
Net cash outflow from operating
activities (1,764) (11,959)
------------------------------------------ ------------ ------------
18. Contingencies, Guarantees and Financial Commitments
At 31 May 2021 there were financial commitments outstanding of
GBP528m (31 May 2020: GBP541m) in respect of investments in partly
paid shares and interests in private equity funds. Further details
are provided in the Strategic Report in the full Annual Report.
Outstanding commitments include a GBP106.7m (31 May 2020:
GBPnil) cornerstone commitment to the Pantheon Secondaries
Opportunities Fund ("PSOF"). PSOF seeks to partner with high
quality private equity managers to acquire, as single transactions,
their most attractive portfolio companies with the goal of jointly
participating in such companies next phase of growth. PIP has
agreed a fee basis with Pantheon for this investment which, in
recognition of its cornerstone role, is lower than the standard fee
scale applied to the rest of the Company's portfolio.
Further detail of the available finance cover is provided in
Note 19.
19. 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 has little exposure to credit risk. 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-end 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 18 for outstanding commitments as at 31
May 2021) 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 28 May 2020 (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 2021 stood at GBP475m (31
May 2020: GBP431m), comprising GBP198m (31 May 2020: GBP121m) in
cash balances and GBP277m (31 May 2020: GBP310m) (sterling
equivalent) in undrawn bank facilities. The available financing
along with the private equity portfolio exceeded the outstanding
commitments by 4.1 times (31 May 2020: 3.6 times).
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
LIBOR or EURIBOR + 2.35%, dependent on the currency drawn. The
interest rate is then fixed for the duration that the loan is drawn
down. At 31 May 2021 there was the sterling equivalent of GBPnil
funds drawn down on the loan facilities (31 May 2020: 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 2021 and 2020 consisted of investments,
cash and debtors (excluding prepayments). As at 31 May 2021, 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 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 - - -
---------------- ---------- ----------- ---------- ---------- ----------
The interest rate and maturity profile of the Company's
financial assets as at 31 May 2020 was as follows:
Fixed
interest
No Matures Matures average
Maturity within after interest
Total Date 1 year 1 year rate
31 May 2020 GBP'000 GBP'000 GBP'000 GBP'000 %
---------------- ---------- ----------- ---------- ---------- ----------
Fair value of no interest rate risk
financial assets
Sterling 65,420 65,420 - - -
US dollar 1,234,056 1,234,056 - - -
Euro 290,292 290,292 - - -
Other 36,012 36,012 - - -
---------------- ---------- ----------- ---------- ---------- ----------
1,625,780 1,625,780 - - -
---------------- ---------- ----------- ---------- ---------- ----------
Financial Liabilities
At 31 May 2021, the Company had drawn the sterling equivalent of
GBPnil (31 May 2020: GBPnil) of its committed revolving multi
currency credit facility, expiring 31 May 2024, with Lloyds Bank,
Natwest Markets, State Street Bank and Trust Company. 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 2020: GBPnil) was accruing as the facilities were
unutilised.
At 31 May 2021 and 31 May 2020, 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(E) 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 2021
valuation, with all other variables held constant, there would have
been a reduction of GBP342,745,000 (31 May 2020: GBP299,138,000) 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 2021, realised exchange losses of GBP63,000 (31
May 2020: realised exchange gains of GBP162,000) and realised
losses relating to currency of GBP18,389,000 (31 May 2020: realised
gains of GBP1,241,000) 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 2021, it would have the effect,
with all other variables held constant, of increasing equity
shareholders' funds by GBP20,497,000 (31 May 2020: GBP12,639,000).
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 GBP16,770,000 (31 May
2020: GBP10,341,000). The calculations are based on the financial
assets and liabilities and the exchange rate as at 31 May 2021 of
1.42155 (31 May 2020: 1.23680) sterling/dollar and 1.16255 (31 May
2020: 1.11185) 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
2021 2021 2020 2020
Assets Liabilities Assets Liabilities
GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------- -------------- ---------- --------------
US dollar 166,508 455 112,583 310
Canadian dollar 18 - - -
Euro 19,071 203 1,606 127
Swedish krone 3,219 - 66 -
Norwegian krone 1,712 - 321 -
Australian dollar 7,480 - 331 -
197,558 658 114,907 437
------------------- ---------- -------------- ---------- --------------
Fair Value of Financial Assets and Financial Liabilities
The financial assets of the Company are held at fair value.
Other than the ALN, the financial liabilities are held at amortised
cost, which is not materially different from fair value.
Managing Capital and Reserves
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.
As at 31 May 2021 and 31 May 2020 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.
20. 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's National Insurance contribution in relation
to Directors' remuneration is disclosed in Note 4.
There are no other identifiable related parties at the period
end.
ANNUAL GENERAL MEETING
The Company's Annual General Meeting ("AGM") will be held on
Wednesday, 27 October 2021 at 10.30 a.m. A separate circular
containing the AGM notice will be published and made available
towards the end of August 2021.
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 .
ENDS
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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END
FR USABRAOUWRAR
(END) Dow Jones Newswires
August 05, 2021 02:00 ET (06:00 GMT)
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