Final Results
Pantheon International Participations PLC (PIP)
Preliminary Announcement of Results for the year ended 30 June 2006
Chairman's Statement
Private equity markets globally have shown continuing strength with
realisations from investments reaching unprecedented levels and valuation
trends remaining strongly positive. Consequently PIP's portfolio of investments
in private equity funds has shown good performance in the year to 30th June
2006 leading to an increase in PIP's net asset value per share of 21.1% to
796.8p. Our total assets increased by £59.5 million to £441.0 million after
redeeming £20 million of redeemable shares.
The 21.1% increase in PIP's net asset value per share compares to increases in
the MSCI World index of 16.9% and the FTSE All Share index of 19.7%
respectively. The 11.7% increase in PIP's ordinary share price during the year
did not match the increase in PIP's net asset value per share because the share
price discount had widened to 8.8% at the year end. Since then PIP's share
price has been trading closer to net asset value per share.
Adverse currency movements, in particular the US dollar which declined 3.2%
against sterling over the year, resulted in a £5.7m reduction in the sterling
value of the portfolio.
INVESTMENT ACTIVITY
The past year has been an active one for both investment and realisations. PIP
invested £131.2 million in underlying private equity assets during the period,
an increase of 13% over the previous year. Of this amount, £59.5m was paid to
meet investment calls arising from PIP's primary portfolio and £71.7m was
applied to the secondary portfolio. The total amount of cash distributed to PIP
as a result of investment realisations during the period was £156.8 million.
This represents an increase of 74% over the previous year and is equivalent to
approximately 50% of opening private equity asset value. Of this amount, £59.8m
resulted from the primary portfolio although the majority of distributions, £
97.0m, came from the secondary portfolio bearing out a tendency of secondary
purchases to return cash sooner than primary investments. This high level of
liquidity is testament to the quality and maturity of PIP's portfolio as well
as to the current favourable market conditions.
PRIMARY COMMITMENTS
The rate of private equity fund raising increased again during the year under
review, boosted by the number of large funds coming to the market and raising
significantly greater amounts. Despite the growth in fund sizes at the top end,
many of the best funds are still oversubscribed. Pantheon's relationships with
top-tier managers have helped ensure that PIP continues to access high-demand
funds worldwide.
PIP's commitments to primary investments reached its highest level of £159.2
million over the year to end June 2006, encompassing 12 Europe-focused funds (£
75.6m) and 20 US focused funds (£83.6m), representing many of the most
attractive opportunities from among the hundreds of new fund offerings
available during the period. In addition, PIP gained exposure to 6 new Asian
funds through the investment in Pantheon Asia Fund IV Limited.
In line with the growth of PIP's private equity portfolio, the Board increased
the rate that PIP commits to primary funds from £300 million to £450 million
over a three-year period.
SECONDARY COMMITMENTS
During the year PIP committed £80.7 million to five secondary transactions to
purchase existing interests in private equity funds. The majority of the assets
added to the portfolio through these investments were US venture funds, during
a period when the venture sector appears at last to be enjoying some revival,
as evidenced by a number of prominent trade sales and successful IPOs.
MARKET REVIEW AND PROSPECTS
Growth in the global private equity market has continued, with the buyout
industry raising record amounts on the back of the good investment returns
generated in recent years. The pace of realisations during the year has been
bolstered by low interest rates, accommodating debt markets and an increase in
M&A activity occasioned by the return of the corporate buyer. In addition, the
venture markets are showing signs of renewed life and, with 27% of the
portfolio in venture capital funds, PIP is well placed to benefit from further
recovery. Pantheon expects the current high levels of fundraising,
distributions and deal flow to continue whilst the favourable economic
environment persists. Although these predictions might tend to reinforce
optimism regarding prospects for private equity in the short to medium term,
the industry is cyclical in nature and some market commentators are predicting
that the current peak in fundraising will mark the top of the market cycle.
As ever, the watchword for investors in private equity must be selectivity,
with prudent investment decisions based not only on evaluation of a firm's
track record and discipline but also on a judgement as to whether future
conditions will be such that the manager's strategy will continue to deliver
superior performance. PIP's primary programme strategy aims to create a
portfolio of top tier funds that provides exposure globally to attractive
market segment.
Deal flow remains strong within the secondary market resulting from a growth in
the number of investors who are selling in order to actively manage their
portfolios. Pantheon believes that the secondary market will continue to expand
as the scale of the primary market grows and as the secondary market matures.
CAPITAL STRUCTURE
PIP redeemed £20m in value of Redeemable Shares during the year in order to
release surplus cash arising from the high level of distributions received from
the portfolio.
PIP's ability to redeem surplus cash ensures that the Board can prevent an
accumulation of excessive cash, thereby helping to counter the effect of 'cash
drag' on investment performance.
ANNUAL GENERAL MEETING
AND PRESENTATION
The Annual General Meeting of the Company will take place at 12 noon on 22nd
November 2006 at Pantheon's office. Pantheon will give a presentation on the
progress of PIP's portfolio. Both the Directors and Pantheon look forward to
meeting shareholders informally after the meeting.
TOM BARTLAM
Chairman
26 September 2006
INCOME STATEMENT (unaudited)
for the year ended 30 June
2006 Restated
2005
Revenue Capital Total* Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments ** - 79,356 79,356 - 51,947 51,947
Currency timing differences - 263 263 - 161 161
Income
Dividends and interest 7,521 - 7,521 4,589 - 4,589
Investment management fee (5,410) - (5,410) (4,130) - (4,130)
Other expenses (804) (141) (945) (824) 257 (567)
Return on ordinary activities
before financing costs and
tax 1,307 79,478 80,785 (365) 52,365 52,000
Interest payable and similar
charges (852) - (852) (1,256) - (1,256)
Return on ordinary activities
before tax 455 79,478 79,933 (1,621) 52,365 50,744
Tax on ordinary activities - (385) (385) - (516) (516)
Return on ordinary activities
after tax 455 79,093 79,548 (1,621) 51,849 50,288
Return per ordinary and
redeemable share - basic 0.80p 138.74p 139.54p (3.87)p 119.43p 115.56p
Return per PLN N/A N/A N/A - 8.49p 8.49p
All revenue and capital items in the above statement relate to continuing
operations.
* The total column of this statement represents the Company's profit and loss
statement prepared in accordance with UK Accounting Standards. The
supplementary revenue return and capital columns are both prepared under
guidance published by the Association of Investment Trust Companies.
** Includes currency movements on investments.
RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS
Share Capital Share PLN Special Capital Capital Revenue Total
capital premium reserve reserve- reserve- reserve
redemption reserve realised unrealised
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Movement for
the year
ended
30 June 2006
Opening - -
equity
shareholders
funds 18,050 91,959 119,962 111,125 55,679 (15,287) 381,488
Return for - -
the year - - - 40,539 38,554 455 79,548
Buy back of 26 -
redeemable
shares (26) - (20,065) - - - (20,065)
Over accrual - -
on costs of
issue of
redeemable
shares - 12 - - - - 12
Closing 26 -
Equity
shareholders
funds 18,024 91,971 99,897 151,664 94,233 (14,832) 440,983
Movement for
the year
ended
30 June 2005
Opening - 121,555
equity
shareholders
funds 14,467 6,034 - 105,369 11,425 (13,666) 245,184
Return for - -
the year - - - 7,595 44,254 (1,621) 50,228
Revaluation - 1,839
of PLNs - - - (1,839) - - -
Issue of -
shares from
PLN
cancellation 3,268 - (1,453) - - - - 1,815
Issue of - (123,394)
redeemable
shares 315 207,340 - - - - 84,261
Transfer to - -
special
reserve - (119,962) 119,962 - - - -
Closing
Equity -
shareholders
funds 18,050 - 91,959 119,962 111,125 55,679 (15,287) 381,488
BALANCE SHEET (unaudited)
As at 30 As at 30
June 2006 June 2005
£'000 £'000
Fixed assets
Investments* 434,087 371,950
Investment in - 1
subsidiary
undertaking
434,087 371,951
Current assets
Debtors 1,882 2,868
Cash at bank 6,636 12,507
8,518 15,375
Creditors - amounts 1,622 5,838
falling due within
one year
Net current assets 6,896 9,537
Total assets less 440,983 381,488
current liabilities
Capital and reserves
Called-up share 18,024 18,050
capital
Capital redemption 26 -
reserve
Share premium account 91,971 91,959
PLN reserve
- -
Special reserve 99,897 119,962
Capital reserve 245,897 166,804
Revenue reserve (14,832) (15,287)
Total equity 440,983 381,488
shareholders' funds
* Includes fixed interest investments held for cash management purposes
As at As at
30 June 2006 30 June 2005
Number of ordinary 67p shares in issue 26,471,013 26,471,013
Number of redeemable 1p shares in issue 28,871,255 31,513,199
Net asset value per share- basic 796.8p 657.9p
CASHFLOW STATEMENT (unaudited)
Year Year
ended ended
30 June 30 June
2006 2005
£'000 £'000
Cash flow from operating activities
Investment income received 7,701 4,232
Deposit interest received - -
Investment management fees paid (5,791) (3,464)
Secretarial fees paid (133) (105)
Other cash payments (616) (584)
Net cash inflow from operating activities 1,161 79
Returns on investments and servicing of finance
Revolving credit facility and overdraft interest paid (10) (409)
Loan commitment and arrangement fees paid (386) (301)
Redeemable share and PLN commitment fees paid (500) (751)
Net cash outflow from returns on investment and servicing (896) (1,461)
of finance
Taxation
Withholding tax suffered on limited partnership (438) (516)
distributions
Tax recovered - -
Net cash outflow from taxation (438) (516)
Capital expenditure and financial investment
Purchases of investments (135,888) (113,758)
Purchases of government securities (417,027) (57,199)
Disposals of investments 154,271 87,168
Disposals of government securities 412,702 -
Realised currency gains 9 22
Net cash inflow/(outflow) from capital expenditure and (83,767)
financial investment 14,067
Net cash inflow/(outflow) before financing 13,894 (85,665)
Financing
Proceeds from issue of redeemable shares - 87,529
Costs of ordinary and redeemable share issues 12 (1,453)
Payments to buy back redeemable shares (20,000) -
Costs of buy back of redeemable shares (65) -
Realised currency gains on repayment of revolving credit 34
facility -
Net cash (outflow)/inflow from financing (20,053) 86,110
(Decrease)/increase in cash (6,159) 445
These accounts have been prepared using accounting standards and policies
adopted at the year-end except as explained below.
This report has been prepared using new accounting standards, which have been
issued to begin the process of converging UK standards with International
Financial Reporting Standards ('IFRS'). The applicable standards that have been
adopted by the Company with effect from 1 July 2005 are FRS 21 Events after the
Balance Sheet Date; FRS 22 Earnings per share, FRS 23 The Effects of Changes in
Foreign Exchange Rates, FRS 25 Financial Instruments: Disclosure and
Presentation, FRS 26 Financial instruments: Measurement and FRS 28
Corresponding Amounts.
All investments held by the Company are classified as 'fair value through
profit or loss'. 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 on the balance sheet date.
For investments that are not actively traded on organised financial markets,
fair value is determined using reliable valuation techniques as described in
detail in the Company's last Annual Report. There is no material effect on the
portfolio as a result of this change.
Under FRS25, Participating Loan Notes (PLNs) have been classified as equity.
The revaluation of PLNs in the year ended 30 June 2005 is now treated as an
allocation of profits. This has no effect on the return to ordinary and
redeemable shareholders. As the PLNs were converted to ordinary and redeemable
shares on 20 September 2004, there is no restatement effect to the Balance
Sheet at 30 June 2005 or 30 June 2006.
The above financial information does not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985. The comparative financial
information for the year ended 30 June 2005 is taken from the full accounts,
which have been delivered to the Registrar of Companies and contained an
unqualified audit report and did not contain statements under S.237(2) or (3)
of the Companies Act 1985. Statutory financial statements for the year ended 30
June 2006 have not yet been approved, audited or filed and will be delivered to
the Registrar of Companies following the Annual General Meeting.
For further information please contact:
Rhoddy Swire, Director of Pantheon International Participations PLC - 020 7484
6200
Alastair Bruce, Pantheon Ventures Limited - 020 7484 6200
Andrew Lebus, Pantheon Ventures Limited - 020 7484 6200
Email: contactus@pipplc.com
Signed on behalf of the Board
Tom H. Bartlam
Chairman
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