Last checked at 
15 Mar 2007 12:24
PANTHEON INTERNATIONAL PARTICIPATIONS PLC (`PIP')
Chairman's Statement
Global private equity markets have thrived during the first six months of PIP's financial year. Investment activity has increased, realisations from existing investments remain high and the high level of fundraising has been sustained.
PIP's Net Asset Value per share increased by 4.1% to 829.2p in the six months to December. This performance has been achieved despite adverse currency movements over the period which resulted in a ‚£18.6m reduction (equivalent to 4.2% of opening net assets) in the sterling value of the portfolio.
Our ordinary share price increased by 12.5% to 817.5p over the six months to 31 December 2006 whilst total assets increased by ‚£17.9 million to ‚£458.9 million.
INVESTMENT ACTIVITY
The six months to end December 2006 has been an active one for both investment and realisations. PIP invested a record ‚£126.4 million in underlying private equity assets during the first six months, an increase of 111% over the equivalent period in the previous year. Of this amount, ‚£55.4m was paid to meet investment calls arising from PIP's primary portfolio and ‚£71.0m applied to the secondary portfolio. The total amount of cash distributed to PIP as a result of investment realisations during the period was ‚£59.2 million. Of this amount, ‚£ 22.2m emanated from the primary portfolio and ‚£37.0m came principally from the secondary portfolio.
PRIMARY COMMITMENTS
Despite the rate of fund raising continuing to gather pace many of the best private equity funds are oversubscribed. Pantheon's expertise and long-term relationships with these managers have helped ensure that PIP is able to gain continued access to top-tier funds worldwide.
PIP committed ‚£86.9 million to primary funds over the six month period, including nine Europe-focused funds (‚£53.7m) and seven US-focused funds (‚£ 33.2m). These funds represent many of the most attractive opportunities from the multitude of new fund offerings available during the period.
In order to be able to reinvest the distributions from PIP's growing private equity portfolio the Board increased the rate that PIP commits to primary funds from ‚£450 million to ‚£600 million over a three-year period.
SECONDARY COMMITMENTS
PIP had a very active period in the secondary market committing ‚£125.8 million to seven secondary transactions to purchase existing interests in private equity funds. The majority of the assets added to the portfolio were US venture funds which reflects our manager's belief that this is a favourable point in the market cycle to acquire venture assets. The largest portfolio, representing ‚£60.4m, related to the purchase of interests in 90 venture funds and eight direct investments.
MARKET REVIEW AND PROSPECTS
The buyout market has experienced high levels of realisations through refinancings and profitable disposals. The belief that private equity can, in many circumstances, provide companies with an ownership structure that is more aligned with a company's management and ensures rapid decision making and close accountability has meant that the buyout industry has continued to attract top quality teams. This trend, combined with recent record fundraising, has expanded the number of opportunities to include many amongst even the largest companies.
Pantheon expects the current high levels of new investment to continue as long as the debt markets remain accommodating in a favourable economic environment. Distributions should also remain strong in such an active market. The potential for companies to over leverage their balance sheet underlines the importance your manager places on selecting experienced and disciplined private equity managers.
The venture market has been progressing well with venture capital investment in US companies reaching its highest level for five years. We expect this part of the market to continue to perform well as more companies achieve an exit through merger, acquisition or an initial public offering.
PIP's manager has an established position and reputation ensuring that PIP is well placed to gain access to top quality funds through our primary programme. Deal flow within the secondary market remains strong and we are optimistic that PIP will continue to grow its assets in the coming years through secondary acquisitions that may need to be financed externally.
CAPITAL STRUCTURE
PIP's capital structure is designed to provide flexibility to issue and redeem capital to suit its financing needs. While outstanding commitments are expected to be met from cashflow emanating from existing assets, with occasional use of PIP's debt facilities, secondary activity is expected to be financed through a combination of debt facility utilisation and new equity issuance.
In order to ensure PIP can finance calls from its outstanding commitments, PIP has in place agreements with certain institutions under which PIP can call on such institutions to subscribe for Redeemable shares. The purpose of these agreements is to provide an additional level of assurance that PIP will be in a position to meet portfolio calls, irrespective of market appetite for issues of new shares and other sources of capital. Due to the growth of assets and a planned increase in outstanding commitments PIP has increased available standby financing by ‚£50m to ‚£150m, with effect from the 1st January 2007. PIP pays a fee of 0.5% per annum on these commitments.
EXTRAORDINARY GENERAL MEETING
An Extraordinary General Meeting of the Company took place at 10am on 26th February 2007 at Pantheon's office. PIP's shareholders approved a recommendation by the Board to change the terms of the management agreement between PIP and Pantheon. The details of the changes were announced to the market and a copy of the announcement can be found on PIP's website at www.pipplc.co.uk.
TOM BARTLAMChairman15March2007INCOME STATEMENT (unaudited)
For the Six months to 31 December
2006 2005 Revenue Capital Total* Revenue Capital Total* ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Gains on investments ** - 19,806 19,806 - 63,428 63,428 Currency (losses)/gains - (513) (513) - 352 352 on cash and borrowings Income 3,763 - 3,763 3,541 - 3,541 Investment management (3,074) - (3,074) (2,367) - (2,367)fees Other expenses (960) (191) (1,151) (547) (56) (603) Return on ordinary (271) 19,102 18,831 627 63,724 64,351 activities before financing costs and tax Interest payable and (439) - (439) (431) - (431)similar charges Return on ordinary (710) 19,102 18,392 196 63,724 63,920 activities before tax Tax on ordinary - (414) (414) - (247) (247)activities Return on ordinary (710) 18,688 17,978 196 63,477 63,673 activities after tax for the period
RETURN PER ORDINARY AND (1.28p) 33.77p 32.49p 0.34p 110.09p 110.43p REDEEMABLE SHARE
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 Companies.
** Includes currency movements on investments.
RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS (unaudited)
Share Capital Share Special Capital Capital Revenue Total Capital Redemption Premium Reserve Reserve Reserve Reserve ‚£'000 Reserve ‚£ ‚£'000 ‚£'000 Realised Unrealised ‚£'000 ‚£'000 '000 ‚£'000 ‚£'000 Movement for the 6 months ended 31 December 2006 Opening Equity 18,024 26 91,971 99,897 151,664 94,233 (14,832) 440,983 Shareholders' Funds Return for the - - - - 13,557 5,131 (710) 17,978 period Costs of buy - - - (37) - - - (37)back of Redeemable shares CLOSING EQUITY 18,024 26 91,971 99,860 165,221 99,364 (15,542) 458,924 SHAREHOLDERS' FUNDS Movement for the 6 months ended 31 December 2005 OPENING EQUITY 18,050 - 91,959 119,962 111,125 55,679 (15,287) 381,488 SHAREHOLDERS' FUNDS Return for the - - - - 21,491 41,986 196 63,673 period Costs of buy (14) 14 - (10,027) - - - (10,027)back of Redeemable shares CLOSING EQUITY 18,036 14 91,959 109,935 132,616 97,665 (15,091) 435,134 SHAREHOLDERS' FUNDS BALANCE SHEET (unaudited) As at 31 As at 30 As at 31 Dec 2006 June 2006 Dec 2005 ‚£'000 ‚£'000 ‚£'000 Fixed assets Investments at fair value * 462,103 434,087 422,143 Current assets Debtors 2,420 1,882 1,316 Cash at bank 6,640 6,636 13,333 9,060 8,518 14,649 Creditors: Amounts falling due within one year Revolving credit facility 10,219 - - Other creditors 2,020 1,622 1,658 12,239 1,622 1,658 NET CURRENT (LIABILITIES)/ASSETS (3,179) 6,896 12,991
TOTAL ASSETS LESS CURRENT LIABILITIES 458,924 440,983 435,134
Capital and reserves Called-up share capital 18,024 18,024 18,036 Capital redemption reserve 26 26 14 Share premium account 91,971 91,971 91,959 Special reserve 99,860 99,897 109,935 Capital reserve - realised gains 165,221 151,664 132,616 Capital reserve - unrealised gains 99,364 94,233 97,665 Revenue reserve (15,542) (14,832) (15,091) TOTAL EQUITY SHAREHOLDERS' FUNDS 458,924 440,983 435,134 Net asset value per share - basic 829.2p 796.8p 768.9p
Number of Ordinary shares and Redeemable 55,342,268 55,342,268 56,588,977 shares in issue
*Includes short dated fixed interest investments held for cash management purposes at 30 June 2006 (‚£61,329,000) and 31 December 2005 (‚£61,353,000). There were no short dated fixed interest investments at 31 December 2006.
CASH FLOW STATEMENT (unaudited)
For the six months to 31 December
2006 2005 ‚£'000 ‚£'000 Cash flow from operating activities Investment income received 3,922 3,386 Deposit and other interest received 10 (7) Investment management fees paid (2,891) (2,608) Secretarial fees paid (58) (50) Legal and professional fees (351) (177) Other cash payments (657) (472) NET CASH (OUTFLOW)/INFLOW FROM OPERATING (25) 72 ACTIVITIES Returns on investment and serving of finance Revolving credit facility and overdraft (4) (6)interest paid Loan commitment and agreement fees paid (166) (132) Redeemable shares commitment fees paid (252) (252) NET CASH OUTFLOW FROM RETURNS ON (422) (390)INVESTMENT AND SERVICING OF FINANCE Taxation Withholding tax suffered on limited (357) (247)partnership distributions NET CASH OUTFLOW FROM TAXATION (357) (247) Capital expenditure and financial investment Purchases of investments (128,976) (63,012) Purchases of short dated government (182,345) (140,327)securities Disposals of investments 58,983 77,731 Disposals of short dated government 243,503 136,645 securities Realised currency (losses)/gains (113) 73 Net cash (OUTFLOW)/INFLOW from capital (8,948) 11,110 expenditure and financial investment NET CASH (OUTFLOW)/INFLOW BEFORE (9,752) 10,545 FINANCING Financing Payments to buy back Redeemable shares - (10,000) Drawdown of bank credit facility 10,211 - Costs of buy back of Redeemable shares (37) - Net cash inflow/(outflow) from financing 10,174 (10,000) INCREASE IN CASH 422 545
These accounts have been prepared using accounting standards and policies adopted at the year-end.
This interim statement is not the Company's statutory accounts. The statutory accounts for the year ended 30 June 2006 have been delivered to the Registrar of Companies and received an audit report which was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section 237(2) and (3) of the Companies Act 1985.
The results for the six months to 31 December 2006 have been reviewed by the Company's auditors and their report is attached.
Signed on behalf of the BoardTom H. BartlamChairman15 March 2007
INDEPENDENT REVIEW REPORT TO PANTHEON INTERNATIONAL PARTICIPATIONS PLC
FINANCIAL INFORMATION FOR THE SIX MONTH PERIOD ENDED 31DECEMBER 2006
Introduction
We have been instructed by the Company to review the financial information, which comprises the income statement, reconciliation of movement in equity shareholders' funds, the balance sheet, the cash flow statement and notes to the interim accounts. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.
This report is made solely to the company having regard to guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority. The directors are also responsible for ensuring that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/ 4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the disclosed accounting policies have been consistently applied, unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 December 2006.
RSM Robson Rhodes LLPChartered AccountantsLondon, England15 March 2007
PANTHEON INTERNATIONAL PARTICIPATIONS PLC