27th Feb 2009 18:00
Pantheon International Participations PLCHalf Yearly Financial Report: 31 December 2008Financial SummaryHIGHLIGHTS 31ST DEC 2008 30TH JUNE 2008 CHANGE Summary of resultsNAV per share 1126.3p 1108.7p 1.6%Total assets less currentliabilities £747.8m £736.1m 1.6% Ordinary sharesShare price 240.0p 750.0p (68.0)%Discount to NAV 78.7% 32.4% Redeemable sharesShare price 315.0p 819.5p (61.6)%Discount to NAV 72.0% 26.1% Investment activityInvested in private equityassets £107.7mReceived from private equityassets £62.6m SINCE 3 YEARS % 5 YEARS % 10 YEARS % INCEPTION*%PERFORMANCE 1 YEAR % P.A P.A P.A P.A NAV per share 7.0 13.6 15.8 12.2 14.3Ordinary share price (71.4) (31.8) (12.9) 4.1 10.4FTSE All-Share (29.9) (4.8) 3.5 1.2 6.7MSCI World (sterling) (18.8) (2.4) 4.1 1.1 5.8
* PIP was launched on 18th September 1987
CAPITAL STRUCTURE Ordinary shares 37,521,013Redeemable shares 28,871,255Total 66,392,268
Objective and Investment Policy
The Company's primary investment objective is to maximise capital growth by investing in a diversified portfolio of private equity funds and, occasionally, directly in private companies.
The Company's policy is to make unquoted investments, in general, bysubscribing for investments in new private equity funds and buying secondaryinterests in existing private equity funds and, occasionally, by acquiringdirect holdings in unquoted companies, usually either where a vendor isseeking to sell a combined portfolio of fund interests and direct holdings orwhere there is a private equity manager, well known to the Company's manager,investing on substantially the same terms.The Company may invest in private equity funds which are quoted. In addition,the Company may from time to time hold quoted investments in consequence ofsuch investments being distributed to the Company from its fund investments orin consequence of an investment in an unquoted company becoming quoted. TheCompany will not otherwise normally invest in quoted securities although theCompany reserves the right to do so should this be deemed to be in theinterests of the Company.The Company may invest in any type of financial instrument, including equityand non-equity shares, debt securities, subscription and conversion rights andoptions in relation to such shares and securities and interests inpartnerships and limited partnerships and other forms of collective investmentscheme. Investments in funds and companies may be made either directly orindirectly, through one or more holding, special purpose or investmentvehicles in which one or more co-investors may also have an interest.The Company employs a policy of over-commitment. This means that the Companymay commit more than its available uninvested assets to investments in privateequity funds on the basis that such commitments can be met from anticipatedfuture cash flows to the Company and through the use of borrowings and capitalraisings where necessary.The Company's policy is to adopt a global investment approach. The Company'sstrategy is to mitigate investment risk through diversification of itsunderlying portfolio by geography, sector and investment stage. Since theCompany's assets are invested globally on the basis, primarily, of the meritsof individual investment opportunities, the Company does not adopt maximum orminimum exposures to specific geographic regions, industry sectors or theinvestment stage of underlying investments.
In addition, the Company adopts the following limitations for the purpose of diversifying investment risk:
- the requirement for approval as an investment trust that no holding in a company will represent more than 15% by value of the Company's investments at the time of investment;
- the aggregate of all the amounts invested by the Company in (including commitments to or in respect of) funds managed by a single management group may not, in consequence of any such investment being made, form more than 20% of the aggregate of the most recently determined gross asset value of the Company and the Company's aggregate outstanding commitments in respect of investments at the time such investment is made;
- the Company will invest no more than 15% of its total assets in other UK listed closed-ended investment funds (including UK listed investment trusts).
The Company may invest in funds and other vehicles established and managed oradvised by Pantheon or any Pantheon affiliate. In determining thediversification of its portfolio and applying the manager diversificationrequirement referred to above, the Company looks through vehicles establishedand 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 borrowingfacilities to manage its cash flows flexibly, enabling the Company to makeinvestments as and when suitable opportunities arise and to meet calls inrelation to existing investments without having to retain significant cashbalances for such purposes. Under the Company's articles of association, theCompany's borrowings may not at any time exceed 100% of the Company's netasset value. Typically, the Company does not expect its gearing to exceed 30%of gross assets. However, gearing may exceed this in the event that, forexample, the Company's pipeline of future cash flows alters.
The Company may invest in private equity funds, unquoted companies or special purpose or investment holding vehicles which are geared by loan facilities that rank ahead of the Company's investment. The Company does not adopt restrictions on the extent to which it is exposed to gearing in funds or companies in which it invests.
Chairman's Statement
PIP's NAV per share increased by 1.6% to 1126.3p in the six months to 31stDecember 2008. This modest increase masks substantial negative underlyingmovements in the valuations of the assets, which declined 24%. These valuationlosses were more than offset by large currency gains due to the depreciationof sterling against both the US dollar and euro, in which the majority ofPIP's assets are denominated.Over the six month period, the ordinary share price fell by 68.0% as thediscount to NAV widened to 78.7% from 32.4% at 30th June 2008. The extent ofthis discount is much wider than it has been at any time in the Company's 21year history and appears to reflect exceptional anxiety in the financialmarkets that the value of private equity assets will fall further as a resultof declining corporate profitability and the adverse effects of leverage in adownturn. In addition, in such a fearful climate, funds of funds like PIPwhich have a high level of commitments needing to be funded over time, haveseen their share prices fall even further than the sector average, reflectingmarket pessimism over funding arrangements.Your Board continues to believe that the advantages of long term investmenthorizons inherent in the private equity process together with our widelydiversified portfolio should be beneficial to PIP, notwithstanding both theundoubted challenges that private equity managers face in such a negativeeconomic environment and the need to ensure that PIP can meet its commitmentsand finance future investments in what is likely to prove a fertile investmentenvironment.Our net assets increased by £11.7m to £747.8m during the six months to 31stDecember 2008. As the majority of PIP's assets are denominated in either USdollars or euros, substantial currency gains offset losses from the investmentportfolio.Private equity valuations are reported either quarterly or half yearly byPIP's underlying fund managers. It is expected that the accounts to bereceived over the coming months from underlying managers reporting privateequity valuations at 31st December 2008 will show write downs following thesignificant falls in quoted market prices seen during the period. A provisiontotalling £141m was made against the value of the assets as at 31st Decemberto allow for this reporting lag. This provision, in addition to reportedreductions in value and falls in quoted stocks totalling £76m, made up the 24%decline in the portfolio value over the six months to 31st December. Inassessing the size of the provision, guidance was obtained from a number ofPIP's underlying fund managers covering around 29% of PIP's investmentportfolio value. Taken together with the movements in relevant stock marketindices, this provided a basis on which to calculate a provision applicable tothe portfolio. The provision is likely to differ from the change in valuationsthat are actually reported by the underlying managers. The extent and durationof the global downturn is still unclear, and even if stock market indices donot deteriorate much further, it is possible that declining profits, theeffect of leverage and rising company failures could continue adversely toaffect valuations.
INVESTMENT ACTIVITY
The lack of availability of debt financing allied with investor uncertainty has resulted in significantly reduced activity levels. Despite a brief increase in investment at the start of the period, relating mostly to deals agreed prior to the banking crisis, the Company's rate of investment has exhibited a considerable slow down. In addition, the rate of distributions also showed a considerable slow down during the period.
In the six months to 31st December 2008, PIP invested £107.7 million inunderlying private equity assets. Of this amount, £79.2m was paid to meetinvestment calls arising from PIP's primary commitments and £28.5m to pay forcalls from previously agreed secondary transactions. The total amount of cashdistributed to PIP as a result of investment realisations during the sixmonths was £62.6m. Of this amount, £21.2m came from the primary portfolio with£41.4m arising from the secondary portfolio. In total PIP receiveddistributions from more than 100 different funds, showing that even indifficult economic times a well diversified portfolio can still generatesignificant realisation activity.
COMMITMENTS
PIP committed a total of £27.3 million to five primary funds, encompassing oneEurope-focused fund (£16.1m) and four US-focused funds (£11.2m). The Companydoes not intend to make any further commitments until there is a recovery inthe level of distributions. Overall, outstanding commitments to investments,which are likely to be called over a number of years, increased during theperiod by £92m to £733m due largely to the effect of currency movements.
MARKET REVIEW AND PROSPECTS
The six months to 31st December 2008 was undoubtedly one of the most difficultperiods in financial markets in modern times. The increasingly tight creditconditions, culminating in the state sponsored rescue of several high profilebanks, created concerns that the financial system was near collapse. Liquiditymeasures undertaken by central banks around the world have somewhat eased theextreme levels of market volatility. However the deleveraging of the financialsector, which limits the creation of new debt, continues to depress thepotential for buyout activity. In addition the rapid deterioration of theeconomic outlook over the past quarter in particular, makes it difficult forprivate equity buyers to price new investments.Global buyout activity fell dramatically in the second half of 2008, with thevalue of deals in the last quarter amounting to approximately 10% of thosecompleted in the equivalent period during the previous year. The reduction inthe availability of credit has severely impacted buyout markets, most notablyin the large cap segment, whilst debt re-capitalisations have become almostnon-existent. The venture capital market has also seen lower investmentactivity, although due to its lesser reliance on debt financing, the impacthas been somewhat less dramatic. Both the venture and buyout markets have seena significant reduction in investment realisations, as the IPO and M&A marketshave come to a virtual standstill. During 2009, it is likely that low activitylevels, both in terms of the number of deals completed and investmentrealisations, will continue at least until the market experiences animprovement both in credit conditions and investor sentiment.Stock markets fell steeply in the second half of the year, with the FTSEAll-Share and MSCI World losing 23% and 34% respectively. With thesustainability of corporate earnings under question, the fear of significantcompany defaults rises. Undoubtedly some of the Company's underlying portfoliocompanies will be affected, but we believe the defensive orientation ofprivate equity portfolios will help many of them to weather the storm.Nevertheless, the decline in public markets and expected earnings declines maycontinue adversely to affect valuations, most notably within the large andmega buyout sectors where leverage levels were typically higher. It isimportant to note that funds falling into this category represent a minorityof PIP's portfolio, at some 23% of the investments.
Of course, falling public markets, which may have a negative impact on valuations in the short-term, also foreshadow attractive investment opportunities. Lower valuations provide circumstances where private equity managers can purchase good quality assets at attractive prices. It could be the case that in the coming years, as in the past, investments made in an economic downturn produce excellent returns over the long-run.
The diversification of PIP's portfolio with top quality managers acrossbuyout, venture and special situations sectors, and across all majorgeographical regions of the private equity industry, should help mitigate someof the difficulties experienced by specific companies or sectors in thecurrent economic conditions. Private equity managers generally favourcompanies in defensive industries. As a result, PIP's portfolio is underweightin many of those sectors, such as financials, property and basic resources,which comprise a significant part of the listed market indices and which havefallen the most in recent months. As always, it is important for investors inprivate equity to ensure that they select the managers that are able todeliver across the market cycle. Pantheon's strategy is to focus on managersthat can demonstrate clear value creation, much of which is centred on greaterefficiency and building scale in middle market businesses.
CAPITAL STRUCTURE AND FINANCING
In December, PIP issued £49.5 million of unsecured subordinated loan notes(the "Notes") to institutional investors who had previously entered intostandby redeemable share agreements. In the event of a drawdown by the Companyunder a "standby" commitment from an institutional investor who is aNoteholder, the Company shall repay an equivalent amount on the Notes held bysuch investor (or such lesser amount as is outstanding). The Company has"standby" commitments totalling £150m.In addition to the standby financing, PIP had £61.8m of unutilised bank loanfacility and cash as at 31st December 2008. At the end of January, this figurewas £54.9m.In this economic environment, call and distribution rates are likely to remainsubdued. The Company expects net cash outflows to continue during a period ofeconomic downturn. While the Company's available financing capacity, totalling£162m as at 31st December 2008, is substantial in relation to near termrequirements, it remains a key priority to ensure the Company has sufficientresources to continue to finance its outstanding commitments. The Company isexploring a number of liquidity options, including the disposal of certainfund interests, to ensure that there is sufficient liquidity through 2010 andbeyond.OUTLOOKWe are not optimistic of seeing a recovery in the short term. Companies willneed to adapt to conditions that for many will probably be the mostchallenging in their history. However, when the market is consumed by fear thelong term investor can benefit, often at the expense of the short terminvestor. The private equity market can offer investors an opportunity toinvest in soundly managed adaptable businesses that have long term horizonsand a clear focus on generating cash.Managing the level of PIP's outstanding commitments together with securingPIP's financing are clear priorities not only to enable PIP to meetoutstanding commitments but also to position the Company to be able to takeadvantage of opportunities in the secondary market. Such new investments madeat what may prove to be an attractive time in the cycle should provide a soundbasis for good long term returns.TOM BARTLAMChairman27th February 2009Portfolio ReviewThe underlying companies in the portfolio range from large and matureindustrial enterprises with multinational operations to early-stage venturesoperating at the leading edge of technological development. All the companieshave one factor in common: the influence of professional private equitymanagers who are motivated to maximise the value of each underlyinginvestment.
PORTFOLIO ANALYSIS BY VALUE AS AT 31ST DECEMBER 2008
GEOGRAPHIC SPREAD
The weighting to the USA increased from 53% to 54% over the period whereas theweighting to Europe fell from 40% to 37%, reflecting both investment returnsand relative currency movements since 30th June 2008. The weighting to Asiaand other regions increased from 7% to 9% in the period.Geographic Area PercentageUSA 54%Europe 37%Asia and other 9% 100%STAGE COMPOSITION
PIP's portfolio is well diversified across all the major stages of private equity. The majority of the Company's exposure to buyouts is via mid and small cap funds, which tend to utilise lower levels of leverage within portfolio companies than the very largest funds. In addition PIP has a significant exposure to venture capital focused funds.
Stage PercentageBuyouts 59%Venture 30%Special Situations 5%Generalist 4%Directs 2% 100%SECTOR COMPOSITION
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 or volatility within particular industry segments.
Sector PercentageOther services & 28%manufacturingComputer-related 16%Consumer-related 16%Medical/health-related 11%Communications 10%Industrial products 7%Biotechnology & 5%pharmacologyEnergy-related 4%Other 3%electronics-related 100%MATURITY
PIP's portfolio is well diversified by fund vintage (referring to the year the fund was established).
Year Percentage2008 3%2007 14%2006 20%2005 13%2004 5%2003 4%2002 3%2001 7%2000 16%1999 6%1998 and earlier 9% 100%Activity
PIP made commitments totalling £27m to private equity funds during the past six month period.
NEW INVESTMENTSPIP committed to five new funds in the six-month period, totalling £27.3m asat 31st December 2008. One of the new funds is a Europe-focused buyout fund(£16.1m), one is a US-focused buyout fund (£6.1m), two are US-focused venturefunds (£3.0m) and one is a US-focused special situations fund (£2.1m).
SECONDARY ACQUISITIONS
PIP completed no new secondary transactions in the second half of 2008.
In the Annual Report and Accounts 2008, the Company announced that it hadsuspended its new fund commitment programme to ensure that any cash resourcesnot needed to finance outstanding commitments can be applied to prioritisingsecondary activity.DISTRIBUTIONSPIP received £62.6m in proceeds from the portfolio during the six months to31st December 2008, equivalent to approximately 8% of opening private equityasset value.Market DistributionPrimary £21.2mSecondary £41.4mThe rate of distributions fell in the third quarter of 2008. However, PIP thensaw an increase in the rate for the fourth quarter. Distribution rates areexpected to be lower in the first half of 2009 due to the continueddeterioration of the economic climate. However, the quarter to 31st December2008 highlights that even in times of heightened uncertainty a diversifiedportfolio can continue to generate significant investment exits anddistributions.
CALLS
PIP paid £107.7m in cash calls during the half year to 31st December 2008.
The rate of drawdowns from outstanding commitments increased in the quarter to30th September 2008, as a number of the Company's buyout funds made drawdownsto finance deals agreed earlier in the year. However, the rate of drawdownsreduced significantly during the final quarter of 2008, driven by a deepeningof the financial crisis.Portfolio CallsPrimary £79.2mSecondary £28.5m
The value of global buyout deals in the fourth quarter dropped dramaticallyrelative to the third quarter. Call rates tend to lag buyout activity data(since financing is typically required some time after a deal is closed), andas such the latest figures suggest that calls are likely to continue at a lowlevel for at least the coming months.
INVESTMENT CASH FLOWS
PIP's net cash outflow from investments in the half year to 31st December 2008was £45.1m. We expect the Company to experience further outflows going into2009 although drawdowns for making new investments in this economicenvironment are likely to remain below historic levels for a period.
Outstanding Commitments
PIP's outstanding commitments to fund investments are well diversified by stage and geography and will enable the Company to participate in future investments with many of the highest quality fund managers in the private equity industry.
Due largely to the appreciation in the value of the US dollar and euro againststerling, PIP's outstanding commitments to investments increased to £732.9m at31st December 2008 compared with £641.2m at 30th June 2008.
GEOGRAPHIC SPREAD
The chart below shows the breakdown of the Company's outstanding commitmentsby geography. Europe and the USA have the largest outstanding commitmentsreflecting that they have the most mature private equity markets. Commitmentsto Asia & other regions totalled 9%.Geographic Area PercentageEurope 50%USA 41%Asia and other 9% 100%STAGE COMPOSITION
The chart below shows the breakdown of the Company's outstanding commitments by the stage focus of the underlying funds.
Stage PercentageBuyouts 73%Venture 20%Special Situations 6%Generalist 1% 100%MATURITYThe chart below shows the breakdown of the Company's outstanding commitmentsby the vintage (referring to the year the fund was established) of theunderlying funds.Year Percentage2008 36%2007 30%2006 15%2005 6%2004 2%2003 and earlier 11% 100%FINANCE
At 31st December 2008 the Company had £17.5m in cash and £44m remaining of its £150m revolving credit facility.
PIP continues to have in place agreements with certain institutions under which the Company can require the institutions to subscribe for redeemable shares, up to the value of £150m. The purpose of these agreements is to provide an additional level of assurance that PIP will be in a position to meet calls in the near-term.
In December, PIP issued £49.5m of unsecured subordinated loan notes (the"Notes") to the institutional investors who had previously entered into thestandby redeemable agreements. The Notes have a maturity date of 15th November2010 and accrue interest at LIBOR plus 1.5%. In the event of a drawdown by theCompany under a "standby" commitment from an institutional investor who is aNoteholder, the Company shall repay an equivalent amount on the Notes held bysuch investor (or such lesser amount as is outstanding).
As such, PIP's available financing capacity stood at £162m at 31st December 2008.
The Company is exploring a number of options, including the disposal of certain fund interests, to ensure there is enough liquidity through 2010 and beyond.
PANTHEON VEHICLESPantheon Ventures Limited ("Pantheon") is not entitled to management andcommitment fees in respect of PIP's holdings in, and outstanding commitmentsto, the firm's managed fund-of-funds vehicles. In addition, Pantheon hasagreed that PIP will never be disadvantaged in terms of fees compared with theposition it would have been in had it made investments directly into theunderlying funds rather than indirectly through such fund-of-funds vehicles.
Interim Management Report and Responsibility
Statement of the Directors
IN RESPECT OF THE HALF YEARLY FINANCIAL REPORT
INTERIM MANAGEMENT REPORT
The important events that have occurred during the period under review, thekey factors influencing the financial statements and the principaluncertainties for the remaining six months of the financial year are all setout in the Chairman's Statement. The principal risks facing the Company aresubstantially unchanged since the date of the annual report for the year ended30th June 2008 and continue to be as set out in that report.
RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements has been prepared in accordance with the Statement Half Yearly Financial Reports issued by the UK Accounting Standards Board; and
- this Half Yearly Financial Report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indicationof important events that have occurred during the first six months of thefinancial year and their impact on the condensed set of financial statements;and a description of the principal risks and uncertainties for the remainingsix months of the year; and(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related partytransactions that have taken place in the first six months of the currentfinancial year and that have materially affected the financial position orperformance of the Company during that period; and any changes in the relatedparty transactions described in the last annual report that could do so.
This Half Yearly Financial Report was approved by the Board of Directors on 27th February 2009 and the above responsibility statement was signed on its behalf by Tom Bartlam, Chairman.
Income Statement (unaudited)
FOR THE SIX MONTHS TO 31ST DECEMBER
SIX MONTHS TO 31ST SIX MONTHS TO 31ST YEAR TO 30TH DECEMBER 2008 DECEMBER 2007 JUNE 2008 REVENUE CAPITAL TOTAL* REVENUE CAPITAL TOTAL* REVENUE CAPITAL TOTAL* £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Gains oninvestments** - 40,259 40,259 - 94,747 94,747 - 137,351 137,351Currency(losses)/gains on cashandborrowings - (21,107) (21,107) - 92 92 - 310 310Income 1,640 - 1,640 3,627 - 3,627 4,787 - 4,787Investmentmanagementandperformancefees (4,374) 121 (4,253) (4,412) (4,379) (8,791) (9,768) (3,660) (13,428)Otherexpenses (623) (192) (815) (477) (314) (791) (900) (454) (1,354) Return onordinaryactivitiesbeforefinancingcostsand tax (3,357) 19,081 15,724 (1,262) 90,146 88,884 (5,881)
133,547 127,666Interestpayableand similarcharges (3,781) - (3,781) (716) - (716) (2,199) - (2,199) Return onordinaryactivitiesbeforetax (7,138) 19,081 11,943 (1,978) 90,146 88,168 (8,080) 133,547 125,467Tax onordinaryactivities - (275) (275) 609 (279) 330 609 (275) 334 Return onordinaryactivitiesaftertax for theperiod (7,138) 18,806 11,668 (1,369) 89,867 88,498 (7,471) 133,272 125,801 RETURN PERORDINARY ANDREDEEMABLESHARE (10.75p) 28.32p 17.57p (2.06p) 135.36p 133.30p (11.25p) 200.73p 189.48p
All revenue and capital items in the above statement relate to continuing operations.
No operations were acquired or discontinued during the period.
* The total column of the statement represents the Company's profit and lossstatement prepared in accordance with UK Accounting Standards. Thesupplementary revenue return and capital columns are prepared under guidancepublished by the Association of Investment Companies.
** Includes currency gains on investments.
There were no recognised gains or losses other than those passing through the income statement.
Reconciliation of Movement in Equity Shareholders' Funds (unaudited)
CAPITAL CAPITAL CAPITAL SHARE REDEMPTION SHARE SPECIAL RESERVE RESERVE REVENUE CAPITAL RESERVE PREMIUM RESERVE REALISED UNREALISED RESERVE TOTAL £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Movement for the sixmonths ended 31stDecember 2008 OPENING EQUITYSHAREHOLDERS'FUNDS 25,428 26 183,182 99,861 227,504
225,056 (24,952) 736,105Return for the period - - - - (1,332) 20,138 (7,138) 11,668Expenses relating to theissue of Ordinary shareswritten back - - 2 - - - - 2 CLOSING EQUITYSHAREHOLDERS'
FUNDS 25,428 26 183,184 99,861 226,172 245,194 (32,090) 747,775 Movement for the sixmonths ended 31stDecember 2007 OPENING EQUITYSHAREHOLDERS'FUNDS 25,428 26 183,139 99,861 187,543
131,745 (17,481) 610,261Return for the period - - - - 28,515 61,352 (1,369) 88,498 CLOSING EQUITYSHAREHOLDERS'
FUNDS 25,428 26 183,139 99,861 216,058 193,097 (18,850) 698,759 Movement for the yearended 30th June 2008 OPENING EQUITYSHAREHOLDERS'FUNDS 25,428 26 183,139 99,861 187,543
131,745 (17,481) 610,261Return for the period - - - - 39,961 93,311 (7,471) 125,801Expenses relating to issueof Ordinary shareswritten back - - 43 - - - - 43 CLOSING EQUITYSHAREHOLDERS'FUNDS 25,428 26 183,182 99,861 227,504 225,056 (24,952) 736,105Balance Sheet (unaudited) AS AT AS AT AS AT 31ST DECEMBER 31ST DECEMBER 30TH JUNE 2008 2007 2008 £'000 £'000 £'000 Fixed assetsInvestments at fair value throughprofit or loss* 892,837 696,544 806,485 Current assetsDebtors 6,331 2,253 927Cash at bank 17,504 10,480 8,801 23,835 12,733 9,728 Creditors: Amounts falling duewithin one yearOther creditors 13,643 10,518 7,888Bank loan 105,754 - 69,966Bank overdraft - - 2,254 119,397 10,518 80,108 NET CURRENT (LIABILITIES)/ASSETS (95,562) 2,215 (70,380) TOTAL ASSETS LESS CURRENTLIABILITIES 797,275 698,759 736,105 Creditors: Amounts falling dueafter more than one yearLoan notes 49,500 - - NET ASSETS 747,775 698,759 736,105 Capital and reservesCalled-up share capital 25,428 25,428 25,428Share premium account 183,184 183,139 183,182Capital redemption reserve 26 26 26Capital reserve - realised gains 226,172 216,058
227,504
Capital reserve - unrealised gains 245,194 193,097 225,056Special reserve 99,861 99,861 99,861Revenue reserve (32,090) (18,850) (24,952) TOTAL EQUITY SHAREHOLDERS' FUNDS 747,775 698,759 736,105 Net asset value per share 1,126.3p 1,052.5p 1,108.7p Number of Ordinary shares and Redeemable shares in issue 66,392,268 66,392,268 66,392,268
There were no fixed interest investments held at 31st December 2008 (31st December 2007: £11,877,000, 30th June 2008: nil).
Cash Flow Statement (unaudited)
FOR THE SIX MONTHS TO 31ST DECEMBER
SIX MONTHS SIX MONTHS TO 31ST TO 31ST YEAR TO DECEMBER DECEMBER 30TH JUNE 2008 2007 2008 £'000 £'000 £'000 Cash flow from operating activitiesInvestment income received 1,397 3,422
4,814
Deposit and other interest received 2 205
210
Investment management fees paid - (2,790) (9,198)Secretarial fees paid (72) (41) (102)Other cash payments (494) (143) (2,022) NET CASH INFLOW/(OUTFLOW) FROM OPERATINGACTIVITIES 833 653
(6,298)
Returns on investment and servicing of financeRevolving credit facility and overdraftinterest paid (3,556) (34)
(471)
Loan commitment and arrangement fees paid (225) (376)
(552)
Redeemable shares commitment fees paid (427) (414)
(654)
Interest on loan notes paid (73) -
-
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTAND SERVICING OF FINANCE (4,281) (824) (1,677) TaxationNet taxation (paid)/refund (275) 510 498
NET CASH (OUTFLOW)/INFLOW FROM TAXATION (275) 510
498
Capital expenditure and financial investmentPurchases of investments (112,830) (149,175)
(280,170)
Purchases of government securities - (23,455)
(23,455)
Disposals of investments 63,471 83,394
136,172
Disposals of government securities - 82,275
94,152
Realised currency gains/(losses) 85 (101)
(94)
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE ANDFINANCIAL INVESTMENT (49,274) (7,062)
(73,395)
NET CASH OUTFLOW BEFORE FINANCING (52,997) (6,723)
(80,872)
Financing
Written back/costs of Ordinary share issue 2 -
43Drawdown of loan 75,788 - 69,966Repayment of loan (40,000) - -Issue of loan notes 49,500 - -Realised currency (losses)/gains on repaymentof revolving credit facility (23,515) -
(594)
NET CASH INFLOW FROM FINANCING 61,775 - 69,415 INCREASE/(DECREASE) IN CASH 8,778 (6,723) (11,457)
Notes to the Half Yearly Financial Report (unaudited)
1. FINANCIAL INFORMATION
This financial information has been prepared on the historical cost basis of accounting, except for the measurement at fair value of investments, and in accordance with applicable UK accounting standards on the basis that all activities are continuing. The accounting policies set out in the statutory accounts for the year ended 30th June 2008 have been applied to this Half Yearly Financial Report.
The accounts have been prepared in accordance with the Statement of Recommended Practice (revised December 2005) issued by the Association of Investment Companies.
The financial information contained in this Half Yearly Financial Report isnot the Company's statutory accounts. The financial information for the sixmonths ended 31st December 2008 and 31st December 2007 are not for a financialyear and have not been audited but have been reviewed by the Company'sauditors and their report is attached. The statutory accounts for thefinancial year ended 30th June 2008 have been delivered to the Registrar ofCompanies and received an audit report which was unqualified. They did notinclude a reference to any matters to which the auditors drew attention by wayof emphasis without qualifying the report, and did not contain a statementunder section 237(2) or (3) of the Companies Act 1985.
2. TAX CREDIT/CHARGE ON ORDINARY ACTIVITIES
The tax debit for the half-year is £275,000 (31st December 2007: £330,000 credit; 30th June 2008: £334,000 credit) based on an estimated effective tax rate of (0.4%) for the year ending 30th June 2009.
The tax charge to capital consists of Japanese Corporation Tax and tax withheld from capital distributions.
3. RELATED PARTY TRANSACTIONS
Pantheon Ventures Limited, as Manager of the Company, is considered to be arelated party by virtue of its management contract with the Company. Mr R. M.Swire, a Director of the Company, is a director of Pantheon Holdings Limited,the holding company of Pantheon Ventures Limited.
During the period, services of a total value of £6,075,000 (31st December 2007: £8,791,000; 30th June 2008: £13,428,000) were purchased by the Company from Pantheon Ventures Limited. This has been reduced to £4,253,000 in the income statement following the refund of VAT relating to services purchased from Pantheon Ventures Limited in prior periods, as detailed in Note 5.
4. PERFORMANCE FEE
The manager is entitled to a performance fee from the Company in respect ofeach 12 calendar month period ending on 30th June in each year. The feepayable in respect of each such period is 5% of any increase in the Net AssetValue of the Company at the end of such period over the applicable "high watermark" plus the hurdle rate of 10%.The applicable "high water mark" in respect of any calculation period is theNet Asset Value at the end of the previous calculation period in which aperformance fee was payable, compounded annually at the hurdle rate for eachsubsequent completed calculation period up to the commencement of thecalculation period for which the performance fee is being calculated.
5. VAT DISCLOSURE NOTE
As a result of the AIC/Claverhouse ruling the Company no longer pays VAT on its investment management fees.
For the period ended 31st December 2008 £1,822,000 of VAT recovered from investment management fees has been credited to investment management fees and £241,000 of related interest received has been credited to income. This represents the amounts of VAT and interest recovered by the manager from HM Revenue & Customs relating to VAT charged since August 2001.
There is a possibility that additional amounts of VAT may be recoverable in respect of earlier years.
6. RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES
6 MONTHS 6 MONTHS TO 31ST TO 31ST YEAR TO DECEMBER DECEMBER 30TH JUNE 2008 2007 2008 £'000 £'000 £'000 Net return before finance costs andtaxation 15,724 88,884 127,667Gains on investments (40,259) (94,747) (137,351)Currency losses/(gains) on cash andborrowings 21,107 (92) (310)Increase in creditors 6,233 6,029 3,187
(Increase)/decrease in other debtors (1,972) 579 509
NET CASH INFLOW/(OUTFLOW) FROMOPERATING ACTIVITIES 833 653 (6,298)
7. RECONCILIATION OF NET CASH FLOW TO MOVEMENTS IN NET DEBT
6 MONTHS 6 MONTHS TO 31ST TO 31ST YEAR TO DECEMBER DECEMBER 30TH JUNE 2008 2007 2008 £'000 £'000 £'000 Increase/(decrease) in cash in the 6months/year 8,778 (6,723) (11,457) Non-cash movementExchange gains 2,179 193 994 Movement in net cash flows 10,957 (6,530) (10,463)
Net debt at beginning of period (63,419) 17,010 17,010 Loans drawn down
(75,788) - (69,966)Loans repaid 40,000 - -Issue of loan notes (49,500) - -
NET (DEBT)/FUNDS AT END OF PERIOD (137,750) 10,480 (63,419)
8. ANALYSIS OF NET DEBT/FUNDS 6 MONTHS 6 MONTHS TO 31ST TO 31ST YEAR TO DECEMBER DECEMBER 30TH JUNE 2008 2007 2008 £'000 £'000 £'000 Cash at bank 17,504 10,480 8,801Bank overdraft - - (2,254)Bank loan (105,754) - (69,966)Loan notes (49,500) - - (137,750) 10,480 (63,419)Independent Review Report
TO PANTHEON INTERNATIONAL PARTICIPATIONS PLC
INTRODUCTION
We have been engaged by the Company to review the condensed set of financialstatements in the Half Yearly Financial Report for the six months ended 31stDecember 2008 which comprises Income Statement, Reconciliation of Movement inEquity Shareholders' Funds, Balance Sheet, Cash Flow Statement and Notes tothe Half Yearly Financial Report. We have read the other information containedin the Half Yearly Financial Report which comprises only the FinancialSummary, Objective and Investment Policy, Chairman's Statement, PortfolioReview, Activity, Outstanding Commitments and Interim Management Report andResponsibility Statement of the Directors, and considered whether it containsany apparent misstatements or material inconsistencies with the information inthe condensed set of financial statements.This report is made solely to the Company in accordance with guidancecontained in ISRE (UK and Ireland) 2410, "Review of Interim FinancialInformation performed by the Independent Auditor of the Entity". Our reviewwork has been undertaken so that we might state to the company those matterswe are required to state to them in a review report and for no other purpose.To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company, for our review work, for thisreport, or for the conclusion we have formed.
DIRECTORS' RESPONSIBILITIES
The Half Yearly Financial Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in Note 1, the annual financial statements of the Company areprepared in accordance with applicable United Kingdom law and AccountingStandards (United Kingdom Generally Accepted Accounting Practice) and with theStatement of Recommended Practice "Financial Statements of Investment TrustCompanies", issued in December 2005. The condensed set of financial statementsincluded in this Half Yearly Financial Report has been prepared in accordancewith the Accounting Standards Board Statement "Half Yearly Financial Reports".
OUR RESPONSIBILITY
Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the Half Yearly Financial Report based on ourreview.SCOPE OF REVIEW
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed set of financial statements in the Half YearlyFinancial Report for the six months ended 31st December 2008 is not prepared,in all material respects, in accordance with the Accounting Standards BoardStatement "Half Yearly Financial Reports" and the Disclosure and TransparencyRules of the United Kingdom's Financial Services Authority.GRANT THORNTON UK LLPChartered AccountantsLondon27th February 2009Directors and AdvisorsDIRECTORS REGISTRARSTom Bartlam (Chairman) Capita RegistrarsIan Barby Northern HouseRichard Crowder Woodsome ParkPeter Readman Fenay BridgeRhoddy Swire HuddersfieldSandy Thomson West Yorkshire HD8 0LAMANAGER * Telephone: 0871 664 0300Pantheon Ventures Limited * calls cost 10p per minute plus network charges(Authorised and regulated by the FSA) * Telephone from overseas: +44(0)20 8639 3399Norfolk House31 St. James's Square BANKERSLondon The Royal Bank of Scotland PLCSW1Y 4JR Waterhouse SquareTelephone: 020 7484 6200 138-142 HolbornEmail: [email protected] LondonInternet: www.pantheonventures.com EC1N 2TH SECRETARY & REGISTERED OFFICE HSBC Bank PLCCapita Sinclair Henderson Limited (Also custodian)Beaufort House Global Investor Services51 New North Road Mariner HouseExeter Pepys StreetEX4 4EP LondonTelephone: 01392 412122 EC3N 4DA BROKERS AUDITORSCollins Stewart Europe Ltd Grant Thornton UK LLP9th Floor 30 Finsbury Square88 Wood Street LondonLondon EC2P 2YUEC2V 7QR SOLICITORSFIXED INTEREST INVESTMENT ADVISOR Covington & Burling LLPAlliance Bernstein 265 StrandDevonshire House London1 Mayfair Place WC2R 1BHLondonW1X 6JJ HALF-YEARLY REPORT
The foregoing represents the full text of the Half-Yearly Report for the six months to 31st December 2008, which will be posted to shareholders shortly. The Report will also be available for download from the following website: www.pipplc.com or on request from the Company Secretary.
Capita Sinclair Henderson Limited
27th February 2009
vendorRelated Shares:
Pantheon International