PANTHEON INTERNATIONAL PARTICIPATIONS PLC - Annual Financial Report
Oct 14, 2009 (PR Newswire Europe via COMTEX) --
Company: Pantheon International Participations PLC (PIRPF)
PANTHEON INTERNATIONAL PARTICIPATIONS PLC
FINAL RESULTS FOR THE YEAR ENDED 30 JUNE 2009
The full Annual Report and Accounts can be accessed via the Company's website
at www.pipplc.com or by contacting the Company Secretary on telephone 01392
412122.
FINANCIAL SUMMARY
HIGHLIGHTS 30TH JUNE 2009 30TH JUNE 2008 CHANGE
Summary of results
NAV per share 773.6p 1,108.7p (30.2%)
Total assets less current and GBP513.6m GBP736.1m (30.2%)
non-current liabilities
Ordinary shares
Share price 295.3p 750.0p (60.6%)
Discount to NAV 61.8% 32.4%
Redeemable shares
Share price 350.0p 819.5p (57.3%)
Discount to NAV 54.8% 26.1%
Investment activity
Invested in private equity GBP157.2m GBP272.5m
assets
Received from private equity GBP86.1m GBP133.0m
assets
1 YEAR 3 YEARS 5 YEARS 10 YEARS
PERFORMANCE % % P.A. % P.A. % P.A.
NAV per share (30.2) (1.0) 6.2 7.0
Ordinary share price (60.6) (25.9) (8.6) 1.1
FTSE All-Share (20.5) (6.5) 3.1 0.1
MSCI World (sterling) (14.2) (3.9) 2.5 (0.8)
PIP was launched on 18th September 1987. GBP1,000 invested at inception, assuming
reinvestment of dividends and capital repayments, would have been worth GBP4,250
at 30th June 2009.
CAPITAL STRUCTURE
Ordinary shares 37,521,013
Redeemable shares 28,871,255
Total 66,392,268
CHAIRMAN'S STATEMENT
It is disappointing to report a decrease in net asset value ("NAV") per share
of 30% to 773.6p in the twelve months to 30th June 2009. The significant
deterioration in stock markets and economic conditions led to widespread
reductions in valuations across the portfolio. In the final quarter PIP, in
order to strengthen its financial position, completed a number of asset
disposals which also contributed to the decrease in NAV per share.
It is even more disappointing that, over the twelve months to 30th June 2009,
the ordinary share price fell by 61%, reflecting both the fall in NAV per share
and the increase in the discount from 32% to 62%. Discounts widened across the
listed private equity sector as a whole, reflecting market anxiety over the
future direction of valuations and the funding of undrawn commitments. While
the Company's capital structure had been built to withstand a downturn, with
some GBP300 million in the form of loan facilities and standby financing, the
extent of the economic crisis and the expected prolonged low level of
distributions meant that it was necessary for the Company to take action to
improve its financial position through the sale of certain fund interests. As a
result, the Board believes the Company is now in a position to finance all its
outstanding commitments for the foreseeable future.
Net assets decreased by GBP222m to GBP514m during the twelve months to 30th June
2009. Reported reductions in valuations by general partners and listed
securities amounted to GBP220m. An additional GBP80m was due to realised losses on
disposals of assets, and GBP10m was a provision relating to expected losses on
unclosed sales with signed agreements. These portfolio losses were partially
offset by GBP106m of net foreign exchange gains from the depreciation of sterling
against both the US dollar and euro, currencies in which most of the Company's
assets are denominated. Interest and expenses accounted for the remainder of
the decrease.
INVESTMENT ACTIVITY
The scarcity of debt financing allied with increased investor uncertainty
resulted in a significant reduction in activity levels within the private
equity industry. During the year, the rate at which undrawn commitments were
called fell markedly from December onwards. The distribution rate also slowed
down dramatically throughout the year with the exception of the quarter ended
31st December 2008, when PIP received a number of notable distributions
highlighting the value of a well diversified portfolio.
In the twelve months to 30th June 2009, PIP invested GBP157m in underlying
private equity assets. Of this amount, GBP114m was paid to meet investment calls
arising from PIP's primary commitments and GBP43m to pay for calls from the
secondary portfolio. The total amount of cash distributed to PIP as a result of
investment realisations during the year was GBP86m. Of this amount, GBP28m came
from the primary portfolio with GBP58m arising from the secondary portfolio. In
total PIP received distributions from more than 200 different funds, showing
that even in difficult economic times a well diversified portfolio can generate
significant realisation activity.
COMMITMENTS
In the quarter to 30th September 2008, PIP committed a total of GBP24m to five
primary funds, encompassing one Europe-focused fund (GBP14m) and four US-focused
funds (GBP10m). Due to the deteriorating outlook for distribution activity, the
Company did not make any additional commitments in the last three quarters of
the financial year.
Undrawn commitments decreased by GBP213m to GBP428m. GBP157m of this reduction was
due to calls and GBP163m was due to the sale of fund commitments. These
reductions were partially offset by the depreciation of sterling versus the US
dollar and euro, and the new commitments referred to above. As has historically
been the case, it is unlikely that undrawn commitments will be called in full.
The Company does not intend to make any further commitments until there is a
sustained recovery in the level of distributions or additional financing is
obtained.
MARKET REVIEW AND PROSPECTS
The twelve months to 30th June 2009 has without doubt been the most challenging
in the 22-year history of the Company. The near collapse of the banking sector
and subsequent deleveraging of the financial system resulted in a sudden,
extreme scarcity of credit. The result was a significant reduction in
consumption, pushing the crisis into the wider economy and causing investor
sentiment along with stock markets across the globe to plunge. These conditions
resulted in a dramatic reduction in private equity activity in the second half
of 2008, as M&A and IPO activity plummeted and buyout managers struggled to
find financing for new deals.
The liquidity measures undertaken by the major economies have helped to ease
the panic that was evident in the markets at the end of 2008 and early in 2009.
Credit markets are beginning to show some signs of life, although it is too
early to say whether the worst is over. In our view, it is likely that the
recovery in economic fundamentals will be relatively slow, with low activity
levels in the private equity market expected to continue over the coming
quarters.
The FTSE All-Share and MSCI World (sterling) total return indices fell by 20.5%
and 14.2% respectively in the twelve months to 30th June 2009. Valuation
multiples and corporate earnings for listed securities have been hit hard as a
result of the economic crisis. Consequently many private equity assets, which
are often valued relative to publicly listed entities and whose earnings have
been similarly impacted by the recession, have been written-down. The greatest
reductions in valuations have been experienced in the mega and large buyout
area, where higher levels of leverage have magnified write-downs. The recent
stock market rally should provide some support to private equity valuations.
Notwithstanding this, the scale and extent of the economic crisis means that we
cannot rule out further volatility in the coming quarters, and as such we
maintain a cautious outlook going forward.
Falling valuations can provide opportunities to invest in good companies at
lower prices. We expect the best private equity managers, who have the benefit
of long-term investment horizons, to make the most of these opportunities in
the coming years. Whilst there are undoubtedly issues concerning leverage
levels utilised in the mega buyout deals of recent times, other areas of
private equity, notably small / mid market buyouts and venture capital, have
relied less on leverage. It should be noted that small / mid market buyouts and
venture capital account for 69% of PIP's portfolio, whilst exposure to large /
mega buyouts is only 20% of the portfolio. In our view, the market has been
indiscriminate in the derating of the listed private equity sector over the
past year, failing to reflect adequately the differences in risk profiles of
the various private equity stages.
The diversification of PIP's portfolio, with top quality managers across
buyout, venture capital and special situations stages, and across all major
regions, should help mitigate some of the difficulties experienced by specific
companies or sectors in the current economic conditions. Buyout managers
generally favour companies in defensive industries, thus partly mitigating the
risk of higher leverage. As a result, PIP's portfolio is underweight in many of
those sectors, such as financials, property and basic resources, which comprise
a significant part of the listed market indices and which have fallen most in
the past year. As always, it is important for investors in private equity to
ensure that they select the managers that are able to deliver across the market
cycle. Pantheon's strategy is to focus on managers that can demonstrate clear
value creation, much of which is centred on greater efficiency and building
scale in middle market businesses.
CAPITAL STRUCTURE AND FINANCING
In December 2008, PIP issued GBP49.5m of unsecured subordinated loan notes (the
"Notes") to institutional investors who had previously entered into "standby"
agreements to subscribe, if called upon by PIP to do so, for new redeemable
shares. In the event of a drawdown by the Company under a "standby" agreement
from an institutional investor who is a Noteholder, the Company shall repay an
equivalent amount on the Notes held by such investor (or such lesser amount as
is outstanding). The Company has commitments from institutional investors under
"standby" agreements to subscribe a total of GBP150m for new redeemable shares.
In the March and June quarters PIP entered into agreements to sell fund
interests to a number of third parties. The Company has reduced undrawn
commitments by approximately GBP163m and received approximately GBP23m in cash
proceeds, from sales that were completed in the twelve months to 30th June
2009. In addition, a further GBP27m of sales proceeds relating to transactions
completed during the year was received in July 2009. With the exception of one
transaction that is due to close in January 2010, all planned deals have now
completed.
These combined sales have strengthened the financial position of the Company.
As at 31st August 2009 PIP had GBP177m of available financing, comprising GBP46m of
cash, GBP30m of unutilised bank loan facility and GBP101m of unutilised standby
financing. As such, the Board believes that the Company is in a position to
meet its undrawn commitments for the foreseeable future.
OUTLOOK
The increase in value of comparable quoted companies following the recent stock
market rally should provide some support to private equity valuations in the
coming quarter. However, we believe the prospects for underlying earnings in
the near term will remain muted until there is a significant improvement in the
macroeconomic environment. Therefore the outlook for private equity valuations
remains uncertain.
Often in the past, large stock market shocks have been followed by periods of
strong returns. Recent stock market falls have reduced most company valuations,
and as such, PIP is well positioned via its undrawn commitments to benefit from
a potentially fertile investment environment.
We expect calls and distributions to remain at a low level in the coming
quarters. Any recovery in the level of calls is likely to occur before a
recovery in the level of distributions, which could result in higher cash
outflows for a period.
The Company will focus any investment capacity not needed to meet its unfunded
commitments on its secondary programme.
Tom Bartlam
Chairman
13th October 2009
THE MANAGER'S REVIEW
MARKET REVIEW
The private equity industry has been affected by the banking crisis and
significant tightening in the debt markets, resulting in a dramatic slowdown in
investment activity in the second half of 2008, particularly at the larger end
of the buyout market. Historically low levels of initial public offerings
("IPOs"), mergers and acquisitions ("M&A") and secondary buyouts have resulted
in a dramatic decrease in realisations. The current conditions could provide
opportunities for private equity managers to acquire high quality assets at
attractive prices.
BUYOUT MARKET
Buyout activity in the USA, particularly at the larger end of the market, has
been severely hit by the banking crisis and the collapse of the leveraged loan
market. The scarcity of debt has pushed down available leverage multiples and
increased the proportion of equity in new transactions. Additionally, the
uncertainty surrounding the economic crisis has suppressed demand in the buyout
sector. As a result, private equity deal value was down approximately 70% in
the first half of 2009 relative to the same period in 2008.
The European market has experienced similar difficulties, with the value of
buyout deals dropping by over 80% in the first half of 2009 relative to the
same period last year. This drop in deal flow was felt most at the larger end
of the market, with no deals greater than ae1 billion completed in the first
half of 2009. The second quarter of 2009 saw an increase in the value of buyout
deals, although it is too early to suggest that the bottom has been reached in
the European buyout market. Much uncertainty persists as to both the length and
depth of this crisis, with the threat of further downside likely to continue in
the coming quarters.
Buyout realisation activity has also been severely restricted by the turmoil in
the financial markets. This was due to a slowdown in M&A and secondary buyout
activity, coupled with a near shut-down in the IPO market. Any recovery will
likely be driven by an improvement in market sentiment and debt market
conditions, both of which could be slow to materialise. That said, the current
market dislocation could provide attractive investment returns for those with
long-term horizons.
VENTURE CAPITAL MARKET
Venture capital investments do not typically utilise debt and have therefore
been much less affected by the turbulence within the debt markets. However, the
string of poor economic data and virtual shutdown of the IPO market has had a
significant impact on activity, with venture investment in the USA down around
55% in the half year to 30th June 2009 relative to the same period in the
previous year. Only one venture-backed IPO was completed in the three quarters
to 31st March 2009. This compares to 48 in the same period the year before. A
significant decrease in venture-backed M&A has also added to the depressed
realisation levels confronting the industry.
Recently there has been some signs of a slight recovery in the level of venture
capital realisations, with a total of five IPOs executed in the June quarter,
alongside a quarterly increase in venture-backed M&A activity. We expect any
recovery, as with the buyout market, to be slow to materialise.
ASIA AND OTHER REGIONS
Private equity firms continue to extend themselves internationally, with a
notable trend for US private equity funds to increase their focus on Europe and
Asia. Markets are continuing to develop in Asia, Africa and the Middle-East,
providing a greater breadth of opportunity going forward. Many of these markets
are very difficult to invest in without a strong local presence, highlighting
the importance of a genuinely global perspective.
Asia has not been immune to problems affecting the USA and Europe. Private
equity investment activity was down by more than 70% in the first half of 2009
relative to the same period in the previous year. Divestments were also down,
falling by approximately 55%. In general, managers in the region are less
dependent on leverage than their western counterparts. Additionally, Asian
markets have become more resilient to foreign trade shocks, with domestic
consumption diminishing reliance on exports to developed markets. As such, we
believe that managers with solid local market knowledge and experience of
investing in challenging times will have an opportunity to outperform strongly
in Asian markets.
SECONDARY MARKET
The substantial wave of capital that flowed into private equity assets in the
years preceding the financial crisis is expected to give rise to an
unprecedented level of opportunity in the secondary market in the coming years.
A large number of potential sellers, distressed, over-allocated or simply
disenchanted with their performance, will add to those already selling for
portfolio management reasons. Despite the significant potential, the number of
deals completed so far has been relatively low due to mismatches between buyer
and seller pricing expectations, and uncertainty over the effects of the
recession on underlying performance. We expect deal volumes to increase over
the coming year as pricing expectations align and economic visibility improves.
Pantheon's influence as a significant limited partner has made it a preferred
buyer of secondary interests for many of the foremost general partners in the
industry. In addition, Pantheon's strength in manager research and depth of
transactional experience can enable PIP, subject to financing, to take
advantage of the current opportunities in the secondary market.
ACTIVITY
PIP suspended its primary investment programme in the quarter to 30th September
2008, prior to which, commitments totalling GBP24 million were made to new
private equity funds.
SECONDARY ACQUISITIONS
PIP acquired no new secondary assets in the year, having suspended new
commitments to secondaries at the beginning of 2008.
The Company does not intend to make any further commitments until there is a
sustained recovery in the level of distributions or additional financing is
obtained.
DISTRIBUTIONS
PIP received GBP86m in proceeds from the portfolio during the twelve months to
30th June 2009, equivalent to approximately 11% of the opening private equity
assets. This figure excludes proceeds from fund disposals.
Primary GBP28m
Secondary GBP58m
Total GBP86m
The rate of distributions fell markedly in the second half of the financial
year, as the deteriorating economic climate impacted the level of portfolio
company exits. A higher distribution rate in the quarter to December 2008
included the two largest portfolio exits of the year - the sales of MessageLabs
and N&W Global Vending.
CALLS
PIP paid GBP157m in cash calls during the year to 30th June 2009, equivalent to
approximately 24% of opening undrawn commitments.
Primary GBP114m
Secondary GBP43m
Total GBP157m
The rate of drawdowns from outstanding commitments decreased in the year to
30th June 2009, as a lack of debt financing coupled with economic uncertainty
reduced investment activity. Pantheon expects call rates to remain subdued over
the coming months.
INVESTMENT CASH FLOWS
With the exception of the quarter to 31st December 2008, when the distribution
rate was significantly higher due to the exits of MessageLabs and N&W Global
Vending, the Company has experienced a net cash outflow in all other quarters.
FINANCE
At 30th June 2009 the Company had GBP20.5m in cash and GBP30m remaining of its GBP
150m revolving credit facility.
PIP continues to have in place "standby" agreements with certain institutions
under which the Company can require the institutions to subscribe for new
redeemable shares, up to the value of GBP150m. 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 2008, PIP issued GBP49.5m of unsecured subordinated loan notes (the
"Notes") to institutional investors who had previously entered into "standby"
agreements. The Notes have a maturity date of 15th November 2010 and accrue
interest at LIBOR plus 1.5%. In the event of a drawdown by the Company under a
"standby" agreement from an institutional investor who is a Noteholder, the
Company shall repay an equivalent amount on the Notes held by such investor (or
such lesser amount as is outstanding).
During the year PIP entered into agreements to sell fund interests to a number
of third parties. As a result of these disposals, the Company has received
approximately GBP23m in cash proceeds and reduced undrawn commitments by
approximately GBP163m. A further GBP27m of sales proceeds from transactions
completed during the year was received in July 2009.
Including the above sales proceeds received in July 2009, PIP's available
financing stood at GBP178m at 30th June 2009.
PORTFOLIO REVIEW
The underlying companies in the portfolio range from large and mature
industrial enterprises with multinational operations to early-stage ventures
operating at the leading edge of technological development. All the companies
have one factor in common: the influence of professional private equity
managers who are motivated to maximise the value of each underlying investment.
PORTFOLIO ANALYSIS BY VALUE AS AT 30TH JUNE 2009
PIP disposed of a number of assets in the year to 30th June 2009. Where mature
primary assets were sold, in the majority of cases, PIP retained a 50% stake in
order to maintain exposure to these funds and to ensure the portfolio continues
to be well diversified.
GEOGRAPHIC SPREAD
The weighting to the USA increased from 53% to 60% over the period whereas the
weighting to Europe fell from 40% to 31%, reflecting both investment returns,
relative currency movements and fund sales since 30th June 2008. The weighting
to Asia and other regions increased from 7% to 9% in the period.
USA 60%
Europe 31%
Asia and other 9%
100%
STAGE COMPOSTION
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.
Venture 35%
Small/Mid buyouts 34%
Large/ Mega 20%
buyouts
Special situations 6%
Generalist 4%
Directs 1%
100%
SECTOR COMPOSTION
PIP's portfolio is well diversiied by the sectors in which the underlying
companies operate. This sectoral diversiication helps to minimise the effects
of cyclical trends or volatility within particular industry segments.
Other services & manufacturing 29%
Consumer-related 18%
Computer-related 14%
Medical / Health-related 11%
Communications 10%
Industrial products 6%
Biotechnology & pharmacology 5%
Energy-related 4%
Other electronics-related 3%
100%
MATURITY
PIP's portfolio is well diversified by fund vintage (referring to the year the
fund was established).
2008 2%
2007 15%
2006 16%
2005 13%
2004 7%
2003 4%
2002 3%
2001 7%
2000 17%
1999 7%
1998 and earlier 9%
100%
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.
PIP's outstanding commitments to investments decreased to GBP428m at 30th June
2009 compared with GBP641m at 30th June 2008. GBP157m of this reduction was due to
calls and GBP163m was due to the sale of fund commitments. These reductions were
partially offset by the depreciation of sterling versus the US dollar and euro,
and the new commitments made during the year.
PORTFOLIO ANALYSIS BY OUTSTANDING COMMITMENTS AS AT 30TH JUNE 2009
GEOGRAPHIC SPREAD
The chart below shows the breakdown of the Company's outstanding commitments by
geography. Europe and the USA have the largest outstanding commitments
reflecting the fact that they have the most mature private equity markets.
Commitments to Asia and other regions totalled 12%.
USA 46%
Europe 42%
Asia and other 12%
100%
STAGE COMPOSITION
The chart below shows the breakdown of the Company's outstanding commitments by
the stage focus of the underlying funds.
Small/Mid buyouts 40%
Venture 27%
Large/ Mega buyouts 25%
Special situations 7%
Generalist 1%
100%
MATURITY
The chart below shows the breakdown of the Company's outstanding commitments by
the vintage (referring to the year the fund made its first drawdown) of the
underlying funds.
2009 3%
2008 26%
2007 32%
2006 15%
2005 7%
2004 2%
2003 and earlier 15%
100%
PANTHEON VEHICLES
Pantheon Ventures Limited ("Pantheon") is not entitled to management and
commitment fees in respect of PIP's holdings in, and outstanding commitments
to, the irm's managed fund-of-funds vehicles. In addition, Pantheon has agreed
that PIP will never be disadvantaged in terms of fees compared with the
position it would have been in had it made investments directly into the
underlying funds rather than indirectly through such fund-of-funds vehicles.
THE TOP 20 MANAGERS BY VALUE AND OUTSTANDING COMMITMENTS
TOP 20 MANAGERS BY VALUE AS AT 30TH JUNE 2009
NUMBER MANAGER REGION STAGE BIAS % OF PIP'S TOTAL
PRIVATE EQUITY
ASSET VALUE
1 Barclays Private EUROPE BUYOUT 2.5%
Equity
2 Apax Partners EUROPE BUYOUT 2.2%
3 ABS Capital Partners USA GENERALIST 1.9%
4 Brentwood Associates USA BUYOUT 1.8%
5 Doughty Hanson & Co EUROPE BUYOUT 1.6%
6 Avista Capital USA BUYOUT 1.6%
Partners
7 Churchill Equity USA BUYOUT 1.6%
8 Nova Capital EUROPE BUYOUT 1.5%
Management
9 Oaktree Capital GLOBAL GENERALIST 1.4%
Management
10 Oak Investment USA VENTURE 1.4%
Partners
11 CVC Capital Partners EUROPE BUYOUT 1.4%
12 IK Investment EUROPE BUYOUT 1.3%
Partners
13 Providence Equity USA BUYOUT 1.3%
Partners
14 ABRY Partners USA BUYOUT 1.3%
15 Vision Capital EUROPE BUYOUT 1.3%
16 BC Partners EUROPE BUYOUT 1.2%
17 Carlyle Group/ USA SPECIAL 1.2%
Riverstone Holdings SITUATIONS
18 Cipio Partners EUROPE VENTURE 1.1%
19 Carlyle Group GLOBAL GENERALIST 1.1%
20 Nordic Capital EUROPE BUYOUT 1.1%
Figures are adjusted for fund disposals that had yet to be completed at 30th
June 2009.
TOP 20 MANAGERS BY OUTSTANDING COMMITMENTS AS AT 30TH JUNE 2009
NUMBER MANAGER REGION STAGE BIAS % OF OUTSTANDING
COMMITMENTS
1 Hutton Collins EUROPE SPECIAL 3.7%
SITUATIONS
2 Golden Gate Capital USA BUYOUT 3.6%
3 CVC Capital Partners EUROPE BUYOUT 3.2%
4 Clessidra Capital EUROPE BUYOUT 2.9%
Partners
5 Apax Partners EUROPE BUYOUT 2.4%
6 Summit Partners GLOBAL VENTURE 2.3%
7 Barclays Private EUROPE BUYOUT 2.3%
Equity
8 Mid-Europa Partners EUROPE BUYOUT 1.8%
9 Carlyle Group GLOBAL GENERALIST 1.8%
10 Baring Vostok Capital REST OF THE BUYOUT 1.7%
Partners WORLD
11 Apollo Management USA BUYOUT 1.6%
12 Doughty Hanson & Co EUROPE BUYOUT 1.5%
13 Vision Capital EUROPE BUYOUT 1.5%
14 Technology Crossover USA VENTURE 1.4%
Ventures
15 Mercapital EUROPE BUYOUT 1.4%
16 Private Equity EUROPE BUYOUT 1.3%
Partners
17 Providence Equity USA BUYOUT 1.3%
Partners
18 Arcadia EUROPE BUYOUT 1.2%
19 Brentwood Associates USA BUYOUT 1.2%
20 Unison Capital ASIA BUYOUT 1.2%
Figures are adjusted for fund disposals that had yet to be completed at 30th
June 2009 and any known reduction in commitments post 30th June 2009.
TOP 20 COMPANIES BY VALUE AS AT 30TH JUNE 2009
NUMBER COMPANY SECTOR % OF PIP'S
TOTAL PRIVATE
EQUITY ASSET
VALUE
1 Nycomed MEDICAL/HEALTH 0.9%
2 Rosetta Stone* COMPUTER 0.6%
3 Bibby Scientific OTHER SERVICES AND 0.5%
MANUFACTURING
4 GSI Commerce* COMMUNICATIONS 0.5%
5 Spectrum Athletic Clubs CONSUMER 0.5%
6 Carbolite OTHER SERVICES AND 0.5%
MANUFACTURING
7 Array OTHER SERVICES AND 0.5%
MANUFACTURING
8 Orchid Orthopedic MEDICAL/HEATH 0.4%
Solutions
9 InterXion COMPUTER 0.4%
10 TDC* COMMUNICATIONS 0.4%
11 The Teaching Company OTHER SERVICES AND 0.4%
MANUFACTURING
12 Duff & Phelps* OTHER SERVICES AND 0.4%
MANUFACTURING
13 Cavium Networks* OTHER ELECTRONICS 0.4%
14 VBrick Systems COMPUTER 0.4%
15 SciLabware BIOTECHNOLOGY AND 0.3%
PHARMACOLOGY
16 Converteam ENERGY 0.3%
17 Global Refund OTHER SERVICES AND 0.3%
MANUFACTURING
18 Polar OTHER SERVICES AND 0.3%
MANUFACTURING
19 ConvaTec Group MEDICAL/HEATH 0.3%
20 BrightHouse CONSUMER 0.3%
Figures are adjusted for fund disposals that had yet to be completed at 30th
June 2009.
* Quoted holding as at 30th June 2009.
COMPANY STRATEGY, 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.
COMPANY STRATEGY
The spread of performance in private equity is much wider than in other asset
classes and the selection of managers has a signiicant influence on investment
performance. As a specialist fund-of-funds manager monitoring and researching
the global private equity market, Pantheon, PIP's Manager, is well positioned
to identify fund managers who have the skills and strategies to deliver
superior performance within their particular market segments.
PIP's strategy is to invest with leading private equity managers whilst
reducing investment risk through diversification of the underlying portfolio by
geography, investment stage and sector. This strategy is implemented through
PIP's primary and secondary investment programmes. PIP has the flexibility to
vary the size of the primary and secondary investment programmes depending on
available financing. The portfolio reflects PIP's prolonged access to
Pantheon's highly successful primary and secondary investments over the past 22
years. Only funds that have passed rigorous due diligence and research are
selected for the primary and secondary programmes.
PRIMARY PROGRAMME
The primary programme invests in private equity funds when they are irst
formed. Pantheon aims to secure access to superior managers and to identify
high quality managers often overlooked by the market. Investments are made on a
pro-rata basis alongside Pantheon's regional fund-of-funds.
Through the primary programme, PIP invests in fewer than 2% of the estimated
universe of private equity funds and thus is able to substantially outperform
the market averages, given the high dispersal of returns between managers.
The primary programme enables PIP to invest strategically in speciic areas of
the market, put money to work steadily over time and gain access to the very
best funds.
SECONDARY PROGRAMME
The secondary programme purchases existing investments in private equity funds.
Typically these investments are acquired between three and six years after a
fund's inception. PIP benefits from secondaries because the fees and expenses
in the first few years have been paid and distributions from the fund will be
returned over a shorter time period. This helps to reduce the drag to
performance from young and immature funds, known as the "J-curve effect". In
addition secondary assets can be purchased at a discount, especially in cases
where the seller has liquidity problems, increasing the opportunity for
outperformance.
In accordance with the terms of its management agreement with Pantheon, PIP is
entitled under Pantheon's allocation policy to the opportunity to co-invest in
a predetermined ratio alongside Pantheon's latest global secondary fund,
benefiting from access to larger secondary opportunities that it would not have
had the capacity to complete alone. The secondary programme enables PIP to
acquire attractively priced secondary interests as they become available, and
is thus able to outperform market averages through judicious pricing and
timing.
The Company does not intend to make any further commitments to either the
primary or secondary programmes until there is a sustained recovery in the
level of distributions or additional financing is obtained. As the Company's
finances become less constrained, either as a result of a normalisation in the
level of distributions, or due to a capital raising, PIP will be able to
participate in new investments, with emphasis on the current opportunities in
the secondary market as a priority.
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, by
subscribing for investments in new private equity funds and buying secondary
interests in existing private equity funds and, occasionally, by acquiring
direct holdings in unquoted companies, 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 invest in private equity funds which are quoted. In addition,
the Company may from time to time hold quoted investments in consequence of
such investments being distributed to the Company from its fund investments or
in consequence of an investment in an unquoted company becoming quoted. The
Company will not otherwise normally invest in quoted securities although the
Company 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 scheme.
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:
aEURc 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;
aEURc 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;
aEURc 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 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 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.
THE DIRECTORS
The Directors in office during the year and at the date of this report are:
Tom Bartlam (Chairman)
Ian Barby
Richard Crowder
Peter Readman
Rhoddy Swire
Sandy Thomson
EXTRACTS FROM THE DIRECTOR'S REPORT
BUSINESS REVIEW
The Business Review which follows is designed to provide shareholders with
information about the Company's business and results in the year to 30th June
2009. It should be read in conjunction with the Chairman's Statement and
Manager's Review.
BUSINESS AND STRATEGY
Pantheon International Participations PLC (the "Company" or "PIP"), a
closed-ended investment trust, is the longest established private equity
fund-of-funds quoted on the London Stock Exchange. It enables investors to gain
access to a substantial portfolio of unquoted companies in the USA, Europe and
Asia, within funds managed by experienced private equity managers selected for
their ability to outperform.
PIP'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 full Objective and Investment Policy are
set out above.
The Company has received written approval from HM Revenue & Customs as an
authorised investment trust under Section 842 of the Income and Corporation
Taxes Act 1988 up to the year ended 30th June 2007. This approval is subject to
there being no subsequent enquiry under corporation tax self-assessment. The
Company has been approved as an investment trust for all previous years. It is
the opinion of the Directors that the Company has subsequently directed its
affairs so as to enable it to continue to qualify for such approval and the
Company will continue to seek approval under Section 842 each year.
The Company's status as an investment trust allows it to obtain an exemption
from paying taxes on the profits made from the sale of its investments.
Investment trusts offer a number of advantages for investors, including access
to investment opportunities that might not be open to private investors and to
professional stock selection skills at low cost.
The Company was incorporated and registered in England and Wales on 16 July
1987. It is registered as a public limited company and is an investment company
as defined by Section 833 of the Companies Act 2006. It is a member of The
Association of Investment Companies ("AIC").
PRINCIPAL RISKS AND UNCERTAINTIES FACING THE COMPANY
The Company invests principally in private equity funds. However, the Company's
strategy is to adopt a global fund-of-funds investment programme maximising
returns through selection of the best available funds and to mitigate
investment risk through diversification of the underlying portfolio by
geography, investment stage and sector. The principal risks facing the Company
include the following:
Funding of investment commitments
In the normal course of its business, the Company typically has outstanding
commitments to private equity funds which are substantial relative to the
Company's assets. The Company's ability to meet these commitments is dependent
upon it receiving cash distributions (the timing and amount of which can be
unpredictable) from its private equity investments and, to the extent these are
insufficient, on the availability of financing facilities.
Risks relating to investment opportunities
There is no guarantee that the Company will find sufficient suitable investment
opportunities, or that the private equity funds in which it invests will find
suitable investment opportunities, to achieve the level of diversification
which the Company seeks to achieve in relation to its investment portfolio.
Financial risk of private equity
The Company invests in private equity funds and unquoted companies which are
less readily marketable than quoted securities and may take a long time to
realise. In addition, such investments may carry a higher degree of risk than
investments in quoted securities. The Company may be adversely affected by
these risks notwithstanding the level of diversification which it seeks to
achieve in relation to its investment portfolio.
Long-term nature of private equity investments
Private equity investments are long-term in nature and may take some years
before reaching a level of maturity at which they can be realised. Accordingly,
it is possible that the Company may not receive a return on investments made by
it for a number of years.
Liquidity risk
Due to the Company's investment policy, a large proportion of the Company's
portfolio comprises indirect participations in unquoted investments and direct
holdings in unquoted investments. Such investments are less readily marketable
than quoted securities and realisation of these investments may require a
lengthy time period or may result in distributions in kind to the Company.
Valuation uncertainty
In valuing its investments in private equity funds and unquoted companies and
in publishing its net asset value, the Company relies to a significant extent
on the accuracy of financial and other information provided by these funds and
companies to the Manager. There is potential for inconsistency in the valuation
methods adopted by these funds and companies. In addition, the information
provided is typically more than 90 days old at the time the net asset value of
the Company's shares is reported.
Gearing
As at 30th June 2009 the Company had borrowings of GBP170m. The use of gearing
can cause both gains and losses in the asset value of the Company to be
magnified. The Company may also invest in private equity funds or unquoted
companies which are geared by loan facilities that rank ahead of the Company's
investment, both for payment of interest and capital. As a consequence, the
Company may be exposed to gearing through the borrowings from time to time of
such private equity funds and companies, therefore investment in such assets
presents a higher risk as to their capital return.
Foreign currency risk
The Company makes investments in US dollars, euros and other currencies as well
as sterling. Accordingly, the Company is exposed to currency exchange rate
fluctuations.
Competition
The Company competes for investments with other investors. It is possible that
competition for appropriate investment opportunities may increase, thus
reducing the number of opportunities available and adversely affecting the
terms upon which such investments can be made.
Unregulated nature of underlying investments
The private equity funds and underlying unquoted investments that form the
basis of the majority of the Company's portfolio are not subject to regulation
by the Financial Services Authority or an equivalent regulatory body. Funds and
unquoted companies in which the Company invests (directly or indirectly) may be
domiciled in jurisdictions which do not have a regulatory regime which provides
an equivalent level of investor protection to that provided under the laws of
the United Kingdom.
Defaults on commitments
If, in consequence of any failure to meet a demand for payment of any
outstanding unpaid capital commitment of the Company to any private equity fund
in which the Company has invested, the Company is treated as a defaulting
investor by that fund, the Company may suffer a resultant dilution in its
interest in that fund and, possibly, the compulsory sale of that interest.
Taxation
Any change in the Company's tax status or in taxation legislation or practice
could affect the value of the investments held by and the performance of the
Company. In addition, the income and gains of the Company from its investments
may suffer withholding tax which may not be reclaimable in the countries where
such income and gains arise.
The Manager and other third party advisers
Like most investment trust companies, the Company has no employees and the
Directors are all non-executive. The Company is dependent upon the services of
Pantheon Ventures Limited ("Pantheon") as Manager and may be adversely affected
if the services of Pantheon cease to be available to the Company. Details of
the terms of the Management Agreement are set out below.
Other third party service providers on whom the Company relies include Capita
Sinclair Henderson Limited, who provide company secretarial and accounting
services, and HSBC Bank plc, who act as Custodian.
Further information on risks
Further information on the principal risks the Company faces in its portfolio
management activities and the policies for managing these risks and the policy
and practice with regard to financial instruments are summarised in Note 20 to
the financial statements.
REVIEW OF 2008/2009
Net asset value
The Company's total net assets attributable to shareholders decreased during
the year to GBP513,622,000 (2008: GBP736,105,000). The net asset value per ordinary
share and redemption value per redeemable share was 773.62p at 30th June 2009
(2008: 1,108.72p).
Results and dividends
As set out in the Income Statement, the Company's net revenue deficit on
ordinary activities before taxation for the year was GBP14,659,000 (2008: deficit
of GBP8,080,000) and capital deficits were GBP207,427,000 (2008: profit of GBP
133,547,000). The Directors do not recommend the payment of a dividend in
respect of the year ended 30th June 2009 (2008: nil). The results for the year
are as set out in the Income Statement.
Performance highlights
The Board and the Manager monitor the following Key Performance Indicators:
1. The net asset value performance
2. The level of discount
3. The total expense ratio of the Company
PIP's net asset value per ordinary share decreased by 30.2% to 773.62p in the
year to 30th June 2009. Total assets decreased by GBP222.5 million to GBP513.6
million.
The 30.2% decrease in PIP's net asset value per share compares to decreases in
the MSCI World Index (sterling) of 14.2% and the FTSE All-Share Index of 20.5%
respectively. PIP's ordinary share price during the year decreased by 60.6% and
the discount widened to 61.8% at the year end (discount of 32.4% at 30th June
2008).
The net asset value returns over 1 year, 3 years, 5 years and 10 years are set
out in the Financial Summary above. The total expense ratio of the Company for
the year ended 30th June 2009 was 2.05% (2008: 1.45%).
Future developments
A review of the year to 30th June 2009 and the outlook for the coming year can
be found in the Chairman's Statement.
Share capital
As at 30th June 2009 and as at the date of this Report, the Company had shares
in issue as shown in the table below, all of which are admitted to trading on
the London Stock Exchange's market for listed securities.
No shares were issued or repurchased by the Company and no shares were held in
treasury during the year or since the year end.
The redeemable shares do not carry any right to speak or vote at general
meetings of the Company (although holders of redeemable shares are entitled to
receive notice of general meetings of the Company and to attend such meetings).
Redeemable shares do carry the right to vote at separate class meetings of the
holders of redeemable shares.
Further details of the rights attaching to each of the Company's classes of
share are included in Note 13 to the financial statements.
VOTING RIGHTS % OF TOTAL
VOTING
NUMBER OF ATTACHED TO RIGHTS
SHARES REPRESENTED
SHARE CAPITAL AND VOTING RIGHTS IN ISSUE EACH SHARE BY EACH CLASS
ORDINARY SHARES OF 67p EACH 37,521,013 1 100
REDEEMABLE SHARES OF 1p EACH 28,871,255 - -
TOTAL VOTING RIGHTS 37,521,013
Social, Environmental, Community and Employee Issues
The Company has no employees and the Board consists entirely of non-executive
Directors. As an
investment trust, the Company has no direct impact on the community or the
environment, and as such has no policies in this area. In carrying out its
activities and in relationships with suppliers, the Company aims to conduct
itself responsibly, ethically and fairly.
MANAGEMENT
The Company's investment manager, Pantheon Ventures Limited, is one of the
world's foremost private equity fund-of-funds managers and has acted as Manager
to the Company since its inception in 1987. Pantheon evaluates and manages
investments on the Company's behalf in line with the strategy agreed by the
Board.
The Manager acts under a management agreement with the Company dated 25th
February 2004 (as amended by supplemental agreements dated 9th August 2004 and
30th January 2007) (the "Management Agreement").
Under the terms of the Management Agreement (as amended) Pantheon has been
appointed as the sole and exclusive discretionary manager of all the assets of
the Company from time to time and to provide certain additional services in
connection with the management and administration of the Company's affairs,
including monitoring the performance of, and giving instructions on behalf of
the Company to, other service providers to the Company.
The Manager is entitled to a monthly management fee at an annual rate of (i)
1.5% on the value of the Company's investment assets up to GBP150 million and
(ii) 1% on the value of such assets in excess of GBP150 million. In addition, the
Manager is entitled to a monthly commitment fee of 0.5% per annum on the
aggregate amount committed (but unpaid) in respect of investments, up to a
maximum amount equal to the total value of the Company's investment assets.
The Manager was also entitled to a performance fee from the Company in respect
of the period of 18 months commencing on 1st January 2007 and ending on 30th
June 2008 and, thereafter, is entitled to a performance fee from the Company in
respect of each 12 calendar month period ending on 30th June 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 paid,
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.
If no performance fee has previously been paid, the applicable `high-water
mark' is the aggregate net asset value of all the shares of the Company in
issue as at 31st December 2006 multiplied by 1 + (181 / 365 x 10%), compounded
annually at 10% for each completed 12 calendar month period after 30th June
2007 up to the start of the calculation period for which the fee is being
calculated.
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.
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. In addition, the
Manager has agreed that the total fees (including performance fees) payable by
Pantheon Funds to members of the Pantheon group and attributable to the
Company's investments in Pantheon Funds shall be less than the total fees
(excluding the performance fee) that the Company would have been charged under
the Management Agreement had it invested directly in all of the underlying
investments of the relevant Pantheon Funds instead of through the relevant
Pantheon Funds.
The Management Agreement is capable of being terminated (without penalty to the
Company) by either party giving two years' notice in writing. It is capable of
being terminated by the Company (without penalty to the Company) immediately
if, among other things, the Manager defaults or goes into liquidation and on
six months' notice if there is a change of control of the Manager or if certain
"key man" provisions are triggered. The Manager has the benefit of an indemnity
from the Company in respect of liabilities arising out of the proper
performance by the Manager of its duties and compliance with instructions given
to it by the Board and an exclusion of liability save to the extent of any
negligence, fraud, wilful default or breach of duty.
Under the terms of the Management Agreement, the Company is entitled to
participate in allocations made by the Pantheon group, under its secondary
investment programme, of opportunities to acquire secondary investments, other
than certain co-investment opportunities in single companies or business
entities. The Company is entitled to be allocated half of any such opportunity
(other than a single fund secondary investment opportunity) up to an
acquisition cost of $40 million and 25% of any balance. The Company is also
entitled to be allocated, on the same basis, a share of the excess
participation in single fund secondary investment opportunities which cannot be
allocated to the Pantheon group's regional fund-of-funds clients. This basis
for allocation to PIP of secondary investments applies until replaced by
alternative allocation arrangements. They will apply during the investment
period of Pantheon Global Secondary Fund III ("PGSF III"), a fund established
by the Pantheon group in July 2006 for the purpose of acquiring secondary
investments, and will continue to apply during the investment period of
Pantheon Global Secondary Fund IV ("PGSF IV"), a successor fund to PGSF III.
An alternative basis for the allocation to the Company of secondary investment
opportunities may be applied by Pantheon in the context of a successor fund to
PGSF IV. In the event of Pantheon and the Company being unable to agree any
such alternative allocation basis, Pantheon will cease to be entitled to any
performance fee for calculation periods following that in which the alternative
allocation basis takes effect and the Company will be entitled to terminate the
Management Agreement (without penalty to the Company) on six months' notice.
The Board keeps under review the performance of the Manager and the Board are
of the opinion that it is in the interests of shareholders to continue the
appointment. The reasons for this view are that the investment performance is
satisfactory and the Manager is best placed to continue to manage the assets of
the Company according to the Company's strategy.
Related party transactions and Directors' interests in contracts and agreements
are disclosed in Note 21 to the financial statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
IN RESPECT OF THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare financial
statements in accordance with United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice). The financial statements are
required by law to give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that period. In preparing
these financial statements, the Directors are required to:
aEURc select suitable accounting policies and then apply them consistently;
aEURc make judgements and estimates that are reasonable and prudent;
aEURc state whether applicable UK accounting standards have been followed, subject
to any material departure disclosed and explained in the financial statements;
and
aEURc prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors, to the best of their knowledge, state that:
aEURc the financial statements, prepared in accordance with UK Accounting
Standards, give a true and fair view of the assets, liabilities, financial
position and return of the Company; and
aEURc this Annual Report 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 Directors are responsible for keeping proper accounting records that
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. The Directors are responsible for ensuring that the
Directors' Report and other information in the Annual Report is prepared in
accordance with Company law in the United Kingdom. They are also responsible
for ensuring that the Annual Report includes information required by the
Listing Rules of the Financial Services Authority. They also have
responsibility 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 responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
On behalf of the Board
Tom Bartlam
Chairman
13th October 2009
INDEPENDENT AUDITOR'S REPORT
The Company's financial statements for the year ended 30 June 2009 have been
audited by Grant Thornton UK LLP. The text of the Independent Auditor's Report
can be found in the Company's Annual Report and Accounts at www.pipplc.com.
The statutory accounts for the year ended 30 June 2009 have been prepared on
the basis of the financial information presented by the Directors in this
announcement and will be delivered to the Registrar of Companies following the
Company's Annual General Meeting. The financial information for the year ended
30 June 2008 is derived from the statutory accounts for that year which have
been delivered to the Registrar of Companies. The Auditor reported on those
accounts; their report was unqualified and did not contain any emphasis of
matter or a statement under s237(2) or (3) Companies Act 1985.
INCOME STATEMENT
YEAR ENDED 30th JUNE 2009
2009 2008
REVENUE CAPITAL TOTAL* REVENUE CAPITAL TOTAL*
NOTE GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses)/gains on 9 b - (181,805) (181,805) - 137,351 137,351
investments designated at
fair value through profit
or loss**
Currency (losses)/gains 18 - (22,335) (22,335) - 310 310
on cash and borrowings
Investment income 2 2,761 - 2,761 4,787 - 4,787
Investment management 3 (11,279) 106 (11,173) (9,768) (3,660) (13,428)
fees
Refund of VAT on 3 2,295 - 2,295 - - -
investment management
fees
Other expenses 4 (1,554) (3,393) (4,947) (900) (454) (1,354)
RETURN ON ORDINARY (7,777) (207,427) (215,204) (5,881) 133,547 127,666
ACTIVITIES BEFORE
FINANCING COSTS AND TAX
Interest payable and 6 (6,882) - (6,882) (2,199) - (2,199)
similar charges / finance
costs
RETURN ON ORDINARY (14,659) (207,427) (222,086) (8,080) 133,547 125,467
ACTIVITIES BEFORE TAX
Tax on ordinary 7 (399) - (399) 609 (275) 334
activities
RETURN ON ORDINARY (15,058) (207,427) (222,485) (7,471) 133,272 125,801
ACTIVITIES AFTER TAX FOR
THE FINANCIAL YEAR
RETURN PER ORDINARY AND 8 (22.68)p (312.43)p (335.11)p (11.25) 200.73p 189.48p
REDEEMABLE SHARE p
* The total column of this statement represents the Company's profit and loss
account prepared in accordance with UK Accounting Standards. The supplementary
revenue return and capital columns are prepared under guidance published by the
Association of Investment Companies.
** Includes currency movements on investments.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued during the year.
There were no recognised gains or losses other than those passing through the
Income Statement.
The Notes form part of these financial statements.
RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
CAPITAL
CAPITAL OTHER RESERVE ON
SHARE SHARE REDEMPTION CAPITAL INVESTMENTS SPECIAL REVENUE
CAPITAL PREMIUM RESERVE RESERVE HELD RESERVE RESERVE TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Movement for the
year ended 30th
June 2009
OPENING EQUITY 25,428 183,182 26 227,504 225,056 99,861 (24,952) 736,105
SHAREHOLDERS'
FUNDS
Return for the - - - (51,912) (155,515) - (15,058) (222,485)
year
Expenses relating - 2 - - - - - 2
to issue of
ordinary shares
written back
CLOSING EQUITY 25,428 183,184 26 175,592 69,541 99,861 (40,010) 513,622
SHAREHOLDERS'
FUNDS
Movement for the
year ended 30th
June 2008
OPENING EQUITY 25,428 183,139 26 187,543 131,745 99,861 (17,481) 610,261
SHAREHOLDERS'
FUNDS
Return for the - - - 39,961 93,311 - (7,471) 125,801
year
Expenses relating - 43 - - - - - 43
to issue of
ordinary shares
written back
CLOSING EQUITY 25,428 183,182 26 227,504 225,056 99,861 (24,952) 736,105
SHAREHOLDERS'
FUNDS
The Notes form part of these financial statements.
BALANCE SHEET
as at 30th JUNE 2009
2009 2008
NOTE GBP'000 GBP'000
Fixed assets
Investments designated at fair value through 9a 648,207 806,485
profit or loss
Current assets
Debtors 10 27,685 927
Cash at bank 17 20,512 8,801
48,197 9,728
Creditors: Amounts falling due within one year
Other creditors 11 13,282 7,888
Bank loan 17 120,000 69,966
Bank overdraft 17 - 2,254
133,282 80,108
NET CURRENT ASSETS (85,085) (70,380)
Creditors: Amounts falling due after one year
Loan notes 12 49,500 -
TOTAL ASSETS LESS CURRENT AND NON-CURRENT 513,622 736,105
LIABILITIES
Capital and reserves
Called-up share capital 13 25,428 25,428
Share premium account 14 183,184 183,182
Capital redemption reserve 14 26 26
Other capital reserve 14 175,592 227,504
Capital reserve on investments held 14 69,541 225,056
Special reserve 14 99,861 99,861
Revenue reserve 14 (40,010) (24,952)
TOTAL EQUITY SHAREHOLDER'S FUNDS 513,622 736,105
NET ASSET VALUE PER SHARE - ORDINARY AND 15 773.62p 1,108.72p
REDEEMABLE
The Notes form part of these financial statements.
The inancial statements were approved by the Board on 13th October 2009 and
were signed on its behalf by
Tom Bartlam
Chairman
CASH FLOW STATEMENT
YEAR ENDED 30th JUNE 2009
2009 2008
NOTE GBP'000 GBP'000
Cash flow from operating activities
Investment income received 2,140 4,814
Deposit and other interest received 621 210
Investment management fees paid (8,100) (9,198)
Secretarial fees paid (169) (102)
Other cash payments 269 (2,022)
NET CASH OUTFLOW FROM OPERATING ACTIVITIES 18 (5,239) (6,298)
Returns on investment and servicing of inance
Revolving credit facility and overdraft interest (5,459) (471)
paid
Loan commitment and arrangement fees paid (429) (552)
Redeemable share commitment fees paid (629) (654)
Interest on loan notes paid (824) -
NET CASH OUTFLOW FROM RETURNS ON INVESTMENT AND (7,341) (1,677)
SERVICING OF FINANCE
Taxation
Net taxation (charge) / refund (399) 498
NET CASH (OUTFLOW) / INFLOW FROM TAXATION (399) 498
Capital expenditure and inancial investment
Purchases of investments (164,296) (280,170)
Purchases of government securities - (23,455)
Disposals of investments 114,124 136,172
Disposals of government securities - 94,152
Realised currency gains / (losses) 93 (94)
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND (50,079) (73,395)
FINANCIAL INVESTMENT
NET CASH OUTFLOW BEFORE FINANCING (63,058) (80,872)
Financing
Written back / costs of ordinary shares issue 2 43
Drawdown of loan 90,034 69,966
Repayment of loan (40,000) -
Issue of loan notes 49,500 -
Realised currency losses on repayment of revolving (23,515) (594)
credit facility
NET CASH INFLOW FROM FINANCING 76,021 69,415
INCREASE / (DECREASE) IN CASH 16 12,963 (11,457)
The Notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
A summary of the principal accounting policies, all of which have been applied
consistently throughout the year, is set out below.
(A) BASIS OF PREPARATION
The inancial statements have been prepared on the historical cost basis of
accounting, except for the measurement at fair value of investments and i
nancial instruments, and in accordance with applicable UK accounting standards
and on the basis that all activities are continuing. 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) STATEMENT OF RECOMMENDED PRACTICE
The financial statements have been prepared in accordance with the Statement of
Recommended Practice (as amended December 2005) issued by the Association of
Investment Companies.
(C) SEGMENTAL REPORTING
The Directors are of the opinion that the Company is engaged in a single
segment of business, being investment business.
(D) VALUATION OF INVESTMENTS
All investments held by the Company are classiied as `fair value through proit
or loss'. As the Company's business is investing in inancial assets with a view
to proiting from their total return in the form of interest, dividends or
increases in fair value, quoted equities and ixed income securities are
designated as fair value through proit or loss 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 inancial 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 inancial markets, fair value is determined using reliable
valuation techniques as described below:
(i) Unquoted ixed 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. 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 reasonable. These valuations are reviewed periodically for reasonableness.
In the case of direct investments in unquoted companies, the initial valuation
is based on cost. 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. This information may include
the valuations provided by private equity managers who are also invested in the
company. Valuations are reduced where the company's performance is not
considered satisfactory.
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 year end. If there has been a material movement in the
value of these holdings, the valuation is adjusted to reflect this.
(ii) Quoted investments are valued at the bid price on the relevant stock
exchange.
(iii) 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 purchased at a premium are normally immediately revalued to their
stated net asset values irrespective of the purchase price. Those fund holdings
purchased at a discount are normally held at cost until the receipt of a
valuation from the fund manager in respect of a date after acquisition, when
they are revalued to their stated net asset values, unless an adjustment
against a speciic investment is considered appropriate.
As at 30th June 2009 there was no aggregate difference to be recognised in the
profit or loss at the start or end of the period.
(E) 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 ixed return on a debt security is recognised on a time
apportionment basis so as to reflect the effective interest rate on the
security.
Other interest receivable is included on an accruals basis.
(F) TAXATION
Corporation tax payable is based on the taxable proit for the year. 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, unless such provision is not
permitted by Financial Reporting Standard 19: Deferred Tax.
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 of tax for the accounting
period.
(G) EXPENSES
All expenses are accounted for on an accruals basis. Expenses, including
investment management fees, are charged through the revenue account except as
follows:
aEURc expenses which are incidental to the acquisition or disposal of an investment
are treated as capital costs and separately identified and disclosed in Note 9;
aEURc expenses of a capital nature are accounted for through the capital account;
and
aEURc investment performance fees.
(H) FOREIGN CURRENCY
The currency of the Primary Economic Environment in which the Company operates
(the "functional currency") is pounds sterling ("sterling"), which is also the
presentation currency. Transactions denominated in foreign currencies are
recorded in the local currency at actual exchange rates as at the date of
transaction or, where applicable, at the rate of exchange in a related forward
exchange contract. Monetary assets and liabilities denominated in foreign
currencies at the year end are reported at the rates of exchange prevailing at
the year end or, where appropriate, at the rate of exchange in a related
forward exchange contract. 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 Income Statement. For non-monetary assets these are covered by
fair value adjustments.
(I) OTHER CAPITAL RESERVE
The following are accounted for in this reserve:
aEURc investment performance fees;
aEURc gains and losses on the realisation of investments;
aEURc realised exchange differences of a capital nature; and
aEURc expenses of a capital nature.
Capital distributions from investments are accounted for on a reducing cost
basis; cash received is irst applied to reducing the historical cost of an
investment; a realised gain will be recognised only when the cost has been
reduced to nil.
(J) CAPITAL RESERVE ON INVESTMENTS HELD
The following are accounted for in this reserve:
aEURc increases and decreases in the value of investments held at the year end.
(K) cash and cash equivalents
Cash and cash equivalents are held for the purpose of meeting short-term cash
commitments rather than for investment purposes. Assets are classified as cash
equivalents if they are readily convertible to cash and are not subject to
significant changes in value.
Cash and cash equivalents are defined as cash at bank.
(L) INVESTMENT PERFORMANCE FEE
The Manager is entitled to a performance fee from the Company in respect of
each 12 calendar month period ending on 30th June in each year. The fee payable
in respect of each such period is 5% of any increase in the net asset value of
the Company at the end of such period over the applicable `high-water mark'
plus the hurdle rate of 10%.
The applicable `high-water mark' in respect of any calculation period is the
net asset value at the end of the previous calculation period in which a
performance fee was payable, compounded annually at the hurdle rate for each
subsequent completed calculation period up to the commencement of the
calculation period for which the performance fee is being calculated.
If no performance fee has previously been expensed, the applicable `high-water
mark' is the net asset value at 31st December 2006 multiplied by 1 + (181/365 x
10%), compounded annually at the hurdle rate for each completed 12 calendar
month period after 30th June 2007 up to the commencement of the calculation
period for which the performance fee is being calculated.
2. Income
30TH JUNE 2009 30TH JUNE
2008
GBP'000 GBP'000
Income from investments
Unfranked dividends 2,140 3,037
Interest from UK ixed interest investments - 1,540
2,140 4,577
Other income
Deposit interest - 210
Other interest 620 -
Exchange differences on income 1 -
621 210
TOTAL INCOME 2,761 4,787
Total income comprises:
Dividends 2,140 3,037
Interest 620 1,750
Exchange differences on income 1 -
2,761 4,787
Analysis of income from investments
Listed UK - 1,540
Unlisted 2,140 3,037
2,140 4,577
3. Investment Management Fees
30TH JUNE 30TH JUNE
2009 2008
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management 11,279 - 11,279 9,768 - 9,768
fees
Investment performance - (106) (106) - 3,660 3,660
fee
VAT thereon (2,295) - (2,295) - - -
8,984 (106) 8,878 9,768 3,660 13,428
The investment management fee is payable monthly in arrears at the rate set out
in the Extracts from the Directors' Report above. At 30th June 2009 GBP5,064,000
(2008: GBP1,885,000) was owed for investment management fees (see Note 19 for
more details on VAT reclaim). Following an adjustment of GBP(106,000), a
performance fee of GBP5,057,000 is payable to the Manager in respect of the
initial 18 month performance fee calculation period ended 30th June 2008. Of
this amount GBP3,660,000 was charged in the year to 30th June 2008 with the
remaining balance charged in the year to 30th June 2007. No performance fee is
payable in respect of the 12 calendar month period to 30th June 2009. The basis
upon which the performance fee is calculated is explained in Note 1(L) and the
Extracts from the Directors' Report above.
4. Other Expenses
30TH JUNE 30TH JUNE
2009 2008
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Secretarial and 169 - 169 113 - 113
accountancy services
Fees payable to the 35 - 35 34 - 34
Company's Auditor for the
audit of the annual
financial statements
Fees payable to the 26 - 26 20 - 20
Company's Auditor for
other services: - All
other services
Directors' remuneration 145 - 145 135 - 135
(see Note 5)
Fixed income management - - - 41 - 41
Irrecoverable VAT 299 - 299 (153) - (153)
Legal and professional 585 3,393 3,978 288 454 742
fees
Printing 65 - 65 87 - 87
Other 230 - 230 335 - 335
1,554 3,393 4,947 900 454 1,354
The Directors do not consider that the provision of non-audit work to the
Company affects the independence of the Auditor.
5. Directors' Remuneration
Directors' emoluments comprise wholly Directors' fees.
6. Interest Payable and Similar Charges
30TH JUNE 2009 30TH JUNE
2008
GBP'000 GBP'000
Bank loan and overdraft interest 5,045 885
Loan commitment and arrangement fees 344 725
Redeemable share commitment fee 669 589
Loan notes interest 824 -
6,882 2,199
7. Tax on Ordinary Activities
30TH JUNE 30TH
2009 JUNE
2008
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income tax refund - - - (609) - (609)
Withholding tax deducted 399 - 399 - 191 191
from distributions
Japanese tax charged on - - - - 84 84
capital gains
399 - 399 (609) 275 (334)
Current taxation
The current taxation for the year differs from the standard rate of corporation
tax in the UK (28%). The differences are explained below:
Net return on ordinary (14,659) (207,427) (222,086) (8,080) 133,547 125,467
activities before tax
Theoretical tax at UK (4,104) (58,080) (62,184) (2,424) 40,064 37,640
corporation tax rate of 28%
(2008: 30%)
Non-taxable investment and - 57,159 57,159 - (41,345) (41,345)
currency gains
Effect of expenses in - 921 921 - 1,281 1,281
excess of taxable income
Unused management expenses 4,104 - 4,104 2,424 - 2,424
Withholding tax deducted (399) - (399) - (191) (191)
from distributions
Japanese tax charged on - - - - (84) (84)
capital gains
Income tax refund - - - 609 - 609
TOTAL CURRENT TAX (399) - (399) 609 (275) 334
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 suficient future taxable revenue. As at
30th June 2009 excess management expenses are estimated to be in excess of GBP35
million.
8. Return per Share
30TH JUN 30TH
E 2009 JUNE
2008
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
RETURN PER ORDINARY AND (22.68) (312.43) (335.11) (11.25) 200.73p 189.48p
REDEEMABLE SHARE p p p p
Ordinary and redeemable shares
Revenue return per share is based on the net deficit on ordinary activities
after taxation of GBP15,058,000 (2008: deficit of GBP7,471,000) and on 66,392,268
(2008: 66,392,268) ordinary shares and redeemable shares, being the number of
shares in issue during the year.
Capital return per share is based on the net deficit on ordinary activities
after taxation of GBP207,427,000 (2008: return of GBP133,272,000) and on 66,392,268
(2008: 66,392,268) ordinary shares and redeemable shares, being the number of
shares in issue during the year.
Total return per share is based on the net deficit for the year of GBP222,485,000
(2008: return of GBP125,801,000) and on 66,392,268 (2008: 66,392,268) ordinary
shares and redeemable shares, being the number of shares in issue during the
year.
9a. Movements On Investments
30TH JUNE 30TH JUNE
2009 2008
GBP'000 GBP'000
Book cost brought forward 582,462 464,286
Acquisitions at cost 164,296 303,457
Capital distributions - proceeds (140,769) (230,316)
Capital distributions - realised (losses) / gains on (26,205) 45,038
sales
BOOK COST AT 30TH JUNE 579,787 582,465
Unrealised appreciation of investments
Unlisted investments 78,679 224,020
Provision (10,259) -
VALUATION OF INVESTMENTS AT 30TH JUNE 648,207 806,485
9b. Analysis Of Investments
30TH JUNE 30TH JUNE
2009 2008
GBP'000 GBP'000
United Kingdom
Unlisted investments 37,230 56,516
USA
Unlisted investments 474,584 522,181
Other
Unlisted investments 136,393 227,788
648,207 806,485
Realised (losses) / proits on sales (26,205) 45,038
Amounts previously recognised as unrealised 55,121 10,329
appreciation on those sales
(Decrease) / increase in unrealised appreciation (210,721) 81,984
(LOSSES) / GAINS ON INVESTMENTS (181,805) 137,351
Further analysis of the investment portfolio is provided in the Manager's
Review.
Transaction costs incidental to the acquisition of investments totalled GBPnil
(2008: GBPnil) and to the disposals of investments totalled GBP8,000 (2008: GBP6,000)
for the year.
9c. Disposal Of Investments
During the year PIP disposed of a number of fund interests to strengthen its
finances and reduce undrawn commitments.
VALUE AS AT
PROCEEDS BOOK COST 30TH JUNE
2008
GBP'000 GBP'000 GBP'000
DISPOSAL OF INVESTMENTS 49,691 103,417 118,911
10. Debtors
30TH JUNE 30TH JUNE
2009 2008
GBP'000 GBP'000
Amounts owed by investment funds 27 221
Prepayments and accrued income 566 706
Proceeds from disposal of investments 27,092 -
27,685 927
11. Creditors: Amounts falling due within one year
30TH JUNE 30TH JUNE
2009 2008
GBP'000 GBP'000
Investment management fees 5,064 1,885
Investment performance fee 5,057 5,163
Other creditors and accruals 3,161 840
Other creditors 13,282 7,888
Bank loan 120,000 69,966
Bank overdraft - 2,254
133,282 80,108
The Company has a facility agreement with The Royal Bank of Scotland whereby
the bank has agreed to make available to the Company a GBP150,000,000 ive-year
committed revolving credit facility, expiring 25th May 2012, and an overdraft
facility of GBP5,000,000. Each individual draw down bears interest at a variable
rate agreed in advance for the period of the draw down. At 30th June 2009 the
amount of GBP120,000,000 (30th June 2008: GBP72,220,000) was drawn down under the
facilities.
12. CREDITORS: Amounts Falling Due After One Year
30TH JUNE 30TH JUNE
2009 2008
GBP'000 GBP'000
Non-current liabilities
Unsecured subordinated loan notes 49,500 -
49,500 -
Terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
2009 2008
NOTIONAL CARRYING CARRYING
INTEREST YEAR OF FACE AMOUNT FACE AMOUNT
VALUE VALUE
CURRENCY RATE MATURITY GBP'000 GBP'000 GBP'000 GBP'000
Unsecured GBP LIBOR* 2010** 49,500 49,500 - -
subordinated loan +1.5%
notes
49,500 49,500 - -
* LIBOR is the published British Banking Association rate of interest for one
month sterling deposits in the London interbank market on the date the interest
period commences or the next business day if the interest commencement date is
not a business day. Interest is payable quarterly in arrears.
** Unsecured subordinated loan notes are due to mature in November 2010.
13. Called-up Share Capital
30TH JUNE 30TH JUNE
2009 2008
GBP'000 GBP'000
Authorised:
63,474,919 (2008: 63,474,919) ordinary shares of 67p 42,528 42,528
each
100,000,000 (2008: 100,000,000) redeemable shares of 1p 1,000 1,000
each
43,528 43,528
Allotted, called-up and fully paid:
37,521,013 (2008: 37,521,013) ordinary shares of 67p 25,139 25,139
each
28,871,255 (2008: 28,871,255) redeemable shares of 1p 289 289
each
25,428 25,428
Redeemable shares rank equally with ordinary shares regarding dividend rights
and rights on winding up or return of capital (other than a redemption or
purchase of shares). The holders of redeemable shares have the right to receive
notice of and attend all general meetings of the Company but not to speak or
vote. The holders of ordinary shares are entitled to one vote for each ordinary
share held.
The redeemable shares are redeemable at the option of the Company, at the
prevailing net asset value per share, within 60 days following the end of each
quarterly NAV calculation date or within 60 days of any other business day
which is determined by the Directors to be a NAV calculation date.
14. Reserves
CAPITAL
CAPITAL OTHER RESERVE ON
SHARE REDEMPTION CAPITAL INVESTMENTS SPECIAL REVENUE
PREMIUM RESERVE RESERVE HELD RESERVE RESERVE
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Beginning of year 183,182 26 227,504 225,056 99,861 (24,952)
Net gain on realisation - - 28,916 - - -
of investments
Increase in unrealised - - - (210,721) - -
appreciation
Transfer on disposal of - - (55,121) 55,121 - -
investments
Exchange differences on - - (22,420) - - -
loan and currency
Exchange differences on - - - 85 - -
other capital items
Legal and professional - - (3,393) - - -
costs charged to capital
Performance fee rebate - - 106 - - -
charged to capital
Costs of issue of 2 - - - - -
ordinary shares written
back
Revenue return for the - - - - - (15,058)
year
END OF YEAR 183,184 26 175,592 69,541 99,861 (40,010)
15. Net Asset Value per Share
The net asset value per share and the net assets attributable at the year end
calculated in accordance with the Articles of Association were as follows:
NET ASSET VALUE PER NET ASSETS
SHARE ATTRIBUTABLE
2009 2008 2009 2008
GBP'000 GBP'000
ORDINARY AND REDEEMABLE SHARES 773.62p 1,108.72p 513,622 736,105
Basic net asset value per share is based on net assets attributable to equity
shareholders of GBP513,622,000 (2008: GBP736,105,000) and on 66,392,268 (2008:
66,392,268) ordinary shares and redeemable shares, being the number of shares
in issue at the year end.
16. Reconciliation of Net Cash Flow to the Movement in Net Debt
30TH JUNE 2009 30TH JUNE 2008
GBP'000 GBP'000
Increase / (decrease) in cash in year 12,963 (11,457)
Non-cash movement
- Exchange gains 1,002 994
CHANGE IN NET FUNDS / (DEBT) 13,965 (10,463)
NET (DEBT) / FUNDS AT BEGINNING OF YEAR (63,419) 17,010
Loans drawn down (50,034) (69,966)
Loan notes (49,500) -
NET DEBT AT END OF YEAR (148,988) (63,419)
17. Analysis of Net Debt
AT 30TH JUNE AT 30TH JUNE
2009 2008
GBP'000 GBP'000
Cash at bank 20,512 8,801
Bank overdraft - (2,254)
Bank loan (120,000) (69,966)
Loan notes (49,500) -
(148,988) (63,419)
18. Reconciliation of Return on Ordinary Activities before Tax and Financing
Costs to Net Cash Flow from Operating Activities
30TH JUNE 30TH JUNE
2009 2008
GBP'000 GBP'000
Return on ordinary activities before inancing costs (215,204) 127,667
and tax
Losses / (gains) on investments 181,805 (137,351)
Currency losses / (gains) on cash and borrowings 22,335 (310)
Increase in creditors 5,685 3,187
Decrease in other debtors 140 509
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (5,239) (6,298)
19. Contingencies, Guarantees and Financial Commitments
At 30th June 2009 there were inancial commitments outstanding of GBP427.8 million
(2008: GBP641.2 million) in respect of investments in partly paid shares and
interests in private equity funds.
As a result of the AIC/Claverhouse ruling the Company no longer pays VAT on its
investment management fees.
During the year the Company recovered GBP2,295,000 of VAT previously paid on
investment management fees and GBP620,000 in associated interest from HM Revenue
& Customs.
20. Analysis of Financial Assets and Liabilities
The primary investment objective of the Company is to seek to maximise
long-term capital growth for its shareholders by investing in funds
specialising in unquoted investments, acquiring unquoted portfolios and
participating directly in private placements. Investments are not restricted to
a single market but are made when the opportunity arises and on an
international basis.
The Company's financial instruments comprise securities and other investments,
cash balances and debtors and creditors that arise from its operations, for
example sales and purchases awaiting settlement and debtors for accrued income.
The principal risks the Company faces in its portfolio management activities
are:
aEURc liquidity/marketability risk;
aEURc interest rate risk;
aEURc market price risk; and
aEURc 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
receive financial information monthly, which is used to identify and monitor
risk.
In accordance with Financial Reporting Standard 29: Financial Instruments:
Disclosures, 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 monthly basis.
There are limited opportunities for the Company to acquire secondary unquoted
portfolios due to the cyclical nature of their occurrence. As a result, at
times of low investment opportunity, some funds may be invested in gilts and
other fixed interest government bonds. It is the nature of investment in
private equity that a commitment 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. In order to cover such commitments, the Company has entered
into a GBP150,000,000 five-year committed revolving credit facility with The
Royal Bank of Scotland plc expiring on 25th May 2012. At 30th June 2009 the
amount drawn down was GBP120,000,000 (30th June 2008: GBP69,966,000) (see Note 11
for further information).
The principal covenant that applies to the loan facility is that gross
borrowings do not exceed 30% of adjusted gross asset value.
INTEREST RATE RISK
The Company may use gearing to achieve its investment objectives and manage
cash flows and uses a GBP150,000,000 revolving credit facility and unsecured
subordinated loan notes for this purpose.
Interest on the revolving credit facility is payable at variable rates
determined subject to draw down. Variable rates are defined as LIBOR + 1.25%.
The interest rate is then fixed for the duration that the loan is drawn down.
At 30th June 2009 there were GBP120,000,000 funds drawn down on the loan
facilities (30th June 2008: GBP69,966,000). The loan is due to be repaid within
one year and as such fair value is not considered to be materially different
from par value.
Interest on the unsecured subordinated loan notes is payable quarterly in
arrears at LIBOR + 1.5%. LIBOR is the published British Banking Association
rate of interest for 1 month sterling deposits in the London interbank market
on the date the interest period commences or the next business day if the
interest commencement date is not a business day. At 30th June 2009 there were
GBP49,500,000 funds drawn down on the loan notes (30th June 2008: nil). The loan
notes are due to mature in November 2010 and fair value is not considered to be
materially different from par value.
The Company's bank accounts do not earn interest. Should any balance go
overdrawn then interest will become payable at variable rates.
Non-interest rate exposure
The remainder of the Company's portfolio and current assets are not subject to
interest rate risks.
Financial assets for 2009 and 2008 consist of investments, cash and debtors
(excluding prepayments).
As at 30th June 2009, the interest rate and maturity profile of the Company's
financial assets was as follows:
FIXED
INTEREST
NO MATURES AVERAGE
MATURITY WITHIN INTEREST
TOTAL DATE 1 YEAR RATE
30TH JUNE 2009 GBP'000 GBP'000 GBP'000 %
Fair value interest rate risk inancial assets
Sterling - - - -
US dollar - - - -
Other European - - - -
- - - -
No interest rate risk inancial assets
Sterling 41,601 41,601 - -
US dollar 492,259 492,259 - -
Other European 161,979 161,979 - -
Other - - - -
695,839 695,839 - -
The interest rate and maturity profile of the Company's financial assets as at
30th June 2008 was as follows:
FIXED
INTEREST
NO MATURES AVERAGE
MATURITY WITHIN INTEREST
TOTAL DATE 1 YEAR RATE
30TH JUNE 2008 GBP'000 GBP'000 GBP'000 %
Fair value interest rate risk inancial assets
Sterling - - - -
US dollar - - - -
Other European - - - -
- - - -
No interest rate risk inancial assets
Sterling 57,042 57,042 - -
US dollar 530,408 530,408 - -
Other European 227,977 227,977 - -
Other - - - -
815,427 815,427 - -
As at 30th June 2009, the interest rate and maturity profile of the Company's
financial liabilities was as follows:
NO MATURES MATURES
MATURITY WITHIN AFTER
TOTAL DATE 1 YEAR 1 YEAR
30TH JUNE 2009 GBP'000 GBP'000 GBP'000 GBP'000
Overdraft - - - -
Loan 120,000 - 120,000 -
Loan notes 49,500 - - 49,500
169,500 - 120,000 49,500
As at 30th June 2008, the interest rate and maturity profile of the Company's
financial liabilities was as follows:
NO MATURES
MATURITY WITHIN
TOTAL DATE 1 YEAR
30TH JUNE 2008 GBP'000 GBP'000 GBP'000
Overdraft 2,254 - 2,254
Loan 69,966 - 69,966
72,220 - 72,220
FINANCIAL LIABILITIES
The Company primarily finances its operations through its issued capital, bank
borrowings, unsecured subordinated loan notes and existing reserves. At 30th
June 2009, the Company had GBP120,000,000 (2008: GBP69,966,000) drawn down of its GBP
150,000,000 committed five-year revolving credit facility with The Royal Bank
of Scotland. Tranches from this facility are drawable in US dollars, euros and
sterling. Interest is incurred at a variable rate as agreed at the time of draw
down and is payable at the maturity date of each advance. At the year end,
interest of GBPnil (2008: GBP414,000) was accruing. The unsecured subordinated loan
notes are due to mature in November 2010. Interest is payable quarterly in
arrears as described in Note 12, no interest was payable at the year end (2008:
GBPnil). With the exception of the loan notes and bank overdraft, which at 30th
June 2009 stood at GBPnil (2008: GBP2,254,000), there was no interest rate risk
associated with other short-term creditors at 30th June 2009 or 30th June 2008.
At 30th June 2009 and 30th June 2008, with the exception of the loan notes and
bank revolving credit facility referred to above, all other financial
liabilities were due within one year. The revolving credit facility is included
in creditors falling due within one year.
MARKET PRICE RISK
The method of valuation of the fixed asset investments is described in Note 1
(D) to the financial statements. 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.
If the investment portfolio valuation fell by 20% from the 30th June 2009
valuation, with all other variables held constant, there would have been a
reduction of GBP129,641,000 (2008 based on a 20% fall: GBP161,297,000) in the
return before taxation. An increase of 20% in the investment portfolio
valuation would have had an equal and opposite effect in the return before
taxation.
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 Manager's
Review. Although it is permitted to do so, the Company did not hedge the
portfolio against the movement in exchange rates during the financial year as
there was no significant increase in the perceived risk of exchange rate
movement.
The investment approach and the Manager's consideration of the associated risk
are discussed in further detail in the Manager's Review. 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 30th June 2009, realised exchange
gains of GBP93,000 (2008: GBP94,000 losses) and unrealised gains relating to
currency of GBP1,087,000 (2008: GBP998,000) have been taken to the capital reserve.
If the sterling/dollar and sterling/euro exchange rate had reduced by 10% from
that obtained at 30th June 2009, it would have the effect, with all other
variables held constant, of increasing equity shareholders' funds by GBP4,807,000
(2008: reducing by GBP6,081,000). 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 GBP3,933,000 (2008: increasing by GBP
4,975,000). The calculations are based on the investments held at fair value
through profit or loss and the exchange rate of 1.61255 sterling/dollar and
1.13925 sterling/euro as at 30 June 2009.
An analysis of the Company's exposure to foreign currency, excluding private
equity investments, is given below:
30TH 30TH JUNE 30TH 30TH JUNE
JUNE JUNE
2009 2009 2008 2008
ASSETS LIABILITIES ASSETS LIABILITIES
GBP'000 GBP'000 GBP'000 GBP'000
US dollar 17,675 - 8,308 52,258
Euro 25,163 - 187 10,962
Swedish krona 423 - - -
Japanese yen - - 1 -
43,261 - 8,496 63,220
FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
All of the financial assets and liabilities of the Company are held at fair
value. Financial liabilities are held at amortised cost which is not materially
different from fair value.
MANAGING CAPITAL
The capital structure of the Company consists of cash held and shareholders'
equity. The Company's equity is analysed into its various components in Note
13. Capital is managed so as to maximise the return to shareholders while
maintaining a capital base to allow the Company to operate effectively in the
marketplace and sustain future development of the business.
To this end the Company may use gearing to achieve its objectives. Details of
borrowings at the year end can be found earlier in this note and in the
Extracts from the Directors' Report.
The Company's assets and borrowing levels are reviewed regularly by the Board
of the Company with reference to the loan covenants.
The Company's capital requirement is reviewed regularly by the Board of the
Company.
21. Related Party Transactions
The Manager, Pantheon Ventures Limited, is regarded as a related party of 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.
The amounts paid to the Manager are disclosed in Note 3.
DOCUMENTS AVAILABLE FOR INSPECTION
At the Annual General Meeting to be held on 26th November 2009, it is proposed
that new Articles of Association be adopted, primarily to reflect the
provisions of the Companies Act 2006 that are due to come into force on or
before 1st October 2009 and the provisions of the Companies (Shareholders'
Rights) Regulations 2009 which came into force on 3rd August 2009. An
explanation of the principal changes is set out in the Annual Report and
Accounts for the year ended 30th June 2009, a copy of which can be found at
www.pipplc.com. A copy of the proposed new Articles is being lodged with the UK
Listing Authority and will shortly be available for inspection through the
Document Viewing Facility, which is situated at Financial Services Authority,
25 The North Colonnade, Canary Wharf, London E14 5HS (Tel no. 020 7676 8224).
END
Copyright (C) 2009 PR Newswire Europe. All rights reserved
News Provided by COMTEX
Company: Pantheon International Participations PLC (PIRPF)
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