Chairman's Statement
Global private equity markets have thrived during the first six months of PIP's
financial year. Investment activity has increased, realisations from existing
investments remain high and the high level of fundraising has been sustained.
PIP's Net Asset Value per share increased by 4.1% to 829.2p in the six months
to December. This performance has been achieved despite adverse currency
movements over the period which resulted in a £18.6m reduction (equivalent to
4.2% of opening net assets) in the sterling value of the portfolio.
Our ordinary share price increased by 12.5% to 817.5p over the six months to 31
December 2006 whilst total assets increased by £17.9 million to £458.9 million.
INVESTMENT ACTIVITY
The six months to end December 2006 has been an active one for both investment
and realisations. PIP invested a record £126.4 million in underlying private
equity assets during the first six months, an increase of 111% over the
equivalent period in the previous year. Of this amount, £55.4m was paid to meet
investment calls arising from PIP's primary portfolio and £71.0m applied to the
secondary portfolio. The total amount of cash distributed to PIP as a result of
investment realisations during the period was £59.2 million. Of this amount, £
22.2m emanated from the primary portfolio and £37.0m came principally from the
secondary portfolio.
PRIMARY COMMITMENTS
Despite the rate of fund raising continuing to gather pace many of the best
private equity funds are oversubscribed. Pantheon's expertise and long-term
relationships with these managers have helped ensure that PIP is able to gain
continued access to top-tier funds worldwide.
PIP committed £86.9 million to primary funds over the six month period,
including nine Europe-focused funds (£53.7m) and seven US-focused funds (£
33.2m). These funds represent many of the most attractive opportunities from
the multitude of new fund offerings available during the period.
In order to be able to reinvest the distributions from PIP's growing private
equity portfolio the Board increased the rate that PIP commits to primary funds
from £450 million to £600 million over a three-year period.
SECONDARY COMMITMENTS
PIP had a very active period in the secondary market committing £125.8 million
to seven secondary transactions to purchase existing interests in private
equity funds. The majority of the assets added to the portfolio were US venture
funds which reflects our manager's belief that this is a favourable point in
the market cycle to acquire venture assets. The largest portfolio, representing
£60.4m, related to the purchase of interests in 90 venture funds and eight
direct investments.
MARKET REVIEW AND PROSPECTS
The buyout market has experienced high levels of realisations through
refinancings and profitable disposals. The belief that private equity can, in
many circumstances, provide companies with an ownership structure that is more
aligned with a company's management and ensures rapid decision making and close
accountability has meant that the buyout industry has continued to attract top
quality teams. This trend, combined with recent record fundraising, has
expanded the number of opportunities to include many amongst even the largest
companies.
Pantheon expects the current high levels of new investment to continue as long
as the debt markets remain accommodating in a favourable economic environment.
Distributions should also remain strong in such an active market. The potential
for companies to over leverage their balance sheet underlines the importance
your manager places on selecting experienced and disciplined private equity
managers.
The venture market has been progressing well with venture capital investment in
US companies reaching its highest level for five years. We expect this part of
the market to continue to perform well as more companies achieve an exit
through merger, acquisition or an initial public offering.
PIP's manager has an established position and reputation ensuring that PIP is
well placed to gain access to top quality funds through our primary programme.
Deal flow within the secondary market remains strong and we are optimistic that
PIP will continue to grow its assets in the coming years through secondary
acquisitions that may need to be financed externally.
CAPITAL STRUCTURE
PIP's capital structure is designed to provide flexibility to issue and redeem
capital to suit its financing needs. While outstanding commitments are expected
to be met from cashflow emanating from existing assets, with occasional use of
PIP's debt facilities, secondary activity is expected to be financed through a
combination of debt facility utilisation and new equity issuance.
In order to ensure PIP can finance calls from its outstanding commitments, PIP
has in place agreements with certain institutions under which PIP can call on
such institutions to subscribe for Redeemable shares. The purpose of these
agreements is to provide an additional level of assurance that PIP will be in a
position to meet portfolio calls, irrespective of market appetite for issues of
new shares and other sources of capital. Due to the growth of assets and a
planned increase in outstanding commitments PIP has increased available standby
financing by £50m to £150m, with effect from the 1st January 2007. PIP pays a
fee of 0.5% per annum on these commitments.
EXTRAORDINARY GENERAL MEETING
An Extraordinary General Meeting of the Company took place at 10am on 26th
February 2007 at Pantheon's office. PIP's shareholders approved a
recommendation by the Board to change the terms of the management agreement
between PIP and Pantheon. The details of the changes were announced to the
market and a copy of the announcement can be found on PIP's website at
www.pipplc.co.uk.
TOM BARTLAM
Chairman
15March2007
INCOME STATEMENT (unaudited)
For the Six months to 31 December
2006 2005
Revenue Capital Total* Revenue Capital Total*
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments ** - 19,806 19,806 - 63,428 63,428
Currency (losses)/gains - (513) (513) - 352 352
on cash and borrowings
Income 3,763 - 3,763 3,541 - 3,541
Investment management (3,074) - (3,074) (2,367) - (2,367)
fees
Other expenses (960) (191) (1,151) (547) (56) (603)
Return on ordinary (271) 19,102 18,831 627 63,724 64,351
activities before
financing costs and tax
Interest payable and (439) - (439) (431) - (431)
similar charges
Return on ordinary (710) 19,102 18,392 196 63,724 63,920
activities before tax
Tax on ordinary - (414) (414) - (247) (247)
activities
Return on ordinary (710) 18,688 17,978 196 63,477 63,673
activities after tax
for the period
RETURN PER ORDINARY AND (1.28p) 33.77p 32.49p 0.34p 110.09p 110.43p
REDEEMABLE SHARE
All revenue and capital items in the above statement relate to continuing
operations.
* The total column of this statement represents the Company's profit and loss
statement prepared in accordance with UK Accounting Standards. The
supplementary revenue return and capital columns are both prepared under
guidance published by the Association of Investment Companies.
** Includes currency movements on investments.
RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS (unaudited)
Share Capital Share Special Capital Capital Revenue Total
Capital Redemption Premium Reserve Reserve Reserve Reserve
£'000 Reserve £ £'000 £'000 Realised Unrealised £'000 £'000
'000 £'000 £'000
Movement for
the
6 months ended
31 December
2006
Opening Equity 18,024 26 91,971 99,897 151,664 94,233 (14,832) 440,983
Shareholders'
Funds
Return for the - - - - 13,557 5,131 (710) 17,978
period
Costs of buy - - - (37) - - - (37)
back of
Redeemable
shares
CLOSING EQUITY 18,024 26 91,971 99,860 165,221 99,364 (15,542) 458,924
SHAREHOLDERS'
FUNDS
Movement for
the
6 months ended
31 December
2005
OPENING EQUITY 18,050 - 91,959 119,962 111,125 55,679 (15,287) 381,488
SHAREHOLDERS'
FUNDS
Return for the - - - - 21,491 41,986 196 63,673
period
Costs of buy (14) 14 - (10,027) - - - (10,027)
back of
Redeemable
shares
CLOSING EQUITY 18,036 14 91,959 109,935 132,616 97,665 (15,091) 435,134
SHAREHOLDERS'
FUNDS
BALANCE SHEET (unaudited)
As at 31 As at 30 As at 31
Dec 2006 June 2006 Dec 2005
£'000 £'000 £'000
Fixed assets
Investments at fair value * 462,103 434,087 422,143
Current assets
Debtors 2,420 1,882 1,316
Cash at bank 6,640 6,636 13,333
9,060 8,518 14,649
Creditors: Amounts falling due within one
year
Revolving credit facility 10,219 - -
Other creditors 2,020 1,622 1,658
12,239 1,622 1,658
NET CURRENT (LIABILITIES)/ASSETS (3,179) 6,896 12,991
TOTAL ASSETS LESS CURRENT LIABILITIES 458,924 440,983 435,134
Capital and reserves
Called-up share capital 18,024 18,024 18,036
Capital redemption reserve 26 26 14
Share premium account 91,971 91,971 91,959
Special reserve 99,860 99,897 109,935
Capital reserve - realised gains 165,221 151,664 132,616
Capital reserve - unrealised gains 99,364 94,233 97,665
Revenue reserve (15,542) (14,832) (15,091)
TOTAL EQUITY SHAREHOLDERS' FUNDS 458,924 440,983 435,134
Net asset value per share - basic 829.2p 796.8p 768.9p
Number of Ordinary shares and Redeemable 55,342,268 55,342,268 56,588,977
shares in issue
*Includes short dated fixed interest investments held for cash management
purposes at 30 June 2006 (£61,329,000) and 31 December 2005 (£61,353,000).
There were no short dated fixed interest investments at 31 December 2006.
CASH FLOW STATEMENT (unaudited)
For the six months to 31 December
2006 2005
£'000 £'000
Cash flow from operating activities
Investment income received 3,922 3,386
Deposit and other interest received 10 (7)
Investment management fees paid (2,891) (2,608)
Secretarial fees paid (58) (50)
Legal and professional fees (351) (177)
Other cash payments (657) (472)
NET CASH (OUTFLOW)/INFLOW FROM OPERATING (25) 72
ACTIVITIES
Returns on investment and serving of
finance
Revolving credit facility and overdraft (4) (6)
interest paid
Loan commitment and agreement fees paid (166) (132)
Redeemable shares commitment fees paid (252) (252)
NET CASH OUTFLOW FROM RETURNS ON (422) (390)
INVESTMENT AND SERVICING OF FINANCE
Taxation
Withholding tax suffered on limited (357) (247)
partnership distributions
NET CASH OUTFLOW FROM TAXATION (357) (247)
Capital expenditure and financial
investment
Purchases of investments (128,976) (63,012)
Purchases of short dated government (182,345) (140,327)
securities
Disposals of investments 58,983 77,731
Disposals of short dated government 243,503 136,645
securities
Realised currency (losses)/gains (113) 73
Net cash (OUTFLOW)/INFLOW from capital (8,948) 11,110
expenditure and financial investment
NET CASH (OUTFLOW)/INFLOW BEFORE (9,752) 10,545
FINANCING
Financing
Payments to buy back Redeemable shares - (10,000)
Drawdown of bank credit facility 10,211 -
Costs of buy back of Redeemable shares (37) -
Net cash inflow/(outflow) from financing 10,174 (10,000)
INCREASE IN CASH 422 545
These accounts have been prepared using accounting standards and policies
adopted at the year-end.
This interim statement is not the Company's statutory accounts. The statutory
accounts for the year ended 30 June 2006 have been delivered to the Registrar
of Companies and received an audit report which was unqualified, did not
include a reference to any matters to which the auditors drew attention by way
of emphasis without qualifying the report, and did not contain statements under
section 237(2) and (3) of the Companies Act 1985.
The results for the six months to 31 December 2006 have been reviewed by the
Company's auditors and their report is attached.
Signed on behalf of the Board
Tom H. Bartlam
Chairman
15 March 2007
INDEPENDENT REVIEW REPORT TO PANTHEON INTERNATIONAL PARTICIPATIONS PLC
FINANCIAL INFORMATION FOR THE SIX MONTH PERIOD ENDED 31DECEMBER 2006
Introduction
We have been instructed by the Company to review the financial information,
which comprises the income statement, reconciliation of movement in equity
shareholders' funds, the balance sheet, the cash flow statement and notes to
the interim accounts. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the company having regard to guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority. The directors are also responsible
for ensuring that the accounting policies and presentation applied to the
interim figures are consistent with those applied in preparing the preceding
annual accounts except where any changes, and the reasons for them, are
disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of management and applying
analytical procedures to the financial information and underlying financial
data and, based thereon, assessing whether the disclosed accounting policies
have been consistently applied, unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
and therefore provides a lower level of assurance. Accordingly we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 2006.
RSM Robson Rhodes LLP
Chartered Accountants
London, England
16 March 2007
END
PANTHEON INTERNATIONAL PARTICIPATIONS PLC
Friday, March 16, 2007
PANTHEON INTERNATIONAL PARTICIPATIONS PLC (`PIP')
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