Pantheon International Plc Annual Report and Accounts 2020 Pantheon International Plc Annual Report and Accounts 2020 RESILIENCE RESPONSIBILITY LONG-TERM PERFORMANCE Pantheon International Plc (“PIP” or the “Company”) is a listed FTSE 250 private equity investment trust, overseen by an independent Board of Directors and managed by Pantheon, one of the leading private equity investment managers globally. Contents Strategic Report 1 Governance 68 Why choose us? 2 Board of Directors 69 With just one share... 7 Directors’ Report 71 Our business 11 Statement on Corporate Governance 75 Chairman's statement 12 Audit Committee Report 81 Our business model 16 Directors' Remuneration report 84 Our strategy 18 Directors’ Responsibility Statement 88 Section 172(1) statement 20 Independent Auditor’s Report to the Investment policy 23 Members of Pantheon International Plc 89 Key performance indicators 24 Financial Statements 95 Responsible business 26 Income Statement 96 Financing our undrawn commitments 30 Statement of Changes in Equity 97 Risk management and principal risks 32 Balance Sheet 98 Viability statement 36 Cash Flow Statement 99 Manager’s Review 37 Notes to the Financial Statements 100 Performance 38 Other Information 116 Our Market 40 AIFMD Disclosures 117 Sector themes 44 Alternative Performance Measures 119 Distributions 48 Glossary of Terms 123 Calls 55 Directors and Advisers 125 New commitments 56 Buyout Analysis 61 Other information 62 Key Pantheon personnel supporting PIP 66 At a glance as at 31 May 2020 Net asset value (NAV) per share growth Net asset value +4.0% in the year £1.6bn Share price decrease Market capitalisation -7.2% in the year £1.1bn Average annual NAV AIC ongoing charges1 +11.6% growth since 1987 1.23% 1 Including financing costs, PIP's total ongoing charges would be 1.38%. Strategic Report Manager’s Review Governance Financial Statements Other Information 1 PIP makes the private, public. Firms backed by private equity are all around us, making up a dynamic and growing market. For many people, this exciting sector can appear to be inaccessible. But with one PIP share, investors can access a high-quality diversified portfolio of private equity assets, managed by Pantheon. Pantheon's responsible, transparent and collegiate culture is one of the reasons why PIP has such an outstanding 33-year track record. It is also down to having the right skills, experience and relationships built up over many years. We believe that taking a long-term view leads to better outcomes, whatever is going on in the world. Companies we invest in Pg 29 Supporting Pg 47 Infor communities Pg 50 LBX Pharmacy Pg 52 National Pg 59 KD Pharma Veterinary Association Group H3C OH O Pg 60 Jaggaer Pantheon International Plc 2 Annual Report and Accounts 2020 WHY CHOOSE US? The way we do things makes the difference Pantheon manages PIP's Private equity is the term can boost the performance of assets responsibly, with used for privately negotiated their investment portfolios. investments typically made in But barriers to entry are high transparency and integrity non-public companies. It can be and doing it well requires an attractive asset class for a experience and expertise. broad range of investors as it That is where we come in. Our time-tested culture leads to strong outcomes: LONG-TERM STRENGTH AND RESPONSIBLE PERFORMANCE RESILIENCE INVESTMENT Thinking long term, A carefully A thoughtful making the right diversified portfolio ESG1 approach choices and designed to informs delivering results perform well in a every decision range of conditions we make 1 Environmental, Social and Governance (ESG). Strategic Report Manager’s Review Governance Financial Statements Other Information 3 LONG-TERM PERFORMANCE Thinking long term, making the right choices and delivering results 4,000 11.6% 3,500 Average annual 3,000 NAV growth since 1987 2,500 PIP is a FTSE 250 company and one of the longest (REBASED TO 100) 2,000 established private equity funds listed on the London Stock Exchange. 1,500 Our track record speaks for PERFORMANCE itself: PIP has outperformed the 1,000 FTSE All-Share and MSCI World over multiple periods and since 500 its inception in 1987. 0 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 PIP FINANCIAL YEAR NAV PIP share price MSCI World Total Return (Sterling) FTSE AllShare otal Retrn Annualised performance Since 1 yr 3 yrs 5 yrs 10 yrs inception NAV per share 4.0% 9.6% 13.0% 12.0% 11.6% Ordinary share price -7.2% 4.8% 10.0% 14.8% 10.9% FTSE All-Share, TR -11.2% -2.9% 1.3% 6.1% 7.1% MSCI World, TR (Sterling) 7.4% 6.2% 9.9% 11.1% 7.8% Share price relative performance (annualised) Since 1 yr 3 yrs 5 yrs 10 yrs inception Versus FTSE All-Share, TR +4.0% +7.7% +8.7% +8.8% +3.8% Versus MSCI World, TR (Sterling) (14.6%) (1.4%) +0.1% +3.7% +3.1% Pantheon International Plc 4 Annual Report and Accounts 2020 WHY CHOOSE US? STRENGTH AND RESILIENCE A carefully diversified portfolio designed to perform well in a range of conditions Our portfolio is structured We carefully select our Our continuous focus on to reduce the risks typically assets, based on the strengths the mix of assets in our portfolio associated with private equity of our appointed underlying and balance sheet management investments, and managed to private equity managers, and means that PIP is able to maximise liquidity and growth actively monitor and diversify withstand uncertainty while over time. them to reduce specific timing, being well-positioned to regional and sector risks. invest for the future. PIP has the right foundations in place, not only to respond to current challenges, but also to capitalise on Helen Steers Pantheon Partner and the opportunities that arise from manager of PIP changing market conditions." Strategic Report Manager’s Review Governance Financial Statements Other Information 5 1 1 We build and Investment type Region Flexible approach to portfolio Weighted towards the more developed manage a carefully construction increases potential private equity markets in the USA and for outperformance. See our Business Europe while Asia and EM provide access diversified portfolio Model on page 16 for a description of to faster-growing economies. the different types of investment. Secondary 36% USA 50% Co-investments 35% Europe 31% Primary 29% Asia and EM2 12% Global3 7% 1 1 Stage Maturity 2020 1% Well diversified with an emphasis on PIP’s portfolio has a weighted average 2019 8% the small and mid-market buyout and fund age of 5.1 years. 2018 14% growth stages. 2017 15% 2016 18% 2015 15% 2014 5% 2013 3% 2012 3% 2011 4% 2010 1% 2009 1% 2008 and earlier 12% Small/Mid Buyout 41% Large/Mega Buyout 26% Growth 20% Special Situations 8% Venture 5% As at 31 May 2020. 1 Fund investment type, region, stage and maturity charts are based upon underlying fund valuations and account for 100% of PIP’s overall portfolio value. Excludes the portion of the reference portfolio attributable to the Asset Linked Note. 2 EM: Emerging Markets. 3 Global category contains funds with no target allocation to any particular region equal to or exceeding 60%. Pantheon International Plc 6 Annual Report and Accounts 2020 RESPONSIBLE INVESTMENT A thoughtful ESG approach informs every decision we make Pantheon is a responsible An adherence to We are committed to and highly experienced sound ESG principles is promoting ESG and diversity, investment manager whose integrated into our pre- and and actively engage with our culture and values reflect post-investment due diligence underlying private equity teamwork and diversity across and monitoring processes. managers to raise standards its entire global workforce. in our industry. Jie Gong Pantheon Partner, Asian We are convinced that companies Investment, Co-Head of Global ESG Committee which have a strong emphasis on behaving responsibly towards their stakeholders, are better managed and produce superior long-term performance." Alex Scott Pantheon Partner, European Primary Investment, Co-Head of Global ESG Committee Strategic Report Manager’s Review Governance Financial Statements Other Information 7 WITH JUST ONE SHARE ... Access to agents of change and transformation The value that the supporting them with differing returns depending on best private equity undertaking new product the private equity manager that development or helping owns it. Top quartile private managers can add to grow businesses into equity managers are able to One of the reasons why private new geographies or manage underlying assets equity has become a more customer segments. effectively and produce public popular way of funding for market-beating returns through On the same page growing companies is because different economic cycles. private equity managers do Private equity managers In addition, highly skilled not just bring capital to their generally acquire influential or managers are able to take portfolio companies. They controlling stakes in high-quality advantage of mispricing and typically employ sector and companies and operate dislocation opportunities operational experts, who bring according to a long-term when identifying attractive deep expertise, skills and investment horizon. The investment transactions. experience, and offer hands-on governance model in private Operating with a longer-term management support to build equity is designed to encourage investment horizon, private companies and transform all stakeholders in the business equity managers are able to their future. Some of the tactics – company management, the position their investments for they use include practical private equity fund manager, sale at the appropriate juncture help in improving operations, and the ultimate investor – and are able to time their for example optimising supply to pull in the same direction realisations, exploring each chains, improving companies’ and focus on value creation.