Outperformance by Adding Value
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Pantheon International Plc Annual Report 2019 and Accounts Outperformance by adding value Pantheon International Plc Annual Report and Accounts 2019 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 66 What We Offer Our Investors 1 Board of Directors 68 Key Performance Indicators 8 The Directors’ Report 70 Chairman’s Statement 10 Statement on Corporate Governance 76 Our Business Model 14 Audit Committee Report 82 Our Strategy 16 Directors’ Remuneration Report 84 Our Investment Policy 19 Directors’ Responsibility Statement 88 Principal Risks and Uncertainties 20 Independent Auditor’s Report to the Members of Pantheon International Plc 89 Manager’s Review 24 Financial Statements 94 How Private Equity Managers Add Value 26 Income Statement 96 Manager’s Market Review 28 Statement of Changes in Equity 97 Performance 32 Balance Sheet 98 Sector Themes 34 Cash Flow Statement 99 Managing Our Business Responsibly 40 Notes to the Financial Statements 100 Distributions 44 Calls 51 Other Information 118 New Commitments 52 AIFMD Disclosures 120 Buyout Analysis 57 Notice of Annual General Meeting 122 Undrawn Commitments 58 Alternative Performance Measures 127 Finance and Share Buybacks 59 Glossary of Terms 129 Other Information 60 Directors and Advisers 131 Key Pantheon Personnel Supporting PIP 64 This report contains terminology that may be unfamiliar to some readers. The Glossary on pages 129 to 130 provides definitions for frequently used terms. Companies We Invest In First Watch, see p42 Adyen, see p46 Sivantos, see p48 Renaissance Learning, see p55 Mitchell International, see p56 Strategic Report Manager’s Review Governance Financial Statements Other Information 1 What we offer our investors Outperformance through an actively managed private equity portfolio PIP provides easy access to: Privateequityinliquidformthroughquoted Manyofthemostexcitinggrowth-orientated shares businessesintheworld Along-establishedglobalplatformof Aninvestmentcompanyofscalewith broadanddeeprelationshipstosource riskmanagedthroughselectionand attractiveinvestmentopportunities diversification Theexcellentvaluecreationpotential Independencethroughbothourflexible generatedbysomeoftheleadingprivate investmentapproachandgovernanceby equitymanagersglobally PIP’sBoard Ourmanagers’trackrecordandexpertisein Aresponsibleandhighlyexperienced identifyingandmanagingleadingcompanies investmentmanager,Pantheon,whose throughmultipleeconomiccycles cultureandvaluesreflectteamworkand diversityacrossitsentireglobalworkforce PIP has outperformed investors’ benchmarks Asattheendofthefullyearperiod,PIP’ssharepricehasoutperformedtheFTSEAllShareTotal ReturnIndexandMSCIWorldTotalReturnIndex(Sterling)overone,three,fiveandtenyears,aswell assinceinception. Annualised performance Since 1yr 3yrs 5yrs 10yrs inception NAVpershare 14.7% 16.8% 14.9% 11.2% 11.9% Ordinaryshareprice 10.7% 19.6% 14.3% 18.9% 11.5% FTSEAllShare,TR -3.2% 8.7% 5.3% 9.6% 7.7% MSCIWorld,TR(Sterling) 2.5% 13.8% 11.8% 13.0% 7.8% Share price outperformance (annualised) VersusFTSEAllShare,TR +13.9% +10.9% +9.0% +9.3% +3.8% VersusMSCIWorld,TR(Sterling) +8.2% +5.8% +2.5% +5.9% +3.7% Pantheon International Plc 2 Annual Report and Accounts 2019 What we offer our investors We offer a simple and differentiated entry point to the impressive returns that private equity can provide Weaimtodeliverattractiveandconsistentreturnstoshareholders throughactivelymanagedprivateequityinvestments. Sinceitsinceptionin1987,PIP’sinvestmentstrategyhasfocused onbackingmanagersthatcreatesustainablevalueinunderlying companies.Thishascontributedtoaconsistentoutperformance ofPIP’ssharepriceoverpublicmarketindices. At a glance as at 31 May 2019 NAVpersharegrowth Netassetvalue 14.7% intheyear £1.5bn Sharepriceincrease Market 10.7% intheyear £1.2bn capitalisation AverageannualNAV AICongoingcharges1 11.9% growthsince1987 1.22% 1 Includingfinancingcosts,PIP’stotalongoingchargeswouldbe1.39%. Strategic Report Manager’s ReviewReview Governance Financial Statements Other Information 3 PIP’s track record PIPisthelongestestablishedprivateequityfund-of-fundsontheLondonStockExchange. 000 11.9% NAV Annualsed A rowt 000 since 1987 PIP ordinary share 2000 price P (REBASED TO 100) MSCI World 1000 Total Return (Sterling) FTSE All Share Total Return 0 191111111211100900000002010099999999929190988 PIP II TheCompany’sissuedsharecapitalconsistedof54,089,447ordinarysharesasat31May2019. Consistent outperformance PIP has generated average annual NAV growth of 11.9% since inception and 14.9% over the last five years, significantly outperforming the benchmark public market indices over these time periods. The five-year cumulative total shareholder return was +95% at 31 May 2019. Sir Laurie Magnus Chairman Pantheon International Plc 4 Annual Report and Accounts 2019 What we offer our investors Pantheon’s scale, experience and deep relationships with private equity managers are essential to creating value Pantheon’smorethan35years’experienceasaprivateequityinvestor andthedeeprelationshipsbuiltupbyitsglobalinvestmentteam,many ofwhomhavebeenwiththefirmforover20years,providePIPwith anoutstandingbaseofexpertisetosecureinvestmentswiththebest managersandtheirunderlyingportfoliocompanies. people investment assetsunder globally1 professionals management2 295 84 globally $43.5bn DUBLIN 5 SEOUL 4 LONDON SAN NEW FRANCISCO YORK 203 TOKYO people 41 26 HONG 3 KONG 10 BOGOTÁ 3 1 Asat1July2019. 2 Asat31December2018.Thefigureincludesassetssubjecttodiscretionaryornon-discretionarymanagement,adviceorthoselimitedtoareportingfunction. Strategic Report Manager’s ReviewReview Governance Financial Statements Other Information 5 Pantheon’s three pillars of investment ThewayinwhichPantheoninvestsusingprimary,secondaryandco-investmentstrategiesoffersa flexibleandpowerfulmeansofaccessingprivateequity-backedcompanies. Primary FUND 1 Weinvestinanewprivateequityfundwhenit isestablished Our strategy is more than the sum of its parts Secondary Investinginprimary fundsprovides FUND accesstotoptiermanagers,whooftenoffer co‑investmentopportunities. 2 Wereplaceaninvestorinafundorfunds typicallylateinto,orafter,theinvestmentperiod Theserelationshipsinturnprovideincreased accessandprivilegedinsightintomanyof thebestsecondaryopportunitiesthatwe Co-investments originateinthemarket. PORTFOLIO COMPANY Wepurchaseaportfoliocompanydirectlyalongside 3 aprivateequityfundduringtheinvestmentperiodoracquire adirectinvestmentthroughasecondarytransaction Formoreinformationonthethreewaysweinvest,seepages14to15 A highly selective approach Our manager relationships are the result of the tireless work of our global investment team who are able to use their extensive networks and access to privileged information to tap into the exciting deal flow that we continue to see in our pipeline for PIP. Andrew LebusPartner Pantheon International Plc 6 Annual Report and Accounts 2019 What we offer our investors A carefully constructed, diversified portfolio of assets SincePIP’sinception,wehavebeenabletogenerateexcellentreturnswhilestructuringour portfoliotominimisetheriskstypicallyassociatedwithprivateequityinvestments.Ourestablished portfolioofassetshasbeencarefullyselected,basedonthestrengthsofourappointedmanagers, activelymonitoredanddiversifiedtoreducespecifictiming,regionalandsectorrisks,and managedtomaximisegrowthandliquidityovertime. Investment type1 Fund region1 Flexibleapproachtoportfolioconstructionincreases Weightedtowardsthemoredevelopedprivateequity potentialforoutperformance. marketsintheUSAandEuropewhileAsiaandEM provideaccesstofaster-growingeconomies. Secondary 0% USA 55% Co-inestments 33% Europe 26% Primary 2 Asia and EM2 12% Global3 7% Fund stage1 Fund maturity1 Welldiversifiedacrossdifferentinvestmentstageswith Maturityprofileismanagedtoenhanceperformance aparticularfocusonsmall/mid-marketbuyoutand whilemaintainingacash-generativeportfolio. growthfunds. c conestents Small/mid buyout 9% 201 and later 1% 6% Large/mega buyout 2% 201 1% 8% Groth 20% 201 1% 8% Special situations 12% 201 1% 7% Venture 5% 201 6% 2% 201 4% 2% 2012 5% 0% 2011 4% 0% 2010 1% 0% 2009 2% 0% 200 7% 0% 200 7% 0% 200 and earler 4% 0% 1 Fundinvestmenttype,region,stageandmaturitychartsarebaseduponunderlyingfundvaluationsand accountfor100%ofPIP’soverallportfoliovalue. ThechartsexcludetheportionofthereferenceportfolioattributabletotheAssetLinkedNote. 2 EM:EmergingMarkets. 3 Globalcategorycontainsfundswithnotargetallocationtoanyparticularregionequaltoorexceeding60%. Strategic Report Manager’s Review Governance Financial Statements Other Information 7 Transforming companies to create real value Inanenvironmentcharacterisedbyanabundanceofcapital,highvaluationsandtherisingpopularity ofpassiveinvestmentstrategies,privateequityisunderincreasingpressuretodemonstrateitsability toproducereturnsinexcessofthosegeneratedbythebroaderpublicmarkets. Techniques used by private equity managers to create value: Operational Generatingtoplinegrowthandmarginexpansionbydevelopingnewproducts, improvements geographicexpansion,enhancedsalesforceeffectiveness,processoptimisation andtheuseoftechnology Capital expenditure Providingthefinancialresourcestosupportbusinessgrowthobjectives Transforming Increasingthemarketvalueofacompanybyadoptinganewbusinessmodel, strategy repositioningabusinesswithinitssector,diversifyingitsmarketsand implementingacrediblegrowthstrategy