Our Strategy

 

Our investment strategy is to build a resilient portfolio that can deliver long-term outperformance.

 

The Board regularly reviews PIP's overall investment strategy and it has formed part of Board discussions throughout the year.

 

Through the ongoing dialogue between the Board and the Manager, Pantheon, the Manager reports to the Board on progress and highlights any obstacles or changes in market conditions which may impact the Company's ability to achieve its strategic goals. In cases where this may occur, the Manager will propose solutions for which it will seek the support of the Board. Equally, the Board maintains the flexibility to propose amendments to the strategy as it deems necessary.

 

In addition, the Board reviews individual investments that exceed exposure limits, which are set at appropriate levels to reflect a diversified approach. At times, the Manager may make recommendations to the Board and seek approval for certain investments that fall outside of any limits expressed in the agreed strategic approach, but which the Pantheon believes to be a good investment opportunity for PIP. The Board maintains its independence at all times and robustly challenges such recommendations to ensure that they are in the best interests of shareholders. The Manager also reports to the Board on PIP's marketing and investor relations activities, considering new initiatives that could help to increase PIP's profile, and to reach potential new shareholders in the Company. As part of this, on 1 November 2021, each of PIP's existing shares was split into 10 shares. The aim was to make PIP's shares more accessible to a range of investors and to improve the marketability of PIP's shares.

 

Investment type: Focus on maturity profile and potential to boost performance

 

Primaries, secondaries and co-investments all have attractive characteristics, as highlighted in the Business Model above. PIP's transparent and direct investment approach gives it the flexibility to take advantage of prevailing market conditions and to maximise control over the Company's financing risk, including its ability to generate positive cash flows.

 

As the weighting towards co-investments has been increased over time, the three different investment types have intentionally taken on more equal weightings. These weightings do not represent hard caps; however, the Board and the Manager believe that this is the optimal mix to benefit from the cash generated by the more mature assets in PIP's portfolio while rejuvenating the portfolio with the younger vintages offered by primaries and co-investments. In addition, we have been steering PIP's secondary investment strategy towards single-asset secondaries which form a fast-growing part of the secondary market and are attractive for several reasons as highlighted below.

 

With an increased weighting towards co-investments and single-asset secondaries, we expect the number of underlying managers and portfolio companies to which the Company is exposed to continue to reduce over time. As a result, the potential for the Company's overall NAV to be impacted by the performance of individual assets should be increased while maintaining the benefits of a portfolio that is well diversified by type, stage, geography and sector.

 

The Board believes that there are several benefits to this investment approach: risk is effectively managed through diversification while the improved transparency of PIP's underlying portfolio and increased investment flexibility, should create a clearer link between the strongest performing companies in the portfolio and the potential to boost NAV growth in the future. Also, Pantheon can remain highly selective and disciplined when assessing deal flow, while at the same time reducing the risk of PIP being excluded from exciting opportunities due to investment constraints.

 

During the year, while maintaining its disciplined approach, the Board and the Manager identified that there was an opportunity to increase the Company's investment pacing to take advantage of the exciting deals emanating from its private equity managers.

 

Fund Maturity¹

2021 and later	16%
2020	8%
2019	13%
2018	14%
2017	13%
2016	11%
2015	10%
2014	4%
2011-2013	6%
2010 and earlier	5%

 

Investment type2 Primary	38%
Co-investments	31%
Secondary	31%

 

¹ Maturity chart is based on underlying fund valuations and accounts for 100% of PIP's portfolio value. Excludes the portion of the reference portfolio attributable to the ALN.

² Fund investment type and maturity charts are based upon underlying fund valuations and account for 100% of PIP's overall portfolio value. The charts exclude the portion of the reference portfolio attributable to the Asset Linked Note.

 

 

Investment stage: Focus on mid-market and growth

 

PIP's portfolio is diversified by stage, which ranges across venture, growth, small/mid buyout and large/mega buyout opportunities, as well as those classified as special situations. While the Company's strategy is to maintain a healthy mix of all stages, Pantheon favours the growth and buyout segments, with a particular focus on the mid-market. The mid-market offers distinct characteristics, when compared with large deals, such as:

 

-    More attractively priced assets which tend to have lower levels of leverage than the broader market average;

-    Greater visibility of the value drivers and the levers to pull to improve operational efficiency to better drive growth, both organically and through buy-and-build strategies; and

-    More routes to exit including strategic acquisitions, sales to other private equity managers or initial public offerings ("IPOs"). In PIP's case, it should be noted that the majority of exits has consistently been to strategic buyers and other private equity managers.

 

While late stage venture opportunities remain attractive, it is our view that the return profile of early stage venture can often be too protracted to be suitable for PIP's portfolio. Therefore, any investment activity by PIP in early stage venture funds is focused on investing with top-tier venture managers, mainly through primary fund investments, who are able to identify innovative opportunities with the potential to generate significant outperformance. While special situations include assets with unique characteristics which can offer potential for outperformance, it is the Board's intention that special situations investments will only be a small minority of the overall portfolio.

 

Fund Stage¹

Small/mid buyout	39%
Large/mega buyout	26%
Growth	24%
Special situations2	7%
Venture	4%

1 Fund stage chart is based upon underlying fund valuations and accounts for 100% of PIP's overall portfolio value.

   The chart excludes the portion of the reference portfolio attributable to the Asset Linked Note.

² Special situations investments can include distressed debt, mezzanine, energy/utilities and turnarounds.

 

Sector and geographic exposure: Global outlook, with a focus on high-growth and niche areas

 

The Board is committed to offering investors a global portfolio with investments in North America, Europe, Asia and Emerging Markets. It takes an active approach towards the weightings of those geographies in response to market conditions but supports the majority of the Company's capital being invested in the USA and Europe where the private equity markets are well established.

 

The Board relies on Pantheon's investment teams around the world that are on the ground locally, to take advantage of proprietary information flows and access to opportunities through their extensive networks of relationships.

 

It is Pantheon's objective to identify managers globally that are able to take a thematic approach and focus on high-growth sectors, many of which may not be fully represented by the public markets. In addition, Pantheon has a deliberate strategy of targeting sectors experiencing dislocation, as well as niches where underlying growth is less correlated to GDP growth. Recent examples of this have been within the Information Technology and Healthcare sectors. For more information on the sectors in which PIP is invested, see below.

 

The Board believes that its oversight of the Manager's activities, while at the same time allowing Pantheon the flexibility that it needs to make the appropriate investment decisions on the Company's behalf, ensures that PIP is able to deliver on its strategic objectives for shareholders over the long term.

 

 

Culture and Purpose

 

It is a requirement for all companies to set out their culture and purpose. The Company's defined purpose is relatively simple: it is to deliver our investment strategy led by a Board that promotes strong governance and a long-term investment approach that actively considers the interests of all stakeholders.

The Directors agree that establishing and maintaining a healthy corporate culture among the Board and in its interaction with the Manager, shareholders and other stakeholders will support the delivery of its purpose, values and strategy. The Board seeks to promote a culture of openness and integrity through ongoing dialogue and engagement with its service providers, principally the Manager.

 

 

Company Sector¹

Information technology	33%
Healthcare	18%
Consumer	14%
Financials	11%
Industrials	9%
Communication services	7%
Energy	4%
Materials	2%
Others	2%

 

Fund Region²

Weighted towards the more developed private equity markets in the USA and Europe while Asia and EM provide access to faster-growing economies.

 

USA	51%
Europe	28%
Asia and EM3	11%
Global	10%

¹ The company sector chart is based upon underlying company valuations as at 31 March 2022, adjusted for calls and distributions to 31 May 2022. These account for 100% of PIP's overall portfolio value.

² Fund region is based upon underlying fund valuations and accounts for 100% of PIP's overall portfolio value. The chart excludes the portion of the reference portfolio attributable to the Asset Linked Note.

³ EM is Emerging Markets.

 

 

Our Business Model

 

 

We aim to deliver consistent returns over the long term

 

 

OUR INVESTMENT PROCESS

 

1.   Investment opportunities in funds and companies are originated via Pantheon's extensive and well-established platform.

2.   We invest in many of the best private equity managers who are able to identify and create value in their businesses.

3.   Cash generated from the sale of those companies is returned to PIP and redeployed into new investment opportunities.

 

What we do

 

PIP invests in private equity funds and co-invests (alongside selected private equity managers) directly into private companies worldwide.

 

-     An investment in PIP offers shareholders exposure to a growing market worth over US$5.3tn¹ globally where the best private equity managers might

otherwise be inaccessible to shareholders.

 

We aim to deliver attractive and consistent returns to shareholders over the long term, and at relatively low risk. The Board remains committed to its policy of maximising capital growth and therefore, as in previous years, is not proposing the payment of a dividend.

 

Why we do it

 

Through Pantheon, we have an opportunity to invest with many of the best private equity managers globally based on the trust and experience built up over the almost 40 years during which Pantheon has been making investments.

 

·      It is our aim to bring the strong credentials of private equity and its track record of outperforming public markets to a wider set of investors.

 

It is our mission to generate sustainably high investment returns through an actively managed, institutional grade portfolio of funds and companies built by investing with the best managers globally.

 

How we do it

 

PIP's Manager, Pantheon, has a well-established platform built on three strategic pillars of investment: primary, secondary and co-investments, with each offering their own merits.

 

We believe that by combining the three ways of accessing private equity investments, we are able to:

-    Build and maintain a well-balanced portfolio in a combination that we monitor and manage with the aim of maximising capital growth;

-    Manage the maturity profile of our assets so that our portfolio remains naturally cash-generative on a sustainable basis; and

-    Ensure that the vehicle remains as cost-effective as possible for our shareholders by reducing any potential drag on returns.

 

 

¹ Source: Prequin Global Private Equity Report 2022.

 

 

INVESTMENT STRATEGIES

 

Primary

 

We invest in a new private equity fund when it is established.

 

·      Captures exposure to top-tier, well-recognised managers as well as to smaller niche funds that are generally hard to access.

·      Targets leading managers predominantly in the USA and Europe, with a focus on funds which are unlikely to become available in the secondary market.

 

Limited Partner Secondary

 

We purchase the interests of an investor in a fund or funds typically late into, or after, the investment period.

 

·      Targets favoured funds and companies at a stage when the underlying assets' performance is visible and the funds are realising investments, returning cash to PIP more quickly.

·      One of the advantages of investing in secondaries is that earlier fees will have been borne by the seller so total expenses are lower.

 

Manager - led Secondary

 

We invest in a company directly, alongside a private equity manager, that the manager has already owned for a period of time and therefore knows well.

·      We partner with high-quality private equity managers to acquire, as single transactions, their most attractive portfolio companies via a continuation fund.

·      Allows the private equity manager to hold onto a prized asset, which they believe has potential for further growth, when the fund in which it is held comes to the end of its life.

 

Co-investments

 

We invest in a company directly, alongside a private equity manager.

·      Direct investment in individual companies, which have attractive growth characteristics and have effectively passed through a "double quality filter", alongside PIP's leading private equity managers.

·      This boosts the performance potential because there are typically very low or no fees, making it a cost-effective way of capitalising on the high value added by PIP's selected managers.

·      Co-investments are through invitation only and are therefore not accessible to most investors.

For more information on the commitments that PIP has made during the year, see the full Annual Report.

 

What sets us apart

Track record

For 35 years, PIP has been able to adapt quickly and effectively to changing market conditions. This flexible and proactive approach means that PIP is well placed to continue to deliver on its strategic objectives. PIP's NAV has outperformed its public market benchmark indices since the Company's inception in 1987.

 

Broad and deep relationships

With investments in North America, Europe, Asia and Emerging Markets, PIP provides a carefully constructed, broad-based portfolio for investors. The presence of Pantheon's team of 417 people, including 121 investment professionals¹ in its 10 offices around the world means that they are on the ground locally, working with their extensive networks of relationships with private equity managers and taking advantage of proprietary information flows and access to opportunities. These relationships enable Pantheon to source and respond quickly to the best deal flow in those regions. In addition, through its participation on over 560² advisory boards globally, Pantheon actively engages with its General Partners ("GPs") on portfolio monitoring issues on a continuous basis.

 

Independence

PIP has the opportunity to participate in all the private equity investments sourced by Pantheon. The majority of the Company's investments are made directly in private equity funds and companies rather than via Pantheon's collective vehicles, which offers several benefits to PIP and its shareholders, including:

 

-    Control of investment strategy, overseen by the Board;

-    Reduction of financing risk by being able to accept or decline investments offered to it by Pantheon according to its financial resources at the time;

-    The flexibility to vary the size of its commitments as appropriate and in line with any adjustments to its investment strategy; and

-    Lower cost than investing through intermediate vehicles, due to the elimination of management fees and related expenses.

 

Culture & Transparency

Pantheon has a strong culture of collaborative and inclusive teamwork, transparency and diversity, as well as a long history of investing its clients' capital responsibly. PIP is supported strongly by a global workforce of 417 people¹ and a large and experienced team of investment professionals, many of whom have been at Pantheon for over 20 years. In keeping with its collaborative culture, Pantheon avoids investments in private equity managers with 'star' individuals giving rise to a higher degree of key person risk.

 

PIP is committed to being transparent with its investors and publishes a monthly NAV and newsletter to ensure the market is kept updated on developments in the portfolio.

 

¹ As at 30 June 2022.

² As at 31 March 2022.

 

For more information on PIP's strategic objectives, see below.

 

 

Our Investment Policy

 

Our investment policy is to maximise capital growth with a carefully managed risk profile.

 

The Company's policy is to make unquoted investments. It does so by subscribing to investments in new private equity funds ("Primary Investment"), buying secondary interests in existing private equity funds ("Secondary Investment"), and acquiring direct holdings in unquoted companies ("Co-investments"), 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, from time to time, hold quoted investments as a consequence of such investments being distributed to the Company from its fund investments as the result of an investment in an unquoted company becoming quoted. In addition, the Company may invest in private equity funds which are quoted. The Company will not otherwise normally invest in quoted securities, although it 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 schemes. 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:

 

·      No holding in a company will represent more than 15% by value of the Company's investments at the time of investment (in accordance with the requirement for approval as an investment trust which applied to the Company in relation to its accounting periods ended on and before 30 June 2012).

 

·      The aggregate of all the amounts invested by the Company in (including commitments to or in respect of) funds managed by a single management group may not, in consequence of any such investment being made, form more than 20% of the aggregate of the most recently determined gross asset value of the Company and the Company's aggregate outstanding commitments in respect of investments at the time such investment is made.

 

·      The Company will invest no more than 15% of its total assets in other UK-listed closed-ended investment funds (including UK-listed investment trusts).

 

The Company may invest in funds and other vehicles established and managed or advised by Pantheon or any Pantheon affiliate. In determining the diversification of its portfolio and applying the Manager's 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 future cash flows alter.

 

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.

 

 

RISK MANAGEMENT AND PRINCIPAL RISKS

 

The Company is exposed to a variety of risks and uncertainties. The Board, through delegation to the Audit Committee, has undertaken a robust assessment and review of the principal risks facing PIP, together with a review of any new and emerging risks that may have arisen during the year to 31 May 2022, including those that would threaten its business model, future performance, solvency or liquidity. A summary of the risk management and internal control processes

be found in the Statement on Corporate Governance in the full Annual Report.

 

Investment risk

 

Type and Description of Risk	Potential Impact		Risk Management		Outcome for the Year
Market factors such as interest rates, inflation and equity market performance can affect the value of investments.	• Impact of general economic conditions on underlying fund and company valuations, exit opportunities and the availability of credit.		• Pantheon's investment process incorporates an assessment of market risk. • Investing alongside private equity managers with experience of navigating economic cycles, while achieving diversification by geography, stage vintage and sector, helps to mitigate the effect of public market movements on the Company's performance. PIP invests in private assets and only gains exposure to public markets by companies being taken through an initial public offering.		• PIP continues to adopt a diversified approach to portfolio construction. • Exposure to quoted companies was only 12% as at 31 May 2022. • In historical periods of significant public market volatility, private equity market valuations have typically been less affected than public equity market valuations.
Insufficient liquid resources to meet outstanding commitments to private equity funds.	• Investment losses and reputational damage arising from the inability to meet capital call obligations.		• PIP has a mature portfolio that is naturally cash generative. • In the event that cash balances and cash distributions are insufficient to cover capital calls, PIP has the ability to draw funds from a credit facility. • Pantheon manages the Company so that undrawn commitments remain at an acceptable level relative to its portfolio assets and available financing. • The Board conducts a comprehensive review of the Company's cash flow modelling forecasts under different scenarios on a regular basis.		• PIP has access to a £300m loan facility that expires in May 2024. Together with PIP's net available cash balances of £227m, total available financing as at 31 May 2022 stood at £528m. Total available financing, along with the private equity portfolio, was greater than outstanding commitments by a factor of 3.7 times. • The Company renewed its multi-currency revolving credit facility after the year end. The new £500m secured facility, which is due to expire in July 2027, remains completely undrawn at the time of writing.
Lack of suitable investment opportunities to meet strategic diversification objectives.	• Change in risk profile as a result of manager, fund or company exposures that are materially different from the Company's intended strategy.		• Pantheon has put in place a dedicated investment management process designed to achieve the intended investment strategy agreed with the Board. • The Board regularly reviews investment and financial reports to monitor the effectiveness of the Manager's investment processes.		• During the year, PIP has invested within strategic limits for vintage year, geography and stage allocations, as well as within concentration limits for individual managers, funds and companies.
Private equity investments are long term in nature and it may be some years before they can be realised.	• Potential decline in realisation activity which may affect portfolio performance.		• PIP pursues a flexible investment strategy, combining secondary investments which typically have shorter exit horizons, with co-investments and primary commitments.		• The Company's flexible investment strategy has resulted in a portfolio with a healthy mix of likely exit horizons.
Investments in unquoted companies carry a higher degree of liquidity risk relative to investments in quoted securities.	• Liquidity of underlying assets may have an adverse effect on realisations and portfolio performance.		• As part of its investment process, Pantheon assesses the approach of its managers to company illiquidity as well as projected exit outcomes.		• Robust realisation activity during the year, with a record level distributions of £419m and a distribution rate equivalent to 25% of opening portfolio assets. .
Gearing, whether at the Company, fund investment or portfolio company level, could cause the magnification of gains and losses in the asset value of the Company.	• Potential impact on performance and liquidity, especially in the event of a market downturn.		• PIP's Articles of Association and investment policy impose limits on the amount of gearing that the Company can take on. • The principal covenant of the loan facility ensures that the Company is limited to a maximum gearing (excluding the ALN) of 34% of adjusted gross asset value (excluding the ALN). • The Board conducts regular reviews of the balance sheet and long-term cash flow projections, including downside scenarios that reflect the potential effects of significant declines in NAV performance, adverse changes in call/distribution rates and restrained liquidity sourcing in a distressed environment. •  As part of its investment process, the Manager undertakes a detailed assessment of the impact of debt at the underlying fund level and underlying company level on the risk-return profile of a specific investment.		• Cash flow forecasts under normal and stress conditions were reviewed with the Board. Downside scenario modelling indicates that the Company has the available financing in place to meet investment commitments, even in an environment characterised by large NAV declines and a material reduction in distribution activity. • There was no gearing at the Company level as at the end of the financial year. • Debt multiples in PIP's buyout portfolio remain at reasonable levels as at year end. • Since the period end, the Company has announced that it has agreed a new revolving credit facility, totalling £500m which is due to expire in July 2027. • The principal covenants that apply to PIP's credit facility ensure that the Company is subject to maximum loan to value and liquidity ratios.
Non-sterling investments expose the Company to fluctuations in currency exchange rates.	• Unhedged foreign exchange rate movements could impact NAV total returns.		• The Manager monitors the Company's underlying foreign currency exposure. • As part of its investment process, the Manager takes currency denominations into account when assessing the risk/return profile of a specific investment. • The multi-currency credit facility is a natural hedge for currency fluctuations relating to outstanding commitments.		• Foreign exchange had a positive impact on performance during the year.
Reliance on the accuracy of information provided by GPs when valuing investments.	• Risk of errors in financial statements and NAV reporting.		• The valuation of investments is based on periodically audited valuations that are provided by the underlying private equity managers. • Pantheon carries out a formal valuation process involving monthly reviews of valuations, the verification of audit reports and a review of any potential adjustments required to ensure reasonable valuations in accordance to fair market value principles under Generally Accepted Accounting Principles (GAAP).		• No material misstatements concerning the valuations provided by GPs and the existence of investments during the year.
Possibility that another investor in a fund is unable or unwilling to meet future capital calls.	• Counterparty defaults can have unintended consequences on the remaining investors' obligations and investment exposure.		• PIP invests in high-quality funds alongside institutional private equity investors. • A considerable proportion of PIP's investments are in funded positions.		• During the year, funds in which PIP is invested did not suffer from any limited partner defaulting events.
Changes in the Company's tax status or in tax legislation and practice.	• Failure to understand tax risks when investing or divesting could lead to tax exposure or financial loss.		• Pantheon's investment process incorporates an assessment of tax. • The Manager reviews the appropriateness of an investment's legal structure to minimise the potential tax impact on the Company.		• Taxes had a minimal effect on overall NAV performance in the year.

 

Non-investment risk

 

Type and Description of Risk	Potential Impact	Risk Management	Outcome for the Year
PIP relies on the services of Pantheon as its Manager and other third-party service providers.	• Business disruption should the services of Pantheon and other third-party suppliers cease to be available to the Company.	• The Board keeps the services of the Manager and third-party suppliers under continual review. • The Management Agreement is subject to a notice period of two years, giving the Board adequate time to make alternative arrangements in the event that the services of Pantheon cease to be available.	• The Board has approved the continuing appointment of the Manager and other service providers following an assessment of their respective performance during the year. • Pantheon now operates a hybrid working model and is confident of being able to continue to meet PIP's needs through this model.
High dependency on effective information technology systems to support key business functions and the safeguarding of sensitive information.	• Significant disruption to information technology systems, including from a potential cyber attack may result in financial losses, the inability to perform business-critical functions, regulatory censure, legal liability and reputational damage.	• Pantheon has a comprehensive set of policies, standards and procedures related to information technology and cybersecurity. • Ongoing investment and training to improve the reliability and resilience of Pantheon's information technology processes and systems.	• No material issues to report for the year. • Pantheon's systems, processes and technologies have been thoroughly tested and are fully operational.
Global geopolitical risks (including the Russia-Ukraine war) and the resulting economic uncertainty may affect the Company.	• Market and currency volatility may affect returns. • Geopolitical undercurrents may disrupt long-term investment and capital allocation decision-making.	• Pantheon continuously monitors geopolitical developments and societal issues relevant to its business.	• Pantheon's established Risk, Legal and Tax functions have ensured compliance with local laws and regulations. • An assessment of geopolitical risk is embedded in Pantheon's investment process. • PIP's exposure to high risk countries is minimal. • PIP's de minimis legacy exposure to Russian assets were reduced to zero during the financial year.

 

 

Retail investors advised by independent financial advisers

 

The Company currently conducts its affairs so that its shares can be recommended by independent financial advisers to retail private investors in accordance with the FCA's rules in relation to non-mainstream investment products.

 

The shares are excluded from the FCA's restrictions which apply to non-mainstream investment products because they are shares in a UK-listed investment trust.

 

Viability statement

Pursuant to provision 31 of the UK Corporate Governance Code 2018, and the AIC Code of Corporate Governance, the Board has assessed the viability of the Company over a three-year period from 31 May 2022. It has chosen this period as it falls within the Board's strategic planning horizon.

 

The Company invests in a portfolio of private equity assets that is diversified by geography, sector, stage, manager and vintage; it does so via both fund investments and by co-investing directly into companies alongside selected private equity managers. The Company invests significantly in the private equity secondaries market as this allows the Company to maintain a more mature portfolio profile that is naturally cash-generative in any particular year.

 

The Company seeks to maximise long-term capital growth by investing with top-tier private equity managers that are focused on generating outperformance against the broader private equity market. As an investment trust, the Company's permanent capital structure is well suited to investing in private equity, a long-term asset class. The Company's Manager has a long-standing culture that emphasises collaboration and accountability, facilitating open dialogue with underlying private equity managers that help the Company to anticipate market conditions and maintain a conservative approach to balance sheet management. The resilience of the Company, positioning of the portfolio and durability of the private equity market are detailed in the full Annual Report.

 

In making this statement, the Directors have reviewed the reports of the Investment Manager in relation to the resilience of the Company, taking account of its current position, the principal risks facing it in a low case scenario due to a disrupted recovery in the wake of COVID-19, the geopolitical uncertainties as a result of the Russia-Ukraine conflict including the disruption to the supply chain and increases in the cost of living as a result of this conflict, inflationary expectations, interest rate  rises, the impact of climate change on PIP's portfolio as discussed in Note 1 of the financial statements, the effectiveness

of any mitigating actions and the Company's risk appetite, all of which were considered as part of the various downside liquidity modelling scenarios carried out, after which the Directors came to the conclusion that there is no significant impact on viability.

 

As part of the assessment this also included a combined reverse stress test that analyses the factors that would have to simultaneously occur for the Company to be forced into a wind-down scenario where the Company's business model would no longer remain viable. These circumstances include a significant peak in the outstanding commitments called within a 12-month period, combined with a significant decline in the portfolio valuations and distributions. Overall, the reverse stress tests are sufficiently improbable as to provide a low likely risk of impact to the Company's viability and medium-term resilience.

 

Commitments to new funds are controlled relative to the Company's assets, and the Company's available liquid financial resources are managed to maintain a reasonable expectation of being able to finance the calls, which arise from such commitments, out of internally generated cash flow. In addition, the Company has put in place a revolving credit facility to ensure that it is able to finance such calls in the event that distributions received from investments in the period are insufficient to finance calls. The Board reviews the Company's financing arrangements at least quarterly to ensure that the Company is in a strong position to finance all outstanding commitments on existing investments as well as being able to finance new investments.

 

In reviewing the Company's viability, the Board has considered the Company's position with reference to its investment trust structure, its business model, its business objectives, the principal risks and uncertainties as detailed above and its present and expected financial position. In addition, the Board has also considered the Company's conservative approach to Balance Sheet management, which allows it to take advantage of significant investment opportunities, and the appropriateness of the Company's current investment objectives in the prevailing investment market and environment.

 

Since the period end, the Company has announced that it has agreed a new multi-currency revolving credit facility to replace the existing one that was due to expire in May 2024. This new currently undrawn facility, totalling £500m is due to expire in July 2027.

 

On behalf of the Board

 

Sir Laurie Magnus CBE

3 August 2022

 

 

Manager's Review

 

Our Market

 

Targeting highly resilient businesses, benefiting from positive long-term secular trends, in an uncertain macroeconomic environment

 

Against a backdrop of heightened geopolitical tensions and the uncertain outlook for the global economy, Helen Steers, Partner at Pantheon and manager of PIP, discusses how the private equity sector and PIP are well-positioned to navigate this challenging environment.

 

While many countries are still grappling with the aftermath of the COVID-19 crisis, the tragic war in Ukraine has generated further turmoil. Global supply chain issues, which were triggered by successive lockdowns during the pandemic, have been exacerbated over the past few months by rising energy prices and difficulties in sourcing certain essential raw materials. As a result, there have been shortages of vital industrial components, logistical challenges when transporting merchandise and increasing concerns about food security and energy supply, particularly in Europe. The consequent rise in inflation, fuelled by higher food prices and energy costs, means that many household budgets are being squeezed and consumer confidence has been dented. Although GDP in many regions rebounded in 2021 from the COVID-induced lows of 2020, global growth expectations have been revised down dramatically for 2022 and fears of a global recession are increasingly becoming a reality. One of the immediate consequences of these developments has been the sharp fall in public markets in the first half of 2022, with economic forecasters struggling to identify many causes for optimism on the horizon.

 

Private equity is not immune to geopolitical and macroeconomic events; however, our private equity managers had been preparing for a downturn for some time and taking action to prepare their portfolio companies for more difficult economic times. Furthermore, assessing our managers' track records in steering their portfolios through previous crises forms a key component of our due diligence when considering new deals for investment. History has shown that the best private equity managers are able to adapt to volatile market conditions, working closely with their portfolio companies, and have outperformed the public markets throughout economic cycles. In addition, they are able to respond nimbly and capitalise on periods of market dislocation and disruption, which can often generate compelling new deal opportunities.

 

These may present themselves in a variety of ways such as the creation of investments at more attractive pricing levels, or assisting companies to build market share through consolidation and add-on acquisitions of weaker competitors.

 

Following a slowdown in fundraising in 2020 during the COVID-19 pandemic, the global private equity industry had a record year in 2021, raising US$749bn¹ of capital.

 

¹ Source: Preqin Private Equity. Excludes secondaries, funds of funds, and co-investment vehicles to avoid double counting of capital fundraised.

 

Investment activity was also very buoyant with $837bn² invested in buyout deals with managers also completing a large number of add-on acquisitions during the year. Although fundraising strength has continued into 2022, we expect to see a moderation in the coming months as the bifurcation between the top-rated private equity managers, who are able to raise capital quickly via oversubscribed funds regardless of the macroeconomic environment, and those managers who may find fundraising more challenging, becomes even more pronounced.

 

² Source: Preqin Private Equity.

 

Managers have raised significant capital in recent years and dry powder, which is capital raised but not yet invested, stood at US$1.32tn as at September 2021³. We expect the levels of dry powder to continue to drive deal flow, especially in secondary and tertiary buyouts, although there are signs that market volatility may impact new investment activity during the course of 2022.

 

³ Source: 2022 Prequin Global Private Equity Report

 

Nevertheless, since dry powder is concentrated in the larger global buyout funds, which often target secondary buyouts of smaller, high-growth businesses, PIP's weighting towards the small/mid-market buyout and growth segments of the market positions it well to continue to benefit from this exit route. The majority of the managers with whom PIP invests focus on selling their portfolio companies to trade buyers, progressing their own strategic and M&A objectives, as well as selling their portfolio companies to other private equity managers. In other words, they are not reliant on the IPO markets being open in order to realise their investments. During the financial year, 49% of exits in PIP's portfolio were to trade buyers, 42% were to other private equity managers while, despite a strong year for IPOs in 2021, only 7% of PIP's underlying portfolio companies were exited by them being taken public.

 

In the current environment, it is more important than ever to be highly selective when assessing deals for investment. We will continue to back high-quality private equity managers who are sector specialists and equipped with sufficiently resourced and experienced operational teams to support their portfolio companies through uncertainty. While it is possible that there may be some pressure on the valuations of certain private equity-backed companies, we expect this to be very dependent on the subsectors in which those businesses operate and whether they require significant new capital expenditure. PIP's portfolio is weighted towards resilient and high-growth sectors such as Information Technology and Healthcare, which held up well through the pandemic and are benefiting from long-term secular trends that we believe are here to stay. We focus on managers who are targeting non-cyclical companies for investment that have defensible business models and offer a differentiated product or service, giving them a competitive advantage and pricing power in their respective markets. While we note the stark declines in the share prices of many technology stocks in the public markets, the technology-related businesses in PIP's portfolio are primarily profitable high-quality software and business infrastructure companies providing essential "need to have" products and services as well as those supporting the digitalisation and automation of processes that are occurring across many different sectors. In healthcare, which is the second largest sector in PIP's portfolio, we are backing managers who are tapping into the opportunities arising from the needs of ageing populations in developed economies, the increasing demand for better quality healthcare services in developing countries and the prevalence of chronic diseases everywhere. A common theme linking these businesses is that they have stable, recurring revenues and the characteristics to produce sustainable positive earnings growth. Private equity managers control the businesses in which they are invested and therefore are able to respond effectively to changing market conditions and implement necessary operational and strategic changes. Finally, it should be noted that private equity managers are not under pressure to sell their assets, therefore they will only do so when the time is right and they are confident that they can achieve an attractive return on exit. The embedded value in PIP's portfolio has been demonstrated by the consistently positive average uplifts that have been achieved since 2011, when we started tracking this metric. During the period, the weighted average uplift in PIP's portfolio was 42%.

 

As part of our detailed due diligence process, we not only assess how our managers create the right operating models for their portfolio businesses, but also appraise our managers' ability to construct appropriate capital structures for their investee companies, that can withstand increases in interest rates and any potential pressure on margins. PIP's portfolio is tilted towards asset-light companies, which typically have no debt (in the case of companies in the growth capital stage), or lower levels of debt (in the case of small and mid-sized businesses), compared with large and mega sized firms.

 

Private equity secondaries are playing an increasingly important role in the private equity universe

Increasingly, the global secondaries market is establishing itself as an active portfolio management tool for a wide range of investors in private equity funds who are seeking liquidity for their investments. As a result, it has continued to experience strong growth with transaction volumes reaching record levels of US$134bn⁴ in 2021. Of this total, 54% comprised traditional secondary transactions, which is when the investor in a fund initiates a sales process to another investor, while 46% were manager-led deals, which is when the private equity managers themselves instigate deals in order to provide liquidity options for investors in their funds. We have seen an increase in the size and complexity of deals coming to market and also in the quality with some of the most sophisticated, top-ranked private equity managers now actively participating in the secondaries market. This has fuelled unprecedented growth in manager-led deals, which can consist of either multi-asset portfolios or single-asset secondaries. Single-asset secondaries accounted for approximately half of the manager-led transactions in 2021⁵

 

⁴ Source: Greenhill Cogent - Global Secondary Market Review, January 2022.

⁵ Source: Lazard Private Capital Advisory, Sponsor-led Secondary Market Report 2021, January 2022

 

 

Managers are reluctant to sell high-quality portfolio companies, which they believe still have scope for further value creation, therefore single-asset secondaries occur when a private equity manager moves an individual company out of an older fund, which is in the process of being liquidated, into a continuation fund. This allows existing investors in the fund to exit their positions in the older fund while at the same time the private equity manager can continue to invest in the company and build value. Selected investors, such as PIP, are offered the opportunity to invest in the new investment vehicle and to benefit from the company's future growth. The management teams of the underlying companies are invariably supportive of this approach as they can avoid the disruption that a change in ownership can sometimes bring. We believe that this area of the secondaries market is particularly attractive because:

 

·      Typically these are the managers' star assets that they believe are likely to generate significant value but require more time beyond the life of the existing fund or additional capital, which the existing fund does not have, to achieve it;

·      These transactions provide strong alignment with the private equity managers who roll their interests into the continuation fund and, in many cases, increase their own existing investment;

·      These transactions tend to have an attractive risk/return profile as they offer the opportunity to invest alongside knowledgeable owners and benefit from the continued success of the company; and

·      It is a very specialised part of the secondaries market and therefore tends to be less competitive.

 

 

Pantheon was a pioneer of the secondary market and has both the expertise as well as the significant resources required to carry out the necessary detailed due diligence on manager-led deals. In many cases, we are able to work with the private equity manager to assist them with price discovery and help them to shape the deals themselves. PIP's total commitment of US$225.0m to the Pantheon Secondary Opportunity Fund ("PSOF") allows it to deploy capital efficiently in these high-quality assets on favourable terms. PIP gains access to single-asset secondaries both directly and through PSOF, and during the period, invested in nine single-asset secondaries.

 

While the current elevated macroeconomic risks call for a more cautious approach, the quality and volume of deal flow remain high in the secondaries market and we expect this to continue. The mid-market, which can often be overlooked by less experienced secondary investors, forms a significant part of PIP's portfolio and we believe that it should continue to provide attractive opportunities for PIP.

 

The best private equity managers are becoming increasingly restrictive, meaning that only those investors who have established deep, long-standing relationships with such managers are given priority access to their investment opportunities. Pantheon has an almost 40-year history of investing in the secondaries market and, with its flexible and highly selective approach, has established itself as a partner of choice for many private equity managers. Our sizeable secondaries team is led by seven Partners who have an average of around 23 years of investment experience each. The recent appointment of a new Global Head of Private Equity Secondaries at Partner level will further strengthen our deal origination and investment capabilities, which we can put to work on behalf of PIP.

 

PIP continues to benefit from high-quality co-investment deal flow

 

Pantheon had a very active year in terms of both deal origination for co-investments, generating record deal flow in 2021, and exit activity which was also strong. Co-investments are attractive for PIP as they enable the Company to invest directly in exciting high-growth companies on the same terms and conditions as the private equity manager, while they are also typically free of management and performance fees. PIP benefits from Pantheon's large global network of primary and secondary relationships from which we are able to source co-investment opportunities. In many cases, the strength of our relationships has resulted in us being offered proprietary deals whereby we are the only party to be invited to co-invest alongside a manager.

 

The co-investment market has become increasingly competitive; however, we believe that Pantheon has a distinct advantage and is an attractive co-investor for our managers because:

 

·      We do not compete against them and are viewed as a desirable investment partner; as a result, we believe that we see a large proportion of co-investments on offer from our core managers around the world;

·      Our consistent reliability in co-underwriting transactions means that we have become a "go to" partner for many of our private equity managers;

·      We have the scale to deploy substantial capital quickly into new deals and follow-on investments; and

·      We have proven our willingness to step in at an early stage to help our managers to secure and execute upon exciting opportunities through co-underwriting transactions.

 

Pantheon continues to assess each co-investment opportunity on its own merits with each co-investment passing through a "double quality filter", since each opportunity has first been evaluated by one of our best private equity managers, who themselves have already passed our rigorous manager selection hurdles. The opportunity is then subjected to our own detailed due diligence process, carried out by our dedicated co-investment team. Our disciplined and selective approach means that we will typically only invest in companies that display the following attributes:

 

-    We focus only on compelling  opportunities with the highest-quality managers that we believe are able to meet our return expectations;

-    The business must be a good fit for the manager's geographical, sectoral and stage expertise and experience;

-    There are multiple and clear value creation levers that our managers can pull;

-    We focus on attractive, resilient sectors that are experiencing long-term tailwinds and have the potential for strong organic growth through the launch of additional products and services;

-    The business has the ability to maintain revenue and margin stability even in an economic downturn; and

-    There is the potential for add-on acquisitions that can help the business to build scale and grow its market share.

 

 

Co-investments represented 31% of PIP's portfolio at the period end and we expect them to continue to be a significant area of investment. During the period, PIP received £49.5m from the sale of EUSA Pharma, a UK-based specialty pharmaceutical company focusing on oncology and rare diseases. PIP co-invested in EUSA Pharma alongside EW Healthcare in 2015 and it represents the Company's largest single company exit in its history. See the case study within the full Annual Report.

 

Outlook

 

The impact of substantially lower economic growth globally, coupled with supply chain issues, higher energy, food and input costs, and the lingering effects of the COVID-19 crisis, is creating an unenviable mix of challenges which are being faced by both individuals and businesses.

 

While we are cautious in these difficult times, we believe that our industry will continue to experience significant growth in the coming years.

Private equity benefits from a long-term investment horizon, still comprises a relatively small part of the wider global investment universe and investor appetite for the asset class remains strong - in a recent survey of institutional investors, 95% of the participants indicated that they intended to maintain or increase their allocations to private equity investments⁶. Indeed, in its most recent report, Preqin forecasted that the assets under management in the global private equity and venture capital market would reach US$11.1tn in 2026, which compares with the private equity market being worth US$5.3tn at the end of 2021⁷.

 

⁶ Source: Preqin H2 2022 investor outlook survey.

⁷ Source: 2022 Preqin Global Private Equity Report.

 

 

Private equity offers access to subsectors that are generally under-represented in the public markets and that continue to innovate and offer compelling long-term investment opportunities.

 

 

It is our view that PIP's diversified investment approach and robust financial position will serve it well through uncertainty. Its approach to mainly investing directly into the companies and funds that are sourced for it by Pantheon, means that it has the flexibility to tilt the portfolio towards where we see the best opportunities. PIP's portfolio has been deliberately positioned to be resilient in times of stress while at the same time we are seeking investments with strong sector tailwinds behind them to drive growth. The dispersion of returns in private equity is wide, therefore having access to and selecting the highest-quality managers is key. Private equity managers have evolved their teams enormously in recent years to include operational, strategic and capital markets experts that they can dedicate to improving the prospects of a portfolio company in a variety of market conditions. Over the long term, this hands-on approach has resulted in the companies in PIP's portfolio consistently reporting significantly stronger revenue and earnings growth when compared with companies in the MSCI World index.

 

In addition, investors should note that for more than three decades, Pantheon has managed PIP throughout different economic cycles to deliver long-term outperformance over the FTSE All-Share and MSCI World Indices. We believe that our experience, PIP's access to many of the best private equity managers globally, its conservatively managed balance sheet and the exciting opportunities in PIP's full deal pipeline, provide the vital ingredients for being able to weather the storm and to continue to secure healthy returns for PIP's shareholders over the long term.

 

 

Performance

Overall, PIP's underlying portfolio continues to deliver robust returns. The cash-generative profile of the portfolio, and the portfolio's tilt towards high quality assets and more resilient sectors has helped underpin performance during the year.

 

Private equity portfolio movements

·      Excluding returns attributable to the ALN share of the portfolio, PIP's portfolio generated returns of 26.2% during the year.

·      Including returns attributable to the ALN share of the portfolio, PIP's total portfolio generated investment returns, prior to foreign exchange effects, of 25.3%.

 

Valuation gains by type¹

·      Impressive performance across all strategies over the year, with primaries producing particularly attractive returns.

 

	Return  (%)	Closing   portfolio NAV   (%)
Primary	34.8	38
Co-investment	20.4	31
Secondary	22.3	31

 

 

Valuation movements by stage¹

·    PIP experienced strong performance across its portfolio.

	Return  (%)	Closing   portfolio NAV   (%)
Growth	27.3	24
Venture	33.7	4
Large/mega-buyout	26.2	26
Small/mid-buyout	23.2	39
Special situations	33.6	7

 

 

Valuation gains by region¹

·      Impressive performance across all regions driven by exits and favourable valuation movements.

 

	Return  (%)	Closing   portfolio NAV   (%)
Global	23.3	10
USA	28.6	51
Europe	23.6	28
Asia and EM	25.8	11

 

 

¹ Portfolio returns include income, exclude gains and losses from foreign exchange movements, and look through underlying vehicle structures to the underlying funds feeders and funds-of-funds to the underlying funds. Portfolio returns exclude returns generated by the portion of the reference portfolio attributable to the ALN, and are calculated by dividing valuation gains by opening portfolio values.

 

 

DISTRIBUTIONS

 

PIP had a record year for distributions, receiving more than 850¹ distributions during the 12 months to 31 May 2022, with many reflecting realisations at significant uplifts to carrying value. PIP's mature portfolio is expected to continue to generate significant distributions.

 

¹ This figure looks through underlying vehicle structures.

 

Distribution by Stage and Region

 

PIP received £419m in proceeds from PIP's portfolio in the year to 31 May 2022 (31 May 2021: £319m), equivalent to 25% of opening private equity assets (31 May 2021: 22%). The USA accounted for the majority of PIP's distributions, where market conditions supported a good level of exits, particularly from buyouts.

 

 

Distribution by stage

for the year to 31 May 2022

Small/mid buyout	48%
Large/mega buyout	22%
Growth	20%
Special situations	8%
Venture	2%

 

Distribution by region

for the year to 31 May 2022

 

USA	53%
Europe	26%
Asia and EM	14%
Global	7%

 

 

Quarterly Distribution Rates¹

 

Strong quarterly distribution rates throughout the year reflect the maturity and resilience of PIP's portfolio.

 

¹ Distribution rate equals distributions in the period (annualised) divided by opening portfolio value.

 

 

Distribution Rates by Vintage

With a weighted average fund maturity of 4.9 years¹ at the end of the period (31 May 2021: 5.2 years), PIP's portfolio should continue to generate significant levels of cash.

 

¹ Calculation for weighted average age excludes the portion of the reference portfolio attributable to the Asset Linked Note. Fund age refers to the year in which a fund makes its first call or, in the case of a co-investment, the year in which the co-investment was made.

 

Cost multiples on exit realisations¹

The average cost multiple on exit realisations of the sample was 3.1 times, demonstrating value creation over the course of an investment.

 

¹ See the Alternative Performance Measures section within the full Annual Report for sample calculations and disclosures.

 

 

Uplifts on exit realisations¹

The value-weighted incremental average uplift on exit realisations in the year was 42%, consistent with our view that realisations can be significantly incremental to returns.

 

The method used to calculate the average uplift is to compare the value at exit with the value 12 months prior to exit.

 

¹ See the Alternative Performance Measures section within the full Annual Report for sample calculations and disclosures.

 

Exit realisations by sector and type

The portfolio benefited from good realisation activity, particularly in the healthcare and information technology sectors. Trade sales and secondary buyouts represented the most significant source of exit activity during the year. The data in the sample provide coverage for 100% (for exit realisations by sector) and 97% (for exit realisations by type) of proceeds from exit realisations received during the period.

 

 

Exit realisation by sector

For the year to 31 May 2022

 

Healthcare	27%
Industrials	22%
Information technology	18%
Consumer	11%
Communication services	11%
Energy	5%
Financials	4%
Materials	2%

 

Exit realisation by type

For the year to 31 May 2022

Trade sale	49%
Secondary buyout	42%
Public market sale	7%
Sale to management	2%

 

Calls

Calls during the year were used to finance investments in high-quality businesses globally.

 

Calls by Region and Stage

PIP paid £187m to finance calls on undrawn commitments during the year (31 May 2021: £120m). Calls were predominantly made by private equity managers in the growth and buyout segments.

 

Calls by region
USA	38%
Europe	34%
Global Asia & EM	21%
Asia & EM	7%

 

Calls by stage
Small/mid-buyout	30%
Growth	30%
Large/mega-buyout	22%
Venture	13%
Special situations	5%

 

 

 

 

 

 

 

 

Calls by Sector

A large proportion of calls were for investments made in the information technology and healthcare sectors.

 

Calls by sector
Information Technology	30%
Healthcare	22%
Industrials	14%
Consumer	12%
Communication services	10%
Financials	7%
Other	3%
Materials	1%
Energy	1%

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Call Rate¹

The annualised call rate for the year to 31 May 2022 was equivalent to 35% of opening undrawn commitments (31 May 2021: 22%). The increase in call rate has been mainly due to PIP's commitment to single asset secondaries through the Pantheon Secondary Opportunity Fund ("PSOF"). Commitments to PSOF have an accelerated drawdown over a period of 18 to 24 months.

 

¹ Call rate equals calls in the period (annualised) divided by opening undrawn commitments. All call figures exclude the acquisition cost of new secondary and co-investment transactions.

 

 

New Commitments

PIP committed £496m to 70 new investments during the year (31 May 2021: £240m, 33 new investments). Of the total commitments made, £160m was drawn at the time of purchase. Since the period end, PIP has committed a further £76m to five new investments.

 

New Commitments by Investment Type

 

New commitments during the year reflected the attractiveness of opportunities across the spectrum of PIP's investment activity.

 

 

Primary	53%
Co-investment	25%
Secondary	22%

 

 

New Commitments by Region

The majority of commitments made in the year were to global and US private equity opportunities.

 

USA	37%
Global	31%
Europe	19%
Asia and EM	13%

 

New Commitments by Stage

Buyout and growth investment activity was robust during the period.

 

Small/mid buyout	37%
Growth	23%
Large/mega buyout	16%
Venture	13%
Generalist	11%

 

New Commitments by Vintage

Primaries, co-investments and manager-led secondaries, which accounted for 97% of total commitments during the year, offer exposure to current vintages.

 

2022	43%
2021	52%
2020 and earlier	5%

 

 

NEW COMMITMENTS

 

 

Primary Commitments

 

£262m committed to 25 primaries during the year

 

Investing in primary funds allows PIP to gain exposure to top-tier, well-recognised managers including smaller niche funds that might not typically be traded on the secondary market.

 

Our focus remains on investing with high-quality, access-constrained managers who have the proven ability to drive value at the underlying company level, and to generate strong returns across market cycles. In addition, we target funds with market-leading specialisms in high-growth sectors such as healthcare and information technology.

 

2022 examples

 

FUND	STAGE	DESCRIPTION	COMMITMENTS FOR THE YEAR (£M)
Advent Global Private Equity X USD Stage	Large/mega buyout	Global large buyout fund	21.5
Index Ventures Growth VI	Growth	Global growth fund focusing on disruptive technology companies	20.5
Oak HC/FT V	Growth	North American growth equity fund focused on the healthcare sector	18.2
Apax Global Impact Fund I	Small/mid buyout	Global buyout fund focusing on ESG-friendly companies	17.8
Hg Saturn 3	Large/mega buyout	European buyout fund focused on the information technology sector	14.9
Summa Equity III	Small/mid buyout	European buyout fund with an ESG-focused strategy	14.5
ChrysCapital IX	Growth	Indian growth fund investing in the small-mid market segment	14.0
Sentinel Continuation Fund I	Small/mid buyout	North American buyout fund targeting middle market companies	13.7
Veritas Capital Fund VIII	Large/mega buyout	North American buyout fund targeting technology investments	13.7
LYFE Capital Fund IV	Growth	Asian growth fund focused on healthcare AI investments	11.5

 

 

 

Secondary commitments

 

The private equity secondary market has grown significantly over the last 10 years, both in scale and complexity. Despite strong competition, PIP continues to originate compelling opportunities derived from Pantheon's global platform and its market-leading expertise in sourcing and executing complex secondary transactions over which it may have proprietary access.

 

Manager-led secondary commitments

 

£101m committed to 11 manager-led secondary transactions during the year.

 

Top-tier private equity managers are increasingly transferring some of their most attractive portfolio companies into continuation vehicles, mainly in the form of single-asset secondaries. By holding companies for longer, private equity managers are able to participate in the companies' next phase of growth.

 

2022 examples¹

REGION	STAGE	DESCRIPTION	COMMITMENTS £M	FUNDED %2
Global	Generalist	Pantheon fund (PSOF) focused on single-asset secondary transactions	55.6	0%
USA	Small/mid buyout	Transaction involving two companies in the healthcare sector	6.4	71%
Europe	Small/mid buyout	Provider of governance, risk & compliance and human capital management software to the healthcare sector	6.1	88%

 

Secondary fund commitments

 

£10m committed to four secondary fund transactions during the year.

 

Secondary fund investments allow the Company to invest in funds at a stage when the underlying companies are ready to be sold to generate cash distributions.

 

2022 examples¹

 

REGION	STAGE	DESCRIPTION	COMMITMENTS £M	FUNDED %2
USA	Small/mid buyout	Portfolio of 22 high quality middle market assets	5.7	52%
Global	Large/mega buyout	Two buyout technology sector specialist funds	4.9	55%
USA	Growth	Follow-on investments in portfolio companies of a North American  growth equity fund	2.8	99%

 

^1. Companies and funds acquired in secondary transactions are not named due to non-disclosure agreements.

² Funding level does not include deferred payments.

 

 

Co-investments

 

£123m committed to 30 co-investments during the year.

 

PIP's co-investment programme benefits from Pantheon's extensive primary investment platform which has enabled PIP to participate in proprietary deals that would otherwise be difficult to access.

 

PIP invests alongside private equity managers who have the sector expertise to source and acquire attractively priced companies and build value through operational enhancements, organic growth and buy-and-build strategies.

 

27 out of 30 commitments to co-investments were alongside investment managers that PIP had already invested with in the past.

 

New co-investments by Region
USA	56%
Europe	22%
Asia and EM	18%
Global	4%

 

 

 

New co-investments by Sector
Information Technology	27%
Consumer	19%
Financials	18%
Industrials	17%
Healthcare	15%
Communication services	4%

 

New co-investments by Stage
Small/mid buyout	41%
Large/mega buyout	36%
Growth	23%

 

 

Financing our Undrawn Commitments

 

Prudent balance sheet management supports PIP's long-term investment strategy.

 

We manage PIP to ensure that it has enough liquidity to finance its undrawn commitments, which represent capital committed to funds but yet to be drawn by the private equity managers, as well as to take advantage of new investment opportunities. We monitor and closely control the Company's level of undrawn commitments and future calls. A critical part of this exercise is ensuring that the undrawn commitments do not become excessive relative to PIP's private equity portfolio and available financing. We achieve this by managing PIP's investment pacing as well as constructing its portfolio so that it has the right balance of exposure to primaries, secondaries and co-investments.

 

 

Managing our financing cover¹

 

PIP's undrawn commitments were £755m as at 31 May 2022 (31 May 2021: £528m).

 

At 31 May 2022, PIP had net available cash² balances of £227m (31 May 2021: £198m). In addition to these cash balances, PIP also has access to a wholly undrawn £300m multi-currency revolving credit facility agreement ("loan facility") that expires in May 2024. Using exchange rates at 31 May 2022, the loan facility amounted to a sterling equivalent of £301m (31 May 2021: £277m).

 

At 31 May 2022, the Company had £528m (31 May 2021: £475m) of available financing which, along with the value of the private equity portfolio, provides comfortable cover of 3.7 times (31 May 2021: 4.1 times) relative to its undrawn commitments.

 

Another important measure is the undrawn coverage ratio, which is the ratio of available financing and 10% of private equity assets to undrawn commitments. The undrawn coverage ratio is a key indicator of the Company's ability to meet outstanding commitments, even in the event of a market downturn, and was 100% as at 31 May 2022 (31 May 2021: 122%).

 

On 2 August 2022, PIP announced that it has agreed a new five-year £500m multi-tranche, multi-currency revolving credit facility agreement (the "Loan Facility") arranged by Credit Suisse, AG London Branch, Lloyds Bank Corporate Markets plc and State Street Bank International GmbH. The Loan Facility, which replaced the £300m loan facility agreement due to expire in May 2024, is comprised of facilities amounting to $512.9m and €89.2m and is secured by certain assets of the Company. The new Loan Facility will expire in July 2027 with an ongoing option to extend, by agreement, the maturity date by another year at a time. The new facility has the effect of increasing our undrawn coverage ratio from 100% as at 31 May 2022 to a pro forma level of 126%. The enlarged and extended Loan Facility will be instrumental in supporting the Company's growth ambitions while maintaining a resilient balance sheet..

 

¹ Includes undrawn commitments attributable to the reference portfolio underlying the ALN.

² The net available cash figure excludes the current portion payable under the Asset Linked Note, which amounted to £2.8m as at 31 May 2022.

 

 

Undrawn Commitments by Region¹

The largest share of undrawn commitments is represented by investments in the USA and Europe, which highlights the Company's investment focus on more developed private equity markets. PIP's undrawn loan facility is denominated in US dollars and euros to match the predominant currencies of its undrawn commitments.

 

 

USA	46%
Europe	27%
Global	17%
Asia and EM	10%

 

 

Undrawn commitments by Stage¹

PIP's undrawn commitments are diversified by stage with an emphasis on small and mid-market buyout managers, many of whom have experience of successfully investing across multiple economic cycles.

 

Small/mid buyout	34%
Large/mega buyout	28%
Growth	24%
Venture	9%
Special situations	5%

 

 

Undrawn Commitments by Vintage¹

The rise in more recent vintages is a result of PIP's increased allocation to direct investments in recent years. Approximately 20% of PIP's undrawn commitments are in funds with vintage years which are 2016 or older. Generally, when a fund is past its investment period, which is typically between five and six years, it cannot make any new investments and only draws capital to fund follow-on investments into existing portfolio companies, or to pay expenses. As a result, the rate of capital calls by these funds tends to slow dramatically.

 

2022	31%
2021	24%
2020	6%
2019	9%
2018	7%
2017	3%
2016	3%
2015	3%
2014	1%
2011 - 2013	4%
2010 and earlier	9%

 

 

¹ Includes undrawn commitments attributable to the reference portfolio underlying the Asset Linked Note.

 

 

 

 

OTHER INFORMATION

The Largest 50 Managers by Value

 

RANK	MANAGER	REGION1	STAGE BIAS	% OF TOTAL PRIVATE EQUITY ASSET VALUE2
1	Insight Partners	USA	Growth	8.1%
2	Index Ventures	Global	Venture, Growth	5.0%
3	Providence Equity Partners	USA	Buyout, Growth	3.6%
4	Advent International	Global	Buyout	2.5%
5	Baring Private Equity Asia	Asia and EM	Growth	2.2%
6	LYFE Capital	Asia and EM	Growth	2.1%
7	Apax Partners	Europe	Buyout	2.0%
8	Veritas Capital	USA	Buyout	1.8%
9	Parthenon Capital	USA	Buyout	1.8%
10	ABRY Partners	USA	Buyout	1.7%
11	Water Street	USA	Buyout	1.7%
12	Mid-Europa	Europe	Buyout	1.7%
13	Oak HC/FT	USA	Growth	1.6%
14	Hellman & Friedman	USA	Buyout	1.5%
15	Investment Partners	Europe	Buyout	1.5%
16	Searchlight	Global	Special Situations	1.4%
17	Hg	Europe	Buyout	1.4%
18	Apollo	USA	Buyout	1.2%
19	Quantum Energy Partners	USA	Special Situations	1.2%
20	Lee Equity	USA	Growth	1.2%
21	The Energy & Minerals Group	USA	Special Situations	1.1%
22	Charlesbank	USA	Buyout	1.1%
23	HIG Capital	USA	Buyout	1.1%
24	Altor Group	Europe	Buyout	1.1%
25	TPG	USA	Buyout	1.1%
26	Calera Capital	USA	Buyout	1.0%
27	Onex	Global	Buyout	1.0%
28	Warburg Pincus	Global	Growth	1.0%
29	Chequers Capital	Europe	Buyout	1.0%
30	Growth Fund3	USA	Growth	1.0%
31	BC Partners	Europe	Buyout	0.9%
32	Ares	USA	Buyout	0.9%
33	Main Post Partners	USA	Growth	0.9%
34	ECI Partners	Europe	Buyout	0.9%
35	NMS Management	USA	Buyout	0.8%
36	Francisco Partners	USA	Buyout	0.8%
37	Ergon Capital Partners	Europe	Buyout	0.8%
38	Madison India Capital	Asia and EM	Buyout	0.8%
39	Sageview Capital	USA	Growth	0.7%
40	Gemini Capital	Europe	Venture	0.7%
41	Growth Fund3	USA	Growth	0.7%
42	Nordic Capital	Europe	Buyout	0.7%
43	Equistone	Europe	Buyout	0.7%
44	IVF Advisors	Asia and EM	Buyout	0.7%
45	PAI Partners	Europe	Buyout	0.7%
46	Allegro	Asia and EM	Special Situations	0.7%
47	Altamont Capital Partners	USA	Buyout	0.7%
48	3i	Europe	Buyout	0.6%
49	Capiton	Europe	Buyout	0.6%
50	Shamrock Capital Advisors	USA	Buyout	0.6%
COVERAGE OF PIP'S PRIVATE EQUITY ASSET VALUE2				70.6%

 

¹ Refers to the regional exposure of funds.

² Percentages look through underlying vehicle structures and exclude the portion of the reference portfolio attributable to the ALN.³ The private equity manager does not permit the Company to disclose this information.

 

The Largest 50 Companies by Value¹

 

	COMPANY	COUNTRY	SECTOR	Public/Private	Investment type	DESCRIPTION	% of PIP'S NAV
1	LifePoint Health	USA	Healthcare	Private	Secondary; Co-Investment	Leading healthcare provider	1.0%
2	Asurion	USA	Financials	Private	Primary; Secondary; Co-Investment	Mobile phone insurance company	0.9%
3	Visma	Norway	Information Technology	Private	Primary; Co-investment	Provider of enterprise software solutions	0.8%
4	Omni Eye Services	USA	Healthcare	Private	Secondary	Specialist eye treatment provider	0.8%
5	Recorded Future	USA	Information Technology	Private	Primary; Secondary; Co-investment	Cybersecurity software company	0.8%
6	Ascent Resources	USA	Energy	Private	Secondary; Co-investment	Natural gas and oil producer	0.7%
7	Vistra	Hong Kong	Financials	Private	Secondary; Co-investment	Provider of trust, fiduciary, fund and corporate services	0.7%
8	Star Health	India	Financials	Public	Co-Investment	Health insurance provider	0.7%
9	Chewy	USA	Consumer	Public	Co-Investment	Online distributor of pet food and supplies	0.7%
10	Logic Monitor	USA	Information Technology	Private	Primary; Secondary; Co-investment	Managed IT services provider	0.7%
11	Software Company2	USA	Information Technology	Private	Co-Investment	Security management solutions provider	0.7%
12	Perspecta	USA	Information Technology	Private	Co-Investment	IT services management company	0.7%
13	Genesys	USA	Information Technology	Private	Primary; Secondary	Provider of broadband solutions	0.6%
14	Action	Netherlands	Consumer	Private	Secondary	Non-food discount stores	0.6%
15	KD Pharma	Germany	Healthcare	Private	Secondary	Specialist pharmaceutical company	0.6%
16	Revolut	UK	Information Technology	Private	Primary; Secondary	Fintech company offering banking services	0.6%
17	Flynn Restaurant Group	USA	Consumer	Private	Primary; Co-Investment	Restaurant franchise	0.5%
18	Froneri	UK	Consumer	Private	Secondary	Ice cream and frozen food manufacturer	0.5%
19	Project Fusion2	USA	Healthcare	Private	Secondary	Commercial services platform for the life science sector	0.5%
20	ALM	USA	Communication Services	Private	Secondary; Co-investment	Content provider to the legal industry	0.5%
21	CallRail	USA	Information Technology	Private	Secondary; Co-investment	Mobile data analytics company	0.5%
22	Act Fibernet	India	Communication Services	Private	Co-Investment	In-home entertainment, education and interactive services provider	0.5%
23	Sonar	Switzerland	Information Technology	Private	Primary; Secondary	Developer of coding software	0.5%
24	Olaplex	USA	Consumer	Public	Primary	Manufacturer of premium hair treatments	0.4%
25	CAA	USA	Communication Services	Private	Secondary	Entertainment, media and sports agency	0.4%
26	Arnott	USA	Consumer	Private	Secondary; Co-investment	Manufacturer of vehicle suspension products	0.4%
27	MRO	USA	Healthcare	Private	Primary; Co-investment	Provider of disclosure management services	0.4%
28	Confie	USA	Financials	Private	Co-Investment	Commercial insurance broker	0.4%
29	24 Seven	USA	Industrials	Private	Secondary	Digital marketing and recruitment services provider	0.4%
30	Confluent	USA	Information Technology	Public	Primary	Business intelligence provider	0.4%
31	Nord Anglia Education	Hong Kong	Consumer	Private	Primary; Co-investment	Operator of educational institutions	0.4%
32	Kilcoy	Australia	Consumer	Private	Secondary	Producer of beef and other animal protein products	0.4%
33	K2 Claims Services	USA	Financials	Private	Co-Investment	Provider of specialty insurance products	0.4%
34	GraphPad	USA	Information Technology	Private	Primary; Secondary	Developer of software for scientific research	0.4%
35	IMEIK	China	Healthcare	Public	Primary	Biotechnology company	0.4%
36	Eagle Investment Trust2	Australia	Industrials	Private	Co-Investment	Provider of transport and logistics services	0.4%
37	Cotiviti	USA	Healthcare	Private	Primary	Provider of risk assessment services to the healthcare industry	0.4%
38	doit	Israel	Information Technology	Private	Co-Investment	Provider of cloud consulting and engineering services	0.4%
39	Prelude	USA	Healthcare	Private	Secondary; Co-investment	Provider of fertility preservation services	0.4%
40	JFrog	Israel	Information Technology	Public	Primary	Offers software development platforms	0.4%
41	Shawbrook	UK	Financials	Private	Primary; Secondary; Co-Investment	Commercial bank	0.4%
42	digicert	USA	Information Technology	Private	Primary; Secondary	Digital security company	0.4%
43	Personio	Germany	Information Technology	Private	Primary	Developer of an HR management and recruitment platform	0.4%
44	Infovista	France	Information Technology	Private	Primary; Secondary; Co-investment	Provider of unified network and application performance management	0.4%
45	Regina Maria	Romania	Healthcare	Private	Secondary	Operator of hospitals and healthcare clinics	0.4%
46	Devoted Health	USA	Healthcare	Private	Co-Investment	Healthcare service provider	0.4%
47	Project Phoenix2	France	Communication Services	Private	Co-Investment	Satellite communication provider	0.4%
48	CaptiveResources	USA	Financials	Private	Secondary	Provider of advisory services to insurance companies	0.4%
49	Profi	Romania	Consumer	Private	Co-Investment	Supermarket chain	0.4%
50	KYOBO	South Korea	Financials	Private	Secondary	Life insurance company	0.4%
COVERAGE OF PIP'S PRIVATE EQUITY ASSET VALUE							25.9%

 

 

¹ The largest 50 companies table is based upon underlying company valuations at 31 March 2022 adjusted for known call and distributions to 31 May 2022, and includes the portion of the reference portfolio attributable to the ALN

 

² The private equity manager does not permit the Company to disclose this information.

 

 

Portfolio Concentration

70 managers and 597 companies account for 80% of PIP's total exposure.

 

¹Exposure is equivalent to the sum of the NAV and undrawn commitments.

 

THE DIRECTORS

 

The Directors in office at the date of this report are:

 

Sir Laurie Magnus* (Chairman)

Mary Ann Sieghart* (Senior Independent Director)

David Melvin* (Audit Committee Chairman)

John Singer*

John Burgess*

Dame Susan Owen DCB*

 

* Independent of the Manager

 

EXTRACTS FROM THE DIRECTORS' REPORT

 

Share capital

 

The rights attaching to the Company's shares are set out in the Company's Articles of Association. Further details can be found in Note 14 of the financial statements.

 

Authorities given to the Directors at the AGM on 27 October 2021 to allot shares, disapply statutory pre-emption rights and buy back shares will expire at the forthcoming AGM. During the year 3,400,830 shares were bought back and subsequently cancelled.

 

As at 31 May 2022 and as at the date of this Report, the Company had shares in issue as shown in the table below, all of which were listed on the official list maintained by the Financial Conduct Authority ("FCA') and admitted to trading on the London Stock Exchange. No shares were held in Treasury at the year end.

 

Share Capital and Voting Rights at 31 May 2022	Number of Shares in issue	Voting rights attached to each share	Number of shares held in treasury
Ordinary shares at 6.7p each	537,493,640	1	-
Total voting rights	537,493,640	-	-

 

 

Going Concern

 

The Company's business activities, together with the factors likely to affect its future development, performance, and financial position, are set out in the Strategic Report and Manager's Review.

 

The Directors have made an assessment of the going concern, taking into account both the Company's financial position at the Balance Sheet date and the expected performance of the Company, considering the disrupted recovery in the wake of the COVID-19 pandemic, the geopolitical uncertainties as a result of the Russia-Ukraine conflict, including the disruption to the global supply chain, increases in the cost of living as a result of this conflict, persistent inflation, interest rate rises and the impact of climate change on PIP's portfolio using the information available up to the date of issue of the financial statements.

 

The Directors have also considered the Company's position with reference to its investment trust structure, its business model, its business objectives, the principal risks and uncertainties as detailed in the full Annual Report and its present and projected financial position. As part of the overall assessment, the Directors have taken into account the Manager's culture, which emphasises collaboration and accountability, the Manager's conservative approach to balance sheet management, and its emphasis on investing with underlying private equity managers that are focused on market outperformance.

 

At each Board meeting, the Directors review the Company's latest management accounts and other financial information. The Company's commitments to private equity investments are reviewed, together with its financial resources, including cash held and its borrowing capability. One-year cash flow scenarios are also presented and discussed at each meeting.

 

PIP's Balance Sheet is managed to ensure that the Company can finance its undrawn commitments, which are carefully controlled relative to its assets and available liquidity.

 

This disciplined approach enables the Company to withstand periods of volatility such as those experienced as a result of the COVID-19 pandemic and the Russia-Ukraine conflict.

 

The Directors have considered downside liquidity modelling scenarios with varying degrees of decline in investment valuations, decreased investment distributions, and increased call rates, with the worst being an extreme downside scenario representing an impact to the portfolio that is worse than that experienced during the 2008-2009 global financial crisis.

 

In the event of a downside scenario, PIP can take steps to limit or mitigate the impact on the Balance Sheet, namely drawing on the credit facility and pausing on new commitments. In addition, subject to the prevailing market environment, it could raise additional credit or capital, and sell assets to increase liquidity and reduce outstanding commitments.

 

Since the period end, the Company has announced that it has agreed a new multi-currency revolving credit facility to replace the existing one that was due to expire in May 2024. This new currently undrawn facility, totalling £500m is due to expire in July 2027.

 

After due consideration of the Balance Sheet, activities of the Company, its assets, liabilities, commitments and financial resources, the Directors have concluded that the Company has adequate resources to continue in operation for at least 12 months from the approval of the financial statements for the year ended 31 May 2022.

 

For this reason, they consider it appropriate to continue to adopt the going concern basis in preparing the financial statements.

 

Directors' Responsibility Statement

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable laws and regulations in accordance with FRS102. Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company as at the end of each financial year and of the profit or loss of the Company for that period.

 

In preparing these financial statements, the Directors are required to:

 

·      Present a true and fair view of the financial position, financial performance and cash flows of the Company;

·      Select suitable accounting policies in accordance with United Kingdom GAAP and then apply them consistently;

·      Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

·      Make judgements and estimates that are reasonable and prudent;

·      State whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

·      Prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and 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. They are also responsible 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 also responsible for preparing the Strategic Report, the Directors' Report, the Directors' Remuneration Report, the Corporate Governance Statement and the Report of the Audit Committee in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure Guidance and Transparency Rules. The Directors have delegated responsibility to the Investment Manager for the maintenance and integrity of the Company's corporate and financial information included on the Company's website (www.piplc.com). Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Each of the Directors, whose names are listed above, confirms that to the best of their knowledge:

 

·      The financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

·      The Strategic Report contained in the annual report and financial statements 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 UK Corporate Governance Code requires Directors to ensure that the Annual Report and financial statements are fair, balanced and understandable. In order to reach a conclusion on this matter, the Board has requested that the Audit Committee advises on whether it considers that the Annual Report and financial statements fulfil these requirements. The process by which the Audit Committee has reached these conclusions is set in the full Annual report. As a result, the Board has concluded that the Annual Report and financial statements for the year ended 31 May 2022, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

 

 

Signed on behalf of the Board by

Sir Laurie Magnus

Chairman

3 August 2022

 

 

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the year ended 31 May 2022 and period ended 31 May 2021 but is derived from those accounts. Statutory accounts for 2021 have been delivered to the Registrar of Companies, and those for 2022 will be delivered in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and financial statements at www.piplc.com.