Annual Financial Report

PANTHEON INTERNATIONAL PARTICIPATIONS PLC (the "Company" or "PIP") ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30TH JUNE 2013 The full Annual Report and Accounts can be accessed via the Company's website at www.pipplc.com or by contacting the Company Secretary by telephone on 01392 412122. PIP will be holding a webcast today at 2.30 pm BST to discuss the 2013 Annual Report and Accounts. The presentation can be viewed on www.meetingzone.com/en-GB/presenter/default.aspx?partCEC=7406221 with Access Pin 7406221. Please use the dial in details below and ensure that you give your name, company name and the password PIP when dialling in for the webcast. 0808 109 07000 UK Toll Free +44 (0) 20 3003 2666 Standard International Access FINANCIAL SUMMARY +11.6% NAV per share increase +43.6% Ordinary share price increase +38.2% Redeemable share price increase Â£150m Net cash flow generated from PIP's portfolio Â£129m New investment commitments, mainly focused on secondaries and co-investments in the USA Â£27m Invested in share buybacks in the year, generating a 1.2% uplift to NAV per share Â£903m Net asset value at 30th June 2013 5.2x Ratio of assets and available financing to undrawn commitments +4.6% PIP's NAV per share outperformance per annum versus the MSCI World Index since inception SINCE PERFORMANCE AT 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION 30TH JUNE 2013 % % P.A. % P.A. % P.A. % P.A. NAV per share 11.6 11.6 3.7 9.3 11.5 Ordinary share price 43.6 28.9 6.8 8.8 11.0 FTSE All-Share Total Return 17.9 12.8 6.7 9.0 7.9 MSCI World Total Return (sterling) 23.2 13.8 9.0 8.7 6.9 PIP was launched on 18th September 1987. The figures since inception assume reinvestment of dividends, capital repayments and cash flows from the exercise of warrants. CAPITAL STRUCTURE AT 30TH JUNE 2013 Ordinary shares 34,507,013 Redeemable shares 33,312,534 Total 67,819,547 Since 30th June 2013 the Company has bought back for cancellation 225,000 ordinary shares. CHAIRMAN'S STATEMENT I am pleased to report another year of progress as the NAV per share grew by 11.6% to 1,331.9p. Most importantly, shareholders have seen the discount narrow significantly, as the price of their ordinary and redeemable shares gained 43.6% and 38.2% respectively in the period, well ahead of the rises in the FTSE and MSCI indices. We would hope to see the discount narrow further as the market more fully recognises the Company's distinctive characteristics: - Cash generative portfolio: realisations in the year amounted to almost a quarter of PIP's opening portfolio value as managers took advantage of the improved exit environment. - Good growth potential: we continued to see evidence of strong sales and earnings growth in portfolio companies exceeding that of the MSCI World and FTSE All-Share indices. - Uplifts on exit: we have seen consistent evidence of the largest realisations occurring on average at an uplift to the previous holding value. Realisations are a key driver of NAV performance. - Investing actively: this year we have committed Â£129m to 20 new investments, mainly in secondary interests. Pantheon's global investment platform and team puts the Company in a strong position as the outlook for secondaries and co-investment remains good. - Strategic global access: 68% of the portfolio is invested outside Europe, with the majority invested in the USA. - Strong balance sheet: PIP has no debt, an undrawn loan facility, and positive cash flows. PERFORMANCE Since my last statement, the economic indicators have pointed more convincingly towards sustainable recovery, signs of which have been clearest in the USA. While structural problems in Europe persist, growth has at least returned to many parts, even if at a low rate. With this background, PIP's portfolio has posted solid NAV growth. The underlying assets generated a return of +8.4%. Foreign exchange effects (+3.6%) and share buybacks (+1.2%) also enhanced NAV per share. Looking ahead, it remains unclear how changes to quantitative easing on both sides of the Atlantic will impact asset values, but even though we anticipate it will increase market volatility, we believe PIP's portfolio can continue to prosper. The buyout portfolio produced the best rates of growth in the year, particularly at the larger end, which rose by 13.4%. The Asian portfolio, having underperformed last year, rose by 11.6% helped by the rally in public markets in China. European buyouts and global venture performed relatively less well this year in contrast to the prior year. Underlying Earnings Growth Our portfolio's investment potential is based at least in part on the better than public market revenue and EBITDA growth exhibited in a sample of over 55% of PIP's buyout portfolio, where aggregated revenue grew by 11.6% and EBITDA by 14.4%, compared with 2.2% and -1.1% respectively for the MSCI World. Share Buybacks Your Board is encouraged that the discount has continued to narrow to close at year end at 22% for the ordinary shares and 21% for the redeemable shares. However, in our view this still does not reflect the strong balance sheet, fundamental value of the portfolio, and the relatively low risk associated with our diversified investment approach focused on high-quality opportunities worldwide. Frustrating though this persistent discount has been, it has provided an opportunity to enhance NAV per share performance through share buybacks. The Company began buying back shares in August 2011 and so far has invested Â£61m in buying back 10.5% of the Company's shares. Whilst the discount remains wide, the Board believes share buybacks are a compelling investment opportunity. In the full year to 30th June 2013, PIP invested Â£27m to buy back and cancel 1.6m ordinary shares and 1.4m redeemable shares, resulting in an uplift to NAV per share of approximately 13.8p, or 1.2% of PIP's NAV per share at 30th June 2012. ACTIVITY AND BALANCE SHEET Net portfolio cash flows were Â£150m as distributions received in the year were Â£190m (2012: Â£139m), equivalent to 24% of the opening portfolio value, whilst calls from underlying private equity funds amounted to Â£40m (2012: Â£54m). Increased net cash flows are a consequence of PIP's portfolio maturity, which has a weighted average fund age of 7.5 years. Distribution rates increased across all regions and stages but were particularly strong from the USA. Exits often occur at an uplift to their previous holding value as managers are able to realise a premium on sale. PIP's largest 100 distributions, representing 46% by value of total distributions, were at an average uplift of 26%. This was a key contributor to PIP's NAV performance in the period and remains an important factor for future performance given the maturity of our portfolio. Balance Sheet The Company's flexibility in making new investments is a consequence of our financial and balance sheet strength. The Company's loan facility, which expires in June 2015, was unutilised at 30th June 2013 and cash stood at Â£78m, meaning the Company had total liquid resources of Â£181m. Undrawn commitments of Â£195m as at 30th June 2013 were covered by assets and loan facilities by a factor of 5.2 times. New Investments This has been an active year for the Company as our strong positive cash flow enabled us to substantially increase our new investments. PIP made 20 new investments in the year with total commitments of Â£129m. This included nine secondary and two late primary commitments (commitments already partially funded) to funds totalling Â£113m, bucking the trend of a broader reported market decline in secondary deal volume. PIP also made nine co-investments, committing Â£16m. The majority of new secondary commitments were in 2006-2008 fund vintages whereas PIP's co-investments increased our exposure to the current vintages. The first half of 2013 saw a slowdown in reported secondary transactions as sellers temporarily postponed sale processes following the rise in public markets and regulatory uncertainty affecting banks in the USA. Our principal focus has been on the US market but Pantheon has sourced good opportunities in Asia and the rest of the world, where 36% of our new investments were made. Despite being very early in their investment period we have already seen good performance from these investments both on discount reversal and, pleasingly, on underlying valuation gains. OUTLOOK Existing Portfolio The relative underlying revenue and EBITDA growth in the sample I referred to earlier adds to our confidence in our portfolio. Given the maturity of PIP's portfolio, provided that conditions for exits remain supportive, we expect distribution rates to continue at a healthy pace. New Investments The secondary market deceleration referred to earlier appears to be easing with a number of potential transactions now filling the deal pipeline. Banks will need to continue to divest private equity portfolios, and pension funds and endowments will continue to rebalance their portfolios by selling in the secondary market. The pipeline is likely to remain dominated by 2006-2008 vintage fund interests given the volume of funds raised during this period. We will continue to selectively purchase additional 2006-2008 fund vintage exposure, targeting those funds containing attractive companies with strong business models and lower-risk capital structures. Expecting the USA to emerge first and fastest from the global financial crisis, during the financial year PIP made the majority of its new investments in the USA, where Pantheon continues to find a favourable outlook. We have invested selectively in Europe and other markets and will continue to buy assets that have demonstrated the resilience to find growth in and outside weaker markets. Asia and other emerging markets selectively represent an attractive though smaller opportunity. The Company's recent commitments to two new late primary investments provided an opportunity to increase investments in current vintages in funds that had already been partially invested. We envisage that there may be opportunities to advantageously target further selective primary investments to enhance our portfolio profile. Commitments to such opportunistic primaries would be limited so as not to reduce the Company's financial flexibility to acquire secondary interests and co-investments. A continued emphasis on secondary interests will allow us to maintain an attractively mature portfolio profile and ensure that our undrawn commitments continue to be at a level relative to our assets that can be comfortably financed from internally generated cash flows. In summary, the Company will use net cash generated by the portfolio to make new investments focusing on secondary interests and making co-investments and, on a limited basis, primary commitments where to do so complements the portfolio without significantly affecting the Company's financing ratios. We will continue to carry out share buybacks when they represent an attractive investment opportunity whilst the shares trade at a discount to NAV. BOARD CHANGE Richard Crowder, who has been a Director for the past 13 years, will be retiring at the Annual General Meeting. I would like to take this opportunity to thank Richard for his valuable contribution to the Company as a Director over these years. While no other changes to Board membership are currently contemplated, the Board is aware that it still has a number of long-serving Directors. It is committed to ensuring that the pace of retirement and addition of new Directors in the coming years preserves a healthy balance between longer established and newer members. TOM BARTLAM Chairman 30th September 2013 COMPANY STRATEGY PIP's strategy is to invest with leading private equity managers whilst reducing investment risk through diversification of the underlying portfolio by geography, investment stage and sector. This strategy is implemented through PIP's access to Pantheon's primary, secondary and co-investment activities. PIP has the flexibility to vary the size and emphasis of its investments depending on its available financing. The spread of performance in private equity is much wider than in other asset classes and the selection of managers has a significant influence on investment performance. As a specialist fund-of-funds manager monitoring and researching the global private equity market, Pantheon, PIP's Manager, is well positioned to identify fund managers who have the skills and strategies to deliver superior performance within their particular market segments. The current portfolio reflects PIP's prolonged access to Pantheon's highly successful primary and secondary investments over the past 25 years. Only funds that have passed through rigorous research and analysis can be selected for investment. Secondary Programme Emphasis It is the Board's current intention to emphasise secondary investment as the Company makes new commitments. Secondary purchases of existing interests in private equity funds are typically acquired between three and six years after a fund's inception, when such funds are substantially invested. As a result, they tend to have relatively low levels of undrawn commitments. PIP benefits from secondaries because the fees and expenses in the first few years have been paid and distributions from the fund will be returned over a shorter time period. This helps to reduce the drag to performance from young and immature funds, known as the "J-curve effect". In addition, secondary assets can be purchased at a discount, especially in cases where the seller has a need for liquidity, increasing the opportunity for outperformance. As the Company continues to build its financial resources through net portfolio realisations, the shorter duration of secondary investments and lower associated undrawn commitments will enable the Company to maintain its financial strength. In accordance with the terms of its management agreement with Pantheon, PIP is entitled under Pantheon's allocation policy to the opportunity to co-invest in a predetermined ratio alongside Pantheon's latest global secondary fund, Pantheon Global Secondary Fund IV, benefiting from access to larger secondary opportunities that it would not have had the capacity to complete alone. The secondary programme enables PIP to acquire attractively priced secondary interests as they become available, and aims to outperform market averages through judicious selection, pricing and timing. Co-investments Whilst the intention is to emphasise secondary investment, the Company will also participate in co-investments alongside established private equity managers. The breadth and depth of Pantheon's General Partner relationships provide a significant advantage for the sourcing and evaluation of co-investments. As with secondary investing, co-investments allow the Company to put money to work at the time it is committed. In addition, as there are lower or no management fees charged on co-investments by the underlying private equity manager, co-investing can represent a cost-efficient way of investing, whilst providing PIP with exposure to current vintages. It is the Board's current intention that co-investments will not, on average, account for more than 20% of PIP's new commitments. Primary Commitments Investing in private equity through a primary commitment strategy (e.g. commitments to new private equity funds), by increasing the proportion of immature assets in its portfolio and by increasing its undrawn commitments relative to its assets, can reduce the Company's financial flexibility. New primary investments have longer payback periods, requiring the Company to maintain higher levels of standby financing against undrawn commitments. For these reasons and because the current outlook for secondary investment and co-investment is so favourable, the Board de-emphasises primary commitments. However, the Company will consider making primary commitments on a targeted basis for portfolio construction purposes. The investment rationale for any new primary commitments will always be weighed against their effects on the Company's financial flexibility so as to keep the undrawn commitments to a level that can comfortably be expected to be financed from internally generated cash flows. Share Buybacks In certain circumstances, usually where the Company's shares are quoted at a significant discount to NAV, the Board may view the shares as presenting an attractive investment opportunity relative to other uses of cash, such as new investment commitments. In such circumstances, the Board will consider targeted buybacks of ordinary and redeemable shares instead of, or in addition to, new investments as a means of utilising cash generated from the Company's portfolio. THE MANAGER'S REVIEW MARKET REVIEW Over the year we have seen continued signs of strengthening economic recovery in the USA and Europe. However, there remain potential obstacles to recovery, particularly in Europe. Despite this we feel more optimistic that the economic environment is likely to remain stable. Public market performance over the year reflected this growing confidence as US and European markets posted strong rallies. Market volatility in the second quarter followed the Federal Reserve's announcement of its plans to taper quantitative easing. Uncertainty over timing is likely to remain a feature affecting the financial markets whilst recovery continues. This background has provided a supportive environment for private equity investors, evidence of which can be seen in the high rates of distributions from the portfolio. Emerging markets, particularly the BRICs, have fared less well over the past year as country-specific concerns dampened the performance of public markets impacting both investment and exit activity. That being said, growth rates remain significantly above those of developed markets and the continuing development of these economies presents opportunities for private equity managers. USA The US has shown signs of moderate recovery over the last year, with GDP estimated to have grown by 1.7% in the second quarter of 2013(1). The housing market recovery has started and there has been modest growth in consumption. US manufacturing is benefiting from higher productivity levels, competitive labour costs as the wage gap has narrowed particularly between the US and China, and inexpensive energy. Private equity deal volume surged 44% over the first half of 2012, reaching $211bn, the highest amount since 2007(1), as uncertainty abated around the Presidential election and tax-motivated sellers sought to realise gains by the end of 2012, particularly in the middle market. Subsequently, in the first half of 2013, new investment activity slowed, the result of a more limited supply of deals in the market following the year end surge and high pricing expectations of vendors persisting in spite of market volatility. Many of our managers have expressed optimism that deal flow will increase in the second half of 2013. Our managers have generally sought investments in higher growth segments of the market in companies that have demonstrated strong growth potential. Sectors such as energy, chemicals, automotive, building products and technology have each benefited from tailwinds and trends in certain subsectors, creating opportunities for new investments and exits in certain cases. Exit activity generally mirrored the trend in investment activity, with a strong second half of 2012 followed by a weak first half of 2013. Overall exit volume for the year ended 30th June 2013 was $122bn, a decline of 14% compared with the prior year(1). An exception to the slowdown in early 2013 was the strong IPO market, which has provided an exit route for a number of private equity-backed companies. In the first half of 2013, 23 private equity-backed companies were listed in the US compared to 38 for all of 2012, which is on trend to be the highest annual total since 2007(1). Private equity fundraising has continued to improve since the trough in 2010. $109bn was raised in 2012 and 2013 is poised to exceed that amount, with $73bn raised through the first half of the year(1). Notably in 2013, the US market has seen an increase in fundraising amongst the largest buyout firms, many of whom have been well received after successfully navigating the global financial crisis with their very large funds raised during the peak years. In venture capital, the volume and number of deals has fallen over the past year as investors have pulled back, particularly from seed stage investments following a significant increase in these from 2009 to early 2012. In total, investment volume declined 16% from $29bn(1). Software has remained the most prominent sector for investment, although this year saw a move from consumer focused applications to enterprise and commercial services. While venture capital exits also remain subdued overall, the IPO market has been receptive for both technology and life sciences companies. There were 30 venture-backed IPOs in the first half of 2013, the best start to a year since 2007. EUROPE Economic uncertainty in the Eurozone continued to cast a shadow over the private equity markets in the year to 30th June 2013 resulting in subdued levels of M&A activity and tough operating conditions for many private equity-backed companies. GDP growth of EU members over the period was flat. However, the second quarter of 2013 did see the EU move out of recession, with quarterly growth of 0.4%(2). The biggest disappointment for private equity in Europe has been the decline in the number of transactions over the year. Fewer than 80 buyout transactions were completed in the second quarter of 2013 compared with over 100 in the same quarter in 2012(3). This has been offset by an increase in average transaction sizes, supported by fairly buoyant debt markets, resulting in the total value of deals being struck remaining fairly steady with a run rate of around â‚¬70bn per annum(3). The main obstacle has been the frequent failure of buyers and sellers of businesses to agree on fundamental value given volatility in earnings in the current economic environment. However, entry pricing for transactions has remained steady in the last few years, with EV/EBITDA multiples averaging at around 8.5-9.0x, well below the peak of 10.6x reached in 2007(4). A cause for optimism has been private equity firms' ability to generate liquidity with an improving trend in the value of exits being generated. PIP has benefited from a number of IPOs including Countrywide and Hellerman Tyton, as well as a raft of trade sales and exits to trade buyers and other private equity firms, most notably Global Blue, Carbolite and Norit. Refinancings permitted by improved debt market conditions have also been a source of liquidity. The fundraising market for new funds continues to be challenging, with investors demonstrating a high degree of selectivity coupled with the advantage of being able to observe managers' performances through the crisis and the suitability of their strategies in a post-crisis environment. The flight to quality was reflected in successful fund-raisings for CVC (â‚¬10.5bn) and Advent International (â‚¬8.5bn), both of which were oversubscribed and closed quickly. A number of other managers have fared less well and it is anticipated that this will lay the foundations for less competitive market conditions going forward as the manager shakeout continues. DEVELOPING MARKETS The slowdown in most developing markets has provoked questions about the sustainability of high growth rates in some of the larger of these economies. Large structural changes are needed to shift economic activity further towards consumption-led growth. Doubts are most visible in the currency markets where freely traded currencies from some of the largest developing economies have weakened significantly. Together with the declines seen in domestic stock markets in many of these countries, the consequent reduction in entry prices continues to make these markets compelling for investment. In China, the private equity fund landscape is in the process of contracting following the explosive growth in the local currency investment market over the past five years. In the face of a slowing IPO environment, a number of managers are experiencing extended holding periods for their assets leading to pressure from investors to generate liquidity. For many, prospects for a successful subsequent fundraising will remain challenging. At the same time, access to bank financing for companies which are not state-owned remains limited, an environment which continues to create opportunity for well-funded and stable private equity franchises. Selecting the right managers whose strategic focus and stable platforms position them well in the current environment remains critically important. In India, where Pantheon has adopted a more underweight position due to the greater ease with which companies there can raise capital on India's quoted equity markets, concerns over the reduction of foreign capital inflows, in particular following the initial signs of a withdrawal of quantitative easing globally, has exposed concerns regarding India's fiscal position. This has resulted in steep declines in stock markets and the currency, taking pricing down to a level which better compensates international investors for these risks. In the rest of Asia, the private equity market continues to develop well. This is most evident in some of the smaller markets which now have much more developed domestic manager universes. These include markets in Southeast Asia like Indonesia, Malaysia, and the Philippines, as well as the more developed markets such as South Korea. In part these new centres of single-country fund activity are responding to increasing levels of intra-regional trade buoyed by improving cross-border trading dynamics. For example, in Southeast Asia, trading terms are set to be relaxed within the ASEAN region. In Northeast Asia, markets such as South Korea now trade more with China than any other global partner. In such an environment, we expect to see improving investment conditions both for primary and secondary investors. Outside Asia, Pantheon continues to invest capital predominately in primary fund investment as the markets, generally more recently established, have a less developed secondary market. While mostly focused on Eastern Europe and Latin America, Pantheon has also been increasingly active in Africa. As PIP is focused on buying secondary interests, it will take longer to see exposure to all these markets in the Company's portfolio, although PIP was active in buying secondaries in Asia and Latin America during the course of the year. SECONDARY MARKET REVIEW The past financial year was a tale of two halves for secondary market deal volume. Momentum continued from earlier in the year into the second half of 2012, with $12bn of secondary deals(5) transacted. Financial institutions' selling slowed down, partially offset by an increase in selling by endowments and foundations. This was followed by a more subdued market in the first half of 2013 with $7bn of secondary deal volume(5), principally as a result of a lull in bank selling activity, but also lower pension plan sales. Banks continue to hold significant private equity portfolios on their balance sheets ($75bn according to a recent market estimate(6)) but delays in the implementation of regulatory constraints, in the USA in particular, have resulted in a postponement of bank sale decisions. Nevertheless, we expect banks to return actively to selling again in the coming year to 18 months to meet regulatory deadlines. Given portfolio value increases from rising public equity markets and the subsequent reverse denominator effect, pension plans reduced selling activity. However, pension plans are expected to add to secondary market volume in the near term as they continue to rebalance portfolios and concentrate manager positions. The overall market saw $19bn of secondary deals(5) transacted during the past year, slightly lower than in the prior period. Despite the market slowdown in the second half of the year, Pantheon screened over $40bn of deals across approximately 300 sellers during the year to 30th June 2013. Furthermore, Pantheon continued to invest at a robust pace, committing $1.3bn on behalf of all clients to transactions representing nearly 7% of all deals reportedly done in the year to 30th June 2013. (1) PitchBook. (2) Eurostat. (3) Bureau of Economic Analysis. (4) Pantheon Analysis. (5) Cogent Partners estimate. (6) Cogent Partners estimate July 2013. SECONDARIES EXPLAINED WHAT IS A SECONDARY? A secondary transaction generally consists of purchasing an interest in a private equity fund, or portfolio of multiple funds (consisting of invested capital and remaining capital commitments) from an existing investor seeking liquidity prior to the termination of these funds. A secondary transaction can also consist of purchasing direct company interests which are either privately held or in which the trading of shares is restricted. WHY INVEST IN SECONDARIES? A secondary investment exhibits several features that differentiate it from other private equity assets, including the potential for timely deployment and earlier return of capital, portfolio transparency and the ability from time to time to acquire assets at a discount to Pantheon's assessment of the fair market value. Pantheon believes that these characteristics have the potential to reduce some of the risks typically associated with private equity fund investing. Timely Deployment of Capital Investing in secondaries can be a particularly helpful strategy for investors seeking to boost the proportion of their allocation to private equity actually at work "in the ground". Whereas a primary fund at inception has no assets, and will draw down capital at an unpredictable rate over a period of years as it invests into underlying companies, a fund acquired as a secondary is at least partially invested at the time of purchase. Earlier Return on Investment Investing later in a fund's life reduces the impact of the "J-curve" normally associated with private equity fund investments. The visibility of assets makes it easier to identify outperforming funds and likely exit horizons. Furthermore, the write down of early, unsuccessful investments, the reduced impact of early management fees and the shorter time horizon to liquidity provide a number of benefits to the investor. Investors may expect an earlier return of capital on their investments, relatively fewer capital calls and a shorter investment holding period. Reduced Investor Risk Unlike investing in a fund at inception, when it represents a blind pool of capital, secondary investing allows detailed analysis of a fund's assets. Using a rigorous due diligence process, Pantheon evaluates funds on a company-by-company basis. This bottom-up analysis allows Pantheon to determine which companies are critical to a portfolio's success and evaluate their potential value at the time of exit. This transparency may decrease investment risk. Embedded knowledge of portfolios also enhances Pantheon's ability to assess and value portfolios accurately. Pantheon frequently has performance and operational information on the assets for sale in the secondary market due to its position as an adviser or manager to existing investors in the fund, investment in a portfolio company through another fund or previous contact with the fund manager. Discount to Fair Market Value Pantheon undertakes detailed analysis on underlying assets in a portfolio to establish value. Discounts to assessed fair market value may be applied to reflect the quality of the assets, the seller's motivation to divest, market conditions and the illiquid nature of the asset class. In certain circumstances a fund interest may be acquired at a premium to NAV, depending on asset quality and fund manager valuation policy among other factors. Time and Vintage Diversification Secondary investment is a tool which enables investors in private equity to add an element of retrospective vintage diversification to their portfolios by buying into a range of mature funds, typically three to six years into their lives. This additional diversification serves to mitigate private equity investment risk at the portfolio level. PORTFOLIO OVERVIEW Â£190m Distributions from PIP's mature portfolio 24% Distributions as a percentage of opening portfolio 26% Average uplift on PIP's top 100 distributions Â£40m Calls made on existing commitments Â£113m New commitments made to private equity funds Â£16m Committed to nine co-investments Â£150m Net cash flow generated 8.4% Return on underlying assets 7.5 years Weighted average age of portfolio DISTRIBUTIONS IN THE YEAR TO 30TH JUNE 2013 PIP received more than 1,700(*) distributions in the year, with many at significant uplifts to carrying value. The Company's mature and diversified portfolio should continue to generate significant distributions in the coming quarters. (*) This figure looks through feeders and funds-of-funds. Distributions by Region and Stage PIP received Â£190m in proceeds from the portfolio in the 12 months to 30th June 2013, equivalent to approximately 24% of the opening private equity assets, up from 17% for the prior year. The USA accounted for the majority of PIP's distributions, where stronger economic performance enabled a good level of exits. Despite a challenging economic climate, PIP's European investments continued to distribute robustly. Distribution rates were consistent across all stages of the portfolio. Distributions by Region = Â£190m USA 59% Europe 32% Asia and other 9% Total 100% Distributions by Stage = Â£190m Small/Mid Buyout 39% Venture and Growth 29% Large/Mega Buyout 23% Special Situations 6% Generalist 3% Total 100% Cost Multiples on a Sample of the Largest Distributions in the Financial Year to 30th June 2013(1) On a sample of the largest 100 distributions, the value-weighted average cost multiple was 3.3 times. This highlights the continued ability of private equity managers to create significant value over the course of an investment. (1) The available data in the sample represented approximately 47% by value of PIP's total distributions for the financial year to 30th June 2013. This data is based upon gross cost multiples available at the time of the distribution. Uplifts on Liquidity Event on a Sample of the Largest Distributions in the Financial Year to 30th June 2013(2). On a sample of the largest 100 distributions, the value-weighted average uplift on liquidity event was 26%. This is consistent with PIP's view that realisations tend to be significantly incremental to returns. PIP's mature portfolio is well placed to continue to generate a good level of distributions in the coming year. (2) Uplift on liquidity event compares the value received upon realisation against the investment's carrying value prior to the transaction taking place. In the event of an IPO the uplift is the difference between the carrying value prior to the IPO and the value at the close of the first day of trading. The available data in the sample represented approximately 46% by value of PIP's total distributions for the financial year to 30th June 2013. INVESTMENTS CALLED IN THE YEAR TO 30TH JUNE 2013 Investments called during the year ranged across many sectors and regions, from retail firms to restaurant chains, IT companies to specialised manufacturers and from financial services companies to firms operating in the multimedia industry. Calls by Region and Stage PIP paid Â£40m of fund calls in the year to 30th June 2013, equivalent to approximately 21% of opening undrawn commitments. This is marginally lower than the rate for the prior financial year, which was 22%. Calls by Region = Â£40m USA 50% Europe 35% Asia and other 15% Total 100% Calls by Stage = Â£40m Small/Mid Buyout 39% Venture and Growth 28% Large/Mega Buyout 26% Special Situations 7% Total 100% NEW COMMITMENTS PIP committed Â£129m to new investments during the financial year, concentrated on buyout funds in the attractive USA and Asian markets. These commitments were on average approximately 65% funded at the time of purchase. The investments were often proprietary, taking advantage of Pantheon's global network of contacts within the private equity industry. New Commitments by Region In line with our preferred geographic focus, PIP concentrated its new commitments in the USA, the most attractive market based upon growth prospects and depth of opportunity. We also added significant exposure to higher growth, strong operating companies in the emerging markets, principally in developing Asia but also in Latin America. USA 57% Europe 36% Asia and other 7% Total 100% New Commitments by Stage A significant majority of investments were made in the large buyout and mid-market buyout space. This is consistent with PIP's strategy of focusing on mid and large cap companies that have high barriers to entry, strong cash generation and multiple exit routes. In addition, we continue to emphasise later stage growth managers within the venture and growth subset. PIP's co-investments were in the buyout and growth stages. Large/Mega Buyout 50% Small/Mid Buyout 33% Co-investments 12% Venture and Growth 5% Total 100% New Commitments by Deal Type In line with our investment strategy, the majority of new commitments were across nine secondary transactions. PIP also invested in nine co-investments, and two primaries that were already partially invested, taking advantage of attractive opportunities. The commitments made to co-investments and primaries also offer PIP exposure to more recent vintages which are less frequently seen in secondary deals. Secondaries 79% Co-investments 12% Primaries 9% Total 100% Secondary Origination Pantheon's outbound origination approach has enabled PIP to secure early access to highly attractive deal flow in the year, with 80% of deals purchased in processes that were either proprietary or involved restricted competition(*). Pantheon's platform allows PIP to access differentiated opportunities from other secondary players at attractive prices. Proprietary 46% Restricted Process 34% Auction 20% Total 100% (*) A proprietary deal is where Pantheon was in exclusive discussions with the seller. A restricted process deal is where there are three bidders or fewer. Pantheon Vehicles At 30th June 2013, 8% of PIP's portfolio value and 10% of PIP's outstanding commitments were comprised of funds-of-funds directly managed by Pantheon. Pantheon is not entitled to management and commitment fees in respect of PIP's holdings in, and outstanding commitments to, the firm's managed fund-of-funds vehicles. In addition, Pantheon has agreed that PIP will never be disadvantaged in terms of fees compared with the position it would have been in had it made investments directly into the underlying funds rather than indirectly through such fund-of-funds vehicles. PORTFOLIO OVERVIEW The Company offers a global, diversified selection of private equity assets, carefully selected by Pantheon for their quality. The diversification of PIP's portfolio, with assets spread across different investment styles and stages including buyout, venture and growth, and special situations, helps to reduce volatility both of returns and cash flows. The maturity profile of the portfolio ensures that PIP is not overly exposed to any one vintage. PIP's geographical diversification extends its exposure beyond the USA and Europe, to regions with higher rates of economic growth such as Asia. PORTFOLIO ANALYSIS BY VALUE AS AT 30TH JUNE 2013 (*) (*) Fund geography, stage, maturity and primary/secondary tables are based upon underlying fund valuations and account for 100% of PIP's overall portfolio value. Company sector and company geography tables are based upon underlying company valuations at 31st December 2012 and account for approximately 90% of PIP's overall portfolio value. Fund Geography The majority of PIP's geographical exposure is focused on the USA and Europe, reflecting the fact that these regions have the most developed private equity markets. PIP's assets based in Asia and other regions provide access to faster-growing economies. The Company's exposure to these areas has increased in the past financial year (from 11% to 14%) driven by new investments made during the financial year. USA 54% Europe 32% Asia and other 14% Total 100% Fund Stage PIP's portfolio is well diversified across different private equity investment styles and stages. The majority of PIP's portfolio consists of buyout funds. Exposure to these funds increased in 2013 driven by a combination of strong returns and new investments. PIP has a significant exposure to venture and growth-focused funds, many of which were acquired through the secondary market. The size of PIP's venture and growth portfolio declined in 2013 as a result of distributions and the Company's emphasis on buyouts when making new investments. Small/Mid Buyout 35% Venture and Growth 29% Large Buyout 23% Special Situations 5% Directs 3% Mega Buyout 3% Generalist 2% Total 100% Fund Maturity PIP's portfolio is well diversified by fund vintage (referring to the year the fund made its first investment). In the last year the NAV of funds with a vintage of 2000 and earlier declined as a percentage of PIP's portfolio, from 15% to 10%, driven by significant distributions in this segment of the portfolio. PIP's secondary focus is expected to lead to continued high exposure to the high fundraising years of 2006-2008. 2000 and earlier 10% 2001 3% 2002 1% 2003 2% 2004 4% 2005 13% 2006 24% 2007 27% 2008 13% 2009-2013 3% Total 100% Primary/Secondary 60% of the portfolio is derived from primary transactions. However, PIP's strategic emphasis means that secondaries are becoming a larger proportion of the portfolio at 40%, up from 35% at the end of the last financial year. Primary 60% Secondary 40% Total 100% Company Sectors PIP's sectoral diversification helps to minimise the effects of cyclical trends within particular industry segments. Relative to the FTSE All-Share and MSCI World indices PIP has high exposure to information technology, and low exposure to the banking, mining and utilities sectors. Consumer 28% Information Technology 23% Healthcare 14% Industrials 12% Financials 8% Energy 8% Materials 4% Telecom Services 3% Total 100% Company Geography Half of PIP's portfolio is with companies based in North America which has, in our view, better growth prospects than many other areas of the developed world. PIP's European exposure, which represents just over a third of the portfolio, is predominantly in companies based in the stronger Northern European economies, including the UK, Scandinavia and Germany. 14% of PIP's portfolio is based in Asia and other regions, providing access to faster growing economies such as China and India. North America 50% Asia and other 14% UK 12% Scandinavia 6% Germany 4% Benelux 4% Central and Eastern Europe 3% France 2% Italy 2% Iberia 2% Other Europe 1% Total 100% PORTFOLIO ANALYSIS Portfolio Performance by Stage for the Year to 30th June 2013(1) â— The portfolio performed solidly during the year, generating an investment return of 8.4%. â— Returns were highest in the buyout portfolios which benefited from significant distributions and strong earnings growth from the underlying companies. The new investments PIP made during 2013 showed strong early performance which contributed to the impressive buyout returns. Stage Return (%) NAV (%) Large/Mega Buyout 13.4% 26% Small/Mid Buyout 9.8% 35% Venture & Growth 5.6% 29% Directs/Co-investments 3.7% 3% Generalist 2.7% 2% Special Situations 0.4% 5% PIP 8.4% 100% Debt Multiples(2) Venture and growth and buyout investments have differing leverage characteristics. â— The venture and growth portfolio accounts for 29% of portfolio value and has very little or no reliance on leverage. â— The small/mid buyout portfolio sampled contains a moderate level of debt, with net debt/EBITDA of 3.3 times at 31st December 2012. â— The large/mega buyout portfolio sampled contains higher levels of debt, with net debt/EBITDA of 4.1 times at 31st December 2012. Investments made between 2006-2008, a time period associated with high debt levels, had an average net debt/EBITDA of 4.3 times, only marginally higher than the overall average. PORTFOLIO ANALYSIS - BUYOUT Valuation Multiple(2) â— Accounting standards require private equity managers to value their portfolio at fair value. As public markets move this can be reflected in valuations. â— Sample-weighted average enterprise value/EBITDA for the year to 31st December 2012 was 9.1 times, broadly in line with public market benchmarks. Revenue and EBITDA Growth(2) â— Weighted average revenue and EBITDA growth for the sample buyout companies was +11.6% and +14.4% respectively in the year to 31st December 2012. â— In each of the past four calendar years PIP's sample growth data has exceeded the equivalent growth rates of the FTSE All-Share and MSCI World indices. â— This strong top-line performance and efficient cost control of companies is a principal objective of PIP's mid-market focus, where opportunities for managers to add value provides scope for outperformance under the private equity model. (1) Portfolio returns include income, exclude gains and losses from foreign exchange movements, and look through feeders and funds-of-funds. (2) Buyout Sample Methodology. The sample buyout figures for the 12 months to 31st December 2012 were calculated from the companies, where information was available, in PIP's buyout funds at 31st December 2012. The figures are based on unaudited data. The revenue and EBITDA figures were based upon the last 12 months to 31st December 2012 or, where not available, the closest annual period disclosed, and provide coverage of 58% and 60% respectively of PIP's buyout portfolio. Individual company revenue and EBITDA growth figures were capped between +100% and -100% to avoid large distortions from excessive outliers. Sample data for 2009-2011 is based on the same methodology and provides coverage of greater than 60% of the portfolio in each year. Enterprise value is defined as carrying value + net debt. The net debt and enterprise value figures were based upon 31st December 2012 underlying valuations, or the closest period end disclosed. The valuation multiple sample covers approximately 75% of PIP's buyout portfolio. The debt multiple sample covers 67% of PIP's buyout portfolio. PORTFOLIO ANALYSIS - VENTURE AND GROWTH Venture and Growth Performance â— PIP's venture and growth funds generated a return of 5.6% in the year to 30th June 2013. â— 2002 and later vintage funds performed solidly and in line with PIP's overall portfolio. However, performance of the venture and growth portfolio was impacted by low returns from 2001 and earlier vintage funds. This adverse performance was caused by a number of material write-downs within the segment, partially offset by the gains on the IPO of Splunk. â— The venture and growth portfolio generated significant cash flow during 2013, particularly the older vintage funds. This has resulted in the stronger performing venture and growth funds with vintage from 2002 to 2006 now constituting almost 50% of the overall venture and growth portfolio. FINANCE AND SHARE BUYBACKS Cash and Available Bank Facility At 30th June 2013 PIP had cash balances of Â£78m. As well as these cash balances, PIP can also finance investments out of its multi-currency revolving credit facility agreement ("Loan Facility"). The Loan Facility is due to expire in June 2015 and comprises facilities of $82m and â‚¬57m which, using exchange rates at 30th June 2013, amount to a sterling equivalent of Â£103m. At 30th June 2013 the Loan Facility remained fully undrawn. Undrawn Commitment Cover At 30th June 2013, the Company had Â£181m of available financing, comprised of its cash balances and Loan Facility. The sum of PIP's available financing and private equity portfolio provide 5.2 times cover relative to undrawn commitments. It should be noted that a portion of the Company's undrawn commitments of Â£195m are unlikely to be called in full by the underlying managers. When a fund is past its investment period, which is typically between five and six years, it generally cannot make any new investments (only drawing capital to fund existing follow-on investments or pay expenses). As a result, the rate of capital calls in these funds tends to slow dramatically. Approximately 40% of the Company's undrawn commitments are in fund vintages that are greater than six years old. Share Buybacks PIP bought back 4.3%(1) of its shares in the financial year, taking advantage of the investment opportunity offered by its shares continuing to trade at high discounts. In total, 1.6m ordinary shares and 1.4m redeemable shares were bought back at a weighted discount of 23% and 29% respectively, resulting in a total uplift to NAV per share of 13.8p, or 1.2% of opening NAV per share. Since the financial year end, the Company has bought back a further 0.2m ordinary shares at a discount of 22%. Whilst PIP's shares trade at high discounts the Board will continue to consider further share buybacks for investment purposes. (1) 4.3% is calculated using the number of shares bought back in the financial year divided by the number of shares outstanding at 30th June 2012. OUTSTANDING COMMITMENTS PIP's outstanding commitments to fund investments, 60% of which relate to primary investments and 40% of which relate to secondary investments, are well diversified by stage and geography and will enable the Company to participate in future investments with many of the highest quality fund managers in the private equity industry worldwide. ANALYSIS OF OUTSTANDING COMMITMENTS AS AT 30TH JUNE 2013 PIP's outstanding commitments to investments increased to Â£195m at 30th June 2013 compared with Â£191m at 30th June 2012. The Company paid calls of Â£40m and acquired an additional Â£44m of outstanding commitments associated with all new investments made in the year. Geography The USA and Europe have the largest outstanding commitments, reflecting the Company's investment emphasis. Commitments to Asia and other regions provide access to faster-growing economies. USA 50% Europe 32% Asia and other 18% Total 100% Stage PIP's undrawn commitments are well diversified across all major stages of private equity. Small/Mid Buyout 37% Large/Mega Buyout 34% Venture and Growth 20% Special Situations 7% Directs/Co-investments 1% Generalist 1% Total 100% Maturity 40% of PIP's undrawn commitments are in the 2006 vintage or older. Most relate to funds that are outside their investment periods and, as such, should have slower call rates. It is likely that a portion of these commitments will not be drawn. 2005 and earlier 27% 2006 13% 2007 24% 2008 24% 2009 4% 2010 1% 2011 0% 2012 0% 2013 7% Total 100% LARGEST 50 MANAGERS BY VALUE AS AT 30TH JUNE 2013 % OF PIP'S TOTAL PRIVATE EQUITY NUMBER MANAGER REGION(1) STAGE BIAS ASSET VALUE 1 Texas Pacific GLOBAL BUYOUT 3.3% Group 2 CVC Capital GLOBAL BUYOUT 2.4% Partners 3 Providence Equity USA BUYOUT 2.4% Partners 4 Carlyle Group GLOBAL GENERALIST 2.3% 5 Vision Capital EUROPE BUYOUT 2.2% 6 Apax Partners EUROPE BUYOUT 2.1% 7 Apollo Management USA BUYOUT 2.0% 8 Brentwood USA BUYOUT 1.7% Associates 9 Golden Gate USA BUYOUT 1.7% Capital 10 Blackstone USA BUYOUT 1.6% Capital Partners 11 Equistone EUROPE BUYOUT 1.5% 12 Baring Private ASIA VENTURE AND GROWTH 1.5% Equity 13 Baring Vostok RUSSIA BUYOUT 1.4% Capital Partners 14 Nova Capital EUROPE BUYOUT 1.4% Management 15 IK Investment EUROPE BUYOUT 1.3% Partners 16 EQT GLOBAL BUYOUT 1.3% 17 Bain Capital USA BUYOUT 1.3% 18 Oak Investment USA VENTURE AND GROWTH 1.3% Partners 19 Doughty Hanson & EUROPE BUYOUT 1.2% Co. 20 Hutton Collins EUROPE SPECIAL SITUATIONS 1.2% 21 Genstar Capital USA BUYOUT 1.1% Partners 22 Permira EUROPE BUYOUT 1.1% 23 Riverstone USA SPECIAL SITUATIONS 1.0% Holdings 24 Gavea BRAZIL BUYOUT 1.0% Investimentos 25 KRG USA BUYOUT 1.0% 26 Avista Capital USA BUYOUT 1.0% Partners 27 Summit Partners GLOBAL GENERALIST 1.0% 28 ABS Capital USA VENTURE AND GROWTH 0.9% Partners 29 Polaris Venture USA VENTURE AND GROWTH 0.9% Partners 30 Francisco Partners USA BUYOUT 0.9% 31 Mercapital EUROPE BUYOUT 0.9% 32 Nordic Capital EUROPE BUYOUT 0.9% 33 Cinven Partners EUROPE BUYOUT 0.9% 34 Mid-Europa EUROPE BUYOUT 0.9% Partners 35 Altor Capital EUROPE BUYOUT 0.9% 36 New Enterprise USA VENTURE AND GROWTH 0.8% Associates 37 Catalyst Investors USA VENTURE AND GROWTH 0.7% 38 Technology USA VENTURE AND GROWTH 0.7% Crossover Ventures 39 Canaan Partners USA VENTURE AND GROWTH 0.7% 40 Tricor US USA BUYOUT 0.7% Management 41 BC Partners EUROPE BUYOUT 0.7% 42 Weston Presidio USA VENTURE AND GROWTH 0.7% Capital 43 KKR GLOBAL BUYOUT 0.7% 44 Sterling USA BUYOUT 0.7% Investment Partners 45 Baker Capital USA VENTURE AND GROWTH 0.7% Ventures 46 Index Ventures EUROPE VENTURE AND GROWTH 0.7% 47 Pacven Walden ASIA VENTURE AND GROWTH 0.6% Ventures 48 Northzone Partners EUROPE VENTURE AND GROWTH 0.6% 49 Wellington EUROPE VENTURE AND GROWTH 0.6% Partners 50 Hony Capital ASIA BUYOUT 0.6% COVERAGE OF PIP'S TOTAL PRIVATE EQUITY ASSET VALUE 59.7% (1) Refers to the regional exposure of the funds in which PIP is invested. LARGEST 50 COMPANIES BY VALUE AS AT 30TH JUNE 2013 % OF PIP'S TOTAL PRIVATE EQUITY NUMBER COMPANY COUNTRY SECTOR ASSET VALUE 1 Attendo SWEDEN HEALTHCARE 1.2% 2 Bibby UK INDUSTRIALS 1.1% Scientific 3 JDR USA ENERGY 1.1% 4 Spotify SWEDEN INFORMATION 0.8% TECHNOLOGY 5 Applied Medical USA HEALTHCARE 0.7% Resources 6 InterXion NETHERLANDS INFORMATION 0.6% TECHNOLOGY 7 Oriental SOUTH CONSUMER 0.4% Brewery Company KOREA 8 Convatec USA HEALTHCARE 0.4% 9 SoftBrands USA INFORMATION 0.4% TECHNOLOGY 10 The Teaching USA CONSUMER 0.4% Company 11 Evonik GERMANY MATERIALS 0.4% 12 China Yongda CHINA CONSUMER 0.4% Automobiles 13 McGraw-Hill USA CONSUMER 0.4% Education 14 CPI Card Group USA INDUSTRIALS 0.4% 15 Fairway Market USA CONSUMER 0.3% 16 Cobalt USA ENERGY 0.3% International Energy 17 Mindbody USA INFORMATION 0.3% TECHNOLOGY 18 CPL Industries UK ENERGY 0.3% 19 Michaels Stores USA CONSUMER 0.3% 20 GGC Credit Opps USA FINANCIALS 0.3% 21 Standard USA CONSUMER 0.3% Pacific Corporation 22 Nord Anglia Hong Kong CONSUMER 0.3% 23 Property UK FINANCIALS 0.3% Portfolio 24 The Nielsen Netherlands INDUSTRIALS 0.3% Company 25 Wrist Denmark INDUSTRIALS 0.3% 26 Standard USA FINANCIALS 0.3% Bancshares 27 BrightHouse UK CONSUMER 0.3% 28 Siltron South INFORMATION 0.3% Korea TECHNOLOGY 29 Hugo Boss & Italy CONSUMER 0.3% Valentino Fashion 30 Zoe's Kitchen USA CONSUMER 0.3% 31 Aquafil Italy CONSUMER 0.3% 32 Yandex RUSSIA INFORMATION 0.3% TECHNOLOGY 33 Allison USA INDUSTRIALS 0.3% Transmission 34 Visma Norway INFORMATION 0.2% TECHNOLOGY 35 EP Energy USA ENERGY 0.2% 36 CaffÃ¨ Nero UK CONSUMER 0.2% 37 Sapphire Energy USA ENERGY 0.2% 38 GENBAND USA INFORMATION 0.2% TECHNOLOGY 39 Portman UK CONSUMER 0.2% 40 Syniverse USA TELECOMMUNICATION 0.2% Technologies SERVICES 41 TMF Netherlands FINANCIALS 0.2% 42 NXP Netherlands INFORMATION 0.2% TECHNOLOGY 43 VBrick Systems USA INFORMATION 0.2% TECHNOLOGY 44 Wagamama UK CONSUMER 0.2% 45 Lindorff Norway FINANCIALS 0.2% 46 Booz Allen USA INDUSTRIALS 0.2% Hamilton 47 Sequa USA INDUSTRIALS 0.2% Corporation 48 Orient Express Russia FINANCIALS 0.2% Bank 49 K-Mac USA CONSUMER 0.2% Enterprises 50 USI USA FINANCIALS 0.2% TOTAL 17.8% The largest 50 companies table is based upon underlying company valuations at 31st December 2012, adjusted for known calls, distributions and new investment commitments and post-valuation information. THE MANAGER (PANTHEON) Pantheon, one of the world's foremost private equity specialists, has acted as Manager to PIP since its inception in 1987, evaluating and managing investments on PIP's behalf in line with the strategy agreed by the Board. Pantheon is also one of the largest and most experienced secondary managers, having committed more than $8bn to secondaries over the last 25 years. Strong Private Equity Track Record Pantheon is one of the leading private equity fund investors in the world, with global assets under management of $24.1bn, and over 400 institutional investors. Pantheon has a strong and consistent private equity investment track record. For over 30 years Pantheon has made investments in over 1,300 private equity funds, gaining exceptional insight and access to the most attractive funds in all the major private equity markets. Diversification Pantheon has substantial experience of investing in private equity through various economic cycles and in different regional markets. The firm's asset allocation, diversification strategies and disciplined investment process are structured with the objective of producing the best possible risk-adjusted returns. Pantheon's diversification strategy limits portfolio risk by including a multi-strategy approach, targeting funds with a variety of different return characteristics and deploying capital over a number of vintage years, generally ensuring that the most attractive segments of the market are represented in the portfolio. When applying this approach, the Board works closely with Pantheon to ensure that the management of the Company is in line with its agreed strategy. Reputation as a Preferred Investor Pantheon has been investing in private equity for over 30 years and has an enviable reputation in the industry. Pantheon is often considered a preferred investor due to its reputation, active approach and scale of commitments. In addition, Pantheon generally seeks advisory board seats to contribute actively to governance during the life of the fund. As such Pantheon is represented on over 280 advisory boards worldwide. Long-standing partnerships with managers on a global basis can also enhance the firm's deal flow in the secondary market. Team-based Culture Pantheon draws upon a deep pool of resources that contributes to a unique team-based culture. With teams operating in London, San Francisco, Hong Kong and New York, Pantheon adopts a collegiate approach to investment decision-making, globally leveraging the collective experience and expertise of its investment professionals. The team's experience is also brought to bear on the evaluation, selection and ongoing monitoring of fund investments. Pantheon's team of 68 investment professionals, supported by 117 other professionals, work together with the ultimate aim of producing strong and consistent results. Secondary Investing Pantheon is one of the largest and longest established secondary investors in the world, with more than 20 years' experience of successful secondary investing and a team of 68 investment professionals. This size and experience means Pantheon can focus on large and complex transactions in which many other lessor resourced investors cannot participate. Pantheon has committed more than $8bn in the secondary market globally across more than 310 transactions, including more than 100 portfolio transactions and more than 200 single fund secondaries. Pantheon consistently utilises the knowledge and due diligence information of its primary fund teams and global offices. Long-standing partnerships with private equity managers around the world help to enhance the firm's deal flow. While the increase in scale of the secondary market has been paralleled by growth in the number of would-be acquirers of secondary assets, Pantheon believes it has an advantage in having wide experience and coverage. As a result, the differentiation between experienced and well-resourced global specialists and the rest is becoming increasingly apparent as the market evolves. OBJECTIVE AND INVESTMENT POLICY The Company's primary investment objective is to maximise capital growth by investing in a diversified portfolio of private equity funds and, occasionally, directly in private companies. The Company's policy is to make unquoted investments, in general by subscribing for investments in new private equity funds and buying secondary interests in existing private equity funds and, occasionally, by acquiring direct holdings in unquoted companies, usually either where a vendor is seeking to sell a combined portfolio of fund interests and direct holdings or where there is a private equity manager, well known to the Company's Manager, investing on substantially the same terms. The Company may invest in private equity funds which are quoted. In addition, the Company may from time to time hold quoted investments in consequence of such investments being distributed to the Company from its fund investments or in consequence of an investment in an unquoted company becoming quoted. The Company will not otherwise normally invest in quoted securities, although the Company reserves the right to do so should this be deemed to be in the interests of the Company. The Company may invest in any type of financial instrument, including equity and non-equity shares, debt securities, subscription and conversion rights and options in relation to such shares and securities and interests in partnerships and limited partnerships and other forms of collective investment scheme. Investments in funds and companies may be made either directly or indirectly, through one or more holding, special purpose or investment vehicles in which one or more co-investors may also have an interest. The Company employs a policy of over-commitment. This means that the Company may commit more than its available uninvested assets to investments in private equity funds on the basis that such commitments can be met from anticipated future cash flows to the Company and through the use of borrowings and capital raisings where necessary. The Company's policy is to adopt a global investment approach. The Company's strategy is to mitigate investment risk through diversification of its underlying portfolio by geography, sector and investment stage. Since the Company's assets are invested globally on the basis, primarily, of the merits of individual investment opportunities, the Company does not adopt maximum or minimum exposures to specific geographic regions, industry sectors or the investment stage of underlying investments. In addition, the Company adopts the following limitations for the purpose of diversifying investment risk: - that 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 30th 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 diversification requirement referred to above, the Company looks through vehicles established and managed or advised by Pantheon or any Pantheon affiliate. The Company may enter into derivatives transactions for the purposes of efficient portfolio management and hedging (for example, hedging interest rate, currency or market exposures). Surplus cash of the Company may be invested in fixed interest securities, bank deposits or other similar securities. The Company may borrow to make investments and typically uses its borrowing facilities to manage its cash flows flexibly, enabling the Company to make investments as and when suitable opportunities arise and to meet calls in relation to existing investments without having to retain significant cash balances for such purposes. Under the Company's articles of association, the Company's borrowings may not at any time exceed 100% of the Company's net asset value. Typically, the Company does not expect its gearing to exceed 30% of gross assets. However, gearing may exceed this in the event that, for example, the Company's pipeline of future cash flows alters. The Company may invest in private equity funds, unquoted companies or special purpose or investment holding vehicles which are geared by loan facilities that rank ahead of the Company's investment. The Company does not adopt restrictions on the extent to which it is exposed to gearing in funds or companies in which it invests. THE DIRECTORS The Directors in office at the date of this report are: Tom Bartlam* (Chairman) Ian Barby* (Audit Committee Chairman) Richard Crowder Sir Laurie Magnus* Susannah Nicklin* Peter Readman* (Senior Independent Director) Rhoddy Swire * Independent of the Manager EXTRACTS FROM THE DIRECTORS' REPORT BUSINESS REVIEW The Business Review is designed to provide shareholders with information about the Company's business and results in the year to 30th June 2013. It should be read in conjunction with the Chairman's Statement and Manager's Review. Business and Strategy Pantheon International Participations PLC (the "Company" or "PIP"), a closed-ended investment trust, is the longest established private equity fund-of-funds quoted on the London Stock Exchange. It enables investors to gain access to a substantial portfolio of unquoted companies in the USA, Europe and Asia, within funds managed by experienced private equity managers selected for their ability to outperform. PIP's primary investment objective is to maximise capital growth by investing in a diversified portfolio of private equity funds and, occasionally, directly in private companies. The Company's full Objective and Investment Policy are set out above. The Company was incorporated and registered in England and Wales on 16th July 1987. It is registered as a public limited company and is an investment company as defined by Section 833 of the Companies Act 2006. It is a member of The Association of Investment Companies ("AIC"). The Company has received written approval from HM Revenue & Customs ("HMRC") as an authorised investment trust under Sections 1158/59 of the Corporation Tax Act 2010 for the year ended 30th June 2012. The Company has been approved as an investment trust for all previous years. New regulations for obtaining and retaining investment trust status applied to the Company with effect from 1st July 2012. The Company has applied for, and been granted, approval as an investment trust under the new regulations for the year ended 30th June 2013. The Company will be treated as an investment trust company for each subsequent accounting period, subject to there being no serious breaches of the conditions for approval. It is the opinion of the Directors that the Company has subsequently directed its affairs so as to enable it to continue to qualify for such approval. The principal conditions that must be met for approval by HMRC for any given accounting period as an investment trust are that all, or substantially all, of the Company's business should consist of "investing in shares, land or other assets with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds" and the Company must not retain more than 15% of all its income. In addition, the Company must not be a close company and its shares must be admitted to trading on a regulated market. The Company's status as an investment trust allows it to obtain an exemption from paying capital gains tax on the profits made from the sale of its investments. Investment trusts offer a number of advantages for investors, including access to investment opportunities that might not be open to private investors and to professional stock selection skills at low cost. Principal Risks and Uncertainties Facing the Company The Company invests principally in private equity funds. However, the Company's strategy is to adopt a global fund-of funds investment programme, maximising returns through selection of the best available funds, and to mitigate investment risk through diversification of the underlying portfolio by geography, investment stage and sector. The principal risks facing the Company include the following: Funding of investment commitments In the normal course of its business, the Company typically has outstanding commitments to private equity funds which are substantial relative to the Company's assets and may be drawn down at any time. The Company's ability to meet these commitments is dependent upon it receiving cash distributions (the timing and amount of which can be unpredictable) from its private equity investments and, to the extent these are insufficient, on the availability of financing facilities. Risks relating to investment opportunities There is no guarantee that the Company will find sufficient suitable investment opportunities, or that the private equity funds in which it invests will find suitable investment opportunities, to achieve the level of diversification which the Company seeks to achieve in relation to its investment portfolio. Financial risk of private equity The Company invests in private equity funds and unquoted companies which are less readily marketable than quoted securities and may take a long time to realise. In addition, such investments may carry a higher degree of risk than investments in quoted securities. The Company may be adversely affected by these risks notwithstanding the level of diversification which it seeks to achieve in relation to its investment portfolio. Long-term nature of private equity investments Private equity investments are long-term in nature and may take some years before reaching a level of maturity at which they can be realised. Accordingly, it is possible that the Company may not receive a return on investments made by it for a number of years. Liquidity risk Due to the Company's investment policy, a large proportion of the Company's portfolio comprises indirect participations in unquoted investments and direct holdings in unquoted investments. Such investments are less readily marketable than quoted securities and realisation of these investments may require a lengthy time period or may result in distributions in kind to the Company. Valuation uncertainty In valuing its investments in private equity funds and unquoted companies and in publishing its net asset value ("NAV"), the Company relies to a significant extent on the accuracy of financial and other information provided by these funds and companies to the Manager. There is potential for inconsistency in the valuation methods adopted by these funds and companies. In addition, the information provided is typically more than 60 days old at the time the NAV of the Company's shares is reported. Gearing The Company has committed revolving dollar and euro credit facilities with The Royal Bank of Scotland plc and Lloyds TSB Bank plc, which expire in June 2015. As at 30th June 2013 these facilities were undrawn (2012: undrawn). The use of gearing can cause both gains and losses in the asset value of the Company to be magnified. The Company may also invest in private equity funds or unquoted companies which are geared by loan facilities that rank ahead of the Company's investment both for payment of interest and capital. As a consequence, the Company may be exposed to gearing through the borrowings from time to time of such private equity funds and companies, therefore investment in such assets presents a higher risk as to their capital return. Foreign currency risk The Company makes investments in US dollars, euros and other currencies as well as sterling. Accordingly, the Company is exposed to currency exchange rate fluctuations. Competition The Company competes for investments with other investors. It is possible that competition for appropriate investment opportunities may increase, thus reducing the number of opportunities available and adversely affecting the terms upon which such investments can be made. Unregulated nature of underlying investments The private equity funds and underlying unquoted investments that form the basis of the majority of the Company's portfolio are not necessarily subject to regulation by the Financial Conduct Authority ("FCA") or an equivalent regulatory body. Funds and unquoted companies in which the Company invests (directly or indirectly) may be domiciled in jurisdictions which do not have a regulatory regime which provides an equivalent level of investor protection to that provided under the laws of the United Kingdom. Defaults on commitments If, in consequence of any failure to meet a demand for payment of any outstanding unpaid capital commitment of the Company to any private equity fund in which the Company has invested, the Company is treated as a defaulting investor by that fund, the Company may suffer a resultant dilution in its interest in that fund and, possibly, the compulsory sale of that interest. Taxation Any change in the Company's tax status or in taxation legislation or practice could affect the value of the investments held by and the performance of the Company. In addition, the income and gains of the Company from its investments may suffer withholding tax which may not be reclaimable in the countries where such income and gains arise. The Manager and other third party advisers Like most investment trust companies, the Company has no employees and the Directors are all non-executive. The Company is dependent upon the services of Pantheon as Manager and may be adversely affected if the services of Pantheon cease to be available to the Company. Details of the terms of the Management Agreement are set out in the full Annual Report and Accounts. Other third party service providers on whom the Company relies include Capita Sinclair Henderson Limited, which provides administrative, accounting and company secretarial services, and HSBC Bank plc, which acts as Custodian in respect of the Company's quoted equities and bonds. The Foreign Account Tax Compliance Act ("FATCA") FATCA is United States anti-tax avoidance legislation that forces Foreign Financial Institutions ("FFIs") to identify and report on investments by "US Persons". The regime will be implemented in the UK by primary British legislation and reporting will be to HMRC. UK investment trust companies are included in the FFI definition and need to have registered with the IRS by 30th June 2014. An investment trust company, however, will not have to make any reports where its shares and securities are regularly traded on an established stock exchange. If registration is required, PIP intends to register by 25th April 2014 to ensure that the Company is published on the first list of compliant FFIs. Alternative Investment Fund Managers' Directive The Alternative Investment Fund Managers' Directive ("AIFMD") was implemented by EU member states, including the UK, on 22nd July 2013, with existing investment companies, such as PIP, having until 22nd July 2014 to comply with the requirements. It seems likely that there will be an increase, potentially a material increase, in the Company's governance, administration and depositary expenses as a result of the implementation of AIFMD. The Board is in the process of discussing the requirements and the implications with its advisers to ensure compliance by 22nd July 2014. Further information on risks Further information on the principal risks the Company faces in its portfolio management activities and the policies for managing these risks and the policy and practice with regard to financial instruments are summarised in Note 21 to the financial statements. Review of 2012/2013 Net asset value The Company's total net assets attributable to shareholders increased during the year to Â£903.3m (2012: Â£845.4m). The NAV per share was 1,331.9p at 30th June 2013 (2012: 1,193.50p). Results and dividends The results for the year are as set out in the Income Statement. This shows that the Company's net revenue profit on ordinary activities before taxation for the year was Â£1.0m (2012: Â£0.3m) and capital returns were Â£85.9m (2012: Â£44.9m excluding the loss on the derivative asset at fair value through profit or loss). The Directors do not recommend the payment of a dividend in respect of the year ended 30th June 2013 (2012: nil). Key performance indicators The Board and the Manager monitor the following Key Performance Indicators: 1. The NAV performance PIP's NAV per share increased by 11.6% from the prior year NAV per share to 1,331.9p in the year to 30th June 2013. The NAV returns over 1 year, 3 years, 5 years and 10 years and since inception are set out above. The 11.6% increase in PIP's NAV per share compares with increases in the MSCI World Total Return (sterling) Index of 23.2% and the FTSE All-Share Total Return Index of 17.9% respectively. 2. The level of discount PIP's ordinary share price increased by 43.6% to 1,042.00p at 30th June 2013 (2012: 725.50p) and the discount to NAV decreased to 21.8% at the year end (2012: discount of 39.2%). PIP's redeemable share price increased by 38.2% to 1,050.00p at 30th June 2013 (2012: 760.00p) and the discount to NAV decreased to 21.2% at the year end (2012: discount of 36.3%). 3. The ongoing charges 2013 2012 Ongoing charges 1.16% 1.20% Look-through ongoing charges* 0.07% 0.08% Performance fees 0.00% 0.00% Finance costs 0.17% 0.22% Total ongoing charges, look-through ongoing charges*, performance fees and finance costs 1.40% 1.50% * Look-through ongoing charges includes management fees paid directly to PIP's Pantheon-managed fund investments. Future Developments A review of the year to 30th June 2013 and the outlook for the coming year can be found in the Chairman's Statement and the Manager's Review. Share Capital As at 30th June 2013, the Company had 34,507,013 ordinary shares of Â£0.67 each and 33,312,534 redeemable shares of Â£0.01 each in issue. No shares were held in treasury at the year end. During the year, 1,614,000 ordinary shares (with an aggregate nominal value of Â£1,081,380 and representing 4.5% of the ordinary share capital in issue on 30th June 2012) were purchased in the market for cancellation for a total consideration of Â£14.8m. During the year, 1,401,000 redeemable shares (with an aggregate nominal value of Â£14,010 and representing 4.0% of the redeemable share capital in issue on 30th June 2012) were also purchased in the market for cancellation for a total consideration of Â£11.9m. Since the year end, 225,000 ordinary shares (with an aggregate nominal value of Â£150,750 and representing 0.7% of the ordinary share capital in issue on 30th June 2013) have been purchased in the market for cancellation for a total consideration of Â£2.3m. As at the date of this report, the Company had shares in issue as shown in the table below, all of which are admitted to the official list maintained by the FCA and admitted to trading on the London Stock Exchange: SHARE CAPITAL NUMBER OF % OF TOTAL AND VOTING NUMBER OF VOTING RIGHTS SHARES VOTING RIGHTS RIGHTS AT SHARES ATTACHED TO HELD IN REPRESENTED 30TH SEPTEMBER 2013 IN ISSUE EACH SHARE TREASURY BY EACH CLASS ORDINARY SHARES OF 34,282,013 1 - 100 Â£0.67 EACH REDEEMABLE SHARES 33,312,534 - - - OF Â£0.01 EACH TOTAL VOTING RIGHTS 34,282,013 The rights attaching to each of the Company's classes of share are set out in the Company's Articles of Association. Further details are included in Note 14 to the financial statements. The redeemable shares do not carry any right to speak or vote at general meetings of the Company, including on resolutions authorising the issue or buyback of shares, although holders of redeemable shares are entitled to receive notice of general meetings of the Company and to attend such meetings. Redeemable shares do carry the right to vote at separate class meetings of the holders of redeemable shares. The sanction of holders of redeemable shares is required to various corporate actions as set out in the Articles of Association. The Company's ordinary shares and redeemable shares are freely transferable. However, the Directors may refuse to register a transfer of shares held in certificated form which are not fully paid and unless the instrument of transfer is (i) lodged, duly stamped, at the Company's registered office, accompanied by the relevant share certificate(s) and such other evidence (if any) as the Directors may reasonably require to show the right of the transferor to make the transfer; (ii) in respect of only one class of share; and (iii) not in favour of more than four persons jointly. The Directors may decline to register a transfer of an uncertificated share in the circumstances set out in the Uncertified Securities Regulations 2001 and where, in the case of a transfer to joint holders, the number of joint holders to whom the uncertificated share is to be transferred exceeds four. If the Directors decline to register a transfer, they are required to send notice of the refusal to the transferee within two months, giving reasons for their decision. Unless the Directors otherwise determine, a holder of ordinary shares will cease to be entitled to attend or vote at general meetings of the Company or at class meetings or on any poll if he/she fails to comply with a request by the Company to provide details of any interest held by any person in his/her ordinary shares within 14 days of the request being made. Additionally, if the shares represent at least 0.25% of their class, any dividends payable in respect of the shares will be withheld by the Company and no transfers of any of the shares held in certified form will be registered unless the shareholder is not him/herself in default as regards supplying the information required (and the Directors are satisfied that no person in default as regards supplying such information is interested in any of the shares the subject of the transfer) or unless the transfer arises as a result of the acceptance of a takeover offer or a sale made through a recognised investment exchange (or any other stock exchange outside the United Kingdom on which the Company's shares are normally traded) or is a transfer which the Directors are satisfied is made in consequence of a sale of the entire beneficial interest in the shares to a person who is unconnected with the shareholder and with any other person appearing interested in the shares. Save as described above there are: no restrictions concerning the transfer of securities in the Company or on voting rights; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; and no agreements which the Company is party to that might affect its control following a successful takeover bid. Amendment of the Company's Articles of Association and the giving of authority to issue or buy back the Company's shares require an appropriate resolution to be passed by shareholders. Proposals for the renewal of the Board's current authorities to issue and buy back shares are detailed in the full Annual Report and Accounts. Social, Environmental, Community and Employee Issues The Company has no employees and the Board consists entirely of non-executive Directors. As an investment trust, the Company has no direct impact on the community or the environment. The Manager is committed to the Principles for Responsible Investing and its policies are set out in the full Annual Report and Accounts. These Principles are integrated into Pantheon's investment analysis and decision-making process, as well as during post-investment monitoring. Going Concern The Company's business activities, together with the factors likely to affect its future development, performance and position, including its financial position, are set out in the Chairman's Statement and Manager's Review. At each Board meeting, the Directors review the Company's latest management accounts and other financial information. Its commitments to private equity investments are reviewed, together with its financial resources, including cash held and the Company's borrowing capability. One-year cash flow scenarios are also presented to each meeting and discussed. After due consideration of the balance sheet and activities of the Company and the Company's assets, liabilities, commitments and financial resources, the Directors have concluded that the Company has adequate resources to continue in operation for the foreseeable future. For this reason, they consider it appropriate to continue to adopt the going concern basis in preparing the financial statements. The full Annual Report contains the following statements regarding responsibility for the Annual Report and financial statements (references in the following statements are to pages in the Annual Report). STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare financial statements in accordance with United Kingdom Generally Accepted Accounting Practice ("UK GAAP"). 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 and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to: â€¢ select suitable accounting policies and then apply them consistently; â€¢ make judgements and estimates that are reasonable and prudent; â€¢ state whether applicable UK accounting standards have been followed, subject to any material departure disclosed and explained in the financial statements; and â€¢ prepare the financial statements on the 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 disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. The Directors are responsible for ensuring that the Directors' Report and other information in the Annual Report is prepared in accordance with company law in the United Kingdom, and that the Annual Report includes information required by the Listing Rules of the Financial Conduct Authority. They also have responsibility for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors, to the best of their knowledge, state that: â€¢ the financial statements, prepared in accordance with UK GAAP, give a true and fair view of the assets, liabilities, financial position and return of the Company; and â€¢ this Annual Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces. On behalf of the Board TOM BARTLAM Chairman 30th September 2013 NON-STATUTORY ACCOUNTS The financial information set out below does not constitute the Company's statutory accounts for the years ended 30th June 2013 and 2012 but is derived from those accounts. Statutory accounts for 2012 have been delivered to the Registrar of Companies, and those for 2013 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 Accounts at www.pipplc.com. INCOME STATEMENT YEAR ENDED 30th JUNE 2013 2013 2012 REVENUE CAPITAL TOTAL* REVENUE CAPITAL TOTAL* NOTE Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Gains on investments designated at fair value through profit or loss** 9b - 82,202 82,202 - 46,146 46,146 Loss on derivatives contained in standby agreements at fair value through profit or loss*** - - - - (14,938) (14,938) Currency gains/ (losses) on cash and borrowings 19 - 3,720 3,720 - (1,104) (1,104) Investment income 2 12,410 - 12,410 12,065 - 12,065 Investment management fees 3 (8,839) - (8,839) (8,867) - (8,867) Other expenses 4 (1,134) - (1,134) (1,062) (160) (1,222) RETURN ON ORDINARY ACTIVITIES BEFORE FINANCING COSTS AND TAX 2,437 85,922 88,359 2,136 29,944 32,080 Interest payable and similar charges/ finance costs 6 (1,453) - (1,453) (1,831) - (1,831) RETURN ON ORDINARY ACTIVITIES BEFORE TAX 984 85,922 86,906 305 29,944 30,249 Tax on ordinary activities 7 (2,401) - (2,401) (1,363) - (1,363) RETURN ON ORDINARY ACTIVITIES AFTER TAX FOR THE FINANCIAL YEAR (1,417) 85,922 84,505 (1,058) 29,944 28,886 RETURN PER ORDINARY AND REDEEMABLE SHARE 8 (2.04)p 123.99p 121.95p (1.48)p 41.77p 40.29p ADJUSTED RETURN PER ORDINARY AND REDEEMABLE SHARE 8 (2.04)p 123.99p 121.95p (1.48)p 62.62p 61.14p * The total column of the statement represents the Company's profit and loss statement prepared in accordance with UK GAAP. The supplementary revenue return and capital columns are prepared under guidance published by the Association of Investment Companies. ** Includes currency gains on investments. *** The loss on the derivative was an accounting entry only and had no effect on the cash balances of the Company. All revenue and capital items in the above statement relate to continuing operations. No operations were acquired or discontinued during the year. There were no recognised gains or losses other than those passing through the Income Statement. The notes form part of these financial statements. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS CAPITAL CAPITAL OTHER RESERVE ON SHARE SHARE REDEMPTION CAPITAL INVESTMENTS SPECIAL REVENUE CAPITAL PREMIUM RESERVE RESERVE HELD RESERVE RESERVE TOTAL Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Movement for the year ended 30th June 2013 OPENING EQUITY SHAREHOLDERS' FUNDS 24,549 283,555 996 265,724 259,255 67,939 (56,604) 845,414 Return for the year - - - 48,414 37,508 - (1,417) 84,505 Ordinary shares bought back for cancellation (1,081) - 1,081 - - (14,764) - (14,764) Redeemable shares bought back for cancellation (14) - 14 - - (11,871) - (11,871) CLOSING EQUITY SHAREHOLDERS' FUNDS 23,454 2 83,555 2,091 314,138 296,763 41,304 (58,021) 903,284 Movement for the year ended 30th June 2012 OPENING EQUITY SHAREHOLDERS' FUNDS 25,428 183,184 26 288,790 244,850 99,861 (55,546) 786,593 Return for the year - - - 15,539 14,405 - (1,058) 28,886 Derecognition of derivative asset - - - (38,605) - - - (38,605) Issue of new redeemable shares 91 100,409 - - - - - 100,500 Expenses relating to the issue of new redeemable shares - (38) - - - - - (38) Ordinary shares bought back for cancellation (938) - 938 - - (9,685) - (9,685) Redeemable shares bought back for cancellation (23) - 23 - - (15,770) - (15,770) Redeemable shares bought back and held in treasury* - - - - - (6,467) - (6,467) Redeemable shares cancelled from treasury (9) - 9 - - - - - CLOSING EQUITY SHAREHOLDERS' FUNDS 24,549 283,555 996 265,724 259,255 67,939 (56,604) 845,414 * Shares bought back and held in treasury were subsequently cancelled on 28th October 2011. The notes form part of these financial statements. BALANCE SHEET as at 30th JUNE 2013 2013 2012 Note Â£'000 Â£'000 Fixed assets Investments designated at fair value through profit or loss 9a/b 826,423 799,853 Current assets Debtors 11 1,051 1,512 Cash at bank 18 78,387 51,143 79,438 52,655 Creditors: Amounts falling due within one year Other creditors 12 2,577 7,094 2,577 7,094 NET CURRENT ASSETS 76,861 45,561 NET ASSETS 903,284 845,414 Capital and reserves Called-up share capital 14 23,454 24,549 Share premium 15 283,555 283,555 Capital redemption reserve 15 2,091 996 Other capital reserve 15 314,138 265,724 Capital reserve on investments held 15 296,763 259,255 Special reserve 15 41,304 67,939 Revenue reserve 15 58,021) (56,604) TOTAL EQUITY SHAREHOLDERS' FUNDS 903,284 845,414 NET ASSET VALUE PER SHARE - ORDINARY AND REDEEMABLE 16 1,331.89p 1,193.50p The notes form part of these financial statements. The financial statements were approved by the Board of Pantheon International Participations PLC on 30th September 2013 and were signed on its behalf by TOM BARTLAM Chairman Company No. 2147984 CASH FLOW STATEMENT YEAR ENDED 30TH JUNE 2013 2013 2012 NOTE Â£'000 Â£'000 Cash flow from operating activities Investment income received 12,357 12,052 Deposit and other interest received 53 13 Investment management fees paid (9,574) (8,869) Performance fee paid (5,057) - Secretarial fees paid (211) (172) Other cash payments (1,077) (951) Withholding tax deducted (2,401) (1,363) NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES 19 (5,910) 710 Servicing of finance Loan commitment and arrangement fees paid (1,138) (1,160) Redeemable shares commitment fees paid - (63) Interest on loan notes paid - (322) NET CASH OUTFLOW FROM RETURNS ON INVESTMENT AND SERVICING OF FINANCE (1,138) (1,545) Capital expenditure and financial investment Purchases of investments (128,198) (77,126) Purchases of government securities - (15,901) Disposals of investments 183, 995 134,632 Disposals of government securities - 15,743 NET CASH INFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT 55,797 57,348 NET CASH INFLOW BEFORE FINANCING 48,749 56,513 Financing Expenses relating to issue of new redeemable shares - (38) Ordinary shares purchased for cancellation (13,324) (9,685) Redeemable shares purchased for cancellation (11,871) (15,770) Redeemable shares purchased to be held in treasury - (6,467) NET CASH OUTFLOW FROM FINANCING (25,195) (31,960) INCREASE IN CASH 17 23,554 24,553 The notes form part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS 1. Accounting Policies A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below. (A) Basis of Preparation The financial statements have been prepared on the historical cost basis of accounting, except for the measurement at fair value of investments, and in accordance with applicable UK GAAP and on the basis that all activities are continuing. The Company's financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (Â£'000) except when indicated otherwise. (B) Statement of Recommended Practice The financial statements have been prepared in accordance with the Statement of Recommended Practice (as amended in January 2009) for the financial statements of investment trust companies and venture capital trusts issued by the Association of Investment Companies. (C) Segmental Reporting The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business. (D) Valuation of Investments All investments held by the Company are classified as "fair value through profit or loss". As the Company's business is investing in financial assets with a view to profiting from their total return in the form of interest, dividends or increases in fair value, quoted equities and fixed income securities are designated as fair value through profit or loss on initial recognition. The Company manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy. For investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business at the Balance Sheet date. For investments that are not actively traded in organised financial markets, fair value is determined using reliable valuation techniques as described below: (i) Unquoted fixed asset investments are stated at the estimated fair value. In the case of investments in private equity funds, this is based on the net asset value of those funds ascertained from periodic valuations provided by the managers of the funds. Such valuations are necessarily dependent upon the reasonableness of the valuations by the fund managers of the underlying investments. In the absence of contrary information the values are assumed to be reasonable. These valuations are reviewed periodically for reasonableness. The Company may acquire secondary interests at either a premium or a discount to the fund manager's valuation. Within the Company's portfolio, those fund holdings purchased at a premium are normally revalued to their stated net asset values at the next reporting date. Those fund holdings purchased at a discount are normally held at cost until the receipt of a valuation from the fund manager in respect of a date after acquisition, when they are revalued to their stated net asset values, unless an adjustment against a specific investment is considered appropriate. In the case of direct investments in unquoted companies, the initial valuation is based on the transaction price. Where better indications of fair value become available, such as through subsequent issues of capital or dealings between third parties, the valuation is adjusted to reflect the new evidence. This information may include the valuations provided by private equity managers who are also invested in the company. Valuations are reduced where the company's performance is not considered satisfactory. Private equity funds may contain a proportion of quoted shares from time to time, for example, where the underlying company investments have been taken public but the holdings have not yet been sold. The quoted market holdings at the date of the latest fund accounts are reviewed and compared with the value of those holdings at the year end. If there has been a material movement in the value of these holdings, the valuation is adjusted to reflect this. As at 30th June 2013 there was no aggregate difference on underlying investments to be recognised in profit or loss at the start or end of the period. (ii) Quoted investments are valued at the bid price on the relevant stock exchange. (E) Income Dividends receivable on quoted equity shares are brought into account on the ex-dividend date. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. The fixed return on a debt security is recognised on a time apportionment basis so as to reflect the effective interest rate on the security. Other interest receivable is included on an accruals basis. (F) Taxation Corporation tax payable is based on the taxable profit for the year. The charge for taxation takes into account taxation deferred or accelerated because of timing differences between the treatment of certain items for accounting and taxation purposes. Full provision for deferred taxation is made under the liability method, without discounting, on all timing differences that have arisen but not reversed by the Balance Sheet date, unless such provision is not permitted by FRS 19 Deferred Tax. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue on the same basis as the particular item to which it relates, using the marginal method. (G) Expenses All expenses are accounted for on an accruals basis. Expenses, including investment management fees, are charged through the revenue account except as follows: â€¢ expenses which are incidental to the acquisition or disposal of an investment are treated as capital costs and separately identified and disclosed in Note 9; â€¢ expenses of a capital nature are accounted for through the capital account; and â€¢ investment performance fees. (H) Foreign Currency The currency of the Primary Economic Environment in which the Company operates ("the functional currency") is pounds sterling ("sterling"), which is also the presentation currency. Transactions denominated in foreign currencies are recorded in the local currency at actual exchange rates as at the date of transaction. Monetary assets and liabilities denominated in foreign currencies at the year end are reported at the rates of exchange prevailing at the year end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the Income Statement. For non-monetary assets these are covered by fair value adjustments. (I) Other Capital Reserve The following are accounted for in this reserve: â€¢ investment performance fees; â€¢ gains and losses on the realisation of investments; â€¢ realised exchange differences of a capital nature; and â€¢ expenses of a capital nature. Capital distributions from investments are accounted for on a reducing cost basis; cash received is first applied to reducing the historical cost of an investment; any gain will be recognised as realised only when the cost has been reduced to nil. (J) Capital Reserve on Investments Held The following are accounted for in this reserve: â€¢ increases and decreases in the value of investments held at the year end. (K) Investment Performance Fee The Manager is entitled to a performance fee from the Company in respect of each 12 calendar month period ending on 30th June in each year. The performance fee payable in respect of each such calculation period is 5% of the amount by which the net asset value at the end of such period exceeds 110% of the applicable "high-water mark", i.e. the net asset value at the end of the previous calculation period in respect of which a performance fee was payable, compounded annually at 10% for each subsequent completed calculation period up to the start of the calculation period for which the fee is being calculated. For the calculation period ended 30th June 2013, the notional performance fee hurdle is a net asset value per share of 1,828.19p. The performance fee is calculated using the adjusted net asset value. In previous periods this was adjusted to exclude the derivative asset. The performance fee is calculated so as to ignore the effect on performance of any performance fee payable in respect of the period for which the fee is being calculated or of any increase or decrease in the net assets of the Company resulting from any issue, redemption or purchase of any shares or other securities, the sale of any treasury shares or the issue or cancellation of any subscription or conversion rights for any shares or other securities and any other reduction in the Company's share capital or any distribution to shareholders. 2. Income 30TH JUNE 2013 30TH JUNE 2012 Â£'000 Â£'000 Income from investments Unfranked investment income 12,357 12,047 12,357 12,047 Other income Interest 55 13 Exchange difference on income (2) 5 53 18 TOTAL INCOME 12,410 12,065 Total income comprises Dividends 12,357 12,041 Interest 55 19 Exchange difference on income (2) 5 12,410 12,065 Analysis of income from investments Unlisted 12,357 12,041 Listed - 6 12,357 12,047 3. Investment Management Fees 30TH JUNE 2013 30TH JUNE 2012 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Investment management fees 8,839 - 8,839 8,867 - 8,867 8,839 - 8,839 8,867 - 8,867 The investment management fee is payable monthly in arrears at the rate set out in the Directors' Report in the full Annual Report and Accounts. During the year, services with a total value of Â£9,454,000 (2012: Â£9,511,000), being Â£8,839,000 (2012: Â£8,867,000) directly from Pantheon Ventures (UK) LLP and Â£615,000 (2012: Â£644,000) via Pantheon managed fund investments, were purchased by the Company. At 30th June 2013 Â£769,000 (2012: Â£1,504,000) was owed for investment management fees. A performance fee of Â£5,057,000 was paid to the Manager during the year (see Note 12) in respect of the initial 18 month performance fee calculation period ended 30th June 2008. Of this amount, Â£3,660,000 was charged in the year to 30th June 2008 with the remaining balance charged in the year to 30th June 2007. No performance fee is payable in respect of the 12 calendar month period to 30th June 2013. The basis upon which the performance fee is calculated is explained in Note 1(K) and in the Directors' Report in the full Annual Report and Accounts. 4. Other Expenses 30TH JUNE 2013 30TH JUNE 2012 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Secretarial and accountancy services 202 - 202 194 - 194 VAT refund on secretarial and accountancy services - - - (68) - (68) Fees payable to the Company's Auditor for the audit of the annual financial statements 33 - 33 31 - 31 Fees payable to the Company's Auditor for - audit-related assurance services - half-yearly report 6 - 6 6 - 6 - other assurance services - net asset value calculations 11 - 11 26 - 26 Directors' remuneration (see Note 5) 235 - 235 157 - 157 Irrecoverable VAT 29 - 29 27 - 27 Legal and professional fees 366 - 366 409 160 569 Printing 27 - 27 40 - 40 Other 225 - 225 240 - 240 1,134 - 1,134 1,062 160 1,222 The Directors do not consider that the provision of non-audit work to the Company affects the independence of the Auditor. 5. Directors' Remuneration Directors' emoluments comprise wholly Directors' fees. A breakdown is provided in the Directors' Remuneration Report in the full Annual Report and Accounts. 6. Interest Payable and Similar Charges 30TH JUNE 2013 30TH JUNE 2012 Â£'000 Â£'000 Bank loan and overdraft interest - 1 Loan commitment and arrangement fees 1,453 1,445 Redeemable share commitment fee - 63 Loan notes interest - 322 1,453 1,831 In June 2011 the Company entered into a new loan agreement with The Royal Bank of Scotland plc and Lloyds TSB Bank plc. Under the agreement, which will expire in June 2015, committed revolving dollar and euro credit facilities of $82m and â‚¬57m have been made available. Each individual drawdown bears interest at a variable rate agreed for the period of the drawdown and a commitment fee of 1.10% per annum is payable in respect of the amounts available for drawdown in each facility. In addition, the Company has an overdraft facility of Â£5m with The Royal Bank of Scotland plc. At 30th June 2013, the sterling equivalent amount of Â£nil (2012: Â£nil) was drawn down under the facilities. 7. Tax on Ordinary Activities 30TH JUNE 2013 30TH JUNE 2012 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Withholding tax deducted from distributions 2,401 - 2,401 1,363 - 1,363 Current tax The current tax for the year differs from the standard rate of corporation tax in the UK (23%). The differences are explained below: Net return on ordinary activities before tax 984 85,922 86,906 305 29,944 30,249 Theoretical tax at UK corporation tax rate of 23.75% (2012: 25.5%)* 234 20,406 20,640 78 7,636 7,714 Non-taxable investment, derivative and currency (gains)/losses - (20,406) (20,406) - (7,677) (7,677) Effect of expenses in excess of taxable income - - - - 41 41 Unutilised management expenses (234) - (234) (78) - (78) Withholding tax deducted from distributions (2,401) - (2,401) (1,363) - (1,363) (2,401) - (2,401) (1,363) - (1,363) * The corporation tax rate applied is based on the average tax rates for the financial years ended 30th June 2013 and 30th June 2012. Factors that May Affect Future Tax Charges The Company is an investment trust and therefore is not subject to tax on capital gains. Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the Company meets (and intends to meet for the foreseeable future) the conditions for approval as an investment trust company. No deferred tax asset has been recognised in respect of excess management expenses and expenses in excess of taxable income as they will only be recoverable to the extent that there is sufficient future taxable revenue. As at 30th June 2013, excess management expenses are estimated to be in excess of Â£121m (2012: Â£122m). 8. Return per Share 30TH JUNE 2013 30TH JUNE 2012 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL Return on ordinary activities after tax for the financial year in Â£'000 (1,417) 85,922 84,505 (1,058) 29,944 28,886 Loss on derivatives contained in standby agreements in Â£'000 - - - - 14,938 14,938 Adjusted return on ordinary activities after tax for the financial year in Â£'000* (1,417) 85,922 84,505 (1,058) 44,882 43,824 Weighted average ordinary and redeemable shares 69,296,879 71,680,727 Return per ordinary and redeemable share (2.04)p 123.99p 121.95p (1.48)p 41.77p 40.29p Adjusted return per ordinary and redeemable share* (2.04)p 123.99p 121.95p (1.48)p 62.62p 61.14p * The adjusted return excludes the realised loss on the derivative (see Note 13) of Â£nil (2012: Â£14,938,000). 9a. Movements on Investments 30TH JUNE 2013 30TH JUNE 2012 Â£'000 Â£'000 Book cost brought forward 541,721 572,112 Acquisitions at cost 128,160 87,649 Capital distributions - proceeds (183,792) (149,810) Capital distributions - realised gains on sales 44,695 31,770 BOOK COST AT 30TH JUNE 530,784 541,721 Unrealised appreciation of investments Unlisted investments 295,509 258,043 Listed investments 130 89 VALUATION OF INVESTMENTS AT 30TH JUNE 826,423 799,853 9b. Analysis of Investments 30TH JUNE 2013 30TH JUNE 2012 Â£'000 Â£'000 Sterling Unlisted investments 57,226 44,237 Listed investments - - 57,226 44,237 US dollar Unlisted investments 587,617 560,142 Listed investments 199 531 587,816 560,673 Euro Unlisted investments 170,232 184,037 Listed investments - - 170,232 184,037 Other Unlisted investments 11,149 10,906 Listed investments - - 11,149 10,906 826,423 799,853 Realised profits on sales 44,695 31,770 Amounts previously recognised as unrealised depreciation on those sales 89 545 Increase in unrealised appreciation 37,418 13,831 GAINS ON INVESTMENTS 82,202 46,146 Further analysis of the investment portfolio is provided in the Manager's Review above. Transaction costs incidental to the acquisition of investments totalled Â£nil (2012: Â£nil) and to the disposals of investments totalled Â£15,000 (2012: Â£3,000) for the year. 10. Fair Value Hierarchy Financial Assets at Fair Value Through Profit or Loss at 30th June 2013 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Â£'000 Â£'000 Â£'000 Â£'000 Unlisted holdings - - 826,224 826,224 Listed holdings 199 - - 199 199 - 826,224 826,423 Financial Assets at Fair Value Through Profit or Loss at 30th June 2012 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Â£'000 Â£'000 Â£'000 Â£'000 Unlisted holdings - - 799,322 799,322 Listed holdings 531 - - 531 531 - 799,322 799,853 Level 3 Financial Assets at Fair Value Through Profit or Loss at 30th June 2013 PRIVATE EQUITY INVESTMENTS Â£'000 Opening balance 799,322 Purchases at cost 128,160 Transfer of book cost to level 1* (4,857) Sales proceeds (172,352) Total gains or losses included in "Gains on investments" in the Income Statement - on assets sold 38,485 - on assets held as at 30th June 2013 37,466 CLOSING BALANCE 826,224 Level 3 Financial Assets at Fair Value Through Profit or Loss at 30th June 2012 PRIVATE EQUITY INVESTMENTS AND DERIVATIVE ASSET Â£'000 Opening balance 863,448 Purchases at cost 77,164 Transfer of book cost to level 1* (1,100) Sales proceeds (132,457) Total gains or losses included in "Gains on investments" in the Income Statement - on assets sold 31,032 - on assets held as at 30th June 2012 14,778 Realised loss on derivatives (14,938) Derivative asset derecognised (38,605) CLOSING BALANCE 799,322 * The transfer of book cost to level 1 is due to stock distributions received from private equity investments. 11. Debtors 30TH JUNE 2013 30TH JUNE 2012 Â£'000 Â£'000 Amounts owed by investment funds 299 472 Prepayments and accrued income 752 1,040 1,051 1,512 12. Creditors: Amounts Falling Due Within One Year 30TH JUNE 2013 30TH JUNE 2012 Â£'000 Â£'000 Investment management fees 769 1,504 Investment performance fee - 5,057 Amounts owed to brokers - 38 Amounts owing for share buybacks 1,440 - Other creditors and accruals 368 495 2,577 7,094 13. Derivatives 30TH JUNE 2013 30TH JUNE 2012 Â£'000 Â£'000 Beginning of year - 53,543 Realised loss on derivatives - (14,938) Derecognition of derivatives - (38,605) END OF YEAR - - Between the years 2005 and 2008 PIP entered into standby commitments under which certain institutions agreed to subscribe an aggregate amount of Â£150m for new redeemable shares in the Company when called upon by the Company at a subscription price per new redeemable share equal to the prevailing net asset value per share at the time of subscription. In order to comply with FRS 26 the standby commitments were treated as a derivative and valued as an asset accordingly. On 24th August 2011, the Company drew down on the standby commitments and issued Â£100.5m of new redeemable shares. The Company terminated the remaining standby commitments of Â£49.5m with effect from 30th September 2011. 14. Called-up Share Capital 30TH JUNE 2013 30TH JUNE 2012 Â£'000 Â£'000 Allotted, called-up and fully paid: 34,507,013 (2012: 36,121,013) ordinary shares of 67p each 23,121 24,202 33,312,534 (2012: 34,713,534) redeemable shares 333 347 of 1p each 23,454 24,549 During the year, 1,401,000 redeemable shares and 1,614,000 ordinary shares were bought back in the market for cancellation. The total consideration paid, including commission and stamp duty, was Â£11,871,000 and Â£14,764,000 respectively. Redeemable shares rank equally with ordinary shares regarding dividend rights and rights on winding up or return of capital (other than a redemption or purchase of shares). The holders of redeemable shares have the right to receive notice of and attend all general meetings of the Company but not to speak or vote. Each holder of ordinary shares is entitled, on a show of hands, to one vote and, on a poll, to one vote for each ordinary share held. The redeemable shares are redeemable at the option of the Company, at the prevailing net asset value per share, within 60 days following the end of each monthly NAV calculation date or within 60 days of any other business day which is determined by the Directors to be a NAV calculation date. 15. Reserves CAPITAL CAPITAL OTHER RESERVE ON SHARE REDEMPTION CAPITAL INVESTMENTS SPECIAL REVENUE PREMIUM RESERVE RESERVE HELD RESERVE RESERVE Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Beginning of year 283,555 996 265,724 259,255 67,939 (56,604) Net gain on realisation of investments - - 44,695 - - - Increase in unrealised appreciation - - - 37,418 - - Transfer on disposal of investments - - - 89 - - Exchange differences on currency - - 3,690 - - - Exchange differences on other capital items - - 29 1 - - Share cancellations - 1,095 - - - - Share buybacks - - - - (26,635) - Revenue return for the year - - - - - (1,417) END OF YEAR 283,555 2,091 314,138 296,763 41,304 (58,021) Under the Company's Articles of Association, the Company is prohibited from distributing capital profits by way of dividend. 16. Net Asset Value per Share 30TH JUNE 2013 30TH JUNE 2012 Net assets attributable in Â£'000 903,284 845,414 Ordinary and redeemable shares 67,819,547 70,834,547 Net asset value per share - ordinary and redeemable 1,331.89p 1,193.50p 17. Reconciliation of Net Cash Flow to the Movement in Net Funds 30TH JUNE 2013 30TH JUNE 2012 Â£'000 Â£'000 Increase in cash in the year 23,554 24,553 Non-cash movement - foreign exchange gains/(losses) 3,690 (1,055) - loan notes repaid by issue of redeemable shares - 100,500 CHANGE IN NET FUNDS 27,244 123,998 Net cash/(debt) at beginning of year 51,143 (72,855) NET FUNDS AT END OF YEAR 78,387 51,143 18. Analysis of Net Funds 30TH JUNE 2013 30TH JUNE 2012 Â£'000 Â£'000 Cash at bank 78,387 51,143 78,387 51,143 19. Reconciliation of Return on Ordinary Activities Before Financing Costs and Tax to Net Cash Flow from Operating Activities 30TH JUNE 2013 30TH JUNE 2012 Â£'000 Â£'000 Return on ordinary activities before financing costs and tax 88,359 32,080 Withholding tax deducted (2,401) (1,363) Gains on investments (82,202) (46,146) Loss on derivative - 14,938 Currency (gains)/losses on cash and borrowings (3,720) 1,104 (Decrease)/increase in creditors (5,921) 96 (Increase)/decrease in other debtors (25) 1 (5,910) 710 20. Contingencies, Guarantees and Financial Commitments At 30th June 2013, there were financial commitments outstanding of Â£195.1m (2012: Â£190.9m) in respect of investments in partly paid shares and interests in private equity funds. 21. Analysis of Financial Assets and Liabilities The primary investment objective of the Company is to seek to maximise long-term capital growth for its shareholders by investing in funds specialising in unquoted investments, acquiring unquoted portfolios and participating directly in private placements. Investments are not restricted to a single market but are made when the opportunity arises and on an international basis. The Company's financial instruments comprise securities and other investments, cash balances and debtors and creditors that arise from its operations, for example, sales and purchases awaiting settlement and debtors for accrued income. The principal risks the Company faces in its portfolio management activities are: â€¢ liquidity/marketability risk; â€¢ interest rate risk; â€¢ market price risk; and â€¢ foreign currency risk. The Company has little exposure to credit risk. The Manager monitors the financial risks affecting the Company on a daily basis and the Directors regularly receive financial information, which is used to identify and monitor risk. In accordance with FRS 29, an analysis of financial assets and liabilities, which identifies the risk to the Company of holding such items, is given below. Liquidity Risk Due to the nature of the Company's investment policy, the largest proportion of the portfolio is invested in unquoted securities, many of which are less readily marketable than, for example, "blue-chip" UK equities. The Directors believe that the Company, as a closed-end fund with no fixed wind-up date, is ideally suited to making long-term investments in instruments with limited marketability. The investments in unquoted securities are monitored by the Board on a regular basis. There are limited opportunities for the Company to acquire secondary unquoted portfolios due to the cyclical nature of their occurrence. As a result, at times of low investment opportunity, some funds may be invested in gilts and other fixed interest government bonds. It is the nature of investment in private equity that a commitment (see Note 20 for outstanding commitments as at 30th June 2013) to invest will be made and that calls for payments will then be received from the unlisted investee entity. These payments are usually on an ad-hoc basis and may be called at any instance over a number of years. The Company's ability to meet these commitments is dependent upon it receiving cash distributions from its private equity investments and, to the extent these are insufficient, on the availability of financing facilities. In order to cover any shortfalls, the Company has entered into a multi-currency revolving credit facility with The Royal Bank of Scotland plc and Lloyds TSB Bank plc, due to expire in June 2015, and comprising facilities of $82m and â‚¬57m of which at 30th June 2013 the sterling equivalent of Â£nil (30th June 2012: Â£nil) was drawn down (see Note 6 for further information). The principal covenant that applies to the loan facility is that gross borrowings do not exceed 30% of adjusted gross asset value. Total available financing as at 30th June 2013 stood at Â£181.3m (2012: Â£149.5m), comprising Â£78.4m (2012: Â£51.1m) in cash balances and Â£102.9m (2012: Â£98.4m) (sterling equivalent) in undrawn bank facilities. The available financing along with the private equity portfolio exceeded the outstanding commitments by 5.2 times (2012: 5.0 times). Interest Rate Risk The Company may use gearing to achieve its investment objectives and manage cash flows and uses a multi-currency revolving credit facility for this purpose. Interest on the revolving credit facility is payable at variable rates determined subject to drawdown. Variable rates are defined as LIBOR or EURIBOR + 2.75%, dependent on the currency drawn. The interest rate is then fixed for the duration that the loan is drawn down. At 30th June 2013 there was the sterling equivalent of Â£nil funds drawn down on the loan facilities (30th June 2012: Â£nil). A commitment fee of 1.10% per annum is payable in respect of the amounts available for drawdown in each facility. Non-interest rate exposure The remainder of the Company's portfolio and current assets are not subject to interest rate risks. Financial assets for 2013 and 2012 consisted of investments, cash and debtors (excluding prepayments). As at 30th June 2013, the interest rate risk and maturity profile of the Company's financial assets was as follows: FIXED INTEREST NO MATURES MATURES AVERAGE MATURITY WITHIN AFTER INTEREST TOTAL DATE 1 YEAR 1 YEAR RATE 30TH JUNE 2013 Â£'000 Â£'000 Â£'000 Â£'000 % Fair value no interest rate risk financial assets Sterling 58,676 58,676 - - - US dollar 661,480 661,480 - - - Euro 172,464 172,464 - - - Other 12,525 12,525 - - - 905,145 905,145 - - - The interest rate risk and maturity profile of the Company's financial assets as at 30th June 2012 was as follows: FIXED INTEREST NO MATURES MATURES AVERAGE MATURITY WITHIN AFTER INTEREST TOTAL DATE 1 YEAR 1 YEAR RATE 30TH JUNE 2012 Â£'000 Â£'000 Â£'000 Â£'000 % Fair value no interest rate risk financial assets Sterling 50,595 50,595 - - - US dollar 602,149 602,149 - - - Euro 187,818 187,818 - - - Other 10,906 10,906 - - - 851,468 851,468 - - - Financial Liabilities At 30th June 2013, the Company had drawn the sterling equivalent of Â£nil (2012: Â£nil) of its committed revolving dollar and euro credit facilities, expiring June 2015, of $82m and â‚¬57m respectively with The Royal Bank of Scotland plc and Lloyds TSB Bank plc. Interest is incurred at a variable rate as agreed at the time of drawdown and is payable at the maturity date of each advance. At the year end, interest of Â£nil (2012: Â£nil) was accruing. A commitment fee of 1.10% per annum is payable in respect of the amounts available for drawdown in each facility. At 30th June 2013 and at 30th June 2012, all financial liabilities were due within one year and comprised short-term creditors. Market Price Risk The method of valuation of the fixed asset investments is described in Note 1 (D) above. The nature of the Company's fixed asset investments, with a high proportion of the portfolio invested in unquoted securities, means that the investments are valued by the Directors after due consideration of the most recent available information from the underlying investments. PIP's portfolio is well diversified by the sectors in which the underlying companies operate. This sectoral diversification helps to minimise the effects of cyclical trends within particular industry segments. If the investment portfolio fell by 20% from the 30th June 2013 valuation, with all other variables held constant, there would have been a reduction of Â£166,937,000 (2012 based on a fall of 20%: Â£161,570,000) in the return before taxation. An increase of 20% would have increased the return before taxation by Â£163,632,000 (2012 based on a 20% increase: Â£158,371,000). Foreign Currency Risk Since it is the Company's policy to invest in a diverse portfolio of investments based in a number of countries, the Company is exposed to the risk of movement in a number of foreign exchange rates. A geographical analysis of the portfolio and hence its exposure to currency risk is given above. Although it is permitted to do so, the Company did not hedge the portfolio against the movement in exchange rates during the financial year. The investment approach and the Manager's consideration of the associated risk are discussed in further detail in the Manager's Review above. The Company settles its transactions from its bank accounts at an agreed rate of exchange at the date on which the bargain was made. As at 30th June 2013, realised exchange gains of Â£29,000 (2012: realised exchange losses of Â£78,000) and realised gains relating to currency of Â£3,690,000 (2012: realised losses of Â£1,055,000) have been taken to the capital reserve. The Company's exposure to foreign currency excluding private equity investments is shown below. In relation to this exposure, if the sterling/dollar and sterling/euro exchange rates had reduced by 10% from that obtained at 30th June 2013, it would have the effect, with all other variables held constant, of increasing equity shareholders' funds by Â£8,433,000 (2012: Â£5,029,000). If there had been an increase in the sterling/dollar and sterling/euro exchange rates of 10%, it would have the effect of decreasing equity shareholders' funds by Â£6,900,000 (2012: Â£4,114,000). The calculations are based on the financial assets and liabilities and the exchange rate as at 30th June 2013 of 1.51670 (2012: 1.56845) sterling/dollar and 1.16880 (2012: 1.23595) sterling/euro. An analysis of the Company's exposure to foreign currency excluding private equity investments is given below: 30TH JUNE 30TH JUNE 30TH JUNE 30TH JUNE 2013 2013 2012 2012 ASSETS LIABILITIES ASSETS LIABILITIES Â£'000 Â£'000 Â£'000 Â£'000 US dollar 73,664 - 41,476 - Euro 2,232 - 3,782 - Swedish krona 66 - - - Norwegian krona 1,310 - - - 77,272 - 45,258 - Fair Value of Financial Assets and Financial Liabilities The financial assets of the Company are held at fair value. Financial liabilities are held at amortised cost, which is not materially different from fair value. Managing Capital The Company's equity comprises ordinary shares and redeemable shares as described in Note 14. Capital is managed so as to maximise the return to shareholders while maintaining a capital base that allows the Company to operate effectively in the marketplace and sustain future development of the business. As at 30th June 2013, the Company had bank debt facilities to increase the Company's liquidity. Details of available borrowings at the year end can be found earlier in this Note. The Company's assets and borrowing levels are reviewed regularly by the Board of Directors with reference to the loan covenants. The Company's capital requirement is reviewed regularly by the Board of Directors. 22. Related Party Transactions Under the FCA Listing Rules, the Manager, Pantheon Ventures (UK) LLP, is regarded as a related party of the Company The amounts paid to the Manager are disclosed in Note 3. The Company is entitled to invest in funds managed by Pantheon. The Manager is not entitled to management and commitment fees in respect of PIP's holdings in, and outstanding commitments to, these funds. ANNUAL GENERAL MEETING The Company's Annual General Meeting will be held on 25th November 2013 at 2.30 pm at the offices of Pantheon Ventures (UK) LLP, Norfolk House, 31 St James's Square, London SW1Y 4JR. NATIONAL STORAGE MECHANISM A copy of the Annual Report and Financial Statements will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/nsm ENDS Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

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