Half-yearly Report

Pantheon International Participations PLC Half Yearly Financial Report: 31 December 2007 Financial Summary HIGHLIGHTS 31ST DEC 2007 30TH JUNE 2007 CHANGE Summary of results NAV per share 1052.5p 919.2p 14.5% Total assets less current liabilities Â£698.8m Â£610.3m 14.5% Ordinary shares Share price 839.5p 917.5p (8.5)% Discount to NAV 20.2% 0.2% Redeemable shares Share price 857.5p 897.5p (4.5)% Discount to NAV 18.5% 2.4% Investment activity Invested in private equity assets Â£146.2m - - Received from private equity assets Â£84.9m - - SINCE 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION* PERFORMANCE % % P.A % P.A % P.A % P.A NAV per share 26.9 22.1 14.8 12.1 14.5 Ordinary share price 2.7 16.9 12.8 13.6 13.8 FTSE All Share 5.3 14.5 15.4 6.2 9.0 MSCI World (sterling) 8.1 12.0 12.7 5.5 7.2 * PIP was launched on 18th September 1987 CAPITAL STRUCTURE Ordinary shares 37,521,013 Redeemable shares 28,871,255 Total 66,392,268 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: * the requirement for approval as an investment trust that no holding in a company will represent more than 15% by value of the Company's investments at the time of investment; * 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. Chairman's Statement I am pleased to report that in the six months to 31st December 2007 we had strong growth in net asset value per share which increased by 14.5% to 1,052.5p. This compares to an increase in the MSCI World index of 1.3% and a decrease in the FTSE All Share index of 2.1%. PIP's share price decreased by 8.5% over the six month period as a result of the discount widening from 0.2% to 20.2% which is a reflection of negative sentiment affecting share prices in the sector and the wider equity markets. Our total assets rose by Â£88.5 million to Â£698.8 million during the period. This resulted mainly from an uplift in the value of investments but also included favourable currency movements which increased the sterling value of the private equity portfolio by Â£19.0m. INVESTMENT ACTIVITY The global private equity market continued to be active both in investment and in realisations over the period. However, as the effect of the debt market correction works its way through the system we expect to see a significant slowdown in buyout activity at least in the first half of 2008. PIP invested Â£ 146.2 million in underlying private equity assets, an increase of 16% over the equivalent period in the previous year. Of this amount, Â£76.3m was paid to meet investment calls arising from PIP's primary portfolio and Â£69.9m was applied to the secondary portfolio. The total amount of cash distributed to PIP as a result of investment realisations during the six months was Â£84.9 million, an increase of 43% over the equivalent six month period in the previous year. Of this amount, Â£32.5m came from the primary portfolio with Â£52.4m arising from the secondary portfolio. PRIMARY COMMITMENTS Fundraising activity continued at the high levels seen in the previous year with restricted access to many of the most desirable funds. Pantheon's relationships with top-tier private equity fund managers help to ensure that PIP gains access to top quality funds worldwide. PIP's commitments to primary investments reached Â£90.4 million in the period, an increase of 4% over the previous year, encompassing six Europe-focused funds (Â£49.1m), nine US-focused funds (Â£37.8m) and a commitment of Â£3.5m to an Israeli fund. Through these commitments PIP will continue to gain strategic access to buyout, venture and special situations activity globally. PIP's commitments to Asia are managed through Pantheon's Asian funds of funds which continued to invest in the region by committing to five funds. SECONDARY COMMITMENTS PIP committed Â£62.1 million to eight secondary transactions to purchase existing interests in private equity funds. The developing private equity secondary market should give rise to continued growth of more active portfolio management by institutional investors. The secondary market is expected to remain active through the calendar year 2008. MARKET REVIEW AND PROSPECTS The tightening of the credit market has resulted in an overhang of debt, affecting the financing of new buyouts in particular. While this is clearing slowly it will take some time to be fully accommodated. We are now seeing a material reduction in the levels of debt available to support buy out activity and terms and conditions of debt financing are returning to levels seen some years ago. This has resulted in a reduction in the proportion of debt in buyout structures. Consequent reduced level buyout of activity means that calls and distributions are expected to occur at a lower rate in 2008 than in recent years. Furthermore any effect on private equity market valuations of declines in the broader equity markets following on from the credit squeeze has yet to be seen. Globally, economic growth is moderating as a result of a reduction in consumer demand and problems in the debt markets. However, the acquisition activity of some corporate buyers indicates that the M&A markets may remain active at some level. The venture market has been less affected by the credit market slowdown making it possible for investment within the venture market to continue in 2008. With 29% of the portfolio in venture capital funds, PIP is well placed to benefit from any continued activity. Within the secondary market, deal flow has increased markedly, reflecting growing institutional awareness of the utility of more actively managing private equity portfolios, although pricing remains high in some areas. We expect deal flow to continue to be active and prices to moderate to reflect the higher perception of risk. Underlying the above is the realisation that, in many cases, private equity can provide companies with a better form of ownership than public equity, yet it still accounts for a relatively small proportion of global enterprise value. Despite the nature of market cycles, there is significant opportunity for long term growth. FINANCING OF INVESTMENTS PIP issued Â£100m in value of ordinary shares in June 2007 in order to increase the financing available to implement its investment strategy and in particular, to participate in secondary investments. This has financed an expectedly active investment programme as detailed above. At 31st December 2007 PIP had substantial financial resources available to fund investment commitments in the form of cash (Â£10m), banking facilities (Â£150m) and standby equity financing of Â£120m. The level of new commitments to secondary purchases continues to be dependent on the level of distributions from the existing portfolio and the amount of new financing raised. TOM BARTLAM Chairman 29th February 2008 Portfolio Review The underlying companies in the portfolio range from large and mature industrial enterprises with multinational operations to early-stage ventures operating at the leading edge of technological development. All the companies have one factor in common: the influence of professional private equity managers who are motivated to maximise the value of each underlying investment. PORTFOLIO ANALYSIS BY VALUE AS AT 31ST DECEMBER 2007 GEOGRAPHIC SPREAD While the USA remains the most developed and largest private equity market, the European market continues to mature and grow in relative size. The weighting to the USA reduced from 59% to 53% over the period. This coincided with an increase in the weighting to Europe from 35% to 41%. This reflects both the impact of the higher weighting to Europe in the primary programme and the location of secondaries purchased during the period. Geographic Area Percentage Spread USA 53 Europe 41 Asia 5 Other 1 STAGE COMPOSITION Below shows the breakdown of the portfolio by the stage focus of the underlying funds. Stage Percentage Buyouts 59 Venture 29 Generalist 6 Special Situations 4 Directs 2 MATURITY PIP's portfolio contains a wide range of fund vintages (referring to the year the fund was established), as shown in the chart below. Private equity funds typically take up to five years of a fund's life to invest the majority of their available capital into underlying companies. As a result, significant flows of realised proceeds tend not be returned to investors until the middle and later stages of a fund's life. Year Percentage 2007 12 2006 12 2005 11 2004 12 2003 3 2002 4 2001 8 2000 21 1999 7 1998 4 1997 and earlier 6 LISTED COMPANY EXPOSURE PIP's portfolio of funds primarily comprises private equity assets. These funds may also hold listed companies as a result of recent IPOs within fund portfolios that may be held subject to selling restrictions or in some instances due to private investments in public equity (PIPEs). Underlying listed company interests are estimated to be approximately 9% of PIP's assets at 31st December 2007. HEDGING Due to the uncertain timing of cash flows in and out of underlying private equity assets, it is not possible to match currency movements perfectly with hedging instruments. For this reason, the present policy of the PIP Board is not to hedge the portfolio against currency movements except where there is a significant change in the geographic weighting that is expected to be of a short-term nature. PIP did not hedge the portfolio against exchange rate movements during the financial year. The net effect of currency movements on the net asset value over the period resulted in a Â£19.0m increase in the sterling value of the portfolio. Activity PIP has made commitments of Â£159 million to private equity funds during the past six months. Of this, Â£90m was committed to new funds and Â£69m was committed to the purchase of secondary investments and direct co-investments. NEW INVESTMENTS PIP committed a total of Â£90.4 million to 16 new funds in the six-month period. Four of the new funds are Europe-focused buyout funds (total Â£43.2m), two are Europe-focused venture funds (total Â£5.9m), three are US-focused buyout funds (total Â£22.6m), six are US-focused venture funds (Â£15.2m) and one is an Israeli venture fund (Â£3.5m). SECONDARY ACQUISITIONS PIP completed eight secondary purchases during the period at a value of Â£62.1 million including unfunded commitments. PIP also committed Â£6.6m to the purchase of three direct co-investments. In addition, PIP made a deferred payment of Â£13.6m in relation to a previous secondary purchase. DISTRIBUTIONS PIP enjoyed a good period for distributions. In all, the Company received Â£84.9 million in proceeds from the portfolio, equivalent to approximately 16% of opening private equity asset value. Market Distribution Primary Â£32.5m Secondary Â£52.4m Total Â£84.9m CALLS PIP has had an active investment period, with cash calls increasing to Â£146.2 million. Portfolio Calls Primary Â£76.3m Secondary Â£69.9m Total Â£146.2m OUTSTANDING COMMITMENTS PIP's outstanding commitment to investments rose to Â£556.9m at 31st December 2007, compared with Â£528.0m at 30th June 2007. FINANCE PIP maintained its borrowing facilities at Â£150 million in order to ensure adequate financing. These borrowing facilities allow PIP to maximise the proportion of its assets invested in private equity while ensuring PIP retains sufficient capacity to meet calls arising from the portfolio. PIP also has in place agreements with certain institutions under which PIP can require the institutions to subscribe for Redeemable shares. PIP has available standby financing of Â£120m. PIP pays a fee of 0.5% per annum on these commitments. The purpose of these agreements is to provide an additional level of assurance that PIP will be in a position to meet portfolio calls, irrespective of market appetite for issues of new Redeemable shares and other sources of capital in the short term. PANTHEON VEHICLES In Asia the new fund programme continues to be implemented through commitments to Pantheon fund-of-funds vehicles. This is due to the relative size of PIP's strategic allocation to the region. Pantheon's policy is to waive management fees in respect of PIP's holdings in the firm's managed fund-of-funds vehicles and to ensure that PIP is never disadvantaged in terms of fees compared with its position had it made direct investments into the underlying funds. Interim Management Report and Responsibility Statement of the Directors IN RESPECT OF THE HALF YEARLY FINANCIAL REPORT INTERIM MANAGEMENT REPORT This Half Yearly Financial Report is the first to be published by the Company under the Disclosure and Transparency Rules ("DTR"). The Company is required to make a number of new disclosures, including the following: The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal risks and uncertainties for the remaining six months of the financial year are all set out in the Chairman's statement. RESPONSIBILITY STATEMENT The Directors confirm that to the best of their knowledge: * the condensed set of financial statements has been prepared in accordance with the Statement Half Yearly Financial Reports issued by the UK Accounting Standards Board; * the interim management report includes a fair review of the information required by: (a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and (b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so. This Half Yearly Financial Report was approved by the Board of Directors on 29 February 2008 and the above responsibility statement was signed on its behalf by Tom Bartlam, Chairman. Condensed Income Statement (unaudited) FOR THE SIX MONTHS TO 31ST DECEMBER SIX MONTHS TO 31ST SIX MONTHS TO 31ST YEAR TO 30TH JUNE 2007 DECEMBER 2007 DECEMBER 2006 REVENUE CAPITAL TOTAL* REVENUE CAPITAL TOTAL* REVENUE CAPITAL TOTAL* Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Gains on investments ** - 94,747 94,747 - 19,806 19,806 - 77,537 77,537 Currency (losses)/ gains on cash and borrowings - 92 92 - (513) (513) - (625) (625) Income 3,627 - 3,627 3,763 - 3,763 7,179 - 7,179 Investment management fees*** (4,412) (4,379) (8,791) (3,074) - (3,074) (7,189) (1,607) (8,796) Other expenses (477) (314) (791) (960) (191) (1,151) (1,152) (617) (1,769) Return on ordinary activities before financing costs and tax (1,262) 90,146 88,884 (271) 19,102 18,831 (1,162) 74,688 73,526 Interest payable and similar charges (716) - (716) (439) - (439) (1,487) - (1,487) Return on ordinary activities before tax (1,978) 90,146 88,168 (710) 19,102 18,392 (2,649) 74,688 72,039 Tax on ordinary activities 609 (279) 330 - (414) (414) - (1,297) (1,297) Return on ordinary activities after tax for the period (1,369) 89,867 88,498 (710) 18,688 17,978 (2,649) 73,391 70,742 RETURN PER ORDINARY AND REDEEMABLE SHARE (2.06p) 136.25p 134.19p (1.28p) 33.77p 32.49p (4.76p) 131.89p 127.13p All revenue and capital items in the above statement relate to continuing operations. No operations were acquired or discontinued during the period. No Statement of Total Recognised Gains and Losses has been prepared as all gains and losses are shown in the Income Statement. * The total column of the statement represents the Company's profit / and loss statement prepared in accordance with UK Accounting Standards. The supplementary revenue return and capital columns are prepared under guidance published by the Association of Investment Companies. ** Includes currency movements on investments. *** The charge in the capital column of the income statement relates to an accrual for the performance fee as detailed in note 4 of the notes to the half yearly financial report. Condensed Reconciliation of Movement in Equity Shareholders' Funds (unaudited) CAPITAL CAPITAL CAPITAL SHARE REDEMPTION SHARE SPECIAL RESERVE RESERVE REVENUE CAPITAL RESERVE PREMIUM RESERVE REALISED UNREALISED RESERVE TOTAL Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Movement for the 6 months ended 31st December 2007 OPENING EQUITY SHAREHOLDERS' FUNDS 25,428 26 183,139 99,861 187,543 131,745 (17,481) 610,261 Return for the period - - - - 28,515 61,352 (1,369) 88,498 Costs of buy back of Redeemable shares - - - - - - - - CLOSING EQUITY SHAREHOLDERS' FUNDS 25,428 26 183,139 99,861 216,058 193,097 (18,850) 698,759 Movement for the 6 months ended 31st December 2006 OPENING EQUITY SHAREHOLDERS' FUNDS 18,024 26 91,971 99,897 151,664 94,233 (14,832) 440,983 Return for the period - - - - 13,557 5,131 (710) 17,978 Buy back of Redeemable shares - - - (37) - - - (37) CLOSING EQUITY SHAREHOLDERS' FUNDS 18,024 26 91,971 99,860 165,221 99,364 (15,542) 458,924 Movement for the year ended 30th June 2007 OPENING EQUITY SHAREHOLDERS' FUNDS 18,024 26 91,971 99,897 151,664 94,233 (14,832) 440,983 Return for the year - - - - 35,879 37,512 (2,649) 70,742 Issue of Ordinary shares 7,404 - 92,599 - - - - 100,003 Expenses relating to issue of Ordinary shares - - (1,431) - - - - (1,431) Additional costs of redemption of Redeemable shares - - - (36) - - - (36) CLOSING EQUITY SHAREHOLDERS' FUNDS 25,428 26 183,139 99,861 187,543 131,745 (17,481) 610,261 Condensed Balance Sheet (unaudited) AS AT AS AT AS AT 31ST DECEMBER 30TH JUNE 31ST DECEMBER 2007 2007 2006 Â£'000 Â£'000 Â£'000 Fixed assets Investments at fair value* 696,544 595,994 462,103 Current assets Debtors 2,253 2,018 2,420 Cash at bank 10,480 17,010 6,640 12,733 19,028 9,060 Creditors: Amounts falling due within one year Revolving credit facility - - 10,219 Other creditors 10,518 4,761 2,020 10,518 4,761 12,239 NET CURRENT ASSETS / (LIABILITIES) 2,215 14,267 (3,179) TOTAL ASSETS LESS CURRENT LIABILITIES 698,759 610,261 458,924 Capital and reserves Called-up share capital 25,428 25,428 18,024 Capital redemption reserve 26 26 26 Share premium account 183,139 183,139 91,971 Special reserve 99,861 99,861 99,860 Capital reserve - realised gains 216,058 187,543 165,221 Capital reserve - unrealised gains 193,097 131,745 99,364 Revenue reserve (18,850) (17,481) (15,542) TOTAL EQUITY SHAREHOLDERS' FUNDS 698,759 610,261 458,924 Net asset value per share - basic 1,052.5p 919.2p 829.2p Number of Ordinary shares and Redeemable shares in issue 66,392,268 66,392,268 55,342,268 * Includes fixed interest investments held for cash management purposes at 31st December 2007 (Â£11,877,000) and 30th June 2007 (Â£34,794,000). There were no fixed interest investments held as at 31st December 2006. Condensed Cash Flow Statement (unaudited) FOR THE SIX MONTHS TO 31ST DECEMBER SIX MONTHS SIX MONTHS YEAR TO TO 31ST TO 31ST 30 JUNE DECEMBER 2007 DECEMBER 2006 2007 Â£'000 Â£'000 Â£'000 Cash flow from operating activities Investment income received 3,422 3,922 7,107 Deposit and other interest received 205 10 12 Investment management fees paid (2,790) (2,891) (6,372) Secretarial fees paid (41) (58) (109) Legal and professional fees (136) (351) _ Other cash payments (7) (657) (2,169) NET CASH INFLOW /(OUTFLOW) FROM OPERATING ACTIVITIES 653 (25) (1,531) Returns on investment and servicing of finance Revolving credit facility and overdraft interest paid (34) (4) (571) Loan commitment and arrangement fees paid (376) (166) (1,071) Redeemable shares commitment fees paid (414) (252) (477) NET CASH OUTFLOW FROM RETURNS ON INVESTMENT AND SERVICING OF FINANCE (824) (422) (2,119) Taxation Withholding tax suffered on limited partnership distributions (277) (357) (1,230) Income tax recovered 787 - - NET CASH INFLOW / (OUTFLOW) FROM TAXATION 510 (357) (1,230) Capital expenditure and financial investment Purchases of investments (149,175) (128,976) (224,262) Purchases of short-dated government securities (23,455) (182,345) (251,677) Disposals of investments 83,394 58,983 149,337 Disposals of short-dated government securities 82,275 243,503 243,503 Realised currency losses (101) (113) (152) NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (7,062) (8,948) (83,251) NET CASH OUTFLOW BEFORE FINANCING (6,723) (9,752) (88,131) Financing Proceeds from issue of Ordinary shares - - 100,003 Costs of Ordinary share issue - - (968) Drawdown of loan - 10,211 10,211 Repayment of loan - - (10,211) Realised currency gains on repayment of revolving credit facility - - 75 Costs to redeem Redeemable shares - (37) (36) NET CASH INFLOW FROM FINANCING - 10,174 99,074 (DECREASE) / INCREASE IN CASH (6,723) 422 10,943 Notes to the Half Yearly Financial Report (unaudited) 1. FINANCIAL INFORMATION This financial information has been prepared under the historical cost convention as modified by the revaluation of certain investments and in accordance with the Accounting Standard Board's ("ASB") Statement on Half Yearly Financial Reports, applicable law and Accounting Standards in the United Kingdom ("UK GAAP") and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" ("SORP") issued by the Association of Investment Companies ("AIC") in January 2003 and revised in December 2005 and in accordance with accounting policies set out in the statutory accounts for the year ended 30 June 2007. The financial information contained in this Half Yearly Financial Report is not the company's statutory accounts. The financial information for the six months ended 31 December 2007 and 31 December 2006 are not for a financial year and have not been audited. The statutory accounts for the financial year ended 30 June 2007 have been delivered to the Registrar of Companies and received an audit report which was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section 237(2) and (3) of the Companies Act 1985. 2. TAX CREDIT / CHARGE ON ORDINARY ACTIVITIES The tax credit for the half-year is Â£329,008 (31 December 2006: Â£414,361 charge; 30 June 2007: Â£1,296,887 charge) based on an estimated effective tax rate of (0.4%) for the year ending 30 June 2008. The tax charge to capital consists of Japanese Corporation Tax and tax withheld from capital distributions. 3. RELATED PARTY TRANSACTIONS Pantheon Ventures Limited, as Investment Manager of the Company, is considered to be a related party by virtue of its management contract with the Company. During the period, services of a total value of Â£8,790,398 (31 December 2006: Â£ 3,612,123; 30 June 2007: Â£9,506,579) were purchased by the Company from Pantheon Ventures Limited. At the 31 December 2007, the amount due to Pantheon Ventures Limited disclosed under creditors was Â£8,210,298. All amounts are inclusive of VAT. 4. PERFORMANCE FEE In line with the management agreement the manager is entitled to a performance fee of 5 percent of the amount by which the net asset value at the end of the period exceeds 110 percent of the applicable high water mark. For the first performance fee the applicable high water mark is the aggregate net asset value of all shares of the Company in issue at 31 December 2006 (multiplied by 1 + (181/365 x 10%)) compounded annually at 10% for each 12 month period. 5. VAT DISCLOSURE NOTE Since the previous quarter end HM Revenue & Customs ("HMRC") have confirmed that they accept that fund management services to investment trusts are exempt from VAT. The Manager has confirmed that it has lodged claims with HMRC to recover VAT paid from October 2001. Negotiations with the investment manager are ongoing and until all remaining uncertainties surrounding the mechanisms of the reclaim process have been cleared, it is not practicable to quantify the amount of VAT which will be recoverable and there will be no recognition of an asset in the accounts. 6. RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH INFLOW / (OUTFLOW) FROM OPERATING ACTIVITIES 6 MONTHS 6 MONTHS TO 31ST TO 31ST YEAR TO DECEMBER DECEMBER 30TH JUNE 2007 2006 2007 Â£'000 Â£'000 Â£'000 Net return before finance costs and taxation 88,168 18,392 72,039 Gains on investments (94,747) (19,806) (77,537) Currency losses/(gains) on cash and borrowings 92 513 625 Increase in accrued income 532 440 1,487 Increase in creditors 6,029 323 2,127 Decrease / (Increase) in other debtors 579 113 (272) NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 653 (25) (1,531) 7. RECONCILIATION OF NET CASH FLOWS TO MOVEMENTS IN NET FUNDS 6 MONTHS TO 6 MONTHS TO YEAR TO 31ST DECEMBER 31ST DECEMBER 30TH JUNE 2007 2006 2007 Â£'000 Â£'000 Â£'000 (Decrease)/increase in cash in the year (6,723) 422 10,943 Non-cash movement Exchange (losses)/gains 193 (418) (569) Movement in net debt (6,530) 4 10,374 Net funds at beginning of period 17,010 6,636 6,636 NET FUNDS AT END OF PERIOD 10,480 6,640 17,010 8. ANALYSIS OF NET FUNDS 31ST 1ST JULY EXCHANGE DECEMBER 2007 CASH FLOWS MOVEMENTS 2007 Â£'000 Â£'000 Â£,000 Â£'000 Cash at bank 17,010 (6,723) 193 10,480 17,010 (6,723) 193 10,480 Independent Review Report TO PANTHEON INTERNATIONAL PARTICIPATIONS PLC FINANCIAL INFORMATION FOR THE SIX MONTH PERIOD ENDED 31ST DECEMBER 2007 INTRODUCTION We have been engaged by the company to review the condensed set of financial statements in the Half Yearly Financial Report for the six months ended 31 December 2007 which comprises Income Statement, Reconciliation of Movement in Equity Shareholders' Funds, Balance Sheet, Cash Flow Statement and Notes to the Half Yearly Financial Report. We have read the other information contained in the Half Yearly Financial Report which comprises only the Objective and Investment Policy, Chairman's Statement, Portfolio Review and Activity and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, "Review of Interim Financial Information performed by the Independent Auditor of the Entity". Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we have formed. DIRECTORS' RESPONSIBILITIES The Half Yearly Financial Report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half Yearly Financial Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. As disclosed in Note 1, the annual financial statements of the company are prepared in accordance with applicable United Kingdom law and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies", issued in December 2005. The condensed set of financial statements included in this Half Yearly Financial Report has been prepared in accordance with the Accounting Standards Board Statement "Half Yearly Financial Reports". OUR RESPONSIBILITY Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Half Yearly Financial Report based on our review. SCOPE OF REVIEW We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. CONCLUSION Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half Yearly Financial Report for the six months ended 31 December 2007 is not prepared, in all material respects, in accordance with the Accounting Standards Board Statement "Half Yearly Financial Reports" and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. GRANT THORNTON UK LLP Auditor London 29th February 2008 Directors and Advisors DIRECTORS Tom Bartlam (Chairman) Ian Barby Richard Crowder Peter Readman Rhoddy Swire Sandy Thomson MANAGER Pantheon Ventures Limited Authorised and regulated by the FSA Norfolk House 31 St. James's Square London SW1Y 4JR Telephone: 020 7484 6200 E-mail: pip@pantheonventures.com Internet: www.pantheonventures.com SECRETARY & REGISTERED OFFICE Capita Sinclair Henderson Limited Beaufort House 51 New North Road Exeter EX4 4EP Telephone: 01392 412122 BROKERS Dresdner Kleinwort Limited 30 Gresham Street London EC2P 2XY REGISTRARS Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU * Telephone: 0871 664 0300 * Calls cost 10p per minute plus network charges BANKERS The Royal Bank of Scotland PLC Waterhouse Square 138-142 Holborn London EC1N 2TH HSBC Bank PLC (Also custodian) Global Investor Services Mariner House Pepys Street London EC3N 4DA AUDITORS Grant Thornton UK LLP 30 Finsbury Square London EC2P 2YU SOLICITORS Covington& Burling LLP 265 Strand London WC2R 1BH

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