Half-yearly Report

Pantheon International Participations PLC Half Yearly Financial Report: 31 December 2008 Financial Summary HIGHLIGHTS 31ST DEC 2008 30TH JUNE 2008 CHANGE Summary of results NAV per share 1126.3p 1108.7p 1.6% Total assets less current liabilities Â£747.8m Â£736.1m 1.6% Ordinary shares Share price 240.0p 750.0p (68.0)% Discount to NAV 78.7% 32.4% Redeemable shares Share price 315.0p 819.5p (61.6)% Discount to NAV 72.0% 26.1% Investment activity Invested in private equity assets Â£107.7m Received from private equity assets Â£62.6m SINCE 3 YEARS % 5 YEARS % 10 YEARS % INCEPTION*% PERFORMANCE 1 YEAR % P.A P.A P.A P.A NAV per share 7.0 13.6 15.8 12.2 14.3 Ordinary share price (71.4) (31.8) (12.9) 4.1 10.4 FTSE All-Share (29.9) (4.8) 3.5 1.2 6.7 MSCI World (sterling) (18.8) (2.4) 4.1 1.1 5.8 * 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 PIP's NAV per share increased by 1.6% to 1126.3p in the six months to 31st December 2008. This modest increase masks substantial negative underlying movements in the valuations of the assets, which declined 24%. These valuation losses were more than offset by large currency gains due to the depreciation of sterling against both the US dollar and euro, in which the majority of PIP's assets are denominated. Over the six month period, the ordinary share price fell by 68.0% as the discount to NAV widened to 78.7% from 32.4% at 30th June 2008. The extent of this discount is much wider than it has been at any time in the Company's 21 year history and appears to reflect exceptional anxiety in the financial markets that the value of private equity assets will fall further as a result of declining corporate profitability and the adverse effects of leverage in a downturn. In addition, in such a fearful climate, funds of funds like PIP which have a high level of commitments needing to be funded over time, have seen their share prices fall even further than the sector average, reflecting market pessimism over funding arrangements. Your Board continues to believe that the advantages of long term investment horizons inherent in the private equity process together with our widely diversified portfolio should be beneficial to PIP, notwithstanding both the undoubted challenges that private equity managers face in such a negative economic environment and the need to ensure that PIP can meet its commitments and finance future investments in what is likely to prove a fertile investment environment. Our net assets increased by Â£11.7m to Â£747.8m during the six months to 31st December 2008. As the majority of PIP's assets are denominated in either US dollars or euros, substantial currency gains offset losses from the investment portfolio. Private equity valuations are reported either quarterly or half yearly by PIP's underlying fund managers. It is expected that the accounts to be received over the coming months from underlying managers reporting private equity valuations at 31st December 2008 will show write downs following the significant falls in quoted market prices seen during the period. A provision totalling Â£141m was made against the value of the assets as at 31st December to allow for this reporting lag. This provision, in addition to reported reductions in value and falls in quoted stocks totalling Â£76m, made up the 24% decline in the portfolio value over the six months to 31st December. In assessing the size of the provision, guidance was obtained from a number of PIP's underlying fund managers covering around 29% of PIP's investment portfolio value. Taken together with the movements in relevant stock market indices, this provided a basis on which to calculate a provision applicable to the portfolio. The provision is likely to differ from the change in valuations that are actually reported by the underlying managers. The extent and duration of the global downturn is still unclear, and even if stock market indices do not deteriorate much further, it is possible that declining profits, the effect of leverage and rising company failures could continue adversely to affect valuations. INVESTMENT ACTIVITY The lack of availability of debt financing allied with investor uncertainty has resulted in significantly reduced activity levels. Despite a brief increase in investment at the start of the period, relating mostly to deals agreed prior to the banking crisis, the Company's rate of investment has exhibited a considerable slow down. In addition, the rate of distributions also showed a considerable slow down during the period. In the six months to 31st December 2008, PIP invested Â£107.7 million in underlying private equity assets. Of this amount, Â£79.2m was paid to meet investment calls arising from PIP's primary commitments and Â£28.5m to pay for calls from previously agreed secondary transactions. The total amount of cash distributed to PIP as a result of investment realisations during the six months was Â£62.6m. Of this amount, Â£21.2m came from the primary portfolio with Â£41.4m arising from the secondary portfolio. In total PIP received distributions from more than 100 different funds, showing that even in difficult economic times a well diversified portfolio can still generate significant realisation activity. COMMITMENTS PIP committed a total of Â£27.3 million to five primary funds, encompassing one Europe-focused fund (Â£16.1m) and four US-focused funds (Â£11.2m). The Company does not intend to make any further commitments until there is a recovery in the level of distributions. Overall, outstanding commitments to investments, which are likely to be called over a number of years, increased during the period by Â£92m to Â£733m due largely to the effect of currency movements. MARKET REVIEW AND PROSPECTS The six months to 31st December 2008 was undoubtedly one of the most difficult periods in financial markets in modern times. The increasingly tight credit conditions, culminating in the state sponsored rescue of several high profile banks, created concerns that the financial system was near collapse. Liquidity measures undertaken by central banks around the world have somewhat eased the extreme levels of market volatility. However the deleveraging of the financial sector, which limits the creation of new debt, continues to depress the potential for buyout activity. In addition the rapid deterioration of the economic outlook over the past quarter in particular, makes it difficult for private equity buyers to price new investments. Global buyout activity fell dramatically in the second half of 2008, with the value of deals in the last quarter amounting to approximately 10% of those completed in the equivalent period during the previous year. The reduction in the availability of credit has severely impacted buyout markets, most notably in the large cap segment, whilst debt re-capitalisations have become almost non-existent. The venture capital market has also seen lower investment activity, although due to its lesser reliance on debt financing, the impact has been somewhat less dramatic. Both the venture and buyout markets have seen a significant reduction in investment realisations, as the IPO and M&A markets have come to a virtual standstill. During 2009, it is likely that low activity levels, both in terms of the number of deals completed and investment realisations, will continue at least until the market experiences an improvement both in credit conditions and investor sentiment. Stock markets fell steeply in the second half of the year, with the FTSE All-Share and MSCI World losing 23% and 34% respectively. With the sustainability of corporate earnings under question, the fear of significant company defaults rises. Undoubtedly some of the Company's underlying portfolio companies will be affected, but we believe the defensive orientation of private equity portfolios will help many of them to weather the storm. Nevertheless, the decline in public markets and expected earnings declines may continue adversely to affect valuations, most notably within the large and mega buyout sectors where leverage levels were typically higher. It is important to note that funds falling into this category represent a minority of PIP's portfolio, at some 23% of the investments. Of course, falling public markets, which may have a negative impact on valuations in the short-term, also foreshadow attractive investment opportunities. Lower valuations provide circumstances where private equity managers can purchase good quality assets at attractive prices. It could be the case that in the coming years, as in the past, investments made in an economic downturn produce excellent returns over the long-run. The diversification of PIP's portfolio with top quality managers across buyout, venture and special situations sectors, and across all major geographical regions of the private equity industry, should help mitigate some of the difficulties experienced by specific companies or sectors in the current economic conditions. Private equity managers generally favour companies in defensive industries. As a result, PIP's portfolio is underweight in many of those sectors, such as financials, property and basic resources, which comprise a significant part of the listed market indices and which have fallen the most in recent months. As always, it is important for investors in private equity to ensure that they select the managers that are able to deliver across the market cycle. Pantheon's strategy is to focus on managers that can demonstrate clear value creation, much of which is centred on greater efficiency and building scale in middle market businesses. CAPITAL STRUCTURE AND FINANCING In December, PIP issued Â£49.5 million of unsecured subordinated loan notes (the "Notes") to institutional investors who had previously entered into standby redeemable share agreements. In the event of a drawdown by the Company under a "standby" commitment from an institutional investor who is a Noteholder, the Company shall repay an equivalent amount on the Notes held by such investor (or such lesser amount as is outstanding). The Company has "standby" commitments totalling Â£150m. In addition to the standby financing, PIP had Â£61.8m of unutilised bank loan facility and cash as at 31st December 2008. At the end of January, this figure was Â£54.9m. In this economic environment, call and distribution rates are likely to remain subdued. The Company expects net cash outflows to continue during a period of economic downturn. While the Company's available financing capacity, totalling Â£162m as at 31st December 2008, is substantial in relation to near term requirements, it remains a key priority to ensure the Company has sufficient resources to continue to finance its outstanding commitments. The Company is exploring a number of liquidity options, including the disposal of certain fund interests, to ensure that there is sufficient liquidity through 2010 and beyond. OUTLOOK We are not optimistic of seeing a recovery in the short term. Companies will need to adapt to conditions that for many will probably be the most challenging in their history. However, when the market is consumed by fear the long term investor can benefit, often at the expense of the short term investor. The private equity market can offer investors an opportunity to invest in soundly managed adaptable businesses that have long term horizons and a clear focus on generating cash. Managing the level of PIP's outstanding commitments together with securing PIP's financing are clear priorities not only to enable PIP to meet outstanding commitments but also to position the Company to be able to take advantage of opportunities in the secondary market. Such new investments made at what may prove to be an attractive time in the cycle should provide a sound basis for good long term returns. TOM BARTLAM Chairman 27th February 2009 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 2008 GEOGRAPHIC SPREAD The weighting to the USA increased from 53% to 54% over the period whereas the weighting to Europe fell from 40% to 37%, reflecting both investment returns and relative currency movements since 30th June 2008. The weighting to Asia and other regions increased from 7% to 9% in the period. Geographic Area Percentage USA 54% Europe 37% Asia and other 9% 100% STAGE COMPOSITION PIP's portfolio is well diversified across all the major stages of private equity. The majority of the Company's exposure to buyouts is via mid and small cap funds, which tend to utilise lower levels of leverage within portfolio companies than the very largest funds. In addition PIP has a significant exposure to venture capital focused funds. Stage Percentage Buyouts 59% Venture 30% Special Situations 5% Generalist 4% Directs 2% 100% SECTOR COMPOSITION 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 or volatility within particular industry segments. Sector Percentage Other services & 28% manufacturing Computer-related 16% Consumer-related 16% Medical/health-related 11% Communications 10% Industrial products 7% Biotechnology & 5% pharmacology Energy-related 4% Other 3% electronics-related 100% MATURITY PIP's portfolio is well diversified by fund vintage (referring to the year the fund was established). Year Percentage 2008 3% 2007 14% 2006 20% 2005 13% 2004 5% 2003 4% 2002 3% 2001 7% 2000 16% 1999 6% 1998 and earlier 9% 100% Activity PIP made commitments totalling Â£27m to private equity funds during the past six month period. NEW INVESTMENTS PIP committed to five new funds in the six-month period, totalling Â£27.3m as at 31st December 2008. One of the new funds is a Europe-focused buyout fund (Â£16.1m), one is a US-focused buyout fund (Â£6.1m), two are US-focused venture funds (Â£3.0m) and one is a US-focused special situations fund (Â£2.1m). SECONDARY ACQUISITIONS PIP completed no new secondary transactions in the second half of 2008. In the Annual Report and Accounts 2008, the Company announced that it had suspended its new fund commitment programme to ensure that any cash resources not needed to finance outstanding commitments can be applied to prioritising secondary activity. DISTRIBUTIONS PIP received Â£62.6m in proceeds from the portfolio during the six months to 31st December 2008, equivalent to approximately 8% of opening private equity asset value. Market Distribution Primary Â£21.2m Secondary Â£41.4m The rate of distributions fell in the third quarter of 2008. However, PIP then saw an increase in the rate for the fourth quarter. Distribution rates are expected to be lower in the first half of 2009 due to the continued deterioration of the economic climate. However, the quarter to 31st December 2008 highlights that even in times of heightened uncertainty a diversified portfolio can continue to generate significant investment exits and distributions. CALLS PIP paid Â£107.7m in cash calls during the half year to 31st December 2008. The rate of drawdowns from outstanding commitments increased in the quarter to 30th September 2008, as a number of the Company's buyout funds made drawdowns to finance deals agreed earlier in the year. However, the rate of drawdowns reduced significantly during the final quarter of 2008, driven by a deepening of the financial crisis. Portfolio Calls Primary Â£79.2m Secondary Â£28.5m The value of global buyout deals in the fourth quarter dropped dramatically relative to the third quarter. Call rates tend to lag buyout activity data (since financing is typically required some time after a deal is closed), and as such the latest figures suggest that calls are likely to continue at a low level for at least the coming months. INVESTMENT CASH FLOWS PIP's net cash outflow from investments in the half year to 31st December 2008 was Â£45.1m. We expect the Company to experience further outflows going into 2009 although drawdowns for making new investments in this economic environment are likely to remain below historic levels for a period. Outstanding Commitments PIP's outstanding commitments to fund 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. Due largely to the appreciation in the value of the US dollar and euro against sterling, PIP's outstanding commitments to investments increased to Â£732.9m at 31st December 2008 compared with Â£641.2m at 30th June 2008. GEOGRAPHIC SPREAD The chart below shows the breakdown of the Company's outstanding commitments by geography. Europe and the USA have the largest outstanding commitments reflecting that they have the most mature private equity markets. Commitments to Asia & other regions totalled 9%. Geographic Area Percentage Europe 50% USA 41% Asia and other 9% 100% STAGE COMPOSITION The chart below shows the breakdown of the Company's outstanding commitments by the stage focus of the underlying funds. Stage Percentage Buyouts 73% Venture 20% Special Situations 6% Generalist 1% 100% MATURITY The chart below shows the breakdown of the Company's outstanding commitments by the vintage (referring to the year the fund was established) of the underlying funds. Year Percentage 2008 36% 2007 30% 2006 15% 2005 6% 2004 2% 2003 and earlier 11% 100% FINANCE At 31st December 2008 the Company had Â£17.5m in cash and Â£44m remaining of its Â£150m revolving credit facility. PIP continues to have in place agreements with certain institutions under which the Company can require the institutions to subscribe for redeemable shares, up to the value of Â£150m. The purpose of these agreements is to provide an additional level of assurance that PIP will be in a position to meet calls in the near-term. In December, PIP issued Â£49.5m of unsecured subordinated loan notes (the "Notes") to the institutional investors who had previously entered into the standby redeemable agreements. The Notes have a maturity date of 15th November 2010 and accrue interest at LIBOR plus 1.5%. In the event of a drawdown by the Company under a "standby" commitment from an institutional investor who is a Noteholder, the Company shall repay an equivalent amount on the Notes held by such investor (or such lesser amount as is outstanding). As such, PIP's available financing capacity stood at Â£162m at 31st December 2008. The Company is exploring a number of options, including the disposal of certain fund interests, to ensure there is enough liquidity through 2010 and beyond. PANTHEON VEHICLES Pantheon Ventures Limited ("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. Interim Management Report and Responsibility Statement of the Directors IN RESPECT OF THE HALF YEARLY FINANCIAL REPORT INTERIM MANAGEMENT REPORT The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal uncertainties for the remaining six months of the financial year are all set out in the Chairman's Statement. The principal risks facing the Company are substantially unchanged since the date of the annual report for the year ended 30th June 2008 and continue to be as set out in that report. 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; and - this Half Yearly Financial 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 Company 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 27th February 2009 and the above responsibility statement was signed on its behalf by Tom Bartlam, Chairman. Income Statement (unaudited) FOR THE SIX MONTHS TO 31ST DECEMBER SIX MONTHS TO 31ST SIX MONTHS TO 31ST YEAR TO 30TH DECEMBER 2008 DECEMBER 2007 JUNE 2008 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** - 40,259 40,259 - 94,747 94,747 - 137,351 137,351 Currency (losses)/ gains on cash and borrowings - (21,107) (21,107) - 92 92 - 310 310 Income 1,640 - 1,640 3,627 - 3,627 4,787 - 4,787 Investment management and performance fees (4,374) 121 (4,253) (4,412) (4,379) (8,791) (9,768) (3,660) (13,428) Other expenses (623) (192) (815) (477) (314) (791) (900) (454) (1,354) Return on ordinary activities before financing costs and tax (3,357) 19,081 15,724 (1,262) 90,146 88,884 (5,881) 133,547 127,666 Interest payable and similar charges (3,781) - (3,781) (716) - (716) (2,199) - (2,199) Return on ordinary activities before tax (7,138) 19,081 11,943 (1,978) 90,146 88,168 (8,080) 133,547 125,467 Tax on ordinary activities - (275) (275) 609 (279) 330 609 (275) 334 Return on ordinary activities after tax for the period (7,138) 18,806 11,668 (1,369) 89,867 88,498 (7,471) 133,272 125,801 RETURN PER ORDINARY AND REDEEMABLE SHARE (10.75p) 28.32p 17.57p (2.06p) 135.36p 133.30p (11.25p) 200.73p 189.48p All revenue and capital items in the above statement relate to continuing operations. No operations were acquired or discontinued during the period. * 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 gains on investments. There were no recognised gains or losses other than those passing through the income statement. 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 six months ended 31st December 2008 OPENING EQUITY SHAREHOLDERS' FUNDS 25,428 26 183,182 99,861 227,504 225,056 (24,952) 736,105 Return for the period - - - - (1,332) 20,138 (7,138) 11,668 Expenses relating to the issue of Ordinary shares written back - - 2 - - - - 2 CLOSING EQUITY SHAREHOLDERS' FUNDS 25,428 26 183,184 99,861 226,172 245,194 (32,090) 747,775 Movement for the six 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 CLOSING EQUITY SHAREHOLDERS' FUNDS 25,428 26 183,139 99,861 216,058 193,097 (18,850) 698,759 Movement for the year ended 30th June 2008 OPENING EQUITY SHAREHOLDERS' FUNDS 25,428 26 183,139 99,861 187,543 131,745 (17,481) 610,261 Return for the period - - - - 39,961 93,311 (7,471) 125,801 Expenses relating to issue of Ordinary shares written back - - 43 - - - - 43 CLOSING EQUITY SHAREHOLDERS' FUNDS 25,428 26 183,182 99,861 227,504 225,056 (24,952) 736,105 Balance Sheet (unaudited) AS AT AS AT AS AT 31ST DECEMBER 31ST DECEMBER 30TH JUNE 2008 2007 2008 Â£'000 Â£'000 Â£'000 Fixed assets Investments at fair value through profit or loss* 892,837 696,544 806,485 Current assets Debtors 6,331 2,253 927 Cash at bank 17,504 10,480 8,801 23,835 12,733 9,728 Creditors: Amounts falling due within one year Other creditors 13,643 10,518 7,888 Bank loan 105,754 - 69,966 Bank overdraft - - 2,254 119,397 10,518 80,108 NET CURRENT (LIABILITIES)/ASSETS (95,562) 2,215 (70,380) TOTAL ASSETS LESS CURRENT LIABILITIES 797,275 698,759 736,105 Creditors: Amounts falling due after more than one year Loan notes 49,500 - - NET ASSETS 747,775 698,759 736,105 Capital and reserves Called-up share capital 25,428 25,428 25,428 Share premium account 183,184 183,139 183,182 Capital redemption reserve 26 26 26 Capital reserve - realised gains 226,172 216,058 227,504 Capital reserve - unrealised gains 245,194 193,097 225,056 Special reserve 99,861 99,861 99,861 Revenue reserve (32,090) (18,850) (24,952) TOTAL EQUITY SHAREHOLDERS' FUNDS 747,775 698,759 736,105 Net asset value per share 1,126.3p 1,052.5p 1,108.7p Number of Ordinary shares and Redeemable shares in issue 66,392,268 66,392,268 66,392,268 There were no fixed interest investments held at 31st December 2008 (31st December 2007: Â£11,877,000, 30th June 2008: nil). Cash Flow Statement (unaudited) FOR THE SIX MONTHS TO 31ST DECEMBER SIX MONTHS SIX MONTHS TO 31ST TO 31ST YEAR TO DECEMBER DECEMBER 30TH JUNE 2008 2007 2008 Â£'000 Â£'000 Â£'000 Cash flow from operating activities Investment income received 1,397 3,422 4,814 Deposit and other interest received 2 205 210 Investment management fees paid - (2,790) (9,198) Secretarial fees paid (72) (41) (102) Other cash payments (494) (143) (2,022) NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 833 653 (6,298) Returns on investment and servicing of finance Revolving credit facility and overdraft interest paid (3,556) (34) (471) Loan commitment and arrangement fees paid (225) (376) (552) Redeemable shares commitment fees paid (427) (414) (654) Interest on loan notes paid (73) - - NET CASH OUTFLOW FROM RETURNS ON INVESTMENT AND SERVICING OF FINANCE (4,281) (824) (1,677) Taxation Net taxation (paid)/refund (275) 510 498 NET CASH (OUTFLOW)/INFLOW FROM TAXATION (275) 510 498 Capital expenditure and financial investment Purchases of investments (112,830) (149,175) (280,170) Purchases of government securities - (23,455) (23,455) Disposals of investments 63,471 83,394 136,172 Disposals of government securities - 82,275 94,152 Realised currency gains/(losses) 85 (101) (94) NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (49,274) (7,062) (73,395) NET CASH OUTFLOW BEFORE FINANCING (52,997) (6,723) (80,872) Financing Written back/costs of Ordinary share issue 2 - 43 Drawdown of loan 75,788 - 69,966 Repayment of loan (40,000) - - Issue of loan notes 49,500 - - Realised currency (losses)/gains on repayment of revolving credit facility (23,515) - (594) NET CASH INFLOW FROM FINANCING 61,775 - 69,415 INCREASE/(DECREASE) IN CASH 8,778 (6,723) (11,457) Notes to the Half Yearly Financial Report (unaudited) 1. FINANCIAL INFORMATION This financial information has been prepared on the historical cost basis of accounting, except for the measurement at fair value of investments, and in accordance with applicable UK accounting standards on the basis that all activities are continuing. The accounting policies set out in the statutory accounts for the year ended 30th June 2008 have been applied to this Half Yearly Financial Report. The accounts have been prepared in accordance with the Statement of Recommended Practice (revised December 2005) issued by the Association of Investment Companies. 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 31st December 2008 and 31st December 2007 are not for a financial year and have not been audited but have been reviewed by the Company's auditors and their report is attached. The statutory accounts for the financial year ended 30th June 2008 have been delivered to the Registrar of Companies and received an audit report which was unqualified. They 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 a statement under section 237(2) or (3) of the Companies Act 1985. 2. TAX CREDIT/CHARGE ON ORDINARY ACTIVITIES The tax debit for the half-year is Â£275,000 (31st December 2007: Â£330,000 credit; 30th June 2008: Â£334,000 credit) based on an estimated effective tax rate of (0.4%) for the year ending 30th June 2009. The tax charge to capital consists of Japanese Corporation Tax and tax withheld from capital distributions. 3. RELATED PARTY TRANSACTIONS Pantheon Ventures Limited, as Manager of the Company, is considered to be a related party by virtue of its management contract with the Company. Mr R. M. Swire, a Director of the Company, is a director of Pantheon Holdings Limited, the holding company of Pantheon Ventures Limited. During the period, services of a total value of Â£6,075,000 (31st December 2007: Â£8,791,000; 30th June 2008: Â£13,428,000) were purchased by the Company from Pantheon Ventures Limited. This has been reduced to Â£4,253,000 in the income statement following the refund of VAT relating to services purchased from Pantheon Ventures Limited in prior periods, as detailed in Note 5. 4. 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 fee payable in respect of each such period is 5% of any increase in the Net Asset Value of the Company at the end of such period over the applicable "high water mark" plus the hurdle rate of 10%. The applicable "high water mark" in respect of any calculation period is the Net Asset Value at the end of the previous calculation period in which a performance fee was payable, compounded annually at the hurdle rate for each subsequent completed calculation period up to the commencement of the calculation period for which the performance fee is being calculated. 5. VAT DISCLOSURE NOTE As a result of the AIC/Claverhouse ruling the Company no longer pays VAT on its investment management fees. For the period ended 31st December 2008 Â£1,822,000 of VAT recovered from investment management fees has been credited to investment management fees and Â£241,000 of related interest received has been credited to income. This represents the amounts of VAT and interest recovered by the manager from HM Revenue & Customs relating to VAT charged since August 2001. There is a possibility that additional amounts of VAT may be recoverable in respect of earlier years. 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 2008 2007 2008 Â£'000 Â£'000 Â£'000 Net return before finance costs and taxation 15,724 88,884 127,667 Gains on investments (40,259) (94,747) (137,351) Currency losses/(gains) on cash and borrowings 21,107 (92) (310) Increase in creditors 6,233 6,029 3,187 (Increase)/decrease in other debtors (1,972) 579 509 NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 833 653 (6,298) 7. RECONCILIATION OF NET CASH FLOW TO MOVEMENTS IN NET DEBT 6 MONTHS 6 MONTHS TO 31ST TO 31ST YEAR TO DECEMBER DECEMBER 30TH JUNE 2008 2007 2008 Â£'000 Â£'000 Â£'000 Increase/(decrease) in cash in the 6 months/year 8,778 (6,723) (11,457) Non-cash movement Exchange gains 2,179 193 994 Movement in net cash flows 10,957 (6,530) (10,463) Net debt at beginning of period (63,419) 17,010 17,010 Loans drawn down (75,788) - (69,966) Loans repaid 40,000 - - Issue of loan notes (49,500) - - NET (DEBT)/FUNDS AT END OF PERIOD (137,750) 10,480 (63,419) 8. ANALYSIS OF NET DEBT/FUNDS 6 MONTHS 6 MONTHS TO 31ST TO 31ST YEAR TO DECEMBER DECEMBER 30TH JUNE 2008 2007 2008 Â£'000 Â£'000 Â£'000 Cash at bank 17,504 10,480 8,801 Bank overdraft - - (2,254) Bank loan (105,754) - (69,966) Loan notes (49,500) - - (137,750) 10,480 (63,419) Independent Review Report TO PANTHEON INTERNATIONAL PARTICIPATIONS PLC 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 31st December 2008 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 Financial Summary, Objective and Investment Policy, Chairman's Statement, Portfolio Review, Activity, Outstanding Commitments and Interim Management Report and Responsibility Statement of the Directors, 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 31st December 2008 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 Chartered Accountants London 27th February 2009 Directors and Advisors DIRECTORS REGISTRARS Tom Bartlam (Chairman) Capita Registrars Ian Barby Northern House Richard Crowder Woodsome Park Peter Readman Fenay Bridge Rhoddy Swire Huddersfield Sandy Thomson West Yorkshire HD8 0LA MANAGER * Telephone: 0871 664 0300 Pantheon Ventures Limited * calls cost 10p per minute plus network charges (Authorised and regulated by the FSA) * Telephone from overseas: +44(0)20 8639 3399 Norfolk House 31 St. James's Square BANKERS London The Royal Bank of Scotland PLC SW1Y 4JR Waterhouse Square Telephone: 020 7484 6200 138-142 Holborn Email: pip@pantheonventures.com London Internet: www.pantheonventures.com EC1N 2TH SECRETARY & REGISTERED OFFICE HSBC Bank PLC Capita Sinclair Henderson Limited (Also custodian) Beaufort House Global Investor Services 51 New North Road Mariner House Exeter Pepys Street EX4 4EP London Telephone: 01392 412122 EC3N 4DA BROKERS AUDITORS Collins Stewart Europe Ltd Grant Thornton UK LLP 9th Floor 30 Finsbury Square 88 Wood Street London London EC2P 2YU EC2V 7QR SOLICITORS FIXED INTEREST INVESTMENT ADVISOR Covington & Burling LLP Alliance Bernstein 265 Strand Devonshire House London 1 Mayfair Place WC2R 1BH London W1X 6JJ HALF-YEARLY REPORT The foregoing represents the full text of the Half-Yearly Report for the six months to 31st December 2008, which will be posted to shareholders shortly. The Report will also be available for download from the following website: www.pipplc.com or on request from the Company Secretary. Capita Sinclair Henderson Limited 27th February 2009

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