Half-yearly Report

PANTHEON INTERNATIONAL PARTICIPATIONS PLC HALF YEARLY FINANCIAL REPORT SIX MONTHS TO 31ST DECEMBER 2011 The Company presents its Half Yearly Financial Report for the six months to 31st December 2011. FINANCIAL SUMMARY HIGHLIGHTS 31ST DECEMBER 2011 30TH JUNE 2011 CHANGE Summary of results Adjusted NAV per share 1,134.0p 1,104.1p ¹ 2.7% Adjusted net assets £826.2m £733.1m¹ 12.7% Ordinary shares Share price 625.8p 714.0p (12.4%) Discount to adjusted NAV per 44.8% 35.3% share Redeemable shares Share price 645.0p 710.0p (9.2%) Discount to adjusted NAV per 43.1% 35.7% share SIX MONTHS TO YEAR TO 31ST DECEMBER 2011 30TH JUNE 2011 Portfolio activity Distributions £80.5m £165.2m Investments called £28.1m £84.1m² Net portfolio cash flow £52.4m £81.1m ¹ 30th June 2011 figures relate to the adjusted NAV, which excluded a derivative asset relating to the Company's standby subscription agreements with certain institutions under which those institutions could be called upon by the Company to subscribe for new redeemable shares in the Company ("Standby Commitments"). These agreements were required to be included as an asset in the Company's accounts to comply with FRS 26. The Board considered that the best measure of the Company's economic value to shareholders at 30th June 2011 was the adjusted NAV per share, which is directly comparable to previously published NAV per share. The utilisation and expiry of Standby Commitments in the September 2011 quarter led to a reversal of the asset in the accounts. ² Excludes £18.8m acquisition cost of a new secondary transaction completed in the year to 30th June 2011. SINCE PERFORMANCE AT 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION 31ST DECEMBER 2011 % % P.A. % P.A. % P.A. % P.A. NAV per share 15.9 0.2 6.5 6.6 11.4 Ordinary share price 0.1 37.6 (5.1) 2.7 9.2 FTSE All-Share Total Return (3.5) 12.9 1.2 4.8 7.6 MSCI World Total Return (4.5) 9.5 2.9 3.5 6.2 (sterling) PIP was launched on 18th September 1987. Historical NAV per share calculations use adjusted NAV per share where applicable. £1,000 invested at inception, assuming reinvestment of dividends, capital repayments and cash flows from the exercise of warrants would have been worth £8,525 at 31st December 2011. CAPITAL STRUCTURE AT 31ST DECEMBER 2011 Ordinary shares 36,896,013 Redeemable shares 35,958,534 Total 72,854,547 Since 31st December 2011 the Company has bought back for cancellation 230,000 ordinary shares and 500,000 redeemable shares. CHAIRMAN'S STATEMENT I am pleased to report PIP's net asset value ("NAV") per share increased by 2.7% to 1,134.0p in the half year to 31st December 2011, despite the public market volatility in the third quarter of 2011. The increase in NAV per share was driven by valuation gains and uplifts from share buybacks. However, the market price of redeemable and ordinary shares moved negatively, in line with the direction of stock markets. This is disappointing as it increases the discount at which the Company's shares have traded in the period. Investment performance Distributions, which are often executed at uplifts to carrying value, amounted to a healthy £80m for the period. Valuations, particularly those of large buyout funds, were inevitably impacted by public market volatility in the September 2011 quarter. However, overall, the portfolio showed positive performance in the half year to 31st December 2011, in contrast to falls of 7% and 6% in the MSCI World and FTSE All-Share indices respectively. Capital structure A year ago, I stated that it was a key priority to extend the Company's bank loan facility and review whether the equity capital structure could be simplified. As previously disclosed, a new facility, expiring in June 2015, was agreed which remains undrawn. Following this, on 24th August 2011, the Company terminated the standby bridge loan arrangements by exchanging £100.5m of new redeemable shares for the £100.5m of loan notes then outstanding on its balance sheet. The Company also announced the termination of the remaining standby agreements effective from 30th September 2011.The balance sheet is now debt-free and the capital structure has been simplified. Secondaries remain the main investment focus During this phase of the investment cycle, the Board favours investments that have a shorter duration and a lower unfunded component than committing to primary fund investments. Accordingly, the Board currently intends that the Company should continue to emphasise investments in secondary interests and also occasionally to invest by participating in co-investments alongside leading private equity managers selected by Pantheon, our Manager. As secondary investments by nature are opportunistic the Company will, through its co-investment programme, be able to build additional exposure in those regions we believe to be particularly attractive. Share buybacks increased NAV per share Given the wide discount at which the shares have traded in the period, the Board has prioritised share buybacks over new secondary transactions as an investment priority. In the half year to 31st December 2011 PIP bought back, for cancellation, a total value of £17.4m shares, resulting in an uplift to NAV per share of approximately 16p, or 1.4% of PIP's adjusted NAV per share at 30th June 2011. PIP's growing financial strength increases its capacity for new investments, but share buybacks will remain a compelling investment alternative while discounts are high. Change to Net Asset Value In the six months to 31st December 2011 PIP's net assets increased by £93.1m to £826.2m. Of this increase, £100.5m resulted from the exchange of loan notes for new redeemable shares in August 2011, while reported gains in unlisted and listed securities amounted to £7m. Expenses and interest of £7m were fully offset by income, whilst foreign exchange movements on the portfolio and cash balances added £2m. The net asset value was reduced by the £17m market value of ordinary and redeemable shares bought back and cancelled by the Company during the half year. Solid performance progress from mid-cap buyout funds Small and mid-cap buyout funds, which represent a majority of the Company's buyout portfolio, outperformed large and mega buyout funds in all regions. This was particularly evident in the US, where large and mega buyout funds were significantly impacted by falls in public markets, possibly reflecting the higher levels of leverage typical of capital structures at the large end of the market. PIP's European buyout portfolio, which has greater exposure to mid and small cap buyout funds, outperformed the US and Asia. A number of substantial realisations were beneficial to performance, particularly in Europe. PIP's European exposure is weighted predominantly in the UK, Germany and Scandinavia, with only a small exposure to Southern European countries such as Spain and Italy, which together represent approximately 4% of PIP's overall portfolio. Venture and growth valuations remained stable PIP's venture and growth assets, which account for 32% of the total portfolio, experienced less market-related volatility, with a flat performance over the half year period. The rate of distributions from PIP's venture and growth funds were lower than those from buyout funds, reflecting the current weakness in IPO markets and a reduction in venture-backed M&A activity. PIP's mature venture and growth assets, with a weighted average fund maturity of 7.9 years, should benefit from any future recovery in exit markets. The rate of realisation activity can be a significant factor for investment performance, as distributions from venture assets have often resulted in healthy uplifts to carrying value. Investment Activity The increasing maturity of PIP's portfolio naturally strengthens the Company's cash flow, as distributions increasingly outweigh calls of unfunded commitments. The Company's net cash flow continued to pick up from last year. £52m was generated during the half year to 31st December 2011, up from £29m in the same period last year. The Company made no new commitments during the period. Continuing strong distribution activity Following the increase in exit activity during the first half of the 2011 calendar year, PIP continued to experience similar levels of distributions from its portfolio in the period, due in part to the completion of exits signed earlier in the year. Furthermore, we continue to see evidence that distributions played a significant part in driving performance; the top 25 distributions in the period achieved an average multiple to cost of 3.3 times and uplift to carrying value of 38%. Call rates showing signs of slowing The Company invested £28m through calls from underlying private equity funds. These calls represent 12% of opening undrawn commitments, down from approximately 14% in the same period last year. This modest slowdown in the pace of investment activity reflects both the increased caution of managers due to the uncertain macro-economic environment and also the weaker debt markets, particularly in Europe. Share buybacks and new investment commitments After 31st December 2011 the Company signed an agreement committing £5m to a secondary interest which has now completed, but made no new commitments during the period, focusing instead on investing through share buybacks. The Company invested a total of £17.4m buying back its shares for cancellation at an average discount of approximately 40% to the 30th June 2011 adjusted NAV per share, resulting in an uplift to PIP's NAV per share of 16p. Since 31st December 2011, the Company has bought back a further £4.8m of shares at an average discount of approximately 42%, taking the total amount bought back to 4.5% of PIP's total shares outstanding prior to any share buybacks. In pursuing its investment strategy, the Company will continue to weigh new secondary and co-investment opportunities against the opportunity to acquire more of its own shares at a significant discount to NAV. Financing and Capital Structure Adjustments to the capital structure In August 2011 the Company exchanged for new redeemable shares the full outstanding £100.5m balance of loan notes issued in 2008 and 2010 to bridge calls under the Company's standby redeemable share subscription agreements ("Standby Commitments") with certain institutions. The new redeemable shares were issued under these Standby Commitments at a subscription price of 1,104.1p, equal to the adjusted NAV per share at 30th June 2011. The Company subsequently terminated the remaining £49.5m of Standby Commitments with effect from 30th September 2011. Loan facility remains undrawn PIP's multi-currency, revolving credit agreement, which remains unutilised, comprises facilities of $82m and €57m that will expire in June 2015. The Board intends to reserve the credit facilities to enable the Company to finance calls of undrawn commitments in the event that distributions from investments are insufficient to do so. Undrawn commitments are well covered Outstanding commitments to investments, which are likely to be called over several years, stood at £211m at 31st December 2011, down from £243m at 30th June 2011. At 31st December 2011, the Company's available financing was £157m, comprising cash balances of £57m and the unutilised bank loan facility of £100m. This available financing, together with the private equity portfolio of £775m, represented 4.4 times the value of the Company's £211m of undrawn commitments. Outlook The outlook is for weak economic growth to continue in many of the markets in which the Company's investments are based. Despite this, in the absence of a more challenging economic environment that could result from disorderly changes in the membership of the Eurozone, the maturity of the Company's portfolio should help it to continue to perform depending on the level of realisation activity in the coming periods. Although the outlook for exits through IPOs remains uncertain, we believe M&A will dominate exit activity given the high level of cash on many corporate balance sheets. This activity should drive distributions and ultimately performance. While the debt markets, especially in Europe, have certainly slowed somewhat, debt remains available for attractive buyout targets and the need for growth equity investment will continue in some markets. Therefore we expect to see call activity continuing in the coming period. With more widespread recognition of the economic uncertainties, attractive investment opportunities should increase as vendors resume their efforts to meet structural and liquidity objectives. This has been experienced to a significant extent already in the secondary market where deal flow patterns indicate a return to historically high levels of secondary investment activity. The Company is strongly positioned to benefit from these developments and will continue to emphasise secondary investment and co-investment in its investment programme, together with share buybacks. TOM BARTLAM Chairman 27th February 2012 THE MANAGER'S REVIEW MARKET REVIEW Buyouts The resurgence of buyout activity which began in 2010 continued to gain pace in the first half of 2011 with credit markets becoming increasingly accommodating. This slowed markedly in the second half of the year as risk aversion amongst lenders increased amidst growing concern over the European debt crisis. In all markets, but particularly in Europe, while credit markets can be said to be open for business, there is no doubt that financing costs have risen and that credit availability is both more constrained and more volatile. In the USA, buyout volume totalled $111bn during 2011, an approximate 40% increase over 2010, although activity remains well below that of 2007, which peaked at $434bn. Leveraged buyout loan volume has also rebounded, totalling $52bn during the year. While valuations have risen as a consequence of the increase in volume, purchase price multiples remain below peaks reached in 2007, and debt multiples have moderated. Take-privates and secondary buyouts continue to represent a significant proportion of transactions completed. A similar picture emerged in Europe, which saw around a 50% increase in transactions in 2011. However, in the final quarter of 2011 there was a significant slowdown in deals and exits due to volatility in financial markets and the Eurozone crisis. In particular, the reduced appetite of banks to underwrite new loans, given the current economic conditions, has been a stumbling block to completing new transactions. Venture and Growth The US venture capital environment continues to benefit from rapid developments in certain areas of the technology market. Investment pace has ranged from approximately $25bn to $30bn annually for each of the past six years. More recently, venture capital investment performance has strengthened based on the growth prospects for certain companies and the greater receptivity of public markets (particularly for the technology, energy and healthcare sectors). While M&A transactions continue to represent a majority of the liquidity generated by venture-backed companies, public offerings raised $12bn in 2011 and $9bn in 2010. After the recent strength in venture-backed exits, IPO activity has already slowed following recent stock market volatility. However, if markets stabilise again we could continue to see strength in M&A activity within the sector, as cash-rich IT and healthcare firms seek to acquire venture-backed companies developing potentially disruptive technologies. Secondary Market Secondary market transaction volumes were at a record level in 2011, although here also volumes slowed in the second half of 2011. Estimates for total transaction volume in the year are around $24 bn. The supply of deals in 2012 continues to look robust, with a number of $1bn-plus deals in the pipeline. As ever, volumes are highly sensitive to prevailing levels of discounts to NAV, with fewer sellers transacting when discounts are higher. Pricing appeared to peak around June 2011, although interests in high quality buyout funds can still attract buyers at narrow discounts to NAV. A spread has been developing between European funds and equivalent quality US funds, reflecting the perception of the higher risk in owning European assets. On the demand side, it is estimated that secondary investors have $32.5 bn in dry powder, according to UBS research. A number of secondary groups are expected to be fundraising in 2012. Asia While the Company's Asian investment portfolio incorporates a significant buyout element, it is characterised by much higher levels of growth capital investment. In 2011, investment levels in the Asian private equity market almost matched 2010 levels, even after a slowdown caused by the increase in global economic uncertainty in the second half of the year. Greater China continues to dominate the region, accounting for more than 40% of Asian investment. Rising investor interest saw more funds raised with a focus on South East Asia, particularly Indonesia. Japan remains an underactive buyout market although some large investments were recorded, with some funds taking advantage of lower valuations in one of the largest economies in Asia. In five of the last seven years, IPOs have accounted for the largest share of realisation activity in Asia. However, during 2011 M&A realisations outpaced IPOs, reflecting the downturn in equity markets in the second half of 2011. IPO activity in 2012 may remain muted as equity markets globally respond to the headwinds in the developed world. The Company experienced high levels of realisations from its portfolio in 2011, reflecting both buoyant IPO markets in the first half and strong trade sales as corporate buyers made acquisitions both within and outside the region. Notable examples include Nestlé's purchase of Hsu Fu Chi, a Chinese confectionary company, and Canada-based Valeant Pharmaceuticals' purchase of Australian pharmaceutical company iNova. INVESTMENTS CALLED IN THE HALF YEAR TO 31ST DECEMBER 2011 New investments financed during the year ranged across many sectors and regions, from business services, manufacturing and energy companies to casual restaurant chains, software developers and healthcare providers. Further calls from the Company's undrawn commitments of £211m will be made in the coming year, ensuring that PIP continues to invest throughout the economic cycle. Calls PIP paid £28m of calls in the half year to 31st December 2011, equivalent to approximately 12% of opening undrawn commitments. This is slightly down on the rate for the same period last year, which was approximately 14%. USA 53% Europe 39% Asia and other 8% DISTRIBUTIONS IN THE HALF YEAR TO 31ST DECEMBER 2011 PIP received distributions from more than 300¹ funds, 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. ¹ This figure looks through feeders and funds-of-funds. Distributions PIP received £80m in proceeds from the portfolio in the half year to 31st December 2011, equivalent to approximately 10% of opening private equity assets, a rate equal to that experienced in the same period last year. USA 46% Europe 40% Asia and other 14% Cost multiples on a sample of the largest distributions in the half year to 31st December 2011 The weighted average cost multiple achieved by the underlying fund manager on a sample of the largest 25 distributions was 3.3 times. 100% of the distributions in the sample generated multiples in excess of 1.0 times cost for the underlying fund, over 60% achieved multiples in excess of 2.0 times and over 20% of the sample generated multiples in excess of 5.0 times. These results highlight the continued ability of private equity managers to create significant value over the course of an investment. Uplifts to previous valuations on a sample of the largest distributions in the half year to 31st December 2011 The weighted average uplift to previous valuations achieved by the underlying fund manager on a sample of the largest 25 distributions was 38%. 94% of the sample distributed an amount greater than the previous valuation, over 60% of the sample generated uplifts in excess of 25% and over 20% generated uplifts in excess of 50%. These findings are consistent with our view that distributions 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. FINANCE Cash and available bank facility At 31st December 2011 the Company had cash balances equivalent to £56.5m, up from £27.6m at 30th June 2011. The Company has a multi-currency revolving credit facility agreement ("Loan Facility") that is due to expire in June 2015 and comprises facilities of $82m and €57m. The Loan Facility remained undrawn at 31st December 2011. Standby financing and loan notes Between 2005 and 2008 PIP entered into a number of standby agreements (the "Standby Commitments") with certain institutions under which the Company could require the institutions to subscribe up to £150m for new redeemable shares, at a price equal to the prevailing NAV per share at the time of subscription. The purpose of these Standby Commitments was to provide an additional level of assurance that PIP would be in a position at all times to meet its financial obligations. Furthermore, in December 2008 and September/ October 2010, PIP issued to these institutions a total of £100.5m in unsecured subordinated loan notes which were due to mature on 15th November 2011 (the "Loan Notes") in order to bridge calls under the Standby Commitments. On 24th August 2011, PIP drew down £100.5m under the Standby Commitments resulting in the issue of 9,102,279 new redeemable shares (based on the prevailing adjusted NAV per share at 30th June 2011 of 1,104.12p). Simultaneously, the Company repaid £100.5m of Loan Notes, effectively exchanging the full balance of the Loan Notes for new redeemable shares. At the end of September 2011 the Board terminated the remaining £49.5m of Standby Commitments. These actions have enabled the Company to simplify its capital structure by removing the Loan Notes from the balance sheet. Commitment cover At 31st December 2011, PIP's available financing stood at £156.9m, comprising £56.5m in cash balances and £100.4m in undrawn bank facility (sterling equivalent). The sum of the Company's available financing and private equity portfolio exceeded its undrawn commitments by 4.4 times, up from 3.9 times at 30th June 2011. It should be noted that a portion of the Company's undrawn commitments might not be called 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 draw 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. 31% of the Company's undrawn commitments are in fund vintages that are greater than five years old. Share buybacks In the half year to 31st December 2011, the Company bought back for cancellation a total of £4.0m ordinary shares and £13.4m redeemable shares at an average price per share of 641p and 665p respectively. These transactions were executed at an overall average discount of approximately 40% to the 30th June 2011 adjusted NAV per share. These buybacks have resulted in an uplift to PIP's NAV per share of 16p, representing 1.4% of PIP's adjusted NAV per share at 30th June 2011. Since the half year end the Company has bought back, for cancellation, a further 230,000 ordinary shares and 500,000 redeemable shares, at an overall average discount of 42% to the 31st December 2011 NAV per share. Since the Company began acquiring its own shares in August 2011, PIP has deployed a total of £22m in implementing share buybacks, acquiring 4.5% of PIP's total shares outstanding prior to any share buybacks. PORTFOLIO OVERVIEW 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 of both returns and cash flows. The maturity profile of the portfolio ensures that PIP is not overly exposed to any one vintage. Furthermore, PIP's geographical diversification extends its exposure beyond the USA and Europe, to regions with higher rates of economic growth such as Asia. As such, the Company offers a comprehensively global, diversified selection of private equity assets, carefully selected by Pantheon for their quality. Portfolio Analysis by Value as at 31 December 2011 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. USA 54% Europe 35% Asia and other 11% Stage PIP's portfolio is well diversified across different private equity investment styles and stages. The majority of the Company's buyout exposure is focused on mid- and small-cap funds, which have tended to utilise lower levels of leverage in their acquisition structures than the very largest funds. In addition, PIP has a significant exposure to venture and growth-focused funds, many of which were acquired through the secondary market. Buyout: Small/Mid 36% Buyout: Large/Mega 20% Venture and Growth 32% Special Situations 6% Generalist 4% Directs 2% Primary/secondary 64% of the portfolio is derived from primary transactions and 36% from secondary transactions. Primary 64% Secondary 36% Maturity PIP's portfolio is well diversified by fund vintage (referring to the year the fund made its first drawdown). Only 16% of the portfolio relates to large/mega buyouts from fund vintages 2005 to 2007, indicating that the Company has a relatively low exposure to the higher levels of leverage experienced during the peak of the buyout market. Because PIP acquires many of its investments in the secondary market, it achieves further "backward diversification" and is able to acquire assets having good visibility of underlying company quality and prospects. 2000 and earlier 17% 2001 5% 2002 2% 2003 3% 2004 5% 2005 15% 2006 21% 2007 24% 2008 8% 2009 0% 2010 0% 2011 0% Company sector 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. Relative to the FTSE All-Share and MSCI World indices, PIP is underweight in many of the segments that have been most recently associated with high levels of volatility, such as energy and financials. Information 24% Technology Consumer 20% Discretionary Industrials 15% Healthcare 14% Financials 7% Energy 6% Consumer Staples 5% Materials 4% Telecom Services 4% Utilities 1% Company geography The geographical exposure of PIP's underlying company investments is diversified across North America, Europe and Asia. Notably, PIP's European exposure is focused upon Northern European economies. North America 48% Asia and other 13% UK 12% Germany 6% Scandinavia 6% Benelux 4% France 3% Central and Eastern 3% Europe Italy 2% Iberia 2% Other Europe 1% Geography, Stage, Primary/Secondary and Maturity tables above 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 30th June 2011 and account for approximately 90% of PIP's overall portfolio value. A detailed list of portfolio fund holdings is available on PIP's website at www.pipplc.com PORTFOLIO ANALYSIS Buyout Debt Multiples¹ Venture and growth, small/mid-size buyouts and large/mega buyouts account for 88% of the porfolio value, and have differing leverage characteristics: ● The venture and growth portfolio accounts for 32% of portfolio value and has very little or no reliance on debt. ● Small/mid-size buyout assets, which account for 36% of portfolio value, tend to contain a moderate level of debt. Sample underlying net debt/EBITDA for small/mid-size buyout assets at 30th June 2011 was 2.9 times. ● Large/mega buyout assets, which account for 20% of portfolio value, contain higher levels of debt with underlying sample net debt/EBITDA of 4.2 times, a figure that is relatively low compared to the debt multiples of deals executed at the peak of the buyout market in 2006/2007. Buyout revenue and EBITDA Growth¹ ● Weighted average revenue and EBITDA growth for the sampled buyout companies was +12.5% and +19.0% respectively in the 12 months to 30th June 2011. This compares favourably with the MSCI World and FSTE All-Share indices, both of which recorded lower EBITDA growth in the same period. ● These revenue and EBITDA growth figures suggest resilience at the underlying company level. In particular, they suggest that, on the whole, our managers have been successful in managing costs, driving efficiencies and positioning their companies for top line growth. Buyout Valuation Multiple¹ ● Accounting standards require private equity managers to value their portfolio at fair value. This leads to volatility in valuations reflecting movements in the broader markets. However, valuations of private equity assets can often leave some room for value enhancement when liquidity is released through a sale. ● Sample weighted average enterprise value/EBITDA for the 12 months to 30th June 2011 was 10.1 times. ¹Buyout sample methodology The sample buyout growth, net debt/EBITDA and EV/EBITDA figures were calculated from approximately 65%, 85% and 85% respectively, of the value of the companies within the largest 50 buyout funds and direct investments as at 30th June 2011, accounting for approximately 45%, 55% and 55% respectively of the value of PIP's buyout and direct portfolio. The figures are based upon unaudited data. The revenue and EBITDA figures were based upon the 12 months to 30th June 2011. The net debt and enterprise value figures were based upon 30th June 2011 underlying valuations. The underlying company data was weighted by NAV to calculate an average. Individual company revenue and EBITDA growth figures were capped between +1000% and -1000% to avoid large distortions from movements relative to a small denominator. FTSE All-Share and MSCI World data was taken from Bloomberg. Venture and Growth Distribution Rates ● Over 35% of PIP's venture and growth assets are in funds dated 2001 and earlier. These companies are now mature and many are cash-generative, having survived the bursting of the technology bubble and the latest downturn. Venture managers focus their attention on those companies that have the ability to drive meaningful returns and are generally quick to pull out of investments in failing companies. Consequently, only venture assets with good potential survive to maturity. ● Mature venture companies, which often resemble growth investments in terms of cash generation and profitability, have shown an increased likelihood of returning cash to investors. It is our view that PIP's mature venture and growth assets can continue to generate a good level of distributions. Given that distributions have tended to lead to uplifts, PIP's mature venture and growth portfolio is in a position to continue to perform. OUTSTANDING COMMITMENTS PIP's outstanding commitments to fund investments, 71% of which relate to primary funds and 29% of which relate to secondary funds, 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. Portfolio Analysis by Outstanding Commitments as at 31st December 2011 PIP's outstanding commitments to investments decreased to £211m at 31st December 2011 compared with £243m at 30th June 2011. The Company paid calls of £28m in the half year period. The remaining movements in undrawn commitments were caused by fluctuations in exchange rates and cancellations of outstanding commitments by general partners. Geography The USA and Europe have the largest outstanding commitments, reflecting the fact that they have the most developed private equity markets. Commitments to Asia and other regions provide access to faster-growing economies. USA 47% Europe 40% Asia and other 13% Stage PIP's undrawn commitments are well diversified across all major stages of private equity. The majority of the buyout exposure is with mid-cap and smaller funds. Venture and growth forms a significant portion of the Company's undrawn commitments. Buyout: Small/Mid 42% Buyout: Large/Mega 21% Venture and Growth 26% Special Situations 8% Generalist 3% Maturity 31% of PIP's undrawn commitments are in the 2005 fund 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 31% 2006 16% 2007 27% 2008 20% 2009 5% 2010 1% 2011 0% Geography, Stage and Maturity tables are based upon underlying fund valuations and account for 100% of PIP's undrawn commitments. Pantheon Vehicles Pantheon Ventures (UK) LLP ("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. TOP 20 MANAGERS BY VALUE AS AT 31ST DECEMBER 2011 % OF PIP'S PRIVATE NUMBER MANAGER REGION STAGE BIAS EQUITY ASSET VALUE 1 Equistone* EUROPE BUYOUT 2.5% 2 CVC Capital Partners GLOBAL BUYOUT 2.5% 3 Apax Partners EUROPE BUYOUT 2.3% 4 Nova Capital Management EUROPE BUYOUT 2.3% 5 Golden Gate Capital USA BUYOUT 2.1% 6 Brentwood Associates USA BUYOUT 2.0% 7 Vision Capital EUROPE BUYOUT 1.7% 8 IK Investment Partners EUROPE BUYOUT 1.6% 9 Doughty Hanson & Co EUROPE BUYOUT 1.6% 10 Providence Equity USA BUYOUT 1.6% Partners 11 Carlyle Group GLOBAL GENERALIST 1.5% 12 Genstar Capital Partners USA BUYOUT 1.4% 13 Bain Capital USA BUYOUT 1.4% 14 ABS Capital Partners USA VENTURE AND 1.3% GROWTH 15 Oak Investment Partners USA VENTURE AND 1.3% GROWTH 16 Hutton Collins EUROPE SPECIAL 1.3% SITUATIONS 17 Riverstone Holdings USA SPECIAL 1.2% SITUATIONS 18 Baring Vostok Capital EUROPE BUYOUT 1.2% Partners 19 Avista Capital Partners USA BUYOUT 1.2% 20 Polaris Venture Partners USA VENTURE AND 1.1% GROWTH TOP 20 MANAGERS BY OUTSTANDING COMMITMENTS AS AT 31ST DECEMBER 2011 % OF OUTSTANDING NUMBER MANAGER REGION STAGE BIAS COMMITMENTS 1 Hutton Collins EUROPE SPECIAL 3.9% SITUATIONS 2 CVC Capital Partners GLOBAL BUYOUT 3.9% 3 Summit Partners GLOBAL VENTURE AND 2.9% GROWTH 4 Clessidra Capital EUROPE BUYOUT 2.6% Partners 5 GrandBanks Capital USA VENTURE AND 2.4% GROWTH 6 ABS Capital Partners USA VENTURE AND 2.2% GROWTH 7 Unison ASIA AND BUYOUT 2.2% OTHER 8 Carlyle Group GLOBAL GENERALIST 2.2% 9 Private Equity Partners EUROPE BUYOUT 2.0% 10 Baring Vostok Capital EUROPE BUYOUT 1.7% Partners 11 Equistone* EUROPE BUYOUT 1.6% 12 Mid-Europa Partners EUROPE BUYOUT 1.5% 13 Doughty Hanson & Co EUROPE BUYOUT 1.5% 14 CCMP Capital ASIA AND BUYOUT 1.5% OTHER 15 Mercapital EUROPE BUYOUT 1.5% 16 Vision Capital EUROPE BUYOUT 1.5% 17 Gemini Israel Funds EUROPE VENTURE AND 1.4% GROWTH 18 Brentwood Associates USA BUYOUT 1.3% 19 Castle Harlan Associates GLOBAL BUYOUT 1.1% 20 Herkules Capital EUROPE BUYOUT 1.1% * Formerly Barclays Private Equity. TOP 20 COMPANIES VALUE AS AT 31ST DECEMBER 2011 % OF PIP'S PRIVATE NUMBER COMPANY SECTOR EQUITY ASSET VALUE 1 Carbolite INDUSTRIALS 1.2% 2 Attendo HEALTHCARE 1.1% 3 Yandex* INFORMATION TECHNOLOGY 0.6% 4 Array Marketing Group INDUSTRIALS 0.5% 5 Global Blue FINANCIALS 0.5% 6 BrightHouse CONSUMER DISCRETIONARY 0.5% 7 Splunk INFORMATION TECHNOLOGY 0.5% 8 Evonik MATERIALS 0.4% 9 VBrick Systems INFORMATION TECHNOLOGY 0.4% 10 Siltron INFORMATION TECHNOLOGY 0.4% 11 TDC* TELECOMMUNICATION 0.4% SERVICES 12 InterXion* INFORMATION TECHNOLOGY 0.4% 13 Bibby Scientific INFORMATION TECHNOLOGY 0.4% 14 The Teaching Company CONSUMER DISCRETIONARY 0.4% 15 Rosetta Stone* CONSUMER DISCRETIONARY 0.3% 16 PRA International HEALTHCARE 0.3% 17 2e2 INFORMATION TECHNOLOGY 0.3% 18 Fairway Market CONSUMER STAPLES 0.3% 19 Ancestry.com* INFORMATION TECHNOLOGY 0.3% 20 HCA* HEALTHCARE 0.3% *Quoted holding as at 31st December 2011. The top 20 managers by value and outstanding commitments above are based upon underlying fund valuations. The top 20 company data above is based upon underlying company valuations at 30th June 2011, adjusted for known calls and distributions. 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; and ● 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. INTERIM MANGEMENT 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 set out in the Chairman's Statement and the Manager's Review. The principal risks facing the Company are substantially unchanged since the date of the Annual Report for the year ended 30th June 2011 and continue to be as set out in that report. Risks faced by the Company include, but are not limited to, funding of investment commitments, risks relating to investment opportunities, financial risk of private equity, long-term nature of private equity investments, liquidity/marketability risk, valuation uncertainty and market price risk, gearing, interest rate risk, foreign currency risk, competition, the unregulated nature of underlying investments, defaults on commitments, taxation and the risks associated with the engagement of third parties. 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 on Half Yearly Financial Reports issued by the UK Accounting Standards Board and gives a true and fair view of the assets, liabilities and financial position of the Company; 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 2012 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 AS RESTATED* SIX MONTHS TO SIX MONTHS TO YEAR TO 31ST DECEMBER 2011 31ST DECEMBER 2010 30TH JUNE 2011 REVENUE CAPITAL TOTAL** REVENUE CAPITAL TOTAL** REVENUE CAPITAL TOTAL** £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Gains on - 10,671 10,671 - 16,124 16,124 - 100,976 100,976 investments designated at fair value through profit or loss*** (Loss)/gain - (53,543) (53,543) - 3,272 3,272 - (10,404) (10,404) on derivatives contained in standby agreements at fair value through profit or loss (see Note 6) Currency - (380) (380) - 91 91 - 911 911 (losses)/ gains on cash and borrowings Investment 6,861 - 6,861 4,694 - 4,694 9,986 - 9,986 income Investment (4,484) - (4,484) (4,407) - (4,407) (8,836) - (8,836) management fees Other (486) (157) (643) (578) (4) (582) (1,115) (37) (1,152) expenses RETURN ON 1,891 (43,409) (41,518) (291) 19,483 19,192 35 91,446 91,481 ORDINARY ACTIVITIES BEFORE FINANCING COSTS AND TAX Interest (1,113) - (1,113) (1,673) - (1,673) (3,427) - (3,427) payable and similar charges RETURN ON 778 (43,409) (42,631) (1,964) 19,483 17,519 (3,392) 91,446 88,054 ORDINARY ACTIVITIES BEFORE TAX Tax on (699) - (699) (1,123) - (1,123) (1,920) - (1,920) ordinary activities RETURN ON 79 (43,409) (43,330) (3,087) 19,483 16,396 (5,312) 91,446 86,134 ORDINARY ACTIVITIES AFTER TAX FOR THE PERIOD**** * The amounts at 31st December 2010 have been restated for comparative purposes to reflect the inclusion of a derivative asset relating to the Company's standby commitments. The inclusion and subsequent reversal of the derivative asset was an accounting entry only and had no effect on the cash balances of the Company (see Note 6). ** The total column of this statement represents the Company's profit and loss account 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. **** Return per ordinary and redeemable share is shown in Note 7. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. There were no recognised gains or losses other than those passing through the Income Statement. The Notes form part of these financial statements. CONDENSED RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS (UNAUDITED) CAPITAL CAPITAL OTHER RESERVE ON SHARE SHARE REDEMPTION CAPITAL INVESTMENTS SPECIAL REVENUE CAPITAL PREMIUM RESERVE RESERVE HELD RESERVE RESERVE TOTAL £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Movement for the six months ended 31st December 2011 OPENING EQUITY 25,428 183,184 26 288,790 244,850 99,861 (55,546) 786,593 SHAREHOLDERS' FUNDS Return for the - - - (34,953) (8,456) - 79 (43,330) period Issue of new 91 100,371 - - - - - 100,462 redeemable shares Ordinary shares (419) - 419 - - (4,034) - (4,034) bought back for cancellation Redeemable (20) - 20 - - (13,503) - (13,503) shares bought back for cancellation CLOSING EQUITY 25,080 283,555 465 253,837 236,394 82,324 (55,467) 826,188 SHAREHOLDERS' FUNDS Movement for the six months ended 31st December 20 10 as restated* OPENING EQUITY 25,428 183,184 26 249,366 192,828 99,861 (50,234) 700,459 SHAREHOLDERS' FUNDS Return for the - - - 27,643 (8,160) - (3,087) 16,396 period CLOSING EQUITY 25,428 183,184 26 277,009 184,668 99,861 (53,321) 716,855 SHAREHOLDERS' FUNDS Movement for the year ended 30th June 2011 OPENING EQUITY 25,428 183,184 26 249,366 192,828 99,861 (50,234) 700,459 SHAREHOLDERS' FUNDS Return for the - - - 39,424 52,022 - (5,312) 86,134 year CLOSING EQUITY 25,428 183,184 26 288,790 244,850 99,861 (55,546) 786,593 SHAREHOLDERS' FUNDS * The amounts at 31st December 2010 have been restated for comparative purposes to reflect the inclusion of a derivative asset relating to the Company's standby commitments. The inclusion and subsequent reversal of the derivative asset was an accounting entry only and had no effect on the cash balances of the Company (see Note 6). The Notes form part of these financial statements. CONDENSED BALANCE SHEET (UNAUDITED) AS RESTATED* AS AT AS AT AS AT 31ST DECEMBER 2011 31ST DECEMBER 2010 30TH JUNE 2011 £'000 £'000 £'000 Fixed assets Investment designated 774,782 753,965 815,868 at fair value through profit or loss Current assets Debtors 1,676 3,522 2,440 Derivatives contained - 67,219 53,543 in standby agreements at fair value through profit or loss Cash at bank 56,515 16,346 27,645 58,191 87,087 83,628 Creditors: Amounts falling due within one year Other creditors 6,785 6,885 12,403 Bank loan - 16,812 - Loan notes - **100,500 **100,500 6,785 124,197 112,903 NET CURRENT ASSETS/ 51,406 (37,110) (29,275) (LIABILITIES) NET ASSETS 826,188 716,855 786,593 Capital and reserves Called-up share capital 25,080 25,428 25,428 Share premium 283,555 183,184 183,184 Capital redemption 465 26 26 reserve Other capital reserve 253,837 277,009 288,790 Capital reserve on 236,394 184,668 244,850 investments held Special reserve 82,324 99,861 99,861 Revenue reserve (55,467) (53,321) (55,546) TOTAL EQUITY 826,188 716,855 786,593 SHAREHOLDERS' FUNDS NET ASSET VALUE PER 1,134.02p 1,079.73p 1,184.77p SHARE - ORDINARY AND REDEEMABLE ADJUSTED NET ASSET 1,134.02p 978.48p 1,104.12p VALUE PER SHARE - ORDINARY AND REDEEMABLE DILUTED NET ASSET VALUE N/A 978.48p 1,104.12p PER SHARE - ORDINARY AND REDEEMABLE Number of ordinary 72,854,547 66,392,268 66,392,268 shares and redeemable shares in issue * The amounts at 31st December 2010 have been restated for comparative purposes to reflect the inclusion of a derivative asset relating to the Company's standby commitments. The inclusion and subsequent reversal of the derivative asset was an accounting entry only and had no effect on the cash balances of the Company (see Note 6). ** In addition to the series A unsecured subordinated loan notes issued in December 2008, the Company issued £51.0m of series B unsecured subordinated loan notes in September and October 2010, which were all set to mature in November 2011. The standby commitments were partially utilised on 24th August 2011 with 9,102,279 new redeemable shares issued to repay the loan notes outstanding. The Company terminated the remaining standby commitments of £49.5m with effect from 30th September 2011. The Notes form part of these financial statements. CONDENSED CASH FLOW STATEMENT (UNAUDITED) FOR THE SIX MONTHS TO 31ST DECEMBER SIX MONTHS TO SIX MONTHS TO YEAR TO 31ST DECEMBER 2011 31ST DECEMBER 2010 30TH JUNE 2011 £'000 £'000 £'000 Cash flow from operating activities Investment income 6,845 4,696 9,848 received Deposit and other 16 (2) 2 interest received/ (paid) Investment management (4,537) (4,459) (8,873) fees paid Secretarial fees paid (108) (102) (186) Other cash payments (672) (370) (808) NET CASH INFLOW/ 1,544 (237) (17) (OUTFLOW) FROM OPERATING ACTIVITIES Returns on investment and serving of finance Revolving credit - (463) (501) facility and overdraft interest paid Loan commitment and (577) (238) (1,752) arrangement fees paid Redeemable share (62) (189) (312) commitment fees paid Interest on loan notes (322) (782) (1,831) paid NET CASH OUTFLOW FROM (961) (1,672) (4,396) RETURNS ON INVESTMENT AND SERVICING OF FINANCE Tax Net tax paid (699) (1,123) (1,920) NET CASH OUTFLOW FROM (699) (1,123) (1,920) TAX Capital expenditure and financial investment Purchases of (30,552) (51,609) (113,761) investments Purchases of government (15,901) - (10,874) securities Disposals of 77,683 74,403 167,053 investments Disposals of government 15,743 - 10,874 securities Realised currency (84) 29 - (losses)/gains NET CASH INFLOW FROM 46,889 22,823 53,292 CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT NET CASH INFLOW BEFORE 46,773 19,791 46,959 FINANCING Financing Drawdown of loan - 3,754 3,755 Repayment of loan - (64,688) (80,839) Issue of loan notes - 51,000 51,000 Expenses relating to (38) - - issue of redeemable shares Ordinary shares (4,034) - - purchased for cancellation Redeemable shares (13,503) - - purchased for cancellation Realised currency gains - 484 - on repayment of revolving credit facility NET CASH OUTFLOW FROM (17,575) (9,450) (26,084) FINANCING INCREASE IN CASH 29,198 10,341 20,875 The Notes form part of these financial statements. NOTES TO THE HALF YEARLY FINANCIAL STATEMENTS (UNAUDITED) 1. Financial Information The financial information has been prepared on the historical cost basis of accounting, except for the measurement at fair value of investments and financial instruments, 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 2011 have been applied to this Half Yearly Financial Report. The financial statements have been prepared in accordance with the Statement of Recommended Practice (revised January 2009) 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 2011 and 31st December 2010 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 2011 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 498 (2) and (3) of the Companies Act 2006. 2. 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. 3. Tax Charge on Ordinary Activities The tax charge for the six months to 31st December 2011 is £699,000 (six months to 31st December 2010: £1,123,000; year to 30th June 2011: £1,920,000). The tax charge is wholly comprised of irrecoverable withholding tax suffered. Investment gains are exempt from capital gains tax owing to the Company's status as an investment trust. 4. Related Party Transactions The Manager, Pantheon Ventures (UK) LLP, is regarded as a related party the Company. Mr R.M. Swire, a Director of the Company, is a director of Pantheon Ventures Limited, a parent undertaking of the Manager. During the period, services of a total value of £4,484,000 (six months to 31st December 2010: £4,407,000; year to 30th June 2011: £8,836,000) were purchased by the Company from Pantheon Ventures (UK) LLP. At 31st December 2011, the amount due to Pantheon Ventures (UK) LLP in management fees and performance fees disclosed under creditors was £1,453,000 and £5,057,000 respectively. The performance fee payable as at 31st December 2011 relates to the initial 18-month calculation period ending 30th June 2008. 5. 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. 6. Derivatives Between the years 2005 and 2008 PIP entered into standby commitments under which certain institutions agreed to subscribe up to an aggregate amount of £150.0m for new redeemable shares in the Company when called upon by the Company at a subscription price per 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 had to be treated as a derivative as the Company had the option to require the institutions to subscribe for shares at a price (adjusted net asset value share) which was different to the prevailing share price. Accordingly the derivative was valued as an asset for the reporting periods to 30th June 2011.The subsequent utilisation of £100.5m of the £150.0m standby commitments and termination of the remaining £49.5m has led to a reversal of the asset of £53.5m included in the accounts at 30th June 2011. These accounting entries relating to the derivative asset have had no effect on the cash balances of the Company. The Company issued £100.5m of new redeemable shares on 24th August 2011 under the standby commitments and with effect from 30th September 2011 terminated the remaining standby commitments of £49.5m. As at 31st December 2011 there is no derivative asset to be valued following the termination of the remaining standby commitments. 7. Return per Ordinary and Redeemable Share AS RESTATED SIX MONTHS TO SIX MONTHS TO YEAR TO 31ST DECEMBER 2011 31ST DECEMBER 2010 30TH JUNE 2011 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL Return on 79 (43,409) (43,330) (3,087) 19,483 16,396 (5,312) 91,446 86,134 ordinary activities after tax in £'000 Loss/(gain) on - 53,543 53,543 - (3,272) (3,272) - 10,404 10,404 derivative contained in standby agreements in £'000 Adjusted 79 10,134 10,213 (3,087) 16,211 13,124 (5,312) 101,850 96,538 return on ordinary activities after tax in £'000* Weighted 71,695,943 66,392,268 66,392,268 average ordinary and redeemable shares Diluted N/A 81,722,145 79,977,748 weighted average ordinary and redeemable shares** Return per 0.11p (60.55)p (60.44)p (4.65)p 29.35p 24.70p (8.00)p 137.73p 129.73p ordinary and redeemable share Adjusted 0.11p 14.13p 14.24p (4.65)p 24.42p 19.77p (8.00)p 153.41p 145.41p return per ordinary and redeemable share* Diluted return N/A N/A N/A (3.78)p 19.84p 16.06p (6.64)p 127.35p 120.71p per ordinary and redeemable share** * The adjusted return excludes the loss/(gain) on the derivative (see Note 6). ** The diluted return for prior periods has been calculated on the basis of the total drawdown of standby commitments of £150.0m. Using the 31st December 2010 adjusted net asset value per share, the Company would have issued 15,329,877 new redeemable shares and reversed the gain on the derivative asset included in the return on ordinary activities. Using the 30th June 2011 adjusted net asset value per share, the Company would have issued 13,585,480 new redeemable shares and reversed the loss on the derivative asset included in the return on ordinary activities. 8. Net Asset Value per Share AS RESTATED 31ST DECEMBER 2011 31ST DECEMBER 2010 30TH JUNE 2011 Net assets 826,188 716,855 786,593 attributable in £'000 Derivative asset - (67,219) (53,543) contained in standby agreements in £'000 (see Note 6) Adjusted net assets 826,188 649,636 733,050 attributable in £'000* Ordinary and 72,854,547 66,392,268 66,392,268 redeemable shares Net asset value per 1,134.02p 1,079.73p 1,184.77p share - ordinary and redeemable Adjusted net asset 1,134.02p 978.48p 1,104.12p value per share - ordinary and redeemable Diluted net assets N/A 799,636 883,050 attributable in £'000** Ordinary and N/A 81,722,145 79,977,748 redeemable shares following issue of new redeemable shares Diluted net asset N/A 978.48p 1,104.12p value per share - ordinary and redeemable** * The adjusted net asset value per share excludes a derivative asset relating to the Company's standby subscription commitments. The standby commitments were partially utilised on 24th August 2011 and 9,102,279 new redeemable shares issued. The Company terminated the remaining standby commitments of £49.5m with effect from 30th September 2011 (see Note 6). ** The diluted net asset value per share has been calculated on the basis of the total drawdown of standby commitments of £150.0m. 9. Reconciliation of Return Before Finance Costs and Taxation to Net Cash Flow from Operating Activities AS RESTATED SIX MONTHS TO SIX MONTHS TO YEAR TO 31ST DECEMBER 2011 31ST DECEMBER 2010 30TH JUNE 2011 £'000 £'000 £'000 Return on ordinary (41,518) 19,192 91,481 activities before financing costs and tax Gains on investments (10,671) (16,124) (100,976) Loss/(gain) on 53,543 (3,272) 10,404 derivative (see Note 6) Currency losses/(gains) 380 (91) (911) on cash and borrowings (Decrease)/increase in (181) (32) 124 creditors (Increase)/decrease in (9) 90 (139) other debtors NET CASH INFLOW/ 1,544 (237) (17) (OUTFLOW) FROM OPERATING ACTIVITIES 10. Reconciliation of Net Cash Flows to Movements in Net Cash/(Debt) SIX MONTHS TO SIX MONTHS TO YEAR TO 31ST DECEMBER 2011 31ST DECEMBER 2010 30TH JUNE 2011 £'000 £'000 £'000 Increase in cash in 29,198 10,341 20,875 period Non-cash movement Foreign exchange (328) (448) 339 (losses)/gains Movement in net cash 28,870 9,893 21,214 flows Net debt at beginning (72,855) (120,793) (120,793) of period Loans drawn down - (3,754) (3,755) Loans repaid - 64,688 81,479 Loan notes 100,500 (51,000) (51,000) NET CASH/(DEBT) AT END 56,515 (100,966) (72,855) OF PERIOD 11. Analysis of Net Cash/(Debt) 31ST DECEMBER 2011 31ST DECEMBER 2010 30TH JUNE 2011 £'000 £'000 £'000 Cash at bank 56,515 16,346 27,645 Bank loan - (16,812) - Loan notes - (100,500) (100,500) 56,515 (100,966) (72,855) 12. Fair Value Hierarchy Financial assets at fair value through profit or loss at 31st December 2011 TOTAL LEVEL 1 LEVEL 2 LEVEL 3 £'000 £'000 £'000 £'000 Unlisted investments 774,725 - - 774,725 Listed investments 57 57 - - 774,782 57 - 774,725 Level 3 financial assets at fair value through profit or loss at 31st December 2011 PRIVATE EQUITY INVESTMENTS TOTAL £'000 £'000 Opening balance 863,448 863,448 Purchases at cost 30,552 30,552 Sales proceeds (57,712) (57,712) Total gains or losses included in "Gains on investments" in the income statement - on assets sold 18,705 18,705 - foreign exchange loss on disposal (124) (124) - on assets held as at 31st December 2011 (80,144) (80,144) CLOSING BALANCE 774,725 774,725 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 2011 which comprises the condensed Income Statement, condensed Reconciliation of Movements in Equity Shareholders' Funds, condensed Balance Sheet, condensed Cash Flow Statement and Notes to the half yearly financial statements. We have read the other information contained in the half yearly financial report which comprises only the Financial Summary, Chairman's Statement, The Manager's Review and the 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 and Venture Capital Trusts", issued in January 2009. 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" issued in July 2007. 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 2011 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 27th February 2012 The Half Yearly Financial Report 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. NATIONAL STORAGE MECHANISM A copy of the Half Yearly Financial Report will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.hemscott.com/nsm.do Ends Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of this announcement.

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