Annual Financial Report

PANTHEON INTERNATIONAL PARTICIPATIONS PLC (the "Company" or "PIP")ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30TH JUNE 2013 The full Annual Report and Accounts can be accessed via the Company's websiteat www.pipplc.com or by contacting the Company Secretary by telephone on 01392412122. PIP will be holding a webcast today at 2.30 pm BST to discuss the 2013 AnnualReport and Accounts. The presentation can be viewed onwww.meetingzone.com/en-GB/presenter/default.aspx?partCEC=7406221 with AccessPin 7406221. Please use the dial in details below and ensure that you give yourname, company name and the password PIP when dialling in for the webcast. 0808 109 07000 UK Toll Free+44 (0) 20 3003 2666 Standard International Access FINANCIAL SUMMARY +11.6% NAV per share increase +43.6% Ordinary share price increase +38.2% Redeemable share price increase £150m Net cash flow generated from PIP's portfolio £129m New investment commitments, mainly focused on secondaries and co-investments in the USA £27m Invested in share buybacks in the year, generating a 1.2% uplift to NAV per share £903m Net asset value at 30th June 2013 5.2x Ratio of assets and available financing to undrawn commitments +4.6% PIP's NAV per share outperformance per annum versus the MSCI World Index since inception SINCEPERFORMANCE AT 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION30TH JUNE 2013 % % P.A. % P.A. % P.A. % P.A. NAV per share 11.6 11.6 3.7 9.3 11.5 Ordinary share price 43.6 28.9 6.8 8.8 11.0 FTSE All-Share Total Return 17.9 12.8 6.7 9.0 7.9 MSCI World Total Return (sterling) 23.2 13.8 9.0 8.7 6.9 PIP was launched on 18th September 1987. The figures since inception assume reinvestment of dividends, capital repayments and cash flows from the exercise of warrants. CAPITAL STRUCTURE AT 30TH JUNE 2013 Ordinary shares 34,507,013 Redeemable shares 33,312,534 Total 67,819,547 Since 30th June 2013 the Company has bought back for cancellation 225,000 ordinary shares. CHAIRMAN'S STATEMENT I am pleased to report another year of progress as the NAV per share grew by11.6% to 1,331.9p. Most importantly, shareholders have seen the discount narrowsignificantly, as the price of their ordinary and redeemable shares gained43.6% and 38.2% respectively in the period, well ahead of the rises in the FTSEand MSCI indices. We would hope to see the discount narrow further as themarket more fully recognises the Company's distinctive characteristics: - Cash generative portfolio: realisations in the year amounted to almost aquarter of PIP's opening portfolio value as managers took advantage of theimproved exit environment. - Good growth potential: we continued to see evidence of strong sales andearnings growth in portfolio companies exceeding that of the MSCI World andFTSE All-Share indices. - Uplifts on exit: we have seen consistent evidence of the largest realisationsoccurring on average at an uplift to the previous holding value. Realisationsare a key driver of NAV performance. - Investing actively: this year we have committed £129m to 20 new investments,mainly in secondary interests. Pantheon's global investment platform and teamputs the Company in a strong position as the outlook for secondaries andco-investment remains good. - Strategic global access: 68% of the portfolio is invested outside Europe,with the majority invested in the USA. - Strong balance sheet: PIP has no debt, an undrawn loan facility, and positivecash flows. PERFORMANCE Since my last statement, the economic indicators have pointed more convincinglytowards sustainable recovery, signs of which have been clearest in the USA.While structural problems in Europe persist, growth has at least returned tomany parts, even if at a low rate. With this background, PIP's portfolio hasposted solid NAV growth. The underlying assets generated a return of +8.4%.Foreign exchange effects (+3.6%) and share buybacks (+1.2%) also enhanced NAVper share. Looking ahead, it remains unclear how changes to quantitative easing on bothsides of the Atlantic will impact asset values, but even though we anticipateit will increase market volatility, we believe PIP's portfolio can continue toprosper. The buyout portfolio produced the best rates of growth in the year,particularly at the larger end, which rose by 13.4%. The Asian portfolio,having underperformed last year, rose by 11.6% helped by the rally in publicmarkets in China. European buyouts and global venture performed relatively lesswell this year in contrast to the prior year. Underlying Earnings Growth Our portfolio's investment potential is based at least in part on the betterthan public market revenue and EBITDA growth exhibited in a sample of over 55%of PIP's buyout portfolio, where aggregated revenue grew by 11.6% and EBITDA by14.4%, compared with 2.2% and -1.1% respectively for the MSCI World. Share Buybacks Your Board is encouraged that the discount has continued to narrow to close atyear end at 22% for the ordinary shares and 21% for the redeemable shares.However, in our view this still does not reflect the strong balance sheet,fundamental value of the portfolio, and the relatively low risk associated withour diversified investment approach focused on high-quality opportunitiesworldwide. Frustrating though this persistent discount has been, it hasprovided an opportunity to enhance NAV per share performance through sharebuybacks. The Company began buying back shares in August 2011 and so far hasinvested £61m in buying back 10.5% of the Company's shares. Whilst the discountremains wide, the Board believes share buybacks are a compelling investmentopportunity. In the full year to 30th June 2013, PIP invested £27m to buy backand cancel 1.6m ordinary shares and 1.4m redeemable shares, resulting in anuplift to NAV per share of approximately 13.8p, or 1.2% of PIP's NAV per shareat 30th June 2012. ACTIVITY AND BALANCE SHEET Net portfolio cash flows were £150m as distributions received in the year were£190m (2012: £139m), equivalent to 24% of the opening portfolio value, whilstcalls from underlying private equity funds amounted to £40m (2012: £54m).Increased net cash flows are a consequence of PIP's portfolio maturity, whichhas a weighted average fund age of 7.5 years. Distribution rates increasedacross all regions and stages but were particularly strong from the USA. Exits often occur at an uplift to their previous holding value as managers areable to realise a premium on sale. PIP's largest 100 distributions,representing 46% by value of total distributions, were at an average uplift of26%. This was a key contributor to PIP's NAV performance in the period andremains an important factor for future performance given the maturity of ourportfolio. Balance Sheet The Company's flexibility in making new investments is a consequence of ourfinancial and balance sheet strength. The Company's loan facility, whichexpires in June 2015, was unutilised at 30th June 2013 and cash stood at £78m,meaning the Company had total liquid resources of £181m. Undrawn commitments of£195m as at 30th June 2013 were covered by assets and loan facilities by afactor of 5.2 times. New Investments This has been an active year for the Company as our strong positive cash flowenabled us to substantially increase our new investments. PIP made 20 newinvestments in the year with total commitments of £129m. This included ninesecondary and two late primary commitments (commitments already partiallyfunded) to funds totalling £113m, bucking the trend of a broader reportedmarket decline in secondary deal volume. PIP also made nine co-investments,committing £16m. The majority of new secondary commitments were in 2006-2008fund vintages whereas PIP's co-investments increased our exposure to thecurrent vintages. The first half of 2013 saw a slowdown in reported secondary transactions assellers temporarily postponed sale processes following the rise in publicmarkets and regulatory uncertainty affecting banks in the USA. Our principalfocus has been on the US market but Pantheon has sourced good opportunities inAsia and the rest of the world, where 36% of our new investments were made.Despite being very early in their investment period we have already seen goodperformance from these investments both on discount reversal and, pleasingly,on underlying valuation gains. OUTLOOK Existing Portfolio The relative underlying revenue and EBITDA growth in the sample I referred toearlier adds to our confidence in our portfolio. Given the maturity of PIP'sportfolio, provided that conditions for exits remain supportive, we expectdistribution rates to continue at a healthy pace. New Investments The secondary market deceleration referred to earlier appears to be easing witha number of potential transactions now filling the deal pipeline. Banks willneed to continue to divest private equity portfolios, and pension funds andendowments will continue to rebalance their portfolios by selling in thesecondary market. The pipeline is likely to remain dominated by 2006-2008 vintage fund interestsgiven the volume of funds raised during this period. We will continue toselectively purchase additional 2006-2008 fund vintage exposure, targetingthose funds containing attractive companies with strong business models andlower-risk capital structures. Expecting the USA to emerge first and fastest from the global financial crisis,during the financial year PIP made the majority of its new investments in theUSA, where Pantheon continues to find a favourable outlook. We have investedselectively in Europe and other markets and will continue to buy assets thathave demonstrated the resilience to find growth in and outside weaker markets.Asia and other emerging markets selectively represent an attractive thoughsmaller opportunity. The Company's recent commitments to two new late primary investments providedan opportunity to increase investments in current vintages in funds that hadalready been partially invested. We envisage that there may be opportunities toadvantageously target further selective primary investments to enhance ourportfolio profile. Commitments to such opportunistic primaries would be limitedso as not to reduce the Company's financial flexibility to acquire secondaryinterests and co-investments. A continued emphasis on secondary interests willallow us to maintain an attractively mature portfolio profile and ensure thatour undrawn commitments continue to be at a level relative to our assets thatcan be comfortably financed from internally generated cash flows. In summary, the Company will use net cash generated by the portfolio to makenew investments focusing on secondary interests and making co-investments and,on a limited basis, primary commitments where to do so complements theportfolio without significantly affecting the Company's financing ratios. Wewill continue to carry out share buybacks when they represent an attractiveinvestment opportunity whilst the shares trade at a discount to NAV. BOARD CHANGE Richard Crowder, who has been a Director for the past 13 years, will beretiring at the Annual General Meeting. I would like to take this opportunityto thank Richard for his valuable contribution to the Company as a Directorover these years. While no other changes to Board membership are currently contemplated, theBoard is aware that it still has a number of long-serving Directors. It iscommitted to ensuring that the pace of retirement and addition of new Directorsin the coming years preserves a healthy balance between longer established andnewer members. TOM BARTLAMChairman30th September 2013 COMPANY STRATEGY PIP's strategy is to invest with leading private equity managers whilstreducing investment risk through diversification of the underlying portfolio bygeography, investment stage and sector. This strategy is implemented throughPIP's access to Pantheon's primary, secondary and co-investment activities. PIPhas the flexibility to vary the size and emphasis of its investments dependingon its available financing. The spread of performance in private equity is much wider than in other assetclasses and the selection of managers has a significant influence on investmentperformance. As a specialist fund-of-funds manager monitoring and researchingthe global private equity market, Pantheon, PIP's Manager, is well positionedto identify fund managers who have the skills and strategies to deliversuperior performance within their particular market segments. The current portfolio reflects PIP's prolonged access to Pantheon's highlysuccessful primary and secondary investments over the past 25 years. Only fundsthat have passed through rigorous research and analysis can be selected forinvestment. Secondary Programme Emphasis It is the Board's current intention to emphasise secondary investment as theCompany makes new commitments. Secondary purchases of existing interests in private equity funds are typicallyacquired between three and six years after a fund's inception, when such fundsare substantially invested. As a result, they tend to have relatively lowlevels of undrawn commitments. PIP benefits from secondaries because the feesand expenses in the first few years have been paid and distributions from thefund will be returned over a shorter time period. This helps to reduce the dragto performance from young and immature funds, known as the "J-curve effect". Inaddition, secondary assets can be purchased at a discount, especially in caseswhere the seller has a need for liquidity, increasing the opportunity foroutperformance. As the Company continues to build its financial resources through net portfoliorealisations, the shorter duration of secondary investments and lowerassociated undrawn commitments will enable the Company to maintain itsfinancial strength. In accordance with the terms of its management agreementwith Pantheon, PIP is entitled under Pantheon's allocation policy to theopportunity to co-invest in a predetermined ratio alongside Pantheon's latestglobal secondary fund, Pantheon Global Secondary Fund IV, benefiting fromaccess to larger secondary opportunities that it would not have had thecapacity to complete alone. The secondary programme enables PIP to acquireattractively priced secondary interests as they become available, and aims tooutperform market averages through judicious selection, pricing and timing. Co-investments Whilst the intention is to emphasise secondary investment, the Company willalso participate in co-investments alongside established private equitymanagers. The breadth and depth of Pantheon's General Partner relationshipsprovide a significant advantage for the sourcing and evaluation ofco-investments. As with secondary investing, co-investments allow the Companyto put money to work at the time it is committed. In addition, as there arelower or no management fees charged on co-investments by the underlying privateequity manager, co-investing can represent a cost-efficient way of investing,whilst providing PIP with exposure to current vintages. It is the Board's current intention that co-investments will not, on average,account for more than 20% of PIP's new commitments. Primary Commitments Investing in private equity through a primary commitment strategy (e.g.commitments to new private equity funds), by increasing the proportion ofimmature assets in its portfolio and by increasing its undrawn commitmentsrelative to its assets, can reduce the Company's financial flexibility. Newprimary investments have longer payback periods, requiring the Company tomaintain higher levels of standby financing against undrawn commitments. Forthese reasons and because the current outlook for secondary investment andco-investment is so favourable, the Board de-emphasises primary commitments.However, the Company will consider making primary commitments on a targetedbasis for portfolio construction purposes. The investment rationale for any new primary commitments will always be weighedagainst their effects on the Company's financial flexibility so as to keep theundrawn commitments to a level that can comfortably be expected to be financedfrom internally generated cash flows. Share Buybacks In certain circumstances, usually where the Company's shares are quoted at asignificant discount to NAV, the Board may view the shares as presenting anattractive investment opportunity relative to other uses of cash, such as newinvestment commitments. In such circumstances, the Board will consider targetedbuybacks of ordinary and redeemable shares instead of, or in addition to, newinvestments as a means of utilising cash generated from the Company'sportfolio. THE MANAGER'S REVIEW MARKET REVIEW Over the year we have seen continued signs of strengthening economic recoveryin the USA and Europe. However, there remain potential obstacles to recovery,particularly in Europe. Despite this we feel more optimistic that the economicenvironment is likely to remain stable. Public market performance over the year reflected this growing confidence as USand European markets posted strong rallies. Market volatility in the secondquarter followed the Federal Reserve's announcement of its plans to taperquantitative easing. Uncertainty over timing is likely to remain a featureaffecting the financial markets whilst recovery continues. This background hasprovided a supportive environment for private equity investors, evidence ofwhich can be seen in the high rates of distributions from the portfolio. Emerging markets, particularly the BRICs, have fared less well over the pastyear as country-specific concerns dampened the performance of public marketsimpacting both investment and exit activity. That being said, growth ratesremain significantly above those of developed markets and the continuingdevelopment of these economies presents opportunities for private equitymanagers. USA The US has shown signs of moderate recovery over the last year, with GDPestimated to have grown by 1.7% in the second quarter of 2013(1). The housingmarket recovery has started and there has been modest growth in consumption. USmanufacturing is benefiting from higher productivity levels, competitive labourcosts as the wage gap has narrowed particularly between the US and China, andinexpensive energy. Private equity deal volume surged 44% over the first half of 2012, reaching$211bn, the highest amount since 2007(1), as uncertainty abated around thePresidential election and tax-motivated sellers sought to realise gains by theend of 2012, particularly in the middle market. Subsequently, in the first halfof 2013, new investment activity slowed, the result of a more limited supply ofdeals in the market following the year end surge and high pricing expectationsof vendors persisting in spite of market volatility. Many of our managers haveexpressed optimism that deal flow will increase in the second half of 2013. Our managers have generally sought investments in higher growth segments of themarket in companies that have demonstrated strong growth potential. Sectorssuch as energy, chemicals, automotive, building products and technology haveeach benefited from tailwinds and trends in certain subsectors, creatingopportunities for new investments and exits in certain cases. Exit activity generally mirrored the trend in investment activity, with astrong second half of 2012 followed by a weak first half of 2013. Overall exitvolume for the year ended 30th June 2013 was $122bn, a decline of 14% comparedwith the prior year(1). An exception to the slowdown in early 2013 was thestrong IPO market, which has provided an exit route for a number of privateequity-backed companies. In the first half of 2013, 23 private equity-backedcompanies were listed in the US compared to 38 for all of 2012, which is ontrend to be the highest annual total since 2007(1). Private equity fundraising has continued to improve since the trough in 2010.$109bn was raised in 2012 and 2013 is poised to exceed that amount, with $73bnraised through the first half of the year(1). Notably in 2013, the US markethas seen an increase in fundraising amongst the largest buyout firms, many ofwhom have been well received after successfully navigating the global financialcrisis with their very large funds raised during the peak years. In venture capital, the volume and number of deals has fallen over the pastyear as investors have pulled back, particularly from seed stage investmentsfollowing a significant increase in these from 2009 to early 2012. In total,investment volume declined 16% from $29bn(1). Software has remained the mostprominent sector for investment, although this year saw a move from consumerfocused applications to enterprise and commercial services. While venturecapital exits also remain subdued overall, the IPO market has been receptivefor both technology and life sciences companies. There were 30 venture-backedIPOs in the first half of 2013, the best start to a year since 2007. EUROPE Economic uncertainty in the Eurozone continued to cast a shadow over theprivate equity markets in the year to 30th June 2013 resulting in subduedlevels of M&A activity and tough operating conditions for many privateequity-backed companies. GDP growth of EU members over the period was flat.However, the second quarter of 2013 did see the EU move out of recession, withquarterly growth of 0.4%(2). The biggest disappointment for private equity in Europe has been the decline inthe number of transactions over the year. Fewer than 80 buyout transactionswere completed in the second quarter of 2013 compared with over 100 in the samequarter in 2012(3). This has been offset by an increase in average transactionsizes, supported by fairly buoyant debt markets, resulting in the total valueof deals being struck remaining fairly steady with a run rate of around €70bnper annum(3). The main obstacle has been the frequent failure of buyers andsellers of businesses to agree on fundamental value given volatility inearnings in the current economic environment. However, entry pricing fortransactions has remained steady in the last few years, with EV/EBITDAmultiples averaging at around 8.5-9.0x, well below the peak of 10.6x reached in2007(4). A cause for optimism has been private equity firms' ability to generateliquidity with an improving trend in the value of exits being generated. PIPhas benefited from a number of IPOs including Countrywide and Hellerman Tyton,as well as a raft of trade sales and exits to trade buyers and other privateequity firms, most notably Global Blue, Carbolite and Norit. Refinancingspermitted by improved debt market conditions have also been a source ofliquidity. The fundraising market for new funds continues to be challenging, withinvestors demonstrating a high degree of selectivity coupled with the advantageof being able to observe managers' performances through the crisis and thesuitability of their strategies in a post-crisis environment. The flight toquality was reflected in successful fund-raisings for CVC (€10.5bn) and AdventInternational (€8.5bn), both of which were oversubscribed and closed quickly. Anumber of other managers have fared less well and it is anticipated that thiswill lay the foundations for less competitive market conditions going forwardas the manager shakeout continues. DEVELOPING MARKETS The slowdown in most developing markets has provoked questions about thesustainability of high growth rates in some of the larger of these economies.Large structural changes are needed to shift economic activity further towardsconsumption-led growth. Doubts are most visible in the currency markets wherefreely traded currencies from some of the largest developing economies haveweakened significantly. Together with the declines seen in domestic stockmarkets in many of these countries, the consequent reduction in entry pricescontinues to make these markets compelling for investment. In China, the private equity fund landscape is in the process of contractingfollowing the explosive growth in the local currency investment market over thepast five years. In the face of a slowing IPO environment, a number of managersare experiencing extended holding periods for their assets leading to pressurefrom investors to generate liquidity. For many, prospects for a successfulsubsequent fundraising will remain challenging. At the same time, access tobank financing for companies which are not state-owned remains limited, anenvironment which continues to create opportunity for well-funded and stableprivate equity franchises. Selecting the right managers whose strategic focusand stable platforms position them well in the current environment remainscritically important. In India, where Pantheon has adopted a more underweight position due to thegreater ease with which companies there can raise capital on India's quotedequity markets, concerns over the reduction of foreign capital inflows, inparticular following the initial signs of a withdrawal of quantitative easingglobally, has exposed concerns regarding India's fiscal position. This hasresulted in steep declines in stock markets and the currency, taking pricingdown to a level which better compensates international investors for theserisks. In the rest of Asia, the private equity market continues to developwell. This is most evident in some of the smaller markets which now have muchmore developed domestic manager universes. These include markets in SoutheastAsia like Indonesia, Malaysia, and the Philippines, as well as the moredeveloped markets such as South Korea. In part these new centres ofsingle-country fund activity are responding to increasing levels ofintra-regional trade buoyed by improving cross-border trading dynamics. Forexample, in Southeast Asia, trading terms are set to be relaxed within theASEAN region. In Northeast Asia, markets such as South Korea now trade morewith China than any other global partner. In such an environment, we expect to see improving investment conditions bothfor primary and secondary investors. Outside Asia, Pantheon continues to invest capital predominately in primaryfund investment as the markets, generally more recently established, have aless developed secondary market. While mostly focused on Eastern Europe andLatin America, Pantheon has also been increasingly active in Africa. As PIP isfocused on buying secondary interests, it will take longer to see exposure toall these markets in the Company's portfolio, although PIP was active in buyingsecondaries in Asia and Latin America during the course of the year. SECONDARY MARKET REVIEW The past financial year was a tale of two halves for secondary market dealvolume. Momentum continued from earlier in the year into the second half of2012, with $12bn of secondary deals(5) transacted. Financial institutions'selling slowed down, partially offset by an increase in selling by endowmentsand foundations. This was followed by a more subdued market in the first halfof 2013 with $7bn of secondary deal volume(5), principally as a result of alull in bank selling activity, but also lower pension plan sales. Banks continue to hold significant private equity portfolios on their balancesheets ($75bn according to a recent market estimate(6)) but delays in theimplementation of regulatory constraints, in the USA in particular, haveresulted in a postponement of bank sale decisions. Nevertheless, we expectbanks to return actively to selling again in the coming year to 18 months tomeet regulatory deadlines. Given portfolio value increases from rising publicequity markets and the subsequent reverse denominator effect, pension plansreduced selling activity. However, pension plans are expected to add tosecondary market volume in the near term as they continue to rebalanceportfolios and concentrate manager positions. The overall market saw $19bn of secondary deals(5) transacted during the pastyear, slightly lower than in the prior period. Despite the market slowdown inthe second half of the year, Pantheon screened over $40bn of deals acrossapproximately 300 sellers during the year to 30th June 2013. Furthermore,Pantheon continued to invest at a robust pace, committing $1.3bn on behalf ofall clients to transactions representing nearly 7% of all deals reportedly donein the year to 30th June 2013. (1) PitchBook.(2) Eurostat.(3) Bureau of Economic Analysis.(4) Pantheon Analysis.(5) Cogent Partners estimate.(6) Cogent Partners estimate July 2013. SECONDARIES EXPLAINED WHAT IS A SECONDARY? A secondary transaction generally consists of purchasing an interest in aprivate equity fund, or portfolio of multiple funds (consisting of investedcapital and remaining capital commitments) from an existing investor seekingliquidity prior to the termination of these funds. A secondary transaction canalso consist of purchasing direct company interests which are either privatelyheld or in which the trading of shares is restricted. WHY INVEST IN SECONDARIES? A secondary investment exhibits several features that differentiate it fromother private equity assets, including the potential for timely deployment andearlier return of capital, portfolio transparency and the ability from time totime to acquire assets at a discount to Pantheon's assessment of the fairmarket value. Pantheon believes that these characteristics have the potentialto reduce some of the risks typically associated with private equity fundinvesting. Timely Deployment of Capital Investing in secondaries can be a particularly helpful strategy for investorsseeking to boost the proportion of their allocation to private equity actuallyat work "in the ground". Whereas a primary fund at inception has no assets, andwill draw down capital at an unpredictable rate over a period of years as itinvests into underlying companies, a fund acquired as a secondary is at leastpartially invested at the time of purchase. Earlier Return on Investment Investing later in a fund's life reduces the impact of the "J-curve" normallyassociated with private equity fund investments. The visibility of assets makesit easier to identify outperforming funds and likely exit horizons.Furthermore, the write down of early, unsuccessful investments, the reducedimpact of early management fees and the shorter time horizon to liquidityprovide a number of benefits to the investor. Investors may expect an earlierreturn of capital on their investments, relatively fewer capital calls and ashorter investment holding period. Reduced Investor Risk Unlike investing in a fund at inception, when it represents a blind pool ofcapital, secondary investing allows detailed analysis of a fund's assets. Usinga rigorous due diligence process, Pantheon evaluates funds on acompany-by-company basis. This bottom-up analysis allows Pantheon to determinewhich companies are critical to a portfolio's success and evaluate theirpotential value at the time of exit. This transparency may decrease investmentrisk. Embedded knowledge of portfolios also enhances Pantheon's ability to assess andvalue portfolios accurately. Pantheon frequently has performance andoperational information on the assets for sale in the secondary market due toits position as an adviser or manager to existing investors in the fund,investment in a portfolio company through another fund or previous contact withthe fund manager. Discount to Fair Market Value Pantheon undertakes detailed analysis on underlying assets in a portfolio toestablish value. Discounts to assessed fair market value may be applied toreflect the quality of the assets, the seller's motivation to divest, marketconditions and the illiquid nature of the asset class. In certain circumstancesa fund interest may be acquired at a premium to NAV, depending on asset qualityand fund manager valuation policy among other factors. Time and Vintage Diversification Secondary investment is a tool which enables investors in private equity to addan element of retrospective vintage diversification to their portfolios bybuying into a range of mature funds, typically three to six years into theirlives. This additional diversification serves to mitigate private equityinvestment risk at the portfolio level. PORTFOLIO OVERVIEW £190m Distributions from PIP's mature portfolio 24% Distributions as a percentage of opening portfolio 26% Average uplift on PIP's top 100 distributions £40m Calls made on existing commitments £113m New commitments made to private equity funds £16m Committed to nine co-investments £150m Net cash flow generated 8.4% Return on underlying assets 7.5 years Weighted average age of portfolio DISTRIBUTIONS IN THE YEAR TO 30TH JUNE 2013 PIP received more than 1,700(*) distributions in the year, with many atsignificant uplifts to carrying value. The Company's mature and diversifiedportfolio should continue to generate significant distributions in the comingquarters. (*) This figure looks through feeders and funds-of-funds. Distributions by Region and Stage PIP received £190m in proceeds from the portfolio in the 12 months to 30th June2013, equivalent to approximately 24% of the opening private equity assets, upfrom 17% for the prior year. The USA accounted for the majority of PIP's distributions, where strongereconomic performance enabled a good level of exits. Despite a challengingeconomic climate, PIP's European investments continued to distribute robustly.Distribution rates were consistent across all stages of the portfolio. Distributions by Region = £190m USA 59%Europe 32%Asia and other 9%Total 100% Distributions by Stage = £190m Small/Mid Buyout 39%Venture and Growth 29%Large/Mega Buyout 23%Special Situations 6%Generalist 3%Total 100% Cost Multiples on a Sample of the Largest Distributions in the Financial Yearto 30th June 2013(1) On a sample of the largest 100 distributions, the value-weighted average costmultiple was 3.3 times. This highlights the continued ability of private equitymanagers to create significant value over the course of an investment. (1) The available data in the sample represented approximately 47% by value ofPIP's total distributions for the financial year to 30th June 2013. This datais based upon gross cost multiples available at the time of the distribution. Uplifts on Liquidity Event on a Sample of the Largest Distributions in theFinancial Year to 30th June 2013(2). On a sample of the largest 100 distributions, the value-weighted average uplifton liquidity event was 26%. This is consistent with PIP's view thatrealisations tend to be significantly incremental to returns. PIP's matureportfolio is well placed to continue to generate a good level of distributionsin the coming year. (2) Uplift on liquidity event compares the value received upon realisationagainst the investment's carrying value prior to the transaction taking place.In the event of an IPO the uplift is the difference between the carrying valueprior to the IPO and the value at the close of the first day of trading. Theavailable data in the sample represented approximately 46% by value of PIP'stotal distributions for the financial year to 30th June 2013. INVESTMENTS CALLED IN THE YEAR TO 30TH JUNE 2013 Investments called during the year ranged across many sectors and regions, fromretail firms to restaurant chains, IT companies to specialised manufacturersand from financial services companies to firms operating in the multimediaindustry. Calls by Region and Stage PIP paid £40m of fund calls in the year to 30th June 2013, equivalent toapproximately 21% of opening undrawn commitments. This is marginally lower thanthe rate for the prior financial year, which was 22%. Calls by Region = £40m USA 50%Europe 35%Asia and other 15%Total 100% Calls by Stage = £40m Small/Mid Buyout 39%Venture and Growth 28%Large/Mega Buyout 26%Special Situations 7%Total 100% NEW COMMITMENTS PIP committed £129m to new investments during the financial year, concentratedon buyout funds in the attractive USA and Asian markets. These commitments wereon average approximately 65% funded at the time of purchase. The investmentswere often proprietary, taking advantage of Pantheon's global network ofcontacts within the private equity industry. New Commitments by Region In line with our preferred geographic focus, PIP concentrated its newcommitments in the USA, the most attractive market based upon growth prospectsand depth of opportunity. We also added significant exposure to higher growth,strong operating companies in the emerging markets, principally in developingAsia but also in Latin America. USA 57%Europe 36%Asia and other 7%Total 100% New Commitments by Stage A significant majority of investments were made in the large buyout andmid-market buyout space. This is consistent with PIP's strategy of focusing onmid and large cap companies that have high barriers to entry, strong cashgeneration and multiple exit routes. In addition, we continue to emphasiselater stage growth managers within the venture and growth subset. PIP'sco-investments were in the buyout and growth stages. Large/Mega Buyout 50%Small/Mid Buyout 33%Co-investments 12%Venture and Growth 5%Total 100% New Commitments by Deal Type In line with our investment strategy, the majority of new commitments wereacross nine secondary transactions. PIP also invested in nine co-investments,and two primaries that were already partially invested, taking advantage ofattractive opportunities. The commitments made to co-investments and primariesalso offer PIP exposure to more recent vintages which are less frequently seenin secondary deals. Secondaries 79%Co-investments 12%Primaries 9%Total 100% Secondary Origination Pantheon's outbound origination approach has enabled PIP to secure early accessto highly attractive deal flow in the year, with 80% of deals purchased inprocesses that were either proprietary or involved restricted competition(*).Pantheon's platform allows PIP to access differentiated opportunities fromother secondary players at attractive prices. Proprietary 46%Restricted Process 34%Auction 20%Total 100% (*) A proprietary deal is where Pantheon was in exclusive discussions with the seller.A restricted process deal is where there are three bidders or fewer. Pantheon Vehicles At 30th June 2013, 8% of PIP's portfolio value and 10% of PIP's outstandingcommitments were comprised of funds-of-funds directly managed by Pantheon.Pantheon is not entitled to management and commitment fees in respect of PIP'sholdings in, and outstanding commitments to, the firm's managed fund-of-fundsvehicles. In addition, Pantheon has agreed that PIP will never be disadvantagedin terms of fees compared with the position it would have been in had it madeinvestments directly into the underlying funds rather than indirectly throughsuch fund-of-funds vehicles. PORTFOLIO OVERVIEW The Company offers a global, diversified selection of private equity assets,carefully selected by Pantheon for their quality. The diversification of PIP'sportfolio, with assets spread across different investment styles and stagesincluding buyout, venture and growth, and special situations, helps to reducevolatility both of returns and cash flows. The maturity profile of theportfolio ensures that PIP is not overly exposed to any one vintage. PIP'sgeographical diversification extends its exposure beyond the USA and Europe, toregions with higher rates of economic growth such as Asia. PORTFOLIO ANALYSIS BY VALUE AS AT 30TH JUNE 2013 (*) (*) Fund geography, stage, maturity and primary/secondary tables are based uponunderlying fund valuations and account for 100% of PIP's overall portfoliovalue. Company sector and company geography tables are based upon underlyingcompany valuations at 31st December 2012 and account for approximately 90% ofPIP's overall portfolio value. Fund Geography The majority of PIP's geographical exposure is focused on the USA and Europe,reflecting the fact that these regions have the most developed private equitymarkets. PIP's assets based in Asia and other regions provide access to faster-growingeconomies. The Company's exposure to these areas has increased in the pastfinancial year (from 11% to 14%) driven by new investments made during thefinancial year. USA 54%Europe 32%Asia and other 14%Total 100% Fund Stage PIP's portfolio is well diversified across different private equity investmentstyles and stages. The majority of PIP's portfolio consists of buyout funds. Exposure to thesefunds increased in 2013 driven by a combination of strong returns and newinvestments. PIP has a significant exposure to venture and growth-focused funds, many ofwhich were acquired through the secondary market. The size of PIP's venture andgrowth portfolio declined in 2013 as a result of distributions and theCompany's emphasis on buyouts when making new investments. Small/Mid Buyout 35%Venture and Growth 29%Large Buyout 23%Special Situations 5%Directs 3%Mega Buyout 3%Generalist 2%Total 100% Fund Maturity PIP's portfolio is well diversified by fund vintage (referring to the year thefund made its first investment). In the last year the NAV of funds with avintage of 2000 and earlier declined as a percentage of PIP's portfolio, from15% to 10%, driven by significant distributions in this segment of theportfolio. PIP's secondary focus is expected to lead to continued high exposureto the high fundraising years of 2006-2008. 2000 and earlier 10%2001 3%2002 1%2003 2%2004 4%2005 13%2006 24%2007 27%2008 13%2009-2013 3%Total 100% Primary/Secondary 60% of the portfolio is derived from primary transactions. However, PIP'sstrategic emphasis means that secondaries are becoming a larger proportion ofthe portfolio at 40%, up from 35% at the end of the last financial year. Primary 60%Secondary 40%Total 100% Company Sectors PIP's sectoral diversification helps to minimise the effects of cyclical trendswithin particular industry segments. Relative to the FTSE All-Share and MSCIWorld indices PIP has high exposure to information technology, and low exposureto the banking, mining and utilities sectors. Consumer 28%Information Technology 23%Healthcare 14%Industrials 12%Financials 8%Energy 8%Materials 4%Telecom Services 3%Total 100% Company Geography Half of PIP's portfolio is with companies based in North America which has, inour view, better growth prospects than many other areas of the developed world.PIP's European exposure, which represents just over a third of the portfolio,is predominantly in companies based in the stronger Northern Europeaneconomies, including the UK, Scandinavia and Germany. 14% of PIP's portfolio isbased in Asia and other regions, providing access to faster growing economiessuch as China and India. North America 50%Asia and other 14%UK 12%Scandinavia 6%Germany 4%Benelux 4%Central and Eastern Europe 3%France 2%Italy 2%Iberia 2%Other Europe 1%Total 100% PORTFOLIO ANALYSIS Portfolio Performance by Stage for the Year to 30th June 2013(1) ● The portfolio performed solidly during the year, generating an investment return of 8.4%. ● Returns were highest in the buyout portfolios which benefited fromsignificant distributions and strong earnings growth from the underlyingcompanies. The new investments PIP made during 2013 showed strong earlyperformance which contributed to the impressive buyout returns. Stage Return (%) NAV (%) Large/Mega Buyout 13.4% 26% Small/Mid Buyout 9.8% 35% Venture & Growth 5.6% 29% Directs/Co-investments 3.7% 3% Generalist 2.7% 2% Special Situations 0.4% 5% PIP 8.4% 100% Debt Multiples(2) Venture and growth and buyout investments have differing leverage characteristics. ● The venture and growth portfolio accounts for 29% of portfolio value and hasvery little or no reliance on leverage. ● The small/mid buyout portfolio sampled contains a moderate level of debt,with net debt/EBITDA of 3.3 times at 31st December 2012. ● The large/mega buyout portfolio sampled contains higher levels of debt, withnet debt/EBITDA of 4.1 times at 31st December 2012. Investments made between2006-2008, a time period associated with high debt levels, had an average netdebt/EBITDA of 4.3 times, only marginally higher than the overall average. PORTFOLIO ANALYSIS - BUYOUT Valuation Multiple(2) ● Accounting standards require private equity managers to value their portfolioat fair value. As public markets move this can be reflected in valuations. ● Sample-weighted average enterprise value/EBITDA for the year to 31st December2012 was 9.1 times, broadly in line with public market benchmarks. Revenue and EBITDA Growth(2) ● Weighted average revenue and EBITDA growth for the sample buyout companieswas +11.6% and +14.4% respectively in the year to 31st December 2012. ● In each of the past four calendar years PIP's sample growth data has exceededthe equivalent growth rates of the FTSE All-Share and MSCI World indices. ● This strong top-line performance and efficient cost control of companies is aprincipal objective of PIP's mid-market focus, where opportunities for managersto add value provides scope for outperformance under the private equity model. (1) Portfolio returns include income, exclude gains and losses from foreignexchange movements, and look through feeders and funds-of-funds. (2) Buyout Sample Methodology. The sample buyout figures for the 12 months to31st December 2012 were calculated from the companies, where information wasavailable, in PIP's buyout funds at 31st December 2012. The figures are basedon unaudited data. The revenue and EBITDA figures were based upon the last 12months to 31st December 2012 or, where not available, the closest annual perioddisclosed, and provide coverage of 58% and 60% respectively of PIP's buyoutportfolio. Individual company revenue and EBITDA growth figures were cappedbetween +100% and -100% to avoid large distortions from excessive outliers.Sample data for 2009-2011 is based on the same methodology and providescoverage of greater than 60% of the portfolio in each year. Enterprise value isdefined as carrying value + net debt. The net debt and enterprise value figureswere based upon 31st December 2012 underlying valuations, or the closest periodend disclosed. The valuation multiple sample covers approximately 75% of PIP'sbuyout portfolio. The debt multiple sample covers 67% of PIP's buyoutportfolio. PORTFOLIO ANALYSIS - VENTURE AND GROWTH Venture and Growth Performance ● PIP's venture and growth funds generated a return of 5.6% in the year to 30thJune 2013. ● 2002 and later vintage funds performed solidly and in line with PIP's overallportfolio. However, performance of the venture and growth portfolio wasimpacted by low returns from 2001 and earlier vintage funds. This adverseperformance was caused by a number of material write-downs within the segment,partially offset by the gains on the IPO of Splunk. ● The venture and growth portfolio generated significant cash flow during 2013,particularly the older vintage funds. This has resulted in the strongerperforming venture and growth funds with vintage from 2002 to 2006 nowconstituting almost 50% of the overall venture and growth portfolio. FINANCE AND SHARE BUYBACKS Cash and Available Bank FacilityAt 30th June 2013 PIP had cash balances of £78m. As well as these cash balances, PIP can also finance investments out of itsmulti-currency revolving credit facility agreement ("Loan Facility"). The LoanFacility is due to expire in June 2015 and comprises facilities of $82m and€57m which, using exchange rates at 30th June 2013, amount to a sterlingequivalent of £103m. At 30th June 2013 the Loan Facility remained fullyundrawn. Undrawn Commitment Cover At 30th June 2013, the Company had £181m of available financing, comprised ofits cash balances and Loan Facility. The sum of PIP's available financing andprivate equity portfolio provide 5.2 times cover relative to undrawncommitments. It should be noted that a portion of the Company's undrawn commitments of £195mare unlikely to be called in full by the underlying managers. When a fund ispast its investment period, which is typically between five and six years, itgenerally cannot make any new investments (only drawing capital to fundexisting follow-on investments or pay expenses). As a result, the rate ofcapital calls in these funds tends to slow dramatically. Approximately 40% ofthe Company's undrawn commitments are in fund vintages that are greater thansix years old. Share Buybacks PIP bought back 4.3%(1) of its shares in the financial year, taking advantageof the investment opportunity offered by its shares continuing to trade at highdiscounts. In total, 1.6m ordinary shares and 1.4m redeemable shares werebought back at a weighted discount of 23% and 29% respectively, resulting in atotal uplift to NAV per share of 13.8p, or 1.2% of opening NAV per share. Since the financial year end, the Company has bought back a further 0.2mordinary shares at a discount of 22%. Whilst PIP's shares trade at highdiscounts the Board will continue to consider further share buybacks forinvestment purposes. (1) 4.3% is calculated using the number of shares bought back in the financialyear divided by the number of shares outstanding at 30th June 2012. OUTSTANDING COMMITMENTS PIP's outstanding commitments to fund investments, 60% of which relate toprimary investments and 40% of which relate to secondary investments, are welldiversified by stage and geography and will enable the Company to participatein future investments with many of the highest quality fund managers in theprivate equity industry worldwide. ANALYSIS OF OUTSTANDING COMMITMENTS AS AT 30TH JUNE 2013 PIP's outstanding commitments to investments increased to £195m at 30th June2013 compared with £191m at 30th June 2012. The Company paid calls of £40m andacquired an additional £44m of outstanding commitments associated with all newinvestments made in the year. Geography The USA and Europe have the largest outstanding commitments, reflecting theCompany's investment emphasis. Commitments to Asia and other regions provideaccess to faster-growing economies. USA 50%Europe 32%Asia and other 18%Total 100% Stage PIP's undrawn commitments are well diversified across all major stages ofprivate equity. Small/Mid Buyout 37%Large/Mega Buyout 34%Venture and Growth 20%Special Situations 7%Directs/Co-investments 1%Generalist 1%Total 100% Maturity 40% of PIP's undrawn commitments are in the 2006 vintage or older. Most relateto funds that are outside their investment periods and, as such, should haveslower call rates. It is likely that a portion of these commitments will not bedrawn. 2005 and earlier 27%2006 13%2007 24%2008 24%2009 4%2010 1%2011 0%2012 0%2013 7%Total 100% LARGEST 50 MANAGERS BY VALUE AS AT 30TH JUNE 2013 % OF PIP'S TOTAL PRIVATE EQUITYNUMBER MANAGER REGION(1) STAGE BIAS ASSET VALUE 1 Texas Pacific GLOBAL BUYOUT 3.3% Group 2 CVC Capital GLOBAL BUYOUT 2.4% Partners 3 Providence Equity USA BUYOUT 2.4% Partners 4 Carlyle Group GLOBAL GENERALIST 2.3% 5 Vision Capital EUROPE BUYOUT 2.2% 6 Apax Partners EUROPE BUYOUT 2.1% 7 Apollo Management USA BUYOUT 2.0% 8 Brentwood USA BUYOUT 1.7% Associates 9 Golden Gate USA BUYOUT 1.7% Capital 10 Blackstone USA BUYOUT 1.6% Capital Partners 11 Equistone EUROPE BUYOUT 1.5% 12 Baring Private ASIA VENTURE AND GROWTH 1.5% Equity 13 Baring Vostok RUSSIA BUYOUT 1.4% Capital Partners 14 Nova Capital EUROPE BUYOUT 1.4% Management 15 IK Investment EUROPE BUYOUT 1.3% Partners 16 EQT GLOBAL BUYOUT 1.3% 17 Bain Capital USA BUYOUT 1.3% 18 Oak Investment USA VENTURE AND GROWTH 1.3% Partners 19 Doughty Hanson & EUROPE BUYOUT 1.2% Co. 20 Hutton Collins EUROPE SPECIAL SITUATIONS 1.2% 21 Genstar Capital USA BUYOUT 1.1% Partners 22 Permira EUROPE BUYOUT 1.1% 23 Riverstone USA SPECIAL SITUATIONS 1.0% Holdings 24 Gavea BRAZIL BUYOUT 1.0% Investimentos 25 KRG USA BUYOUT 1.0% 26 Avista Capital USA BUYOUT 1.0% Partners 27 Summit Partners GLOBAL GENERALIST 1.0% 28 ABS Capital USA VENTURE AND GROWTH 0.9% Partners 29 Polaris Venture USA VENTURE AND GROWTH 0.9% Partners 30 Francisco Partners USA BUYOUT 0.9% 31 Mercapital EUROPE BUYOUT 0.9% 32 Nordic Capital EUROPE BUYOUT 0.9% 33 Cinven Partners EUROPE BUYOUT 0.9% 34 Mid-Europa EUROPE BUYOUT 0.9% Partners 35 Altor Capital EUROPE BUYOUT 0.9% 36 New Enterprise USA VENTURE AND GROWTH 0.8% Associates 37 Catalyst Investors USA VENTURE AND GROWTH 0.7% 38 Technology USA VENTURE AND GROWTH 0.7% Crossover Ventures 39 Canaan Partners USA VENTURE AND GROWTH 0.7% 40 Tricor US USA BUYOUT 0.7% Management 41 BC Partners EUROPE BUYOUT 0.7% 42 Weston Presidio USA VENTURE AND GROWTH 0.7% Capital 43 KKR GLOBAL BUYOUT 0.7% 44 Sterling USA BUYOUT 0.7% Investment Partners 45 Baker Capital USA VENTURE AND GROWTH 0.7% Ventures 46 Index Ventures EUROPE VENTURE AND GROWTH 0.7% 47 Pacven Walden ASIA VENTURE AND GROWTH 0.6% Ventures 48 Northzone Partners EUROPE VENTURE AND GROWTH 0.6% 49 Wellington EUROPE VENTURE AND GROWTH 0.6% Partners 50 Hony Capital ASIA BUYOUT 0.6% COVERAGE OF PIP'S TOTAL PRIVATE EQUITY ASSET VALUE 59.7% (1) Refers to the regional exposure of the funds in which PIP is invested. LARGEST 50 COMPANIES BY VALUE AS AT 30TH JUNE 2013 % OF PIP'S TOTAL PRIVATE EQUITYNUMBER COMPANY COUNTRY SECTOR ASSET VALUE 1 Attendo SWEDEN HEALTHCARE 1.2% 2 Bibby UK INDUSTRIALS 1.1% Scientific 3 JDR USA ENERGY 1.1% 4 Spotify SWEDEN INFORMATION 0.8% TECHNOLOGY 5 Applied Medical USA HEALTHCARE 0.7% Resources 6 InterXion NETHERLANDS INFORMATION 0.6% TECHNOLOGY 7 Oriental SOUTH CONSUMER 0.4% Brewery Company KOREA 8 Convatec USA HEALTHCARE 0.4% 9 SoftBrands USA INFORMATION 0.4% TECHNOLOGY 10 The Teaching USA CONSUMER 0.4% Company 11 Evonik GERMANY MATERIALS 0.4% 12 China Yongda CHINA CONSUMER 0.4% Automobiles 13 McGraw-Hill USA CONSUMER 0.4% Education 14 CPI Card Group USA INDUSTRIALS 0.4% 15 Fairway Market USA CONSUMER 0.3% 16 Cobalt USA ENERGY 0.3% International Energy 17 Mindbody USA INFORMATION 0.3% TECHNOLOGY 18 CPL Industries UK ENERGY 0.3% 19 Michaels Stores USA CONSUMER 0.3% 20 GGC Credit Opps USA FINANCIALS 0.3% 21 Standard USA CONSUMER 0.3% Pacific Corporation 22 Nord Anglia Hong Kong CONSUMER 0.3% 23 Property UK FINANCIALS 0.3% Portfolio 24 The Nielsen Netherlands INDUSTRIALS 0.3% Company 25 Wrist Denmark INDUSTRIALS 0.3% 26 Standard USA FINANCIALS 0.3% Bancshares 27 BrightHouse UK CONSUMER 0.3% 28 Siltron South INFORMATION 0.3% Korea TECHNOLOGY 29 Hugo Boss & Italy CONSUMER 0.3% Valentino Fashion 30 Zoe's Kitchen USA CONSUMER 0.3% 31 Aquafil Italy CONSUMER 0.3% 32 Yandex RUSSIA INFORMATION 0.3% TECHNOLOGY 33 Allison USA INDUSTRIALS 0.3% Transmission 34 Visma Norway INFORMATION 0.2% TECHNOLOGY 35 EP Energy USA ENERGY 0.2% 36 Caffè Nero UK CONSUMER 0.2% 37 Sapphire Energy USA ENERGY 0.2% 38 GENBAND USA INFORMATION 0.2% TECHNOLOGY 39 Portman UK CONSUMER 0.2% 40 Syniverse USA TELECOMMUNICATION 0.2% Technologies SERVICES 41 TMF Netherlands FINANCIALS 0.2% 42 NXP Netherlands INFORMATION 0.2% TECHNOLOGY 43 VBrick Systems USA INFORMATION 0.2% TECHNOLOGY 44 Wagamama UK CONSUMER 0.2% 45 Lindorff Norway FINANCIALS 0.2% 46 Booz Allen USA INDUSTRIALS 0.2% Hamilton 47 Sequa USA INDUSTRIALS 0.2% Corporation 48 Orient Express Russia FINANCIALS 0.2% Bank 49 K-Mac USA CONSUMER 0.2% Enterprises 50 USI USA FINANCIALS 0.2% TOTAL 17.8% The largest 50 companies table is based upon underlying company valuations at31st December 2012, adjusted for known calls, distributions and new investmentcommitments and post-valuation information. THE MANAGER (PANTHEON) Pantheon, one of the world's foremost private equity specialists, has acted asManager to PIP since its inception in 1987, evaluating and managing investmentson PIP's behalf in line with the strategy agreed by the Board. Pantheon is alsoone of the largest and most experienced secondary managers, having committedmore than $8bn to secondaries over the last 25 years. Strong Private Equity Track Record Pantheon is one of the leading private equity fund investors in the world, withglobal assets under management of $24.1bn, and over 400 institutionalinvestors. Pantheon has a strong and consistent private equity investment track record.For over 30 years Pantheon has made investments in over 1,300 private equityfunds, gaining exceptional insight and access to the most attractive funds inall the major private equity markets. Diversification Pantheon has substantial experience of investing in private equity throughvarious economic cycles and in different regional markets. The firm's assetallocation, diversification strategies and disciplined investment process arestructured with the objective of producing the best possible risk-adjustedreturns. Pantheon's diversification strategy limits portfolio risk by includinga multi-strategy approach, targeting funds with a variety of different returncharacteristics and deploying capital over a number of vintage years, generallyensuring that the most attractive segments of the market are represented in theportfolio. When applying this approach, the Board works closely with Pantheonto ensure that the management of the Company is in line with its agreedstrategy. Reputation as a Preferred Investor Pantheon has been investing in private equity for over 30 years and has anenviable reputation in the industry. Pantheon is often considered a preferredinvestor due to its reputation, active approach and scale of commitments. Inaddition, Pantheon generally seeks advisory board seats to contribute activelyto governance during the life of the fund. As such Pantheon is represented onover 280 advisory boards worldwide. Long-standing partnerships with managers ona global basis can also enhance the firm's deal flow in the secondary market. Team-based Culture Pantheon draws upon a deep pool of resources that contributes to a uniqueteam-based culture. With teams operating in London, San Francisco, Hong Kongand New York, Pantheon adopts a collegiate approach to investmentdecision-making, globally leveraging the collective experience and expertise ofits investment professionals. The team's experience is also brought to bear onthe evaluation, selection and ongoing monitoring of fund investments.Pantheon's team of 68 investment professionals, supported by 117 otherprofessionals, work together with the ultimate aim of producing strong andconsistent results. Secondary Investing Pantheon is one of the largest and longest established secondary investors inthe world, with more than 20 years' experience of successful secondaryinvesting and a team of 68 investment professionals. This size and experiencemeans Pantheon can focus on large and complex transactions in which many otherlessor resourced investors cannot participate. Pantheon has committed more than $8bn in the secondary market globally acrossmore than 310 transactions, including more than 100 portfolio transactions andmore than 200 single fund secondaries. Pantheon consistently utilises the knowledge and due diligence information ofits primary fund teams and global offices. Long-standing partnerships withprivate equity managers around the world help to enhance the firm's deal flow. While the increase in scale of the secondary market has been paralleled bygrowth in the number of would-be acquirers of secondary assets, Pantheonbelieves it has an advantage in having wide experience and coverage. As aresult, the differentiation between experienced and well-resourced globalspecialists and the rest is becoming increasingly apparent as the marketevolves. OBJECTIVE AND INVESTMENT POLICY The Company's primary investment objective is to maximise capital growth byinvesting 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 subscribingfor investments in new private equity funds and buying secondary interests inexisting private equity funds and, occasionally, by acquiring direct holdingsin unquoted companies, usually either where a vendor is seeking to sell acombined portfolio of fund interests and direct holdings or where there is aprivate equity manager, well known to the Company's Manager, investing onsubstantially 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 ofsuch investments being distributed to the Company from its fund investments orin consequence of an investment in an unquoted company becoming quoted. TheCompany will not otherwise normally invest in quoted securities, although theCompany reserves the right to do so should this be deemed to be in theinterests of the Company. The Company may invest in any type of financial instrument, including equityand non-equity shares, debt securities, subscription and conversion rights andoptions in relation to such shares and securities and interests in partnershipsand 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 whichone or more co-investors may also have an interest. The Company employs a policy of over-commitment. This means that the Companymay commit more than its available uninvested assets to investments in privateequity funds on the basis that such commitments can be met from anticipatedfuture cash flows to the Company and through the use of borrowings and capitalraisings where necessary. The Company's policy is to adopt a global investment approach. The Company'sstrategy is to mitigate investment risk through diversification of itsunderlying portfolio by geography, sector and investment stage. Since theCompany's assets are invested globally on the basis, primarily, of the meritsof individual investment opportunities, the Company does not adopt maximum orminimum exposures to specific geographic regions, industry sectors or theinvestment stage of underlying investments. In addition, the Company adopts the following limitations for the purpose ofdiversifying investment risk: - that no holding in a company will represent more than 15% by value of theCompany's investments at the time of investment (in accordance with therequirement for approval as an investment trust which applied to the Company inrelation to its accounting periods ended on and before 30th June 2012); - the aggregate of all the amounts invested by the Company in (includingcommitments to or in respect of) funds managed by a single management group maynot, in consequence of any such investment being made, form more than 20% ofthe aggregate of the most recently determined gross asset value of the Companyand the Company's aggregate outstanding commitments in respect of investmentsat the time such investment is made; - the Company will invest no more than 15% of its total assets in otherUK-listed closed-ended investment funds (including UK-listed investmenttrusts). The Company may invest in funds and other vehicles established and managed oradvised by Pantheon or any Pantheon affiliate. In determining thediversification of its portfolio and applying the manager diversificationrequirement referred to above, the Company looks through vehicles establishedand managed or advised by Pantheon or any Pantheon affiliate. The Company may enter into derivatives transactions for the purposes ofefficient 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, bankdeposits or other similar securities. The Company may borrow to make investments and typically uses its borrowingfacilities to manage its cash flows flexibly, enabling the Company to makeinvestments as and when suitable opportunities arise and to meet calls inrelation to existing investments without having to retain significant cashbalances for such purposes. Under the Company's articles of association, theCompany's borrowings may not at any time exceed 100% of the Company's net assetvalue. Typically, the Company does not expect its gearing to exceed 30% ofgross 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 specialpurpose or investment holding vehicles which are geared by loan facilities thatrank ahead of the Company's investment. The Company does not adopt restrictionson the extent to which it is exposed to gearing in funds or companies in whichit invests. THE DIRECTORSThe Directors in office at the date of this report are: Tom Bartlam* (Chairman)Ian Barby* (Audit Committee Chairman)Richard CrowderSir Laurie Magnus*Susannah Nicklin*Peter Readman* (Senior Independent Director)Rhoddy Swire * Independent of the Manager EXTRACTS FROM THE DIRECTORS' REPORT BUSINESS REVIEW The Business Review is designed to provide shareholders with information aboutthe Company's business and results in the year to 30th June 2013. It should beread in conjunction with the Chairman's Statement and Manager's Review. Business and Strategy Pantheon International Participations PLC (the "Company" or "PIP"), aclosed-ended investment trust, is the longest established private equityfund-of-funds quoted on the London Stock Exchange. It enables investors to gainaccess to a substantial portfolio of unquoted companies in the USA, Europe andAsia, within funds managed by experienced private equity managers selected fortheir ability to outperform. PIP's primary investment objective is to maximise capital growth by investingin a diversified portfolio of private equity funds and, occasionally, directlyin private companies. The Company's full Objective and Investment Policy areset out above. The Company was incorporated and registered in England and Wales on 16th July1987. It is registered as a public limited company and is an investment companyas defined by Section 833 of the Companies Act 2006. It is a member of TheAssociation of Investment Companies ("AIC"). The Company has received written approval from HM Revenue & Customs ("HMRC") asan authorised investment trust under Sections 1158/59 of the Corporation TaxAct 2010 for the year ended 30th June 2012. The Company has been approved as aninvestment trust for all previous years. New regulations for obtaining and retaining investment trust status applied tothe Company with effect from 1st July 2012. The Company has applied for, andbeen granted, approval as an investment trust under the new regulations for theyear ended 30th June 2013. The Company will be treated as an investment trustcompany for each subsequent accounting period, subject to there being noserious breaches of the conditions for approval. It is the opinion of theDirectors that the Company has subsequently directed its affairs so as toenable it to continue to qualify for such approval. The principal conditions that must be met for approval by HMRC for any givenaccounting period as an investment trust are that all, or substantially all, ofthe Company's business should consist of "investing in shares, land or otherassets with the aim of spreading investment risk and giving members of thecompany the benefit of the results of the management of its funds" and theCompany must not retain more than 15% of all its income. In addition, theCompany must not be a close company and its shares must be admitted to tradingon a regulated market. The Company's status as an investment trust allows it to obtain an exemptionfrom paying capital gains tax on the profits made from the sale of itsinvestments. Investment trusts offer a number of advantages for investors,including access to investment opportunities that might not be open to privateinvestors and to professional stock selection skills at low cost. Principal Risks and Uncertainties Facing the Company The Company invests principally in private equity funds. However, the Company'sstrategy is to adopt a global fund-of funds investment programme, maximisingreturns through selection of the best available funds, and to mitigateinvestment risk through diversification of the underlying portfolio bygeography, investment stage and sector. The principal risks facing the Companyinclude the following: Funding of investment commitments In the normal course of its business, the Company typically has outstandingcommitments to private equity funds which are substantial relative to theCompany's assets and may be drawn down at any time. The Company's ability tomeet these commitments is dependent upon it receiving cash distributions (thetiming and amount of which can be unpredictable) from its private equityinvestments and, to the extent these are insufficient, on the availability offinancing facilities. Risks relating to investment opportunities There is no guarantee that the Company will find sufficient suitable investmentopportunities, or that the private equity funds in which it invests will findsuitable investment opportunities, to achieve the level of diversificationwhich the Company seeks to achieve in relation to its investment portfolio. Financial risk of private equity The Company invests in private equity funds and unquoted companies which areless readily marketable than quoted securities and may take a long time torealise. In addition, such investments may carry a higher degree of risk thaninvestments in quoted securities. The Company may be adversely affected bythese risks notwithstanding the level of diversification which it seeks toachieve in relation to its investment portfolio. Long-term nature of private equity investments Private equity investments are long-term in nature and may take some yearsbefore reaching a level of maturity at which they can be realised. Accordingly,it is possible that the Company may not receive a return on investments made byit for a number of years. Liquidity risk Due to the Company's investment policy, a large proportion of the Company'sportfolio comprises indirect participations in unquoted investments and directholdings in unquoted investments. Such investments are less readily marketablethan quoted securities and realisation of these investments may require alengthy time period or may result in distributions in kind to the Company. Valuation uncertainty In valuing its investments in private equity funds and unquoted companies andin publishing its net asset value ("NAV"), the Company relies to a significantextent on the accuracy of financial and other information provided by thesefunds and companies to the Manager. There is potential for inconsistency in thevaluation methods adopted by these funds and companies. In addition, theinformation provided is typically more than 60 days old at the time the NAV ofthe Company's shares is reported. Gearing The Company has committed revolving dollar and euro credit facilities with TheRoyal Bank of Scotland plc and Lloyds TSB Bank plc, which expire in June 2015.As at 30th June 2013 these facilities were undrawn (2012: undrawn). The use of gearing can cause both gains and losses in the asset value of theCompany to be magnified. The Company may also invest in private equity funds orunquoted companies which are geared by loan facilities that rank ahead of theCompany's investment both for payment of interest and capital. As aconsequence, the Company may be exposed to gearing through the borrowings fromtime to time of such private equity funds and companies, therefore investmentin such assets presents a higher risk as to their capital return. Foreign currency risk The Company makes investments in US dollars, euros and other currencies as wellas sterling. Accordingly, the Company is exposed to currency exchange ratefluctuations. Competition The Company competes for investments with other investors. It is possible thatcompetition for appropriate investment opportunities may increase, thusreducing the number of opportunities available and adversely affecting theterms upon which such investments can be made. Unregulated nature of underlying investments The private equity funds and underlying unquoted investments that form thebasis of the majority of the Company's portfolio are not necessarily subject toregulation by the Financial Conduct Authority ("FCA") or an equivalentregulatory body. Funds and unquoted companies in which the Company invests(directly or indirectly) may be domiciled in jurisdictions which do not have aregulatory regime which provides an equivalent level of investor protection tothat provided under the laws of the United Kingdom. Defaults on commitments If, in consequence of any failure to meet a demand for payment of anyoutstanding unpaid capital commitment of the Company to any private equity fundin which the Company has invested, the Company is treated as a defaultinginvestor by that fund, the Company may suffer a resultant dilution in itsinterest in that fund and, possibly, the compulsory sale of that interest. Taxation Any change in the Company's tax status or in taxation legislation or practicecould affect the value of the investments held by and the performance of theCompany. In addition, the income and gains of the Company from its investmentsmay suffer withholding tax which may not be reclaimable in the countries wheresuch income and gains arise. The Manager and other third party advisers Like most investment trust companies, the Company has no employees and theDirectors are all non-executive. The Company is dependent upon the services ofPantheon as Manager and may be adversely affected if the services of Pantheoncease to be available to the Company. Details of the terms of the ManagementAgreement are set out in the full Annual Report and Accounts. Other third party service providers on whom the Company relies include CapitaSinclair Henderson Limited, which provides administrative, accounting andcompany secretarial services, and HSBC Bank plc, which acts as Custodian inrespect of the Company's quoted equities and bonds. The Foreign Account Tax Compliance Act ("FATCA") FATCA is United States anti-tax avoidance legislation that forces ForeignFinancial Institutions ("FFIs") to identify and report on investments by "USPersons". The regime will be implemented in the UK by primary Britishlegislation and reporting will be to HMRC. UK investment trust companies areincluded in the FFI definition and need to have registered with the IRS by 30thJune 2014. An investment trust company, however, will not have to make anyreports where its shares and securities are regularly traded on an establishedstock exchange. If registration is required, PIP intends to register by 25thApril 2014 to ensure that the Company is published on the first list ofcompliant FFIs. Alternative Investment Fund Managers' Directive The Alternative Investment Fund Managers' Directive ("AIFMD") was implementedby EU member states, including the UK, on 22nd July 2013, with existinginvestment companies, such as PIP, having until 22nd July 2014 to comply withthe requirements. It seems likely that there will be an increase, potentially amaterial increase, in the Company's governance, administration and depositaryexpenses as a result of the implementation of AIFMD. The Board is in theprocess of discussing the requirements and the implications with its advisersto ensure compliance by 22nd July 2014. Further information on risks Further information on the principal risks the Company faces in its portfoliomanagement activities and the policies for managing these risks and the policyand practice with regard to financial instruments are summarised in Note 21 tothe financial statements. Review of 2012/2013Net asset value The Company's total net assets attributable to shareholders increased duringthe year to £903.3m (2012: £845.4m). The NAV per share was 1,331.9p at 30thJune 2013 (2012: 1,193.50p). Results and dividends The results for the year are as set out in the Income Statement. This showsthat the Company's net revenue profit on ordinary activities before taxationfor the year was £1.0m (2012: £0.3m) and capital returns were £85.9m (2012:£44.9m excluding the loss on the derivative asset at fair value through profitor loss). The Directors do not recommend the payment of a dividend in respect of the yearended 30th June 2013 (2012: nil). Key performance indicatorsThe Board and the Manager monitor the following Key Performance Indicators: 1. The NAV performance PIP's NAV per share increased by 11.6% from the prior year NAV per share to1,331.9p in the year to 30th June 2013. The NAV returns over 1 year, 3 years, 5years and 10 years and since inception are set out above. The 11.6% increase inPIP's NAV per share compares with increases in the MSCI World Total Return(sterling) Index of 23.2% and the FTSE All-Share Total Return Index of 17.9%respectively. 2. The level of discount PIP's ordinary share price increased by 43.6% to 1,042.00p at 30th June 2013(2012: 725.50p) and the discount to NAV decreased to 21.8% at the year end(2012: discount of 39.2%). PIP's redeemable share price increased by 38.2% to 1,050.00p at 30th June 2013(2012: 760.00p) and the discount to NAV decreased to 21.2% at the year end(2012: discount of 36.3%). 3. The ongoing charges 2013 2012 Ongoing charges 1.16% 1.20% Look-through ongoing charges* 0.07% 0.08% Performance fees 0.00% 0.00% Finance costs 0.17% 0.22% Total ongoing charges, look-through ongoingcharges*, performance fees and finance costs 1.40% 1.50% * Look-through ongoing charges includes management fees paid directly to PIP'sPantheon-managed fund investments. Future Developments A review of the year to 30th June 2013 and the outlook for the coming year canbe found in the Chairman's Statement and the Manager's Review. Share Capital As at 30th June 2013, the Company had 34,507,013 ordinary shares of £0.67 eachand 33,312,534 redeemable shares of £0.01 each in issue. No shares were held intreasury at the year end. During the year, 1,614,000 ordinary shares (with an aggregate nominal value of£1,081,380 and representing 4.5% of the ordinary share capital in issue on30th June 2012) were purchased in the market for cancellation for a totalconsideration of £14.8m. During the year, 1,401,000 redeemable shares (with an aggregate nominal valueof £14,010 and representing 4.0% of the redeemable share capital in issue on30th June 2012) were also purchased in the market for cancellation for a totalconsideration of £11.9m. Since the year end, 225,000 ordinary shares (with an aggregate nominal value of£150,750 and representing 0.7% of the ordinary share capital in issue on30th June 2013) have been purchased in the market for cancellation for a totalconsideration of £2.3m. As at the date of this report, the Company had shares in issue as shown in thetable below, all of which are admitted to the official list maintained by theFCA and admitted to trading on the London Stock Exchange: SHARE CAPITAL NUMBER OF % OF TOTALAND VOTING NUMBER OF VOTING RIGHTS SHARES VOTING RIGHTSRIGHTS AT SHARES ATTACHED TO HELD IN REPRESENTED30TH SEPTEMBER 2013 IN ISSUE EACH SHARE TREASURY BY EACH CLASS ORDINARY SHARES OF 34,282,013 1 - 100£0.67 EACH REDEEMABLE SHARES 33,312,534 - - -OF £0.01 EACH TOTAL VOTING RIGHTS 34,282,013 The rights attaching to each of the Company's classes of share are set out inthe Company's Articles of Association. Further details are included in Note 14to the financial statements. The redeemable shares do not carry any right to speak or vote at generalmeetings of the Company, including on resolutions authorising the issue orbuyback of shares, although holders of redeemable shares are entitled toreceive notice of general meetings of the Company and to attend such meetings.Redeemable shares do carry the right to vote at separate class meetings of theholders of redeemable shares. The sanction of holders of redeemable shares isrequired to various corporate actions as set out in the Articles ofAssociation. The Company's ordinary shares and redeemable shares are freely transferable.However, the Directors may refuse to register a transfer of shares held incertificated form which are not fully paid and unless the instrument oftransfer is (i) lodged, duly stamped, at the Company's registered office,accompanied by the relevant share certificate(s) and such other evidence (ifany) as the Directors may reasonably require to show the right of thetransferor to make the transfer; (ii) in respect of only one class of share;and (iii) not in favour of more than four persons jointly. The Directors maydecline to register a transfer of an uncertificated share in the circumstancesset out in the Uncertified Securities Regulations 2001 and where, in the caseof a transfer to joint holders, the number of joint holders to whom theuncertificated share is to be transferred exceeds four. If the Directorsdecline to register a transfer, they are required to send notice of the refusalto the transferee within two months, giving reasons for their decision. Unless the Directors otherwise determine, a holder of ordinary shares willcease to be entitled to attend or vote at general meetings of the Company or atclass meetings or on any poll if he/she fails to comply with a request by theCompany to provide details of any interest held by any person in his/herordinary shares within 14 days of the request being made. Additionally, if theshares represent at least 0.25% of their class, any dividends payable inrespect of the shares will be withheld by the Company and no transfers of anyof the shares held in certified form will be registered unless the shareholderis not him/herself in default as regards supplying the information required(and the Directors are satisfied that no person in default as regards supplyingsuch information is interested in any of the shares the subject of thetransfer) or unless the transfer arises as a result of the acceptance of atakeover offer or a sale made through a recognised investment exchange (or anyother stock exchange outside the United Kingdom on which the Company's sharesare normally traded) or is a transfer which the Directors are satisfied is madein consequence of a sale of the entire beneficial interest in the shares to aperson who is unconnected with the shareholder and with any other personappearing interested in the shares. Save as described above there are: no restrictions concerning the transfer ofsecurities in the Company or on voting rights; no special rights with regard tocontrol attached to securities; no agreements between holders of securitiesregarding their transfer known to the Company; and no agreements which theCompany is party to that might affect its control following a successfultakeover bid. Amendment of the Company's Articles of Association and the giving of authorityto issue or buy back the Company's shares require an appropriate resolution tobe passed by shareholders. Proposals for the renewal of the Board's currentauthorities to issue and buy back shares are detailed in the full Annual Reportand Accounts. Social, Environmental, Community and Employee Issues The Company has no employees and the Board consists entirely of non-executiveDirectors. As an investment trust, the Company has no direct impact on thecommunity or the environment. The Manager is committed to the Principles forResponsible Investing and its policies are set out in the full Annual Reportand Accounts. These Principles are integrated into Pantheon's investmentanalysis and decision-making process, as well as during post-investmentmonitoring. Going Concern The Company's business activities, together with the factors likely to affectits future development, performance and position, including its financialposition, are set out in the Chairman's Statement and Manager's Review. At each Board meeting, the Directors review the Company's latest managementaccounts and other financial information. Its commitments to private equityinvestments are reviewed, together with its financial resources, including cashheld and the Company's borrowing capability. One-year cash flow scenarios arealso presented to each meeting and discussed. After due consideration of the balance sheet and activities of the Company andthe Company's assets, liabilities, commitments and financial resources, theDirectors have concluded that the Company has adequate resources to continue inoperation for the foreseeable future. For this reason, they consider itappropriate to continue to adopt the going concern basis in preparing thefinancial statements. The full Annual Report contains the following statements regardingresponsibility for the Annual Report and financial statements (references inthe following statements are to pages in the Annual Report). STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIALSTATEMENTS The Directors are responsible for preparing the Annual Report and the financialstatements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for eachfinancial year. Under that law the Directors have elected to prepare financialstatements in accordance with United Kingdom Generally Accepted AccountingPractice ("UK GAAP"). Under company law the Directors must not approve thefinancial statements unless they are satisfied that they give a true and fairview of the state of affairs of the Company and of the profit or loss of theCompany for that period. In preparing these financial statements, the Directorsare required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable UK accounting standards have been followed, subjectto any material departure disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it isinappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records thatdisclose with reasonable accuracy at any time the financial position of theCompany and enable them to ensure that the financial statements comply with theCompanies Act 2006. The Directors are responsible for ensuring that theDirectors' Report and other information in the Annual Report is prepared inaccordance with company law in the United Kingdom, and that the Annual Reportincludes information required by the Listing Rules of the Financial ConductAuthority. They also have responsibility for safeguarding the assets of theCompany and hence for taking reasonable steps for the prevention and detectionof fraud and other irregularities. The Directors are responsible for the maintenance and integrity of thecorporate and financial information included on the Company's website.Legislation in the United Kingdom governing the preparation and disseminationof financial statements may differ from legislation in other jurisdictions. The Directors, to the best of their knowledge, state that: • the financial statements, prepared in accordance with UK GAAP, give a trueand fair view of the assets, liabilities, financial position and return of theCompany; and • this Annual Report includes a fair review of the development and performanceof the business and the position of the Company together with a description ofthe principal risks and uncertainties that it faces. On behalf of the Board TOM BARTLAMChairman30th September 2013 NON-STATUTORY ACCOUNTS The financial information set out below does not constitute the Company'sstatutory accounts for the years ended 30th June 2013 and 2012 but is derivedfrom those accounts. Statutory accounts for 2012 have been delivered to theRegistrar of Companies, and those for 2013 will be delivered in due course. TheAuditors have reported on those accounts; their report was (i) unqualified,(ii) did not include a reference to any matters to which the Auditors drewattention by way of emphasis without qualifying their report and (iii) did notcontain a statement under Section 498 (2) or (3) of the Companies Act 2006. Thetext of the Auditors' report can be found in the Company's full Annual Reportand Accounts at www.pipplc.com. INCOME STATEMENTYEAR ENDED 30th JUNE 2013 2013 2012 REVENUE CAPITAL TOTAL* REVENUE CAPITAL TOTAL* NOTE £'000 £'000 £'000 £'000 £'000 £'000 Gains on investmentsdesignated at fairvalue through profitor loss** 9b - 82,202 82,202 - 46,146 46,146 Loss on derivativescontained in standbyagreements at fairvalue through profitor loss*** - - - - (14,938) (14,938) Currency gains/(losses) on cash andborrowings 19 - 3,720 3,720 - (1,104) (1,104) Investment income 2 12,410 - 12,410 12,065 - 12,065 Investment managementfees 3 (8,839) - (8,839) (8,867) - (8,867) Other expenses 4 (1,134) - (1,134) (1,062) (160) (1,222) RETURN ON ORDINARYACTIVITIES BEFOREFINANCING COSTS AND TAX 2,437 85,922 88,359 2,136 29,944 32,080 Interest payable andsimilar charges/finance costs 6 (1,453) - (1,453) (1,831) - (1,831) RETURN ON ORDINARYACTIVITIES BEFORE TAX 984 85,922 86,906 305 29,944 30,249 Tax on ordinaryactivities 7 (2,401) - (2,401) (1,363) - (1,363) RETURN ON ORDINARYACTIVITIES AFTER TAXFOR THE FINANCIAL YEAR (1,417) 85,922 84,505 (1,058) 29,944 28,886 RETURN PER ORDINARYAND REDEEMABLE SHARE 8 (2.04)p 123.99p 121.95p (1.48)p 41.77p 40.29p ADJUSTED RETURN PERORDINARY ANDREDEEMABLE SHARE 8 (2.04)p 123.99p 121.95p (1.48)p 62.62p 61.14p * The total column of the statement represents the Company's profit and lossstatement prepared in accordance with UK GAAP. The supplementary revenue returnand capital columns are prepared under guidance published by the Association ofInvestment Companies. ** Includes currency gains on investments. *** The loss on the derivative was an accounting entry only and had no effecton the cash balances of the Company. All revenue and capital items in the above statement relate to continuingoperations. No operations were acquired or discontinued during the year. There were no recognised gains or losses other than those passing through theIncome Statement. The notes form part of these financial statements. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS CAPITAL CAPITAL OTHER RESERVE ON SHARE SHARE REDEMPTION CAPITAL INVESTMENTS SPECIAL REVENUE CAPITAL PREMIUM RESERVE RESERVE HELD RESERVE RESERVE TOTAL £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Movement for the yearended 30th June 2013 OPENING EQUITYSHAREHOLDERS' FUNDS 24,549 283,555 996 265,724 259,255 67,939 (56,604) 845,414 Return for the year - - - 48,414 37,508 - (1,417) 84,505 Ordinary sharesbought back forcancellation (1,081) - 1,081 - - (14,764) - (14,764) Redeemable sharesbought back forcancellation (14) - 14 - - (11,871) - (11,871) CLOSING EQUITYSHAREHOLDERS' FUNDS 23,454 2 83,555 2,091 314,138 296,763 41,304 (58,021) 903,284 Movement for the yearended 30th June 2012 OPENING EQUITYSHAREHOLDERS' FUNDS 25,428 183,184 26 288,790 244,850 99,861 (55,546) 786,593 Return for the year - - - 15,539 14,405 - (1,058) 28,886 Derecognition ofderivative asset - - - (38,605) - - - (38,605) Issue of newredeemable shares 91 100,409 - - - - - 100,500 Expenses relating tothe issue ofnew redeemable shares - (38) - - - - - (38) Ordinary sharesbought back forcancellation (938) - 938 - - (9,685) - (9,685) Redeemable sharesbought back forcancellation (23) - 23 - - (15,770) - (15,770) Redeemable sharesbought back andheld in treasury* - - - - - (6,467) - (6,467) Redeemable sharescancelled fromtreasury (9) - 9 - - - - - CLOSING EQUITYSHAREHOLDERS' FUNDS 24,549 283,555 996 265,724 259,255 67,939 (56,604) 845,414 * Shares bought back and held in treasury were subsequently cancelled on 28thOctober 2011. The notes form part of these financial statements. BALANCE SHEETas at 30th JUNE 2013 2013 2012 Note £'000 £'000 Fixed assets Investments designated at fair valuethrough profit or loss 9a/b 826,423 799,853 Current assets Debtors 11 1,051 1,512 Cash at bank 18 78,387 51,143 79,438 52,655 Creditors: Amounts falling due within one year Other creditors 12 2,577 7,094 2,577 7,094 NET CURRENT ASSETS 76,861 45,561 NET ASSETS 903,284 845,414 Capital and reserves Called-up share capital 14 23,454 24,549 Share premium 15 283,555 283,555 Capital redemption reserve 15 2,091 996 Other capital reserve 15 314,138 265,724 Capital reserve on investments held 15 296,763 259,255 Special reserve 15 41,304 67,939 Revenue reserve 15 58,021) (56,604) TOTAL EQUITY SHAREHOLDERS' FUNDS 903,284 845,414 NET ASSET VALUE PER SHARE - ORDINARY ANDREDEEMABLE 16 1,331.89p 1,193.50p The notes form part of these financial statements. The financial statements were approved by the Board of Pantheon InternationalParticipations PLC on 30th September 2013 and were signed on its behalf by TOM BARTLAMChairman Company No. 2147984 CASH FLOW STATEMENTYEAR ENDED 30TH JUNE 2013 2013 2012 NOTE £'000 £'000 Cash flow from operating activities Investment income received 12,357 12,052 Deposit and other interest received 53 13 Investment management fees paid (9,574) (8,869) Performance fee paid (5,057) - Secretarial fees paid (211) (172) Other cash payments (1,077) (951) Withholding tax deducted (2,401) (1,363) NET CASH (OUTFLOW)/INFLOW FROMOPERATING ACTIVITIES 19 (5,910) 710 Servicing of finance Loan commitment and arrangement fees paid (1,138) (1,160) Redeemable shares commitment fees paid - (63) Interest on loan notes paid - (322) NET CASH OUTFLOW FROM RETURNS ONINVESTMENT AND SERVICING OF FINANCE (1,138) (1,545) Capital expenditure and financialinvestment Purchases of investments (128,198) (77,126) Purchases of government securities - (15,901) Disposals of investments 183, 995 134,632 Disposals of government securities - 15,743 NET CASH INFLOW FROM CAPITAL EXPENDITUREAND FINANCIAL INVESTMENT 55,797 57,348 NET CASH INFLOW BEFORE FINANCING 48,749 56,513 Financing Expenses relating to issue of newredeemable shares - (38) Ordinary shares purchased forcancellation (13,324) (9,685) Redeemable shares purchased forcancellation (11,871) (15,770) Redeemable shares purchased to be held intreasury - (6,467) NET CASH OUTFLOW FROM FINANCING (25,195) (31,960) INCREASE IN CASH 17 23,554 24,553 The notes form part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS 1. Accounting Policies A summary of the principal accounting policies, all of which have been appliedconsistently throughout the year, is set out below. (A) Basis of Preparation The financial statements have been prepared on the historical cost basis ofaccounting, except for the measurement at fair value of investments, and inaccordance with applicable UK GAAP and on the basis that all activities arecontinuing. The Company's financial statements are presented in sterling andall values are rounded to the nearest thousand pounds (£'000) except whenindicated otherwise. (B) Statement of Recommended Practice The financial statements have been prepared in accordance with the Statement ofRecommended Practice (as amended in January 2009) for the financial statementsof investment trust companies and venture capital trusts issued by theAssociation of Investment Companies. (C) Segmental Reporting The Directors are of the opinion that the Company is engaged in a singlesegment of business, being investment business. (D) Valuation of Investments All investments held by the Company are classified as "fair value throughprofit or loss". As the Company's business is investing in financial assetswith a view to profiting from their total return in the form of interest,dividends or increases in fair value, quoted equities and fixed incomesecurities are designated as fair value through profit or loss on initialrecognition. The Company manages and evaluates the performance of theseinvestments on a fair value basis in accordance with its investment strategy.For investments actively traded in organised financial markets, fair value isgenerally determined by reference to Stock Exchange quoted market bid prices atthe close of business at the Balance Sheet date. For investments that are notactively traded in organised financial markets, fair value is determined usingreliable valuation techniques as described below: (i) Unquoted fixed asset investments are stated at the estimated fair value. In the case of investments in private equity funds, this is based on the netasset value of those funds ascertained from periodic valuations provided by themanagers of the funds. Such valuations are necessarily dependent upon thereasonableness of the valuations by the fund managers of the underlyinginvestments. In the absence of contrary information the values are assumed tobe reasonable. These valuations are reviewed periodically for reasonableness. The Company may acquire secondary interests at either a premium or a discountto the fund manager's valuation. Within the Company's portfolio, those fundholdings purchased at a premium are normally revalued to their stated net assetvalues at the next reporting date. Those fund holdings purchased at a discountare normally held at cost until the receipt of a valuation from the fundmanager in respect of a date after acquisition, when they are revalued to theirstated net asset values, unless an adjustment against a specific investment isconsidered appropriate. In the case of direct investments in unquoted companies, the initial valuationis based on the transaction price. Where better indications of fair valuebecome available, such as through subsequent issues of capital or dealingsbetween third parties, the valuation is adjusted to reflect the new evidence.This information may include the valuations provided by private equity managerswho are also invested in the company. Valuations are reduced where thecompany's performance is not considered satisfactory. Private equity funds may contain a proportion of quoted shares from time totime, for example, where the underlying company investments have been takenpublic but the holdings have not yet been sold. The quoted market holdings atthe date of the latest fund accounts are reviewed and compared with the valueof those holdings at the year end. If there has been a material movement in thevalue of these holdings, the valuation is adjusted to reflect this. As at 30th June 2013 there was no aggregate difference on underlyinginvestments to be recognised in profit or loss at the start or end of theperiod. (ii) Quoted investments are valued at the bid price on the relevant stockexchange. (E) Income Dividends receivable on quoted equity shares are brought into account on theex-dividend date. Dividends receivable on equity shares where no ex-dividend date is quoted arebrought into account when the Company's right to receive payment isestablished. The fixed return on a debt security is recognised on a timeapportionment basis so as to reflect the effective interest rate on thesecurity. Other interest receivable is included on an accruals basis. (F) Taxation Corporation tax payable is based on the taxable profit for the year. The chargefor taxation takes into account taxation deferred or accelerated because oftiming differences between the treatment of certain items for accounting andtaxation purposes. Full provision for deferred taxation is made under theliability method, without discounting, on all timing differences that havearisen but not reversed by the Balance Sheet date, unless such provision is notpermitted by FRS 19 Deferred Tax. The tax effect of different items of income/gain and expenditure/loss isallocated between capital and revenue on the same basis as the particular itemto which it relates, using the marginal method. (G) Expenses All expenses are accounted for on an accruals basis. Expenses, includinginvestment management fees, are charged through the revenue account except asfollows: • expenses which are incidental to the acquisition or disposal of an investmentare treated as capital costs and separately identified and disclosed in Note 9;• expenses of a capital nature are accounted for through the capital account;and• investment performance fees. (H) Foreign Currency The currency of the Primary Economic Environment in which the Company operates("the functional currency") is pounds sterling ("sterling"), which is also thepresentation currency. Transactions denominated in foreign currencies arerecorded in the local currency at actual exchange rates as at the date oftransaction. Monetary assets and liabilities denominated in foreign currenciesat the year end are reported at the rates of exchange prevailing at the yearend. Any gain or loss arising from a change in exchange rates subsequent to thedate of the transaction is included as an exchange gain or loss in the IncomeStatement. For non-monetary assets these are covered by fair value adjustments. (I) Other Capital Reserve The following are accounted for in this reserve: • investment performance fees;• gains and losses on the realisation of investments;• realised exchange differences of a capital nature; and• expenses of a capital nature. Capital distributions from investments are accounted for on a reducing costbasis; cash received is first applied to reducing the historical cost of aninvestment; any gain will be recognised as realised only when the cost has beenreduced to nil. (J) Capital Reserve on Investments Held The following are accounted for in this reserve: • increases and decreases in the value of investments held at the year end. (K) Investment Performance Fee The Manager is entitled to a performance fee from the Company in respect ofeach 12 calendar month period ending on 30th June in each year. The performancefee payable in respect of each such calculation period is 5% of the amount bywhich the net asset value at the end of such period exceeds 110% of theapplicable "high-water mark", i.e. the net asset value at the end of theprevious calculation period in respect of which a performance fee was payable,compounded annually at 10% for each subsequent completed calculation period upto the start of the calculation period for which the fee is being calculated.For the calculation period ended 30th June 2013, the notional performance feehurdle is a net asset value per share of 1,828.19p. The performance fee iscalculated using the adjusted net asset value. In previous periods this wasadjusted to exclude the derivative asset. The performance fee is calculated so as to ignore the effect on performance ofany performance fee payable in respect of the period for which the fee is beingcalculated or of any increase or decrease in the net assets of the Companyresulting from any issue, redemption or purchase of any shares or othersecurities, the sale of any treasury shares or the issue or cancellation of anysubscription or conversion rights for any shares or other securities and anyother reduction in the Company's share capital or any distribution toshareholders. 2. Income 30TH JUNE 2013 30TH JUNE 2012 £'000 £'000 Income from investments Unfranked investment income 12,357 12,047 12,357 12,047 Other income Interest 55 13 Exchange difference on income (2) 5 53 18 TOTAL INCOME 12,410 12,065 Total income comprises Dividends 12,357 12,041 Interest 55 19 Exchange difference on income (2) 5 12,410 12,065 Analysis of income frominvestments Unlisted 12,357 12,041 Listed - 6 12,357 12,047 3. Investment Management Fees 30TH JUNE 2013 30TH JUNE 2012 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL £'000 £'000 £'000 £'000 £'000 £'000 Investment management fees 8,839 - 8,839 8,867 - 8,867 8,839 - 8,839 8,867 - 8,867 The investment management fee is payable monthly in arrears at the rate set outin the Directors' Report in the full Annual Report and Accounts. During the year, services with a total value of £9,454,000 (2012: £9,511,000),being £8,839,000 (2012: £8,867,000) directly from Pantheon Ventures (UK) LLPand £615,000 (2012: £644,000) via Pantheon managed fund investments, werepurchased by the Company. At 30th June 2013 £769,000 (2012: £1,504,000) was owed for investmentmanagement fees. A performance fee of £5,057,000 was paid to the Manager duringthe year (see Note 12) in respect of the initial 18 month performance feecalculation period ended 30th June 2008. Of this amount, £3,660,000 was chargedin the year to 30th June 2008 with the remaining balance charged in the year to30th June 2007. No performance fee is payable in respect of the 12 calendarmonth period to 30th June 2013. The basis upon which the performance fee iscalculated is explained in Note 1(K) and in the Directors' Report in the fullAnnual Report and Accounts. 4. Other Expenses 30TH JUNE 2013 30TH JUNE 2012 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL £'000 £'000 £'000 £'000 £'000 £'000 Secretarial and accountancyservices 202 - 202 194 - 194 VAT refund on secretarialand accountancy services - - - (68) - (68) Fees payable to theCompany's Auditor forthe audit of the annualfinancial statements 33 - 33 31 - 31 Fees payable to theCompany's Auditor for - audit-related assuranceservices - half-yearly report 6 - 6 6 - 6 - other assuranceservices - net asset valuecalculations 11 - 11 26 - 26 Directors' remuneration(see Note 5) 235 - 235 157 - 157 Irrecoverable VAT 29 - 29 27 - 27 Legal and professional fees 366 - 366 409 160 569 Printing 27 - 27 40 - 40 Other 225 - 225 240 - 240 1,134 - 1,134 1,062 160 1,222 The Directors do not consider that the provision of non-audit work to theCompany affects the independence of the Auditor. 5. Directors' Remuneration Directors' emoluments comprise wholly Directors' fees. A breakdown is providedin the Directors' Remuneration Report in the full Annual Report and Accounts. 6. Interest Payable and Similar Charges 30TH JUNE 2013 30TH JUNE 2012 £'000 £'000 Bank loan and overdraft interest - 1 Loan commitment and arrangement fees 1,453 1,445 Redeemable share commitment fee - 63 Loan notes interest - 322 1,453 1,831 In June 2011 the Company entered into a new loan agreement with The Royal Bankof Scotland plc and Lloyds TSB Bank plc. Under the agreement, which will expirein June 2015, committed revolving dollar and euro credit facilities of $82m and€57m have been made available. Each individual drawdown bears interest at avariable rate agreed for the period of the drawdown and a commitment fee of1.10% per annum is payable in respect of the amounts available for drawdown ineach facility. In addition, the Company has an overdraft facility of £5m withThe Royal Bank of Scotland plc. At 30th June 2013, the sterling equivalentamount of £nil (2012: £nil) was drawn down under the facilities. 7. Tax on Ordinary Activities 30TH JUNE 2013 30TH JUNE 2012 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL £'000 £'000 £'000 £'000 £'000 £'000 Withholding tax deductedfrom distributions 2,401 - 2,401 1,363 - 1,363 Current tax The current tax for the year differs from the standard rate of corporation taxin the UK (23%). The differences are explained below: Net return on ordinaryactivities before tax 984 85,922 86,906 305 29,944 30,249 Theoretical tax at UKcorporation tax rate of23.75% (2012: 25.5%)* 234 20,406 20,640 78 7,636 7,714 Non-taxable investment,derivative and currency(gains)/losses - (20,406) (20,406) - (7,677) (7,677) Effect of expenses in excessof taxable income - - - - 41 41 Unutilised managementexpenses (234) - (234) (78) - (78) Withholding tax deducted fromdistributions (2,401) - (2,401) (1,363) - (1,363) (2,401) - (2,401) (1,363) - (1,363) * The corporation tax rate applied is based on the average tax rates for thefinancial years ended 30th June 2013 and 30th June 2012. Factors that May Affect Future Tax Charges The Company is an investment trust and therefore is not subject to tax oncapital gains. Deferred tax is not provided on capital gains and losses arisingon the revaluation or disposal of investments because the Company meets (andintends to meet for the foreseeable future) the conditions for approval as aninvestment trust company. No deferred tax asset has been recognised in respect of excess managementexpenses and expenses in excess of taxable income as they will only berecoverable to the extent that there is sufficient future taxable revenue. Asat 30th June 2013, excess management expenses are estimated to be in excess of£121m (2012: £122m). 8. Return per Share 30TH JUNE 2013 30TH JUNE 2012 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL Return on ordinaryactivities after taxfor the financial yearin £'000 (1,417) 85,922 84,505 (1,058) 29,944 28,886 Loss on derivativescontained in standbyagreements in £'000 - - - - 14,938 14,938 Adjusted return onordinary activities aftertax for the financialyear in £'000* (1,417) 85,922 84,505 (1,058) 44,882 43,824 Weighted average ordinaryand redeemable shares 69,296,879 71,680,727 Return per ordinary andredeemable share (2.04)p 123.99p 121.95p (1.48)p 41.77p 40.29p Adjusted return perordinary and redeemableshare* (2.04)p 123.99p 121.95p (1.48)p 62.62p 61.14p * The adjusted return excludes the realised loss on the derivative (see Note13) of £nil (2012: £14,938,000). 9a. Movements on Investments 30TH JUNE 2013 30TH JUNE 2012 £'000 £'000 Book cost brought forward 541,721 572,112 Acquisitions at cost 128,160 87,649 Capital distributions - proceeds (183,792) (149,810) Capital distributions - realisedgains on sales 44,695 31,770 BOOK COST AT 30TH JUNE 530,784 541,721 Unrealised appreciation of investments Unlisted investments 295,509 258,043 Listed investments 130 89 VALUATION OF INVESTMENTS AT 30TH JUNE 826,423 799,853 9b. Analysis of Investments 30TH JUNE 2013 30TH JUNE 2012 £'000 £'000 Sterling Unlisted investments 57,226 44,237 Listed investments - - 57,226 44,237 US dollar Unlisted investments 587,617 560,142 Listed investments 199 531 587,816 560,673 Euro Unlisted investments 170,232 184,037 Listed investments - - 170,232 184,037 Other Unlisted investments 11,149 10,906 Listed investments - - 11,149 10,906 826,423 799,853 Realised profits on sales 44,695 31,770 Amounts previously recognised as unrealiseddepreciation on those sales 89 545 Increase in unrealised appreciation 37,418 13,831 GAINS ON INVESTMENTS 82,202 46,146 Further analysis of the investment portfolio is provided in the Manager'sReview above. Transaction costs incidental to the acquisition of investments totalled £nil(2012: £nil) and to the disposals of investments totalled £15,000 (2012:£3,000) for the year. 10. Fair Value Hierarchy Financial Assets at Fair Value Through Profit or Loss at 30th June 2013 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL £'000 £'000 £'000 £'000 Unlisted holdings - - 826,224 826,224 Listed holdings 199 - - 199 199 - 826,224 826,423 Financial Assets at Fair Value Through Profit or Loss at 30th June 2012 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL £'000 £'000 £'000 £'000 Unlisted holdings - - 799,322 799,322 Listed holdings 531 - - 531 531 - 799,322 799,853 Level 3 Financial Assets at Fair Value Through Profit or Loss at 30th June 2013 PRIVATE EQUITY INVESTMENTS £'000 Opening balance 799,322 Purchases at cost 128,160 Transfer of book cost to level 1* (4,857) Sales proceeds (172,352) Total gains or losses included in"Gains on investments" in the IncomeStatement - on assets sold 38,485 - on assets held as at 30th June 2013 37,466 CLOSING BALANCE 826,224 Level 3 Financial Assets at Fair Value Through Profit or Loss at 30th June 2012 PRIVATE EQUITY INVESTMENTS AND DERIVATIVE ASSET £'000 Opening balance 863,448 Purchases at cost 77,164 Transfer of book cost to level 1* (1,100) Sales proceeds (132,457) Total gains or losses included in"Gains on investments" in the IncomeStatement - on assets sold 31,032 - on assets held as at 30th June 2012 14,778 Realised loss on derivatives (14,938) Derivative asset derecognised (38,605) CLOSING BALANCE 799,322 * The transfer of book cost to level 1 is due to stock distributions receivedfrom private equity investments. 11. Debtors 30TH JUNE 2013 30TH JUNE 2012 £'000 £'000 Amounts owed by investment funds 299 472 Prepayments and accrued income 752 1,040 1,051 1,512 12. Creditors: Amounts Falling Due Within One Year 30TH JUNE 2013 30TH JUNE 2012 £'000 £'000 Investment management fees 769 1,504 Investment performance fee - 5,057 Amounts owed to brokers - 38 Amounts owing for share buybacks 1,440 - Other creditors and accruals 368 495 2,577 7,094 13. Derivatives 30TH JUNE 2013 30TH JUNE 2012 £'000 £'000 Beginning of year - 53,543 Realised loss on derivatives - (14,938) Derecognition of derivatives - (38,605) END OF YEAR - - Between the years 2005 and 2008 PIP entered into standby commitments underwhich certain institutions agreed to subscribe an aggregate amount of £150m fornew redeemable shares in the Company when called upon by the Company at asubscription price per new redeemable share equal to the prevailing net assetvalue per share at the time of subscription. In order to comply with FRS 26 thestandby commitments were treated as a derivative and valued as an assetaccordingly. On 24th August 2011, the Company drew down on the standby commitments andissued £100.5m of new redeemable shares. The Company terminated the remaining standby commitments of £49.5m with effectfrom 30th September 2011. 14. Called-up Share Capital 30TH JUNE 2013 30TH JUNE 2012 £'000 £'000 Allotted, called-up and fully paid: 34,507,013 (2012: 36,121,013) ordinary sharesof 67p each 23,121 24,202 33,312,534 (2012: 34,713,534) redeemable shares 333 347of 1p each 23,454 24,549 During the year, 1,401,000 redeemable shares and 1,614,000 ordinary shares werebought back in the market for cancellation. The total consideration paid,including commission and stamp duty, was £11,871,000 and £14,764,000respectively. Redeemable shares rank equally with ordinary shares regarding dividend rightsand rights on winding up or return of capital (other than a redemption orpurchase of shares). The holders of redeemable shares have the right to receivenotice of and attend all general meetings of the Company but not to speak orvote. Each holder of ordinary shares is entitled, on a show of hands, to onevote and, on a poll, to one vote for each ordinary share held. The redeemable shares are redeemable at the option of the Company, at theprevailing net asset value per share, within 60 days following the end of eachmonthly NAV calculation date or within 60 days of any other business day whichis determined by the Directors to be a NAV calculation date. 15. Reserves CAPITAL CAPITAL OTHER RESERVE ON SHARE REDEMPTION CAPITAL INVESTMENTS SPECIAL REVENUE PREMIUM RESERVE RESERVE HELD RESERVE RESERVE £'000 £'000 £'000 £'000 £'000 £'000 Beginning of year 283,555 996 265,724 259,255 67,939 (56,604) Net gain onrealisation ofinvestments - - 44,695 - - - Increase inunrealisedappreciation - - - 37,418 - - Transfer on disposalof investments - - - 89 - - Exchange differenceson currency - - 3,690 - - - Exchange differenceson other capitalitems - - 29 1 - - Share cancellations - 1,095 - - - - Share buybacks - - - - (26,635) - Revenue return forthe year - - - - - (1,417) END OF YEAR 283,555 2,091 314,138 296,763 41,304 (58,021) Under the Company's Articles of Association, the Company is prohibited fromdistributing capital profits by way of dividend. 16. Net Asset Value per Share 30TH JUNE 2013 30TH JUNE 2012 Net assets attributable in £'000 903,284 845,414 Ordinary and redeemable shares 67,819,547 70,834,547 Net asset value per share - ordinary andredeemable 1,331.89p 1,193.50p 17. Reconciliation of Net Cash Flow to the Movement in Net Funds 30TH JUNE 2013 30TH JUNE 2012 £'000 £'000 Increase in cash in the year 23,554 24,553 Non-cash movement - foreign exchange gains/(losses) 3,690 (1,055) - loan notes repaid by issueof redeemable shares - 100,500 CHANGE IN NET FUNDS 27,244 123,998 Net cash/(debt) at beginning of year 51,143 (72,855) NET FUNDS AT END OF YEAR 78,387 51,143 18. Analysis of Net Funds 30TH JUNE 2013 30TH JUNE 2012 £'000 £'000 Cash at bank 78,387 51,143 78,387 51,143 19. Reconciliation of Return on Ordinary Activities Before Financing Costs andTax to Net Cash Flow from Operating Activities 30TH JUNE 2013 30TH JUNE 2012 £'000 £'000 Return on ordinary activities beforefinancing costs and tax 88,359 32,080 Withholding tax deducted (2,401) (1,363) Gains on investments (82,202) (46,146) Loss on derivative - 14,938 Currency (gains)/losses on cash andborrowings (3,720) 1,104 (Decrease)/increase in creditors (5,921) 96 (Increase)/decrease in other debtors (25) 1 (5,910) 710 20. Contingencies, Guarantees and Financial Commitments At 30th June 2013, there were financial commitments outstanding of £195.1m(2012: £190.9m) in respect of investments in partly paid shares and interestsin private equity funds. 21. Analysis of Financial Assets and Liabilities The primary investment objective of the Company is to seek to maximiselong-term capital growth for its shareholders by investing in fundsspecialising in unquoted investments, acquiring unquoted portfolios andparticipating directly in private placements. Investments are not restricted toa single market but are made when the opportunity arises and on aninternational basis. The Company's financial instruments comprise securities and other investments,cash balances and debtors and creditors that arise from its operations, forexample, sales and purchases awaiting settlement and debtors for accruedincome. The principal risks the Company faces in its portfolio management activitiesare: • liquidity/marketability risk;• interest rate risk;• market price risk; and• foreign currency risk. The Company has little exposure to credit risk. The Manager monitors thefinancial risks affecting the Company on a daily basis and the Directorsregularly receive financial information, which is used to identify and monitorrisk. In accordance with FRS 29, an analysis of financial assets and liabilities,which identifies the risk to the Company of holding such items, is given below. Liquidity Risk Due to the nature of the Company's investment policy, the largest proportion ofthe portfolio is invested in unquoted securities, many of which are lessreadily marketable than, for example, "blue-chip" UK equities. The Directorsbelieve that the Company, as a closed-end fund with no fixed wind-up date, isideally suited to making long-term investments in instruments with limitedmarketability. The investments in unquoted securities are monitored by theBoard on a regular basis. There are limited opportunities for the Company to acquire secondary unquotedportfolios due to the cyclical nature of their occurrence. As a result, attimes of low investment opportunity, some funds may be invested in gilts andother fixed interest government bonds. It is the nature of investment inprivate equity that a commitment (see Note 20 for outstanding commitments as at30th June 2013) to invest will be made and that calls for payments will then bereceived from the unlisted investee entity. These payments are usually on anad-hoc basis and may be called at any instance over a number of years. TheCompany's ability to meet these commitments is dependent upon it receiving cashdistributions from its private equity investments and, to the extent these areinsufficient, on the availability of financing facilities. In order to coverany shortfalls, the Company has entered into a multi-currency revolving creditfacility with The Royal Bank of Scotland plc and Lloyds TSB Bank plc, due toexpire in June 2015, and comprising facilities of $82m and €57m of which at30th June 2013 the sterling equivalent of £nil (30th June 2012: £nil) was drawndown (see Note 6 for further information). The principal covenant that applies to the loan facility is that grossborrowings do not exceed 30% of adjusted gross asset value. Total available financing as at 30th June 2013 stood at £181.3m (2012:£149.5m), comprising £78.4m (2012: £51.1m) in cash balances and £102.9m(2012: £98.4m) (sterling equivalent) in undrawn bank facilities. The availablefinancing along with the private equity portfolio exceeded the outstandingcommitments by 5.2 times (2012: 5.0 times). Interest Rate Risk The Company may use gearing to achieve its investment objectives and managecash flows and uses a multi-currency revolving credit facility for thispurpose. Interest on the revolving credit facility is payable at variable ratesdetermined subject to drawdown. Variable rates are defined as LIBOR or EURIBOR+ 2.75%, dependent on the currency drawn. The interest rate is then fixed forthe duration that the loan is drawn down. At 30th June 2013 there was thesterling equivalent of £nil funds drawn down on the loan facilities(30th June 2012: £nil). A commitment fee of 1.10% per annum is payablein respect of the amounts available for drawdown in each facility. Non-interest rate exposure The remainder of the Company's portfolio and current assets are not subject tointerest rate risks. Financial assets for 2013 and 2012 consisted of investments, cash and debtors(excluding prepayments). As at 30th June 2013, the interest rate risk andmaturity profile of the Company's financial assets was as follows: FIXED INTEREST NO MATURES MATURES AVERAGE MATURITY WITHIN AFTER INTEREST TOTAL DATE 1 YEAR 1 YEAR RATE30TH JUNE 2013 £'000 £'000 £'000 £'000 % Fair value no interestrate risk financialassets Sterling 58,676 58,676 - - - US dollar 661,480 661,480 - - - Euro 172,464 172,464 - - - Other 12,525 12,525 - - - 905,145 905,145 - - - The interest rate risk and maturity profile of the Company's financial assetsas at 30th June 2012 was as follows: FIXED INTEREST NO MATURES MATURES AVERAGE MATURITY WITHIN AFTER INTEREST TOTAL DATE 1 YEAR 1 YEAR RATE30TH JUNE 2012 £'000 £'000 £'000 £'000 % Fair value no interestrate risk financialassets Sterling 50,595 50,595 - - - US dollar 602,149 602,149 - - - Euro 187,818 187,818 - - - Other 10,906 10,906 - - - 851,468 851,468 - - - Financial Liabilities At 30th June 2013, the Company had drawn the sterling equivalent of £nil (2012:£nil) of its committed revolving dollar and euro credit facilities, expiringJune 2015, of $82m and €57m respectively with The Royal Bank of Scotland plcand Lloyds TSB Bank plc. Interest is incurred at a variable rate as agreed atthe time of drawdown and is payable at the maturity date of each advance. Atthe year end, interest of £nil (2012: £nil) was accruing. A commitment fee of1.10% per annum is payable in respect of the amounts available for drawdown ineach facility. At 30th June 2013 and at 30th June 2012, all financial liabilities were duewithin one year and comprised short-term creditors. Market Price Risk The method of valuation of the fixed asset investments is described in Note 1(D) above. The nature of the Company's fixed asset investments, with a highproportion of the portfolio invested in unquoted securities, means that theinvestments are valued by the Directors after due consideration of the mostrecent available information from the underlying investments. PIP's portfolio is well diversified by the sectors in which the underlyingcompanies operate. This sectoral diversification helps to minimise the effectsof cyclical trends within particular industry segments. If the investment portfolio fell by 20% from the 30th June 2013 valuation, withall other variables held constant, there would have been a reduction of£166,937,000 (2012 based on a fall of 20%: £161,570,000) in the return beforetaxation. An increase of 20% would have increased the return before taxation by£163,632,000 (2012 based on a 20% increase: £158,371,000). Foreign Currency Risk Since it is the Company's policy to invest in a diverse portfolio ofinvestments based in a number of countries, the Company is exposed to the riskof movement in a number of foreign exchange rates. A geographical analysis ofthe portfolio and hence its exposure to currency risk is given above. Althoughit is permitted to do so, the Company did not hedge the portfolio against themovement in exchange rates during the financial year. The investment approach and the Manager's consideration of the associated riskare discussed in further detail in the Manager's Review above. The Companysettles its transactions from its bank accounts at an agreed rate of exchangeat the date on which the bargain was made. As at 30th June 2013, realisedexchange gains of £29,000 (2012: realised exchange losses of £78,000) andrealised gains relating to currency of £3,690,000 (2012: realised losses of£1,055,000) have been taken to the capital reserve. The Company's exposure to foreign currency excluding private equity investmentsis shown below. In relation to this exposure, if the sterling/dollar andsterling/euro exchange rates had reduced by 10% from that obtained at 30th June2013, it would have the effect, with all other variables held constant, ofincreasing equity shareholders' funds by £8,433,000 (2012: £5,029,000). Ifthere had been an increase in the sterling/dollar and sterling/euro exchangerates of 10%, it would have the effect of decreasing equity shareholders' fundsby £6,900,000 (2012: £4,114,000). The calculations are based on the financialassets and liabilities and the exchange rate as at 30th June 2013 of 1.51670(2012: 1.56845) sterling/dollar and 1.16880 (2012: 1.23595) sterling/euro. An analysis of the Company's exposure to foreign currency excluding privateequity investments is given below: 30TH JUNE 30TH JUNE 30TH JUNE 30TH JUNE 2013 2013 2012 2012 ASSETS LIABILITIES ASSETS LIABILITIES £'000 £'000 £'000 £'000 US dollar 73,664 - 41,476 - Euro 2,232 - 3,782 - Swedish krona 66 - - - Norwegian krona 1,310 - - - 77,272 - 45,258 - Fair Value of Financial Assets and Financial Liabilities The financial assets of the Company are held at fair value. Financialliabilities are held at amortised cost, which is not materially different fromfair value. Managing Capital The Company's equity comprises ordinary shares and redeemable shares asdescribed in Note 14. Capital is managed so as to maximise the return toshareholders while maintaining a capital base that allows the Company tooperate effectively in the marketplace and sustain future development of thebusiness. As at 30th June 2013, the Company had bank debt facilities to increase theCompany's liquidity. Details of available borrowings at the year end can befound earlier in this Note. The Company's assets and borrowing levels are reviewed regularly by the Boardof Directors with reference to the loan covenants. The Company's capital requirement is reviewed regularly by the Board ofDirectors. 22. Related Party Transactions Under the FCA Listing Rules, the Manager, Pantheon Ventures (UK) LLP, isregarded as a related party of the Company The amounts paid to the Manager are disclosed in Note 3. The Company is entitled to invest in funds managed by Pantheon. The Manager isnot entitled to management and commitment fees in respect of PIP's holdings in,and outstanding commitments to, these funds. ANNUAL GENERAL MEETING The Company's Annual General Meeting will be held on 25th November 2013 at 2.30pm at the offices of Pantheon Ventures (UK) LLP, Norfolk House, 31 St James'sSquare, London SW1Y 4JR. NATIONAL STORAGE MECHANISM A copy of the Annual Report and Financial Statements will be submitted shortlyto the National Storage Mechanism ("NSM") and will be available for inspectionat the NSM, which is situated at: www.morningstar.co.uk/uk/nsm ENDS Neither the contents of the Company's website nor the contents of any websiteaccessible from hyperlinks on this announcement (or any other website) isincorporated into, or forms part of, this announcement.