Annual Financial Report

PANTHEON INTERNATIONAL PARTICIPATIONS PLC (the "Company" or "PIP")ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30TH JUNE 2014 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 at 2.30pm BST today to discuss the 2014 AnnualReport and Accounts. The presentation can be viewed onwww.meetingzone.com/presenter?partCEC=9013832 with Access Pin 9013832. Pleaseuse the dial in details below and ensure that you give your name, company nameand the password PIP when dialling in for the webcast. 0808 109 0700 UK Toll Free+44 (0) 20 3003 2666 Standard International Access STRATEGIC REPORT YEAR AT A GLANCE Key Performance Indicators - +2% NAV per share increase (2013: +12%) - 16% Ordinary share price discount to NAV (2013: 22%) - 22% Redeemable share price discount to NAV (2013: 21%) - 1.34% Total ongoing charges excluding tax (2013: 1.40%) Other Indicators - +10% Ordinary share price increase (FTSE All Share TR: +13%, MSCI World TR: +11%) - +2% Redeemable share price increase (FTSE All Share TR: +13%, MSCI World TR: +11%) - £902m NAV (2013: £903m) - 1,364.2p NAV per share (2013: 1,331.9p) - £142m Net cash flow generated from PIP's portfolio (2013: £150m) - £148m New investment commitments (2013: £129m) - £18m Investments in share buybacks for the year, generating a 0.5% uplift to NAV per share (2013: £27m; 1.2% uplift) - 5.7x Ratio of assets and available financing to undrawn commitments (2013: 5.2x) SINCEPerformance at 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION30th June 2014 % % P.A. % P.A. % P.A. % P.A. NAV per share 2.4 7.3 12.0 9.1 11.2Ordinary share price 10.4 17.2 31.3 9.5 11.1FTSE All-Share Total Return 13.1 8.9 14.5 8.6 8.1MSCI World Total Return (sterling) 10.7 10.1 14.7 8.5 7.1 PIP was launched on 18th September 1987. The figures since inception assumereinvestment of dividends, capital repayments and cash flows from the exerciseof warrants. Capital Structure at 30th June 2014 Ordinary shares 33,522,013Redeemable shares 32,572,534Total 66,094,547 CHAIRMAN'S STATEMENT In the financial year, our NAV rose by 2.4%. The underlying investment gain ofmore than 13% was reduced by foreign exchange effects caused by the strength ofsterling relative to the US dollar and to a lesser extent the euro and othercurrencies. While adverse foreign exchange movements can be frustrating in theshort term, over the long term we believe currency volatility has minimaleffects on our investment returns. The share prices of the ordinary and redeemable shares increased by 10.4% and1.9% respectively and, in the case of the ordinary shares, the discount to NAVper share narrowed. The portfolio generated significant cash inflows through distributions which wehave redeployed in new investment opportunities including, from time to time,buying our own shares. We believe, given the positive outlook for realisations,and our ability flexibly to redeploy our capital in attractive investments, theoutlook for the Company continues to be favourable. Performance PIP's portfolio generated a return including income of 13.4% relative toopening assets before foreign exchange effects, which reduced NAV per share by10.1%. Share buybacks added 0.5% to the NAV per share and expenses includingtaxes amounted to 1.4%. The performance was particularly affected by thenegative movement of the US dollar against sterling, as 54% of the portfolio isinvested in funds focused on the USA, reflecting our belief in the greaterresilience and depth of opportunity in that market. While exchange rates willfrom time to time fluctuate and have had a more positive impact on performancesince the period end, over the long term we believe we can expect to derive thefull economic benefit from our portfolio's exposure to higher growth businesseswith a bias towards those operating in economies that have demonstrated greatercommitment to sound economic management. The net performance, therefore, masks strong underlying growth, in particularfrom our US portfolio in a period that saw US GDP grow, in real terms, by 1.9%,and the S&P 500 reach all-time highs. In Europe, while overall the economicoutlook was not as resilient, we continue to see good performance out of theregion. Despite a faltering GDP outlook, particularly in Europe, a sample representingapproximately 70% of PIP's buyout portfolio continued to demonstrate earningsgrowth in excess of broader equity markets. Underlying revenue and EBITDAgrowth in the sample was 10.9% and 8.4% respectively. This compares favourablyto the equivalent rates of the FTSE All-Share and MSCI World indices. Ourportfolio, with its principal focus on businesses operating in niches with goodgrowth prospects, can achieve investment performance through strategic andoperational changes that private equity managers selected by Pantheon implementthrough a well-aligned, capital efficient investment model. The prices of ordinary and redeemable shares increased by 10.4% and 1.9%respectively in the period. The ordinary share price benefited from asignificant reduction in the discount to NAV from 22% to 16%, while theredeemable share price discount finished the period at 22%. Share Buybacks In the year to 30th June 2014, the Company invested £18m to buy back and cancel1.0m ordinary shares, and 0.7m redeemable shares, resulting in an uplift to NAVper share of 7.2p or 0.5% of PIP's NAV per share. PIP began buying back sharesin August 2011 and so far has invested £76.2m in buying back 12.5% of theCompany's shares. The discounts at which the Company's shares trade from timeto time may make buybacks an attractive investment opportunity relative toother potential new investment commitments. Investment Activity PIP received distributions of £184m during the year, equivalent to an annualrate of 22% of opening portfolio assets. Calls from underlying private equityfunds were £42m. This resulted in a net portfolio cash flow prior to newinvestment commitments of £142m during the year. PIP's portfolio is mature,with a weighted average fund age of 7.8 years. Given this maturity, it isexpected that the portfolio will continue to generate positive net cash flows. Realisations can contribute to performance as exits often occur at an uplift totheir previous holding value. PIP's largest 100 distributions, representing 35%by value of total distributions, had realised an average uplift of 25%. New Investments While the environment for new investments has undoubtedly become morecompetitive this year, the Company has benefited from its flexible investmentstrategy and Pantheon's extensive network to seek out opportunities which offercompelling relative value. PIP made 29 new investments in the year, amountingto £148m in commitments with £92m drawn. This consists of six secondary andfour primary commitments totalling £106m of commitments to funds, and 19co-investments alongside selected private equity managers of £42m. Almost 54% of the secondary investments were in large buyout funds that wereformed predominantly within the 2004-2008 vintages. This reflects both theemphasis of Pantheon's secondary origination initiative and sellers' focus ontrimming their exposure to these fund vintages. The majority of PIP'sco-investments were in buyouts. Since the year end, the Company has committed a further £70m; £41m to threesecondaries, £6m to two co-investments, and £23m to three primary funds. Balance Sheet PIP's balance sheet remains ungeared. This gives the Company flexibility inredeploying capital as it receives distributions with an expectation of beingable to steadily renew its portfolio. Consequently, while the Company maintainscredit facilities as a matter of course to cover any unexpected cash needs,they again remained unutilised throughout the period. The Board expects torenew the credit facility before its expiry in June 2015. At 30th June 2014, the Company's cash stood at £88m, which together with creditfacilities, meant the Company had total liquid resources of £182m. Undrawncommitments of £176m at 30th June 2014 were covered by assets and loanfacilities by a factor of 5.7 times. Strategy The Board regularly reviews the Company's investment strategy and theappropriate balance between secondaries, co-investments and primary investmentsin order to achieve our objective of maximising capital growth whilecontrolling the level of asset concentration, maturity and financial risk.Emphasising secondary investment enables us to maintain a relatively matureportfolio. Consequently, the portfolio distribution rate can remain high fromyear to year, enabling the Company, through the re-investment of distributionproceeds, to renew the portfolio over a four to five year period as capital isre-invested at a controlled pace. We believe this steady renewal rate helps tocontrol cyclical risk on our way to generating long-term investmentperformance. PIP increased its allocation to co-investments this year. Co-investment isbecoming a more established part of the market and with Pantheon's dedicatedpool of professionals sourcing co-investment opportunities from amongst itsmanager relationships globally, we can take advantage of this opportunity.Therefore, as a proportion of PIP's investment activity, co-investments mayaccount for up to 30% of our new investments and if so, we will see PIP'sexposure to co-investments increase over the next 3-4 years if the marketopportunity remains attractive. The Company will make primary commitments on a targeted basis, where there isan opportunity to gain access to top tier funds addressing particular marketopportunities that might not otherwise be so accessible through the secondarymarket. Such commitments are made within the context of controlling the levelof undrawn commitments so they do not ordinarily represent more than a third ofPIP's assets. Subject both to this constraint and to the appropriateopportunities being available, we expect to make up to approximately £50m newprimary commitments per year. At this level, undrawn commitments can beexpected to be comfortably financed from internally-generated cashflow.However, we will also maintain borrowing facilities sufficient to finance anyshortfall in net cash flow during unusually low periods of market liquidity. Outlook Although the pace of economic recovery across the regions and markets in whichthe Company operates is mixed, the general outlook for continued economicrecovery in some major markets is helpful in underpinning the rates ofunderlying corporate earnings growth in our portfolio. Risks of a reversal inmarket sentiment, however, remain. As recovery takes hold and quantitativeeasing slows, some factors such as labour costs and interest rates, which havebeen subdued for some time, may begin putting a brake on the pace of corporateprofit growth. Additionally, while the recent events in Ukraine and the MiddleEast have to date had little impact on public markets, these remain a potentialthreat to stability. Within the private equity market, easy availability ofcredit and buoyant equity markets have created a positive environment forrealisations but can also lead to an increase in leverage risk. Secondary pricing has tightened as public markets have risen and conditions forexits have remained benign, giving buyers greater confidence in valuations.However, this has also had the effect of increasing the number of secondarymarket sellers, with 2014 transaction volumes on track to exceed those of 2013,which in itself was a record year. Pantheon has been able to take advantage ofthese conditions to source high quality assets; we expect the pricingconditions, along with the upcoming regulatory-driven deadlines for banks andinsurance companies, to result in a full pipeline of deals in the second halfof 2014, although we will continue to exercise pricing discipline. The Company's strong cash generation is helpful in providing investors withcontinuing evidence of the Company's performance potential so we can activelyredeploy capital in new investments, including share buybacks. The portfolio'stendencies to produce better than public market underlying revenue and earningsgrowth rates and to experience uplifts to holding values on exits, coupled withearly performance from new investments enhanced by share buybacks, are thefactors that support the outlook for continued NAV growth. Indeed, since theyear end, we have seen further NAV per share growth of 5.8%. This was partlydriven by investment gains including income, and a reversal of foreign exchangeeffects, which gave rise to a 4.0% and 2.0% uplift per share respectively. We are optimistic that there is potential for further narrowing of the shareprice discount, while the historically low average discounts elsewhere in theinvestment trust sector indicate that the listed private equity sector stilloffers good value. Board Changes In my statement last year, I noted that the Board is aware that it has a numberof long-serving Directors and is committed to ensuring that the pace ofretirement and addition of new Directors in the coming years preserves ahealthy balance between longer serving and newer members. Further to this,Peter Readman, who joined the Board in 1994, has decided to step down after 20years as a Director and will be retiring at the Annual General Meeting. I wouldlike to take this opportunity to thank Peter for his dedication and wisecounsel, most recently as our Senior Independent Director, over these manyyears. We are conducting a search for a new Director to join the Board inPeter's place and will announce the new appointment when a suitable candidatehas been identified. The Strategic Report has been approved and signed on the Board's behalf. Tom BartlamChairman1st October 2014 OBJECTIVE AND INVESTMENT POLICY Investment Objective The Company's primary investment objective is to maximise capital growth byinvesting in a diversified portfolio of private equity funds and directly inprivate companies. Investment Policy The Company's policy is to make unquoted investments, in general by subscribingfor investments in new private equity funds ("Primary Investment") and bybuying secondary interests in existing private equity funds ("SecondaryInvestment"), and from time to time to capitalise further on its fundinvestment activities by acquiring direct holdings in unquoted companies("Co-investments"), usually either where a vendor is seeking to sell a combinedportfolio of fund interests and direct holdings or where there is a privateequity manager, well known to the Company's Manager, investing on substantiallythe 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. INVESTMENT RATIONALE The Board believes that there is a convincing rationale for investing inprivate equity funds or direct co-investments managed by private equity managers,selected for their ability to outperform their peers, within a globally diversifiedportfolio. Private equity is the term used for investments made in non-public companiesthrough privately negotiated transactions. More than 5,200 private equitymanagers globally collectively manage approximately $3 trillion in assets (1).The asset class covers a broad range of strategies, which all share a commontheme - capital structure optimisation combined with long-term investmenthorizons and hands-on management support. For investors looking for attractive risk-adjusted returns relative to otherasset classes, private equity has strong credentials. A broad range ofinstitutions, including pension funds, sovereign wealth funds and endowments,as well as high net worth individuals, invest in private equity as it can offera meaningful boost to the performance of their investment portfolios. (1) Source: Credit Suisse Private Equity Market Overview, December 2013. The Private Equity Investment Approach Private equity investors acquire influential or controlling shareholdings inbusinesses where there is an opportunity to work closely with a company'smanagement to implement both strategic and operational change that cantransform a company's value. Typically specialising in market sectors in whichthey already have extensive investment experience, private equity managers arewell placed to identify attractive investment opportunities based onproprietary research. By ensuring that a company's management are investing at the same time, betteralignment between management and shareholders can be achieved through jointownership. Private equity managers aim to produce absolute returns thatoutperform public benchmarks through a clear value creation plan and carefulalignment of management team interests, while at the same time using leverageto create an efficient capital structure. The high level of outperformance achieved by top quartile managers in theprivate equity market, evident through multiple cycles, provides theopportunity for a specialist manager such as Pantheon to identify and selectmanagers capable of outperforming public market benchmarks within a diversifiedportfolio that mitigates the risk of being over-exposed to any single fund,region or investment style. The Board believes that investing the Company's capital in private equity fundsflexibly between the primary and secondary markets or directly co-investing incompanies alongside private equity managers, in each case selected by Pantheon,provides a good opportunity to generate attractive long-term investment performance. OUR BUSINESS MODEL 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 carefullyselected primary and secondary investments over the past 27 years. Only fundsthat have passed through rigorous research and analysis can be selected forinvestment. Secondary Commitments 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. PIP benefits from secondaries because the fees andexpenses in the first few years have been paid and distributions from the fundwill be returned over a shorter time period. This helps to reduce the drag toperformance from young and immature funds, known as the "J-curve effect". Inaddition, secondary assets can sometimes be purchased at a discount, especiallyin cases where the seller has a need for liquidity, increasing the opportunityfor outperformance. 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 alongside Pantheon's latest global secondary fund,Pantheon Global Secondary Fund V, benefiting from access to larger secondaryopportunities that it would not have had the capacity to complete alone. Thesecondary programme enables PIP to acquire attractively priced secondaryinterests as they become available, and aims to outperform market averagesthrough judicious selection, pricing and timing. Co-investments The Company will also participate in co-investments alongside establishedprivate equity managers. The extent 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 an investment is made. In addition, as there are lower or no management fees charged on co-investmentsby the underlying private equity manager, co-investing can represent acost-efficient way of investing, whilst providing PIP with exposure to currentvintages. It is the Board's current intention that co-investments will not, onaverage, account for more than 30% 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 PIP's financial flexibility. New primaryinvestments have longer payback periods, requiring the Company to maintainhigher levels of standby financing against undrawn commitments. For thesereasons, the Board de-emphasises primary commitments. However, the Company willconsider making primary commitments on a targeted basis for portfolioconstruction purposes. The investment rationale for any new primary commitmentswill always be weighed against their effects on the Company's financialflexibility so as to keep the undrawn commitments to a level that cancomfortably be expected to be financed from 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. Social, Environmental, Community, Human Rights and Employment Issues The Company has no employees and the Board consists entirely of non-executiveDirectors. At the end of the year under review, the Board was comprised of fivemale Directors and one female Director. As an investment trust, the Company has no direct impact on the community orthe environment. The Manager is committed to the Principles for ResponsibleInvestment and its policies are set out in the full Annual Report and Accounts.These Principles are integrated into Pantheon's investment analysis anddecision-making process, as well as post-investment monitoring procedures. Retail Investors Advised by IFAs The Company currently conducts its affairs so that its shares can berecommended by independent financial advisers to retail private investors inaccordance with the Financial Conduct Authority's ("FCA") rules in relation tonon-mainstream investment products. The shares are excluded from the FCA's restrictions which apply tonon-mainstream investment products because they are shares in a UK-listedinvestment trust. PRINCIPAL RISKS AND UNCERTAINTIES 1. Funding of investment commitments and default risk Risk: In the normal course of its business, the Company typically hasoutstanding commitments to private equity funds which are substantial relativeto the Company's assets and may be drawn down at any time. The Company'sability to meet these commitments is dependent upon it receiving cashdistributions (the timing and amount of which can be unpredictable) from itsprivate equity investments and, to the extent these are insufficient, on theavailability of financing facilities. Mitigation: The Company has a mature portfolio which is naturally cashgenerative and does not ordinarily gear its balance sheet for the purpose ofenhancing performance. The Board intends to manage the Company so that undrawncommitments remain at a conservative level relative to its assets and availablefinancing. The total available financing as at 30th June 2014 stood at £182m,comprising £88m in cash balances and £94m in undrawn bank facilities. As aresult, the available financing along with the private equity portfolioexceeded the outstanding commitments by a factor of 5.7 times. The Companyexpects ordinarily to finance the majority of calls from undrawn commitmentsout of distributions. In the event that the levels of cash distributions andcash balances are insufficient to cover capital calls, the Company has theability to draw funds from a credit facility (see Gearing section below fordetails on credit facility). 2. Risks relating to investment opportunities Risk: There is no guarantee that the Company will find sufficient suitableinvestment opportunities, or that the private equity funds in which it investswill find suitable investment opportunities, to achieve the level ofdiversification which the Company seeks to achieve in relation to itsinvestment portfolio. Mitigation: The Manager has in place a dedicated investment management processthat is designed to help maximise the chances of the Board's intendedinvestment strategy being achieved, in line with the Investment Policy sectionabove. The Board periodically reviews investment and financial reports from theManager to monitor the effectiveness of the Manager's investment managementprocess. 3. Financial risk of private equity Risk: The Company invests in private equity funds and unquoted companies whichare less readily marketable than quoted securities. In addition, suchinvestments may carry a higher degree of risk than investments in quotedsecurities. Mitigation: The Manager's investment management process is designed to producethe best possible risk-adjusted returns from private equity investments. Wherethe Company commits to private equity funds, such funds are structured aslimited life funds where the manager is incentivised to realise investments andreturn proceeds to investors within the funds' limited life span. As part ofthe investment process for secondaries and co-investments, an assessment ismade to understand the possible impact of the underlying assets' illiquidity onprojected exit outcomes. As part of the investment process for primaries, anassessment is made to understand a manager's approach to underlying companyilliquidity. 4. Long-term nature of private equity investments Risk: Private equity investments are long-term in nature and may take someyears before reaching a level of maturity at which they can be realised.Accordingly, it is possible that the Company may not receive a return oninvestments made by it for a number of years Mitigation: The Company pursues a flexible investment strategy, emphasisingsecondary investments which will typically have shorter average exit horizonsthan co-investment and primary commitments. A flexible investment strategytherefore results in a range of likely exit horizons for underlyinginvestments, mitigating this risk. 5. Valuation uncertainty Risk: In valuing its investments in private equity funds and unquoted companiesand in publishing its NAV, the Company relies to a significant extent on theaccuracy of financial and other information provided by these funds andcompanies to the Manager. There is potential for inconsistency in the valuationmethods adopted by the managers of 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. Mitigation: In the case of the Company's investment in private equity funds anddirect investments managed by private equity managers, the valuation ofinvestments is based on valuations provided by the private equity managers thatare periodically audited. Pantheon carries out a formal valuation processinvolving a monthly review of these valuations, verification of the latestaudited reports coverage, as well as a review of any potential adjustmentsrequired to ensure reasonable valuation of underlying investments in accordancewith fair market value principles required under GAAP. 6. Gearing Risk: The use of gearing can cause both gains and losses in the asset value ofthe Company to be magnified. The Company may also invest in private equityfunds or unquoted companies which are geared by loan facilities that rank aheadof the Company'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, increasing itsinvestment risk. Mitigation: While debt is commonly used within the capital structure of privateequity funds' portfolio investments, it is not commonly used at the fund levelother than for working capital purposes. Thus, leverage risk is typicallynon-recourse between portfolio companies operating independently within thesame portfolio. For working capital purposes, the Company maintains a revolving credit facilityarranged by The Royal Bank of Scotland plc, due to expire in June 2015, andcomprising facilities of $82m and €57m. The principal covenant that applies tothe loan facility ensures that the Company is limited to a maximum gearing of30% of adjusted gross asset value. The facility was unutilised as at 30th June2014. 7. Foreign currency risk Risk: The Company makes investments in US dollars, euros and other currenciesas well as sterling. Accordingly, the Company is exposed to currency exchangerate fluctuations. Mitigation: The Manager monitors the Company's underlying foreign exchangeexposure and seeks to balance the risks associated with holding differentcurrencies through diversification and cost averaging effects. Furthermore, aspart of the investment management process, the Manager will assess therisk-return of a specific investment, taking into consideration the currencydenomination of the investment and the potential impact of currency risk.However, foreign currency risk tends to be mitigated over longer investmenthorizons. 8. Unregulated nature of underlying investments Risk: The private equity funds and underlying unquoted investments that formthe basis of the majority of the Company's portfolio are not necessarilysubject to regulation by the FCA or an equivalent regulatory body. Funds and unquoted companies in which the Company invests (directly orindirectly) may be domiciled in jurisdictions which do not have a regulatoryregime which provides an equivalent level of investor protection to thatprovided under the laws of the United Kingdom. Mitigation: The Manager's investment management process for primary andsecondary investments requires verification of the regulatory jurisdiction ofunderlying funds. In addition, the managers of the underlying funds are mostlyregulated by the FCA, SEC, or an equivalent body in the managers' respectivejurisdictions. 9. Taxation Risk: Any change in the Company's tax status or in taxation legislation orpractice could affect the value of the investments held by and the performanceof the Company. In addition, the income and gains of the Company from itsinvestments may suffer withholding tax which may not be reclaimable in thecountries where such income and gains arise. Mitigation: The Manager's investment management process incorporates anassessment of the tax impact of each primary or secondary fund investment, orco-investment that is purchased. For every investment, the Manager also reviewsthe appropriateness of an investment's legal structure and any action required,including the establishment of special purpose and/or blocker vehicles, totailor an investment's structure to minimise the potential tax impact on theCompany. 10. The Manager and other third party advisers Risk: Like most investment trust companies, the Company has no employees andthe Directors are all non-executive. The Company is dependent upon the servicesof Pantheon as Manager and may be adversely affected if the services ofPantheon cease to be available to the Company. Mitigation: The Board keeps the performance of the Manager under continualreview. In addition, the Management Agreement is subject to a notice periodthat is designed to provide the Board with adequate time to put in placealternative arrangements in the event the services of Pantheon cease to beavailable. MANAGER'S REVIEW 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 30 years. At a Glance • $30.5bn(1) assets under management, on behalf of over 400 institutionalinvestors • A leader in private equity fund-of-funds management with over 30 years'experience • International team comprising around 200 staff, including 75 investmentprofessionals(2) • At the forefront of the fast-growing secondary market, having committed morethan $8bn to secondary investments globally, across more than 320 transactions (1) As at 31st March 2014. The figure includes assets subject to discretionaryor non-discretionary management, advice, or those limited to a reportingfunction. (2) All staff figures as at 1st July 2014. Strong Private Equity Track Record Pantheon is one of the leading private equity fund investors in the world, withglobal assets under management of $30.5bn, 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 1,400 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 270 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 Kong,Bogotá and 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 75 investment professionals, supported by over 120 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 30 years' experience of successful secondaryinvesting. This size and experience means Pantheon can focus on large andcomplex transactions in which many other lesser resourced investors cannotparticipate. Pantheon has committed more than $8bn in the secondary market globally acrossmore than 320 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. MARKET REVIEW The economic recovery has continued over the last year with many developedeconomies experiencing GDP growth, albeit at a low rate. Despite a slowdown inthe first quarter of 2014 due to the severe winter, the US recovery seems to beon track. In Europe, recovery limps on and the risks to growth remain high.With public markets seeming fully valued, particularly in the US, and given theeasy availability of credit, we believe investors must exercise vigilance inselecting assets and be prepared for any setbacks to recovery. Although the public market rallies experienced in the second half of 2013 loststeam in the US and Europe during the first half of 2014, they have remainedrelatively stable. US markets in particular have pushed on to a record high,while volatility, as measured by the VIX, remains low. Credit is easilyavailable and debt pricing has continued to fall. These conditions have provedsupportive for exits by private equity managers both in the US and Europe. Elsewhere, despite growth rates remaining lower, emerging markets continue togrow at a faster rate than developed economies. While markets in the regionhave been volatile, there is an increased possibility that GDP growth in Chinamay stabilise and rise in 2015 as the government introduces measures to supportthe economy. Market confidence has also begun to return to India, anticipatingpositive economic developments following the recent change of government. USA The US recovery is now well underway, despite a slowdown in the first quarterof 2014 related to the unusually severe winter. US GDP grew 1.9% in 2013 and isforecasted to grow 1.7% and 2.3%, respectively, in 2014 and 2015(1). Housingstarts are on an upward trend, household debt has fallen, and property priceshave recovered. The USA continues to benefit from increasingly competitivelabour costs (relative to China) and inexpensive energy created by an abundantsupply of natural gas, both of which have contributed to a re-shoring ofmanufacturing. Private equity firms invested $89bn of capital during the first half of 2014, a16% decrease over the first half of 2013(2). A slowdown in the number of largedeals completed contributed to this decline, as readily available andinexpensive debt financing have increased median purchase price multiples topre-crisis levels. In contrast, deal activity by number increased by 8% duringthe first half of 2014(3), driven by growth and add-on transactions that aremore conservatively valued and often have limited or no competition. Theindustrial and information technology sectors were the most active during thefirst half of 2014, representing 30% and 15% of deals completed, respectively(4). We expect healthy deal activity in the second half of 2014 due tosignificant dry powder remaining in the market and investors' desire to putcapital to work. Exit activity has remained strong in 2014, despite the record $586bndistributed to investors by private equity managers in 2013(5). During thefirst half of 2014, private equity investors exited 435 companies valued at$127bn(6), a 57% increase over 2013. IPOs continue to be an attractive exitroute, comprising 7% of all exits in 2014 to date(7). Private equity firmsraised $15.6bn in 36 IPOs during the first half of 2014, a 44% year-over-yearincrease(8). Secondary buyouts and trade sales remain the most popular exitroutes as both sponsors and strategics are seeking to acquire high qualitycompanies. Venture capital ("VC") investment continued to increase during the first halfof 2014, while financing activity slightly declined. VC funds invested $28.9bnin US start-ups, driven by large rounds for later stage companies, includingUber ($1.2bn), Airbnb ($519.7m), Lyft ($250m) and Pinterest ($200m)(9). Highvaluations resulted in fewer seed stage financings, which also contributed tothe 22% year-on-year volume decline. Exit activity remained steady, withinvestors selling $25.1bn of investments through 369 liquidity events(10), andis expected to end 2014 on a high note with the completion of Facebook's $19bnacquisition of WhatsApp. IPOs remain a popular exit route for investors, with68 VC-backed IPOs completed in the first half of 2014(11). Strong LPdistributions in 2012 and 2013 fuelled a rebound in the VC fundraising marketin 2014. Through the first half of the year, 105 US VC funds have been raisedtotalling $17.4bn in capital commitments, compared to the $18.2bn raised in allof 2013(12). US fundraising remains strong with continued investor demand for privateequity, in part due to robust distributions. In 2013, private equity fundsraised $167bn, a post-crisis record, driven by 11 funds that closed on morethan $5bn of commitments(13). Fundraising momentum continued in the first halfof 2014, with private equity firms raising more than $87bn(14). High-qualitymanagers continue to benefit from scarcity value, resulting in quick fundraisesoften with a single close. Despite a strong first half, 2014 fundraising willlikely not exceed that of 2013 as there are fewer large funds in the market andLPs have shifted their focus to small and middle market funds. (1) Source: Capital Economics, Global Economic Outlook Q314(2) Source: Preqin(3) Source: Preqin(4) Source: Preqin(5) Source: Preqin PE Performance Monitor(6) Source: Preqin(7) Source: Preqin(8) Source: Renaissance Capital 2Q14 Review(9) Source: PitchBook 3Q14 US Venture Industry Report(10) Source: PitchBook 3Q14 US Venture Industry Report(11) Source: Renaissance Capital 2Q14 Review(12) Source: PitchBook 3Q14 US Venture Industry Report(13) Source: Preqin(14) Source: Preqin Europe The picture in Europe remains mixed with overall GDP growth sluggish. Estimatesof Q2 2014 GDP growth suggest this was flat in the Eurozone and +0.2% acrossthe EU(15). Consumer recovery remains slow, particularly in Southern Europe.Evidence of an improvement in either industry or exports is light, with aparticular divergence between France and Germany(16). Unemployment is lower butwas still 11.5% in the Eurozone in June 2014(17), however, encouragingly, Spainand Portugal did see falls in unemployment and generally youth unemployment iscreeping lower. There has been no significant pick-up in exports but prospectsare brighter given the weakening of the euro and potential for growth amongstthe principal export markets such as China and the US. The ECB's decision inSeptember 2014 to cut interest rates and signal future purchases ofasset-backed securities is supportive. Despite this relatively weak backdrop,as seen in our own portfolio, with careful selection of high quality assets,Europe can be an attractive investment prospect. Investment activity has slowed slightly as valuations have increased butpurchase price multiples for companies with enterprise values below $250m wheremany of our managers are active, have not experienced the same increases(18).Private equity managers are favouring smaller add-on acquisitions to platformbuyouts. Just as in the US, credit is easily available on attractive terms. The exit environment has been strong during the first half of 2014. While tradesales and secondary buyouts have remained viable exit routes, there was asignificant jump in IPO activity in the period, particularly in the UK, withnumerous portfolio companies successfully listing on the London Stock Exchange.2014 is on track to record one of the most active periods for larger exitssince the pre-crisis boom, with a number of €1bn+ transactions closing in thefirst half of the year. Rising equity markets and an increasing rate of distributions have encouragedinvestors to replenish their commitments to European private equity. Newcapital has been concentrated towards an ever-smaller group of high-qualityfunds, with investors continuing to favour the most experienced private equitymanagers with proven performance track records. (15) Source: Eurostat(16) Source: Capital Economics(17) Source: Eurostat(18) Source: S&P Capital IQ, M&A Stats June 2014 Asia Emerging markets appear to have avoided a hard landing, with GDP growth inChina expected to stabilise this year at around 7.4%(19). Debt remains high butwe are seeing steps from the Chinese government to control this. Investorconfidence in India has improved with better exit conditions but uncertaintyremains around regulatory issues. The first half of 2014 saw a significant increase in the value of dealscompleted(20). Many Asian company owners are finding traditional sources ofcapital restricted and they are becoming more familiar with private equity as aconstructive source of capital. These improving perceptions are giving rise toa greater supply of investment opportunities, where private equity managers aretaking significantly influential shareholdings, enabling their activeinvolvement throughout the ownership period. Investor confidence and optimism for the second half of 2014 remains high. Asiais an attractive diversification option for investors, and private equitymanagers continue to unlock opportunities from the large stock of privatecompanies. Improving market conditions should provide the encouragementrequired for investment transactions throughout the remainder of 2014. Equally,robust credit markets have made capital more accessible and potentiallyfacilitate increased deal-making going forward. (19) Source: IMF, World Economic Outlook Update, 24th July 2014(20) Source: Preqin Secondaries Secondary market activity reached a historical high, with $16bn of deal volumein the first half of 2014 versus $12bn in the same period last year(21).Sellers came from a broad spectrum, with banks, public pension funds and assetmanagers among the most active participants in the market. Regulatory change,capital adequacy testing and portfolio management typically dominate sellers'motivations; this year, they were also enhanced by higher secondary marketpricing levels. The overall market saw $36.5bn of secondary deals transacted during the pastyear, significantly higher than the prior period due to a very busy second halfof 2013(22). Matching the broader increase in activity, Pantheon saw anincrease in deal flow, reviewing over $50bn of transactions acrossapproximately 280 sellers during the year to 30th June 2014. During the year, secondary market pricing continued to recover towardspre-crisis ranges, with many funds trading at par, or even at premium pricing,to most recent net asset values(23). This has been partly caused by risingpublic market valuations, but also by the expectation of further increases inpublic market valuations and continued strong realisation activity. In such afully priced environment, Pantheon's approach remains highly selective,investing in opportunities only when convinced that there is a clear case forvalue at entry. This approach attempts to identify fundamentally soundbusinesses managed by high quality general partners, with robust prospects formedium-term capital gain. Despite the potential for a delay in the implementation of the Volker rulecompliance deadline beyond June 2015, banks that continue to hold privateequity assets are expected to engage in more selling activity by the end of theyear. In addition, if pricing levels persist at current levels, sellers arelikely to continue to opportunistically access the secondary market. Given thelikely deal flow in the second half of the year, there is a real prospect ofsecondary deal volume reaching record volumes of over $30bn in 2014. (21) Source: Cogent Partners, Secondary Market Trends and Outlook, July 2014(22) Source: Cogent Partners, Secondary Market Trends and Outlook, January 2014 & July 2014(23) Source: Cogent Partners, Secondary Market Trends and Outlook, July 2014 PORTFOLIO OVERVIEW - 13.4% Underlying (pre FX) return relative to opening assets - £142m Net cash flow generated from portfolio - 25% Average realisation uplift on largest distributions - £184m Distributions - 22% Distributions as percentage of opening portfolio - £42m Calls made from existing undrawn commitments - £148m Total new investment commitments made in the year - £42m New commitments made to 19 co-investments - 7.8 years Weighted average fund age of portfolio 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 stages,including 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 2014(1) (1) Fund geography, stage, maturity and primary/secondary charts are based uponunderlying fund valuations and account for 100% of PIP's overall portfoliovalue. Company sector and company geography charts are based upon underlyingcompany valuations at 31st December 2013 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. Portfolio assets based in Asia and other regions provide access tofaster-growing economies. USA 54%Europe 31%Asia and other 15% Fund Stage PIP's portfolio is well diversified across different private equity investmentstyles and stages. The majority of the portfolio is made up of buyout funds. Larger buyout exposure increased through new investments during the period,leading to a corresponding reduction in smaller buyouts. Exposure to co-investments increased to 7% (from 3%) during the year, due tonew investments. Large/Mega Buyout 28%Small/Mid Buyout 28%Venture and Growth 28%Co-investments 7%Special Situations 6%Generalist 3% Pantheon Vehicles At 30th June 2014, 7% of PIP's portfolio value and 6% 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. Fund Maturity The portfolio is well diversified by fund vintage. PIP's secondary activity isexpected to lead to continued exposure to the high fundraising years of2006-2008. In addition, new co-investments are increasing PIP's exposure to more recentvintages, with the 2009 and later segment of the portfolio increasing to 11%(from 3%) during the year. 2009-2014 11%2008 13%2007 24%2006 21%2005 12%2004 5%2003 2%2002 1%2001 and earlier 11% Primary/Secondary 56% of the portfolio is derived from primary commitments. However, PIP's secondary emphasis has increased the secondary exposure of theportfolio to 44%, up from 40% at the end of the last financial year. Primary 56%Secondary 44% Company Sectors PIP's sectoral exposure diversifies the effects of cyclical trends withinparticular industry segments. Relative to the FTSE All-Share and MSCI World indices, PIP has a high exposureto information technology, and low exposure to the banking, mining andutilities sectors. Consumer 28%Information Technology 24%Healthcare 15%Industrials 14%Financials 7%Energy 6%Materials 4%Telecommunication Services 2% Company Geography Half of the portfolio is with companies based in North America, which benefitfrom greater market scope and depth. 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. 15% of PIP's portfolio is based in Asia and other regions, providing access tofaster growing economies such as China and India. North America 51%Asia and other 15%UK 11%Scandinavia 5%Germany 4%Central and Eastern Europe 4%Benelux 3%Italy 2%France 2%Iberia 2%Other Europe 1% PORTFOLIO ANALYSIS Portfolio Performance by Stage for the Year to 30th June 2014(1) • The portfolio generated investment returns equivalent to 13.4% on openingportfolio assets during the year. • Returns were healthy across all stages, particularly in PIP's co-investment,large buyout, and venture and growth portfolios, which benefited from a numberof significant realisations and good earnings growth at an underlying companylevel. (1) Portfolio stage returns include income, exclude gains and losses fromforeign exchange movements, and look through feeders and funds-of-funds to theunderlying funds. Debt Multiples(2) Venture and growth and buyout investments have differing leveragecharacteristics. • The venture and growth portfolio accounts for 28% of portfolio value and haslittle or no reliance on leverage. • In a market associated with high leverage transactions, debt multiples onPIP's underlying companies have remained within reasonable levels. PORTFOLIO ANALYSIS - BUYOUT Valuation Multiple(2) • Accounting standards require private equity managers to value their portfolioat fair value. Public market movements can be reflected in valuations. • Sample-weighted average enterprise value/EBITDA for the year to 31st December2013 was 9.4 times, compared to 8.3 times and 10.1 times for the FTSE All-Shareand MSCI World indices. Revenue and EBITDA Growth(2) • Weighted average revenue growth for the sample buyout companies was +10.9% inthe 12 months to 31st December 2013, compared to +3.6% and -0.4% for the FTSEAll-Share and MSCI World indices. • Weighted average EBITDA growth for the sample buyout companies was +8.4% inthe 12 months to 31st December 2013, compared to +3.1% and +2.6% for the FTSEAll-Share and MSCI World indices. • Strong top-line performance and cost control is a principal objective ofprivate equity managers. (2) The data is based on a sample of PIP's buyout funds. Buyout SampleMethodology: The sample buyout figures for the 12 months to 31st December 2013were calculated from the companies, where information was available. Thefigures are based on unaudited data. The revenue and EBITDA figures were basedupon the last 12 months to 31st December 2013 or, where not available, theclosest annual period disclosed, and provide coverage of 69% and 67% (forrevenue and EBITDA respectively) of PIP's buyout portfolio. Individual companyrevenue and EBITDA growth figures were capped between +100% and -100% to avoidlarge distortions from excessive outliers. Sample data for 2009-2012 is basedon the same methodology and provides coverage of 50-75% of the portfolio ineach year. Enterprise value is defined as carrying value + net debt. The netdebt and enterprise value figures were based upon 31st December 2013 underlyingvaluations, or the closest period end disclosed. The valuation multiple samplecovers approximately 76% of PIP's buyout portfolio. The debt multiple samplecovers 75% of PIP's buyout portfolio and 68% of PIP's co-investment portfolio.Data sourced from Bloomberg. PORTFOLIO ANALYSIS - VENTURE AND GROWTH Venture and Growth Portfolio Analysis • Prior to foreign exchange effects, PIP's venture and growth funds generated areturn of 16.4% in 2014, up from 5.6% in the prior year. • Although vintage 2002 and earlier returns are more modest, we continue to seedistributions from these vintages. • 2003 and later funds performed strongly, with returns exceeding 15%. Thesefunds constitute 75% of the venture and growth portfolio. • The venture and growth portfolio generated significant cash flow during theyear, particularly the older vintage funds. • 2003 to 2006 funds constitute 43% of the venture and growth portfolio and inour view, can continue to produce a substantial level of distributions. DISTRIBUTIONS IN THE YEAR TO 30TH JUNE 2014 PIP received more than 1,800(1) distributions in the year, with many atsignificant uplifts to carrying value. Given the current robust exitenvironment, the Company's mature portfolio should continue to generatesignificant distributions in the coming quarters. (1) This figure looks through feeders and funds-of-funds. Distributions by Region and Stage PIP received £184m in proceeds from the portfolio in the 12 months to 30th June2014, implying an annualised distribution rate equivalent to 22% of openingprivate equity assets. The US accounted for the majority of PIP's distributions, where marketconditions enabled a good level of exits. Despite economic headwinds, European distributions were also strong. Distributions by Region = £184mUSA 57%Europe 32%Asia and other 11% Distributions by Stage = £184mLarge/Mega Buyout 35%Small/Mid Buyout 30%Venture and Growth 19%Special Situations 8%Co-investments 7%Generalist 1% Distribution Rates in the Year to 30th June 2014 by Vintage(2) Mature vintages continue to distribute at higher rates, with 2008 and earlierfunds distributing at a rate in excess of 20%. With a weighted fund maturity of7.8 years, PIP's mature portfolio should continue to generate significantlevels of cash, particularly if we see sustained improvements in the financialmarkets. (2) Distribution rate equals distributions in period divided by openingportfolio value. Cost Multiples on a Sample of the Largest Distributions in the Financial Yearto 30th June 2014(1) On a sample of the largest 100 distributions, the value-weighted average costmultiple on initial cost was 2.8 times. This highlights the continued abilityof private equity managers to create significant value over the course of aninvestment. (1) The available data in the sample represented approximately 40% by value ofPIP's total distributions for the financial year to 30th June 2014. 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 2014(2) On a sample of the largest 100 distributions, the value-weighted average uplifton liquidity event was 25%. This average uplift is consistent with PIP's viewthat realisations 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 35% by value of PIP'stotal distributions for the financial year to 30th June 2014. INVESTMENTS CALLED IN THE YEAR TO 30TH JUNE 2014 Investments called during the year ranged across regions and sectors, includingconsumer, specialty pharmaceuticals, energy companies and software-as-a-serviceproviders. Calls by Region and Stage PIP paid £42m to finance calls on undrawn commitments during the year to 30thJune 2014, equivalent to 22% of opening undrawn commitments. Calls by Region = £42mUSA 56%Europe 32%Asia and other 12% Calls by Stage = £42mLarge/Mega Buyout 30%Small/Mid Buyout 20%Venture and Growth 19%Special Situations 17%Co-investments 14% New Commitments PIP committed £148m to new investments during the financial year, concentratedon buyout funds in the US and European markets. £92m was drawn at the time ofpurchase, with an emphasis on secondary interests in 2005-2008 vintage funds.As a result of Pantheon's targeted origination, PIP continued to benefit fromgood deal flow, with 72% of secondary deals in processes that were eitherproprietary or involved restricted competition(1). (1) A proprietary deal is where Pantheon was in exclusive discussions with theseller. A restricted process deal is where there were three bidders or less forthe asset. New Commitments by Region 70% of new commitments were made to private equity funds focused on the USmarket, which continues to offer the greatest opportunity for investment. USA 70%Europe 19%Asia and other 11% New Commitments by Stage A significant majority of new investments were made in the large buyout andmid-market buyout space, targeting funds whose portfolio companies have highbarriers to entry, strong cash generation and multiple potential exit routes. PIP's co-investments in 2014 were in the buyout and growth stages. In line withPIP's strategy, co-investments as a percentage of new commitments in the periodhas increased to 28% in 2014. Large/Mega Buyout 39%Co-investments 28%Small/Mid Buyout 18%Special Situations 11%Venture and Growth 4% New Commitments by Deal Type In line with our investment strategy, six secondary transactions account forthe majority of new commitments. PIP also committed to 19 co-investments, and four primaries. Co-investments and primaries offer exposure to more recent vintages and assetswhich may be less accessible in the secondary market. Secondaries 64%Co-investments 28%Primaries 8% NEW COMMITMENTSSECONDARY AND PRIMARY (FUNDS) PIP committed £95.1m to six secondary transactions, with 54% of secondarycommitments in large buyout fund interests. PIP also acquired assets in partsof the market where competition has been less intense, with investmentsfocusing on niche strategies such as energy. PIP's commitment to primaries in the year included three large buyout funds,and a venture capital firm, adding current vintage exposure with high qualitymanagers New Secondary and Primary Commitments (1) Secondary Commitments in the Year to 30th June 2014 INVESTMENT STAGE DESCRIPTION COMMITMENTS £M % Funded Nov-13 Buyout Portfolio of seven 15.8 92% primarily European fund interests with global exposureDec-13 Buyout Portfolio of three brand 10.4 88% name US fund interests with global exposureDec-13 Buyout Diversified portfolio of 38.2 51%(2) primarily US buyout fund interestsDec-13 Buyout Portfolio of two large US 9.4 38%(2) buyout interestsMar-14 Buyout Portfolio of two Spanish 8.4 57% lower mid-market fund interestsJun-14 Special Portfolio of two US-based 12.9 72% Situations upstream energy-focused fundsTOTAL 95.1 Primary Commitments in the Year to 30th June 2014 INVESTMENT STAGE DESCRIPTION COMMITMENTS £MNordic Capital VIII Buyout Large buyout manager 2.0 operating primarily in the Scandinavia regionBain Capital Fund Buyout US large buyout manager 2.9XI with global exposureClayton, Dubilier & Buyout Large buyout manager 2.4Rice Fund IX operating in the US and Western EuropeVenture Fund Venture & Growth Top tier international 4.0 venture capital fund focused on IT SectorTOTAL 11.3 (1) Funds acquired in new secondary transactions are not named due tonon-disclosure agreements(2) Funded amount excludes the deferred portion of the purchase price. NEW COMMITMENTSCO-INVESTMENTS (DIRECTS) PIP committed £42m to 19 co-investments alongside top tier managers, mainly inlarge and mid-sized buyout companies. Consumer, industrials and energyconstituted the largest areas of focus, with four investments completed in eachsector. Co-investments The USA and Europe accounted for the majority of new co-investments, in linewith the PIP's preferred geographic focus. Co-investment activity in 2014 has focused primarily on a few key sectors. PIPhas participated in a number of attractive opportunities in the energy sector,alongside a number of managers that have been backed by Pantheon for theirsector expertise. BY SECTOR Energy 27%Consumer 22%Healthcare 18%Industrials 17%Information Technology 10%Others 6% BY GEOGRAPHY USA 46%Europe 34%Asia and other 20% OUTSTANDING COMMITMENTS PIP's outstanding commitments to fund investments are well-diversified by stageand geography and will enable the Company to participate in future investmentswith many of the highest quality fund managers in the private equity industryworldwide. Analysis of Outstanding Commitments as at 30th June 2014 PIP's outstanding commitments to investments decreased to £176m at 30th June2014 compared with £195m at 30th June 2013. The Company paid calls of £42m andadded an additional £56m of outstanding commitments associated with newinvestments made in the year. The remaining reduction of £33m was due toforeign exchange movements and cancellations of outstanding commitmentsin the portfolio's underlying funds. 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 56%Europe 28%Asia and other 16% Stage PIP's undrawn commitments are well-diversified across all major stages ofprivate equity. Large/Mega Buyout 35%Small/Mid Buyout 26%Venture and Growth 18%Special Situations 10%Co-investments 7%Generalist 4% Maturity Over 50% of PIP's undrawn commitments are in the 2007 vintage or older. Mostrelate to funds that are outside their investment periods and, as such, shouldhave slower call rates. It is likely that a portion of these commitments willnot be drawn. 2005 and earlier 25%2006 16%2007 18%2008 17%2009 1%2010 1%2011 0%2012 7%(1)2013 6%2014 9% (1) We seek to ensure consistency of classification across fund managers. As aresult, a small portion of PIP's portfolio has been reclassified into the 2012vintage. FINANCE AND SHARE BUYBACKS Cash and Available Bank Facility At 30th June 2014, PIP had cash balances of £88m. 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 2014, amount to a sterlingequivalent of £94m. At 30th June 2014, the Loan Facility remained fullyundrawn. Undrawn Commitment Cover At 30th June 2014, the Company had £182m of available financing, comprised ofits cash balances and Loan Facility. The sum of PIP's available financing andprivate equity portfolio provide 5.7 times cover relative to undrawncommitments. It should be noted that a portion of the Company's undrawn commitments of £176mare 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 59% of the Company's undrawn commitments are in fund vintagesthat are greater than six years old. Share Buybacks PIP bought back 2.5% of its shares in the financial year(1). In total, 1.0mordinary shares and 0.7m redeemable shares were bought back at a weighteddiscount of 20% and 23% respectively, resulting in a total uplift to NAV pershare of 7.2p, or 0.5% of opening NAV per share. The discounts at which theCompany's shares trade from time to time may make buybacks an attractiveinvestment opportunity relative to other potential new investment commitments. Since the financial year end, the Company has bought back a further 0.1mordinary shares and 0.1m redeemable shares at a discount of 16% and 23%respectively. (1) 2.5% is calculated using the number of shares bought back in the financialyear divided by the number of shares outstanding at 30th June 2013. LARGEST 50 MANAGERS BY VALUE AS AT 30TH JUNE 2014(1) % OF PIP'S TOTAL PRIVATE EQUITYNUMBER MANAGER REGION(2) STAGE BIAS ASSET VALUE 1 TPG Global Buyout 4.5%2 Vision Capital Europe Buyout 2.3%3 Carlyle Group Global Buyout 2.2%4 Apax Partners Europe Buyout 2.2%5 Blackstone Capital Partners USA Buyout 2.0%6 Providence Equity Partners USA Buyout 1.9%7 CVC Capital Partners Global Buyout 1.9%8 Brentwood Associates USA Buyout 1.8%9 Quantum Energy Partners USA Energy 1.5%10 EQT Global Buyout 1.4%11 Golden Gate Capital USA Buyout 1.4%12 Baring Vostok Capital Partners Russia Buyout 1.4%13 Equistone Europe Buyout 1.4%14 Matlin Patterson USA Special Situations 1.2%15 Apollo Management USA Buyout 1.2%16 KRG Capital Partners USA Buyout 1.2%17 Doughty Hanson & Co Europe Buyout 1.2%18 Hutton Collins Europe Special Situations 1.1%19 Cinven Partners Europe Buyout 1.1%20 Warburg Pincus Partners Global Buyout 1.1%21 Baring Private Equity Asia Venture and Growth 1.1%22 Oak Investment Partners USA Venture and Growth 1.1%23 Bain Capital USA Buyout 1.0%24 ABS Capital Partners USA Venture and Growth 0.9%25 Permira Europe Buyout 0.9%26 Canaan Partners USA Venture and Growth 0.9%27 IK Investment Partners Europe Buyout 0.9%28 Apollo Advisors USA Buyout 0.9%29 Summit Partners Global Venture and Growth 0.9%30 Index Ventures Europe Venture and Growth 0.9%31 Catalyst Investors USA Venture and Growth 0.8%32 Hony Capital Asia Buyout 0.8%33 Nordic Capital Europe Venture and Growth 0.8%34 Polaris Venture Partners USA Venture and Growth 0.8%35 Avista Capital Partners USA Buyout 0.8%36 Nova Capital Management Europe Buyout 0.8%37 Yorktown Partners USA Energy 0.8%38 Mid-Europa Partners Europe Buyout 0.8%39 Altor Capital Europe Buyout 0.8%40 Riverstone Holdings USA Special Situations 0.8%41 Bencis Capital Partners Europe Buyout 0.8%42 Advent International Group Global Buyout 0.8%43 HgCapital Europe Buyout 0.8%44 Genstar Capital Partners USA Buyout 0.7%45 Thomas H. Lee Partners USA Buyout 0.7%46 Rutland Partners Europe Buyout 0.7%47 Essex Venture Partners USA Venture and Growth 0.7%48 Technology Crossover Ventures USA Venture and Growth 0.7%49 New Enterprise Associates USA Venture and Growth 0.7%50 Mercapital Europe Buyout 0.7% COVERAGE OF PIP'S TOTAL PRIVATE EQUITY ASSET VALUE 58.8% (1) Percentages look through feeders and funds-of-funds.(2) Refers to the regional exposure of the funds in which PIP is invested. LARGEST 50 COMPANIES BY VALUE(1) % OF PIP'S TOTAL PRIVATE EQUITYNUMBER COMPANY COUNTRY SECTOR ASSET VALUE1 Attendo Sweden Healthcare 1.0%2 JDR Cable Systems USA Energy 0.7%3 Spotify Limited Sweden Information Technology 0.7%4 Applied Medical Resources USA Healthcare 0.6%5 CSPC Pharmaceutical China Healthcare 0.6%6 Nord Anglia Education Hong Kong Consumer 0.6%7 InterXion Netherlands Information Technology 0.5%8 LBX Pharmacy Chain China Consumer 0.5%9 Bibby Scientific UK Information Technology 0.5%10 Oriental Brewery (2) South Korea Consumer 0.5%11 SoftBrands USA Information Technology 0.4%12 Hilton Worldwide USA Consumer 0.4%13 Alarm.com USA Industrials 0.4%14 MINDBODY USA Information 0.4%15 ConvaTec Healthcare (2) USA Healthcare 0.4%16 CPL Industries UK Energy 0.4%17 McGraw-Hill(2) USA Consumer 0.4%18 CPI Card Group USA Industrials 0.4%19 EP Energy USA Energy 0.4%20 AutoTrader(2) USA Information Technology 0.4%21 Antero Resources USA Energy 0.4%22 King.com UK Information Technology 0.3%23 Byron Hamburgers UK Consumer 0.3%24 Wrist Group(2) Denmark Industrials 0.3%25 Vitruvian Exploration USA Energy 0.3%26 Zoë's Kitchen USA Consumer 0.3%27 Standard Bancshares USA Financials 0.3%28 Fairway Group USA Consumer 0.3%29 Golden Boy Foods(2) Canada Consumer 0.3%30 Standard Pacific USA Consumer 0.3%31 GGC Credit Opps USA Financials 0.3%32 TMF Group Netherlands Industrials 0.3%33 Hugo Boss(2) Italy Consumer 0.3%34 Property Portfolio UK Financials 0.3%35 BrightHouse UK Consumer 0.3%36 Syniverse Technologies USA Information Technology 0.3%37 Jimmy John's USA Consumer 0.3%38 United Surgical Partners Spain Healthcare 0.3%39 The Teaching Company USA Consumer 0.3%40 Evonik Industries(2) Germany Materials 0.3%41 Yandex(2) Russia Information Technology 0.3%42 ista International Germany Industrials 0.3%43 CommScope USA Information Technology 0.3%44 Spire Healthcare UK Healthcare 0.3%45 Avio Italy Industrials 0.3%46 Healthscope USA Healthcare 0.3%47 LIN TV USA Consumer 0.3%48 ATI Holdings USA Healthcare 0.3%49 K-Mac Enterprises USA Consumer 0.3%50 Caffè Nero(2) UK Consumer 0.3%TOTAL 19.3% (1) The largest 50 companies table is based upon underlying company valuationsat 31st December 2013, adjusted for known calls, distributions, new investmentcommitments and post-valuation information.(2) Liquidation event subsequent to 31st December 2013. THE DIRECTORSThe Directors in office at the date of this report are: Tom Bartlam* (Chairman)Ian Barby* (Audit Committee Chairman)Sir Laurie Magnus*Susannah Nicklin*Peter Readman* (Senior Independent Director)Rhoddy Swire * Independent of the Manager EXTRACTS FROM THE DIRECTORS REPORT Share CapitalAs at 30th June 2014, the Company had 33,522,013 ordinary shares of £0.67 eachand 32,572,534 redeemable shares of £0.01 each in issue. No shares were held intreasury at the year end. During the year, 985,000 ordinary shares (with an aggregate nominal value of£659,950 and representing 2.9% of the ordinary share capital in issue on 30thJune 2013) were purchased in the market for cancellation for a totalconsideration of £10.5m. During the year, 740,000 redeemable shares (with an aggregate nominal value of£7,400 and representing 2.2% of the redeemable share capital in issue on 30thJune 2013) were also purchased in the market for cancellation for a totalconsideration of £7.7m. Since the year end, 100,000 ordinary shares (with an aggregate nominal value of£67,000 and representing 0.30% of the ordinary share capital in issue on 30thJune 2014) have been purchased in the market for cancellation for a totalconsideration of £1.1m. In addition, since the year end, 100,000 redeemable shares (with an aggregatenominal value of £1,000 and representing 0.31% of the redeemable share capitalin issue on 30th June 2014) have been purchased in the market for cancellationfor a total consideration of £1.1m. As at the date of this report, the Company has 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 and NUMBER OF VOTING RIGHTS NUMBER OF % OF TOTALvoting rights at 1st SHARES IN ATTACHED TO SHARES VOTING RIGHTSOctober 2014 ISSUE EACH SHARE HELD IN REPRESENTED BY TREASURY EACH CLASS ORDINARY SHARES AT£0.67 EACH 33,422,013 1 - 100 REDEEMABLE SHARES AT£0.01 EACH 32,472,534 - - - TOTAL VOTING RIGHTS 33,422,013 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 Strategic Report 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' RESPONSIBILITIESIn Respect of Financial Statements 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 the Strategic Report,Directors' 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 Conduct Authority.They also have responsibility for safeguarding the assets of the Company and hencefor taking reasonable steps for the prevention and detection of fraud andother 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 confirm that, to the best of their knowledge: • the financial statements have been prepared in accordance with UK accountingstandards, give a true and fair view of the assets, liabilities, financialposition and return of the Company; • the Strategic Report includes a fair review of the development andperformance of the business and the position of the Company, together with adescription of the principal risks and uncertainties that it faces; and • the Annual Report and financial statements, taken as a whole, is consideredby the Board to be fair, balanced and understandable and provides the necessaryinformation for shareholders to assess the Company's performance, businessmodel and strategy. On behalf of the BoardTOM BARTLAMChairman1st October 2014 NON-STATUTORY ACCOUNTSThe financial information set out below does not constitute the Company'sstatutory accounts for the years ended 30th June 2014 and 2013 but is derivedfrom those accounts. Statutory accounts for 2013 have been delivered to theRegistrar of Companies, and those for 2014 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 STATEMENT YEAR ENDED 30th JUNE 2014 2014 2013 REVENUE CAPITAL TOTAL* REVENUE CAPITAL TOTAL* NOTE £'000 £'000 £'000 £'000 £'000 £'000 Gains on investmentsdesignated at fairvalue through profitor loss** 9b - 25,659 25,659 - 82,202 82,202Currency (losses)/gains on cash andborrowings 18 - (10,530) (10,530) - 3,720 3,720Investment income 2 13,681 - 13,681 12,410 - 12,410Investment management fees 3 (8,749) - (8,749) (8,839) - (8,839)Other expenses 4 (995) (189) (1,184) (1,134) - (1,134) RETURN ON ORDINARYACTIVITIES BEFOREFINANCING COSTS ANDTAX 3,937 14,940 18,877 2,437 85,922 88,359Interest payable andsimilar charges/finance costs 6 (1,419) - (1,419) (1,453) - (1,453) RETURN ON ORDINARYACTIVITIESBEFORE TAX 2,518 14,940 17,458 984 85,922 86,906Tax on ordinaryactivities 7 (945) - (945) (2,401) - (2,401) RETURN ON ORDINARYACTIVITIES AFTER TAXFOR THE PERIOD 1,573 14,940 16,513 (1,417) 85,922 84,505 RETURN PER ORDINARY ANDREDEEMABLE SHARE 8 2.35p 22.30p 24.65p (2.04)p 123.99p 121.95p * The total column of the statement represents the Company's profit and lossstatement prepared in accordance with UK Accounting Standards. Thesupplementary revenue and capital columns are prepared under guidance publishedby the Association of Investment Companies.** Includes currency gains on investments. 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 forthe yearended30th June2014 OPENINGEQUITYSHAREHOLDERS'FUNDS 23,454 283,555 2,091 314,138 296,763 41,304 (58,021) 903,284 Return forthe year - - - 23,014 (8,074) - 1,573 16,513 Ordinaryshares boughtback forcancellation (660) - 660 - - (10,456) - (10,456) Redeemableshares boughtback forcancellation (7) - 7 - - (7,650) - (7,650) CLOSINGEQUITYSHAREHOLDERS'FUNDS 22,787 283,555 2,758 337,152 288,689 23,198 (56,448) 901,691 Movement forthe yearended30th June2013 OPENINGEQUITYSHAREHOLDERS'FUNDS 24,549 283,555 996 265,724 259,255 67,939 (56,604) 845,414 Return forthe year - - - 48,414 37,508 - (1,417) 84,505 Ordinaryshares boughtback forcancellation (1,081) - 1,081 - - (14,764) - (14,764) Redeemableshares boughtback forcancellation (14) - 14 - - (11,871) - (11,871) CLOSING 23,454 283,555 2,091 314,138 296,763 41,304 (58,021) 903,284EQUITYSHAREHOLDERS'FUNDS The Notes form part of these financial statements. BALANCE SHEETas at 30th JUNE 2014 2014 2013 Note £'000 £'000 Fixed assetsInvestments designated at fair value throughprofit or loss 9a/b 814,959 826,423 Current assetsDebtors 11 576 1,051Cash at bank 17 88,346 78,387 88,922 79,438 Creditors: Amounts falling due within oneyear Other creditors 12 2,190 2,577 2,190 2,577 NET CURRENT ASSETS 86,732 76,861 NET ASSETS 901,691 903,284 Capital and reservesCalled-up share capital 13 22,787 23,454Share premium 14 283,555 283,555Capital redemption reserve 14 2,758 2,091Other capital reserve 14 337,152 314,138Capital reserve on investments held 14 288,689 296,763Special reserve 14 23,198 41,304Revenue reserve 14 (56,448) (58,021) TOTAL EQUITY SHAREHOLDERS' FUNDS 901,691 903,284 NET ASSET VALUE PER SHARE - ORDINARY ANDREDEEMABLE 15 1,364.24p 1,331.89p The Notes form part of these financial statements. The financial statements were approved by the Board of Pantheon InternationalParticipations PLC on 1st October 2014 and were signed on its behalf by TOM BartlamChairman Company No. 2147984 CASH FLOW STATEMENTYEAR ENDED 30TH JUNE 2014 2014 2013 NOTE £'000 £'000 Cash flow from operating activitiesInvestment income received 13,637 12,357Deposit and other interest received 44 53Investment management fees paid (8,772) (9,574)Performance fee paid - (5,057)Secretarial fees paid (201) (211)Other cash payments (977) (1,077)Withholding tax deducted (945) (2,401) NET CASH INFLOW/(OUTFLOW) FROMOPERATING ACTIVITIES 18 2,786 (5,910) Servicing of financeLoan commitment and arrangement feespaid (1,110) (1,138) NET CASH OUTFLOW FROM RETURNS ONINVESTMENT AND SERVICING OF FINANCE (1,110) (1,138) Capital expenditure and financial investmentPurchases of investments (134,472) (128,198)Disposals of investments 171,724 183,995 NET CASH INFLOW FROM CAPITAL EXPENDITUREAND FINANCIAL INVESTMENT 37,252 55,797 NET CASH INFLOW BEFORE FINANCING 38,928 48,749 FinancingOrdinary shares purchased forcancellation (11,896) (13,324) Redeemable shares purchased forcancellation (6,577) (11,871) NET CASH OUTFLOW FROM FINANCING (18,473) (25,195) INCREASE IN CASH 16 20,455 23,554 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 2014 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 2014, the notional performance feehurdle is a net asset value per share of 2,032.93p. 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 2014 30TH JUNE 2013 £'000 £'000 Income from investments Investment income 13,637 12,357 13,637 12,357 Other income Interest 47 55 Exchange difference on income (3) (2) 44 53 TOTAL INCOME 13,681 12,410 Total income comprises Dividends 13,637 12,357 Bank interest 47 55 Exchange difference on income (3) (2) 13,681 12,410 Analysis of income frominvestments Unlisted 13,637 12,357 13,637 12,357 3. Investment Management Fees 30TH JUNE 2014 30TH JUNE 2013 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL £'000 £'000 £'000 £'000 £'000 £'000 Investment managementfees 8,749 - 8,749 8,839 - 8,839 8,749 - 8,749 8,839 - 8,839 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 £9,312,000 (2013: £9,454,000),being £8,749,000 (2013: £8,839,000) directly from Pantheon Ventures (UK) LLPand £563,000 (2013: £615,000) via Pantheon managed fund investments werepurchased by the Company. At 30th June 2014, £746,000 (2013: £769,000) was owed for investment managementfees. No performance fee is payable in respect of the 12 calendar month periodto 30th June 2014 (2013: nil). 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 2014 30TH JUNE 2013 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL £'000 £'000 £'000 £'000 £'000 £'000 Secretarial and accountancyservices 208 - 208 202 - 202 Fees payable to theCompany's Auditor for theaudit of the annualfinancial statements 35 - 35 33 - 33 Fees payable to theCompany's Auditor for - audit-related assuranceservices - half-yearlyreport 7 - 7 6 - 6 - other assurance services- net asset valuecalculations 11 - 11 11 - 11 Directors' remuneration(see Note 5) 219 - 219 235 - 235 Irrecoverable VAT 16 - 16 29 - 29 Legal and professional fees 137 189 326 366 - 366 Printing 44 - 44 27 - 27 Other 318 - 318 225 - 225 995 189 1,184 1,134 - 1,134 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 Directors' fees and reclaimed travel expenses. Abreakdown is provided in the Directors' Remuneration Report in the full AnnualReport and Accounts. 6. Interest Payable and Similar Charges 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Loan commitment and arrangement fees 1,419 1,453 1,419 1,453 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 £2m withThe Royal Bank of Scotland plc. At 30th June 2014, the sterling equivalentamount of £nil (2013: £nil) was drawn down under the facilities. 7. Tax on Ordinary Activities 30TH JUNE 2014 30TH JUNE 2013 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL £'000 £'000 £'000 £'000 £'000 £'000 Withholding tax deductedfrom distributions 945 - 945 2,401 - 2,401 Current tax The current tax for the year differs from the standard rate of corporation taxin the UK (21%). The differences are explained below: Net return on ordinaryactivities before tax 2,518 14,940 17,458 984 85,922 86,906 Theoretical tax at UKcorporation tax rate of22.50% (2013: 23.75%)* 567 3,361 3,928 234 20,406 20,640 Non-taxable investment,derivative and currencygains - (3,404) (3,404) - (20,406) (20,406) Effect of expenses inexcess of taxable income - 43 43 - - - Utilised managementexpenses (567) - (567) (234) - (234) Withholding tax deductedfrom distributions (945) - (945) (2,401) - (2,401) (945) - (945) (2,401) - (2,401) * The corporation tax rate applied is based on the average tax rates for thefinancial years ended 30th June 2014 and 30th June 2013. 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 2014, excess management expenses are estimated to be in excess of£118m (2013: £121m). 8. Return per Share 30TH JUNE 2014 30TH JUNE 2013 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL Return onordinaryactivities aftertax for thefinancial yearin £'000 1,573 14,940 16,513 (1,417) 85,922 84,505 Weighted averageordinary andredeemableshares 66,994,396 69,296,879 Return perordinary andredeemable share 2.35p 22.30p 24.65p (2.04)p 123.99p 121.95p 9a. Movements on Investments 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Book cost brought forward 530,784 541,721 Acquisitions at cost 134,472 128,160 Capital distributions - proceeds (171,597) (183,792) Capital distributions - realised gains onsales 33,733 44,695 BOOK COST AT 30TH JUNE 527,392 530,784 Unrealised appreciation/(depreciation) ofinvestments Unlisted investments 287,575 295,509 Listed investments (8) 130 VALUATION OF INVESTMENTS AT 30TH JUNE 814,959 826,423 9b. Analysis of Investments 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Sterling Unlisted investments 55,736 57,226 Listed investments - - 55,736 57,226 US dollar Unlisted investments 592,258 587,617 Listed investments 113 199 592,371 587,816 Euro Unlisted investments 156,626 170,232 Listed investments - - 156,626 170,232 Other Unlisted investments 10,226 11,149 Listed investments - - 10,226 11,149 814,959 826,423 Realised profits on sales 33,733 44,695 Amounts previously recognised as unrealised 130 89appreciation on those sales (Decrease)/increase in unrealised (8,202) 37,418appreciation GAINS ON INVESTMENTS 25,661 82,202 Further analysis of the investment portfolio is provided in the Manager'sReview above. Transaction costs incidental to the acquisition of investments totalled £nil(2013: £nil) and to the disposals of investments totalled £6,000 (2013:£15,000) for the year. 10. Fair Value Hierarchy Financial Assets at Fair Value Through Profit or Loss at 30th June 2014 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL £'000 £'000 £'000 £'000 Unlisted holdings - - 814,846 814,846 Listed holdings 113 - - 113 113 - 814,846 814,959 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 Level 3 Financial Assets at Fair Value Through Profit or Loss at 30th June 2014 PRIVATE EQUITY INVESTMENTS £'000 Opening balance 826,224 Purchases at cost 134,472 Transfer of book cost to level 1* (3,008) Sales proceeds (167,565) Total gains or losses included in "Gains on investments" in the IncomeStatement - on assets sold 32,657 - on assets held as at 30th June 2014 (7,934) CLOSING BALANCE 814,846 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 * The transfer of book cost to level 1 is due to stock distributions receivedfrom private equity investments. 11. Debtors 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Amounts owed by investment funds 136 299 Prepayments and accrued income 440 752 576 1,051 12. Creditors: Amounts Falling Due Within One Year 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Investment management fees 746 769 Amounts owed to brokers 1,073 1,440 Other creditors and accruals 371 368 2,190 2,577 13. Called-up Share Capital 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Allotted, called-up and fully paid: 33,522,013 (2013: 34,507,013) ordinary sharesof 67p each 22,461 23,121 32,572,534 (2013: 33,312,534) redeemable sharesof 1p each 326 333 22,787 23,454 During the year, 740,000 redeemable shares and 985,000 ordinary shares werebought back in the market for cancellation. The total consideration paid,including commission and stamp duty, was £7,650,000 and £10,456,000respectively. 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. 14. 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 2,091 314,138 296,763 41,304 (58,021) Net gain onrealisation ofinvestments - - 33,733 - - - Decrease inunrealisedappreciation - - - (8,202) - - Transfer on disposalof investments - - - 130 - - Exchange differenceson currency - - 10,496) - - - Exchange differenceson other capitalitems - - (34) (2) - - Legal andprofessional costscharged to capital - - (189) - - - Share cancellations - 667 - - - - Share buybacks - - - - (18,106) - Revenue return for - - - - - 1,573the year END OF YEAR 283,555 2,758 337,152 288,689 23,198 (56,448) * Reserves that are distributable by way of dividends. 15. Net Asset Value per Share 30TH JUNE 2014 30TH JUNE 2013 Net assets attributable in £'000 901,691 903,284Ordinary and redeemable shares 66,094,547 67,819,547Net asset value per share - ordinary and 1,364.24p 1,331.89predeemable 16. Reconciliation of Net Cash Flow to the Movement in Net Funds 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Increase in cash in the year 20,455 23,554 Non-cash movement- foreign exchange (losses)/gains (10,496) 3,690 CHANGE IN NET FUNDS 9,959 27,244Net cash at beginning of year 78,387 51,143 NET FUNDS AT END OF YEAR 88,346 78,387 17. Analysis of Net Funds 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Cash at bank 88,346 78,387 88,346 78,387 18. Reconciliation of Return on Ordinary Activities Before Financing Costs andTax to Net Cash Flow from Operating Activities 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Return on ordinary activities beforefinancing costs and tax 18,877 88,359Withholding tax deducted (945) (2,401)Gains on investments (25,659) (82,202)Currency losses/(gains) on cash andborrowings 10,530 (3,720)Decrease in creditors (16) (5,921)Increase in other debtors (1) (25) 2,786 (5,910) 19. Contingencies, Guarantees and Financial Commitments At 30th June 2014, there were financial commitments outstanding of £175.7m2013: £195.1m) in respect of investments in partly paid shares and interestsin private equity funds. 20. 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 times when opportunities for the Company to acquire secondaryunquoted portfolios of interests or co-investments may be limited due to thecyclical nature of their occurrence. As a result, at times of low investmentopportunity, some funds may be held on deposit or invested in gilts and otherfixed interest government bonds. It is the nature of investment in privateequity that a commitment (see Note 19 for outstanding commitments as at 30thJune 2014) 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 2014, the sterling equivalent of £nil (30th June 2013: £nil) wasdrawn down (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 2014 stood at £181.9m (2013: £181.3m),comprising £88.3m (2013: £78.4m) in cash balances and £93.6m (2013: £102.9m)(sterling equivalent) in undrawn bank facilities. The available financing alongwith the private equity portfolio exceeded the outstanding commitments by 5.7 times(2013: 5.2 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 2014, there was thesterling equivalent of £nil funds drawn down on the loan facilities (30th June2013: £nil). A commitment fee of 1.10% per annum is payable in respect of theamounts 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 2014 and 2013 consisted of investments, cash and debtors(excluding prepayments). As at 30th June 2014, 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 2014 £'000 £'000 £'000 £'000 % Fair value no interestrate risk financialassets Sterling 57,055 57,055 - - -US dollar 660,642 660,642 - - -Euro 175,230 175,230 - - -Other 10,529 10,529 - - - 903,456 903,456 - - - The interest rate risk and maturity profile of the Company's financial assetsas at 30th June 2013 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 financialassetsSterling 58,676 58,676 - - -US dollar 661,480 661,480 - - -Euro 172,464 172,464 - - -Other 12,525 12,525 - - - 905,145 905,145 - - - Financial Liabilities At 30th June 2014, the Company had drawn the sterling equivalent of £nil (2013:£nil) of its four-year committed revolving dollar and euro credit facilities,expiring June 2015, of $82m and €57m respectively with The Royal Bank ofScotland plc and Lloyds TSB Bank plc. Interest is incurred at a variable rateas agreed at the time of drawdown and is payable at the maturity date of eachadvance. At the year end, interest of £nil (2013: £nil) was accruing. At 30th June 2014 and at 30th June 2013, 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 Note1(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 2014 valuation, withall other variables held constant, there would have been a reduction of£164,622,000 (2013 based on a fall of 20%: £166,937,000) in the return beforetaxation. An increase of 20% would have increased the return before taxation by£161,362,000 (2013 based on a 20% increase: £163,632,000). 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 2014, realisedexchange losses of £34,000 (2013: realised exchange gains of £29,000) andrealised losses relating to currency of £10,496,000 (2013: realised gains of£3,690,000) 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 rate had reduced by 10% from that obtained at 30th June2014, it would have the effect, with all other variables held constant, ofincreasing equity shareholders' funds by £9,653,000 (2013: £8,433,000). Ifthere had been an increase in the sterling/dollar and sterling/euro exchangerate of 10%, it would have the effect of decreasing equity shareholders' fundsby £7,898,000 (2013: £6,900,000). The calculations are based on the financialassets and liabilities and the exchange rate as at 30th June 2014 of 1.70985(2013: 1.51670) sterling/dollar and 1.24885 (2013: 1.16880) sterling/euro. An analysis of the Company's exposure to foreign currency is given below: 30TH JUNE 30TH JUNE 30TH JUNE 30TH JUNE 2014 2014 2013 2013 ASSETS LIABILITIES ASSETS LIABILITIES £'000 £'000 £'000 £'000 US dollar 68,271 - 73,664 -Euro 18,604 - 2,232 -Swedish krona 59 - 66 -Norwegian krone 5 - 1,310 -Australian dollar 239 - - -Japanese yen 27 - - - 87,205 - 77,272 - 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 13. 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 2014, 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 2014 at10.30 am at The British Academy, 10-11 Carlton House Terrace, London SW1Y 5AH. 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.