Annual Financial Report

PANTHEON INTERNATIONAL PARTICIPATIONS PLC FINAL RESULTS FOR THE YEAR ENDED 30 JUNE 2009 The full Annual Report and Accounts can be accessed via the Company's website at www.pipplc.com or by contacting the Company Secretary on telephone 01392 412122. FINANCIAL SUMMARY HIGHLIGHTS 30TH JUNE 2009 30TH JUNE 2008 CHANGE Summary of results NAV per share 773.6p 1,108.7p (30.2%) Total assets less current and Â£513.6m Â£736.1m (30.2%) non-current liabilities Ordinary shares Share price 295.3p 750.0p (60.6%) Discount to NAV 61.8% 32.4% Redeemable shares Share price 350.0p 819.5p (57.3%) Discount to NAV 54.8% 26.1% Investment activity Invested in private equity Â£157.2m Â£272.5m assets Received from private equity Â£86.1m Â£133.0m assets 1 YEAR 3 YEARS 5 YEARS 10 YEARS PERFORMANCE % % P.A. % P.A. % P.A. NAV per share (30.2) (1.0) 6.2 7.0 Ordinary share price (60.6) (25.9) (8.6) 1.1 FTSE All-Share (20.5) (6.5) 3.1 0.1 MSCI World (sterling) (14.2) (3.9) 2.5 (0.8) PIP was launched on 18th September 1987. Â£1,000 invested at inception, assuming reinvestment of dividends and capital repayments, would have been worth Â£4,250 at 30th June 2009. CAPITAL STRUCTURE Ordinary shares 37,521,013 Redeemable shares 28,871,255 Total 66,392,268 CHAIRMAN'S STATEMENT It is disappointing to report a decrease in net asset value ("NAV") per share of 30% to 773.6p in the twelve months to 30th June 2009. The significant deterioration in stock markets and economic conditions led to widespread reductions in valuations across the portfolio. In the final quarter PIP, in order to strengthen its financial position, completed a number of asset disposals which also contributed to the decrease in NAV per share. It is even more disappointing that, over the twelve months to 30th June 2009, the ordinary share price fell by 61%, reflecting both the fall in NAV per share and the increase in the discount from 32% to 62%. Discounts widened across the listed private equity sector as a whole, reflecting market anxiety over the future direction of valuations and the funding of undrawn commitments. While the Company's capital structure had been built to withstand a downturn, with some Â£300 million in the form of loan facilities and standby financing, the extent of the economic crisis and the expected prolonged low level of distributions meant that it was necessary for the Company to take action to improve its financial position through the sale of certain fund interests. As a result, the Board believes the Company is now in a position to finance all its outstanding commitments for the foreseeable future. Net assets decreased by Â£222m to Â£514m during the twelve months to 30th June 2009. Reported reductions in valuations by general partners and listed securities amounted to Â£220m. An additional Â£80m was due to realised losses on disposals of assets, and Â£10m was a provision relating to expected losses on unclosed sales with signed agreements. These portfolio losses were partially offset by Â£106m of net foreign exchange gains from the depreciation of sterling against both the US dollar and euro, currencies in which most of the Company's assets are denominated. Interest and expenses accounted for the remainder of the decrease. INVESTMENT ACTIVITY The scarcity of debt financing allied with increased investor uncertainty resulted in a significant reduction in activity levels within the private equity industry. During the year, the rate at which undrawn commitments were called fell markedly from December onwards. The distribution rate also slowed down dramatically throughout the year with the exception of the quarter ended 31st December 2008, when PIP received a number of notable distributions highlighting the value of a well diversified portfolio. In the twelve months to 30th June 2009, PIP invested Â£157m in underlying private equity assets. Of this amount, Â£114m was paid to meet investment calls arising from PIP's primary commitments and Â£43m to pay for calls from the secondary portfolio. The total amount of cash distributed to PIP as a result of investment realisations during the year was Â£86m. Of this amount, Â£28m came from the primary portfolio with Â£58m arising from the secondary portfolio. In total PIP received distributions from more than 200 different funds, showing that even in difficult economic times a well diversified portfolio can generate significant realisation activity. COMMITMENTS In the quarter to 30th September 2008, PIP committed a total of Â£24m to five primary funds, encompassing one Europe-focused fund (Â£14m) and four US-focused funds (Â£10m). Due to the deteriorating outlook for distribution activity, the Company did not make any additional commitments in the last three quarters of the financial year. Undrawn commitments decreased by Â£213m to Â£428m. Â£157m of this reduction was due to calls and Â£163m was due to the sale of fund commitments. These reductions were partially offset by the depreciation of sterling versus the US dollar and euro, and the new commitments referred to above. As has historically been the case, it is unlikely that undrawn commitments will be called in full. The Company does not intend to make any further commitments until there is a sustained recovery in the level of distributions or additional financing is obtained. MARKET REVIEW AND PROSPECTS The twelve months to 30th June 2009 has without doubt been the most challenging in the 22-year history of the Company. The near collapse of the banking sector and subsequent deleveraging of the financial system resulted in a sudden, extreme scarcity of credit. The result was a significant reduction in consumption, pushing the crisis into the wider economy and causing investor sentiment along with stock markets across the globe to plunge. These conditions resulted in a dramatic reduction in private equity activity in the second half of 2008, as M&A and IPO activity plummeted and buyout managers struggled to find financing for new deals. The liquidity measures undertaken by the major economies have helped to ease the panic that was evident in the markets at the end of 2008 and early in 2009. Credit markets are beginning to show some signs of life, although it is too early to say whether the worst is over. In our view, it is likely that the recovery in economic fundamentals will be relatively slow, with low activity levels in the private equity market expected to continue over the coming quarters. The FTSE All-Share and MSCI World (sterling) total return indices fell by 20.5% and 14.2% respectively in the twelve months to 30th June 2009. Valuation multiples and corporate earnings for listed securities have been hit hard as a result of the economic crisis. Consequently many private equity assets, which are often valued relative to publicly listed entities and whose earnings have been similarly impacted by the recession, have been written-down. The greatest reductions in valuations have been experienced in the mega and large buyout area, where higher levels of leverage have magnified write-downs. The recent stock market rally should provide some support to private equity valuations. Notwithstanding this, the scale and extent of the economic crisis means that we cannot rule out further volatility in the coming quarters, and as such we maintain a cautious outlook going forward. Falling valuations can provide opportunities to invest in good companies at lower prices. We expect the best private equity managers, who have the benefit of long-term investment horizons, to make the most of these opportunities in the coming years. Whilst there are undoubtedly issues concerning leverage levels utilised in the mega buyout deals of recent times, other areas of private equity, notably small / mid market buyouts and venture capital, have relied less on leverage. It should be noted that small / mid market buyouts and venture capital account for 69% of PIP's portfolio, whilst exposure to large / mega buyouts is only 20% of the portfolio. In our view, the market has been indiscriminate in the derating of the listed private equity sector over the past year, failing to reflect adequately the differences in risk profiles of the various private equity stages. The diversification of PIP's portfolio, with top quality managers across buyout, venture capital and special situations stages, and across all major regions, should help mitigate some of the difficulties experienced by specific companies or sectors in the current economic conditions. Buyout managers generally favour companies in defensive industries, thus partly mitigating the risk of higher leverage. As a result, PIP's portfolio is underweight in many of those sectors, such as financials, property and basic resources, which comprise a significant part of the listed market indices and which have fallen most in the past year. As always, it is important for investors in private equity to ensure that they select the managers that are able to deliver across the market cycle. Pantheon's strategy is to focus on managers that can demonstrate clear value creation, much of which is centred on greater efficiency and building scale in middle market businesses. CAPITAL STRUCTURE AND FINANCING In December 2008, PIP issued Â£49.5m of unsecured subordinated loan notes (the "Notes") to institutional investors who had previously entered into "standby" agreements to subscribe, if called upon by PIP to do so, for new redeemable shares. In the event of a drawdown by the Company under a "standby" agreement from an institutional investor who is a Noteholder, the Company shall repay an equivalent amount on the Notes held by such investor (or such lesser amount as is outstanding). The Company has commitments from institutional investors under "standby" agreements to subscribe a total of Â£150m for new redeemable shares. In the March and June quarters PIP entered into agreements to sell fund interests to a number of third parties. The Company has reduced undrawn commitments by approximately Â£163m and received approximately Â£23m in cash proceeds, from sales that were completed in the twelve months to 30th June 2009. In addition, a further Â£27m of sales proceeds relating to transactions completed during the year was received in July 2009. With the exception of one transaction that is due to close in January 2010, all planned deals have now completed. These combined sales have strengthened the financial position of the Company. As at 31st August 2009 PIP had Â£177m of available financing, comprising Â£46m of cash, Â£30m of unutilised bank loan facility and Â£101m of unutilised standby financing. As such, the Board believes that the Company is in a position to meet its undrawn commitments for the foreseeable future. OUTLOOK The increase in value of comparable quoted companies following the recent stock market rally should provide some support to private equity valuations in the coming quarter. However, we believe the prospects for underlying earnings in the near term will remain muted until there is a significant improvement in the macroeconomic environment. Therefore the outlook for private equity valuations remains uncertain. Often in the past, large stock market shocks have been followed by periods of strong returns. Recent stock market falls have reduced most company valuations, and as such, PIP is well positioned via its undrawn commitments to benefit from a potentially fertile investment environment. We expect calls and distributions to remain at a low level in the coming quarters. Any recovery in the level of calls is likely to occur before a recovery in the level of distributions, which could result in higher cash outflows for a period. The Company will focus any investment capacity not needed to meet its unfunded commitments on its secondary programme. Tom Bartlam Chairman 13th October 2009 THE MANAGER'S REVIEW MARKET REVIEW The private equity industry has been affected by the banking crisis and significant tightening in the debt markets, resulting in a dramatic slowdown in investment activity in the second half of 2008, particularly at the larger end of the buyout market. Historically low levels of initial public offerings ("IPOs"), mergers and acquisitions ("M&A") and secondary buyouts have resulted in a dramatic decrease in realisations. The current conditions could provide opportunities for private equity managers to acquire high quality assets at attractive prices. BUYOUT MARKET Buyout activity in the USA, particularly at the larger end of the market, has been severely hit by the banking crisis and the collapse of the leveraged loan market. The scarcity of debt has pushed down available leverage multiples and increased the proportion of equity in new transactions. Additionally, the uncertainty surrounding the economic crisis has suppressed demand in the buyout sector. As a result, private equity deal value was down approximately 70% in the first half of 2009 relative to the same period in 2008. The European market has experienced similar difficulties, with the value of buyout deals dropping by over 80% in the first half of 2009 relative to the same period last year. This drop in deal flow was felt most at the larger end of the market, with no deals greater than â‚¬1 billion completed in the first half of 2009. The second quarter of 2009 saw an increase in the value of buyout deals, although it is too early to suggest that the bottom has been reached in the European buyout market. Much uncertainty persists as to both the length and depth of this crisis, with the threat of further downside likely to continue in the coming quarters. Buyout realisation activity has also been severely restricted by the turmoil in the financial markets. This was due to a slowdown in M&A and secondary buyout activity, coupled with a near shut-down in the IPO market. Any recovery will likely be driven by an improvement in market sentiment and debt market conditions, both of which could be slow to materialise. That said, the current market dislocation could provide attractive investment returns for those with long-term horizons. VENTURE CAPITAL MARKET Venture capital investments do not typically utilise debt and have therefore been much less affected by the turbulence within the debt markets. However, the string of poor economic data and virtual shutdown of the IPO market has had a significant impact on activity, with venture investment in the USA down around 55% in the half year to 30th June 2009 relative to the same period in the previous year. Only one venture-backed IPO was completed in the three quarters to 31st March 2009. This compares to 48 in the same period the year before. A significant decrease in venture-backed M&A has also added to the depressed realisation levels confronting the industry. Recently there has been some signs of a slight recovery in the level of venture capital realisations, with a total of five IPOs executed in the June quarter, alongside a quarterly increase in venture-backed M&A activity. We expect any recovery, as with the buyout market, to be slow to materialise. ASIA AND OTHER REGIONS Private equity firms continue to extend themselves internationally, with a notable trend for US private equity funds to increase their focus on Europe and Asia. Markets are continuing to develop in Asia, Africa and the Middle-East, providing a greater breadth of opportunity going forward. Many of these markets are very difficult to invest in without a strong local presence, highlighting the importance of a genuinely global perspective. Asia has not been immune to problems affecting the USA and Europe. Private equity investment activity was down by more than 70% in the first half of 2009 relative to the same period in the previous year. Divestments were also down, falling by approximately 55%. In general, managers in the region are less dependent on leverage than their western counterparts. Additionally, Asian markets have become more resilient to foreign trade shocks, with domestic consumption diminishing reliance on exports to developed markets. As such, we believe that managers with solid local market knowledge and experience of investing in challenging times will have an opportunity to outperform strongly in Asian markets. SECONDARY MARKET The substantial wave of capital that flowed into private equity assets in the years preceding the financial crisis is expected to give rise to an unprecedented level of opportunity in the secondary market in the coming years. A large number of potential sellers, distressed, over-allocated or simply disenchanted with their performance, will add to those already selling for portfolio management reasons. Despite the significant potential, the number of deals completed so far has been relatively low due to mismatches between buyer and seller pricing expectations, and uncertainty over the effects of the recession on underlying performance. We expect deal volumes to increase over the coming year as pricing expectations align and economic visibility improves. Pantheon's influence as a significant limited partner has made it a preferred buyer of secondary interests for many of the foremost general partners in the industry. In addition, Pantheon's strength in manager research and depth of transactional experience can enable PIP, subject to financing, to take advantage of the current opportunities in the secondary market. ACTIVITY PIP suspended its primary investment programme in the quarter to 30th September 2008, prior to which, commitments totalling Â£24 million were made to new private equity funds. SECONDARY ACQUISITIONS PIP acquired no new secondary assets in the year, having suspended new commitments to secondaries at the beginning of 2008. The Company does not intend to make any further commitments until there is a sustained recovery in the level of distributions or additional financing is obtained. DISTRIBUTIONS PIP received Â£86m in proceeds from the portfolio during the twelve months to 30th June 2009, equivalent to approximately 11% of the opening private equity assets. This figure excludes proceeds from fund disposals. Primary Â£28m Secondary Â£58m Total Â£86m The rate of distributions fell markedly in the second half of the financial year, as the deteriorating economic climate impacted the level of portfolio company exits. A higher distribution rate in the quarter to December 2008 included the two largest portfolio exits of the year - the sales of MessageLabs and N&W Global Vending. CALLS PIP paid Â£157m in cash calls during the year to 30th June 2009, equivalent to approximately 24% of opening undrawn commitments. Primary Â£114m Secondary Â£43m Total Â£157m The rate of drawdowns from outstanding commitments decreased in the year to 30th June 2009, as a lack of debt financing coupled with economic uncertainty reduced investment activity. Pantheon expects call rates to remain subdued over the coming months. INVESTMENT CASH FLOWS With the exception of the quarter to 31st December 2008, when the distribution rate was significantly higher due to the exits of MessageLabs and N&W Global Vending, the Company has experienced a net cash outflow in all other quarters. FINANCE At 30th June 2009 the Company had Â£20.5m in cash and Â£30m remaining of its Â£ 150m revolving credit facility. PIP continues to have in place "standby" agreements with certain institutions under which the Company can require the institutions to subscribe for new redeemable shares, up to the value of Â£150m. The purpose of these agreements is to provide an additional level of assurance that PIP will be in a position to meet calls in the near term. In December 2008, PIP issued Â£49.5m of unsecured subordinated loan notes (the "Notes") to institutional investors who had previously entered into "standby" agreements. The Notes have a maturity date of 15th November 2010 and accrue interest at LIBOR plus 1.5%. In the event of a drawdown by the Company under a "standby" agreement from an institutional investor who is a Noteholder, the Company shall repay an equivalent amount on the Notes held by such investor (or such lesser amount as is outstanding). During the year PIP entered into agreements to sell fund interests to a number of third parties. As a result of these disposals, the Company has received approximately Â£23m in cash proceeds and reduced undrawn commitments by approximately Â£163m. A further Â£27m of sales proceeds from transactions completed during the year was received in July 2009. Including the above sales proceeds received in July 2009, PIP's available financing stood at Â£178m at 30th June 2009. PORTFOLIO REVIEW The underlying companies in the portfolio range from large and mature industrial enterprises with multinational operations to early-stage ventures operating at the leading edge of technological development. All the companies have one factor in common: the influence of professional private equity managers who are motivated to maximise the value of each underlying investment. PORTFOLIO ANALYSIS BY VALUE AS AT 30TH JUNE 2009 PIP disposed of a number of assets in the year to 30th June 2009. Where mature primary assets were sold, in the majority of cases, PIP retained a 50% stake in order to maintain exposure to these funds and to ensure the portfolio continues to be well diversified. GEOGRAPHIC SPREAD The weighting to the USA increased from 53% to 60% over the period whereas the weighting to Europe fell from 40% to 31%, reflecting both investment returns, relative currency movements and fund sales since 30th June 2008. The weighting to Asia and other regions increased from 7% to 9% in the period. USA 60% Europe 31% Asia and other 9% 100% STAGE COMPOSTION PIP's portfolio is well diversified across all the major stages of private equity. The majority of the Company's exposure to buyouts is via mid and small cap funds, which tend to utilise lower levels of leverage within portfolio companies than the very largest funds. In addition, PIP has a significant exposure to venture capital-focused funds. Venture 35% Small/Mid buyouts 34% Large/ Mega 20% buyouts Special situations 6% Generalist 4% Directs 1% 100% SECTOR COMPOSTION PIP's portfolio is well diversiï¬ed by the sectors in which the underlying companies operate. This sectoral diversiï¬cation helps to minimise the effects of cyclical trends or volatility within particular industry segments. Other services & manufacturing 29% Consumer-related 18% Computer-related 14% Medical / Health-related 11% Communications 10% Industrial products 6% Biotechnology & pharmacology 5% Energy-related 4% Other electronics-related 3% 100% MATURITY PIP's portfolio is well diversified by fund vintage (referring to the year the fund was established). 2008 2% 2007 15% 2006 16% 2005 13% 2004 7% 2003 4% 2002 3% 2001 7% 2000 17% 1999 7% 1998 and earlier 9% 100% OUTSTANDING COMMITMENTS PIP's outstanding commitments to fund investments are well diversified by stage and geography and will enable the Company to participate in future investments with many of the highest quality fund managers in the private equity industry. PIP's outstanding commitments to investments decreased to Â£428m at 30th June 2009 compared with Â£641m at 30th June 2008. Â£157m of this reduction was due to calls and Â£163m was due to the sale of fund commitments. These reductions were partially offset by the depreciation of sterling versus the US dollar and euro, and the new commitments made during the year. PORTFOLIO ANALYSIS BY OUTSTANDING COMMITMENTS AS AT 30TH JUNE 2009 GEOGRAPHIC SPREAD The chart below shows the breakdown of the Company's outstanding commitments by geography. Europe and the USA have the largest outstanding commitments reflecting the fact that they have the most mature private equity markets. Commitments to Asia and other regions totalled 12%. USA 46% Europe 42% Asia and other 12% 100% STAGE COMPOSITION The chart below shows the breakdown of the Company's outstanding commitments by the stage focus of the underlying funds. Small/Mid buyouts 40% Venture 27% Large/ Mega buyouts 25% Special situations 7% Generalist 1% 100% MATURITY The chart below shows the breakdown of the Company's outstanding commitments by the vintage (referring to the year the fund made its first drawdown) of the underlying funds. 2009 3% 2008 26% 2007 32% 2006 15% 2005 7% 2004 2% 2003 and earlier 15% 100% PANTHEON VEHICLES Pantheon Ventures Limited ("Pantheon") is not entitled to management and commitment fees in respect of PIP's holdings in, and outstanding commitments to, the ï¬rm's managed fund-of-funds vehicles. In addition, Pantheon has agreed that PIP will never be disadvantaged in terms of fees compared with the position it would have been in had it made investments directly into the underlying funds rather than indirectly through such fund-of-funds vehicles. THE TOP 20 MANAGERS BY VALUE AND OUTSTANDING COMMITMENTS TOP 20 MANAGERS BY VALUE AS AT 30TH JUNE 2009 NUMBER MANAGER REGION STAGE BIAS % OF PIP'S TOTAL PRIVATE EQUITY ASSET VALUE 1 Barclays Private EUROPE BUYOUT 2.5% Equity 2 Apax Partners EUROPE BUYOUT 2.2% 3 ABS Capital Partners USA GENERALIST 1.9% 4 Brentwood Associates USA BUYOUT 1.8% 5 Doughty Hanson & Co EUROPE BUYOUT 1.6% 6 Avista Capital USA BUYOUT 1.6% Partners 7 Churchill Equity USA BUYOUT 1.6% 8 Nova Capital EUROPE BUYOUT 1.5% Management 9 Oaktree Capital GLOBAL GENERALIST 1.4% Management 10 Oak Investment USA VENTURE 1.4% Partners 11 CVC Capital Partners EUROPE BUYOUT 1.4% 12 IK Investment EUROPE BUYOUT 1.3% Partners 13 Providence Equity USA BUYOUT 1.3% Partners 14 ABRY Partners USA BUYOUT 1.3% 15 Vision Capital EUROPE BUYOUT 1.3% 16 BC Partners EUROPE BUYOUT 1.2% 17 Carlyle Group/ USA SPECIAL 1.2% Riverstone Holdings SITUATIONS 18 Cipio Partners EUROPE VENTURE 1.1% 19 Carlyle Group GLOBAL GENERALIST 1.1% 20 Nordic Capital EUROPE BUYOUT 1.1% Figures are adjusted for fund disposals that had yet to be completed at 30th June 2009. TOP 20 MANAGERS BY OUTSTANDING COMMITMENTS AS AT 30TH JUNE 2009 NUMBER MANAGER REGION STAGE BIAS % OF OUTSTANDING COMMITMENTS 1 Hutton Collins EUROPE SPECIAL 3.7% SITUATIONS 2 Golden Gate Capital USA BUYOUT 3.6% 3 CVC Capital Partners EUROPE BUYOUT 3.2% 4 Clessidra Capital EUROPE BUYOUT 2.9% Partners 5 Apax Partners EUROPE BUYOUT 2.4% 6 Summit Partners GLOBAL VENTURE 2.3% 7 Barclays Private EUROPE BUYOUT 2.3% Equity 8 Mid-Europa Partners EUROPE BUYOUT 1.8% 9 Carlyle Group GLOBAL GENERALIST 1.8% 10 Baring Vostok Capital REST OF THE BUYOUT 1.7% Partners WORLD 11 Apollo Management USA BUYOUT 1.6% 12 Doughty Hanson & Co EUROPE BUYOUT 1.5% 13 Vision Capital EUROPE BUYOUT 1.5% 14 Technology Crossover USA VENTURE 1.4% Ventures 15 Mercapital EUROPE BUYOUT 1.4% 16 Private Equity EUROPE BUYOUT 1.3% Partners 17 Providence Equity USA BUYOUT 1.3% Partners 18 Arcadia EUROPE BUYOUT 1.2% 19 Brentwood Associates USA BUYOUT 1.2% 20 Unison Capital ASIA BUYOUT 1.2% Figures are adjusted for fund disposals that had yet to be completed at 30th June 2009 and any known reduction in commitments post 30th June 2009. TOP 20 COMPANIES BY VALUE AS AT 30TH JUNE 2009 NUMBER COMPANY SECTOR % OF PIP'S TOTAL PRIVATE EQUITY ASSET VALUE 1 Nycomed MEDICAL/HEALTH 0.9% 2 Rosetta Stone* COMPUTER 0.6% 3 Bibby Scientific OTHER SERVICES AND 0.5% MANUFACTURING 4 GSI Commerce* COMMUNICATIONS 0.5% 5 Spectrum Athletic Clubs CONSUMER 0.5% 6 Carbolite OTHER SERVICES AND 0.5% MANUFACTURING 7 Array OTHER SERVICES AND 0.5% MANUFACTURING 8 Orchid Orthopedic MEDICAL/HEATH 0.4% Solutions 9 InterXion COMPUTER 0.4% 10 TDC* COMMUNICATIONS 0.4% 11 The Teaching Company OTHER SERVICES AND 0.4% MANUFACTURING 12 Duff & Phelps* OTHER SERVICES AND 0.4% MANUFACTURING 13 Cavium Networks* OTHER ELECTRONICS 0.4% 14 VBrick Systems COMPUTER 0.4% 15 SciLabware BIOTECHNOLOGY AND 0.3% PHARMACOLOGY 16 Converteam ENERGY 0.3% 17 Global Refund OTHER SERVICES AND 0.3% MANUFACTURING 18 Polar OTHER SERVICES AND 0.3% MANUFACTURING 19 ConvaTec Group MEDICAL/HEATH 0.3% 20 BrightHouse CONSUMER 0.3% Figures are adjusted for fund disposals that had yet to be completed at 30th June 2009. * Quoted holding as at 30th June 2009. COMPANY STRATEGY, OBJECTIVE AND INVESTMENT POLICY The Company's primary investment objective is to maximise capital growth by investing in a diversified portfolio of private equity funds and, occasionally, directly in private companies. COMPANY STRATEGY The spread of performance in private equity is much wider than in other asset classes and the selection of managers has a signiï¬cant influence on investment performance. As a specialist fund-of-funds manager monitoring and researching the global private equity market, Pantheon, PIP's Manager, is well positioned to identify fund managers who have the skills and strategies to deliver superior performance within their particular market segments. PIP's strategy is to invest with leading private equity managers whilst reducing investment risk through diversification of the underlying portfolio by geography, investment stage and sector. This strategy is implemented through PIP's primary and secondary investment programmes. PIP has the flexibility to vary the size of the primary and secondary investment programmes depending on available financing. The portfolio reflects PIP's prolonged access to Pantheon's highly successful primary and secondary investments over the past 22 years. Only funds that have passed rigorous due diligence and research are selected for the primary and secondary programmes. PRIMARY PROGRAMME The primary programme invests in private equity funds when they are ï¬rst formed. Pantheon aims to secure access to superior managers and to identify high quality managers often overlooked by the market. Investments are made on a pro-rata basis alongside Pantheon's regional fund-of-funds. Through the primary programme, PIP invests in fewer than 2% of the estimated universe of private equity funds and thus is able to substantially outperform the market averages, given the high dispersal of returns between managers. The primary programme enables PIP to invest strategically in speciï¬c areas of the market, put money to work steadily over time and gain access to the very best funds. SECONDARY PROGRAMME The secondary programme purchases existing investments in private equity funds. Typically these investments are acquired between three and six years after a fund's inception. PIP benefits from secondaries because the fees and expenses in the first few years have been paid and distributions from the fund will be returned over a shorter time period. This helps to reduce the drag to performance from young and immature funds, known as the "J-curve effect". In addition secondary assets can be purchased at a discount, especially in cases where the seller has liquidity problems, increasing the opportunity for outperformance. In accordance with the terms of its management agreement with Pantheon, PIP is entitled under Pantheon's allocation policy to the opportunity to co-invest in a predetermined ratio alongside Pantheon's latest global secondary fund, benefiting from access to larger secondary opportunities that it would not have had the capacity to complete alone. The secondary programme enables PIP to acquire attractively priced secondary interests as they become available, and is thus able to outperform market averages through judicious pricing and timing. The Company does not intend to make any further commitments to either the primary or secondary programmes until there is a sustained recovery in the level of distributions or additional financing is obtained. As the Company's finances become less constrained, either as a result of a normalisation in the level of distributions, or due to a capital raising, PIP will be able to participate in new investments, with emphasis on the current opportunities in the secondary market as a priority. OBJECTIVE AND INVESTMENT POLICY The Company's primary investment objective is to maximise capital growth by investing in a diversified portfolio of private equity funds and, occasionally, directly in private companies. The Company's policy is to make unquoted investments, in general, by subscribing for investments in new private equity funds and buying secondary interests in existing private equity funds and, occasionally, by acquiring direct holdings in unquoted companies, usually either where a vendor is seeking to sell a combined portfolio of fund interests and direct holdings or where there is a private equity manager, well known to the Company's Manager, investing on substantially the same terms. The Company may invest in private equity funds which are quoted. In addition, the Company may from time to time hold quoted investments in consequence of such investments being distributed to the Company from its fund investments or in consequence of an investment in an unquoted company becoming quoted. The Company will not otherwise normally invest in quoted securities although the Company reserves the right to do so should this be deemed to be in the interests of the Company. The Company may invest in any type of financial instrument, including equity and non-equity shares, debt securities, subscription and conversion rights and options in relation to such shares and securities and interests in partnerships and limited partnerships and other forms of collective investment scheme. Investments in funds and companies may be made either directly or indirectly, through one or more holding, special purpose or investment vehicles in which one or more co-investors may also have an interest. The Company employs a policy of over-commitment. This means that the Company may commit more than its available uninvested assets to investments in private equity funds on the basis that such commitments can be met from anticipated future cash flows to the Company and through the use of borrowings and capital raisings where necessary. The Company's policy is to adopt a global investment approach. The Company's strategy is to mitigate investment risk through diversification of its underlying portfolio by geography, sector and investment stage. Since the Company's assets are invested globally on the basis, primarily, of the merits of individual investment opportunities, the Company does not adopt maximum or minimum exposures to specific geographic regions, industry sectors or the investment stage of underlying investments. In addition, the Company adopts the following limitations for the purpose of diversifying investment risk: â€¢ the requirement for approval as an investment trust that no holding in a company will represent more than 15% by value of the Company's investments at the time of investment; â€¢ the aggregate of all the amounts invested by the Company in (including commitments to or in respect of) funds managed by a single management group may not, in consequence of any such investment being made, form more than 20% of the aggregate of the most recently determined gross asset value of the Company and the Company's aggregate outstanding commitments in respect of investments at the time such investment is made; â€¢ the Company will invest no more than 15% of its total assets in other UK listed closed-ended investment funds (including UK listed investment trusts). The Company may invest in funds and other vehicles established and managed or advised by Pantheon or any Pantheon affiliate. In determining the diversification of its portfolio and applying the manager diversification requirement referred to above, the Company looks through vehicles established and managed or advised by Pantheon or any Pantheon affiliate. The Company may enter into derivatives transactions for the purposes of efficient portfolio management and hedging (for example, hedging interest rate, currency or market exposures). Surplus cash of the Company may be invested in fixed interest securities, bank deposits or other similar securities. The Company may borrow to make investments and typically uses its borrowing facilities to manage its cash flows flexibly, enabling the Company to make investments as and when suitable opportunities arise and to meet calls in relation to existing investments without having to retain significant cash balances for such purposes. Under the Company's articles of association, the Company's borrowings may not at any time exceed 100% of the Company's net asset value. Typically, the Company does not expect its gearing to exceed 30% of gross assets. However, gearing may exceed this in the event that, for example, the Company's pipeline of future cash flows alters. The Company may invest in private equity funds, unquoted companies or special purpose or investment holding vehicles which are geared by loan facilities that rank ahead of the Company's investment. The Company does not adopt restrictions on the extent to which it is exposed to gearing in funds or companies in which it invests. THE DIRECTORS The Directors in office during the year and at the date of this report are: Tom Bartlam (Chairman) Ian Barby Richard Crowder Peter Readman Rhoddy Swire Sandy Thomson EXTRACTS FROM THE DIRECTOR'S REPORT BUSINESS REVIEW The Business Review which follows is designed to provide shareholders with information about the Company's business and results in the year to 30th June 2009. It should be read in conjunction with the Chairman's Statement and Manager's Review. BUSINESS AND STRATEGY Pantheon International Participations PLC (the "Company" or "PIP"), a closed-ended investment trust, is the longest established private equity fund-of-funds quoted on the London Stock Exchange. It enables investors to gain access to a substantial portfolio of unquoted companies in the USA, Europe and Asia, within funds managed by experienced private equity managers selected for their ability to outperform. PIP's primary investment objective is to maximise capital growth by investing in a diversified portfolio of private equity funds and, occasionally, directly in private companies. The Company's full Objective and Investment Policy are set out above. The Company has received written approval from HM Revenue & Customs as an authorised investment trust under Section 842 of the Income and Corporation Taxes Act 1988 up to the year ended 30th June 2007. This approval is subject to there being no subsequent enquiry under corporation tax self-assessment. The Company has been approved as an investment trust for all previous years. It is the opinion of the Directors that the Company has subsequently directed its affairs so as to enable it to continue to qualify for such approval and the Company will continue to seek approval under Section 842 each year. The Company's status as an investment trust allows it to obtain an exemption from paying taxes on the profits made from the sale of its investments. Investment trusts offer a number of advantages for investors, including access to investment opportunities that might not be open to private investors and to professional stock selection skills at low cost. The Company was incorporated and registered in England and Wales on 16 July 1987. It is registered as a public limited company and is an investment company as defined by Section 833 of the Companies Act 2006. It is a member of The Association of Investment Companies ("AIC"). PRINCIPAL RISKS AND UNCERTAINTIES FACING THE COMPANY The Company invests principally in private equity funds. However, the Company's strategy is to adopt a global fund-of-funds investment programme maximising returns through selection of the best available funds and to mitigate investment risk through diversification of the underlying portfolio by geography, investment stage and sector. The principal risks facing the Company include the following: Funding of investment commitments In the normal course of its business, the Company typically has outstanding commitments to private equity funds which are substantial relative to the Company's assets. The Company's ability to meet these commitments is dependent upon it receiving cash distributions (the timing and amount of which can be unpredictable) from its private equity investments and, to the extent these are insufficient, on the availability of financing facilities. Risks relating to investment opportunities There is no guarantee that the Company will find sufficient suitable investment opportunities, or that the private equity funds in which it invests will find suitable investment opportunities, to achieve the level of diversification which the Company seeks to achieve in relation to its investment portfolio. Financial risk of private equity The Company invests in private equity funds and unquoted companies which are less readily marketable than quoted securities and may take a long time to realise. In addition, such investments may carry a higher degree of risk than investments in quoted securities. The Company may be adversely affected by these risks notwithstanding the level of diversification which it seeks to achieve in relation to its investment portfolio. Long-term nature of private equity investments Private equity investments are long-term in nature and may take some years before reaching a level of maturity at which they can be realised. Accordingly, it is possible that the Company may not receive a return on investments made by it for a number of years. Liquidity risk Due to the Company's investment policy, a large proportion of the Company's portfolio comprises indirect participations in unquoted investments and direct holdings in unquoted investments. Such investments are less readily marketable than quoted securities and realisation of these investments may require a lengthy time period or may result in distributions in kind to the Company. Valuation uncertainty In valuing its investments in private equity funds and unquoted companies and in publishing its net asset value, the Company relies to a significant extent on the accuracy of financial and other information provided by these funds and companies to the Manager. There is potential for inconsistency in the valuation methods adopted by these funds and companies. In addition, the information provided is typically more than 90 days old at the time the net asset value of the Company's shares is reported. Gearing As at 30th June 2009 the Company had borrowings of Â£170m. The use of gearing can cause both gains and losses in the asset value of the Company to be magnified. The Company may also invest in private equity funds or unquoted companies which are geared by loan facilities that rank ahead of the Company's investment, both for payment of interest and capital. As a consequence, the Company may be exposed to gearing through the borrowings from time to time of such private equity funds and companies, therefore investment in such assets presents a higher risk as to their capital return. Foreign currency risk The Company makes investments in US dollars, euros and other currencies as well as sterling. Accordingly, the Company is exposed to currency exchange rate fluctuations. Competition The Company competes for investments with other investors. It is possible that competition for appropriate investment opportunities may increase, thus reducing the number of opportunities available and adversely affecting the terms upon which such investments can be made. Unregulated nature of underlying investments The private equity funds and underlying unquoted investments that form the basis of the majority of the Company's portfolio are not subject to regulation by the Financial Services Authority or an equivalent regulatory body. Funds and unquoted companies in which the Company invests (directly or indirectly) may be domiciled in jurisdictions which do not have a regulatory regime which provides an equivalent level of investor protection to that provided under the laws of the United Kingdom. Defaults on commitments If, in consequence of any failure to meet a demand for payment of any outstanding unpaid capital commitment of the Company to any private equity fund in which the Company has invested, the Company is treated as a defaulting investor by that fund, the Company may suffer a resultant dilution in its interest in that fund and, possibly, the compulsory sale of that interest. Taxation Any change in the Company's tax status or in taxation legislation or practice could affect the value of the investments held by and the performance of the Company. In addition, the income and gains of the Company from its investments may suffer withholding tax which may not be reclaimable in the countries where such income and gains arise. The Manager and other third party advisers Like most investment trust companies, the Company has no employees and the Directors are all non-executive. The Company is dependent upon the services of Pantheon Ventures Limited ("Pantheon") as Manager and may be adversely affected if the services of Pantheon cease to be available to the Company. Details of the terms of the Management Agreement are set out below. Other third party service providers on whom the Company relies include Capita Sinclair Henderson Limited, who provide company secretarial and accounting services, and HSBC Bank plc, who act as Custodian. Further information on risks Further information on the principal risks the Company faces in its portfolio management activities and the policies for managing these risks and the policy and practice with regard to financial instruments are summarised in Note 20 to the financial statements. REVIEW OF 2008/2009 Net asset value The Company's total net assets attributable to shareholders decreased during the year to Â£513,622,000 (2008: Â£736,105,000). The net asset value per ordinary share and redemption value per redeemable share was 773.62p at 30th June 2009 (2008: 1,108.72p). Results and dividends As set out in the Income Statement, the Company's net revenue deficit on ordinary activities before taxation for the year was Â£14,659,000 (2008: deficit of Â£8,080,000) and capital deficits were Â£207,427,000 (2008: profit of Â£ 133,547,000). The Directors do not recommend the payment of a dividend in respect of the year ended 30th June 2009 (2008: nil). The results for the year are as set out in the Income Statement. Performance highlights The Board and the Manager monitor the following Key Performance Indicators: 1. The net asset value performance 2. The level of discount 3. The total expense ratio of the Company PIP's net asset value per ordinary share decreased by 30.2% to 773.62p in the year to 30th June 2009. Total assets decreased by Â£222.5 million to Â£513.6 million. The 30.2% decrease in PIP's net asset value per share compares to decreases in the MSCI World Index (sterling) of 14.2% and the FTSE All-Share Index of 20.5% respectively. PIP's ordinary share price during the year decreased by 60.6% and the discount widened to 61.8% at the year end (discount of 32.4% at 30th June 2008). The net asset value returns over 1 year, 3 years, 5 years and 10 years are set out in the Financial Summary above. The total expense ratio of the Company for the year ended 30th June 2009 was 2.05% (2008: 1.45%). Future developments A review of the year to 30th June 2009 and the outlook for the coming year can be found in the Chairman's Statement. Share capital As at 30th June 2009 and as at the date of this Report, the Company had shares in issue as shown in the table below, all of which are admitted to trading on the London Stock Exchange's market for listed securities. No shares were issued or repurchased by the Company and no shares were held in treasury during the year or since the year end. The redeemable shares do not carry any right to speak or vote at general meetings of the Company (although holders of redeemable shares are entitled to receive notice of general meetings of the Company and to attend such meetings). Redeemable shares do carry the right to vote at separate class meetings of the holders of redeemable shares. Further details of the rights attaching to each of the Company's classes of share are included in Note 13 to the financial statements. VOTING RIGHTS % OF TOTAL VOTING NUMBER OF ATTACHED TO RIGHTS SHARES REPRESENTED SHARE CAPITAL AND VOTING RIGHTS IN ISSUE EACH SHARE BY EACH CLASS ORDINARY SHARES OF 67p EACH 37,521,013 1 100 REDEEMABLE SHARES OF 1p EACH 28,871,255 - - TOTAL VOTING RIGHTS 37,521,013 Social, Environmental, Community and Employee Issues The Company has no employees and the Board consists entirely of non-executive Directors. As an investment trust, the Company has no direct impact on the community or the environment, and as such has no policies in this area. In carrying out its activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly. MANAGEMENT The Company's investment manager, Pantheon Ventures Limited, is one of the world's foremost private equity fund-of-funds managers and has acted as Manager to the Company since its inception in 1987. Pantheon evaluates and manages investments on the Company's behalf in line with the strategy agreed by the Board. The Manager acts under a management agreement with the Company dated 25th February 2004 (as amended by supplemental agreements dated 9th August 2004 and 30th January 2007) (the "Management Agreement"). Under the terms of the Management Agreement (as amended) Pantheon has been appointed as the sole and exclusive discretionary manager of all the assets of the Company from time to time and to provide certain additional services in connection with the management and administration of the Company's affairs, including monitoring the performance of, and giving instructions on behalf of the Company to, other service providers to the Company. The Manager is entitled to a monthly management fee at an annual rate of (i) 1.5% on the value of the Company's investment assets up to Â£150 million and (ii) 1% on the value of such assets in excess of Â£150 million. In addition, the Manager is entitled to a monthly commitment fee of 0.5% per annum on the aggregate amount committed (but unpaid) in respect of investments, up to a maximum amount equal to the total value of the Company's investment assets. The Manager was also entitled to a performance fee from the Company in respect of the period of 18 months commencing on 1st January 2007 and ending on 30th June 2008 and, thereafter, is entitled to a performance fee from the Company in respect of each 12 calendar month period ending on 30th June in each year. The performance fee payable in respect of each such calculation period is 5% of the amount by which the net asset value at the end of such period exceeds 110% of the applicable `high-water mark', i.e. the net asset value at the end of the previous calculation period in respect of which a performance fee was paid, compounded annually at 10% for each subsequent completed calculation period up to the start of the calculation period for which the fee is being calculated. If no performance fee has previously been paid, the applicable `high-water mark' is the aggregate net asset value of all the shares of the Company in issue as at 31st December 2006 multiplied by 1 + (181 / 365 x 10%), compounded annually at 10% for each completed 12 calendar month period after 30th June 2007 up to the start of the calculation period for which the fee is being calculated. The performance fee is calculated so as to ignore the effect on performance of any performance fee payable in respect of the period for which the fee is being calculated or of any increase or decrease in the net assets of the Company resulting from any issue, redemption or purchase of any shares or other securities, the sale of any treasury shares or the issue or cancellation of any subscription or conversion rights for any shares or other securities and any other reduction in the Company's share capital or any distribution to shareholders. The value of investments in, and outstanding commitments to, investment funds managed or advised by the Pantheon group ("Pantheon Funds") are excluded in calculating the monthly management fee and the commitment fee. In addition, the Manager has agreed that the total fees (including performance fees) payable by Pantheon Funds to members of the Pantheon group and attributable to the Company's investments in Pantheon Funds shall be less than the total fees (excluding the performance fee) that the Company would have been charged under the Management Agreement had it invested directly in all of the underlying investments of the relevant Pantheon Funds instead of through the relevant Pantheon Funds. The Management Agreement is capable of being terminated (without penalty to the Company) by either party giving two years' notice in writing. It is capable of being terminated by the Company (without penalty to the Company) immediately if, among other things, the Manager defaults or goes into liquidation and on six months' notice if there is a change of control of the Manager or if certain "key man" provisions are triggered. The Manager has the benefit of an indemnity from the Company in respect of liabilities arising out of the proper performance by the Manager of its duties and compliance with instructions given to it by the Board and an exclusion of liability save to the extent of any negligence, fraud, wilful default or breach of duty. Under the terms of the Management Agreement, the Company is entitled to participate in allocations made by the Pantheon group, under its secondary investment programme, of opportunities to acquire secondary investments, other than certain co-investment opportunities in single companies or business entities. The Company is entitled to be allocated half of any such opportunity (other than a single fund secondary investment opportunity) up to an acquisition cost of $40 million and 25% of any balance. The Company is also entitled to be allocated, on the same basis, a share of the excess participation in single fund secondary investment opportunities which cannot be allocated to the Pantheon group's regional fund-of-funds clients. This basis for allocation to PIP of secondary investments applies until replaced by alternative allocation arrangements. They will apply during the investment period of Pantheon Global Secondary Fund III ("PGSF III"), a fund established by the Pantheon group in July 2006 for the purpose of acquiring secondary investments, and will continue to apply during the investment period of Pantheon Global Secondary Fund IV ("PGSF IV"), a successor fund to PGSF III. An alternative basis for the allocation to the Company of secondary investment opportunities may be applied by Pantheon in the context of a successor fund to PGSF IV. In the event of Pantheon and the Company being unable to agree any such alternative allocation basis, Pantheon will cease to be entitled to any performance fee for calculation periods following that in which the alternative allocation basis takes effect and the Company will be entitled to terminate the Management Agreement (without penalty to the Company) on six months' notice. The Board keeps under review the performance of the Manager and the Board are of the opinion that it is in the interests of shareholders to continue the appointment. The reasons for this view are that the investment performance is satisfactory and the Manager is best placed to continue to manage the assets of the Company according to the Company's strategy. Related party transactions and Directors' interests in contracts and agreements are disclosed in Note 21 to the financial statements. STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to: â€¢ select suitable accounting policies and then apply them consistently; â€¢ make judgements and estimates that are reasonable and prudent; â€¢ state whether applicable UK accounting standards have been followed, subject to any material departure disclosed and explained in the financial statements; and â€¢ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors, to the best of their knowledge, state that: â€¢ the financial statements, prepared in accordance with UK Accounting Standards, give a true and fair view of the assets, liabilities, financial position and return of the Company; and â€¢ this Annual Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. The Directors are responsible for ensuring that the Directors' Report and other information in the Annual Report is prepared in accordance with Company law in the United Kingdom. They are also responsible for ensuring that the Annual Report includes information required by the Listing Rules of the Financial Services Authority. They also have responsibility for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the Board Tom Bartlam Chairman 13th October 2009 INDEPENDENT AUDITOR'S REPORT The Company's financial statements for the year ended 30 June 2009 have been audited by Grant Thornton UK LLP. The text of the Independent Auditor's Report can be found in the Company's Annual Report and Accounts at www.pipplc.com. The statutory accounts for the year ended 30 June 2009 have been prepared on the basis of the financial information presented by the Directors in this announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The financial information for the year ended 30 June 2008 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The Auditor reported on those accounts; their report was unqualified and did not contain any emphasis of matter or a statement under s237(2) or (3) Companies Act 1985. INCOME STATEMENT YEAR ENDED 30th JUNE 2009 2009 2008 REVENUE CAPITAL TOTAL* REVENUE CAPITAL TOTAL* NOTE Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 (Losses)/gains on 9 b - (181,805) (181,805) - 137,351 137,351 investments designated at fair value through profit or loss** Currency (losses)/gains 18 - (22,335) (22,335) - 310 310 on cash and borrowings Investment income 2 2,761 - 2,761 4,787 - 4,787 Investment management 3 (11,279) 106 (11,173) (9,768) (3,660) (13,428) fees Refund of VAT on 3 2,295 - 2,295 - - - investment management fees Other expenses 4 (1,554) (3,393) (4,947) (900) (454) (1,354) RETURN ON ORDINARY (7,777) (207,427) (215,204) (5,881) 133,547 127,666 ACTIVITIES BEFORE FINANCING COSTS AND TAX Interest payable and 6 (6,882) - (6,882) (2,199) - (2,199) similar charges / finance costs RETURN ON ORDINARY (14,659) (207,427) (222,086) (8,080) 133,547 125,467 ACTIVITIES BEFORE TAX Tax on ordinary 7 (399) - (399) 609 (275) 334 activities RETURN ON ORDINARY (15,058) (207,427) (222,485) (7,471) 133,272 125,801 ACTIVITIES AFTER TAX FOR THE FINANCIAL YEAR RETURN PER ORDINARY AND 8 (22.68)p (312.43)p (335.11)p (11.25) 200.73p 189.48p REDEEMABLE SHARE p * The total column of this statement represents the Company's profit and loss account prepared in accordance with UK Accounting Standards. The supplementary revenue return and capital columns are prepared under guidance published by the Association of Investment Companies. ** Includes currency movements on investments. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. There were no recognised gains or losses other than those passing through the Income 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 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Movement for the year ended 30th June 2009 OPENING EQUITY 25,428 183,182 26 227,504 225,056 99,861 (24,952) 736,105 SHAREHOLDERS' FUNDS Return for the - - - (51,912) (155,515) - (15,058) (222,485) year Expenses relating - 2 - - - - - 2 to issue of ordinary shares written back CLOSING EQUITY 25,428 183,184 26 175,592 69,541 99,861 (40,010) 513,622 SHAREHOLDERS' FUNDS Movement for the year ended 30th June 2008 OPENING EQUITY 25,428 183,139 26 187,543 131,745 99,861 (17,481) 610,261 SHAREHOLDERS' FUNDS Return for the - - - 39,961 93,311 - (7,471) 125,801 year Expenses relating - 43 - - - - - 43 to issue of ordinary shares written back CLOSING EQUITY 25,428 183,182 26 227,504 225,056 99,861 (24,952) 736,105 SHAREHOLDERS' FUNDS The Notes form part of these financial statements. BALANCE SHEET as at 30th JUNE 2009 2009 2008 NOTE Â£'000 Â£'000 Fixed assets Investments designated at fair value through 9a 648,207 806,485 profit or loss Current assets Debtors 10 27,685 927 Cash at bank 17 20,512 8,801 48,197 9,728 Creditors: Amounts falling due within one year Other creditors 11 13,282 7,888 Bank loan 17 120,000 69,966 Bank overdraft 17 - 2,254 133,282 80,108 NET CURRENT ASSETS (85,085) (70,380) Creditors: Amounts falling due after one year Loan notes 12 49,500 - TOTAL ASSETS LESS CURRENT AND NON-CURRENT 513,622 736,105 LIABILITIES Capital and reserves Called-up share capital 13 25,428 25,428 Share premium account 14 183,184 183,182 Capital redemption reserve 14 26 26 Other capital reserve 14 175,592 227,504 Capital reserve on investments held 14 69,541 225,056 Special reserve 14 99,861 99,861 Revenue reserve 14 (40,010) (24,952) TOTAL EQUITY SHAREHOLDER'S FUNDS 513,622 736,105 NET ASSET VALUE PER SHARE - ORDINARY AND 15 773.62p 1,108.72p REDEEMABLE The Notes form part of these financial statements. The ï¬nancial statements were approved by the Board on 13th October 2009 and were signed on its behalf by Tom Bartlam Chairman CASH FLOW STATEMENT YEAR ENDED 30th JUNE 2009 2009 2008 NOTE Â£'000 Â£'000 Cash flow from operating activities Investment income received 2,140 4,814 Deposit and other interest received 621 210 Investment management fees paid (8,100) (9,198) Secretarial fees paid (169) (102) Other cash payments 269 (2,022) NET CASH OUTFLOW FROM OPERATING ACTIVITIES 18 (5,239) (6,298) Returns on investment and servicing of ï¬nance Revolving credit facility and overdraft interest (5,459) (471) paid Loan commitment and arrangement fees paid (429) (552) Redeemable share commitment fees paid (629) (654) Interest on loan notes paid (824) - NET CASH OUTFLOW FROM RETURNS ON INVESTMENT AND (7,341) (1,677) SERVICING OF FINANCE Taxation Net taxation (charge) / refund (399) 498 NET CASH (OUTFLOW) / INFLOW FROM TAXATION (399) 498 Capital expenditure and ï¬nancial investment Purchases of investments (164,296) (280,170) Purchases of government securities - (23,455) Disposals of investments 114,124 136,172 Disposals of government securities - 94,152 Realised currency gains / (losses) 93 (94) NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND (50,079) (73,395) FINANCIAL INVESTMENT NET CASH OUTFLOW BEFORE FINANCING (63,058) (80,872) Financing Written back / costs of ordinary shares issue 2 43 Drawdown of loan 90,034 69,966 Repayment of loan (40,000) - Issue of loan notes 49,500 - Realised currency losses on repayment of revolving (23,515) (594) credit facility NET CASH INFLOW FROM FINANCING 76,021 69,415 INCREASE / (DECREASE) IN CASH 16 12,963 (11,457) 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 applied consistently throughout the year, is set out below. (A) BASIS OF PREPARATION The ï¬nancial statements have been prepared on the historical cost basis of accounting, except for the measurement at fair value of investments and ï¬ nancial instruments, and in accordance with applicable UK accounting standards and on the basis that all activities are continuing. The Company's financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (Â£'000) except when indicated otherwise. (B) STATEMENT OF RECOMMENDED PRACTICE The financial statements have been prepared in accordance with the Statement of Recommended Practice (as amended December 2005) issued by the Association of Investment Companies. (C) SEGMENTAL REPORTING The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business. (D) VALUATION OF INVESTMENTS All investments held by the Company are classiï¬ed as `fair value through proï¬t or loss'. As the Company's business is investing in ï¬nancial assets with a view to proï¬ting from their total return in the form of interest, dividends or increases in fair value, quoted equities and ï¬xed income securities are designated as fair value through proï¬t or loss on initial recognition. The Company manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy. For investments actively traded in organised ï¬nancial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business at the balance sheet date. For investments that are not actively traded in organised ï¬nancial markets, fair value is determined using reliable valuation techniques as described below: (i) Unquoted ï¬xed asset investments are stated at the estimated fair value. In the case of investments in private equity funds, this is based on the net asset value of those funds ascertained from periodic valuations provided by the managers of the funds. Such valuations are necessarily dependent upon the reasonableness of the valuations by the fund managers of the underlying investments. In the absence of contrary information the values are assumed to be reasonable. These valuations are reviewed periodically for reasonableness. In the case of direct investments in unquoted companies, the initial valuation is based on cost. Where better indications of fair value become available, such as through subsequent issues of capital or dealings between third parties, the valuation is adjusted to reflect the new evidence. This information may include the valuations provided by private equity managers who are also invested in the company. Valuations are reduced where the company's performance is not considered satisfactory. Private equity funds may contain a proportion of quoted shares from time to time, for example, where the underlying company investments have been taken public but the holdings have not yet been sold. The quoted market holdings at the date of the latest fund accounts are reviewed and compared with the value of those holdings at the year end. If there has been a material movement in the value of these holdings, the valuation is adjusted to reflect this. (ii) Quoted investments are valued at the bid price on the relevant stock exchange. (iii) The Company may acquire secondary interests at either a premium or a discount to the fund manager's valuation. Within the Company's portfolio, those fund holdings purchased at a premium are normally immediately revalued to their stated net asset values irrespective of the purchase price. Those fund holdings purchased at a discount are normally held at cost until the receipt of a valuation from the fund manager in respect of a date after acquisition, when they are revalued to their stated net asset values, unless an adjustment against a speciï¬c investment is considered appropriate. As at 30th June 2009 there was no aggregate difference to be recognised in the profit or loss at the start or end of the period. (E) INCOME Dividends receivable on quoted equity shares are brought into account on the ex-dividend date. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. The ï¬xed return on a debt security is recognised on a time apportionment basis so as to reflect the effective interest rate on the security. Other interest receivable is included on an accruals basis. (F) TAXATION Corporation tax payable is based on the taxable proï¬t for the year. The charge for taxation takes into account taxation deferred or accelerated because of timing differences between the treatment of certain items for accounting and taxation purposes. Full provision for deferred taxation is made under the liability method, without discounting, on all timing differences that have arisen but not reversed by the balance sheet date, unless such provision is not permitted by Financial Reporting Standard 19: Deferred Tax. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue on the same basis as the particular item to which it relates, using the marginal method of tax for the accounting period. (G) EXPENSES All expenses are accounted for on an accruals basis. Expenses, including investment management fees, are charged through the revenue account except as follows: â€¢ expenses which are incidental to the acquisition or disposal of an investment are treated as capital costs and separately identified and disclosed in Note 9; â€¢ expenses of a capital nature are accounted for through the capital account; and â€¢ 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 the presentation currency. Transactions denominated in foreign currencies are recorded in the local currency at actual exchange rates as at the date of transaction or, where applicable, at the rate of exchange in a related forward exchange contract. Monetary assets and liabilities denominated in foreign currencies at the year end are reported at the rates of exchange prevailing at the year end or, where appropriate, at the rate of exchange in a related forward exchange contract. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the Income Statement. For non-monetary assets these are covered by fair value adjustments. (I) OTHER CAPITAL RESERVE The following are accounted for in this reserve: â€¢ investment performance fees; â€¢ gains and losses on the realisation of investments; â€¢ realised exchange differences of a capital nature; and â€¢ expenses of a capital nature. Capital distributions from investments are accounted for on a reducing cost basis; cash received is ï¬rst applied to reducing the historical cost of an investment; a realised gain will be recognised only when the cost has been reduced to nil. (J) CAPITAL RESERVE ON INVESTMENTS HELD The following are accounted for in this reserve: â€¢ increases and decreases in the value of investments held at the year end. (K) cash and cash equivalents Cash and cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment purposes. Assets are classified as cash equivalents if they are readily convertible to cash and are not subject to significant changes in value. Cash and cash equivalents are defined as cash at bank. (L) INVESTMENT PERFORMANCE FEE The Manager is entitled to a performance fee from the Company in respect of each 12 calendar month period ending on 30th June in each year. The fee payable in respect of each such period is 5% of any increase in the net asset value of the Company at the end of such period over the applicable `high-water mark' plus the hurdle rate of 10%. The applicable `high-water mark' in respect of any calculation period is the net asset value at the end of the previous calculation period in which a performance fee was payable, compounded annually at the hurdle rate for each subsequent completed calculation period up to the commencement of the calculation period for which the performance fee is being calculated. If no performance fee has previously been expensed, the applicable `high-water mark' is the net asset value at 31st December 2006 multiplied by 1 + (181/365 x 10%), compounded annually at the hurdle rate for each completed 12 calendar month period after 30th June 2007 up to the commencement of the calculation period for which the performance fee is being calculated. 2. Income 30TH JUNE 2009 30TH JUNE 2008 Â£'000 Â£'000 Income from investments Unfranked dividends 2,140 3,037 Interest from UK ï¬xed interest investments - 1,540 2,140 4,577 Other income Deposit interest - 210 Other interest 620 - Exchange differences on income 1 - 621 210 TOTAL INCOME 2,761 4,787 Total income comprises: Dividends 2,140 3,037 Interest 620 1,750 Exchange differences on income 1 - 2,761 4,787 Analysis of income from investments Listed UK - 1,540 Unlisted 2,140 3,037 2,140 4,577 3. Investment Management Fees 30TH JUNE 30TH JUNE 2009 2008 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Investment management 11,279 - 11,279 9,768 - 9,768 fees Investment performance - (106) (106) - 3,660 3,660 fee VAT thereon (2,295) - (2,295) - - - 8,984 (106) 8,878 9,768 3,660 13,428 The investment management fee is payable monthly in arrears at the rate set out in the Extracts from the Directors' Report above. At 30th June 2009 Â£5,064,000 (2008: Â£1,885,000) was owed for investment management fees (see Note 19 for more details on VAT reclaim). Following an adjustment of Â£(106,000), a performance fee of Â£5,057,000 is payable to the Manager in respect of the initial 18 month performance fee calculation period ended 30th June 2008. Of this amount Â£3,660,000 was charged in the year to 30th June 2008 with the remaining balance charged in the year to 30th June 2007. No performance fee is payable in respect of the 12 calendar month period to 30th June 2009. The basis upon which the performance fee is calculated is explained in Note 1(L) and the Extracts from the Directors' Report above. 4. Other Expenses 30TH JUNE 30TH JUNE 2009 2008 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Secretarial and 169 - 169 113 - 113 accountancy services Fees payable to the 35 - 35 34 - 34 Company's Auditor for the audit of the annual financial statements Fees payable to the 26 - 26 20 - 20 Company's Auditor for other services: - All other services Directors' remuneration 145 - 145 135 - 135 (see Note 5) Fixed income management - - - 41 - 41 Irrecoverable VAT 299 - 299 (153) - (153) Legal and professional 585 3,393 3,978 288 454 742 fees Printing 65 - 65 87 - 87 Other 230 - 230 335 - 335 1,554 3,393 4,947 900 454 1,354 The Directors do not consider that the provision of non-audit work to the Company affects the independence of the Auditor. 5. Directors' Remuneration Directors' emoluments comprise wholly Directors' fees. 6. Interest Payable and Similar Charges 30TH JUNE 2009 30TH JUNE 2008 Â£'000 Â£'000 Bank loan and overdraft interest 5,045 885 Loan commitment and arrangement fees 344 725 Redeemable share commitment fee 669 589 Loan notes interest 824 - 6,882 2,199 7. Tax on Ordinary Activities 30TH JUNE 30TH 2009 JUNE 2008 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Income tax refund - - - (609) - (609) Withholding tax deducted 399 - 399 - 191 191 from distributions Japanese tax charged on - - - - 84 84 capital gains 399 - 399 (609) 275 (334) Current taxation The current taxation for the year differs from the standard rate of corporation tax in the UK (28%). The differences are explained below: Net return on ordinary (14,659) (207,427) (222,086) (8,080) 133,547 125,467 activities before tax Theoretical tax at UK (4,104) (58,080) (62,184) (2,424) 40,064 37,640 corporation tax rate of 28% (2008: 30%) Non-taxable investment and - 57,159 57,159 - (41,345) (41,345) currency gains Effect of expenses in - 921 921 - 1,281 1,281 excess of taxable income Unused management expenses 4,104 - 4,104 2,424 - 2,424 Withholding tax deducted (399) - (399) - (191) (191) from distributions Japanese tax charged on - - - - (84) (84) capital gains Income tax refund - - - 609 - 609 TOTAL CURRENT TAX (399) - (399) 609 (275) 334 Factors that may affect future tax charges The Company is an investment trust and therefore is not subject to tax on capital gains. Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the Company meets (and intends to meet for the foreseeable future) the conditions for approval as an Investment Trust Company. No deferred tax asset has been recognised in respect of excess management expenses and expenses in excess of taxable income as they will only be recoverable to the extent that there is sufï¬cient future taxable revenue. As at 30th June 2009 excess management expenses are estimated to be in excess of Â£35 million. 8. Return per Share 30TH JUN 30TH E 2009 JUNE 2008 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL RETURN PER ORDINARY AND (22.68) (312.43) (335.11) (11.25) 200.73p 189.48p REDEEMABLE SHARE p p p p Ordinary and redeemable shares Revenue return per share is based on the net deficit on ordinary activities after taxation of Â£15,058,000 (2008: deficit of Â£7,471,000) and on 66,392,268 (2008: 66,392,268) ordinary shares and redeemable shares, being the number of shares in issue during the year. Capital return per share is based on the net deficit on ordinary activities after taxation of Â£207,427,000 (2008: return of Â£133,272,000) and on 66,392,268 (2008: 66,392,268) ordinary shares and redeemable shares, being the number of shares in issue during the year. Total return per share is based on the net deficit for the year of Â£222,485,000 (2008: return of Â£125,801,000) and on 66,392,268 (2008: 66,392,268) ordinary shares and redeemable shares, being the number of shares in issue during the year. 9a. Movements On Investments 30TH JUNE 30TH JUNE 2009 2008 Â£'000 Â£'000 Book cost brought forward 582,462 464,286 Acquisitions at cost 164,296 303,457 Capital distributions - proceeds (140,769) (230,316) Capital distributions - realised (losses) / gains on (26,205) 45,038 sales BOOK COST AT 30TH JUNE 579,787 582,465 Unrealised appreciation of investments Unlisted investments 78,679 224,020 Provision (10,259) - VALUATION OF INVESTMENTS AT 30TH JUNE 648,207 806,485 9b. Analysis Of Investments 30TH JUNE 30TH JUNE 2009 2008 Â£'000 Â£'000 United Kingdom Unlisted investments 37,230 56,516 USA Unlisted investments 474,584 522,181 Other Unlisted investments 136,393 227,788 648,207 806,485 Realised (losses) / proï¬ts on sales (26,205) 45,038 Amounts previously recognised as unrealised 55,121 10,329 appreciation on those sales (Decrease) / increase in unrealised appreciation (210,721) 81,984 (LOSSES) / GAINS ON INVESTMENTS (181,805) 137,351 Further analysis of the investment portfolio is provided in the Manager's Review. Transaction costs incidental to the acquisition of investments totalled Â£nil (2008: Â£nil) and to the disposals of investments totalled Â£8,000 (2008: Â£6,000) for the year. 9c. Disposal Of Investments During the year PIP disposed of a number of fund interests to strengthen its finances and reduce undrawn commitments. VALUE AS AT PROCEEDS BOOK COST 30TH JUNE 2008 Â£'000 Â£'000 Â£'000 DISPOSAL OF INVESTMENTS 49,691 103,417 118,911 10. Debtors 30TH JUNE 30TH JUNE 2009 2008 Â£'000 Â£'000 Amounts owed by investment funds 27 221 Prepayments and accrued income 566 706 Proceeds from disposal of investments 27,092 - 27,685 927 11. Creditors: Amounts falling due within one year 30TH JUNE 30TH JUNE 2009 2008 Â£'000 Â£'000 Investment management fees 5,064 1,885 Investment performance fee 5,057 5,163 Other creditors and accruals 3,161 840 Other creditors 13,282 7,888 Bank loan 120,000 69,966 Bank overdraft - 2,254 133,282 80,108 The Company has a facility agreement with The Royal Bank of Scotland whereby the bank has agreed to make available to the Company a Â£150,000,000 ï¬ve-year committed revolving credit facility, expiring 25th May 2012, and an overdraft facility of Â£5,000,000. Each individual draw down bears interest at a variable rate agreed in advance for the period of the draw down. At 30th June 2009 the amount of Â£120,000,000 (30th June 2008: Â£72,220,000) was drawn down under the facilities. 12. CREDITORS: Amounts Falling Due After One Year 30TH JUNE 30TH JUNE 2009 2008 Â£'000 Â£'000 Non-current liabilities Unsecured subordinated loan notes 49,500 - 49,500 - Terms and debt repayment schedule Terms and conditions of outstanding loans were as follows: 2009 2008 NOTIONAL CARRYING CARRYING INTEREST YEAR OF FACE AMOUNT FACE AMOUNT VALUE VALUE CURRENCY RATE MATURITY Â£'000 Â£'000 Â£'000 Â£'000 Unsecured GBP LIBOR* 2010** 49,500 49,500 - - subordinated loan +1.5% notes 49,500 49,500 - - * LIBOR is the published British Banking Association rate of interest for one month sterling deposits in the London interbank market on the date the interest period commences or the next business day if the interest commencement date is not a business day. Interest is payable quarterly in arrears. ** Unsecured subordinated loan notes are due to mature in November 2010. 13. Called-up Share Capital 30TH JUNE 30TH JUNE 2009 2008 Â£'000 Â£'000 Authorised: 63,474,919 (2008: 63,474,919) ordinary shares of 67p 42,528 42,528 each 100,000,000 (2008: 100,000,000) redeemable shares of 1p 1,000 1,000 each 43,528 43,528 Allotted, called-up and fully paid: 37,521,013 (2008: 37,521,013) ordinary shares of 67p 25,139 25,139 each 28,871,255 (2008: 28,871,255) redeemable shares of 1p 289 289 each 25,428 25,428 Redeemable shares rank equally with ordinary shares regarding dividend rights and rights on winding up or return of capital (other than a redemption or purchase of shares). The holders of redeemable shares have the right to receive notice of and attend all general meetings of the Company but not to speak or vote. The holders of ordinary shares are entitled to one vote for each ordinary share held. The redeemable shares are redeemable at the option of the Company, at the prevailing net asset value per share, within 60 days following the end of each quarterly NAV calculation date or within 60 days of any other business day which is 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 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Beginning of year 183,182 26 227,504 225,056 99,861 (24,952) Net gain on realisation - - 28,916 - - - of investments Increase in unrealised - - - (210,721) - - appreciation Transfer on disposal of - - (55,121) 55,121 - - investments Exchange differences on - - (22,420) - - - loan and currency Exchange differences on - - - 85 - - other capital items Legal and professional - - (3,393) - - - costs charged to capital Performance fee rebate - - 106 - - - charged to capital Costs of issue of 2 - - - - - ordinary shares written back Revenue return for the - - - - - (15,058) year END OF YEAR 183,184 26 175,592 69,541 99,861 (40,010) 15. Net Asset Value per Share The net asset value per share and the net assets attributable at the year end calculated in accordance with the Articles of Association were as follows: NET ASSET VALUE PER NET ASSETS SHARE ATTRIBUTABLE 2009 2008 2009 2008 Â£'000 Â£'000 ORDINARY AND REDEEMABLE SHARES 773.62p 1,108.72p 513,622 736,105 Basic net asset value per share is based on net assets attributable to equity shareholders of Â£513,622,000 (2008: Â£736,105,000) and on 66,392,268 (2008: 66,392,268) ordinary shares and redeemable shares, being the number of shares in issue at the year end. 16. Reconciliation of Net Cash Flow to the Movement in Net Debt 30TH JUNE 2009 30TH JUNE 2008 Â£'000 Â£'000 Increase / (decrease) in cash in year 12,963 (11,457) Non-cash movement - Exchange gains 1,002 994 CHANGE IN NET FUNDS / (DEBT) 13,965 (10,463) NET (DEBT) / FUNDS AT BEGINNING OF YEAR (63,419) 17,010 Loans drawn down (50,034) (69,966) Loan notes (49,500) - NET DEBT AT END OF YEAR (148,988) (63,419) 17. Analysis of Net Debt AT 30TH JUNE AT 30TH JUNE 2009 2008 Â£'000 Â£'000 Cash at bank 20,512 8,801 Bank overdraft - (2,254) Bank loan (120,000) (69,966) Loan notes (49,500) - (148,988) (63,419) 18. Reconciliation of Return on Ordinary Activities before Tax and Financing Costs to Net Cash Flow from Operating Activities 30TH JUNE 30TH JUNE 2009 2008 Â£'000 Â£'000 Return on ordinary activities before ï¬nancing costs (215,204) 127,667 and tax Losses / (gains) on investments 181,805 (137,351) Currency losses / (gains) on cash and borrowings 22,335 (310) Increase in creditors 5,685 3,187 Decrease in other debtors 140 509 NET CASH OUTFLOW FROM OPERATING ACTIVITIES (5,239) (6,298) 19. Contingencies, Guarantees and Financial Commitments At 30th June 2009 there were ï¬nancial commitments outstanding of Â£427.8 million (2008: Â£641.2 million) in respect of investments in partly paid shares and interests in private equity funds. As a result of the AIC/Claverhouse ruling the Company no longer pays VAT on its investment management fees. During the year the Company recovered Â£2,295,000 of VAT previously paid on investment management fees and Â£620,000 in associated interest from HM Revenue & Customs. 20. Analysis of Financial Assets and Liabilities The primary investment objective of the Company is to seek to maximise long-term capital growth for its shareholders by investing in funds specialising in unquoted investments, acquiring unquoted portfolios and participating directly in private placements. Investments are not restricted to a single market but are made when the opportunity arises and on an international basis. The Company's financial instruments comprise securities and other investments, cash balances and debtors and creditors that arise from its operations, for example sales and purchases awaiting settlement and debtors for accrued income. The principal risks the Company faces in its portfolio management activities are: â€¢ liquidity/marketability risk; â€¢ interest rate risk; â€¢ market price risk; and â€¢ foreign currency risk. The Company has little exposure to credit risk. The Manager monitors the financial risks affecting the Company on a daily basis and the Directors receive financial information monthly, which is used to identify and monitor risk. In accordance with Financial Reporting Standard 29: Financial Instruments: Disclosures, 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 of the portfolio is invested in unquoted securities, many of which are less readily marketable than, for example, `blue-chip' UK equities. The Directors believe that the Company, as a closed-end fund with no fixed wind-up date, is ideally suited to making long-term investments in instruments with limited marketability. The investments in unquoted securities are monitored by the Board on a monthly basis. There are limited opportunities for the Company to acquire secondary unquoted portfolios due to the cyclical nature of their occurrence. As a result, at times of low investment opportunity, some funds may be invested in gilts and other fixed interest government bonds. It is the nature of investment in private equity that a commitment to invest will be made and that calls for payments will then be received from the unlisted investee entity. These payments are usually on an ad-hoc basis and may be called at any instance over a number of years. In order to cover such commitments, the Company has entered into a Â£150,000,000 five-year committed revolving credit facility with The Royal Bank of Scotland plc expiring on 25th May 2012. At 30th June 2009 the amount drawn down was Â£120,000,000 (30th June 2008: Â£69,966,000) (see Note 11 for further information). The principal covenant that applies to the loan facility is that gross borrowings do not exceed 30% of adjusted gross asset value. INTEREST RATE RISK The Company may use gearing to achieve its investment objectives and manage cash flows and uses a Â£150,000,000 revolving credit facility and unsecured subordinated loan notes for this purpose. Interest on the revolving credit facility is payable at variable rates determined subject to draw down. Variable rates are defined as LIBOR + 1.25%. The interest rate is then fixed for the duration that the loan is drawn down. At 30th June 2009 there were Â£120,000,000 funds drawn down on the loan facilities (30th June 2008: Â£69,966,000). The loan is due to be repaid within one year and as such fair value is not considered to be materially different from par value. Interest on the unsecured subordinated loan notes is payable quarterly in arrears at LIBOR + 1.5%. LIBOR is the published British Banking Association rate of interest for 1 month sterling deposits in the London interbank market on the date the interest period commences or the next business day if the interest commencement date is not a business day. At 30th June 2009 there were Â£49,500,000 funds drawn down on the loan notes (30th June 2008: nil). The loan notes are due to mature in November 2010 and fair value is not considered to be materially different from par value. The Company's bank accounts do not earn interest. Should any balance go overdrawn then interest will become payable at variable rates. Non-interest rate exposure The remainder of the Company's portfolio and current assets are not subject to interest rate risks. Financial assets for 2009 and 2008 consist of investments, cash and debtors (excluding prepayments). As at 30th June 2009, the interest rate and maturity profile of the Company's financial assets was as follows: FIXED INTEREST NO MATURES AVERAGE MATURITY WITHIN INTEREST TOTAL DATE 1 YEAR RATE 30TH JUNE 2009 Â£'000 Â£'000 Â£'000 % Fair value interest rate risk ï¬nancial assets Sterling - - - - US dollar - - - - Other European - - - - - - - - No interest rate risk ï¬nancial assets Sterling 41,601 41,601 - - US dollar 492,259 492,259 - - Other European 161,979 161,979 - - Other - - - - 695,839 695,839 - - The interest rate and maturity profile of the Company's financial assets as at 30th June 2008 was as follows: FIXED INTEREST NO MATURES AVERAGE MATURITY WITHIN INTEREST TOTAL DATE 1 YEAR RATE 30TH JUNE 2008 Â£'000 Â£'000 Â£'000 % Fair value interest rate risk ï¬nancial assets Sterling - - - - US dollar - - - - Other European - - - - - - - - No interest rate risk ï¬nancial assets Sterling 57,042 57,042 - - US dollar 530,408 530,408 - - Other European 227,977 227,977 - - Other - - - - 815,427 815,427 - - As at 30th June 2009, the interest rate and maturity profile of the Company's financial liabilities was as follows: NO MATURES MATURES MATURITY WITHIN AFTER TOTAL DATE 1 YEAR 1 YEAR 30TH JUNE 2009 Â£'000 Â£'000 Â£'000 Â£'000 Overdraft - - - - Loan 120,000 - 120,000 - Loan notes 49,500 - - 49,500 169,500 - 120,000 49,500 As at 30th June 2008, the interest rate and maturity profile of the Company's financial liabilities was as follows: NO MATURES MATURITY WITHIN TOTAL DATE 1 YEAR 30TH JUNE 2008 Â£'000 Â£'000 Â£'000 Overdraft 2,254 - 2,254 Loan 69,966 - 69,966 72,220 - 72,220 FINANCIAL LIABILITIES The Company primarily finances its operations through its issued capital, bank borrowings, unsecured subordinated loan notes and existing reserves. At 30th June 2009, the Company had Â£120,000,000 (2008: Â£69,966,000) drawn down of its Â£ 150,000,000 committed five-year revolving credit facility with The Royal Bank of Scotland. Tranches from this facility are drawable in US dollars, euros and sterling. Interest is incurred at a variable rate as agreed at the time of draw down and is payable at the maturity date of each advance. At the year end, interest of Â£nil (2008: Â£414,000) was accruing. The unsecured subordinated loan notes are due to mature in November 2010. Interest is payable quarterly in arrears as described in Note 12, no interest was payable at the year end (2008: Â£nil). With the exception of the loan notes and bank overdraft, which at 30th June 2009 stood at Â£nil (2008: Â£2,254,000), there was no interest rate risk associated with other short-term creditors at 30th June 2009 or 30th June 2008. At 30th June 2009 and 30th June 2008, with the exception of the loan notes and bank revolving credit facility referred to above, all other financial liabilities were due within one year. The revolving credit facility is included in creditors falling due within one year. MARKET PRICE RISK The method of valuation of the fixed asset investments is described in Note 1 (D) to the financial statements. The nature of the Company's fixed asset investments, with a high proportion of the portfolio invested in unquoted securities, means that the investments are valued by the Directors after due consideration of the most recent available information from the underlying investments. If the investment portfolio valuation fell by 20% from the 30th June 2009 valuation, with all other variables held constant, there would have been a reduction of Â£129,641,000 (2008 based on a 20% fall: Â£161,297,000) in the return before taxation. An increase of 20% in the investment portfolio valuation would have had an equal and opposite effect in the return before taxation. FOREIGN CURRENCY RISK Since it is the Company's policy to invest in a diverse portfolio of investments based in a number of countries, the Company is exposed to the risk of movement in a number of foreign exchange rates. A geographical analysis of the portfolio and hence its exposure to currency risk is given in the Manager's Review. Although it is permitted to do so, the Company did not hedge the portfolio against the movement in exchange rates during the financial year as there was no significant increase in the perceived risk of exchange rate movement. The investment approach and the Manager's consideration of the associated risk are discussed in further detail in the Manager's Review. The Company settles its transactions from its bank accounts at an agreed rate of exchange at the date on which the bargain was made. As at 30th June 2009, realised exchange gains of Â£93,000 (2008: Â£94,000 losses) and unrealised gains relating to currency of Â£1,087,000 (2008: Â£998,000) have been taken to the capital reserve. If the sterling/dollar and sterling/euro exchange rate had reduced by 10% from that obtained at 30th June 2009, it would have the effect, with all other variables held constant, of increasing equity shareholders' funds by Â£4,807,000 (2008: reducing by Â£6,081,000). If there had been an increase in the sterling/ dollar and sterling/euro exchange rate of 10% it would have the effect of decreasing equity shareholders' funds by Â£3,933,000 (2008: increasing by Â£ 4,975,000). The calculations are based on the investments held at fair value through profit or loss and the exchange rate of 1.61255 sterling/dollar and 1.13925 sterling/euro as at 30 June 2009. An analysis of the Company's exposure to foreign currency, excluding private equity investments, is given below: 30TH 30TH JUNE 30TH 30TH JUNE JUNE JUNE 2009 2009 2008 2008 ASSETS LIABILITIES ASSETS LIABILITIES Â£'000 Â£'000 Â£'000 Â£'000 US dollar 17,675 - 8,308 52,258 Euro 25,163 - 187 10,962 Swedish krona 423 - - - Japanese yen - - 1 - 43,261 - 8,496 63,220 FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES All of the financial assets and liabilities of the Company are held at fair value. Financial liabilities are held at amortised cost which is not materially different from fair value. MANAGING CAPITAL The capital structure of the Company consists of cash held and shareholders' equity. The Company's equity is analysed into its various components in Note 13. Capital is managed so as to maximise the return to shareholders while maintaining a capital base to allow the Company to operate effectively in the marketplace and sustain future development of the business. To this end the Company may use gearing to achieve its objectives. Details of borrowings at the year end can be found earlier in this note and in the Extracts from the Directors' Report. The Company's assets and borrowing levels are reviewed regularly by the Board of the Company with reference to the loan covenants. The Company's capital requirement is reviewed regularly by the Board of the Company. 21. Related Party Transactions The Manager, Pantheon Ventures Limited, is regarded as a related party of the Company. Mr R.M. Swire, a Director of the Company, is a director of Pantheon Holdings Limited, the holding company of Pantheon Ventures Limited. The amounts paid to the Manager are disclosed in Note 3. DOCUMENTS AVAILABLE FOR INSPECTION At the Annual General Meeting to be held on 26th November 2009, it is proposed that new Articles of Association be adopted, primarily to reflect the provisions of the Companies Act 2006 that are due to come into force on or before 1st October 2009 and the provisions of the Companies (Shareholders' Rights) Regulations 2009 which came into force on 3rd August 2009. An explanation of the principal changes is set out in the Annual Report and Accounts for the year ended 30th June 2009, a copy of which can be found at www.pipplc.com. A copy of the proposed new Articles is being lodged with the UK Listing Authority and will shortly be available for inspection through the Document Viewing Facility, which is situated at Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS (Tel no. 020 7676 8224).

Companies

Pantheon International (PIN)

Thursday, 23rd May 2024

COMPANIES COVERED:

HL. QQ. AJB

Another day and another round of takeover talk with Hargreaves Lansdown being eyed by private equity suitors. AJ Bell also advances on upbeat earnings news whilst QinetiQ upgrades its profit guidance, too.

Full Archive

UK 100

Latest directors dealings

1 hour ago Marlowe
2 hours ago Haleon
2 hours ago TUI AG Reg Shs (DI)
2 hours ago Georgia Capital
2 hours ago Weir Group

All directors dealings today