Annual Financial Report

PANTHEON INTERNATIONAL PARTICIPATIONS PLC (the "Company" or "PIP") ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30TH JUNE 2014 The full Annual Report and Accounts can be accessed via the Company's website at or by contacting the Company Secretary by telephone on 01392 412122. PIP will be holding a webcast at 2.30pm BST today to discuss the 2014 Annual Report and Accounts. The presentation can be viewed on with Access Pin 9013832. Please use the dial in details below and ensure that you give your name, company name and the password PIP when dialling in for the webcast. 0808 109 0700 UK Toll Free +44 (0) 20 3003 2666 Standard International Access STRATEGIC REPORT YEAR AT A GLANCE Key Performance Indicators - +2% NAV per share increase (2013: +12%) - 16% Ordinary share price discount to NAV (2013: 22%) - 22% Redeemable share price discount to NAV (2013: 21%) - 1.34% Total ongoing charges excluding tax (2013: 1.40%) Other Indicators - +10% Ordinary share price increase (FTSE All Share TR: +13%, MSCI World TR: +11%) - +2% Redeemable share price increase (FTSE All Share TR: +13%, MSCI World TR: +11%) - £902m NAV (2013: £903m) - 1,364.2p NAV per share (2013: 1,331.9p) - £142m Net cash flow generated from PIP's portfolio (2013: £150m) - £148m New investment commitments (2013: £129m) - £18m Investments in share buybacks for the year, generating a 0.5% uplift to NAV per share (2013: £27m; 1.2% uplift) - 5.7x Ratio of assets and available financing to undrawn commitments (2013: 5.2x) SINCE Performance at 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION 30th June 2014 % % P.A. % P.A. % P.A. % P.A. NAV per share 2.4 7.3 12.0 9.1 11.2 Ordinary share price 10.4 17.2 31.3 9.5 11.1 FTSE All-Share Total Return 13.1 8.9 14.5 8.6 8.1 MSCI World Total Return (sterling) 10.7 10.1 14.7 8.5 7.1 PIP was launched on 18th September 1987. The figures since inception assume reinvestment of dividends, capital repayments and cash flows from the exercise of warrants. Capital Structure at 30th June 2014 Ordinary shares 33,522,013 Redeemable shares 32,572,534 Total 66,094,547 CHAIRMAN'S STATEMENT In the financial year, our NAV rose by 2.4%. The underlying investment gain of more than 13% was reduced by foreign exchange effects caused by the strength of sterling relative to the US dollar and to a lesser extent the euro and other currencies. While adverse foreign exchange movements can be frustrating in the short term, over the long term we believe currency volatility has minimal effects on our investment returns. The share prices of the ordinary and redeemable shares increased by 10.4% and 1.9% respectively and, in the case of the ordinary shares, the discount to NAV per share narrowed. The portfolio generated significant cash inflows through distributions which we have redeployed in new investment opportunities including, from time to time, buying our own shares. We believe, given the positive outlook for realisations, and our ability flexibly to redeploy our capital in attractive investments, the outlook for the Company continues to be favourable. Performance PIP's portfolio generated a return including income of 13.4% relative to opening assets before foreign exchange effects, which reduced NAV per share by 10.1%. Share buybacks added 0.5% to the NAV per share and expenses including taxes amounted to 1.4%. The performance was particularly affected by the negative movement of the US dollar against sterling, as 54% of the portfolio is invested in funds focused on the USA, reflecting our belief in the greater resilience and depth of opportunity in that market. While exchange rates will from time to time fluctuate and have had a more positive impact on performance since the period end, over the long term we believe we can expect to derive the full economic benefit from our portfolio's exposure to higher growth businesses with a bias towards those operating in economies that have demonstrated greater commitment to sound economic management. The net performance, therefore, masks strong underlying growth, in particular from our US portfolio in a period that saw US GDP grow, in real terms, by 1.9%, and the S&P 500 reach all-time highs. In Europe, while overall the economic outlook was not as resilient, we continue to see good performance out of the region. Despite a faltering GDP outlook, particularly in Europe, a sample representing approximately 70% of PIP's buyout portfolio continued to demonstrate earnings growth in excess of broader equity markets. Underlying revenue and EBITDA growth in the sample was 10.9% and 8.4% respectively. This compares favourably to the equivalent rates of the FTSE All-Share and MSCI World indices. Our portfolio, with its principal focus on businesses operating in niches with good growth prospects, can achieve investment performance through strategic and operational changes that private equity managers selected by Pantheon implement through a well-aligned, capital efficient investment model. The prices of ordinary and redeemable shares increased by 10.4% and 1.9% respectively in the period. The ordinary share price benefited from a significant reduction in the discount to NAV from 22% to 16%, while the redeemable share price discount finished the period at 22%. Share Buybacks In the year to 30th June 2014, the Company invested £18m to buy back and cancel 1.0m ordinary shares, and 0.7m redeemable shares, resulting in an uplift to NAV per share of 7.2p or 0.5% of PIP's NAV per share. PIP began buying back shares in August 2011 and so far has invested £76.2m in buying back 12.5% of the Company's shares. The discounts at which the Company's shares trade from time to time may make buybacks an attractive investment opportunity relative to other potential new investment commitments. Investment Activity PIP received distributions of £184m during the year, equivalent to an annual rate of 22% of opening portfolio assets. Calls from underlying private equity funds were £42m. This resulted in a net portfolio cash flow prior to new investment commitments of £142m during the year. PIP's portfolio is mature, with a weighted average fund age of 7.8 years. Given this maturity, it is expected that the portfolio will continue to generate positive net cash flows. Realisations can contribute to performance as exits often occur at an uplift to their previous holding value. PIP's largest 100 distributions, representing 35% by value of total distributions, had realised an average uplift of 25%. New Investments While the environment for new investments has undoubtedly become more competitive this year, the Company has benefited from its flexible investment strategy and Pantheon's extensive network to seek out opportunities which offer compelling relative value. PIP made 29 new investments in the year, amounting to £148m in commitments with £92m drawn. This consists of six secondary and four primary commitments totalling £106m of commitments to funds, and 19 co-investments alongside selected private equity managers of £42m. Almost 54% of the secondary investments were in large buyout funds that were formed predominantly within the 2004-2008 vintages. This reflects both the emphasis of Pantheon's secondary origination initiative and sellers' focus on trimming their exposure to these fund vintages. The majority of PIP's co-investments were in buyouts. Since the year end, the Company has committed a further £70m; £41m to three secondaries, £6m to two co-investments, and £23m to three primary funds. Balance Sheet PIP's balance sheet remains ungeared. This gives the Company flexibility in redeploying capital as it receives distributions with an expectation of being able to steadily renew its portfolio. Consequently, while the Company maintains credit facilities as a matter of course to cover any unexpected cash needs, they again remained unutilised throughout the period. The Board expects to renew the credit facility before its expiry in June 2015. At 30th June 2014, the Company's cash stood at £88m, which together with credit facilities, meant the Company had total liquid resources of £182m. Undrawn commitments of £176m at 30th June 2014 were covered by assets and loan facilities by a factor of 5.7 times. Strategy The Board regularly reviews the Company's investment strategy and the appropriate balance between secondaries, co-investments and primary investments in order to achieve our objective of maximising capital growth while controlling the level of asset concentration, maturity and financial risk. Emphasising secondary investment enables us to maintain a relatively mature portfolio. Consequently, the portfolio distribution rate can remain high from year to year, enabling the Company, through the re-investment of distribution proceeds, to renew the portfolio over a four to five year period as capital is re-invested at a controlled pace. We believe this steady renewal rate helps to control cyclical risk on our way to generating long-term investment performance. PIP increased its allocation to co-investments this year. Co-investment is becoming a more established part of the market and with Pantheon's dedicated pool of professionals sourcing co-investment opportunities from amongst its manager relationships globally, we can take advantage of this opportunity. Therefore, as a proportion of PIP's investment activity, co-investments may account for up to 30% of our new investments and if so, we will see PIP's exposure to co-investments increase over the next 3-4 years if the market opportunity remains attractive. The Company will make primary commitments on a targeted basis, where there is an opportunity to gain access to top tier funds addressing particular market opportunities that might not otherwise be so accessible through the secondary market. Such commitments are made within the context of controlling the level of undrawn commitments so they do not ordinarily represent more than a third of PIP's assets. Subject both to this constraint and to the appropriate opportunities being available, we expect to make up to approximately £50m new primary commitments per year. At this level, undrawn commitments can be expected to be comfortably financed from internally-generated cashflow. However, we will also maintain borrowing facilities sufficient to finance any shortfall in net cash flow during unusually low periods of market liquidity. Outlook Although the pace of economic recovery across the regions and markets in which the Company operates is mixed, the general outlook for continued economic recovery in some major markets is helpful in underpinning the rates of underlying corporate earnings growth in our portfolio. Risks of a reversal in market sentiment, however, remain. As recovery takes hold and quantitative easing slows, some factors such as labour costs and interest rates, which have been subdued for some time, may begin putting a brake on the pace of corporate profit growth. Additionally, while the recent events in Ukraine and the Middle East have to date had little impact on public markets, these remain a potential threat to stability. Within the private equity market, easy availability of credit and buoyant equity markets have created a positive environment for realisations but can also lead to an increase in leverage risk. Secondary pricing has tightened as public markets have risen and conditions for exits have remained benign, giving buyers greater confidence in valuations. However, this has also had the effect of increasing the number of secondary market sellers, with 2014 transaction volumes on track to exceed those of 2013, which in itself was a record year. Pantheon has been able to take advantage of these conditions to source high quality assets; we expect the pricing conditions, along with the upcoming regulatory-driven deadlines for banks and insurance companies, to result in a full pipeline of deals in the second half of 2014, although we will continue to exercise pricing discipline. The Company's strong cash generation is helpful in providing investors with continuing evidence of the Company's performance potential so we can actively redeploy capital in new investments, including share buybacks. The portfolio's tendencies to produce better than public market underlying revenue and earnings growth rates and to experience uplifts to holding values on exits, coupled with early performance from new investments enhanced by share buybacks, are the factors that support the outlook for continued NAV growth. Indeed, since the year end, we have seen further NAV per share growth of 5.8%. This was partly driven by investment gains including income, and a reversal of foreign exchange effects, which gave rise to a 4.0% and 2.0% uplift per share respectively. We are optimistic that there is potential for further narrowing of the share price discount, while the historically low average discounts elsewhere in the investment trust sector indicate that the listed private equity sector still offers good value. Board Changes In my statement last year, I noted that the Board is aware that it has a number of long-serving Directors and is committed to ensuring that the pace of retirement and addition of new Directors in the coming years preserves a healthy balance between longer serving and newer members. Further to this, Peter Readman, who joined the Board in 1994, has decided to step down after 20 years as a Director and will be retiring at the Annual General Meeting. I would like to take this opportunity to thank Peter for his dedication and wise counsel, most recently as our Senior Independent Director, over these many years. We are conducting a search for a new Director to join the Board in Peter's place and will announce the new appointment when a suitable candidate has been identified. The Strategic Report has been approved and signed on the Board's behalf. Tom Bartlam Chairman 1st October 2014 OBJECTIVE AND INVESTMENT POLICY Investment Objective The Company's primary investment objective is to maximise capital growth by investing in a diversified portfolio of private equity funds and directly in private companies. Investment Policy The Company's policy is to make unquoted investments, in general by subscribing for investments in new private equity funds ("Primary Investment") and by buying secondary interests in existing private equity funds ("Secondary Investment"), and from time to time to capitalise further on its fund investment activities by acquiring direct holdings in unquoted companies ("Co-investments"), 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: • that no holding in a company will represent more than 15% by value of the Company's investments at the time of investment (in accordance with the requirement for approval as an investment trust which applied to the Company in relation to its accounting periods ended on and before 30th June 2012); • the aggregate of all the amounts invested by the Company in (including commitments to or in respect of) funds managed by a single management group may not, in consequence of any such investment being made, form more than 20% of the aggregate of the most recently determined gross asset value of the Company and the Company's aggregate outstanding commitments in respect of investments at the time such investment is made; • the Company will invest no more than 15% of its total assets in other UK-listed closed-ended investment funds (including UK-listed investment trusts). The Company may invest in funds and other vehicles established and managed or advised by Pantheon or any Pantheon affiliate. In determining the diversification of its portfolio and applying the manager diversification requirement referred to above, the Company looks through vehicles established and managed or advised by Pantheon or any Pantheon affiliate. The Company may enter into derivatives transactions for the purposes of efficient portfolio management and hedging (for example, hedging interest rate, currency or market exposures). Surplus cash of the Company may be invested in fixed interest securities, bank deposits or other similar securities. The Company may borrow to make investments and typically uses its borrowing facilities to manage its cash flows flexibly, enabling the Company to make investments as and when suitable opportunities arise and to meet calls in relation to existing investments without having to retain significant cash balances for such purposes. Under the Company's articles of association, the Company's borrowings may not at any time exceed 100% of the Company's net asset value. Typically, the Company does not expect its gearing to exceed 30% of gross assets. However, gearing may exceed this in the event that, for example, the Company's pipeline of future cash flows alters. The Company may invest in private equity funds, unquoted companies or special purpose or investment holding vehicles which are geared by loan facilities that rank ahead of the Company's investment. The Company does not adopt restrictions on the extent to which it is exposed to gearing in funds or companies in which it invests. INVESTMENT RATIONALE The Board believes that there is a convincing rationale for investing in private equity funds or direct co-investments managed by private equity managers, selected for their ability to outperform their peers, within a globally diversified portfolio. Private equity is the term used for investments made in non-public companies through privately negotiated transactions. More than 5,200 private equity managers globally collectively manage approximately $3 trillion in assets (1). The asset class covers a broad range of strategies, which all share a common theme - capital structure optimisation combined with long-term investment horizons and hands-on management support. For investors looking for attractive risk-adjusted returns relative to other asset classes, private equity has strong credentials. A broad range of institutions, including pension funds, sovereign wealth funds and endowments, as well as high net worth individuals, invest in private equity as it can offer a meaningful boost to the performance of their investment portfolios. (1) Source: Credit Suisse Private Equity Market Overview, December 2013. The Private Equity Investment Approach Private equity investors acquire influential or controlling shareholdings in businesses where there is an opportunity to work closely with a company's management to implement both strategic and operational change that can transform a company's value. Typically specialising in market sectors in which they already have extensive investment experience, private equity managers are well placed to identify attractive investment opportunities based on proprietary research. By ensuring that a company's management are investing at the same time, better alignment between management and shareholders can be achieved through joint ownership. Private equity managers aim to produce absolute returns that outperform public benchmarks through a clear value creation plan and careful alignment of management team interests, while at the same time using leverage to create an efficient capital structure. The high level of outperformance achieved by top quartile managers in the private equity market, evident through multiple cycles, provides the opportunity for a specialist manager such as Pantheon to identify and select managers capable of outperforming public market benchmarks within a diversified portfolio that mitigates the risk of being over-exposed to any single fund, region or investment style. The Board believes that investing the Company's capital in private equity funds flexibly between the primary and secondary markets or directly co-investing in companies alongside private equity managers, in each case selected by Pantheon, provides a good opportunity to generate attractive long-term investment performance. OUR BUSINESS MODEL Company Strategy PIP's strategy is to invest with leading private equity managers whilst reducing investment risk through diversification of the underlying portfolio by geography, investment stage and sector. This strategy is implemented through PIP's access to Pantheon's primary, secondary and co-investment activities. PIP has the flexibility to vary the size and emphasis of its investments depending on its available financing. The spread of performance in private equity is much wider than in other asset classes and the selection of managers has a significant 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. The current portfolio reflects PIP's prolonged access to Pantheon's carefully selected primary and secondary investments over the past 27 years. Only funds that have passed through rigorous research and analysis can be selected for investment. Secondary Commitments It is the Board's current intention to emphasise secondary investment as the Company makes new commitments. Secondary purchases of existing interests in private equity funds are typically acquired between three and six years after a fund's inception, when such funds are substantially invested. 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 sometimes be purchased at a discount, especially in cases where the seller has a need for liquidity, increasing the opportunity for outperformance. As the Company continues to build its financial resources through net portfolio realisations, the shorter duration of secondary investments and lower associated undrawn commitments will enable the Company to maintain its financial strength. 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 alongside Pantheon's latest global secondary fund, Pantheon Global Secondary Fund V, 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 aims to outperform market averages through judicious selection, pricing and timing. Co-investments The Company will also participate in co-investments alongside established private equity managers. The extent of Pantheon's General Partner relationships provide a significant advantage for the sourcing and evaluation of co-investments. As with secondary investing, co-investments allow the Company to put money to work at the time an investment is made. In addition, as there are lower or no management fees charged on co-investments by the underlying private equity manager, co-investing can represent a cost-efficient way of investing, whilst providing PIP with exposure to current vintages. It is the Board's current intention that co-investments will not, on average, account for more than 30% of PIP's new commitments. Primary Commitments Investing in private equity through a primary commitment strategy (e.g. commitments to new private equity funds), by increasing the proportion of immature assets in its portfolio and by increasing its undrawn commitments relative to its assets, can reduce PIP's financial flexibility. New primary investments have longer payback periods, requiring the Company to maintain higher levels of standby financing against undrawn commitments. For these reasons, the Board de-emphasises primary commitments. However, the Company will consider making primary commitments on a targeted basis for portfolio construction purposes. The investment rationale for any new primary commitments will always be weighed against their effects on the Company's financial flexibility so as to keep the undrawn commitments to a level that can comfortably be expected to be financed from internally generated cash flows. Share Buybacks In certain circumstances, usually where the Company's shares are quoted at a significant discount to NAV, the Board may view the shares as presenting an attractive investment opportunity relative to other uses of cash, such as new investment commitments. In such circumstances, the Board will consider targeted buybacks of ordinary and redeemable shares instead of, or in addition to, new investments as a means of utilising cash generated from the Company's portfolio. Social, Environmental, Community, Human Rights and Employment Issues The Company has no employees and the Board consists entirely of non-executive Directors. At the end of the year under review, the Board was comprised of five male Directors and one female Director. As an investment trust, the Company has no direct impact on the community or the environment. The Manager is committed to the Principles for Responsible Investment and its policies are set out in the full Annual Report and Accounts. These Principles are integrated into Pantheon's investment analysis and decision-making process, as well as post-investment monitoring procedures. Retail Investors Advised by IFAs The Company currently conducts its affairs so that its shares can be recommended by independent financial advisers to retail private investors in accordance with the Financial Conduct Authority's ("FCA") rules in relation to non-mainstream investment products. The shares are excluded from the FCA's restrictions which apply to non-mainstream investment products because they are shares in a UK-listed investment trust. PRINCIPAL RISKS AND UNCERTAINTIES 1. Funding of investment commitments and default risk Risk: 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 and may be drawn down at any time. 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. Mitigation: The Company has a mature portfolio which is naturally cash generative and does not ordinarily gear its balance sheet for the purpose of enhancing performance. The Board intends to manage the Company so that undrawn commitments remain at a conservative level relative to its assets and available financing. The total available financing as at 30th June 2014 stood at £182m, comprising £88m in cash balances and £94m in undrawn bank facilities. As a result, the available financing along with the private equity portfolio exceeded the outstanding commitments by a factor of 5.7 times. The Company expects ordinarily to finance the majority of calls from undrawn commitments out of distributions. In the event that the levels of cash distributions and cash balances are insufficient to cover capital calls, the Company has the ability to draw funds from a credit facility (see Gearing section below for details on credit facility). 2. Risks relating to investment opportunities Risk: 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. Mitigation: The Manager has in place a dedicated investment management process that is designed to help maximise the chances of the Board's intended investment strategy being achieved, in line with the Investment Policy section above. The Board periodically reviews investment and financial reports from the Manager to monitor the effectiveness of the Manager's investment management process. 3. Financial risk of private equity Risk: The Company invests in private equity funds and unquoted companies which are less readily marketable than quoted securities. In addition, such investments may carry a higher degree of risk than investments in quoted securities. Mitigation: The Manager's investment management process is designed to produce the best possible risk-adjusted returns from private equity investments. Where the Company commits to private equity funds, such funds are structured as limited life funds where the manager is incentivised to realise investments and return proceeds to investors within the funds' limited life span. As part of the investment process for secondaries and co-investments, an assessment is made to understand the possible impact of the underlying assets' illiquidity on projected exit outcomes. As part of the investment process for primaries, an assessment is made to understand a manager's approach to underlying company illiquidity. 4. Long-term nature of private equity investments Risk: 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 Mitigation: The Company pursues a flexible investment strategy, emphasising secondary investments which will typically have shorter average exit horizons than co-investment and primary commitments. A flexible investment strategy therefore results in a range of likely exit horizons for underlying investments, mitigating this risk. 5. Valuation uncertainty Risk: In valuing its investments in private equity funds and unquoted companies and in publishing its NAV, 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 the managers of these funds and companies. In addition, the information provided is typically more than 60 days old at the time the NAV of the Company's shares is reported. Mitigation: In the case of the Company's investment in private equity funds and direct investments managed by private equity managers, the valuation of investments is based on valuations provided by the private equity managers that are periodically audited. Pantheon carries out a formal valuation process involving a monthly review of these valuations, verification of the latest audited reports coverage, as well as a review of any potential adjustments required to ensure reasonable valuation of underlying investments in accordance with fair market value principles required under GAAP. 6. Gearing Risk: 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, increasing its investment risk. Mitigation: While debt is commonly used within the capital structure of private equity funds' portfolio investments, it is not commonly used at the fund level other than for working capital purposes. Thus, leverage risk is typically non-recourse between portfolio companies operating independently within the same portfolio. For working capital purposes, the Company maintains a revolving credit facility arranged by The Royal Bank of Scotland plc, due to expire in June 2015, and comprising facilities of $82m and €57m. The principal covenant that applies to the loan facility ensures that the Company is limited to a maximum gearing of 30% of adjusted gross asset value. The facility was unutilised as at 30th June 2014. 7. Foreign currency risk 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. Mitigation: The Manager monitors the Company's underlying foreign exchange exposure and seeks to balance the risks associated with holding different currencies through diversification and cost averaging effects. Furthermore, as part of the investment management process, the Manager will assess the risk-return of a specific investment, taking into consideration the currency denomination of the investment and the potential impact of currency risk. However, foreign currency risk tends to be mitigated over longer investment horizons. 8. Unregulated nature of underlying investments Risk: The private equity funds and underlying unquoted investments that form the basis of the majority of the Company's portfolio are not necessarily subject to regulation by the FCA 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. Mitigation: The Manager's investment management process for primary and secondary investments requires verification of the regulatory jurisdiction of underlying funds. In addition, the managers of the underlying funds are mostly regulated by the FCA, SEC, or an equivalent body in the managers' respective jurisdictions. 9. Taxation Risk: 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. Mitigation: The Manager's investment management process incorporates an assessment of the tax impact of each primary or secondary fund investment, or co-investment that is purchased. For every investment, the Manager also reviews the appropriateness of an investment's legal structure and any action required, including the establishment of special purpose and/or blocker vehicles, to tailor an investment's structure to minimise the potential tax impact on the Company. 10. The Manager and other third party advisers Risk: 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 as Manager and may be adversely affected if the services of Pantheon cease to be available to the Company. Mitigation: The Board keeps the performance of the Manager under continual review. In addition, the Management Agreement is subject to a notice period that is designed to provide the Board with adequate time to put in place alternative arrangements in the event the services of Pantheon cease to be available. MANAGER'S REVIEW The Manager (Pantheon) Pantheon, one of the world's foremost private equity specialists, has acted as Manager to PIP since its inception in 1987, evaluating and managing investments on PIP's behalf in line with the strategy agreed by the Board. Pantheon is also one of the largest and most experienced secondary managers, having committed more than $8bn to secondaries over the last 30 years. At a Glance • $30.5bn(1) assets under management, on behalf of over 400 institutional investors • A leader in private equity fund-of-funds management with over 30 years' experience • International team comprising around 200 staff, including 75 investment professionals(2) • At the forefront of the fast-growing secondary market, having committed more than $8bn to secondary investments globally, across more than 320 transactions (1) As at 31st March 2014. The figure includes assets subject to discretionary or non-discretionary management, advice, or those limited to a reporting function. (2) All staff figures as at 1st July 2014. Strong Private Equity Track Record Pantheon is one of the leading private equity fund investors in the world, with global assets under management of $30.5bn, and over 400 institutional investors. Pantheon has a strong and consistent private equity investment track record. For over 30 years, Pantheon has made investments in over 1,400 private equity funds, gaining exceptional insight and access to the most attractive funds in all the major private equity markets. Diversification Pantheon has substantial experience of investing in private equity through various economic cycles and in different regional markets. The firm's asset allocation, diversification strategies and disciplined investment process are structured with the objective of producing the best possible risk-adjusted returns. Pantheon's diversification strategy limits portfolio risk by including a multi-strategy approach, targeting funds with a variety of different return characteristics and deploying capital over a number of vintage years, generally ensuring that the most attractive segments of the market are represented in the portfolio. When applying this approach, the Board works closely with Pantheon to ensure that the management of the Company is in line with its agreed strategy. Reputation as a Preferred Investor Pantheon has been investing in private equity for over 30 years and has an enviable reputation in the industry. Pantheon is often considered a preferred investor due to its reputation, active approach and scale of commitments. In addition, Pantheon generally seeks advisory board seats to contribute actively to governance during the life of the fund. As such, Pantheon is represented on over 270 advisory boards worldwide. Long-standing partnerships with managers on a global basis can also enhance the firm's deal flow in the secondary market. Team-based Culture Pantheon draws upon a deep pool of resources that contributes to a unique team-based culture. With teams operating in London, San Francisco, Hong Kong, Bogotá and New York, Pantheon adopts a collegiate approach to investment decision making, globally leveraging the collective experience and expertise of its investment professionals. The team's experience is also brought to bear on the evaluation, selection and ongoing monitoring of fund investments. Pantheon's team of 75 investment professionals, supported by over 120 other professionals, work together with the ultimate aim of producing strong and consistent results. Secondary Investing Pantheon is one of the largest and longest established secondary investors in the world, with more than 30 years' experience of successful secondary investing. This size and experience means Pantheon can focus on large and complex transactions in which many other lesser resourced investors cannot participate. Pantheon has committed more than $8bn in the secondary market globally across more than 320 transactions, including more than 100 portfolio transactions and more than 200 single fund secondaries. Pantheon consistently utilises the knowledge and due diligence information of its primary fund teams and global offices. Long-standing partnerships with private equity managers around the world help to enhance the firm's deal flow. While the increase in scale of the secondary market has been paralleled by growth in the number of would-be acquirers of secondary assets, Pantheon believes it has an advantage in having wide experience and coverage. As a result, the differentiation between experienced and well-resourced global specialists and the rest is becoming increasingly apparent as the market evolves. MARKET REVIEW The economic recovery has continued over the last year with many developed economies experiencing GDP growth, albeit at a low rate. Despite a slowdown in the first quarter of 2014 due to the severe winter, the US recovery seems to be on track. In Europe, recovery limps on and the risks to growth remain high. With public markets seeming fully valued, particularly in the US, and given the easy availability of credit, we believe investors must exercise vigilance in selecting assets and be prepared for any setbacks to recovery. Although the public market rallies experienced in the second half of 2013 lost steam in the US and Europe during the first half of 2014, they have remained relatively stable. US markets in particular have pushed on to a record high, while volatility, as measured by the VIX, remains low. Credit is easily available and debt pricing has continued to fall. These conditions have proved supportive for exits by private equity managers both in the US and Europe. Elsewhere, despite growth rates remaining lower, emerging markets continue to grow at a faster rate than developed economies. While markets in the region have been volatile, there is an increased possibility that GDP growth in China may stabilise and rise in 2015 as the government introduces measures to support the economy. Market confidence has also begun to return to India, anticipating positive economic developments following the recent change of government. USA The US recovery is now well underway, despite a slowdown in the first quarter of 2014 related to the unusually severe winter. US GDP grew 1.9% in 2013 and is forecasted to grow 1.7% and 2.3%, respectively, in 2014 and 2015(1). Housing starts are on an upward trend, household debt has fallen, and property prices have recovered. The USA continues to benefit from increasingly competitive labour costs (relative to China) and inexpensive energy created by an abundant supply of natural gas, both of which have contributed to a re-shoring of manufacturing. Private equity firms invested $89bn of capital during the first half of 2014, a 16% decrease over the first half of 2013(2). A slowdown in the number of large deals completed contributed to this decline, as readily available and inexpensive debt financing have increased median purchase price multiples to pre-crisis levels. In contrast, deal activity by number increased by 8% during the first half of 2014(3), driven by growth and add-on transactions that are more conservatively valued and often have limited or no competition. The industrial and information technology sectors were the most active during the first half of 2014, representing 30% and 15% of deals completed, respectively (4). We expect healthy deal activity in the second half of 2014 due to significant dry powder remaining in the market and investors' desire to put capital to work. Exit activity has remained strong in 2014, despite the record $586bn distributed to investors by private equity managers in 2013(5). During the first half of 2014, private equity investors exited 435 companies valued at $127bn(6), a 57% increase over 2013. IPOs continue to be an attractive exit route, comprising 7% of all exits in 2014 to date(7). Private equity firms raised $15.6bn in 36 IPOs during the first half of 2014, a 44% year-over-year increase(8). Secondary buyouts and trade sales remain the most popular exit routes as both sponsors and strategics are seeking to acquire high quality companies. Venture capital ("VC") investment continued to increase during the first half of 2014, while financing activity slightly declined. VC funds invested $28.9bn in US start-ups, driven by large rounds for later stage companies, including Uber ($1.2bn), Airbnb ($519.7m), Lyft ($250m) and Pinterest ($200m)(9). High valuations resulted in fewer seed stage financings, which also contributed to the 22% year-on-year volume decline. Exit activity remained steady, with investors selling $25.1bn of investments through 369 liquidity events(10), and is expected to end 2014 on a high note with the completion of Facebook's $19bn acquisition of WhatsApp. IPOs remain a popular exit route for investors, with 68 VC-backed IPOs completed in the first half of 2014(11). Strong LP distributions in 2012 and 2013 fuelled a rebound in the VC fundraising market in 2014. Through the first half of the year, 105 US VC funds have been raised totalling $17.4bn in capital commitments, compared to the $18.2bn raised in all of 2013(12). US fundraising remains strong with continued investor demand for private equity, in part due to robust distributions. In 2013, private equity funds raised $167bn, a post-crisis record, driven by 11 funds that closed on more than $5bn of commitments(13). Fundraising momentum continued in the first half of 2014, with private equity firms raising more than $87bn(14). High-quality managers continue to benefit from scarcity value, resulting in quick fundraises often with a single close. Despite a strong first half, 2014 fundraising will likely not exceed that of 2013 as there are fewer large funds in the market and LPs have shifted their focus to small and middle market funds. (1) Source: Capital Economics, Global Economic Outlook Q314 (2) Source: Preqin (3) Source: Preqin (4) Source: Preqin (5) Source: Preqin PE Performance Monitor (6) Source: Preqin (7) Source: Preqin (8) Source: Renaissance Capital 2Q14 Review (9) Source: PitchBook 3Q14 US Venture Industry Report (10) Source: PitchBook 3Q14 US Venture Industry Report (11) Source: Renaissance Capital 2Q14 Review (12) Source: PitchBook 3Q14 US Venture Industry Report (13) Source: Preqin (14) Source: Preqin Europe The picture in Europe remains mixed with overall GDP growth sluggish. Estimates of Q2 2014 GDP growth suggest this was flat in the Eurozone and +0.2% across the EU(15). Consumer recovery remains slow, particularly in Southern Europe. Evidence of an improvement in either industry or exports is light, with a particular divergence between France and Germany(16). Unemployment is lower but was still 11.5% in the Eurozone in June 2014(17), however, encouragingly, Spain and Portugal did see falls in unemployment and generally youth unemployment is creeping lower. There has been no significant pick-up in exports but prospects are brighter given the weakening of the euro and potential for growth amongst the principal export markets such as China and the US. The ECB's decision in September 2014 to cut interest rates and signal future purchases of asset-backed securities is supportive. Despite this relatively weak backdrop, as seen in our own portfolio, with careful selection of high quality assets, Europe can be an attractive investment prospect. Investment activity has slowed slightly as valuations have increased but purchase price multiples for companies with enterprise values below $250m where many of our managers are active, have not experienced the same increases(18). Private equity managers are favouring smaller add-on acquisitions to platform buyouts. Just as in the US, credit is easily available on attractive terms. The exit environment has been strong during the first half of 2014. While trade sales and secondary buyouts have remained viable exit routes, there was a significant jump in IPO activity in the period, particularly in the UK, with numerous portfolio companies successfully listing on the London Stock Exchange. 2014 is on track to record one of the most active periods for larger exits since the pre-crisis boom, with a number of €1bn+ transactions closing in the first half of the year. Rising equity markets and an increasing rate of distributions have encouraged investors to replenish their commitments to European private equity. New capital has been concentrated towards an ever-smaller group of high-quality funds, with investors continuing to favour the most experienced private equity managers with proven performance track records. (15) Source: Eurostat (16) Source: Capital Economics (17) Source: Eurostat (18) Source: S&P Capital IQ, M&A Stats June 2014 Asia Emerging markets appear to have avoided a hard landing, with GDP growth in China expected to stabilise this year at around 7.4%(19). Debt remains high but we are seeing steps from the Chinese government to control this. Investor confidence in India has improved with better exit conditions but uncertainty remains around regulatory issues. The first half of 2014 saw a significant increase in the value of deals completed(20). Many Asian company owners are finding traditional sources of capital restricted and they are becoming more familiar with private equity as a constructive source of capital. These improving perceptions are giving rise to a greater supply of investment opportunities, where private equity managers are taking significantly influential shareholdings, enabling their active involvement throughout the ownership period. Investor confidence and optimism for the second half of 2014 remains high. Asia is an attractive diversification option for investors, and private equity managers continue to unlock opportunities from the large stock of private companies. Improving market conditions should provide the encouragement required for investment transactions throughout the remainder of 2014. Equally, robust credit markets have made capital more accessible and potentially facilitate increased deal-making going forward. (19) Source: IMF, World Economic Outlook Update, 24th July 2014 (20) Source: Preqin Secondaries Secondary market activity reached a historical high, with $16bn of deal volume in the first half of 2014 versus $12bn in the same period last year(21). Sellers came from a broad spectrum, with banks, public pension funds and asset managers among the most active participants in the market. Regulatory change, capital adequacy testing and portfolio management typically dominate sellers' motivations; this year, they were also enhanced by higher secondary market pricing levels. The overall market saw $36.5bn of secondary deals transacted during the past year, significantly higher than the prior period due to a very busy second half of 2013(22). Matching the broader increase in activity, Pantheon saw an increase in deal flow, reviewing over $50bn of transactions across approximately 280 sellers during the year to 30th June 2014. During the year, secondary market pricing continued to recover towards pre-crisis ranges, with many funds trading at par, or even at premium pricing, to most recent net asset values(23). This has been partly caused by rising public market valuations, but also by the expectation of further increases in public market valuations and continued strong realisation activity. In such a fully priced environment, Pantheon's approach remains highly selective, investing in opportunities only when convinced that there is a clear case for value at entry. This approach attempts to identify fundamentally sound businesses managed by high quality general partners, with robust prospects for medium-term capital gain. Despite the potential for a delay in the implementation of the Volker rule compliance deadline beyond June 2015, banks that continue to hold private equity assets are expected to engage in more selling activity by the end of the year. In addition, if pricing levels persist at current levels, sellers are likely to continue to opportunistically access the secondary market. Given the likely deal flow in the second half of the year, there is a real prospect of secondary deal volume reaching record volumes of over $30bn in 2014. (21) Source: Cogent Partners, Secondary Market Trends and Outlook, July 2014 (22) Source: Cogent Partners, Secondary Market Trends and Outlook, January 2014 & July 2014 (23) Source: Cogent Partners, Secondary Market Trends and Outlook, July 2014 PORTFOLIO OVERVIEW - 13.4% Underlying (pre FX) return relative to opening assets - £142m Net cash flow generated from portfolio - 25% Average realisation uplift on largest distributions - £184m Distributions - 22% Distributions as percentage of opening portfolio - £42m Calls made from existing undrawn commitments - £148m Total new investment commitments made in the year - £42m New commitments made to 19 co-investments - 7.8 years Weighted average fund age of portfolio The Company offers a global, diversified selection of private equity assets, carefully selected by Pantheon for their quality. The diversification of PIP's portfolio, with assets spread across different investment styles and stages, including buyout, venture and growth, and special situations, helps to reduce volatility both of returns and cash flows. The maturity profile of the portfolio ensures that PIP is not overly exposed to any one vintage. PIP's geographical diversification extends its exposure beyond the USA and Europe, to regions with higher rates of economic growth such as Asia. Portfolio Analysis by Value as at 30th June 2014(1) (1) Fund geography, stage, maturity and primary/secondary charts are based upon underlying fund valuations and account for 100% of PIP's overall portfolio value. Company sector and company geography charts are based upon underlying company valuations at 31st December 2013 and account for approximately 90% of PIP's overall portfolio value. Fund Geography The majority of PIP's geographical exposure is focused on the USA and Europe, reflecting the fact that these regions have the most developed private equity markets. Portfolio assets based in Asia and other regions provide access to faster-growing economies. USA 54% Europe 31% Asia and other 15% Fund Stage PIP's portfolio is well diversified across different private equity investment styles and stages. The majority of the portfolio is made up of buyout funds. Larger buyout exposure increased through new investments during the period, leading to a corresponding reduction in smaller buyouts. Exposure to co-investments increased to 7% (from 3%) during the year, due to new investments. Large/Mega Buyout 28% Small/Mid Buyout 28% Venture and Growth 28% Co-investments 7% Special Situations 6% Generalist 3% Pantheon Vehicles At 30th June 2014, 7% of PIP's portfolio value and 6% of PIP's outstanding commitments were comprised of funds-of-funds directly managed by Pantheon. Pantheon is not entitled to management and commitment fees in respect of PIP's holdings in, and outstanding commitments to, the firm's managed fund-of-funds vehicles. In addition, Pantheon has agreed that PIP will never be disadvantaged in terms of fees compared with the position it would have been in had it made investments directly into the underlying funds rather than indirectly through such fund-of-funds vehicles. Fund Maturity The portfolio is well diversified by fund vintage. PIP's secondary activity is expected to lead to continued exposure to the high fundraising years of 2006-2008. In addition, new co-investments are increasing PIP's exposure to more recent vintages, with the 2009 and later segment of the portfolio increasing to 11% (from 3%) during the year. 2009-2014 11% 2008 13% 2007 24% 2006 21% 2005 12% 2004 5% 2003 2% 2002 1% 2001 and earlier 11% Primary/Secondary 56% of the portfolio is derived from primary commitments. However, PIP's secondary emphasis has increased the secondary exposure of the portfolio to 44%, up from 40% at the end of the last financial year. Primary 56% Secondary 44% Company Sectors PIP's sectoral exposure diversifies the effects of cyclical trends within particular industry segments. Relative to the FTSE All-Share and MSCI World indices, PIP has a high exposure to information technology, and low exposure to the banking, mining and utilities sectors. Consumer 28% Information Technology 24% Healthcare 15% Industrials 14% Financials 7% Energy 6% Materials 4% Telecommunication Services 2% Company Geography Half of the portfolio is with companies based in North America, which benefit from greater market scope and depth. PIP's European exposure, which represents just over a third of the portfolio, is predominantly in companies based in the stronger Northern European economies, including the UK, Scandinavia and Germany. 15% of PIP's portfolio is based in Asia and other regions, providing access to faster growing economies such as China and India. North America 51% Asia and other 15% UK 11% Scandinavia 5% Germany 4% Central and Eastern Europe 4% Benelux 3% Italy 2% France 2% Iberia 2% Other Europe 1% PORTFOLIO ANALYSIS Portfolio Performance by Stage for the Year to 30th June 2014(1) • The portfolio generated investment returns equivalent to 13.4% on opening portfolio assets during the year. • Returns were healthy across all stages, particularly in PIP's co-investment, large buyout, and venture and growth portfolios, which benefited from a number of significant realisations and good earnings growth at an underlying company level. (1) Portfolio stage returns include income, exclude gains and losses from foreign exchange movements, and look through feeders and funds-of-funds to the underlying funds. Debt Multiples(2) Venture and growth and buyout investments have differing leverage characteristics. • The venture and growth portfolio accounts for 28% of portfolio value and has little or no reliance on leverage. • In a market associated with high leverage transactions, debt multiples on PIP's underlying companies have remained within reasonable levels. PORTFOLIO ANALYSIS - BUYOUT Valuation Multiple(2) • Accounting standards require private equity managers to value their portfolio at fair value. Public market movements can be reflected in valuations. • Sample-weighted average enterprise value/EBITDA for the year to 31st December 2013 was 9.4 times, compared to 8.3 times and 10.1 times for the FTSE All-Share and MSCI World indices. Revenue and EBITDA Growth(2) • Weighted average revenue growth for the sample buyout companies was +10.9% in the 12 months to 31st December 2013, compared to +3.6% and -0.4% for the FTSE All-Share and MSCI World indices. • Weighted average EBITDA growth for the sample buyout companies was +8.4% in the 12 months to 31st December 2013, compared to +3.1% and +2.6% for the FTSE All-Share and MSCI World indices. • Strong top-line performance and cost control is a principal objective of private equity managers. (2) The data is based on a sample of PIP's buyout funds. Buyout Sample Methodology: The sample buyout figures for the 12 months to 31st December 2013 were calculated from the companies, where information was available. The figures are based on unaudited data. The revenue and EBITDA figures were based upon the last 12 months to 31st December 2013 or, where not available, the closest annual period disclosed, and provide coverage of 69% and 67% (for revenue and EBITDA respectively) of PIP's buyout portfolio. Individual company revenue and EBITDA growth figures were capped between +100% and -100% to avoid large distortions from excessive outliers. Sample data for 2009-2012 is based on the same methodology and provides coverage of 50-75% of the portfolio in each year. Enterprise value is defined as carrying value + net debt. The net debt and enterprise value figures were based upon 31st December 2013 underlying valuations, or the closest period end disclosed. The valuation multiple sample covers approximately 76% of PIP's buyout portfolio. The debt multiple sample covers 75% of PIP's buyout portfolio and 68% of PIP's co-investment portfolio. Data sourced from Bloomberg. PORTFOLIO ANALYSIS - VENTURE AND GROWTH Venture and Growth Portfolio Analysis • Prior to foreign exchange effects, PIP's venture and growth funds generated a return of 16.4% in 2014, up from 5.6% in the prior year. • Although vintage 2002 and earlier returns are more modest, we continue to see distributions from these vintages. • 2003 and later funds performed strongly, with returns exceeding 15%. These funds constitute 75% of the venture and growth portfolio. • The venture and growth portfolio generated significant cash flow during the year, particularly the older vintage funds. • 2003 to 2006 funds constitute 43% of the venture and growth portfolio and in our view, can continue to produce a substantial level of distributions. DISTRIBUTIONS IN THE YEAR TO 30TH JUNE 2014 PIP received more than 1,800(1) distributions in the year, with many at significant uplifts to carrying value. Given the current robust exit environment, the Company's mature portfolio should continue to generate significant distributions in the coming quarters. (1) This figure looks through feeders and funds-of-funds. Distributions by Region and Stage PIP received £184m in proceeds from the portfolio in the 12 months to 30th June 2014, implying an annualised distribution rate equivalent to 22% of opening private equity assets. The US accounted for the majority of PIP's distributions, where market conditions enabled a good level of exits. Despite economic headwinds, European distributions were also strong. Distributions by Region = £184m USA 57% Europe 32% Asia and other 11% Distributions by Stage = £184m Large/Mega Buyout 35% Small/Mid Buyout 30% Venture and Growth 19% Special Situations 8% Co-investments 7% Generalist 1% Distribution Rates in the Year to 30th June 2014 by Vintage(2) Mature vintages continue to distribute at higher rates, with 2008 and earlier funds distributing at a rate in excess of 20%. With a weighted fund maturity of 7.8 years, PIP's mature portfolio should continue to generate significant levels of cash, particularly if we see sustained improvements in the financial markets. (2) Distribution rate equals distributions in period divided by opening portfolio value. Cost Multiples on a Sample of the Largest Distributions in the Financial Year to 30th June 2014(1) On a sample of the largest 100 distributions, the value-weighted average cost multiple on initial cost was 2.8 times. This highlights the continued ability of private equity managers to create significant value over the course of an investment. (1) The available data in the sample represented approximately 40% by value of PIP's total distributions for the financial year to 30th June 2014. This data is based upon gross cost multiples available at the time of the distribution. Uplifts on Liquidity Event on a Sample of the Largest Distributions in the Financial Year to 30th June 2014(2) On a sample of the largest 100 distributions, the value-weighted average uplift on liquidity event was 25%. This average uplift is consistent with PIP's view that realisations tend to be significantly incremental to returns. PIP's mature portfolio is well placed to continue to generate a good level of distributions in the coming year. (2) Uplift on liquidity event compares the value received upon realisation against the investment's carrying value prior to the transaction taking place. In the event of an IPO, the uplift is the difference between the carrying value prior to the IPO and the value at the close of the first day of trading. The available data in the sample represented approximately 35% by value of PIP's total distributions for the financial year to 30th June 2014. INVESTMENTS CALLED IN THE YEAR TO 30TH JUNE 2014 Investments called during the year ranged across regions and sectors, including consumer, specialty pharmaceuticals, energy companies and software-as-a-service providers. Calls by Region and Stage PIP paid £42m to finance calls on undrawn commitments during the year to 30th June 2014, equivalent to 22% of opening undrawn commitments. Calls by Region = £42m USA 56% Europe 32% Asia and other 12% Calls by Stage = £42m Large/Mega Buyout 30% Small/Mid Buyout 20% Venture and Growth 19% Special Situations 17% Co-investments 14% New Commitments PIP committed £148m to new investments during the financial year, concentrated on buyout funds in the US and European markets. £92m was drawn at the time of purchase, with an emphasis on secondary interests in 2005-2008 vintage funds. As a result of Pantheon's targeted origination, PIP continued to benefit from good deal flow, with 72% of secondary deals in processes that were either proprietary or involved restricted competition(1). (1) A proprietary deal is where Pantheon was in exclusive discussions with the seller. A restricted process deal is where there were three bidders or less for the asset. New Commitments by Region 70% of new commitments were made to private equity funds focused on the US market, which continues to offer the greatest opportunity for investment. USA 70% Europe 19% Asia and other 11% New Commitments by Stage A significant majority of new investments were made in the large buyout and mid-market buyout space, targeting funds whose portfolio companies have high barriers to entry, strong cash generation and multiple potential exit routes. PIP's co-investments in 2014 were in the buyout and growth stages. In line with PIP's strategy, co-investments as a percentage of new commitments in the period has increased to 28% in 2014. Large/Mega Buyout 39% Co-investments 28% Small/Mid Buyout 18% Special Situations 11% Venture and Growth 4% New Commitments by Deal Type In line with our investment strategy, six secondary transactions account for the majority of new commitments. PIP also committed to 19 co-investments, and four primaries. Co-investments and primaries offer exposure to more recent vintages and assets which may be less accessible in the secondary market. Secondaries 64% Co-investments 28% Primaries 8% NEW COMMITMENTS SECONDARY AND PRIMARY (FUNDS) PIP committed £95.1m to six secondary transactions, with 54% of secondary commitments in large buyout fund interests. PIP also acquired assets in parts of the market where competition has been less intense, with investments focusing on niche strategies such as energy. PIP's commitment to primaries in the year included three large buyout funds, and a venture capital firm, adding current vintage exposure with high quality managers New Secondary and Primary Commitments (1) Secondary Commitments in the Year to 30th June 2014 INVESTMENT STAGE DESCRIPTION COMMITMENTS £M % Funded Nov-13 Buyout Portfolio of seven 15.8 92% primarily European fund interests with global exposure Dec-13 Buyout Portfolio of three brand 10.4 88% name US fund interests with global exposure Dec-13 Buyout Diversified portfolio of 38.2 51%(2) primarily US buyout fund interests Dec-13 Buyout Portfolio of two large US 9.4 38%(2) buyout interests Mar-14 Buyout Portfolio of two Spanish 8.4 57% lower mid-market fund interests Jun-14 Special Portfolio of two US-based 12.9 72% Situations upstream energy-focused funds TOTAL 95.1 Primary Commitments in the Year to 30th June 2014 INVESTMENT STAGE DESCRIPTION COMMITMENTS £M Nordic Capital VIII Buyout Large buyout manager 2.0 operating primarily in the Scandinavia region Bain Capital Fund Buyout US large buyout manager 2.9 XI with global exposure Clayton, Dubilier & Buyout Large buyout manager 2.4 Rice Fund IX operating in the US and Western Europe Venture Fund Venture & Growth Top tier international 4.0 venture capital fund focused on IT Sector TOTAL 11.3 (1) Funds acquired in new secondary transactions are not named due to non-disclosure agreements (2) Funded amount excludes the deferred portion of the purchase price. NEW COMMITMENTS CO-INVESTMENTS (DIRECTS) PIP committed £42m to 19 co-investments alongside top tier managers, mainly in large and mid-sized buyout companies. Consumer, industrials and energy constituted the largest areas of focus, with four investments completed in each sector. Co-investments The USA and Europe accounted for the majority of new co-investments, in line with the PIP's preferred geographic focus. Co-investment activity in 2014 has focused primarily on a few key sectors. PIP has participated in a number of attractive opportunities in the energy sector, alongside a number of managers that have been backed by Pantheon for their sector expertise. BY SECTOR Energy 27% Consumer 22% Healthcare 18% Industrials 17% Information Technology 10% Others 6% BY GEOGRAPHY USA 46% Europe 34% Asia and other 20% OUTSTANDING COMMITMENTS PIP's outstanding commitments to fund investments are well-diversified by 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 worldwide. Analysis of Outstanding Commitments as at 30th June 2014 PIP's outstanding commitments to investments decreased to £176m at 30th June 2014 compared with £195m at 30th June 2013. The Company paid calls of £42m and added an additional £56m of outstanding commitments associated with new investments made in the year. The remaining reduction of £33m was due to foreign exchange movements and cancellations of outstanding commitments in the portfolio's underlying funds. Geography The USA and Europe have the largest outstanding commitments, reflecting the Company's investment emphasis. Commitments to Asia and other regions provide access to faster-growing economies. USA 56% Europe 28% Asia and other 16% Stage PIP's undrawn commitments are well-diversified across all major stages of private equity. Large/Mega Buyout 35% Small/Mid Buyout 26% Venture and Growth 18% Special Situations 10% Co-investments 7% Generalist 4% Maturity Over 50% of PIP's undrawn commitments are in the 2007 vintage or older. Most relate to funds that are outside their investment periods and, as such, should have slower call rates. It is likely that a portion of these commitments will not be drawn. 2005 and earlier 25% 2006 16% 2007 18% 2008 17% 2009 1% 2010 1% 2011 0% 2012 7%(1) 2013 6% 2014 9% (1) We seek to ensure consistency of classification across fund managers. As a result, a small portion of PIP's portfolio has been reclassified into the 2012 vintage. FINANCE AND SHARE BUYBACKS Cash and Available Bank Facility At 30th June 2014, PIP had cash balances of £88m. As well as these cash balances, PIP can also finance investments out of its multi-currency revolving credit facility agreement ("Loan Facility"). The Loan Facility is due to expire in June 2015 and comprises facilities of $82m and €57m which, using exchange rates at 30th June 2014, amount to a sterling equivalent of £94m. At 30th June 2014, the Loan Facility remained fully undrawn. Undrawn Commitment Cover At 30th June 2014, the Company had £182m of available financing, comprised of its cash balances and Loan Facility. The sum of PIP's available financing and private equity portfolio provide 5.7 times cover relative to undrawn commitments. It should be noted that a portion of the Company's undrawn commitments of £176m are unlikely to be called in full by the underlying managers. When a fund is past its investment period, which is typically between five and six years, it generally cannot make any new investments (only drawing capital to fund existing follow-on investments or pay expenses). As a result, the rate of capital calls in these funds tends to slow dramatically. Approximately 59% of the Company's undrawn commitments are in fund vintages that are greater than six years old. Share Buybacks PIP bought back 2.5% of its shares in the financial year(1). In total, 1.0m ordinary shares and 0.7m redeemable shares were bought back at a weighted discount of 20% and 23% respectively, resulting in a total uplift to NAV per share of 7.2p, or 0.5% of opening NAV per share. The discounts at which the Company's shares trade from time to time may make buybacks an attractive investment opportunity relative to other potential new investment commitments. Since the financial year end, the Company has bought back a further 0.1m ordinary shares and 0.1m redeemable shares at a discount of 16% and 23% respectively. (1) 2.5% is calculated using the number of shares bought back in the financial year divided by the number of shares outstanding at 30th June 2013. LARGEST 50 MANAGERS BY VALUE AS AT 30TH JUNE 2014(1) % OF PIP'S TOTAL PRIVATE EQUITY NUMBER MANAGER REGION(2) STAGE BIAS ASSET VALUE 1 TPG Global Buyout 4.5% 2 Vision Capital Europe Buyout 2.3% 3 Carlyle Group Global Buyout 2.2% 4 Apax Partners Europe Buyout 2.2% 5 Blackstone Capital Partners USA Buyout 2.0% 6 Providence Equity Partners USA Buyout 1.9% 7 CVC Capital Partners Global Buyout 1.9% 8 Brentwood Associates USA Buyout 1.8% 9 Quantum Energy Partners USA Energy 1.5% 10 EQT Global Buyout 1.4% 11 Golden Gate Capital USA Buyout 1.4% 12 Baring Vostok Capital Partners Russia Buyout 1.4% 13 Equistone Europe Buyout 1.4% 14 Matlin Patterson USA Special Situations 1.2% 15 Apollo Management USA Buyout 1.2% 16 KRG Capital Partners USA Buyout 1.2% 17 Doughty Hanson & Co Europe Buyout 1.2% 18 Hutton Collins Europe Special Situations 1.1% 19 Cinven Partners Europe Buyout 1.1% 20 Warburg Pincus Partners Global Buyout 1.1% 21 Baring Private Equity Asia Venture and Growth 1.1% 22 Oak Investment Partners USA Venture and Growth 1.1% 23 Bain Capital USA Buyout 1.0% 24 ABS Capital Partners USA Venture and Growth 0.9% 25 Permira Europe Buyout 0.9% 26 Canaan Partners USA Venture and Growth 0.9% 27 IK Investment Partners Europe Buyout 0.9% 28 Apollo Advisors USA Buyout 0.9% 29 Summit Partners Global Venture and Growth 0.9% 30 Index Ventures Europe Venture and Growth 0.9% 31 Catalyst Investors USA Venture and Growth 0.8% 32 Hony Capital Asia Buyout 0.8% 33 Nordic Capital Europe Venture and Growth 0.8% 34 Polaris Venture Partners USA Venture and Growth 0.8% 35 Avista Capital Partners USA Buyout 0.8% 36 Nova Capital Management Europe Buyout 0.8% 37 Yorktown Partners USA Energy 0.8% 38 Mid-Europa Partners Europe Buyout 0.8% 39 Altor Capital Europe Buyout 0.8% 40 Riverstone Holdings USA Special Situations 0.8% 41 Bencis Capital Partners Europe Buyout 0.8% 42 Advent International Group Global Buyout 0.8% 43 HgCapital Europe Buyout 0.8% 44 Genstar Capital Partners USA Buyout 0.7% 45 Thomas H. Lee Partners USA Buyout 0.7% 46 Rutland Partners Europe Buyout 0.7% 47 Essex Venture Partners USA Venture and Growth 0.7% 48 Technology Crossover Ventures USA Venture and Growth 0.7% 49 New Enterprise Associates USA Venture and Growth 0.7% 50 Mercapital Europe Buyout 0.7% COVERAGE OF PIP'S TOTAL PRIVATE EQUITY ASSET VALUE 58.8% (1) Percentages look through feeders and funds-of-funds. (2) Refers to the regional exposure of the funds in which PIP is invested. LARGEST 50 COMPANIES BY VALUE(1) % OF PIP'S TOTAL PRIVATE EQUITY NUMBER COMPANY COUNTRY SECTOR ASSET VALUE 1 Attendo Sweden Healthcare 1.0% 2 JDR Cable Systems USA Energy 0.7% 3 Spotify Limited Sweden Information Technology 0.7% 4 Applied Medical Resources USA Healthcare 0.6% 5 CSPC Pharmaceutical China Healthcare 0.6% 6 Nord Anglia Education Hong Kong Consumer 0.6% 7 InterXion Netherlands Information Technology 0.5% 8 LBX Pharmacy Chain China Consumer 0.5% 9 Bibby Scientific UK Information Technology 0.5% 10 Oriental Brewery (2) South Korea Consumer 0.5% 11 SoftBrands USA Information Technology 0.4% 12 Hilton Worldwide USA Consumer 0.4% 13 USA Industrials 0.4% 14 MINDBODY USA Information 0.4% 15 ConvaTec Healthcare (2) USA Healthcare 0.4% 16 CPL Industries UK Energy 0.4% 17 McGraw-Hill(2) USA Consumer 0.4% 18 CPI Card Group USA Industrials 0.4% 19 EP Energy USA Energy 0.4% 20 AutoTrader(2) USA Information Technology 0.4% 21 Antero Resources USA Energy 0.4% 22 UK Information Technology 0.3% 23 Byron Hamburgers UK Consumer 0.3% 24 Wrist Group(2) Denmark Industrials 0.3% 25 Vitruvian Exploration USA Energy 0.3% 26 Zoë's Kitchen USA Consumer 0.3% 27 Standard Bancshares USA Financials 0.3% 28 Fairway Group USA Consumer 0.3% 29 Golden Boy Foods(2) Canada Consumer 0.3% 30 Standard Pacific USA Consumer 0.3% 31 GGC Credit Opps USA Financials 0.3% 32 TMF Group Netherlands Industrials 0.3% 33 Hugo Boss(2) Italy Consumer 0.3% 34 Property Portfolio UK Financials 0.3% 35 BrightHouse UK Consumer 0.3% 36 Syniverse Technologies USA Information Technology 0.3% 37 Jimmy John's USA Consumer 0.3% 38 United Surgical Partners Spain Healthcare 0.3% 39 The Teaching Company USA Consumer 0.3% 40 Evonik Industries(2) Germany Materials 0.3% 41 Yandex(2) Russia Information Technology 0.3% 42 ista International Germany Industrials 0.3% 43 CommScope USA Information Technology 0.3% 44 Spire Healthcare UK Healthcare 0.3% 45 Avio Italy Industrials 0.3% 46 Healthscope USA Healthcare 0.3% 47 LIN TV USA Consumer 0.3% 48 ATI Holdings USA Healthcare 0.3% 49 K-Mac Enterprises USA Consumer 0.3% 50 Caffè Nero(2) UK Consumer 0.3% TOTAL 19.3% (1) The largest 50 companies table is based upon underlying company valuations at 31st December 2013, adjusted for known calls, distributions, new investment commitments and post-valuation information. (2) Liquidation event subsequent to 31st December 2013. THE DIRECTORS The Directors in office at the date of this report are: Tom Bartlam* (Chairman) Ian Barby* (Audit Committee Chairman) Sir Laurie Magnus* Susannah Nicklin* Peter Readman* (Senior Independent Director) Rhoddy Swire * Independent of the Manager EXTRACTS FROM THE DIRECTORS REPORT Share Capital As at 30th June 2014, the Company had 33,522,013 ordinary shares of £0.67 each and 32,572,534 redeemable shares of £0.01 each in issue. No shares were held in treasury at the year end. During the year, 985,000 ordinary shares (with an aggregate nominal value of £659,950 and representing 2.9% of the ordinary share capital in issue on 30th June 2013) were purchased in the market for cancellation for a total consideration of £10.5m. During the year, 740,000 redeemable shares (with an aggregate nominal value of £7,400 and representing 2.2% of the redeemable share capital in issue on 30th June 2013) were also purchased in the market for cancellation for a total consideration of £7.7m. Since the year end, 100,000 ordinary shares (with an aggregate nominal value of £67,000 and representing 0.30% of the ordinary share capital in issue on 30th June 2014) have been purchased in the market for cancellation for a total consideration of £1.1m. In addition, since the year end, 100,000 redeemable shares (with an aggregate nominal value of £1,000 and representing 0.31% of the redeemable share capital in issue on 30th June 2014) have been purchased in the market for cancellation for a total consideration of £1.1m. As at the date of this report, the Company has shares in issue as shown in the table below, all of which are admitted to the official list maintained by the FCA and admitted to trading on the London Stock Exchange: Share capital and NUMBER OF VOTING RIGHTS NUMBER OF % OF TOTAL voting rights at 1st SHARES IN ATTACHED TO SHARES VOTING RIGHTS October 2014 ISSUE EACH SHARE HELD IN REPRESENTED BY TREASURY EACH CLASS ORDINARY SHARES AT £0.67 EACH 33,422,013 1 - 100 REDEEMABLE SHARES AT £0.01 EACH 32,472,534 - - - TOTAL VOTING RIGHTS 33,422,013 Going Concern The Company's business activities, together with the factors likely to affect its future development, performance and position, including its financial position, are set out in the Strategic Report and Manager's Review. At each Board meeting, the Directors review the Company's latest management accounts and other financial information. Its commitments to private equity investments are reviewed, together with its financial resources, including cash held and the Company's borrowing capability. One-year cash flow scenarios are also presented to each meeting and discussed. After due consideration of the balance sheet and activities of the Company and the Company's assets, liabilities, commitments and financial resources, the Directors have concluded that the Company has adequate resources to continue in operation for the foreseeable future. For this reason, they consider it appropriate to continue to adopt the going concern basis in preparing the financial statements. The full Annual Report contains the following statements regarding responsibility for the Annual Report and financial statements (references in the following statements are to pages in the Annual Report). STATEMENT OF DIRECTORS' RESPONSIBILITIES In Respect of 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 Generally Accepted Accounting Practice ("UK GAAP"). Under company law the Directors must not approve the financial statements unless they are satisfied that they 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: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable UK accounting standards have been followed, subject to any material departure disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate 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 Strategic Report, Directors' Report and other information in the Annual Report is prepared in accordance with company law in the United Kingdom, and that the Annual Report includes information required by the Listing Rules of the Financial Conduct 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. The Directors confirm that, to the best of their knowledge: • the financial statements have been prepared in accordance with UK accounting standards, give a true and fair view of the assets, liabilities, financial position and return of the Company; • the Strategic 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; and • the Annual Report and financial statements, taken as a whole, is considered by the Board to be fair, balanced and understandable and provides the necessary information for shareholders to assess the Company's performance, business model and strategy. On behalf of the Board TOM BARTLAM Chairman 1st October 2014 NON-STATUTORY ACCOUNTS The financial information set out below does not constitute the Company's statutory accounts for the years ended 30th June 2014 and 2013 but is derived from those accounts. Statutory accounts for 2013 have been delivered to the Registrar of Companies, and those for 2014 will be delivered in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and Accounts at INCOME STATEMENT YEAR ENDED 30th JUNE 2014 2014 2013 REVENUE CAPITAL TOTAL* REVENUE CAPITAL TOTAL* NOTE £'000 £'000 £'000 £'000 £'000 £'000 Gains on investments designated at fair value through profit or loss** 9b - 25,659 25,659 - 82,202 82,202 Currency (losses)/ gains on cash and borrowings 18 - (10,530) (10,530) - 3,720 3,720 Investment income 2 13,681 - 13,681 12,410 - 12,410 Investment management fees 3 (8,749) - (8,749) (8,839) - (8,839) Other expenses 4 (995) (189) (1,184) (1,134) - (1,134) RETURN ON ORDINARY ACTIVITIES BEFORE FINANCING COSTS AND TAX 3,937 14,940 18,877 2,437 85,922 88,359 Interest payable and similar charges/ finance costs 6 (1,419) - (1,419) (1,453) - (1,453) RETURN ON ORDINARY ACTIVITIES BEFORE TAX 2,518 14,940 17,458 984 85,922 86,906 Tax on ordinary activities 7 (945) - (945) (2,401) - (2,401) RETURN ON ORDINARY ACTIVITIES AFTER TAX FOR THE PERIOD 1,573 14,940 16,513 (1,417) 85,922 84,505 RETURN PER ORDINARY AND REDEEMABLE SHARE 8 2.35p 22.30p 24.65p (2.04)p 123.99p 121.95p * The total column of the statement represents the Company's profit and loss statement prepared in accordance with UK Accounting Standards. The supplementary revenue and capital columns are prepared under guidance published by the Association of Investment Companies. ** Includes currency gains on investments. All revenue and capital items in the above statement relate to 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 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Movement for the year ended 30th June 2014 OPENING EQUITY SHAREHOLDERS' FUNDS 23,454 283,555 2,091 314,138 296,763 41,304 (58,021) 903,284 Return for the year - - - 23,014 (8,074) - 1,573 16,513 Ordinary shares bought back for cancellation (660) - 660 - - (10,456) - (10,456) Redeemable shares bought back for cancellation (7) - 7 - - (7,650) - (7,650) CLOSING EQUITY SHAREHOLDERS' FUNDS 22,787 283,555 2,758 337,152 288,689 23,198 (56,448) 901,691 Movement for the year ended 30th June 2013 OPENING EQUITY SHAREHOLDERS' FUNDS 24,549 283,555 996 265,724 259,255 67,939 (56,604) 845,414 Return for the year - - - 48,414 37,508 - (1,417) 84,505 Ordinary shares bought back for cancellation (1,081) - 1,081 - - (14,764) - (14,764) Redeemable shares bought back for cancellation (14) - 14 - - (11,871) - (11,871) CLOSING 23,454 283,555 2,091 314,138 296,763 41,304 (58,021) 903,284 EQUITY SHAREHOLDERS' FUNDS The Notes form part of these financial statements. BALANCE SHEET as at 30th JUNE 2014 2014 2013 Note £'000 £'000 Fixed assets Investments designated at fair value through profit or loss 9a/b 814,959 826,423 Current assets Debtors 11 576 1,051 Cash at bank 17 88,346 78,387 88,922 79,438 Creditors: Amounts falling due within one year Other creditors 12 2,190 2,577 2,190 2,577 NET CURRENT ASSETS 86,732 76,861 NET ASSETS 901,691 903,284 Capital and reserves Called-up share capital 13 22,787 23,454 Share premium 14 283,555 283,555 Capital redemption reserve 14 2,758 2,091 Other capital reserve 14 337,152 314,138 Capital reserve on investments held 14 288,689 296,763 Special reserve 14 23,198 41,304 Revenue reserve 14 (56,448) (58,021) TOTAL EQUITY SHAREHOLDERS' FUNDS 901,691 903,284 NET ASSET VALUE PER SHARE - ORDINARY AND REDEEMABLE 15 1,364.24p 1,331.89p The Notes form part of these financial statements. The financial statements were approved by the Board of Pantheon International Participations PLC on 1st October 2014 and were signed on its behalf by TOM Bartlam Chairman Company No. 2147984 CASH FLOW STATEMENT YEAR ENDED 30TH JUNE 2014 2014 2013 NOTE £'000 £'000 Cash flow from operating activities Investment income received 13,637 12,357 Deposit and other interest received 44 53 Investment management fees paid (8,772) (9,574) Performance fee paid - (5,057) Secretarial fees paid (201) (211) Other cash payments (977) (1,077) Withholding tax deducted (945) (2,401) NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 18 2,786 (5,910) Servicing of finance Loan commitment and arrangement fees paid (1,110) (1,138) NET CASH OUTFLOW FROM RETURNS ON INVESTMENT AND SERVICING OF FINANCE (1,110) (1,138) Capital expenditure and financial investment Purchases of investments (134,472) (128,198) Disposals of investments 171,724 183,995 NET CASH INFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT 37,252 55,797 NET CASH INFLOW BEFORE FINANCING 38,928 48,749 Financing Ordinary shares purchased for cancellation (11,896) (13,324) Redeemable shares purchased for cancellation (6,577) (11,871) NET CASH OUTFLOW FROM FINANCING (18,473) (25,195) INCREASE IN CASH 16 20,455 23,554 The Notes form part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS 1. Accounting Policies A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below. (A) Basis of Preparation The financial statements have been prepared on the historical cost basis of accounting, except for the measurement at fair value of investments, and in accordance with applicable UK GAAP 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 (£'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 in January 2009) for the financial statements of investment trust companies and venture capital trusts 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 classified as "fair value through profit or loss". As the Company's business is investing in financial assets with a view to profiting from their total return in the form of interest, dividends or increases in fair value, quoted equities and fixed income securities are designated as fair value through profit 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 financial 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 financial markets, fair value is determined using reliable valuation techniques as described below: (i) Unquoted fixed asset investments are stated at the estimated fair value. In the case of investments in private equity funds, this is based on the 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. 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 revalued to their stated net asset values at the next reporting date. 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 specific investment is considered appropriate. In the case of direct investments in unquoted companies, the initial valuation is based on the transaction price. 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. As at 30th June 2014 there was no aggregate difference on underlying investments to be recognised in profit or loss at the start or end of the period. (ii) Quoted investments are valued at the bid price on the relevant stock exchange. (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 fixed 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 profit 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 FRS 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. (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: • 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; • expenses of a capital nature are accounted for through the capital account; and • investment performance fees. (H) Foreign Currency The currency of the Primary Economic Environment in which the Company operates ("the functional currency") is pounds sterling ("sterling"), which is also the presentation currency. Transactions denominated in foreign currencies are recorded in the local currency at actual exchange rates as at the date of transaction. Monetary assets and liabilities denominated in foreign currencies at the year end are reported at the rates of exchange prevailing at the year end. 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: • investment performance fees; • gains and losses on the realisation of investments; • realised exchange differences of a capital nature; and • expenses of a capital nature. Capital distributions from investments are accounted for on a reducing cost basis; cash received is first applied to reducing the historical cost of an investment; any gain will be recognised as realised only when the cost has been reduced to nil. (J) Capital Reserve on Investments Held The following are accounted for in this reserve: • increases and decreases in the value of investments held at the year end. (K) Investment Performance Fee The Manager is entitled to a performance fee from the Company in respect 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 payable, 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. For the calculation period ended 30th June 2014, the notional performance fee hurdle is a net asset value per share of 2,032.93p. The performance fee is calculated using the adjusted net asset value. In previous periods this was adjusted to exclude the derivative asset. 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. 2. Income 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Income from investments Investment income 13,637 12,357 13,637 12,357 Other income Interest 47 55 Exchange difference on income (3) (2) 44 53 TOTAL INCOME 13,681 12,410 Total income comprises Dividends 13,637 12,357 Bank interest 47 55 Exchange difference on income (3) (2) 13,681 12,410 Analysis of income from investments Unlisted 13,637 12,357 13,637 12,357 3. Investment Management Fees 30TH JUNE 2014 30TH JUNE 2013 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL £'000 £'000 £'000 £'000 £'000 £'000 Investment management fees 8,749 - 8,749 8,839 - 8,839 8,749 - 8,749 8,839 - 8,839 The investment management fee is payable monthly in arrears at the rate set out in the Directors' Report in the full Annual Report and Accounts. During the year, services with a total value of £9,312,000 (2013: £9,454,000), being £8,749,000 (2013: £8,839,000) directly from Pantheon Ventures (UK) LLP and £563,000 (2013: £615,000) via Pantheon managed fund investments were purchased by the Company. At 30th June 2014, £746,000 (2013: £769,000) was owed for investment management fees. No performance fee is payable in respect of the 12 calendar month period to 30th June 2014 (2013: nil). The basis upon which the performance fee is calculated is explained in Note 1(K) and in the Directors' Report in the full Annual Report and Accounts. 4. Other Expenses 30TH JUNE 2014 30TH JUNE 2013 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL £'000 £'000 £'000 £'000 £'000 £'000 Secretarial and accountancy services 208 - 208 202 - 202 Fees payable to the Company's Auditor for the audit of the annual financial statements 35 - 35 33 - 33 Fees payable to the Company's Auditor for - audit-related assurance services - half-yearly report 7 - 7 6 - 6 - other assurance services - net asset value calculations 11 - 11 11 - 11 Directors' remuneration (see Note 5) 219 - 219 235 - 235 Irrecoverable VAT 16 - 16 29 - 29 Legal and professional fees 137 189 326 366 - 366 Printing 44 - 44 27 - 27 Other 318 - 318 225 - 225 995 189 1,184 1,134 - 1,134 The Directors do not consider that the provision of non-audit work to the Company affects the independence of the Auditor. 5. Directors' Remuneration Directors' emoluments comprise Directors' fees and reclaimed travel expenses. A breakdown is provided in the Directors' Remuneration Report in the full Annual Report and Accounts. 6. Interest Payable and Similar Charges 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Loan commitment and arrangement fees 1,419 1,453 1,419 1,453 In June 2011, the Company entered into a new loan agreement with The Royal Bank of Scotland plc and Lloyds TSB Bank plc. Under the agreement, which will expire in June 2015, committed revolving dollar and euro credit facilities of $82m and €57m have been made available. Each individual drawdown bears interest at a variable rate agreed for the period of the drawdown and a commitment fee of 1.10% per annum is payable in respect of the amounts available for drawdown in each facility. In addition, the Company has an overdraft facility of £2m with The Royal Bank of Scotland plc. At 30th June 2014, the sterling equivalent amount of £nil (2013: £nil) was drawn down under the facilities. 7. Tax on Ordinary Activities 30TH JUNE 2014 30TH JUNE 2013 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL £'000 £'000 £'000 £'000 £'000 £'000 Withholding tax deducted from distributions 945 - 945 2,401 - 2,401 Current tax The current tax for the year differs from the standard rate of corporation tax in the UK (21%). The differences are explained below: Net return on ordinary activities before tax 2,518 14,940 17,458 984 85,922 86,906 Theoretical tax at UK corporation tax rate of 22.50% (2013: 23.75%)* 567 3,361 3,928 234 20,406 20,640 Non-taxable investment, derivative and currency gains - (3,404) (3,404) - (20,406) (20,406) Effect of expenses in excess of taxable income - 43 43 - - - Utilised management expenses (567) - (567) (234) - (234) Withholding tax deducted from distributions (945) - (945) (2,401) - (2,401) (945) - (945) (2,401) - (2,401) * The corporation tax rate applied is based on the average tax rates for the financial years ended 30th June 2014 and 30th June 2013. Factors that May Affect Future Tax Charges The Company is an investment trust and therefore is not subject to tax 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 sufficient future taxable revenue. As at 30th June 2014, excess management expenses are estimated to be in excess of £118m (2013: £121m). 8. Return per Share 30TH JUNE 2014 30TH JUNE 2013 REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL Return on ordinary activities after tax for the financial year in £'000 1,573 14,940 16,513 (1,417) 85,922 84,505 Weighted average ordinary and redeemable shares 66,994,396 69,296,879 Return per ordinary and redeemable share 2.35p 22.30p 24.65p (2.04)p 123.99p 121.95p 9a. Movements on Investments 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Book cost brought forward 530,784 541,721 Acquisitions at cost 134,472 128,160 Capital distributions - proceeds (171,597) (183,792) Capital distributions - realised gains on sales 33,733 44,695 BOOK COST AT 30TH JUNE 527,392 530,784 Unrealised appreciation/(depreciation) of investments Unlisted investments 287,575 295,509 Listed investments (8) 130 VALUATION OF INVESTMENTS AT 30TH JUNE 814,959 826,423 9b. Analysis of Investments 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Sterling Unlisted investments 55,736 57,226 Listed investments - - 55,736 57,226 US dollar Unlisted investments 592,258 587,617 Listed investments 113 199 592,371 587,816 Euro Unlisted investments 156,626 170,232 Listed investments - - 156,626 170,232 Other Unlisted investments 10,226 11,149 Listed investments - - 10,226 11,149 814,959 826,423 Realised profits on sales 33,733 44,695 Amounts previously recognised as unrealised 130 89 appreciation on those sales (Decrease)/increase in unrealised (8,202) 37,418 appreciation GAINS ON INVESTMENTS 25,661 82,202 Further analysis of the investment portfolio is provided in the Manager's Review above. Transaction costs incidental to the acquisition of investments totalled £nil (2013: £nil) and to the disposals of investments totalled £6,000 (2013: £15,000) for the year. 10. Fair Value Hierarchy Financial Assets at Fair Value Through Profit or Loss at 30th June 2014 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL £'000 £'000 £'000 £'000 Unlisted holdings - - 814,846 814,846 Listed holdings 113 - - 113 113 - 814,846 814,959 Financial Assets at Fair Value Through Profit or Loss at 30th June 2013 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL £'000 £'000 £'000 £'000 Unlisted holdings - - 826,224 826,224 Listed holdings 199 - - 199 199 - 826,224 826,423 Level 3 Financial Assets at Fair Value Through Profit or Loss at 30th June 2014 PRIVATE EQUITY INVESTMENTS £'000 Opening balance 826,224 Purchases at cost 134,472 Transfer of book cost to level 1* (3,008) Sales proceeds (167,565) Total gains or losses included in "Gains on investments" in the Income Statement - on assets sold 32,657 - on assets held as at 30th June 2014 (7,934) CLOSING BALANCE 814,846 Level 3 Financial Assets at Fair Value Through Profit or Loss at 30th June 2013 PRIVATE EQUITY INVESTMENTS £'000 Opening balance 799,322 Purchases at cost 128,160 Transfer of book cost to level 1* (4,857) Sales proceeds (172,352) Total gains or losses included in "Gains on investments" in the Income Statement - on assets sold 38,485 - on assets held as at 30th June 2013 37,466 CLOSING BALANCE 826,224 * The transfer of book cost to level 1 is due to stock distributions received from private equity investments. 11. Debtors 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Amounts owed by investment funds 136 299 Prepayments and accrued income 440 752 576 1,051 12. Creditors: Amounts Falling Due Within One Year 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Investment management fees 746 769 Amounts owed to brokers 1,073 1,440 Other creditors and accruals 371 368 2,190 2,577 13. Called-up Share Capital 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Allotted, called-up and fully paid: 33,522,013 (2013: 34,507,013) ordinary shares of 67p each 22,461 23,121 32,572,534 (2013: 33,312,534) redeemable shares of 1p each 326 333 22,787 23,454 During the year, 740,000 redeemable shares and 985,000 ordinary shares were bought back in the market for cancellation. The total consideration paid, including commission and stamp duty, was £7,650,000 and £10,456,000 respectively. 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. Each holder of ordinary shares is entitled, on a show of hands, to one vote and, on a poll, 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 monthly 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* £'000 £'000 £'000 £'000 £'000 £'000 Beginning of year 283,555 2,091 314,138 296,763 41,304 (58,021) Net gain on realisation of investments - - 33,733 - - - Decrease in unrealised appreciation - - - (8,202) - - Transfer on disposal of investments - - - 130 - - Exchange differences on currency - - 10,496) - - - Exchange differences on other capital items - - (34) (2) - - Legal and professional costs charged to capital - - (189) - - - Share cancellations - 667 - - - - Share buybacks - - - - (18,106) - Revenue return for - - - - - 1,573 the year END OF YEAR 283,555 2,758 337,152 288,689 23,198 (56,448) * Reserves that are distributable by way of dividends. 15. Net Asset Value per Share 30TH JUNE 2014 30TH JUNE 2013 Net assets attributable in £'000 901,691 903,284 Ordinary and redeemable shares 66,094,547 67,819,547 Net asset value per share - ordinary and 1,364.24p 1,331.89p redeemable 16. Reconciliation of Net Cash Flow to the Movement in Net Funds 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Increase in cash in the year 20,455 23,554 Non-cash movement - foreign exchange (losses)/gains (10,496) 3,690 CHANGE IN NET FUNDS 9,959 27,244 Net cash at beginning of year 78,387 51,143 NET FUNDS AT END OF YEAR 88,346 78,387 17. Analysis of Net Funds 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Cash at bank 88,346 78,387 88,346 78,387 18. Reconciliation of Return on Ordinary Activities Before Financing Costs and Tax to Net Cash Flow from Operating Activities 30TH JUNE 2014 30TH JUNE 2013 £'000 £'000 Return on ordinary activities before financing costs and tax 18,877 88,359 Withholding tax deducted (945) (2,401) Gains on investments (25,659) (82,202) Currency losses/(gains) on cash and borrowings 10,530 (3,720) Decrease in creditors (16) (5,921) Increase in other debtors (1) (25) 2,786 (5,910) 19. Contingencies, Guarantees and Financial Commitments At 30th June 2014, there were financial commitments outstanding of £175.7m 2013: £195.1m) in respect of investments in partly paid shares and interests in private equity funds. 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: • liquidity/marketability risk; • interest rate risk; • market price risk; and • 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 regularly receive financial information, which is used to identify and monitor risk. In accordance with FRS 29, an analysis of financial assets and liabilities, which identifies the risk to the Company of holding such items, is given below. Liquidity Risk Due to the nature of the Company's investment policy, the largest proportion 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 regular basis. There are times when opportunities for the Company to acquire secondary unquoted portfolios of interests or co-investments may be limited due to the cyclical nature of their occurrence. As a result, at times of low investment opportunity, some funds may be held on deposit or invested in gilts and other fixed interest government bonds. It is the nature of investment in private equity that a commitment (see Note 19 for outstanding commitments as at 30th June 2014) 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. The Company's ability to meet these commitments is dependent upon it receiving cash distributions from its private equity investments and, to the extent these are insufficient, on the availability of financing facilities. In order to cover any shortfalls, the Company has entered into a multi-currency revolving credit facility with The Royal Bank of Scotland plc and Lloyds TSB Bank plc, due to expire in June 2015, and comprising facilities of $82m and €57m of which at 30th June 2014, the sterling equivalent of £nil (30th June 2013: £nil) was drawn down (see Note 6 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. Total available financing as at 30th June 2014 stood at £181.9m (2013: £181.3m), comprising £88.3m (2013: £78.4m) in cash balances and £93.6m (2013: £102.9m) (sterling equivalent) in undrawn bank facilities. The available financing along with the private equity portfolio exceeded the outstanding commitments by 5.7 times (2013: 5.2 times). Interest Rate Risk The Company may use gearing to achieve its investment objectives and manage cash flows and uses a multi-currency revolving credit facility for this purpose. Interest on the revolving credit facility is payable at variable rates determined subject to drawdown. Variable rates are defined as LIBOR or EURIBOR + 2.75%, dependent on the currency drawn. The interest rate is then fixed for the duration that the loan is drawn down. At 30th June 2014, there was the sterling equivalent of £nil funds drawn down on the loan facilities (30th June 2013: £nil). A commitment fee of 1.10% per annum is payable in respect of the amounts available for drawdown in each facility. Non-interest rate exposure The remainder of the Company's portfolio and current assets are not subject to interest rate risks. Financial assets for 2014 and 2013 consisted of investments, cash and debtors (excluding prepayments). As at 30th June 2014, the interest rate risk and maturity profile of the Company's financial assets was as follows: FIXED INTEREST NO MATURES MATURES AVERAGE MATURITY WITHIN AFTER INTEREST TOTAL DATE 1 YEAR 1 YEAR RATE 30TH JUNE 2014 £'000 £'000 £'000 £'000 % Fair value no interest rate risk financial assets Sterling 57,055 57,055 - - - US dollar 660,642 660,642 - - - Euro 175,230 175,230 - - - Other 10,529 10,529 - - - 903,456 903,456 - - - The interest rate risk and maturity profile of the Company's financial assets as at 30th June 2013 was as follows: FIXED INTEREST NO MATURES MATURES AVERAGE MATURITY WITHIN AFTER INTEREST TOTAL DATE 1 YEAR 1 YEAR RATE 30TH JUNE 2013 £'000 £'000 £'000 £'000 % Fair value no interest rate risk financial assets Sterling 58,676 58,676 - - - US dollar 661,480 661,480 - - - Euro 172,464 172,464 - - - Other 12,525 12,525 - - - 905,145 905,145 - - - Financial Liabilities At 30th June 2014, the Company had drawn the sterling equivalent of £nil (2013: £nil) of its four-year committed revolving dollar and euro credit facilities, expiring June 2015, of $82m and €57m respectively with The Royal Bank of Scotland plc and Lloyds TSB Bank plc. Interest is incurred at a variable rate as agreed at the time of drawdown and is payable at the maturity date of each advance. At the year end, interest of £nil (2013: £nil) was accruing. At 30th June 2014 and at 30th June 2013, all financial liabilities were due within one year and comprised short-term creditors. Market Price Risk The method of valuation of the fixed asset investments is described in Note 1(D) above. The nature of the Company's fixed asset investments, with a 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. PIP's portfolio is well diversified by the sectors in which the underlying companies operate. This sectoral diversification helps to minimise the effects of cyclical trends within particular industry segments. If the investment portfolio fell by 20% from the 30th June 2014 valuation, with all other variables held constant, there would have been a reduction of £164,622,000 (2013 based on a fall of 20%: £166,937,000) in the return before taxation. An increase of 20% would have increased the return before taxation by £161,362,000 (2013 based on a 20% increase: £163,632,000). Foreign Currency Risk Since it is the Company's policy to invest in a diverse portfolio 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 above. Although it is permitted to do so, the Company did not hedge the portfolio against the movement in exchange rates during the financial year. The investment approach and the Manager's consideration of the associated risk are discussed in further detail in the Manager's Review above. 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 2014, realised exchange losses of £34,000 (2013: realised exchange gains of £29,000) and realised losses relating to currency of £10,496,000 (2013: realised gains of £3,690,000) have been taken to the capital reserve. The Company's exposure to foreign currency excluding private equity investments is shown below. In relation to this exposure, if the sterling/dollar and sterling/euro exchange rate had reduced by 10% from that obtained at 30th June 2014, it would have the effect, with all other variables held constant, of increasing equity shareholders' funds by £9,653,000 (2013: £8,433,000). 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 £7,898,000 (2013: £6,900,000). The calculations are based on the financial assets and liabilities and the exchange rate as at 30th June 2014 of 1.70985 (2013: 1.51670) sterling/dollar and 1.24885 (2013: 1.16880) sterling/euro. An analysis of the Company's exposure to foreign currency is given below: 30TH JUNE 30TH JUNE 30TH JUNE 30TH JUNE 2014 2014 2013 2013 ASSETS LIABILITIES ASSETS LIABILITIES £'000 £'000 £'000 £'000 US dollar 68,271 - 73,664 - Euro 18,604 - 2,232 - Swedish krona 59 - 66 - Norwegian krone 5 - 1,310 - Australian dollar 239 - - - Japanese yen 27 - - - 87,205 - 77,272 - Fair Value of Financial Assets and Financial Liabilities The financial assets of the Company are held at fair value. Financial liabilities are held at amortised cost, which is not materially different from fair value. Managing Capital The Company's equity comprises ordinary shares and redeemable shares as described in Note 13. Capital is managed so as to maximise the return to shareholders while maintaining a capital base that allows the Company to operate effectively in the marketplace and sustain future development of the business. As at 30th June 2014, the Company had bank debt facilities to increase the Company's liquidity. Details of available borrowings at the year end can be found earlier in this Note. The Company's assets and borrowing levels are reviewed regularly by the Board of Directors with reference to the loan covenants. The Company's capital requirement is reviewed regularly by the Board of Directors. 22. Related Party Transactions Under the FCA listing rules, the Manager, Pantheon Ventures (UK) LLP, is regarded as a related party of the Company. The amounts paid to the Manager are disclosed in Note 3. The Company is entitled to invest in funds managed by Pantheon. The Manager is not entitled to management and commitment fees in respect of PIP's holdings in, and outstanding commitments to, these funds. ANNUAL GENERAL MEETING The Company's Annual General Meeting will be held on 25th November 2014 at 10.30 am at The British Academy, 10-11 Carlton House Terrace, London SW1Y 5AH. NATIONAL STORAGE MECHANISM A copy of the Annual Report and Financial Statements will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: ENDS Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.
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