Pantheon International Regulatory News (PIN)

PANTHEON INTERNATIONAL PARTICIPATIONS PLC

HALF-YEARLY FINANCIAL REPORT

SIX MONTHS TO 31ST DECEMBER 2014

The Half-Yearly Financial Report can be accessed via the Company's website at www.pipplc.com or by contacting the Company Secretary by telephone on 01392 412122.

PIP will host a webcast on Thursday, 26 February 2015 at 2:30pm GMT. Dial in details can be found below.

The presentation can be viewed on the day via

www.meetingzone.com/presenter?partCEC=1302390 with participant PIN 1302390. Please refer to the numbers below or international dial-in numbers for your local dial-in details. When you dial in for the webcast, you will be asked to provide your name, company name and the password PIP.

+44 (0) 20 3003 2666 Standard International Access

0808 109 0700 UK Toll Free

HALF-YEAR AT A GLANCE

1 Excludes legal costs associated with the purchase and sale of investments.

PERFORMANCE SUMMARY

NAV and Share Price Performance

Net Investment Cash Flow

* 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.

* As at 31st December 2014

CHAIRMAN'S STATEMENT

We are pleased to report NAV per share rose 10.9% to 1,513.3 pence during the half-year. This good result reflects positive progress in the value of the underlying portfolio of 5.1% (including income), boosted by positive foreign exchange movements stemming from the US dollar's gains against sterling. The share prices of the ordinary and redeemable shares mirrored these gains, each rising by 10% in the period.

The portfolio continued to generate significant realisations as market conditions remained supportive of exit activity, resulting in increased distributions to the Company.

Performance

During the half-year to 31st December 2014, the Company's NAV per share grew by 10.9%. This growth was driven by portfolio gains of 4.2%, investment income of 0.9% and share buybacks which added 0.1% to NAV per share. The reversal of sterling's gains versus the US dollar in the second half of 2014 led to positive foreign exchange effects in the period of 6.5% per share, reflecting the effect of a strengthening US dollar on PIP's portfolio, of which 56% is invested in funds operating mainly in the USA. Expenses and taxes in the period reduced NAV per share by 0.8%.

Sample EBTIDA and revenue growth amongst underlying portfolio companies, representing approximately 48% by value of the buyout portfolio, was 9.8% and 8.5% respectively in the 12 months to 30th June 2014. Our portfolio weighting emphasises the consumer, IT, healthcare and industrial sectors. These sectors provide ample opportunity for private equity managers, investing often in the mid-market, to acquire companies with higher growth characteristics relative to the broader equity markets due to their market positioning and scale. Our relentless focus on investing with high-quality managers globally, often with specialist knowledge of the sectors in which they are investing, helps to ensure that our portfolio is exposed to these growth opportunities through disciplined ownership practices that drive operational and capital efficiencies.

Share Buybacks

In the half-year to 31st December 2014, the Company invested £3.6m to buy back and cancel 125,000 ordinary shares and 200,000 redeemable shares, resulting in an uplift to NAV per share of 1.5p, or 0.1% of PIP's NAV per share. PIP began buying back shares in August 2011 and so far has invested £80m in buying back 13% 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

The portfolio benefited in the period from significant distributions, including from a number of IPOs that had listed during the first half of 2014. The Company received distributions of £129m during the half-year, equivalent to an annualised rate of 32% of opening portfolio assets. Calls from underlying private equity funds were £16m, or approximately 18% of opening undrawn commitments on an annualised basis. This resulted in a net portfolio cash flow prior to new investment commitments of £113m during the period. PIP's portfolio is mature, with a weighted average fund age of 7.9 years. If conditions remain supportive, this maturity should lead to continued positive net cash flows.

A sample of PIP's largest 50 distributions during the half-year had an average uplift of 27% to their previous holding value. This tendency for exits to occur at an uplift can add to performance.

New Investments

Demand for assets remains high, with markets consequently appearing to be fully priced. The Company's flexible investment strategy has enabled it to seek out assets which demonstrate relative value. During the half-year, PIP made 19 new commitments amounting to £132m, comprising £72m in seven secondaries, £16m in six co-investments and £44m in six primaries.

Our secondary purchases were mainly in US and European buyout funds, typically in more concentrated portfolios involving single fund interests where portfolio prospects could be more fully evaluated. Our Manager's investment emphasis continues to target high quality funds with identifiable near term liquidity prospects, exploiting information often gained from prior investments. Moreover, in line with current strategy, the Company has made six carefully selected primary commitments, mostly in mid-market funds that are oversubscribed and where such fund interests are thought less likely to be readily available in the secondary market.

Since 31st December 2014, the Company has committed a further £30m: £14m to two secondaries, £7m to two co-investments and £9m to two primary funds.

Balance Sheet

In November, the Company renewed its credit facility with improved terms and a revised maturity date of November 2018. The size of the new loan facility remains unchanged at $100m and €46m, which was equivalent to £100m as at 31st December 2014. The facility was undrawn as at this date. Given the average maturity of PIP's funds, we expect the private equity portfolio to generate net cash for investments. Our positive net cash flows and ungeared balance sheet allow us to renew the portfolio on an ongoing basis with a view to achieving some consistency in deployment, ideally over a 4-5 year period.

At 31st December 2014, the Company held cash of £123m, which together with the credit facility gave it total liquid resources of £223m.

Outlook

The Company's strategy continues to emphasise opportunities in the secondary market. While pricing of assets in the secondary market has moved in sympathy with rising prices in all asset markets, our relationships with more than 100 selected private equity managers globally positions us to be able to buy assets on the secondary market when portfolios look to be at a favourable point in their value development. This approach provides the Company with access to assets selected for their high quality that are nearer to being realised. Should these market conditions continue, purchasing assets in the secondary market with an emphasis on their ripeness for sale enables the Company to continue to benefit from these unusually buoyant equity markets. Selective co-investment in opportunities where the price can be clearly justified by the opportunity for value growth, together with targeted primary commitments to funds managed in all regions by some of the world's best private equity managers, allows the Company to continue to renew its portfolio while maintaining a conservative approach to balance sheet management.

Board Changes

Following Peter Readman's retirement from the Board at the Annual General Meeting, I am pleased to announce the appointment of David Melvin as a Director with effect from 23rd February 2015. David's private equity experience has been acquired over many years as a capital markets practitioner, providing a set of perspectives that will complement those of the other Board members. David was a Partner and Head of Investor Relations for TDR Capital LLP and was formerly Global Co-Head of Financial Sponsors at Merrill Lynch.

TOM BARTLAM

Chairman

25th February 2015

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 it reserves the right to do so should this be deemed to be in its interests.

The Company may invest in any type of financial instrument, including equity and non-equity shares, debt securities, subscription and conversion rights and options in relation to such shares and securities and interests in partnerships and limited partnerships and other forms of collective investment scheme. Investments in funds and companies may be made either directly or indirectly, through one or more holding, special purpose or investment vehicles in which one or more co-investors may also have an interest.

The Company employs a policy of over-commitment. This means that the Company may commit more than its available uninvested assets to investments in private equity funds on the basis that such commitments can be met from anticipated future cash flows to the Company and through the use of borrowings and capital raisings where necessary.

The Company's policy is to adopt a global investment approach. The Company's strategy is to mitigate investment risk through diversification of its underlying portfolio by geography, sector and investment stage. Since the Company's assets are invested globally on the basis, primarily, of the merits of individual investment opportunities, the Company does not adopt maximum or minimum exposures to specific geographic regions, industry sectors or the investment stage of underlying investments.

In addition, the Company adopts the following limitations for the purpose of diversifying investment risk:

The 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.

MANAGER'S REVIEW

MARKET REVIEW

Economic stimulus is nothing without structural reform. Nor, for that matter, is swingeing austerity. Just when most of the world appeared to be recovering from the economic ills of the past six years, symptoms have returned to many markets that indicate that the medicine administered has proven as unsuccessful as the widespread cure.

Europe, having turned a corner, is slipping into recession once more. Deflation across the Eurozone is a threat, and indeed already a reality in some markets1. The UK, which emerged strongly from the downturn, may not be able to escape the pull backwards. Meanwhile, Japan has slipped into recession once more, with its fifth technical recession since 2002 deeper than at first thought2. At the end of 2014, the Bank of Japan signalled its intention to lift its bond buying program to unprecedented levels, while the European Central Bank in January announced plans to buy €60bn a month of sovereign debt and other assets until September 2016 in the hope of rekindling growth. So, just as one large central bank - the US Federal Reserve - seems to be turning off the printing presses, two other central banks appear ready to flood markets with masses of liquidity.

The problem of slow growth is most acute in those two markets, but not confined to them. A large part of the world is now faced with the symptoms of what economists call "secular stagnation" - a long-term reduction in the potential growth rates of developed economies. Meanwhile, large emerging markets, including China and India, have stronger growth but seem unlikely to recapture the heady double-digit or high single-digit rates registered just a couple of years ago. The prospect of anaemic growth leaves policymakers around the world grappling with ways to stimulate their economies, create jobs and increase prosperity for their citizens.

As investors, we have to find ways to generate returns against a backdrop of persistent uncertainty and volatility. In the face of slower growth and stagnation, investors' fundamental quest for yield has fuelled the credit markets. Treasury yields flirt with record lows and high-yield credit can prove to be anything but. While, of course, a lower cost of credit is helpful to private equity managers in reducing the cost of capital for portfolio companies, it also has the effect of pushing up asset prices. As such, private equity is not immune to downward pressure on returns, but private equity managers can be more active in order to create value, including making judicious use of the credit markets as well as financing growth in businesses with clear opportunities to increase operating efficiency and/or market penetration.

Amidst the uncertainty, bright spots remain on the horizon. In the US, growth is on an upward trajectory, joblessness has fallen, consumer spending and business investment are growing and inflation - pushed down in part by low oil prices - is picking up and wages are responding3. Normal economic progress, though not boundless growth, is returning. The US experience of quantitative easing shows that such measures can work, but only when allied with financial and structural reform. Certain emerging markets are also showing strong signs of continued growth and undervaluation from a private equity perspective. And globally, oil prices - which at time of writing have slipped to below $60 a barrel4 - can provide a fillip for growth, particularly in those countries reliant on oil imports for their manufacturing output.

Contrast the situation in the US with that in Western Europe and Japan - economies where last year we observed encouraging signs of growth5. As we enter 2015, both are tipping backwards as deflation and recession take hold once more. The result is that as one massive monetary program comes to a close, two new packages are ready to take its place.

Europe and Japan Quantitative Easing Looms

In Europe, a brief honeymoon of improving economic growth has been replaced with a deteriorating outlook. The European Union registered GDP growth of just 0.3% in the third quarter, with its largest actor Germany having effectively ground to a halt since the end of March6.ECB President Mario Draghi's planned €1 trillion quantitative easing stands ready to administer emergency liquidity7. Yet, without long-term reform, the benefit is likely to be short-lived. The politics of inequality is trumping much of Europe's political commitment for reforming labour markets, cleaning out its banking problems, and dealing with an inconsistent Stability and Growth Pact, which is driving the continent into deflation.

In Japan, structural market reforms, one of Shinzo Abe's "three arrows" of expansionist policies, have been disappointingly slow in coming. It remains to be seen whether the renewed mandate of his government can deliver on this elusive goal.

While the quantitative easing that is expected in both these markets is likely to be helpful for equity markets in the short term, private equity investors, as long-term investors, will need to be particularly careful to invest in areas of the market that are better defended against these largely deflationary effects.

Emerging Markets Attractive Despite Headwinds

Long-term slowing growth extends to large emerging markets, presenting challenges for their respective administrations. Additional political volatility creates a backdrop of uncertainty for investors, despite the potential long-term attractive characteristics as these economies grow.

China's growth has come off its peak, and while much has been made of attempts to increase the pace of growth, the OECD is predicting that GDP expansion will dip below 7% in 2016, while OECD member growth increases to 3%8. Addressing wasteful investment will help, but China's transition to a domestically-driven consumption economy will inevitably mean slower-paced growth in the long run.

Despite the prevailing macroeconomic and political headwinds, there will be opportunities to invest in companies whose prospects for growth can be transformed by the economic development within many emerging markets. Experienced private equity managers, used to the greater volatility of equity prices typical in these markets, use their understanding of the longer term prospects for certain businesses to create buying opportunities.

Widespread Asset Price Inflation

One of the hazardous consequences of quantitative easing is the widespread asset price inflation witnessed globally. Stock markets are above where they stood before the crisis, while bond yields are at some of their lowest levels. Private equity has not been immune. Public market comparables set a high benchmark for valuations, while cheap loans and high-yield bonds enable sponsors to stretch prices further. Furthermore, fundraising has been enjoying its best run since 20089 with record levels of dry powder increasing competition for assets. We expect that run to continue in 2015 as the European Central Bank and the Bank of Japan take on the mantle of providers of liquidity of last resort to the global economy. High valuations and high levels of market liquidity, which increases the risk of overpaying when deploying capital in new investments, provides a welcome boost to sellers of assets and consequently the market as a whole, as well as PIP's own portfolio, has seen increasing levels of distributions from funds as assets are realised in this favourable environment.

Active Investment Provides Opportunity for Success

The macroeconomic environment and socio-political backdrop are important factors which influence Pantheon's strategic view on certain investment markets. For instance, we remain positively inclined to the US given improving fundamentals. Meanwhile, our view on Europe is marginally more bearish because of the strengthening economic headwinds. However, slavish adherence to such broad views would overlook beneficial undercurrents and opportunities in any individual market. In the face of low growth and high asset prices globally, a more fundamental view on investment and value creation is needed. The discipline of investors and the value-adding operational skill of private equity managers have always been important, but now they are critical. Expanding valuation multiples and cheap leverage cannot be relied upon to lift returns in these markets.

Secondary Market Review

Secondary transaction volume reached another record level in 2014 with $38.5bn10 transacted, significantly surpassing the 2013 level of $24.5bn10. The growth reflected a favourable pricing environment for sellers of secondary interests in funds enjoying helpful exit market conditions. Consequently, in addition to the expected sellers, we saw many institutions making opportunistic use of the secondary market to reduce exposure to non-core managers.

Pricing in the market has been robust, with an average high bid of 95%11 of NAV throughout the year. Discounts to NAV stabilised in the second half of 2014 following contraction in the first half, as buyers' expectations of further valuation write-ups have reduced11.

Underpinning the high transaction volume levels were a record number of deals above $1bn11, as sellers increased the concentration in their portfolios, and continued to shift their strategy focus (e.g. from large buyout to mid-market).

As a reflection of this, pension funds were the most active sellers during the year, accounting for 28%12 of all sellers. Despite having been active sellers for some time now, banks continue to remain one of the most active at 25%12. 

Pantheon has screened over $50bn of deals, committing to nine transactions during the year, targeting more concentrated transactions involving fund interests with identifiable value drivers; these typically comprise a number of investments with strong growth prospects or where potential liquidity events give rise to significant upside relative to current holding valuations.

The most active sellers in the market are expected to provide significant secondary deal flow in 2015. Despite the Federal Reserve Board's announcement in December 2014 of a deadline extension for banks' compliance with the Volcker Rule to at least July 2016, banks are expected to engage in further selling activity this year. Moreover, pension funds are expected to look to take advantage of a more active secondary market to concentrate their resources on fewer fund relationships. These trends, along with a recovering US economy and further volatility in Europe is likely to mean another active year for secondary deal flow in 2015.

Private Equity Outlook

While we see high prices and fierce competition for assets in many markets, we do believe there are broad themes shaping consumption trends globally, including developments in technology and in large emerging markets. These are enduring investment themes which private equity can tap into and ultimately profit from. Among these we see demand for new energy sources, resurgent US manufacturing and the ageing global populations as driving forces for our investment markets.

1 Source: Eurostat Newsrelease, October 2014. Six EU countries including Greece, Bulgaria, Hungary and Spain were registering negative annual inflation

2 Source: Japan Recession 2014: Why Abenomics Isn't Working, Jessica Menton, International Business Times, December 8, 2014

3 Source: Big Job Gains and Rising Pay in Labor Data, Nelson D Schwartz, New York Times, December 5, 2014

4 Source: Bloomberg Energy & Oil Prices, February 23, 2015. Brent Crude priced at $58.42 a barrel

5 Source: Japan Recession and EU Slump Hold Lessons for US, Investor's Business Daily, November 17, 2014

6 Source: Eurostat, December 5, 2014. Germany contracted by 0.1% in Q2 followed by 0.1% growth in Q3

7 Source: European Central Bank United on €1 trillion Liquidity Injection, Claire Jones, Financial Times, November 6, 2014.

8 Source: OECD, China Economic Forecast Summary, November 2014

9 Source: Preqin, October 2014. Funds raised totalled $320 billion in the first three quarters of 2014, and dry powder stood at $1.2 trillion.

10 Secondary deal volume excludes real estate transactions. Source: Cogent Partners Secondary Market Update, January 2015

11 Cogent Partners Secondary Market Update, January 2015

12 Setter Capital Volume Report, Secondary Market 2014

PORTFOLIO OVERVIEW

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 US and Europe, to regions with higher rates of economic growth such as Asia.

Portfolio Analysis by Value as at 31 December 20141

1 Fund geography, stage, maturity and primary/secondary tables are based upon underlying fund valuations and account for 100% of PIP's overall portfolio value. Company sector and company geography tables are based upon underlying company valuations at 30th June 2014 and account for approximately 90% of PIP's overall portfolio value.

Fund Geography

The majority of PIP's geographical exposure is focused on the US and Europe, reflecting the fact that these regions have the most developed private equity markets.

Portfiolio assets based in Asia and other regions provide access to faster-growing economies.

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.

Exposure to co-investments increased to 8% (from 7%) during the half-year, due to new investments.

Pantheon Vehicles

At 31st December 2014, 6% of PIP's portfolio value and 5% 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 primary commitments and co-investments are increasing PIP's exposure to more recent vintages, with the 2009 and later segment of the portfolio increasing to 15% (from 11%) during the half-year.

Primary/Secondary

53% of the portfolio is derived from primary commitments.

However, PIP's secondary emphasis has increased the secondary exposure of the portfolio to 47%, up from 44% as at 30th June 2014.

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 greater exposure to information technology, and lower exposure to the banking, mining and utilities sectors.

Company Geography

Over half of the portfolio is with companies based in North America, which benefit from greater capital market scope and depth.

PIP's European exposure, which represents 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.

PORTFOLIO ANALYSIS

Portfolio Performance by Stage for the Half-Year to 31st December 20141

Debt Mutiples2

Venture and growth and buyout investments have differing leverage characteristics.

PORTFOLIO ANALYSIS - BUYOUT

Valuation Multiple2

Revenue and EBITDA Growth2

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.

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 30th June 2014 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 30th June 2014 or, where not available, the closest annual period disclosed, and provide coverage of 48% (for both revenue and EBITDA growth) 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 2009-2013 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 30th June 2014 underlying valuations, or the closest period end disclosed. The valuation multiple sample covers approximately 56% of PIP's buyout portfolio. The debt multiple sample covers 61% of PIP's buyout portfolio and 51% of PIP's co-investment portfolio. Data sourced from Bloomberg.

PORTFOLIO ANALYSIS - VENTURE AND GROWTH

Venture and Growth Portfolio Analysis

DISTRIBUTIONS IN THE HALF-YEAR TO 31ST DECEMBER 2014

PIP received more than 9001 distributions in the half-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 £129m in proceeds from the portfolio in the six months to 31st December 2014, implying an annualised distribution rate equivalent to 32% of the opening private equity assets.

The US accounted for the majority of PIP's distributions, where market conditions supported a good level of exits among larger buyouts.

Despite economic headwinds, European distributions were at least as strong.

Distribution Rates2 in the Half-Year to 31st December 2014 by Vintage

Mature vintages continue to distribute at higher rates, with 2009 and earlier funds distributing at a rate in excess of 30%. With a weighted fund maturity of 7.9 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 Half-Year to 31st December 20141

On a sample of the largest 50 distributions, the value-weighted average cost multiple on initial cost was 2.1 times, highlighting the continued ability of private equity managers to create a significant value over the course of an investment.

1 The available data in the sample represented approximately 36% by value of PIP's total distributions for the half-year to 31st December 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 Half-Year to 31st December 20142

On a sample of the largest 50 distributions, the value-weighted average uplift on the sample was 27%. 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 34% by value of PIP's total distributions for the half-year to 31st December 2014.

INVESTMENTS CALLED IN THE HALF-YEAR TO 31ST DECEMBER 2014

Investments called during the half-year ranged across regions and sectors, including consumer, speciality pharmaceuticals, energy companies and outsourced business service providers.

Calls by Region and Stage

PIP paid £16m to finance calls on undrawn commitments during the half-year to 31st December 2014, equivalent to an annualised call rate of 18% of opening undrawn commitments.

New Commitments

PIP committed £132m to new investments during the half-year, concentrated on buyout funds in the US and European markets. £66m was drawn at the time of purchase. As a result of Pantheon's targeted origination, PIP continued to benefit from good deal flow, with all secondary deals during the half-year in processes that were either proprietary or involved restricted competition.1

New Commitments by Region

Over 90% of new commitments made in the half-year were to private equity funds focused on the US and European markets, reflecting the larger secondary opportunity in these regions.

New Commitments by Stage

A significant majority of new investments were made in the large buyout and mid-market space, targeting funds whose portfolio companies have high barriers to entry, strong cash generation and multiple potential exit routes.

New Commitments by Deal Type

Secondary transactions accounted for the majority of new commitments.

Investment activity in the half-year reflected PIP's efforts to grow its primary programme on a targeted basis, committing £45m to six top-tier funds. PIP also participated in six co-investments. Co-investments and primaries offer exposure to more recent vintages and assets which may be less accessible in the secondary market.

1 A proprietary deal is where Pantheon was in exclusive discussions with the seller. A restricted process deal is where there are three or fewer bidders for the asset.

2 Includes late primary commitments.

NEW COMMITMENTS

SECONDARY AND PRIMARY (FUNDS)

PIP committed £72m to five secondary and two late transactions, with a majority of commitments in large and mid-market buyout funds. Late primary commitments enable PIP on occasion to invest in a fund being raised when there is evidence of value manifesting in the portfolio.

PIP's commitment to primaries during the half-year included four buyout funds and two growth capital firms, adding current vintage exposure with high-quality managers to its portfolio.

New Secondary and Primary Commitments1

Secondary and Late Primary Commitments in the Half-Year to 31st December 2014

Primary Commitments in the Half-Year to 31st December 2014

1 Funds acquired in new secondary transactions are not named due to non-disclosure agreements.

2 Late primary commitments.

3 Confidential.  

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 31st December 2014

PIP's outstanding commitments to investments increased to £240m at 31st December 2014 compared with £176m at 30th June 2014. The Company paid calls of £16m and added an additional £66m of outstanding commitments associated with new investments made in the half-year. The remaining £14m increase was due to foreign exchange movements 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.

Stage

PIP's undrawn commitments are well-diversified across all major stages of private equity.

Maturity

47% of PIP's undrawn commitments are in the 2007 vintage or older. It is likely that a portion of these commitments will not be drawn.

Rise in vintage 2014 undrawns reflect increase in primary commitment levels.

FINANCE AND SHARE BUYBACKS

Cash and Available Bank Facility

At 31st December 2014, PIP had cash balances of £123m.

In addition to 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 November 2018 and comprises facilities of $100m and €46m which, using exchange rates at 31st December 2014, amount to a sterling equivalent of £100m. At 31st December 2014, the Loan Facility remained fully undrawn.

Undrawn Commitment Cover

At 31st December 2014, the Company had £223m of available financing, comprised of its cash balances and Loan Facility. The sum of PIP's available financing and private equity portfolio provide 4.5 times cover relative to undrawn commitments.

It should be noted that a portion of the Company's undrawn commitments of £240m is 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 60% of the Company's undrawn commitments are in fund vintages that are greater than six years old.

Share Buybacks

PIP bought back 0.5%1 of its shares in the financial year. In total, 125,000 ordinary shares and 200,000 redeemable shares were bought back at a weighted average discount of 16% and 23% respectively, resulting in a total uplift to NAV per share of 1.5p, or 0.1% 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.

1 Calculated using the number of shares bought back in the half-year divided by the number of shares outstanding at 30th June 2014.

LARGEST 50 MANAGERS BY VALUE AS AT 31ST DECEMBER 20141

1 Percentages look through feeders and funds-of-funds.

2 Refers to the regional exposure of funds.

3 The majority of PIP's remaining investment in EQT is held in one of its Asian funds.

LARGEST 50 COMPANIES BY VALUE AS AT 31ST DECEMBER 2014

1 The largest 50 companies table is based upon underlying company valuations at 30th June 2014, adjusted for known calls, distributions, new investment commitments and post-valuation information.

2 Liquidation event subsequent to 30th June 2014.

3Co-Investments/directs.

4 Listed companies.

INTERIM MANGEMENT REPORT AND RESPONSIBILITY STATEMENT OF THE DIRECTORS

IN RESPECT OF THE HALF-YEARLY FINANCIAL REPORT

Interim Management Report

The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal uncertainties for the remaining six months of the financial year are set out in the Chairman's Statement and the Manager's Review.

The principal risks facing the Company are substantially unchanged since the date of the Annual Report for the year ended 30th June 2014 and continue to be as set out in that report.

Risks faced by the Company include, but are not limited to, funding of investment commitments and default risk, risks relating to investment opportunities, financial risk of private equity, long-term nature of private equity investments, liquidity risk, valuation uncertainty, gearing, foreign currency risk, the unregulated nature of underlying investments, taxation and the risks associated with the engagement of the Manager or other third party advisers.

Responsibility Statement

Each Director confirms that to the best of their knowledge:

• the condensed set of financial statements has been prepared in accordance with the Statement on Half-Yearly Financial Reports issued by the UK Accounting Standards Board.

• this Half-Yearly Financial Report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that

have occurred during the first six months of the financial year and their impact on the set of financial

statements; and a description of the principal risks and uncertainties for the remaining six months of the

year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken

place in the first six months of the current financial year and that have materially affected the financial

position or performance of the Company during that period; and any changes in the related party

transactions described in the last annual report that could do so.

This Half-Yearly Financial Report was approved by the Board of Directors on 25th February 2015 and the above responsibility statement was signed on its behalf by Tom Bartlam, Chairman.

INCOME STATEMENT (UNAUDITED)

FOR THE SIX MONTHS TO 31ST DECEMBER 2014

* The total column of the statement represents the Company′s profit and loss statement prepared in accordance with UK Accounting Standards. The supplementary revenue return and capital columns are prepared under guidance published by the Association of Investment Companies.

** Includes currency movements on investments.

*** Return per ordinary and redeemable share is shown in note 6.

All revenue and capital items in the above statement relate to continuing operations.

No operations were acquired or discontinued during the period.

There were no recognised gains or losses other than those passing through the Income Statement.

The Notes form part of these financial statements.

RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS (UNAUDITED)

The Notes form part of these financial statements.

BALANCE SHEET (UNAUDITED)

The Notes form part of these financial statements.

CASH FLOW STATEMENT (UNAUDITED)

FOR THE SIX MONTHS TO 31ST DECEMBER 2014

The Notes form part of these financial statements.

NOTES TO THE HALF-YEARLY FINANCIAL STATEMENTS (UNAUDITED)

1. Financial Information

The financial information has been prepared on the historical cost basis of accounting, except for the measurement at fair value of investments and financial instruments, and in accordance with applicable UK accounting standards on the basis that all activities are continuing. The accounting policies set out in the statutory accounts for the year ended 30th June 2014 have been applied to this Half-Yearly Financial Report. They have also been prepared on the assumption that approval as an investment trust will continue to be granted.

The accounting policies are also consistent with the Statement of Recommended Practice (revised January 2009) issued by the Association of Investment Companies. The financial information has been prepared in accordance with the Accounting Standards Board Statement 'Half-Yearly Financial Reports' issued in July 2007.

The financial information contained in this Half-Yearly Financial Report is not the Company's statutory accounts. The financial information for the six months ended 31st December 2014 and 31st December 2013 are not for a financial year and have not been audited but have been reviewed by the Company's auditors and their report can be found below. The statutory accounts for the financial year ended 30th June 2014 have been delivered to the Registrar of Companies and received an audit report which was unqualified, did not include a reference to any matters which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under section 498 (2) and (3) of the Companies Act 2006.

2. Going Concern

The Company's business activities, together with the factors likely to affect its future development, performance and position, including its financial position, are set out in the Chairman's Statement and Manager's Review above.

At each Board meeting, the Directors review the Company's latest management accounts and other financial information. Its commitments to private equity investments are reviewed, together with its financial resources, including cash held and the Company's borrowing capability. One-year cash flow scenarios are also presented to each meeting and discussed.

After due consideration of the balance sheet and activities of the Company and the Company's assets, liabilities, commitments and financial resources, the Directors have concluded that the Company has adequate resources to continue in operation for the foreseeable future. For this reason, they consider it appropriate to continue to adopt the going concern basis in preparing the financial statements.

3. Tax on Ordinary Activities

The tax charge for the six months to 31st December 2014 is £231,000 (six months to 31st December 2013: £612,000; year to 30th June 2014: £945,000). The tax charge is wholly comprised of irrecoverable withholding tax suffered. Investment gains are exempt from capital gains tax owing to the Company's status as an investment trust.

4. Related Party Transactions

Under the FCA listing rules, the Manager, Pantheon Ventures (UK) LLP, is regarded as a related party of the Company.

During the period, services were provided with a total value of £5,202,000, being £4,908,000 directly from Pantheon Ventures (UK) LLP and £294,000 via Pantheon managed fund investments. (31st December 2013: £4,522,000; £4,232,000; and £290,000; year to 30th June 2014: £9,312,000; £8,749,000; and £563,000 respectively). At 31st December 2014, the amount due to Pantheon Ventures (UK) LLP in management fees and performance fees disclosed under creditors was £830,000 and £nil respectively.

5. Performance Fee

The Manager is entitled to a performance fee from the Company in respect of each 12 calendar month period ending on 30th June in each year. The 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 six month period ended 31st December 2014, the notional performance fee hurdle is a net asset value per share of 2,139.06p. 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.

6. Return per Ordinary and Redeemable Share

7. Net Asset Value per Share

8. Reconciliation of Return on Ordinary Activities before Financing Costs and Tax to Net Cash Flow from Operating Activities

9. Reconciliation of Net Cash Flows to Movements in Net Funds