Final Results

10th May 2007 07:03

3i Group PLC10 May 2007 10 May 2007 3i Group plc announces £1.075 billion total return, investmentup 42% and 25% growth in assets under management Preliminary results for the year to 31 March 2007 2007 2006Investment activityInvestment £1,576m £1,110mRealisation proceeds £2,438m £2,207m ReturnsRealised profits on disposal ofinvestments £830m £576mGross portfolio return on openingportfolio value 34.0% 24.4%Total return £1,075m £831mTotal return on opening shareholders'funds 26.8% 22.5%Final dividend 10.3p 9.7p Portfolio and assets under management Own balance sheet £4,362m £4,139m Third-party funds £2,772m £1,573m --------- --------- £7,134m £5,712m Net asset value per share (diluted) 932p 739p Highlights • A total return of £1,075 million representing a return of 26.8% on opening shareholders' funds • Investment increased by 42% to £1,576 million • Total assets under management increased by 25% over the year, from £5,712 million to £7,134 million • Realisation proceeds on the sale of assets of £2,438 million generating realised profits of £830 million • Final dividend of 10.3p, making a total ordinary dividend for the year of 16.1p, up 5.9% • Board confirms the return of £800 million to shareholders through a bonus issue of B shares Baroness Hogg, Chairman of 3i Group plc, said: "This has been an exceptionalyear for 3i. The Group has delivered a high return on shareholders' funds and astrong cash flow and, most importantly of all, has taken important steps todevelop the business for the longer term." 3i's Chief Executive, Philip Yea, said: "We continue to see good investmentopportunities in our chosen areas, albeit that pricing remains high. Continuedbroadening of our investment activities by geography and asset class, and afocus on delivering real value within each specific opportunity, remain criticalcomponents of our strategy. Although levels of realisations are expected toslow, we remain confident of reporting further good progress in the delivery ofour strategy over the year ahead." Return of capital to shareholdersThe Board of 3i Group plc also confirms, subject to shareholder approval, theproposed return of £800 million to shareholders. The proposed cash return iscurrently expected to be made by way of a bonus issue of listed B sharesaccompanied by a share consolidation designed to maintain comparability of shareprice and earnings per share. This is currently expected to take place in July. Resolutions relating to the return of capital proposals will be put toshareholders at an Extraordinary General Meeting. A circular convening the EGMand giving more information and detail on the proposals is expected to be sentto shareholders in June. - ends - For further information, please contact: Philip Yea, Chief Executive Tel: 020 7975 33863i Group plc Simon Ball, Finance Director Tel: 020 7975 33563i Group plc Patrick Dunne, Group Communications Director Tel: 020 7975 32833i Group plcIssued by:Philip Gawith Tel: 020 7379 5151The Maitland Consultancy For further information regarding the announcement of 3i's annual results to 31March 2007, including video interviews with Philip Yea and Simon Ball (available7.15am) and a live webcast of the results presentation (at 10.00am, available ondemand from 2.00pm), please see www.3igroup.com. Notes to editors3i is a world leader in private equity and venture capital. We focus on buyouts,growth capital and venture capital and invest across Europe, Asia and the US. Our competitive advantage comes from our international network and the strengthand breadth of our relationships in business. These underpin the value that wedeliver to our portfolio and to our shareholders. Chairman's statement3i has had another year of strong financial performance. A number of ourstrategic initiatives have contributed to our growth and it has been a veryproductive period for business development. The Group's total return of £1,075million for the year to 31 March 2007 represented 26.8% on opening shareholders'funds. Realisations were again very strong. The quality of our portfolio, favourablemerger and acquisitions markets and the skill of our teams around the world havedelivered realisation proceeds of £2,438 million, with an uplift in value onsale of 52%. 3i's strategic position in both high growth and more mature markets also enabledthe Group to increase investment by 42% to £1,576 million. Growth was especiallystrong in Asia, which accounted for 16% of investment in the year. During the year the Buyouts business raised its latest €5 billion mid-marketbuyout fund, Eurofund V, and we extended our international reach with new GrowthCapital teams in Beijing and New York. We also established two new businesslines, with the £700 million launch of 3i Infrastructure Limited on the LondonStock Exchange, and the establishment of our "Quoted Private Equity" team. Progress on so many fronts would not, of course, have been possible without thecommitment and experience of many people to whom I offer my thanks: our staffworld-wide; the management teams and advisers of our portfolio companies; andabove all our Chief Executive Philip Yea and his Management Committee. The strength of the Group's cash flow has meant that we have been able not onlyto grow investment levels and invest in a number of strategic initiatives butalso to return capital to shareholders. Following approval at our ExtraordinaryGeneral Meeting ("EGM") last year, £700 million has been returned to ourshareholders. The Group also bought back £74 million of ordinary shares duringthe year. The Board has announced its intention to return a further £800 millionto shareholders by way of a bonus issue of listed B shares. Resolutions relatingto the return of capital proposals will be put to shareholders at another EGM,which is currently expected to take place in July. The Board is recommending a final ordinary dividend of 10.3p, making a totalordinary dividend for the year of 16.1p, up 5.9% on last year. I was delighted to welcome Robert Swannell as a non-executive Director to theBoard in September 2006. Robert is Vice Chairman of Citigroup Europe and amember of Citigroup's Global Investment Banking Committee, in addition to beinga non-executive Director of British Land Company plc. He has extensiveexperience of international financial services and wide experience of business. Danny Rosenkranz, who has been a non-executive Director of the Group since 2000,retires from the Board at the AGM in July. I would like to thank him for theconsiderable contribution he has made to the Board during a very importantperiod for 3i and especially for his work as Chairman of the RemunerationCommittee. As private equity has grown as an asset class for investors, so it has attractedmore attention from political and business commentators. Our track record as aFTSE 100 company since 1994, and our pioneering approach to governance andcorporate responsibility issues in the industry, stand 3i in good stead as thedebate about responsibility and transparency in the industry develops. As a member of Sir David Walker's working group for the British Venture CapitalAssociation I am delighted to be involved in taking this debate to the nextstage. Meanwhile, in this report you will see that we have provided furtherdetails on our largest investments and realisations in the year. At 3i, we are proud of our record of growing businesses. We have always placedconsiderable emphasis on the quality of our relationships with investeecompanies, and on corporate responsibility, as endorsed by our high ranking inthe Dow Jones Sustainability Index for 2007. I would like to congratulate ourCorporate Responsibility Committee, led by the Company Secretary, Tony Brierley,on winning this year's Investor Relations Society Best Practice Award for theCorporate responsibility section of our Annual report. In summary, this has been an exceptional year for 3i. The Group has delivered ahigh return on shareholders' funds and a strong cash flow and, most importantlyof all, has taken important steps to develop the business for the longer term. Baroness Hogg Chairman9 May 2007 Chief Executive's statementThis was a further year of good progress for the Group. The Group's financialperformance was very strong, in terms of new investment and divestment activity,as well as the high level of returns achieved. At the same time we are able toreport further significant progress in our strategic development, most notablyin the scale up of our Infrastructure business and the launch of our QPEbusiness line. The first element of our strategy is to invest in high-return assets. In thisregard, total return was notable at 26.8%, a figure that was beyond ourexpectations at the start of the year, not least because divestment conditionsremained attractive throughout the period due to favourable economic conditionsand the buoyancy of debt financing markets. This figure was well ahead of lastyear's return of 22.5%, principally as a result of both our Buyouts and GrowthCapital businesses delivering exceptional gross portfolio returns on a one yearbasis at 53.8% and 47.7% respectively, well ahead of our through the cycletargets and last year's equivalent figures of 29.4% and 26.4%. These results were underpinned by a high proportion of realised profits, aconsequence of a record level of realisations, which at £2.4 billion for theGroup, was an improvement on last year's previous record figure of £2.2 billion.Our Venture Capital business line improved its performance in the second half,reducing its negative return to (5.6)% for the full year compared to (8.4)% forthe first six months. The next elements of our strategy are to grow our assets and those we manage onbehalf of third parties, as well as to extend our international reach bothdirectly and through investing in other funds. The amount of 3i's own investmentrose from £1.1 billion to £1.6 billion, an increase of 42% on last year. Thisrise in new investment reflects the strategic changes of the last few years,with the most significant increases coming in Growth Capital and Infrastructureon a business line basis, and within Growth Capital in Asia on a regional basis. Asia represented 9% of the Group's portfolio value at the end of the year, anincrease over last year's 4%. Assuming no change to financial markets, we aretargeting a further increase in investment levels over the new financial year,with a contribution from our QPE business line and further progress in Buyoutsand Growth Capital. As a key element of our strategy is to grow the level of third-party funds undermanagement, it is pleasing to report that these rose by 76% last year,increasing from £1,573 million to £2,772 million. This figure includes thethird-party element of our most recent buyout fund, Eurofund V, which in totalclosed at €5 billion, a significant increase on the €3 billion raised forEurofund IV. Further growth in assets under management came from the launch of 3iInfrastructure Limited, a £700 million Jersey-based listed infrastructure fundto which the Group contributed assets and cash of £325 million and third-partyshareholders contributed the balance of £375 million. The Group's strategy is to raise third-party money where structurally it isnecessary to do so as in the case of Buyouts, or where it optimises ourshareholders' exposure to a particular asset due to the nature of the returns,such as Infrastructure. These activities can be attractive due to theopportunity to earn management, advisory and performance fees that enhance theoverall level of shareholder return. Since the end of the year we have announcedthe signing of a Memorandum of Understanding with IIFCL, a debt financinginstitution set up by the Indian Government, which will pave the way for 3i toraise a further infrastructure fund dedicated to the Indian market. These developments are also excellent examples of the fourth part of ourstrategy, which is to use our balance sheet and resources to develop bothexisting and new business lines. With unprecedented liquidity in financing markets, as well as continuedsignificant change in the shape of the Group's business, the last element of ourstrategy, to continue to build our strong culture of operating as one companyacross business lines, geographies and sectors, is critical. All of our senior management, and in particular our Group Partners, have made ittheir priority to ensure that this unique 3i culture is nurtured andstrengthened, through informal and formal channels. We measure our colleagues'level of engagement on an annual basis. At a time when there is increasing debate about private equity as an assetclass, with concerns being raised with respect to its stewardship, itstransparency and the sources of and sustainability of returns, we have chosen toincrease yet again 3i's own level of disclosure in this report to shareholders.In addition to the point by point disclosure of progress against our strategymentioned above, we are also giving greater disclosure of the financial andbusiness progress of key investments for each of our major business lines. Twelve months ago we announced the intention to return some £700 million toshareholders. At the time we wanted to retain sufficient resources to grow ournear-term investment levels whilst maintaining strategic flexibility as weconsidered the development of the Infrastructure and QPE business lines. Withthese two initiatives now launched, and on the back of the excellent rate ofrealisations over the year, it is possible to recommend a further return of cashwithout compromising our ambition to grow assets. Markets remain fast-changing. On the one hand the drive by major firms toincrease their deal size is expanding the definition of the mid-market, whichgiven the international spread of 3i's network is to our advantage. On the otherhand, there is an increase in the number of firms contemplating investing in theGrowth Capital market on a trans-national basis. Prices are generally high, and so our teams remain selective in their choice oftargets, focused on identifying and then driving, with management, theunderlying value of each investment in order to deliver or exceed our returntargets. It is important to keep the organisation of our business flexible inorder to face these markets. The formation of distinct Infrastructure and QPEbusiness lines was consistent with our policy of building internal capabilitiesbefore building assets. We welcome the announced and actual listings of other private equity firms,whether as management companies, or funds under management. We believe that thiscan only be beneficial to stock markets' understanding of both the sectorgenerally, and their appreciation of the 3i business model in particular. Justas within the public markets there are different companies with differentmodels, so too within private equity will the market grow to understand betterthat various firms have different strategies, some differentiated and othersless so. 3i is defined by an explicit choice to work predominantly in the mid market, byour spread of assets over 14 countries and five different asset classes, and ourdesire to ensure that all of our teams nurture and value our relationships withthose outside the Group in a way that delivers real benefits to the companies inwhich we invest. We continue to see good investment opportunities in our chosen areas, albeitthat pricing remains high. Continued broadening of our investment activities bygeography and asset class, and a focus on delivering real value within eachspecific opportunity, remain critical components of our strategy. Althoughlevels of realisations are expected to slow, we remain confident of reportingfurther good progress in the delivery of our strategy over the year ahead. Philip Yea Chief Executive9 May 2007 Business review Group Business Introduction to the Group3i is a world leader in private equity and venture capital with five distinctbusiness lines investing across Europe, Asia and the US. We invest from our ownbalance sheet and also with funds that we advise or manage on behalf of others. There are detailed descriptions, performance data and commentaries for ourBuyouts, Growth Capital and Venture Capital business lines. Our two new businesslines, Infrastructure and Quoted Private Equity are also described. The Group's overall vision is to be the private equity firm of choice, operatingon a world-wide scale; producing consistent market-beating returns; beingacknowledged for our partnership style; and winning through our unparalleledresources. We have set out the strategy for achieving this vision, along with asummary of our progress, the key risk factors involved and statistics relatingto our performance with respect to each key element of strategy. We operate in a number of distinct geographical and sector markets and themarket for each of our business lines has its own specific characteristics.However the environment and competitive landscape for each of them is influencedby the level of private equity funds raised and invested, the strength of thecapital markets and the extent of merger and acquisitions activity. With theexception of Venture Capital, all of these influences were strongly positiveduring the year increasing both activity and competition, especially in Buyouts. Overall global private equity fundraising and investment levels were dominatedby buyouts. Preliminary statistics for calendar year 2006 released by theEuropean Private Equity and Venture Capital Association ("EVCA") in March 2007show that European private equity firms raised a record €90 billion in 2006(2005: €72 billion) and invested €50 billion (2005: €47 billion). According tothe EVCA some 79% of funds raised and 78% of that invested related to buyouts.According to unquote", the number of mid-market buyouts in Europe increased by17% from 2005 to 2006. Funds raised for venture capital in Europe rose almost 50% in the year to €16billion, according to EVCA data. Ernst & Young and Dow Jones VentureOne datashows that European venture capital investment increased by 5% to €4.1 billionand that US venture capital investment increased by 8% to $26 billion in 2006,its highest level of investment in five years. Although there is no single source that accurately tracks the European growthcapital market in which 3i operates, our own internal data suggests that therewas a 65% increase in the amount invested to €4.5 billion in 2006. According to Asian Venture Capital Journal statistics, the Asian markets inwhich 3i operates directly (China, India, North Asia and South East Asia) saw a50% increase in investment. 3i is a highly-selective investor and made 62 investments during the year to 31March 2007 (2006: 58). We make a small number of investments each year across arange of sectors, regions and types of investment. Consequently general economicconditions have less influence than changes occurring in specific sectors. Private equity thrives on change, and strategic shifts within economies andsectors drives activity both in terms of investment and realisations. 3i's localpresence and dedicated sector-focused teams enable us to achieve competitiveadvantage in originating investment opportunities, assessing them and inmanaging assets. As a returns-focused business, we set clear targets for our key performancemeasures at a Group and business line level. We employ a relatively small number of staff (an average of 765 for the year)for a FTSE 100 company, and they work in focused teams across 23 locations inthree continents in a matrix structure. The key dimensions of this matrix arebusiness line, geography and sector, with each business line unified throughcommon carried interest schemes and processes. Our professional service teamsare incentivised on Group performance. The high levels of staff engagement achieved by the Group are supported by our"One room: One firm" culture. This is underpinned by a clear set of values anddeveloped through combining capabilities and knowledge, aligning interests andby selecting the "best team for the job" from our internal and externalresources around the world. Our culture is performance-based andhighly-collaborative and requires continuous investment in our people and in ourcommunications. Buyouts Business modelThe Buyouts business line targets cash-to-cash IRR returns of 20% through thecycle and is focused on leading or co-leading mid-market transactions acrossEurope of typically up to around €1 billion in value. Investments are madethrough a Limited Partnership private equity fund vehicle (currently EurofundV), which is managed by 3i (see Fund management section). Returns fromindividual investments are achieved through a mix of income, returns of capitaland capital realisation upon exit. Returns to 3i Group are enhanced through feesand carried interest from these funds. A core element of the business model is that our team of over 100 investmentprofessionals operate as one pan-European team with full economic alignment.This enables resources to be matched to opportunities across Europe on a "bestteam for the job" basis, allowing 3i to pursue larger and more complextransactions than smaller funds. StrategyThe core elements of strategy relate to origination and value creation. As partof 3i Group, an extensive origination network is combined with pan-Europeandecision making, sector expertise and access to high-quality operationalexpertise. This provides the opportunity to be able to choose the best 12-15investments to make in each year. Working with management, we create a bespoke value creation plan for eachinvestment, focused on growing earnings and using 3i's network, knowledge andexpertise to maximum effect. These value creation plans are benchmarked andreviewed by a team of experienced partners on a pan-European basis. Extending our international reach has also been a component of our strategy.During the year a team was established to focus on central and eastern Europeaninvestments. This team made its first investment shortly after the 31 March yearend. Our latest fund, the €5 billion Eurofund V, also has the capacity to investup to 10% of its capital in companies outside Europe. MarketplaceThe mid-market buyout market in Europe remains buoyant. In calendar year 2006this segment, defined as deals between €25 million and €1 billion deal size,according to unquote", represented some 470 transactions with an aggregate dealvalue of €67 billion (2005: 402 transactions, €69 billion). It is a highly fragmented and competitive marketplace with 283 different firmscompleting transactions in 2006 (2005: 227). Increased market activity has been driven by an increase in the capitalallocated by institutions to buyout funds attracted by the recent track recordof returns on buyouts generally and a benign economic environment which presentsfavourable investment conditions and low corporate default rates. There has alsobeen a plentiful source of debt from traditional lenders and, increasingly, frominstitutional investors such as collateral debt and loan obligation funds. Increased competition continues to put upward pressure on deal entry pricingmultiples. Therefore, in this environment, we have remained highly-selectivebuyers and active sellers. Investment and realisationsWe invested £383 million (2006: £360 million) in 12 new transactions in the year(2006: 14). Investment including co-investment funds was £615 million (2006:£525 million). Although the amount of investment was ahead of the previous year,the number of transactions was marginally lower as we remained highly selective. In addition to new investments, £115 million of further investments were madeinto the existing portfolio, which includes sizeable acquisitions made byportfolio companies such as Carema. Realisation activity was also very strong with total proceeds of £1,341 million(2006: £877 million) or £2,089 million including co-invested funds (2006: £1,477million). Significant realisations during the year included SR Technics, NCP OffStreet and Vetco Gray, all businesses which had been significantly developed,where employment had grown and which attracted good prices due to their futuregrowth prospects. Gross portfolio returnThe Buyouts business line generated a gross portfolio return of £788 million inthe year to 31 March 2007 (2006: £447 million). This represented some 54% (2006:29%) of opening portfolio value, demonstrating the continuing effectiveness ofour business model. Realised profit up 159% to £538 million was responsible for 68% of grossportfolio return. The unrealised value movement was £123 million (2006: £124million). Portfolio healthThe health of the Buyouts portfolio remains robust. The realised loss rate ontotal investments since the new business model was introduced in 2001 was 1% asat 31 March 2007, and the level of provisions taken for the same period was 4%of total investment at cost as at 31 March 2007 (2006: realised loss rate 1%,provision rate 2%). Fund managementDuring the year we successfully closed Eurofund V with €5 billion ofcommitments, exceeding our initial target of €3.5 billion. The fund attracted 62Limited Partners, approximately half of whom are based in Europe, a third inNorth America and the balance in the Middle East and Asia Pacific. This year saw the final investment made by the predecessor €3 billion fund,Eurofund IV. By 31 March 2007, four new investments had been completed byEurofund V, which started investing in January 2007. The performance of Eurofund IV continues to remain strong in comparison tomarket benchmarks for funds of a similar vintage. At 31 March 2007, Eurofund IVhad already returned 76% of its drawn commitments, with a significant portfoliovalue still remaining. Fund management fees and carried interest receivable by 3i amounted to £118million (2006: £103 million). Growth Capital Business modelThe Growth Capital business, which has a team of over 100 investmentprofessionals in Europe, Asia and the US, targets cash-to-cash IRR returns of20% through the cycle. These returns are achieved through a mix of dividend andinterest income, returns of capital and capital realisation upon exit. Ahighly-selective approach to investment is taken with 20 to 30 minoritytransactions completed each year, investing typically €10 million to €250million from 3i's own balance sheet in each situation. The purpose of theinvestment may include supporting organic growth, funding for acquisitions or toresolve succession issues or simply to reduce gearing. Another key element of the business model is to have a portfolio which isdiversified by region, sector, investment type and size of business. Aligninginterests between 3i and the majority owners of the company, who are typicallythe management, underpins the delivery of targeted returns. The Growth Capital business line also manages some third-party funds whichinclude pre-Eurofund IV buyout co-investment funds which had a mandate to makegrowth capital investments. In recognition of the increased significance and potential of infrastructure asa separate asset class, a new business line "Infrastructure" was establishedduring the year. Prior to this, the Growth Capital business line also managed3i's infrastructure investing activity. Accordingly, whilst all of theperformance data for the year to 31 March 2007 regarding gross portfolio return,investment and realisations excludes Infrastructure, comparatives have not beenrestated. In addition, long-term performance IRRs exclude those assets whichformed part of the Infrastructure portfolio at 1 April 2006. StrategyOur strategy is to capitalise on 3i's competitive advantages in this marketwhich are principally our track record, experience, global network and theflexibility afforded to us by investing from our own balance sheet. Over the last five years we have increased the average size of each investmentsignificantly (2007: £26 million, 2003: £6 million), targeting larger companieswhich are more likely to have international operations or aspirations. 3i's expansion in Asia and the US has increased the opportunity to leverage ournetwork, People Programmes and sector expertise for the benefit of the companies in which we invest. For each opportunity, we assemble the "best team for the job" with the most relevant geographical, sector and transactional experience drawn from the global team. MarketplaceThe market in the last year has both grown and become more competitive. Globalmarket statistics are somewhat inconsistent but the general consensus is thatthe market for growth capital investments grew by around 20% in terms of value. Although the mandates of many private equity funds preclude them from makingminority investments and few competitors can currently access permanent capitalto fund their investments, competition has increased in several regions due tonew entrants. These include US growth specialists entering the European market,hedge funds starting to take minority positions in private rather than publiccompanies and mezzanine funds moving towards private equity as mainstream banksencroach on their traditional markets. In Asia general economic development has driven opportunity, especially inconsumer-related sectors. Competition varies from market to market, with Indiabeing the most competitive. Investment and realisationsOur strategy is to accelerate the development of the business in Asia and toincrease the average size of investment globally. At £258 million (2006: £91million) Asia represented 54% of the £482 million (2006: £497 million) investedin the year. Excluding infrastructure investment (£89 million) from the 2006total, Growth Capital investment grew by 18%. The average size of the 21 Growth Capital investments (2006: 18) made during theyear was £26 million (2006: £21 million), with the two largest beingSingapore-based ACR Limited at £105 million and Spanish-based STEN at £78million. Realisation performance was once again strong with total realisations of £691million (2006: £855 million), delivering realised profits of £235 million (2006:£232 million). The majority of proceeds arose from the sale of portfoliocompanies to trade buyers. In addition four companies achieved an IPO. Thelargest of these was SeLoger.com, a £41 million 2005 investment which achieved alisting on the Paris Stock Exchange in December 2006 since when 3i has realised£98 million. Gross portfolio returnThe Growth Capital business line generated a gross portfolio return of £569million in the year to 31 March 2007 (2006: £341 million). This represents areturn of 48% (2006: 26%) on opening portfolio value. Realised profits which were up 1% to £235 million produced 41% of grossportfolio return. The unrealised value movement of £269 million (2006: £60million) included £129 million of uplifts to imminent sale on assets, of which£60 million has been realised since the year end. Post 2002 vintages have performed particularly strongly, contributing 57% ofgross portfolio return in the period, demonstrating the effectiveness of ourbusiness model. Portfolio healthA favourable macroeconomic environment, the focus on a smaller number ofhigher-value investments, together with a global approach to assessingopportunities and more international deal and portfolio management teams, haveled to a significant reduction in the level of portfolio write-downs over thelast two years. Provisions of £1 million have been made in the year, the lowestlevel for a number of years. As at 31 March 2007, 92% of our investments wereclassified as healthy, against a three year rolling average of 81% (2006: 84%,and 74%). ManagementIn November 2006 we announced that Guy Zarzavatdjian would succeed Michael Queenas Managing Partner, Growth Capital in April 2008. This was to allow Michael tobecome full-time Managing Partner of 3i's Infrastructure business line. Tofacilitate this transition, Guy became responsible for GrowthCapital in Europe on 1 January 2007, reporting to Michael. Venture Capital Business modelThe Venture Capital business targets cash-to-cash IRR returns of 25% through thecycle. With an early and late-stage technology focus, our Venture Capital team of 47investment professionals work as a global team across six offices in Europe andthe US. Returns, which are achieved principally through realisations, have ahigher volatility than the Group's other business lines. The purpose of theinvestment is usually to move a technology business from an early or developmentstage through to revenue and profit. A highly-selective approach is taken with around 20 new investments made eachyear of between €2 million and €50 million in companies new to the portfolio. Our value proposition is based on the scale of 3i's network of relationshipswithin and outside the venture industry, the proactive involvement of 3i'sinvestment team, the ability to provide multiple investments and our deepknowledge of core technology sectors. The majority of Venture Capital investment is made directly from 3i's balancesheet. We also manage third-party funds of £15 million in Asia. StrategyBy operating as a single team, 3i's international reach, which is fundamental toour value proposition to entrepreneurs and syndicate investors, is delivered tohighly-specialised segments of the technology industry. Activity has been focused on early (30%) and late (70%) stage investment inhealthcare, IT and cleantech. Our preference is to lead or co-lead investments,and invest in companies with significant growth potential, disruptivetechnologies and strong management. We select opportunities where we can createand realise significant value, take board seats and achieve exits via trade saleor IPO. This strategy is now working well in the US where our scale and internationaloffering appeals to more mature venture businesses. Reflecting the increased focus on later-stage investing we changed ourresourcing mix during the year. In the US we recruited Jim McLean, who hasalmost two decades of venture capital experience, to run our business there. Wealso consolidated our US team in Silicon Valley and made plans to close ourWaltham office. MarketplaceAccording to reports from Ernst & Young and Dow Jones VentureOne, Europeanventure capital investment at €4.1 billion and the number of venture IPOs (90)in 2006 were at their highest since 2002 and 2000 respectively. In the US, the equivalent report stated that US venture capital investment in2006 increased by 8% to $26 billion. Fifty six venture IPOs were completedraising $3.7 billion, an increase of 33% and 64% on 2005 respectively. Despite the increased amount of investment in both the US and Europe, the actualnumber of deals dropped 27% in Europe and was only slightly ahead in the US,when compared with 2005. Corporate acquisitions of venture-backed companies in Europe decreased by 12%with 185 acquisitions made, and in the US the number and value of acquisitionswere flat. The competitive landscape is changing with fewer but larger funds being raisedin both Europe and the US. This more selective environment is reflected in theUS as the number of active venture capital firms there continues to shrink withmany firms not raising new funds. The main quoted technology indices, NASDAQ and techMARK, rose 3.5% and 7.9%respectively during the year. Gross portfolio returnDue to a weaker market for realisations and reduced share prices of severalquoted assets in the Venture Capital portfolio, both realised and unrealisedprofits were lower than last year. As a consequence we delivered a negativereturn of £(46) million, which represented (6)% on the opening portfolio. Theunrealised loss on the quoted part of the Venture Capital portfolio was £(64)million in total and, although spread over a number of assets, the fall in theshare price of Vonage was most significant. Vonage, a US asset in which 3i firstinvested in 2004, accounted for £49 million of the unrealised value loss in theyear. Net realised profits of £12 million (2006: £72 million) resulted from a numberof smaller disposals as we continued to focus the portfolio. Our performance for the year at the gross portfolio return level was thereforedisappointing despite the modest recovery in the second six months of the year. Investment and realisationsIn line with our strategy, the increase in later-stage investments resulted intotal investment of £200 million (2006: £156 million) during the year of which46% was in the US and 40% was in the UK. A total of £123 million (2006: £64 million) was invested in 20 companies whichwere new to the portfolio. Late-stage investment accounted for 65% (2006: 44%)of total investment. The average size of a late-stage investment during the yearwas £13 million. This investment included £1 million of a £5 million total commitment in DTCapital Partners fund in China to provide a window on this rapidly-growingventure market. There were a total of 35 realisations during the year delivering proceeds of£187 million and realised profits of £12 million. Five companies from theportfolio achieved IPOs: Vonage; Eleksen; Newron; Santhera; and Omniture. Portfolio healthPortfolio health is more volatile in Venture Capital than 3i's other businesslines but at 31 March 2007, 69% of the portfolio companies were classified ashealthy, against a three year rolling average of 67% (2006: 67% and 65%). Infrastructure Business modelBuilding on 3i's experience of making infrastructure investments for over 20years, the Group established a distinct Infrastructure business line during theyear. Infrastructure assets and returns had previously been reported as a partof the Growth Capital business line. The objective was to facilitate the expansion of 3i's business in thisrapidly-growing market internationally and also to prepare for the launch of alisted investment vehicle, 3i Infrastructure Limited, which is advisedexclusively by 3i and in which 3i Group plc has a 46.4% stake. The business model for the Infrastructure business line is to achieve a blendedreturn through a combination of returns earned on assets (invested eitherdirectly by 3i or indirectly through 3i Infrastructure Limited) and advisory andperformance fees earned from advising external funds such as 3i InfrastructureLimited. An annual advisory fee paid by 3i Infrastructure Limited to 3i is based on thefair value of 3i Infrastructure Limited's investments at 1.5% for investmentswhen initially acquired, reducing to 1.25% for investments held for longer thanfive years. A performance fee of 20% is earned by 3i on the total return abovean 8% performance hurdle at the end of a financial period. StrategyA dedicated international team of 14 investment professionals has a geographicalfocus on Europe, Asia and the US through four hubs: London; Frankfurt; Mumbai;and New York. These investors target three main sub sectors: socialinfrastructure (eg PFI projects, hospitals, education, and governmentaccommodation); utilities (eg water, gas, electricity distribution); andtransportation (eg roads, airports, ports, rail and ferry operations). An example in the utilities sector was the £251 million AWG investment. AnglianWater, AWG's principal business, is the fourth largest Ofwat regulated water andwaste-water company, with 4.2 million water and 5.4 million waste-watercustomers. MarketplaceInfrastructure businesses tend to be asset-intensive businesses providingessential public services over the long term, often on a regulated basis or witha significant component of revenue and costs that are subject to long-termcontracts. There is a substantial market opportunity for new and replacement infrastructurein developing and more mature economies. Increasing recognition by governmentsof the value that the private sector can bring to infrastructure has also growndemand. The combination of these factors has resulted in a significantly growing assetclass. 3i Infrastructure Limited3i Infrastructure Limited listed on 13 March 2007 with a market capitalisationof £700 million. 3i's infrastructure investments in Europe and the US are nowmade mainly through the 3i Infrastructure listed company. 3i's initial investment in 3i Infrastructure Limited was provided bytransferring four seed assets with a value of £234 million and investing £91million in cash. Three assets, Alpha Schools, Octagon Holdings andInfrastructure Investors (I2) were transferred in full (£94 million). Osprey(AWG) was transferred in part (£140 million) with the balance (£111 million)remaining on the 3i balance sheet, as 3i Infrastructure Limited is not permittedto hold more than 20% of its portfolio cost in any individual asset. The board of 3i Infrastructure Limited, which is chaired by Peter Sedgwick aformer member of the management committee of the European Investment Bank,comprises four independent non-executive directors. A fifth non-executivedirector is Paul Waller, a member of 3i's Management Committee. At 31 March 2007, 3i's 46.4% shareholding, including associated warrants, in 3iInfrastructure Limited was valued at £334 million. 3i Infrastructure Limited is expected to publish its first interim results inNovember 2007. Gross portfolio returnThe Infrastructure business line generated a gross portfolio return of 16% onopening portfolio value in the year to 31 March 2007. Of the return, £12 millionrelates to the transfer of assets to 3i Infrastructure Limited and income yieldon the portfolio. A further £8.6 million unrealised profit was generated fromthe increase in 3i Infrastructure Limited's share price and associated warrantssince flotation. Investment and realisationsDuring the year the Infrastructure team made new investments of £251 million inOsprey (AWG) and £6 million in T2C. In addition further drawdowns of £32 millionwere made by I2 and Alma Mater to fund the purchase of new assets in thosefunds. The only disposals made were transfers of assets to 3i Infrastructure Limitedand proceeds from a partial realisation in the Alma Mater fund. PortfolioIn addition to the £334 million value of 3i's holding in 3i InfrastructureLimited at 31 March 2007, the Group continues to hold direct investment in fourassets not transferred to 3i Infrastructure Limited with a value of £135million, the largest of these being the retained holding in Osprey (AWG) with avalue of £111 million. Quoted Private Equity ("QPE") Business modelThis new business line was established to address a significant marketopportunity to provide equity finance and added value to small and mid-capquoted companies in Europe. The QPE team will aim to deliver private equityvalue creation techniques to public companies without taking them private. Anumber of small and mid-cap quoted companies in Europe suffer from a lack ofstrategic focus or direction; are typically relatively under-researched by thecapital markets; and frequently suffer from relatively limited liquidity intheir shares, in some cases exacerbated by shareholders with significantholdings who may be sellers. We believe that the operating performance of manysuch companies could be significantly improved by applying private equitytechniques. QPE will acquire influential stakes in selected companies and will haveflexibility in the size of its equity investment. We will aim to avoid competingon price with traditional buyout funds or other buyers seeking 100% ownership.As portfolio companies will remain listed, existing investors will have a choiceof whether to sell to QPE or to remain invested, sharing in the value which maybe created by enhancing the investee companies' operational performance. QPE's business model is differentiated from typical buyout funds which generallyrequire total ownership as a condition of any offer for a public company; aretypically restricted in the planned holding period for any investment; and aregenerally required to pay a significant premium over current trading prices inorder to secure full control. StrategyThe initial geographic focus of QPE's activity is in Europe and QPE will use3i's sector resources and geographic deal origination network to build a view ofeach relevant sector and identify potential investment candidates. Investmentswill only be made on the basis of a strategic plan for each situation, whichwill include some or all of the following key elements: - Governance - the strengthening of boards and executive management to ensure adirect connection between shareholders' interests and the operational deliveryof performance; - Management and incentives - the enhancement of management capabilitiestogether with the introduction or strengthening of incentive structures designedto drive sustained growth in shareholder value; - Value creation plan - the rigorous construction of strategic, operational andfinancial objectives set out over a clear timeline, starting with a "100-day"plan and transitioning into monthly performance milestones; and - Active ownership - the strategic and practical input required to driveearnings growth and accelerate enhanced shareholder value, which may includeidentifying opportunities for acquisitions or disposals by the investee company. 3i's track record, network, People Programmes, sector resources and privateequity skill base mean that this should be a compelling offering to many publiccompanies. QPE will also seek to provide further value by appointing at leastone of its Partners to the board. MarketplaceResearch undertaken by 3i has identified approximately 2,300 companies withmarket capitalisation between €100 million and €2 billion quoted on majorEuropean exchanges. This research has also highlighted that in 2006 there wereapproximately 25 public-to-private transactions of all sizes involving privateequity funds on these exchanges. Therefore, the potential market for QPE'soffering, which is differentiated from either an "activist fund" orPublic-to-Private approach, is very significant. However, QPE will take a highlyselective approach to this opportunity and aims to invest in only eight to 12situations during its first two years. Financial review Investment activity -------------------------------------------------------------------------------------------Investment by business line and geography (£m)for the year to 31 March------------------------------------------------------------------------------------------- Continental Rest Europe UK Asia US of World Total------------------------------------------------------------------------------------------- 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006-------------------------------------------------------------------------------------------Buyouts 326 248 169 203 - - - - 3 - 498 451Growth Capital 212 234 11 168 258 91 - - 1 4 482 497Venture 15 53 81 31 1 - 92 70 11 2 200 156CapitalInfrastructure 6 - 374 - - - - - - - 380 -QPE - - 14 - - - - - - - 14 -SMI 1 3 1 3 - - - - - - 2 6-------------------------------------------------------------------------------------------Total 560 538 650 405 259 91 92 70 15 6 1,576 1,110------------------------------------------------------------------------------------------- InvestmentA total of £1,576 million was invested from our balance sheet during the year in62 new assets, including the £91 million cash investment in 3i InfrastructureLimited (2006: £1,110 million, 58 new assets). Buyouts accounted for 32% of thistotal investment; Growth Capital 31%; Infrastructure 24%; and Venture Capital13%. Investment made on behalf of co-investment funds, principally in Buyouts,was £290 million (2006: £212 million). This represents a year-on-year increase of 42% in investment and followed anincrease in the average size of new investment for the year to £26 million(2006: £15 million). The increase also reflects, in line with our strategy, the significant growth ofinvestment in Asia, which included transactions in China, India and Singapore,totalling £259 million (2006: £91 million). The significant rise in investmentin the UK included the £251 million investment in AWG. US Venture Capitalinvestment, principally in later-stage situations, also grew by 31% andaccounted for 6% of total Group investment in the year. The Group invested a further £77 million in private equity funds of which £26million was in new funds (Ithmar Capital L.L.C, Korea Global Fund L.P, D TCapital Partners, Indiareit Offshore Fund and the SVG Strategic Recovery FundII). Commitments to these five new funds totalled £81 million. ------------------------------------------------------------------------------------------Realisation proceeds by business line and geography (£m)for the year to 31 March------------------------------------------------------------------------------------------ Continental Rest of Europe UK Asia US World Total------------------------------------------------------------------------------------------ 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006------------------------------------------------------------------------------------------Buyouts 617 471 724 406 - - - - - - 1,341 877Growth Capital 435 293 203 453 53 66 - 43 - - 691 855Venture 61 84 69 89 1 1 56 33 - - 187 207CapitalInfrastructure - - 5 - - - - - - - 5 -QPE - - - - - - - - - - - -SMI 46 43 168 225 - - - - - - 214 268------------------------------------------------------------------------------------------Total 1,159 891 1,169 1,173 54 67 56 76 - - 2,438 2,207------------------------------------------------------------------------------------------ RealisationsThe ability to capitalise on continued favourable market conditions throughoutthis year gave rise to realisation proceeds of £2,438 million (2006: £2,207million). Once again, this represented a high level of portfolio activity resulting insome 39% of the total opening portfolio value being realised in the year (2006:38%). Europe continued to represent the majority of realisations, with thecontinental European portfolio contributing £1,159 million (2006: £891 million),and the UK £1,169 million (2006: £1,173 million). Realisations from theportfolio in Asia of £54 million came principally from Chinese investments. The nature of realisations followed a broadly similar pattern to last year with35% of proceeds arising from trade sales and 6% through refinancing portfoliobusinesses (2006: 26%, 8%). Sales to other private equity firms, so-called"secondaries", amounted to £327 million (2006: £404 million). Ten portfoliocompanies achieved an IPO during the year and realisations from these and otherquoted portfolio companies amounted to £240 million (2006: £372 million). The SMI portfolio delivered realisations of £214 million from 233 investments(2006: £268 million, 278 investments). Consistent with our strategy, thisportfolio, which is now valued at £391 million, has been reduced from 1,079companies as at 31 March 2004 to 293 at 31 March 2007, realising £916 million inthe process. Returns Total return3i achieved a total return for the year ended 31 March 2007 of £1,075 million(2006: £831 million), which equates to a 26.8% return on opening shareholders'funds (2006: 22.5%). This was a very strong result for the year, the mostsignificant component of which was realised profits of £830 million (2006: £576million). --------------------------------------------------------------------------------Total returnfor the year to 31 March-------------------------------------------------------------------------------- 2007 2006 £m £m--------------------------------------------------------------------------------Realised profits on disposal of investments 830 576Unrealised profits on revaluation of investments 323 245Portfolio income 253 232--------------------------------------------------------------------------------Gross portfolio return 1,406 1,053--------------------------------------------------------------------------------Fees receivable from external funds 37 24Net carried interest (61) 15Operating expenses (255) (211)--------------------------------------------------------------------------------Net portfolio return 1,127 881--------------------------------------------------------------------------------Net interest payable (9) (17)Movements in the fair value of derivatives (29) (78)Exchange movements (31) 47Other (2) 19--------------------------------------------------------------------------------Profit after tax 1,056 852--------------------------------------------------------------------------------Reserve movements (pension, property and currency translation) 19 (21)--------------------------------------------------------------------------------Total recognised income and expense ("Total return") 1,075 831-------------------------------------------------------------------------------- Gross portfolio return at £1,406 million (2006: £1,053 million) for the yearrepresented 34.0% on opening portfolio value (2006: 24.4%), of which more than80% was crystallized in the form of realised profits, interest and dividends,and unrealised profits on uplifts to sale in respect of assets sold shortlyafter the end of the financial year. After adding carried interest receivable and external fees and deducting carriedinterest payable and operating expenses, the net portfolio return for the yearwas £1,127 million (2006: £881 million) representing 27% of opening portfoliovalue (2006: 20%). Realised profitThe high level of realisations was also accompanied by a significant increase inthe level of uplift achieved on sale of 52% (2006: 35%), resulting in realisedprofits of £830 million (2006: £576 million). This exceptional rate of uplift isin part attributable to a small number of high-value realisations being sold,some still valued at original investment cost. The most significant of which wasthe partial disposal of NCP. Realised profits are stated net of write-offs of £27 million (2006: £66million). Unrealised value movementThe unrealised profit on revaluation of investments was £323 million (2006: £245million). £139 million of this movement arises from revaluations due to imminentsales (2006: £97 million), including Smart & Cook and Clinica Baviera. A further £142 million (2006: £70 million) is attributable to first time upliftsfrom cost, particularly in relation to the Buyouts portfolio. Assets valued onan earnings basis at the beginning and end of the financial year also showed anincrease of £147 million (2006: £136 million). Offset against these positivemovements was a net decrease in the value of the quoted portfolio of £(37)million, principally due to share price movements in the Venture Capitalinvestments Vonage and CSR plc. --------------------------------------------------------------------------------Unrealised profits/(losses) on revaluation of investmentsfor the year to 31 March-------------------------------------------------------------------------------- 2007 2006 £m £m--------------------------------------------------------------------------------Earnings multiples* 5 41Earnings growth 142 95First-time uplifts 142 70Provisions (29) (62)Up rounds 15 3Uplift to imminent sale 139 97Other movements on unquoted investments (54) (29)Quoted portfolio (37) 30--------------------------------------------------------------------------------Total 323 245--------------------------------------------------------------------------------\* The weighted average earnings multiple applied to investments valued on anearnings basis for 2007 was 11.6 (2006: 12.2). Portfolio incomePortfolio income of £253 million (2006: £232 million) includes £158 million(2006: £133 million) of interest and £81 million (2006: £75 million) ofdividends, as well as £14 million (2006: £24 million) of net deal-related fees. The increase in interest income results from a number of high-yielding Buyoutinvestments made in the year together with some early redemption premiumsrelated to the strong realisations in the year. Dividends benefited from somesignificant distributions from our investments in unquoted funds. Lower levelsof negotiation fee income together with increasing deal-related fee costs,underlie the reduction in net fee income. Gross portfolio returnIn aggregate, realised profits, unrealised value growth and portfolio incomegave rise to total gross portfolio return for 2007 of £1,406 million (2006:£1,053 million). From a business line perspective, Buyouts and Growth Capitalwere the main contributors, delivering gross portfolio returns of 54% (2006:29%) and 48% (2006: 26%) respectively. For both business lines, these returnswere above our across-the-cycle expectations, and reflect favourable marketconditions for realisations, good portfolio health and earnings growth. Incontrast, despite a stronger second half of the year, the Venture Capitalbusiness line generated a negative gross portfolio return of (6)% (2006: 17%positive). This was largely a consequence of adverse movements in the value ofits quoted portfolio, but also due to a less advantageous realisations market. The new Infrastructure business line contributed £15 million to gross portfolioreturn as a result of income yield on the portfolio, profit on the transfer ofassets to 3i Infrastructure Limited and a subsequent rise in the share price of3i Infrastructure Limited (and its associated warrants) since flotation. The SMI portfolio has generated a positive gross portfolio return of £74 million(2006: £137 million) representing 13% (2006: 18%) of opening portfolio value. -------------------------------------------------------------------------------- Gross portfolio return by business linefor the year to 31 March Return as a % of opening Gross portfolio return portfolio 2007 2006 2007 2006 £m £m % %--------------------------------------------------------------------------------Buyouts 788 447 54% 29%Growth Capital 569 341 48% 26%Venture Capital (46) 128 (6)% 17%SMI 74 137 13% 18%Infrastructure 15 n/a 16% n/aQPE 6 n/a n/a n/a--------------------------------------------------------------------------------Gross portfolio return 1,406 1,053 34% 24%-------------------------------------------------------------------------------- Fees receivable from external fundsFollowing the successful launch of Eurofund V, fees receivable from our managedfunds have increased substantially in the year to £37 million (2006: £24million). Net carried interestCarried interest aligns the incentivisation of 3i's investment staff and themanagement teams in 3i's portfolio with the interests of 3i's shareholders andfund investors. 3i receives carried interest from the co-investment fundsmanaged by 3i Investments plc, and pays carried interest to investment staffbased on the performance of its assets under management. Carried interest receivable of £81 million (2006: £79 million) relates primarilyto two managed funds, Eurofund III and Eurofund IV, which account for 80% of theaccrued income. Investments in these funds have performed particularly stronglyin the period and the Group has accrued its entitlement to carried interestbased on the realised profits generated in the funds and the fair value ofunrealised assets at 31 March 2007. In the prior year most of the carry receivable related to Eurofund III, whichachieved its performance hurdle in that year. There has been a substantial increase in carried interest payable to investmentstaff in the year. The Group has accrued £142 million of carried interestpayable across all its business lines, based on the realised profits generatedby assets in carry schemes and the closing value of assets that remainunrealised (2006: £64 million). The increase is due to the strong grossportfolio return in Buyouts and Growth Capital in the financial year, and thehigh proportion of realisations being made from the most recent vintages, all ofwhich are in market-aligned carried interest schemes with typically higher carryrates than earlier vintages. Of the £142 million charge in the year, 63% relatesto Buyouts and 35% to Growth Capital. CostsOperating expenses totalled £255 million (2006: £211 million). Approximatelyone-third of the £44 million increase in costs relates to expenses associatedwith implementing new strategic initiatives such as the establishment of the twonew business lines (Infrastructure and QPE), continued development in Asia andthe US, as well as the move of our office in London. In addition, theexceptional level of total return has generated correspondingly higher levels ofperformance payment to employees. We have continued to reshape our regional network with new offices added inBeijing and New York, the closure of four smaller regional offices in Europe andthe decision to focus our US venture activity in Silicon Valley and to close ouroffice in Waltham, Massachusetts. Restructuring costs in the year for these changes totalled £8 million. Net operating expenses for the year (after offsetting fee income from externalfunds) are 5.3% of opening portfolio value. With effect from 1 April 2007 we areadopting a further key performance measure to monitor cost efficiency. We expectthis measure to reduce to around 4.5% in the next two to three years, with along-term target of 3%. Net interest payable for the year was £9 million (2006: £17 million), reflectingthe low level of net borrowings maintained throughout the year. Other movementsThe two largest "other" movements in the year relate to Exchange movements andthe movements in the fair value of derivatives. The movements in the fair value of derivatives relate largely to the valuationof the equity derivative embedded in the €550 million 2008 Convertible Bond.This unrealised value movement accounted for a gross charge of £(62) million inthis category. It is the product of a number of factors, the most significant ofwhich was the Company's share price which rose 21% during the year to 1136p(2006: 941p). Offsetting this movement were net movements on interest-rate swapsused to hedge the portfolio. A number of these swaps were closed out profitablyduring the period to reflect changes in the proportion of the sterlingportfolio. Exchange movements of £(31) million (2006: £47 million) arose as a result of theweakening of both the US dollar and the Euro during the year. Portfolio and assets under management Assets under managementAt 31 March 2007 assets under management totalled £7,134 million (2006: £5,712million). This comprised £4,362 million of portfolio assets owned directly(2006: £4,139 million), co-investment funds of £2,387 million (2006: £1,573million) and external quoted investment companies of £385 million (2006: nil). The main contributors to this 25% growth in assets under management were theclosing of 3i's latest mid-market buyout fund, Eurofund V, in November 2006 at€5 billion and the £700 million launch of 3i Infrastructure Limited on theLondon Stock Exchange in March 2007. 3i Group's commitment to Eurofund V is€2,780 million and the Group's investment in 3i Infrastructure Limited wasvalued at £334 million at 31 March 2007. Portfolio assets directly owned by the GroupThe value of the portfolio at 31 March 2007 was £4,362 million (2006: £4,139million). In line with our strategy, the number of companies in the portfolio was reducedfurther during the year. At 31 March 2007 there were 762 companies in theportfolio compared with 1,087 at the start of the year and 1,878 just threeyears ago. The SMI programme again made another significant contribution to thisreduction with 233 exits during the year. This reduction, combined with higherrealisations in other business lines, means that more than two-thirds of theportfolio is now less than three years old, and 36% is less than one year old. The portfolio is well diversified by business line. The high level ofrealisations in the Buyouts business has resulted in the value of the Buyoutsportfolio falling by 13% despite increasing investment by 10%. This hasincreased the proportion of the Buyout portfolio held for less than three yearsfrom 64% to 83%. Excluding Infrastructure investment (£89 million) from the 2006 total, GrowthCapital investment grew by 18% in the year, and the proportion of the portfoliorepresented by Growth Capital increased to 33%. During the year, £234 million ofportfolio assets were transferred to 3i Infrastructure Limited, £92 million ofwhich was included in Growth Capital as at 31 March 2006. Geographically, significant growth in investment in Asia led to an increase inthe proportion of the portfolio value in that region, rising from 4% to 9%during the year. The continental European portfolio now represents 43% (2006:46%) of total value with the UK representing 41% (2006: 42%) and the USportfolio 6% (2006: 7%). The Group also increased its investment in private equity funds. As aconsequence, the value of this portfolio of investments at 31 March 2007 was £64million (2006: £25 million). These investments are included within therespective business line and geographies tables below. --------------------------------------------------------------------------------Portfolio value by business line and age (£m)as at 31 March-------------------------------------------------------------------------------- Up to 1yr 1-3yrs 3-5yrs 5-7yrs Over 7yrs 2007 2006--------------------------------------------------------------------------------Buyouts 461 599 148 23 50 1,281 1,465Growth Capital 449 579 200 159 73 1,460 1,192Venture Capital 205 233 129 99 75 741 826Infrastructure 451 - 18 - - 469 92QPE 20 - - - - 20 -SMI 4 10 14 35 328 391 564--------------------------------------------------------------------------------Total 1,590 1,421 509 316 526 4,362 4,139--------------------------------------------------------------------------------Percentage 36 33 12 7 12-------------------------------------------------------------------------------- --------------------------------------------------------------------------------Portfolio value by geography (£m)as at 31 March-------------------------------------------------------------------------------- 2007 2006--------------------------------------------------------------------------------Continental Europe 1,894 1,923UK 1,792 1,736Asia 373 167US 283 307Rest of World 20 6--------------------------------------------------------------------------------Total 4,362 4,139-------------------------------------------------------------------------------- Assets managed and advised by 3iThese assets principally relate to Buyouts, where there are three current fundsin operation, and to Infrastructure, where our investment in 3i InfrastructureLimited includes the provision of advisory services to the company on anexclusive basis. --------------------------------------------------------------------------------Assets under management (£m)as at 31 March-------------------------------------------------------------------------------- 2007 2006--------------------------------------------------------------------------------3i direct portfolio 4,362 4,139Third-party advised and managed 2,772 1,573--------------------------------------------------------------------------------Total 7,134 5,712-------------------------------------------------------------------------------- Balance sheet Capital structure and gearing3i's capital structure comprises a combination of shareholders' funds, long-termborrowing, short-term borrowing and liquid treasury assets and cash. The Boardis committed to achieving capital efficiency for the Group and remains of theview that a gearing ratio of debt to shareholders' funds of between 30% and 40%is appropriate across the cycle given both the current profile of the businessand its plans for development. During the year, £774 million was returned to shareholders by way of the B sharearrangements (£700 million) and an on-market share buy-back programme (£74million), as approved by shareholders at an Extraordinary General Meeting andthe Annual General Meeting in July 2006. Despite a 42% increase in investment, repurchases of B shares amounting to £689million and the aforementioned buy-backs of ordinary shares, the Group ended theyear ungeared (0%), with a net cash balance of £1 million (2006: 1% geared,equating to net borrowings of £56 million). At 31 March 2007 there were B sharesoutstanding at an issued value of £11 million. On 29 March 2007, the Board announced its intention to return a further £800million to shareholders by means of a bonus issue of listed preference sharesand approval for this issue will be sought at an Extraordinary General Meetingexpected to take place in July 2007. Had this further £800 million return takenplace before the year end, it would have resulted in gearing of 23% on a proforma basis at 31 March 2007. Growth in diluted net asset valueDiluted net asset value ("NAV") per share was 932p at 31 March 2007, whichcompares with 739p at 31 March 2006, a net increase of 193p. This increase comprises 236p attributable to the total return of £1,075 millionin the year, offset by the combination of the dilutive impact of the £700million return of capital (14.5p), share buy-backs (1p), the payment of theinterim and final dividends (15.5p) and other adjustments (12p), which togethertotalled 43p. Consolidated income statementfor the year to 31 March 2007-------------------------------------------------------------------------------- 2007 2006 £m £m-------------------------------------------------------------------------------- Realised profits over value on thedisposal of investments 830 576Unrealised profits on the revaluation of investments 323 245-------------------------------------------------------------------------------- 1,153 821Portfolio income Dividends 81 75 Income from loans and receivables 158 133 Fees receivable 14 24--------------------------------------------------------------------------------Gross portfolioreturn 1,406 1,053Fees receivablefrom external funds 37 24Carried interest Carried interest receivable from managed funds 81 79 Carried interest payable to executives (142) (64)Operating expenses (255) (211)--------------------------------------------------------------------------------Net portfolio return 1,127 881Treasury interest receivable 91 57Interest payable (100) (74)Movement in the fair value of derivatives (29) (78)Exchange movements (31) 47Other income 1 22--------------------------------------------------------------------------------Profit before tax 1,059 855Income taxes (3) (3)--------------------------------------------------------------------------------Profit after tax and profit for the year 1,056 852-------------------------------------------------------------------------------- Earnings per share Basic (pence) 215.5 152.0 Diluted (pence) 213.2 151.2*--------------------------------------------------------------------------------*As restated. Statement of recognised income and expensefor the year to 31 March 2007-------------------------------------------------------------------------------- Group Group Company Company 2007 2006 2007 2006 £m £m £m £m-------------------------------------------------------------------------------- Profit for the year 1,056 852 1,099 643Exchange differences on translation offoreign operations 5 (5) - -Revaluation of own-use property 1 - 1 -Actuarial gains/(losses) 13 (16) - ---------------------------------------------------------------------------------Total recognised income and expensefor the year 1,075 831 1,100 643-------------------------------------------------------------------------------- Analysed in reserves as Revenue 134 117 88 87 Capital 936 719 1,012 556 Translation reserve 5 (5) - --------------------------------------------------------------------------------- 1,075 831 1,100 643-------------------------------------------------------------------------------- Reconciliation of movements in equityfor the year to 31 March 2007-------------------------------------------------------------------------------- Group Group Company Company 2007 2006 2007 2006 (as restated)* £m £m £m £m--------------------------------------------------------------------------------Total equity at start of year 4,006 3,699 3,746 3,635Total recognised income andexpense for the year 1,075 831 1,100 643Share-based payments 9 8 9 8Ordinary dividends (79) (86) (79) (86)Special dividends - (245) - (245)Issue of B shares (700) - (700) -Issues of ordinary shares 18 13 18 13Share buy-backs (74) (222) (74) (222)Own shares (6) 8 - ---------------------------------------------------------------------------------Total equity at end of year 4,249 4,006 4,020 3,746--------------------------------------------------------------------------------*As restated for the adoption of IFRIC 11. Balance sheetas at 31 March 2007-------------------------------------------------------------------------------- Group Group Company Company 2007 2006 2007 2006 (as restated)* £m £m £m £m--------------------------------------------------------------------------------AssetsNon-current assetsInvestments Quoted equity investments 570 259 498 173 Unquoted equity 2,534 2,514 1,179 1,349 investments Loans and receivables 1,258 1,366 548 735--------------------------------------------------------------------------------Investment portfolio 4,362 4,139 2,225 2,257Carried interest receivable 83 77 83 77Interests in Group entities - - 1,766 1,500Property, plant and equipment 32 31 9 9--------------------------------------------------------------------------------Total non-current assets 4,477 4,247 4,083 3,843--------------------------------------------------------------------------------Current assetsOther current assets 197 149 168 193Derivative financial instruments 21 19 21 19Deposits 1,668 1,108 1,668 1,052Cash and cash equivalents 486 847 346 776--------------------------------------------------------------------------------Total current assets 2,372 2,123 2,203 2,040--------------------------------------------------------------------------------Total assets 6,849 6,370 6,286 5,883-------------------------------------------------------------------------------- LiabilitiesNon-current liabilitiesCarried interest payable (153) (83) (153) (83)Loans and borrowings (916) (1,243) (843) (968)Convertible Bonds (363) (365) (363) (365)B shares (11) - (11) -Subordinated liabilities (21) (24) - -Retirement benefit deficit (1) (17) - -Deferred income tax (1) (1) - -Provisions (7) (5) - ---------------------------------------------------------------------------------Total non-current liabilities (1,473) (1,738) (1,370) (1,416)--------------------------------------------------------------------------------Current liabilitiesTrade and other payables (179) (160) (191) (271)Carried interest payable (71) (60) (42) (60)Loans and borrowings (675) (231) (474) (230)Derivative financial instruments (189) (168) (188) (160)Current income tax (2) (2) (1) -Provisions (11) (5) - ---------------------------------------------------------------------------------Total current liabilities (1,127) (626) (896) (721)--------------------------------------------------------------------------------Total liabilities (2,600) (2,364) (2,266) (2,137)--------------------------------------------------------------------------------Net assets 4,249 4,006 4,020 3,746-------------------------------------------------------------------------------- EquityIssued capital 289 292 289 292Share premium 387 376 387 376Capital redemption reserve 27 17 27 17Share-based payment reserve 18 17 18 17Translation reserve 5 - - -Capital reserve 3,280 3,110 3,013 2,767Revenue reserve 318 263 286 277Own shares (75) (69) - ---------------------------------------------------------------------------------Total equity 4,249 4,006 4,020 3,746--------------------------------------------------------------------------------*As restated for the adoption of IFRIC 11. Cash flow statementfor the year to 31 March 2007-------------------------------------------------------------------------------- Group Group Company Company 2007 2006 2007 2006 £m £m £m £m--------------------------------------------------------------------------------Cash flow from operating activitiesPurchase of investments (1,503) (1,068) (1,693) (873)Proceeds from investments 2,364 2,213 2,458 1,949Interest received 68 67 47 42Dividends received 66 76 30 70Portfolio fees received 17 22 - 13Fees received from external funds 37 24 - -Carried interest received 76 9 76 9Carried interest paid (58) (30) - -Operating expenses (202) (216) (114) (182)Income tax paid (8) (8) - (5)--------------------------------------------------------------------------------Net cash flow from operations 857 1,089 804 1,023-------------------------------------------------------------------------------- Cash flow from financing activitiesProceeds from issues of share capital 18 13 18 13Buy-back of ordinary shares (74) (222) (74) (222)Purchase of own shares (20) - - -Disposal of own shares 8 - - -Repurchase of B shares (689) - (689) -Dividend paid (79) (331) (79) (331)Interest received 80 50 73 46Interest paid (101) (60) (81) (38)Proceeds from long-term borrowings 1 69 - 92Repayment of long-term borrowings (2) (54) - -Net cash flow from short-term borrowings 211 188 213 156Net cash flow from deposits (560) (223) (616) (261)--------------------------------------------------------------------------------Net cash flow from financing activities (1,207) (570) (1,235) (545)-------------------------------------------------------------------------------- Cash flow from investing activitiesPurchases of property, plant and equipment (9) (15) - -Sales of property, plant and equipment 2 24 1 17Divestment from joint venture - 2 - 2--------------------------------------------------------------------------------Net cash flow from investing activities (7) 11 1 19-------------------------------------------------------------------------------- --------------------------------------------------------------------------------Change in cash and cash equivalents (357) 530 (430) 497--------------------------------------------------------------------------------Cash and cash equivalents at start of year 847 314 776 279Effect of exchange rate fluctuations (4) 3 - ---------------------------------------------------------------------------------Cash and cash equivalents at the end of year 486 847 346 776-------------------------------------------------------------------------------- Notes to the financial statements 1 Segmental analysis---------------------------------------------------------------------------------------Year to 31 March 2007 Quoted Smaller Growth Venture Private Minority Buyouts Capital Capital Infrastructure Equity Investments Total £m £m £m £m £m £m £m---------------------------------------------------------------------------------------Gross portfolio returnRealised profits overvalue on the disposal of investments 538 235 12 (15) - 60 830Unrealised profits on the revaluation of nvestments 123 269 (61) 3 6 (17) 323Portfolio income 127 65 3 27 - 31 253--------------------------------------------------------------------------------------- 788 569 (46) 15 6 74 1,406Net (investment)/divestmentRealisationproceeds 1,341 691 187 5 - 214 2,438Investment (498) (482) (200) (380) (14) (2) (1,576)--------------------------------------------------------------------------------------- 843 209 (13) (375) (14) 212 862---------------------------------------------------------------------------------------Balance sheetValue of investmentportfolio atend of year 1,281 1,460 741 469 20 391 4,362--------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------Year to 31 March 2006 Quoted Smaller Growth Venture Private Minority Buyouts Capital Capital Infrastructure Equity Investments Total £m £m £m £m £m £m £m--------------------------------------------------------------------------------------- Gross portfolio returnRealised profits overvalue on the disposal of investments 208 232 72 - - 64 576Unrealisedprofits on therevaluation ofinvestments 124 60 51 - - 10 245Portfolio income 115 49 5 - - 63 232--------------------------------------------------------------------------------------- 447 341 128 - - 137 1,053 Net (investment)/divestmentRealisationproceeds 877 855 207 - - 268 2,207Investment (451) (497) (156) - - (6) (1,110)--------------------------------------------------------------------------------------- 426 358 51 - - 262 1,097---------------------------------------------------------------------------------------Balance sheetValue ofinvestmentportfolio atend of year 1,465 1,192 826 *92 - 564 4,139---------------------------------------------------------------------------------------* This represents the value at 31 March 2006 of the assets incorporated into theInfrastructure business line previously included in Growth Capital. -------------------------------------------------------------------------------- Year to 31 March 2007 Continental Rest of UK Europe Asia US World Total £m £m £m £m £m £m--------------------------------------------------------------------------------Gross portfolio return 716 692 25 (27) - 1,406--------------------------------------------------------------------------------Net (investment)/divestmentRealisation proceeds 1,169 1,159 54 56 - 2,438Investment (650) (560) (259) (92) (15) (1,576)-------------------------------------------------------------------------------- 519 599 (205) (36) (15) 862--------------------------------------------------------------------------------Balance sheetValue of investmentportfolio at end ofyear 1,792 1,894 373 283 20 4,362-------------------------------------------------------------------------------- --------------------------------------------------------------------------------Year to 31 March 2006 Continental Rest of UK Europe Asia US World Total £m £m £m £m £m £m--------------------------------------------------------------------------------Gross portfolio return 392 586 48 27 - 1,053--------------------------------------------------------------------------------Net (investment)/divestmentRealisation proceeds 1,173 891 67 76 - 2,207Investment (405) (538) (91) (70) (6) (1,110)-------------------------------------------------------------------------------- 768 353 (24) 6 (6) 1,097--------------------------------------------------------------------------------Balance sheetValue of investmentportfolio at end ofyear 1,736 1,923 167 307 6 4,139-------------------------------------------------------------------------------- Per share information-------------------------------------------------------------------------------- 2007 2006--------------------------------------------------------------------------------Net assets per share (pence)Basic 944 743Diluted 932 739--------------------------------------------------------------------------------Net assets (£m)Net assets attributable to equity holders of the Company 4,249 4,006-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2007 2006 Number Number--------------------------------------------------------------------------------Ordinary shares in issue 461,106,007 550,556,502Own shares (10,931,404) (11,080,758)-------------------------------------------------------------------------------- 450,174,603 539,475,744Effect of dilutive potential ordinary shares Share options 5,896,253 2,916,552--------------------------------------------------------------------------------Diluted shares 456,070,856 542,392,296-------------------------------------------------------------------------------- Notes to the preliminary announcement Note 1The statutory accounts for the year to 31 March 2007 have not yet been deliveredto the Registrar of Companies. The statutory accounts for the year to 31 March2006 have been delivered to the Registrar of Companies. The auditors' reports onthe statutory accounts for these years are unqualified and do not contain anystatements under section 237(2) or (3) of the Companies Act 1985. Thisannouncement does not constitute statutory accounts. Note 2The final dividend will be payable on 20 July 2007 to holders of shares on theregister on 22 June 2007. Note 3Copies of the Report and accounts 2007 will be distributed to shareholders on orsoon after 25 May 2007. Note 4This announcement may contain certain statements about the future outlook for 3i. Although we believe our expectations are based on reasonableassumptions, any statements about the future outlook may be influenced byfactors that could cause actual outcomes and results to be materially different. Ten largest investments The table below provides information on our ten largest investments, as required by LR 15.4.12, in respect of the Group's holding and excluding any co-investment by 3i managed funds, or share of 3i Infrastructure Limited owned by third parties. Income represents dividends received (inclusive of overseas withholding tax) and gross interest receivable in the year to 31 March 2007. Net assets and earnings figures are taken from the most recent audited accounts of the investee business, and are the net assets of each business and the total earnings on ordinary activities after tax respectively. It should be noted that, because of the varying rights attaching to the classes of shares held by the Group, it could be misleading to attribute a certain proportion of the earnings and net assets to the proportion of equity capital held by the Group.-------------------------------------------------------------------------------- Investment (Business line) Proportion Income(Geography) Residual of equity Directors' in the NetBusiness description cost shares valuation year Assets Earnings(First invested in) £m held £m £m £m £m--------------------------------------------------------------------------------3i Infrastructure Limited (1) (Infrastructure) (UK)Quoted investment company, investing in infrastructure(2007)Equity shares 325 46.4% 334 --------------------------------------------------------------------------------- 325 334 ---------------------------------------------------------------------------------Osprey Jersey Holdco Limited (AWG) (2),(3) (Infrastructure) (UK)Provider of drinking water and waste water services (2006)Equity shares 78 7.1% 78 -Loans 33 33 4-------------------------------------------------------------------------------- 111 111 4 130 30--------------------------------------------------------------------------------ACR Capital Holdings Pte Limited (4) (Growth) (Singapore)Reinsurance in large risk segments (2006)Equity shares 105 31.6% 102 --------------------------------------------------------------------------------- 105 102 ---------------------------------------------------------------------------------Sistemas Tecnicos de Encofrados S.A. (STEN) (Growth) (Spain)Sale and rental of formwork and scaffolding equipment (2006)Equity shares 78 28.8% 78 --------------------------------------------------------------------------------- 78 78 - 47 16--------------------------------------------------------------------------------Laholm Intressenter AB (DIAB) (Growth) (Sweden)Polymer based sandwich construction laminates (2001)Equity shares 44 48.1% 77 --------------------------------------------------------------------------------- 44 77 - 30 12--------------------------------------------------------------------------------FM-Holding AB (Coor Service Management) (Buyouts) (Sweden)Facilities management services (2004)Equity shares 1 37.5% 45 -Loans 29 27 2-------------------------------------------------------------------------------- 30 72 2 2 2--------------------------------------------------------------------------------H-Careholding AB (Buyouts) (Sweden)Elderly, primary and specialist care (2005)Equity shares 11 41.7% 15Loans 57 56 4-------------------------------------------------------------------------------- 68 71 4 26 (2)--------------------------------------------------------------------------------Hayley Conference Centres Limited (Growth) (UK)Provider of conference and training facilities (2005)Equity shares 1 45.8% 66 2-------------------------------------------------------------------------------- 1 66 2 72 5--------------------------------------------------------------------------------Dockwise Transport N.V. (Buyouts) (Netherlands)Specialists in heavy transport shipping within the marine and oil & gas industry (2007)Equity shares 1 49.1% 1Loans 64 64 2-------------------------------------------------------------------------------- 65 65 2 107 31--------------------------------------------------------------------------------Giochi Preziosi S.r.l (Buyouts) (Italy)Retailer and wholesaler of toys (2005)Equity shares 63 37.8% 63 --------------------------------------------------------------------------------- 63 63 - 134 (14)-------------------------------------------------------------------------------- Notes 1 3i Infrastructure Limited was incorporated in March 2007 and no audited accounts are available, consequently no net assets or earnings are disclosed. 2 Osprey was incorporated in October 2006, consequently there is no set of audited accounts. Osprey is the holding company for Anglian Water Group (AWG), and therefore their accounts have been used for the net assets and earnings figures. 3i Infrastructure Limited also owns 9% of Osprey, which was transferred to it by 3i at a value of £140 million on 13 March 2007. 3 3i Group's interest is held through a Limited partnership which entitles 3i Group to a 7.1% share in the interests of Osprey Jersey Holdco Limited, the ultimate holding company of AWG plc. 4 ACR was incorporated in November 2006 consequently there is no set of audited accounts. ACR is the holding company for Asia Capital Reinsurance Group Pte Limited which was also incorporated in November 2006. Consequently no audited net assets or earnings are disclosed. Forty other large investments Detailed below are forty other large investments which are substantially all of the Group's remaining investments valued over £20 million. This does not include one investment that has been excluded for commercial reasons. -------------------------------------------------------------------------------- Residual Directors'Investment Business First Cost(1) Valuation(1)Description of Business line Geography invested £m £m--------------------------------------------------------------------------------Clinica Baviera S.A Eye laser surgery clinics Growth Spain 2005 27 62Tato Holdings Limited Manufacture and saleof specialist chemicals SMI UK 1989 2 58Boxer TV-Access AB Digital TV distributor Growth Sweden 2005 56 57Senoble Holding SAS Manufacturer of dairyproducts and chilled desserts Growth France 2004 27 50Jake Holdings Limited (Mayborn)Manufacturer and distributor of babyand household products Buyouts UK 2006 49 49Care PrinciplesTopCo Limited Specialist healthcare Buyouts UK 1997 20 44Hobbs Holdings No.1 Limited Retailer of women'sclothing and footwear Buyouts UK 2004 38 44Volnay B.V. Dutch recruitmentclassified advertising Buyouts Netherlands 2007 43 44Polyconcept Investments B.V. Supplier of promotional products Growth UK 2005 25 43Planet AcquisitionsHoldings Limited (Chorion) Owner of intellectualproperty Buyouts UK 2006 42 42HSS Hire Services Holdings Limited Tool hire Buyouts UK 2004 20 40Selbatoneil S.L. (La Sirena) Specialist frozenfood retailer Buyouts Spain 2006 41 40Nimbus Communications Limited Media and entertainmentservices Growth India 2005 39 37Aviapartner Group S.A. Airport ground handling Buyouts Belgium 2005 35 36ABX Logistics Group Industrial transportation Buyouts Belgium 2006 35 34Smart & Cook Holdings Limited Insurance broking, life, pensions and investment Growth UK 2004 11 34Sofitandus S.L. (GES - Global Energy Services)Wind power service provider Buyouts Spain 2006 33 33CID Car InteriorDesign Holding GmbH Manufacturer ofvehicle interior trim Growth Germany 2004 20 32Norma Group Holding GmbH Provider of plastic and metal connecting technology Buyouts Germany 2005 25 29Telecity Group plc Services for internetservice providers Buyouts UK 1998 17 29Kirk Newco plc (Enterprise) UK utilities and public sector maintenanceoutsourcing Buyouts UK 2007 29 29Azelis Group Distributor of specialty chemicals, polymers and related services Buyouts Italy 2007 27 28Alo Intressenter AB Manufacture of frontend loaders Growth Sweden 2002 30 27NCP ServicesTopco Limited Transport managementand parking services Buyouts UK 2005 3 26Kudos International Port operations Growth India 2006 27 26EUSA Pharma Inc Speciality pharmaceuticalbusiness Venture EU/US 2007 26 26Selective Beauty Holdings S.A. (Saint Denis)Independent distributor ofbranded fragrances and cosmetic products Buyouts France 2006 25 25Kneip Communication S.A. Outsourced publication ofinvestment fund data Growth Luxembourg 2007 25 25CDH China Fund II China growth capital fund Growth China 2005 23 24Wendt Holding GmbH Manufacturer of precisiongrinding tools Buyouts Germany 2005 2 24Venture Production plc (2),(3) Oil and gas production Growth UK 2002 - 24Newron Pharmaceuticals S.p.A (2) Central nervous system drug discovery Venture Italy 1999 12 23Navayuga Engineering Company Limited Engineering and construction Growth India 2006 23 23Morse plc (2) Technology integrator Buyouts UK 1995 8 23Vonage Holdings Corp (2) Voice over internet serviceprovider Venture US 2004 25 23Goromar XXI, SL Manufacturer of frits, glazes and colours for tiles Buyouts Spain 2002 19 23Fincorp Mortgage and insurance web broker Growth France 2006 22 22Sulake Corporation Oy Online communities andmultiplayer games Venture Finland 2003 5 22Osby Intressenter AB (Brio Lekolar) Distributor of educational toys and materials Buyouts Sweden 2007 21 21Demand Media Inc Internet/media domain name registry services Venture US 2006 21 20 Notes 1 The investment information is in respect of the Group's holding and excludesany co-investment by 3i managed funds. 2 Quoted company (including secondary markets). 3 The residual cost is less than £0.5 million. This information is provided by RNS The company news service from the London Stock Exchange

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