Information Services Group, Inc. Annual Report 2011

FY2011 Annual Report · Information Services Group, Inc.
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3i Group plc  
Report and accounts 2011

Further content online…
http://reportingcentre.3igroup.com/2011 k
Throughout the report we have truncated some web addresses.  
Where this occurs, please use: http://reportingcentre.3igroup.com/2011 
followed by the path.

Further information online

Other financial information  
about 3i
–  3i portfolio
–  Investment 
– Realisations 

/other3i k

Information about  
our industry
–  About private equity
–  About infrastructure
–  About debt management

/otherindustry k

3i and transparency
A full report on 3i and transparency.

/transparency k

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Directors’ report
Pages 2 to 77, comprise the Directors’ 
report and pages 78 to 86 comprise the 
Directors’ remuneration report, both of 
which are presented in accordance with 
English company law. The liabilities of 
Directors in connection with these reports 
shall be subject to the limitations and 
restrictions provided by such law. 

Disclaimer
This Annual report and accounts may 
contain certain statements about the 
future outlook for 3i Group plc and its 
subsidiaries (“3i”). Although we believe 
our expectations are based on reasonable 
assumptions, any statements about the 
future outlook may be influenced by 
factors that could cause actual outcomes 
and results to be materially different.

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Report and accounts 2011 3i Group plc

Contents of this report
Overview
P 2-5

Key financial data 
Chairman’s statement  

Strategy and business model
P 6-15

Chief Executive’s review 
Our business  
Strategy and performance 
Business model 

Introduction 
Assets under management 
Market environment 
Business lines 
Financial review 

Review of risks 
Risk governance framework 
Risk factors 

Corporate responsibility at 3i 
A responsible approach aligned 
to our business model 
Achieving our strategy 
Our priorities for the year ahead 

Board of Directors and  
Leadership Team 
Statutory and corporate  
governance information 
Corporate governance statement 
Directors’ remuneration report 

Business review
P 16-49

Risk
P 50-55

Corporate responsibility
P 56-60

Governance
P 61-86

Financial statements
P 87-127

Portfolio and other information
P 128-137

Statement of comprehensive income 
Statement of changes in equity 
Balance sheet 
Cash flow statement 
Significant accounting policies  
Notes to the financial statements 
Independent auditor’s report  

Portfolio valuation – an explanation  
Ten largest investments  
Forty other large investments 
Information for shareholders 

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3i Group plc Report and accounts 2011

Overview

An overview of our business  
and performance for the year  
to 31 March 2011.

Key financial data 
Chairman’s statement 

4
5

Transparency 
For over 65 years, 3i’s objective has 
been to take an open and straightforward 
approach to doing business. 
3i is fully compliant with the Walker 
Guidelines on transparency and disclosure 
in private equity.
The full report on 3i and transparency 
can be found in the Reporting centre. 

/transparency k

Report and accounts 2011 3i Group plc

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We are an international investor focused  
on private equity, infrastructure and debt 
management, investing in Europe, Asia and  
the Americas.
The development of our infrastructure and 
debt management activities, combined with 
the continued progress of our private equity 
business, is changing the overall balance 
of 3i and strengthening our financial profile. 

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3i Group plc  Report and accounts 2011

Overview

Key financial data

Returns

Gross portfolio return

Gross portfolio return on opening portfolio value1

Total return

Total return on opening shareholders’ funds2

Dividend per ordinary share

Assets under management3 

3i

External funds

Total assets under management3

Balance sheet

3i portfolio value

Net debt

Liquidity

Net asset value

Diluted net asset value per ordinary share

Investment activity

Investment

Realisations

Year to/as at  
31 March 2011

Year to/as at  
31 March 2010

£601m

17.1%

£324m

10.6%

3.6p

£5,450m

£7,236m

£12,686m

£3,993m

£522m

£1,846m

£3,357m

£3.51

£843m

20.9%

£407m

16.2%

3.0p

£5,787m

£3,846m

£9,633m

£3,517m

£258m

£2,731m

£3,068m

£3.21

£719m

£609m

£386m

£1,385m

1   Opening portfolio value in the prior year is the weighted average of the opening portfolio value, less the opening portfolio value 
of 3i’s share of 3i Quoted Private Equity plc (“3iQPEP”), plus the value of investments transferred from 3iQPEP to 3i Group plc.
2   Opening shareholders’ funds in the prior year is the weighted average of opening shareholders’ funds and the equity value following 

the liquidation of 3iQPEP and the nine for seven rights issue.

3   “Assets under management” was re-defined as at 31 March 2010. The new definition is detailed in the Business review.

For more information on the following, please go to:

Assets under management p18 k
Investment and realisations p41 k
Returns p43 k
Balance sheet p49 k

Chairman’s statement

“Anabsolutefocusonimprovingtheperformance
ofeveryaspectofourbusiness.”

Report and accounts 2011 3i Group plc

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An in-depth review of the brand was undertaken during 
the year. This review produced evidence of deep loyalty 
to 3i amongst the wide group surveyed, as well as 
considerable affinity for our responsible style of investing. 
There was, however, a desire for 3i to operate more 
consistently, especially within our Private Equity business.

As a result, we have made a number of changes to the 
business to improve both consistency and performance. 
These cover a range of actions including the formation 
of the Private Equity business line from our Growth 
Capital and Buyouts businesses, a series of “Responsible 
investing” initiatives and the decision to form a Brand  
and Values committee composed of executives and 
non-executives.

In March 2011, the Group announced that Jonathan 
Asquith would be joining the Board. Jonathan is also a 
non-executive director of Ashmore Group plc, AXA UK 
plc and Chairman of AXA Investment Managers. As a 
former chief financial officer and later vice-chairman of 
Schroders, he brings a wide range of financial experience 
directly relevant to our strategy for growing the business. 

During the year, Robert Swannell also retired from the 
Board to take up his new role as Chairman of Marks and 
Spencer Group plc. As a consequence, Richard Meddings 
became the Senior Independent Director. Following his 
appointment as a non-executive director to the board of 
the UK Home Office, John Allan stepped down from the 
3i Board on 1 May 2011. After nine years on the Board, 
Christine Morin-Postel will retire as a non-executive 
director at the forthcoming Annual General Meeting in 
July 2011. On behalf of the Board, I would like to thank 
Robert, John and Christine for their valuable contributions 
to 3i. They have been much appreciated. 

With regard to outlook, it would appear that there 
remains a generally improving but somewhat fragile 
environment. Significant regional differences are evident 
and it is a little early to assess the longer term effects 
of the geopolitical developments in the Middle East, the 
natural disaster in Japan, and increased energy and other 
commodity prices. Our strategy therefore is to retain 
our financial strength, to continue to take a measured 
and highly selective approach to investment and to 
keep an absolute focus on improving the performance 
of every aspect of our business.

Sir Adrian Montague 
Chairman
11 May 2011

For more information on Governance, please go to p61 k

Increased momentum in the Private Equity business, 
further good progress in Infrastructure and a significant 
acquisition in Debt Management meant that the financial 
year to 31 March 2011 was both active and productive 
for 3i, albeit against an uncertain economic background, 
especially in the UK. 

High quality new investment has always been central to 
future value growth for our shareholders. It was therefore 
encouraging that, although we retained a measured and 
highly selective approach to investing, the rate of balance 
sheet investment, at £719 million in the year to 31 March 
2011, was significantly ahead of last year’s low level of 
£386 million. We also invested a further £736 million 
on behalf of funds that we manage or advise.

Good performances across most of the Group meant 
that we were able to deliver a total return of 10.6%, 
despite a significant value reduction in one of our largest 
investments. Strong overall growth in the earnings of 
our Private Equity portfolio, especially in northern Europe, 
more than compensated for a general reduction in the 
multiples used for valuation purposes. 

Our balance sheet remains strong with net debt at  
£522 million and we have substantial liquidity available  
to increase investment. The Board has decided to 
recommend a final dividend of 2.4p which, together 
with the increased interim dividend, results in a total 
dividend of 3.6p, 20% higher than last year. 

In the Half-yearly report in November 2010, my first 
since becoming Chairman in July 2010, I said that 3i 
is a group with considerable opportunity in each of its 
three areas of business. Given the highly competitive 
nature of most of our markets, the 3i brand is key 
to winning investments, to developing the business 
internationally and in taking these opportunities.

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3i Group plc Report and accounts 2011

Strategy
andbusiness
model

A description of our business, our 
strategy and business model, as well 
as our key performance measures.

Chief Executive’s review 
Our business 
Strategy and performance 
Business model 

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Chief Executive’s review

Report and accounts 2011 3i Group plc

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“Wehavemadeagoodstarttothefinancialyearandarewellplacedto
makefurtherprogressbothinincreasinginvestmentandimprovingthe
consistencyofourreturns.”

When I became Chief Executive in January 2009,  
there were four key areas of change that I felt were vital 
to focus on to ensure 3i’s continued success. First, there 
was a pressing need to restructure the Group’s balance 
sheet. Through a combination of cash flow generated 
from within the business and the successful rights issue, 
supported by our shareholders in the summer of 2009, 
this was achieved somewhat sooner than anticipated.  
By maintaining a low level of net debt and a robust 
balance sheet we have been able to take advantage 
of a number of opportunities to grow in a measured way. 

Alongside improving 3i’s financial position, another early 
priority was to ensure that we were maximising the value 
of our portfolio. We have made good progress on this 
front through a range of actions. These have increased 
the effectiveness of our portfolio management and 
enabled us to achieve some notable exits including Hyva, 
which delivered a return of seven times our investment.

Earnings growth in our Private Equity portfolio of 15% in 
the year is evidence of the overall quality of the portfolio. 
However, there have been elements of this portfolio that 
have underperformed. The significant reduction in value 
of our fourth largest investment at 31 March 2010, was 
clearly a setback.

Cultural and organisational changes were the third area 
of focus. A “One 3i” approach has been central to this, 
as has been the decision to combine the strengths of 
our Growth Capital and Buyouts businesses to form a 
single Private Equity business. The objectives in doing 
this were to improve our ability to originate high-quality 
investment opportunities and to add value to our 
portfolio by placing greater emphasis on our regional, 
sector, Active Partnership and Business Leaders Network 
activities. More effective origination is already evident 
and bearing fruit in increased investment. 

The senior Leadership Team was also strengthened 
during the year with the addition of Menno Antal, 
Alan Giddins, Jeremy Ghose and Cressida Hogg. 
Together, they have helped to broaden the experience 
of the Leadership Team as well as raise our ambition and 
increase our operational effectiveness. Lower operating 
costs and increased assets under management helped 
us to improve our operating expenses per AUM ratio 
during the year from 2.3% to 1.8%. 

Ourvision
To be recognised as a leading international 
investor based on:
–  the value we add to our portfolio
–   the returns we deliver to our investors
–  our responsible approach and style 

of investing

Ourvalues
In all our activities we will:
–  be commercial and fair
–   respect the needs of shareholders, 

investors, our people and the 
companies in which we invest

– maintain our integrity and professionalism
– strive for continual improvement 

and innovation

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3i Group plc  Report and accounts 2011

Strategy and business model > Chief Executive’s review

I have also been determined to put 3i back on a  
growth agenda. The acquisition of Mizuho Investment 
Management (UK) Limited (“MIM”) from Mizuho in 
February 2011 provided the catalyst to form a distinct 
Debt Management business line to build on the success 
of our own in-house capability. This new business line will 
not only diversify returns to our investors, but will also 
provide additional yield and lower volatility of earnings.  
It also reinforces that 3i is no longer solely a private equity 
business but rather a broader-based alternative asset 
manager and investor.

Since the year end, we have extended our international 
reach with the recruitment of an experienced team in 
Brazil. This investment in our network will enhance our 
global investment capabilities and also provide our 
portfolio companies, 20% of whom are already active 
across Latin America, with further access to one of the 
world’s fastest growing regions.

We have also made further progress in Asia. The 3i India 
Infrastructure Fund has made three further investments 
and is now 65% invested. 

These developments, alongside the continuing progress 
elsewhere in the Group, are designed to grow shareholder 
value for the future, as well as to strengthen our brand, 
our competitive advantage and our heritage as a 
responsible investor.

We have made significant progress since the beginning  
of 2009 in what has been an uncertain economic 
environment and I am confident that we now have 
three strong platforms for growth and that they are 
starting to deliver that growth.

Market environment
3i has operations in Europe, Asia and the Americas and 
our investment portfolio is itself comprised of companies 
with a wide range of international diversity. You will see 
from the contents of this report that 3i’s international 
presence has allowed us to benefit from exposure to a 
variety of geographies and sectors in the global economy. 

Market conditions have generally improved over the year, 
albeit with significant regional differences. Global GDP 
growth of 4.9% in calendar year 2010 was driven by high 
growth rates in India, China and Brazil, and economic 
recovery in the US, Germany and Japan. However, several 
European economies, including the UK and France, have 
shown sluggish recovery rates and there has been 
significant distress in other EU countries. 

As I said in my half-year statement, as a result of the 
significant amount of capital raised by the industry in  
the pre-crisis years and recent low levels of investment, 
there has been excess capital in many of our markets. 
This remains the case today and has provided an 
additional stimulus to an active secondary market, as 
well as contributing to competitive pressure and high 
prices. Investment has picked up, yet new fundraising 
remains at historic lows. This, combined with the fact 
that private equity and infrastructure funds typically 
have five-year investing periods, suggests that the 
excess capital available in our markets is likely to fall 
significantly over the next few years.

Performance
Our total return for the year to 31 March 2011 
was 10.6%. This was the result of a generally strong 
underlying performance from our Private Equity 
portfolio combined with good performances from 
Infrastructure and Debt Management, being offset to 
a degree by a weaker performance from a small number 
of UK investments. Total return of £324 million is stated 
after deducting £198 million in respect of the impairment 
in value of Enterprise, a UK asset. The underlying 
performance is, however, consistent with our long-term 
return on equity objective of 15%.

Private Equity performed well with a gross portfolio 
return of 16%. Within this, Growth Capital achieved  
a gross portfolio return of 23%. Our Private Equity 
business also saw increased investment during the 
year as a result of good value opportunities in a wide 
range of sectors.

Infrastructure continued to achieve its overall objectives 
and delivered an 11% return. Highlights of the year were 
the completion of an investment by 3i Infrastructure plc 
in Eversholt Rail Group, one of the UK’s rail rolling stock 
leasing companies, as well as a number of good investments 
in India through the 3i India Infrastructure Fund.

3i Debt Management was only fully established in 
February and so has had a marginal impact on total 
return. 3i’s pre-existing debt management business 
realised the majority of assets in the 2007 Debt 
Warehouse during the financial year, generating profits  
of £24 million. This successful exit will help to position  
3i Debt Management as one of the market’s top 
performing debt managers in this vintage and assist 
in future fundraising.

We have retained our measured and highly selective 
approach to new investment in what has remained a 
highly competitive environment. Nine new investments 
were made in the year in companies operating in sectors 
and countries which we know well. You can find further 
information on these investments in the business line 
reviews on pages 22, 34 and 38. 

For more information on the market environment, please go to p20 k

Report and accounts 2011 3i Group plc

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Realisation proceeds were lower than the previous year 
at £609 million (2010: £1,385 million), but at a higher 
uplift to opening value (26%, 2010: 11%). In part, this 
was due to the timing of the exit of Hyva and the 
partial sale of our holding in Norma on its IPO in early 
April. These investments are excellent examples of 3i 
at its best.

Our net asset value (“NAV”) per share increased during 
the year to £3.51. The chart below shows the steady but 
sustained progress that the Group has made since 2009; 
adding an additional 30p to the NAV this year gives an 
annualised return of 12.8% over the two years.

Chart 1: Continued growth in returns to shareholders 
(p per share)

Net returns take account of the funding structures, 
which deliver fees and carry to enhance gross returns. 
They also reflect the costs of running the business. 
As we deploy a lower proportion of our own capital 
in Debt Management, for example, there is a net 
enhancement as fees exceed cost. Each of our business 
lines are structured to deliver 15% returns over the 
long term.

The Group’s total return also reflects the cost of the 
Group’s funding, foreign exchange and other factors 
such as the pension scheme. We have taken, and 
continue to explore, steps to reduce the costs and 
volatility associated with these items so that over time 
there is a very material reduction in the dilution from 
net portfolio return to total return.

355.2

For more details on our business line models and return 
characteristics, please refer to pages 10 and 11.

333.0

322.0

279.0*

286.0

Looking forward
We have made a good start to the financial year and are 
well placed to make further progress both in increasing 
investment and improving the consistency of our returns. 
With the addition of our Debt Management business,  
we have a multi-asset class platform that is ready for 
renewed growth. The market environment remains 
testing, but our teams across the world are determined  
to deliver increasing value for our shareholders and the 
investors in our funds.

31.3.09

30.9.09

31.3.10

30.9.10

31.3.11

1Diluted NAV per share  1Cumulative dividend per share (paid)
*  Adjusted to reflect the impact of the rights issue and issue of shares 

related to the acquisition of 3iQPEP.

Michael Queen 
ChiefExecutive
11 May 2011

Model for returns
With our business model now clearly established I wanted, 
as part of our results communication this year, to set out 
the management tool that I am using to challenge our 
businesses to deliver returns for our shareholders and 
the investors in our funds. 

Overall, we aim to deliver an average 15% return on 
equity over a five-year period, with lower volatility and 
steady and consistent progression in NAV. 

Each of our business lines has gross return objectives 
reflecting the relative risk in their asset class. We have  
set these out previously for our Private Equity (20%)  
and Infrastructure (12% Europe, 20% India) businesses. 
We are now adding the gross portfolio return objective 
for Debt Management of 10%. 

For more information on our returns model, please go to p11 k

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3i Group plc  Report and accounts 2011

Strategy and business model

Our business
3i is an international investor focused on private equity, infrastructure and debt 
management, investing in Europe, Asia and the Americas.

Business lines

Private Equity 

Investment funding model

Assets under management

Buyouts
Investing in buyouts with an enterprise 
value up to €1 billion in Europe and Asia. 
Portfolio companies: 47

More on Buyouts, please go to p23 k

Growth Capital 
Minority investing in high-growth 
businesses with an enterprise value of up to 
€1 billion in Europe, Asia and the Americas.
Portfolio companies: 52

More on Growth Capital, please go to p29 k

Buyouts as at 31 March (£m)

Investments are currently made 
through Eurofund V, a €5 billion 
Limited Partner fund to which 
3i has a €2.8 billion commitment.

2009

2010

2011

2011 (%)

5,690

5,227

5,190

Investments are currently made 
through the €1.2 billion 3i Growth 
Capital Fund to which 3i has an 
€800 million commitment.

Growth Capital as at 31 March (£m)

64%

2009

2010

2011
13i  1External funds

2,267

2,585

2,355

Infrastructure

Investment funding model

Assets under management

Investing primarily in utilities, transportation 
and social infrastructure in Europe, India and 
North America.
Portfolio companies: 17

More on Infrastructure, please go to p34 k

Investments are currently made 
through 3i Infrastructure plc (“3iN”), 
a listed vehicle in which the Group 
has a 33% shareholding, and the 
3i India Infrastructure Fund (“3iIIF”), 
a $1.2 billion Limited Partner fund 
to which 3i has a $250 million 
commitment. 

as at 31 March (£m)

2011 (%)

2009

2010

2011
13i  1External funds

1,671

1,627

1,636

29%

Debt Management

Investment funding model

Assets under management

Management of funds which invest in senior 
and mezzanine corporate debt in a wide 
range of typically large and private 
companies in Europe. 

More on Debt Management, please go to p38 k

To manage external funds. 

as at 31 March (£m)

2011 (%)

2009

2010

2011
13i  1External funds

104

83

3,386

<1%

Group

Investment funding model

Assets under management

An international investor and a listed 
company. 
Investing in private equity, infrastructure 
and debt management in Europe, Asia and 
the Americas.

Investments are made using capital 
from our own balance sheet and 
external funds.
Total assets under management 
“AUM” are £12.7 billion.

2009

2010

2011
13i  1External funds

10,780

9,633

12,686

43%

as at 31 March (£m)

2011 (%)

For more information on our business model, please go to p14 k

Report and accounts 2011 3i Group plc

11

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Risk

Risks relate to:
–  assessment of investment opportunities;
–  selection of appropriate financial structures 

and negotiation of terms;

–  ability to implement value creation plans; and 
–  opportunities to negotiate successful exits. 

Returns model

Gross portfolio return objectives
20%

The performance of the portfolio is derived from:
–  realised profits from the sale of investments;
–  unrealised portfolio value growth; and
– portfolio income.

Net portfolio return objectives

15%

Gross portfolio return plus/less:
– fees from funds;
– carried interest from funds;
–  carried interest payable to staff; and
– operating expenses.

Risk

Risks relate to:
–  assessment of investment opportunities;
–  selection of the appropriate financial 
structures and negotiation of terms;
–  changes in the regulatory environment;
–  ability to implement value creation plans; 

and, where relevant,

–  opportunities to negotiate successful exits.

12%

15%

The performance is derived from
3iN:
– dividends; and 
–  unrealised growth in the value of the Group’s 
holding driven by the underlying performance 
of the assets. 

3iIIF:
–  realised profits from the sale of investments;
–  unrealised portfolio value growth; and
– portfolio income.

Gross portfolio return plus/less:
– fees from funds;
– carried interest from funds;
–  carried interest payable to staff; and
– operating expenses.

Risk

Risks relate to: 
–  fundamental credit assessment of the 
underlying assets in each fund; and

–  management of income and costs during 

the life of each fund.

10%

15%

3i managed vehicles return:
– realised and unrealised gains; and
– portfolio income.
Equity stakes in debt funds return:
– capital returns; and
– unrealised growth.

Gross portfolio return plus/less:
– fees from funds; 
– carried interest from funds;
–  long-term incentives, including earn outs 

payable to staff; and
– operating expenses.

Returns model

Risk

Risks relate to:
– external factors;
– strategy;
– investment;
– treasury funding; and 
– operations.

Net portfolio return objective 15%

Reflects fund management fees and cost.

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15%

Reflects funding costs, impact of foreign exchange 
and pensions.

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12

3i Group plc  Report and accounts 2011

Strategy and business model

Strategy and performance

As an investor, we know that a clear strategy is fundamental to success. Here are the key 
elements of our strategy, a summary of how we plan to deliver them, our progress and  
the risks involved.

Strategy

Invest

Priorities

Today

Increase the rate of investment in a measured way 
by maintaining our highly selective approach.
Add additional resource and capabilities in Debt 
Management and Infrastructure, extend our network  
into Brazil and further strengthen our teams in Asia.

Grow our business

Today

Continue to focus on growing the value of our portfolio 
companies through the support that we provide in growing 
their earnings and improving their strategic position. 
Continue to invest in a range of activities, including  
Active Partnership, our Business Leaders Network  
and our approach to responsible investing.

Build on our reputation

Today

Strengthen further our brand and our approach 
to responsible investing.
Use the insights gained from an in-depth brand 
review to deliver more consistent performance 
in all aspects of the business. 
Respond to the appetite from our portfolio 
to become more engaged and supportive on 
environmental, social and governance issues (“ESG”). 

Tomorrow

Continue to increase the levels of investment 
in our three business lines and across all of our 
geographies. As economies and companies return 
to growth agendas, we will continue to adopt 
a highly disciplined and measured approach.
Invest further in building our brand, network  
and capabilities. 

Tomorrow

Use the strength of our balance sheet 
to develop each of our business lines.
Improve our operational effectiveness 
as we continue to grow. 

Tomorrow

Continue to build our brand in well-established 
and developing markets.
Use the insights gained from research to strengthen 
our offering, our approach to the market and 
to enhance our competitive advantage.
Build on the increasing level of engagement with 
the portfolio on ESG issues to further enhance 
our approach to responsible investing. 

Maintain “One 3i” culture Today

Tomorrow

Build on the progress that has been made through the 
structural changes in our Private Equity business and the 
formation of a new leadership team, comprising the senior 
people from our Private Equity, Infrastructure and Debt 
Management businesses.
Develop further our “One 3i” approach to achieve 
our full potential in this area, building upon the strong 
endorsement from our latest staff survey.

Implement a range of actions from the brand 
review and our latest staff survey. Some of these 
will be Group wide, including our “Responsible 
investing” programme. Some will be within 
specific business lines such as refreshing the 
approach to deal origination in Private Equity or 
the continuing integration plan for the recently 
acquired MIM business. 

Strategy

Invest

Priorities

Today

Increase the rate of investment in a measured way 

by maintaining our highly selective approach.

Add additional resource and capabilities in Debt 

Management and Infrastructure, extend our network  

into Brazil and further strengthen our teams in Asia.

Tomorrow

Continue to increase the levels of investment 

in our three business lines and across all of our 

geographies. As economies and companies return 

to growth agendas, we will continue to adopt 

a highly disciplined and measured approach.

Invest further in building our brand, network  

and capabilities. 

Grow our business

Today

Tomorrow

Continue to focus on growing the value of our portfolio 

Use the strength of our balance sheet 

companies through the support that we provide in growing 

to develop each of our business lines.

their earnings and improving their strategic position. 

Continue to invest in a range of activities, including  

Active Partnership, our Business Leaders Network  

and our approach to responsible investing.

Improve our operational effectiveness 

as we continue to grow. 

Report and accounts 2011 3i Group plc

Key Group financial performance measures

Total return
Gross portfolio return
Net portfolio return
Cost efficiency
Operating expenses per AUM
Net debt
Net asset value per share movement1

2011
10.6%
17.1%
12.8%
3.2%
1.8%
£522m
£0.33

2010
16.2%
20.9%
15.5%
4.1%
2.3%
£258m
£0.43

Risk

Performance

1  Growth in NAV per share is stated before dividends and other distributions to shareholders and, in respect of the 

prior year, the rights issue and the 3iQPEP transaction.

Gross portfolio return by year (%)

Investment activity (£m)

The major risks to investing well are:
–  the macroeconomic environment which, 

although gradually improving in most of the 
countries that 3i operates in, remains fragile; 
–  competitive pressure resulting in unattractive 

pricing for new investments; and 

– failing to maintain our investment discipline.

year to 31 March

2007
2008
2009
2010

2011

year to 31 March

Investment
Realisations
Net investment/
(divestment)

34.0
23.9
(36.7)
20.9

17.1

2011

2010

719
(609)

386
(1,385)

110

(999)

The major risks to growth are:
–  the ability to retain or attract and integrate 
high-calibre staff, especially in the high-
growth markets;

–  failure to take advantage of opportunities 

to invest;

–  competitive pressure resulting in unattractive 

pricing; and

–  failure to maintain our disciplined approach to 

asset management and strategic development.

Growth in assets under management (£m)

year to 31 March

2009

2010

6,909

3,871

5,787

3,846

2011
13i direct  1Managed and advised by 3i

5,450

Total

10,780

9,633

12,686

7,236

Build on our reputation

Today

Tomorrow

Responsible investing

Brand review

Strengthen further our brand and our approach 

Continue to build our brand in well-established 

to responsible investing.

and developing markets.

Use the insights gained from an in-depth brand 

review to deliver more consistent performance 

in all aspects of the business. 

Respond to the appetite from our portfolio 

to become more engaged and supportive on 

Use the insights gained from research to strengthen 

our offering, our approach to the market and 

to enhance our competitive advantage.

Build on the increasing level of engagement with 

the portfolio on ESG issues to further enhance 

environmental, social and governance issues (“ESG”). 

our approach to responsible investing. 

The major risks to building our reputation are:
–  not maintaining high-quality portfolio 

management processes;

–  not implementing our strategy effectively; and
–  not participating actively in industry and 

sector regulatory developments.

Increased focus, additional resource and a major 
review of our approach including:
– development of policies and processes; 
–  greater communication on “Responsible 

investing” and ESG issues; and 

–  an Awareness and Training programme, which 

is being rolled-out across the Group in 2011/12.

In-depth research with over 200 people across 
a wide range of participant groups.
Research shows strong affinity for the 3i brand 
and values. However, in some markets, there is  
a demand for more consistency of delivery and 
clarity of our offering. 
Competitively, 3i is seen as a highly responsible 
investor but with an opportunity to increase its 
focus in this area.

Maintain “One 3i” culture Today

Tomorrow

Build on the progress that has been made through the 

Implement a range of actions from the brand 

structural changes in our Private Equity business and the 

review and our latest staff survey. Some of these 

formation of a new leadership team, comprising the senior 

will be Group wide, including our “Responsible 

people from our Private Equity, Infrastructure and Debt 

Management businesses.

Develop further our “One 3i” approach to achieve 

our full potential in this area, building upon the strong 

endorsement from our latest staff survey.

investing” programme. Some will be within 

specific business lines such as refreshing the 

approach to deal origination in Private Equity or 

the continuing integration plan for the recently 

acquired MIM business. 

The major risks to our “One 3i” culture are:
–  not ensuring the right recruitment and 

retention measures are in place;

–  not investing sufficiently in staff development 

and training; and

–  failure to address underperformance 

adequately.

For more information on the following, please go to:

Financial review p41 k
Risk p50 k

Staff survey results 2011

Employee engagement
2009
2010

2011

85%

74%

86%

Other highlights
–  96% of staff are committed to helping 

3i achieve its objectives; and

–  91% of staff are proud to work for 3i.
Opportunities for improvement
These included career development and more 
focus on our “One 3i” approach.

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14

3i Group plc  Report and accounts 2011

Strategy and business model

Business model

Our approach to investing has evolved over many years. Today, we have 
three focused businesses, each with its own distinctive characteristics.  
They all share a common set of values and benefit from the strength 
of 3i’s reputation.

The fundamental elements of our business model are set 
out on the following page. Our core values and our brand 
are at the heart of our business model and are consistent 
across all of our activities. A strong track record as a 
successful and responsible investor is critical to gaining 
access to capital, as is our record of delivering value to 
those we work with, whether they are the investors in 
our funds or the management teams of the companies 
that we invest in.

The depth of involvement and use of Group resources 
varies across our business lines and depends on the 
nature of our investment. The intensive relationship we 
have with the team of a mid-market buyout company, 
where 3i and funds may together own the majority 
of the equity of the business and hold a position on the 
board, naturally differs from that with the finance director 
of a company in which one of our Debt Management 
funds holds debt. 

The diagram opposite captures the degree of importance 
each aspect of our business model has to our Private 
Equity, Infrastructure and Debt Management 
business lines.

Our business model and brand are underpinned by our core values
Our core values are to: 
–  be commercial and fair
–   respect the needs of shareholders, investors,  

our people and the companies in which we invest

– maintain our integrity and professionalism
– strive for continual improvement and innovation

For more information on the following, please go to:

Business lines p22-40 k
Risk p50 k
Corporate responsibility p56 k

Report and accounts 2011 3i Group plc

Secure access to capital from  
multiple sources

Invest in our network,  
people and knowledge

See the best investment 
opportunities

As a listed company with its own capital and 
as a manager or adviser to external funds, 3i has 
access to multiple sources of funds. This provides 
resilience and sustainability and depends upon 
performance, transparency and a long-term 
approach to managing relationships.

Our strong culture of working across borders and 
harnessing the skills and knowledge from local, 
sector and business line teams delivers what we 
call the “best team for the job” for each phase of 
the investment lifecycle. Sustaining this requires 
constant investment in our people, systems and 
communications.

Access to high-quality investment opportunities 
is critical to future value growth. Investment over 
many decades in our network, people, knowledge 
and relationships provides 3i with the right 
relationships and insights to deliver this.

Business lines

Private Equity 
Infrastructure 
Debt Management 

Level of importance

>
>
>

Business lines

Private Equity 
Infrastructure 
Debt Management 

Level of importance

>
>
>

Business lines

Private Equity 
Infrastructure 
Debt Management 

Level of importance

>
>
>

Invest in our 
network, people 
and knowledge

Secure access  
to capital from 
multiple sources

See the best 
investment 
opportunities

Core values

Brand

Build great 
companies and 
deliver outstanding 
returns

Create innovative 
financial solutions  
and ensure excellent 
execution

Achieve full 
potential 
through active 
partnership

Build great companies and 
deliver outstanding returns

Achieve full potential through 
active partnership

Two significant Private Equity investments, 
Norma and Ålö, are examples of this. Each of 
these businesses delivered strong and sustained 
growth in earnings in competitive markets. 
In Infrastructure, similar examples include 
Anglian Water and Adani Power.

Effective portfolio management has underpinned 
our performance and reputation for over 65 
years. Our rigorous methodology for effecting 
business change is focused on operational and 
functional expertise, sector and strategic insight 
and high standards of governance.

Create innovative financial solutions 
and ensure excellent execution

3i has a strong heritage of successfully aligning 
interests and delivering innovative financial 
solutions. Our scale, culture, experience 
and training are central to sustaining this. 
The development of our infrastructure and 
debt management capabilities are good 
examples of this.

Business lines

Private Equity 
Infrastructure 
Debt Management

Level of importance

>

>

Business lines

Private Equity 
Infrastructure 
Debt Management

>

Level of importance

>

Business lines

Private Equity 
Infrastructure 
Debt Management 

Level of importance

>
>
>

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3i Group plc Report and accounts 2011

Business 
review

A review of our business at a Group 
and business line level. 

Introduction  
Assets under management 
Market environment 
Business lines 
Financial review 

17
18
20
22
41

Report and accounts 2011 3i Group plc

17

Introduction 

3i is an international investor focused on private equity, infrastructure and 
debt management, investing in Europe, Asia and the Americas. Our vision, 
values and strategy are set out on pages 7, 12 and 13.

All three of 3i’s business lines invest using a mix of the 
Group’s own balance sheet capital and external capital. 
Total assets under management at 31 March 2011, 
including 3i’s commitments to funds, were £12.7 billion 
(2010: £9.6 billion), including £7.2 billion (2010:  
£3.8 billion) advised or managed on behalf of others. 

The composition of our assets under management is set 
out on the following pages. Further detail is also provided 
on the composition of the investment portfolios within 
each of the business line reviews on pages 22 to 40. 
Information on our largest investments is provided on 
pages 132 to 135.

A detailed review of our performance at a Group and 
business line level for the year to 31 March 2011 is set 
out in this Business review. In summary, the Group’s total 
return is generated by the realised and unrealised returns 
we achieve from our direct portfolio and the fees that  
we receive from advising or managing external funds,  
less the operating expenses and funding costs of  
the business. 

Corporate responsibility and risk management, for 
which there are reports on pages 50 and 56, are 
central to our strategy. During the year, we undertook 
an extensive survey of over 200 people from a range 
of key groups engaged with 3i, including our portfolio, 
key intermediaries, members of our Business Leaders 
Network and shareholders. This review has informed  
our thinking and is referred to in the relevant sections  
of this report.

Employee engagement is our key non-financial 
performance measure. As an international investor 
employing a relatively small number of people, in a 
highly competitive market, employee engagement 
is important to 3i and we undertake a detailed survey 
of our staff each year. 

Achieving the right balance between transparency 
and accessibility of information was an important 
factor in developing the online Reporting centre, 
which was launched last year. We have continued 
to provide further information online this year and 
enhanced the functionality of the site. 

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For more information on the following, please go to:

Strategy and performance p12 and 13 k
Key Group financial performance measures p13 k
Business line reviews p22, 34 and 38 k
Risk p50 k
Corporate responsibility p56 k
Ten largest investments p132 k
Forty other large investments p134 k

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3i Group plc  Report and accounts 2011

Business review

Assets under management 

Assets owned, managed 
and advised by 3i 
The Group defines its assets under management (“AUM”) 
as the total commitments, including the Group’s, to its 
active managed and advised funds, as well as the residual 
cost of investments in funds that are already invested and 
the cost of any other investments owned directly by 3i. 
As at 31 March 2011, the Group had total AUM of 
£12,686 million (2010: £9,633 million).

The 32% increase in Group AUM during the year was 
principally driven by growth in Debt Management 
AUM, which rose to £3,386 million (2010: £83 million) 
following the Mizuho Investment Management (UK) 
Limited (“MIM”) acquisition. A combination of factors, 
including realisations and foreign exchange, resulted in 
AUM in the Private Equity business line of £7,545 million 
at 31 March 2011 (2010: £7,812 million).

A description of the development of 3i’s fund 
management and advisory business can be found 
for each business line on pages 28, 33 and 37.

The proportion of direct balance sheet value by business 
line is shown in Chart 2.

Table 1: Assets under management

Close date

Original  
fund size

Original 3i 
commitment

% invested at 
March 2011

Gross money 
multiple at
March 20111

Private Equity 
3i Eurofund III

3i Eurofund IV

3i Eurofund V

July 1999

June 2004

€1,990m

€3,067m

€995m

€1,941m

Nov 2006

€5,000m

€2,780m

3i Growth Capital Fund March 2010

€1,192m

Growth Capital non-fund

Other

Infrastructure
3i India 
Infrastructure Fund

various

various

various

various

March 2008

$1,195m

3i Infrastructure plc

March 2007

Other

various

£973m3

various

Debt Management
Harvest I

Harvest II

Harvest III

Harvest IV

Harvest V

Windmill I

3i Debt Warehouse 

Friday Street

Vintage I

Non-core

Total AUM (in sterling)

April 2004

April 2005

April 2006

June 2006

April 2007

Oct 2007

Oct 2007

Aug 2006

March 2007

€514m

€552m

€660m

€752m

€650m

€600m

€325m

€300m

€500m

€800m

various

various

$250m

£320m4

various

€15m

€5m

€5m

€6m

€10m

€5m

€120m

nil

nil

91%

96%

71%

46%

various

various

65%

n/a

various

100%

100%

100%

100%

100%

100%

 4%6

100%

100%

2.1

2.3

0.8

1.2

n/a

n/a

1.3

n/a

n/a

 n/a5

 n/a5

 n/a5

 n/a5

 n/a5

 n/a5

 n/a5

 n/a5

 n/a5

1  Gross money multiple is cash returned to the Fund plus value, as at 31 March 2011, as a multiple of cash invested.
2  Adjusted to reflect 3i Infrastructure plc’s $250 million commitment to the Fund.
3  Based on latest published NAV (ex-dividend).
4  3i Group’s proportion of latest published NAV.
5  The capital and fee structure of CLO funds means that money multiple is not a market standard fund performance metric.
6  The majority of assets were realised during the year.

For more information on 3i’s fund management, please go to p28, 33 and 37 k

AUM

€99m

€910m

€5,000m

€1,192m

£1,081m

£243m

$945m2

£973m

£74m

€345m

€514m

€618m

€716m

€598m

€490m

€13m

€180m

€360m

£118m

£12,686m

Report and accounts 2011 3i Group plc

19

The Group’s three business lines use differing proportions of own balance sheet and external funds to invest. Chart 2 
shows the direct balance sheet investment by business line. Private Equity is the largest business line in terms of assets 
under management (£7,545 million). It is also the one with the highest proportion of balance sheet capital (64%).  
As can be seen from Chart 3, the development of the Debt Management business line during the year means that 
Infrastructure and Debt Management together now represent 40% (2010: 18%) of total assets under management. 

As can be seen from Charts 4 and 5, 3i has a well diversified investor base for the funds it manages or advises both  
by geography and by type of investor.

Chart 2: Balance sheet portfolio by business line 
as at 31 March 2011

Chart 3: Total AUM by business line as at 31 March 2011

Non-core: 3%
Infrastructure: 12%

Debt Management: 0%

Private Equity:
Buyouts: 49%

Debt Management: 27%

Private Equity:
Buyouts: 41%

Private Equity:
Growth Capital: 36%

Infrastructure: 13%

Private Equity:
Growth Capital: 19%

Chart 4: External investor base for non-listed funds managed 
and advised by geographic location as at 31 March 2011

Chart 5: External investor base for non-listed funds managed 
and advised by type of investor as at 31 March 2011

Rest of Europe: 32%

North America: 27%

Other: 1%
Government agencies: 21%

Corporate
investors: 0%
Endowments: 3%

Private individuals: 1%

Middle East: 10%

Financial institutions: 8%

Fund of funds: 21%

Insurance
companies: 15%

UK: 16%

Asia: 15%

Pension funds: 30%

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3i Group plc  Report and accounts 2011

Business review

Market environment 

Market conditions 
This section provides commentary on the broader 
environment in which the Group and its Private Equity, 
Infrastructure and Debt Management businesses 
operate. It covers a review of macroeconomic conditions, 
mergers and acquisitions activity and the conditions 
in the capital markets. Each of the business line reviews 
(pages 22, 34 and 38) cover the levels of investment 
and fundraising for the relevant markets. Commentary 
on the regulatory environment is included in the Risk 
section of this report on page 50.

In summary, conditions generally improved over the  
year, although there were significant regional differences. 
It is somewhat early to assess the longer-term effects,  
if any, of the geopolitical developments in the Middle East 
and the natural disaster in Japan, which took place 
towards the end of the financial year.

Mergers and acquisition activity
Conditions in mergers and acquisitions (“M&A”) 
markets influence the environment for both investment 
and realisations across the Group. As can be seen 
from Chart 6, there has been a significant improvement 
in M&A markets from 2009. However, deal activity 
and value remain substantially below their peak levels.

Global M&A activity in calendar year 2010 at 41,654 
transactions, was up by 12% from 2009 (source: 
Dealogic). European M&A activity, which accounted  
for 33% of global M&A activity in 2010 and totalled 
13,820 transactions with a value of $803 billion, 
was also up 12% from the previous year. M&A activity 
in Asia (excluding Australasia) was 9% higher in 2010 
but with average deal size increasing in value, was also 
some 28% higher than in 2009 at $421 billion.

With the value of global transactions in the first calendar 
quarter of 2011 up 28%, this recovery continued (source: 
Dealogic Global M&A Review – First quarter 2011).

Chart 6: Global M&A deals 2000 to 2010

$bn
1,600

1,400

1,200

1,000

800

600

400

200

0

12,000

10,000

8,000

6,000

4,000

2,000

0

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2
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2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

1Deal value $bn         Volume
Source: Dealogic, M&A review.

For more information on risk, please go to p50 k

Report and accounts 2011 3i Group plc

21

Macroeconomic conditions 
3i’s direct operations are in Europe, Asia and the Americas 
and our investment portfolio comprises companies 
which themselves have a range of international diversity. 
Consequently, it is not just the economies of those 
countries where we have operations that are relevant  
to 3i. The compositions of our Private Equity and Debt 
Management portfolios by geography are contained 
on pages 24, 30 and 39.

Overall, real global GDP growth of 4.9% in calendar 
year 2010 (source: Barclays Capital) was driven by 
high growth in the BRIC economies and, in particular,  
India (8.6%), China (10.4%) and Brazil (7.5%), together 
with a recovery in some of the major industrialised 
economies such as Germany (3.5%), Japan (3.9%)  
and the US (2.8%). These proved enough to offset 
significant distress in a number of smaller European 
countries and sluggish performances elsewhere,  
including the UK (1.3%) and France (1.5%). 

Conditions also varied across the industrial spectrum.  
For example, general industrials in Europe benefited  
from growth in developing markets whereas domestic 
consumer businesses in some European countries, 
including the UK, experienced more challenging 
conditions. Higher energy and commodity costs, 
combined with the prospect of further fiscal tightening, 
also present a challenging outlook for some regions, 
including the UK. 

Equity markets
The condition of equity markets is important to 3i for 
a number of reasons. Firstly, stock market levels have 
an influence on company valuations and on the multiples 
used to value portfolio companies which are valued on  
an earnings basis.

Overall, the major global stock markets ended the 
year at moderately higher levels. However, there 
was a considerable degree of volatility within the year.  
As an illustration, the FTSE was at 5,680 at 31 March 
2010 and 5,909 at 31 March 2011, but reached a peak 
of 6,091 and a low point of 4,806 during the year. 

Another feature of interest to 3i is the market’s appetite 
for IPOs. After a period of virtual closure from late 2008 
to early 2010, conditions, although still fragile, improved 
for IPOs in 2010. 

With $285 billion raised in 1,393 IPOs in calendar year 
2010, global IPO activity recovered to pre-financial crisis 
levels. However, over $60 billion of this amount was 
in three IPOs, two in Asia and one in the US. Emerging 
market IPO volume made up 69% of global volume. 
Asia raised the most capital on record and contributed 
approximately 65% of global proceeds ($184 billion), 
including $132 billion for China (source: Ernst & Young’s 
Global IPO trends 2011 report).

European exchanges raised the highest volume since 
2007 ($37 billion in 252 IPOs). The Ernst & Young report 
also notes that Europe represented a 13% global IPO 
market share, compared with the past 10-year average 
level of 25%.

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22

3i Group plc  Report and accounts 2011

Business review

Business lines Private Equity

3i’s Private Equity business has evolved throughout the 
Company’s history. Today, this business line invests in 
buyouts and makes minority growth capital investments 
in high-growth businesses, typically with an enterprise 
value of up to €1 billion, in Europe, Asia and the Americas. 
Investments are made using a blend of own balance sheet 
capital and external funds under management. 

During the year, the decision was taken to combine our 
Buyouts and Growth Capital businesses to form a single 
Private Equity business line. Our ultimate objective in 
making this change is to improve the returns to our 
shareholders and to the investors in our funds whilst 
honouring our obligations to our existing fund mandates. 

The key drivers of this decision were a desire to improve 
our ability to originate investment opportunities and to 
add increased value to our portfolio by placing greater 
emphasis on our regional, sector, Active Partnership and 
Business Leaders Network activities. We have provided 
separate Buyouts and Growth Capital reviews, reflecting 
our existing fund commitments. 

Further details on investments referred to in this review 
can be found on pages 132 to 135.

Levels of investment and fundraising 
As can be seen from the chart below, private equity 
investment in Europe in calendar 2010 grew by 63%  
to €39 billion compared to 2009.

According to data from unquote”, this increase was  
driven by buyout rather than growth capital investment. 
The number and value of European buyouts in 2010 
increased by 43% and 169% respectively, whereas 
growth capital investment in the region in 2010 increased 
by 14% by value. 

The Q1 2011 unquote” Private Equity Barometer released 
on 20 April 2011, however, stated that there had been 
a less buoyant start to 2011. The number and value of 
European deals for Q1 2011 were down 7% and 48% 
respectively on the previous quarter and the average size 
was €52 million.

As can be seen from Chart 7, the recovery in investment 
in Europe was not mirrored by private equity fundraising 
which, at €18 billion in 2010, showed no growth on 
the previous year and remained at the lowest level 
of European fundraising since 2004. 

Given the significant amount of capital raised in earlier 
years and the recent low levels of investment, there 
has been a substantial excess of capital available for 
investment. This has provided an additional stimulus 
to an active secondary market, as well as contributing 
to competitive pressure and high prices. However, a 
sustained pick up in investment, combined with the 
fact that investing periods for private equity funds 
are typically five years, means that this excess of capital 
in the market is likely to be significantly reduced in the 
next two years unless there is a corresponding increase 
in new fundraising.  

Global data from Preqin states that a total of 482 funds 
achieved a final close in 2010, raising $226 billion, down 
8% from $246 billion raised in 2009. Buyout funds raised 
a total of $68.5 billion from 88 funds closed in 2010, 
down by 33% from 2009 levels.

North America-focused funds raised $134 billion 
by 242 funds. European fundraising, with a total of 
122 closed, raised an aggregate $50 billion. Rest of 
the world-focused funds (including Asia) accounted 
for $41 billion, with 118 funds closed.

Chart 7: Funds raised and invested – Europe 2000 to 2010 (€bn)

112

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72

80

80

48

40

35

47

37

28

28

29

27

27

24

54

39

24

18

18

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2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

1Funds raised  1Investment
Source: EVCA for 2007-2010, EVCA/Thomson Reuters/PwC for previous years Europe, by location of private equity firm.

For more information on investments, please go to p132-135 k

Report and accounts 2011 3i Group plc

23

Private Equity: Buyouts

The market 
3i’s buyout activities are focused on the European 
mid-market where, in the calendar year 2010, the 
number and value of transactions increased by 87% and 
131% to 101 transactions and €28 billion respectively 
(source: unquote”/3i). The market showed signs of 
recovery from the trough in 2009, with increases  
driven by a rise in the number of buyouts valued at over 
€100 million, as the availability of leverage improved. 
However, the mid market, defined as transactions 
between €100 million and €1 billion, was still some  
56% below the levels seen at the cyclical peak of 2007, 
both in terms of volume and value.

During the last economic downturn in 2002/03, average 
deal pricing in the European market, as a multiple of 
EBITDA, was estimated to have fallen to six to seven 
times (source: Bain 2010 Private Equity Review).  
Investments made in the market in 2009 and 2010 
were characterised by pricing levels not far from 
the 2006/07 peak. This has been driven by both the 
overhang of capital in the market and the consequent 
pressure to invest, which has led to high demand for 
good investment opportunities. 

Exit activity increased markedly in calendar year 2010 
and appears to be showing a sustained pick up. European 
exits amounted to €60 billion in 2010, the highest level 
seen since 2007 (source: unquote”/3i). With more than 
54% of exits sold to private equity buyers, secondary 
transactions accounted for a rising share of exits.

In line with private equity in general, the outlook for  
fund raising for buyouts, although improved, remains 
challenging and the market is expected to become more 
crowded as general partners with 2007/08 funds start 
to return to the market to raise new funds in the second 
half of 2011 and 2012.

Looking forward, it is anticipated that the recovery 
in deal activity is likely to continue, in the absence 
of major macroeconomic or geopolitical challenges. 
With its brand and network, 3i is well positioned 
to originate an attractive pipeline of opportunities.

Business model
3i’s mid-market Buyouts business is focused on leading or 
co-leading mid-market buyout transactions in companies 
with an enterprise value typically of up to €1 billion.

Returns from individual investments are achieved through 
a mix of capital realisations upon exit, returns of capital 
and portfolio income. Returns to 3i Group are enhanced 
through management fees and carried interest from 
external funds, which we manage alongside 3i’s own 
balance sheet commitments.

Our investment strategy is built around a number of 
core components. The first of these is to identify leading 
European mid-market businesses with potential for 
significant value creation. Then, we aim to purchase these 
businesses at appropriate prices. We do this by applying 
3i’s local knowledge, sector expertise, Business Leaders 
Network relationships, investment discipline and our 
approach to responsible investing. With the right financial 
structure in place, the task then is to build these 
businesses through organic growth and acquisitions and 
optimise their performance. We do this in partnership 
with portfolio company management, with the objective 
of maximising value through timely and well-executed 
exit strategies.

As can be seen from Chart 8, at 31 March 2011, for 
the 68 investments completed since 1 January 2001 
that have been exited to date, 56% of the growth in the 
value of the companies’ equity was driven by earnings 
growth. Enhanced multiples on exit also contributed to 
this growth in equity value, the majority of which is due  
to the strategic repositioning of these companies, with 
the balance due to market movements. Optimising the 
financial structure contributed a significant but much 
smaller amount to the overall creation of value.

Chart 8: Buyouts sources of value creation from 
realised investments

15%

29%

56%

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Source: 3i, 68 realised 3i-led buyouts since 2001, exited prior to 
31 March 2011.

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3i Group plc  Report and accounts 2011

Business review > Business lines > Private Equity: Buyouts

Portfolio composition 
As can be seen from the charts below, the Buyouts portfolio is well diversified by sector and geography, both by 
value and number of portfolio companies. The value of our 47 investments at 31 March 2011 was £1,961 million 
(2010, 45 investments: £1,539 million).

Geographic focus 
Our focus is on investing in businesses that are either headquartered or that have a substantial part of their 
operations in Europe. Many of these businesses will, however, have a wider international presence outside of Europe. 
The 47 portfolio companies are based in 13 different countries.

Total portfolio value £1,961 million

Total number of companies 47

Buyouts – Direct portfolio by value
By geography as at 31 March 2011

Buyouts – Direct portfolio by number
By geography as at 31 March 2011

North America: 0%
Asia: 2%

UK: 18%

Rest of World: 1%

North America: 0%
Asia: 2%

Continental Europe: 79%

UK: 34%

Rest of World: 2%

Continental Europe: 62%

Sector focus 
Sectors are an important component of our business, both in terms of origination and investment decision making.  
We focus on: Business Services; Consumer; Industrial; Healthcare; and TMT (Technology, Media and Telecoms). 

Buyouts – Direct portfolio by value
By sector as at 31 March 2011

Buyouts – Direct portfolio by number
By sector as at 31 March 2011

TMT: 4%

Healthcare: 12%

Business Services: 20%

TMT: 8%

Healthcare: 11%

Business Services: 28%

Consumer: 14%

Industrial: 50%

Financial Services: 0%

Industrial: 28%

Consumer: 19%

Financial Services: 6%

Vintage year
Subject to prevailing market conditions, we look to build a diversified portfolio by vintage year of investment. 

Buyouts – Direct portfolio by value
By vintage year as at 31 March 2011

Buyouts – Direct portfolio by number
By vintage year as at 31 March 2011

2003: 2%
2004: 9%

2005: 7%

2006: 1%

2007: 26%

2002 and before: 0%
2011: 14%
2010: 0%

2002 and before: 8%

2003: 2%

2004: 9%

2009: 17%

2005: 11%

2006: 6%

2008: 24%

2007: 19%

2011: 11%
2010: 0%

2009: 15%

2008: 19%

Report and accounts 2011 3i Group plc

25

Investment activity

Table 2: Buyouts investment and realisations

year to 31 March

Realisation proceeds

Investment

Net investment/(divestment)

2011 
£m

170

562

392

These realisations exclude proceeds received in April 2011 
from the sale of Hyva (£181 million) and from the partial 
realisation of our holding in Norma, following its IPO 
(£74 million). The MWM exit, which was signed in the year, 
was undergoing competition clearance at the year end. 

SMT

2010 
£m

403

201

(202)

storksmt.com

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Note: 2010 comparables have been adjusted to exclude the Debt 
Warehouse.

Following a period of low investment, activity levels 
increased in the year. Of the £562 million of Buyouts 
investment in the year, £249 million was invested 
in five new companies, which are shown in Table 3. 
A total of £177 million was invested into existing portfolio 
companies. Of this, £28 million was used to support 
acquisitions and £39 million was used to increase our 
equity holdings through buying out existing shareholders. 
The balance of further investment of £110 million  
was used to purchase debt in portfolio companies,  
which we were able to acquire below its par value.  
The remaining £136 million of gross investment in 
the year was capitalised interest.

As can be seen from Table 3, the five new investments  
in the year were in four different countries and three 
different sectors. Our value growth strategies for these 
investments include buy and build opportunities, 
international market growth and operational 
improvement potential. All are well positioned in their 
markets and are stable, robust businesses with an 
average revenue of £160 million. 

Realisation proceeds of £170 million were generated  
in the year to 31 March 2011 (2010: £403 million). 
These included the sale of the Inspectorate division  
of Inspicio to Bureau Veritas. This partial exit generated 
proceeds of £121 million and delivered a 1.2x cash  
return on 3i’s total investment in Inspicio, with the 
remaining part of the business, ESG, which was valued  
at £41 million as at 31 March 2011. The full exit of 
Panreac generated proceeds of £30 million and a 
2.2x return on 3i’s investment. The sale of our remaining 
holding in NCP, the NSL Service Group, generated 
proceeds of £9 million, and took the total return on  
NCP to £280 million, 2.9x our original investment. 

Stork Materials Technology (“SMT”) was the non-core testing 
division within Stork, a Dutch engineering group, prior to a 
€205 million 3i-led buyout in December 2010. 3i’s Business 
Services team had identified SMT as a potential opportunity in the 
materials testing space following a review of the testing, inspection 
and certification sector (“TIC”), undertaken in 2006 alongside 
Ad Verkuyten, our senior sector adviser and former CEO of RTD. 
This focus on the TIC industry has delivered a number of other 
successful investments, including Inspicio, Inspecta and Trescal.

As the leading private equity investor in the TIC sector, the 3i team 
had immediate credibility with management in terms of our ability 
to articulate a clear strategic vision for the business. We were able 
to combine this with our strong geographic presence in Benelux, 
where we already had an established relationship with Stork. 

The value creation plan focused on developing SMT’s expertise 
in destructive testing and failure analysis and broadening its 
geographic footprint through a combination of organic and inorganic 
growth. Specifically, we saw the opportunity to pursue a buy and 
build strategy in a number of SMT’s core geographies where the 
market remains highly fragmented, and across a number of its core 
industry verticals.

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Table 3: Private Equity – New Private Equity Buyouts investments
year to 31 March 2011

Investment

Vedici

Trescal

SMT

Amor

OneMed

Country

France

France

Netherlands

Germany

Finland

Sector

Healthcare 

Business Services 

Business Services 

Consumer 

Healthcare 

3i  
investment 
£m

3i+Funds 
investment 
£m

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55

48

88

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26

3i Group plc  Report and accounts 2011

Business review > Business lines > Private Equity: Buyouts

Performance

Table 4: Returns from Buyouts

year to 31 March

Realised profits over value on the 
disposal of investments

Unrealised profits/(losses) on the 
revaluation of investments

Portfolio income

Gross portfolio return

Gross portfolio return %

Fees receivable from external funds

2011
£m

2010
£m

22

60

75

168

204

69

441

157
10% 30%
39

32

Note: 2010 comparables have been adjusted to exclude the 
Debt Warehouse.

Gross portfolio return
The gross portfolio return for the year to 31 March 2011 
for the Buyouts business was £157 million, which 
represented a 10% return on opening portfolio value 
(2010: £441 million, 30%). The lower return compared 
to the prior year is due to fewer exits, resulting in a 
reduction in realised profits and lower unrealised profits. 
Unrealised profits have been impacted by a 7% fall in  
the multiples used for portfolio company valuations at  
31 March 2011 compared to 31 March 2010, and by 
value reductions in a small number of portfolio companies 
from lower earnings.

Portfolio earnings
Aggregate earnings in the portfolio as at 31 March 2011 
increased in the year by 15%. This was principally 
driven by the growth in our northern European portfolio.  
Of particular note were 3i’s Buyout investments in 
the Industrial sector. A number of the companies in this 
sector made significant progress as a result of initiatives 
taken by 3i, including operational improvement and 
support for accretive acquisitions.

The five new investments made in the year shown in 
Table 3 are beginning to show good earnings growth.  
We continue to work proactively across the wider 
portfolio to improve operational effectiveness and to  
help management to source attractive opportunities  
for expansion.

The portfolio in general has delivered stable or 
improving operating margins, despite a number of 
companies operating in persistently challenging markets. 
This is due in large part to the Active Partnership 
initiatives undertaken during the year, as well as the 
longer term benefits from comprehensive efficiency 
programmes implemented during the downturn.

Portfolio leverage 
The debt levels in the Buyouts portfolio are at an 
average of 4.3x EBITDA. Financing structures for the 
Buyouts portfolio are based on committed facilities, 
providing long-term secured financing. As can be 
seen from Chart 9, the repayment profile is weighted 
towards 2015 and later. 

Breaches of debt covenants in the portfolio have been 
limited, with six assets in breach at 31 March 2011 
(2010: 7, 2009: 16). The six assets had a combined 
value of £91 million at 31 March 2011. We continue 
to actively manage all these situations with the assistance 
of 3i’s in-house banking advisory team. 

Chart 9: Debt repayment proﬁle – Buyout portfolio
Repayment index weighted by 3i carrying values (%) 
as at 31 March 2011

52

5

7

9

10

10

7

2011

2012

2013

2014

2015

2016

2017
onwards

As at 31 March 2011, 69% (2010: 71%) of the 
outstanding debt in the Buyouts portfolio was repayable 
in 2015 or later. The recovery in debt availability since 
the 2008/09 crisis period is enabling many of our 
portfolio companies to refinance their medium-term 
debt at favourable terms. In combination with this, we 
are working with the small number of more leveraged 
companies to help them de-leverage, providing not only 
additional balance sheet security but also the potential 
to increase prospective returns. Chart 10 shows the 
range of leverage across the Buyouts portfolio as at 
31 March 2011, weighted by 3i value at this date.

Chart 10: Ratio of net debt to EBITDA – Buyout portfolio
Weighted by 3i Group carrying value (£m) 
as at 31 March 2011

468

460

297

231

247

123

134

<1x

1–2x

2–3x

3–4x

4–5x

5–6x

>6x

Net debt/EBITDA segmentation

Report and accounts 2011 3i Group plc

27

Long-term performance 
Table 5 shows vintage year performances from 2002 
to 2011. The vintages to 2006 have all achieved IRRs 
in excess of 20%. The reduction in the IRR of the 2007 
vintage was due to the value reduction on Enterprise. 
Other assets in the vintage are performing well. 

The IRR of the 2008 vintage remains negative but 
improved from (18)% at 31 March 2010 to (6)% at  
31 March 2011.

The five new investments made in the 2011 vintage  
are showing encouraging trading performance.

Portfolio health
At 31 March 2011, 66% of the portfolio based on 
cost was “healthy” (2010: 65%), and by value 96% 
(2010: 89%). 

Investments are only moved from “sick” back to 
“healthy” when their performance and valuation 
demonstrate that a recovery of our invested capital 
is probable. 

Portfolio valuations
The unrealised value growth in the year of £60 million 
(2010: £204 million) comprised £407 million of  
positive value movements, net of value reductions 
of £(347) million. The majority of the portfolio grew 
in value during the year with the largest contributors 
to the positive value growth being from the northern 
European portfolio. The largest value reduction was 
Enterprise (£201 million), which has experienced 
challenging trading and a reduction in earnings. 
We have acted to deal with these challenges and improve 
performance by driving a significant transformation 
programme. The business remains strong in its core 
markets, continues to win significant contracts and was 
fully compliant with its covenants as at 31 March 2011. 

At 31 March 2011, 61% of the Buyouts portfolio was 
valued on an earnings basis and 29% on an imminent 
sale or IPO basis. As noted earlier, the average multiple 
used in the valuation of companies valued on an earnings  
basis was around 7% lower than in the previous year.  
The weighted average EBITDA multiple pre liquidity 
discount was 8.5x (2010: 9.1x).

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Table 5: Long-term performance – Buyouts
New investments made in the financial years ended 31 March

Vintage year

Total investment1
£m

Return flow 
£m

Value remaining 
£m

IRR to 31 March 
2011

IRR to 31 March 
2010

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

Analysis excludes investment in Debt Warehouse. 
1  Total investment includes capitalised interest.

251

–

402

825

714

516

384

332

277

186

–

–

1

144

328

1,176

954

524

664

441

269

–

333

463

504

22

130

187

31

–

n/a

–

1%

(6)%

17%

49%

61%

35%

49%

61%

n/a

–

9%

(18)%

25%

49%

62%

34%

49%

61%

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3i Group plc  Report and accounts 2011

Business review > Business lines > Private Equity: Buyouts

Fund management

Chart 11: Buyout investor base for non-listed funds managed 
and advised by type of investor as at 31 March 2011

Government agencies: 10%
Corporate investors: 0%
Endowments: 4%
Private individuals: 1%

Financial institutions: 11%

Fund of funds: 26%

Pension funds: 29%

Insurance companies: 19%

Eurofund III, a 1999 fund, is almost fully realised. The 
Fund portfolio has generated a gross multiple of 2.1x its 
invested cash, in line with its position at 31 March 2010.

Eurofund IV, a 2004 fund, continues to perform strongly. 
The Fund portfolio had generated a gross multiple of 2.3x 
its invested cash at 31 March 2011 (31 March 2010: 2.2x), 
driven by realisations in the year. For realised investments 
the multiple is 3.0x.

Eurofund V, a 2006 €5 billion fund, was 71% invested 
at 31 March 2011 (31 March 2010: 54%). During the 
year, it invested €859 million and distributed proceeds 
from the partial sale of Inspectorate (€150 million). 
At 31 March 2011, the fund portfolio had generated 
a gross multiple of 0.8x its invested cash. The focus 
for the next financial year will be to complete the 
overall fund portfolio with new investments and drive 
the performance of the portfolio as the fund matures.

As can be seen from Chart 11, there are a diverse 
range of investors in 3i’s Buyouts funds. 

Further demographic information on the investors 
in 3i’s funds can be found on pages 18 and 19.

Norma

normagroup.com

In 2006, 3i and funds invested to support the formation of Norma 
from Rasmussen GmbH in Germany and 3i-backed ABA Group 
in Sweden. Since then, the company has been transformed into a 
global, market leading business in joining technology. This has been 
achieved through organic growth, including international growth 
and new plants in China, Thailand, Mexico, Russia and Serbia, as 
well as further acquisitions, including Breeze and R.G.Ray in the US. 

This, combined with a range of Active Partnership initiatives, has 
helped Norma to grow EBITDA from €26 million to c€100 million  
in the year to December 2010, as well as double EBITDA margins.  
In 2009, as part of the preparation for IPO, a new “Global Excellence” 
programme was initiated covering manufacturing, supply chain 
management, purchasing, market coverage, sales force effectiveness 
and working capital. This substantially improved Norma’s market 
position and growth, resulting in €20 million incremental EBITDA 
improvements in 2009. 

In April 2011, the company achieved a successful IPO on the 
Frankfurt stock exchange, delivering proceeds for 3i of £74 million 
and valuing 3i’s residual stake at £123 million, together representing 
around five times our investment cost.

Priorities and opportunities
There are two key priorities for our Buyouts business 
given the opportunities that we see in the market.  
The first priority is to ensure that all of our investments 
are performing in line with our expectations. Driving 
earnings growth across the portfolio, both organically  
and through acquisitions, is central to this. We also aim  
to use 3i’s global network to support our portfolio 
companies’ continued international development. 

The second priority is to continue to use our brand,  
deep local market presence and sector insights to 
originate and invest in attractive new investment 
opportunities. More favourable M&A markets and 
general macroeconomic conditions have the potential  
to provide a further stimulus to our market activity.

In part, these priorities will be achieved through the 
benefits of a more integrated Private Equity business, 
which can draw on a wider range of resources, 
knowledge and relationships. 

We start the new financial year with an active exit 
pipeline and will continue to realise investments which 
create good returns. 

For more information on 3i’s funds, please go to p18 and 19 k

 
Report and accounts 2011 3i Group plc

29

Private Equity: Growth Capital

Chart 12: Growth Capital sources of value creation from 
realised investments

40%

(21)%

81%

Equity value 
at entry

Earnings
improvement

Multiple 
expansion

Debt
reduction

Equity value 
at exit

Source: 3i, based on 33 realised 3i Growth Capital investments since 
2003, exited prior to 31 March 2011.

An important aspect of our business model is the way  
in which we generate growth in the value of our portfolio 
companies. As can be seen from Chart 12, the major 
driver of value creation in the Growth Capital business, 
for investments realised from the 2003 and more recent 
vintages, has been the underlying earnings growth of 
portfolio companies. This earnings growth is driven 
principally by revenue and margin expansion as our 
portfolio companies, with our support, strengthen their 
market positions, operational effectiveness and brands.

Multiple enhancement on realisation in Growth Capital 
portfolio companies is driven by a number of factors: 
improvement in the strategic positioning of portfolio 
companies; professionalising businesses; making what 
was “hard to buy, easy to sell”; and the fact that whilst 
investments are made on minority valuations, exits tend 
to occur when a majority of the company is sold or listed.

Many Growth Capital investments are made to 
strengthen balance sheets and to reduce financial risk 
for high-growth companies. As a consequence, as 
can be seen from Chart 12, there is a negative effect 
through reduced leverage. Leverage across the portfolio 
remains low at 2.4x EBITDA. 

The market
The growth capital market is less well defined than  
the buyouts market and, as a result, external market 
information is not as well documented. However, our  
own data suggests that activity levels in the global 
growth capital markets have increased by approximately 
18% from the exceptionally low level seen in 2009.  
This rise appears to have been driven by a significant  
increase in investments made in Asia, offsetting a 
lower level of investment in North America and flat 
volume in Europe. 

Increased competition and higher prices have, in part, 
been driven by the emergence of new entrants viewing 
the lower-leveraged growth capital sector as attractive, 
given the high prices for deals in their traditional markets. 
As a consequence, some investments that were initially 
minority growth capital style deals evolved into majority 
buyouts, as entrepreneurs took advantage of the premiums 
on offer for a controlling interest in their companies. 

Banks continue to be highly selective and only offer debt 
packages to the best companies with a lower risk profile. 
Although this does affect the general availability of debt 
for our portfolio companies, it continues to create 
opportunities for growth capital investors as they seek  
to bridge the funding gap for profitable companies.

The Growth Capital model remains attractive to 
entrepreneurs and business owners who want to expand 
and add value to their business without increasing leverage. 

Business model 
3i’s Growth Capital business operates in Europe, Asia  
and the Americas, making minority equity investments  
of between €25 million and €150 million in established, 
profitable and mainly international businesses.

The Group’s international presence, sector knowledge, 
networks, approach to responsible investing and broader 
resources create the premium market access to 
companies that are “not for sale”. Over the last four 
years, 67% of the new investments completed have been 
proprietary. These resources also provide the ability to 
benchmark investment opportunities globally, match 
resources to opportunities on a “best team for the job” 
basis and to work actively with high-growth companies 
to maximise value through a mix of capital realisations  
on exit and portfolio income.

The Group’s track record of making such investments  
for over 65 years has provided it with the experience, 
approach and techniques critical to success in minority 
investing. These are underpinned by seeking to invest 
only where we can align interests with entrepreneurs and 
management teams and by the differentiated approach 
that 3i takes to adding value to its portfolio companies.

3i has historically carried out its growth capital activity 
using own balance sheet funds. However, since March 
2010, all new investments have been made through 
the €1.2 billion Growth Capital Fund.

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3i Group plc  Report and accounts 2011

Business review > Business lines > Private Equity: Growth Capital

Portfolio composition 
As can be seen from the charts below, the Growth Capital portfolio is well diversified by sector and geography and 
by both value and number of portfolio companies. 

The value of our 52 investments at 31 March 2011 was £1,433 million (2010: £1,331 million).

Geographic focus 
Our focus is on investing in businesses that are headquartered in Europe, Asia and the Americas. Many of these businesses 
will have a wider international presence outside these areas. The 52 companies in the portfolio are based in 18 countries.

Total portfolio value £1,433 million

Total number of companies 52

Growth Capital – Direct portfolio by value
By geography as at 31 March 2011

Growth Capital – Direct portfolio by number
By geography as at 31 March 2011

Rest of World: 0%
North America: 19%

North America: 10%

Continental Europe: 34%

Rest of World: 0%

Continental Europe: 40%

Asia: 28%

Asia: 31%

UK: 19%

UK: 19%

Sector focus
Sectors are an important component of our business, both in terms of origination and investment decision making.  
We focus on: Business Services; Consumer; Industrial; Healthcare and TMT (Technology, Media and Telecoms).

Growth Capital – Direct portfolio by value
By sector as at 31 March 2011

Growth Capital – Direct portfolio by number
By sector as at 31 March 2011

TMT: 10%

Business Services: 16%

TMT: 14%

Business Services: 13%

Healthcare: 15%

Consumer: 12%

Healthcare: 10%

Consumer: 21%

Industrial: 30%

Industrial: 27%

Financial Services: 15%

Financial Services: 17%

Vintage year 
Subject to prevailing market conditions, we look to build a diversified portfolio by vintage year of investment.

Growth Capital – Direct portfolio by value
By vintage year as at 31 March 2011

Growth Capital – Direct portfolio by number
By vintage year as at 31 March 2011

2002 and before: 2%
2003: 9%
2004: 1%
2005: 1%
2006: 4%

2011: 1%
2010: 3%
2009: 10%

2002 and before: 8%

2003: 2%

2004: 6%

2005: 7%

2006: 7%

2007: 28%

2007: 27%

2008: 41%

2011: 2%
2010: 2%
2009: 6%

2008: 33%

Report and accounts 2011 3i Group plc

31

Investment activity

Performance 

Table 6: Growth Capital investment and realisations

Table 7: Returns from Growth Capital

year to 31 March

Realisation proceeds

Investment

2011 
£m

202

72

Net investment/(divestment)

(130)

2010 
£m

578

121

(457)

We have adopted a cautious and selective approach to 
growth capital investment during the past year. Although 
3i saw 75% of the transactions taking place in its target 
market, only a modest amount of £72 million was 
invested in the 12 months to 31 March 2011, compared 
to £121 million in the year to March 2010. 

One new investment was made during the year, 
£21 million in BVG India Limited, one of India’s largest 
facilities management services companies. 

We invested a further £24 million into Refresco, a 
European market leader in the production of private 
label fruit juices and soft drinks, to support two 
substantial acquisitions, one in Germany and one in Italy. 

Of the balance of £27 million, £22 million represented 
capitalised interest. We start the new financial year with 
an attractive pipeline of opportunities.

Realisation proceeds of £202 million were generated 
during the year from 10 full exits (2010: £578 million, 
42). We have continued to focus on the sale of 
older, non-core investments, while at the same time 
opportunistically exiting larger investments such 
as Carso and Balco, which generated money multiples 
of 3.4x and 5.0x respectively.

Labco

labco.eu

Since 3i invested in 2008, we have supported the company in 
becoming a leading consolidator in its sector through the acquisition 
of 31 regional businesses. As the second largest European network 
of diagnostics laboratories, Labco has market leading positions 
in France, Portugal and Spain, as well as significant operations 
in Belgium, Germany, Italy and a growing presence in UK. 

In January 2011, 3i led a successful €500 million bond issue for 
Labco with a seven-year maturity and coupon of 8.5%, which was 
more than 5x over subscribed. In addition, an acquisition facility  
of €135 million was raised, significantly strengthening Labco’s 
relationships with key banks and allowing the company to continue 
to pursue its acquisition strategy.

year to 31 March

Realised profits/(losses) over value on 
the disposal of investments

Unrealised profits on the revaluation of 
investments

Portfolio income

Gross portfolio return 

Gross portfolio return %

Fees receivable from external funds

2011
£m

2010
£m

40

(14)

217

48

305

23%

8

145

63

194

11%

–

Gross portfolio return
The Growth Capital business line generated a gross 
portfolio return of £305 million in the year to 31 March 
2011 (2010: £194 million), or 23% (2010: 11%) of 
opening portfolio value. 

The majority of portfolio companies have performed  
well, and earnings at an aggregate level have increased 
significantly, driving a substantial improvement in 
valuations. This, combined with a number of healthy 
realisations at significant uplifts to book value, has 
resulted in a much-improved gross portfolio return.

The main contributor to the gross portfolio return was 
the impact of unrealised valuation movements of  
£217 million (2010: £145 million). The unrealised value 
gain was driven principally by an earnings growth increase 
of 15% over the year. This was partially offset by an 11% 
fall in the average (pre discount) EBITDA multiple to 9.2x 
(2010: 10.3x).

Portfolio earnings
The 15% earnings improvement was driven by 
increased revenue, combined with improved operational 
effectiveness from initiatives implemented by 3i and 
our portfolio companies’ management teams. 

Portfolio income of £48 million for the year to 31 March 
2011 included a special distribution from Phibro of  
£10 million. The prior year included a non-recurring  
£23 million special distribution from Quintiles.

Fees receivable from external funds at £8 million (2010: 
nil) reflect the income from the Growth Capital Fund.

The portfolio performed well in the year and we have 
worked to improve earnings with many of our portfolio 
companies using our active partnership approach to 
focus on operational efficiency. 

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3i Group plc  Report and accounts 2011

Business review > Business lines > Private Equity: Growth Capital

Portfolio leverage 
As can be seen from Charts 13 and 14, debt levels 
in the Growth Capital portfolio at 31 March 2011 
were low and the portfolio has a broad debt repayment 
profile. The covenant risk in the Growth Capital 
portfolio is moderate, with only four companies 
in breach at 31 March 2011, with a combined value 
at that date of £nil. 

Chart 13: Debt repayment proﬁle – Growth Capital portfolio
Repayment index weighted by 3i carrying values (%)
as at 31 March 2011

30

27

19

15

4

4

2

Portfolio valuations 
Value growth of £217 million in the year to 31 March 2011 
(2010: £145 million), was driven by earnings growth 
and was achieved despite a reduction in multiples used 
to value the portfolio.

At 31 March 2011, 70% of the portfolio was valued 
on an earnings basis. The average multiple used for 
the valuation of investments which were valued on an 
earnings basis at 31 March 2011 was 9.2x (2010: 10.3x), 
11% lower than the previous year.

Long-term performance
Table 8 shows the performance of each vintage year 
from 2002 to 2011. As can be seen from the table,  
the vintage performance has been stable over the last  
12 months.

Performance improved for the more recent vintages of 
2008 to 2010 and the more mature vintages continued 
to show good returns.

2011

2012

2013

2014

2015

2016

2017
onwards

The improvement in performance was due to improved 
valuations resulting from earnings growth and strong 
realisations in the year.

Chart 14: Ratio of net debt to EBITDA – Growth Capital 
portfolio Weighted by 3i Group carrying value (£m) 
as at 31 March 2011

599

368

123

141

87

54

9

<1x

1–2x

2–3x

3–4x

4–5x

5–6x

>6x

Net debt/EBITDA segmentation

Portfolio health
As at 31 March 2011, 95% (2010: 93%) of the portfolio 
on both a value and a cost basis was classified as healthy. 

This was driven by the fact that, overall, the portfolio 
continued to deliver good earnings growth despite a 
challenging economic environment in many countries. 

Report and accounts 2011 3i Group plc

33

Fund management
Historically, 3i’s Growth Capital investments have been 
funded through the balance sheet, with limited external 
fund investment. However, since March 2010, all new 
investments have been made through the €1.2 billion 
3i Growth Capital Fund. As part of its €800 million 
commitment, 3i contributed a seed portfolio of seven 
investments valued at €339 million, being all new 
investments made since 1 January 2008 remaining 
in the portfolio. At 31 March 2011, the Fund portfolio 
had generated a gross multiple of 1.2x its value at 
the inception of the fund.

Further information on the investors in 3i’s funds can 
be found on pages 18 and 19.

Chart 15: Growth Capital investor base for non-listed 
funds managed and advised by type of investor
as at 31 March 2011

Financial institutions: 3%

Insurance companies: 13%

Government 
agencies: 61%

Pension funds: 23%

Priorities and opportunities
From a competitor perspective, growth capital remains a 
less well defined market than buyouts. Our specialisation 
of investing in businesses “not for sale”, combined with 
our strong brand and international presence, positions 3i 
well against competitors with a broader remit. We focus 
on maintaining a strong network of relationships with 
entrepreneurs and their advisers in our chosen markets. 
We will continue to invest selectively to ensure optimal 
returns for 3i and for the investors in our Fund.

In line with our investment strategy, we will continue  
to avoid investments which do not ensure alignment with 
management and other portfolio company shareholders, 
where we would hold a public equity investment at the 
outset, or where we would be investing in a fund or 
project structure.

We aim to drive future returns from the existing portfolio 
through our active partnership approach and the 
implementation of operational improvements in portfolio 
companies. We expect that the focus of these initiatives 
will develop during 2011 to support revenue growth 
projects, including funding acquisitive growth, where 
appropriate, as well as continuing to drive efficiency in  
the portfolio.

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Table 8: Long-term performance – Growth Capital
New investments made in the financial years to 31 March

Vintage year

Total investment1
£m

Return flow 
£m

Value remaining 
£m

IRR to 31 March 
2011

IRR to 31 March 
2010

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

21

46

208

1,061

554

448

179

297

231

498

–

–

45

447

229

627

300

511

411

718

20

47

140

592

350

60

11

16

129

2

n/a

8%

(5)%

1%

 1%

23%

26%

26%

27%

12%

n/a

n/a

(7)%

(3)%

 (2)%

24%

25%

25%

24%

12%

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1  Total investment includes capitalised interest.

For more information on 3i’s funds, please go to p18 and 19 k

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34

3i Group plc  Report and accounts 2011

Business review > Business lines

Infrastructure 

3i invests in infrastructure through two vehicles:  
3i Infrastructure plc (“3iN”), an infrastructure investment 
company listed in London (in which 3i owns a 33% stake), 
and the 3i India Infrastructure Fund, a limited partnership 
fund focused on investing in Indian infrastructure 
(in which 3i holds a $250 million commitment).

Returns for 3i from the Infrastructure business line 
are generated from: dividend income and capital growth  
from our 33% holding in 3iN; capital returns from 
our investment in the 3i India Infrastructure Fund; and 
advisory and management fees from the two vehicles.

The market
Transaction activity in the infrastructure market 
increased throughout the year. Deal volumes are 
returning to pre-crisis levels and debt availability 
(both from banks and from capital markets) is good. 

The outlook for inflation and interest rates will be an 
important determinant in the conditions for investment 
going forward. While moderately high inflation is positive 
for the infrastructure asset class, its impact on interest 
rates may affect the cost of financing new transactions 
and achievable returns. 

Transaction opportunities in the developed world are 
coming from a number of sources. There are non-core 
disposals from both financial institutions and corporates, 
driven by new capital adequacy regulations and the 
pressure to reduce leverage. Public sector budget 
constraints are likely to result in privatisations and an 
increase in Public Private Partnership/Private Finance 
Initiative (“PPP/PFI”) schemes.

In addition, policy drivers, such as the push for a 
“green economy” and the use of infrastructure spending 
as an economic stimulus tool, have the potential to create 
further opportunities. Secondary market sales may also 
increase, as infrastructure funds nearing the end of their 
life begin to sell assets to prove valuations, or refinance 
assets to extract equity.

The opportunity in India remains significant, as 
evidenced by the strong levels of transaction activity 
for the 3i India Infrastructure Fund described on page 37. 
Deal flow will continue to be determined by the 
growing infrastructure deficit. Strong GDP growth and 
an increasingly urbanised population are driving demand 
for new build infrastructure, supported by political 
momentum. The Indian government continues to place 
much importance on private investment in the sector.

Investors are increasingly attracted to investing in 
assets with infrastructure characteristics, as they seek 
protection from volatility in other asset classes, as well 
as from inflation and other macroeconomic risks. 

Growing demand for assets has resulted in some pricing 
pressure, in particular in the more liquid segments such  
as PPP/PFI and, increasingly, in core economic 
infrastructure assets.

As returns in the asset class are tested in a more 
challenging market environment, we expect that only 
managers with an established track record and a solid 
operational understanding of the asset class will be 
able to continue to raise funds and invest successfully. 
This may lead to a reduction in investors active in the 
market and to increasing specialisation along geographic 
or sector lines. 3i is well positioned to compete in this 
market, with its strong track record and its skill in 
completing complex transactions and working closely 
with operating partners and other investors.

Business model
The Infrastructure investment team seeks to add value 
to the vehicles it advises or manages in a number of 
ways. It originates new opportunities through building 
proprietary knowledge and networks in target sectors 
and geographies. It applies rigorous selection criteria 
to choose the best investments.

Following investment, the team engages with the 
management of portfolio assets to develop business 
strategies that deliver improvements in operational and 
financial performance, and to monitor performance to 
ensure that any issues are identified quickly. The managed 
or advised vehicles are represented, generally by the 
team, on the boards of their equity investments.

Capital growth is delivered from investments by working 
with management to devise and implement development 
strategies that deliver value accretion over the longer 
term. This requires an in-depth knowledge of market 
and sector dynamics, as well as an understanding of 
the long-term value drivers for each of the assets.

The Infrastructure business line currently invests 
principally in Europe and in India through the two vehicles 
described above. 

Investments can be broadly categorised as shown 
in Chart 16. 3iN has exposure across the spectrum 
but invests principally in “core” infrastructure assets 
(such as regulated utilities and transportation assets 
in the developed world) and in social infrastructure 
assets (such as hospitals, schools and government 
accommodation). The 3i India Infrastructure Fund’s 
investments can be categorised as “hybrid” infrastructure 
assets, which have higher country or volume risk, or 
higher geopolitical risk. 

Returns from infrastructure are typically 8% to 15%  
or greater, depending on the risks associated with the 
investment. Yields generated from the assets also vary, 
depending, among other factors, on the stage of 
development of the asset (eg assets in construction 
versus operational assets).

Report and accounts 2011 3i Group plc

35

Chart 16: Infrastructure asset class

Social Infrastructure/ 
PPP/PFI

“Core” infrastructure

“Hybrid” infrastructure

8-12% Return

10-16% Return

>15% Return

 − Low volume/market/GDP risk

 − Higher risk characteristics

 − Quasi monopolies/regulatory 

protection or long-term contracts

 − Asset backed, with low volatility 

across economic cycles

country risk

  market-volume risk

GDP correlation

 − Operational expertise in managing 

the assets more important

Capital growth

 − High inflation correlation

 − Mainly government-backed  

revenue streams

 − Lower risk/return profile 

 − Strong yield when fully operational

Yield

Performance

Table 9: Returns from Infrastructure

year to 31 March

Realised profits over value on the 
disposal of investments

Unrealised profits on the revaluation 
of investments

Portfolio income

Gross portfolio return

Gross portfolio return %

Fees receivable from  
external funds

2011
£m

2010
£m

–

29

16

45

11%

–

84

16

100

27%

25

20

The Infrastructure business line generated a gross 
portfolio return of £45 million in the year to 31 March 
2011 (2010: £100 million). The return was driven by an 
unrealised value gain of £29 million from 3i’s investments 
in 3iN and in the 3i India Infrastructure Fund (2010: 
£84 million) and by strong portfolio income of £16 million 
(2010: £16 million). 

The unrealised value gain was lower than last year 
due to the lower mark-to-market gain on the valuation 
of the Group’s holding in 3iN. During the year to 
31 March 2011, 3iN shares traded up by 6%, generating 
an unrealised value gain of £21 million, compared to 
a 32% movement, corresponding to a £72 million gain, 
the previous year, when the shares had traded up from 
a much lower base. The remainder of the unrealised 
value gain of £8 million (2010: £10 million) is attributable 
to a revaluation of the holding in the 3i India Infrastructure 
Fund, as its assets continue to progress through their 
construction phases. 

Portfolio income was flat at £16 million (2010:  
£16 million), and was driven almost entirely by the 
dividend received on the holding in 3iN, which was 
partially offset by abort costs.

Fees receivable from 3iN and the 3i India Infrastructure 
Fund amounted to £25 million (2010: £20 million).  
This was due to the higher advisory and performance 
fees receivable from 3iN, which pays fees on invested 
capital only, following the investments made this year. 

Priorities and opportunities for 3i
We intend to strengthen our position as a leading 
participant in the infrastructure market through 
the ongoing investment of our advised and managed 
vehicles in a portfolio of strong assets, which can 
continue to generate attractive returns for shareholders 
and limited partners. 

We will maintain a rigorous investment approach, using 
our proprietary sector knowledge and our broad network 
of contacts in our chosen sectors and geographies to 
originate transactions that contribute to the delivery of 
the target return objectives. This will be key to positioning 
the business line and 3iN for future fundraisings. 

Seeking to generate attractive returns from the existing 
portfolio will also remain a priority for the Infrastructure 
team. The assets in the two vehicles are performing well, 
and the team’s portfolio management expertise, as well 
as the Group’s resources, will be leveraged to continue 
to drive value from those assets.

The opportunity for 3i is to grow the funds it manages 
or advises and to raise new funds, generating increased 
fee income. 

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36

3i Group plc  Report and accounts 2011

Business review > Business lines > Infrastructure

Chart 17: 3i Infrastructure plc – portfolio split by sector
as at 31 March 2011

Utilities: 43%

Social Infrastructure: 15%

Transportation: 42%

Chart 18: 3i Infrastructure plc – portfolio split by category
as at 31 March 2011

Hybrid: 16%

Social Infrastructure: 15%

Core: 69%

3i Infrastructure plc
3i holds a 32.9% holding in 3iN, which is an investment 
company listed on the London Stock Exchange and 
a component of the FTSE 250. At 31 March 2011, 
3iN had a market capitalisation of £957 million.

3iN is domiciled in Jersey, is governed by an independent 
board of directors, and targets a 12% net return over 
the long term through NAV growth, of which 5% 
is returned to shareholders through dividends. 

3iN has a $250 million commitment to the 3i India 
Infrastructure Fund and participated in the new 
investments completed in the year by the Fund, 
described on page 37. 

3i Group, through 3i Investments plc, a wholly-owned 
subsidiary, acts as investment adviser to 3iN and in 
return receives an annual advisory fee of 1.5% of the 
invested capital (excluding cash balances) and an annual 
performance fee of 20% on the growth in net asset 
value, before distributions, over an 8% hurdle calculated 
each year. 

3iN has its own dedicated website,  
www.3i-infrastructure.com. The company announced 
its annual results on 5 May 2011. The total return 
for the year to 31 March 2011 was £85.5 million, 
or 9.2% of opening shareholders’ equity. Assisted 
by our investment advice, 3iN has built a strong 
track record since inception in March 2007, delivering 
an annualised growth in returns to shareholders 
of 9.9%, and a total annualised asset IRR of 19%. 

3iN aims to deliver a 12% net return over the long term 
by building a portfolio which is predominantly weighted 
towards mature “core” infrastructure assets, which are 
expected to generate returns in the 10-16% range. 

Around 69% of 3i Infrastructure’s portfolio is weighted 
towards mature “core” assets, with the 15% exposure 
to Social Infrastructure assets providing support to 
the delivery of the yield objective, and a 16% “hybrid” 
exposure through the 3i India Infrastructure Fund 
providing higher capital growth. 

Eversholt Rail Group 
During the year, 3iN completed a large investment in 
Eversholt Rail Group (“Eversholt”), in consortium with 
Morgan Stanley Infrastructure Partners and STAR Capital 
Partners. Eversholt is one of the three leading rail rolling 
stock companies in the UK and owns approximately 29% 
of the current British rail fleet. 

The transaction valued Eversholt’s gross assets at 
approximately £2.1 billion, and the consortium financed 
the acquisition through a combination of equity and 
debt. 3iN contributed £151.1 million in equity instruments 
as part of the total consideration. The investment in 
Eversholt, a “core” infrastructure asset, was immediately 
accretive to NAV and income, and built up the company’s 
exposure to the transportation sector.

For more information on 3i’s funds, please go to p18 and 19 k

Report and accounts 2011 3i Group plc

37

3i India Infrastructure Fund
The 3i India Infrastructure Fund (the “Fund”) is a 
$1.2 billion limited partnership fund established by 
3i to invest in Indian infrastructure, with a particular 
focus on ports, airports, roads and power assets. 3i and 
3iN each hold a $250 million commitment in the Fund. 

The Fund closed in 2008 with a target investment 
horizon of two to four years and, as at 31 March 2011, 
was 65% invested and 70% committed. Since inception, 
the Fund has generated a gross money multiple on 
invested cash of 1.3x.

3i earns management fees from limited partners in the 
Fund, with the exception of 3iN.

The Fund completed three new investments in the 
year, in two developers of power projects and, in one 
toll road developer and operator, with an aggregate 
cost of $268 million (£168 million). 3i’s share of these 
investments was £36 million. The growing Indian power 
generation market is an attractive area for investment,  
as the imbalances between power demand and supply  
in India are expected to endure in the next decade.  
The Indian road sector has seen similar growth, as 
the Indian government retains its focus on relieving 
road congestion and improving accessibility. Like the 
other investments in the Fund, all three investments 
have been made alongside strong local promoters 
with an established track record of delivery in their 
respective sectors. 

GVK Energy 
GVK Energy Limited (“GVK Energy”) is developing a 
power portfolio comprising an operational capacity 
of 915MW, with a further 3,132MW under various 
stages of development. The portfolio is mainly gas-fired. 
The Fund invested $178 million (£113 million) for a 
substantial minority stake in GVK Energy in December 
2010, with GVK Power and Infrastructure, GVK Energy’s 
parent company, retaining a majority. 3i’s share of the 
investment was £24 million, of which a first, £15 million 
tranche was drawn in this financial year. The remaining 
£9 million tranche will be drawn in the next financial year. 

Ind-Barath Utkal 
Ind-Barath (Utkal) Limited (“Ind-Barath Utkal”) is building 
a 700MW coal-fired power plant based in the state 
of Orissa. The Fund invested $45 million (£28 million) 
for a minority stake in Ind-Barath Utkal in March 2011, 
with the company’s parent, Ind-Barath Power Infra 
Limited, a developer of power projects, retaining the 
majority. 3i’s share of the investment was £6 million.

KMC Roads 
KMC Infratech Limited (“KMC Roads”) is a subsidiary 
of KMC Constructions Limited (“KMCCL”), a 
Hyderabad-based infrastructure engineering and 
construction company. KMC Roads is KMCCL’s 
“build, operate and transfer” (“BOT”) roads business. 
Its portfolio currently comprises 10 such projects, 
aggregating c.1,000 kilometres across India, making 
it one of the largest road portfolios in the country 
and a strong platform for future BOT road projects. 
The Fund invested $111 million (£69 million) for a 
substantial minority in KMC Roads in March 2011. 
3i’s share of the investment was £15 million.

Other Infrastructure assets
3i Group has a small residual holding in Anglian Water 
Group, valued at £7 million.

Chart 19: 3i India Infrastructure Fund portfolio 
split by sector as at 31 March 2011

Ports: 23%

Roads: 23%

Power: 54%

Chart 20: Infrastructure investor base for non-listed fund 
managed and advised by type of investor as at 31 March 2011

Other: 7%

Government 
agencies: 33%

Endowments: 1%

Financial institutions: 2%

Fund of funds: 17%

Pension funds: 40%

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38

3i Group plc  Report and accounts 2011

Business review > Business lines

Debt management 

3i first established a debt management capability in 
October 2007 to capitalise on the opportunity to invest 
in non-investment grade debt of European businesses 
(in non-3i portfolio companies) at a discount to par 
value. Investments were initially made through a Debt 
Warehouse facility.

In line with our strategy of growing in areas in which we 
have investment expertise, 3i Debt Management Ltd,  
a newly formed subsidiary of the Group, and in which  
3i has a majority shareholding, signed an agreement 
in September 2010 to acquire Mizuho Investment 
Management (UK) Limited (“MIM”). Following completion 
in February 2011, 3i’s existing debt management 
activities were merged with MIM to form a distinct 
business line, Debt Management. The acquisition cash 
consideration for MIM was £18.3 million. 

The acquisition of MIM enhanced 3i’s capabilities in 
the debt fund management market and builds upon 
the Group’s existing Private Equity and Infrastructure 
businesses. The third-party funds that MIM manages 
primarily invest in non-investment grade senior secured 
debt issued by medium and large European companies. 
The acquisition of MIM, combined with the successful 
exit of the majority of the Debt Warehouse assets 
during the year, has enhanced 3i’s track record, changed 
the profile of this business line and produced a strong 
platform for future growth, with total assets under 
management of £3.4 billion at 31 March 2011.

The market
Fundraising for new primary Collateralised Loan 
Obligations (“CLO”) in Europe has proven challenging over 
the last 12 months, with €1.8 billion of volume in 2010 
and zero new issuance to date in 2011 (source: Bank of 
America). Elsewhere, the US market has seen a recovery 
in the primary CLO market; in 2010, eight new CLOs 
priced, producing $3.1 billion of volume. This was 
followed by five new vehicles in Q1 2011, representing 
a further $1.9 billion of volume. The increase in new 
primary CLO issuance in the US is on the back of attractive 
returns, an availability of leverage, and an active primary 
pipeline of deals into which the vehicles can invest. 

The European credit market witnessed a continuing 
recovery during 2010 with a rally in secondary market 
prices. Issuance in the primary credit market has also 
improved, due to a number of factors, including increased 
confidence of arranging and underwriting banks, quantum 
of committed private equity capital available to invest, 
and increased mergers and acquisitions activity generally. 

In the European debt fund management market today, 
there is currently approximately €100 billion of assets 
under management (source: Creditflux), with the top 10 
managers accounting for over half the issuance in the 
market. Although the competitive environment remains 
relatively benign, the last 12 months has witnessed 
an increase in consolidation activity. As the debt fund 
management business is highly scalable, it is anticipated 
that further consolidation activity amongst managers 
will continue as smaller participants look to exit. 

Business model
Debt Management specialises in the management of 
third-party funds investing in non-investment grade 
debt. The current funds have a European geographic 
focus investing in a diversified portfolio of medium 
and large businesses across four core product areas: 

 − Harvest I – V (five senior debt heavy CLOs);

 − Windmill I (managed account);

 − Friday Street (dedicated mezzanine fund); and

 − Vintage I (private equity fund of funds).

The Debt Management investment team, of over  
30 professionals, adds value to the funds it advises  
or manages in a number of ways. In originating new 
investments, the team have strong primary market 
syndication relationships, together with well established 
private equity sponsor relationships, ensuring that a high 
proportion of opportunities in the market are seen.  
An in-depth credit analysis is undertaken for each 
opportunity. The minimal annualised default rate of less 
than 1.5% on the 2007 Debt Warehouse is evidence 
of a disciplined and credit-focused investment strategy. 

Ongoing portfolio management is a critical area of focus 
for the team and is central to driving fund returns. 
Analysts are specialised by sector, and each investment 
has a dedicated analyst who monitors performance to 
ensure that any issues are identified early. Returns from 
all funds are generated by way of a management fee and 
typically an incentive fee. These fees are structured to 
align the interests of the portfolio manager with those 
of the underlying debt and equity investors. The fee 
structure is typically created in order to provide the 
portfolio manager with a modest senior management 
fee, with the remainder of the management fee being 
performance related. Incentive fees are typically paid 
after the investors have received a stated return, after 
which the fund manager receives a percentage of the 
investment returns. 

Report and accounts 2011 3i Group plc

39

Portfolio composition of CLO funds
As can be seen from the charts below, the CLO funds are well diversified by sector, with a concentration in Europe by 
geography. Within Europe, there is considerable diversity with the £3,175 million of AUM for these funds being spread 
across 15 countries. The portfolio is also well diversified by sector. 

Portfolio by value by geography 
as at 31 March 2011

Portfolio by number by geography 
as at 31 March 2011

North America: 7%
Asia: 0%

UK: 27%

Rest of World: 1%

Continental Europe: 65%

North America: 5%
Asia: 0%

Rest of World: 1%

Continental Europe: 63%

UK: 31%

Portfolio by value by sector 
as at 31 March 2011

Portfolio by number by sector 
as at 31 March 2011

Other: 1%

TMT: 16%

Healthcare: 12%

General Industrial: 24%

Business Services: 13%

Other: 1%
TMT: 15%

Business Services: 12%

Healthcare: 13%

Consumer: 31%

General Industrial: 27%

Financial Services: 1%

Consumer: 32%

Financial Services: 2%

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40

3i Group plc  Report and accounts 2011

Business review > Business lines > Debt Management

Performance 
During the year, Debt Management realised the majority 
of assets from within the 2007 3i Debt Warehouse, 
generating realised profits of £24 million in the financial 
year. This successful exit was at a money multiple of 1.4x, 
and an IRR of 13.4%. 

The Debt Management business line generated a gross 
portfolio return of £39 million in the year to 31 March 
2011 (2010: £109 million). The return was driven by the 
realisation of the majority of the Debt Warehouse, with 
a strong realised gain of £24 million (2010: £55 million 
gain), together with £8 million of unrealised value growth 
and £7 million of portfolio income.

The acquisition of MIM, completed on 15 February 2011, 
had only minimal effect on gross portfolio returns in this 
financial year. The £8 million of unrealised value growth 
included a £7 million gain on the equity stakes of the 
CLO funds acquired as part of the acquisition. Fee income 
of £2 million was also generated from the funds that 
the team managed in the six weeks to 31 March 2011.

Priorities and opportunities
Having made and integrated the MIM acquisition, the 
priorities now are to strengthen our position as a leading 
participant in the debt management market. This will 
be underpinned through the ongoing investment of 
our funds in a diversified portfolio of assets, which will 
continue to generate attractive returns for shareholders 
and limited partners. We will maintain a rigorous 
investment approach, using our disciplined and credit 
focused investment strategy, strong relationships in the 
debt market and proactive portfolio management to 
contribute to the delivery of the return objectives of the 
eight funds currently managed by the team. This will be 
critical in positioning the business line for future fundraisings. 

Debt Management is now well positioned in the European 
debt market, with a strong brand and robust track record. 
The acquisition of MIM builds on 3i’s existing debt 
management activities and creates a platform of scale 
to manage multiple funds. Should market conditions 
allow, there is potential to expand through the launch 
of new funds, to introduce further diversification across 
funds, and to expand into new geographies. We will 
also actively consider acquisition opportunities in the 
anticipated continuing consolidation of the smaller 
participants in the market. 

Operational framework
Debt Management operates as a distinct business line 
within 3i and 3i Debt Management Investments Limited 
is regulated as a separately registered entity by the 
Financial Services Authority (“FSA”). Debt Management’s 
operating model is in line with FSA best practice, ensuring 
that investors are protected by clear processes, policies 
and conflicts management. There are principles and 
processes in place for managing actual and potential 
conflicts of interest, confidentiality restrictions, and price 
sensitive information flows across our business lines. 

The compositions of the investment committees 
for 3i Group across debt and equity investments are 
also distinct. 

 
Report and accounts 2011 3i Group plc

41

Financial review

As in previous years, an element of gross investment 
in the Private Equity business was non-cash capitalised 
interest. This amounted to £158 million in the year 
to March 2011 (2010: £183 million). Investment in 
restructurings was significantly lower at £16 million 
(2010: £83 million). 

Continental Europe accounted for the largest proportion 
of investment by region at 60% (2010: 31%) with the  
UK at 31% (2010: 58%). Direct Asian and US investment 
was subdued in the year, in part as a result of price 
pressure in these markets. However, 3i was able to 
achieve significant access to these markets through 
investing in European-based businesses. An analysis 
of new Private Equity investment by sector is provided 
in the Private Equity business line review on page 25.

Table 11: Total investment 
Total investment: £719 million

for the year to 31 March 2011

New/first investment

Acquisition finance

Restructurings

Capitalised interest1

Purchase of portfolio debt instruments

Other

1  Includes PIK notes.

Table 12: Investment by business line 
Total investment: £719 million

for the year to 31 March 2011

Private Equity 

  Buyouts

  Growth Capital

Infrastructure

Debt Management

Non-core activities

Table 13: Investment by geography 
Total investment: £719 million

for the year to 31 March 2011

UK

Continental Europe

Asia

North America

Rest of World

£m

308

54

16

158

110

73

£m

562

72

36

49

– 

£m

221

433

62

3

–

Investment and realisations

Table 10: Investment activity – own balance sheet and 
external funds

year to 31 March

Realisations

Investments

Net investment/
(divestment)

3i own balance sheet

External funds

2011
£m

609

719

2010
£m

1,385

386

2011
£m

166

736

2010
£m

157

325

110

(999)

570

168

There was a significant increase in the Group’s investment 
activity during the year to 31 March 2011 compared 
to an atypically low level of investment in the prior year. 
Realisations were lower, in part due to the timing of the 
MWM and Hyva sales, which were signed in October 
and December 2010 respectively but were subject to 
competition clearances. The disposal of Hyva completed 
in April 2011 and generated proceeds of £181 million. 
The successful IPO of Norma was also completed in  
April 2011, generating proceeds for 3i of £74 million. 

Private Equity accounted for 88% (2010: 83%) of own 
balance sheet investment in the year to 31 March 2011. 
The acquisition of MIM by the Debt Management 
business line was completed in February 2011 and had 
minimal effect on investment or realisations for the year 
to 31 March 2011. Investments and realisations made 
by the funds managed by the MIM business will be 
reported within the Debt Management business line.

Further details on investments referred to in this Financial 
review can be found on pages 132 to 135.

Investment 
Total investment in the year was £719 million (2010: 
£386 million). Tables 11, 12 and 13 provide an analysis 
of the nature of this balance sheet investment, as well 
as its composition by business line and geography. 

A total of £308 million (2010: £21 million) was invested 
in nine (2010: one) new portfolio companies in the year 
to 31 March 2011. More detail on these investments, 
which included three investments made by the 3i India 
Infrastructure Fund, is provided in the relevant business 
line reviews from pages 22 to 40. A total of £54 million 
(2010: £18 million) was also provided to support 
acquisitions made by portfolio companies.

As noted at the half year, investment in the debt 
instruments of two portfolio companies totalled  
£110 million. These were purchased at a discount 
to par value. Other investment of £73 million 
(2010: £81 million) in Table 11 included £47 million 
investment made from the Debt Warehouse. 

For more information on the following, please go to:

Norma p28 k
Business line reviews p22, 34 and 38 k

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42

3i Group plc  Report and accounts 2011

Business review > Financial review

Realisations 
Realisation proceeds for the year to 31 March 2011 
totalled £609 million (2010: £1,385 million). Although 
lower than the previous year, they were achieved at a 
higher uplift of 26% (2010: 19%) to opening value. 

An analysis of realisations by business line, geography  
and type of realisation is provided in Tables 14, 15 and 16.  
At 61% (2010: 71%), Private Equity generated the largest 
proportion of realisations. Debt Management also  
realised the majority of the assets in the 2007 3i Debt 
Warehouse, generating proceeds of £145 million and 
realised profits of £24 million. 

The residual non-core portfolio delivered realisations  
of £79 million from SMI and £12 million from Venture 
Capital, at a combined uplift of 69% (2010: 3%).  
As a result of these divestments, the non-core portfolio 
at 31 March 2011 represented 3% (2010: 5%) of the 
Group’s total portfolio. 

The UK accounted for 62% of total realisations 
(2010: 45%). Table 16 shows that there was a good 
spread by type of divestment during the year, with 
trade sales representing the largest single category and 
3i taking advantage of an active secondary market. 

Table 14: Realisation by business line 
Total realisations: £609 million

for the year to 31 March 2011

Private Equity 

  Buyouts

  Growth Capital

Infrastructure

Debt Management

Non-core activities

Table 15: Realisations by geography 
Total realisations: £609 million

for the year to 31 March 2011

UK

Continental Europe

Asia

North America

Rest of World

Table 16: Realisations by type 
Total realisations: £609 million

for the year to 31 March 2011

Trade sales

Secondaries

Loan repayment

IPO

Management buyback

Other1

£m

170

202

1

145

91

£m

376

190

25

18

–

£m

156

104

33

16

127

173

1  Other includes realisations of £145 million from the sale of assets in 

the Debt Warehouse. 

Report and accounts 2011 3i Group plc

43

Returns
year to 31 March 2011

Gross portfolio return

Net portfolio return

Total return

Gross portfolio return 

£601m

Net portfolio return 

Realised profits 

£124m

Fees receivable 

Unrealised value movement  £325m

Net carried interest 

£67m

£(38)m

Net interest payable 

Exchange movements 

Portfolio income 

£152m

Operating expenses 

£(181)m

Other 

Gross portfolio return 

£601m

Net portfolio return 

£449m

Total return 

£449m

£(127)m

£(17)m

£19m

£324m

Return on opening portfolio  17.1%

Return on opening portfolio  12.8%

Return on opening equity 

10.6%

Gross portfolio return represents the performance of the investment portfolio. Net portfolio return includes additional 
income generated from managing external funds, through management fees and carried interest receivable, less the 
costs of running our business and carried interest paid to our investment teams. Finally, total return is the net portfolio 
return, less our funding costs and the impact of foreign exchange and other factors.

Each of these aspects of our returns is considered in greater detail in this review. An explanation of our valuation 
methodology is contained on pages 129 to 131. 

Table 17: Total return

year to 31 March

Realised profits over value on disposal of investments

Unrealised profits on revaluation of investments

Portfolio income

  Dividends

Income from loans and receivables

  Net fees receivable/(payable)

Gross portfolio return
Fees receivable from external funds

Carried interest receivable from external funds

Carried interest and performance fees payable

Operating expenses

Net portfolio return
Net interest payable

Movement in the fair value of derivatives

Net foreign exchange movements

Pension actuarial gain/(loss)

Other (including taxes)

Total comprehensive income (“Total return”)

2011
£m

124

325

41

110

 1 

601

67

25

(63)

(181)

449

(127)

(1)

(17)

20

–

324

2010
£m

218

458

59

110

(2)

843

59

30

(88)

(221)

623

(112)

9

(35)

(71)

(7)

407

The Group generated a total return of £324 million  
for the year (2010: £407 million), which represents  
a 10.6% return over opening shareholders’ funds.  
Gross portfolio return of £601 million reflected 
portfolio value growth of £325 million, portfolio income 
of £152 million and realised profits of £124 million.  
The returns reflected generally strong performance 
across the Private Equity portfolio, with aggregate 

earnings used for valuations up 13% in the year. 
There have, however, been marked regional differences, 
with the unrealised value gain of £325 million (2010: 
£458 million) driven by strong growth in northern Europe, 
counterbalanced by weaker performance from a small 
number of UK assets. Earnings multiples were down 
by 7% in the year, in line with comparable sector and 
geographic market multiples.

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44

3i Group plc  Report and accounts 2011

Business review > Financial review

Operating expenses, at £181 million (2010: £221 million), 
were 18% lower than the same period last year, resulting 
in a 28% reduction since 2009. Net interest payable 
increased to £127 million (2010: £112 million) reflecting 
the overlap in refinancing the 2011 convertible bond, 
following the issue of a €350 million fixed rate bond 
in March 2010. Finally, total return included an adverse 
net currency movement of £17 million in the year 
(2010: £35 million) and an IAS 19 pensions gain of 
£20 million (2010: charge of £71 million).

Gross portfolio return

Table 18: Gross portfolio return by business line

year to 31 March

Private Equity

  Buyouts

  Growth Capital

Total Private Equity

Infrastructure

Debt Management

Non-core activities

Gross portfolio 
return

Return as a % of 
opening portfolio

2011
£m

2010
£m

2011
%

2010
%

157

305

462

45

39

55

441

194

635

100

109

(1)

843

10

23

16

11

52

33

17

30

11

21

27

n/a

–

21

Gross portfolio return 601

Gross portfolio return for the year to 31 March 2011 
totalled £601 million (2010: £843 million), a 17% return 
on opening portfolio value (2010: 21%). Given the 
different blends of own and external capital used by 
our business lines, as can be seen from Table 18, 77% 
of gross portfolio return was generated by the Private 
Equity business line.

Within Private Equity, the Buyouts gross portfolio 
return for the year of £157 million (2010: £441 million) 
represented a 10% (2010: 30%) return on opening 
portfolio value. It comprised unrealised value growth 
of £60 million (2010: £204 million), portfolio income 
of £75 million (2010: £69 million) and realised profits 
of £22 million (2010: £168 million). The unrealised value 
growth reflected generally strong performance across 
the portfolio, particularly in northern European assets.  
This was partially offset by the impact of impairments  
in a small number of UK assets. Earnings growth in the 
portfolio was 6% for those companies valued on an 
earnings basis at the beginning and the end of the year. 

Also within Private Equity, the Growth Capital gross 
portfolio return for the 12 months of £305 million (2010: 
£194 million) represented a 23% (2010: 11%) return 
on opening portfolio value. This was a result of unrealised 
value growth of £217 million (2010: £145 million), 
portfolio income of £48 million (2010: £63 million) and 
realised profits of £40 million (2010: £(14) million loss). 

The unrealised value growth reflected generally 
strong performance across the portfolio, with 
earnings growth of 15%. 

Infrastructure gross portfolio return for the year  
of £45 million (2010: £100 million) comprised value 
growth of £29 million (2010: £84 million) and 
portfolio income of £16 million (2010: £16 million). 
Value growth in the year related to the increase in 
the share price of 3i Infrastructure plc, which drove 
a £21 million increase in the year (2010: £72 million), 
together with £8 million value growth in the 3i India  
Infrastructure Fund.

Debt Management gross portfolio return for the year 
was £39 million (2010: £109 million). This primarily 
reflected realised profits of £24 million (2010:  
£55 million) relating to the exit of the majority of the 
Debt Warehouse’s assets in the year. Unrealised value 
growth in the year was £8 million, of which £7 million 
related to the assets acquired with MIM in February 
2011. Portfolio income was £7 million (2010: £9 million). 

Realised profits of £38 million from a number of 
SMI assets, unrealised value growth of £11 million 
and portfolio income of £6 million, delivered a non-core 
gross portfolio return for the year of £55 million 
(2010: £(1) million).

Realised profits
Overall, the Group achieved realised profits in the 
year of £124 million (2010: £218 million) at an average 
uplift to opening book value of 26% (2010: 19%).

Unrealised value movements
The unrealised value movement of £325 million 
(2010: £458 million) reflected strong earnings 
performance across the portfolio, with an aggregate 
13% increase in earnings used for valuation. Strong 
earnings growth in northern Europe was partially offset 
by the impact of impairments in a few UK investments. 
Earnings multiples used for valuation were down 7% 
in line with comparable market multiples.

Table 19: Movement in earnings and multiples

2011

Value 
impact 

% change

£m % change

13%

(7)%

295

(76)

(8)%

34%

2010

Value 
impact 
£m

(171)

536

year to 
31 March

Earnings

Multiples

Report and accounts 2011 3i Group plc

45

The mix of earnings used to 31 March 2011 was  
4% audited accounts (2010: 7%), 84% management 
accounts (2010: 79%), and 12% current year forecast 
accounts (2010: 14%).

An aggregate 13% increase in earnings for those 
companies valued on an earnings basis, both at the 
beginning and the end of the year to 31 March 2011,  
led to value growth of £295 million (2010: £171 million 
reduction). 

Loan impairments
Where the net attributable enterprise value of a 
portfolio company is less than the cost of any 3i loans 
provided, a shortfall is recognised against the value of 
the loan. This movement is classified as an impairment. 

The impairments for the year to 31 March 2011 
totalled £(196) million (2010: £47 million reversal), 
comprising £(201) million of impairments on an earnings 
basis and £5 million reversal of impairments on other 
valuations bases.

The significant increase in loan impairments for assets 
valued on an earnings basis primarily reflects a reduction 
in the value of Enterprise, which saw a loan impairment 
of £(198) million. 

Provisions 
A provision is recognised where we anticipate that 
there is a 50% or greater chance that a company may 
fail within the next 12 months.

Provisions for the 12 months to 31 March 2011 
totalled £(71) million (2010: £(24) million) or 2% of 
opening portfolio value. The provisions related to eight 
investments spread across geographies and sectors,  
with the single largest amount being £(30) million.

Uplift to imminent sale 
Assets valued on an imminent sales basis include all 
investments currently in a negotiated sales process, 
or for which the proceeds have been received since 
the year end.

There were six assets valued on an imminent sales  
basis at 31 March 2011, with the associated value 
increase totalling £240 million (2010: £(28) million).  
The successful IPO of Norma in early April gave rise to a 
value increase of £92 million in the year. Also significant 
were the sales of MWM (£63 million increase) and Hyva 
(£80 million increase), both of which were signed by  
31 March 2011. Both the Hyva and Norma transactions 
completed in April 2011, generating proceeds 
of £181 million and £74 million respectively. 

Table 20 shows the unrealised value movement for each 
category of valuation. The most significant category 
relates to investments valued on an earnings and multiple 
basis. These accounted for 59% of the portfolio by value 
at 31 March 2011 (2010: 71%).

Table 20: Unrealised profits/(losses) on revaluation of 
investments

year to 31 March

Private Equity and Infrastructure
Earnings and multiples based valuations

  Equity – Earnings multiples

– Earnings

  Loans – Impairments (earnings basis)

Market adjustment to earnings basis¹

Other bases

  Provisions

  Uplift to imminent sale

  Discounted Cash Flow

  Loans – Impairments (other basis)

 Other movements on unquoted 
investments

  Quoted portfolio

Debt Management
  Broker quotes

Total

2011
£m

2010
£m

(76)

295

(201)

–

(71)

240

54

5

48

23

536

(171)

76

(8)

(24)

(28)

19

(29)

(32)

74

8

325

45

458

1  New investments are valued on an earnings basis at the first 

reporting date. The market adjustment to earnings basis is therefore 
no longer used.

Impact of earnings multiple movements
Equity markets were volatile during the year, and 
multiples used in the valuation process reduced by 
7% in the year to 31 March 2011. This movement 
was in line with comparable market multiples and 
led to a £76 million reduction in portfolio value 
(2010: £536 million gain).

The average EBITDA multiple used to value 
Buyouts investments on an earnings basis was 8.5x 
pre-marketability discount, a 6.6% decrease from 
the 9.1x used in the prior year. In the Growth Capital 
portfolio, the average EBITDA multiple used to value 
investments was 9.2x pre discount, an 11% decrease 
from the 10.3x used at 31 March 2010. 

Earnings movements
When valuing a portfolio investment on an earnings 
basis, the earnings used are usually from the 
management accounts earnings for the 12 months 
to the quarter end preceding the reporting period, 
unless the portfolio company’s current year forecast 
is lower, or more recent data provides a more reliable 
picture of maintainable earnings performance.

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46

3i Group plc  Report and accounts 2011

Business review > Financial review

Discounted Cash Flow
Discounted Cash Flow (“DCF”) is used primarily to value 
infrastructure and other investments with stable cash 
flows. This category accounted for an uplift of £54 million 
in the year to 31 March 2011 (2010: £19 million).

Other
The “other” category includes a number of assets valued 
using different valuation bases, including the sum of  
parts, where different divisions of a portfolio company 
are valued on a different basis, as well as other industry 
and asset specific methods. This category saw an overall 
value movement in the year to 31 March 2011 of 
£48 million (2010: £(32) million). 

Quoted portfolio
The total quoted equity movement for the 12 months 
to 31 March 2011 was £23 million, which compared to 
an unrealised value gain of £74 million for the 12 months 
to 31 March 2010. At 31 March 2011, the total quoted 
portfolio was valued at £405 million (2010: £370 million), 
or 10% (2010: 11%) of the total portfolio value. 

3i’s 33% holding in 3i Infrastructure plc was valued at 
£320 million at 31 March 2011 (2010: £300 million) and 
therefore accounted for 79% of the total quoted portfolio 
value. The increase of £21 million in value during the year 
resulted from the increase in share price from 110.7p at 
the start of the year to 117.2p at 31 March 2011.

Broker quotes 
With the acquisition of MIM in February 2011, the 
Group purchased minimum holdings in the lowest ranking 
loan notes in a number of the underlying CLO funds that 
it now manages, at a cost of £2 million. Consistent with 
the approach used for the 3i Debt Warehouse, these 
holdings are valued through the use of broker quotes. 
There was a £7 million uplift in value from acquisition 
to 31 March 2011.

The 3i Debt Warehouse took advantage of favourable 
secondary market conditions to sell virtually all of the 
assets in its portfolio during the final quarter, leaving  
only three loans in the portfolio at 31 March 2011.  
These were valued using broker quotes of agreed 
transaction prices and generated value growth of  
£1 million in the year.

Table 21: Proportion of portfolio value by valuation basis 

as at 31 March 2011

Earnings

Imminent sale

Quoted

Discounted Cash Flow

Other

Specific industry metrics

Broker quotes

%

59

15

10

7

5

4

–

Portfolio income 

Table 22: Portfolio income

year to 31 March

Dividends

Income from loans and receivables

Net fees receivable/(payable)

Portfolio income
Portfolio income/opening portfolio 
(“income yield”)

2011
£m

 41

110

2010
£m

59

110

1 

(2)

152

167

4.3% 4.1%

Portfolio income for the year to 31 March 2011 was 
£152 million (2010: £167 million), of which £41 million 
was dividend income and £110 million was interest.  
The reduction in dividend income primarily reflects 
an exceptional dividend of £23 million received in the 
prior year. 

Total portfolio income received as cash was £56 million 
(2010: £73 million), due to the high proportion of 
capitalised interest. 

Net portfolio return 
Net portfolio return is an important measure for 3i, as 
it incorporates the economic benefits provided through 
our asset management capabilities and captures our 
ability to drive cost efficiency. We will be reporting net 
portfolio return as a key performance measure from 
1 April 2011. 

For the year to 31 March 2011, net portfolio return was 
£449 million (2010: £623 million), or 12.8% (2010: 15%) 
of opening portfolio value.

Net operating expenses (operating expenses less 
managed and advised fees receivable from external 
funds) reduced to £114 million from £164 million in 
2010, or 3.2% of opening portfolio value (2010: 4.1%). 
Dilution from net carried interest was £38 million, 
or 1.1% of opening portfolio value.

Fees receivable from external funds 
Fees receivable from external funds in the year to 
31 March 2011 were £67 million (2010: £59 million). 
Private Equity management fees of £40 million (2010: 
£39 million) comprised £32 million from our managed 
Buyouts funds and £8 million from the Growth Capital 
Fund launched in March 2010. The Group received 
£25 million for advisory and management services to 
3i Infrastructure plc and the 3i India Infrastructure Fund. 
Finally, following the acquisition of MIM on 15 February 
2011, £2 million was earned from the Debt Management 
business line. The increase in fee income from the prior 
year primarily reflected the launch of the Growth Capital 
Fund on 25 March 2010.

For our key performance measures, please go to p13 k

Net carried interest and performance  
fees payable 
Net carried interest and performance fees payable 
includes net carried interest in respect of our Private 
Equity business, performance fees in respect of our 
Infrastructure and Debt Management businesses, 
and provision for earn-out payments in respect of 
the MIM acquisition.

Net carried interest and performance fees payable 
in the 12 months to 31 March 2011 were £38 million 
(2010: £58 million).

Operating expenses 

Table 23: Cost efficiency

year to 31 March

Operating expenses

Fees receivable from external funds1

Net operating expenses

Net operating expenses/opening 
portfolio (“cost efficiency”)

Cost/AUM2

1  Prior year net of performance fees of £2 million.
2  Weighted average AUM.

2011
£m

181

(67)

114

2010
£m

221

(57)

164

3.2% 4.1%
1.8% 2.3%

Cost management continued to be a priority throughout 
the year. Total operating expenses were 18% lower at 
£181 million at 31 March 2011 (2010: £221 million).  
A key driver of this improvement in operating expenses 
was employment costs. This reflected some absolute 
reduction in staff numbers, but also an element of 
deferral of recruitment. The number of staff at 31 March 
2011 was 491, up only slightly from 488 at the beginning 
of the year, despite an increase of 28 on the acquisition 
of MIM in February 2011. Staff numbers, excluding the 
MIM team, were 463, down 5% from the previous year. 

Excluding the impact of MIM and the non-recurring  
costs related to restructuring, underlying costs were 
down £28 million, or 13%, with employment costs 
down £23 million.

The Group’s cost efficiency measure is defined as 
operating costs, net of management and advisory fee 
income, as a percentage of opening portfolio value. 
During the year to March 2011, cost efficiency improved 
from 4.1% to 3.2%, despite the reduction in opening 
portfolio value.

Since 1 April 2010, the Group has also measured and 
reported operating expenses as a proportion of assets 
under management as a key group financial performance 
measure. This is aligned to the industry standard measure 
used in Private Equity. During the year to 31 March 2011, 
cost per AUM improved from 2.3% to 1.8%, with the 
improvement reflecting both the cost reduction and the 
increase in AUM.

Report and accounts 2011 3i Group plc

47

Total return 
Net interest payable 
Net interest payable increased during the year from 
£112 million to £127 million. Interest receivable was flat 
at £12 million (2010: £12 million), reflecting continuing 
low interest rates throughout the year. Interest payable 
increased from £124 million to £139 million. This reflects 
the issue of €350 million of fixed rate notes in March 
2010, which effectively refinanced the 2011 convertible 
bond. The effect of this overlap was mitigated by the 
early repayment of a proportion of both the convertible 
bond and the €500 million floating rate note.

Exchange movements 
During the year, the Group extended the hedging 
in place through currency borrowing with the 
implementation of derivative hedging against portfolio 
foreign currency movements. This programme 
commenced in November 2010. As a consequence, 
68% of European and Nordic euro and Swedish krona 
denominated portfolios, and 46% of the North 
American and Asian US dollar portfolios, were hedged 
at 31 March 2011 through borrowings and derivatives. 
The net foreign exchange loss of £17 million for the 
year to 31 March 2011 was driven by the weakening 
of the euro and US dollar against sterling in the year.

Pensions
The gain of £20 million in the year to 31 March 2011 
(2010: £71 million loss) related to the Group’s UK defined 
benefit pension scheme. Rising equity and bond markets 
during the year resulted in higher returns on the plan’s 
assets than were expected at the start of the year, and 
a reduction in expected future inflation rates has reduced 
the plan’s liabilities. In addition, in July 2010, the 
Government announced a change to pension revaluation 
laws, which will result in the use of the Consumer Price 
Index (CPI) rather than the Retail Price Index (RPI) as 
the Index for the purposes of determining statutory 
minimum pension increases. This has resulted in a 
£14 million reduction in the plan’s liabilities, as increases 
given to scheme pensions in deferment are linked to 
the statutory minimum.

Discussions with the Trustees with respect to the triennial 
funding valuation are under way and will be concluded 
by 30 September 2011. The fund is now closed to new 
members and to future accrual. Over time, it is intended 
to de-risk the fund through its investment policy and 
other measures.

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please go to p129-131 k

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3i Group plc  Report and accounts 2011

Business review > Financial review

Portfolio value
Portfolio assets directly owned by the Group

Table 24: Portfolio value movement by business line

Opening
portfolio 
value
1 April 
2010
£m

1,539

1,331

75

407

3,352

165

3,517

New
investment
£m

Value
disposed
£m

Unrealised
value
movement
£m

Other
movement
£m

562

72

49

36

719

–

719

(148)

(162)

(120)

(1)

(431)

(54)

(485)

60

217

8

29

314

11

325

(52)

(25)

2

(7)

(82)

(1)

(83)

Closing
portfolio
value
31 March 
2011
£m

1,961

1,433

14

464

3,872

121

3,993

Core business lines
Private Equity

  Buyouts

  Growth Capital

Debt Management

Infrastructure

Non-core activities

Total

As a result of the investment in the year and of 
unrealised value growth, the value of the Group’s 
directly owned investments increased to £3,993 million 
(2010: £3,517 million). Investments, realisations and 
value movements are discussed elsewhere in this 
report. The other movements relate primarily to foreign 
exchange and movements in capitalised interest.

Table 25: 3i direct portfolio value by geography

as at 31 March

Continental Europe

UK

Asia

North America

Rest of World

Total

2011
£m

2010
£m

2,060 1,381
1,071 1,327
509

579

277

6

294

6

3,993 3,517

The increase in the proportion of the portfolio in 
Continental Europe from 39% to 52% has been driven 
by value growth in northern European assets, as well 
as by new investment.

Table 26: 3i direct portfolio value by sector

as at 31 March

Business Services

Consumer

Financial Services

Industrial

Healthcare

Technology, Media, Telecoms

Infrastructure

Total

2011
£m

618

449

259

2010 
£m

694

303

335

1,491 1,091
427

483

229

464

260

407

3,993 3,517

The shifts in the portfolio sector profile are driven by the 
same factors as the geographic profile. The increase in 
the proportion of industrial assets reflects value growth  
in northern European industrial assets.

Report and accounts 2011 3i Group plc

49

Liquidity
Liquidity at 31 March 2011 remained strong at  
£1,846 million (2010: £2,731 million), and comprised 
£1,521 million of cash and deposits, and undrawn  
facilities of £325 million. The reduction in cash from 
£2,252 million to £1,521 million resulted from the  
£422 million debt repayment, together with operating 
cash flows, partially offset by cash inflow from net 
divestment. Undrawn commitments are down from  
£479 million at 31 March 2010 to £325 million at  
31 March 2011, reflecting the replacement of the  
£486 million revolving credit facility with the  
£300 million multi-currency facility.

Diluted NAV
The diluted NAV per share of £3.51 at 31 March 2011 
(2010: £3.21) reflects the total return of £324 million, 
partially offset by dividends paid of £30 million.

Balance sheet

Table 27: Group balance sheet

as at 31 March

Shareholders’ funds

Net debt

Gearing

2011

2010

£3,357m £3,068m
£522m £258m
8%

16%

Diluted net asset value per share

£3.51

£3.21

Gearing and borrowings
The Group continued its focus on conservative balance 
sheet management, with gross debt reducing to  
£2,043 million at 31 March 2011, from £2,510 million  
at 31 March 2010. This reduction primarily reflected  
the repayment of £422 million of debt during the  
year, including £249 million of the convertible bond,  
£89 million of commercial paper, €68 million of the  
€500 million floating rate note and a $50 million bond. 

On 20 September 2010, £486 million of the revolving 
credit facility matured and a £300 million multi-currency 
facility, maturing on 31 October 2012, commenced.  
No additional finance was raised during the year.

The amount of long-term debt repayable within one  
year at 31 March 2011 of £169 million (March 2010:  
£125 million) now includes the remaining convertible 
bond outstanding of £138 million, which matures in  
May 2011. This will be repaid out of cash reserves. 

Net debt increased from £258 million at 31 March 2010 
to £522 million at 31 March 2011. This reflected the 
operating cash outflows, which were partially offset by 
cash inflow from net divestment and portfolio income. 
As a consequence, gearing has increased from 8% 
to 16%. We continue to manage net debt to a limit 
of £1 billion, consistent with our conservative balance 
sheet management approach.

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50

3i Group plc Report and accounts 2011

Risk

A description of our risk management 
framework, key risks and our 
approach to risk mitigation.

Review of risks 
Risk governance framework 
Risk factors 

51
53
54

Report and accounts 2011 3i Group plc

51

Risk

This section provides a review 
of the evolution and management 
of 3i’s key risks during the year, 
together with an overview of 
the main elements of 3i’s risk 
governance framework. This is 
followed by a description of 
the main inherent risk factors.
Further details on the management 
of key risks, and related results 
and outcomes, can be found in 
the relevant section on risk factors.

Review of risks

External
The key external risks identified by 3i over the course  
of the financial year have centred on the impact of the 
continuing adverse economic conditions in some markets.

The current economic uncertainty continues to impact 
the market in which 3i operates in a number of ways. 
Fundraising conditions, for example, remain challenging. 
Although M&A activity has shown modest recovery 
over the past year, there remains a significant private 
equity funding overhang which, together with improved 
availability in debt terms, underpins high prices for 
transactions. The climate for investment realisations 
has therefore remained favourable whilst that for new 
investments has been more challenging.

Economic conditions also present varying degrees 
of risk for the operations and growth of 3i’s portfolio 
companies and therefore overall performance and 
valuations, as described under Investment risk on 
the following page. The key factors include the risk 
of below trend economic growth and the impact 
and uncertainties of sovereign debt refinancing 
and government deficit reduction programmes. 

The reputation of the wider financial services sector 
remains low. In this context, there is a trend towards 
closer scrutiny of the integrity and transparency of  
firms and a greater emphasis on responsible investing. 
Firms that are able to differentiate themselves in these 
areas are likely to be at an advantage in the future. In 
recognition of this, 3i initiated a wide-ranging strategic 
review of responsible investing and is building on its 
current policies and processes. 

Regulatory developments continue to be monitored 
closely. The key developments affecting 3i include: 
the European AIFM Directive, which will have a number 
of consequences, including higher levels of disclosure; 
the implementation of the UK Bribery Act; and US 
financial reform, which may require certain 3i entities 
to be registered with the Securities and Exchange 
Commission. Although it is difficult to assess the 
combined impact of these changes, the effect on 3i’s 
overall business is not expected to be disproportionate 
in the context of the wider financial services industry.

Strategic
3i continues to anticipate and to respond to market 
conditions, risks and opportunities. Following 
improvements to the Group’s financial position, the 
strategic focus has been on performance improvement 
and growth. 

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For more information on the following, please go to:

Chief Executive’s statement p7 k
Market environment p20 k
Corporate responsibility p56 k

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52

3i Group plc  Report and accounts 2011

Risk

To support this, 3i took steps to simplify its business 
structure, bringing together the former Growth Capital 
and Buyouts business lines. 3i also completed the 
purchase of Mizuho Investment Management (UK) 
Limited (“MIM”) from Mizuho Bank. MIM specialises 
in managing funds that are invested in senior and 
subordinated debt. This was a significant step, providing 
the basis for a new Debt Management business line.  
This business line has a distinct risk profile, which is being 
integrated into 3i’s overall risk assessment. 

Investment
The Group’s key investment risks remain closely 
linked to the adverse economic and market conditions, 
described earlier. Risks included the pricing of investment 
opportunities and potential underperformance of 
portfolio companies, impacting valuations. As part 
of the investment assessment and portfolio company 
review process, ESG risks are also considered.

The overall health of the portfolio has been relatively 
stable over the year, but with some sectors and 
geographies more exposed than others and, accordingly, 
some valuation reductions were required. Although it 
remains well diversified, the Group’s investment portfolio 
has become relatively more concentrated over time, 
which increases its exposure to the performance of 
a smaller number of large investments and, therefore, 
the potential for material individual valuation movements. 

The portfolio company review process includes both 
the identification of risks that might affect a substantial 
proportion of the portfolio and the assessment of 
significant exposures to specific known risks. Examples 
of the latter include the impact of higher oil prices and 
potential disruption to the Japanese economy following 
the earthquake and tsunami in March 2011. The 
exposure of the portfolio to reductions in government 
expenditure has been reviewed in depth with the 
conclusion that direct exposure is limited to a small 
number of portfolio companies, although the indirect 
impact is more complex to assess.

Refinancing of debt by portfolio companies has generally 
been easier than in 2008 and 2009, albeit that costs 
may be higher or debt terms less favourable. The majority 
of European financing transactions were structured at 
the peak of the market in 2006 and 2007, with tenors 
of between seven and nine years. This means that 
refinancing requirements will increase substantially, 
peaking in 2013 and 2014. The market, therefore, is likely 
to become increasingly focused on this risk in the run 
up to 2013. At this stage it is difficult to predict how 
this will unfold, particularly given the wider fundamental 
economic uncertainties, fragile confidence, and 
refinancing of corporate and sovereign debt. This will 
require continued focus on this area of risk management. 
More detail on this can be found in the business line 
reviews on pages 22 to 40.

Treasury and funding 
The Group maintains a conservative financial structure 
and has tight controls and targets to support this, for 
example, in relation to the proportion of debt maturing 
in any one year for future refinancing. 

The Group’s bond refinancing strategy continues to focus 
on material maturities within a 12 month rolling period. 
Bond markets have been active for strong credits; 
however Euro sovereign debt concerns are still creating 
general investor caution leading to a preference by 
investors for corporate issuance in sectors regarded 
as stable. 3i’s rating is BBB+/Baa1 with stable outlook.

The Group uses core currency borrowing to hedge 
foreign exchange exposures in the portfolio, which are 
primarily in euro and US dollars. In cases where there is 
limited availability of currency funding, the Group’s US 
dollar and euro positions may be exposed to the impact 
of adverse currency movements. As gross debt is 
reduced, and potentially a greater proportion of the 
portfolio is invested outside of the UK, the exposure 
to foreign exchange risk could also increase. Following 
a Board review during the year, it was agreed to use 
forward contracts to supplement core hedging through 
debt where appropriate, subject to a maximum overall 
derivative limit. 

Operational
The key operational risks facing the Group during the 
year relate mainly to people. In common with many other 
businesses, cost pressures, lower levels of investment 
activity and change in the external business environment 
have all contributed to a degree of uncertainty for staff. 
However, as reported on page 60, the latest staff survey 
shows high levels of employee engagement and 
commitment to 3i’s strategy. During the year, we also 
reviewed our Critical Incident Plan and made a number of 
changes to the composition and processes of our Incident 
management team. More specific risks include key man 
retention (specifically in relation to managed funds), 
alignment to a different and difficult operating 
environment and the balance of skills and resources to 
meet these challenges. A people plan is in place to enable 
3i to deliver its business strategy and vision by addressing 
these and other people risks.

In response to the draft provisions of the UK Bribery Act, 
the Group has undertaken an extensive review of its 
current policies and processes with the conclusion 
that, although no substantive changes were required, 
some refinements should be implemented as a matter 
of good practice, together with a refresh of related 
policy statements. 

For more information on the following, please go to:

Staff survey results p13 k
Business lines p22-40 k

Report and accounts 2011 3i Group plc

53

Risk governance framework
3i’s risk governance framework provides a structured 
process to oversee the identification, assessment and 
approach to mitigation in respect of those risks which 
could materially impact the Group’s strategic objectives 
or execution. 

Risk management operates at all levels throughout the 
Group, across business lines, geographies and professional 
functions. The Board is ultimately responsible for risk 
management, which includes the Group’s risk governance 
or oversight structure and maintaining an appropriate 
internal control framework. Management’s responsibility 
is to manage risk on behalf of the Board.

By reporting regularly to Audit and Compliance 
Committee, the Group’s Risk Committee provides 
support to the Board in maintaining oversight of the 
effectiveness of risk management across the Group. 

The risk governance framework and the responsibilities  
of the main committees involved are shown below. 
Details can also be found in the Governance section  
(Pillar 3 disclosures) at www.3igroup.com 

Operation during the year
The formation of a new Leadership Team and Committee 
structure required some changes to 3i’s overall risk 
governance framework to ensure proper alignment 
and effectiveness. The remit of the former Portfolio 
Risk Committee was subsumed by the new Portfolio 
Committee, reporting into the Leadership Team. Similarly, 
the remit of the Operational Risk Committee was 
assumed by the Operating Committee supported 
by an operational risk forum of 3i senior managers. 

Risk reviews are generally carried out on a quarterly 
basis and aligned with the Group Risk Committee 
meetings, which are held at the start of the Leadership 
Team meetings. 

Related committees
The Corporate Responsibility Committee considers and 
reviews corporate responsibility issues relevant to 3i’s 
business, reporting to the Board. This includes identifying 
and assessing the significant risks and opportunities for 3i 
arising from corporate responsibility issues. Any reported 
risks are also considered by the Operating Committee 
or Group Risk Committee as appropriate. As noted 
earlier, the area of responsible investing is undergoing 
a review, which will include consideration of these 
oversight arrangements. 

Group Risk Committee
Chairman:  
Chief Executive
– Oversight of the Group’s overall risk management processes

– Monitors changes in the Group’s external and strategic risk profile

– Reviews risk update reports from each of the Treasury Management, Portfolio and Operating Committees

– Assesses the adequacy of risk mitigation steps put in place in respect of higher level risks

– Reports to the Audit and Compliance Committee

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Treasury Management 
Committee
Chairman:  
Chief Executive
Oversees management of funding, 
gearing, liquidity, interest rate 
and foreign exchange exposures 
in relation to policies agreed by 
the Board.

Operating Committee
Chairman:  
Group Finance Director 

Portfolio Committee
Chairman:  
Chief Investment Officer 

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Oversees the key operational risks 
facing the Group, including changes 
to the operational risk profile and 
new and emerging risks.

Oversees risks arising from 
investment portfolio concentration 
by vintage, geography, sector 
and size.

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For more information on internal control, please go to p76 k

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54

3i Group plc  Report and accounts 2011

Risk

Risk Factors

Inherent risks 

Risk mitigation 

External

Strategic

Risks arising from external factors 
including political, legal, regulatory, 
economic and competitor changes 
which affect the Group’s operations.

−   Changes in macroeconomic variables, eg rates 

of growth

−   General health of capital markets, eg conditions 

for initial public offerings

−  Exposure to new and emerging markets
−  Regulatory developments
−  Changes in government policy, eg taxation
−  Reputational risks
−  Reputation risk in portfolio companies

Risks arising from the analysis, 
design and implementation of the 
Group’s business model, and key 
decisions on the investment levels 
and capital allocations.

−  Understanding and analysis of risks and rewards
−  Appropriateness of business model
−  Changes in the Group’s operating environment
−  Unanticipated outcomes versus assumptions 
−  Potential loss of key staff in certain areas

−   Diversified investment portfolio in a range 
of sectors, with different economic cycles, 
across geographical markets

−   Close monitoring of regulatory and fiscal 

developments in main markets

−   Due diligence when entering new markets 

or business areas

−  Periodic strategic reviews
−   Regular monitoring of key risks by Group Risk 

Committee and the Board

−   Monitoring of a range of key performance 
indicators, forecasts and periodic updates 
of plans and underlying assumptions

−  Disciplined management of key strategic projects 

Key developments 

−  Continuing adverse economic conditions
−   Regulatory developments which may be 

unfavourable

−  Acquisition of debt management business
−  Geographical expansion

Further information 

Overview 

Strategy and business model

Business review 

Financial statements 

Chairman’s statement p5 k

Chairman’s statement p5 k

 Chief Executive’s review, Our business, 
Strategy and performance p7, 10 and 12 k

 Chief Executive’s review, Our business, 
Strategy and performance p7, 10 and 12 k

 Market environment p20 k

 Market environment p20 k

Report and accounts 2011 3i Group plc

55

Risk Factors

Inherent risks 

−   Changes in macroeconomic variables, eg rates 

−  Understanding and analysis of risks and rewards

Risks arising from external factors 

including political, legal, regulatory, 

economic and competitor changes 

which affect the Group’s operations.

Risks arising from the analysis, 

design and implementation of the 

Group’s business model, and key 

decisions on the investment levels 

and capital allocations.

of growth

−   General health of capital markets, eg conditions 

for initial public offerings

−  Exposure to new and emerging markets

−  Regulatory developments

−  Changes in government policy, eg taxation

−  Reputational risks

−  Reputation risk in portfolio companies

−  Appropriateness of business model

−  Changes in the Group’s operating environment

−  Unanticipated outcomes versus assumptions 

−  Potential loss of key staff in certain areas

Risk mitigation 

−   Diversified investment portfolio in a range 

of sectors, with different economic cycles, 

across geographical markets

−   Close monitoring of regulatory and fiscal 

developments in main markets

−   Due diligence when entering new markets 

or business areas

−  Periodic strategic reviews

−   Regular monitoring of key risks by Group Risk 

Committee and the Board

−   Monitoring of a range of key performance 

indicators, forecasts and periodic updates 

of plans and underlying assumptions

−  Disciplined management of key strategic projects 

Key developments 

−  Continuing adverse economic conditions

−  Acquisition of debt management business

−   Regulatory developments which may be 

−  Geographical expansion

unfavourable

External

Strategic

Investment 

Treasury and funding 

Operational 

Risks in relation to changes in market 
prices and rates; access to capital 
markets and third-party funds; and 
the Group’s capital structure. 

Risks arising from inadequate 
or failed processes, people and 
systems or from external factors 
affecting these. 

Risks in respect of specific asset 
investment decisions, the 
subsequent performance of an 
investment or exposure 
concentrations across business line 
portfolios.

−   Market competition, eg number of participants 

and availability of funds

−   Asset pricing and access to deals, eg on a 

proprietary basis

−  Investor experience and key man retention
−  Alignment of remuneration
−   Underlying asset performance, eg earnings 

growth, cash headroom, ESG issues

−  Asset valuations
−   Overexposure to a particular sector, geography 

or small number of assets

−  Investment performance track record
−   Reputational risks arising from portfolio related events 

−  Liquidity
−  Level of gearing
−  Debt levels and maturity profile
−  Credit rating and access to funds
−  Counterparty risk
−  Foreign exchange exposure
−  Interest rate exposure
−  Impact of volatility of investment valuations 

−   In-depth market and competitor analysis, 

−   Weekly detailed cash flow forecasts, tracked 

supported by an international network of sector 
and industry specialists

against a minimum liquidity headroom

−   Gross and net debt target limits and monitoring 

−   Rigorous investment appraisal and approval 

of gearing range

process

−   Monitoring of material maturities within a 

−   Guidelines on responsible investing incorporated 

12 month rolling period

into investment procedures

−   Regular asset reviews, including risk assessment, 
based on up to date management accounts 
and reporting

−   Consistent application of detailed valuation 

guidelines and review processes

−   Representation by a 3i executive on the boards 

of investee companies

−  Setting of investment concentration limits
−   Periodic portfolio reviews to monitor exposure 

to sectors, geographies and larger assets

−  Recovery in investment levels 
−   Impact of current economic environment on 

portfolio companies’ earnings causing valuations 
to lag public markets

−   Increased diversification through the addition 

of the debt management business 

−   Use of currency borrowings to reduce structural 

currency exposures

−   Use of ‘plain vanilla’ derivatives where appropriate, 

eg interest rate swaps

−   Regular reviews of liquidity, gearing, gross and 
net debt levels and large currency exposures
−   Regular Board reviews of the Group’s financial 
resources and treasury policy, eg currency 
hedging 

−  Strong liquidity position maintained

−   Resource balance, including recruitment and 

retention of capable people

−  Appropriate systems, processes and procedures
−   Adherence to tax regulations, including permanent 

establishment risk

−  Complexity of regulatory operating environment
−  Potential exposure to litigation
−   Reputational risks arising from operational risk 

incidents

−  Exposure to fraud
−  Business disruption 

−   Framework of core values, global policies, a code 
of business conduct and delegated authorities
−   Procedures and job descriptions setting out line 
management responsibilities for identifying, 
assessing, controlling and reporting operational risks

−   Rigorous staff recruitment, vetting, review and 

appraisal processes

−  Appropriate remuneration structures
−  Succession planning
−   Close monitoring of legal, regulatory and tax 

developments by specialist teams

−   Internal Audit and Compliance functions carry 

out independent periodic reviews

−  Business continuity and contingency planning 
−   Controls over information security, confidentiality 

and conflicts of interest
−  Anti-fraud programme 

−  Integration of debt management business
−  Outsourcing of main UK data centre
−  Regulatory developments
−   Changing people risks, eg as recruitment market 

recovers

Further information 

Overview 

Business review 

Financial statements 

Chairman’s statement p5 k

Chairman’s statement p5 k

Strategy and business model

 Chief Executive’s review, Our business, 

Strategy and performance p7, 10 and 12 k

 Chief Executive’s review, Our business, 

Strategy and performance p7, 10 and 12 k

 Chief Executive’s review, Our business, 
Strategy and performance p7, 10 and 12 k

 Market environment p20 k

 Market environment p20 k

 Market environment p20 k

Financial review (Balance sheet) p49 k

Corporate responsibility, Governance  
p56-60 and 61-86 k

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Notes 19-22 p110-117 k

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56

3i Group plc Report and accounts 2011

Corporate 
responsibility

An overview of our approach to 
Corporate responsibility, a summary 
of our achievements and a guide 
to the further information that you 
can find online.

57

Corporate responsibility at 3i 
A responsible approach aligned 
58
to our business model 
Achieving our strategy 
59
Our priorities for the year ahead  60

Report and accounts 2011 3i Group plc

57

Corporate responsibility at 3i

Being a responsible investor and a 
responsible business is a vital part 
of achieving 3i’s vision and strategy. 
A long-term approach to thinking on 
environmental, social and governance 
(“ESG”) matters makes good business 
sense. We believe that companies with 
high standards on these issues are better 
run, are lower risk and easier to realise 
value from. 

At 3i, we believe that being a responsible investor is 
integral to achieving our vision and strategy. Our goal 
is to be a top performer in the area, and to influence 
positively our portfolio companies where we can do so.

It is increasingly important to be aware of, and take into 
account, a broad spectrum of responsible investing issues, 
ranging from the imperative of global sustainability, to 
demands for greater transparency and accountability.

We also believe that businesses with high environmental, 
social and governance standards tend to be better run 
and have more sustainable business models than those 
that fail to take such issues into account.

In our industry, there is also a need to demonstrate 
that we have a responsible approach to investing which 
is integrated into our investment and other processes. 
Increasingly, our shareholders and fund investors are 
expecting this, as do our staff.

We are increasing our efforts to imbed and integrate 
our responsible investing approach into our investment 
and portfolio review processes on a consistent basis. 
We also continue to develop policies and tools, and build 
a network of leading advisers, that will assist our staff 
in making well-informed judgements.

You can see some of the results of this in the Corporate 
responsibility section of our Investor relations website, 
www.3igroup.com/cr

The following pages provide an update on our efforts and 
highlight our key achievements and the challenges that 
we face in our approach.

Michael Queen 
Chief Executive

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Organisation and governance

Board level

Senior level

Brand and Values Committee
Chaired by 3i Chairman

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Investment Committee
Portfolio Committee
Operating Committee

Corporate Responsibility  
Committee
Chaired by General Counsel 
and Company Secretary

Group Risk  
Committee
Chaired by  
Chief Executive

Operational level

Implementation by staff with the support of in-house and external expertise

For more information, please go to ‘Accountability’ in the corporate responsibility (“CR”) section of our  
Investor relations (“IR”) website.

For more information on the following, please go to:

For more information please go to:

Chief Executive’s review p7 k
Strategy and performance p12 k

www.3igroup.com/cr k
/transparency k

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58

3i Group plc  Report and accounts 2011

Corporate responsibility

A responsible approach aligned to our business model
Increased focus on, and investment in our approach to responsible investing and related ESG matters during the year reinforces our business 
model and our brand. One of our values is to strive for continual improvement and innovation. During the year, in-depth research, with over 
200 people across a wide range of groups, as part of our brand review, evidenced that 3i is seen as a highly responsible business and investor. 
It also highlighted the need for greater consistency and more effective communication with our portfolio on ESG issues. 

The progress in each aspect of our business model in terms of responsible investing is shown below.

Core values and brand
Our core values underpin our brand and these are that in all our activities we will: be commercial and fair; respect the needs of our shareholders, 
investors, our people and the companies in which we invest; maintain our integrity and professionalism; and strive for continual improvement 
and innovation.

Secure access to capital from 
multiple sources

Invest in our network, 
people and knowledge

Our annual Corporate Governance event 
with shareholders, individual engagements 
with the investors in our funds, and our 
round table discussions with the wider 
investment community have provided  
useful input to developing our approach.

Further investment in our “One 3i” and 
Training Board initiatives continued our focus 
on the retention and engagement of highly 
qualified and appropriately competent 
employees. This is central to 3i being both 
a responsible company and investor.

See the best investment  
opportunities 

We have invested time and resources 
in seeking earlier and greater visibility 
of material ESG matters in our 
investment processes. 

Invest in our 
network, people 
and knowledge

Secure access  
to capital from 
multiple sources

See the best 
investment 
opportunities

Core values

Brand

Build great 
companies and 
deliver outstanding 
returns

Create innovative 
financial solutions  
and ensure excellent 
execution

Achieve full 
potential 
through active 
partnership

Build great companies and 
deliver outstanding returns

Achieve full potential through 
active partnership 

We are developing a more explicit responsible 
investment approach for each stage of the 
investment lifecycle, and integrating a deeper 
analysis of the materiality and management 
of ESG matters in our portfolio company 
review process.

Increased training and improved tools for our 
investment professionals on a range of ESG 
topics is being developed in order to create 
greater awareness and capability, as well as 
helping to identify opportunities for enhanced 
financial returns. 

Create innovative financial solutions 
and ensure excellent execution

As part of our increased training and 
awareness on ESG issues, there is a focus 
on transparency and on good governance.

Report and accounts 2011 3i Group plc

59

A sustainability workshop for 39 Chief Financial 
Officers of portfolio companies raised awareness on 
the business case for sustainability, and explored best 
practice in integrated ESG reporting and anti-bribery 
and anti-corruption programmes. 

Portfolio company review processes were revised 
to integrate a deeper analysis of the materiality and 
management of ESG risks and opportunities.

Key challenges
Given the nature of our business, we have varying 
degrees of influence with the management teams of 
our portfolio on ESG matters. We also need to ensure 
that the tools and training provide the right resource and 
capability to assist our staff and portfolio companies in 
identifying and managing ESG issues and opportunities. 

For more information, please go to ‘How we invest’ and 
‘Adding value as an investor’ and ‘Accountability as an 
investor’ in the CR section of our IR website.

Build on our reputation
Our priority is to maintain and build on our reputation as a 
responsible investor, employer and partner, with a strong 
record of performance. Accountability and transparency 
are fundamental to gaining access to capital, as is a record 
of delivering value to those we work with, whether 
investors in our funds, or portfolio management teams.

Key achievements
We held 3i’s Corporate Governance event for 
shareholders to disclose and generate feedback on our 
approach to being a responsible business and investor. 
Interviews were also conducted through our brand 
review with shareholders, investors in funds, thought 
leaders and portfolio companies on 3i’s performance 
as a responsible business and investor. 

Two round table discussions were hosted by 3i, 
in partnership with Business in the Community (“BitC”), 
on responsible investment in private equity with 
the wider investment community, to disclose and 
generate feedback on our approach.

Achieving our strategy through being 
a responsible investor and business

To invest
We aim to ensure that all of our investment processes 
take ESG matters into account in a consistent, systematic 
and timely manner. Our belief is that in doing so, we will 
make higher quality investment decisions.

Key achievements
A strategic review of our responsible investment 
approach resulted in a decision to refresh our responsible 
investment policy. We are developing a more explicit 
approach to managing ESG impacts throughout the 
investment process and across our business, which we 
will roll out across the Group in the year to 31 March 
2012. This will include new and refreshed tools and 
resources to support our teams in consistently identifying 
and managing ESG impacts throughout the investment 
process, as well as providing training to staff.

Our approach is being informed by internationally 
recognised standards. 

A responsible investment webinar for 3i investment 
professionals re-emphasised and raised awareness of the 
business case for managing ESG risks and opportunities. 

Key challenges
There are three key challenges in this area. The first 
is to achieve consistency across our business lines,  
sectors and geographies. The second relates to the  
ability to perform timely due diligence in a competitive 
environment. Finally, we need to gain access to sufficient 
information early in the investment process.

For more information, please go to ‘How we invest’, 
‘Adding value as an investor’ and ‘Accountability 
as an investor’ in the CR section of our IR website.

To grow our business
We will continue to focus on protecting and growing the 
value of our portfolio through the effective management 
of ESG risks and the identification of value enhancing 
opportunities arising from ESG trends. Opportunities for 
our portfolio companies may include new products and 
services or markets, improvements to their supply chains, 
or simply improving operational effectiveness.

Key achievements
An independent review of our portfolio was 
commissioned to highlight ESG related opportunities 
to reduce risk and to enhance value. Guidance was also 
provided to 71 portfolio companies to assist them in 
their preparations for the implementation of the 2010 
UK Bribery Act.

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60

3i Group plc  Report and accounts 2011

Corporate responsibility

External benchmarking

Dow Jones Sustainability 
Index (DJSI)

Carbon  
Disclosure  
Project 

Business in the 
Community (BitC) 
CR Index

2010

2009

2008

Score:  
62%
Disclosure 
Score:  
43% 
Score:  
81% 
Silver (2011)

Score: 
61% 

Score: 
63% 

CDLI: 
51%
Score: 
80% 
Silver

CDLI: 
61%
Score:  
78%
Bronze

As a founder member of BitC over thirty years ago, 
3i is proud to have maintained its ranking in the 2011 
BitC CR Index. We have also maintained our ranking 
in the DJSI. However, our disclosure score from the 
Carbon Disclosure Project was lower this year, and 
we will be taking steps to understand where and 
how we can improve.

Key challenges

There are two key challenges in this area. The first is  
to ensure that 3i continues to be well regarded as a 
responsible business. The second relates to the need  
to respond to higher expectations and demands for 
information from a growing number of groups.

For more information, please go to ‘Accountability’ 
and ‘Transparency’ in the CR section of our IR website.

To maintain a ‘One 3i’ culture 
Ensuring that 3i is an attractive place to work  
requires investment in staff, our internal communications 
and our brand. We believe that investing in these areas 
will foster a strong and unified culture. This is best 
illustrated by our “best team for the job” approach,  
which aims to harness the skills and knowledge of our 
teams from around the world.

Key achievements 
We achieved high scores in our annual Employee 
engagement survey, including on pride in working for  
3i and commitment to helping 3i achieve its objectives.  
We also received numerous constructive suggestions 
for improvement from our staff. 

Our entire suite of training programmes has been 
refreshed and communicated to all staff. 

As a responsible business, we have engaged our staff 
through a series of initiatives on a range of topics, 
including reducing our environmental footprint, through 
local initiatives to reduce waste. Our investment staff 
are also being given responsible investment objectives 
for the financial year to 31 March 2012.

Employee engagement

2010

2009

2008

Score: 
86%

Score: 
83%

Score: 
74%

Employee engagement is a composite measure.

The Board has recently formed a Brand and Values 
Committee, which is chaired by the Company’s Chairman. 
It comprises non-executive Directors and senior 
management. The Committee will provide guidance, 
counsel and oversight on a range of matters pertaining to 
the Group’s reputation, brand and values, and its 
approach as a responsible investor and a responsible 
business.

Challenges
The challenges in this area are to ensure that sufficient 
emphasis, investment and time are spent on training and 
development. We also need to constantly strive for 
consistency, given the diversity of 3i’s operations and 
differing cultural norms.

For more information, please go to ‘Adding value as 
a company’ and ‘Partnership as an investor’ in the CR 
section of our IR website.

Our priorities for the year ahead
We recognise that we have more to do in this area, and 
have identified the following priorities for the year ahead: 

 − training and awareness programmes for all staff on 

anti-bribery and 3i values;

 − ensuring that our revised investment procedures are 
finalised, communicated across 3i, and supported by 
appropriate training and resources;

 − enhancing our monitoring and reporting to include 
meaningful KPIs with respect to ESG matters in our 
portfolio;

 − using the results of our existing portfolio review on 

bribery and wider environmental, social and governance 
matters to engage with portfolio management teams 
and assist them in achieving improvements; and 

 − to develop the remit of the Brand and Values 

Committee and use that Committee to good effect.

For more information on the following topics, please go  
to ‘Adding value as a company’ in the CR section of our  
IR website.

 − People

 − Direct environmental impact

 − Community

Report and accounts 2011 3i Group plc

61

Governance

Information on how 3i is governed 
and run at a board and executive level, 
as well as our remuneration report 
and details on our Board and 
Leadership Team.

Board of Directors and  
Leadership Team 
Statutory and corporate 
governance information 
64
Corporate governance statement  71
78
Directors’ remuneration report 

62

62

3i Group plc  Report and accounts 2011

Governance

Board of Directors and Leadership Team

Board of Directors

Sir Adrian Montague Chairman

Michael Queen Chief Executive

Julia Wilson Group Finance Director

Jonathan Asquith

Alistair Cox

Richard Meddings

Willem Mesdag

Christine Morin-Postel

Leadership Team

Menno Antal

Kevin Dunn

Jeremy Ghose

Alan Giddins

Cressida Hogg

Ian Nolan

Bob Stefanowski

Paul Waller

Board Committees

Audit and Compliance Committee:
Richard Meddings (Chairman)
Jonathan Asquith
Alistair Cox
Christine Morin-Postel

Remuneration Committee:
Jonathan Asquith (Chairman)
Willem Mesdag
Christine Morin-Postel

Nominations Committee:
Sir Adrian Montague (Chairman)
Jonathan Asquith
Alistair Cox
Richard Meddings
Willem Mesdag
Christine Morin-Postel
Michael Queen

Valuations Committee:
Willem Mesdag (Chairman)
Sir Adrian Montague
Michael Queen
Julia Wilson

Guy Zarzavatdjian

Report and accounts 2011 3i Group plc

63

Chairman
Sir Adrian Montague  
Chairman
Chairman since July 2010 and a 
non-executive Director since June 
2010. Non-executive Chairman 
of Michael Page International PLC, 
CellMark AB and Anglian Water Group. 
A director of Skanska AB. Chairman 
of London First and of the Advisory 
Board of Reform.
Previous experience
Chairman of Friends Provident PLC, 
British Energy Group PLC, Cross 
London Rail Links Ltd (Crossrail) and 
Deputy Chairman of Network Rail. 

Executive Directors
Michael Queen  
Chief Executive
Chief Executive since 2009, and 
an Executive Director since 1997. 
A member of the Leadership Team 
(formerly Management Committee) 
and the Group’s Investment 
Committee since 1997. A member 
of the Group’s Portfolio Committee 
since it was established in September 
2010. Joined 3i in 1987. A member 
of the Prime Minister’s Business 
Advisory Group.
Previous experience
Seconded to HM Treasury 1994  
to 1996. Group Financial Controller 
from 1996 to 1997 and Finance 
Director from 1997 to 2005. 
Managing Partner, Growth Capital 
2005 to 2008 and Managing Partner, 
Infrastructure 2008 to 2009. 
Chairman of the British Venture Capital 
Association from 2002 to 2003.
Julia Wilson 
Group Finance Director
Group Finance Director and member 
of the Leadership Team (formerly 
Management Committee) since 
2008. Chair of the Group’s Operating 
Committee since it was established 
in September 2010. Joined 3i in 2006 
as Deputy Finance Director, with 
responsibility for the Group’s finance, 
taxation and treasury functions. 
Previous experience
Group Director of Corporate Finance 
at Cable & Wireless plc. 

Non-Executive Directors
Jonathan Asquith
Non-executive Director since March 
2011. Non-executive director 
of Ashmore Group plc, AXA UK plc 
and Chairman of AXA Investment 
Managers. 
Previous experience
A director of Schroders plc from 2002 
until 2008, during which time he  
was Chief Financial Officer and later 
Vice-Chairman.
Alistair Cox
Non-executive Director since 2009. 
Chief Executive of Hays plc. 
Previous experience
Chief Executive of Xansa plc from 
2002 to 2007, and Regional President 
of Asia and Group Strategy Director 
at Lafarge (formerly Blue Circle 
Industries) between 1994 and 2002.
Richard Meddings
Non-executive Director since 2008 
and Senior Independent Director since 
October 2010. Group Finance Director 
of Standard Chartered PLC since 
2006, having joined the Board of 
Standard Chartered PLC as a Group 
Executive Director in 2002. A member 
of the Governing Council of the 
International Chamber of Commerce, 
United Kingdom. 
Previous experience
Chief Operating Officer, Barclays 
Private Clients, Group Financial 
Controller at Barclays PLC and Group 
Finance Director of Woolwich PLC.
Willem Mesdag
Non-executive Director since 2007. 
Managing Partner of Red Mountain 
Capital Partners LLC. 
Previous experience
A Partner and Managing Director 
of Goldman, Sachs & Co.
Christine Morin-Postel
Non-executive Director since 2002. 
A director of British American 
Tobacco p.l.c., Royal Dutch Shell plc 
and EXOR S.p.A. 
Previous experience 
Chief Executive of Société Générale 
de Belgique, executive Vice-President 
and member of the executive 
committee of Suez and a director 
of Tractebel, Fortis and Alcan, Inc.

Leadership Team (formerly 
Management Committee)
Menno Antal
Managing Partner, Northern Europe 
and Buyout Fund. A member of the 
Leadership Team since September 
2010. A member of the Group’s 
Investment Committee and Portfolio 
Committee since September 2010. 
Previous experience
Joined 3i in 2000 and Managing 
Director, Benelux, since 2003.  
Prior to joining 3i, held a broad  
range of international managerial 
positions within Heineken.
Kevin Dunn
General Counsel, Company Secretary 
and Head of Human Resources, 
responsible for 3i’s legal, compliance, 
internal audit, human resources 
and company secretarial functions. 
A member of the Leadership Team 
since joining 3i in 2007. 
Previous experience
A Senior Managing Director, running 
GE’s European Leveraged Finance 
business after serving as European 
General Counsel for GE. Prior to GE, 
was a partner at the law firms Travers 
Smith and Latham & Watkins.
Jeremy Ghose
Managing Partner and CEO of 3i 
Debt Management. A member of the 
Leadership Team since joining 3i in 
February 2011 on 3i’s acquisition of 
Mizuho Investment Management (UK) 
Limited from Mizuho Corporate Bank. 
Previous experience
Prior to joining 3i, was with Mizuho 
Corporate Bank (formerly The Fuji 
Bank) since 1988 and on its executive 
board since 2005. Founder of 
Mizuho’s Leveraged Finance business 
in 1988 and of the third-party 
independent debt fund management 
business in 2005. 
Alan Giddins
Managing Partner, UK Private Equity. 
A member of the Leadership Team 
since September 2010. A member 
of the Group’s Investment Committee 
and Portfolio Committee since 
September 2010. 
Previous experience
Joined 3i in 2005. Prior to joining 3i, 
spent 13 years in investment banking, 
latterly as a Managing Director at 
Société Générale. A member of the 
Mid-Market Committee of the British 
Venture Capital Association. 

Cressida Hogg
Managing Partner, Infrastructure. 
A member of the Leadership Team 
since September 2010. A member 
of the Group’s Investment Committee 
and Portfolio Committee since 
September 2010. Responsible for 
the Infrastructure business line and 
for leading the advisory relationship 
with the independent Board of 
3i Infrastructure plc. 
Previous experience 
Joined 3i in 1995. Co-founded  
3i’s Infrastructure business in 2005 
and became Managing Partner, 
Infrastructure in 2009.
Ian Nolan
Chief Investment Officer. A member 
of the Leadership Team since 2009. 
A member since 2006 and now 
Co-Chairman of the Group’s Investment 
Committee and Chairman of the 
Group’s Portfolio Committee since it 
was established in September 2010. 
Previous experience
Managing Director, UK Buyouts. 
Joined 3i in 1987.
Bob Stefanowski
Chairman and Managing Partner,  
Asia and the Americas. A member 
of the Leadership Team since joining 
3i in 2008. A member of the Group’s 
Investment Committee and Portfolio 
Committee since September 2010. 
Previous experience
Prior to joining 3i, spent 15 years with 
GE Capital Corporation, most recently 
President and CEO of GE Corporate 
Finance EMEA.
Paul Waller
Managing Partner, Funds. A member 
of the Leadership Team since 1999. 
Co-Chairman of the Group’s Investment 
Committee and a member of the 
Group’s Portfolio Committee since it 
was established in September 2010. 
Previous experience
Joined 3i in 1978. Chairman of the 
European Private Equity and Venture 
Capital Association from 1998 to 1999.
Guy Zarzavatdjian
Managing Partner, Southern Europe 
and Growth Fund. A member of  
the Leadership Team since 2007.  
A member of the Group’s Investment 
Committee since 2006 and of the 
Group’s Portfolio Committee since it 
was established in September 2010. 
Previous experience
Joined 3i’s Paris office in 1987. 
Managing Director, Benelux from 
1999 to 2002 and Managing Director, 
France from 2002 until 2007.

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64

3i Group plc  Report and accounts 2011

Governance

Statutory and corporate governance information

This section of the Directors’ report contains statutory 
and corporate governance information for the year to 
31 March 2011 (“the year”).

Principal activity
3i is an international investor focused on private equity, 
infrastructure and debt management, investing 
responsibly in Europe, Asia and the Americas. The principal 
activity of the Company and its subsidiaries (“the Group”) 
is investment.

Group investment policy
3i’s investment policy, which as a closed-ended 
investment fund it is required to publish, is as follows:

 − 3i is an investment company which aims to provide  
its shareholders with quoted access to private equity 
returns. Currently, its main focus is on making quoted 
and unquoted equity and/or debt investments in 
businesses and funds across Europe, Asia and the 
Americas. The geographies, economic sectors, funds 
and asset classes in which 3i invests continue to evolve 
as opportunities are identified. Proposed investments 
are assessed individually and all significant investments 
require approval from the Group’s Investment 
Committee. Overall investment targets are subject to 
periodic reviews and the investment portfolio is also 
reviewed to monitor exposure to specific geographies, 
economic sectors and asset classes. 

 − 3i seeks to diversify risk through significant dispersion 
of investments by geography, economic sector, asset 
class and size as well as through the maturity profile 
of its investment portfolio. In addition, although 3i does 
not set maximum exposure limits for asset allocations, 
no more than 15% by value of 3i’s portfolio can be held 
in a single investment.

 − Investments are generally funded with a mixture of 

debt and shareholders’ funds with a view to maximising 
returns to shareholders, whilst maintaining a strong 
capital base. 3i’s gearing depends not only on its level 
of debt, but also on the impact of market movements 
and other factors on the value of its investments. The 
Board takes this into account when, as required, it sets 
a precise maximum level of gearing. The Board has 
therefore set the maximum level of gearing at 150% 
and has set no minimum level of gearing. If the gearing 
ratio should exceed the 150% maximum limit, the 
Board will take steps to reduce the gearing ratio to 
below that limit as soon as practicable thereafter.  
3i is committed to achieving balance sheet efficiency.

During the year, the Company has continued its approach 
of conservative balance sheet management. The Board 
recognises the current need to manage liquidity and gross 
and net debt levels on a conservative basis such that the 
Company should be well-placed to deal with external 
events, take advantage of opportunities and manage its 
investment and divestment activities in a flexible manner. 
The Board has decided that net debt should not currently 
exceed £1 billion and may at times be significantly below 
this limit. As a consequence, gearing, which is a function 
of both net debt and asset values, is expected to be in 

the range of 0%–30% for the immediate future. It should 
be noted that (subject always to the formal gearing limit 
in the Company’s investment policy statement set out 
above) the actual gearing level at any point in time will 
fluctuate since it is a function of, among other things, 
asset valuations and the timing of investment and 
realisation cash flows. The Board anticipates that the 
Company may be in a net cash position during certain 
periods (for example during periods of high valuations 
where realisations might be expected to exceed 
investment) but may have net debt in other periods  
(for example where valuations are relatively low or  
after periods of low return flows).

Tax and investment company status
The Company is an investment company as defined by 
section 833 of the Companies Act 2006. HM Revenue & 
Customs has approved the Company as an investment 
trust under section 842 of the Income and Corporation 
Taxes Act 1988 for the year to 31 March 2010. Since 
that date the Company has directed its affairs to enable 
it to continue to be so approved.

Regulation
3i Investments plc, 3i Debt Management Investments 
Limited, 3i Europe plc and 3i Nordic plc, subsidiaries 
of the Company, are authorised and regulated by the 
FSA under the Financial Services and Markets Act 2000. 
Where applicable, certain Group subsidiaries’ businesses 
outside the United Kingdom are regulated locally by 
relevant authorities.

Management arrangements
3i Investments plc acts as investment manager to the 
Company and certain of its subsidiaries. Contracts for 
these investment management and other services,  
for which regulatory authorisation is required, provide  
for fees based on the work done and costs incurred  
in providing such services. These contracts may 
be terminated by either party on reasonable notice.

3i plc provides the Group with certain corporate  
and administrative services, for which no regulatory 
authorisation is required, under contracts which provide 
for fees based on the work done and costs incurred in 
providing such services together with a performance  
fee based on realised profits on the sale of assets.

Results and dividends
Total recognised income and expense for the year was 
£324 million (2010: £407 million). An interim dividend  
of 1.2p per ordinary share in respect of the year to 
31 March 2011 was paid on 12 January 2011. The 
Directors recommend a final dividend of 2.4p per ordinary 
share be paid in respect of the year to 31 March 2011 
to shareholders on the Register at the close of business 
on 17 June 2011.

The trustee of The 3i Group Employee Trust (“the 
Employee Trust”) has waived (subject to certain minor 
exceptions) dividends declared by the Company after 
26 May 1994 on shares held by the Employee Trust.

Report and accounts 2011 3i Group plc

65

Business review
The Group’s development during the year to 31 March 
2011, its position at that date and the Group’s likely 
future development are detailed in the Chairman’s 
statement, the Chief Executive’s review and the  
Business review.

Share capital
The issued share capital of the Company as at 
31 March 2011 comprised 970,650,620 ordinary 
shares of 73 19/22p each and 4,635,018 B shares 
(cumulative preference shares of 1p each), which 
represented 99.99% and 0.01% respectively of the 
nominal value of the Company’s issued share capital. 
During the year, the issued share capital of the 
Company altered as set out below.

Ordinary shares
The issued ordinary share capital of the Company as at 
1 April 2010 was 970,381,476 ordinary shares. During 
the year to 31 March 2011 this increased by 269,144 
ordinary shares as a result of the issue of shares to the 
trustee of the 3i Group Share Incentive Plan. 

At the Annual General Meeting (“AGM”) on 7 July 2010, 
the Directors were authorised to repurchase up 
to 97,000,000 ordinary shares in the Company 
(representing approximately 10% of the Company’s 
issued ordinary share capital as at 12 May 2010) until 
the Company’s AGM in 2011 or 6 October 2011, if 
earlier. This authority was not exercised in the year.

B shares
The issued B share capital of the Company as at 1 April 
2010 was 4,635,018 B shares. No B shares were issued 

in the year to 31 March 2011. At the AGM on 7 July 
2010, the Directors were authorised to repurchase up to 
4,635,018 B shares in the Company until the Company’s 
AGM in 2011 or 6 October 2011, if earlier. This authority 
was not exercised in the year.

Directors’ interests
In accordance with FSA Listing Rule 9.8.6(R)(1), Directors’ 
interests in the shares of the Company (in respect of 
which transactions are notifiable to the Company under 
FSA Disclosure and Transparency Rule 3.1.2(R)) as at  
31 March 2011 are shown below:

Sir Adrian Montague

M J Queen

J S Wilson

J P Asquith

A R Cox

R H Meddings

W Mesdag

C J M Morin-Postel

Ordinary 
Shares

21,990

1,597,856

47,459

0

12,400

15,960

118,301

21,451

B Shares

0

6,227

1,038

0

0

0

0

0

The share interests shown for Mr M J Queen and 
Mrs J S Wilson include shares held in the 3i Group Share 
Incentive Plan and share bonus awards under the 3i 
Group Deferred Bonus Plan. The share interests shown 
exclude share option and performance share awards 
detailed in the Directors’ remuneration report. From 
1 April 2011 to 11 May 2011, Mr M J Queen and 
Mrs J S Wilson became interested in an additional 
138 ordinary shares each and there were no other 
changes to Directors’ share interests.

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Major interests in ordinary shares
Notifications of the following voting interests in the Company’s ordinary share capital had been received by the 
Company (in accordance with Chapter 5 of the FSA’s Disclosure and Transparency Rules and section 793 Companies 
Act 2006) as at 31 March 2011 and 11 May 2011:

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BlackRock, Inc

125,860,652

12.968 125,860,652

12.968

As at  
31 March  
2011

% of issued  
share capital

As at  
11 May  
2011

% of issued  
share capital

Legal & General Group Plc and/or 
its subsidiaries 

Deutsche Bank AG

Schroders Plc

38,620,595

49,065,391

47,870,160

Ameriprise Financial, Inc. and its group 

66,041,715

Standard Life Investments plc

48,482,387

3.980

5.055

4.933

6.805

4.996

38,620,595

3.980

49,065,391

5.055 Direct and indirect

47,870,160

4.933

Indirect

66,041,715

6.805 Direct and indirect

48,482,387

4.996 Direct and indirect

Government of Singapore 
Investment Corporation Pte Ltd

29,029,897

2.991

29,029,897

2.991

Direct

Nature of holding

Indirect

Direct

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66

3i Group plc  Report and accounts 2011

Governance > Statutory and corporate governance information

Rights and restrictions attaching to shares
A summary of the rights and restrictions attaching 
to shares as at 31 March 2011 is set out below.

The amendment of the Company’s Articles of Association 
is governed by relevant statutes. The Articles may be 
amended by special resolution of the shareholders in 
general meeting.

Holders of ordinary shares and B shares enjoy the rights 
accorded to them under the Articles of Association of 
the Company and under the laws of England and Wales. 
Any share may be issued with or have attached to it 
such rights and restrictions as the Company by ordinary 
resolution or failing such resolution the Board may decide.

Holders of ordinary shares are entitled to attend, 
speak and vote at general meetings of the Company 
and to appoint proxies and, in the case of corporations, 
corporate representatives to attend, speak and vote 
at such meetings on their behalf. On a poll, holders of 
ordinary shares are entitled to one vote for each share 
held. Holders of ordinary shares are entitled to receive the 
Company’s Annual Report and accounts, to receive such 
dividends and other distributions as may lawfully be paid 
or declared on such shares and, on any liquidation of the 
Company, to share in the surplus assets of the Company 
after satisfaction of the entitlements of the holders of 
the B shares or such other shares with preferred rights 
as may then be in issue.

Holders of B shares are entitled, out of the profits 
available for distribution in any year and in priority to any 
payment of dividend or other distribution to holders of 
ordinary shares, to a cumulative preferential dividend of 
3.75% per annum calculated on the amount of 127p per 
B share (“the Return Amount”). On a return of capital 
(other than a solvent intra group re-organisation) holders 
of B shares are entitled to receive in priority to any 
payment to holders of ordinary shares payment of the 
Return Amount together with any accrued but unpaid 
dividends but are not entitled to any further right of 
participation in the profits or assets of the Company.

Holders of B shares are not entitled to receive notice 
of or attend, speak or vote at general meetings of the 
Company save where the B share dividend has remained 
unpaid for six months or more or where the business of 
the meeting includes consideration of a resolution for the 
winding-up of the Company (other than a solvent intra 
group reorganisation) in which case holders of B shares 
shall be entitled to attend, speak and vote only in relation 
to such resolution and in either case shall, on a poll, be 
entitled to one vote per B share held.

There are no restrictions on the transfer of fully paid 
shares in the Company, save as follows. The Board may 
decline to register a transfer of uncertificated shares in 
the circumstances set out in the Uncertificated Securities 
Regulations 2001 or where a transfer is to more than 
four joint holders. The Board may decline to register any 
transfer of certificated shares which is not in respect of 
only one class of share, which is to more than four joint 
holders, which is not accompanied by the certificate for 
the shares to which it relates, which is not duly stamped 
in circumstances where a duly stamped instrument is 
required, or where in accordance with section 794 of the 
Companies Act 2006 a notice (under section 793 of that 
Act) has been served by the Company on a shareholder 
who has then failed to give the information required 
within the specified time. In the latter circumstances  
the Company may make the relevant shares subject  
to certain restrictions (including in respect of the ability  
to exercise voting rights, to transfer the shares validly 
and, except in the case of a liquidation, to receive the 
payment of sums due from the Company). Since 14 July 
2009 the Company has been entitled to appoint a person 
to execute a transfer on behalf of all holders of B shares 
in acceptance of an offer, paying the holders such amount 
as they would have been entitled to on a winding-up of 
the Company.

There are no shares carrying special rights with regard 
to control of the Company. There are no restrictions 
placed on voting rights of fully paid shares, save where 
in accordance with Article 12 of the Company’s Articles 
of Association a restriction notice has been served by the 
Company in respect of shares for failure to comply with 
statutory notices or where a transfer notice (as described 
below) has been served in respect of shares and has not 
yet been complied with.

In the circumstances specified in Article 38 of the 
Company’s Articles of Association the Company may 
serve a transfer notice on holders of shares. The relevant 
circumstances relate to: (a) potential tax disadvantage  
to the Company, (b) the number of “United States 
Residents” who own or hold shares becoming 75 or more, 
or (c) the Company being required to be registered as  
an investment company under relevant US legislation.  
The notice would require the transfer of relevant shares 
and pending such transfer the rights and privileges 
attaching to those shares would be suspended.

To attend and vote at a Company general meeting a 
shareholder must be entered on the register of members 
at such time (not being earlier than 48 hours before the 
meeting) as stated in the notice of general meeting.

The Company is not aware of any agreements between 
holders of its securities that may restrict the transfer of 
shares or exercise of voting rights.

Report and accounts 2011 3i Group plc

67

Debentures
As detailed in notes 21 and 22 to the Accounts, as at  
31 March 2011 the Company had in issue 3.625 per cent 
convertible bonds due 2011 and Notes issued under the 
3i Group plc £2,000 million Note Issuance Programme. 
There were no Notes in issue under the 3i Group plc 
€1,000 million Euro-Commercial Paper Programme.

Appointment and re-election of Directors
Subject to the Company’s Articles of Association,  
the Companies Acts and satisfactory performance 
evaluation, non-executive Directors are appointed for  
an initial period of three years. Before the third and  
sixth anniversaries of a non-executive Director’s first 
appointment, the Director discusses with the Board 
whether it is appropriate for a further three year term  
to be served.

The Company’s Articles of Association provide for:

(a) the minimum number of Directors to be two and 

the maximum to be 20, unless otherwise determined 
by the Company by ordinary resolution;

(b) Directors to be appointed by ordinary resolution 

of the Company’s shareholders in general meeting 
or by the Board;

(c) Directors to retire by rotation at an AGM if:

(i)  they have been appointed by the Board since 

the preceding AGM; 

(ii)  they held office during the two preceding AGMs 

but did not retire at either of them; 

(iii) not being Chairman of the Board, they held 

non-executive office for a continuous period of 
nine years or more at the date of that AGM; or

(iv) they choose to retire from office. 

(d) shareholders to have the power to remove any 

Director by special resolution.

Subject to the Company’s Articles of Association, retiring 
Directors are eligible for reappointment. The office of 
Director shall be vacated if the Director resigns, becomes 
bankrupt or is prohibited by law from being a Director 
or where the Board so resolves following the Director 
suffering from mental ill-health or being absent from 
Board meetings for 12 months without the Board’s 
permission.

In accordance with the UK Corporate Governance Code 
all Directors submit to reappointment every year. 
Accordingly at the AGM to be held on 6 July 2011 all 
the Directors will retire from office. All these Directors 
are eligible for, and, save for Mme C J M Morin-Postel 
who is stepping down from the Board at the conclusion 
of the AGM, seek, reappointment.

The Board’s recommendation for the reappointment 
of Directors is set out in the 2011 Notice of AGM.

Directors’ conflicts of interests
Directors have a statutory duty to avoid conflicts 
of interest with the Company. The Company’s Articles 
of Association enable Directors to approve conflicts of 
interest and include other conflict of interest provisions. 
The Company has implemented processes to identify 
potential and actual conflicts of interest. Such conflicts 
are then considered for approval by the Board, subject,  
if necessary, to appropriate conditions.

Directors’ indemnities
As permitted by the Company’s Articles of Association, 
the Company has maintained Qualifying Third-Party 
Indemnity Provisions (as defined under relevant 
legislation) for the benefit of the Company’s Directors 
throughout the year.

Employment
The policy of the Group is one of equal opportunity in the 
selection, training, career development and promotion of 
employees, regardless of age, gender, sexual orientation, 
ethnic origin, religion and whether disabled or otherwise.

3i treats applicants and employees with disabilities equally 
and fairly and provides facilities, equipment and training 
to assist disabled employees to do their jobs. 
Arrangements are made as necessary to ensure access 
and support to job applicants who happen to be disabled 
and who respond to our request to inform the Company 
of any requirements. Should an employee become 
disabled during their employment, efforts would be made 
to retain them in their current employment or to explore 
the opportunities for their retraining or redeployment 
within 3i. Financial support is also provided by 3i to 
support disabled employees who are unable to work, 
as appropriate to local market conditions.

3i’s principal means of keeping in touch with the views of 
its employees are through employee appraisals, informal 
consultations, team briefings, and staff conferences and 
surveys. Managers throughout 3i have a continuing 
responsibility to keep their staff fully informed of 
developments and to communicate financial results and 
other matters of interest. This is achieved by structured 
communication including regular meetings of employees.

3i is an equal opportunities employer and has clear 
grievance and disciplinary procedures in place. 3i also 
has an employee assistance programme which provides 
a confidential, free and independent counselling service 
and is available to all staff and their families in the UK.

3i’s employment policies are designed to provide a 
competitive reward package which will attract and retain 
high quality staff, whilst ensuring that the relevant costs 
remain at an appropriate level. 

Remuneration policy is reviewed by the 3i Group plc 
Remuneration Committee, comprising 3i Group plc 
non-executive Directors.

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68

3i Group plc  Report and accounts 2011

Governance > Statutory and corporate governance information

(b) £100 million Revolving Credit Facility Agreement 

dated 17 September 2009, between the Company,  
3i Holdings plc and Nordea Bank AB (publ) in relation 
to the provision of a multi-currency revolving credit 
facility to the Company and 3i Holdings plc. Under this 
agreement, the Company would be required to notify 
Nordea Bank AB (publ) within five days of any change 
of control of the Company. Such notification would 
open a negotiation period of 20 days (from the date 
of the change of control) to determine whether 
Nordea Bank AB (publ) would be willing to continue  
to make available the facility and, if so, on what terms. 
Failing agreement and if so required by Nordea Bank 
AB (publ), amounts outstanding would be required 
to be repaid and the facility cancelled;

(c) £200 million Revolving Credit Facility Agreement 

dated 4 November 2009, between the Company,  
3i Holdings plc and Lloyds TSB Bank plc in relation to 
the provision of a multi-currency term and revolving 
credit facility to the Company and 3i Holdings plc. 
Under this agreement, the Company would be 
required to notify Lloyds TSB Bank plc within five  
days of any change of control of the Company.  
Such notification would open a negotiation period  
of 20 days (from the date of the change of control)  
to determine whether Lloyds TSB Bank plc would be 
willing to continue to make available the facility and,  
if so, on what terms. Failing agreement and if so 
required by Lloyds TSB Bank plc, amounts outstanding 
would be required to be repaid and the facility 
cancelled; 

(d) Limited Partnership Agreements dated 12 July 2006, 

between 3i EFV GP Limited, 3i Europartners V 
Verwaltungs GmbH & Co. KG, the Company and  
other investors from time to time in relation to the 
formation of partnerships to carry on the business 
of investing as the fund known as 3i Eurofund V. 
Under these agreements, the manager, 3i 
Investments plc, would be required to notify the 
investors of any change of control of the Company. 
If such a change of control occurs before the end 
of the relevant investment period, the manager’s 
powers to make new investments on behalf of the 
partnerships would be suspended unless the investors 
had given consent before the change of control 
occurred. Where suspension occurs, the investors may 
consent at any time before the end of the investment 
period to the resumption of the manager’s powers;

3i’s remuneration policy is influenced by 3i’s financial and 
other performance conditions and market practices in 
the countries in which it operates. All employees receive 
a base salary and are eligible for a performance-related 
bonus. Where appropriate, employees are eligible to 
participate in 3i share schemes to encourage employees’ 
involvement in 3i’s performance. Investment executives 
may also participate in co-investment plans and carried 
interest schemes, which allow executives to share directly 
in any future profits on investments. Employees 
participate in local state or company pension schemes 
as appropriate to local market conditions.

Charitable and political donations
Charitable donations made by the Group in the year to 
31 March 2011 amounted to £408,566. Detail on these 
donations is provided in the CR section of our Investor 
relations website, www.3igroup.com.

In line with Group policy, during the year to 31 March 
2011 no donations were made to political parties or 
organisations, or independent election candidates,  
and no political expenditure was incurred.

Policy for paying creditors
The Group’s policy is to pay suppliers in accordance with 
the terms and conditions of the relevant markets in which 
it operates. Expenses are paid on a timely basis in the 
ordinary course of business. The Company had no trade 
creditors outstanding at the year end. 3i plc had trade 
creditors outstanding at the year end representing on 
average 10.7 days’ purchases.

Significant agreements
As at 31 March 2011 the Company was party to the 
following agreements that take effect, alter or terminate 
on a change of control of the Company following a 
takeover bid:

(a) £300 million Revolving Credit Facility Agreement 
dated 15 July 2009, between the Company,  
3i Holdings plc and Lloyds TSB Bank plc, The Royal 
Bank of Scotland plc, Société Générale, Commerzbank 
AG, London Branch, Standard Chartered Bank, UBS 
Limited, Bank of Ireland and JPMorgan Chase Bank 
N.A., London Branch in relation to the provision of 
a multi-currency revolving credit facility to the 
Company and 3i Holdings plc. Under this agreement, 
the Company would be required to notify Lloyds TSB 
Bank plc in its capacity as agent for the banks, within 
five days of any change of control of the Company. 
Such notification would open a negotiation period of 
20 days (from the date of the change of control) to 
determine whether the Majority Lenders (as defined 
in the agreement) would be willing to continue to 
make available the facility and, if so, on what terms. 
Failing agreement and if so required by the Majority 
Lenders, amounts outstanding would be required 
to be repaid and the facility cancelled;

Report and accounts 2011 3i Group plc

69

(e) Limited Partnership Agreements dated 24 March 
2010, between 3i GC GP Limited, the Company,  
other 3i entities and other investors from time to  
time in relation to the formation of partnerships to 
carry on the business of investing as the fund known 
as 3i Growth Capital Fund. Under these agreements, 
the manager, 3i Investments plc, would be required  
to notify the investors of any change of control 
of the Company. If such a change of control occurs 
before the end of the relevant investment period,  
the manager’s powers to make new investments  
on behalf of the partnerships would be suspended 
unless the investors had given consent before the 
change of control occurred. Where suspension occurs, 
the investors may consent at any time before the 
end of the investment period to the resumption 
of the manager’s powers; and

(f) 3i Group plc £430,000,000 3.625 per cent 

convertible bonds due 2011 (the “bonds”). Condition 
6 of the terms and conditions of the bonds sets out 
the conversion rights of the holders of the bonds  
and the calculation of the conversion price payable. 
The conversion price will decrease if a “Relevant 
Event” occurs. Condition 6(b)(x) sets out the definition 
of Relevant Event and the consequential adjustment 
to the conversion price. In summary, a Relevant 
Event occurs if an offer is made to all (or as nearly 
as may be practicable all) shareholders to acquire 
all or a majority of the issued shares of the Company 
or if any person proposes a scheme with regard 
to such acquisition (other than a Newco Scheme 
(as defined)) and (such offer or scheme having 
become unconditional in all respects) the right 
to cast more than 50% of the votes which may 
ordinarily be cast on a poll at a general meeting 
of the Company has or will become unconditionally 
vested in the offeror and/or an associate (as defined) 
of the offeror. Condition 7(d) of the terms and 
conditions of the bonds gives bondholders an early 
redemption option (early repayment at face value plus 
accrued interest) upon a Relevant Event occurring.

Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual 
Report and the Group financial statements in accordance 
with applicable United Kingdom law and those 
International Financial Reporting Standards which have 
been adopted by the European Union.

Under Company Law the Directors must not approve  
the Group financial statements unless they are satisfied 
that they present fairly the financial position, financial 
performance and cash flows of the Group for that period. 
In preparing the Group financial statements the Directors:

(a) select suitable accounting policies in accordance 
with IAS 8: Accounting Policies, Changes in 
Accounting Estimates and Errors and then apply 
them consistently;

(b) present information, including accounting policies, 

in a manner that provides relevant, reliable, 
comparable and understandable information;

(c) provide additional disclosures when compliance with 
the specific requirements in IFRSs is insufficient to 
enable users to understand the impact of particular 
transactions, other events and conditions on the 
Group’s financial position and financial performance;

(d) state that the Group has complied with IFRSs, 

subject to any material departures disclosed and 
explained in the financial statements; and

(e) make judgements and estimates that are reasonable 

and prudent.

The Directors have a responsibility for ensuring that 
proper accounting records are kept which are sufficient  
to show and explain the Group’s transactions and disclose 
with reasonable accuracy at any time the financial 
position of the Group and enable them to ensure that the 
Group financial statements comply with the Companies 
Act 2006.

They have a general responsibility for taking such 
steps as are reasonably open to them to safeguard the 
assets of the Group and to prevent and detect fraud 
and other irregularities.

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70

3i Group plc  Report and accounts 2011

Governance > Statutory and corporate governance information

Audit information
Pursuant to section 418(2) of the Companies Act 2006, 
each of the Directors confirms that: (a) so far as they are 
aware, there is no relevant audit information of which the 
Company’s auditors are unaware; and (b) they have taken 
all steps they ought to have taken to make themselves 
aware of any relevant audit information and to establish 
that the Company’s auditors are aware of such 
information.

Appointment of auditors
In accordance with section 489 of the Companies 
Act 2006, a resolution proposing the reappointment 
of Ernst & Young LLP as the Company’s auditors 
will be put to members at the forthcoming AGM.

By order of the Board

K J Dunn
Company Secretary 
11 May 2011

Registered Office: 
16 Palace Street, London, SW1E 5JD

In accordance with the FSA’s Disclosure and Transparency 
Rules, the Directors confirm to the best of their 
knowledge that:

(a) the financial statements, prepared in accordance with 
applicable accounting standards, give a true and fair 
view of the assets, liabilities, financial position and 
profit or loss of the Company and the undertakings 
included in the consolidation taken as a whole; and

(b) the Directors’ report includes a fair review of the 

development and performance of the business and 
the position of the Company and the undertakings 
included in the consolidation taken as a whole 
together with a description of the principal risks 
and uncertainties that they face.

The Directors of the Company and their functions 
are listed in the Board of Directors and Leadership 
Team section.

Going concern
The Directors have acknowledged their responsibilities  
in relation to the financial statements for the year to  
31 March 2011.

The Group’s business activities, together with the factors 
likely to affect its future development, performance  
and position are set out in the Business review section. 
The financial position of the Group, its capital structure, 
gearing and liquidity positions are described in the 
Financial review section. The Group’s policies on risk 
management, including treasury and funding risks,  
are contained in the Risk section. Further details are 
contained in the financial statements and notes including, 
in particular, details on financial risk management and 
derivative financial instruments.

The Directors believe that the Group is well placed  
to manage its business risks successfully despite the 
continuing uncertain economic outlook. The Directors 
have considered the uncertainties inherent in current  
and expected future market conditions and their possible 
impact upon the financial performance of the Group. 
After consideration, the Directors are satisfied that 
the Company has and will maintain sufficient financial 
resources to enable it to continue operating in the 
foreseeable future and therefore continue to adopt  
the going concern basis in preparing the Annual Report 
and accounts.

Report and accounts 2011 3i Group plc

71

Corporate governance statement

Corporate governance
Throughout the year, the Company complied with 
the provisions of section 1 of the Combined Code 
on corporate governance published by the Financial 
Reporting Council in June 2008 save that none 
of the Directors was formally nominated as Senior 
Independent Director between 1 October 2010 when 
Mr R W A Swannell stepped down from the Board and 
7 October 2010 when Mr R H Meddings was named 
as his successor as Senior Independent Director. For 
the year to 31 March 2012, the Company will report 
compliance against the UK Corporate Governance 
Code, which has replaced the Combined Code.

The Company’s approach to 
corporate governance
The Company has a policy of seeking to comply with 
established best practice in the field of corporate 
governance. The Board has adopted core values and 
global policies which set out the behaviour expected 
of staff in their dealings with shareholders, customers, 
colleagues, suppliers and others who engage with the 
Company. One of the core values communicated within 
the Group is a belief that the highest standard of integrity 
is essential in business.

The Board’s responsibilities and processes
The Board is responsible to shareholders for the overall 
management of the Group and may exercise all the 
powers of the Company subject to the provisions of 
relevant statutes, the Company’s Articles of Association 
and any directions given by special resolution of the 

shareholders. The Articles of Association empower the 
Board to offer, allot, grant options over or otherwise deal 
with or dispose of the Company’s shares as the Board 
may decide. The Companies Act 2006 authorises the 
Company to make market purchases of its own shares 
if the purchase has first been authorised by a resolution 
of the Company.

At the AGM in July 2010, shareholders renewed  
the Board’s authority to allot ordinary shares and to 
repurchase ordinary shares on behalf of the Company 
subject to certain limits. At the AGM in July 2010, 
shareholders authorised the Board to repurchase B shares 
on behalf of the Company subject to certain limits.  
Details of the authorities which the Board will be seeking 
at the 2011 AGM are set out in the 2011 Notice of AGM.

The Articles of Association also specifically empower 
the Board to exercise the Company’s powers to borrow 
money and to mortgage or charge the Company’s assets 
and any uncalled capital and to issue debentures and 
other securities.

The Board determines matters including financial strategy 
and planning and takes major business decisions. The 
Board has put in place an organisational structure. This 
is further described under the heading “internal control”.

Attendance at Board and 
Committee Meetings
The table below shows the number of scheduled 
meetings attended by Directors during the year to 
31 March 2011 and, in brackets, the number of such 
meetings they were eligible to attend. In addition to 
these meetings a small number of ad hoc meetings 
were held to deal with specific items as they arose.

Total meetings held

Number attended:

Sir Adrian Montague1

Baroness Hogg2

M J Queen

J S Wilson

J M Allan3 

J P Asquith4

A R Cox 

R H Meddings

W Mesdag

C J M Morin-Postel

R W A Swannell5

Audit and 
Compliance 
Committee

Nomination 
Committee

Remuneration 
Committee

Valuations 
Committee

4

–

–

–

–

3 (4)

–

4 (4)

4 (4)

–

3 (4)

2 (2)

5

4 (4)

1 (1)

5 (5)

–

5 (5)

1 (1)

4 (5)

5 (5)

5 (5)

5 (5)

2 (2)

6

–

2 (2)

–

–

6 (6)

1 (1)

–

–

6 (6)

5 (6)

–

3

2 (2)

1 (1)

3 (3)

3 (3)

–

–

–

–

3 (3)

–

1 (1)

Board

7

6 (6)

1 (1)

7 (7)

7 (7)

6 (7)

1 (1)

6 (7)

7 (7)

7 (7)

7 (7)

3 (3)

1  Appointed to the Board on 1 June 2010 and to Valuations Committee and Nominations Committee on 7 July 2010.
2  Retired on 7 July 2010.
3  Retired on 30 April 2011.
4  Appointed to the Board on 7 March 2011 and to Remuneration Committee, Nominations Committee and Audit and Compliance Committee on 

31 March 2011.

5  Retired on 1 October 2010.

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72

3i Group plc  Report and accounts 2011

Governance > Statutory and corporate governance information

Matters reserved for the Board
The Board has approved a formal schedule of matters 
reserved to it and its duly authorised Committees for 
decision. These include:

Meetings of the Board
The principal matters considered by the Board during 
the year (in addition to matters formally reserved to 
the Board) included:

 − approval of the Group’s overall strategy, strategic plan 

 − the strategic plan, budget and financial resources;

and annual operating budget;

 − approval of the Company’s half-yearly and annual 
financial statements and changes in the Group’s 
accounting policies or practices;

 − changes relating to the capital structure of the 

Company or its regulated status;

 − regular reports from the Chief Executive;

 − regular reports from the Board’s committees;

 − the recommendations of the Valuations Committee 

on valuations of investments;

 − the Board’s risk appetite and risk tolerance;

 − major capital projects;

 − the business model and its application by different 

 − major changes in the nature of business operations;

 − investments and divestments in the ordinary course  
of business above certain limits set by the Board from 
time to time;

business lines; 

 − independence of non-executive Directors;

 − the acquisition of Mizuho Investment Management 

(UK) Limited;

 − adequacy of internal control systems;

 − the portfolio company management process; and

 − appointments to the Board and the Leadership Team;

 − the impact of the new UK Bribery Act.

 − principal terms and conditions of employment of 

members of the Leadership Team; and

 − changes in employee share schemes and other 

long-term incentive schemes.

Matters delegated by the Board to management include 
implementation of the Board approved strategy,  
day-to-day operation of the business, the appointment 
and remuneration of all executives below the Leadership 
Team and the formulation and execution of risk 
management policies and practices.

A succession and contingency plan for executive 
leadership is prepared by management and reviewed 
periodically by the Board. The purpose of this plan is  
to identify suitable candidates for succession to key  
senior management positions, agree their training  
and development needs, and ensure the necessary 
human resources are in place for the Company to  
meet its objectives.

Information
Reports and papers are circulated to the Directors in a 
timely manner in preparation for Board and committee 
meetings. These papers are supplemented by information 
specifically requested by the Directors from time to time.

Performance evaluation
During the year, the Board conducted its annual 
evaluation of its own performance and that of its 
committees and individual Directors. The evaluation 
process in the year to 31 March 2010 had been 
externally facilitated by The Zygos Partnership and the 
evaluation in the year to 31 March 2011 was conducted 
internally by the Chairman with the assistance of the 
Company Secretary. The results of this year’s evaluation 
process were reported to and discussed by the Board. 

The Board performance evaluation included consideration 
of the overall functioning of the Board. Particular topics 
considered included: length and frequency of Meetings; 
the information provided to the Board; the correct 
balance of attendance at Meeting by managers below 
Board level; the appropriate emphasis within Meetings 
placed on different aspects of its role and issues which 
would deserve fuller Board consideration; the way in 
which information on the Group’s investment portfolio 
could most usefully be presented to the Board and  
the allocation of work between the Board and its 
Committees. The evaluation was valuable in enabling 
Directors to identify a number of areas where its working 
practices could usefully be developed.

In his role as Senior Independent Director, Mr R H Meddings 
led a review by the Directors of the performance of the 
Chairman and subsequently reported back to the Board.

Report and accounts 2011 3i Group plc

73

The roles of the Chairman, Chief Executive 
and Senior Independent Director
The division of responsibilities between the Chairman 
of the Board and the Chief Executive is clearly defined 
and has been approved by the Board.

The Chairman
The Chairman leads the Board in the determination 
of its strategy and in the achievement of its objectives.  
The Chairman is responsible for organising the business  
of the Board, ensuring its effectiveness and setting 
its agenda. The Chairman has no involvement in the 
day-to-day business of the Group. The Chairman 
facilitates the effective contribution of non-executive 
Directors and constructive relations between executive 
and non-executive Directors. The Chairman ensures  
that regular reports from the Company’s brokers are 
circulated to the non-executive Directors to enable 
non-executive Directors to remain aware of shareholders’ 
views. The Chairman ensures effective communication 
with the Company’s shareholders.

The Chief Executive
The Chief Executive has direct charge of the Group  
on a day-to-day basis and is accountable to the Board  
for the financial and operational performance of the 
Group. The Chief Executive has formed a committee 
called the Leadership Team (formerly Management 
Committee) to enable him to carry out the responsibilities 
delegated to him by the Board. The Committee 
comprises Mr M J Queen, Mrs J S Wilson, Mr M A Antal,  
Mr K J Dunn, Mr A C B Giddins, Mr J R Ghose,  
Ms C M Hogg, Mr I M Nolan, Mr R Stefanowski,  
Mr P Waller and Mr G A R Zarzavatdjian. The Committee 
meets on a regular basis to consider operational matters 
and the implementation of the Group’s strategy.

Senior Independent Director
Mr R W A Swannell served as Senior Independent 
Director until 1 October 2010, and Mr R H Meddings 
from 7 October 2010, to whom, in accordance with the 
Combined Code, concerns were able to be conveyed. 

Directors
The Board comprises the Chairman, five independent 
non-executive Directors and two executive Directors. 
Biographical details for each of the Directors are set  
out in the Board of Directors and Leadership Team 
section. Mr A R Cox, Mr R H Meddings, Mr W Mesdag,  
Mme C J M Morin-Postel, Mr M J Queen, and  
Mrs J S Wilson served throughout the year under  
review. Mr J M Allan served throughout the year  
under review, stepping down as a Director on 30 April 
2011. Sir Adrian Montague served as a Director from  
1 June 2010 and Chairman from 7 July 2010 and  
Mr J P Asquith served as a Director from 7 March 2011. 
Baroness Hogg served as Chairman and a Director until  
7 July 2010. Mr R W A Swannell served as a Director  
until 1 October 2010.

In addition to fulfilling their legal responsibilities as 
Directors, non-executive Directors are expected to bring 
an independent judgement to bear on issues of strategy, 
performance, resources and standards of conduct, and  
to help the Board provide the Company with effective 
leadership. They are also expected to ensure high 
standards of financial probity on the part of the Company 
and to monitor the effectiveness of the executive 
Directors. Directors are expected to make available 
sufficient time to meet the requirements of the 
appointment. The average time commitment for a 
non-executive Director is expected to be around 15 days 
a year together with additional time for serving on the 
Board’s committees. 

The Board’s discussions, and its approval of the Group’s 
strategic plan and annual budget, provide the  
non-executive Directors with the opportunity to 
contribute to and validate management’s plans and assist 
in the development of strategy. The non-executive 
Directors receive regular management accounts, reports 
and information which enable them to scrutinise the 
Company’s and management’s performance against 
agreed objectives.

Directors’ independence
All the non-executive Directors (other than the Chairman, 
who was independent on appointment) were considered 
by the Board to be independent for the purposes of the 
Combined Code in the year to 31 March 2011. 

The Board assesses and reviews the independence of 
each of the non-executive Directors at least annually, 
having regard to the potential relevance and materiality  
of a Director’s interests and relationships rather than 
applying rigid criteria in a mechanistic manner. No Director 
was materially interested in any contract or arrangement 
subsisting during or at the end of the financial period that 
was significant in relation to the business of the Company.

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74

3i Group plc  Report and accounts 2011

Governance > Statutory and corporate governance information

Directors’ employment contracts
Details of executive Directors’ employment contracts 
are set out in the Directors’ remuneration report.

Training and development
The Company has developed a training policy which 
provides a framework within which training for Directors 
is planned with the objective of ensuring Directors 
understand the duties and responsibilities of being a 
director of a listed company. All Directors are required 
to update their skills and maintain their familiarity with 
the Company and its business continually. Presentations 
on different aspects of the Company’s business are made 
regularly to the Board. On appointment, all non-executive 
Directors have discussions with the Chairman and the 
Chief Executive following which appropriate briefings  
on the responsibilities of Directors, the Company’s 
business and the Company’s procedures are arranged. 
The Company provides opportunities for non-executive 
Directors to obtain a thorough understanding of the 
Company’s business by meeting members of the senior 
management team who in turn arrange, as required, visits 
to investment or support teams.

The Company has procedures for Directors to take 
independent legal or other professional advice about 
the performance of their duties.

The Board’s committees
The Board is assisted by various standing committees  
of the Board which report regularly to the Board.  
The membership of these committees is regularly 
reviewed by the Board. When considering committee 
membership and chairmanship, the Board aims to ensure 
that undue reliance is not placed on particular Directors.

These committees all have clearly defined terms of 
reference which are available at www.3igroup.com.  
The terms of reference of the Audit and Compliance 
Committee, the Remuneration Committee and the 
Nominations Committee provide that no one other 
than the particular committee chairman and members 
may attend a meeting unless invited to attend by the 
relevant committee.

Audit and Compliance Committee
The Audit and Compliance Committee comprises  
Mr R H Meddings (Chairman), Mr J P Asquith, Mr A R Cox 
and Mme C J M Morin-Postel, all of whom served 
throughout the year, save for Mr J P Asquith who served 
from 31 March 2011. Mr R W A Swannell served as 
Chairman of the Committee until 1 October 2010.  
Mr J M Allan served as a member of the Committee 
throughout the year, stepping down from the Committee 
on 30 April 2011. All the members of the Committee  
are independent non-executive Directors. The Board is  
satisfied that the Committee Chairman, Mr R H Meddings, 
has recent and relevant financial experience.

During the year, the Committee:

 − reviewed the effectiveness of the internal control 

environment of the Group and the Group’s compliance 
with its regulatory requirements and received reports 
on bank covenants, third-party liabilities and off balance 
sheet liabilities;

 − reviewed and recommended to the Board the 

accounting disclosures comprised in the half-yearly  
and annual financial statements of the Company and 
reviewed the scope of the annual external audit plan 
and the external audit findings;

 − received the reports of the Valuations Committee 
on the valuation of the Group’s investment assets;

 − received regular reports from the Group’s internal audit 
function, monitored its activities and effectiveness, 
and agreed the annual internal audit plan;

 − received regular reports from the Group’s regulatory 
compliance function and Group Risk Committee, 
and monitored their activities and effectiveness;

 − oversaw the Company’s relations with its external 
auditors including assessing auditor performance, 
independence and objectivity, recommending 
the auditors’ reappointment and approving the 
auditors’ fees; 

 − met with the external auditors in the absence 

of management;

 − reviewed the portfolio management processes;

 − received reports on litigation; and

 − considered the impact of the new UK Bribery Act. 

Report and accounts 2011 3i Group plc

75

Remuneration Committee
The Remuneration Committee comprises Mr J P Asquith 
(Chairman from 9 May 2011), Mr W Mesdag and  
Mme C J M Morin-Postel, all of whom served throughout 
the year, save for Mr J P Asquith who served from  
31 March 2011. Mr J M Allan served as Chairman of  
the Committee throughout the year, stepping down  
from the Committee on 30 April 2011. Baroness Hogg 
served as a member of the Committee until 7 July 2010. 
All the current members of the Committee are 
independent non-executive Directors.

The work of the Remuneration Committee is described  
in the Directors’ remuneration report.

Nominations Committee
The Nominations Committee comprises Sir Adrian 
Montague (Chairman), Mr M J Queen, Mr J P Asquith, 
Mr A R Cox, Mr R H Meddings, Mr W Mesdag and 
Mme C J M Morin-Postel, all of whom served throughout 
the year, save for Sir Adrian Montague and Mr J P Asquith 
who served from 7 July 2010 and 31 March 2011, 
respectively. Baroness Hogg served as Chairman of the 
Committee until 7 July 2010. Mr J M Allan served 
throughout the year, stepping down from the Committee 
on 30 April 2011. Mr R W A Swannell served as a 
member of the Committee until 1 October 2010.

During the year, the Nominations Committee:

 − considered the recommendation from a sub-
committee that Sir Adrian Montague succeed 
Baroness Hogg as Chairman and agreed to 
recommend this to the Board;

 − considered and recommended Mr J P Asquith 
for appointment as a non-executive Director 
of the Company;

 − considered potential candidates for further 
non-executive Director appointments; and

 − considered the size, balance and composition 

of the Board.

A formal, rigorous and transparent process for the 
appointment of Directors has been established with 
the objective of identifying the skills and experience 
profile required of new Directors and identifying suitable 
candidates. The procedure includes the appraisal and 
selection of potential candidates, including (in the case 
of non-executive Directors) whether they have sufficient 
time to fulfil their roles. Specialist recruitment consultants 
assist the Committee to identify suitable candidates 
for appointment. The Committee’s recommendations 
for appointment are put to the full Board for approval.

Valuations Committee
The Valuations Committee comprises Mr W Mesdag 
(Chairman), Sir Adrian Montague, Mr M J Queen, and  
Mrs J S Wilson, all of whom served throughout the year 
save for Sir Adrian Montague who served from 7 July 
2010, and who was Chairman of the Committee from 
then until 1 October 2010 when he was succeeded by 
Mr W Mesdag. Baroness Hogg served as Chairman of the 
Committee until 7 July 2010. Mr R W A Swannell served 
as a member of the Committee until 1 October 2010. 

During the year, the Valuations Committee considered 
and made recommendations to the Audit and Compliance 
Committee and the Board on valuations of the Group’s 
investments to be included in the half-yearly and annual 
financial statements of the Group and reviewed 
valuations policy and methodology.

The Company Secretary
All Directors have access to the advice and services 
of the General Counsel and Company Secretary, who is 
responsible for advising the Board, through the Chairman, 
on governance matters. The Company’s Articles of 
Association and the schedule of matters reserved to 
the Board or its duly authorised committees for decision 
provide that the appointment and removal of the 
Company Secretary is a matter for the full Board.

Relations with shareholders
The Board recognises the importance of maintaining a 
purposeful relationship with the Company’s shareholders. 
The Chief Executive and the Finance Director, together 
with the Group Communications Director, meet with the 
Company’s principal institutional shareholders to discuss 
relevant issues as they arise. The Chairman maintains 
a dialogue with shareholders on strategy, corporate 
governance and Directors’ remuneration as required.

The Board receives reports from the Company’s brokers 
on shareholder issues and non-executive Directors are 
invited to attend the Company’s presentations to analysts 
and are offered the opportunity to meet shareholders. 

The Company’s major shareholders are offered the 
opportunity to meet newly-appointed non-executive 
Directors.

The Company also uses its AGM as an opportunity 
to communicate with its shareholders. At the Meeting, 
business presentations are generally made by the 
Chief Executive and the Finance Director. The Chairmen 
of the Remuneration, Audit and Compliance, and 
Nominations Committees are generally available 
to answer shareholders’ questions.

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76

3i Group plc  Report and accounts 2011

Governance > Statutory and corporate governance information

During the year, at the invitation of the Chairman, the 
Company’s major shareholders met with the Chairman, 
the Chairman of the Audit and Compliance Committee 
and the Company Secretary to discuss matters of 
corporate governance and corporate responsibility 
relevant to the Company and its shareholders.

The overall internal control process is regularly 
reviewed by the Board and the Audit and Compliance 
Committee and complies with the internal control 
guidance for Directors on the Combined Code issued 
by the Turnbull Committee. The process established 
for the Group includes:

The 2010 Notice of AGM was dispatched to shareholders 
not less than 20 working days before the Meeting.  
At that Meeting, voting on each resolution was taken  
on a poll and the poll results were made available on  
the Company’s website.

Portfolio management and voting policy
In relation to unquoted investments, the Group’s 
approach is to seek to add value to the businesses in 
which the Group invests through the Group’s extensive 
experience, resources and contacts. In relation to quoted 
investments, the Group’s policy is to exercise voting 
rights on matters affecting its interests.

Internal control 
The Board is responsible for the Group’s system of 
internal control and reviews its effectiveness at least 
annually. Such a system is designed to manage rather 
than eliminate the risk of failure to achieve business 
objectives and can provide only reasonable and not 
absolute assurance against material misstatement or loss.

Through the regular meetings of the Board and the 
schedule of matters reserved to the Board or its duly 
authorised committees for decision, the Board aims 
to maintain full and effective control over appropriate 
strategic, financial, operational and compliance issues.  
The Board has put in place an organisational structure 
with clearly defined lines of responsibility and delegation 
of authority. The Board considers and approves a 
strategic plan regularly and approves a budget on an 
annual basis. In addition, there are established procedures 
and processes for planning and controlling expenditure 
and the making of investments. There are also 
information and reporting systems for monitoring the 
Group’s businesses and their performance.

The Group Risk Committee is a management committee 
formed by the Chief Executive and its purpose is to 
review the business of the Group in order to ensure that 
business risk is considered, assessed and managed as an 
integral part of the business. There is an ongoing process 
for identifying, evaluating and managing the Group’s 
significant risks. This process was in place for the year 
to 31 March 2011 and up to the date of this report.

The Group Risk Committee’s activities are supported  
by the activities of Treasury Management Committee  
as well as the Portfolio Committee and Operating 
Committee. Details of the risk management framework 
can be found in the Risk section.

Policies
 − core values and global policies together comprising 
the Group’s high level principles and controls, with 
which all staff are expected to comply;

 − manuals of policies and procedures, applicable to 
all business units, with procedures for reporting 
weaknesses and for monitoring corrective action;

 − a code of business conduct, with procedures for 

reporting compliance therewith.

Processes
 − appointment of experienced and professional staff, 

both by recruitment and promotion, of the necessary 
calibre to fulfil their allotted responsibilities;

 − a planning framework which incorporates a Board 
approved strategic plan, with objectives for each 
business unit;

 − formal business risk reviews performed by 

management which evaluate the potential financial 
impact and likelihood of identified risks and possible 
new risk areas;

 − the setting of control, mitigation and monitoring 

procedures and the review of actual occurrences, 
identifying lessons to be learnt;

 − a comprehensive system of financial reporting to  

the Board, based on an annual budget with monthly 
reporting of actual results, analysis of variances, 
scrutiny of key performance measures including 
gearing and net debt levels, and regular re-forecasting;

 − regular treasury reports to the Board, which analyse 

the funding requirements of each class of assets, track 
the generation and use of capital and the volume 
of liquidity, measure the Group’s exposure to interest 
and exchange rate movements and record the level 
of compliance with the Group’s funding objectives;

 − a Group Compliance function whose role is to integrate 
regulatory compliance procedures and best practices 
into the Group’s systems;

 − well defined procedures governing the appraisal and 

approval of investments, including detailed investment 
and divestment approval procedures, incorporating 
appropriate levels of authority and regular post-
investment reviews.

For more information on risk please go to p50 k

Report and accounts 2011 3i Group plc

77

Auditors’ independence and objectivity
Subject to annual appointment by shareholders, auditor 
performance is monitored on an ongoing basis and 
formally reviewed every five years, the last review being 
held during the year to 31 March 2009. Following this 
review the Audit and Compliance Committee concluded 
that Ernst & Young LLP’s appointment as the Company’s 
auditors should be continued.

The Audit and Compliance Committee recognises the 
importance of ensuring the independence and objectivity 
of the Company’s auditors. It reviews the nature and 
extent of the services provided by them, the level of 
their fees and the element comprising non-audit fees.

The Audit and Compliance Committee Chairman is 
notified of all assignments allocated to Ernst & Young 
over a set threshold, other than those related to due 
diligence within the Group’s investment process where 
the team engaged would be independent of the audit 
team. Safeguards have been put in place to reduce 
the likelihood of compromising auditor independence, 
including the following principles which are applied in 
respect of services provided by the auditors and other 
accounting firms and monitored by the Audit and 
Compliance Committee:

 − services required to be undertaken by the auditors, 

which include regulatory returns, formalities relating to 
borrowings, shareholder and other circulars. This work 
is normally allocated directly to the auditors;

 − services which it is most efficient for the auditors to 

provide. In this case, information relating to the service 
is largely derived from the Company’s audited financial 
records; for example, corporate tax services. This work 
is normally allocated to the auditors subject to 
consideration of any impact on their independence; and

 − services that could be provided by a number of firms 
including general consultancy work. All significant 
consultancy projects are normally put out to tender 
and work would be allocated to the auditors only if it 
did not present a potential threat to the independence 
of the audit team. Included in this category is due 
diligence work relating to the investment process.  
If this service were to be provided by the auditors,  
the specific team engaged would be independent 
of the audit team.

Details of the fees paid to the auditors are disclosed 
in note 6 to the financial statements.

Verification
 − an Internal Audit function which undertakes 
periodic examination of business units and 
processes and recommends improvements 
in controls to management;

 − the external auditors who are engaged to express 
an opinion on the annual financial statements; and

 − an Audit and Compliance Committee which considers 
significant control matters and receives reports from 
Internal Audit, the external auditors and Group 
Compliance on a regular basis.

The internal control system is monitored and supported 
by Internal Audit and Compliance, which operates on 
an international basis and reports to management and 
the Audit and Compliance Committee on the Group’s 
operations. The work of Internal Audit is focused on 
the areas of greatest risk to the Group determined 
on the basis of the Group’s risk management process.

The external auditors independently and objectively 
review the approach of management to reporting 
operating results and financial condition. In co-ordination 
with Internal Audit, they also review and test the system 
of internal financial control and the information contained 
in the annual financial statements to the extent necessary 
for expressing their opinion.

Financial reporting
In the context of the above internal control framework, 
there are specific processes in place in relation to Financial 
Reporting, including:

 − comprehensive system of key control and oversight 

processes, including regular reconciliations, line 
manager reviews and systems’ access controls;

 − updates for consideration by the Audit and Compliance 
Committee of accounting developments, including 
draft and new accounting standards and legislation; 

 − a separate Valuations Committee which considers  

the Group’s investment valuation policies, application 
and outcome;

 − approval of the Group’s budget by the Board and 
regular updates on actual and forecast financial 
performance against budget;

 − reports from Internal Audit on matters relevant to the 

financial reporting process, including periodic assessments 
of internal controls, processes and fraud risk; 

 − independent updates and reports from the external 
auditors on accounting developments, application 
of accounting standards, key accounting judgements 
and observations on systems and controls; and

 − regular risk reviews, including an assessment of risks 

to reliable financial reporting covering people, processes 
and systems, and updates on the management of 
identified risks or actual incidents.

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78

3i Group plc  Report and accounts 2011

Governance

Directors’ remuneration report

Note: References in this report to “the year” relate to the 
financial year 1 April 2010 to 31 March 2011. References 
to “the current year” relate to the financial year 1 April 2011 
to 31 March 2012.

Executive Directors
The Company’s policy for executive Directors (being 
the Chief Executive and Finance Director only) during 
the year is that:

Remuneration Committee
During the year the Remuneration Committee comprised 
Mr J M Allan (Committee Chairman until 30 April 2011), 
Baroness Hogg (until 7 July 2010), Mr J P Asquith  
(from 31 March 2011), Mr W Mesdag and  
Mme C J M Morin-Postel, all of whom were independent 
non-executive Directors, save for Baroness Hogg 
(Chairman of the Board until 7 July 2010) who was 
independent on appointment. In addition, Sir Adrian 
Montague attended Committee meetings following his 
appointment as Chairman of the Board (on 7 July 2010). 
Mr Allan stepped down as Committee Chairman on  
30 April 2011 on leaving the Board and Mr Asquith was 
appointed as Committee Chairman on 9 May 2011.

The Committee held six regular scheduled meetings 
during the year (which were attended by all members  
of the Committee, save for one meeting which  
Mme Morin-Postel was unable to attend) to consider 
remuneration policy and to determine, on behalf of  
the Board, the specific remuneration packages and 
co-investment and carried interest arrangements for 
executive Directors and other members of the Leadership 
Team. The Committee has terms of reference which are 
available on the Company’s website.

The Committee was materially assisted with advice 
on Directors’ remuneration in the year by Kepler 
Associates (external remuneration advisers appointed 
by the Committee) and Mr M J Queen (Chief Executive), 
who did not advise the Committee on his own 
remuneration. Kepler Associates did not provide any 
services to the Group during the year other than to the 
Remuneration Committee.

Remuneration Policy – overall framework
Chairman and non-executive Directors
Fees are reviewed regularly by the Board (or, in the  
case of the Chairman’s fee, by the Committee) and are 
intended to be competitive with fees paid by FTSE 100 
companies and FTSE 100 financial services companies  
of broadly similar size. The Chairman and non-executive 
Directors are not eligible for bonuses, long-term 
incentives, pensions or performance-related 
remuneration. No changes to remuneration policy for  
the Chairman and non-executive Directors are expected 
for the current or subsequent years.

 − remuneration and other benefits should be sufficient 
to attract, retain and motivate executives of the 
calibre required;

 − variable remuneration linked to performance 

(currently comprising discretionary annual cash 
bonuses, deferred share bonuses and long-term 
incentives) is intended to form a substantial component 
of total remuneration; and

 − remuneration for the Chief Executive and Finance 
Director should be competitive with FTSE 100 
companies and FTSE 100 financial services companies 
of broadly similar size.

The Group’s Discretionary Share Plan, under which 
long-term incentives for executive Directors (in the 
form of share options and Performance Shares) are 
awarded, comes to the end of its 10 year life in 2011. 
The Company will therefore be seeking approval at its 
2011 Annual General Meeting to renew the Plan for a 
further 10 year period. The Company is also actively 
considering what if any changes should be made to the 
mix of incentive vehicles and performance metrics going 
forward to ensure alignment with shareholders’ interests, 
promote the achievement of the Company’s short and 
long-term commercial objectives, and appropriately 
reflect regulatory and other changes.

The Remuneration Committee has agreed a “clawback” 
policy which it intends to apply to future incentive 
awards for the Chief Executive and Finance Director 
(and certain other senior executives). Such awards will 
be subject to forfeiture or reduction (prior to vesting) 
in such exceptional circumstances as the Committee 
considers fair, reasonable and proportionate. Such 
circumstances would include material misstatement of 
Group financial statements, dismissal for cause, or cases 
where an individual is deemed to have caused a material 
loss for the Group as a result of reckless, negligent or 
wilful actions or inappropriate values or behaviour.

Share ownership
The Company’s share ownership and retention policy 
requires executive Directors to build up over time, 
and thereafter maintain, a shareholding equivalent 
to at least 1.5 times salary in the Company’s shares.

Report and accounts 2011 3i Group plc

79

Remuneration policy – components of pay
Chairman and non-executive Directors

Chairman fee*

Non-executive Directors:
– Board membership fee

– Deputy Chairman fee
– Senior Independent 

Director fee
Committee fees**:
– Chairman
– Member

Fees for 2010-11 Fees for 2011-12
£265,000 
plus £30,000 
of 3i shares

£265,000 
plus £30,000 
of 3i shares

£48,000 
plus 1,600 
3i shares
£30,000

£50,000 
plus 2,500 
3i shares
£30,000

£10,000

£10,000

£20,000
£3,000

£20,000
£4,000

*  The fees of the former Chairman, Baroness Hogg (who served until 

7 July 2010), were £260,000 plus 8,000 shares.

** Fees are payable in respect of Audit and Compliance Committee, 
Remuneration Committee and, with effect from 1 October 2010, 
Valuations Committee.

Executive Directors
(a) Salaries
The Committee’s remuneration advisers assist in 
reviewing salary benchmarks for the Chief Executive  
and Finance Director. When considering pay increases, 
the Committee is also sensitive to wider issues, including 
pay and employment conditions elsewhere in the Group. 
The executive Directors received no increase in base 
salary during the year.

(b) Bonuses
Framework:

 − Executive Directors are eligible for non-pensionable 

discretionary annual bonuses.

 − Target bonuses are determined by the Committee, 

expressed as a multiple of salary.

 − Maximum bonus payable is twice the target bonus.

 − Awards are determined on the basis of corporate and 

personal performance. Bonuses above target are given 
only for outstanding performance.

 − Bonuses earned are paid in cash and deferred shares; 

the Committee determines the split between cash and 
deferred shares.

 − The Committee retains discretion to make adjustments 
to bonus arrangements in appropriate circumstances.

Bonus arrangements during the year were as follows:

 − Target bonus in respect of the year for the Chief 

Executive was 125% of base salary and the maximum 
bonus was 250%.

 − Target bonus for the Finance Director was 100% 

of base salary and the maximum bonus was 200%.

 − That part of any bonus which exceeded 100% of salary 

was receivable in shares deferred for two years.

 − The performance indicators used as a guide to the 
corporate performance element for the year were 
based on operating expenses, together with cost 
efficiency, costs relative to assets under management, 
net carried interest, gross portfolio return, total return, 
gross debt, net debt, gearing and liquidity.

For the year to 31 March 2012 executive Directors’ 
annual bonuses will be determined based on a balanced 
scorecard with the majority of the award being based  
on performance against budgeted financial indicators 
including net asset value, comparative gross returns,  
net debt and operating efficiency. The balance will be 
based on strategic deliverables and personal objectives.

(c) Long-term incentives
Long-term incentive arrangements during the year 
for the Chief Executive and Finance Director consisted 
of share options and Performance Share awards under 
the 3i Group Discretionary Share Plan:

 − Share options and/or Performance Shares were 
awarded based on factors including individual 
performance, market practice, the specific 
circumstances facing the Company and calculations  
of the fair values of awards.

 − The annual maximum for an award of:

(a) share options was an award with an aggregate 

exercise price of six times salary; and

(b) Performance Shares was an award with an 

aggregate market value of three times salary.

 − The combination of all share-based awards should  

not have a fair value of more than 2.5 times salary in 
any year. Fair values are calculated by the Committee’s 
remuneration advisers. During the year, the Chief 
Executive was granted share-based awards with a 
fair value of 2.5 times salary and the Finance Director  
was granted share-based awards with a fair value 
of 1.275 times salary.

 − Options may normally be exercised from the third 

until the tenth anniversaries of grant and Performance 
Shares normally vest on the third anniversary of grant.

 − Vesting is normally subject to an appropriate 

performance condition which is calculated over a 
three-year performance period. 

The Committee may also make grants of restricted 
shares, subject only to a forfeiture condition on departure 
from the Company within a specified period. No such 
awards were made to executive Directors during the year.

(d) Co-investment and carried interest plans
3i’s co-investment and carried interest plans provide 
long-term incentives for senior executives other than 
the Chief Executive and Finance Director. The Chief 
Executive and Finance Director are not currently eligible 
to participate, although Mr Queen has retained certain 
interests acquired prior to his appointment as Chief 
Executive, details of which are provided on pages  
85 and 86.

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80

3i Group plc  Report and accounts 2011

Governance > Directors’ remuneration report

Performance graphs

3i total shareholder return versus FTSE All-Share total return
(cumulative)
140

3i diluted NAV versus FTSE All-Share total return
% (non-cumulative)
60

120

100

80

60

40

20

2006

2007

2008

2009

2010

2011

40

20

0

-20

-40

-60

2007

2008

2009

2010

2011

3i

FTSE All-Share

Rebased at 100 at 1 April 2006

3i diluted NAV (with dividends reinvested)

FTSE All-Share

TSR graph:
This graph compares the Company’s total shareholder return 
(“3i TSR”) for the five financial years to 31 March 2011 with the total 
shareholder return of the FTSE All-Share Index. The FTSE All-Share 
Index is a widely used performance comparison for UK companies.

Diluted NAV graph:
This graph compares percentage changes in the Company’s diluted 
net asset value (“NAV”) per share over each of the last five financial 
years (with dividends reinvested) with the FTSE All-Share Index total 
return over the same periods. This has been included as NAV growth 
is one of the performance conditions used in the Company’s long-
term incentive schemes. NAV prior to June 2009 has been adjusted 
to reflect the rights issue in June 2009.

Report and accounts 2011 3i Group plc

81

Directors’ remuneration during the year

Executive Directors (note 3)
M J Queen
J S Wilson
Chairman and non-executive Directors (note 4)
Sir Adrian Montague (Director from 1 June 2010,  

Chairman from 7 July 2010) 

J M Allan (until 30 April 2011)
J P Asquith (from 7 March 2011) 
A R Cox
R H Meddings
W Mesdag 
C J M Morin-Postel
Former Directors
Baroness Hogg (until 7 July 2010) 
Lord Smith of Kelvin (until 30 October 2009)
O H J Stocken (until 31 December 2009)
R W A Swannell (until 1 October 2010)
Total

(note 1)

(note 2)

Salary and 
fees
£’000

Bonus for 
the year 
£’000

Deferred 
share bonus
£’000

Benefits  
in kind
£’000

562
404

260
76
3
56
70
66
59

76
–
–
48
1,680

550
396

188
–

–
–
–
–
–
–
–

–
–
–
–
946

–
–
–
–
–
–
–

–
–
–
–
188

2
2

–
–
–
–
–
–
–

–
–
–
–
4

Total 
remuneration 
year to 
31 March 2011
£’000

Total 
remuneration 
year to 
31 March 2010
£’000

1,302
802

1,978
293

260
76
3
56
70
66
59

76
–
–
48
2,818

–
41
–
27
55
55
58

282
44
73
82
2,988

Notes:
1.  Deferred share bonuses relating to the year to 31 March 2011 will be paid in ordinary shares in the Company, deferred for two years.
2. “Benefits in kind” were health insurance.
3. As at 31 March 2011, executive Directors’ salaries were as follows: Mr M J Queen, £550,000 per annum and Mrs J S Wilson, £400,000 per annum.
4. Salary and fees shown for the Chairman and non-executive Directors include fees used to purchase 3i Group plc shares, where applicable.

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82

3i Group plc  Report and accounts 2011

Governance > Directors’ remuneration report

Share options over ordinary shares held by Directors during the year:

M J Queen

J S Wilson 

Date of grant
28.06.00
27.06.02
25.06.03
23.06.04
21.06.05
09.02.09
15.06.09
17.06.10

11.01.06
18.06.07
23.06.08
12.11.08
15.06.09
17.06.10

Held at  
1 April  
2010
49,452
211,337
91,884
143,808
71,835
1,503,371
595,667
–
2,667,354
21,057
34,209
42,615
401,049
288,808
–
787,738

Granted during 
the year
–
–
–
–
–
–
–
1,118,644
1,118,644
–
–
–
–
–
406,779
406,779

Held at  
Lapsed during 
31 March  
the year
2011
49,452
–
–
211,337
–
91,884
–
143,808
–
71,835
– 1,503,371*
–
595,667
– 1,118,644
3,736,546

49,452
–
34,209
–
–
–
–
34,209

21,057**

–

42,615**

401,049
288,808
406,779
1,160,308

Exercise price  
£
8.56
4.19
3.54
3.76 
4.32
2.18
2.77
2.95

Earliest normal 
exercise date
28.06.03
27.06.05
25.06.06
23.06.07
21.06.08
31.03.12
15.06.12
17.06.13

5.58
7.31
5.16
2.99
2.77
2.95

11.01.09
18.06.10
23.06.11
12.11.11
15.06.12
17.06.13

Expiry date 
27.06.10
26.06.12
24.06.13
22.06.14
 20.06.15
08.02.19
14.06.19
16.06.20

10.01.16
17.06.17
22.06.18
11.11.18
14.06.19
16.06.20

No options were exercised by Directors during the year. The performance condition has not yet been met for those options shown in dark blue text.

*  The exercise price of these options was set approximately 50% above the market price at date of grant.
** Awarded before appointment as a Director.

Notes
1.  Options granted after 1 April 2001 vest subject to a performance condition, measured over a three-year performance period, relating to annual percentage compound 

growth in net asset value per share with dividends re-invested, relative to the annual percentage change in RPI, as shown below. For options granted after 31 March 2004 
there is no opportunity for the performance condition to be re-tested after the three-year period. The Committee determines the fulfilment of performance conditions 
based on calculations independently reviewed by the Company’s auditors.

Award granted
Since 31 March 2005

NAV growth required 
for minimum vesting
RPI + 3 percentage points

In year to 31 March 2005

RPI + 3 percentage points

Between 1 April 2001 
and 31 March 2004

RPI + 5 percentage points

% vesting
30%

50%

50%

NAV growth required 
for maximum vesting
More than RPI + 8 
percentage points
More than RPI + 8 
percentage points
RPI + 10  
percentage points

% vesting
100%

For NAV growth 
between minimum and 
maximum vesting levels
The grant vests pro rata

100%

The grant vests pro rata

100%

The grant vests pro rata

2. Fair values of options granted in the year (calculated by the remuneration advisers using a Black-Scholes valuation) were as follows: Mr M J Queen, £561,000  
and Mrs J S Wilson, £204,000. The fair value was calculated as 17% of the market value at the date of grant of the shares under option. Options were granted  
for nil consideration.

3. The market price of ordinary shares in the Company at 31 March 2011 was 298.9p and the range during the period 1 April 2010 to 31 March 2011 was 251.9p to 340p. 

No gains were made by the highest paid Director (2010: nil) or by the Directors in aggregate (2010: nil).

4. As at 31 March 2011:
  –   Ordinary shares with an aggregate nominal value of £11.936 million had been issued or remained issuable in respect of awards grated under executive (discretionary) 

share schemes within the past 10 years. This was within the 5% dilution limit suggested by the Association of British Insurers.

  –   Ordinary shares with an aggregate nominal value of £13.332 million had been issued or remained issuable in respect of awards granted under all employee share plans 

within the past 10 years. This was within the 10% dilution limit suggested by the Association of British Insurers.

Report and accounts 2011 3i Group plc

83

Performance Shares held by Directors during the year:

M J Queen

J S Wilson 

Date of award
06.02.09
15.06.09
17.06.10

23.06.08
12.11.08
15.06.09
17.06.10

Held at  
1 April  
2010
1,127,528
202,205
–
1,329,733
75,456
200,524
147,058
–
423,038

Granted/issued 
during the year
–
–
540,677
540,677
–
–
–
203,389
203,389

Lapsed during 
the year
–
–
–
–
–
–
–
–
–

Held at  
31 March  
2011
1,127,528
202,205
540,677
1,870,410
75,456*
200,524
147,058
203,389
626,427

Market 
price on date 

of grant Date of vesting
06.02.12
15.06.12
17.06.13

2.35
2.72
2.95

8.29
4.81
2.72
2.95

23.06.11
12.11.11
15.06.12
17.06.13

No awards vested during the year.

*  Awarded before appointment as a Director.

Notes
1.  The fair values (calculated by the remuneration advisers using a Monte Carlo simulation) of Performance Share awards made in the year were as follows: Mr M J Queen, 

£813,450 and Mrs J S Wilson, £306,000. The fair value was calculated as 51% of the market value at the date of award of the shares subject to the award.

2. The performance condition relating to Performance Share awards is based on a comparison of the growth in value of a shareholding in the Company over three years 
(averaged over a 60 day period) with the FTSE 100 Index (both with dividends re-invested), as set out in the table below. The Committee determines the fulfilment 
of performance conditions based on calculations prepared by the Committee’s independent adviser.

Growth in value for Company versus FTSE 100 (as described above) 
Below the FTSE 100
Same as the FTSE 100*
8% pa above the FTSE 100*

*  Between these levels, awards vest pro rata.

% of award vesting
Zero
35%
100%

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84

3i Group plc  Report and accounts 2011

Governance > Directors’ remuneration report

Share Incentive Plan
Participants in the HM Revenue & Customs approved Share Incentive Plan (“SIP”) invest up to £125 per month from pre-tax salary in ordinary 
shares (“partnership shares”). For each partnership share the Company grants two free ordinary shares (“matching shares”) which are normally 
forfeited if employment ceases (other than on retirement or other “qualifying reasons”) within three years of grant. Dividends are reinvested in 
further ordinary shares (“dividend shares”). Directors’ participation is shown below:

Held at  
1 April 2010:
Partnership Shares
B
975
344

Ord
1,830
1,139

Held at  
1 April 2010:
Matching Shares
B
Ord
1,998
3,658
690
2,278

Held at  
1 April 2010:
Dividend Shares
B
Ord
20
435
4
71

Held at  
31 March 2011:
Partnership Shares
B
975
344

Ord
2,343
1,652 

Held at  
31 March 2011:
Matching Shares
B
1,998
690

Ord
4,684
3,304

Held at  
31 March 2011:
Dividend Shares
B
Ord
20
504
4
114

M J Queen
J S Wilson

Notes
1.  From 1 April 2011 to 1 May 2011, Mr M J Queen and Mrs J S Wilson each acquired a further 46 partnership ordinary shares and 92 matching ordinary shares.
2. Ordinary shares were awarded in the year at prices between 258p and 334.1p per share, with an average price of 291.9p per share.
3. B shares held within the plan result from the bonus issues of B shares in 2006 and 2007.
4. Shares within the SIP are held by a nominee on behalf of participants. The nominee exercises the votes on such shares on the participants’ instructions.

Pension arrangements
During the year the Chief Executive and Finance Director were members of the 3i Group Pension Plan, a defined benefit contributory scheme. 
The Plan provides for a maximum pension of two-thirds of final pensionable salary on retirement (limited, in the case of members joining on or 
after 1 June 1989, to the plan earnings cap). It should be noted that pension accrual ceased for all members, including executive Directors, with 
effect from 5 April 2011. Further details of the Plan are set out in note 9 to the financial statements on pages 103 and 104.

(note 1)

(note 2)

(note 1)

(note 3)

(note 3)

Increase in 
accrued 
pension 
(excluding 
inflation) 
during the 
year to 
31 March 
2011
£’000 pa
3.1
2.1

Total accrued 
pension at 
31 March 
2011
£’000 pa
253.3
13.0

Director’s 
own 
contributions 
(excluding 
AVCs) paid 
into the plan 
during the 
year to 
31 March 
2011
£’000
20.0
6.2 

Increase in 
accrued 
pension 
(including 
inflation) 
during the 
year to 
31 March 
2011
£’000 pa
10.6
2.5

Difference 
between 
transfer 
values at start 
and end of the 
accounting 
year, less 
Director’s 
contribution
£’000 
329.0
31.0

Transfer value 
at the end of 
the year of 
the increase in 
accrued 
benefits 
during the 
year less 
Director’s 
contribution
£’000
38.0
24.0

Transfer 
value of the 
accrued 
benefits at 
31 March 
2011 
£’000 
4,744.7
181.8

Transfer value 
of the accrued 
benefits at 
31 March 
2010 
£’000
4,395.7
144.6

Complete 
years of 
pensionable 
service at 31 
March 2011
23
5

Age at 
31 March 
2011
49
43

M J Queen
J S Wilson

Notes
1.  The increase in accrued pension shown reflects the difference between deferred pensions on leaving, payable from age 60.
2. The pensions shown are deferred pensions payable from the Normal Retirement Age of 60.
3. The transfer values have been calculated in accordance with relevant regulations.
4. Additional voluntary contributions are excluded from the above table.

Report and accounts 2011 3i Group plc

85

Directors’ service contracts
The Chairman and the non-executive Directors hold office under the Company’s Articles of Association and do not have service contracts. 
Their appointment letters provide that there is no entitlement to compensation or other benefits on ceasing to be a Director.

The main terms of the service contracts of the executive Directors who served in the year are as follows:

Dates of contracts

Notice period – by the Director

– by the Company

Termination payments

31 March 2009
1 October 2008

Mr M J Queen: 
Mrs J S Wilson: 
– Six months
– 12 months
Company policy is that executive Directors’ notice periods should not normally exceed one year. Save for these notice 
periods the contracts have no unexpired terms.
There are no provisions for compensation of executive Directors on early termination save that: (a) Mr Queen’s contract 
entitles the Company to terminate employment without notice subject to making twelve monthly payments thereafter 
equivalent to monthly basic pay and benefits less any amounts earned from alternative employment; and (b) all Directors’ 
contracts entitle the Company to give pay in lieu of notice.

Arrangements relating to Mr Queen’s previous responsibilities
Before becoming Chief Executive in 2009 Mr Queen had interests in arrangements relating to his role as Managing Partner, Infrastructure and, 
before that, Managing Partner, Growth Capital. These are set out below. Since his appointment as Chief Executive in 2009, Mr Queen has not 
been eligible either for awards under the Infrastructure Incentive Plan or to participate in future carried interest and co-investment arrangements.

Scheme interests, being the percentage of the  
bonus pool in which the participant is interested

Award as at  
1 April 2010
(%)

Awarded in year
(%)

As at  
31 March 2011
(%)

End of period 
over which 
interests may vest

Amounts received 
in respect of 
scheme interests 
in year
£’000

Amounts receivable 
in respect of 
scheme interests 
in current and 
future years
£’000

22.34
15.5

–
–

22.34
15.5

Fully vested
Fully vested

762
322

nil
322

M J Queen
Infrastructure Incentive Plan
Vintage year 2007-08
Vintage year 2008-09

Note
Under the Infrastructure Incentive Plan executives are granted a percentage interest in a bonus pool, provided they invest certain of their own monies in 3i Infrastructure plc 
shares. Mr Queen has invested £1 million since March 2007. Amounts receivable under scheme interests are payable as follows: for vintage year 2007/08, 50% was paid in July 
2008, and 25% was paid in each of July 2009 and July 2010; for vintage year 2008/09, 50% was paid in July 2009, 25% was paid in July 2010 and 25% is expected to be paid 
in July 2011.

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86

3i Group plc  Report and accounts 2011

Governance > Directors’ remuneration report

Amounts co-invested

Scheme interests, being the percentage of the relevant  
pool of investments in respect of which the participant  
is entitled to participate in the realised profits

Invested 
during the 
year
£’000

Total invested 
to 31 March 
2011 
£’000

As at  
1 April 2010
(%)

Awarded 
in year
(%)

Forfeited 
in year
(%)

As at  
31 March 
2011
(%)

End of period 
over which 
interests may 
vest

Amounts 
receivable in 
respect of 
scheme 
interests 
vested in year
£’000

Accrued 
value of 
scheme 
interests as 
at 31 March 
2011
£’000

M J Queen
Co-investment plans
Global Growth Co-invest 
2006-08 plans
Carried interest plans
Pan-european Growth Capital 
2005-06
Infrastructure 2005-06
Primary Infrastructure 
2005-06
Global Growth 2006-08 
plans
Combined carried interest 
and co-investment plans
Global Growth 08-10
India Infrastructure 07-10

Notes
1.  Co-investment plans 

–

–
–

–

–

97

0.023

–
–

–

–

0.44
0.69

0.53

0.34

0.03
1.00

11
94

18
285

–

–
–

–

–

–
–

–

–
–

–

–

–
–

0.023

31.07.08

0.44
0.69

31.03.10
16.05.10

0.53

19.08.10

0.34

31.03.11

0.03
1.00

31.03.13
30.09.12

nil

nil
9

nil

nil

nil
nil

nil

410
302

140

nil

nil
471

Mr Queen ceased to be eligible to make any further related co-investment in the Global Growth Co-invest 2006-08 plans with effect from April 2007, following his 
appointment as Managing Partner, Infrastructure.
2. Combined carried interest and co-investment plans 

Following his appointment as Chief Executive, Mr Queen forfeited a proportion of his interests in the Global Growth 08-10 and India Infrastructure 07-10 plans.

3. General 

Accrued values of plan interests are calculated on the basis set out in note 5 on page 99. Accrued values can increase and decrease with investment valuations and other 
factors and will not necessarily lead to an actual payment to the participant.

Audit
The tables in this report (including the notes thereto) on pages 81 to 86 have been audited by Ernst & Young LLP.

By Order of the Board

Jonathan Asquith 
Chairman, Remuneration Committee 
11 May 2011

Report and accounts 2011 3i Group plc

87

Financial 
statements

Our financial statements, significant 
accounting policies and our 
Independent auditor’s report.

Statement of  
88
comprehensive income 
Statement of changes in equity  89
90
Balance sheet 
91
Cash flow statement 
Significant accounting policies 
92
Notes to the financial statements 97
127
Independent auditor’s report 

88

3i Group plc  Report and accounts 2011

Financial statements

Statement of comprehensive income

for the year to 31 March

Realised profits over value on the disposal of investments
Unrealised profits on the revaluation of investments

Portfolio income
  Dividends

Income from loans and receivables

  Fees receivable/(payable)
Gross portfolio return
Fees receivable from external funds
Carried interest
  Carried interest receivable from external funds
  Carried interest and performance fees payable
Operating expenses
Net portfolio return
Interest receivable
Interest payable
Movement in the fair value of derivatives
Exchange movements
Other income
Profit before tax
Income taxes
Profit for the year
Other comprehensive income
Exchange differences on translation of foreign operations
Actuarial gain/(loss)
Other comprehensive income for the year
Total comprehensive income for the year (“Total return”)
Analysed in reserves as:
  Revenue
  Capital
  Translation reserve

Earnings per share
  Basic (pence)
  Diluted (pence)

Notes
2
3

4
1
1

5
5
6

10
10
11

12

9

29
29

2011
£m
124
325
449

41
110
1
601
67

25
(63)
(181)
449
12
(139)
(1)
(135)
3
189
(3)
186

118
20
138
324

72
134
118
324

19.6
19.5

2010
£m
218
458
676

59
110
(2)
843
59

30
(88)
(221)
623
12
(124)
9
(359)
(2)
159
(5)
154

324
(71)
253
407

97
(14)
324
407

17.2
17.1

 
Report and accounts 2011 3i Group plc

89

Statement of changes in equity

for the year to 31 March

Total equity at the start of the year
Profit for the year
Exchange differences on translation of foreign operations
Actuarial gain/(loss)
Total comprehensive income for the year
Release on forfeiture of share options
Own shares
Ordinary dividends
Issues of ordinary shares
Total equity at the end of the year

Notes

9

28
30
27

Group
2011
£m
3,068
186
118
20
324
(5)
–
(30)
–
3,357

Group
2010
£m
1,862
154
324
(71)
407
9
(9)
(9)
808
3,068

Company
2011
£m
3,188
303
–
–
303
5
–
(30)
–
3,466

Company
2010
£m
2,278
111
–
–
111
–
–
(9)
808
3,188

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90

3i Group plc  Report and accounts 2011

Financial statements

Balance sheet

as at 31 March

Assets
Non-current assets
Investments
  Quoted equity investments
  Unquoted equity investments
  Loans and receivables
Investment portfolio
Carried interest receivable
Interests in Group entities
Intangible assets
Retirement benefit surplus
Property, plant and equipment
Total non-current assets
Current assets
Other current assets
Derivative financial instruments
Deposits
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Non-current liabilities
Carried interest and performance fees payable
Loans and borrowings
Convertible bonds
B shares
Retirement benefit deficit
Deferred income taxes
Provisions
Total non-current liabilities
Current liabilities
Trade and other payables
Carried interest and performance fees payable
Convertible bonds
Loans and borrowings
Derivative financial instruments
Current income taxes
Provisions
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital 
Share premium
Capital redemption reserve
Share-based payment reserve
Translation reserve
Capital reserve
Revenue reserve
Other reserves
Own shares
Total equity

Sir Adrian Montague 
Chairman 
11 May 2011

Group
2011
£m

Group
2010
£m

Company
2011
£m

Company
2010
£m

Notes

405
2,134
1,454
3,993
82
–
21
44
15
4,155

80
3
560
961
1,604
5,759

(81)
(1,837)
–
(6)
(4)
(6)
(4)
(1,938)

(198)
(58)
(138)
(31)
(34)
(1)
(4)
(464)
(2,402)
3,357

717
779
43
17
263
1,093
526
5
(86)
3,357

370
1,760
1,387
3,517
75
–
–
–
17
3,609

74
–
728
1,524
2,326
5,935

(61)
(1,964)
(363)
(6)
(28)
(2)
(10)
(2,434)

(176)
(70)
–
(125)
(52)
(3)
(7)
(433)
(2,867)
3,068

717
779
43
24
145
959
482
5
(86)
3,068

332
584
247
1,163
82
2,714
–
–
4
3,963

258
3
560
836
1,657
5,620

–
(1,612)
–
(6)
–
–
–
(1,618)

(333)
–
(138)
(31)
(34)
–
–
(536)
(2,154)
3,466

717
779
43
17
–
1,614
291
5
–
3,466

312
423
313
1,048
75
2,347
–
–
4
3,474

227
–
713
1,427
2,367
5,841

–
(1,721)
(363)
(6)
–
–
–
(2,090)

(386)
–
–
(125)
(52)
–
–
(563)
(2,653)
3,188

717
779
43
20
–
1,328
296
5
–
3,188

13

14
16
9
17

18
20

21
22
23
9
12
25

24

22
21
20

25

26
27
27
27
27
27
27
27
28

Report and accounts 2011 3i Group plc

91

Cash flow statement

for the year to 31 March

Cash flow from operating activities
Purchase of investments
Proceeds from investments
Portfolio interest received
Portfolio dividends received
Portfolio fees received/(paid)
Fees received from external funds
Carried interest received
Carried interest and performance fees paid
Operating expenses 
Interest received1
Interest paid1
Income taxes paid
Net cash flow from operating activities

Cash flow from financing activities
Net proceeds from liquidation of 3iQPEP
Proceeds from nine for seven rights issue
Fees paid for the nine for seven rights issue
Proceeds from issues of share capital
Purchase of own shares
Repurchase of B shares
Dividend paid
Proceeds from long-term borrowings
Repayment of long-term borrowings
Repurchase of long-term borrowings
Repurchase of convertible bonds
Net cash flow from short-term borrowings
Net cash flow from derivatives
Net cash flow from financing activities

Cash flow from investing activities
Acquisition of subsidiary
Net cash acquired with the subsidiary
Purchase of property, plant and equipment
Proceeds on sale of property, plant and equipment
Net cash flow from deposits1
Net cash flow from investing activities

Change in cash and cash equivalents
Cash and cash equivalents at the start of year
Effect of exchange rate fluctuations
Cash and cash equivalents at the end of year

Group
2011
£m

Group
2010
£m

Company
2011
£m

Company
2010
£m

Notes

(561)
609
15
41
1
62
17
(54)
(218)
12
(124)
(2)
(202)

–
–
–
–
–
–
(30)
–
(56)
(48)
(249)
(88)
(34)
(505)

(18)
18
(5)
2
168
165

(190)
1,315
16
59
(2)
56
3
(57)
(251)
12
(124)
(3)
834

110
732
(33)
18
(9)
(6)
(9)
351
(205)
(77)
–
(144)
(34)
694

–
–
(1)
–
(669)
(670)

(594)
609
8
26
–
–
17
–
(202)
11
(110)
–
(235)

–
–
–
–
–
–
(30)
–
(44)
(48)
(249)
(88)
(34)
(493)

–
–
–
–
153
153

(354)
1,417
11
36
–
–
3
–
(184)
11
(121)
(1)
818

110
732
(33)
18
–
(6)
(9)
351
(152)
(77)
–
(144)
(34)
756

–
–
–
–
(687)
(687)

(542)
1,524
(21)
961

858
675
(9)
1,524

(575)
1,427
(16)
836

887
545
(5)
1,427

15
15

1  Interest received, interest paid and net cash flow from deposits have been reclassified from financing activities to enhance disclosure.

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92

3i Group plc  Report and accounts 2011

Financial statements

Significant accounting policies

3i Group plc (the “Company”) is a company incorporated in Great Britain and registered in England and Wales. The consolidated financial statements for 
the year to 31 March 2011 comprise the financial statements of the Company and its subsidiaries (together referred to as the “Group”). Separate financial 
statements of the Company are also presented.

The accounting policies of the Company are the same as for the Group except where separately disclosed.

The financial statements were authorised for issue by the Directors on 11 May 2011.

A  Statement of compliance
These consolidated and separate financial statements have been prepared in accordance with International Financial Reporting Standards, International 
Accounting Standards and their interpretations issued or adopted by the International Accounting Standards Board as adopted for use in the European Union 
(“IFRS”).

These consolidated and separate financial statements have been prepared in accordance with and in compliance with the Companies Act 2006.

New standards and interpretations not applied
The IASB has issued the following standards and interpretations to be applied to financial statements with periods commencing on or after the following dates:

Extinguishing Financial Liabilities with Equity Instruments
Revised definition of related parties

IFRIC 19
IAS 24
IFRIC 14, IAS 19 Prepayments of a Minimum Funding Requirement (Amendments to IFRIC 14)
IFRS 7
IAS 12

Amendments enhancing disclosures about transfers of financial assets
Limited scope amendment (recovery of underlying assets)

IFRS 9

Financial Instruments – Classification and Measurement

Effective for period beginning on or after
1 July 2010
1 January 2011
1 January 2011
1 July 2011
1 January 2012

1 January 2013

The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the financial statements in the period 
of initial application and have decided not to adopt early.

B  Basis of preparation
The financial statements are presented in sterling, the functional currency of the Company, rounded to the nearest million pounds (£m) except where 
otherwise indicated.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the 
application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical 
experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about 
carrying values of assets and liabilities that are not readily apparent from other sources. The most significant estimates relate to the fair valuation of the 
investment portfolio, the basis of consolidation and the actuarial valuation of the defined benefit pension scheme. These are further disclosed in accounting 
policies C, E and K and notes 9 and 13. The actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which 
the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and 
future periods.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. The statement 
of comprehensive income of the Company has been omitted from these financial statements in accordance with section 408 of the Companies Act 2006.

The accounting policies have been consistently applied across all Group entities for the purposes of producing these consolidated financial statements.

C  Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating 
policies of an entity so as to obtain benefit from its activities. The financial statements of subsidiaries are included in the consolidated financial statements 
from the date that control commences until the date that control ceases.

(ii) Associates
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Investments that are held 
as part of the Group’s investment portfolio are carried in the balance sheet at fair value even though the Group may have significant influence over those 
companies. This treatment is permitted by IAS 28 Investment in Associates, which requires investments held by venture capital organisations to be excluded 
from its scope where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with 
IAS 39, with changes in fair value recognised in the statement of comprehensive income in the period of the change. The Group has no interests in associates 
through which it carries on its business.

(iii) Joint ventures
Interests in joint ventures that are held as part of the Group’s investment portfolio are carried in the balance sheet at fair value. This treatment is permitted 
by IAS 31 Interests in Joint Ventures, which requires venturer’s interests held by venture capital organisations to be excluded from its scope where those 
investments are designated, upon initial recognition, as at fair value through profit or loss are accounted for in accordance with IAS 39, with changes in 
fair value recognised in the statement of comprehensive income in the period of the change.

Report and accounts 2011 3i Group plc

93

D  Exchange differences
(i) Foreign currency transactions
Transactions in currencies different from the functional currency of the Group entity entering into the transaction are translated at the exchange rate ruling 
at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to sterling at the 
exchange rate ruling at that date.

Foreign exchange differences arising on translation are recognised in the statement of comprehensive income. Non-monetary assets and liabilities that are 
measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of transaction. Non-monetary assets and liabilities 
denominated in foreign currencies that are stated at fair value are translated to sterling using exchange rates ruling at the date the fair value was determined.

(ii) Financial statements of non-sterling operations
The assets and liabilities of operations whose functional currency is not sterling, including fair value adjustments arising on consolidation, are translated to 
sterling at exchange rates ruling at the balance sheet date. The revenues and expenses of these operations are translated to sterling at rates approximating 
to the exchange rates ruling at the dates of the transactions. Exchange differences arising on retranslation are recognised in other comprehensive income 
and accumulated within a separate component of equity, the Translation reserve, and are released upon disposal of the non-sterling operation.

In respect of non-sterling operations, cumulative translation differences on the consolidation of non-sterling operations are being accumulated from the 
date of transition to IFRS, 1 April 2004, and not from the original acquisition date.

E  Investment portfolio
(i) Recognition and measurement
Investments are recognised and de-recognised on a date where the purchase or sale of an investment is under a contract whose terms require the delivery 
or settlement of the investment. The Group manages its investments with a view to profiting from the receipt of dividends and changes in fair value of 
equity investments.

Quoted investments are designated at fair value through profit and loss and subsequently carried in the balance sheet at fair value. Fair value is measured 
using the closing bid price at the reporting date, where the investment is quoted on an active stock market.

Unquoted equity investments are designated at fair value through profit and loss and are subsequently carried in the balance sheet at fair value. Fair value 
is measured using the International Private Equity and Venture Capital valuation guidelines, details of which are in the section called Portfolio valuation 
– an explanation.

Other investments including loan investments, bonds, fixed income shares and variable funding notes are included as loans and receivables. Loans, bonds 
and fixed income shares are carried in the balance sheet at amortised cost less impairment. For more detail see the section called Portfolio valuation – 
an explanation. Variable funding notes are used to invest in debt instruments and are carried in the balance sheet at the value derived from the bid prices 
of the underlying debt instruments taking into account the Group’s obligations under the funding contract. The fair value of loans and receivables is not 
anticipated to be substantially different to the holding value.

All investments are initially recognised at the fair value of the consideration given and held at this value until it is appropriate to measure fair value on 
a different basis, applying 3i Group’s valuation policies.

(ii) Income
Gross portfolio return is equivalent to “revenue” for the purposes of IAS 1. It represents the overall increase in net assets from the investment portfolio 
net of deal-related costs but excluding exchange movements. Investment income is analysed into the following components:

(a) Realised profits over value on the disposal of investments are the difference between the fair value of the consideration received less any directly 
attributable costs, on the sale of equity and the repayment of loans and receivables, and its carrying value at the start of the accounting period, 
converted into sterling using the exchange rates in force at the date of disposal.

(b) Unrealised profits on the revaluation of investments are the movement in the carrying value of investments between the start and end of the 
accounting period converted into sterling using the exchange rates in force at the date of the movement.

(c) Portfolio income is that portion of income that is directly related to the return from individual investments. It is recognised to the extent that it is 
probable that there will be economic benefit and the income can be reliably measured. The following specific recognition criteria must be met before 
the income is recognised:

 − Dividends from equity investments are recognised in the statement of comprehensive income when the shareholders’ rights to receive payment 

have been established.

 − Income from loans and receivables is recognised as it accrues by reference to the principal outstanding and the effective interest rate applicable, 

which is the rate that exactly discounts the estimated future cash flows through the expected life of the financial asset to the asset’s carrying value.

 − Fee income is earned directly from investee companies when an investment is first made and through the life of the investment. Fees that are earned 
on a financing arrangement are considered to relate to a financial asset measured at fair value through profit or loss and are recognised when that 
investment is made. Fees that are earned on the basis of providing an ongoing service to the investee company are recognised as that service is provided.

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94

3i Group plc  Report and accounts 2011

Financial statements > Significant accounting policies

F  Fees receivable from external funds
(i) Fund management fees
The Group manages private equity, infrastructure and debt management funds. Fees earned from the ongoing management of these funds are recognised 
to the extent that it is probable that there will be economic benefit and the income can be reliably measured.

(ii) Advisory fees
The Group acts as investment adviser to private equity funds. Fees earned from the provision of investment advisory services are recognised on an accruals 
basis in accordance with the substance of the relevant investment advisory agreement.

(iii) Performance fees
The Group earns a performance fee from funds to which it provides investment advisory services where specified performance targets are achieved. 
Performance fees are recognised to the extent that it is probable that there will be economic benefit and the income can be reliably measured.

(iv) Support services fees
The Group provides support services to external funds, including accounting, treasury management, corporate secretariat and investor relations. 
Fees earned from the provision of these support services are recognised on an accruals basis in accordance with the relevant support services agreement.

G  Carried interest
(i) Carried interest receivable
The Group earns a share of profits (“carried interest receivable”) from funds which it manages on behalf of third parties. These profits are earned once the 
funds meet certain performance conditions.

Carried interest receivable is only accrued on those managed funds in which the fund’s performance conditions, measured at the balance sheet date, would 
be achieved if the remaining assets in the fund were realised at fair value. Fair value is determined using the Group’s valuation methodology and is measured 
at the balance sheet date. An accrual is made equal to the Group’s share of profits in excess of the performance conditions, taking into account the cash 
already returned to fund investors and the fair value of assets remaining in the fund.

(ii) Carried interest payable
The Group offers investment executives the opportunity to participate in the returns from successful investments. “Carried interest payable” is the term 
used for amounts payable to executives on investment-related transactions.

A variety of asset pooling arrangements are in place so that executives may have an interest in one or more carried interest scheme. Carried interest payable 
is only accrued on those schemes in which the scheme’s performance conditions, measured at the balance sheet date, would be achieved if the remaining 
assets in the scheme were realised at fair value. An accrual is made equal to the executive’s share of profits in excess of the performance conditions in place 
in the carried interest scheme.

H  Intangible assets
Fund management contracts, acquired by the Group in connection with the acquisition of a subsidiary, are stated at cost less accumulated amortisation 
and impairment losses. Amortisation is charged to the statement of comprehensive income on a straight-line basis over the estimated useful life of the fund 
management contract, typically five to ten years.

I  Property, plant and equipment
(i) Land and buildings
Land and buildings are carried in the balance sheet at fair value less depreciation and impairment. Fair value is determined at each balance sheet date 
from valuations undertaken by professional valuers using market-based evidence. Any revaluation surplus is recognised in other comprehensive income 
and credited to the Capital reserve except to the extent that it reverses a previous valuation deficit on the same asset recognised in profit or loss in which 
case the surplus is recognised in profit or loss to the extent of the previous deficit.

Any revaluation deficit that offsets a previously recognised surplus in the same asset is directly offset against the surplus in the Capital reserve. 
Any excess valuation deficit over and above that previously recognised in surplus is recognised in the statement of comprehensive income.

Depreciation on revalued buildings is charged in the statement of comprehensive income over their estimated useful life, generally over 50 years.

(ii) Vehicles and office equipment
Vehicles and office equipment are depreciated by equal annual instalments over their estimated useful lives as follows: office equipment five years; 
computer equipment three years; computer software three years; motor vehicles four years.

(iii) Assets held under finance leases
Assets held under finance leases are depreciated over their expected useful life on the same basis as owned assets or, where shorter, the lease term. 
Assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The interest 
element of the rental obligations is charged in the statement of comprehensive income over the period of the agreement and represents a constant 
proportion of the balance of capital repayments outstanding.

J  Treasury assets and liabilities
Short-term treasury assets and short and long-term treasury liabilities are used in order to manage cash flows and overall costs of borrowing. Financial 
assets and liabilities are recognised in the balance sheet when the relevant Group entity becomes a party to the contractual provisions of the instrument. 
De-recognition occurs when rights to cash flows from a financial asset expire, or when a liability is extinguished.

(i) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. 
For the purposes of the cash flow statement, cash and cash equivalents comprise cash and short-term deposits as defined above and other short-term highly 
liquid investments that are readily convertible into cash and are subject to insignificant risk of changes in value, net of bank overdrafts.

(ii) Deposits
Deposits in the balance sheet comprise longer term deposits with an original maturity of greater than three months.

Report and accounts 2011 3i Group plc

95

(iii) Bank loans, loan notes and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowings. After initial 
recognition, these are subsequently measured at amortised cost using the effective interest method, which is the rate that exactly discounts the estimated 
future cash flows through the expected life of the liabilities. Amortised cost is calculated by taking into account any issue costs and any discount or premium 
on settlement.

(iv) Convertible bonds
The convertible bonds are cash settled and are regarded as compound instruments consisting of a liability and a derivative instrument (see policy below for 
derivatives). Subsequent to initial recognition the conversion option is measured as a derivative financial instrument with the market value of the instrument 
at period end used as its fair value. The remainder of the proceeds are allocated to the liability component and this amount is carried as a liability on the 
amortised cost basis until extinguished on conversion, redemption or repurchase.

(v) Derivative financial instruments
Derivative financial instruments are used to manage the risk associated with foreign currency fluctuations of the investment portfolio and changes in interest 
rates on its borrowings. This is achieved by the use of foreign exchange contracts, currency swaps and interest rate swaps. All derivative financial instruments 
are held at fair value.

Derivative financial instruments are recognised initially at fair value on the contract date and subsequently re-measured to the fair value at each reporting 
date. The fair value of forward exchange contracts is calculated by reference to current forward exchange contracts for contracts with similar maturity 
profiles. The fair value of currency swaps and interest rate swaps is determined with reference to future cash flows and current interest and exchange rates. 
All changes in the fair value of financial instruments are taken to the statement of comprehensive income.

Derivatives over own shares are classified as equity when they will be settled by the exchange of a fixed amount of shares for a fixed amount of cash.

K  Employee benefits
(i) Retirement benefit costs
Payments to defined contribution retirement benefit plans are charged to the statement of comprehensive income as they fall due.

For defined benefit retirement plans, the cost of providing benefits is determined using the projected unit method with actuarial valuations being carried out 
at each balance sheet date. Current service costs are recognised in the statement of comprehensive income. Actuarial gains or losses are recognised in full 
as they arise in other comprehensive income.

A retirement benefit deficit is recognised in the balance sheet to the extent that the present value of the defined benefit obligations exceeds the fair value 
of plan assets.

A retirement benefit surplus is recognised in the balance sheet where the fair value of plan assets exceeds the present value of the defined benefit obligations 
limited to the extent that the Group can benefit from that surplus.

(ii) Share-based payments
In accordance with the transitional provisions of IFRS 1, the requirements of IFRS 2 have been applied to all grants of equity instruments after 7 November 
2002 that were unvested at 1 January 2005. The costs of share-based payments made by the Company in respect of subsidiaries’ employees are treated 
as additional investments in those subsidiaries.

The Group enters into arrangements that are equity-settled share-based payments with certain employees. These are measured at fair value at the 
date of grant, which is then recognised in the statement of comprehensive income on a straight-line basis over the vesting period, based on the Group’s 
estimate of shares that will eventually vest. Fair value is measured by use of an appropriate model. In valuing equity-settled transactions, no account is 
taken of any vesting conditions, other than conditions linked to the price of the shares of 3i Group plc. The charge is adjusted at each balance sheet date 
to reflect the actual number of forfeitures, cancellations and leavers during the period. The movement in cumulative charges since the previous balance 
sheet is recognised in the statement of comprehensive income, with a corresponding entry in equity.

L  Other assets
Assets, other than those specifically accounted for under a separate policy, are stated at their cost less impairment losses. They are reviewed at each 
balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated 
based on expected discounted future cash flows. Any change in the level of impairment is recognised directly in the statement of comprehensive income. 
An impairment loss is reversed at subsequent balance sheet dates to the extent that the asset’s carrying amount does not exceed its carrying value had 
no impairment been recognised.

M  Other liabilities
Liabilities, other than those specifically accounted for under a separate policy, are stated based on the amounts which are considered to be payable in respect 
of goods or services received up to the balance sheet date.

N  Share capital
Ordinary shares issued by the Group are recognised at the proceeds or fair value received with the excess of the amount received over nominal value being 
credited to the share premium account. Direct issue costs net of tax are deducted from equity.

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O  Provisions
Provisions are recognised when the Group has a present obligation of uncertain timing or amount as a result of past events, and it is probable that the 
Group will be required to settle that obligation and a reliable estimate of that obligation can be made. The provisions are measured at the Directors’ best 
estimate of the amount to settle the obligation at the balance sheet date, and are discounted to present value if the effect is material. Changes in provisions 
are recognised in the statement of comprehensive income for the period.

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96

3i Group plc  Report and accounts 2011

Financial statements > Significant accounting policies

P Income taxes
Income taxes represent the sum of the tax currently payable, withholding taxes suffered and deferred tax. Tax is charged or credited in the statement 
of comprehensive income, except where it relates to items charged or credited directly to equity, in which case the tax is also dealt with in equity.

The tax currently payable is based on the taxable profit for the year. This may differ from the profit included in the statement of comprehensive income 
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. 
The Group’s liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial 
statements and the corresponding tax bases used in the computation of taxable profit (“temporary differences”), and is accounted for using the balance 
sheet liability method.

Deferred tax liabilities are generally recognised for all taxable temporary differences. Where there are taxable differences arising on investments in 
subsidiaries and associates, and interests in joint ventures, deferred tax liabilities are recognised except where the Group is able to control reversal 
of the temporary difference and it is probable that the temporary differences will reverse in the foreseeable future.

Deferred tax assets are generally recognised to the extent that it is probable that taxable profits will be available against which deductible temporary 
differences can be utilised. However, where there are deductible temporary differences arising from investments in subsidiaries, branches and associates, 
and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that both the temporary differences will reverse 
in the foreseeable future and taxable profits will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient 
taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill and other assets and liabilities 
in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised using tax rates and laws 
that have been enacted or substantively enacted by the balance sheet date.

Report and accounts 2011 3i Group plc

97

Financial statements

Notes to the financial statements

1  Segmental analysis
Operating segments are components of the entity whose results are regularly reviewed by the entity’s chief operating decision-maker to make decisions 
about resources to be allocated to the segment and to assess its performance. The chief operating decision-maker for the Group is considered to be 
the Chief Executive Officer. The Group’s operating segments have been defined as the Group’s business lines, namely Private Equity, Infrastructure, 
Debt Management and Non-core Investments. The business lines are determined with reference to market focus, geographic focus, and investment 
funding model. During the year to 31 March 2011 the Growth Capital and the Buyouts business lines were combined to form the Private Equity business 
line and a new business line, Debt Management, was also established.

The performance of operating segments is assessed based on the gross portfolio return, principally comprising gains and losses on investments and 
investment income. Segmental assets are represented by the investment portfolio value for each business line.

Year to 31 March 2011
Gross portfolio return
Realised profits over value on the disposal of investments
Unrealised profits on the revaluation of investments
Portfolio income
  Dividends

Income from loans and receivables

  Fees receivable/(payable)

Fees receivable from external funds
Net (investment)/divestment
Realisations
Investment

Balance sheet
Value of investment portfolio at the end of the year

Year to 31 March 2010
Gross portfolio return
Realised profits/(losses) over value on the disposal of investments
Unrealised profits/(losses) on the revaluation of investments
Portfolio income
  Dividends

Income from loans and receivables

  Fees (payable)/receivable

Fees receivable from external funds
Net (investment)/divestment
Realisations
Investment

Private 
Equity
Buyouts
£m

Private 
Equity 
Growth
Capital
£m

Private 
Equity
Total
£m

Infra structure
£m

Debt
Manage ment
£m

Non-core
Invest ments
£m

22
60

–
73
2
157
32

170
(562)
(392)

40
217

20
29
(1)
305
8

202
(72)
130

62
277

20
102
1
462
40

372
(634)
(262)

–
29

17
(1)
–
45
25

1
(36)
(35)

24
8

–
7
–
39
2

145
(49)
96

38
11

4
2
–
55
–

91
–
91

Total
£m

124
325

41
110
1
601
67

609
(719)
(110)

1,961

1,433

3,394

464

14

121

3,993

Private 
Equity
Buyouts1
£m

Private 
Equity 
Growth
Capital
£m

Private 
Equity
Total
£m

Infra structure
£m

Debt
Management1
£m

Non-core
Investments
£m

168
204

–
70
(1)
441
39

403
(201)
202

(14)
145

36
29
(2)
194
–

578
(121)
457

154
349

36
99
(3)
635
39

981
(322)
659

–
84

15
1
–
100
20

46
(2)
44

55
45

–
8
1
109
–

64
(42)
22

9
(20)

8
2
–
(1)
–

294
(20)
274

Total
£m

218
458

59
110
(2)
843
59

1,385
(386)
999

Balance sheet
Value of investment portfolio at the end of the year

1,539

1,331

2,870

407

75

165

3,517

1  The Debt Warehouse, which was previously included within the Buyouts business line, was transferred to the Debt Management business line created during the year 

to 31 March 2011. Consequently the 31 March 2010 Debt Warehouse numbers have been reclassified to the Debt Management business line. 

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98

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

1  Segmental analysis (continued)

Year to 31 March 2011
Gross portfolio return
Realised profits/(losses) over value on the disposal of investments
Unrealised (losses)/profits on the revaluation of investments
Portfolio income

Fees receivable from external funds
Net (investment)/divestment
Realisations
Investment

Continental
Europe
£m

UK
£m

72
(125)
79
26
54

376
(221)
155

59
374
57
490
5

190
(433)
(243)

Asia
£m

1
56
1
58
8

25
(62)
(37)

Balance sheet
Value of investment portfolio at the end of the year

1,071

2,060

579

277

North
America
£m

Rest of
World
£m

(8)
20
15
27
–

18
(3)
15

–
–
–
–
–

–
–
–

6

Year to 31 March 2010
Gross portfolio return
Realised profits/(losses) over value on the disposal of investments
Unrealised profits/(losses) on the revaluation of investments
Portfolio income

Fees receivable from external funds
Net (investment)/divestment
Realisations
Investment

Balance sheet
Value of investment portfolio at the end of the year

2  Realised profits over value on the disposal of investments

Continental
Europe
£m

UK
£m

41
201
104
346
41

621
(222)
399

150
115
35
300
9

542
(118)
424

Asia
£m

27
75
2
104
9

134
(25)
109

North
America
£m

Rest of
World
£m

1
69
26
96
–

84
(19)
65

(1)
(2)
–
(3)
–

4
(2)
2

1,327

1,381

509

294

6

3,517

Realisations
Valuation of disposed investments
Investments written off

2011
Unquoted
equity
£m
263
(160)
(1)
102

2011
Quoted
equity
£m
16
(14)
–
2

2011
Loans and
receivables
£m
330
(310)
–
20

2011
Total
£m
609
(484)
(1)
124

2010
Unquoted
equity
£m
701
(527)
(32)
142

2010
Quoted
equity
£m
389
(279)
–
110

2010
Loans and
receivables
£m
295
(283)
(46)
(34)

2010
Total
£m
1,385
(1,089)
(78)
218

Loans and receivables include net proceeds of £145 million (2010: £64 million) and realised profits of £24 million (2010: £55 million) from variable funding 
notes relating to the Debt Warehouse.

Total
£m

124
325
152
601
67

609
(719)
(110)

3,993

Total
£m

218
458
167
843
59

1,385
(386)
999

Report and accounts 2011 3i Group plc

99

3  Unrealised profits on the revaluation of investments

Movement in the fair value of equity1
Provisions, loan impairments and other movements2

2011
Unquoted
equity
£m
572
(20)
552

2011
Quoted
equity
£m
23
–
23

2011
Loans and
receivables
£m
–
(250)
(250)

2011
Total
£m
595
(270)
325

2010
Unquoted
equity
£m
324
(24)
300

2010
Quoted
equity
£m
74
–
74

2010
Loans and
receivables
£m
–
84
84

2010
Total
£m
398
60
458

1  Investment made through the 3i India Infrastructure Fund have been reclassified as individual investments, rather than as a fund which is classified as unquoted equity. 

The prior year has been restated.

2  Included within loan impairments is a £1 million value increase for variable funding notes relating to the Debt Warehouse in the year to 31 March 2011 (2010: £45 million). 

Provisions have been recognised only on investments where it is considered there is a greater than 50% risk of failure. All other equity value movements are 
included within the movement in the fair value of equity.

4  Fees receivable/(payable)

Fees receivable
Deal related costs

2011
£m
6
(5)
1

2010
£m
5
(7)
(2)

Fees receivable include fees arising from the ongoing management of the portfolio together with fees arising from making investments. Deal-related costs 
represent fees incurred in the process of acquiring an investment.

5  Carried interest and performance fees payable

Carried interest receivable from external funds
Carried interest and performance fees payable

2011  
£m
25
(63)
(38)

2010  
£m
30
(88)
(58)

Carried interest receivable represents the Group’s share of profits from external funds. Each fund is reviewed at the balance sheet date and income is accrued 
based on fund profits in excess of the performance conditions within the fund, taking into account cash already returned to fund investors and the fair value 
of assets remaining in the fund.

Carried interest and performance fees payable represents the amount payable to executives from the Group’s carried interest schemes and also includes 
the fees payable to Infrastructure and Debt Management executives that are based on fund performance. As with carried interest receivable, each scheme 
is separately reviewed at the balance sheet date, and an accrual made equal to the executives’ share of profits once the performance conditions in the scheme 
have been met.

6  Operating expenses
Operating expenses include the following amounts:

Depreciation of property, plant and equipment
Amortisation of fund management contracts
Audit fees
Staff costs (note 7)
Restructuring and redundancy costs

2011  
£m
5
1
2
117
2

2010  
£m
5
–
2
137
13

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100

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

6  Operating expenses (continued)
Services provided by the Group’s auditors
During the year the Group obtained the following services from the Group’s auditors, Ernst & Young LLP:

Audit services
Statutory audit  – Company

– UK subsidiaries
– Overseas subsidiaries

Audit-related regulatory reporting

Non-audit services
Other assurance services
Investment due diligence
Tax services (compliance and advisory services)

2011  
£m

2010  
£m

0.8
0.6
0.3
0.2
1.9

0.2
–
0.3
2.4

0.7
0.7
0.3
0.2
1.9

0.7
0.1
0.5
3.2

Non-audit services
These services are services that could be provided by a number of firms, including rights issue advisory work in the prior year and general consultancy work. 
Work is allocated to the auditors only if it does not impact the independence of the audit team.

In addition to the above, Ernst & Young LLP has received fees from investee companies. It is estimated that Ernst & Young LLP receive less than 20% of the 
total investment-related fees paid to the four largest accounting firms.

Ernst & Young LLP also acts as auditor to the 3i Group Pension Plan. The appointment of the auditors to this Plan and the fees paid in respect of the audit 
are agreed by the trustees who act independently from the management of the Group. The aggregate fees paid to the Group’s auditors for audit services 
to the pension scheme during the year were less than £0.1 million (2010: less than £0.1 million).

7  Staff costs

Wages and salaries
Social security costs
Share-based payment costs (note 8)
Pension costs

2011  
£m
90
12
3
12
117

2010  
£m
110
14
3
10
137

The average number of employees during the year was 470 (2010: 530).

Wages and salaries shown above include salaries paid in the year, bonuses and portfolio incentive schemes relating to the year. These costs are included 
in operating expenses.

8  Share-based payments
The Group has a number of share schemes that allow employees to acquire shares in the Company.

The total cost recognised in the statement of comprehensive income is shown below:

Share options1
Performance shares1
Share incentive plan
Deferred bonus shares and phantom awards

1  Credited to equity. 

2011  
£m
(1)
1
1
2
3

2010  
£m
–
–
1
2
3

The features of the Group’s share schemes are set out on the following page. For legal or regulatory reasons certain participants may be granted “phantom 
awards” under these schemes, which are intended to replicate the financial effects of a share award without entitling the participant to acquire shares.

 
 
 
 
 
Report and accounts 2011 3i Group plc 101

8  Share-based payments (continued)
Share options
Options granted under the 3i Group Discretionary Share Plan are normally exercisable between the third and tenth anniversaries of the date of grant to 
the extent a performance condition has been met over a performance period of three years from the date of grant. Details of the performance conditions 
to which unvested options are subject are set out in the Directors’ remuneration report. 

Details of share options outstanding during the year are as follows:

Outstanding at the start of the year
Granted
Exercised
Lapsed
Outstanding at the end of year
Exercisable at the end of year

2011  
Number  
of share  
options
17,778,502
1,525,423
–
(3,694,932)
15,608,993
 5,900,348

2011  
Weighted average  
exercise price  
(pence)
436
295
–
 673
366
395

2010 
Number  
of share  
options
21,077,816
3,390,270
–
(6,689,584)
17,778,502
7,434,393

2010 
Weighted average  
exercise price  
(pence)
472
277
–
468
436
445

Included within the total number of share options are options over 1 million (2010: 2 million) shares that have not been recognised in accordance with IFRS 2 
as the options were granted on or before 7 November 2002.

The range of exercise prices for options outstanding at the year end was:

Grant date: 
year to 31 March
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

2011  
Weighted average  
exercise price  
(pence) 
 –
 557
417
355
373
434
–
–
412
277
295
366

2011  

Number
–
4,978
1,060,613
1,245,831
1,849,686
1,739,240
–
–
4,928,164
3,255,058
 1,525,423
15,608,993

2010  
Weighted average  
exercise price  
(pence) 
845
557
417
355
373
434
603
725
413
277
–
436

2010 

Number
791,154
4,978
1,123,898
1,341,421
2,080,419
2,036,659
55,864
2,013,373
4,965,014
3,365,722
–
17,778,502

Options are exercisable at a price based on the market value of the Company’s shares on the date of grant. 

No options were exercised during the year (2010: nil). The options outstanding at the end of the year have a weighted average contractual life of 6.10 years 
(2010: 6.45 years). The cost of share options is spread over the vesting period of three to five years. The weighted average fair value of options granted 
during the year was 129p (2010: 124p). These fair values were calculated using the Black-Scholes option pricing model.

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102

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

8  Share-based payments (continued)
The inputs to this model were as follows:

Weighted average share price (pence)
Average expected volatility (%)
Expected life (years)
Average risk-free rate (%)
Average expected dividend yield (%)

2011
295
37
8.5
3.5
1.0

2010
268
52
8.5
3.9
2.4

The expected life of the option is based on the best estimate of the Directors following a review of the profile of the award holders. Expected volatility 
was determined using an average of the implied volatility on grant and historic share price volatility of the preceding 8.5 years.

Performance Share awards
Performance Share awards made under the 3i Group Discretionary Share Plan during the year were conditional awards of shares to executives which will 
be transferred to the participant by the 3i Group Employee Trust on vesting. Awards are subject to a performance condition determining whether and to 
what extent the award will vest. There are two types of awards: conditional Performance Share awards and conditional Super-performance Share awards.

The performance condition for Performance Share awards is based on the outperformance of the theoretical growth in value of a shareholding in the 
Company (with dividends reinvested) for the three year performance period from grant (averaged over a 60-day period) compared to the growth in value 
of the FTSE 100 Index (with dividends reinvested) adjusted for mergers, demergers and delistings over that period. At an outperformance level below 0% per 
annum no part of the award will vest. At an outperformance level of 0% per annum, 35% of the award will vest and above 8% per annum the full award will 
vest. At outperformance levels between 0% and 8%, the award will vest on a pro rata basis.

Performance Share awards made before 1 April 2007 were restricted awards which vested based on the Company’s “percentage rank” by total shareholder 
return for the three years from grant (averaged over a 60-day period) compared to a comparator group consisting of the FTSE 100 Index constituents at the 
grant date (adjusted for mergers, demergers and delistings during the performance period). A company’s percentage rank is its rank in the comparator group 
divided by the number of companies in the group at the end of the performance period expressed as a percentage. At a percentage rank below 50% no 
shares vested. At a rank of 50%, 35% of the shares vest and at 75% all the shares vest. Between these points shares vest pro rata.

Super-performance Share awards were conditional awards of shares which were subject to a particularly challenging performance condition. The 
performance condition required annual percentage compound growth in the net asset value per share (with dividends re-invested) over the three-year period 
of RPI plus 10 percentage points per annum to achieve minimum vesting of 25% of the award; RPI plus 13.5 percentage points per annum to achieve 50% 
vesting; and RPI plus 17 percentage points per annum to achieve maximum vesting. The performance condition was measured over a three-year period. If 
the condition was satisfied, the awards remained subject to a further two-year holding period before they vested. Super-performance Share awards made 
before 1 April 2007 were restricted awards which were transferred to the participants by the 3i Group Employee Trust on terms that the shares would be 
forfeited to the extent the performance condition was not satisfied and in certain other circumstances.

No Super-performance Share awards have been made since 2007.

Deferred Share Bonus
Certain employees receive an element of their bonus as a conditional award of shares under the 3i Group Deferred Bonus Plan, which vest after two years. 
The awards are not subject to a performance condition. The fair value of the deferred shares is the share price at the date of the award.

Deferred Share awards
Certain employees receive awards of Deferred Shares under the 3i Group Deferred Bonus Plan which vest after three years subject to continued service for 
that period. These awards are not subject to a performance condition. The fair value of the deferred shares is the share price at the date of the award.

Share Incentive Plan
Eligible UK employees may participate in an HM Revenue and Customs approved Share Incentive Plan intended to encourage employees to invest in the 
Company’s shares. Accordingly it is not subject to a performance condition. During the year participants invested up to £125 per month from their pre-tax 
salaries in the Company’s shares (referred to as partnership shares). For each share so acquired the Company grants two free additional shares (referred to as 
matching shares) which are normally subject to forfeiture if the employee ceases to be employed (other than for certain permitted reasons) within three years 
of grant. Dividends are re-invested on behalf of participants in further shares (referred to as dividend shares).

Employee Share Investment Plan
In conjunction with the June 2009 rights issue, eligible employees could subscribe for between £5,000 and £1.5 million of ordinary shares at market price. 
Employees were then granted one matching share for every two ordinary shares purchased, which are normally subject to forfeiture if the employee ceases 
to be employed (other than for certain permitted reasons) within three years of grant. The matching shares are also subject to the condition that fully diluted 
NAV per share grows by 35% or more between 31 March 2009 and 31 March 2012.

Employee Trust
The Group has established the 3i Group Employee Trust which holds shares in 3i Group plc which can be used to meet its obligations under certain share 
schemes. The share schemes which use this trust are the 3i Group Discretionary Share Plan and the 3i Group Deferred Bonus Plan. The Trustee has full 
discretion as to the application of trust assets. However, in accordance with IAS 27 Consolidated and Separate Financial Statements, 3i Group plc is considered 
the ultimate controlling party for accounting purposes and the operations of the 3i Group Employee Trust are fully consolidated by the Group.

Report and accounts 2011 3i Group plc 103

9  Retirement benefits
Retirement benefit plans
(i) Defined contribution plans
The Group operates a number of defined contribution retirement benefit plans for qualifying employees throughout the Group. The assets of these plans 
are held separately from those of the Group. The employees of the Group’s subsidiaries in France are members of a state-managed retirement benefit 
plan operated by the country’s government. The French subsidiary is required to contribute a specific percentage of payroll costs to the retirement benefit 
scheme to fund the benefits.

The total expense recognised in profit or loss is £3 million (2010: £3 million), which represents the contributions payable to these plans. There were no 
outstanding payments due to these plans at the balance sheet date.

(ii) Defined benefit schemes
The Group operates a final salary defined benefit plan for qualifying employees of its subsidiaries in the UK (“the Plan”). The Plan has not been offered to 
new employees joining 3i since 1 April 2006. The Plan was closed to the future accrual of benefits by members with effect from 5 April 2011, although 
the final salary link will be maintained on existing accruals. Members of the Plan have been invited to join the Group’s defined contribution plan with effect 
from 6 April 2011. The defined benefit plan is a funded scheme, the assets of which are independent of the Company’s finances and are administered by 
the Trustees.

The last full actuarial valuation as at 30 June 2007 was updated on an IAS 19 basis by an independent qualified actuary as at 31 March 2011. Discussions 
with the Trustees are under way concerning the triennial funding valuation and will be concluded by 30 September 2011. As the fund is now closed to future 
accrual and it is intended to take steps to de-risk the fund through changes to its investment policy and other measures.

The principal assumptions made by the actuaries and used for the purpose of the year end valuation of the Plan were as follows:

Discount rate
Expected rate of salary increases
Expected rate of pension increases
Retail Price Index (RPI) inflation
Consumer Price Index (CPI) inflation1
Expected return on the Plan assets

2011
5.5%
5.9%
3.5%
3.4%
2.7%
6.0%

2010
5.5%
6.1%
3.8%
3.6%
n/a
6.2%

1  The UK Government announced on 8 July 2010 that it will in future use the CPI rather than the RPI for the purposes of determining statutory minimum pension increases for 
private sector occupational pension schemes. The Group’s current UK defined benefit pension scheme rules specify that pensions in deferment will be linked to the statutory 
minimum and therefore CPI. The Group has therefore amended its assumption for increases to pensions in deferment to reflect this.

The post-retirement mortality assumptions used to value the benefit obligation at 31 March 2011 and 31 March 2010 are based on 80% of the PNA00 
tables allowing for improvements in line with the medium cohort projections from 2000 subject to a minimum rate of future improvement of 1.5% pa. 
The life expectancy of a male member reaching age 60 in 2031 (2010: 2030) is projected to be 34.1 (2010: 34.0) years compared to 30.7 (2010: 30.5) 
years for someone reaching 60 in 2011.

The amount recognised in the balance sheet in respect of the Group’s defined benefit schemes are as follows:

Present value of funded obligations
Fair value of the Plan assets
Retirement benefit (surplus)/deficit in respect of the Plan
Retirement benefit deficit in respect of other defined benefit schemes

2011  
£m
626
(670)
(44)
4

2010  
£m
615 
(587)
28 
–

Included within the present value of funded obligations is £39 million (2010: £22 million) in relation to the asset restriction. The asset restriction relates to tax 
that would be deducted at source in respect of the plan surplus together with the surplus that arises from the present value of supplementary contributions 
to the Plan agreed by the Plan trustees.

Amounts recognised in the statement of comprehensive income in respect of the Plan are as follows:

Included in operating costs
  Current service cost
Included in finance costs (note 10)
  Expected return on the Plan assets

Interest on obligation

Included in other comprehensive income
  Actuarial (gain)/loss
  Asset restriction
  Total actuarial (gain)/loss and asset restriction
Total

2011  
£m

2010  
£m

6

5

(37)
32

(37)
17
(20)
(19)

(28)
29

49
22
71
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104

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

9  Retirement benefits (continued)
Changes in the present value of the defined benefit obligation were as follows:

Opening defined benefit obligation
Current service cost
Interest cost
Actuarial (gain)/loss
Asset restriction
Contributions
Benefits paid
Closing defined benefit obligation

Changes in the fair value of the Plan assets were as follows:

Opening fair value of the Plan assets
Expected returns
Actuarial gain
Contributions
Benefits paid
Closing fair value of the Plan assets

Contributions paid to the Plan are related party transactions as defined by IAS 24 Related party transactions.

The fair value of the Plan assets at the balance sheet date is as follows:

Equities
Gilts
Other

2011  
£m
615
6
32
(29)
17
1
(16)
626

2011  
£m
587
37
7
55
(16)
670

2011  
£m
353
317
–
670

2010  
£m
437
5
29
145
22
1
(24)
615

2010  
£m
419
28
96
68
(24)
587

2010  
£m
326
262
(1)
587

The actual return on the Plan assets for the year was a gain of £44 million (2010: £124 million).

The Plan assets do not include any of the Group’s own equity instruments nor any property in use by the Group. The expected rate of returns of individual 
categories of the Plan assets is determined by reference to individual indices.

The history of the Plan is as follows:

Present value of defined benefit obligation
Fair value of the Plan assets
(Surplus)/deficit
Experience adjustments on the Plan liabilities
Experience adjustments on the Plan assets

2011 
£m
626
(670)
(44)
(2)%
–

2010 
£m
615
(587)
28
2%
16%

2009 
£m
437
(419)
18
2%
(26)%

2008 
£m
515
(477)
38
1%
(6)%

2007 
£m
480
(479)
1
(2)%
–

The cumulative actuarial losses recognised in other comprehensive income are £102 million (2010: £123 million). This includes £39 million in respect of the 
asset restriction.

As the Plan was closed to future accrual of benefits by members with effect from 5 April 2011 the Group will cease to make regular contributions to the Plan 
in the year to 31 March 2012. The triennial actuarial funding valuation completed in September 2008 resulted in an actuarial deficit of £86 million. The Group 
agreed to fund this over five years making contributions of £20 million per annum. In addition in April 2009 the Group agreed to provide additional 
contributions of £25 million per annum to the Plan until 31 March 2011.

Other retirement schemes
Employees in Germany and Spain are entitled to a pension based on their length of service. 3i Deutschland GmbH and 3i Europe plc Spanish branch contributes 
to individual investment policies for its employees and has agreed to indemnify any shortfall on an employee’s investment policy should it arise. The total value 
of these investment policies intended to cover pension liabilities is £10 million (2010: £10 million) and the future liability calculated by German and Spanish 
actuaries is £14 million (2010: £14 million). The Group has recognised cumulative actuarial losses of £nil (2010: £3 million loss) and £1 million (2010: £1 million) 
in the statement of comprehensive income in respect of these schemes. 

During the year assets and liabilities of the Spanish and German pension schemes were reclassified in the balance sheet from other current assets and trade 
and other payables respectively to be shown as a retirement benefit deficit of £4 million. The impact as at 31 March 2010 is a £4 million increase in the 
retirement benefit deficit, a £5 million reduction in other current assets and a £9 million reduction in trade and other payables.

Report and accounts 2011 3i Group plc 105

10  Net interest payable

Interest receivable
Interest on bank deposits

Interest payable
Interest on loans and borrowings
Interest on convertible bonds
Amortisation of convertible bonds
Subordinated borrowings
Net finance expenses on pension plan

Net interest payable 

11  Movement in the fair value of derivatives

Interest-rate swaps
Derivative element of convertible bonds
Call options

2011  
£m

2010  
£m

12
12

(113)
(7)
(24)
–
5
(139)
(127)

2011  
£m
–
–
(1)
(1)

12
12

(85)
(16)
(21)
(1)
(1)
(124)
(112)

2010  
£m
7
3
(1)
9

Further information on convertible bonds is provided in note 22.

Exchange movements in relation to forward foreign exchange contracts are included within exchange movements in the statement of comprehensive income. 
During the year, a £12 million loss was recognised in exchange movements in relation to forward foreign exchange contracts.

12  Income taxes

Current taxes
Current year
Deferred taxes
Deferred income taxes
Total income taxes in the statement of comprehensive income

2011  
£m

2010  
£m

(4)

1
(3)

(3)

(2)
(5)

Reconciliation of income taxes in the statement of comprehensive income
The tax charge for the year is different to the standard rate of corporation tax in the UK, currently 28% (2010: 28%), and the differences are explained below:

Profit before tax
Profit before tax multiplied by rate of corporation tax in the UK of 28% (2010: 28%)
Effects of:
  Permanent differences
  Short-term timing differences
  Non-taxable dividend income
  Foreign tax
  Foreign tax credits available for double tax relief
  Realised profits, changes in fair value and impairment losses not taxable
Total income taxes in the statement of comprehensive income

2011  
£m
189
(53)

2010  
£m
159
(45)

7
2
2
(4)
–
43
(3)

5
3
13
(3)
–
22
(5)

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The Group’s realised profits, fair value adjustments and impairment losses are primarily included in the Company, the affairs of which are directed so as to allow 
it to be approved as an investment trust. An investment trust is exempt from tax on capital gains, therefore the Group’s capital return will be largely non-taxable.

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106

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

12  Income taxes (continued)
Deferred income taxes

Opening deferred income tax liability
Tax losses
Income in accounts taxable in the future

Recognised through statement of comprehensive income
Tax losses utilised
Income in accounts taxable in the future

Closing deferred income tax liability
Tax losses
Income in accounts taxable in the future
Deferred tax recognised on acquisition

2011 
Group 
£m

2010
Group  
£m

17
(19)
(2)

8
(7)
1

25
(26)
(5)
(6)

9
(9)
–

8
(10)
(2)

17
(19)
–
(2)

At 31 March 2011 the Group had tax losses carried forward of £885 million (2010: £775 million). It is unlikely that the Group will generate sufficient taxable 
profits in the future to utilise these amounts and therefore no deferred tax asset has been recognised. Deferred income taxes are calculated using an 
expected rate of corporation tax in the UK of 26% (2010: 28%).

13  Investment portfolio

Opening book value
Additions
Disposals, repayments and write-offs
Revaluation
Provisions and loan impairments
Other movements
Closing book value
Quoted1
Unquoted1
Closing book value

Group  
2011  
Equity  
investments  
£m
2,130
169
(175)
595
(20)
(160)
2,539
405
2,134
2,539

Group  
2011  
Loans and  
receivables  
£m
1,387
550
(310)
–
(250)
77
1,454
–
1,454
1,454

Group  
2011

Total  
£m
3,517
719
(485)
595
(270)
(83)
3,993
405
3,588
3,993

Group  
2010  
Equity  
investments  
£m
2,581
61
(838)
398
(24)
(48)
2,130
370
1,760
2,130

Group  
2010  
Loans and  
receivables  
£m
1,469
325
(329)
–
84
(162)
1,387
–
1,387
1,387

Group  
2010 

Total  
£m
4,050
386
(1,167)
398
60
(210)
3,517
370
3,147
3,517

1  Investments made through the 3i India Infrastructure Fund have been reclassified as individual investments, rather than as a fund which is classified as unquoted equity. 

The prior year has been restated.

The holding period of 3i’s investment portfolio is on average greater than one year. For this reason the portfolio is classified as non-current. It is not possible 
to identify with certainty investments that will be sold within one year.

Additions to loans and receivables includes £158 million (2010: £183 million) of interest received by way of loan notes. A corresponding amount has been 
included in income from loans and receivables.

Other movements include foreign exchange and conversions from one instrument into another, and the impact of the solvent liquidation of 3iQPEP in the 
prior year.

Included within the statement of comprehensive income are foreign exchange losses of £135 million (2010: £359 million loss). This includes exchange 
movements on non-monetary items (eg equity investment portfolio) and on monetary items (eg non-sterling loans and borrowings). Of this, foreign 
exchange losses on monetary items not measured at fair value total £41 million (2010: £105 million).

 
  
Report and accounts 2011 3i Group plc 107

13  Investment portfolio (continued)
Fair value hierarchy
The Group classifies financial instruments measured at fair value in the investment portfolio according to the following hierarchy:

Level
Level 1

Level 2
Level 3

Fair value input description
Quoted prices (unadjusted) from active markets
Inputs other than quoted prices included in Level 1 that are observable 
either directly (ie as prices) or indirectly (ie derived from prices)
Inputs that are not based on observable market data

Financial instruments
Quoted equity instruments

Unquoted equity instruments, variable funding note

Unquoted equity instruments are measured in accordance with the International Private Equity and Venture Capital valuation guidelines with reference to the 
most appropriate information available at the time of measurement. Further information regarding the valuation of unquoted equity instruments can be found 
in the section Portfolio valuation – an explanation.

The variable funding note relating to the Debt Warehouse is included within the loans and receivables balance at a carrying value of £5 million (2010: £75 million). 
In accordance with the fair value hierarchy the variable funding note is classified as Level 3. The variable funding note had investment of £47 million 
(2010: £42 million), revaluation of £1 million (2010: £45 million) and generated interest income and fees of £7 million (2010: £10 million) in the year. 
The variable funding note also had foreign exchange movements of £3 million (2010: £3 million) in the year.

The Group’s investment portfolio for equity instruments and the variable funding note is classified by the fair value hierarchy as follows:

Quoted equity
Unquoted equity
Variable funding note
Total

Quoted equity
Unquoted equity
Variable funding note
Total

Group  
2011  
Level 1  
£m
405
–
–
405

Group  
2011  
Level 2  
£m
–
–
–
–

Group  
2011  
Level 3  
£m
–
2,134
5
2,139

Group  
2011  
Total  
£m
405
2,134
5
2,544

Group  
2010
Level 11
£m
370
–
–
370

Group  
2010  
Level 2  
£m
–
–
–
–

Group  
2010
Level 31
£m
–
1,760
75
1,835

Group  
2010  
Total  
£m
370
1,760
75
2,205

Company  
2011  
Level 1  
£m
332
–
–
332

Company  
2011  
Level 2  
£m
–
–
–
–

Company  
2011  
Level 3  
£m
–
584
5
589

Company  
2011  
Total  
£m
332
584
5
921

Company  
2010
Level 11
£m
312
–
–
312

Company  
2010  
Level 2  
£m
–
–
–
–

Company  
2010
Level 31
£m
–
423
75
498

Company  
2010  
Total  
£m
312
423
75
810

There were no transfers between Level 1, Level 2 or Level 3 during the year.

This disclosure only relates to the investment portfolio. The fair value hierarchy also applies to derivative financial instruments, see note 20 for further details.

Level 3 fair value reconciliation

Opening book value
Additions
Disposals, repayments and write-offs
Revaluation
Other movements
Closing book value

Group  
2011  
£m
1,835
212
(282)
553
(179)
2,139

Group 
20101
£m
1,909
102
(568)
342
50
1,835

Company  
2011  
£m
498
58
(200)
233
–
589

Company  
2010
£m
715
61
(422)
99
45
498

1  Investments made through the 3i India Infrastructure Fund have been reclassified as individual investments, rather than as a fund which is classified as unquoted equity. 

The prior year has been restated. 

Unquoted equity investments valued using Level 3 inputs also had the following impact on the statement of comprehensive income; realised profits over 
value on disposal of investment of £104 million (2010: £163 million), dividend income of £25 million (2010: £43 million) and foreign exchange losses of 
£28 million (2010: £64 million).

Level 3 inputs are sensitive to assumptions made when ascertaining fair value as described in the Portfolio valuation – an explanation section. A reasonably 
possible alternative assumption would be to apply a standard marketability discount of 5% for all assets rather than the specific approach adopted. This would 
have a positive impact on the portfolio of £146 million (2010: £94 million) or 7% (2010: 5%) of total unquoted equity value.

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108

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

14  Interests in Group entities

Opening book value
Additions
Share of profits
Disposals and repayments
Impairment
Exchange movements
Closing book value

Details of significant Group entities are given in note 35.

Opening book value
Additions
Share of profits
Disposals and repayments
Impairment
Exchange movements
Closing book value

Company  
2011  
Equity 
investments  
£m
88
21
–
(34)
20
–
95

Company  
2011  
Loans and  
receivables  
£m
2,259
545
(134)
(299)
165
83
2,619

Company  
2011

Total  
£m
2,347
566
(134)
(333)
185
83
2,714

Company  
2010  
Equity 
investments  
£m
127
38
–
(33)
(44)
–
88

Company  
2010  
Loans and  
receivables  
£m
2,514
445
(225)
(722)
306
(59)
2,259

Company  
2010

Total  
£m
2,641
483
(225)
(755)
262
(59)
2,347

15  Acquisition of a subsidiary
On 15 February 2011 Mizuho Investment Management (UK) Limited (“MIM”), one of the leading debt management businesses in Europe, became a 
subsidiary of the Group. MIM has since changed its name to 3i Debt Management Investments Limited. The acquisition forms part of the Group’s strategy 
to build its Debt Management business line.

The acquisition of MIM was effected by 3i Debt Management Limited (“3iDM”) on 15 February 2011. 3iDM paid cash consideration of £18 million for 100% 
of the issued share capital of MIM. The equity shares of 3iDM are owned 55% by the Group and 45% by the management team of MIM.

The Group has entered into agreements to purchase this remaining 45% of the equity of 3iDM from the management team over the next five years, with 
the price subject to the performance of 3iDM and its subsidiaries.

In accordance with IFRS 3, the purchase of the management team’s equity holding or “earn-out” is reflected in two parts:

 − £13 million deferred consideration, for the transfer of the remaining 45% of the shares held by MIM management over five years. This has been recognised 

on acquisition and is carried as a liability on the Group balance sheet. 

 − The remaining amount is contingent on the individuals remaining in employment with 3i and 3iDM raising new funds. The amount will be determined 
by the performance of 3iDM during the five-year period and will be recognised in the statement of comprehensive income as carried interest and 
performance fees payable. 

 
 
Report and accounts 2011 3i Group plc 109

15  Acquisition of a subsidiary (continued)
The fair value of the identifiable assets and liabilities of MIM as at the date of acquisition and the consideration paid were:

Fair value of assets received
Cash
Other assets
Intangible assets (fund management contracts)
Total fair value of assets received
Fair value of liabilities assumed
Creditors
Deferred tax liability
Total fair value of liabilities assumed
Total identifiable net assets at fair value
Consideration
Cash
Deferred consideration
Total consideration
Gain on bargain purchase
Net cash outflow arising on acquisition
Cash consideration paid
Cash and cash equivalents acquired
Net cash flow on acquisition

Fair value 
recognised on 
acquisition
£m

18
3
22
43

(3)
(6)
(9)
34

18
13
31
3

(18)
 18
–

The measurement of fair value of the net assets obtained resulted in a gain on bargain purchase of £3 million which has been recognised in other income 
in the statement of comprehensive income.

From the date of acquisition, MIM has contributed £2 million to management fees, and incurred operating expenses and amortisation of the fund 
management contracts of £2 million, which has resulted in an overall charge of £nil to the net profit before tax of the Group. 

If the combination had taken place at the beginning of the year, the contribution to the Group’s revenue from continuing operations would have been 
£16 million and the profit from continuing operations for the Group would have been £5 million.

Transaction costs of £4 million have been charged to operating expenses in the year. 

The Group also acquired equity investments in the funds managed by MIM, on which the unrealised profit on revaluation in the period to 31 March 2011 
was £7 million.

16  Intangible assets 

Fund management contracts
Opening cost 
Acquisitions
Disposals
Closing cost 
Opening accumulated amortisation
Charge for the year
Disposals
Closing accumulated amortisation
Net book amount

Group
2011
£m
–
22
–
22
–
1
–
1
21

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The fund management contracts were purchased in the business combination as disclosed in note 15.

The amortisation charge for the year of £1 million (2010: £nil) has been recognised in operating expenses in the statement of comprehensive income.

Intangible assets are only recognised in the consolidated final statements of the Group. 

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014516_3i_AR11_p97-127.indd   109

25/05/2011   09:50

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
110

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

17  Property, plant and equipment

Land and buildings
Opening cost or valuation
Additions at cost
Disposals
Revaluation
Closing cost or valuation
Net book amount

Depreciation charged in the year on buildings was £nil (2010: £nil).

Plant and equipment
Opening cost or valuation
Additions at cost
Disposals
Closing cost or valuation
Opening accumulated depreciation
Charge for the year
Disposals
Closing accumulated depreciation
Net book amount

Group
2011
£m
4
–
–
–
4
4

Group
2011
£m
37
5
(10)
32
24
5
(8)
21
11

Group
2010
£m
5
–
–
(1)
4
4

Group
2010
£m
50
1
(14)
37
33
5
(14)
24
13

Company
2011
£m
4
–
–
–
4
4

Company
2011
£m
–
–
–
–
–
–
–
–
–

Company
2010
£m
4
–
–
–
4
4

Company
2010
£m
–
–
–
–
–
–
–
–
–

The Group’s freehold properties and long leasehold properties are revalued at each balance sheet date by professional valuers. The valuations were 
undertaken in accordance with the Appraisal and Valuation Manual of the Royal Institute of Chartered Surveyors in the United Kingdom by CBRE and 
Howell Brooks, independent Chartered Surveyors.

18  Other current assets

Prepayments
Other debtors
Amounts due from subsidiaries

Group
2011
£m
5
75
–
80

Group
2010
£m
12
62
–
74

Company
2011
£m
2
24
232
258

Company
2010
£m
2
19
206
227

19  Financial risk management
Introduction
A review of the Group’s objectives, policies and processes for managing and monitoring risk is set out in the Risk section. References in this note to the Risk 
section refer only to the contents of that section and not to other information referred to from the Risk section. This note provides further detail on financial 
risk management, cross-referring to the Risk section where applicable, and includes quantitative data on specific financial risks.

The Group is a highly selective investor and each investment is subject to a risk assessment through an investment approval process. The Group’s Investment 
Committee is part of the overall risk management framework set out in the Risk section.

Capital structure
The capital structure of the Group consists of net debt, including cash held on deposit, and shareholders’ equity. The type and maturity of the Group’s 
borrowings are analysed further in note 21 and the Group’s equity is analysed into its various components in note 27. Capital is managed so as to maximise 
long-term return to shareholders, whilst maintaining a capital base to allow the Group to operate effectively in the marketplace and sustain future 
development of the business.

Cash, deposits and derivative financial assets
Borrowings and derivative financial liabilities
Net debt
Total equity
Gearing (net debt/total equity)

Group
2011
£m
1,524
(2,046)
(522)
3,357
16%

Group
2010
£m
2,252
(2,510)
(258)
3,068
8%

Report and accounts 2011 3i Group plc 111

19  Financial risk management (continued)
Capital constraints
The Group is generally free to transfer capital from subsidiary undertakings to the parent company subject to maintaining each subsidiary with sufficient 
reserves to meet local statutory obligations. No significant constraints have been identified in the past and the Group has been able to distribute profits in 
a tax-efficient manner. The Company operates so as to qualify as a UK Investment Trust for tax purposes which necessitates its investment in subsidiaries 
remaining below 15% of the Company’s investment portfolio.

The Group’s regulated capital requirement is reviewed regularly by the Board of 3i Investments plc, an investment firm that is regulated by the FSA. The 
last submission to the FSA demonstrated a significant consolidated capital surplus in excess of the FSA’s prudential rules. The Group’s capital requirement 
is updated annually following approval of the Group’s Internal Capital Adequacy Assessment Process (ICAAP) report by the Board of 3i Investments plc. 
The Group complies with the Individual Capital Guidance as agreed with the FSA and remains at a significant regulatory capital surplus. The Group’s Pillar 3 
disclosure document can be found on www.3igroup.com.

Financial risks
Concentration risk
The Group’s exposure to and mitigation of concentration risk is explained within the “investment” and “treasury and funding” sections in the Risk section. 
Quantitative data regarding the concentration risk of the portfolio across geographies can be found in note 1, segmental analysis.

Credit risk
The Group is subject to credit risk on its loans, receivables, cash and deposits. The Group’s cash and deposits are held with a variety of counterparties with 
circa 34% of the Group’s surplus cash held on demand in AAA Liquidity funds. The balance is held on short-term deposit with 3i’s relationship banks. The credit 
quality of loans and receivables within the investment portfolio is based on the financial performance of the individual portfolio companies. For those assets 
that are not past due it is believed that the risk of default is small and that capital repayments and interest payments will be made in accordance with the 
agreed terms and conditions of the Group’s investment. Where the portfolio company has failed or is expected to fail in the next 12 months, the Group’s 
policy is to record a provision for the full amount of the loan. Loan impairments are made when the valuation of the portfolio company implies non-recovery 
of all or part of the Group’s loan investment. In these cases an appropriate loan impairment is recorded to reflect the valuation shortfall. Further information 
on how credit risk is managed is given in the Risk section. In accordance with IFRS 7, the amounts shown as past due represent the total credit exposure, not 
the amount actually past due.

As at 31 March 2011
Loans and receivables before provisions and impairments
Provisions on investments that have failed or are 

expected to fail in the next 12 months

Impairments where the valuation of the portfolio 

company implies non-recovery of all or part of the 
Group’s loan investment

Total

As at 31 March 2010
Loans and receivables before provisions and impairments
Provisions on investments that have failed or are 

expected to fail in the next 12 months

Impairments where the valuation of the portfolio 

company implies non-recovery of all or part of the 
Group’s loan investment

Total

Group  

not 
past due
£m
1,752

Group 
up to 
12 months 
past due
£m
56

Group  
more than 
12 months 
past due
£m
152

Group  

Company  

Total
£m
1,960

not past 
due
£m
250

Company  
up to 12 
months 
past due
£m
15

Company 
more than 
12 months 
past due
£m
39

Company  

Total
£m
304

(47)

–

(63)

(110)

(20)

–

(21)

(41)

(330)
1,375

–
56

(66)
23

(396)
1,454

(2)
228

–
15

(14)
4

(16)
247

Group

not
past due
£m
1,541

Group
up to
12 months
past due
£m
146

Group
more than
12 months
past due
£m
52

Group

Company

Total
£m
1,739

not  
past due
£m
319

Company
up to
12 months
past due
£m
57

Company
more than
12 months
past due
£m
25

Company

Total
£m
401

(20)

(7)

(2)

(29)

(12)

(6)

(2)

(20)

(246)
1,275

(64)
75

(13)
37

(323)
1,387

(55)
252

(3)
48

(10)
13

(68)
313

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112

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

19  Financial risk management (continued)
Movements on loan impairment and provisions are shown below:

Balance as at 31 March 2009
Other movements
Credited to income statement in the year1
Balance as at 31 March 2010
Other movements
(Charged)/credited to income statement in year1
Balance as at 31 March 2011

Group
Provisions
£m
(46)
17
–
(29)
(30)
(51)
(110)

Group
Impairments
£m
(731)
324
84
(323)
126
(199)
(396)

Group
Total
£m
(777)
341
84
(352)
96
(250)
(506)

Company
Provisions
£m
(22)
2
–
(20)
(7)
(14)
(41)

Company
Impairments
£m
(230)
114
48
(68)
34
18
(16)

Company
Total
£m
(252)
116
48
(88)
27
4
(57)

1  Included within impairments for the Group and Company is a £1 million value increase for variable funding notes relating to the Debt Warehouse (2010: £45 million). 

Liquidity risk
Further information on how liquidity risk is managed is provided in the Risk section. The table below analyses the maturity of the Group’s gross 
contractual liabilities.

Financial liabilities (excluding forward foreign exchange contracts)

Group
due  
within  
1 year
£m

Group
due 
between  
1 and 2 
years
£m

Group
due 
between 
2 and 5 
years
£m

Group
due  
more  
than 
5 years
£m

Company
due  
within  
1 year
£m

Company
due 
between  
1 and 2 
years
£m

Company
due 
between 
2 and 5 
years
£m

Company
due  
more  
than 
5 years
£m

Group
Total
£m

Company
Total
£m

86
20

142

12
4

58
322

85
397

–

234
2

–
718

158
280

1,380
–

1,709
697

–

56
2

–

–
6

142

302
14

–
496

–
1,386

58
2,922

86
20

142

3
4

–
255

85
397

158
280

1,380
–

1,709
697

–

3
2

–

56
2

–

–
6

142

62
14

–
487

–
496

–
1,386

–
2,624

Group
due  
within  
1 year
£m

Group
due 
between  
1 and 2 
years
£m

Group
due 
between 
2 and 5 
years
£m

Group
due  
more  
than 
5 years
£m

Company
due  
within  
1 year
£m

Company
due 
between  
1 and 2 
years
£m

Company
due 
between 
2 and 5 
years
£m

Company
due  
more  
than 
5 years
£m

Group
Total
£m

Company
Total
£m

437

139

(445)
(8)

(141)
(2)

–

–
–

–

–
–

576

441

146

6

(586)
(10)

(449)
(8)

(148)
(2)

(6)
–

–

–
–

593

(603)
(10)

As at 31 March 2011
Gross commitments:
Fixed loan notes
Variable loan notes
Convertible bond 2011 

£430m 3.625%
Committed multi-
currency facility
Interest rate swaps
Carried interest payable 

within one year

Total

Forward foreign exchange contracts

As at 31 March 2011
Gross amount receivable 
from forward foreign 
exchange contracts
Gross amount payable 
for forward foreign 
exchange contracts
Total amount payable

Report and accounts 2011 3i Group plc 113

19  Financial risk management (continued)
Financial liabilities (excluding forward foreign exchange contracts)1

Company
due  
within  
1 year
£m

Company
due 
between  
1 and 2 
years
£m

Company
due 
between 
2 and 5 
years
£m

Company
due  
more  
than  
5 years
£m

Group
due  
within  
1 year
£m

Group
due 
between  
1 and 2 
years
£m

Group
due 
between 
2 and 5 
years
£m

193
732

–

307
–
8

91
17

11

7
92
19

70
307

88
19

396

7
–
10

–
520

Group
due  
more  
than  
5 years
£m

1,436
–

–

–
–
7

Group
Total
£m

1,808
768

407

321
92
44

91
17

11

3
92
19

88
19

396

3
–
10

–
516

Company
Total
£m

1,808
768

407

67
92
44

193
732

1,436
–

–

61
–
8

–

–
–
7

As at 31 March 2010
Gross commitments:
Fixed loan notes
Variable loan notes
Convertible bond 2011 

£430m 3.625%
Committed multi-
currency facility
Euro commercial paper
Interest rate swaps
Carried interest payable 

within one year

Total

–
1,240

–
1,443

70
3,510

–
233

–
994

–
1,443

–
3,186

1  As at 31 March 2010, the Group/Company had no open forward foreign exchange contracts. 

Market risk
The valuation of the Group’s investment portfolio is largely dependent on the underlying trading performance of the companies within the portfolio but the 
valuation and other items in the financial statements can also be affected by interest rate, currency and quoted market fluctuations. The Group’s sensitivity 
to these items is set out below.

(i) Interest rate risk
Further information on how interest rate risk is managed is provided in the Risk section. The direct impact of a movement in interest rates is relatively small. 
An increase of 100 basis points would lead to an approximate increase in net assets of £5 million (2010: £4 million decrease) for the Group and £6 million 
(2010: £1 million decrease) for the Company. This increase arises principally from changes in interest receivable and payable on floating rate, short-term 
instruments, including cash and deposits in the current year. In addition the Group and Company have indirect exposure to interest rates through changes 
to the financial performance of portfolio companies caused by interest rate fluctuations.

(ii) Currency risk
The Group’s net assets in euro, US dollar, Swedish krona, Indian rupee, Swiss franc and all other currencies combined is shown in the table below. This sensitivity 
analysis is performed based on the sensitivity of the Group and Company’s net assets to movements in foreign currency exchange rates assuming a 5% 
movement in exchange rates against sterling. The Group manages currency risk on a consolidated basis. Further information on how currency risk is managed 
is provided in the Risk section.

As at 31 March 2011
Net assets
Sensitivity analysis
Assuming a 5% movement in exchange rates 

against sterling:

Impact on exchange movements in the statement 

of comprehensive income

Impact on the translation of foreign operations 

in other comprehensive income

Total

Group
sterling  
£m
2,041

Group
euro  
£m
407

Group
US dollar  
£m
487

Group
Swedish  
krona  
£m
113

Group
Indian  
rupee  
£m
105

Group
Swiss  
franc  
£m
(46)

Group
Other  
£m
250

Group
Total  
£m
3,357

n/a

n/a
n/a

74

43

(46)
28

(27)
16

20

(9)
11

(1)

(1)

(5)

130

6
5

1
–

14
9

(61)
69

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114

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

19  Financial risk management (continued)

As at 31 March 2011
Net assets
Sensitivity analysis
Impact on exchange movements in the statement 

of comprehensive income assuming a 5% movement 
in exchange rates against sterling

Total

As at 31 March 2010
Net assets
Sensitivity analysis
Assuming a 5% movement in exchange rates 

against sterling:

Impact on exchange movements in the statement 

of comprehensive income

Impact on the translation of foreign operations 

in other comprehensive income

Total

As at 31 March 2010
Net assets
Sensitivity analysis
Impact on exchange movements in the statement 

of comprehensive income assuming a 5% movement 
in exchange rates against sterling

Total

Company
sterling  
£m
1,899

Company 
euro  
£m
816

Company
US dollar  
£m
409

Company  
Swedish  
krona  
£m
256

Company  
Indian  
rupee  
£m
–

Company  
Swiss  
franc  
£m
(8)

Company
Other  
£m
94

Company
Total  
£m
3,466

n/a
n/a

30
30

16
16

18
18

–
–

Group
sterling  
£m
1,836

Group
euro  
£m
436

Group
US dollar  
£m
575

Group
Swedish  
krona  
£m
(113)

Group
Indian  
rupee  
£m
94

(1)
(1)

Group 
Swiss  
franc  
£m
(27)

5
5

68
68

Group 
Other  
£m
267

Group
Total  
£m
3,068

n/a

n/a
n/a

68

(44)
24

81

(52)
29

14

(9)
5

–

5
5

–

1
1

3

4
7

166

(95)
71

Company
sterling  
£m
1,558

Company
euro  
£m
606

Company
US dollar  
£m
852

Company
Swedish  
krona  
£m
125

Company
Indian  
rupee  
£m
–

Company
Swiss  
franc  
£m
2

Company
Other  
£m
45

Company
Total  
£m
3,188

n/a
n/a

31
31

45
45

7
7

–
–

–
–

2
2

85
85

(iii) Price risk – market fluctuations
Further information about the management of price risk, which arises principally from quoted and unquoted equity investments, is provided in the Risk section. 
A 5% change in the fair value of those investments would have the following direct impact on the statement of comprehensive income:

Group1
Company

2011
Quoted  
equity  
£m
20
17

2011
Unquoted  
equity  
£m
107
29

2011
Total  
£m
127
46

2010
Quoted  
equity  
£m
19
16

2010
Unquoted  
equity  
£m
88
21

2010
Total  
£m
107
37

1  Investments made through the 3i India Infrastructure Fund have been reclassified as individual investments, rather than as a fund which is classified as unquoted equity. 

The prior year has been restated.

In addition, other price risk arises from carried interest balances.

Report and accounts 2011 3i Group plc 115

20  Derivative financial instruments

Current assets
Forward foreign exchange contracts
Call options

Current liabilities
Forward foreign exchange contracts
Interest rate swaps

Group  
2011  
£m

Group  
2010  
£m

Company  
2011 
£m

Company  
2010  
£m

2
1
3

(12)
(22)
(34)

–
–
–

–
(52)
(52)

2
1
3

(12)
(22)
(34)

–
–
–

–
(52)
(52)

Forward foreign exchange contracts
The Group extended its hedging policy during the year to include derivative contracts up to a value of 30% of the corresponding US dollar and euro 
portfolio value.

The contracts entered into by the Group are principally denominated in the currencies of the geographic areas in which the Group operates. The fair value of 
these contracts is recorded in the balance sheet and is determined by discounting future cash flows at the prevailing market rates at the balance sheet date. 
No contracts are designated as hedging instruments, as defined in IAS 39, and consequently all changes in fair value are taken to profit and loss.

At the balance sheet date, the notional amount of outstanding forward foreign exchange contracts was £603 million (2010: £nil).

Interest rate swaps
The Group used interest rate swaps during the year to manage its exposure to interest rate movements on its interest-bearing loans and borrowings. The fair 
value of these contracts is recorded in the balance sheet and is determined by discounting future cash flows at the prevailing market rates at the balance 
sheet date. No contracts are designated as hedging instruments, as defined in IAS 39, and consequently all changes in fair value are taken to the statement 
of comprehensive income.

At the balance sheet date, the notional amount of outstanding interest rate swaps was as follows:

Variable rate to fixed rate
Variable rate to variable rate

2011  
£m
–
150
150

2010  
£m
605
150
755

The Group does not trade in derivatives. In general, derivatives held hedge specific exposures and have maturities designed to match the exposures they 
are hedging. It is the intention to hold both the financial instruments giving rise to the exposure and the derivative hedging them until maturity and therefore 
no net gain or loss is expected to be realised.

The derivatives are held at fair value which represents the replacement cost of the instruments at the balance sheet date. Movements in the fair value 
of derivatives are included in the statement of comprehensive income. In accordance with the fair value hierarchy described in note 13, derivative financial 
instruments are measured using Level 2 inputs.

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116

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

21  Loans and borrowings

Loans and borrowings are repayable as follows:
Within one year
In the second year
In the third year
In the fourth year
In the fifth year
After five years

Principal borrowings include:

Issued under the £2,000 million note issuance programme
Fixed rate
£200 million notes (public issue)
£400 million notes (public issue)
€350 million notes (public issue)
Other
Variable rate
€500 million notes (public issue)
Other

Committed multi-currency facilities

£100 million
£486 million
£300 million
£200 million

Other
Commercial paper
Total loans and borrowings

Group  
2011  
£m

Group  
2010  
£m

Company  
2011 
£m

Company  
2010  
£m

31
638
265
50
–
884
1,868

125
33
726
268
50
887
2,089

31
413
265
50
–
884
1,643

125
33
483
268
50
887
1,846

Rate

Maturity

Group  
2011  
£m

Group  
2010  
£m

Company  
2011  
£m

Company  
2010  
£m

6.875%
5.750%
5.625%

2023
2032
2017

EURIBOR+0.200%

2012

LIBOR+2.750% 
to 3.000%
LIBOR+1.594%
LIBOR+2.750%
LIBOR+3.750%

2012
2010
2012
2014

200
375
309
62

200
375
312
99

200
375
309
62

382
265
1,593

436
268
1,690

382
265
1,593

69
–
156
50
275

92
165
–
50
307

–
–
–
50
50

200
375
312
99

436
268
1,690

14
–
–
50
64

–
1,868

92
2,089

–
1,643

92
1,846

The £100 million multi-currency facility maturing in October 2012 has an undrawn commitment fee of 50% of the margin.

The £486 million multi-currency facility was refinanced by way of a £300 million multi-currency facility which matures in October 2012. The undrawn 
commitment fee on the £300 million multi-currency facility is 50% of the margin.

The £200 million multi-currency facility maturing in November 2014 has an undrawn commitment fee of 50% of the margin.

The Group is subject to a financial covenant relating to its Asset Cover Ratio; defined as total assets (including cash) divided by gross debt. The Asset Cover 
Ratio limit is 1.40 at 31 March 2011 (2010: 1.35), the Asset Cover Ratio at 31 March 2011 is 2.82 (2010: 2.35).

All of the Group’s borrowings are repayable in one instalment on the respective maturity dates. None of the Group’s interest-bearing loans and borrowings 
are secured on the assets of the Group. The fair value of the loans and borrowings is £1,875 million (2010: £2,0301 million), determined where applicable 
with reference to their published market price.

1  Restated to include the fair value of commercial paper.

Report and accounts 2011 3i Group plc 117

22  Convertible bonds

Opening balance
Amortisation 
Repurchase during the year
Closing balance

Group  
2011  
£m
363
24
(249)
138

Group  
2010  
£m
384
21
(42)
363

Company  
2011 
£m
363
24
(249)
138

Company  
2010  
£m
384
21
(42)
363

On 29 May 2008, a £430 million three year 3.625% convertible bond was raised. The Group share price on issue was £8.86 and the conversion price for 
bondholders was £11.32. Following the rights issue, the conversion price for bondholders reduced to £7.51. 

On issue, part of the proceeds was recognised as a derivative financial instrument and the remaining amount recognised as a loan held at amortised cost with 
an effective interest rate of 8.5%. The fair value of the loan at 31 March 2011 was £140 million (31 March 2010: £391 million), determined by its published 
market price and is classified as Level 1 in the fair value hierarchy. The derivative element of the £430 million convertible bond is cash settled. 

As at 31 March 2011, the Group had repurchased £291 million of the bond (£249 million in the year to 31 March 2011), leaving an outstanding convertible 
loan balance at face value of £139 million repayable in May 2011. 

23  B shares

Opening balance
Repurchased and cancelled 
Closing balance

On 10 August 2009 the Company repurchased and subsequently cancelled 4,670,975 B shares.

24  Trade and other payables

Other accruals
Amounts due to subsidiaries

25  Provisions

Opening balance
(Release)/charge for the year
Utilised in the year
Closing balance

Opening balance
Charge for the year
Utilised in the year
Closing balance

Group  
2011  
£m
6
–
6

Group  
2011  
£m
198
–
198

Group  
2010  
£m
12
(6)
6

Company  
2011 
£m
6
–
6

Company  
2010  
£m
12
(6)
6

Group  
2010  
£m
176
–
176

Company  
2011 
£m
30
303
333

Company  
2010  
£m
29
357
386

Group  
2011  
Property  
£m
12
(1)
(4)
7

Group  
2010  
Property  
£m
10
5
(3)
12

Group  
2011  
Redundancy  
£m
5
3
(7)
1

Group  
2010  
Redundancy  
£m
13
4
(12)
5

Group  
2011  
Total  
£m
17
2
(11)
8

Group  
2010  
Total  
£m
23
9
(15)
17

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The provision for redundancy relates to staff reductions announced prior to 31 March 2011. Most of the provision is expected to be utilised in the next year.

The Group has a number of leasehold properties whose rent and unavoidable costs exceed the economic benefits expected to be received. These costs arise 
over the period of the lease, and have been provided for to the extent they are not covered by income from subleases. The leases covered by the provision 
have a remaining term of up to 14 years.

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118

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

26  Issued capital

Issued and fully paid
Ordinary shares of 73 19/22p
Opening balance
Issued under employee share plans
Nine for seven rights issue
Issue for acquisition of assets of 3i Quoted 

Private Equity plc

Closing balance

2011  
Number

970,381,476
269,144
–

–
970,650,620

2011  
£m

717
–
–

–
717

2010  
Number 

383,970,880
6,745,260
542,060,391

37,604,945
970,381,476

2010  
£m

284
5
400

28
717

During the year to 31 March 2011, no options to subscribe for ordinary shares were exercised (2010: nil). Issued under employee share plans in 2010 includes 
6,380,198 ordinary shares subscribed by employees under the Employee Share Investment Plan in June 2009.

27  Equity

Year to 31 March 2011  
Group
Total equity at the start 

of the year
Profit for the year
Exchange differences 
on translation of 
foreign operations

Actuarial gain
Total comprehensive 
income for the year
Share-based payments
Own shares
Release on forfeiture 
of share options
Ordinary dividends
Issue of ordinary shares
Total equity at the end 

of the year

Share  
Capital  
£m

Share  
Premium  
£m

Capital  
redemption  
reserve  
£m

Share- 
based  
payment  
reserve  
£m

Translation  
reserve  
£m

Capital  
reserve  
£m

Revenue  
reserve  
£m

Other  
reserves  
£m

Own  
shares  
£m

Total  
equity  
£m

717

779

43

24

145

959
114

482
72

5

(86)

3,068
186

118

20

–

–

–

–

118

134

72

–

–

(7)

2
(30)

118
20

324
–
–

(5)
(30)
–

717

779

43

17

263

1,093

526

5

(86)

3,357

Report and accounts 2011 3i Group plc 119

27  Equity (continued)

Year to 31 March 2010 
Group
Total equity at the start 

of the year
Profit for the year
Exchange differences 
on translation of 
foreign operations

Actuarial loss
Total comprehensive 
income for the year
Share-based payments
Own shares
Release on forfeiture 
of share options
Ordinary dividends
Issue of ordinary shares
Total equity at the end 

of the year

Share  
Capital  
£m

Share  
Premium  
£m

Capital  
redemption  
reserve  
£m

Share- 
based  
payment  
reserve  
£m

Translation  
reserve  
£m

Capital
reserve
£m

Revenue
reserve
£m

Other
reserves
£m

Own
shares
£m

284

405

42

20

(179)

968
57

394
97

5

(77)

–

–

–

433

717

374

779

1

43

324

324

–
9

(5)

(71)

(14)

5

97

–

–

(9)

(9)

24

145

959

482

5

(86)

3,068

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Total
equity
£m

1,862
154

324
(71)

407
9
(9)

–
(9)
808

Year to 31 March 2011 
Company
Total equity at the start of the year
Profit for the year
Total comprehensive income for the year
Release on forfeiture of share options
Ordinary dividends
Issue of ordinary shares
Total equity at the end of the year

Share
Capital
£m
717

Share
Premium
£m
779

Capital
redemption
reserve
£m
43

–

–

–

Share-
based
payment
reserve
£m
20

–
(3)

Capital
reserve
£m
1,328
286
286

Revenue
reserve
£m
296
17
17
8
(30)

717

779

43

17

1,614

291

Other
reserves
£m
5

–

5

Total
equity
£m
3,188
303
303
5
(30)
–
3,466

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120

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

27  Equity (continued)

Year to 31 March 2010 
Company
Total equity at the start of the year
Profit for the year
Total comprehensive income for the year
Ordinary dividends
Issue of ordinary shares
Total equity at the end of the year

Share
Capital
£m
284

Share
Premium
£m
405

Capital
redemption
reserve
£m
42

–

–

433
717

374
779

–

1
43

Share-
based
payment
reserve
£m
20

–

Capital
reserve
£m
1,256
72
72

Revenue
reserve
£m
266
39
39
(9)

20

1,328

296

Other
reserves
£m
5

–

5

Total
equity
£m
2,278
111
111
(9)
808
3,188

Capital redemption reserve
The capital redemption reserve is established in respect of the redemption of the Company’s ordinary shares.

Share-based payment reserve
The share-based payment reserve is a reserve to recognise those amounts in retained earnings in respect of share-based payments.

Translation reserve
The translation reserve comprises all exchange differences arising from the translation of the financial statements of international operations.

Capital reserve
The capital reserve recognises all profits that are capital in nature or have been allocated to capital. These profits are not distributable by way of dividend.

Revenue reserve
The revenue reserve recognises all profits that are revenue in nature or have been allocated to revenue.

28  Own shares

Opening cost
Additions
Disposals
Closing cost

2011
£m
86
–
–
86

2010
£m
77
11
(2)
86

Own shares consists of shares in 3i Group plc held by the 3i Group Employee Trust. As at 31 March 2011 the Trust held 19,631,587 shares in 3i Group plc 
(2010: 19,758,485). The market value of these shares at 31 March 2011 was £59 million (2010: £58 million). The Trust is funded by an interest-free loan 
from 3i Group plc.

Report and accounts 2011 3i Group plc 121

29  Per share information
The earnings and net assets per share attributable to the equity shareholders of the Company are based on the following data:

Earnings per share (pence)
Basic
Diluted
Earnings (£m)
Profit for the year attributable to equity holders of the Company

Weighted average number of shares in issue
Ordinary shares
Own shares

Effect of dilutive potential ordinary shares
  Share options and awards
Diluted shares

Net assets per share (£)
Basic
Diluted
Net assets (£m)
Net assets attributable to equity holders of the Company

Number of shares in issue
Ordinary shares
Own shares

Effect of dilutive potential ordinary shares
  Share options and awards
Diluted shares

March
2011

19.6
19.5

186

March
2011

March
2010

17.2
17.1

154

March
2010

970,513,394 910,689,107
(16,310,231)
(19,660,791)
950,852,603 894,378,876

3,486,081

5,026,956
954,338,684 899,405,832

March
2011

3.53
3.51

March
2010

3.23
3.21

3,357

3,068

March 
2011

March 
2010

970,650,620 970,381,476
(19,758,485)
(19,631,587)
951,019,033 950,622,991

4,600,795

6,607,673
955,619,828 957,230,664

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122

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

30  Dividends

Declared and paid during the year
Ordinary shares
Final dividend
Interim dividend

Proposed final dividend

31  Operating leases
Leases as lessee
Future minimum payments due under non-cancellable operating lease rentals are as follows:

Less than one year
Between one and five years
More than five years

2011
pence
per share

2011

£m

2010
pence
per share

2010

£m

2.0
1.2
3.2
2.4

19
11
30
23

–
1.0
1.0
2.0

–
9
9
19

Group  
2011  
£m
10
34
25
69

Group  
2010  
£m
11
33
30
74

Company  
2011  
£m
–
–
–
–

Company  
2010  
£m
–
–
–
–

The Group leases a number of its offices under operating leases. None of the leases include contingent rentals.

During the year to 31 March 2011 £6 million (2010: £13 million) was recognised as an expense in the statement of comprehensive income in respect of 
operating leases. Income recognised in the statement of comprehensive income in respect of subleases was £nil (2010: £1 million). The total future sublease 
payments expected to be received under non-cancellable subleases is £3 million (2010: £3 million).

Report and accounts 2011 3i Group plc 123

32  Commitments

Equity and loan investments

Equity and loan investments

Group  
2011  
due within  
one year  
£m
62

Group  
2011  
due  
2-5 years  
£m
2

Group  
2011  
due over  
5 years  
£m
–

Group 

Total  
£m
64

Group  
2010  
due within  
one year  
£m
204

Group  
2010  
due  
2-5 years  
£m
1

Group  
2010  
due over  
5 years  
£m
–

Group 

Total  
£m
205

Company  
2011  
due within  
one year  
£m
1

Company  
2011 
due  
2-5 years  
£m
–

Company  
2011 
due over  
5 years  
£m
–

Company 

Total  
£m
1

Company  
2010  
due within  
one year  
£m
61

Company  
2010  
due  
2-5 years  
£m
–

Company  
2010  
due over  
5 years  
£m
–

Company 

Total  
£m
61

Commitments represent guarantees or commitments made by the Group and Company to portfolio companies. For commitments to funds managed and 
advised by the Group refer to page 18.

33  Contingent liabilities

Contingent liabilities relating to guarantees available to third parties in respect of investee companies 

Group  
2011  
£m
5

Group  
2010  
£m
5

Company  
2011  
£m
–

Company  
2010  
£m
–

The Company has guaranteed the payment of principal and interest on amounts drawn down by 3i Holdings plc under the £100 million bilateral facility 
and £300 million revolving credit facility. At 31 March 2011, 3i Holdings plc had drawn down £69 million (2010: £78 million) under the first facility and 
£156 million (2010: £165 million) under the second facility.

The Company has provided a guarantee to the Trustees of the 3i Group Pension Plan in respect of liabilities of 3i plc to the Plan. 3i plc is the sponsor of 
the 3i Group Pension Plan.

At 31 March 2011, there was no material litigation outstanding against the Company or any of its subsidiary undertakings.

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124

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

34  Related parties
The Group has various related parties stemming from relationships with limited partnerships managed by the Group, its investment portfolio, its advisory 
arrangements and its key management personnel. In addition the Company has related parties in respect of its subsidiaries.

Limited partnerships
The Group manages a number of external funds which invest through limited partnerships. Group companies act as the general partners of these limited 
partnerships and exert significant influence over them. The following amounts have been included in respect of these limited partnerships:

Statement of comprehensive income
Carried interest receivable
Fees receivable from external funds

Balance sheet
Carried interest receivable

Group  
2011  
£m
25
55

Group  
2011  
£m
82

Group  
2010  
£m
30
47

Company  
2011  
£m
25
–

Company  
2010  
£m
30
–

Group  
2010  
£m
75

Company  
2011  
£m
82

Company  
2010  
£m
75

Investments
The Group makes minority investments in the equity of unquoted and quoted investments. This normally allows the Group to participate in the financial 
and operating policies of that company. It is presumed that it is possible to exert significant influence when the equity holding is greater than 20%. These 
investments are not equity accounted for (as permitted by IAS 28) but are related parties. The total amounts included for these investments are as follows:

Statement of comprehensive income
Realised profit over value on the disposal of investments
Unrealised profits on the revaluation of investments
Portfolio income

Balance sheet
Quoted equity investments
Unquoted equity investments
Loans and receivables

Group  
2011  
£m
9
313
136

Group  
2011  
£m
321
1,633
1,294

Group  
2010  
£m
58
327
126

Company  
2011  
£m
17
245
35

Company  
2010  
£m
19
136
41

Group  
2010  
£m
302
1,267
1,264

Company  
2011  
£m
321
507
201

Company  
2010  
£m
302
329
205

From time to time transactions occur between related parties within the investment portfolio that the Group influences to facilitate the reorganisation or 
recapitalisation of an investee company. There has been no single transaction in the year with a material effect on the Group’s financial statements and all 
such transactions are fully included in the above disclosure.

Report and accounts 2011 3i Group plc 125

34  Related parties (continued)
Advisory arrangements
The Group acts as an adviser to 3i Infrastructure plc, which is listed on the London Stock Exchange, and acted as adviser to 3i Quoted Private Equity plc 
prior to its solvent liquidation in April 2009. The following amounts have been included in respect of these advisory relationships:

Statement of comprehensive income
Unrealised profits on the revaluation of investments
Fees receivable from external funds
Dividends

Balance sheet
Quoted equity investments

Group  
2011  
£m
21
17
16

Group  
2011  
£m
320

Group  
2010  
£m
72
12
15

Company  
2011  
£m
21
17
16

Company  
2010  
£m
72
12
15

Group  
2010  
£m
300

Company  
2011  
£m
320

Company  
2010  
£m
300

Key management personnel
The Group’s key management personnel comprise the members of the Leadership Team, which has replaced the Management Committee during the year, 
and the Board’s non-executive Directors. The following amounts have been included in respect of these individuals: 

Statement of comprehensive income
Salaries, fees, supplements and benefits in kind
Bonuses and deferred share bonuses
Increase in accrued pension
Carried interest and performance fees payable
Share-based payments
Termination benefits

Balance sheet
Bonuses and deferred share bonuses
Carried interest and performance fees payable within one year
Carried interest and performance fees payable after one year
Deferred consideration included within trade and other payables1

Group  
2011  
£m
6
6
–
15
1
–

Group  
2011  
£m
8
8
11
9

Group  
2010  
£m
4
8
–
11
1
–

Group  
2010  
£m
7
8
7
–

1  Deferred consideration relates to the acquisition in the year, set out in note 15.
Carried interest paid in the year to key management personnel was £16 million (2010: £6 million).

Subsidiaries
Transactions between the Company and its subsidiaries, which are related parties of the Company, are eliminated on consolidation. Details of related party 
transactions between the Company and its subsidiaries are detailed below.

Management, administrative and secretarial arrangements
The Company has appointed 3i Investments plc, a wholly-owned subsidiary of the Company incorporated in England and Wales, as investment manager 
of the Group. 3i Investments plc received a fee of £23 million (2010: £23 million) for this service.

The Company has appointed 3i plc, a wholly-owned subsidiary of the Company incorporated in England and Wales, to provide the Company with a range 
of administrative and secretarial services. 3i plc received a fee of £151 million (2010: £184 million) for this service.

Investment entities
The Company makes investments through a number of subsidiaries by providing funding in the form of capital contributions or loans depending on the legal 
form of the entity making the investment. The legal form of these subsidiaries may be limited partnerships or limited companies or equivalent depending on 
the jurisdiction of the investment. The Company receives interest on this funding, amounting in the year to 31 March 2011 to £nil (2010: £nil).

Other subsidiaries
The Company borrows funds from certain subsidiaries and pays interest on the outstanding balances. The amounts that are included in the Company’s 
statement of comprehensive income are £nil (2010: £nil).

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126

3i Group plc  Report and accounts 2011

Financial statements > Notes to the financial statements

35  Group entities
Significant subsidiaries

Name
3i Holdings plc

Country of incorporation
England and Wales

Issued and fully paid share capital
1,000,000 ordinary shares of £1

Principal activity
Holding company

Registered office
16 Palace Street 
London SW1E 5JD

England and Wales
3i International Holdings
England and Wales
3i plc
3i Debt Management Limited England and Wales
England and Wales
3i Debt Management 
Investments Limited

2,715,973 ordinary shares of £10
110,000,000 ordinary shares of £1 Services
1,000,000 ordinary shares of £1
12,000,000 ordinary shares of £1

Holding company
Investment manager

Holding company

3i Investments plc
3i Europe plc
3i Nordic plc
3i Asia Pacific plc
Gardens Pension 

Trustees Limited

3i Corporation 

England and Wales
England and Wales
England and Wales
England and Wales
England and Wales

10,000,000 ordinary shares of £1
500,000 ordinary shares of £1
500,000 ordinary shares of £1
140,000 ordinary shares of £1
100 ordinary shares of £1

Investment manager
Investment adviser
Investment adviser
Investment adviser
Pension fund trustee

USA

15,000 shares of common stock 

Investment manager

(no par value)

3i Deutschland Gesellschaft  
für Industriebeteiligungen 
mbH

Germany

€25,564,594

Investment manager

3i Gestion SA

France

1,762,500 shares of €10

Investment manager

375 Park Avenue
Suite 3001
New York
NY 10152, USA
Bockenheimer
Landstrasse 2-4
60306 Frankfurt am
Main, Germany
3 rue Paul Cezanne
Paris, 75008
France

The list above comprises the principal subsidiary undertakings as at 31 March 2011 all of which were wholly-owned, with the exception of 3i Debt 
Management Limited, which is 55% owned and is in turn the 100% owner of 3i Debt Management Investments Limited. They are incorporated in 
Great Britain and registered in England and Wales unless otherwise stated.

Each of the above subsidiary undertakings is included in the consolidated accounts of the Group.

As at 31 March 2011, the entire issued share capital of 3i Holdings plc and 55% of the issued share capital of 3i Debt Management Limited was held by the 
Company. The entire issued share capital of all the other principal subsidiary undertakings listed above was held by subsidiary undertakings of the Company, 
save that four shares in 3i Gestion SA were held by individuals associated with the Group.

The Directors are of the opinion that the number of undertakings in respect of which the Company is required to disclose information under Schedule 4 
to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 is such that compliance would result in information 
of excessive length being given. Full information will be annexed to the Company’s next annual return.

Advantage has been taken of the exemption conferred by regulation 7 of the Partnerships (Accounts) Regulations 2008 from the requirements to deliver 
to the Register of Companies and publish the accounts of those limited partnerships included in the consolidated accounts of the Group.

Report and accounts 2011 3i Group plc 127

Independent auditor’s report

Independent auditor’s report to the members of 3i Group plc
We have audited the financial statements of 3i Group plc for the year ended 31 March 2011 which comprise the Statement of comprehensive income,  
the Group and parent company Statement of changes in equity, the Group and parent company Balance sheets, the Group and parent company Cash flow 
statements and the related notes 1 to 35. The financial reporting framework that has been applied in their preparation is applicable law and International 
Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance 
with the provisions of the Companies Act 2006.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has 
been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other 
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members 
as a body, for our audit work, for this report, or for the opinions we have formed. 

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 69, the directors are responsible for the preparation of the financial 
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in 
accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices 
Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial 
statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are 
appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of 
significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and 
non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent 
material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements
In our opinion:

 − the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2011 and of the group’s 

profit for the year then ended;

 − the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and 

 − the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in 

accordance with the provisions of the Companies Act 2006; and

 − the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial 

statements, Article 4 of the IAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006
In our opinion:

 − the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and

 − the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial 

statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

 − adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not 

visited by us; or

 − the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting 

records and returns; or

 − certain disclosures of directors’ remuneration specified by law are not made; or

 − we have not received all the information and explanations we require for our audit.

Under the Listing Rules we are required to review:

 − the directors’ statement, set out on page 70, in relation to going concern;

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 − the part of the Corporate Governance Statement relating to the company’s compliance with the nine provisions of the June 2008 Combined Code 

specified for our review; and

 − certain elements of the report to shareholders by the Board on directors’ remuneration.

Andrew McIntyre (Senior statutory auditor) 
for and on behalf of Ernst & Young LLP, Statutory Auditor 
London 
11 May 2011

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128

3i Group plc Report and accounts 2011

Portfolio 
and other 
information

Information on our largest 
investments, as well as other useful 
information for shareholders.

Portfolio valuation  
– an explanation 
Ten largest investments 
Forty other large investments 
Information for shareholders 

129
132
134
136

Report and accounts 2011 3i Group plc 129

Portfolio valuation – an explanation

The Group’s valuation policy is  
the responsibility of the Board,  
with additional oversight from 
the Board’s Valuations Committee.  
This section sets out our valuation 
policy in detail and explains how 
we value investments in each of 
our business lines.

Policy
Our policy is to value 3i’s investment portfolio at fair 
value and achieve this by valuing individual investments 
on an appropriate basis using a consistent approach 
across the portfolio. The Group’s valuation policy is the 
responsibility of the Board and periodically reviewed by 
the Board’s Valuations Committee. The policy ensures 
that the portfolio valuation complies with all relevant 
accounting standards and is fully consistent with IFRS and 
the guidelines issued by the International Private Equity 
Valuation Board (the “IPEV guidelines”). The policy covers 
the Group’s Private Equity, Infrastructure and Debt 
Management investment valuations. 

Fair value is the underlying principle and is defined as  
“the price at which an orderly transaction would take 
place between market participants at the reporting date” 
(IPEV guidelines, September 2009). Fair value is therefore 
an estimate and, as such, determining fair value requires 
the use of judgements.

Private Equity valuation

Determining enterprise value
To arrive at the fair value of the Group’s Private Equity 
investments, we first estimate the entire value of the 
company we have invested in – the enterprise value.  
This enterprise value is determined using one of a 
selection of methodologies depending on the nature, 
facts and circumstances of the investment.

Where possible, we use methodologies which draw 
heavily on observable market prices, whether listed equity 
markets or reported merger and acquisition transactions.

The quoted assets in our portfolio are valued at their 
closing bid price on the balance sheet date. 

The majority of the rest of our portfolio, however, is 
represented by unquoted investments. These are valued, 
in the vast majority of cases, with reference to market 
comparables, or to recent reported transactions. 
As unquoted investments are not traded on an active 
market, as quoted investments are, the Group adjusts the 
estimated enterprise value by a marketability or liquidity 
discount. The marketability or liquidity discount is applied 
to the total enterprise value and we apply a higher 
discount rate for investments where there are material 
restrictions on our ability to sell at a time of our choosing.

The table on page 131 outlines in more detail the range 
of valuation methodologies available to us, as well as the 
inputs and adjustments necessary for each.

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130

3i Group plc  Report and accounts 2011

Portfolio and other information > Portfolio valuation – an explanation

Infrastructure valuation
The primary valuation methodology used for 
infrastructure investments is the discounted cash flow 
method (“DCF”). Fair value is estimated by deriving 
the present value of the investment using reasonable 
assumptions of expected future cash flows and the 
terminal value and date, and the appropriate risk-adjusted 
discount rate that quantifies the risk inherent to the 
investment. The discount rate is estimated with reference 
to the market risk-free rate, a risk adjusted premium and 
information specific to the investment or market sector.

Currently, the Group’s investment in the Infrastructure 
business line predominantly consists of the investment  
in the quoted vehicle, 3i Infrastructure plc, and the 
unquoted portfolio in the 3i India Infrastructure Fund. 
These vehicles use DCF as the primary method of valuing 
their underlying portfolio. 

Debt Management valuation
The Group’s Debt Management business line typically 
invests in traded debt instruments and the subordinated 
notes that it is required to hold in the debt funds which 
it manages. The traded debt instruments are valued using 
an average of broker quotes available, reflecting the best 
available market observable data.

The subordinated notes that it is required to hold in the 
debt funds are also valued using average broker quotes 
in the first instance. Where broker quotes are unavailable 
or deemed unreliable, then the net asset value of the 
fund can be used to determine the valuation of the 
equity investment.

Apportioning the enterprise value between 
3i, other shareholders and lenders
Once we have estimated the enterprise value using 
one of the methodologies outlined in the table opposite, 
the following steps are taken:

1   We subtract the value of any claims, net of free cash 
balances, that are more senior to the most senior of 
our investments;

2    The resulting attributable enterprise value is 

apportioned to the Group’s investment, and equal 
ranking investments by other parties, according to 
contractual terms and conditions, to arrive at a fair 
value of the entirety of the investment. The value is 
then distributed amongst the different loan, equity 
and other financial instruments accordingly.

3   If the value attributed to a specific shareholder loan 

investment in a company is less than its par or nominal 
value, a shortfall is implied, which is recognised in our 
valuation. In exceptional cases, we may judge that 
the shortfall is temporary; to recognise the shortfall 
in such a scenario would lead to unrepresentative 
volatility in our accounts and hence we may choose 
not to recognise the shortfall.

Other factors
In applying this framework, there are additional 
considerations that are factored into the valuation 
of some assets.

Impacts from structuring
Structural rights are instruments convertible into equity 
or cash at specific points in time or linked to specific 
events. For example, where a majority shareholder 
chooses to sell, and we have a minority interest, we may 
have the right to a minimum return on our investment.

Debt instruments, in particular, may have structural 
rights. In the valuation, it is assumed third parties, such 
as lenders or holders of convertible instruments, fully 
exercise any rights they might have, and that the value to 
the Group may therefore be reduced by such rights held 
by third parties. The Group’s own rights are valued on the 
basis they are exercisable on the reporting date.

Assets classified as “terminal”
If we believe a business in which we hold an investment 
has more than a 50% probability of failing in the  
12 months following the valuation date, we value the 
investment on the basis of its expected recoverable 
amount in the event of failure. This would generally result 
in the equity and loan components of our investment 
being valued at nil.

Report and accounts 2011 3i Group plc 131

% of 
portfolio  
valued on  
this basis

59%

Adjustments
 A marketability or liquidity 
discount is applied to the 
enterprise value, typically 
between 5% and 15%, 
depending on the specific 
investment

Methodology
Earnings
(Private Equity)

Description
–   Most commonly used Private 
Equity valuation methodology 

–   Used for investments which 
are profitable and for which 
we can determine a set of 
listed companies with similar 
characteristics

Inputs
Earnings multiples are applied to the earnings of 
the company to determine the enterprise value.

Earnings
–   Reported earnings adjusted for non-recurring items, 
such as restructuring expenses, and for significant 
corporate actions, to arrive at maintainable earnings 
–   Most common measure is earnings before interest, 

tax, depreciation and amortisation (“EBITDA”) 

–   Earnings used are usually the management accounts 
for the 12 months to the quarter end preceding the 
reporting period, unless data from forecasts or the 
latest audited accounts provides a more reliable 
picture of maintainable earnings

Earnings multiples 
–   The earnings multiple is derived from comparable 
listed companies or relevant market transaction 
multiples

–   We select companies in the same industry, where 
possible, with a similar business model and profile  
in terms of size, products, services and customers, 
and, where possible, in the same geographic region 
–   We track the multiple paid at our initial investment 
against this set of comparable companies, taking 
into account a relative premium or discount where 
the underlying risk and earnings growth rate 
support that relative ranking 

–   We adjust for changes in the relative performance 

in the set of comparables 

–   Closing bid price at balance sheet date

–   Contracted proceeds for the transaction, 
or best estimate of the expected proceeds

–   Net asset value reported by the fund manager

–   Used for investments 
in listed companies 

–   Used where an asset is in a 

sales process, a price has been 
agreed but the transaction 
has not yet settled
–   Used for investments 

in unlisted funds

Quoted
(Infrastructure/
Private Equity)
Imminent sale
(Infrastructure/
Private Equity)

Fund
(Infrastructure/
Private Equity/
Debt Management)
Specific industry 
metrics
(Private Equity)

No adjustments or 
discounts applied

A discount of typically 
2.5% is applied to reflect 
the uncertainty over the 
ultimate outcome
Typically no further 
discount applied in addition 
to that applied by the fund 
manager
An appropriate discount is 
applied, depending on the 
valuation metric used

10%

15%

<1%

4%

7%

<1%

<1%

5%

–   Used for investments in industries 

–   We create a set of comparable listed companies 

which have well defined 
metrics as bases for valuation

and derive the implied values of the relevant metric

–   We track and adjust this metric as in the case 

–   Eg book value for insurance 

of an earnings multiple

underwriters, or regulated asset 
bases for utilities

–   Comparable companies are selected using the same 
criteria as described for the earnings methodology

Discounted Cash Flow
(Infrastructure/
Private Equity)

–   Appropriate for businesses 
with long-term stable cash 
flows, typically in infrastructure

–   Long-term cash flows are discounted at a rate 

which is benchmarked against market data, where 
possible, or adjusted from the rate at the initial 
investment based on changes in the risk profile 
of the investment

Discount already implicit in 
the discount rate applied to 
long-term cash flows – no 
further discounts applied

Broker quotes
(Debt Management/
Infrastructure)
Net assets
(Private Equity)

Other
(Private Equity)

–   Used to value debt instruments

–   Broker quotes obtained from banks which trade 

No discount is applied

–   Used for businesses that are loss 
making, or where the probability 
of liquidation is high
–   Used where elements 

of a business are valued 
on different bases

the specific instruments concerned

–   Assets are valued at the best estimate 
of the proceeds in a liquidation scenario

–   Values of separate elements prepared on one 

of the methodologies listed above

A discount is applied to 
reflect the uncertainty 
over the ultimate outcome
 No further discount 
is applied

For a small proportion of our smaller investments (less than 3% of the portfolio), the valuation is determined by a more mechanistic approach using 
information from the latest audited accounts. Equity shares are valued at the higher of an earnings or net assets methodology. Fixed income shares 
and loan investments are measured using amortised cost and any implied impairment, in line with IFRS.

Consistent with IPEV guidelines, all equity investments are held at fair value using the most appropriate methodology and no investments are held 
at historical cost.

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132

3i Group plc  Report and accounts 2011

Portfolio and other information

Ten largest investments

The list below provides information on our ten largest investments in respect of the Group’s holding, excluding any managed or advised 
external funds.

3i Infrastructure plc
Quoted investment company,  
investing in infrastructure

Business line

Geography

First invested in

Valuation basis

Proportion of equity shares held

Residual cost

Valuation

NORMA Group Holding GmbH
Provider of engineered 
joining technology

Business line

Geography

MWM GmbH
Provider of decentralised power 
generation systems

Hyva Investments BV
Branded hydraulics 
for commercial vehicles

First invested in

Valuation basis

Proportion of equity shares held

Residual cost

Valuation

Business line

Geography

First invested in

Valuation basis

Proportion of equity shares held

Residual cost

Valuation

Business line

Geography

First invested in

Valuation basis

Proportion of equity shares held

Residual cost

Valuation

ACR Capital Holdings Pte Limited
Reinsurance in large risk segments

Business line

Geography

First invested in

Valuation basis

Proportion of equity shares held

Residual cost

Valuation

Infrastructure

3i-infrastructure.com

UK

2007

Quoted

32.9%

£270m

£320m

Buyouts

Germany

2005

Sale

29.2%

£33m

£197m

Buyouts

Germany

2007

Sale

41.3%

£70m

£191m

Buyouts

Netherlands

2004

Sale

44.2%

£16m

£181m

Growth

Singapore

2006

Industry metric

31.1%

£105m

£146m

normagroup.com

mwm.net

hyva.com

asiacapitalre.com

Report and accounts 2011 3i Group plc 133

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memora.es

quintiles.com

s
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scandlines.de

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Foster + Partners
Architectural services

Business line

Geography

First invested in

Valuation basis

Proportion of equity shares held

Residual cost1

Valuation

Growth

UK

2007

Earnings

40.0%

–

£132m

1  The residual cost of this investment cannot be disclosed per a confidentiality agreement in place at the time of the investment.

fosterandpartners.com

Ålö Intressenter AB
Manufacturer of front end loaders

Business line

Geography

First invested in

Valuation basis

Proportion of equity shares held

Residual cost

Valuation

Mémora Servicios Funerarias
Funeral service provider

Business line

Geography

First invested in

Valuation basis

Proportion of equity shares held

Residual cost

Valuation

Quintiles Transnational Corporation
Clinical research 
outsourcing solutions

Business line

Geography

First invested in

Valuation basis

Proportion of equity shares held

Residual cost

Valuation

Scandferries Holding GmbH (Scandlines)
Ferry operator in the Baltic Sea

Business line

Geography

First invested in

Valuation basis

Proportion of equity shares held

Residual cost

Valuation

Growth

Sweden

2002

Earnings

38.3%

£39m

£129m

Buyouts

Spain

2008

Earnings

38.1%

£109m

£118m

Growth

US

2008

Earnings

4.9%

£74m

£108m

Buyouts

Germany

2007

DCF

27.3%

£45m

£102m

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
134

3i Group plc  Report and accounts 2011

Portfolio and other information

Forty other large investments

In addition to the ten largest investments shown on pages 132 and 133, detailed below are forty other large investments which are  
substantially all of the Group’s investments valued over £18 million. This does not include seven investments that have been excluded  
for commercial reasons.

Investment

Description of business

Business line

Geography

First 
invested 
in

Valuation 
basis

Proportion  
of equity  
shares 
held 
%

Residual 
cost 
£m

Valuation  
£m

Mayborn Group Plc
mayborngroup.com

OneMed Group
onemed.com

Manufacturer and distributor of baby 
products

Distributor of consumable medical 
products, devices and technology

Buyouts

UK

2006

Earnings

37.9

Buyouts

Finland

2011

Earnings

35.5

Plastic processing technology provider

Growth

Canada

2007

Earnings

49.3

Wind power service provider

Buyouts

Spain

2006

Earnings

42.8

45

83

Network services

Buyouts

Finland

2007

Earnings

42.6

Engineering and construction

Growth

India

2006

Other

10.0

Tato Holdings Limited
thor.com

Manufacture and sale of speciality 
chemicals

SMI

UK

1990

Earnings

26.1

Public sector IT and services

Buyouts

UK

2008

Earnings

40.2

90

Developer and supplier of specialist 
active pharmaceutical ingredients

Buyouts

Norway

2007

Earnings

32.5

77

60

Testing and Inspection 

Buyouts

Netherlands

2010

Earnings

42.2

Clinical laboratories

Growth

France

2008

Earnings

12.3

Animal healthcare

Growth

US

2009

Earnings

29.9

Power generation

Infrastructure

India

2007

Quoted

1.6

AES Engineering Limited
aesseal.co.uk

Manufacturer of mechanical seals and 
support systems

Amor GmbH
amor.de

Jewellery supplier focusing 
on procurement, logistics and servicing

Refresco Group B.V.
refresco.com

Manufacturer of private label juices and 
soft drinks

Growth

UK

1996

Earnings

40.6

Buyouts

Germany

2010

Earnings

42.1

Growth

Netherlands

2010

Earnings

12.6

Oil and gas service provider

Buyouts

UK

1996

Other

39.5

Medical cable assemblies

Buyouts

China

2008

Earnings

37.5

Global testing and inspection

Buyouts

UK

2007

Earnings

38.0

27

41

Mold-Masters Luxembourg 
Holdings S.A.R.L.
moldmasters.com

Sortifandus, S.L. (GES – 
Global Energy Services)
services-ges.com

Eltel Networks Oy
eltelnetworks.com

Navayuga Group
necltd.com

Cornwall Topco Limited 
(Civica)
civica.co.uk

Otnortopco AS (Xellia/
Alpharma)
xellia.com

Stork Materials Technology
storksmt.com

Labco SAS
labco.eu

Phibro Animal Health 
Corporation
pahc.com

Adani Power
adanipower.com

RBG Limited
rbgltd.com

LHI Technology Private 
Limited
lhitechnology.com

Environmental Scientifics 
Group (ESG)1
esg.co.uk

1  Formerly Inspicio.

89

89

75

95

91

86

85

23

2

82

66

62

60

56

65

90

25

30

48

46

4

16

57

57

54

54

51

50

47

41

41

Report and accounts 2011 3i Group plc 135

Description of business

Business line

Geography

First 
invested 
in

Valuation 
basis

Proportion  
of equity  
shares 
held 
%

Residual 
cost 
£m

Valuation  
£m

Manufacturer of fine chemicals

Buyouts

Finland

2004

Earnings

35.0

IT consulting business

Growth

Spain

2007

Earnings

18.3

Distributor of pedagogical products and 
educational materials

Buyouts

Sweden

2007

Earnings

39.3

Provider of digital cinema services

Growth

India

2007

Other

35.3

Investment

KemFine Oy
kemfine.com

Everis Participaciones S.L.
everis.com

Lekolar AB
lekolar.se

UFO Moviez
ufomoviez.com

Radius Systems Limited
radius-systems.com

Manufacture of thermoplastic pipe 
systems for gas and water distribution

Buyouts

UK

2008

Earnings

31.6

Trescal
trescal.com

Goromar XXI, S.L. 
(Esmalglass)
esmalglass.com

Krishnapatnam Port
krishnapatnam.com

Hyperion Insurance Group 
Limited
hyperiongrp.com

Soya Concept AS
soyaconcept.com

Joyon Southside
joyon.cn

Polyconcept Investments B.V.
polyconcept.com

Consultim Finance SAS
cerenicimo.fr

Inspecta Holding Oy
inspecta.fi

MKM Building Supplies 
(Holdings) Limited 
mkmbs.co.uk

Boomerang TV, S.A. 
grupoboomerangtv.com

Calibration services

Buyouts

France

2010

Earnings

23.5

Manufacture of frites, glazes and 
colours for tiles

Buyouts

Spain

2002

Earnings

21.6

Port

Infrastructure

India

2009

DCF

3.0

Specialist insurance intermediary

Growth

UK

2008

Industry 
metric

19.1

Fashion design company

Growth

Denmark

2007

Earnings

45.0

Real estate

Growth

China

2007

DCF

49.9

Supplier of promotional products

Growth

Netherlands

2005

Earnings

13.0

Wholesaler of rental real estate

Growth

France

2007

Earnings

20.0

Supplier of testing and inspection 
services

Buyouts

Finland

2007

Earnings

39.2

Building material supplier

Growth

UK

1998

Earnings

33.0

Production of audiovisual contents

Growth

Spain

2008

Earnings

34.1

DC Druck Chemie GmbH 
druckchemie.com

Business services

Buyouts

Germany

2008

Earnings

44.4

Pharmaceuticals business, focused on 
pain, oncology and critical care

Venture

UK

2007

Other

19.4

Retail online forex trading 

Growth

US

2008

Quoted

10.1

Women’s lingerie and assorted products

Buyouts

UK

2007

DCF

39.0

EUSA Pharma Inc 
eusapharma.com

Gain Capital 
gaincapital.com

Pearl (AP) Group Limited 
(Agent Provocateur)
agentprovocateur.com

John Hardy Limited
johnhardy.com

Designer jewellery business

Growth

China

2007

Earnings

23.5

15

18

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32

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31

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25

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24

23

23

22

22

21

20

19

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
136

3i Group plc  Report and accounts 2011

Portfolio and other information

Information for shareholders

Financial calendar
Ex-dividend date
Record date
Annual General Meeting*
Final dividend to be paid
Half-year results (available online only)
Interim dividend expected to be paid

15 June 2011
17 June 2011
6 July 2011
15 July 2011
November 2011
January 2012

*  The 2011 Annual General Meeting will be held at The Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE on 6 July 2011 at 11.00am. 

For further details please see the Notice of Annual General Meeting 2011.

Information on ordinary shares
Shareholder profile: Location of investors at 31 March 2011

UK
US
Continental Europe
Other international

Share price
Share price at 31 March 2011
High during the year (5 January 2011)
Low during the year (7 May 2010)

Dividends paid in the year to 31 March 2011
2010/2011 Interim dividend, paid 12 January 2011

Balance analysis summary

1 – 1,000
1,001 – 10,000
10,001 – 100,000
100,001 – 1,000,000
1,000,001 – 10,000,000
10,000,001 – highest
Total

68.1%
10.0%
10.1%
11.8%

298.9p
340.0p
251.9p

1.2p

%
0.86
1.86
1.86
10.94
35.20
49.28
100.00

Number of holdings
Individuals
17,011
6,497
176
18
1
0
23,703

Number of holdings 
Corporate Bodies
826
1,222
378
280
121
23
2,850

Balance as at
31 March 2011
8,351,662
18,016,752
18,040,661
106,193,422
341,689,252
478,358,871
970,650,620

The table above provides details of the number of shareholdings within each of the bands stated in the register of members at 31 March 2011.

Unsolicited telephone calls
In the past, some of our shareholders have received unsolicited telephone  
calls or correspondence concerning investment matters from organisations 
or persons claiming or implying that they have some connection with the 
Company. These are typically from overseas based “brokers” who target 
UK shareholders offering to sell them what often turn out to be worthless 
or high risk shares in UK or overseas investments. Shareholders are advised 
to be very wary of any unsolicited advice, offers to buy shares at a discount 
or offers of free reports into the Company. These approaches are operated 
out of what is more commonly known as a “boiler room”. You may also 
be approached by brokers offering to purchase your shares for an upfront 
payment in the form of a broker fee, tax payment or de-restriction fee. 
This is a common secondary scam operated by the boiler rooms.

If you receive any unsolicited investment advice:

 − always ensure the firm is on the Financial Services Authority (“FSA” Register) 
and is allowed to give financial advice before handing over your money. 
You can check at www.fsa.gov.uk/pages/register;

 − double-check the caller is from the firm they say they are – ask for their 
name and telephone number and say you will call them back. Check their 
identity by calling the firm using the contact number listed on the FSA 
Register. This is important as the FSA has seen instances where an 
authorised firm’s website has been cloned but with a few subtle changes, 
such as a different phone number or false email address;

 − check the FSA’s list of known unauthorised overseas firms at  

www.fsa.gov.uk/pages/doing/regulated/law/alerts/overseas.shtml 
However, these firms change their name regularly, so even if a firm is 
not listed it does not mean they are legitimate. Always check that they 
are listed on the FSA Register;

 − if you have any doubts, call the FSA Consumer Helpline on 0845 606 1234 

with details, or complete the Unauthorised Firms Reporting Form  
at www.fsa.gov.uk/pages/doing/regulated/law/alerts/form.shtml  
If you deal with an unauthorised firm, you will not be eligible to receive 
payment under the Financial Services Compensation Scheme.  
More detailed information on this or similar activity can be found  
on the FSA website at www.moneymadeclear.org.uk. You should 
also report any approach to Operation Archway, an initiative by the 
City of London Police in conjunction with the FSA, the Serious Fraud 
Office, the Serious Organised Crime Agency and police forces within 
the UK, by email to: operationarchway@cityoflondon.pnn.police.uk

Report and accounts 2011 3i Group plc 137

Registrars 
For shareholder administration enquiries, 
including changes of address, please contact:
Equiniti 
Aspect House 
Spencer Road 
Lancing 
West Sussex BN99 6DA
Telephone 0871 384 2031
Calls to this number are charged at 8p per minute from a BT landline,  
other telephony provider costs may vary. Lines are open from 8.30am to 5.30pm,  
Monday to Friday.
(International callers +44 121 415 7183)

3i Group plc
Registered office:  
16 Palace Street,  
London SW1E 5JD, UK 
Registered in England No. 1142830 
An investment company as defined  
by section 833 of the Companies Act 2006.

Annual and half-yearly reports online 
If you would prefer to receive shareholder 
communications electronically in future, 
including annual reports and notices of 
meetings, please visit our Registrars’ website  
at www.shareview.co.uk/clients/3isignup and 
follow the instructions there to register. The 2011 
half-yearly report will only be available online.  
Please register to ensure you are notified when 
it becomes available.
More general information on electronic 
communications is available on our website  
at www.3igroup.com/e-comms

Investor relations and general enquiries
For all investor relations and general enquiries about 
3i Group plc, including requests for further copies  
of the Report and accounts, please contact:
Group Communications 
3i Group plc 
16 Palace Street 
London SW1E 5JD
Telephone +44 (0)20 7928 3131 
Fax +44 (0)20 7928 0058 
email ir@3igroup.com 
or visit our Investor relations website,  
www.3igroup.com, for full up-to-date 
investor relations information, including the latest 
share price, Reporting centre, results presentations 
and financial news.

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3i Group plc  
16 Palace Street, London SW1E 5JD, UK 
Telephone +44 (0)20 7928 3131 
Fax +44 (0)20 7928 0058

Website www.3igroup.com

M69911 May 2011

Shareholder communications  
– print or online?
It’s quick and easy online…
It’s more environmentally friendly online…
It’s more cost-effective online… 
It’s where you’ll find additional information.

Why not try online?
View our online Report and accounts 2011,  
and additional information at:  
http://reportingcentre.3igroup.com/2011

To register for electronic communications
If you would prefer to receive shareholder 
communications electronically in the future, 
including annual reports and notices of meetings, 
please visit our Registrars’ website at  
www.shareview.co.uk/clients/3isignup  
and follow the instructions there to register.

For investor relations information, please visit:  
www.3igroup.com
For other information about 3i, please visit: 
www.3i.com