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  • 3i Group plc Report and accounts 2000Europes leading venture capital company

    3i Group plc R

    eport and accounts2000

    7666 - 3i R&A Cover 2000 6/6/00 10:42 AM Page 1

  • Contents02 Introduction to 3i03 Chairmans statement04 Chief Executives review07 Operating review

    08 Europe UK14 Using our network of people16 Europe Continental Europe20 Developing key partnerships22 United States24 Asia Pacific26 Making valuable connections28 Fund management

    29 Community and environment30 Financial review34 Board of Directors36 Directors report40 Remuneration report

    46 Auditors report47 Consolidated statement of

    total return48 Consolidated revenue statement49 Consolidated balance sheet50 Parent company balance sheet51 Consolidated cash flow statement52 Accounting policies54 Notes to the accounts77 Principal subsidiary undertakings

    and joint ventures79 Portfolio valuation methodology80 Ten largest investments81 Portfolio analysis82 Investment analysis83 Technology portfolio analysis84 3is network of officesinside back cover

    Information for shareholders and shareholder profile

    Five year financial record 19961997

    1998

    1999

    2000

    2.5

    2.9

    3.5

    3.6

    5.2

    Shareholders funds (bn) at 31 March

    1996

    1997

    1998

    1999

    2000

    3.1

    3.5

    3.9

    4.3

    4.6

    Dividend per share (p) year to 31 March

    5.0

    5.7

    6.4

    7.0

    7.6

    Interim Final

    1996

    1997

    1998

    1999

    2000

    25

    16

    22

    5

    44

    Return on opening shareholders funds (%) year to 31 March

    Financial calendar

    Ex-dividend date

    Record date

    Annual General Mee

    Final dividend to be

    Interim dividend exp

    Range

    1 1,000

    1,001 10,000

    10,001 100,000

    100,001 1,000,000

    1,000,001 10,000,0

    10,000,001 Highes

    The table above prov

    RegistrarsFor shareholder adm

    Lloyds TSB RegistraThe CausewayWorthing, West Suss

    Telephone +44 (0)870

    Investor relations andFor all investor relatiocontact our Corporat

    3i Group plc91 Waterloo RoadLondon SE1 8XP

    Telephone +44 (0)20

    Website www.3i.com

    3i Group plc is an au

    Designed and produ

    3i Group plc Rep

    Information for sh

    Location of investor at

    1 UK 91%2 Continental Europ3 USA 4%4 Other Internationa

    Shareholder profile

    7666 - 3i R&A Cover 2000 6/6/00 10:45 AM Page 2

  • 01. 3i Group plc Report and accounts 2000

    Financial highlights of the year

    1996

    1997

    1998

    1999

    2000

    0.6

    0.7

    1.0

    1.1

    1.4

    Investment (bn) year to 31 March

    1996

    1997

    1998

    1999

    2000

    41

    42

    53

    61

    83

    Uplift over opening valuation on equity realisations (%) year to 31 March

    Investment amounts referred to in this report relate toinvestments made by 3i Group and third party unquotedfunds unless otherwise stated.

    1.6bn44%

    1.2bn+94%

    83%+20%+41%+8%

    Total return

    Return on opening shareholders funds

    Unrealised value growth

    Net realised profit of 350 million

    Uplift over opening valuation onequity realisations

    Investment 1.4 billion

    Diluted net asset value per share 847p

    Dividend per share 12.2p

    1996

    1997

    1998

    1999

    2000

    426

    486

    582

    601

    847

    Diluted net asset value per share (p) at 31 March

    7666 3i R&A Front 6/6/00 9:44 AM Page 1

  • 02. 3i Group plc Report and accounts 2000

    Introduction to 3i

    3i is Europes leading venturecapital company, with 39offices in ten countries.

    We are developing significantbusinesses in Asia Pacific andthe United States.

    We invest in a wide range ofopportunities from start-ups tobuy-outs and buy-ins, focusingon businesses with highgrowth potential and strongmanagement.

    3i has invested almost 12 billion in nearly 13,500businesses.

    7666 3i R&A Front 6/6/00 9:44 AM Page 2

  • The US remains the leading international technology market and during the year we opened offices in Bostonand Palo Alto. 3is ability to provide international reach toUS technology businesses is proving to be a significantcompetitive advantage.

    I am delighted to welcome three new Directors to the Board. Rod Perry, who has executive responsibility for Asia Pacific and Group Services, has been a member of the Executive Committee since 1996. Danny Rosenkranz,formerly Chief Executive of BOC, and Oliver Stocken,previously Finance Director of Barclays Bank, have joinedthe Board as non-executive Directors.

    I would also like to thank John Melbourn, Deputy Chairman,who will be retiring at the conclusion of the Annual GeneralMeeting after serving as a Director for almost ten years. His wise counsel has made an important contribution to 3i, especially during the flotation of 3i in 1994 and asChairman of the Audit & Compliance and RemunerationCommittees. I am delighted that he will be succeeded asDeputy Chairman by Sarah Hogg who has been a Directorsince 1997.

    Our achievements this year result from the outstandingcontribution made by our employees and reaffirm theimportance of highly motivated teams to the business. I would like to thank everyone.

    3i faces an exciting and challenging period ahead, with a clear strategy to grow the business. We will continue to build our capabilities to reinforce our position as theleading venture capital company in Europe and increase our presence in other international markets.

    03. 3i Group plc Report and accounts 2000

    Chairmans statement

    3i has made excellent progress with its strategic objectivesand has achieved very good financial results.

    Total return for the year of 1.6 billion represents a return of 44% on opening shareholders funds. This is a record for 3i and demonstrates the benefits of the Groups strategyand a strong underlying financial performance.

    During the year the share price rose from 626p to 1318p,increasing the market capitalisation of 3i to almost 8billion. The Board is recommending a final dividend of 7.6p, making a total dividend of 12.2p, an increase of 8% for the year.

    We have continued to build our capabilities and grow ourinternational business.

    In the UK, we have maintained our leadership against the background of an increasingly competitive market.Technology based companies have performed well whilethe strength of sterling against the Euro has continued tomake trading conditions difficult for traditionalmanufacturing and exporting companies.

    Continental European venture capital markets are growingrapidly and 3i has added to its network and capabilitiesboth by expanding organically and through the acquisitionof Technologieholding, a leading German early stageventure capital company.

    Our Asia Pacific teams continue to develop and are wellplaced to take advantage of economic restructuring inJapan and renewed growth in the ASEAN region.

    Sir George Russell CBE24 May 2000

    7666 3i R&A Front 6/6/00 9:44 AM Page 3

  • We have a positive view of global economic prospectsalthough dramatic technological change will create greaterimbalances in individual markets and industry sectors thanwe have seen in recent years.

    Much has been written about the divergence of growthprospects for old and new economies and the stockmarket valuation of technology companies. We areconfident that technology provides businesses with thepotential for rapid growth. Ultimately, a successful companyhas to provide a high quality product or service to itscustomers and generate profits and cash flow. In otherwords, business fundamentals have not changed. At 3i, we have and continue to be focused on the fundamentals of management ability and market potential.

    We also believe that there will be good prospects for growthin both old and new economies as so called traditionalbusinesses utilise new technologies to establish competitiveadvantage in their markets. This change process will createincreased opportunities for all parts of our business,including the setting up of many new companies. Buy-outactivity is likely to increase as companies restructure tomeet a new challenging environment and 3i will be acatalyst in making change happen.

    Competitive background There has been a significantincrease in venture capital funds raised in Europe targetedat both early and later stage businesses. Many new entrantsto the market have emerged. However, the market itself has also grown, with demand for venture capital increasinggreatly. Venture capital is also taking on additionalimportance as a separate asset class, with both investorsand governments acknowledging the vital role that it playsin wealth creation.

    04. 3i Group plc Report and accounts 2000

    Chief Executives review

    I am pleased with the progress made with our strategicobjectives and the financial results we have achieved.

    In this review, I comment on market developments and the impact of these on the competitive environment forventure capital. I then outline 3is strategy.

    1996

    1997

    1998

    1999

    2000

    61

    87

    121

    241

    422

    Investment in Continental Europe (m) year to 31 March

    1996

    1997

    1998

    1999

    2000

    136

    131

    164

    291

    656

    Technology investment (m) year to 31 March

    7666 3i R&A Front 6/6/00 9:44 AM Page 4

  • Padua and Bologna in Italy. Since the year end we haveopened an office in Zurich and agreed to acquire a venturecapital business based in Helsinki.

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