Pre-close period briefing

26 Mar 2003

3i Group plc ("3i"), Europe's leading venture capital company, will today start its pre close period briefing of analysts ahead of the announcement of its annual results on 15 May.

The topics that will be discussed during the briefings are:

1. Investment

3i has maintained a selective approach to investment and has made investments in buy-outs, growth capital and technology through its international network. Investment in the eleven months to 28 February 2003 was £867million (including investment from co-investment funds of £206 million). Investment has increased in the second half as 3i took advantage of attractive investment opportunities.

In 2002, 3i extended its leadership of the European mid-market buy-out business, investing €790 million in 16 transactions with a total transaction value of €2.5bn.

2. Realisations

Notwithstanding the lower levels of activity in the mergers and acquisition markets and the small number of IPOs, realisations have continued to be made at good prices across the portfolio generating cash inflow of £934 million (excluding co-investment funds) in the eleven months to 28 February 2003. Realisation proceeds in the first half amounted to £619 million.

3. Portfolio

The majority of the 3i portfolio continues to perform satisfactorily.

The valuation of the portfolio at 31 March 2003 will be determined by applying 3i's normal valuation methodology on a consistent and prudent basis and will take into account current market conditions.

Provisions for companies that may fail are likely to be higher in the second half than in the six months to 30 September although provisions for the year are likely to be no higher than for the year to 31 March 2002 of £400 million. The charge for the write off of investments is likely to be less than last year.

In valuing investments in technology companies, account is taken of the performance of the company against previously agreed milestones as well as external valuation benchmarks. A fall in the level of venture capital available for technology companies has resulted in many companies only being able to raise further capital on a deeply discounted basis. As a result, value reductions arising from down rounds(1) are likely to be around twice the level of the £180 million experienced last year.

4. Fund raising

3i announced in May 2002 that it was raising a pan-European fund for mid-market management buy-outs. Despite the difficult fund raising environment, 3i expects the first closing will take place prior to the preliminary announcement on 15 May. It is likely the predecessor fund, Eurofund III, will continue to make investments until around July, when it will be fully invested and that the new fund will commence investment at that time.

5. Statement of Recommended Practice ("SORP"): Financial statements of Investment Trust Companies

3i will adopt the revised SORP in respect of the year to 31 March 2003. In preparation, a review of the allocation of expenses and interest charged against revenue and capital profits has also been undertaken. This review and adoption of the SORP will have no impact on total return. However, revenue profits after tax will be higher by approximately £50 million and consequently capital profits lower by a similar amount than under the prior approach.

Note
(1) A down round arises where an actual or potential further financing round is or is likely to be raised at a capitalisation lower than that of the original investment or previous financing round.

For information please contact:

 

 3i Group plc  
 Michael Queen, Finance Director  Tel:  020 7975 3400    
 Patrick Dunne, Group Communication Director  Tel:  020 7975 3566
 Issued by The Maitland Consultancy  
 Philip Gawith  Tel:  020 7379 5151