3i Group 2008 Annual Report

3i Group plc Report and accounts 2008
Contents
Directors’ report Introduction 01 Business review continued

Group financial highlights 02 Infrastructure 20
Chairman’s statement 03 Quoted Private Equity 22
3i at a glance 04 Venture Capital 24
Chief Executive’s statement 06 Financial review 28
Business review Risk management 38
Group business 08 Corporate responsibility report 44
Our strategy 10 Board of Directors and
Buyouts 12 Management Committee 54
Growth Capital 16 Directors’ report – statutory and
corporate governance information 56
Directors’ remuneration report Directors’ remuneration report 68
Auditors’ report Independent auditors’ report to

the members of 3i Group plc 79
Financial statements Consolidated income statement 80 Balance sheet 82

Statement of recognised income Cash flow statement 83
and expense 81 Significant accounting policies 84
Reconciliation of movements in equity 81 Notes to the financial statements 88
Portfolio and additional financial Portfolio valuation – an explanation 106 Realisations 115
information Ten largest investments 108 Private equity and
Forty other large investments 109 venture capital – a lexicon 116
Assets under management 110 Returns and IRRs – an explanation 118
3i portfolio 111 Carried interest – an explanation 120
Investment 113 3i and Transparency 122
Information for shareholders Information for shareholders 124

Investor relations and general enquiries 124
Investor relations website – 3igroup.com 125
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d Information online Information in this report
Portfolio and additional
Directors’ report Directors’ remuneration report Auditors’ report Financial statements financial information Information for shareholders
Introduction
3i is a world leader in private equity. We focus on buyouts, growth capital,
infrastructure and quoted private equity, investing across Europe, Asia
and the US.
Our purpose:
to provide quoted access to private equity returns.
Our vision:
to be the private equity firm of choice:
– operating on a world-wide scale;
– producing consistent market-beating returns;
– acknowledged for our partnership style; and
– winning through our unparalleled resources.
Our strategy:
– to invest in high-return assets;
– to grow our assets and those we manage on behalf of third parties;
– to extend our international reach, directly and through investing in funds;
– to use our balance sheet and resources to develop existing and
new business lines; and
– to continue to build our strong culture of operating as one company
across business lines, geographies and sectors.
Report and accounts 2008 3i Group plc 01

Group financial highlights
Year to/as at 31 March 2008 2007
Business activity
Investment £2,160m £1,576m
Realisation proceeds £1,742m £2,438m
Returns
Gross portfolio return £1,041m £1,406m
Total return £792m £1,075m
Total return on opening shareholders’ funds 18.6% 26.8%
Dividend per ordinary share 17.0p 16.1p
Assets under management
Own balance sheet £6,016m £4,362m
Third-party funds £3,776m £2,772m
Total assets under management £9,792m £7,134m
Balance sheet
Gearing 40% 0%
Diluted net asset value per ordinary share £10.77 £9.32
Portfolio value by business line (£m)

as at 31 March 2008 2007
Buyouts 2,025 1,281

Growth Capital 2,366 1,460
Infrastructure 501 469
Quoted Private Equity Limited (“QPE”) 142 20
Smaller Minority Investments (“SMI”) 244 391
Venture Capital 738 741
Total 6,016 4,362
02 3i Group plc Report and accounts 2008

Chairman’s statement
“A good performance in challenging markets.”
Against a background of financial turmoil and Over the past three years, we have taken This led the British Private Equity and Venture
weakening stock markets, 3i achieved advantage of strong demand to realise over Capital Association to invite Sir David Walker to
substantial growth in net asset value, and £6 billion from our portfolio, at an average set up a working group on transparency and
successfully continued its strategy of raising uplift over the opening value of these assets at accountability, of which I was delighted to be a
external funds to accelerate growth in assets the beginning of each year of 43%. Over this member. This annual report is fully in compliance
under management. same three-year period we have returned just with Sir David’s guidelines, as explained on page
over £2 billion to shareholders, improving our 122. Moreover, we have taken again the
The total return of £792 million for the year to
capital efficiency, and raised funds totalling over opportunity to increase disclosure beyond that,
31 March 2008 represented an 18.6% return
£5 billion including a commitment of £2.5 billion by providing more detailed information on our
on opening shareholders’ funds, close to the
from 3i. We closed the latest of these funds, valuation methodology (see page 106).
five-year average of 20.4%. The Board is
an unquoted vehicle for investing in Indian
recommending a final ordinary dividend of In the following pages, Philip Yea and his
infrastructure, above target in March 2008 at
10.9p, making a total ordinary dividend for the management team provide updates on the
$1.2 billion.
year of 17.0p per share, up 5.6% on last year. business lines, geographies and sectors in which
With so much uncertainty still clouding economic 3i operates, with Asia showing the most
The contribution from our mid-market Buyouts
prospects in the major economies, we take a significant growth. At Board level, there will be
business was exceptionally strong. The Growth
cautious view of the coming year. Management only one change at our AGM: as I intimated last
Capital business performed well and will in future
has for some time made it clear that realisations year, Fred Steingraber, who has been a non-
include the results of later-stage technology
were expected to slow, as time would be executive Director since the beginning of 2002,
investing which shares the same characteristics
needed to fulfil the growth plans of newly- will be retiring. Fred’s international experience
as growth investing in other sectors. Venture
acquired assets and realise full value from has been especially helpful to the Board over the
Capital will continue to be reported as a separate
these investments, and we will be taking a highly last six years and I would like to thank him for his
business line until all assets are disposed of,
selective approach to investment. important contribution.
although no new early-stage venture
investments will be made. Our new Quoted Our existing €550 million convertible bond We start the year at a moment of great
Private Equity business has been a cautious matures in August. It has provided a great deal uncertainty as to the impact of the credit
investor due to unsettled markets while of flexibility in our capital planning, at attractive crunch, energy prices and raw material costs on
Infrastructure has continued to focus on rates of return. We have therefore decided economic activity, and as to whether these
opportunities with long-term contractual cash to replace it with a new circa £425 million pressures can be managed by the world’s
flows that make this asset class attractive to similar bond. monetary authorities without precipitating
investors in an uncertain environment. recession or a sharp rise in inflation. We believe
At times like these, 3i’s standards of
that our mid-market focus, a portfolio well-
transparency and accountability, reinforced by
diversified by sector, geography and type of
14 years’ experience as a quoted company,
investment, and the quality of our Board and
serve the Company well. In our annual reports,
management team, provide a combination that
which have been widely praised by observers of
positions us well to meet these challenges and
both private equity and quoted companies, we
build further value for shareholders.
strive to provide our shareholders with a detailed
picture of our approach to investment, valuation
Baroness Hogg Chairman
and risk management. This also stood us in good 14 May 2008
stead at a time of unprecedented interest in the
industry and some challenge to its reputation.

3i at a glance
3i is a mid-market private equity business making and managing investments
in Europe, Asia and the US. 3i Group plc is a FTSE 100 company, providing
shareholders with quoted access to private equity returns. Investments are made
with capital from the Group’s own balance sheet and from funds which the Group
manages or advises for others.
Buyouts Growth Capital Infrastructure

Focusing on leading mid-market transactions Making minority investments of typically up Investing in a broad range of international
primarily in Europe but also in Asia, with an to €250 million in established and profitable infrastructure assets, principally in
enterprise value of typically up to €1 billion. businesses across Europe, Asia and the US. transportation, utilities and social infrastructure.
Investments are generally made through Limited Investments are generally made using 3i’s own Investments are made by 3i Infrastructure
Partnership private equity funds. balance sheet resources. From 1 April 2008, Limited, a quoted company which is advised by
all late-stage technology and healthcare minority 3i, the 3i India Infrastructure Fund, or from 3i’s
investment will also be conducted through this own balance sheet resources.
business line.
Gross portfolio return Gross portfolio return Gross portfolio return
57% (2007: 54%) 21% (2007: 48%) 14% (2007: 16%)

Financial performance (£m) Financial performance (£m) Financial performance (£m)
year to/as at 31 March 2008 year to/as at 31 March 2008 year to/as at 31 March 2008
Investment 788 Investment 990 Investment 38
Realisation proceeds 858 Realisation proceeds 503 Realisation proceeds 57
Realised profits 370 Realised profits 75 Realised profits 6

Unrealised value movement 245 Unrealised value movement 160 Unrealised value movement 43
Portfolio income 116 Portfolio income 67 Portfolio income 18
Gross portfolio return 731 Gross portfolio return 302 Gross portfolio return 67
Fees receivable from external funds 39 Fees receivable from external funds 2 Fees receivable from external funds 18
Assets under management Assets under management Assets under management
Own balance sheet 2,025 Own balance sheet 2,366 Own balance sheet 501
Third-party funds 2,594 Third-party funds 183 Third-party funds 712
4,619 2,549 1,213
For further information on Buyouts For further information on Growth Capital For further information on Infrastructure
please go to page 12 please go to page 16 please go to page 20

07 61% 39% £7,134 million
08 61% 39% £9,792 million
Owned Third-party
QPE SMI Venture Capital

Creating value with the management teams of Managing and realising 3i’s older smaller Following the transition of 3i’s early and late-
quoted companies through applying 3i’s private minority investments. stage technology investment business line to
equity skill base, network and resources. a late-stage investment business, from 1 April
Investments are made through 3i Quoted 2008 a Venture Portfolio team will manage the
Private Equity Limited, a listed company which existing portfolio and all new late-stage
is advised by 3i. technology investments will be made within the
Growth Capital business line.
Gross portfolio return Gross portfolio return Gross portfolio return
n/a (2007: n/a)* 0% (2007: 13%) (2)% (2007: (6)%)

Financial performance (£m) Financial performance (£m) Financial performance (£m)
year to/as at 31 March 2008 year to/as at 31 March 2008 year to/as at 31 March 2008
Investment 182 Investment 6 Investment 156
Realisation proceeds 18 Realisation proceeds 136 Realisation proceeds 170
Realised profits – Realised profits 7 Realised profits 65

Unrealised value movement (42) Unrealised value movement (27) Unrealised value movement (88)
Portfolio income – Portfolio income 20 Portfolio income 6
Gross portfolio return (42) Gross portfolio return – Gross portfolio return (17)
Fees receivable from external funds 1 Fees receivable from external funds – Fees receivable from external funds –
Assets under management Assets under management Assets under management
Own balance sheet 142 Own balance sheet 244 Own balance sheet 738
Third-party funds 269 Third-party funds – Third-party funds 18
411 244 756
*Fund launched June 2007
For further information on Quoted For further information on SMI For further information on Venture Capital
Private Equity please go to page 22 please go to page 29 please go to page 24

Chief Executive’s statement
“Total return was underpinned by continued exceptional returns from
our Buyouts business and good returns from our Growth Capital and
Infrastructure businesses.”
3i achieved a strong performance in the year Against this background, whilst we have Assets on the 3i Group balance sheet grew to
to 31 March 2008, delivering a return on been maintaining our focus on the long-term £6,016 million from £4,362 million a year
opening shareholders’ funds of 18.6% as well as development of 3i, the last 12 months have earlier, and third-party funds rose again, reaching
a 37% growth in assets under management. seen us being even more selective in our new £3,776 million, an increase from £2,772 million
This result was achieved despite the significant investment and active in our engagement with at 31 March 2007. These figures showed
changes in financing markets which took place portfolio companies. Our investment selection excellent progress in delivering a key element of
during the year. These very changed market process has increasingly favoured companies our strategy, which is to grow assets under
conditions set the back drop for my review as with recurring income streams and more management. Closing assets under management
I recognise that no matter how good our defensive qualities. Our relationships in the were £9,792 million (2007: £7,134 million).
performance has been, in the current more mid-market, particularly those with banks, have
“37% growth in assets under
uncertain environment it is the outlook and how allowed transactions to be completed, albeit on
management.”
3i is positioned that are likely to be of most terms closer to those of three years ago.
interest to shareholders. Total return of 18.6% (2007: 26.8%) was
“Maintaining our focus on the long-term
underpinned by continued exceptional returns
My report to you coincides with a period of development of 3i.”
from our Buyouts business and good returns
considerable uncertainty. The 12 months to
The number of first new investments fell from from our Growth Capital and Infrastructure
31 March 2008 have seen a significant adverse
62 to 47 but, consistent with both the market businesses. Our Venture Capital and QPE
change in the outlook for the world’s economy
and our own strategy, the average size of these businesses both produced negative returns and
and have revealed major flaws in the soundness
first investments increased significantly from our SMI run-off portfolio’s gross return was
of the global financial system, the full
£26 million to £37 million, and so total break even. With lower realisations, and lower
consequences of which have still to be
investment levels increased from £1,576 million market multiples at year end, a significant
understood. It is likely to be some time before
to £2,160 million, with strong figures from both element of the return came from improved
the extent of the downturn in the real
Buyouts and Growth Capital. £182 million of this earnings within the portfolio as well as continued
economies will be seen and even longer before
year’s figure was to seed our new QPE business strong realisation profits on those assets that
it will be possible to judge the effects of the
line; whereas the prior year figure included our were sold. The favourable mark-to-market
credit crunch.
£91 million cash investment in the newly- of the derivative element of the Group’s
“A significant adverse change in the outlook created 3i Infrastructure Limited. €550 million convertible bond contributed
for the world’s economy.” £162 million of return, reversing last year’s
As anticipated at the start of last year, due to
negative £62 million. Provisions rose to
For some time we had felt that the buoyancy the relative immaturity of the portfolio,
£188 million from last year’s exceptionally low
of the debt markets was not sustainable and realisations slowed from last year’s exceptional
figure of £71 million.
that investments made over the recent period £2,438 million to £1,742 million. At year end,
would be unlikely to benefit from such positive our portfolio of investments numbered 487 Net asset value per share grew by £1.45 (16%)
conditions on exit. However, the extent of the (2007: 762). The most significant change was to £10.77. The increase before dilution due to
fallout from the sub-prime crisis and its effect in our SMI run-off portfolio, where we ended the B share issue and dividends, was £1.94,
on mergers and acquisitions markets, and the the year with just 92 positions, down from 293 representing a 21% return.
financing markets more generally, were not a year ago and some 1,079 in 2004 when we
predicted by most, including us. started the disposal programme.

During the year, we undertook a regular review Strategic development continued in the year Over the last few years, we have benefited
of our investment business to determine its with the launches of 3i Quoted Private Equity from the financial flexibility which our
future shape in terms of geography, sector and Limited and the 3i India Infrastructure Fund, the €550 million convertible bond has provided.
asset class. The recent evolution of our Venture development of our US Growth Capital business As this bond matures during the course of
Capital business towards later-stage investing and continued international expansion. 2008, our strategy is to maintain such flexibility
has brought it closer to the long-standing remit We closed the year with total assets under by refinancing it through the issue of a new
of our Growth Capital business and so we have management of approximately €12 billion, bond structured at an effective 60% conversion
decided to combine these businesses by creating and believe that we can grow this figure to premium to 3i’s share price at launch.
Technology and Healthcare teams within an over €20 billion by the end of 2010, by which
In these markets, liquidity is at a premium.
expanded Growth Capital mandate. On a more time around half these assets could be managed
We start the new year with liquid resources plus
opportunistic basis, in view of the recent market or advised funds, rather than on 3i’s own
undrawn facilities of £1,082 million. Looking
dislocations, our Buyouts business has acquired balance sheet.
forward, although we are seeing a significant
selective leveraged debt assets on a prudent
“We believe that we can grow assets under level of new investment opportunities,
basis. This is not only to produce private equity
management to over €20 billion by the end nevertheless we are targeting maintaining a
like returns but also to give us the opportunity to
of 2010.” broadly similar level of debt by the end of the
consider extending this business should market
current financial year, with a potentially modest
conditions allow. Our people are critical to our continued success,
increase in gearing during the intervening period
and how we encourage their engagement with
“The recent evolution of our Venture as investments and divestments take place.
the firm’s agenda and reward their contribution
Capital business towards later-stage
to our success, both financial and otherwise, are “Our strategy is as relevant today
has brought it closer to Growth Capital.”
key responsibilities of our senior team. “Carried as a year ago.”
The relatively benign environment of the interest” schemes have attracted considerable
There is, of course, continuing uncertainty in
last few years has allowed 3i to reshape itself comment over the last 12 months, much of it
many of our markets. History shows that
by expanding geographically, broadening its mis-informed and mostly unfavourable. Given
whenever the mergers and acquisitions markets
asset classes, and increasing third-party funds the recent excesses of the banking system, it is
go through a period of adjustment such as this,
under management, and to make major timely for those of us in the private equity
there is a time lag during which price
investments in people and process without industry to emphasise that carried interest
expectations are not fully matched, and so
compromising shareholder expectations. schemes only pay out on the realisation of
activity is less predictable. However, compared
investments, and are aligned with the interests
The results of this reshaping will be seen over to previous periods of economic adjustment,
of the capital provider, whether 3i itself or our
the next few years as the capabilities that we the positive influence of the fast-growing
third-party investors.
have recently built deliver further profitable economies of Asia during this period brings very
assets for the Group and additional income As an investment company, 3i will routinely face different dynamics to the outlook for the world
streams from third-party funds. mis-matches in timing between making new economy. Our portfolio is generally performing
investments and achieving disposals. This was very well but is not immune to general economic
This also means that in the coming year our key
the case last year when, as anticipated, new conditions. Our strategy is as relevant today as a
performance indicator of net costs as a
investment exceeded disposals by £418 million. year ago.
percentage of opening portfolio value will
Having also returned £808 million to
continue its progress towards our long-term As a consequence, we enter the new year
shareholders last year through an issue
objective of 3.0%. confident in our strategy and realistic in outlook,
of B shares, and made further on-market
intending to make further progress and to build on
repurchases of £120 million, 3i ended the year
the significant investment of the last few years.
with gearing at 40%.
Philip Yea Chief Executive
14 May 2008

Business review Group business
This review provides an overview of our main activities, principal markets, Group and
business line performance and risk management. It also describes our key financial
performance measures and our performance against them.
The key Group financial performance Introduction to the Group Market conditions
measures are: 3i is a world leader in private equity investing After four years of strongly positive influences,
2008 2007 across Europe, Asia and the US. We invest from the sub-prime lending crisis in the US which
Total return 18.6% 26.8% our own balance sheet and also with funds that emerged in summer 2007, together with the
Gross portfolio return 23.9% 34.0% we advise or manage on behalf of others. Total subsequent volatility in capital markets and debt
assets under management at 31 March 2008 markets, not only disrupted mergers and
Cost efficiency 5.0% 5.3% were £9.8 billion, including £3.8 billion advised acquisitions markets but also led to a more
Gearing 40% 0% or managed on behalf of third parties. challenging and uncertain economic outlook.
Net asset value growth* £1.94 £2.24 A description of the effect of these conditions is
The Group’s vision is to be the private equity
detailed in the “Market” sections in each of our
*Growth in NAV is stated before dividends and other firm of choice: operating on a world-wide scale;
business line reviews on pages 12 to 27.
distributions to shareholders. producing consistent market-beating returns;
acknowledged for our partnership style; and The impact on the private equity industry as a
The key business line performance winning through our unparalleled resources. whole has been most pronounced in the large
measures are: leveraged buyout (“LBO”) market in the US and
Gross portfolio return Our strategy for achieving this vision, along
in Europe, where new LBO investment activity
with a summary of our progress with respect to
Portfolio health has come to a virtual standstill because of
each element, the key risk factors involved and
Long-term IRRs by vintage the lack of availability of suitably-sized debt
statistics relating to our performance is set out
packages. In the European mid-market buyouts
on pages 10 and 11.
market, which is where 3i’s Buyouts business
The key non-financial performance Governance, accountability and alignment of operates, debt has remained available for new
measures are: interests are key elements of the private equity investments, albeit on terms and conditions
Employee engagement model. 3i achieves this by making investments more reflective of the market in 2004 and
Environmental impact through distinct business line partnerships, which 2005 than in 2007. All of our business lines are
operate internationally and draw upon the influenced by the slow down in the realisations
combined resources of the Group. market and the broader macroeconomic
uncertainty, although the underlying
Detailed descriptions, performance data and
performance of the portfolio remains good.
commentaries for each of our Buyouts, Growth
Capital, Infrastructure, Quoted Private Equity Overall, global private equity fundraising
and Venture Capital business lines can be found remained strong in 2007 at €566 billion (2006:
on pages 12 to 27, together with case studies €532 billion), according to Private Equity
of our most significant investments and Intelligence data. Preliminary statistics for
realisations. calendar year 2007, released by the European
Private Equity and Venture Capital Association
3i operates in a number of distinct geographical
(“EVCA”) in March 2008, show that European
and sector markets. The market for each of our
private equity firms raised a total of €74 billion
business lines has its own specific characteristics.
in 2007 (2006: €112 billion) and invested
However, the environment and competitive
€86 billion (2006: €50 billion). However, data
landscape for all of them is influenced by the
from unquote”, shows that whereas deals with
broader macroeconomic context, as well as
an enterprise value of over £1 billion fell by over
the strength of the capital markets, the level of
50% in quarter four compared to quarter two of
private equity funds raised and invested, and the
2007, the number of mid-market transactions
extent of mergers and acquisitions activity.
was only 4% lower.

3i investment teams: 3i’s investments

Benelux in funds:
China Central Europe
France China
Germany India
India Israel
Italy Japan
Nordic Korea
Singapore Russia
Spain United Arab Emirates
Switzerland
UK
US
Although there is no single source that As a returns-focused business, we set clear Investment policy
accurately tracks the European growth capital targets for our key performance measures at a 3i is an investment company which aims to provide
market in which 3i operates, our own data Group and business line level. For the Group, its shareholders with quoted access to private
suggests that there was a 36% increase in the these targets are set out in the relevant sections equity returns. Currently, our main focus is on
amount invested to €4.8 billion in 2007. of the Financial review. For the business lines, making quoted and unquoted equity and/or debt
they are contained within each of the business investments in businesses and funds across Europe,
According to Asian Venture Capital Journal Asia and North America. The geographies, economic
line reviews on pages 12 to 27.
statistics, the Asian markets in which 3i operates sectors, funds and asset classes in which we invest
directly (China, India, North Asia and South East We employed an average of 772 people in continue to evolve as opportunities are identified.
Asia) continued to grow strongly with a 20% the year (2007: 765), working in focused teams Proposed investments are assessed individually and
increase in investment. in 14 countries across three continents in a all significant investments require approval from the
matrix structure. The key dimensions of this Group’s Investment Committee. Overall investment
3i’s approach matrix are business line, geography and sector, targets are subject to periodic reviews and the
3i is a highly selective investor and made 47 with each business line unified through common investment portfolio is also reviewed to monitor
new investments during the year to 31 March carried interest schemes and processes. exposure to specific geographies, economic sectors
2008 (2007: 62), across a range of sectors, Our internal professional services teams are and asset classes.
regions and types of investment. As can be seen incentivised on Group performance. We seek to diversify risk through significant
from the tables on pages 35 and 36, the dispersion of investments by geography, economic
The high levels of staff engagement achieved
portfolio is well diversified in terms of sector, asset class and size as well as through the
by the Group, which are reported on page 51,
investment type, geography and sector. maturity profile of our investment portfolio.
continue to be supported by our “One room: In addition, although we do not set maximum
Consistent with our investment strategy, the
One firm” culture. This is underpinned by a clear exposure limits for asset allocations, as an approved
number of new investments in the period was
set of values and developed through combining UK investment trust, no more than 15% of the
lower, principally because of a decrease in the
capabilities and knowledge, aligning interests and Group’s portfolio can be held in a single investment.
number of early-stage technology investments.
by selecting the “best team for the job” from our
Investments are generally funded with a mixture
Since 2005, our Venture Capital business has internal and external resources around the world.
of debt and shareholders’ funds with a view to
moved away from predominantly early-stage Our culture is performance-based and highly maximising returns to shareholders, whilst
technology and healthcare investments towards collaborative and requires continuous investment maintaining a strong capital base. We do not
late-stage investing. From 1 April 2008, in our people and in our communications. set minimum or maximum levels of gearing.
we have formalised this process such that all However, we are nonetheless committed to
3i’s values and our non-financial key
new late-stage technology and healthcare achieving balance sheet efficiency. The Board of
performance measures are set out in our Directors currently consider it appropriate to aim to
minority investments will be made by the
Corporate responsibility report on pages 44 operate with an optimum gearing ratio of debt to
Growth Capital business line and the existing
to 53. This report also describes our approach shareholders’ funds within a 30% to 40% range
Venture Capital business line portfolio will be
and performance with respect to corporate across-the-cycle. Since our flotation in 1994, our
managed as a standalone activity.
responsibility, both from the perspective gearing has fluctuated between 0% and 52%.
Private equity thrives on change, and strategic of 3i as a company and 3i as an investor.
shifts within economies and sectors drive
activity both in terms of investment and
realisations. 3i’s local presence and dedicated
sector-focused teams continue to enable us to
achieve competitive advantage in originating
investment opportunities, assessing them and in
managing and realising value.

Business review Our strategy
Achieving our vision depends upon a clear strategy, ensuring that we measure our
progress towards reaching our strategic goals and taking account of the key risks
involved and how they change. Here is a summary of where we are today.
Strategy Progress
Invest in high-return assets Achieving our vision and delivering our return
objectives across the cycle depends upon making
– Gross portfolio return of 23.9% is in line with
targets and has exceeded 20.0% for the past
high-quality investments. three years.
– Earnings growth in the portfolio generated
£307 million of return (2007: £142 million).
Grow our assets and those Combining growth in assets with our investment
disciplines will enable us to grow shareholder value.
– The directly-held portfolio increased in value
by 38% in the year, from £4,362 million to
we manage on behalf of third £6,016 million, following investments in 47 new
parties assets (2007: 62) and value growth in the
opening portfolio.
– External funds increased following the
£400 million listing of 3i Quoted Private Equity
Limited in June 2007 and the final close of 3i India
Infrastructure Fund, announced in April 2008 at
$1.2 billion.
Extend our international International expansion supports asset growth,

provides competitive advantage and delivers
– 3i now operates from 22 offices, 18 of which are
based outside the UK.
reach, directly and through significant added value to our portfolio companies. – Asia now represents 11% (2007: 9%) of the 3i
investing in funds direct portfolio value and the US 8% (2007: 7%).
– US investment has increased from £92 million to
£303 million, mainly due to new Growth Capital
opportunities.
– 3i’s investments in nine private equity funds in
emerging markets continue to extend our
international reach.
Use our balance sheet and 3i’s permanent capital base, FTSE 100 status, credit
rating and strong cash flow provide the platform,
– Two new business lines were established last year,
Infrastructure and Quoted Private Equity. Both
resources to develop existing resources and credibility to grow. have subsequently listed on the London Stock
and new business lines Exchange.
– A new fund has been raised to address the
infrastructure opportunity in India.
– Buyouts and Growth Capital have invested
£788 million and £990 million respectively, an
increase of 58% and 105% on the previous
financial year.
Continue to build our strong Every aspect of our vision depends upon our people,
the strength of their relationships and the way they
– Our 2008 staff engagement survey shows a very
high level of engagement and commitment to 3i’s
culture of operating as one work together. goals. Employee engagement is the extent to
company across business lines, which employees are committed to their role,
their team and the Group and its objectives.
geographies and sectors – Our Business Leaders Network for Chairmen and
Chief Executives is now operating in Europe, Asia
and the US.

Key risk factors Performance

– Quality of origination, review and execution Gross portfolio return by year (%)
processes, including consideration of corporate year to 31 March
responsibility issues. 04 19.4
– Pricing of assets on entry and exit. 05 16.7
– Strength of asset management.
– Timing of exit. 06 24.4
07 34.0
08 23.9
– Need to build capabilities before committing capital. Growth in assets under management (£m)
– Adequacy of Group funding for balance sheet as at 31 March
investing. 04 4,362 2,475 6,837
– Availability of third-party investors to build assets 05 4,317 1,913 6,230
under management.
06 4,139 1,573 5,712
07 4,362 2,772 7,134
08 6,016 3,776 9,792
3i's direct portfolio Managed and advised by 3i
– Effectiveness of knowledge management and Portfolio value by geography

sharing. as at 31 March
– Changes in local legal and regulatory frameworks. 2008 2008 2007 2007 2006 2006
£m £m £m
– Maintenance of control environment. Continental Europe 2,573 43% 1,894 43% 1,923 47%
– Managing corporate responsibility issues
UK 2,250 38% 1,792 41% 1,736 42%
appropriately.
Asia 679 11% 373 9% 167 4%
US 497 8% 283 7% 307 7%
Rest of World 17 – 20 – 6 –
Total portfolio value 6,016 100% 4,362 100% 4,139 100%
– Appropriateness of capital structure. Assets under management by business line

– Availability of non-financial resources. as at 31 March
– Quality of opportunities identified, analysed 2008 2007
£m £m
and implemented. Buyouts 4,619 3,410
Growth Capital 2,549 1,687
Infrastructure (March 2007) 1,213 854
QPE (June 2007) 411 20
SMI 244 407
Venture Capital 756 756
9,792 7,134
– Ability to attract, develop and retain people Employee engagement Corporate responsibility
with requisite skills, experience and cultural fit. The 2008 staff survey, in which 92% of staff took – 3i is a member of the Dow Jones Sustainability Index.
– Effectiveness of knowledge management and part (2007: 78%) showed a high level of – 3i is one of Business in the Community’s top 100
sharing. engagement, with a score of 84% (2007: 87%). Companies that Count.
– Effectiveness of decision making in a matrix High scores from questions which test employee – 3i’s Corporate responsibility report for 2006 was
structure. engagement have a direct positive impact on awarded top place at the 2007 IR Society Best
– Flexibility of resourcing model to adapt to change. employee retention and productivity. Practice awards.

Business review Buyouts
“Our strategy over the last three years, to be active sellers and highly selective
buyers, has delivered strong performance. We now face very different market
conditions. I believe that the strength of our model, our network and our portfolio will
enable us to deal well with both the challenges and opportunities that will arise.”
Gross portfolio return on opening value Gross portfolio return Business model
The Buyouts business line targets cash-to-cash
57% £731m IRR returns of 20% through the cycle and is

focused on leading or co-leading mid-market
transactions, primarily across Europe, of typically
up to around €1 billion in value.
Long-term performance
New investments made in the financial years Investments are made through Limited
to 31 March Total Return Value IRR to IRR to
investment flow remaining 31 March 31 March
Partnership private equity fund vehicles (currently
Vintage year £m £m £m 2008 2007 Eurofund V), which are managed by 3i (see Fund
management section opposite). Returns from
2008 606 8 640 n/a n/a individual investments are achieved through a mix
of capital realisations upon exit, returns of capital
2007 497 122 543 35% 9% and income. Returns to 3i Group are enhanced
2006 470 585 488 57% 47% through fees and carried interest from these
funds.
2005 340 805 138 62% 54%
A core element of the business model is that
2004 303 523 100 37% 30% our team of over 100 investment professionals
operates as one team with full economic
2003 268 663 43 50% 50% alignment. This enables us to match resources to
2002 186 441 4 61% 61% opportunities on a “best team for the job” basis,
based on sector, operational and deal execution
experience.
Returns from Buyouts (£m) Strategy
year to 31 March 2008 2007
The strategy is to apply sector and operational
Realised profits over value on the disposal of investments 370 538 expertise to a premium origination network in
Unrealised profits on the revaluation of investments 245 123 order to find, pursue and execute investments in
Portfolio income 116 127 which we can create value. Investment decisions
Gross portfolio return 731 788 are made on a partnership basis, which provides the
ability to benchmark opportunities to select the
Fees receivable from external funds 39 33 best 10 to 15 investments to make in each year.
Working with management, we create a bespoke
Business activity – investment and divestment (£m) value creation plan for each investment, focused
year to 31 March 2008 2007 on growing earnings, improving operational
Realisation proceeds 858 1,341 efficiency and strategic value, leveraging 3i’s
Investment (788) (498) network, knowledge and expertise to maximum
effect. An illustration of the range of business
Net divestment 70 843 transformation possible through this approach can
be seen from the case studies on pages 14 and 15.
Gross portfolio return by year (%) In the last three years, we have driven realisation
year to 31 March activity across the portfolio, taking full advantage
04 27 of buoyant exit markets and continued to invest in
05 20 high-quality businesses throughout our markets.
In the three years ended 31 March 2008,
06 29
£3,076 million was realised from the Buyouts
07 54 portfolio and £1,737 million was invested
08 57 (£4,948 million of realisation proceeds and
£2,796 million invested including external funds).

Building on the Group’s growing network and 3i has been advantaged in these market Portfolio health
reputation in Asia, a Buyouts team presence was conditions because of the depth and breadth of Portfolio health remains satisfactory and in line
established in the region during the year. its international network of banking relationships with expectations. Our historic loss rates have
and the capability of its well-established been extremely low. However, we anticipate a
Utilising the expertise of our in-house banking
in-house banking team. We continue to see more challenging environment for the portfolio
team, a debt management capability was
good opportunities to invest. over the next 12 months. The realised loss rate
established in October 2007 to capitalise on the
since 2001 was 1.8% at 31 March 2008
opportunity to buy high-quality debt at a
Investment and realisations (2007: 1.1%). The level of provisions for the
discount. An €800 million debt warehouse
During the first half of the year we continued period was 3.8% of total investment cost
facility has been established in which 3i has
to actively sell into favourable markets, realising (2007: 4.2%). As part of the year-end
committed €160 million on a first loss basis and
proceeds of £540 million. However, as valuations process, a specific review of assets
which is separate from Eurofund V.
anticipated, realisation levels slowed during acquired in the last 12 months was conducted
As at 31 March 2008, the debt warehouse the second half of the year and realisations with regard to debt, entry multiples and
had invested €275 million of which the 3i for the 12 months to 31 March 2008 were performance. Of the 11 new investments made,
commitment was €55 million (£40 million). £858 million (2007: £1,341 million). provisions have been taken against one, totalling
The diversity and credit-worthiness of the £22 million.
The largest realisation during the year was the
portfolio remains strong. However, given market
sale of Nordic-based facilities management
volatility, the short-term mark-to-market loss Fund management
business, Coor Service Management, in
on the debt warehouse was €15 million Eurofund V had invested 40% of commitments
December, which generated proceeds of
(£12 million) and is included in the gross at 31 March 2008. Eurofund IV, which was
£158 million.
portfolio return for Buyouts. raised in 2003, has performed well compared
Investment levels were higher at £788 million to latest available industry benchmark data.
Market (2007: £498 million), due to an increase in the The fund has already returned 131% of its
The key features of the market during the year average size of investment to £55 million drawn commitments, has generated a 3.3 times
were the influence of the more difficult financing (2007: £41 million). During the year, 11 new gross money multiple on realised investment and
environment on the availability of debt and investments were completed (2007: 12) in six has a remaining portfolio valued at 57% of
subsequent slow down for the market for different countries and five different sectors. drawn commitments.
mergers and acquisitions.
The case studies on pages 14 and 15 include During the year, fund management fees and
The impact on the private equity industry as a our largest new investments and realisations. carried interest receivable amounted to
whole has been most pronounced in the large £99 million (2007: £114 million).
leveraged buyout (“LBO”) market in the US and Gross portfolio return
Table 12 on page 36 contains a schedule of 3i’s
in Europe, where new LBO investment activity The Buyouts business generated a gross
managed funds and provides details on when
has come to a virtual standstill because of the portfolio return of £731 million (2007:
each fund was raised, its size and the extent of
lack of availability of suitably-sized debt packages. £788 million), a 57% return over opening
3i’s commitment as well as the amount invested
According to unquote”, the number of European portfolio value (2007: 54%). Consistent with
by the fund at 31 March 2008. A further
buyouts with an enterprise value of over €1 billion the good level of realisation proceeds during the
analysis of the source of funds by geography
fell by 42% from 24 in the first half of 2007 to year, realised profits upon exit at £370 million
and type of investor is provided on page 36.
14 in the second half of the calendar year. (2007: £538 million) accounted for over 50%
of the gross portfolio return.
In the European mid-market, which is where 3i Long-term performance
operates, debt has remained available for new Unrealised profits during the year of The vintage IRRs for 2002 to 2007 are all above
investments, albeit on terms and conditions £245 million included assets valued on an our “through-the-cycle” targeted IRR return of
more reflective of the market in 2004 and imminent sales basis of £75 million. Agreement 20%. The 2002 to 2006 vintages have now
2005 than in 2007. Data from unquote”, shows was reached in March 2008 to sell Giochi returned in excess of the original cost and, in
that the number of European transactions with Preziosi, one of the world’s leading toy the case of the 2002 and 2003 vintages,
an enterprise value between €25 million and businesses, resulting in an uplift to opening value more than twice the original cost has been
€1 billion were down, but only by 4%, from 294 of £75 million. Giochi Preziosi is profiled as a returned to date.
in the first half of 2007 to 282 in the second case study on page 15.
half of the calendar year. Jonathan Russell Managing Partner

Business review Buyouts continued
Case studies
Global Garden Products Inspicio

New investment New investment
Location: Italy Location: UK
Sector: Consumer Sector: Business services
Website: www.ggp-group.com Website: www.inspicioplc.com
First investment First investment
3i’s Eurofund V invested €260m in December 2007 3i’s Eurofund V invested £164m in February 2008
to support the buyout, growth and development of to enable the public-to-private buyout of Inspicio.
Global Garden Products (GGP).
Nature of business
Nature of business Inspicio is a market-leading global provider of
GGP is Europe’s leading manufacturer of powered commodity, food and environmental testing and
garden equipment, including lawnmowers, ride-on inspection services.
tractors and handheld equipment.
Results to 31 December 2007
Results to 31 August 2007 (audited)
£m
(audited)
€m Sales 218
Sales 547 EBITDA 23
EBITDA 84 Net assets 9*
Net assets 207
*Net of goodwill.
Current trading Current trading
Sales and EBITDA in the current financial year to date The business continues to trade well, on the back of
are performing ahead of the previous year’s results increased regulation and strong demand for global
for the same period. commodities.
Developments since 3i invested Developments since 3i invested
The board of GGP has been strengthened through 3i is applying its sector expertise to support Inspicio’s
3i’s introduction of Paolo Antonietti as Chairman. 3i is growth strategy. Since announcing an offer for the
also supporting GGP’s plans for growing the business, business in December 2007, Inspicio has made four
particularly in new geographies. In January 2008, strategic bolt-on acquisitions, as well as committing
GGP announced the acquisition of Alpina Italia Spa, to a further capital expenditure plan to accelerate
a company with a turnover of around €17m and the laboratory expansion.
These case studies consist of the two largest investments main distributor of GGP’s Alpina brand in Italy.
3i Group plc’s investment March March
and the two largest realisations (by value) completed in the 3i Group plc’s investment March March 2008 2007
year. We have also included the next largest investment in 2008 2007 £m £m
the portfolio. £m £m
Cost
For new investments, cost and valuation may differ due to Cost Equity and loan 91 n/a
the application of different exchange rates. Equity and loan 104 n/a Valuation (cost basis)
Valuation (cost basis) Equity and loan 91 n/a
Where relevant, EBITDA represents operational EBITDA,
excluding non-recurring items. Equity and loan 116 n/a Equity interest 38% n/a
Equity interest 34% n/a Income in the year 4 n/a
Income in the year 3 n/a
For further information on 3i’s portfolio

and cases studies please visit
www.3i.com/investment-stories
For a list of our Top ten and 40 other large

investments by value, please go to pages 108
and 109

Giochi Preziosi Care Principles Coor Services Management

Investment Realisation Realisation
Location: Italy Location: UK Location: Sweden
Sector: Consumer Sector: Healthcare Sector: Business services
Website: www.giochipreziosi.it Website: www.careprinciples.com Website: www.coor.com
First investment First investment First investment
3i’s Eurofund IV invested €126m in February 2006 3i’s Eurofund IV invested £54m in March 2005 to 3i’s Eurofund IV invested €58m in December 2004
to enable the buyout of Giochi Preziosi. enable the management buyout of Care Principles. to enable the €131m buyout of Coor from Skanska.
3i Group plc held a minority position in the company
Nature of business Nature of business
since 1997.
Giochi Preziosi is one of the world’s leading toy Coor is a provider of Total Facilities Management in
businesses. Nature of business the Nordic region, with services including workplace
Care Principles provides specialist assessment, support, property support, telephony and security
Results to 30 June 2007
treatment and rehabilitation for adults with learning
(audited) and production support.
difficulties, personality disorders and autistic
€m
Sales 723 spectrum disorders. (audited)
EBITDA 79 SEKm
Results to 30 April 2006
Net assets 205 (14 month period) (audited) Sales 3,745
£m EBITDA 309
Current trading Sales 69 Net assets 241
Giochi Preziosi has continued to improve its sales and EBITDA 14
profitability performance over the last year, building Net assets 44 Developments since 3i invested
on its position as the market leader in Italy with 3i’s network has assisted Coor in winning a number
around one quarter of market share. Developments since 3i invested of significant contracts. The company has delivered
3i used its sector knowledge and experience in on its plan to become the Nordic region market
Developments since 3i invested
Healthcare to assist in the development of Care leader through organic growth and the €56m
3i has helped Giochi Preziosi make a number of
Principles. We introduced Paul Preston as CEO, and purchase of Celero from Volvo in 2005, which
senior appointments since investment through its
Nick Irens, formerly of another successful 3i buyout increased sales by more than 60%. During the three
global network. The sale and leaseback of the
Westminster Healthcare, as Chairman. In 2005 years of 3i’s investment, the company’s staff
properties of Giochi Preziosi was also driven by 3i’s
3i helped Care Principles acquire Ermine Care, a numbers grew from 1,800 to 3,700.
value plan, and returned a cash inflow of €73m to
provider of community-based specialist services.
enable the company to repay some of its borrowings. In December 2007, Coor was sold to Cinven,
The company performed strongly and ahead of plan,
The number of employees of Giochi Preziosi has returning €370m to 3i and investors in Eurofund IV.
and in July 2006 Care Principles was re-capitalised,
increased from 1,470 in 2004 to 1,717 in 2007. This represents a 6.3 times money multiple and an
returning £32m to 3i and Eurofund IV investors.
IRR of 82% over the investment period.
In March 2008, an agreement was reached (subject
In July 2007, Care Principles was sold to Three
to regulatory approval and a material adverse change 3i Group plc’s return on investment March March
Delta LLP for £275m, generating a 3.5 times money 2008 2007
clause) to sell Giochi Preziosi. This transaction would
multiple for 3i and investors in Eurofund IV. Over 10 £m £m
return €290m to 3i and investors in Eurofund IV,
years, Care Principles has evolved from a start-up Cost
representing a money multiple of 2.3 times and a
operation to a company with over 1,400 employees. Equity and loan n/a 30
45% IRR.
3i Group plc’s return on investment March March Realised value
3i Group plc’s investment March March 2008 2007 Equity and loan 158 0
2008 2007 £m £m
£m £m Unrealised value
Cost
Cost Equity and loan n/a 72
Equity and loan n/a 20
Equity and loan 63 63 Equity interest 0% 38%
Realised value
Directors’ valuation Income in the year 2 2
Equity and loan 111 23
(imminent sale/cost basis)
Unrealised value
Equity and loan n/a 44
Equity interest 38% 38%
Income in the year 0 0

Business review Growth Capital
“A year of considerable development for our business on so many fronts, yet we still
have much to do to achieve our full potential. The current environment, although
presenting some challenges, increases the attractions of our offering to world-class
growing companies and entrepreneurs.”
The Growth Capital business operates across
21% £302m Europe, Asia and the US with over 100

investment professionals and targets gross
cash-to-cash IRRs of 20% through the cycle.
These returns are generated from minority
Long-term performance
New investments made in the financial years equity investments, funded from 3i’s balance
to 31 March Total Return Value IRR to IRR to sheet, to support the growth of sizeable
investment flow remaining 31 March 31 March businesses organically or through acquisition.
Vintage year £m £m £m 2008 2007 Investments are typically in companies with
2008 939 1 1,009 n/a n/a relatively low leverage.

2007 460 31 536 17% (2)% As the strength of 3i’s international offering has
grown, so has the average size of the companies
2006 414 350 457 43% 35% that the Growth Capital team invest in.
In the year to 31 March 2004, the Growth
2005 182 190 124 31% 35% Capital business line invested £319 million in 34
businesses, with an average size of investment
2004 293 474 25 26% 25% of £7 million. In the year to 31 March 2008,
2003 222 375 59 25% 25% this had grown to £990 million in 27 new
portfolio companies, an average size of new
2002 496 642 95 12% 12% investment of £37 million. These include
five investments totalling £26 million made
through our partnership with 3TS in central
Returns from Growth Capital (£m) and eastern Europe.
The team operates as a global partnership,
Realised profits over value on the disposal of investments 75 235 originating systematically and investing
Unrealised profits on the revaluation of investments 160 269 selectively with the aim of building
Portfolio income 67 65 a portfolio which is diversified by sector,
Gross portfolio return 302 569 geography, type of investment and size
of company.
Fees receivable from external funds 2 3
3i’s investment professionals engage in active
partnership with the companies in which they
Business activity – investment and divestment (£m) invest through aligning interests with other
year to 31 March 2008 2007 shareholders and joining the board. They provide
Realisation proceeds 503 691 sector expertise together with strategic,
Investment (990) (482) operational and financial insights.
Net (investment)/divestment (487) 209 During the year, the decision was taken to form
a new Technology sector team within the
Growth Capital business line, capitalising on
Gross portfolio return by year (%) 3i’s later-stage technology and healthcare
year to 31 March investing activity. This team will comprise
04 25 investors who will transfer from 3i’s Venture
05 23 Capital business line.
06 26
07 48
08 21

Strategy The upheaval in capital markets has provided Unrealised profits of £160 million accounted
Our strategy has been to build our geographic a further impetus to market activity, with for over 50% of the return in the period.
presence, improve effectiveness through companies and investors alike focusing The Asia business generated unrealised profits
increasing the average size of investment and to on equity funding rather than debt. of £143 million as a result of a number of first-
capitalise on 3i’s competitive advantage through time uplifts and IPOs in the period. Indian
our international presence in the mid market. Investment and realisations investment Mundra Ports listed on the Mumbai
Our aim is to be the private equity firm of choice Investment during the period doubled to stock exchange in November 2007, generating
for world-class growing companies and £990 million (2007: £482 million) in an uplift of £24 million at 31 March 2008 over
entrepreneurs. approximately the same number of companies opening value. An uplift of £47 million was also
as last year. This reflected the geographic taken on CDH China Fund.
Investments are sourced, executed and
expansion in recent years and an increase in
managed using a “best team for the job” Lower levels of realisations in the period meant
the average size of new investment to
approach, on a global basis. 3i’s geographic, that realised profits were lower at £75 million
£37 million (2007: £26 million). The US business
sector and Business Leaders Network provide (2007: £235 million). In part, this was also
completed four investments during the period
market access and insight. The development of because Hayley Conference Centres and Clínica
and invested £243 million (2007: £nil). The
our sector approach, combined with the Baviera, which were realised early in the first half
largest investments during the period were UK-
strength of our international network and of the year, were valued on an imminent sales
based oil and gas producer, Venture Production
resources, especially in Asia and the US, have basis at 31 March 2007.
plc (£110 million) and US healthcare business,
increased this access. Over the last few years,
Quintiles International (£100 million).
approximately half of our deals have been Portfolio health
sourced directly. 3i’s track record and experience We continued to see good opportunities in Asia. Provisions in the year of £26 million were above
of managing relationships with company owners However, the prices of assets remained high last year (£6 million) but remain low on a historic
for over 60 years supports the conversion of through the year. We followed a strategy basis. As at 31 March 2008, 93%
opportunities into investments. of selective investment while focusing on of our investments were classified as healthy,
delivering value from the portfolio. against a three-year rolling average of 89%
Market (2007: 92% and 81%). No provisions have
Realisations during the year were lower at
Comprehensive market data is difficult to access, been made against assets acquired in the last
£503 million (2007: £691 million), reflecting
but our own analysis is that €28 billion was 12 months.
the influence of a less mature portfolio and
invested world-wide in 2007, a 38% increase on
market conditions in the second half of the year.
2006. Market growth has been particularly Long-term performance
Some 70% of the portfolio was less than three
strong in Asia, where growth capital has been The long-term performance table shows
years old at 31 March 2008 (2007: 65%).
the driving factor in the growth of private equity continued good progress against the 20% target
as an asset class. The two largest realisations were Hayley through-the-cycle IRR, especially from more
Conference Centres in the UK (£72 million recent vintages. The 2005 and 2006 vintages,
The market is becoming more competitive in all
proceeds) and Clínica Baviera in Spain in particular, have had substantial early-return
the regions in which we operate. In Europe, we
(£63 million proceeds), both of which delivered flow and value growth.
are seeing large buyout firms turning their
over 2.5 times our original cost in less than
attention to growth capital and some direct
three years. Michael Queen Managing Partner Growth Capital until
activity from hedge funds and mezzanine 31 March 2008 – pictured left
players. In Asia, the market continues to see The case studies on pages 18 and 19 include
our largest new investments and realisations. Guy Zarzavatdjian Managing Partner Growth Capital (from
European and US entrants as well as active IPO 1 April 2008) and Managing Partner Growth Capital Europe
markets. The US market remains the most until 31 March 2008 – pictured right
mature, with a number of dedicated and Gross portfolio return
experienced growth capital providers in direct The Growth Capital business generated a
competition with 3i. We believe that with our gross portfolio return of £302 million (2007:
dedicated Growth Capital teams, geographic £569 million), which represents a 21% return
coverage and investment style, we remain well (2007: 48%) over the opening portfolio, in line
positioned competitively. with our through-the-cycle target, but below
the exceptional level generated last year.

Business review Growth Capital continued
Case studies
Quintiles Venture Production plc

New investment New investment
Location: US Location: UK
Sector: Healthcare Sector: Oil, gas and power
Website: www.quintiles.com Website: www.venture-production.com
3i and associated limited partners invested $429m 3i initially backed Venture Production in 1997 before
for a combined 15% minority stake in Quintiles in its IPO and divested in 2002. Since receiving a
January 2008. This was to support the company’s minority stake as consideration on the sale of CH4 to
continued growth as part of a recapitalisation of the Venture Production in 2006, 3i invested a total of
company. £110m in Venture Production plc during August
2007. The aim is to support development in the UK
Nature of business
and Netherlands sectors of the North Sea.
Quintiles is the market leader in providing outsourced
product development and commercialisation Nature of business
solutions and services to the pharmaceutical and Venture Production is a UK North Sea oil and
biotech industries. Quintiles has played a role in gas producer, focusing on development and
developing each of the world’s top 30 best-selling enhancement of discovered and producing oil and
drugs and nine of the top 10 best-selling biotech gas fields.
products.
Results to 31 December 2006 (audited)
£m
(audited)
$mSales 358
Sales 1,921 EBITDA 267
EBITDA 243 Net assets 281
Net assets (448)
Current trading
Current trading During 2007, the company continued the
Quintiles has performed to plan since 3i invested in development of its North Sea asset base, participating
January 2008. in the drilling of 11 new wells and bringing two new
fields on stream.
3i is actively involved in supporting Quintiles’ growth, Developments since 3i invested
These case studies consist of the two largest investments utilising its strong global network and Healthcare Since the start of 2008, the company has announced
and the two largest realisations (by value) completed in the sector expertise, as well as long-standing seven acquisitions of which six have already been
year. We have also included the next largest investment in relationships with major pharmaceutical and completed. These include the company’s first add-on
the portfolio, which is also a new investment. biotech firms. deal following its entry into the Dutch sector in 2006
For new investments, cost and valuation may differ due to and the acquisition of WHAM Energy plc, an AIM
the application of different exchange rates. 2008 2007 listed company, for £14m. Venture Production’s debt
£m £m facilities have expanded to £585m, giving a strong
Where relevant, EBITDA represents operational EBITDA, Cost base to consolidate the company’s position as a
excluding non-recurring items.
Equity and loan 100 n/a leading independent oil and gas company in the
Valuation (cost basis) North Sea.
Equity and loan 101 n/a 3i Group plc’s investment March March
Equity interest 7% n/a 2008 2007
£m £m
Cost
For further information on 3i’s portfolio Valuation (quoted basis)
investments by value, please go to pages 108
and 109

DNA Oy Clínica Baviera Hayley Conference Centres

New investment Realisation Realisation
Location: Nordic Location: Spain Location: UK
Sector: Communications Sector: Healthcare Sector: Leisure
Website: www.dnaoy.fi Website: www.clinicabaviera.com Website: www.hayley-conf.co.uk
3i invested €142m for a 13% stake in DNA Oy 3i acquired a 32% interest in Clínica Baviera in May In September 2005, 3i acquired a 46% stake in
(formerly known as Finnet Oy) in May 2007, 2005 for €40m in order to enable both the organic Hayley for £40m to support the company’s plans for
to support the expansion of DNA’s product offerings. and acquisitive growth of the business. UK and international expansion.
Nature of business Nature of business Nature of business
DNA is an integrated telecommunications and cable At the time of realisation, Clínica Baviera was the At the time of realisation, Hayley was the leading
TV network and services operator, operating in leading provider of refractive surgery and other provider of premium dedicated conference venues in
Finland, providing a full range of services. ophthalmic treatments in Spain. the UK.
Results to 31 December 2007 Results to 30 November 2006 Results to 31 March 2006
(Pro forma including businesses acquired in 2007) (unaudited) (audited) (audited)
€m €m £m
Sales 639 Sales 59 Sales 42
EBITDA 152 EBITDA 21 EBITDA 14
Net assets 299 Net assets 19 Net assets 72
Current trading Developments since 3i invested Developments since 3i invested

Currently the fastest growing mobile operator in 3i utilised its considerable Healthcare sector At sale, the company had eight UK sites and one
Finland, DNA is building on its significant asset base knowledge and experience to assist in the under construction in France. Hayley was voted
and well-established reputation. The integration of development of Clínica Baviera. During the period of number 70 in the Sunday Times 100 Best
the fixed-line businesses is being implemented as 3i’s investment, annual turnover rose from €43m to Companies to Work For in 2006. Employee numbers
planned. €59m, new clinics were opened and Clínica Londres rose from 754 in September 2005 to 833 in May
was successfully acquired. Employment grew from 2007. The reputation of the business as a high-
273 staff in late 2005 to 440 staff in early 2007. quality service provider led to the successful sale of
The focus since 3i invested has been on the
In April 2007, the company achieved a successful the company to Principal Hotels in May 2007.
integration of the local fixed-line networks and
IPO on the Madrid Stock Exchange, generating This generated proceeds for 3i of £72m which, in
operations. This will enable DNA to provide
proceeds for 3i of €96m. This represents a cash addition to £46m re-gearing proceeds in November
broadband, voice telephony, cable television and IT
multiple of 2.6 times and an IRR of 62%. 2006, represents a cash multiple of 2.9 times and
services in addition to its current mobile offerings.
an IRR of 120%.
DNA’s market position has strengthened and 3i Group plc’s return on investment March March
2008 2007
the company now has a strong market position in £m £m
3i Group plc’s return on investment March March
2008 2007
wireless broadband provision.
Cost £m £m
3i Group plc’s investment March March Equity and loan n/a 27 Cost
2008 2007
£m £m Realised value Equity and loan n/a 1
Cost Equity and loan 63 0 Realised value
Equity 97 n/a Unrealised value Equity and loan 72 46
Valuation (cost basis) Equity and loan n/a 62 Unrealised value
Equity 113 n/a Equity interest 0% 32% Equity and loan n/a 66
Equity interest 13% n/a Income in the year 0 3 Equity interest 0% 46%
Income in the year 0 n/a Income in the year 0 2

Business review Infrastructure
“The progress of 3i Infrastructure Limited, the launch of our Indian infrastructure fund
and the development of our team and market position have been good indicators of
progress. The outlook for infrastructure remains positive.”
Returns from Infrastructure (£m) Business model

year to 31 March 2008 2007 3i generates a blended return through its own
Realised profits over value on the disposal of investments 6 (15) balance sheet investment in infrastructure
assets and through advisory, management
Unrealised profits on the revaluation of investments 43 3 and performance fees generated from
Portfolio income 18 27 3i Infrastructure Limited and the 3i India
Gross portfolio return 67 15 Infrastructure Fund. The assets under
management table shows the composition of
Fees receivable from external funds 18 –
assets advised and under management. At this
early phase of development, fees receivable
Assets under management (£m) from external funds of £18 million (2007: £nil)
as at 31 March 2008 2007 are already making a good contribution to the
Own balance sheet 501 469 Group return.
Managed funds 348 – 3i defines infrastructure investments as
investments in asset-intensive businesses which
Advised funds 364 385*
provide essential services such as transport,
1,213 854 utilities and social infrastructure under long-term
*3i Infrastructure Limited was launched in March 2007. The value of external funds was based on the share price at contracts. These include a range of asset
31 March 2007. The Group now uses the latest published net asset value rather than the market price to measure maturities, from mature, typically high-yielding
external assets under management. assets to early-stage development projects,
which would generally provide a lower yield, but
higher potential for capital growth. This range of
maturities is intended to generate returns
through a combination of capital growth and
income yield.
The team comprises 23 investment
professionals operating from London, New York,
Frankfurt and Mumbai, mirroring the geographic
focus of investment in the UK, the US,
continental Europe and India.
3i Infrastructure Limited
3i holds a 46.2% investment in 3i Infrastructure
Limited, which was listed on the London Stock
Exchange in March 2007 and is now a
FTSE 250 company. 3i Group plc, through
3i Investments plc, a wholly-owned subsidiary,
acts as Investment Adviser to 3i Infrastructure
Limited and in return receives an advisory fee
of 1.5% of invested capital and an annual
performance fee of 20% of the growth in net
asset value, before distributions, over an 8%
hurdle, calculated each year.

3i Infrastructure Limited is a long-term investor Strategy Investment and realisations

with a global investment mandate to focus on The Infrastructure team, which advises As the Infrastructure business line’s investment
three key sub-sectors: transport; utilities; and 3i Infrastructure Limited and manages the is mainly made through 3i Infrastructure Limited
social infrastructure. In addition to its direct 3i India Infrastructure Fund, focuses on and the 3i India Infrastructure Fund, investment
investments in infrastructure assets, during delivering the investment strategy of its advised by the Group in the year was £38 million
the year, 3i Infrastructure Limited committed and managed funds and aims to use 3i’s (2007: £380 million). Investment in 2007
to invest US$250 million in the 3i India network, track record and brand to build a first- was substantially higher, due to the Group’s
Infrastructure Fund. class, global infrastructure investment business £325 million initial investment in
which is highly respected in the relevant local 3i Infrastructure Limited, comprising a transfer
3i Infrastructure Limited has its own
markets. of seed assets (£234 million) and cash.
dedicated investor relations website
The largest investment during the current
(www.3i-infrastructure.com). Results for the The team also seeks to be socially conscious
financial year (£36 million) was attributable to
period from incorporation on 16 January 2007 in all of its activities and conforms to 3i’s
drawdowns by the 3i India Infrastructure Fund
to 31 March 2008 are due to be published by social and environmental policies, procedures
to invest in Adani Power Private Limited, which is
3i Infrastructure Limited in June 2008. and standards.
developing a portfolio of power plants across
India, and Soma Enterprise Limited, an
3i India Infrastructure Fund Market
infrastructure construction, operation and
3i’s growing presence and reputation in India, The market for infrastructure investment
management firm.
and in the infrastructure sector, created the remains attractive. We continue to see
opportunity for a strategic partnership to be significant opportunities for investment, in Realisation proceeds of £57 million include the
signed with the India Infrastructure Finance particular in Europe, India and North America. partial divestment of AWG (£25 million) and
Company Limited in April 2007. With this in The asset class has proven to be attractive in the sale of the Alma Mater Fund, active in the
place, 3i set out to raise a US$1.0 billion fund, current markets, due to its defensive construction and management of university
with the mandate to invest in projects across characteristics. accommodation, to 3i Infrastructure Limited
the power, ports, airports and road sub-sectors (£25 million).
in India. Gross portfolio return and fee income
The Infrastructure portfolio generated a gross Portfolio
Subsequent to the year end, on 16 April,
portfolio return of £67 million, 14% on opening The total value of 3i’s direct Infrastructure
3i announced a final closing of the 3i India
portfolio value during the period (2007: portfolio is £501 million. The investment in
Infrastructure Fund at US$1.2 billion,
£15 million, 16%). Unrealised profits of 3i Infrastructure Limited was valued at
exceeding its US$1.0 billion target. 3i and
£43 million (2007: £3 million) and portfolio £363 million. Four additional investments are
3i Infrastructure Limited each committed
income of £18 million (2007: £27 million) were held by the Group, including a £98 million
US$250 million to this fund during the year.
the key drivers of this return. An increase in the investment in AWG.
3i will receive a management fee of 2.0%
value of 3i’s holding in 3i Infrastructure Limited
based on investment committed to the fund, All investments made since the launch of the
contributed £29 million to this, as the value
with the exception of 3i Infrastructure Limited, Infrastructure business in 2006 are classified
of the shares rose from 100.75p on 31 March
which pays advisory fees to 3i. as healthy.
2007 to 110p at 31 March 2008 and at
During the year, the fund made two investments the same date the warrants issued at
Michael Queen Managing Partner
in Adani Power Private Limited (US$227 million) 3i Infrastructure Limited’s IPO had a price of
and Soma Enterprise Limited (US$101 million). 17p (31 March 2007: 19p). Portfolio income
mainly comprises dividend income from
3i Infrastructure Limited and from Anglian
Water Group Limited (“AWG”), in which
3i retains a direct holding.
Fee income included £12 million from
advising and providing other services to
3i Infrastructure Limited and £5 million from
managing the 3i India Infrastructure Fund.

Business review Quoted Private Equity (“QPE”)
“Our investment strategy has been cautious in the early phase of our development.
However, market conditions have increased our opportunities and as markets stabilise
3i Quoted Private Equity Limited is well placed to invest.”
Returns from QPE (£m) Business model

year to 31 March 2008 2007 3i’s Quoted Private Equity (“QPE”) business line
Realised profits over value on the disposal of investments – – brings capital and value creation techniques to
public companies without taking them private.
Unrealised (losses)/profits on the revaluation of investments (42) 6 Investments are made by 3i Quoted Private
Portfolio income – – Equity Limited, a company which listed on the
Gross portfolio return (42) 6 London Stock Exchange in June 2007 at a
capitalisation of £400 million. 3i Quoted Private
Fees receivable from external funds 1 –
Equity Limited has its own dedicated investor
relations website (www.3iqpe.com) and is
Assets under management (£m) scheduled to announce its annual results for the
as at 31 March 2008 2007 year to 31 March 2008 later in May 2008.
Own balance sheet 142 20 3i acts as Investment Adviser to 3i Quoted
Third-party funds 269 – Private Equity Limited. The QPE team comprises
an experienced team of 11 investment
411 20
professionals, one of whom will normally join the
board of the portfolio company. The team
identifies investments in the small and mid-cap
market across continental Europe and the UK,
with a view to 3i Quoted Private Equity Limited
holding these investments for a period of years.
These are typically companies which are under-
researched, suffer from low liquidity in their
shares and where there is an opportunity
to unlock and enable significant strategic
development. 3i Quoted Private Equity Limited’s
approach is to leverage 3i’s international network
and resources and apply a private equity
mindset.

3i’s returns are generated through a combination Progress to date

of capital appreciation from its 45% holding in 3i Quoted Private Equity Limited was listed
3i Quoted Private Equity Limited and advisory on the London Stock Exchange in June 2007
and performance fees received from the listed with a market capitalisation of £400 million.
fund for acting as an investment adviser. The Group made a £181 million investment in
this company to acquire a 45% holding in the
An advisory fee of 2% is payable to 3i Group
company. On listing, 3i Group plc also
based on the gross investment value of
transferred two investments into 3i Quoted
3i Quoted Private Equity Limited less cash
Private Equity Limited, generating proceeds of
uninvested. A performance fee becomes payable
£18 million.
when the net asset value per share at the end of
the relevant performance period exceeds an 8% Since listing, 3i Quoted Private Equity
performance trigger, compounding annually, Limited has announced two new investments.
with the performance fee payable being 20% of On 26 February 2008, it announced that it had
the entire growth in net asset value. made a £30 million investment in Jelf Group plc,
an insurance broker and wealth adviser based in
Strategy the UK employing over 700 staff with more
The advisory strategy is to identify a limited than 20 offices across England and Wales.
number of investments in the UK and On 13 March, it announced a US$53 million
continental Europe through 3i’s international purchase of shares in Phibro Animal Health
network and sector teams. Detailed value Corporation, a diversified global manufacturer
creation plans are formulated and agreed in and marketer of a broad range of animal health
partnership with management for each situation. and nutrition products. Subsequent to the year
end, on 4 April, 3i Quoted Private Equity Limited
Elements of the value creation plan include
announced it had increased this investment to
providing capital to accelerate managements’
US$93 million, following Phibro’s listing on AIM.
growth plans for their businesses; improving
governance; introducing management incentives The gross portfolio return in this initial period
to align managements’ interests with growing following 3i Quoted Private Equity Limited’s
value for shareholders; and optimising the capital listing was £(42) million. This was principally due
structure of the businesses. In summary, the to the lower share price at 31 March 2008
QPE team engages with ambitious management (79p), which accounted for £40 million of this.
teams to enhance shareholder value through During the year, an advisory fee of £1 million
strategic, operational or financial improvements was generated.
to the businesses in which 3i Quoted Private
The net asset value of 3i Quoted Private
Equity Limited invests.
Equity Limited at 31 March 2008 was
102.2p per share (unaudited), a 4.2%
Market
increase over proceeds raised at flotation
The turbulence in capital markets has
(less initial expenses) of 98.1p per share.
exacerbated the challenges for smaller public
companies throughout Europe, potentially In summary, this has been a year of considerable
increasing the size of the market opportunity progress for QPE. Our team is now in place, 3i
for 3i Quoted Private Equity Limited since its Quoted Private Equity Limited has been launched
listing. 3i Quoted Private Equity Limited has now and its first investments have been made. I look
invested approximately 26% of the initial capital forward to reporting more progress.
raised and has ample capital to invest as market
opportunities arise. Bruce Carnegie-Brown Managing Partner

Business review Venture Capital
“The transition from early to late-stage investing is now substantially complete.”
The transition from early to late-stage investing,
(2)% £(17)m which was driven by the objective to maximise

shareholder returns and reduce the volatility
inherent with an early-stage investment
activity, has now been substantially completed.
Long-term performance This increased focus on later stage, where
New investments made in the financial years 3i’s competitive advantage and international
to 31 March Total Return Value IRR to IRR to network has more resonance with management
investment flow remaining 31 March 31 March
Vintage year £m £m £m 2008 2007 teams, also improves the productivity of
our teams.
2008 59 0 72 n/a n/a
During the year, new early-stage investment
2007 167 8 139 (11)% (2)% accounted for just 4% of total investment
(2007: 15%). As the proportion of late-stage
2006 103 12 99 4% 5% technology and healthcare investing has grown
2005 93 21 84 4% (1)% and the size of transactions has increased, the
level of overlap between the Venture Capital
2004 141 91 89 10% 14% and Growth Capital investing activities became
a more regular occurrence. As such, it became
2003 122 31 34 (17)% (19)% evident that the Venture Capital investment
2002 339 141 86 (8)% (12)% activities could benefit, and provide 3i greater
market clarity, by being integrated in our global
Growth Capital business.
Returns from Venture Capital (£m) As a consequence, the decision was taken
year to 31 March 2008 2007 during the year to form new Technology and
Realised profits over value on the disposal of investments 65 12 Healthcare sector teams within the Growth
Unrealised (losses) on the revaluation of investments (88) (61) Capital business line, through which all late-stage
technology and healthcare investments would
Portfolio income 6 3 be made from 1 April 2008. This team has been
Gross portfolio return (17) (46) drawn predominantly from the Venture Capital
Fees receivable from external funds – 1 business line.
All investments currently managed by the
Venture Capital team will be managed by a
Business activity – investment and divestment (£m) focused team, the “Venture Portfolio team”,
who are incentivised through the value that they
Realisation proceeds 170 187 derive from this portfolio. These investments
Investment (156) (200) had a combined value at 31 March 2008 of
Net divestment/(investment) 14 (13) £738 million. The investment performance
and activity of this portfolio will continue to
be reported separately and, from 1 April 2008,
Gross portfolio return by year (%) identified as the Venture Portfolio. In optimising
year to 31 March the return from this portfolio, 3i is committed to
04 10 making further investments in these companies
05 11 as appropriate.
06 17
07 (6)
08 (2)

Market Investment and realisations

In 2007, both the US and European Venture Total realisation proceeds in the period
Capital markets displayed an increasing focus on were £170 million (2007: £187 million).
sizeable late-stage financings. According to The largest realisations in the year were German
VentureSource, in Europe, late-stage accounted pharmaceuticals business Doc Morris, which
for more than 45% of the overall Venture Capital generated a realised profit of £33 million
investment, the highest amount allocated to and the sale of Bluelithium to Yahoo inc., which
later stage since 2001. Investment in early and produced realised profits of £10 million.
late-stage IT companies remained a key driver of
There were 35 full realisations in the year
overall Venture Capital investment. IT remains a
(2007: 35) which principally came from selling
key driver of change in media, financial services
older-vintage assets and an initiative in the
and consumer sectors. While European
early part of the year to reduce the size of the
healthcare venture capital investment in 2007
quoted portfolio.
decreased by 5%, in the US it grew 17%.
Investment during the year was £156 million,
According to PricewaterhouseCoopers’ 2008
of which only £6 million was invested in new
Technology M&A insights, the primary areas
early-stage technology (2007: £29 million).
for deal activity over the next 12 months are
The two largest investments were a £19 million
likely to be around continued cross-border
late-stage investment in France-based E-Travel
consolidation in software and IT services.
business FastBooking and a further late-stage
Climate change and the demand for effective
investment of £13 million in UK-based
environmentally friendly technology may also
Healthcare Brands International.
stimulate additional mergers and acquisitions
activity in 2008. The case studies on pages 26 and 27 include
our largest new investments and realisations.
Gross portfolio return
Portfolio health
The Venture Capital portfolio incurred a marginal
Portfolio health was slightly worse in the year,
negative gross portfolio return of (2)% over the
with 65% (2007: 69%) of the portfolio by cost
opening portfolio value (2007: (6)%).
classified as healthy, compared to the rolling
Realised profits of £65 million were the main three year average of 67% (2007: 67%).
contributor to gross portfolio return in the year.
An unrealised loss of £(88) million in the period Long-term performance
was primarily driven by provisions taken on the The longer life cycle of these investments and
portfolio of £79 million and a loss of £27 million the tendency for the major element of returns
on the quoted portfolio. to be generated on exit means that it is too early
to comment on the performance of the most
recent vintages. However, as the drive from
2004 to increase the proportion of late-stage
investment in each vintage has taken effect, the
vintage IRR performance has shown an
encouraging trend.
Jo Taylor Managing Partner

Business review Venture Capital continued
Case studies
Fastbooking Healthcare Brands International

New investment New investment (further)
Location: France Location: UK
Sector: Internet Sector: Healthcare
Website: www.fastbooking.org Website: www.healthcarebrandsinternational.com
In October 2007, 3i invested a27m in a late-stage 3i first invested £3m in Healthcare Brands
investment to support Fastbooking in growing the International (“HBI”) alongside other investors as
business outside of France. part of a second-round funding in July 2006.
In December 2007, 3i invested a further £13m into
Nature of business
HBI to support the company’s growth.
Fastbooking is a leading provider of advanced
internet booking systems and marketing services for Nature of business
the hospitality industry, operating in Europe, Asia and HBI acquires, develops, and invests in differentiated
North America. healthcare products, primarily in the over-the-
counter medicine market.
(unaudited)
$m Results* 2007
Sales 17 Sales n/a

EBITDA 3 EBITDA n/a
Net assets n/a Net assets n/a
Current trading Current trading

Established in 2000, Fastbooking has over 3,500 HBI has been making acquisitions in products and
client hotels world-wide, with over two million hotel brands in line with its strategy and is expecting
room nights booked through its platform during trading to be in line with budget forecasts for 2007.
2007. The company has developed a global range of Developments since 3i invested
solutions designed to help hotels world-wide, HBI’s first brand, Sambucol, is trading well and is now
especially 4 star and above, grow their internet sales available selectively across Europe and North
and efficiently manage their electronic distribution America. In December 2007, HBI acquired
strategy. Scandinavian healthcare company, Antula, with the
Developments since 3i invested support of 3i’s investment. Antula is a significant
3i introduced Amal Amar (former CEO of over-the-counter healthcare company in the
These case studies consist of the two largest investments Scandinavian market.
SeLoger.com) to the board and he has been
and the two largest realisations (by value) completed in the
year. We have also included the next largest investment in appointed to act as Chairman of Fastbooking. 3i Group plc’s investment March March
the portfolio. 3i also introduced Guillaume de Marcillac (former 2008 2007
CFO of Expedia Corporate Travel) as the new CFO of £m £m
For new investments, cost and valuation may differ due to Fastbooking. Cost
the application of different exchange rates.
Equity 16 3
Where relevant, EBITDA represents operational EBITDA, 2008 2007 Valuation (cost basis)
excluding non recurring items. £m £m
Equity 16 3
Cost Equity interest 17% 17%
Equity 19 n/a Income in the year 0 0
Valuation (cost basis)
*No published results are available for HBI.
Equity 21 n/a
Equity interest 47% n/a
For further information on 3i’s portfolio

investments by value, please go to
pages 108 and 109

Demand Media CSR plc DocMorris.com

Investment Realisation Realisation
Location: US Location: UK Location: Germany
Sector: Internet Sector: Technology Sector: Technology
Website: www.demandmedia.com Website: www.csr.com Website: www.docmorris.de
3i invested $40m in September 2006 to enable 3i invested £7.7m in Cambridge Silicon Radio Ltd 3i initially invested a1m in DocMorris.com when the
Demand Media to invest in future growth initiatives (“CSR”) over several rounds of funding between company was founded in 1999 and has invested a
and acquisitions. A further $20m was invested in 1999 and 2002, after the company was formed as a total of a13m over the lifetime of the investment.
September 2007. spin-out from Cambridge Consultants Ltd.
Nature of business
Nature of business Nature of business DocMorris.com is a mail order company for
Demand Media is a next-generation media platform CSR is a leading manufacturer of single-chip pharmaceuticals, acting as a fully-authorised
company with significant media properties and one Bluetooth wireless devices. pharmacy in accordance with Dutch regulations.
of the largest domain portfolios.
Results to 31 December 2007 Results to 31 December 2006
Results to 31 December 2006 (audited) (audited)
$m €m
(unaudited)
$m Sales 849 Sales 172
Sales 79 EBITDA 185 EBITDA *
EBITDA 19 Net assets 509 Net assets 26
Net assets 233
Developments since 3i invested Developments since 3i invested
Current trading 3i assisted in the successful development of CSR From its start up in 1999, DocMorris.com had
Demand Media has continued to grow both revenue from its founding through to its position as a market 850,000 customers, employed 330 staff and was
and EBITDA. The company has closely tracked its leader at the point of divestment. This assistance was generating annual revenues of a172m at the point of
plan, while growing the business both organically and provided through recruitment of several members of 3i’s divestment. The strategic shift to sell
through acquisitions. the board, backing further funding rounds and pharmaceutical products under the DocMorris brand
assisting with business negotiations with companies and to set up a franchise system for stationary
such as Intel Capital and Sony. CSR floated in 2004 pharmacies attracted interest from potential buyers.
Since 3i invested, Demand Media has released its
and 3i supported the IPO and fund raising on the In June 2007, DocMorris was sold to Celesio,
new media platform. In addition, it has successfully
London Stock Exchange. Europe’s largest pharmaceutical distributor.
closed and integrated a number of acquisitions. In
This generated over a60m for 3i, which represents
June 2007, Charles Hilliard, former President and Over the course of 3i’s investment, CSR returned a
a cash multiple of 5.3 times and an IRR of 59%.
CFO of United Online, was recruited to the position total of £75m, representing a 9.8 times money
of CFO at Demand. multiple and an IRR of 57%. 3i Group plc’s return on investment March March
2008 2007
3i Group plc’s investment March March 3i Group plc’s return on investment March March £m £m
2008 2007 2008 2007
£m £m £m £m
Cost
Cost Cost Equity and loan n/a 8
Equity 31 21 Equity n/a 1 Realised value
Valuation (further/advance) Realised value Equity and loan * n/a
Equity 41 20 Equity 20 7 Unrealised value
Equity interest * 8% Unrealised value Equity and loan n/a 8
Income in the year 0 0 Equity n/a 16 Equity interest * *
Equity interest 0% 13% Income in the year 0 0
*Equity interest cannot be disclosed for legal or
commercial reasons. Income in the year 0 0 *EBITDA, realised value and equity interest for the
company cannot be disclosed for legal reasons.

Business review Financial review
This review provides detailed information on our financial
performance for the year and the financial position at the
end of the year.
Investment activity
Table 1: Investment by business line and geography (£m)
for the year to 31 March
Continental Europe UK Asia US Rest of World Total
2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007
Buyouts 415 326 371 169 – – – – 2 3 788 498
Growth Capital 256 212 357 11 132 258 243 – 2 1 990 482
Infrastructure – 6 2 374 36 – – – – – 38 380
QPE – – 182 14 – – – – – – 182 14
SMI – 1 6 1 – – – – – – 6 2
Venture Capital 36 15 54 81 3 1 60 92 3 11 156 200
Total 707 560 972 650 171 259 303 92 7 15 2,160 1,576
Investment As can be seen from table 1, Growth Capital After significant increases in 2006 and 2007,
Consistent with the strategy to grow assets accounted for 46% of new investment and investment in Asia was lower at £171 million
under management and to extend our Buyouts accounted for 36% of new investment (2007: £259 million). Investment in India
international reach directly and through investing in the year. Although remaining firmly in the was broadly at the same level at £95 million
in funds, investment in the year grew by 37% mid market, the average size of new buyout (2007: £99 million) and included the first
to £2,160 million (2007: £1,576 million). investments increased to £55 million (2007: drawdowns for 3i India Infrastructure Fund for
This included 3i’s £181 million investment in £41 million). a total of £36 million. There was continued
3i Quoted Private Equity Limited, as well as growth in China at £53 million (2007:
The UK and continental Europe accounted for
the Group’s £36 million initial investment in £39 million) but investment in South East Asia
78% (2007: 77%) of investment in the period.
the 3i India Infrastructure Fund. fell compared to the previous year, which
Investment in the US increased to £303 million
included the £105 million ACR investment.
The key driver of this increase was a rise in (2007: £92 million) as the New York
the average size of investment. Excluding the Growth Capital team became established. In addition to the amount invested by 3i directly,
3i Quoted Private Equity Limited and 3i India As a consequence, US investment accounted a further £1,035 million (2007: £290 million)
Infrastructure Fund investments, the average for 14% of total Group investment during the was invested on behalf of funds advised or
size grew to £37 million (2007: £26 million). year (2007: 6%). managed by 3i.
The number of new investments in the period
was lower at 47 (2007: 62), principally because
of a decrease in the number of early-stage
technology investments (2008: 2, 2007: 14).

Directors’ report Directors’ remuneration report Auditors’ report Financial statements financial information Information for shareholders
Table 2: Realisation proceeds by business line and geography (£m)

Continental Europe UK Asia US Rest of World Total
2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007
Buyouts 471 617 387 724 – – – – – – 858 1,341
Growth Capital 320 435 166 203 17 53 – – – – 503 691
Infrastructure 6 – 51 5 – – – – – – 57 5
QPE – – 18 – – – – – – – 18 –
SMI 27 46 109 168 – – – – – – 136 214
Venture Capital 70 61 52 69 8 1 40 56 – – 170 187
Total 894 1,159 783 1,169 25 54 40 56 – – 1,742 2,438
Realisations Despite the more difficult financing The SMI portfolio, a portfolio of older, smaller
As anticipated, after achieving realisation environment, the Group has continued to find minority investments, generated proceeds
proceeds of over £2 billion in each of the buyers for good-quality investments. Third and of £136 million (2007: £214 million) from
previous two years, the level of realisations fourth quarter realisations of £429 million and 201 investments. In March 2004, 3i
in the year to 31 March 2008, although £269 million respectively included the largest announced its strategy to accelerate the
still strong, was lower at £1,742 million realisation for the year, Coor Service realisation of this portfolio. Since then, the
(2007: £2,438 million). Some 28% of the Management, which generated proceeds of total number of investments in the SMI
opening portfolio value was sold (2007: 39%) £158 million and a money multiple of portfolio has been reduced from 1,079 to
during the period. This lower level was a 6.3 times the original 2004 investment. 92 and £816 million has been realised.
consequence of a less mature opening portfolio
The nature of realisations changed from the
following the realisations of the previous two
previous year, with 24% (2007: 37%) from
years. The percentage of the portfolio less than
trade sales, and 8% (2007: 8%) through
one year old at 31 March 2007 was 36%
refinancing portfolio businesses. Sales to
(2006: 26%, 2005: 17%).
financial buyers, including other private equity
Buyouts was again the largest contributor firms (sometimes called “secondaries”),
to realisations, delivering proceeds of accounted for 38% of realisations (2007:
£858 million (2007: £1,341 million) with 27%). Eight 3i portfolio companies achieved an
Growth Capital producing £503 million IPO during the year (2007: 10) and realisations
(2007: £691 million) and Venture Capital from these and other quoted portfolio
generating £170 million (2007: £187 million). companies amounted to £199 million
(2007: £240 million).
UK and continental European investments
accounted for 96% of realisations, reflecting
the relative maturity of this portfolio compared
to Asia and the US.

Business review Financial review continued
Returns Table 3: Total return

Total return for the year to 31 March
Total return for the year to 31 March 2008 2008 2007
was £792 million (2007: £1,075 million) £m £m
representing 18.6% (2007: 26.8%) over Realised profits on disposal of investments 523 830
opening shareholders’ funds. Over the last five
years, the Group has generated an average Unrealised profits on revaluation of investments 291 323
total return of 20.4%. Portfolio income 227 253
Gross portfolio return of £1,041 million (2007: Gross portfolio return 1,041 1,406
£1,406 million) represents a 23.9% (2007: Fees receivable from external funds 60 37
34.0%) return over opening portfolio value. Carried interest receivable 60 81
At 28% (2007: 23%), a higher percentage of Carried interest and performance fees payable (152) (142)
this return has been generated from unrealised
profits in the year, reflecting strong earnings Operating expenses (274) (255)
growth across the portfolio. First-time uplifts Net portfolio return 735 1,127
of £154 million (2007: £142 million) included Net interest payable (16) (9)
a £68 million contribution from the Asian Movements in the fair value of derivatives 158 (29)
portfolio. Other significant factors included the
valuation of Giochi Preziosi on an imminent sales Exchange movements (44) (31)
basis and quoted value movements following Other (5) (2)
IPOs from the Growth Capital and Buyouts Profit after tax 828 1,056
portfolios. Reserve movements (pension, property and currency translation) (36) 19
Net carried interest payable increased to Total recognised income and expense (“Total return”) 792 1,075
£92 million (2007: £61 million) due to higher
levels of carried interest participation, arising
from a greater contribution to this year’s return Total return by year (%)
from more recent vintages. Total return was for the year to 31 March
increased by a £158 million gain from the 04 19.0
fair value of derivatives, of which the largest 05 15.2
contribution, £162 million (2007:
06 22.5
£(62) million), was from movements in
the fair value of the equity element of the 07 26.8
Group’s 2008 convertible bonds related mainly 08 18.6
to share price movements.
Total return comprises the total recognised
income and expense stated as a percentage of
opening shareholders’ funds.

Table 4: Unrealised profits/(losses) on revaluation of investments Uplift to imminent sale Investments valued on
for the year to 31 March an imminent sale basis totalled £83 million
(2007: £139 million). The largest of these was
2008 2007
£m £m
Giochi Preziosi (£75 million).
Earnings multiples (162) 5 Quoted portfolio Increased volatility has seen
significant value movements in the quoted
Earnings growth 307 142
portfolio, although the net impact has been
First-time uplifts 154 142 mitigated by the effect of new IPOs and the
Provisions (188) (71) appreciation of the share price of 3i
Up rounds 7 15 Infrastructure Limited. The overall effect has
been a £64 million increase in the value of the
Uplift to imminent sale 83 139
quoted portfolio. Significant listings during the
Other movements on unquoted investments 26 (12) year included Telecity (closing value:
Quoted portfolio 64 (37) £83 million), Dockwise (£43 million),
Total 291 323 Venture Production (£51 million) and Mundra
Ports (£53 million).
Realised profits portfolio in Asia, Europe and the US. As a guide
Realised profits of £523 million (2007: to how multiples have moved, the weighted
£830 million) were the largest contributor to average PE multiple has reduced by 7% from
gross portfolio return in the year, accounting for 11.6 to 10.8, and the weighted average EBITDA
50% (2007: 59%) of the total. The average multiple reduced by 15% from 6.8 to 5.8 year
uplift over opening value for these realisations on year. Approximately three quarters of the
was 43% (2007: 52%). Despite the level of companies valued on an earnings basis are
uplift being below last year’s levels, the level is valued using an EBITDA multiple.
higher compared to historic levels and reflects
Earnings growth and first-time uplifts Earnings
significant uplifts generated during the first
increases within the portfolio contributed
half (48%).
£307 million (2007: £142 million) to value
Unrealised value movement growth and a further £154 million (2007:
A detailed explanation of each of the different £142 million) of “first-time uplift” on companies
categories of unrealised value movement is valued on an earnings basis for the first time.
contained within the Portfolio valuation section Earnings have proved resilient despite the global
on pages 106 and 107. decline in economic conditions.
Earnings multiples The deterioration of Provisions Provisions during the year of
international equity markets in the year has led £188 million include impairments to loans
to a £162 million reduction (2007: £5 million and are ahead of last year’s levels (2007:
increase) in valuations, due to lower multiples £71 million) following the write-down of
applied to portfolio earnings. At the year end, several Venture Capital investments, totalling
28% (2007: 33%) of the Group’s portfolio was £79 million. Provisions on Buyouts investments
valued on an earnings basis. Large differentials totalled £74 million.
exist between multiples used to value the
For further information on Portfolio valuation

please go to page 106

Table 5: Portfolio income Portfolio income

year to 31 March Portfolio income for the year comprised dividend
income of £56 million (2007: £81 million),
2008 2007
£m £m interest receivable from loans of £149 million
(2007: £158 million) and portfolio fees net
Dividends 56 81
of deal-related costs of £22 million (2007:
Income from loans and receivables 149 158 £14 million). Portfolio income at £227 million
Fees receivable 22 14 (2007: £253 million) is lower, reflecting the
Portfolio income 227 253 high level of dividend income generated during
the previous year following a significant
Portfolio income/opening portfolio (“income yield”) 5.2% 6.1% distribution from infrastructure fund I2, as well
as a fall in interest income following the sale of
Table 6: Gross portfolio return by business line a number of high-yielding buyouts during the
for the year to 31 March first half of the year.
Return as a % of The portfolio generated a yield of 5.2% (2007:
Gross portfolio return opening portfolio 6.1%) of opening portfolio value during the year.
2008 2007 2008 2007 Increased investment levels within both Buyouts
£m £m % % and Growth Capital in the second half resulted
Buyouts 731 788 57 54 in second-half income being £125 million,
compared with £102 million in the first six
Growth Capital 302 569 21 48 months.
Infrastructure 67 15 14 16
QPE (42) 6 n/a n/a Cumulative gross portfolio return for the year
SMI – 74 – 13 of £1,041 million (2007: £1,406 million)
Venture Capital (17) (46) (2) (6) represented a return of 24% (2007: 34%) over
Gross portfolio return 1,041 1,406 24 34 the opening portfolio value.
Buyouts generated a return of £731 million
(2007: £788 million), representing a 57%
Gross portfolio return by year (%) return over the opening portfolio value (2007:
54%). This excellent performance is primarily
04 19.0 driven by the strong levels of realised profits
05 16.7 generated during the year, but also by good
06 24.4 portfolio performance.
07 34.0
08 23.9
Gross portfolio return comprises the income
and capital return (both realised and unrealised
value movement) generated from the portfolio
and is expressed as a percentage of opening
portfolio value.

Growth Capital generated a gross portfolio Fees receivable from external funds Carried interest receivable
return in line with its objective, but below last An important element of our strategy is to grow Carried interest aligns the incentivisation of 3i’s
year’s exceptional level. The Growth Capital the assets we manage or advise on behalf of investment staff and the management teams
gross portfolio return of £302 million (2007: others and to grow the level of fees 3i receives in 3i’s portfolio with the interests of 3i’s
£569 million), a return of 21% (2007: 48%), for advising or managing these funds. These fees shareholders and those of fund investors.
reflected lower realisations from a less mature have grown from £35 million in the year to An explanation of carried interest is provided
portfolio. 44% of the Growth Capital portfolio 31 March 2004, when Eurofund IV was raised, on pages 120 to 121 together with a
by value is valued on a cost basis. The most to £60 million in the year to 31 March 2008. description of our accounting methodology.
significant element of this return was unrealised
In the year, the Group received or accrued Carried interest receivable, which comes
profits of £160 million (2007: £269 million) as
fee income from its managed Buyout funds, principally from the Buyouts business, was
a number of first-time uplifts were generated
3i Infrastructure Limited, the 3i India £60 million (2007: £81 million). This was
from the Indian and Chinese portfolios, including
Infrastructure Fund, and 3i Quoted Private driven by the high level of realised profits
Navayuga and China Digitone.
Equity Limited. Fees received from the managed generated from the sale of Eurofund IV assets
Infrastructure generated a gross portfolio return funds were £40 million (2007: £37 million) of during the year, including Care Principles, HSS
of £67 million (2007: £15 million) including which £26 million was from Eurofund V. and Coor Service Management.
£29 million from the increased value in the share
Total advisory fees of £9 million (2007: nil) Carried interest and performance
price of 3i Infrastructure Limited, £6 million of
comprises £8 million (2007: nil) from 3i fees payable
dividend income from 3i Infrastructure Limited
Infrastructure Limited and £1 million (2007: nil) Carried interest payable amounted to
and £5 million of dividend income from the
from 3i Quoted Private Equity Limited. These £149 million (2007: £142 million). This was
Group’s direct investment in AWG.
fees are payable based on the gross investment based on the level of realised profits generated
The £42 million negative return for QPE was value of the advisory companies. during the year and the closing value of portfolio
driven by the adverse movement in the share assets that remain unrealised. The increase in the
This year we are recognising performance
price of 3i Quoted Private Equity Limited since year is a consequence of the sale of investments
fees received from 3i Infrastructure Limited
IPO. from more recent vintages which attract a
(£3 million). These performance fees, which
higher rate of carry.
SMI generated a gross portfolio return of are based on the growth in NAV per share per
£nil million (2007: £74 million). The lower gross annum, are subject to an 8% hurdle. When the Performance fees are payable to investment
portfolio return in the year was driven by lower performance hurdle is met, 20% of the net staff on both 3i Infrastructure Limited and 3i
levels of realised profits, as well as a fall in the asset growth above the 8% hurdle is receivable Quoted Private Equity Limited. These totalled
multiples used to value the portfolio. by 3i. The amount accrued is based on 3i £3 million in the year (2007: £nil) and relate to
Infrastructure Limited’s most recent publicly 3i Infrastructure Limited.
Venture Capital delivered a small loss of
available information.
£(17) million (2007: £(46) million) or (2)%
(2007: (6)%) over the opening portfolio value. Page 36 contains a detailed schedule of the
funds advised and managed by 3i.

Table 7: Cost efficiency

2008 2007
£m £m
Operating expenses 274 255
Fees receivable from external funds* (57) (37)
Net operating expenses 217 218
Net operating expenses/opening portfolio (“cost efficiency”) 5.0% 5.3%
*Net of £3 million performance fee from 3i Infrastructure Limited in 2008.
Operating expenses With growth in assets under management

In March 2007, we announced the introduction of 37% in the year, including growth of 38%
of a new performance measure for cost in 3i’s direct portfolio, portfolio value has grown
efficiency: operating expenses (net of fund substantially ahead of the increase in operating
management and advisory fee income) expenses in the year. As a consequence, further
as a percentage of opening portfolio value. progress towards the mid-term cost efficiency
The Group has published a mid-term target of target is expected in the coming year.
4.5% with a long-term objective of reducing
this to 3.0%. Other movements
The most significant other movement in the year
Operating expenses for the year were
is the movement in the fair value of derivatives
£274 million (2007: £255 million). This 7.5%
of £158 million. This increase almost entirely
increase followed two years of substantially
relates to fair value movements on the equity
higher increases (2007: 20.8%, 2006: 19.2%)
element of the convertible bond. The movement
to support significant geographic and business
of this derivative is linked to movements in
line expansion. The mid-term cost efficiency
3i Group plc’s share price and to movements in
performance target stood at 5.0% for the year
the euro exchange rate. The movement in 3i’s
(2007: 5.3%).
share price from £11.36 at 31 March 2007 to
£8.30 at 31 March 2008 was the main reason
for a £162 million gain.

Portfolio and assets under management Assets under management

A key element of the Group’s strategy is to
Table 8: Assets under management increase our assets under management and
as at 31 March the fees generated from those assets. Assets
2008 2007 04 under management include 3i’s directly held
£m £m portfolio, managed unlisted funds, some of
05 which are co-investment funds and advised
3i direct portfolio 6,016 4,362
06 listed funds. Where 3i has a direct investment in
Managed funds 3,143 2,387
07 the funds that it manages or advises, this is held
Advised quoted funds 633 385 at fair value within the direct portfolio. The value
08
Total 9,792 7,134 of external funds under management is based on
3i direct portfolio the value on which income is earned by the
Managed funds Group, which normally includes uninvested
Quoted funds commitments and the accounting valuation of
invested assets.
Table 9: Portfolio value by business line and vintage Assets under management grew by 37% in the
as at 31 March year to £9,792 million (2007: £7,134 million).
Pre-
This has been driven by higher investment levels
2008 2007 2006 2005 2005 2008 2007 and value growth from 3i’s direct portfolio as
£m £m £m £m £m £m £m well as the £400 million launch of 3i Quoted
Buyouts 672 543 488 138 184 2,025 1,281 Private Equity Limited fund. At 31 March 2008,
external managed funds for the 3i India
Growth Capital 1,009 536 457 124 240 2,366 1,460
Infrastructure Fund were £348 million (the
Infrastructure 40 461 – – – 501 469 US$1.2 billion final closing of this fund was
QPE 140 2 – – – 142 20 announced on 16 April 2008).
SMI – – – 1 243 244 391
Venture Capital 72 139 99 84 344 738 741
Total 1,933 1,681 1,044 347 1,011 6,016 4,362
Percentage 32% 28% 17% 6% 17%
Table 10: Portfolio value by geography

as at 31 March
2008 2007
£m £m
Continental Europe 2,573 1,894
UK 2,250 1,792
Asia 679 373
US 497 283
Rest of World 17 20
Total 6,016 4,362

Portfolio assets directly owned Table 11: 3i direct portfolio value by sector
by the Group as at 31 March
The value of 3i’s direct portfolio exceeded
2008 2007
£6 billion for the first time since flotation in £m £m
1994 and grew 38% in the year.
Business Services 819 586
The value of the Asia portfolio increased
Consumer 703 494
by 82% in the year to £679 million (2007:
£373 million) and now represents 11% of the Financial Services 415 222
total Group portfolio (2007: 9%). The first US General Industrial 1,423 970
Growth Capital investments, following the Healthcare 572 501
opening of the New York office, resulted in a
Media 455 338
value for the US portfolio of £497 million.
Oil, Gas and Power 316 175
The overall number of investments in the
Technology 670 587
portfolio has also continued to fall. As at
31 March 2008, the number of investments in 5,373 3,873
the portfolio was 487 (395 excluding SMI) Infrastructure 501 469
compared with 762 (469 excluding SMI) at the Quoted Private Equity 142 20
beginning of the year. The SMI programme
Total 6,016 4,362
resulted in 201 exits in the year and Venture
Capital accounted for a reduction of 35.
The Growth Capital portfolio has increased by Table 12: Managed and advised funds
almost £1 billion in the year to £2,366 million Invested at
(2007: £1,460 million) and now represents March
Date Fund 3i 2008
39% of the Group portfolio. The Buyouts Fund closed size commitment %
portfolio increased by 58% in the year to
£2,025 million (2007: £1,281 million), despite Eurofund III July 1999 €1,990m €995m 93%
realising over 38% of the opening portfolio Eurofund IV June 2004 €3,067m €1,941m 93%
value. The value of the Venture Capital portfolio Eurofund V November 2006 €5,000m €2,780m 40%
at £738 million is broadly in line with the value 3i Infrastructure Limited March 2007 £700m £325m 88%
at the start of the year (2007: £741 million).
3i Quoted Private Equity Limited June 2007 £400m £181m 26%
Assets managed or advised by 3i 3i India Infrastructure Fund* March 2008 $1,195m $250m 28%
These have grown by 37% (2007: 25%) in the
period, reflecting growth in investment, the *First close in October 2007 at $500 million, including a commitment of $250 million from 3i Group plc and
$250 million from 3i Infrastructure Limited.
launch of 3i Quoted Private Equity Limited,
a good performance from 3i Infrastructure
Limited and value growth from Buyout Chart 1: Investor base for non-listed Chart 2: Investor base for non-listed
co-investment funds managed by 3i. funds managed and advised by type funds managed and advised by
of investor (%) geographical location (%)
As can be seen from Charts 1 and 2, the source
of these funds is well diversified internationally 13 1 Financial institutions 35 North America
11
and by type of investor. Eurofund V has 62 1 Fund of funds Middle East
Limited Partners and the 3i India Infrastructure 4
1
Insurance companies Asia
Fund 14 Limited Partners, excluding 3i and 3i 27 Pension funds UK
Infrastructure Limited. 3i Quoted Private Equity Private individuals 28 Rest of Europe
Limited and 3i Infrastructure Limited are both Endowment
listed companies. 24
Corporate investors 20 9
18 Government agencies 8
Other
These charts have been prepared on the basis of size commitment.

Capital structure, gearing and liquidity

Table 13: Group balance sheet
as at 31 March
2008 2007
Shareholders’ funds £4,057m £4,249m
Net borrowings/(surplus) £1,638m £(1)m
Gearing 40% 0%
Diluted net asset value per ordinary share £10.77 £9.32
Capital structure Gearing

3i’s capital structure comprises shareholders’ Capital efficiency improved during the year
funds, long-term and short-term borrowings, due to net investment of £(418) million (2007:
as well as liquid treasury assets. The Board is net divestment of £862 million) and the return
committed to achieving capital efficiency and of a total of £928 million (2007: £774 million)
targets an optimum gearing ratio of debt to to shareholders. Gearing at 31 March 2008
shareholders’ funds of between 30% to 40% was 40% (2007: 0%).
through the cycle.
Liquidity
During the year, the Group returned 3i had cash and liquid deposits totalling
£808 million to shareholders through a bonus £796 million at 31 March 2008 (2007:
issue of B shares. In addition, 12 million shares £2,154 million) and undrawn committed
were purchased on market for an aggregate facilities of £286 million (2007: £491 million).
consideration of £120 million, and subsequently
Growth in diluted net asset value
cancelled.
The net asset value per ordinary share rose from
The Group’s €550 million convertible bond has a £9.32 at 31 March 2007 to £10.77 at the year
maturity date of 1 August 2008. The terms of end, an increase of £1.45. The increase before
the bond provide for a number of settlement dilution due to the £808 million return of capital
options dependent on whether a conversion and dividends paid to shareholders in the year,
notice is received from a bondholder, or was £1.94. This represents a gross return before
settlement arises on maturity. It is also the shareholder distributions of 21%.
Group’s intention to refinance its €550 million
convertible bond, which matures on 1 August
2008, through the issuance of another
convertible bond. The new circa £425 million
convertible bond will have an effective
conversion premium of 60% and will mature
in 2011.

Business review Risk management
3i has a risk management framework which provides a structured and consistent
process for identifying, assessing and responding to risks in relation to the Group’s
strategy and business objectives.
Introduction
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 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 Compliance and Risk Assurance and Audit functions provide support to the
Board in maintaining the effectiveness of risk management across the Group. The Group’s risk management processes, including a number of new
committees providing input to Group Risk Management Committee, became operational in March 2007 and formalised many existing practices.
The diagram below shows this risk management framework and outlines the key responsibilities of each committee.
Risk governance
Group Risk Management Committee
– Responsible for overall risk management process
– Monitors changes in external risk environment
– Reviews reports from Investment, Operational and Financial Risk Committees
– Reports to Audit and Compliance Committee
Investment Committee Conflicts Committee

– Takes or recommends investment decisions on individual opportunities Decides issues on conflicts arising in investment process
and other areas
Health and Safety Committee

Reviews Health and Safety arrangements and policy
Operational Risk Committee Monitors implementation and performance
– Provides input to the setting of investment policy and guidelines
– Deals with all aspects of operational risk
Corporate Responsibility Committee

Recommends socially responsible investment policy
Identifies and promotes awareness of corporate
responsibility and developments, opportunities and risks
Financial Risk Committee
– Assesses financial risk including treasury and funding risk
– Quarterly monitoring of portfolio composition Regulatory Risk Forum
Provides regulatory input to investment policy
Identifies and promotes awareness of regulatory
developments and risks

Risk categories
Risk type Brief description Further information Risk mitigation
External Risks arising from current, – Chairman’s statement – Entry into new geographical markets subject
proposed and anticipated political, – Chief Executive’s statement to extensive market research and due diligence
legal, regulatory, economic policy – Business review, – Close monitoring of regulatory and fiscal
and competitor changes Group business section developments in main markets
– Diversified investment portfolio in a range of
sectors, with different economic cycles, across
geographical markets
Strategic Risks arising from the analysis, – Business review, – Monitoring of a range of key performance
design and implementation Group business, indicators, forecasts and periodic updates
of the Group’s business model, Our strategy section of plans and underlying assumptions
and key decisions on investment – Regular monitoring by Group Risk
levels and capital allocations Management Committee
Investment Risks in respect of specific – Business review, – Investment Committee approval of all
asset investment decisions, Financial review section significant investments
the subsequent performance – Financial statements – Regular asset reviews
of an investment or exposure – Ten largest investments – Representation by a 3i investment executive
concentrations across business on the boards of investee companies
line portfolios – Portfolio is subject to periodic reviews at both the
business line and Group levels to monitor exposure
to any one sector or geography
Treasury Risks arising from (i) uncertainty – Business review, – Credit risk exposure is managed on an asset-specific
and funding in market prices and rates, Financial review section basis by individual investment managers
(ii) an inability to raise adequate – Notes to the financial statements – Board review of the Group’s financial resources
funds to meet investment every six months
needs or meet obligations as – Assets denominated in foreign currency broadly
they fall due, or (iii) inappropriate matched with borrowings in the same currency
capital structure – Type and maturity of the borrowings broadly
matched to those of the corresponding assets
Operational Risks arising from inadequate – Business review – Line management at all levels is responsible for
or failed processes, people and – Corporate identifying, assessing, controlling and reporting
systems or from external factors responsibility report operational risks
affecting these – Framework of core values, standards and controls,
a code of business conduct and delegated
authorities are in place
– Independent internal audit function carries out
periodic reviews

Business review Risk management continued
External risks Geopolitical risk 3i carries on business as an investment

Macroeconomic risks Part of the Group’s investment strategy is to trust under section 842 of the Income and
3i invests mainly in European companies and invest in new and emerging markets. The legal, Corporation Taxes Act 1988. Continuation of
continues to develop its operations in Asia regulatory and capital frameworks in these this status is subject to the Company directing
and the US. The performance of the Group’s markets may be less developed than in the other its affairs in line with the relevant requirements
underlying investment portfolio is influenced main geographical markets in which the Group of the legislation. Anticipated and actual changes
by economic growth, interest rates, currency operates. Changes and developments in all our in government policy and related tax treatment
movements and changes in commodity and markets are monitored closely to ensure that any of investment trusts are closely monitored, as
energy prices. Market conditions for initial public impact on the value of existing investments, are other changes which could affect results of
offerings, the level of mergers and acquisitions planned levels of investment or investment operations or financial position. Related risks
activity, the number of active trade or other returns are, as far as possible, anticipated, exist in other jurisdictions in which the Group
private equity buyers and the availability of understood and acted upon. This work includes operates, where there is similar close monitoring
well-priced debt finance, all have an impact, periodic legal and regulatory updates by of changes in local taxation legislation which
not only on the Group’s ability to invest but on geography, in-depth market and sector research could affect the expected tax position of
the Group’s ability to exit from its underlying and regular reviews for existing investments. the Group.
portfolio, or on the levels of profitability Entry into new geographical markets is subject
achieved on exit. to extensive market research and due diligence. Strategic risks
The Group’s strategy is based on a full analysis of
To mitigate this, 3i aims to invest over time Government policy and regulation
its operating environment. In determining the
in a range of sectors, with different economic 3i Investments plc, 3i Europe plc and
appropriate business model, market and sector
cycles, across its different business lines and 3i Nordic plc, all wholly-owned subsidiaries
evaluations are taken into account, as well as the
geographical markets. This includes expansion in of 3i Group plc, are authorised persons under
identification and assessment of external and
both the US and in Asia, which further diversifies the Financial Services and Markets Act 2000
internal risk factors. Significant unexpected
the portfolio. and regulated by the FSA in the United Kingdom.
changes or outcomes, beyond those factored
Where applicable, certain 3i subsidiaries’
into the Group’s strategy and business model,
businesses outside the United Kingdom
may occur which could have an impact on the
are regulated locally by relevant authorities.
Group’s performance or financial position.
Changes to the regulatory frameworks under
which the Group operates are closely monitored. This is addressed through the monitoring of
There are also appropriate processes and a range of key performance indicators,
procedures in place, including a dedicated Group forecasts and periodic updates of plans and
Compliance function, whose remit is to minimise underlying assumptions.
the risk of a breach of applicable regulations
which could affect the Group’s compliance costs,
its business, results of operations or financial
position.

Investment risks Investment performance monitor the exposure to larger investments.

Investment decisions The performance of the Group’s portfolio is One of the conditions set out under section 842
The Group operates in a very competitive dependent upon a range of factors. These of the Income and Corporation Taxes Act 1988
market. Changes in the number of market include, but are not limited to: (i) the quality is that no single investment can exceed 15% of
participants, the availability of funds within the of the initial investment decision described the Group’s investment portfolio to maintain the
market, the pricing of assets, or in the ability to above; (ii) the ability of the portfolio company Group’s tax status as an Investment Trust.
access deals on a proprietary basis could have to execute successfully its business strategy; This also mitigates the Group’s exposure to
a significant effect on the Group’s competitive and (iii) actual outcomes against the key investment concentration risk.
position and on the sustainability of returns. assumptions underlying the portfolio company’s
Investment valuations and exit opportunities
financial projections. Any one of these factors
The ability of the Group to source and execute The valuation of 3i’s portfolio and opportunities
could have an impact on the valuation of a
good quality investments in such markets is for realisations depend to some extent on stock
portfolio company and upon the Group’s ability
dependent upon a range of factors. The most market conditions and the buoyancy of the
to make a profitable exit from the investment
important of these include: wider mergers and acquisitions market. Changes
within the desired timeframe.
in market or macroeconomic conditions could
(i) the ability to attract and develop people with
A rigorous process is put in place for managing impact the valuation of portfolio assets and the
the requisite investment experience and cultural
the relationship with each investee company for ability to exit those investments profitably within
fit; (ii) organisation of teams whose structure
the period through to realisation. This includes the desired timeframe.
is market-adapted and whose compensation is
regular asset reviews and, in many cases, board
results-oriented; and (iii) effective application
representation by a 3i investment executive.
of collective knowledge and relationships to
each investment opportunity. Investment concentration
The Group invests across a range of economic
3i’s investment appraisal is undertaken in a
sectors and geographies. Over-exposure to a
rigorous manner. This includes approval by
particular sector or geography could increase the
the relevant business line partnerships, and
impact of adverse changes in macroeconomic
where appropriate, peer review by executives
or market conditions on the Group. An increase
from other business lines, together with 3i’s
in the average size of investments over time
international network of industry and sector
could also increase the exposure of the Group
specialists. Investments over £5 million are
to the performance of a small number of large
presented to an Investment Committee chaired
investments, albeit in different sectors and/or
by an authorised member of the Management
geographies. The portfolio is subject to periodic
Committee and comprising our senior
reviews by Financial Risk Committee and by
investment executives.
individual business lines in order to monitor
exposure to any one sector or geography and to

Business review Risk management continued
Treasury and funding risks Liquidity risk Foreign exchange risk

3i’s funding objective is that each category The Group invests from its own balance sheet 3i reports in sterling and pays dividends from
of investment asset is broadly matched with using cash generated from its investing activities its sterling profits. The Group seeks to reduce
liabilities and shareholders’ funds according and its core funding. The Group also has available structural currency exposures by matching
to the risk and maturity characteristics of the to it undrawn committed facilities. In addition to investment assets denominated in foreign
assets and that funding needs are met ahead funding from its own balance sheet, the Group currency with borrowings in the same currency.
of planned investment. periodically raises third-party funds and also The Group makes some use of derivative
invests indirectly through funds administered by financial instruments to effect foreign exchange
Credit risk
third parties, or quoted investment vehicles. management. The current policy is to hedge the
3i’s financial assets are predominantly unsecured
main currency exposures in the range of 90%–
investments in unquoted companies. An increase Unexpected changes in the levels of investment
100%.
in concentration of the portfolio in a particular and divestment activities or in interest rates
economic sector or geography could increase could impact the availability of funds required for Interest rate risk
credit risk. Likewise, large or unexpected investment needs or to meet obligations as they 3i has a mixture of fixed and floating-rate
increases in interest rates could increase credit fall due. assets. The assets are funded with a combination
risk, particularly in companies which are of shareholders’ funds and borrowings according
To manage this, a range of cash flow forecasts
highly leveraged. to the risk characteristics of the assets.
are produced and updated on a regular basis for
The Board seeks to minimise interest rate
The Group considers the maximum credit risk to each business line and for the Group as a whole.
exposure by considering the average life profile
be the carrying value of loans and receivables Financial Risk Committee reviews the Group’s
of the various asset classes and adopting a
and credit risk exposure is managed on an asset- liquidity on a quarterly basis and the Board
portfolio approach to the interest rate hedging
specific basis by individual investment managers. reviews the Group’s financial resources every
structure. Some derivative financial instruments
Regular asset reviews within each business line six months. This includes consideration of the
are used to achieve this objective.
provide an insight into the trading performance currency hedging and maturity profile aspects,
of individual assets and give an early indication as well as liquidity, of the Group’s current and
of increased credit risk. Leverage levels and forecast financial position.
performance of individual assets are also
Price risk
reviewed periodically by the Financial Risk
The valuation of unquoted investments depends
Committee.
upon a combination of market factors and the
The Group’s remaining financial assets are mainly performance of the underlying asset. The Group
in the form of deposits with banks of a credit does not currently hedge the market risk
rating of AA or better. Counterparty limits are inherent in the portfolio but manages asset
set and closely monitored. performance risk on an asset-specific basis.

Operational risks Business processes

The Group is exposed to a range of operational The Group’s information technology and treasury
risks which can arise from inadequate or systems, as well as its business processes and
failed processes, people and systems or from procedures, support its operations and business
external factors affecting these. These include performance. The Group has policies and
operational events such as human resources procedures covering information security,
risks, legal and regulatory risks, information change management, business continuity
technology systems failures, business disruption and disaster recovery. These are subject
and shortcomings in internal controls. Line to periodic testing.
management at all levels is responsible for
Legal and regulatory
identifying, assessing, controlling and reporting
In order to conform to necessary legal and
operational risks. This is supported by a
regulatory requirements across multiple
framework of core values, standards and
jurisdictions, the Group operates a complex
controls, a code of business conduct and
legal and corporate structure. This requires
delegated authorities. There is also an
appropriate internal processes and procedures
independent internal audit function which
to be developed and followed, supported by
carries out periodic reviews.
professional teams with appropriate skills,
People drawing upon external resources where
The ability to recruit, develop and retain capable appropriate. There is also a Regulatory Risk
people is of fundamental importance to Forum which meets periodically to review and
achieving the Group’s strategy. The Group plan for forthcoming and anticipated legal
operates in a competitive industry and aims to and regulatory changes which could impact
remunerate staff in line with market practice and the Group.
to provide superior development opportunities.
The Group has human resources policies and
procedures covering recruitment, vetting and
performance management and appropriate
processes in place to monitor their application.
Staff engagement is also regularly evaluated and
reported to the Board.

Corporate responsibility report
“Our approach to corporate responsibility is commercially
based and driven by our vision to be the private equity firm of choice.”
Kevin Dunn Group Company Secretary
Core values Our approach Achieving these objectives depends upon high-
quality management teams and good values, as
3i has been helping to grow and to transform well as effective communication and alignment
We believe that the highest standard of businesses for over 60 years. We have also been of interests. Statements of intent and policies are
integrity is essential in business. In all our building our own business, from a small London- necessary and important but they are by no
activities, we aim to: based operation, to the international FTSE100 means sufficient. As a corporate investor, the
company that it is today, with assets under success of our approach depends upon the
– be commercial and fair; management of almost £10 billion. actions of individuals and the judgments that
– respect the needs of our Our approach to corporate responsibility is they make on a daily basis. Awareness and
commercially based and driven by our vision to training are therefore critical so that corporate
shareholders, our staff, our responsibility issues are properly considered and
be the private equity firm of choice; operating
suppliers, the local community and on a world-wide scale; producing consistent the right decisions are made and implemented,
the businesses in which we invest; market-beating returns; acknowledged for our whether we are planning the launch of a new
partnership style and winning through our 3i business line or assessing an individual
– maintain our integrity investment.
unparalleled resources.
and professionalism; and
We view an active approach to corporate The pace of change in business and in society,
– strive for continual improvement responsibility as more than simply a means to combined with the rising expectations placed
and innovation. retain our licence to operate, or to reduce risk. on companies, means that the corporate
We believe that it provides genuine competitive responsibility agenda is developing rapidly.
advantage and that it helps us to maximise the Our corporate responsibility committee, which
Contact us returns for our shareholders, as well as for the is comprised of executives from across the
For more information please contact investors in the funds that we advise or manage. business, is charged with ensuring that 3i is
Kevin Dunn at KevinDunnCR@3i.com thinking ahead on these issues, as well as
We think about corporate responsibility from operating to the standards that our Board
two perspectives: “as an investor” and “as a expects.
company” in our own right. Our experience of
working with management teams in growing As part of our drive for continuous
companies, in a broad range of sectors and improvement, the current information
countries around the world, has led us to believe contained on our investor relations website
that the companies we back will grow more and (www.3igroup.com) will soon be supplemented
be more attractive to potential purchasers if by a new dedicated corporate responsibility
they are strong on corporate responsibility website – www.3icr.com – which is being
issues. Our own staff and the people who work launched in June 2008.
in our portfolio companies want to work for
companies of which they feel proud. Growth is As an investor
easier with enthusiastic customers, with strong As an investor we view corporate responsibility
supplier relationships and with a good reputation from two perspectives: risk and opportunity.
locally and within a sector. The most significant corporate responsibility-
related risks arising from our investment activity
relate to environmental, ethical, governance and
social issues. If these risks are not identified and
managed effectively, then the success of our
portfolio companies can be compromised and
3i’s reputation could be affected. So identifying
and managing these risks well is an important
part of managing risk for 3i. The opportunity for
3i is that supporting the sustainable growth of
our portfolio companies increases their value
and attraction to others.

With £9.8 billion of assets under management, Throughout our history we have been actively A 3i perspective on some
consisting of £6.0 billion of our own assets and involved in supporting the development of the
£3.8 billion of third party funds, and a portfolio industry through the industry associations and
industry issues
of over 450 investments in a broad range of other activity. Over the course of the past Do private equity firms add value to their
sectors across Europe, Asia and the US, we are 12 months we have taken a leading role in a portfolio companies?
well diversified and have a broad base of number of sector-based initiatives, including in The private equity industry is highly competitive
knowledge and experience on which to draw. particular the Walker Review Group in the UK and is an industry in which competing firms
The business line reviews on pages 12 to 27 on transparency. Taking a lead on issues that differentiate themselves by their track records
contain detailed case studies of our largest affect our sector as a whole is consistent with and style of investing.
investments and realisations in the year and our vision of 3i as a leading private equity firm.
This differentiation is key when raising funds or
pages 108 to 109 contain details of our ten It is also in our interest to share our experience
pitching to the management teams and owners
largest investments and forty other large with our competitors in order to learn ourselves
of businesses. That the success of a business
investments. and to help improve the performance of the
depends on both financial and non-financial
sector as a whole.
performance is recognised within the industry
As a company
3i is well represented on the various committees and 3i and other private equity firms have well-
As a private equity business with around 750
and councils of industry bodies, especially in developed approaches to helping their portfolio
employees world-wide, 3i has a relatively small
Europe where Jonathan Russell, Managing companies grow. We do this through the boards
footprint on many corporate responsibility issues.
Partner, Buyouts, is the Chairman elect of the of these companies and by bringing the benefit
However, being a private equity business with a
European Private Equity and Venture Capital of our experience, knowledge and networks.
sizeable portfolio and a business which operates
Association. Our website, www.3i.com, has many examples
internationally across Europe, in Asia and in the
of businesses that we have backed and the value
US, we recognise that our sustained success and Detailed information is provided on pages 50 to
that we have brought in the process.
our reputation for being a good corporate citizen 53 about 3i as a company, but we also felt that
mean taking our corporate responsibilities it would be helpful to provide a 3i perspective on How do private equity firms engage with
seriously. four key challenges put to the industry recently. management teams?
These issues relate to the value that private Our experience of investing, and working
Being focused on the mid market, operating on a
equity firms bring to their investments; their internationally has helped us to understand that
world-wide scale and as one of the few publicly-
approach to the management teams of the we are stronger as a company when we work
listed private equity firms, 3i is differentiated
companies in which they invest and the degree with others to pursue mutual interests. Strong
within the private equity industry and has been
to which they act in partnership; the relationships are based on trust, which is earned
actively involved in the evolution of the
accountability of private equity firms and over time. Our focus with portfolio companies is
corporate responsibility agenda for many years.
finally, transparency. on working through the board and with
Indeed, 3i was a founder member of Business in
professional advisers. We recognise that the
the Community over 25 years ago.
quality of our track record locally and within a
sector is a key element of the origination and
conversion of future investment opportunities.
A good reputation, backed up by tangible
evidence of past behaviour, is therefore key
to becoming a preferred investor and making
investments.
3i is proud to have been a founder member of

Business in the Community over 25 years ago.

Corporate responsibility report continued
How accountable are private equity firms? 3i is also delighted to participate in the Carbon
We understand that we are accountable to our Disclosure Project and to be a member of both
investors, but also to others, for the decisions the Dow Jones Sustainability Index and the
that we make. 3i is a member of the FTSE100 Business in the Community Corporate
and has over 26,000 shareholders, including Responsibility Index. In the last two years we
some of the world’s biggest financial institutions. have also won awards for our Annual report and
There are also over 70 Limited Partners invested our Corporate responsibility report.
in funds managed or advised by 3i. This means
The demand for transparency has been growing
that we are subject to considerable scrutiny,
as the private equity industry has grown. Private
not just by these investors, but also by rating
equity has increasingly become a mainstream
agencies, the press, governments and many
asset class for investors. The size of the
other groups.
companies in which private equity firms invest
We, like other private equity firms based in the has also grown, as have political and public
UK, are regulated by the Financial Services interest. Despite the scope of our own
Authority (“FSA”). As a listed company we must disclosure and 3i’s reputation in this area,
also adhere to stock exchange regulations, as it was clear in 2007 that the pressures being
well as the prevailing regulation in each of the placed on the private equity sector risked
countries and markets where we operate. affecting 3i as well and that in the UK in
An example of one aspect of FSA regulation is particular a sector-wide response was needed.
the requirement for regulated firms to treat their
Through the British Private Equity and Venture
regulatory customers fairly. This is demonstrated
Capital Association (“BVCA”) 3i supported the
by the FSA’s “Treating Customers Fairly” initiative.
creation of an independent working group led by
Whilst the focus of this FSA initiative is on retail
Sir David Walker. The group’s mandate was to
financial services businesses, the concept is
investigate how to improve disclosure within the
relevant to other financial service businesses
sector. 3i was supportive of the group’s work
such as 3i. 3i has policies and procedures in place
and our Chairman, Baroness Hogg, was a
to seek to ensure that all those that it interacts
member. In November 2007 the Walker
with (and not just its regulatory customers) are
Guidelines were published and 3i was one of
treated fairly.
the first to commit to comply with them.
The “3i and Transparency” section on pages 122
How transparent are private equity firms?
to 123 provides details of these guidelines and
3i’s objective has been to take an open and
how 3i measures up against them.
straightforward approach to doing business and
in describing what we do and the way in which Our commitment to greater transparency
we do it to those who have an interest. This has also prompted a reconsideration of our
Corporate responsibility report, together with Corporate responsibility report. We recognised
“3i and Transparency” on pages 122 to 123, the that people are generally most interested in our
Private equity lexicon on pages 116 to 117, as activities as an investor and so this year we have
well as the guides to “Returns and IRRs” and added more content on our investment process
“Carried interest” on pages 118 to 121, are in this report, as well as on the new Corporate
practical examples of this. Responsibility website (www.3icr.com) which is
due to be launched in June.
For further information on 3i and Transparency and

how 3i meets the Walker guidelines, please go to
pages 122 and 123

“It is very important to Robeco that we

invest in private equity firms that take
corporate responsibility seriously
and 3i does.”
Andrew Musters Robeco
Corporate responsibility in Stages of investment process

our investment activity 682 182 47
Our investment process involves four key

stages. Corporate responsibility considerations
are important in each of those stages to sustain
successful outcomes. Work in progress Partner review
– Fund raising
– Investment assessment
– Creating value once we are invested
– Realisation
Entry to work Partner review Completion
Fundraising in progress of investment
Investments are made by 3i using cash from
our own balance sheet, as well as from funds
that 3i manages or advises for third-parties.
At 31 March 2008 3i had £9.8 billion of assets Investment assessment The opportunity is then subsequently reviewed
under management, comprising £6.0 billion of Our reputation is one of our most important in detail by a group of senior and experienced
our own assets and £3.8 billion of third party assets. Accordingly, an effective review process investment executives in the relevant business
funds. 3i’s own capital has been built from the to identify risks and opportunities in potential line and sector (known as the “Partner Review”).
success of earlier investments. Since the new investments is crucial to our sustained If it is agreed through the Partner Review
company was formed in 1945, with £10 million success. This can be a particular challenge in process that a particular investment opportunity
of share capital, it has only received another emerging markets, where publicly available should continue to be progressed, the Partner
£10 million from shareholders and, ignoring information is sometimes thin. One of the Review process will also agree what further in-
ordinary dividends, has given over £2 billion benefits 3i has, in both developed and emerging depth analysis and due diligence should be
back to shareholders. markets, is that our reputation as a values-based undertaken.
company with high standards might deter those
A list of the funds managed for third parties is Overall, our approval process might involve up
who are reluctant to go through our diligence
set out on page 36. These funds are raised to to 30 different people with sector and regional
process. In a competitive industry this may mean
invest in specific business lines and have clear expertise, but there will be a core group of
that from time to time we lose otherwise
investment mandates. For example, Eurofund V people responsible for progressing the
attractive business.
is a mid-market buy out fund which is focused investment. This investment team is given
Whilst each investment is considered on its own access to the funds it needs to undertake
on Europe, but has the flexibility to invest up to
10% of the size of the fund in Asia. merits, there is a standard review process for all comprehensive due diligence. The time taken
types of investments, which aims to identify all for this will vary considerably, depending on the
Interest in the degree to which 3i and other
of the issues that might affect our decision to nature of the investment, whether we are
public companies and private equity firms
invest. Consideration of corporate responsibility already invested in the company and the
consider environmental, ethical, governance and
issues is embedded as a mandatory part of complexity of the issues involved. It is also not
social issues in our own business has been
this process. uncommon, given the depth and breadth of our
growing amongst a number of large institutional
relationships, for 3i to have known a company or
shareholders and Limited Partners in private All new investment opportunities are the subject
management team for a considerable time
equity funds. 3i is a member of the Dow Jones of a process of filtering and review. In the year to
before an investment opportunity emerges.
Sustainability index and the Business in the 31 March 2008, 682 companies entered our
Community Corporate responsibility index. 3i has formal work in progress but we made only 47
also been reporting to the Carbon Disclosure investments. Following a preliminary appraisal of
Project for the past two years. Investors the potential investment opportunity, a decision
representing $56 trillion of assets under is taken whether to commit further resource to
management have signed up to the Carbon progress the investment opportunity and place it
Disclosure Project, which calls on major in formal work in progress.
companies from around the world to provide
specific details on climate change risk.

“The corporate responsibility agenda is developing rapidly
and it is critical that 3i is not only operating to the standards
that our Board expects but also thinking ahead.”
Summary of Corporate responsibility An explicit review of environmental, ethical, Identifying an environmental, ethical or social risk
Investment policy governance and social issues is required for each in our due diligence process does not necessarily
company under review. We have access to an mean that we will withdraw. This is because we
As a socially responsible investor, 3i aims to invest in international network of specialist consultancies, recognise three levels of compliance with our
companies that act responsibly in terms of
who undertake the due diligence on our behalf. policies: full; partial; and serious non-compliance.
environmental, ethical, governance and social issues.
This objective reflects our values and culture, as well As a result of the nature of the relationship
The “front sheet”, which summarises the
as the wishes of our investors and employees, and between a private equity investor and a portfolio
investment proposition, includes a mandatory
helps protect and enhance our reputation. company, we can often have a strong influence
section on environmental, ethical and social risks.
on the company’s priorities. We will therefore
Before we make an investment, we review all The entrepreneurial culture is important to our
work with the company and its management
potential investee companies from a corporate business model, so we do not impose a box-
responsibility perspective as part of our investment to change practices towards full compliance.
ticking approach to compliance: we expect our
procedures. Further details of our review process are Helping to resolve an issue may be an
investment teams to take responsibility for
set out on pages 47 and 48. important element of our ability to enhance
results and help ensure that they have the
our investment. A simple example might be
We aim to avoid investing in companies that do not: capacity and resources to identify and address
3i’s support in identifying and recruiting a
– respect human rights; relevant issues. We reinforce this by including in
– comply with current environmental, ethical and different director with specialist skills in the
the approval process senior partners from our
social legislation; area concerned.
sector teams and from our country offices
– have proposals to address defined future together with relevant support from our We operate internationally and so it is important
legislation; or professional services teams or external that we consider issues in the context of local
– seek to comply with their industry standards and
best practice.
professional advisers. This ensures that the expectations and 3i’s values, including
proposals are screened by people with an in- considering whether a problem exists because of
We consider that an awareness of corporate depth understanding of the sector, the country a lack of expertise or capacity, rather than
responsibility risks and how to deal with them is and region and the issue, whatever it might be. something more fundamental. Depending on the
fundamental to our due diligence and portfolio nature of the risk identified and its seriousness,
management. Our policies provide guidance to our There are many reasons why an investment may
a condition precedent or post completion
staff on a wide range of potential ethical, not be approved and often it is a combination of
governance, social and environmental challenges, undertaking, requiring that the situation be
different concerns that leads us to reject an
which include consideration of: remedied, may be required from the investee
investment proposal.
– susceptibility to human rights abuses, such as company or its management before we will
child or slave labour or bans on trade unions; proceed. Confidence in the management team’s
– corruption issues arising as a result of industry or capacity and will to address issues satisfactorily
geographic business practices; will be a key determinant of whether we
– ethically sensitive sectors, including arms proceed or not.
manufacture, animal testing, gambling,
pornography and tobacco; The assessment of the material risks and
– impacts on the environment and sensitive natural opportunities facing a business is not the only
resources; and rationale for assessing corporate responsibility
– compliance with social legislation, such as laws issues in our investment process. Our experience
governing discrimination, employment terms and suggests that one of the fundamental factors for
health and safety. investment success is the quality of the portfolio
3i operates internationally: our policy provides that a company management team. The approach we
particular practice considered lawful in one country take to assessing potential investments places
may nevertheless be considered unacceptable by 3i. considerable emphasis on understanding and
Post investment, we seek to ensure that the being comfortable with the management team.
companies in which we invest maintain a responsible Their approach to dealing with due diligence on
corporate responsibility policy. Further details of our corporate responsibility issues can be a useful
approach to actively engaging with our portfolio indicator of quality. For example, a chief
companies to manage and, where necessary, executive with a poor approach to health and
remediate corporate responsibility issues, are set out safety is likely to be weak in other aspects of his
on pages 48 and 49. or her role.

Growing the company These provide an opportunity to learn from, and Sources of expertise
Before we invest in a company we agree a clear share experiences with peers in other companies We are sometimes asked about the sources of
value creation plan with the board and with the either in or outside the same sector and country. our expertise on corporate responsibility issues.
management team who will be responsible for
Our Business Leaders Network which operates on Within 3i it is the combination of our professional
delivering the plan. This will also involve an service and investments teams who draw on the
a world-wide basis, also provides opportunities
expectation that 3i will deliver on the actions it is knowledge and experience that we have built up
for our portfolio companies to access
responsible for in the plan. These may relate to over many years. Our sector and local teams
experienced chairmen and board directors and,
strategic input, a specific functional expertise or also have in-depth knowledge of specific issues
for those involved, to network and learn from
providing access to relevant relationships around relating to particular sectors or regions.
each other. Many of those in our Business
the world. This added value may be why we
Leaders Network have run successful 3i-backed Our Corporate Responsibility, Health & Safety,
have been chosen as the preferred investor and Risk and other committees provide the
companies and so have a good understanding
so delivering on our commitments is important. necessary processes and additional expertise.
and empathy with the issues managers face.
The initial post investment phase will involve
validation and refinement of the plan based Externally, we work with the leading
Realisations consultancies on environmental, ethical and
around a classic first 100-days’ approach.
When we have helped the company implement social due diligence on issues including
Such a plan would also include any
its plans, there are three basic approaches to compliance, liability and reputational risk.
environmental, ethical, governance or social risks
realising the value of our investment: a sale to a Our portfolio companies are also a rich source
or opportunities that were identified either in
trade buyer (eg, a company in the same sector); of experience and their management teams
due diligence or in the post investment analysis.
a sale to another financial buyer (eg, another can also provide interesting insights for 3i and
We undertake portfolio reviews every six months, private equity firm with a new growth strategy); for their peers in other portfolio companies.
where the investment team presents the progress or a listing on a stock exchange through an IPO.
and future plans to a review committee. Any The chairman of the Corporate Responsibility
Corporate responsibility plays an important role in Committee, Kevin Dunn, is also a member of
material corporate responsibility issues that were
the valuation process for each of these exits. Business in the Community’s leadership group.
part of the 100-day plan would be included in this
Trade buyers tend to be bigger companies in the
until they are resolved; in addition, at least once a
same sector. These companies, especially if they
year, other corporate responsibility issues will be
are listed, tend to have well-developed corporate
considered on the agenda.
responsibility policies and expect high standards.
We bring a collaborative approach to the Increasingly, therefore, their audit and valuation
companies in which we invest. Despite having processes look at the portfolio company’s
extensive sector expertise and often taking a corporate responsibility strategy, systems and
role on the board, we recognise that we cannot performance.
know a company as well as its management.
If a trade buyer or another financial buyer were
It is the management who, being closest to the
to identify a material risk or opportunity that
situation, must make most decisions.
we had missed, then this could be used to
An early priority, then, is to help ensure that the disadvantage 3i in negotiations. As a result,
governance of the company is as robust as we often undertake another detailed due
possible and to help support the management diligence process prior to sale, which includes
team and board. Where necessary, we will put a environmental, ethical and social issues.
pre-selected chairman in place, one of whose
Any company that we take to IPO must meet
tasks is to be responsible for corporate
the listing requirements of the relevant markets
responsibility.
and pass the scrutiny of, for instance, the SEC
We have dedicated programmes and activities or FSA reviewers, as well as the environmental,
to help build board capacity and capability. ethical, governance and social standards
These include our CEO forums and sector expected.
events, which are opportunities for the CEOs
of our portfolio companies to come together.

“Our people and the level of their engagement are critical
to our continued success.”
Philip Yea Chief Executive
The Corporate Responsibility Committee Corporate responsibility The Committee, on behalf of the Board,
identifies and assesses the significant risks and
Kevin Dunn Company Secretary and in our company opportunities for 3i arising from social, ethical
Chairman of the Committee 3i is a people business with an entrepreneurial and environmental issues. A risk matrix
Deepak Bagla a Director in 3i’s India culture that depends on our employees’ depth of methodology is used to identify and assess
Infrastructure investment knowledge and their networks of strong internal potential risks and their impact, monitor
business and external relationships. Our success is directly developing trends and best practice and
related to our ability to recruit, train, engage and consider changes in 3i’s business and culture.
Whitney Bower a Partner in US Growth Capital retain highly skilled people. A Group-wide risk log is used to record identified
Denise Collis Group Human Resources risks and to monitor their management and
3i’s staff are fundamental to the success of our
Director mitigation. This log of identified risks is reviewed
business. An environment of mutual respect,
and updated at meetings of the Committee and
Douwe Cosijn Head of Investor Relations where staff are highly motivated by their work,
significant risks are reported to 3i’s Operational
Patrick Dunne where they have a strong commitment to
Group Communications Director Risk Committee. There is a detailed description
deliver and where retention is good, are the
David Holligon a Partner in UK Buyouts of risk management at 3i on pages 38 to 43.
standards we strive to achieve and maintain.
Hans Middelthon an Investment Director in As Chairman of the Committee, Kevin Dunn
Employees are organised in small teams and a
3i’s Oil and Gas team has specific responsibility for 3i’s corporate
spirit of co-operation is encouraged to support
responsibility policies, leading the development
Barbara Sterlina a Communications Executive the highest standards of integrity and
of new initiatives and targets and reporting to
professionalism. In accordance with 3i’s core
Tony Wang an Associate Director in 3i’s Asia the Board. The Committee’s membership reflects
values, individual consultation with employees
investment business the balance of 3i’s business with representation
on matters affecting them and fair and open
from Europe, Asia and the US and from a range
Phil White a Director in UK Infrastructure communication, are a high priority.
of business line and Group activities.
The Committee’s membership reflects the balance An objective of our Chief Executive is to meet
of 3i’s business with representation from Europe, All employees have a responsibility to be aware
separately with each team every year to listen to
Asia and the US and from a range of business line of and to abide by, 3i’s policies and procedures,
their views and insights and to share his vision
and Group activities. which have been developed to guide staff and
and strategy for the business. In addition,
regulate the conduct of the day-to-day
his policy is to have a one-to-one meeting
operations of the business. These policies and
with each new joiner, regardless of
procedures include 3i’s environmental, ethical
organisational level.
and social policies and are available to all
employees through 3i’s portal, a web-based
Roles and responsibilities
knowledge system. Employees are encouraged
The Board as a whole is responsible for corporate
to make suggestions to improve these policies
responsibility. The Executive Directors are
and procedures.
responsible for ensuring compliance with 3i’s
corporate values and standards. 3i’s Corporate
Performance benchmarking and verification
Responsibility Committee (“the Committee”)
The Committee has overseen the formulation
considers and reviews environmental, ethical and
and implementation of corporate responsibility
social issues relevant to 3i’s business and reports
investment procedures, implemented
regularly to the Board. It promotes awareness of
appropriate risk management procedures and
these issues across the business through training
recommended strategic targets and objectives
and communication. It promotes the
for corporate responsibility.
development of corporate responsibility policies,
procedures and initiatives, and monitors and
reviews their operation.

3i’s performance is measured against two As part of this survey of its own employees, Results of the 2008 Employee survey
indices. These are the Dow Jones Sustainability 3i also undertook a survey of a sample of
World Index (“DJSI”), a global index which tracks contract and outsourced staff. Engagement All 3i staff world-wide were given the opportunity
to take part in a confidential telephone survey,
the financial performance of leading companies levels for this group of people were positive and
conducted by Ipsos MORI in January and February
in terms of corporate sustainability and the consistent with those for our own staff. 2008.
Business in the Community (“BitC”) Corporate
Responsibility Index, which aims to benchmark Training and development Highlights
environmental, ethical and social performance We are committed to encouraging the – A response rate of 92%.
and encourage sustainable development. continuous development of our staff, with the – 3i score ahead of the Ipsos MORI Top Ten norm*
objective of maximising both their career on 19 of the 20 norm questions.
3i has again been selected as a constituent of
potential and the overall performance of the
the DJSI during the year and was leader of its – An employee engagement score of 84%.
business. Emphasis is placed on work-based
industry group on a global basis. DJSI also – High employee advocacy, with 90% saying that
learning, with the provision of development
recognised 3i as one of the best companies on a they would speak highly of 3i.
opportunities supported by appropriate coaching
global basis in respect of our codes of conduct,
and mentoring. This is supplemented by more – High commitment to 3i’s objectives (95%).
compliance and anticrime measures. We aim to
formal training programmes, such as workshops,
continue to be included within this Index. – 3i’s culture judged as “open and inclusive”,
to enhance the board management skills of our
“approachable and friendly” and “one where there
In 2007 we again participated in the annual BitC investment staff. is good teamwork”.
Corporate Responsibility Index and were included
In addition, investment staff are required to Areas for improvement
in BitC’s “Top 100 Companies that Count”.
complete an investment training programme – As with any survey of this nature, there were a
In particular, the integration into the business of
on joining 3i and professional services staff number of detailed or specific issues relating to
our corporate responsibility principles and risk
are supported in developing their functional particular parts of the business.
management processes relating to corporate
specialisms through external courses, networks
responsibility issues was recognised. We aim to – Although six points ahead of the MORI Top Ten
and forums. During the year, 527 employees norm, only 72% of staff felt that 3i made the
continue to be included within this Index.
attended a broad range of internal training and best use of their skills and ability.
We also provide information on our carbon development courses.
and greenhouse gas emissions to the Carbon Action
It is a legal and regulatory requirement that all – The results were communicated to all staff
Disclosure Project.
executives involved in making or managing in March.
investment transactions receive anti-money – All issues relating to specific parts of the
Engagement and culture
laundering training and periodic refresher business have been communicated and are being
Our latest comprehensive confidential telephone
training. A programme of training is in place to followed up.
survey of staff was conducted by Ipsos MORI in
discharge these obligations.
January and February 2008 and communicated – Our increased training and development agenda
to staff in March. The survey had a 92% In addition to the fundamental training required and 3i’s continued growth and development will
response rate, up from 78% in last year’s web- for people to fulfil their roles in a responsible address the first area for improvement.
based survey. It included a number of questions manner, 3i has established a number of *The Ipsos MORI Top Ten norm is the average of the
that have a proven correlation to employee programmes to maximise the development of most positive 10 responses to each question in the Ipsos
engagement. The overall employee engagement our people and to reinforce the 3i culture. MORI normative database. These are regarded as
score of 84% (2007: 87%), remains very Examples of these include our Global Welcome high-performing benchmarks.
positive, with 95% of those taking part saying Days for all new joiners, our Value Management
that they were committed to helping 3i achieve through the Board Courses to enhance board
its objectives and 90% saying they would speak skills, our intensive G10 international programme
highly of 3i. 88% also thought that internal for 40 high potential senior leaders and the
communications were relevant to them. INSEAD leadership course for the leaders of our
professional services teams.

Health and Safety Our objective is not to have any reportable Climate change impact assessment
We recognise that the promotion of health and accidents or incidents. During the year to Year to 31 March 2008
safety at work is an essential responsibility of 31 March 2008, no reportable accidents 9,309 CO2 (tonnes per year)
staff and management at all levels. Simon Ball, occurred under UK Health and Safety regulations ‘equivalent emissions’
as Finance Director, has overall responsibility for or under similar regulations outside the UK.
the implementation of 3i’s health and safety 1 62 Premises
policies and procedures. A Health and Safety Environment Business travel
Committee, chaired by the Company Secretary, As a financial services business employing Other
Kevin Dunn, has been established to oversee approximately 750 employees world-wide, 3i’s
the application of these policies and procedures direct environmental impact is relatively low.
and to consider health and safety risks across
Our environmental priorities are carbon
the business.
emissions and waste. In 2007 the Board set an 37
The purpose of 3i’s health and safety policy is objective to be carbon neutral by 2010. We are
to enable all members of 3i’s staff to go about currently in a three-year programme of action to
their everyday business at 3i’s offices in the deliver this, which involves improving the ECCM is now an internationally renowned
expectation that they can do so safely and measurement and modelling of our carbon analytical facility for carbon and related eco-
without risk to their health. High standards emissions; reducing the energy intensity of our metrics with close links with the University of
of health and safety are applied to staff and operations; and investing in carbon offsets. Edinburgh’s School of GeoSciences and
sub-contractors and we endeavour to Imperial College, London. ECCM uses the most
In 2007 we worked with a specialist adviser,
ensure that the health, safety and welfare of up-to-date, country-specific emission factors
the Edinburgh Centre for Carbon Management
our employees, visitors, customers, sub- throughout their assessments, including those
(ECCM) to expand our emissions monitoring to
contractors’ staff and the general public are developed by the UK Department for the
include all three scopes of the World Business
not compromised. Environment, Food and Rural Affairs.
Council for Sustainable Development (WBCSD)
In an endeavour to achieve high standards, greenhouse gas protocol. We also refined our
we have recently revised our Occupational modelling to include updated UK government Procurement
Health and Safety policy (“OH&S”). The CO2 equivalent (CO2e ) factor multipliers. We have developed environmentally conscious
minimum benchmark set for our global OH&S This information has improved our understanding policies and procedures relating to the
policies is UK legislation, unless country-specific and control of emissions and enabled us to purchasing of goods and services. As far as
legislation or practice exceeds this level. This produce our first published Carbon Disclosure possible, we will work only with suppliers who
year, we will also begin the process of Project report. support our aim to source products responsibly
implementing and seeking certification to BS and we exclude suppliers who use child or forced
In 2007, our reported emissions were 9,309
OHSAS 18001:2007, an internationally labour, disregard social legislation and basic
CO2e (t/yr), up roughly 14% from the 2006
recognised occupational health and safety health and safety provisions, or wilfully and
estimate. This increase is largely explained by
management system. avoidably damage the environment. We aim to
the implementation of a much more rigorous
The key objectives of the revised OH&S policy and broad monitoring process and should be have a collaborative relationship with our
are to identify, evaluate and control risks; to viewed in the context of a business which has suppliers and, wherever possible, when problems
maintain an OH&S management system; to grown substantially in the year. The Climate arise with a supplier’s performance or behaviour,
ensure all incidents are reported and investigated change impact assessment table outlines this we will work with the suppliers concerned to
in a timely manner; to set annual objectives and amount as a percentage of each emission type. help them meet our requirements.
targets; and to ensure that 3i employees are
In the next year we will continue to reduce our
informed of and engaged in the process of
energy use and begin to work with a carbon
improving OH&S. Additional details of these
credit provider to identify projects to offset our
policies and procedures can be found on 3i’s
emissions. We will approach offsetting with a
website at www.3igroup.com.
private equity mindset and expect to identify
investment opportunities through what we learn
in the process.

“3i was one of our original sponsors, and

has been key to our success. While their
financial support was useful, their network
and the credibility they gave to our effort
has been immensely helpful in our
rapid expansion.”
Doug Miller Founder and Chairman of the European Venture Philanthropy Association
Community and social enterprise We focus our charitable activities on the

3i has been active for many years in a range disadvantaged, young people and education
of charitable and social enterprise activities. in the communities in which we have offices.
The concept of social enterprise is a natural fit Charities are supported on the basis of their
with 3i’s approach to supporting businesses. effectiveness and impact as well as their
Indeed, over thirty years ago it was a 3i resonance with our staff.
employee who had the idea of forming what is
Two examples of this approach are 3i’s support
today the Enterprise Education Trust (“EET”).
for a series of programmes with The Old Vic
With 3i’s financial and other support EET has
theatre in London, one of which, The Sky’s the
grown and about 100,000 children each year
Limit, is featured on this page. The other is 3i’s
benefit from its programmes to increase
support for The Passage, a charity focused on
awareness of business and to inspire them to The Sky’s the Limit at The Old Vic
the homeless, which is based close to 3i’s
become involved in business. 3i has supported This 2007 project, aimed at raising the
London office.
EET every year since formation. aspirations of UK primary school students,
An important aspect of our charitable giving, was a result of a long-standing partnership
3i was also a founder member of the European
which totalled £454,130 in the year to between 3i and The Old Vic Theatre in London.
Venture Philanthropy Association (“EVPA”) which
21 March 2008 (2007: £429,409), is A new play was created from a series of
is a charity formed to promote the concept of
matching what our staff raise. 3i has actively workshops in schools to build confidence and
Venture philanthropy and to develop best
promoted the UK’s Give As You Earn scheme, team-work skills. The workshops were
practice in this growing area of social enterprise.
which is administered by the Charities Aid facilitated by professional drama educators
3i was also proud to be a founding investor in Foundation. In the year to 31 March 2008, this from The Old Vic and supported by 3i staff.
Bridges Ventures, a privately owned UK venture resulted in donations of £129,733, from the The play, which drew directly on the
capital company with a social mission. Bridges scheme, accounting for 29% of 3i’s charitable suggestions and experiences of the young
was founded in 2002 and has since made equity donations up from 25% in 2007. people involved, was then performed to an
investments in 24 businesses employing 700 audience of over 1,000 primary school
We are also supportive of staff who wish to
people, almost 200 of whom came out of students at The Old Vic. For many of the
volunteer or become trustees or governors of
unemployment. 3i’s total commitment to young people this was their first visit to a
charities and are happy for them to use the 3i
Bridges has been over £2 million. theatre.
network for the benefit of these charities in a
relevant and appropriate way. In addition to working directly with schools
in London and the South East of the UK, a
resources pack was created and distributed
to over 1,000 schools.
The formal evaluation of the project
demonstrated that the project was very
successful from the perspectives of students,
teachers and the schools. The 3i staff taking
part also found it a highly-motivational
experience. This evaluation has also been
helpful in planning the next programme for
2008, which is focused on multicultural
understanding.

Board of Directors and Management Committee
1 4 5
2 3 6 7 8
1. Baroness Hogg 4. Simon Ball 7. Michael Queen

Chairman since 2002 and a non-executive Director since Finance Director and member of the Management Executive Director since 1997. Managing Partner,
1997. Chairman of the Nominations Committee and the Committee since joining the Company in 2005. A member Infrastructure. Joined 3i in 1987. From 1994 to 1996
Valuations Committee and a member of the Remuneration of the Valuations Committee and the Group’s Investment seconded to HM Treasury. Appointed Group Financial
Committee. Chairman of Frontier Economics Limited. Committee. A non-executive director of Cable & Wireless Controller in 1996 and Finance Director in 1997.
A director of BG Group plc. Deputy Chairman of the plc. Formerly, Director General Finance at the Department A member of the Management Committee and the Group’s
Financial Reporting Council and a Governor of the London for Constitutional Affairs, Group Finance Director of Robert Investment Committee since 1997. Ceased to be Finance
Business School. From 1995 to 2002 Chairman of Foreign Fleming and Chief Operating Officer (UK) of Dresdner Director on assuming responsibility for Growth Capital
& Colonial Smaller Companies PLC. From 2003 to 2006 Kleinwort Benson. Aged 48. investment in 2005. A director of Gardens Pension Trustees
Deputy Chairman of GKN plc. Formerly Head of the Prime Limited, a corporate trustee of the 3i Group Pension Plan.
5. Willem Mesdag
Minister’s Policy Unit. Aged 62. A former non-executive director of Northern Rock plc and
Non-executive Director since July 2007. A member of the
past Chairman of the British Venture Capital Association.
2. Oliver Stocken Remuneration Committee and the Nominations Committee.
Aged 46.
Deputy Chairman and Senior Independent Director since Managing Partner of Red Mountain Capital Partners LLC.
2002 and a non-executive Director since 1999. Chairman Formerly a Partner and Managing Director of Goldman, 8. Sir Robert Smith
of the Audit and Compliance Committee and of the Sachs & Co. Aged 54. Non-executive Director since 2004. Chairman of the
trustees of the 3i Group Pension Plan. A member of the Remuneration Committee and a member of the Audit and
6. Christine Morin-Postel
Remuneration Committee, the Nominations Committee and Compliance Committee and the Nominations Committee.
Non-executive Director since 2002. A member of the
the Valuations Committee. Chairman of Home Retail Group Chairman of Weir Group plc and Scottish & Southern Energy
Audit and Compliance Committee, the Remuneration
plc, Oval Limited and Stanhope Group Holdings Limited and plc. A non-executive director of Aegon UK plc and Standard
Committee and the Nominations Committee. A director
a director of Standard Chartered plc. Formerly Finance Bank Group Limited. Formerly a non-executive director of
of British American Tobacco PLC and Royal Dutch Shell PLC.
Director of Barclays plc. Aged 66. the Financial Services Authority and Bank of Scotland plc,
Formerly Chief Executive of Société Générale de Belgique,
Chief Executive of Morgan Grenfell Asset Management and
3. Philip Yea executive Vice-President and member of the executive
a member of the Financial Reporting Council. Aged 63.
Chief Executive and executive Director since joining the committee of Suez and a director of Tractebel, Fortis
Company in 2004. A member of the Nominations and Alcan, Inc. Aged 61.
Committee and the Valuations Committee. A member of the
Group’s Investment Committee since 2004. A non-
executive director of Vodafone Group plc. Formerly
Managing Director within the private equity business of
Investcorp. A former Finance Director of Diageo plc and
former non-executive director of HBOS plc and Manchester
United PLC. Aged 53.

9 10 13 15 17
11 12 14 16 18
9. Fred Steingraber 12. Denise Collis 15. Jonathan Russell

Non-executive Director since 2002. A member of the Group HR Director. A member of the Management Managing Partner, Buyouts. A member of the Management
Audit and Compliance Committee and the Nominations Committee since joining the Company in 2004. Previously Committee and the Group’s Investment Committee since
Committee. A non-executive director of Elkay employed by HSBC and Standard Chartered. Before joining 1999. Joined 3i in 1986. Chairman-elect of the European
Manufacturing and Diamond Hill Financial Trends Fund. 3i was HR Partner at Ernst & Young. A member of the Private Equity and Venture Capital Association and formerly
A member of the supervisory board of Continental AG. Advisory Boards of Leeds University Business School and Chairman of its Buyout Committee. Aged 48.
Chairman Emeritus, and former Chairman and Chief the School of Business and Economics at Exeter University.
16. Jo Taylor
Executive, of AT Kearney, Inc. Formerly a director of Maytag Aged 50.
Managing Partner, Venture Capital. A member of the
Corporation, Lawter International, Inc, Mercury Finance
13. Kevin Dunn Management Committee and the Group’s Investment
Corporation, John Hancock Financial Trends Fund and the
General Counsel and Company Secretary since November Committee since 2005. Joined 3i in 1984. Chairman of
Chicago Stock Exchange. Aged 69.
2007. Responsible for the Group’s legal, compliance, internal the British Venture Capital Association Venture Committee
10. Robert Swannell audit and company secretarial functions. Chairman of the and a British Venture Capital Association Council member.
Non-executive Director since September 2006. A member Corporate Responsibility Committee. A member of the Aged 47.
of the Nominations Committee and the Valuations Management Committee since joining the Company in
17. Paul Waller
Committee. Vice Chairman, Citi Europe and a member of October 2007. Formerly a Senior Managing Director,
Managing Partner, Funds. A member of the Management
Citi’s Global Investment Banking Operating Committee. running the European Leveraged Finance business for GE’s
Committee since 1999 and a member since 1997 of the
A non-executive director of The British Land Company PLC. Commercial Finance division after serving as European
Group’s Investment Committee which he now chairs. Joined
A member of the Takeover Panel Appeal Board, a member General Counsel for GE Commercial Finance. Prior to GE
3i in 1978. Past Chairman of the European Private Equity
of the Industrial Development Advisory Board of the Commercial Finance, was a partner at the law firms Travers
and Venture Capital Association. Aged 53.
Department for Business, Enterprise & Regulatory Reform Smith and Latham & Watkins. Aged 45.
(BERR) and a trustee of the UK Career Academy Foundation. 18. Guy Zarzavatdjian
14. Chris Rowlands
Aged 57. Managing Partner, Growth Capital. A member of the
Managing Partner, Asia. A member of the Management
Management Committee since January 2007 and a
Other members of Management Committee: Committee and the Group’s Investment Committee since
member of the Group’s Investment Committee since June
re-joining the Company in 2002. Formerly Managing
11. Bruce Carnegie-Brown 2006. Joined 3i’s Paris office in 1987. Managing Director,
Partner, Group Markets. Previously employed by 3i from
Managing Partner, Quoted Private Equity. A member of Benelux from 1999 to 2002 and Managing Director, France
1984 to 1996. Formerly a Partner of Andersen and a non-
the Management Committee since joining the Company from 2002 until September 2007. Aged 50.
executive director of Principality Building Society. Aged 51.
in January 2007 and a member of the Group’s Investment
Committee. Formerly CEO of Marsh Limited and Head
of Debt Capital Markets in Europe and Asia for JP Morgan
Chase. A non-executive director of Close Brothers
Group plc. Aged 48.

Directors’ report – statutory and corporate governance information
This section of the Directors’ report contains The trustee of The 3i Group Employee Trust The administrative services contract between
statutory and corporate governance information (“the Employee Trust”) has waived (subject to 3i plc and 3i Investments plc may be terminated
for the year to 31 March 2008 (“the year”). certain minor exceptions) all dividends declared by either party on three months’ notice.
by the Company after 26 May 1994 in respect The administrative services contracts between
Principal activity of shares from time to time held by the 3i plc and other Group companies may be
3i Group plc is a world leader in private equity. Employee Trust (9,881,992 ordinary shares as terminated by either party on reasonable notice.
The principal activity of the Company and at 31 March 2008). In addition, as at that date
its subsidiaries (“the Group”) is investment. holders of certain performance share awards Business review
The Company’s investment policy is set out granted under The 3i Group Discretionary Share The Group’s development during the year to
on page 9. Plan in respect of an aggregate of 985,909 31 March 2008, its position at that date and
ordinary shares, have waived all dividends in the Group’s likely future development are
Tax and investment company status relation to those shares for the duration of the detailed in the Chairman’s statement on page
The Company is an investment company as three year performance periods relating to 3, the Chief Executive’s statement on pages 6
defined by section 833 of the Companies the awards. and 7 and the Business review on pages 8
Act 2006 and carries on business as an to 43.
investment trust. Operations
HM Revenue & Customs has approved the The Group operates through a network of Articles of Association
Company as an investment trust under section offices in Europe, Asia and the US. The Group The amendment of the Company’s Articles of
842 of the Income and Corporation Taxes Act manages a number of funds established with Association is governed by relevant statutes.
1988 for the financial period to 31 March major institutions and other investors to make The Articles may be amended by special
equity and equity-related investments resolution of the shareholders in general
2007. Since that date the Company has
predominantly in unquoted businesses in meeting.
directed its affairs to enable it to continue
to be so approved. Europe and Asia. It also advises two UK listed
investment companies: 3i Infrastructure Share capital
Limited (established to make investments in The issued share capital of the Company as at
Regulation
infrastructure assets) and 3i Quoted Private 31 March 2008 comprised 382,741,094
3i Investments plc, 3i Europe plc and 3i Nordic
Equity Limited (established to acquire influential ordinary shares of 7319/22p each and
plc, wholly owned subsidiaries of the Company,
or controlling stakes in small and mid-cap 16,566,194 B shares (cumulative preference
are authorised and regulated by the FSA under
quoted companies). shares of 1p each), which represented 99.94%
the Financial Services and Markets Act 2000.
and 0.06% respectively of the nominal value of
Where applicable, certain Group subsidiaries’
Management arrangements the Company’s issued share capital. Further
businesses outside the United Kingdom are
3i Investments plc acts as investment manager details of the share capital structure of the
regulated locally by relevant authorities.
to the Company and certain of its subsidiaries. Company are set out in notes 22 and 26 on
Contracts for these investment management pages 100 and 101. During the year, the issued
Results and dividends share capital of the Company altered as set
The financial statements of the Company and and other services, for which regulatory
authorisation is required, provide for fees based out below.
the Group for the year to 31 March 2008
appear on pages 80 to 105. on the work done and costs incurred in providing Ordinary shares
such services. These contracts may be Pre-consolidation ordinary share capital
Total recognised income and expense for the terminated by either party on reasonable notice. movements The issued share capital of the
year was £792 million (2007: £1,075 million).
An interim dividend of 6.1p per ordinary share in 3i plc provides the Group with certain corporate Company as at 1 April692007 was 461,106,007
and administrative services, for which no ordinary shares of 62 /88p each. This increased
respect of the year to 31 March 2008 was paid by 1,794,733 shares to 462,900,740 ordinary
on 2 January 2008. The Directors recommend a regulatory authorisation is required, under
contracts which provide for fees based on the shares of 6269/88p each in the period from
final dividend of 10.9p per ordinary share be 1 April 2007 to 13 July 2007 on the issue of
paid in respect of the year to 31 March 2008 work done and costs incurred in providing such
services together with a performance fee based shares to the trustee of The 3i Group Share
to shareholders on the register at the close of Incentive Plan and on the exercise of options
business on 20 June 2008. on realised profits on the sale of assets.
under the Group’s executive share option plans.

Consolidation of ordinary share capital Pursuant B shares B share repurchases At the EGM on 11 July
to resolutions passed at an Extraordinary General B share issue Pursuant to resolutions passed at 2007, the Directors were authorised to
Meeting (“EGM”) of the Company on 11 July the EGM on 11 July 2007: repurchase up to 651,370,020 B shares in the
2007, the issued ordinary share capital of the Company until the Company’s AGM in 2008.
(a) the authorised share capital of the Company
Company, of 462,900,740 ordinary shares of In the year to 31 March 2008, the Company
was increased by the creation of an additional
6269/88p each, was on 16 July 2007 repurchased and cancelled 628,537,525
50,000,000 B shares (cumulative preference
consolidated into 393,465,629 ordinary shares B shares (representing 2.12% of the nominal
shares of 1p each); and
of 7319/22p each. value of the Company’s total called-up share
(b) on 16 July 2007, the Company issued capital as at 16 July 2007) pursuant to this
Post-consolidation ordinary share capital
636,473,739 B shares on the basis of 11 authority for an aggregate consideration of
movements At the Annual General Meeting
new B shares for 8 existing ordinary shares £798,242,657. These shares were repurchased
(“AGM”) on 11 July 2007, the Directors were
of 6269/88p held on the register of members as part of the Company’s arrangements to
authorised to repurchase up to 46,111,000
on 13 July 2007. return capital to shareholders. 16,566,194
ordinary shares in the Company (representing
B shares remained in issue as at 31 March 2008.
approximately 10% of the Company’s issued
ordinary share capital as at 9 May 2007) until
the Company’s AGM in 2008 or 10 October Major interests in ordinary shares
2008, if earlier. In the year to 31 March 2008, Notifications of the following voting interests in the Company’s ordinary share capital had been
the Company repurchased and cancelled received by the Company (in accordance with Chapter 5 of the FSA’s Disclosure and Transparency
12,000,000 ordinary shares of 7319/22p each Rules) as at 31 March 2008 and 1 May 2008:
(representing 2.99% of the nominal value of
% of % of
the Company’s total called-up share capital as at As at issued As at issued
16 July 2007) pursuant to this authority for an 31 March share 1 May share Nature of
aggregate consideration of £120,352,302. 2008 capital 2008 capital holding
In the period from 16 July 2007 to 31 March AXA S.A. and its group
2008, a total of 1,275,465 ordinary shares of companies 41,760,144 10.91 44,788,612 11.7 Direct and
of 7319/22p were issued to the trustee of indirect
The 3i Group Share Incentive Plan, on the The Goldman
exercise of options under the Group’s executive Sachs Group, Inc 22,865,000 5.97 22,865,000 5.97 Indirect
share option plans and on conversion of BlackRock Investment
€2,000 (nominal) of the €550 million 3i Group Management
1.375 per cent Convertible Bonds due 2008. (UK) Limited 22,737,966 4.93 22,737,966 4.93 Indirect
Accordingly, between 16 July 2007 and
31 March 2008, the share capital of the Lloyds TSB
Company decreased by 10,724,535 ordinary Group Plc 15,745,619 4.11 15,745,619 4.11 Indirect
shares to 382,741,094 ordinary shares of Legal & General
7319/22p each. Group plc and/or
its subsidiaries 15,554,776 4.01 17,732,765 4.63 Direct
Prudential plc group
of companies 11,725,266 3.02 11,725,266 3.02 Direct

Directors’ report – statutory and corporate governance information continued
Directors’ interests Rights and restrictions attaching to shares

In accordance with FSA Listing Rule 9.8.6(R)(1), Directors’ interests in the shares of the Company A summary of the rights and restrictions
(in respect of which transactions are notifiable to the Company under FSA Disclosure and attaching to shares as at 31 March 2008 is set
Transparency Rule 3.1.2(R)) as at 31 March 2008 are shown below: out below. The 2008 Notice of AGM contains a
special resolution proposing the adoption of new
Ordinary Articles of Association in substitution for the
shares B shares
existing Articles of Association. If this resolution
Baroness Hogg 20,956 – is passed, the rights and restrictions attaching to
O H J Stocken 19,651 – shares will be altered as set out in the form of
P E Yea 742,360 547,847 Articles of Association submitted to the AGM.
A summary of the differences between the
S P Ball 304,915 260,534 current and proposed Articles of Association is
W Mesdag – – set out in the 2008 Notice of AGM.
C J M Morin-Postel 6,985 1,872 Holders of ordinary shares and B shares enjoy
M J Queen 353,501 176,478 the rights accorded to them under the
Sir Robert Smith 8,186 – Memorandum and Articles of Association of the
F G Steingraber – – Company and under the laws of England and
Wales. Any share may be issued with or have
R W A Swannell 10,350 – attached to it such rights and restrictions as the
The share interests shown above for each of Mr P E Yea, Mr S P Ball and Mr M J Queen include Company by ordinary resolution or failing such
certain Performance Share awards and Super-performance Share awards which are subject to resolution the Board may decide.
forfeiture and are detailed in the tables on pages 73 and 74 respectively. Holders of ordinary shares are entitled to attend,
Details of Directors’ share options under the Group’s executive share option plans are shown in the speak and vote at general meetings of the
Directors’ remuneration report on page 72. Company and to appoint proxies and, in the case
of corporations, corporate representatives to
In the period from 1 April 2008 to 1 May 2008, Mr P E Yea became interested in an additional attend, speak and vote at such meetings on their
45 ordinary shares and Mr S P Ball and Mr M J Queen became interested in an additional 42 behalf. On a poll, holders of ordinary shares are
ordinary shares each. 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 latter circumstances the Company may apply for the rights and privileges attaching to those
profits available for distribution in any year and an order directing that the relevant shares be shares including voting rights would
in priority to any payment of dividend or other subject to certain restrictions (including in be suspended.
distribution to holders of ordinary shares, to a respect of the ability to exercise voting rights, to
Participants under the 3i Group Share Incentive
cumulative preferential dividend of 3.75% per transfer the shares validly and, except in the case
Plan and certain participants under the 3i Group
annum calculated on the amount of 127p per of a liquidation, to receive the payment of sums
Performance Share Plan and the 3i Group
B share ("the Return Amount"). On a return of due from the Company). In addition, the
Deferred Bonus Plan, who beneficially own
capital (other than a solvent intra group re- Directors and the employees of the Company
shares under these schemes which are held by a
organisation) holders of B shares are entitled to are subject to the Company’s share dealing
nominee on their behalf, cannot exercise directly
receive in priority to any payment to holders of codes, such that approval may be required to
the voting rights attaching to such shares but
ordinary shares payment of the Return Amount deal in the Company’s shares. At any time on or
can instruct the nominee to vote the shares in
together with any accrued but unpaid dividends after 14 July 2009 or at any time when the
accordance with their instructions.
but are not entitled to any further right of criteria for the listing of the B shares under the
participation in the profits or assets of Listing Rules of the UK Listing Authority are no In order to be able to attend and vote at a
the Company. longer met, the Company may appoint a person general meeting of the Company in respect of
to execute a transfer on behalf of all the holders shares in the Company a person must be
Holders of B shares are not entitled in their
of the B shares in acceptance of an offer, paying entered on the register of members in respect of
capacity as such to receive notice of or attend,
the holders of B shares such amount as they those shares at such time (not being earlier than
speak or vote at general meetings of the
would have been entitled to on a winding-up of 48 hours before the meeting) as may be
Company save where the B share dividend has
the Company. Certain restrictions on dealing in specified by the Company in the notice of
remained unpaid for six months or more or
and transferability of shares may also from time general meeting in accordance with Regulation
where the business of the meeting includes
to time be imposed by laws and regulations. 41 of the Uncertificated Securities
consideration of a resolution for the winding-up
Regulations 2001.
of the Company (other than a solvent intra There are no shares carrying special rights with
group re-organisation) in which case holders of regard to control of the Company. There are no The Company is not aware of any agreements
B shares shall be entitled to attend, speak and restrictions placed on voting rights of fully paid between holders of its securities that may
vote only in relation to such resolution and in shares, save where in accordance with Article 13 restrict the transfer of shares or exercise of
either case shall, on a poll, be entitled to one of the Company’s Articles of Association a voting rights.
vote per B share held. restriction notice has been served by the
Company in respect of shares for failure to Debentures
There are no restrictions on the transfer of fully
comply with statutory notices or where a As detailed in notes 20 and 21 on page 99,
paid shares in the Company, save as follows. In
transfer notice (as described below) has been as at 31 March 2008 the Company had in issue
the case of uncertificated shares the Board may
served in respect of shares and has not yet been 1.375 per cent Convertible Bonds due 2008,
decline to register a transfer in the
complied with. Notes issued under the 3i Group plc
circumstances set out in the Uncertificated
£2,000,000 Note Issuance Programme and
Securities Regulations or where a transfer is to In the circumstances specified in Article 38 of
Notes issued under the 3i Group plc
more than four joint holders. In the case of the Company’s Articles of Association the
€1,000,000 Euro-Commercial Paper
certificated shares the Board may decline to Company may serve a transfer notice on holders
Programme.
register any transfer which is not in respect of of shares. The relevant circumstances relate to:
only one class of share, which is to more than (a) potential tax disadvantage to the Company,
four joint holders, which is not accompanied by including the Company’s assets being considered
the certificate for the shares to which it relates, “plan assets” within the meaning of regulations
which is not duly stamped in circumstances adopted under relevant US legislation, (b) the
where a duly stamped instrument is required, or number of “United States Residents” who own
where in accordance with section 794 of the or hold shares becoming 75 or more, or (c) the
Companies Act 2006 a notice (under section Company being required to be registered as an
793 of that Act) has been served by the investment company under relevant US
Company on a shareholder who has then failed legislation. The notice would require the transfer
to give the Company the information required by of the shares in respect of which the transfer
the notice within the time specified in it. In the notice has been given and pending such transfer

Corporate governance The Articles of Association also specifically A Group succession and contingency plan is
Throughout the year, the Company complied empower the Board to exercise the Company’s prepared by management and reviewed
with the provisions of section 1 of the powers to borrow money and to mortgage or periodically by the Board. The purpose of this
Combined Code on corporate governance charge the Company’s assets and any uncalled plan is to identify suitable candidates for
published by the Financial Reporting Council in capital and to issue debentures and other succession to key senior management positions,
June 2006. securities. agree their training and development needs, and
ensure the necessary human resources are in
The Company’s approach to The Board determines matters including financial
place for the Company to meet its objectives.
corporate governance strategy and planning and takes major business
The Company has a policy of seeking to comply decisions. The Board has put in place an Meetings of the Board During the year, there
with established best practice in the field of organisational structure. This is further described were six meetings of the Board of Directors.
corporate governance. The Board has adopted under the heading “internal control”. The Directors who served throughout the
core values and Group standards which set out year attended all six meetings. Mr W Mesdag
The Board has approved a formal schedule of
the behaviour expected of staff in their dealings attended the five meetings held since his
matters reserved to it and its duly authorised
with shareholders, customers, colleagues, appointment on 11 July 2007 and
Committees for decision. These include:
suppliers and others who engage with the Mr F D Rosenkranz attended the one meeting
Company. One of the core values communicated – approval of the Group’s overall strategy, held before his retirement as a Director
within the Group is a belief that the highest strategic plan and annual operating budget; on 11 July 2007.
standard of integrity is essential in business.
– approval of the Company’s half-yearly and The principal matters considered by the Board
The Board’s responsibilities and processes annual financial statements and changes in the during the year (in addition to matters formally
The Board is responsible to shareholders for the Group’s accounting policies or practices; reserved to the Board) included:
overall management of the Group and may
– changes relating to the capital structure of the – the 3i Vision Plan 2008-2012, budget and
exercise all the powers of the Company subject
Company or its regulated status; financial resources;
to the provisions of relevant statutes, the
Company’s Memorandum and Articles of – major capital projects; – the Group’s capital structure;
Association and any directions given by special
– major changes in the nature of business – regular reports from the Chief Executive;
resolution of the shareholders. The Articles of
operations;
Association empower the Board to offer, allot, – the recommendations of the Valuations
grant options over or otherwise dispose of the – investments and divestments in the ordinary Committee on valuations of investments;
unissued shares of the Company (subject to course of business above certain limits set by
– the establishment of the 3i India
relevant statutes) on such terms as the Board the Board from time to time;
Infrastructure Fund;
may decide. The Articles of Association
– adequacy of internal control systems;
empower the Board to issue and buy back – a review of the Group’s advisory and corporate
shares, which powers are exercisable in – appointments to the Board and broking relationships;
accordance with authorities approved from time Management Committee;
– the financial risk management framework;
to time by shareholders in general meeting.
– principal terms and conditions of employment
At the AGM in July 2007, shareholders renewed – the performance of co-investment funds;
of members of Management Committee; and
the Board’s authority to allot ordinary shares and
– the review by Sir David Walker of
to buy back ordinary shares on behalf of the – changes in employee share schemes and other
disclosure and transparency in the private
Company subject to the limits set out in those long-term incentive schemes.
equity industry;
resolutions. At the EGM in July 2007,
Matters delegated by the Board to management
shareholders authorised the Board to allot – independence of non-executive Directors; and
include implementation of the Board approved
B shares and to buy back B shares on behalf of
strategy, day-to-day operation of the business, – corporate responsibility initiatives.
the Company, again subject to the limits set out
the appointment and remuneration of all
in those resolutions. Details of the authorities
executives below Management Committee and
which the Board will be seeking at its 2008
the formulation and execution of risk
AGM are set out in the 2008 Notice of AGM.
management policies and practices.

Information Reports and papers are circulated to The roles of the Chairman and the Directors
the Directors in a timely manner in preparation Chief Executive The Board comprises the Chairman, six
for Board and committee meetings. These The division of responsibilities between the independent non-executive Directors and
papers are supplemented by information Chairman of the Board and the Chief Executive three executive Directors. Biographical details
specifically requested by the Directors from is clearly defined and has been approved by for each of the Directors are set out on pages
time to time. the Board. 54 and 55. Baroness Hogg (Chairman),
Mr O H J Stocken, Mr P E Yea, Mr S P Ball,
Performance evaluation During the year, the The Chairman The Chairman leads the Board in
Mme C J M Morin-Postel, Mr M J Queen,
Board conducted its annual evaluation of its own the determination of its strategy and in the
Sir Robert Smith, Mr F G Steingraber and
performance and that of its committees and achievement of its objectives. The Chairman is
Mr R W A Swannell served throughout the
individual Directors. The Chairman led the responsible for organising the business of the
period under review. Mr W Mesdag served as a
process with the aid of external consultants, Board, ensuring its effectiveness and setting its
Director from 11 July 2007. Mr F D Rosenkranz
The Zygos Partnership, who conducted agenda. The Chairman has no involvement in
served as a Director until 11 July 2007.
interviews with all the Directors and members of the day-to-day business of the Group.
Management Committee. The Chairman also The Chairman facilitates the effective In addition to fulfilling their legal responsibilities
spoke to each of the Directors and members of contribution of non-executive Directors and as Directors, non-executive Directors are
Management Committee individually to obtain constructive relations between executive and expected to bring an independent judgment to
their views. The Zygos Partnership’s written non-executive Directors. The Chairman ensures bear on issues of strategy, performance,
evaluation and the Chairman’s own report were that regular reports from the Company’s brokers resources and standards of conduct, and to help
subsequently reported formally to the Board and are circulated to the non-executive Directors to the Board provide the Company with effective
the Chairman also gave feedback to individual enable non-executive Directors to remain leadership. They are also expected to ensure
Directors. The Senior Independent Director led a aware of shareholders’ views. The Chairman high standards of financial probity on the part of
review by the Directors of the performance of ensures effective communication with the the Company and to monitor the effectiveness
the Chairman. Company’s shareholders. of the executive Directors.
The Board performance evaluation included The Chief Executive The Chief Executive has The Board’s discussions, and its approval of the
consideration of the overall functioning of the direct charge of the Group on a day-to-day Group’s strategic plan and annual budget,
Board with particular focus on strategy, meeting basis and is accountable to the Board for the provide the non-executive Directors with the
composition, the agenda, Board committees, financial and operational performance of the opportunity to contribute to and validate
corporate responsibility, risk and succession Group. The Chief Executive has formed a management’s plans and assist in the
issues. The Board found the involvement of committee called Management Committee development of strategy. The non-executive
external consultants particularly useful in to enable him to carry out the responsibilities Directors receive regular management accounts,
benchmarking the Company’s own experience delegated to him by the Board. The Committee reports and information which enable them to
against that of other quoted companies and comprises the executive Directors, scrutinise the Company’s and management’s
placing an external perspective on their Mr B N Carnegie-Brown, Ms D R Collis, performance against agreed objectives.
own views. Mr K J Dunn, Mr C P Rowlands, Mr J B C Russell,
Directors’ independence All the non-executive
Mr A J M Taylor, Mr P Waller and
During the review, the value of the two strategy Directors (other than the Chairman, who was
Mr G A R Zarzavatdjian. The Committee
sessions held each year, in addition to the regular independent on appointment) are considered by
meets on a regular basis to consider
Board meetings, was endorsed by Directors. the Board to be independent for the purposes of
operational matters and the implementation
The Board identified areas where its the Combined Code. The Board assesses and
of the Group’s strategy.
working practices could be developed further. reviews the independence of each of the non-
In particular, the expansion of the Management Senior Independent Director The Board has executive Directors at least annually, having
Committee with the development of new appointed Mr O H J Stocken as Senior regard to the potential relevance and materiality
business lines led the Board to note the value of Independent Director, to whom, in accordance of a Director’s interests and relationships rather
holding meetings attended by different groups, with the Combined Code, concerns can than applying rigid criteria in a mechanistic
with some meetings attended by Directors be conveyed. manner. No Director was materially interested
only and others with some or all members of in any contract or arrangement subsisting during
Management Committee present. or at the end of the financial period that was
significant in relation to the business of
the Company.

Directors’ employment contracts Details of The reappointment of non-executive Directors The Board’s recommendation for the
executive Directors’ employment contracts are who have served for more than nine years is reappointment of Directors is set out in the
set out in the Directors’ remuneration report on subject to annual review. 2008 Notice of AGM. As previously announced
page 76. Mr F G Steingraber will retire from the Board at
The Company’s Articles of Association
the conclusion of the 2008 AGM.
Training and development The Company has provide for:
developed a training policy which provides a Directors’ indemnities The Company’s Articles of
(a) the minimum number of Directors to be two
framework within which training for Directors is Association provide that, subject to the
and the maximum to be twenty, unless
planned with the objective of ensuring Directors provisions of the Companies Acts, the Directors
otherwise determined by the Company by
understand the duties and responsibilities of shall be indemnified against liabilities incurred by
ordinary resolution;
being a director of a listed company. All Directors them as Directors in defending any proceedings
are required to update their skills and maintain (b) Directors to be appointed by ordinary in which judgment is given in their favour, or
their familiarity with the Company and its resolution of the Company’s shareholders in where they have been acquitted or been granted
business continually. Presentations on different general meeting or by the Board; relief by the court. As permitted by the
aspects of the Company’s business are made Company’s Articles of Association, the Company
(c) Directors appointed by the Board to retire at
regularly to the Board. On appointment, all non- has maintained Qualifying Third-Party Indemnity
the first AGM after their appointment and
executive Directors have discussions with the Provisions (as defined under relevant legislation)
for the number nearest to, but not
Chairman and the Chief Executive following for the benefit of the Company’s Directors
exceeding, one-third of the remaining
which appropriate briefings on the throughout the period.
Directors to retire by rotation (with the
responsibilities of Directors, the Company’s
Directors to retire being those who have Under the rules of the 3i Group Pension Plan
business and the Company’s procedures are
been longest in office since their last (“the Plan”), the Company has granted an
arranged. The Company provides opportunities
appointment or reappointment) at each indemnity to the directors of Gardens Pension
for non-executive Directors to obtain a thorough
AGM; Trustees Limited (a corporate trustee of the Plan
understanding of the Company’s business by
and a wholly-owned subsidiary of the Company)
meeting members of the senior management (d) all Directors to retire at least every
against liabilities incurred as directors of that
team who in turn arrange, as required, visits to three years; and
corporate trustee.
investment or support teams.
(e) shareholders to have the power to remove
The Board’s committees
During the year the Directors received briefings any Director by special resolution.
The Board is assisted by various standing
on corporate responsibility matters, electronic
Subject to the Company’s Articles of Association, committees of the Board which report
communications with shareholders and legal and
retiring Directors are eligible for reappointment. regularly to the Board. The membership of
regulatory developments, including the
The office of Director shall be vacated if the these committees is regularly reviewed by
Companies Act 2006 (in particular directors’
Director resigns, becomes bankrupt or is the Board. When considering committee
duties) and changes to the Listing Rules for
prohibited by law from being a Director or where membership and chairmanship, the Board aims
closed-ended investment funds.
the Board so resolves following the Director to ensure that undue reliance is not placed on
The Company has procedures for Directors to suffering from mental ill health or being absent particular Directors.
take independent legal or other professional from Board meetings for 12 months without the
These committees all have clearly defined terms
advice about the performance of their duties. Board’s permission.
of reference which are available at
Appointment and re-election of Directors In accordance with the Articles of Association, www.3igroup.com. The terms of reference of
Subject to the Company’s Articles of Association, at the AGM to be held on 9 July 2008: the Audit and Compliance Committee, the
the Companies Acts and satisfactory Remuneration Committee and the Nominations
(i) Mr W Mesdag, having been appointed as a
performance evaluation, non-executive Committee provide that no one other than the
Director by the Board since the AGM in
Directors are appointed for an initial period of particular committee chairman and members
2007, will retire and, being eligible, offer
three years. Before the third and sixth may attend a meeting unless invited to attend
himself for reappointment; and
anniversaries of a non-executive Director’s by the relevant committee.
first appointment, the Director discusses (ii) Mr O H J Stocken, Mr S P Ball and
with the Board whether it is appropriate for Sir Robert Smith will retire by rotation
a further three year term to be served. and, being eligible, offer themselves for
reappointment as Directors.

Audit and Compliance Committee – oversaw the Company’s relations with its Chairman of the Board shall not chair the
The Audit and Compliance Committee external auditors including assessing auditor Committee when dealing with the appointment
comprises Mr O H J Stocken (Chairman), performance, independence and objectivity, of the Chairman’s successor.
Mme C J M Morin-Postel, Sir Robert Smith recommending the auditors’ reappointment
During the year, the Nominations Committee
and Mr F G Steingraber, all of whom and approving the auditors’ fees; and
considered and recommended a candidate for
served throughout the period, save for
– met with the external auditors in the absence appointment as a non-executive Director of the
Mr F G Steingraber who served from 11 July
of management. Company.
2007. Mr F D Rosenkranz served as a member
of the Committee until 11 July 2007. All the Remuneration Committee A formal, rigorous and transparent process for
members of the Committee are independent The Remuneration Committee comprises the appointment of Directors has been
non-executive Directors. The Board is Sir Robert Smith (Chairman), Baroness Hogg, established with the objective of identifying the
satisfied that the Committee Chairman, Mr W Mesdag, Mme C J M Morin-Postel and skills and experience profile required of new
Mr O H J Stocken, has recent and relevant Mr O H J Stocken, all of whom served Directors and identifying suitable candidates.
financial experience. throughout the period, save for Baroness Hogg The procedure includes the appraisal and
and Mr W Mesdag who served from selection of potential candidates, including
During the year, there were three meetings of
11 July 2007. Mr F D Rosenkranz and (in the case of non-executive Directors)
the Committee. The members who served
Mr F G Steingraber served as members until whether they have sufficient time to fulfil their
throughout the period attended all meetings.
11 July 2007. All the members of the roles. Specialist recruitment consultants assist
Mr F G Steingraber attended the two meetings
Committee are independent non-executive the Committee to identify suitable candidates
held following his appointment and
Directors, save for Baroness Hogg who was for appointment. The Committee’s
Mr F D Rosenkranz attended the one meeting
independent on appointment as Chairman recommendations for appointment are put
held before he ceased to be a member.
of the Board. to the full Board for approval.
During the year, the Committee:
During the year, there were six meetings of the Valuations Committee
– reviewed the effectiveness of the internal Remuneration Committee. The members who The Valuations Committee comprises Baroness
control environment of the Group and the served throughout the period attended all the Hogg (Chairman), Mr O H J Stocken, Mr P E Yea,
Group’s compliance with its regulatory meetings. Baroness Hogg and Mr W Mesdag Mr S P Ball and Mr R W A Swannell, all of whom
requirements and received reports on bank attended the five meetings held following served throughout the period. There were three
covenants, third-party liabilities and off- their appointment. Mr F D Rosenkranz and meetings of the Valuations Committee during
balance sheet liabilities; Mr F G Steingraber attended the one meeting the year. The members who served throughout
held before they ceased to be members. Details the year attended all meetings.
– reviewed and recommended to the Board the
of the work of the Remuneration Committee are
accounting disclosures comprised in the half- During the year, the Valuations Committee
set out in the Directors’ remuneration report.
yearly and annual financial statements of the considered and made recommendations to the
Company and reviewed the scope of the Nominations Committee Board on valuations of the Group’s investments
annual external audit plan and the external The Nominations Committee to be included in the half-yearly and annual
audit findings; comprises Baroness Hogg (Chairman), financial statements of the Group and reviewed
Mr O H J Stocken, Mr P E Yea, Mr W Mesdag, valuations policy and methodology.
– received regular reports from Group Risk
Mme C J M Morin-Postel, Sir Robert Smith,
Assurance and Audit (the Group’s internal audit The Company Secretary
Mr F G Steingraber and Mr R W A Swannell, all
function), monitored its activities and All Directors have access to the advice and
of whom served throughout the period, save for
effectiveness, and agreed the annual internal services of the Group Legal Counsel and
Mr W Mesdag who served from 11 July 2007.
audit plan; Company Secretary, who is responsible for
Mr F D Rosenkranz served as a member until
advising the Board, through the Chairman, on
– received regular reports from Group 11 July 2007. During the year, there were two
governance matters. The Company’s Articles of
Compliance (the Group’s regulatory meetings of the Nominations Committee.
Association and the schedule of matters
compliance function) and Group Risk The members who served throughout the year
reserved to the Board or its duly authorised
Management Committee, and monitored their attended both meetings and Mr F D Rosenkranz
committees for decision provide that the
activities and effectiveness; attended the one meeting held before he ceased
appointment and removal of the Company
to be a Director. The terms of reference of the
Secretary is a matter for the full Board.
Nominations Committee provide that the

Relations with shareholders Portfolio management and voting policy The Group Risk Management Committee’s
The Board recognises the importance of In relation to unquoted investments, the Group’s activities are supported by the activities of
maintaining a purposeful relationship with the approach is to seek to add value to the Investment Committee as well as two sub-
Company’s shareholders. The Chief Executive businesses in which the Group invests through committees, Financial Risk Committee and
and the Finance Director, together with the the Group’s extensive experience, resources and Operational Risk Committee. Details of the risk
Group Communications Director, meet with the contacts. In relation to quoted investments, the management framework can be found in the
Company’s principal institutional shareholders to Group’s policy is to exercise voting rights on Risk management section of the Business review
discuss relevant issues as they arise. The matters affecting its interests. on pages 38 to 43.
Chairman maintains a dialogue with shareholders
The overall internal control process is regularly
on strategy, corporate governance and Internal control
reviewed by the Board and the Audit and
Directors’ remuneration as required. The Board is responsible for the Group’s system
Compliance Committee and complies with the
of internal control and reviews its effectiveness
The Board receives reports from the Company’s internal control guidance for Directors on the
at least annually. Such a system is designed to
brokers on shareholder issues and non-executive Combined Code issued by the Turnbull
manage rather than eliminate the risk of failure
Directors are invited to attend the Company’s Committee. The process established for the
to achieve business objectives and can provide
presentations to analysts and are offered the Group includes:
only reasonable and not absolute assurance
opportunity to meet shareholders.
against material misstatement or loss. Policies
The Company’s major shareholders are offered – core values, Group standards and Group
Through the regular meetings of the Board and
the opportunity to meet newly-appointed non- controls together comprising the Group’s high
the schedule of matters reserved to the Board
executive Directors. During the year such level principles and controls, with which all
or its duly authorised committees for decision,
shareholders were given the opportunity to staff are expected to comply;
the Board aims to maintain full and effective
meet Mr W Mesdag following his appointment
control over appropriate strategic, financial, – manuals of policies and procedures, applicable
on 11 July 2007.
operational and compliance issues. The Board has to all business units, with procedures for
The Company also uses its AGM as an put in place an organisational structure with reporting weaknesses and for monitoring
opportunity to communicate with its clearly defined lines of responsibility and corrective action;
shareholders. At the Meeting, business delegation of authority. The Board considers and
– a code of business conduct, with procedures
presentations are made by the Chief Executive approves a strategic plan every two years and
for reporting compliance therewith;
and the Finance Director. The Chairmen of the approves a budget on an annual basis. In
Remuneration, Audit and Compliance, and addition, there are established procedures and Processes
Nominations Committees are available to answer processes for planning and controlling – appointment of experienced and professional
shareholders’ questions. expenditure and the making of investments. staff, both by recruitment and promotion, of
There are also information and reporting systems the necessary calibre to fulfil their allotted
During the year, at the invitation of the
for monitoring the Group’s businesses and their responsibilities;
Chairman, the Company’s major shareholders
performance.
met with the Chairman, the Chairmen of the – a planning framework which incorporates a
Audit and Compliance Committee and the The Group Risk Management Committee is a Board approved strategic plan, with objectives
Remuneration Committee and the Company management committee formed by the Chief for each business unit;
Secretary to discuss matters of corporate Executive and its purpose is to review the
– formal business risk reviews performed by
governance and corporate responsibility relevant business of the Group in order to ensure that
management which evaluate the potential
to the Company and its shareholders. business risk is considered, assessed and
financial impact and likelihood of identified
managed as an integral part of the business.
The 2007 Notice of AGM was dispatched to risks and possible new risk areas;
There is an ongoing process for identifying,
shareholders not less than 20 working days
evaluating and managing the Group’s significant – the setting of control, mitigation and
before the Meeting. At that Meeting, voting on
risks. This process was in place for the year monitoring procedures and the review of
each resolution was taken on a poll and the poll
to 31 March 2008 and up to the date of actual occurrences, identifying lessons to be
results were made available on the Company’s
this report. learnt;
website.

– a comprehensive system of financial reporting The external auditors independently and There are clearly defined staff policies for pay
to the Board, based on an annual budget with objectively review the approach of management and working conditions. The Group’s
monthly reporting of actual results, analysis of to reporting operating results and financial employment policies are designed to provide a
variances, scrutiny of key performance condition. In co-ordination with Group Risk competitive reward package which will attract
measures and regular re-forecasting; Assurance and Audit, they also review and test and retain high quality staff, whilst ensuring that
the system of internal financial control and the the cost element of these rewards remains at an
– regular treasury reports to the Board, which
information contained in the annual financial appropriate level.
analyse the funding requirements of each class
statements to the extent necessary for
of assets, track the generation and use of The Group’s remuneration policy is influenced by
expressing their opinion.
capital and the volume of liquidity, measure market conditions and practices in the countries
the Group’s exposure to interest and exchange in which it operates. All employees receive a
Employment
rate movements and record the level of base salary and are eligible for a performance-
The Group’s policy is one of equal opportunity in
compliance with the Group’s funding related bonus. Where appropriate, employees are
the selection, training, career development and
objectives; eligible to participate in Group share schemes to
promotion of employees, regardless of age,
encourage employees’ involvement in the
– a Group Compliance function whose role is to gender, sexual orientation, ethnic origin, religion
performance of the Group. Investment
integrate regulatory compliance procedures and whether disabled or otherwise.
executives may also participate in co-
and best practices into the Group’s systems;
The Group treats applicants and employees with investment plans and carried interest schemes,
– well defined procedures governing the disabilities equally and fairly and provides which allow executives to share directly in the
appraisal and approval of investments, facilities, equipment and training to assist future profits on investments. Employees
including detailed investment and divestment disabled employees to do their jobs. Should an participate in local state or company pension
approval procedures, incorporating appropriate employee become disabled during their schemes as appropriate to local market
levels of authority and regular post- employment, efforts are made to retain them in conditions.
investment reviews; their current employment or to explore the
opportunities for their retraining or Charitable and political donations
Verification
redeployment within the Group. The Group also Charitable donations made by the Group in the
– a Group Risk Assurance and Audit function
provides financial support to disabled employees year to 31 March 2008 amounted to
which undertakes periodic examination of
who are unable to work, as appropriate to local £454,130. Excluding the Company’s matching
business units and processes and recommends
market conditions. of Give As You Earn contributions by staff,
improvements in controls to management;
charitable donations amounted to £324,397.
The Group’s principal means of keeping in touch
– the external auditors who are engaged to Of this amount approximately 44% was donated
with the views of its employees are through
express an opinion on the annual financial to causes which aim to relieve poverty or benefit
employee appraisals, informal consultations,
statements; and the community, or both, approximately 29% was
team briefings, and staff conferences and
donated to charities which advance education,
– an Audit and Compliance Committee which surveys. Managers throughout the Group have a
and approximately 10% was donated to medical
considers significant control matters and continuing responsibility to keep their staff fully
charities. Further details of charitable donations
receives reports from Group Risk Assurance informed of developments and to communicate
are set out in the Corporate responsibility report
and Audit and the external auditors and the financial results and other matters of interest.
on pages 44 to 53.
Group Compliance function on a regular basis. This is achieved by structured communication
including regular meetings of employees. In line with Group policy, no donations were
The internal control system is monitored and
made to political parties during the year.
supported by a Group Risk Assurance and Audit The Group has clear grievance and disciplinary
function which operates on an international basis procedures in place, which include
and reports to management and the Audit and comprehensive procedures on discrimination
Compliance Committee on the Group’s and the Group’s equal opportunities policy.
operations. The work of Group Risk Assurance The Group also has an employee assistance
and Audit is focused on the areas of greatest risk programme which provides a confidential, free
to the Group determined on the basis of the and independent counselling service and is
Group’s risk management process. available to all staff and their families in the UK.

Policy for paying creditors provision of a multi-currency revolving credit to acquire all or a majority of the issued
It is the policy of the Group to pay suppliers in facility to 3i Holdings plc and the Company. shares of the Company or if any person
accordance with the terms and conditions of the Under this agreement, the Company would proposes a scheme with regard to such
relevant markets in which it operates. Expenses be required to notify Nordea Bank AB (publ) acquisition (other than a Newco Scheme (as
are paid on a timely basis in the ordinary course within five days of any change of control of defined)) and (such offer or scheme having
of business. The Company had no trade creditors the Company. Such notification would open a become unconditional in all respects) the
outstanding at the year end. 3i plc had trade negotiation period of 50 days (from the date right to cast more than 50 per cent of the
creditors outstanding at the year end of the change of control) to determine votes which may ordinarily be cast on a poll
representing on average 19 days’ purchases. whether Nordea Bank AB (publ) would be at a general meeting of the Company has or
willing to continue to make available the will become unconditionally vested in the
Significant agreements facility and, if so, on what terms. Failing offeror and/or an associate (as defined) of
The Company is a party to the following agreement and if so required by Nordea Bank the offeror.
agreements that take effect, alter or terminate AB (publ), amounts outstanding would be
on a change of control of the Company following required to be repaid and the facility Statement of Directors’ responsibilities
a takeover bid: cancelled; The Directors are required by UK company law
to prepare financial statements which give a true
(a) £486 million Revolving Credit Facility (c) Limited Partnership Agreements dated
and fair view of the state of affairs of the
Agreement dated 20 September 2005, 12 July 2006, between 3i EFV GP Limited,
Company and the Group as at the end of the
between 3i Holdings plc, Barclays Capital, 3i Europartners V Verwaltungs GmbH & Co.
year and of the profit for the year. The Directors
Bayerische Landesbank, London branch, KG, the Company and other investors from
have responsibility for ensuring that proper
Dresdner Kleinwort Wasserstein Limited, time to time in relation to the formation of
accounting records are kept which disclose with
HSBC Bank plc, Lloyds TSB Bank plc, The partnerships to carry on the business of
reasonable accuracy the financial position of the
Royal Bank of Scotland plc, Société Générale, investing as the fund known as 3i Eurofund
Group and enable them to ensure that the
UBS Limited, WestLB AG, London branch and V. Under these agreements, the manager, 3i
financial statements comply with the Companies
the Company, in relation to the provision of a Investments plc, would be required to notify
Act 1985. They have a general responsibility for
multi-currency revolving credit facility to 3i the investors of any change of control of the
taking such steps as are reasonably open to
Holdings plc and the Company. Under this Company. If such a change of control occurs
them to safeguard the assets of the Group and
agreement, the Company would be required before the end of the relevant investment
to prevent and detect fraud and other
to notify Lloyds TSB Bank plc, in its capacity period, the manager’s powers to make new
irregularities. Suitable accounting policies, which
as agent for the banks, within five days of investments on behalf of the partnerships
follow generally accepted accounting practice
any change of control of the Company. Such would be suspended unless the investors had
and are explained in the notes to the financial
notification would open a negotiation period given consent before the change of control
statements, have been applied consistently and
of 50 days (from the date of the change of occurred. Where suspension occurs, the
applicable accounting standards have been
control) to determine whether Majority investors may consent at any time before the
followed. In addition, these financial statements
Banks (as defined in the agreement) would end of the investment period to the
comply with International Financial Reporting
be willing to continue to make available the resumption of the manager’s powers; and
Standards as adopted by the European Union
facility and, if so, on what terms. Failing
(d) 3i Group plc €550,000,000 1.375 per cent and reasonable and prudent judgments and
agreement and if so required by the Majority
Convertible Bonds due 2008 (the “bonds”). estimates have been used in their preparation.
Banks, amounts outstanding would be
Condition 6 of the terms and conditions of
required to be repaid and the facility In accordance with the FSA’s Disclosure and
the bonds sets out the conversion rights
cancelled. If no such requirement was Transparency Rules, the Directors confirm to the
of the holders of the bonds and the
imposed by the Majority Banks, any best of their knowledge that:
calculation of the conversion price payable.
dissenting bank could require amounts
The conversion price will decrease if a (a) the financial statements, prepared in
outstanding to it to be repaid and cease to
“Relevant Event” occurs. Condition 6(b)(x) accordance with applicable accounting
participate in the facility;
sets out the definition of Relevant Event and standards, give a true and fair view of
(b) £150 million Revolving Credit Facility the consequential adjustment to the the assets, liabilities, financial position and
Agreement dated 24 November 2005, conversion price. In summary, a Relevant profit or loss of the Company and the
between 3i Holdings plc, the Company and Event occurs if an offer is made to all (or as undertakings included in the consolidation
Nordea Bank AB (publ) in relation to the nearly as may be practicable all) shareholders taken as a whole; and

(b) the Directors’ report includes a fair review – services required to be undertaken by the Appointment of auditors
of the development and performance of the auditors, which include regulatory returns, In accordance with section 384 of the
business and the position of the Company formalities relating to borrowings, shareholder Companies Act 1985, a resolution proposing the
and the undertakings included in the and other circulars. This work is normally reappointment of Ernst & Young LLP as the
consolidation taken as a whole together with allocated directly to the auditors; Company’s auditors will be put to members at
a description of the principal risks and the forthcoming AGM.
– services which it is most efficient for the
uncertainties that they face.
auditors to provide. In this case, information By order of the Board
The Directors of the Company and their relating to the service is largely derived from
functions are listed on pages 54 and 55. the Company’s audited financial records; for K J Dunn Company Secretary
example, corporate tax services. This work is 14 May 2008
Going concern normally allocated to the auditors subject to Registered Office:
The Directors are satisfied that the Company consideration of any impact on their 16 Palace Street London SW1E 5JD
and the Group have adequate resources to independence; and
continue to operate for the foreseeable future.
– services that could be provided by a number
For this reason, they continue to adopt the
of firms including general consultancy work.
“going concern” basis for preparing the
All significant consultancy projects are
financial statements.
normally put out to tender and work would be
allocated to the auditors only if it did not
Auditors’ independence and objectivity
present a potential threat to the independence
Subject to annual appointment by shareholders,
of the audit team. Included in this category is
auditor performance is monitored on an ongoing
due diligence work relating to the investment
basis and formally reviewed every five years, the
process. If this service were to be provided by
next review scheduled to be held during the
the auditors, the specific team engaged would
current financial year. The Audit and Compliance
be independent of the audit team.
Committee reviewed auditor performance
during the year and concluded that Ernst & Details of the fees paid to the auditors are
Young LLP’s appointment as the Company’s disclosed in note 6 to the financial statements on
auditors should be continued. page 90.
The Audit and Compliance Committee
Audit information
recognises the importance of ensuring the
Pursuant to section 234ZA (2) of the
independence and objectivity of the Company’s
Companies Act 1985, each of the Directors
auditors. It reviews the nature and extent of the
confirms that: (a) so far as they are aware, there
services provided by them, the level of their fees
is no relevant audit information of which the
and the element comprising non-audit fees.
Company’s auditors are unaware; and (b) they
The Audit and Compliance Committee Chairman
have taken all steps they ought to have taken to
is notified of all assignments allocated to Ernst &
make themselves aware of any relevant audit
Young over a set threshold, other than those
information and to establish that the Company’s
related to due diligence within the Group’s
auditors are aware of such information.
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:

Directors’ remuneration report
Remuneration Committee
Composition and terms of reference
The Remuneration Committee (the “Committee”) comprises independent non-executive Directors, together with Baroness Hogg (Chairman of
the Board). Its members during the year to 31 March 2008 (the “year”) were Sir Robert Smith (Committee Chairman), Mme C J M Morin-Postel,
Mr O H J Stocken, Baroness Hogg (from 11 July 2007), Mr W Mesdag (from 11 July 2007), Mr F D Rosenkranz (until 11 July 2007) and
Mr F G Steingraber (until 11 July 2007). The Committee’s terms of reference take into account the provisions of the Combined Code on corporate
governance and are available on the Company’s website.
Activities during the year
The Committee met six times during the year to consider remuneration policy and to determine and consider, on behalf of the Board, the specific
remuneration packages and co-investment and carried interest arrangements for executive Directors and other members of Management Committee.
The Committee also reviewed the fees payable to the Chairman of the Board. Details of Committee members’ attendance at Committee meetings are
set out in the Directors’ report.
Assistance to the Committee
Persons who materially assisted the Committee with advice on Directors’ remuneration in the year were: Kepler Associates, external remuneration
advisers appointed by the Committee; the Chairman of the Board, Baroness Hogg (until her appointment as a member of the Committee on
11 July 2007); the Chief Executive, Mr P E Yea; and the Group’s Human Resources Director, Ms D R Collis. (Ms D R Collis was not appointed by
the Committee). Baroness Hogg, Mr P E Yea and Ms D R Collis did not advise the Committee on their own remuneration. Kepler Associates did not
provide any other services to the Group during the year.
Background
The Company operates in the private equity sector and is a constituent of the FTSE 100 Index. The majority of the Company’s competitors are either
partnerships of individuals managing funds for investment on behalf of third parties or unquoted subsidiaries of larger banking or financial services
groups. In the private equity industry the ability of trained and experienced executives to gain substantial rewards remains and therefore maintaining
a remuneration structure to support the recruitment and retention of senior executives continues to be critical. In addition to cash bonuses, it is
market practice for investment executives in the private equity sector to be given the opportunity to participate in co-investment and carried
interest investment plans which create close alignment of the executives’ interests with those of investors in the funds that they manage or advise.
The executives put their own money at risk by co-investing and are able to share directly in the future returns on investments, subject normally to
a variety of conditions relating to the performance of those investments.
The left hand graph below compares the Company’s total shareholder return (“3i TSR”) for the five financial years to 31 March 2008 with the total
shareholder return of the FTSE All-Share Index. The Directors consider that since the Company invests in a broad range of industrial and commercial
sectors, this continues to be the most appropriate index against which to compare the Company’s total shareholder return. Additional information is
provided by the right hand graph below, which compares percentage changes in the Company’s diluted net asset value per share over each of the last
five financial years (with dividends re-invested) with the FTSE All-Share Index total return over the same periods. This has been included as net asset
value growth is one of the tests used in the Company’s long-term incentive schemes.
3i total shareholder return versus FTSE All-Share total return 3i diluted NAV versus FTSE All-Share total return
(cumulative) (non-cumulative)
%
340 60
300
40
260
20
220
0
180
–20
140
100 –40
60 –60
2003 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008
3i FTSE All-Share rebased to 100 at 1 April 2003 3i diluted NAV (with dividends re-invested) FTSE All-Share

Directors’ remuneration policy

The Committee made no changes in Directors’ remuneration policy during the year but, following consultation with major shareholders in 2007, revised
a number of the targets and limits for executive Directors’ remuneration arrangements as explained below.
Non-executive Directors
The Company’s policy for the financial year to 31 March 2009 (the “coming year”) for non-executive Directors (including the Chairman) continues to
be to pay fees which are competitive with the fees paid by other financial services companies of broadly similar UK market capitalisation. Non-executive
Directors are not eligible for bonuses, share options, long-term incentives, pensions or performance-related remuneration. The Company does not
currently expect its policy on non-executive Directors’ remuneration for subsequent financial years to change significantly. Non-executive Directors’
fees (other than those of the Chairman, which are determined by the Committee) are regularly reviewed and determined by the Board as a whole,
within the limits set by the Company’s Articles of Association from time to time, having taken advice from the Committee’s remuneration advisers.
Details of non-executive Directors’ remuneration for the year, which include fees for sitting on or chairing Board committees (where relevant), are set
out in the table on page 70. During the year, arrangements were introduced to ensure that non-executive Directors (other than those based in the US)
take part of their basic fee in the form of ordinary shares in the Company: for non-executive Directors this amounted to 1,000 shares a year; and for
the Chairman 5,000 shares a year, purchased in November each year.
Executive Directors
The Company’s policy for the coming year for executive Directors is to provide remuneration and other benefits sufficient to attract, retain and
motivate executives of the calibre required. Variable remuneration (comprising annual cash bonuses, deferred share bonuses and long-term incentives)
is intended to form a substantial component of total remuneration. When setting executive Directors’ remuneration, the Committee is able to evaluate
corporate performance on environmental, social and governance issues.
(a) Salaries and bonuses
The Committee is sensitive to wider issues including pay and employment conditions elsewhere in the Group when setting executive Directors’ pay
levels and takes into account the Company’s reward strategy generally, before deciding specific packages for the executive Directors. The average
percentage increases in base salaries per annum for members of Management Committee (including executive Directors) and for other executive staff
in the UK employed in the period from 31 March 2007 to 31 March 2008 were 5.6% and 11.5% respectively.
Policy for the coming year for:
(i) the Chief Executive and Finance Director continues to be to pay salaries, and if appropriate discretionary bonuses, which are competitive with those
paid by other financial services companies of broadly similar UK market capitalisation. Salary supplements are paid to both, to enable them to make
additional pension provision; and
(ii) executive Directors responsible for investment business, currently only Mr Queen, continues to be to pay salaries, and if appropriate discretionary
bonuses, competitive with those paid in the private equity industry.
Executive Directors’ discretionary annual bonuses are non-pensionable. Target bonuses for each executive Director are determined by the Committee
at the beginning of each year. Bonus awards are assessed against the achievement of corporate, personal and business targets. Following consultation
with 3i’s major shareholders in 2007 on executive Directors’ remuneration, bonus targets were revised for 2007-08. The Chief Executive and
Mr Queen had target bonuses of 125% of base salary, whilst the Finance Director had a target bonus of 100% of base salary. Bonuses above target
will only be paid to executive Directors for outstanding performance, and the maximum is twice the target bonus. For both the Chief Executive and the
Finance Director, any bonus over 100% of base salary will be in shares deferred for two years and for Mr Queen any bonus in excess of 1.5 times
target will be in shares deferred for two years. However, this year the approach for Mr Queen was that any bonus in excess of 1 times target (excluding
the exceptional bonus referred to in note 1 on page 78) would be paid in deferred shares. The Committee retains discretion to make adjustments to
bonus arrangements in appropriate circumstances.
The main measures used to assess corporate performance for the year were: total shareholder return and change in net asset value per share, both in
absolute terms and compared with the FTSE All-Share Index; total non market-driven return; and one to three year internal rate of return compared
with performance of other companies in the private equity industry. In forming its overall judgment the Committee also took into account a number of
more detailed indicators of performance and activity, such as the level of investment, realised profits and costs. The Committee’s view, after taking
account of the performance measures referred to above, was that bonuses above target although below maximum were appropriate for all three
executive Directors. This was in light of strong total return on opening shareholders’ funds of 18.6% and the fact the greater part of this came from
non market-driven factors. On a three year performance basis, returns outperformed the European private equity industry. Realised profits on the sale
of investments of £523 million were high as were levels of investment at £2,160 million and realisation proceeds at £1,742 million. Within the
maximum of two times target bonus, combined awards ranged from 1.52 to 1.65 times target, which translated into 1.0 to 1.24 times salary in cash
and 0.52 to 0.94 times salary in shares deferred for two years.

Directors’ remuneration report continued
(b) Long-term incentives

During the year, long-term incentive arrangements for the Chief Executive and Finance Director consisted of share options, Performance Share awards
and Super-performance Share awards under the 3i Group Discretionary Share Plan (“the Discretionary Share Plan”).
The Discretionary Share Plan The Discretionary Share Plan is a shareholder-approved executive share plan conforming with the Association of British
Insurers’ guidelines on dilution limits. The level of annual awards of options, Performance Shares and Super-performance Shares is reviewed each
year taking account of market practice, individual performance, the specific circumstances facing the Company and calculations of the fair values of
awards. During the year, the Company’s policy was that maximum annual awards should be market price options with an aggregate exercise price of
six times annual salary and three times salary in respect of Performance Shares and Super-performance Shares. This was subject to an overall limit
on the fair value of all share-based awards of 2.5 times salary. During the year awards were made to the Chief Executive and to the Finance Director
with face values of approximately six times salary in share options, 1.9 times salary in Performance Shares and 1.1 times salary in Super-performance
Shares.
The Committee’s remuneration advisers calculate the fair values of share-based awards. For the coming year, these fair values have been calculated by
the Committee’s remuneration advisers to be 17% of face value for share options, 52% of face value for Performance Share awards and 24.4% of face
value for Super-performance Share awards. These fair values are subject to re-calculation in changing market conditions.
The Infrastructure Incentive Plan The Infrastructure Incentive Plan is a part-deferred bonus plan established during the year to provide senior members
of the Infrastructure team, including Mr Queen, with incentives aligning the interests of the executives with those of the Group and investors in
3i Infrastructure Limited.
The Company does not currently have any plans to alter its policy on executive Directors’ remuneration for the coming year.
Directors’ remuneration during the year

(note 1) (note 2) (note 3) (note 4) Total Total
remuneration remuneration
Total salary, year to year to
Salary and Salary fees and Deferred Benefits 31 March 31 March
fees supplements supplements Bonus share bonus in kind 2008 2007
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Executive Directors
P E Yea 773 249 1,022 790 741 23 2,576 2,152
S P Ball 492 72 564 490 255 2 1,311 1,252
M J Queen 427 – 427 1,270 346 2 2,045 1,357
Non-executive Directors
Baroness Hogg 290 – 290 – – – 2908 260
O H J Stocken 113 – 113 – – – 113 103
C J M Morin-Postel 64 – 64 – – – 64 54
W Mesdag (from 11 July 2007) 42 – 42 – – – 42 –
Sir Robert Smith 74 – 74 – – – 74 61
F G Steingraber 60 – 60 – – – 60 51
R W A Swannell 61 – 61 – – – 61 30
Former Directors
F D Rosenkranz (until 11 July 2007) 15 – 15 – – – 15 57
Total 2,411 321 2,732 2,550 1,342 27 6,651 5,377
Notes
1 Mr P E Yea and Mr S P Ball received salary supplements to enable them to make additional pension provision.
2 Bonuses relate to the year to 31 March 2008 and are expected to be paid in June 2008 save that £750,000 of the bonus shown for Mr M J Queen represented the exceptional bonus
described in note 1 on page 78 and paid in July 2007.
3 Deferred share bonuses relate to the year to 31 March 2008 and will be paid in shares in the Company, deferred for two years.
4 “Benefits in kind” were company car (Mr P E Yea) and health insurance (Mr P E Yea, Mr S P Ball and Mr M J Queen).
5 In addition to the salaries and fees shown, executive Directors’ retained fees from outside directorships as follows: Mr P E Yea, £105,000 (Vodafone Group plc); Mr S P Ball, £65,000
(Cable & Wireless plc); and Mr M J Queen, £38,923 (Northern Rock plc).
6 Amounts payable to former Directors in respect of the year were as follows: Dr P Mihatsch, £71,811 (Chairman of the Company’s German Advisory Board); and Mr W J R Govett,
£12,000 (as director of Gardens Pension Trustees Limited, a trustee of the 3i Group Pension Plan).
7 As at 31 March 2008, executive Directors’ salaries were as follows: Mr P E Yea, £790,000 pa plus a salary supplement of £260,000 pa; Mr S P Ball, £490,000 pa plus a salary
supplement of £73,500 pa; and Mr M J Queen, £420,000 pa.
8 Before the year to 31 March 2008, the Chairman’s remuneration had remained unchanged for 2 years.

Share options
Options granted under the Company’s executive share option plans entitle executives to acquire ordinary shares, at an exercise price based on market
price at the date of grant, from the third until the tenth anniversaries of grant. Vesting of such options is normally subject to the satisfaction of a
performance condition, set at the time of the grant, which is calculated over a three-year performance period. Performance conditions for options
granted to Directors since 1 April 2001 are summarised below.
For NAV growth between minimum
Award granted NAV growth required for minimum vesting % vesting NAV growth required for maximum vesting % vesting and maximum vesting levels
Since At least
31 March 2005 RPI + 3 percentage points 30% RPI + 8 percentage points 100% The grant vests pro rata
In year to At least
31 March 2005 RPI + 3 percentage points 50% RPI + 8 percentage points 100% The grant vests pro rata
Between
1 April 2001 At least
and 31 March 2004 RPI + 5 percentage points 50% RPI + 10 percentage points 100% The grant vests pro rata
Notes
1 NAV growth refers to annual percentage compound growth in net asset value per share with dividends reinvested, relative to the annual percentage change in RPI.
2 For options granted after 31 March 2004 there is no opportunity for the performance condition to be retested after the three-year performance period.
These performance conditions are based on increases in net asset value per ordinary share to enable a significant proportion of relevant executive
Directors’ potential remuneration to be linked to an increase in the assets per ordinary share of the Company. The intention is to approximate to the
performance conditions attached to carried interest investment plans in the private equity industry whilst retaining the essential feature of aligning
executives’ interests with those of the Company’s shareholders. The performance conditions were chosen as being appropriately demanding in the
prevailing market conditions at the time of grant.

Options held by Directors who held office during the year were:
Market price
Held at Granted Exercised Lapsed Held at Exercise on date Earliest
Date of 1 April during during during 31 March price of exercise normal
grant 2007 the year the year the year 2008 £ £ exercise date Expiry date
P E Yea 21.07.04 314,410 – – – 314,410 5.73 21.07.07 20.07.14
21.06.05 259,740 – – – 259,740 6.93 21.06.08 20.06.15
14.06.06 322,966 – – – 322,966 8.36 14.06.09 13.06.16
18.06.07 – 368,129 – – 368,129 11.74 18.06.10 17.06.17
897,116 368,129 – – 1,265,245
S P Ball 17.05.05 245,022 – – – 245,022 6.53 17.05.08 16.05.15

21.06.05 48,100 – – – 48,100 6.93 21.06.08 20.06.15
14.06.06 200,956 – – – 200,956 8.36 14.06.09 13.06.16
18.06.07 – 230,080 – – 230,080 11.74 18.06.10 17.06.17
494,078 230,080 – – 724,158
M J Queen 06.07.99 36,002 – – – 36,002 7.28 06.07.02 05.07.09

28.06.00 30,795 – – – 30,795 13.75 28.06.03 27.06.10
27.06.02 184,318 – – (52,715) 131,603 6.73 27.06.05 26.06.12
25.06.03 57,218 – – – 57,218 5.68 25.06.06 24.06.13
23.06.04 89,552 – – – 89,552 6.03 23.06.07 22.06.14
21.06.05 44,733 – – – 44,733 6.93 21.06.08 20.06.15
442,618 – – (52,715) 389,903
The performance condition has not yet been met for those options shown in blue.
Notes
1 The fair values of awards made in the year were as follows: Mr P E Yea, £993,600 and Mr S P Ball, £621,000. These fair values have been calculated by the Committee’s remuneration
advisers using a Monte Carlo simulation based on appropriate assumptions. The fair value of the share options granted during the year was calculated as being 23% of the market value
at the date of grant of the shares under option.
2 On 16 July 2007, the Company issued 11 B shares for every 8 ordinary shares of 6269⁄88p each existing on 13 July 2007. This was followed by a share consolidation, of 17 new ordinary
shares of 7319⁄22p for every 20 ordinary shares of 6269⁄88p. This was designed to maintain the price per share, other things being equal, at the same level after the bonus issue of
B shares as before it. As a result of this consolidation there was no need to adjust the number of shares comprised in option awards or the exercise price per share and options took effect
following the consolidation as options over new ordinary shares of 7319⁄22p.
3 Options granted before 1 April 2001 were granted under The 3i Group 1994 Executive Share Option Plan (the “1994 Plan”) and vested provided a performance condition was met over
a rolling three-year period. This required adjusted net asset value per share (after adding back dividends paid during the performance period) at the end of the three-year period to equal
or exceed the net asset value per share at the beginning of the period compounded annually over the period by the annual increase in the RPI plus 4%.
4 The Committee determines the fulfilment of performance conditions based on calculations which are independently reviewed by the Company’s auditors. These performance conditions
require net asset value per ordinary share at the beginning and end of the performance period to be calculated on a consistent basis using the same accounting policies. Where accounting
policies have altered between the beginning and end of the period, the Committee adjusts the net asset value calculations appropriately to ensure consistency. The Committee also has
power to adjust the calculations to reflect circumstances including changes to the capital of the Company. During the period the Committee made appropriate adjustments to reflect the
bonus issue of B shares, the consolidation of the Company’s share capital and the repurchase by the Company of its own shares.
5 The market price of ordinary shares in the Company at 31 March 2008 was 830p and the range during the period 1 April 2007 to 31 March 2008 was 733.5p to 1,231p. No Directors
exercised share options during the year. Accordingly, no gains were made by the highest paid director (2007: nil) or by all the Directors in aggregate (2007: £402,467).
6 As at 31 March 2008, 16.65 million ordinary shares had been issued or remained issuable in respect of share options granted under Discretionary Share Plans within the past 10 years.
This was within the 5% dilution limit for such plans specified in the guidelines issued by the Association of British Insurers. As as 31 March 2008, 18.93 million ordinary shares had been
issued or remained issuable in respect of awards granted under “all employee” plans within the past 10 years. This was within the 10% dilution limit for such plans specified in the above
mentioned guidelines.

Performance Share and Super-performance Share awards

These are awards of shares subject to a performance condition.
(a) Performance Shares
Awards made during the year will vest based on the outperformance of the 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). If the growth in value for the Company is below that for the FTSE 100 Index, no part of the award will vest.
If growth in value is the same as the Index, 35% of the award will vest and for outperformance above 8% per annum the full award will vest.
At outperformance between these two levels of performance, the award will vest on a pro rata basis.
Performance Share awards made before 1 April 2007 vest 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 vest. At a rank of 50%, 35% of the shares vest and at 75% all the shares vest. Between these points shares vest pro rata.
These performance conditions were chosen to align the interests of participants and shareholders by linking remuneration to shareholder returns
relative to a comparator index of which the Company is a constituent. The Committee determines whether conditions have been met based on
calculations prepared by the Committee’s remuneration advisers.
Performance Share awards of ordinary shares and related B shares are detailed below.
(note 2) Market
Adjustment price on
during Granted/issued Lapsed Held at grant Date of
Date of Held at 1 April 2007 the year during the year Vested during the year during the year 31 March 2008 £ vesting
award Ordinary B Ordinary Ordinary B Ordinary B Ordinary B Ordinary B Ordinary B
P E Yea 21.07.04 149,633 176,840 (22,445) – 205,746 (124,262) (373,785) (2,926) (8,801) – – 5.73 31.07.07
14.07.05 76,563 90,484 (11,485) – 105,274 – – – – 65,078 195,758 6.98 14.07.08
20.07.06 36,537 – (5,481) – 50,238 – – – – 31,056 50,238 8.60 20.07.09
30.07.07 – – – 124,250 – – – – – 124,250 – 11.01 30.07.10
262,733 267,324 (39,411) 124,250 361,258 (124,262) (373,785) (2,926) (8,801)220,384 245,996
S P Ball 14.07.05 21,267 25,134 (3,191) – 29,242 – – – – 18,076 54,376 6.98 14.07.08
20.07.06 22,734 – (3,411) – 31,259 – – – – 19,323 31,259 8.60 20.07.09
30.07.07 – – – 77,656 – – – – – 77,656 – 11.01 30.07.10
44,001 25,134 (6,602) 77,656 60,501 – – – – 115,055 85,635
MJQueen 23.06.04 74,584 88,145 – – – (67,125) (79,330) (7,459) (8,815) – – 6.03 09.07.07
74,584 88,145 – – – (67,125) (79,330) (7,459) (8,815) – –
Notes
1 The fair values of Performance Share awards made in the year were as follows: Mr P E Yea, £711,360 and Mr S P Ball, £444,600. These fair values were calculated by the Committee’s
remuneration adviser using a Monte Carlo simulation based on appropriate assumptions. The fair value of the Performance Shares awarded during the year was calculated as being 52%
of the market value at the date of award of the shares subject to the award.
2 Ordinary shares held at 1 April 2007 were ordinary shares of 6269⁄88p each. “Adjustment during the year” refers to the change in the number of ordinary shares in the award resulting from
the consolidation of the Company’s share capital on 16 July 2007. Ordinary shares held at 31 March 2008 were ordinary shares of 7319⁄22p each.
3 For Performance Share awards granted prior to 1 April 2007 (including related B shares), dividends during the year (including dividends on related B Shares) were re-invested net of tax in
further ordinary shares of the Company. These shares, which are in addition to the above Performance Share awards, are required to be held for the remaining vesting period to which they
relate, but are not forfeitable. Such shares attributable to Directors during the year were as follows: Mr P E Yea, 1,605 ordinary shares; and Mr S P Ball, 588 ordinary shares.
4 The market prices of ordinary shares on the dates of vesting of Mr Yea’s and Mr Queen’s awards granted in 2004, shown above, were £10.78 and £11.62 respectively.
5 Bonus issues of B shares were made on: 17 July 2006 on the basis of one B share for each ordinary share held as at 14 July 2006; and 16 July 2007 on the basis of 11 B shares for every
eight ordinary shares held as at 13 July 2007. B shares may, in certain circumstances, be repurchased by the Company at a price of 127p per share. The B shares detailed above are
regarded as forming part of the award from which they derived.

(b) Super-performance Shares

Super-performance Shares are subject to a particularly challenging performance condition. The performance condition is measured over a three-year
period. If the condition is satisfied, the awards remain subject to a further two-year holding period before they vest.
Percentage of the
Annual percentage compound growth in net asset value per share with dividends re-invested, relative to the annual percentage change in RPI grant vesting
Below RPI + 10 percentage points 0%
At RPI + 10 percentage points 25%
At levels of performance between RPI + 10 percentage points and RPI + 13.5 percentage points the grant will vest pro rata
(between 25% and 50% of the grant)
At RPI + 13.5 percentage points 50%
At levels of performance between RPI + 13.5 percentage points and RPI + 17 percentage points the grant will vest pro rata
(between 50% and 100% of the grant)
At least RPI + 17 percentage points 100%
The performance condition was chosen to add to the mix of long-term incentives a further incentive to achieve outstanding levels of shareholder
returns. The Committee will determine whether the condition has been met based on calculations independently reviewed by the Company’s auditors.
Super-performance Share awards of ordinary shares and related B shares are detailed below.
(note 2) Market
price
Adjustment on
Held at during Granted/Issued Vested Held at grant
Date of 1 April 2007 the year during the year during the year 31 March 2008 £ Date of
award Ordinary B Ordinary Ordinary B Ordinary B Ordinary B Ordinary vesting
P E Yea 29.11.06 133,261 – (19,990) – 183,233 – – 113,271 183,233 9.69 29.11.11
29.03.07 25,000 – (3,750) – 34,375 – – 21,250 34,375 11.44 29.03.12
13.11.07 – – – 85,321 – – – 85,321 – 10.19 13.11.12
158,261 – (23,740) 85,321 217,608 – – 219,842 217,608
S P Ball 29.11.06 84,264 – (12,640) – 115,863 – – 71,624 115,863 9.69 29.11.11
29.03.07 15,000 – (2,250) – 20,625 – – 12,750 20,625 11.44 29.03.12
13.11.07 – – – 52,920 – – – 52,920 – 10.19 13.11.12
99,264 – (14,890) 52,920 136,488 – – 137,294 136,488
M J Queen 29.11.06 82,559 – (12,384) – 113,518 – – 70,175 113,518 9.69 29.11.11
82,559 – (12,384) – 113,518 – – 70,175 113,518
Notes
1 The fair values of Super-performance Share awards made in the year were as follows: Mr P E Yea, £212,036 and Mr S P Ball, £131,516. These fair values were calculated by the
Committee’s remuneration adviser using a Monte Carlo simulation based on appropriate assumptions. The fair value of the Super-performance Shares awarded during the year was
calculated as being 24.4% of the market value at the date of award of the shares subject to the award.
2 Ordinary shares held at 1 April 2007 were ordinary shares of 6269⁄88p each. “Adjustment during the year” refers to the change in the number of shares in the award resulting from
the consolidation of the Company’s share capital on 16 July 2007. Ordinary shares held at 31 March 2008 were ordinary shares of 7319⁄22p each.
3 A bonus issue of B shares was made on 16 July 2007 on the basis of 11 B shares for every eight ordinary shares held as at 13 July 2007. B shares may, in certain circumstances,
be repurchased by the Company at a price of 127p per share. The B shares detailed above are regarded as forming part of the award from which they derived.

Share Incentive Plan

The HM Revenue and Customs approved Share Incentive Plan is open to eligible UK employees and is intended to encourage employees to invest in the
Company’s shares. Participants 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 re-invested in further ordinary shares (“dividend shares”). The extent of executive
Directors’ participation in the Plan is detailed below.
Held at 1 April 2007 Held at 1 April 2007 Held at 1 April 2007 Held at 31 March 2008 Held at 31 March 2008 Held at 31 March 2008
Partnership shares Matching shares Dividend shares Partnership shares Matching shares Dividend shares
Ordinary B Ordinary B Ordinary B Ordinary B Ordinary B Ordinary B
P E Yea 381 318 764 639 46 35 466 886 933 1,777 59 98
S P Ball 278 196 557 394 13 4 379 623 757 1,247 26 22
M J Queen 921 956 1,843 1,914 274 267 926 2,154 1,850 4,313 281 575
Notes
1 Ordinary shares at 1 April 2007 were ordinary shares of 6269⁄88p each. On 16 July 2007 shares in the plan were consolidated on the same basis as the Company’s other issued shares.
Ordinary shares at 31 March 2008 were ordinary shares of 7319⁄22p.
2 In the period from 1 April 2008 to 30 April 2008, Mr P E Yea acquired a further 15 partnership ordinary shares and 30 matching ordinary shares and Mr S P Ball and Mr M J Queen each
acquired a further 14 partnership ordinary shares and 28 matching ordinary shares.
3 During the year, ordinary shares were awarded under the Plan at prices between 833.7p and 1,204.3p per share and with a weighted average price of 1,026.4p per share.
4 Bonus issues of B shares were made on 17 July 2006 on the basis of one B share for each ordinary share within the Share Incentive Plan as at 14 July 2006 and on 16 July 2007 on the
basis of 11 B shares for every eight ordinary shares within the Share Incentive Plan as at 13 July 2007. B shares continue to be held in the Plan as detailed above.
The Infrastructure Incentive Plan

The Infrastructure Incentive Plan was established in order to align the remuneration arrangements of infrastructure executives with both the interests
of the Group and the objectives of investors in infrastructure assets, who expect to see much of their return in the form of yield. Under the Plan,
executives are granted a percentage interest in a bonus pool for each year. Executives are required to invest from their own resources in shares in
3i Infrastructure Limited as a condition of their award. The bonus pool comprises Advisory Fees and Performance Fees received by the Group as
investment adviser to 3i Infrastructure Limited. 50% of the participant’s share of the bonus pool is paid out shortly after the end of the year to which
the fees relate, 25% paid a year later and 25% paid a further year later. During the year, Mr Queen participated in the Plan and has undertaken to
invest approximately £1 million of his own money in 3i Infrastructure Limited shares over three years from 13 March 2007.
Scheme interests, being the percentage of the bonus
pool in which the participant is interested
Amounts Accrued
receivable value of
in respect scheme
of scheme interest
End of period interests as at
As at As at over which vested 31 March
1 April Awarded 31 March interests in year 2008
2007 in year 2008 may vest £’000 £’000
M J Queen
Vintage year 2007–08 Nil 16.4% 16.4% 31.03.10 Nil 1,569
Note
1 The accrued value of the scheme as at 31 March 2008 comprises an estimate of the value of scheme interests which are likely to vest in respect of the year and are expected to become
receivable by Mr Queen after that date. The amount which vests will be paid as follows: 50% in July 2008; 25% in July 2009; and 25% in July 2010.

Pension arrangements
The executive Directors are 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 (limited, in the case of members joining on or after 1 June 1989, to the plan earnings cap) on retirement
(normally at age 60). The Plan also provides death-in-service cover of four times final pensionable salary (limited to the earnings cap where this
applies), pensions payable in the event of ill health and spouses’ pensions on death. Further details of the Plan are set out in note 9 to the financial
statements on pages 91 and 92.
(note 1) (note 2) (note 1) (note 3) (note 4)
Transfer
Director’s value at
Increase own Increase Difference the end of
in accrued contributions in accrued between the year of
pension (excluding pension transfer values the increase
(excluding AVCs) paid (including Transfer Transfer at start and in accrued
Complete inflation) Total into the Plan inflation) value of value of end of the benefits
years of during the accrued during the during the the accrued the accrued accounting during the
pensionable year to pension at year to year to benefits at benefits at year, less year, less
Age at service at 31 March 31 March 31 March 31 March 31 March 31 March Director’s Director’s
31 March 31 March 2008 2008 2008 2008 2008 2007 contribution contribution
2008 2008 £’000 pa £’000 pa £’000 pa £’000 pa £’000 £’000 £’000 £’000
P E Yea 53 3 2.3 8.5 5.6 2.5 145.7 98.5 41.6 33.2
S P Ball 47 3 2.3 7.1 5.6 2.4 99.5 62.8 31.1 25.8
M J Queen 46 20 2.5 221.3 20.0 10.7 2,916.7 2,668.3 228.4 10.1
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 age 60.
3 The transfer values have been calculated on the basis of actuarial advice in accordance with the relevant professional guidance applicable at 31 March 2008 (Actuarial Guidance Note
GN11 (version 9.3)).
4 The transfer values have been calculated on the basis of actuarial advice in accordance with the relevant professional guidance applicable at 31 March 2007 (Actuarial Guidance Note
GN11 (version 9.2)).
5 Additional voluntary contributions are excluded from the above table.
6 The pensions shown above become payable at a Normal Retirement Age of 60. On early retirement from active membership of the Plan, there is a discretionary practice of calculating the
early retirement pension by applying a reduction factor less than the standard factor, in accordance with Company policy. This is not available to deferred pensioners and no allowance for it
is made in the calculations of cash equivalents for deferred pensioners under the Plan.
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.
Company policy is that executive Directors’ notice periods should not normally exceed one year. Mr P E Yea, Mr S P Ball and Mr M J Queen have
employment contracts with 3i plc dated 27 July 2004, 19 April 2005, and 22 June 1987 respectively. These contracts are terminable on 12 months’
notice given by the Company or six months’ notice given by the employee. 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 the Company can elect to give pay in lieu of notice.
In the case of Mr Yea, the Company can also elect to terminate employment without notice subject to making 12 monthly payments thereafter
equivalent to monthly basic pay and benefits less any amounts earned from alternative employment.

Co-investment plans and carried interest plans

In addition to the Directors’ remuneration arrangements, the Company also has in place capital investment plans which permit Mr Queen and other
investment executives to co-invest their own money in areas of the business where they work. These plans are designed to follow best practice in the
private equity industry. An explanation of how co-investment and carried interest plans operate can be found on pages 120 to 121.
The Company’s policy is that awards of carried interest are only normally made to executives who have taken up the opportunity offered to them of
participating in co-investment plans. The Chief Executive and the Finance Director are not eligible to participate in these plans.
Mr Queen has interests in the following co-investment and carried interest plans relating to the areas of the business for which he has responsibility.
Mr Queen’s interests are shown as a percentage of the relevant pools of investments.
(a) Co-investment plans
Amounts invested by Directors in co-investment plans were as follows:
Total
Invested to Invested invested to
1 April during 31 March
2007 the year 2008
£’000 £’000 £’000
M J Queen
Global Growth Co-invest 2006–08 97 Nil 97
Interests of Directors in co-investment plans during the year were as follows:
Scheme interests, being the percentage of
the relevant pool of investments in which
the participant is interested
Amounts Accrued
receivable in value of
year in respect scheme
of scheme interest
interests as at
As at As at 31 March
1 April Acquired 31 March 2008
2007 in year 2008 £’000 £’000
M J Queen
Global Growth Co-invest 2006–08 0.023% Nil 0.023% Nil Nil
Notes
1 As explained in last year’s report, in recognition of Mr Queen’s increased focus on infrastructure investment, his level of participation in the Global Growth 2006–08 carried interest plan
was cut by half and he ceased to be eligible to make any further related co-investment in the above plan with effect from 1 April 2007.
2 The accrued value of the scheme interest is calculated on the basis set out in note 5 on page 89. Accrued values can increase and decrease with investment valuations and other factors
and will not necessarily lead to a payment of the relevant amount to the participant.

(b) Carried interest plans

Interests of Directors in carried interest plans during the year were as follows:
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
Amounts Accrued
receivable in value of
year in respect scheme
of scheme interest
interests as at
As at As at 31 March
1 April Awarded 31 March 2008
2007 in year 2008 £’000 £’000
M J Queen
Pan-european Growth Capital 2005–06 2.18% Nil 2.18% 209 1,155
Infrastructure 2005–06 0.69% Nil 0.69% Nil see note 5
Primary Infrastructure 2005–06 0.53% Nil 0.53% Nil Nil
Global Growth 2006–08 0.34% Nil 0.34% Nil Nil
Notes
1 As explained above, in recognition of Mr Queen’s increased focus on infrastructure investment, his level of participation in the Global Growth 2006–08 carried interest plan was cut by
half, from 0.68% to 0.34% of investments (the figure shown is after this reduction). After consultation with major shareholders, it was decided that he would instead receive an
exceptional bonus, part of which is to be deferred over the three years to 2009-10.
2 Normally, before any payment to a participant becomes due under the carried interest plans, the Group and funds under its management must first have received back the amount of
their investment in the relevant vintage together with a management charge (ranging between 1% and 2.5% per annum) and a hurdle rate of 8% per annum compound on their
investment.
3 The accrued values of the scheme interests are calculated on the basis set out in note 5 on page 89. Accrued values can increase and decrease with investment valuations and other
factors and will not necessarily lead to a payment of the relevant amount to the participant.
4 The total carried interest, for all executives eligible to participate in each plan, does not exceed 15% of the relevant pool of investments made over a specific period (usually two years).
The proportion of the total carried interest that is allocated to an executive Director depends, amongst other matters, on the size of their investment team.
5 No accrued value available. During the year the Infrastructure 2005-06 assets and carried interest plan were transferred to 3i Infrastructure Limited. No Annual Accounts have yet been
produced by that company and consequently no accrued value of scheme interest is available.
Audit
The tables in this report (including the notes thereto) on pages 70 to 78 have been audited by Ernst & Young LLP.
By Order of the Board
Sir Robert Smith Chairman, Remuneration Committee

14 May 2008

Independent auditors’ report to the members of 3i Group plc
We have audited the Group and parent company financial statements (the “financial statements”) of 3i Group plc for the year ended 31 March 2008
which comprise the Consolidated income statement, the Group and parent company Balance sheets, the Group and parent company Cash flow
statements, the Group and parent company Reconciliation of movements in equity, the Group and parent company Statement of recognised income
and expense and the related notes 1 to 35. These financial statements have been prepared under the accounting policies set out therein. We have also
audited the information in the Directors’ remuneration report that is described as having been audited.
This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. 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 auditors’ 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 auditors

The directors’ responsibilities for preparing the Annual Report, the Directors’ remuneration report and the financial statements in accordance with
applicable United Kingdom law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement
of directors’ responsibilities.
Our responsibility is to audit the financial statements and the part of the Directors’ remuneration report to be audited in accordance with relevant legal
and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of
the Directors’ remuneration report to be audited have been properly prepared in accordance with the Companies Act 1985 and, as regards the Group
financial information, Article 4 of the IAS Regulation. We also report to you whether in our opinion the information given in the Directors’ report
is consistent with the financial statements.
In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions are not disclosed.
We review whether the corporate governance information reflects the Company’s compliance with the nine provisions of the 2006 Combined Code
specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether
the Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance
procedures or its risk and control procedures.
We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other
information comprises only the Directors’ report, the unaudited part of the Directors’ remuneration report, 3i Group investment policy, Ten largest
investments, Forty other large investments, additional financial information and information for shareholders. We consider the implications for our
report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend
to any other information.
Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit
includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Directors’
remuneration report to be audited. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation
of the financial statements, and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements and the part of the Directors’ remuneration report to be audited are
free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy
of the presentation of information in the financial statements and the part of the Directors’ remuneration report to be audited.
Opinion
In our opinion:
– the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group’s
affairs as at 31 March 2008 and of its profit for the year then ended;
– the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as applied
in accordance with the provisions of the Companies Act 1985, of the state of the parent company’s affairs as at 31 March 2008;
– the financial statements and the part of the Directors’ remuneration report to be audited have been properly prepared in accordance with
the Companies Act 1985 and, as regards the Group financial statements, Article 4 of the IAS Regulation; and
– the information given in the Directors’ report is consistent with the financial statements.
Ernst & Young LLP Registered auditor

London
14 May 2008

Consolidated
income statement
2008 2007
Notes £m £m
Realised profits over value on the disposal of investments 2 523 830
Unrealised profits on the revaluation of investments 3 291 323
814 1,153
Portfolio income
Dividends 56 81
Income from loans and receivables 149 158
Fees receivable 4 22 14
Gross portfolio return 1 1,041 1,406
Fees receivable from external funds 1 60 37
Carried interest
Carried interest receivable from external funds 5 60 81
Carried interest and performance fees payable 5 (152) (142)
Operating expenses 6 (274) (255)
Net portfolio return 735 1,127
Treasury interest receivable 10 89 91
Interest payable 10 (105) (100)
Movement in the fair value of derivatives 11 158 (29)
Exchange movements (44) (31)
Other income 12 1 1
Profit before tax 834 1,059
Income taxes 13 (6) (3)
Profit after tax and profit for the year 828 1,056
Earnings per share

Basic (pence) 29 207.9 220.4*
Diluted (pence) 29 173.4 217.9*
*As restated (note 29).

Statement
of recognised income and expense
Group Group Company Company

2008 2007 2008 2007
Notes £m £m £m £m
Profit for the year 828 1,056 882 1,099
Exchange differences on translation of foreign operations 6 5 – –
Revaluation of own-use property (1) 1 (1) 1
Actuarial (losses)/gains 9 (41) 13 – –
Total recognised income and expense for the year 792 1,075 881 1,100
Analysed in reserves as:

Revenue 27 111 134 94 88
Capital 27 675 936 787 1,012
Translation reserve 27 6 5 – –
792 1,075 881 1,100
Reconciliation of movements in equity


2008 2007 2008 2007
Total equity at start of year 4,249 4,006 4,020 3,746
Total recognised income and expense for the year 792 1,075 881 1,100
Share-based payments 8 8 9 8 9
Ordinary dividends 30 (70) (79) (70) (79)
Issue of B shares 22 (808) (700) (808) (700)
Issues of ordinary shares 27 19 18 19 18
Buy-back of ordinary shares 27 (120) (74) (120) (74)
Own shares 27 (13) (6) – –
Total equity at end of year 4,057 4,249 3,930 4,020

Balance
as at 31 March
sheet

2008 2007 2008 2007
Assets
Non-current assets
Investments
Quoted equity investments 14 889 570 770 498
Unquoted equity investments 14 3,209 2,609 1,050 1,253
Loans and receivables 14 1,918 1,183 513 474
Investment portfolio 6,016 4,362 2,333 2,225
Carried interest receivable 75 83 75 83
Interests in Group entities 15 – – 3,140 1,766
Property, plant and equipment 16 30 32 8 9
Total non-current assets 6,121 4,477 5,556 4,083
Current assets
Other current assets 17 49 197 182 168
Derivative financial instruments 19 24 21 24 21
Deposits 44 1,668 25 1,668
Cash and cash equivalents 752 486 611 346
Total current assets 869 2,372 842 2,203
Total assets 6,990 6,849 6,398 6,286
Liabilities
Non-current liabilities
Carried interest payable (110) (153) – (153)
Loans and borrowings 20 (1,509) (916) (1,224) (843)
B shares 22 (21) (11) (21) (11)
Subordinated liabilities 23 (14) (21) – –
Retirement benefit deficit 9 (38) (1) – –
Deferred income taxes 13 (2) (1) – –
Provisions 25 (5) (7) – –
Total non-current liabilities (1,699) (1,110) (1,245) (1,007)
Current liabilities
Trade and other payables 24 (166) (179) (308) (191)
Carried interest payable (140) (71) – (42)
Loans and borrowings 20 (373) (675) (373) (474)
Convertible bonds 21 (433) (363) (433) (363)
Derivative financial instruments 19 (108) (189) (108) (188)
Current income taxes (5) (2) (1) (1)
Provisions 25 (9) (11) – –
Total current liabilities (1,234) (1,490) (1,223) (1,259)
Total liabilities (2,933) (2,600) (2,468) (2,266)
Net assets 4,057 4,249 3,930 4,020
Equity
Issued capital 26 283 289 283 289
Share premium 27 397 387 397 387
Capital redemption reserve 27 42 27 42 27
Share-based payment reserve 27 21 18 21 18
Translation reserve 27 11 5 – –
Capital reserve 27 3,026 3,280 2,877 3,013
Revenue reserve 27 359 318 310 286
Own shares 27 (82) (75) – –
Total equity 27 4,057 4,249 3,930 4,020

14 May 2008

Cash flow statement


2008 2007 2008 2007
£m £m £m £m
Cash flow from operating activities
Purchase of investments (2,072) (1,503) (2,246) (1,693)
Proceeds from investments 1,824 2,364 1,733 2,458
Interest received 47 68 21 47
Dividends received 56 66 45 30
Portfolio fees received 22 17 – –
Fees received from external funds 61 37 – –
Carried interest received 67 76 67 76
Carried interest paid (154) (58) – –
Operating expenses (243) (202) (108) (114)
Income taxes paid (7) (8) 3 –
Net cash flow from operations (399) 857 (485) 804
Cash flow from financing activities

Proceeds from issues of share capital 19 18 19 18
Buy-back of ordinary shares (120) (74) (120) (74)
Purchase of own shares (21) (20) – –
Disposal of own shares 8 8 – –
Repurchase of B shares (798) (689) (798) (689)
Dividend paid (70) (79) (70) (79)
Interest received 95 80 88 73
Interest paid (125) (101) (79) (81)
Proceeds from long-term borrowings 591 1 592 –
Repayment of long-term borrowings (413) (2) (401) –
Net cash flow from short-term borrowings (133) 211 (133) 213
Net cash flow from deposits 1,624 (560) 1,643 (616)
Net cash flow from financing activities 657 (1,207) 741 (1,235)
Cash flow from investing activities

Purchases of property, plant and equipment (6) (9) – –
Sales of property, plant and equipment 1 2 – 1
Net cash flow from investing activities (5) (7) – 1
Change in cash and cash equivalents 253 (357) 256 (430)

Cash and cash equivalents at start of year 486 847 346 776
Effect of exchange rate fluctuations 13 (4) 9 –
Cash and cash equivalents at end of year 752 486 611 346

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 2008 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 14 May 2008.
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 1985.
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:
Effective for period beginning on or after
IFRS 2 Amendment – Share-based payments: Vesting conditions and cancellations 1 January 2009
IFRS 8 Operating Segments 1 January 2009
IAS 1 Presentation of Financial Statements (Revised) 1 January 2009
IAS 23 Borrowing Costs (Revised) 1 January 2009
IAS 27 Amendment – Consolidation and Separate Financial Statements 1 July 2009
IFRIC 12 Service Concession Arrangements 1 January 2008
IFRIC 13 Customer Loyalty Payments 1 July 2008
IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction 1 January 2008
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 early adopt.
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 judgments, 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 judgments about carrying values of assets and liabilities that are not readily apparent from other sources.
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 most significant techniques for estimation are described
in the accounting policies relating to the investment portfolio (Section E).
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. The income statement of the Company has been
omitted from these financial statements in accordance with section 230 of the Companies Act 1985.
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 income statement 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 and accounted for in accordance with IAS 39, with changes in fair value recognised in the income statement in the period of the change.

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 income statement. 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 directly in 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 quoted debt
instruments and are carried in the balance sheet at the value derived from the bid price of the underlying debt instrument 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:
– 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.
– Dividends from equity investments are recognised in the income statement when the shareholders’ rights to receive payment have been established except to the extent that dividends,
paid out of pre-acquisition reserves, adjust the fair value of the equity investment.
– 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.
F Fees receivable from external funds

(i) Fund management fees
The Group manages private equity funds, which primarily co-invest alongside the Group. 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.

Significant accounting policies continued
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 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 credited directly to the Capital reserve in equity except to the extent that it reverses a previous valuation deficit
on the same asset charged in the income statement in which case the surplus is recognised in the income statement 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 charged in the income statement.
Depreciation on revalued buildings is charged in the income statement over its 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 income statement over
the period of the agreement and represents a constant proportion of the balance of capital repayments outstanding.
I 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.
(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
Where Convertible Bonds have an issuer cash settlement option in addition to an equity conversion option, the Convertible Bonds 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 long-term liability on the
amortised cost basis until extinguished on conversion or redemption.
(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 currency 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 income statement.
(vi) Subordinated liabilities
The Group has some limited recourse funding, which individually finances investment assets, at various fixed rates of interest and whose maturity is dependent upon the disposal of the
associated assets. This funding is subordinated to other creditors of the individual Group entity to which the funds have been advanced and becomes non-repayable as the assets fail.
These liabilities are held in the balance sheet at the amount expected to be repayable based on the underlying assets. Changes in the amounts repayable as a result of changes in the
underlying assets are treated as other income in the income statement. Interest payable on subordinated liabilities is charged as it accrues by reference to the principal outstanding and
the effective interest rate applicable.

J Employee benefits
(i) Retirement benefit costs
Payments to defined contribution retirement benefit plans are charged to the income statement 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 income statement. Past service costs are recognised to the extent that they are vested in the income statement. Actuarial gains or losses
are recognised in full as they arise as part of the statement of recognised income and expense.
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 income statement 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 changes since the previous balance sheet is
recognised in the income statement, with a corresponding entry in equity.
K 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 income statement. 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.
L 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.
M 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.
N 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 income statement for the period.
O 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 income statement, 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 consolidated income statement 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.

Notes to the financial statements
1 Segmental analysis
Quoted Smaller
Growth Private Minority Venture
Buyouts Capital Infrastructure Equity Investments Capital Total
Year to 31 March 2008 £m £m £m £m £m £m £m
Realised profits over value on the disposal of investments 370 75 6 – 7 65 523
Unrealised profits on the revaluation of investments 245 160 43 (42) (27) (88) 291
Portfolio income 116 67 18 – 20 6 227
731 302 67 (42) – (17) 1,041
Fees receivable from external funds 39 2 18 1 – – 60
Net (investment)/divestment
Realisation proceeds 858 503 57 18 136 170 1,742
Investment (788) (990) (38) (182) (6) (156) (2,160)
70 (487) 19 (164) 130 14 (418)
Balance sheet
Value of investment portfolio at end of year 2,025 2,366 501 142 244 738 6,016
Quoted Smaller
Growth Private Minority Venture
Buyouts Capital Infrastructure Equity Investments Capital Total
Year to 31 March 2007 £m £m £m £m £m £m £m
Realised profits over value on the disposal of investments 538 235 (15) – 60 12 830
Unrealised profits on the revaluation of investments 123 269 3 6 (17) (61) 323
Portfolio income 127 65 27 – 31 3 253
788 569 15 6 74 (46) 1,406
Fees receivable from external funds 33 3 – – – 1 37
Realisation proceeds 1,341 691 5 – 214 187 2,438
Investment (498) (482) (380) (14) (2) (200) (1,576)
843 209 (375) (14) 212 (13) 862
Balance sheet
Value of investment portfolio at end of year 1,281 1,460 469 20 391 741 4,362
Continental
UK Europe Asia US Rest of World Total
Year to 31 March 2008 £m £m £m £m £m £m
Gross portfolio return 372 559 149 (30) (9) 1,041
Fees receivable from external funds 37 18 5 – – 60
Realisation proceeds 783 894 25 40 – 1,742
Investment (972) (707) (171) (303) (7) (2,160)
(189) 187 (146) (263) (7) (418)
Balance sheet
Value of investment portfolio at end of year 2,250 2,573 679 497 17 6,016
Continental
UK Europe Asia US Rest of World Total
Year to 31 March 2007 £m £m £m £m £m £m
Gross portfolio return 716 692 25 (27) – 1,406
Fees receivable from external funds 31 6 – – – 37
Realisation proceeds 1,169 1,159 54 56 – 2,438
Investment (650) (560) (259) (92) (15) (1,576)
519 599 (205) (36) (15) 862
Balance sheet
Value of investment portfolio at end of year 1,792 1,894 373 283 20 4,362

2 Realised profits over value on the disposal of investments

2008 2008 2008 2008 2007 2007 2007 2007*
Unquoted Quoted Loans and Unquoted Quoted Loans and
equity equity receivables Total equity equity receivables Total
£m £m £m £m £m £m £m £m
Net proceeds 1,081 199 462 1,742 1,647 145 646 2,438
Valuation of disposed investments (627) (162) (425) (1,214) (791) (146) (644) (1,581)
Investments written off (2) – (3) (5) (25) – (2) (27)
452 37 34 523 831 (1) – 830
*Restated for investment in external funds reclassified from loans and receivables to equity.
3 Unrealised profits on the revaluation of investments

2008 2008 2008 2008 2007 2007 2007 2007†
Unquoted Quoted Loans and Unquoted Quoted Loans and
equity equity receivables Total equity equity receivables Total
£m £m £m £m £m £m £m £m
Movement in the fair value of equity 415 64 – 479 431 (37) – 394
Provisions and loan impairments* (109) – (79) (188) (22) – (49) (71)
306 64 (79) 291 409 (37) (49) 323
*Included within loan impairments for the Group and Company is an £12 million value reduction for quoted debt instruments.
†Restated for investment in external funds reclassified from loans and receivables to equity.
Provisions have been recognised only on investments where it is considered there is a significant risk of failure. All other value movements are included within the movement in the fair value
of equity.
4 Fees receivable
2008 2007
£m £m
Fees receivable 45 30
Deal-related costs (23) (16)
22 14
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 to acquire an investment.
5 Carried interest
2008 2007
£m £m
Carried interest receivable from external funds 60 81
Carried interest and performance fees payable (152) (142)
(92) (61)
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 payable represents the amount payable to executives from the Group’s carried interest schemes. 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.

Notes to the financial statements continued
6 Operating expenses 8 Share-based payments (continued)

Operating expenses include the following amounts: The features of the Group’s share schemes are set out below. For legal or regulatory reasons
certain participants may be granted “phantom awards” under these schemes, which are
2008 2007 intended to replicate the financial effects of a share award without entitling the participant to
£m £m
acquire shares.
Depreciation of property, plant and equipment 7 6
Audit fees 1 1 Share options
(i) The 3i Group Discretionary Share Plan Options granted after 31 March 2001 were
Staff costs (note 7) 178 154
granted under the Discretionary Share Plan and are normally exercisable between the third
Services provided by the Group’s auditors and tenth anniversaries of the date of grant to the extent a performance target has been
During the year the Group obtained the following services from the Group’s auditors, Ernst & met over a performance period of three years from the date of grant. For options granted
Young LLP: between 1 April 2001 and 31 March 2003 and for options granted to three Directors in
June 2003, if the minimum threshold for vesting is not achieved in the first three years from
2008 2007 grant, the performance period is extended to four and then five years from the date of grant.
£m £m
For options granted between 1 April 2003 and 31 March 2004 the performance period is
Audit services extended only to four years from the date of grant. For options granted after 31 March
Statutory audit– Company 0.3 0.3 2004, there is no opportunity for the performance condition to be re-tested after the
– UK subsidiaries 0.6 0.6 three-year performance period.
– Overseas subsidiaries 0.4 0.4 Options granted between 1 April 2001 and 31 March 2003 were subject to a performance
Audit-related regulatory reporting 0.1 0.1 condition that options would vest if the annual compound growth (“ACG”) in net asset value
1.4 1.4 per share with dividends re-invested was RPI plus 5%. If this target was achieved then 50%
Non-audit services of the options would vest. If the ACG was in excess of RPI plus 10% then the maximum
Investment due diligence 0.4 1.0 number of shares would vest. Options would vest pro rata if the ACG was between these
two amounts. For options granted between 31 March 2003 and 1 April 2004 the target
Tax services (compliance and advisory services) 0.2 0.1 ACG was RPI plus 3% with maximum vesting at RPI plus 6%, except for options granted to
2.0 2.5 three Directors in June 2003 where the target ACG was RPI plus 5% with maximum vesting
Non-audit services at RPI plus 10%. For options granted after 1 April 2005 the target ACG was RPI plus 3% with
These services are services that could be provided by a number of firms, including general maximum vesting at RPI plus 8%.
consultancy work. Work is allocated to the auditors only if it does not impact the (ii) The 3i Group 1994 Executive Share Option Plan Options granted before 31 March
independence of the audit team. 2001 were granted under this plan and are normally exercisable between the third and tenth
In addition to the above, Ernst & Young LLP has received fees from investee companies. It is anniversaries of the date of grant provided that a performance condition has been met over
estimated that Ernst & Young LLP receive less than 10% of the total investment-related fees a rolling three-year period. This requires that the adjusted net asset value per share (with
paid to the four largest accounting firms. dividends re-invested) at the end of the three-year period is equal to or in excess of the net
asset value per share at the beginning of the period compounded annually over the period by
Ernst & Young LLP also acts as auditor to the 3i Group Pension Plan. The appointment of the the annual increase in the RPI plus 4%.
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 Details of share options outstanding during the year are as follows:
Group’s auditors for audit services to the pension scheme during the year were less than 2008 2008 2007 2007
£0.1 million (2007: less than £0.1 million). Weighted Weighted
Number of average Number of average
share options exercise price share options exercise price
7 Staff costs (pence) (pence)
Outstanding at
2008 2007
£m £m start of the year 16,894,767 712 25,304,158 745
Wages and salaries 130 110 Granted 1,360,430 1,165 1,411,173 839
Social security costs 20 16 Exercised (4,210,287) 637 (4,059,359) 577
Share-based payment costs (note 8) 12 12 Lapsed (1,467,797) 764 (5,761,205) 986
Pension costs (note 9) 16 16 Outstanding at end of year 12,577,113 781 16,894,767 712
178 154 Exercisable at end of year 6,821,753 735 7,636,530 742
The average number of employees during the year was 772 (2007: 765). Included within the total number of share options are options over 3 million (2007: 6 million)
shares that have not been recognised in accordance with IFRS 2 as the options were granted
Wages and salaries shown above include salaries paid in the year and bonuses relating to the on or before 7 November 2002. These options have not been subsequently modified and
year. These costs are charged against operating expenses. therefore do not need to be accounted for in accordance with IFRS 2.
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 income statement is shown below:
2008 2007
£m £m
Share options* 6 8
Performance shares* 2 1
Share incentive plan 1 1
Deferred bonus shares 3 2
12 12
*Credited to equity.

8 Share-based payments (continued) 8 Share-based payments (continued)

The range of exercise prices for options outstanding at the year end was: Super-performance Share awards made during the year were conditional awards of shares
which are subject to a particularly challenging performance condition. The performance
Year ended 31 March 2008 2008 2007 2007 condition requires annual percentage compound growth in the net asset value per share
Weighted Weighted
average average (with dividends re-invested) over the three-year period of RPI plus 10 percentage points per
exercise exercise annum to achieve minimum vesting of 25% of the award; RPI plus 13.5 percentage points
price price
Year of grant (pence) Number (pence) Number per annum to achieve 50% vesting; and RPI plus 17 percentage points per annum to achieve
1998 – – 505 277,622 maximum vesting.
1999 628 325,590 630 405,472 The performance condition is measured over a three-year period. If the condition is satisfied,
2000 819 579,862 884 756,975 the awards remain subject to a further two-year holding period before they vest.
2001 1,341 1,024,860 1,312 1,170,432 Super-performance Share awards made before 1 April 2007, were restricted awards which
2002 895 16,761 895 21,026 were transferred to the participants by the 3i Group Employee Trust on terms that the shares
2003 644 1,132,187 663 3,785,511 would be forfeited to the extent the performance condition was not satisfied and in certain
2004 571 1,088,933 571 1,414,290 other circumstances.
2005 597 2,408,538 599 4,247,510 Share Incentive Plan
2006 692 3,312,195 692 3,409,732 Eligible UK employees may participate in an Inland Revenue approved Share Incentive Plan
2007 839 1,388,851 839 1,406,197 intended to encourage employees to invest in the Company’s shares. Accordingly it is not
subject to a performance condition. During the year participants could invest up to £125 per
2008 1,165 1,299,336 – –
month from their pre-tax salaries in the Company’s shares (referred to as partnership shares).
781 12,577,113 712 16,894,767 For each share so acquired the Company grants two free additional shares (referred to as
Options are exercisable at a price based on the market value of the Company’s shares on the matching shares) which are normally subject to forfeiture if the employee ceases to be
date of grant. employed (other than by reason of retirement) within three years of grant. Dividends are re-
invested on behalf of participants in further shares (referred to as dividend shares).
The weighted average share price at the date of exercise during the year was 1,136p
(2007: 1,054p). The options outstanding at the end of the year have a weighted average Deferred Bonus Share Plan
contractual life of 6.07 years (2007: 6.34 years). The cost of share options is spread over Certain employees receive an element of their bonus as shares. These shares are held in trust
the vesting period of three to five years. The weighted average fair value of options granted for two years by the trustee of the 3i Group Employee Trust in a nominee capacity. The fair
during the year was 456p (2007: 331p). These fair values were calculated using the Black- value of the deferred shares is the share price at date of the award.
Scholes option pricing model. Employee trust
The inputs to this model were as follows: The Group has established the 3i Group Employee Trust which holds shares in 3i Group plc to
meet its obligations under certain share schemes. The share schemes which use this trust are
2008 2007 the 3i Group Discretionary Share Plan and the Deferred Bonus Share Plan.
Weighted average share price (pence) 1,195 849
Average expected volatility (%) 29 29 9 Retirement benefit deficit
Retirement benefit plans
Expected life (years) 8.5 8.5 (i) Defined contribution plans The Group operates a number of defined contribution
Average risk-free rate (%) 5.5 4.6 retirement benefit plans for qualifying employees throughout the Group. The assets of these
Average expected dividend yield (%) 1.7 1.6 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
The expected life of the option is based on the best estimate of the Directors following a
government. The French subsidiary is required to contribute a specific percentage of payroll
review of the profile of the award holders. Expected volatility was determined using an
costs to the retirement benefit scheme to fund the benefits.
average of the implied volatility on grant and historic share price volatility of the preceding
8.5 years. No options have been repriced during the year (2007: nil). The total expense recognised in profit or loss is £5 million (2007: £4 million), which
represents the contributions payable to these plans. There were no outstanding payments
Performance share awards
due to these plans at the balance sheet date.
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 (ii) Defined benefit scheme The Group operates a final salary defined benefit plan for
by the 3i Group Employee Trust on vesting. Awards are subject to a performance condition qualifying employees of its subsidiaries in the UK. The plan has not been offered to new
determining whether and to what extent the award will vest. There are two types of awards: employees joining 3i since 1 April 2006. The plan is a funded scheme, the assets of which are
conditional Performance Share awards and conditional Super-performance Share awards. independent of the Company’s finances and are administered by the trustees.
The performance condition for Performance Share awards made during the year is based on The last full actuarial valuation as at 30 June 2004 was updated on an IAS 19 basis by an
the outperformance of the theoretical growth in value of a shareholding in the Company independent qualified actuary as at 31 March 2008.
(with dividends reinvested) for the three year performance period from grant (averaged over
The principal assumptions made by the actuaries and used for the purpose of the year end
a 60 day period) compared to the growth in value of the FTSE 100 Index (with dividends
valuation were as follows:
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 2008 2007
outperformance level of 0% per annum, 35% of the award will vest and above 8% per Discount rate 6.0% 5.0%
annum the full award will vest. At outperformance levels between 0% and 8%, the award will
vest on a pro rata basis. Expected rate of salary increases 6.0% 4.5%
Expected rate of pension increases 3.8% 3.1%
Performance Share awards made before 1 April 2007, were restricted awards which vest Price inflation 3.5% 3.0%
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 Expected return on Plan assets 6.2% 6.1%
the FTSE 100 Index constituents at the grant date (adjusted for mergers, demergers and The post-retirement mortality assumptions used to value the benefit obligation at 31 March
delistings during the performance period). A company’s percentage rank is its rank in the 2008 are based on 80% PNA medium cohort with 1.5% pa minimum annual improvement
comparator group divided by the number of companies in the group at the end of the “PA00 medium cohort table” (2007: PA92 medium cohort table). The life expectancy of a
performance period expressed as a percentage. At a percentage rank below 50% no shares male member reaching age 60 in 2028 is projected to be 33.6 years compared to 30.2
vest. At a rank of 50%, 35% of the shares vest and at 75% all the shares vest. Between years for someone reaching 60 in 2008.
these points shares vest pro rata.

9 Retirement benefit deficit (continued) 9 Retirement benefit deficit (continued)

The amount recognised in the balance sheet in respect of the Group’s defined benefit plan is The history of the Plan is as follows:
as follows:
2008 2007 2006 2005 2004
£m £m £m £m £m
2008 2007
£m £m Present value of
Present value of funded obligations 515 480 defined benefit
Fair value of Plan assets (477) (479) obligation 515 480 472 390 355
Retirement benefit deficit 38 1 Fair value of
Plan assets (477) (479) (455) (367) (272)
Amounts recognised in the income statement in respect of the defined benefit plan are Deficit 38 1 17 23 83
as follows:
Experience
2008 2007 adjustments on
£m £m Plan liabilities (1)% 2% – (4)% (3)%
Included in operating costs Experience
Current service cost 10 12 adjustments on
Included in finance costs (note 10) Plan assets 6% – (11)% (4)% (3)%
Expected return on Plan assets (30) (26) The cumulative actuarial losses recognised in equity are £44 million (2007: losses £4 million).
Interest on obligation 24 22
The Group expects to make regular contributions of approximately £10 million to the Plan in
Included in statement of recognised income the year to 31 March 2009.
and expenses
Actuarial loss/(gain) 41 (14) German retirement scheme
Employees in Germany are entitled to a pension based on their length of service.
45 (6)
3i Deutschland GmbH contributes to individual investment policies for its employees and
Changes in the present value of the defined benefit obligation were as follows: has agreed to indemnify any shortfall on an employee’s investment policy should it arise.
The total value of 3i Deutschland GmbH’s investment policies intended to cover pension
2008 2007 liabilities is £4 million (2007: £3 million) and the future liability calculated by German
£m £m
actuaries is £5 million (2007: £5 million). The Group carries both the asset and liability
Opening defined benefit obligation 480 472 in its consolidated financial statements and has recognised an actuarial loss of £1 million
Current service cost 10 12 (2007: £1 million).
Past service cost 1 –
Interest cost 24 22 10 Net interest payable
Actuarial loss/(gain) 12 (15) 2008 2007
Contributions 1 – £m £m
Benefits paid (13) (11) Treasury interest receivable

Closing defined benefit obligation 515 480 Interest on bank deposits 83 87
Finance income on pension plan 6 4
Changes in the fair value of the Plan assets were as follows:
89 91
2008 2007 Interest payable
£m £m
Interest on loans and borrowings (86) (84)
Opening fair value of Plan assets 479 455
Interest on Convertible Bonds (4) (6)
Expected returns 30 26
Amortisation of Convertible Bonds (7) (7)
Actuarial loss (29) (1)
Subordinated borrowings (8) (3)
Contributions 10 10
(105) (100)
Benefits paid (13) (11)
Net interest payable (16) (9)
Closing fair value of Plan assets 477 479
Contributions paid to the Group Pension Plan are related party transactions as defined by 11 Movements in the fair value of derivatives
IAS 24 Related party transactions.
2008 2007
£m £m
The fair value of the Plan assets at the balance sheet date is as follows:
Forward foreign exchange contracts – 1
2008 2007
£m £m Currency swaps (1) –
Equities 261 268 Interest-rate swaps (3) 32
Gilts 217 213 Derivative element of Convertible Bonds 162 (62)
Other (1) (2) 158 (29)
477 479 Further information on interest-rate swaps is provided in note 19 and on 3i’s Convertible
Bonds in note 21. The fair value of the liability due to the equity element of 3i’s Convertible
The actual return on Plan assets for the year was £1 million (2007: £25 million).
Bonds has decreased, mainly due to the decrease in 3i’s share price in the year. The resulting
The Plan assets do not include any of the Group’s own equity instruments nor any property profit has been recognised in the income statement.
in use by the Group. The expected rate of returns of individual categories of Plan assets is
determined by reference to individual indices.

12 Other income 14 Investment portfolio

2008 2007 Group Group Group
£m £m 2008 2008 2008
Equity Loans and
Other financing income 1 1 investments receivables Total
£m £m £m
1 1
Opening book value 3,179 1,183 4,362
13 Income taxes Additions 1,102 1,058 2,160
Disposals, repayments and write-offs (791) (428) (1,219)
2008 2007
£m £m Revaluation 479 – 479
Current taxes Provision and impairment of loans and receivables (109) (79) (188)
Current year (5) (3) Other movements 238 184 422
Closing book value 4,098 1,918 6,016
Deferred taxes Quoted 889 – 889
Deferred income taxes (1) – Unquoted 3,209 1,918 5,127
Total income taxes in the income statement (6) (3) Closing book value 4,098 1,918 6,016
Reconciliation of income taxes in the income statement

The tax charge for the year is different to the standard rate of corporation tax in the UK, Group Group Group
2007 2007 2007
currently 30% (2007: 30%), and the differences are explained below: Equity Loans and
investments receivables Total
2008 2007 (as restated*) (as restated*)
£m £m £m £m £m
Profit before tax 834 1,059 Opening book value 2,878 1,261 4,139
Profit before tax multiplied by rate of corporation tax Additions 968 608 1,576
in the UK of 30% (2007: 30%) (250) (318) Disposals, repayments and write-offs (962) (646) (1,608)
Effects of: Revaluation 394 – 394
Permanent differences (3) 5 Provision and impairment of loans and receivables (22) (49) (71)
Short-term timing differences (8) 3 Other movements (77) 9 (68)
Current period unutilised tax losses (2) (7) Closing book value 3,179 1,183 4,362
Prior period utilised tax losses 18 8 Quoted 570 – 570
Non-taxable UK dividend income 10 15 Unquoted 2,609 1,183 3,792
Repatriated profits of overseas subsidiaries – (4) Closing book value 3,179 1,183 4,362
Foreign tax (5) (3) *Restated for investment in external funds reclassified from loans and receivables to equity.
Foreign tax credits available for double tax relief 1 4
The holding period of 3i’s investment portfolio is on average greater than one year. For this
Realised profits, changes in fair value
reason the portfolio is classified as non-current. It is not possible to identify with certainty
and impairment losses not taxable 233 294
investments that will be sold within one year.
Total income taxes in the income statement (6) (3)
Additions to loans and receivables includes £46 million (2007: £79 million) interest received
The Group’s realised profits, fair value adjustments and impairment losses are primarily by way of loan notes. A corresponding amount has been included in income from loans and
included in the Company, the affairs of which are directed so as to allow it to be approved as receivables.
an investment trust. An investment trust is exempt from tax on capital gains, therefore the
Group’s capital return will be largely non-taxable. Other movements include foreign exchange and conversions from one instrument into
another.
Deferred income taxes
2008 2007
Group Group
balance balance
sheet sheet
£m £m
Opening deferred income tax liability
Tax losses 12 2
Unrealised valuation surpluses on investments – –
Income in accounts taxable in the future (13) (3)
(1) (1)
Recognised through income statement
Tax losses utilised (7) 10
Valuation surplus now realised – –
Income in accounts taxable in the future 6 (10)
(1) –
Closing deferred income tax liability
Tax losses 5 12
Unrealised valuation surpluses on investments – –
Income in accounts taxable in the future (7) (13)
(2) (1)
At 31 March 2008 the Group had tax losses carried forward of £867 million (2007:
£588 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. These tax
losses are available to carry forward indefinitely. Deferred income taxes are calculated using
an expected rate of corporation tax in the UK of 28% (2007: 30%).

15 Interests in Group entities 16 Property, plant and equipment (continued)

Assets held under finance leases (all vehicles) have the following net book amount:
Company Company Company
2008 2008 2008 Group Group Company Company
Equity Loans and 2008 2007 2008 2007
investments receivables Total £m £m £m £m
£m £m £m
Opening book value 246 1,520 1,766 Cost 1 1 – –
Additions 31 2,171 2,202 Aggregate depreciation – – – –
Share of profits – 360 360 Net book amount 1 1 – –
Disposals and repayments (46) (1,229) (1,275) Finance lease rentals are payable as follows:
Impairment – (27) (27)
Exchange movements – 114 114 2008 2007 2008 2007
Closing book value 231 2,909 3,140 £m £m £m £m
Within one year – 1 – –
Details of significant Group entities are given in note 35.
Between one and five years 1 – – –
Company Company Company
2007 2007 2007 The Group’s freehold properties and long leasehold properties are revalued at each balance
Equity Loans and sheet date by professional valuers. The valuations were undertaken in accordance with the
investments receivables Total
£m £m £m Appraisal and Valuation Manual of the Royal Institute of Chartered Surveyors in the United
Kingdom by CBRE and Howell Brooks, independent Chartered Surveyors.
Opening book value 239 1,261 1,500
Additions 92 818 910 17 Other current assets
Share of profits – 483 483
Disposals and repayments (85) (982) (1,067) Group Group Company Company
2008 2007 2008 2007
Impairment – (1) (1) £m £m £m £m
Exchange movements – (59) (59) Prepayments 39 44 12 19
Closing book value 246 1,520 1,766 Other debtors 10 153 9 38
Amounts due from subsidiaries – – 161 111
16 Property, plant and equipment 49 197 182 168
2008 2007 2008 2007
Land and buildings £m £m £m £m
Opening cost or valuation 10 10 9 9
Additions at cost – – – –
Disposals – (1) – (1)
Revaluation (1) 1 (1) 1
Closing cost or valuation 9 10 8 9
Net book amount 9 10 8 9
Depreciation charged in the year on buildings was £0.2 million (2007: £0.1 million).
2008 2007 2008 2007
Plant and equipment £m £m £m £m
Opening cost or valuation 44 57 – –
Additions at cost 6 8 – –
Disposals (1) (21) – –
Closing cost or valuation 49 44 – –
Opening accumulated
depreciation 22 36 – –
Charge for the year 7 6 – –
Disposals (1) (20) – –
Closing accumulated
depreciation 28 22 – –
Net book amount 21 22 – –

18 Financial risk management

Introduction
A review of the Group’s objectives, policies and processes for managing and monitoring risk is set out in the Directors’ report (pages 38 to 43). This note provides further detail on financial
risk management, cross-referring to the Directors’ report where applicable, and includes quantitative data on specific financial risks.
The Group invests in approximately 50 new investment opportunities per annum and each investment is subject to a full risk assessment through an investment approval process.
The Group’s Investment Committee is part of the overall risk management framework.
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
20 and the Group’s equity is analysed into its various components in note 27. Capital is managed so as to maximise the return to shareholders while maintaining a capital base to allow 3i to
operate effectively in the marketplace and sustain future development of the business. Strong realisations from the investment portfolio in recent years have led to the return of capital to
shareholders. This has been achieved through the issue and repurchase of B shares (2008: £808 million; 2007: £700 million), on-market share purchases (2008: £120 million; 2007:
£74 million; 2006: £222 million) and a special dividend (2006: £245 million).
Group Group
2008 2007
£m £m
Cash, deposits and derivative financial assets 820 2,175
Borrowings and derivative financial liabilities (2,458) (2,174)
Net (debt)/surplus (1,638) 1
Total equity 4,057 4,249
Gearing (net debt/total equity) 40% 0%
Capital is managed on a consolidated basis and the gearing KPI is only applicable to the Group, not the Company.
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. Since 1 January 2008 the Group’s capital requirement has been amended following approval
of the Group’s Internal Capital Adequacy Assessment Process (ICAAP) report by the Board of 3i Investments plc. Although this has increased the regulated capital requirement,
there remains a significant regulatory capital surplus.
Financial risks
Concentration risk
The Group’s exposure to and mitigation of concentration risk is explained within “investment risks” (page 41) in the Directors’ report. Quantitative data regarding the concentration risk of the
portfolio across economic sectors and geographies can be found in the additional portfolio and financial information section (pages 110 to 115).
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 a credit rating of AA or better.
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. Partial provisions, or “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 a loan impairment is recorded equal
to the valuation shortfall. Further information on how credit risk is managed is given on page 42 of the Directors’ report. In accordance with IFRS7, the amounts shown as past due represent
the total credit exposure, not the amount actually past due.
Group 2008 2008 Company 2008 2008
2008 up to more than Group 2008 up to more than Company
not past 12 months 12 months 2008 not past 12 months 12 months 2008
due past due past due Total due past due past due Total
£m £m £m £m £m £m £m £m
Loans and receivables before provisions and impairments 1,772 174 128 2,074 432 83 108 623
Provisions on investments that have failed
or expected to fail in the next 12 months (44) (1) (40) (85) (6) (1) (37) (44)
Impairments where the valuation of the portfolio
company implies non-recovery of all or part
of the Group’s loan investment* (4) (31) (36) (71) (9) (27) (30) (66)
Total 1,724 142 52 1,918 417 55 41 513

Group 2007 2007 Company 2007 2007
2007 up to more than Group 2007 up to more than Company
not past 12 months 12 months 2007 not past 12 months 12 months 2007
due past due past due Total due past due past due Total
£m £m £m £m £m £m £m £m
Loans and receivables before provisions and impairments 1,217 91 91 1,399 471 87 86 644
Provisions on investments that have failed
or expected to fail in the next 12 months (61) (6) (42) (109) (53) (3) (42) (98)
Impairments where the valuation of the portfolio
company implies non-recovery of all or part
of the Group’s loan investment (78) (8) (21) (107) (48) (5) (19) (72)
Total 1,078 77 28 1,183 370 79 25 474
*Included within impairments not past due for the Group and Company is an £12 million value reduction for quoted debt instruments.

18 Financial risk management (continued)

Movements on loan impairments and provisions are shown below.
Group Group Group Company Company Company
Provisions Impairments Total Provisions Impairments Total
£m £m £m £m £m £m
Balance as at 31 March 2006 (189) (179) (368) (169) (150) (319)
Released in year 85 116 201 76 96 172
Charged in year (5) (44) (49) (5) (18) (23)
Released in year 65 74 139 60 30 90
Charged in year (41) (38) (79) (6) (24) (30)
Liquidity risk
Further information on how liquidity risk is managed is provided in the Directors’ report (page 42). The table below analyses the maturity of the Group’s contractual liabilities.
Group Group Group Group Company Company Company Company
due within due between due between due greater Group due within due between due between due greater Company
1 year 1 and 2 years 2 and 5 years than 5 years Total 1 year 1 and 2 years 2 and 5 years than 5 years Total
As at 31 March 2008 £m £m £m £m £m £m £m £m £m £m
Gross commitments:
Fixed loan notes 39 39 165 1,198 1,441 39 39 165 1,198 1,441
Variable loan notes 131 114 437 – 682 131 114 437 – 682
Committed multi-currency facility 19 19 385 – 423 4 4 89 – 97
Convertible Bond 2008 1550 million 1.375% 437 – – – 437 437 – – – 437
Euro commercial paper 267 – – – 267 267 – – – 267
Derivative financial instruments – – 398 258 656 – – 398 258 656
Equity element of Convertible Bond 6 – – – 6 6 – – – 6
Carried interest payable within one year 140 – – – 140 – – – – –
Total 1,039 172 1,385 1,456 4,052 884 157 1,089 1,456 3,586
Group Group Group Group Company Company Company Company

due within due between due between due greater Group due within due between due between due greater Company
1 year 1 and 2 years 2 and 5 years than 5 years Total 1 year 1 and 2 years 2 and 5 years than 5 years Total
As at 31 March 2007 £m £m £m £m £m £m £m £m £m £m
Gross commitments:
Fixed loan notes 251 37 110 1,234 1,632 251 37 110 1,234 1,632
Variable loan notes 213 98 639 – 950 8 98 639 – 745
Committed multi-currency facility 3 7 159 – 169 1 4 80 – 85
Convertible Bond 2008 1550 million 1.375% 5 364 – – 369 5 364 – – 369
Euro commercial paper 265 – – – 265 265 – – – 265
Derivative financial instruments 276 32 200 431 939 66 32 188 431 717
Equity element of Convertible Bond – 156 – – 156 – 156 – – 156
Carried interest payable within one year 71 – – – 71 – – – – –
Total 1,084 694 1,108 1,665 4,551 596 691 1,017 1,665 3,969
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 Directors’ report (page 42). The direct impact of a movement in interest rates is relatively small. An increase of
100 Basis Points would lead to an approximate exposure of £4 million (2007: £5 million) for the Group and £1 million (2007: £5 million) for the Company. This exposure arises principally
from changes in interest payable and receivable on floating rate and short-term instruments and changes in the fair value of interest rate derivatives held at the year end. 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.

18 Financial risk management (continued)

(ii) Currency risk
Further information on how currency risk is managed is provided in the Directors’ report (page 42). 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 based on the sensitivity of the Group and Company’s monetary assets to movements in foreign currency
exchange rates. The Group hedges currency on a consolidated basis.
Group
Group Group Group 2008 Group Group Group Group
2008 2008 2008 Swedish 2008 2008 2008 2008
Sterling Euro US dollar krona Indian rupee Swiss franc Other Total
£m £m £m £m £m £m £m £m
Net assets 4,077 (24) 91 (14) (67) (6) – 4,057
Sensitivity analysis
Assuming a 5% movement in exchange rates against sterling:
Impact on exchange movements in the income statement n/a 10 25 (1) (5) – n/a 29
Impact on the translation of foreign operations in statement
of recognised income and expense n/a (17) (19) – – – n/a (36)
Total n/a (7) 6 (1) (5) – n/a (7)
Company
Company Company Company 2008 Company Company Company Company
2008 2008 2008 Swedish 2008 2008 2008 2008
£m £m £m £m £m £m £m £m
Net assets 4,125 203 238 (89) (281) (184) (82) 3,930
Impact on exchange movements in the income statement assuming a
5% movement in exchange rates against sterling: n/a 2 8 (5) (15) (10) n/a (20)
Group
Group Group Group 2007 Group Group Group Group
2007 2007 2007 Swedish 2007 2007 2007 2007
£m £m £m £m £m £m £m £m
Net assets 4,284 (121) 86 (4) – 1 3 4,249
Assuming a 5% movement in exchange rates against sterling:
Impact on exchange movements in the income statement n/a (20) 14 (1) (4) – n/a (11)
Impact on the translation of foreign operations in statement
of recognised income and expense n/a 14 (6) – – – n/a 8
Total n/a (6) 8 (1) (4) – n/a (3)
Company
Company Company Company 2007 Company Company Company Company
2007 2007 2007 Swedish 2007 2007 2007 2007
£m £m £m £m £m £m £m £m
Net assets 4,326 (127) 136 (92) (99) (130) 6 4,020
Impact on exchange movements in the income statement assuming a
5% movement in exchange rates: n/a (12) 2 (5) (5) (7) n/a (27)
(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 Directors’ report (page 42). A 5% change
in the fair value of those investments would have the following direct impact on the income statement:
2008 2008 2007 2007
Quoted Unquoted 2008 Quoted Unquoted 2007
equity equity Total equity equity Total
£m £m £m £m £m £m
Group 44 160 204 29 130 159
Company 39 53 92 25 63 88
In addition, other price risk arises from carried interest balances and the derivative element of the Convertible Bonds.

19 Derivative financial instruments

2008 2007 2008 2007
£m £m £m £m
Current assets
Forward foreign exchange contracts 5 1 5 1
Currency swaps 8 8 8 8
Interest rate swaps 11 12 11 12
24 21 24 21
Current liabilities
Forward foreign exchange contracts – (1) – (2)
Currency swaps (79) (10) (79) (10)
Interest rate swaps (23) (22) (23) (20)
Derivative element of Convertible Bonds (6) (156) (6) (156)
(108) (189) (108) (188)
Forward foreign exchange contracts and currency swaps
The Group uses forward exchange contracts and currency swaps to minimise the effect of fluctuations in the value of the investment portfolio from movement in exchange rates. Foreign
currency interest-bearing loans and borrowings are also used for this purpose.
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 the income statement.
At the balance sheet date, the notional amount of outstanding forward foreign exchange contracts is as follows:
2008 2007
£m £m
Currency swaps 2,322 1,455
Forward foreign currency contracts 346 174
2,668 1,629
Interest rate swaps
The Group uses interest rate swaps 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 income statement.
At the balance sheet date, the notional amount of outstanding interest rate swaps is as follows:
2008 2007
£m £m
Fixed rate to variable rate – 10
Variable rate to fixed rate 510 687
Variable rate to variable rate 150 200
660 897
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
income statement.

20 Loans and borrowings

2008 2007 2008 2007
£m £m £m £m
Loans and borrowings are repayable as follows:
Within one year 373 675 373 474
In the second year 92 90 92 90
In the third year 394 81 109 81
In the fourth year 398 145 398 72
In the fifth year 25 – 25 –
After five years 600 600 600 600
1,882 1,591 1,597 1,317
Principal borrowings include:
2008 2007 2008 2007
Rate Maturity £m £m £m £m
Issued under the £2,000 million note issuance programme
Fixed rate
£200 million notes (public issue) 6.875% 2007 – 200 – 200
£200 million notes (public issue) 6.875% 2023 200 200 200 200
£400 million notes (public issue) 5.750% 2032 400 400 400 400
Other 50 50
Variable rate
£200 million notes (public issue) LIBOR+0.100% 2007 – 200 – –
€500 million notes (public issue) EURIBOR+0.100% 2012 398 – 398 –
Other 195 171 195 171
1,243 1,171 1,243 971
Committed multi-currency facilities
£486 million LIBOR+0.210% 2010 200 – – –
£150 million LIBOR+0.175% 2010 169 145 85 72
369 145 85 72
Other
Other borrowings – 8 – 8
Euro commercial paper 269 266 269 266
Finance lease obligations 1 1 – –
270 275 269 274
Total for loans and borrowings 1,882 1,591 1,597 1,317

The drawings under the committed multi-currency facilities are repayable within one year but have been classified as repayable at the maturity date as immediate replacement funding is
available until those maturity dates. The undrawn commitment fee on the £150 million committed multi-currency facility is 0.05%. The margin on this facility increases to 0.20% if the
drawn amount is greater than 50% of the facility. The £169 million liability on the £150 million multi-currency facility represents a two billion Swedish Krona drawing being re-translated at
the year end exchange rate. The undrawn commitment fee on the £486 million committed multi-currency facility is 0.08%. The margin on this facility increases to 0.235% if the drawn
amount is between 33% and 66% of the facility, and to 0.26% if the drawn amount is greater than 66% of the facility.
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 £1,840 million (2007: £1,626 million).
21 Convertible Bonds
2008 2007 2008 2007
£m £m £m £m
Opening balance 363 365 363 365
Amortised during the year 7 7 7 7
Exchange movements 63 (9) 63 (9)
Closing balance 433 363 433 363
On 1 August 2003 the Company issued €550 million 1.375% 5-year convertible bonds. The 3i Group plc share price on issue was 635p and at 31 March 2008 was 830p (2007: 1,136p).
The initial conversion price was £8.41, which has subsequently been adjusted to £8.53 following share consolidations implemented by the Company in the period 2005–2007. Interest is
payable on the bonds on 12 January and 12 July each year.
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 4.1%. The fair value of the loan at 31 March 2008 was £433 million (2007: £363 million).

22 B shares
2008 2007 2008 2007
£m £m £m £m
Opening balance 11 – 11 –
Issued 808 700 808 700
Repurchased and cancelled (798) (689) (798) (689)
Closing balance 21 11 21 11
On 16 July 2007, the Company issued B shares with a nominal value of 1p on the basis of 11 B shares for eight existing 6269⁄88p ordinary shares. The B shares carry the right to a
cumulative preferential dividend at a rate per annum of 3.75% based on a notional value of 127p per B share and an entitlement to a priority payment equal to 127p per B share,
plus any accrued but unpaid dividend, from the assets of the Company on a winding up, but will not ordinarily carry voting rights in the Company.
The Company repurchased and cancelled in aggregate 628,537,525 B shares on 23 July 2007 and 20 August 2007 at a price of 127p per share. The Company expects to make future
purchase offers in July 2008 and July 2009 at 127p per B share and has the right to repurchase all outstanding B shares on or after 14 July 2009.
23 Subordinated liabilities
Group Group
2008 2007
£m £m
Subordinated liabilities are repayable as follows:
After five years 14 21
Subordinated liabilities comprise limited recourse funding from Kreditanstalt für Wiederaufbau (“KfW”), a German federal bank. Repayment of the funding, which individually finances
investment assets, is dependent upon the disposal of the associated assets. This funding is subordinated to other creditors of the German subsidiaries to which these funds have been
advanced and in certain circumstances become non-repayable should assets fail.
24 Trade and other payables

2008 2007 2008 2007
£m £m £m £m
Other accruals 166 179 67 22
Amounts due to subsidiaries – – 241 169
166 179 308 191
25 Provisions
Group Group Group
2008 2008 2008
Property Redundancy Total
£m £m £m
Opening balance 7 11 18
Charge for the year 2 6 8
Utilised in the year (2) (10) (12)
Closing balance 7 7 14
Group Group Group

2007 2007 2007
Property Redundancy Total
£m £m £m
Opening balance 5 5 10
Charge for the year 4 11 15
Utilised in the year (2) (5) (7)
Closing balance 7 11 18
The provision for redundancy relates to staff reductions announced prior to 31 March 2008. 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 eight years.

26 Issued capital
2008 2008 2007 2007
Authorised Number £m Number £m
Ordinary shares of 62 ⁄88p
69
– – 653,031,456 410
Ordinary shares of 7319⁄22p 555,076,720 410 – –
B shares of 1p 660,000,000 7 610,000,000 6
Unclassified shares of 10p 1,000,000 1 1,000,000 –
2008 2008 2007 2007

Issued and fully paid Number £m Number £m
Ordinary shares of 531⁄8p
Opening balance – – 550,556,502 292
Issued on exercise of share options and under the 3i Group Share Incentive Plan – – 603,757 –
Share consolidation – – (551,160,259) (292)
Shares cancelled – – – –
Closing balance – – – –
2008 2008 2007 2007

Ordinary shares of 62 ⁄88p 69
Opening balance 461,106,007 289 – –

Issued on exercise of share options and under the 3i Group Share Incentive Plan 1,794,733 2 2,169,634 2
Share consolidation (462,900,740) (291) 466,366,373 292
Shares cancelled – – (7,430,000) (5)
Closing balance – – 461,106,007 289
During the period 1 April 2007 to 15 July 2007, the Company issued shares for cash on the exercise of share options at various prices from 512p to 1,012p per share.
On 16 July 2007, the Company consolidated its issued share capital on the basis of 17 ordinary shares of 7319⁄22p each for every 20 ordinary shares of 6269⁄88p each held.
This occurred immediately following the issue of the B shares.
2008 2008 2007 2007
Ordinary shares of 73 ⁄22p 19
Opening balance – – – –
Share consolidation 393,465,629 291 – –
Issued on exercise of share options, conversion of bonds, and under the 3i Group Share Incentive Plan 1,275,465 1 – –
Shares cancelled (12,000,000) (9) – –
Closing balance 382,741,094 283 – –
During the period 16 July 2007 to 31 March 2008, the Company issued shares for cash on the exercise of share options at various prices from 470p to 895p per share.
27 Equity
Year to 31 March 2008 Capital Share-based
Share Share redemption payment Translation Capital Revenue
capital premium reserve reserve reserve reserve reserve Own shares Total equity
Group £m £m £m £m £m £m £m £m £m
Opening balance 289 387 27 18 5 3,280 318 (75) 4,249
Total recognised income and expense 6 675 111 792
Share-based payments 8 8
Release on exercise/forfeiture of share options (5) (1) 6 –
Issue of ordinary shares 3 16 19
Dividends paid (70) (70)
Share buy-backs (9) 9 (120) (120)
Issue of B shares (6) 6 (808) (808)
Own shares (13) (13)
Closing balance 283 397 42 21 11 3,026 359 (82) 4,057

27 Equity (continued)
Share Share redemption payment Translation Capital Revenue
capital premium reserve reserve reserve reserve reserve Own shares Total equity
Group £m £m £m £m £m £m £m £m £m
Opening balance 292 376 17 17 – 3,110 263 (69) 4,006
Total recognised income and expense 5 936 134 1,075
Release on exercise/forfeiture of share options (8) 8 –
Share buy-backs (5) 5 (74) (74)
Issue of B shares (5) 5 (700) (700)
Own shares (6) (6)
Closing balance 289 387 27 18 5 3,280 318 (75) 4,249

Share Share redemption payment Capital Revenue Total
capital premium reserve reserve reserve reserve equity
Company £m £m £m £m £m £m £m
Opening balance 289 387 27 18 3,013 286 4,020
Total recognised income and expense 787 94 881
B share issue (6) 6 (808) (808)
Share buy-backs (9) 9 (120) (120)
Closing balance 283 397 42 21 2,877 310 3,930

Share Share redemption payment Capital Revenue Total
capital premium reserve reserve reserve reserve equity
Company £m £m £m £m £m £m £m
Opening balance 292 376 17 17 2,767 277 3,746
Total recognised income and expense 1,012 88 1,100
B share issue (5) 5 (700) (700)
Share buy-backs (5) 5 (74) (74)
Closing balance 289 387 27 18 3,013 286 4,020
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 30 Dividends

2008 2007 2008 2007
£m £m pence 2008 pence 2007
per share £m per share £m
Opening cost 75 69
Declared and paid during the year
Additions 21 20
Ordinary shares
Disposals (14) (14)
Final dividend 10.3 47 9.7 52
Closing cost 82 75
Interim dividend 6.1 23 5.8 27
Own shares consists of shares in 3i Group plc held by The 3i Group Employee Trust. 16.4 70 15.5 79
The market value of these shares at 31 March 2008 was £90 million (2007: £124 million). Proposed dividend 10.9 42 10.3 47
The Trust is funded by an interest-free loan from 3i Group plc.
31 Operating leases
29 Per share information
Leases as lessee
The earnings and net assets per share attributable to the equity shareholders of the Company
Future minimum payments due under non-cancellable operating lease rentals are as follows:
are based on the following data:
2008 2007 2008 2007 2008 2007
£m £m £m £m
Earnings per share (pence)
Basic 207.9 220.4* Less than one year 13 9 – –
Diluted 173.4 217.9* Between one and five years 38 32 – –
Earnings (£m) More than five years 44 42 – –
Profit for the year attributable to equity holders 95 83 – –
of the Company 828 1,056 The Group leases a number of its offices under operating leases. None of the leases include
Effect of dilutive ordinary shares (87) – contingent rentals.
741 1,056
During the year to 31 March 2008, £14 million (2007: £10 million) was recognised as an
*Restated for the deduction of own shares not previously taken into account. expense in the income statement in respect of operating leases. £1 million (2007: £1 million)
was recognised as income in the income statement in respect of subleases.
2008 2007
Number Number 32 Commitments
Weighted average number
of shares in issue Group
2008 Group Group
Ordinary shares 408,633,804 489,987,864 due 2008 2008
within due due
Own shares (10,458,932) (10,756,533) one year 2-5 years over 5 years Total
£m £m £m £m
398,174,872 479,231,331
Effect of dilutive potential Equity and loan investments 220 126 10 356
ordinary shares
Share options 4,663,864 5,396,980
Group
Convertible bonds 24,408,684 – 2007 Group Group
due 2007 2007
Diluted shares 427,247,420 484,628,311 within due due
one year 2-5 years over 5 years Total
£m £m £m £m
2008 2007 Equity and loan investments 147 257 22 426

Net assets per share (pence)
Basic 1,091 944 Company
Diluted 1,077 932 2008 Company Company
due 2008 2008
Net assets (£m) within due due
one year 2-5 years over 5 years Total
Net assets attributable to equity holders £m £m £m £m
of the Company 4,057 4,249
Equity and loan investments 95 78 1 174
2008 2007
Number Number Company
2007 Company Company
Ordinary shares in issue 382,741,094 461,106,007 due 2007 2007
within due due
Own shares (10,867,901) (10,931,404) one year 2-5 years over 5 years Total
£m £m £m £m
371,873,193 450,174,603
Effect of dilutive potential Equity and loan investments 73 132 19 224
ordinary shares
Share options 4,954,110 5,896,253
Diluted shares 376,827,303 456,070,856

33 Contingent liabilities 34 Related parties (continued)

From time to time transactions occur between related parties within the investment portfolio
Group Group Company Company that the Group influences to facilitate the reorganisation or recapitalisation of an investee
2008 2007 2008 2007
£m £m £m £m company. There has been no single transaction in the year with a material effect on the
Contingent liabilities relating Group’s financial statements and all such transactions are fully included in the above
to guarantees available to disclosure.
third parties in respect Advisory arrangements
of investee companies 15 9 6 5 The Group acts as an adviser to 3i Infrastructure Limited and 3i Quoted Private Equity
The Company has guaranteed the payment of principal, premium if any, and interest on all Limited, companies listed on the London Stock Exchange. The following amounts have been
the interest rate swap agreements of 3i Holdings plc. included in respect of these advisory relationships:
The Company has guaranteed the payment of principal and interest on amounts drawn down Group Group Company Company
2008 2007 2008 2007
by 3i Holdings plc under the £150 million and the £486 million revolving credit facilities. Income statement £m £m £m £m
At 31 March 2008, 3i Holdings plc had drawn down £84 million (2007: £73 million) under Unrealised (losses)/profits on the
the first facility and £200 million (2007: £nil) under the second facility. revaluation of investments (11) 9 (11) 9
The Company has provided a guarantee to the Trustees of the 3i Group Pension Plan in Fees receivable from external funds 12 – 12 –
respect of liabilities of 3i plc to the Plan. 3i plc is the sponsor of the 3i Group Pension Plan. Dividends 6 – 6 –
At 31 March 2008, there was no material litigation outstanding against the Company or any
of its subsidiary undertakings.
2008 2007 2008 2007
34 Related parties Balance sheet £m £m £m £m
The Group has various related parties stemming from relationships with limited partnerships
Quoted equity investments 503 334 503 334
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 Key management personnel
subsidiaries. The Group’s key management personnel comprises the members of Management
Limited partnerships Committee and the Board’s non-executive Directors.
The Group manages a number of third-party funds which invest through limited Group Group
partnerships. Group companies act as the general partners of these limited partnerships and 2008 2007
Income statement £m £m
exert significant influence over them. The following amounts have been included in respect
of these limited partnerships: Salaries, fees, supplements and benefits in kind 5 5
Bonuses and deferred share bonuses 12 8
2008 2007 2008 2007 Increase in accrued pension – –
Income statement £m £m £m £m
Carried interest payable 19 15
Carried interest receivable 60 81 60 81 Share-based payments 4 2
Fees receivable from external funds 60 37 – –
Group Group
Group Group Company Company 2008 2007
2008 2007 2008 2007 Balance sheet £m £m
Balance sheet £m £m £m £m
Bonuses and deferred share bonuses 12 8
Carried interest receivable 75 83 75 83 Carried interest payable within one year 11 6
Investments Carried interest payable after one year 11 12
The Group makes minority investments in the equity of unquoted and quoted investments. Carried interest paid in the year to key management personnel was £18 million (2007:
This normally allows the Group to participate in the financial and operating policies £6 million).
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 Subsidiaries
(as permitted by IAS 28) but are related parties. The total amounts included for these Transactions between the Company and its subsidiaries, which are related parties of the
investments are as follows: Company, are eliminated on consolidation. Details of related party transactions between the
Company and its subsidiaries are detailed below.
2008 2007 2008 2007 Management, administrative and secretarial arrangements
Income statement £m £m £m £m
The Company has appointed 3i Investments plc, a wholly owned subsidiary of the Company
Realised profit over value on the incorporated in England and Wales, as investment manager of the Group. 3i Investments plc
disposal of investments 369 715 180 346 received a fee of £39 million (2007: £39 million) for this service.
Unrealised profits on the revaluation
The Company has appointed 3i plc, a wholly owned subsidiary of the Company incorporated
of investments 196 316 59 143
in England and Wales, to provide the Company with a range of administrative and secretarial
Portfolio income 204 195 65 144 services. 3i plc received a fee of £223 million (2007: £194 million) for this service.
Investment entities
Group Group Company Company The Company makes investments through a number of subsidiaries by providing funding in
2008 2007 2008 2007 the form of capital contributions or loans depending on the legal form of the entity making
Balance sheet £m £m £m £m
the investment. The legal form of these subsidiaries may be limited partnerships or limited
Quoted equity investments 661 411 654 405 companies or equivalent depending on the jurisdiction of the investment. The Company
Unquoted equity investments 1,990 1,392 738 674 receives interest on this funding, amounting in 2008 to £1 million (2007: £1 million).
Loans and receivables 1,679 803 323 292 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 income statement are £1 million
(2007: £10 million).

35 Group entities
Significant subsidiaries
Name Country of incorporation Issued and fully paid share capital Principal activity Registered office
3i Holdings plc England and Wales 1,000,000 shares of £1 Holding company 16 Palace Street
3i International Holdings England and Wales 2,715,973 shares of £10 Holding company London
3i plc England and Wales 110,000,000 shares of £1 Services SW1E 5JD
3i Investments plc England and Wales 10,000,000 ordinary shares of £1 Investment manager
3i Europe plc England and Wales 500,000 ordinary shares of £1 Investment adviser
3i Nordic plc England and Wales 500,000 ordinary shares of £1 Investment adviser
3i Asia Pacific plc England and Wales 140,000 ordinary shares of £1 Investment adviser
Gardens Pension Trustees Limited England and Wales 100 ordinary shares of £1 Pension fund trustee
3i Corporation USA 15,000 shares of common stock Investment manager 880 Winter Street
(no par value) Suite 330
Waltham
MA 02451, USA
3i Deutschland Gesellschaft für Germany 125,564,594 Investment manager Bockenheimer
Industriebeteiligungen mbH Landstrasse 55
60325 Frankfurt am
Main, Germany
3i Gestion SA France 1,762,500 shares of 110 Investment manager 3 rue Paul Cezanne
Paris,75008
France
The list above comprises the principal subsidiary undertakings as at 31 March 2008 all of which were wholly owned. 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 2008, the entire issued share capital of 3i Holdings plc 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 5 to the Companies Act 1985 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 and Unlimited Companies (Accounts) Regulations 1993 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.

Portfolio valuation – an explanation
Our policy is to value 3i’s investment portfolio at fair value and achieve this by valuing How do we calculate 3i’s share of the enterprise value?
individual investments on an appropriate basis using a consistent methodology across the We allocate the enterprise value to financial instruments which rank above 3i, such as senior
portfolio. The following guide explains the valuation methods used. loans. We then generally apply a marketability discount of 10%–30% in accordance with the
IPEVC valuation guidelines. We can then allocate the remaining balance between equity
What is fair value? holders dependent on individual shareholding.
Fair value is the value of an asset or liability in an arm’s-length transaction between two
willing and knowledgeable parties. This generally provides the best estimate of what we What level of marketability discount is applied?
would receive if we sold the investment at the date of valuation. The Group’s financial The marketability discount of 10%–30% is based on the Group’s influence over the
statements are prepared in accordance with International Financial Reporting Standards exit prospects and timing for the company. A greater influence gained through a greater
(“IFRS”), many of which are based on the concept of fair value. equity holding implies a smaller discount. In a smaller number of cases a greater discount may
be applied if there are particular factors affecting the ability to sell.
Does 3i follow industry guidelines?
Yes. The Group complies with all material aspects of the International Private Equity and What happens if the enterprise value is less than the loan amount?
Venture Capital (“IPEVC”) valuation guidelines. The IPEVC valuation guidelines specify the This implies that there is a shortfall in the value of the loan. A decision based on
valuation methodology which is most appropriate to individual investments at a particular the performance of the investment is then taken as to whether to recognise this shortfall.
point in time.
How do we value loans?
Is an investment valued on the same basis throughout the period 3i is invested? We value loans using the “amortised cost” method, which is in accordance with IFRS.
3i carries out a detailed valuation of its investment portfolio twice yearly. At each valuation point The amortised cost represents the amount at which the loan is measured at initial
the investment is valued on the most appropriate basis. For example, if a portfolio company lists recognition, less principal repayments taking into account any premium or discount on
its shares on a stock exchange it would be valued on a quoted basis at the next valuation. the original loan amount. Effectively, this is cost less any provisions required. Interest
income is recognised using the effective interest rate based on all the loan’s cash flows.
How are quoted investments valued?
Quoted investments are valued at closing bid price at the date of valuation. No discounts How are earnings defined?
are applied for illiquidity of the stock or dealing restrictions, such as lock-up periods, provided The objective is to use maintainable earnings of the company in which 3i is invested.
investments are traded on an active stock market. These are the “normal” earnings of the company, and are calculated by removing any ad hoc
amounts included in the current year figures, such as profits on disposal of fixed assets or
How are unquoted investments valued? one-off expenses that are not expected to occur on a regular basis. A common measure of
In line with the IPEVC valuation guidelines a number of different valuation methods are used earnings used for this calculation is earnings before interest and tax “EBIT”. Other measures
for unquoted investments: used are earnings before interest, tax, depreciation and amortisation ”EBITDA”, or profit after
tax. These figures are usually taken from the latest audited accounts, which cover a period of
– Cost less provisions;
at least six months since the date of investment. A review of more recent management
– Earnings; accounts is conducted to ensure that the audited accounts remain a valid basis.
– Net assets;
Which multiple is appropriate to use?
– Price of recent investment; or Multiples need to be consistent with the measure of earnings chosen. Therefore EBIT
multiples must be used with EBIT, EBITDA multiples with EBITDA and Price Earnings
– Imminent sale or IPO.
(“PE”) multiples used with profit after tax. The multiple used can be calculated using recent
transaction information, external valuations or quoted sector multiples.
What proportion of the portfolio is valued on each valuation basis?
The portfolio for the year ended 31 March 2008 is valued on the following basis: What happens if an investment is reporting a loss?
Cost less provisions 33% One of the other valuation methodologies can be used. For example the valuation can be
prepared on a net asset basis.
Earnings 28%
Quoted equity investments at bid-price 15% What happens if the investment is failing?
Price of recent investment 5% If a company is failing or we consider that there is a 50% chance or more that it is likely
to fail within the next 12 months, the equity element is valued at nil, and any loan element
Imminent sale or IPO 3% is valued at the lower of cost or net recoverable amount.
Net assets 1%
Other 15% When is the price of recent investment basis used?
Venture capital investments often have a number of financing rounds during the life of the
investment. The last round of financing can be used as a reference point to calculate fair
value. To increase the value of an investment, the round of financing must have external
parties investing.
Note: Cost includes unquoted equity investments and loans and receivables.
What is the “other” basis of valuation?
Under what circumstances would an investment be valued on a cost basis? ”Other” includes DCF calculations, which estimate the present value of an investment’s future
For investments that are less than 12 months old, the price that 3i paid, ie cost, cash flows. This methodology is most appropriate where cash flows over the life of an
is considered the most appropriate valuation method. However the performance of investment are predictable. This basis is commonly used for infrastructure investments,
the investment is also reviewed to see if any impairment should be made if the company which are usually held over a long period of time and generate regular and predictable cash
is underperforming. When a full set of accounts (covering a period of at least six months flows. “Other” could also include investments in funds valued based on 3i’s share of net
following the investment) are received then those figures are used to prepare the valuation assets or investments in specific sectors such as insurance where industry specific
on an alternative basis to cost. benchmarks are used. Six of the investments detailed on pages 108 and 109, totalling
£451 million and representing 7.5% of the portfolio value, were included in this category.
What does valuing an investment on an earnings basis actually mean?
The “earnings” basis is a very common basis of valuing unquoted companies when they What happens if an investment is in the process of being sold?
are being bought or sold. Essentially a multiple is applied to the earnings of the company, When an investment is in an advanced sales process, we will use the imminent sale basis of
to calculate an enterprise value. This enterprise value is the total value of the investment, valuation, which uses the expected proceeds from the sale, applying a 10% marketability
including debt, any preferred financial instruments and equity. Before calculating the value discount. We will consider the potential effect of completion conditions before moving an
of 3i’s shareholding in the company, the debt and any preferred instruments need to be asset to this basis.
deducted from the enterprise value. The total value of 3i’s investment is then the value
of its equity plus any debt or preferred financial instruments that are due to 3i.

The valuation lifecycle The calculation shows the sector multiple of 10x being applied to the EBITDA of
The following illustration walks through the valuation of an asset from investment Investment A of £10 million to derive the enterprise value. After reducing the enterprise
to realisation. value by £20 million for higher ranking loans a 25% marketability discount is applied.
This reflects the fact that 3i has reduced influence due to its minority position. The value
Equity attributable to 3i and other shareholders is £60 million. 3i’s loan ranks above equity holders
Loan and therefore this reduces the amount attributable to equity holders to £40 million. We can
Value £m 50 now apply the 3i equity holding percentage of 25% to £40 million to achieve the value of
£10 million for 3i’s equity. The total value to 3i is therefore £20 million for the loan and
45 £10 million for equity, £30 million in total.
40 Year 3 – Earnings basis

Following year 2 the valuation is updated for the performance of Investment A. Earnings
35
have increased to £12 million and the sector multiple has increased to 11x and there is
30 no reason to change the valuation basis, therefore an earnings basis continues to be used.
As other factors have remained the same as for year 2, the valuation of 3i’s equity
25 investment has increased to £16 million and the loan value remains at £20 million.
Total value: £36 million.
20
15 Year 4 – Imminent sale basis
We have been approached by an external buyer to purchase our equity and loan investment
10 in Investment A for £50 million, and discussions are now in their final stages. This is now
valued on an imminent sale basis. The cash has not been received at the time of valuation
5 and therefore a 10% discount has been applied. The valuation is now calculated as the sum
0 of the loan value (£20 million) and of the equity element (£25 million) which together total
Year 1 Year 2 Year 3 Year 4 £45 million.
Cost Earnings Earnings Imminent
basis basis basis sale basis Year 5 – Realisation
The investment is sold and is no longer held in the portfolio at the year end. If proceeds are
3i invested £20 million in loans and £5 million in equity for a 25% equity holding in different to the imminent sale value there would be a realisation profit or loss.
Investment A in year 1. Investment A is an oil and gas production company, based in Europe.
The following description explains the valuation bases used throughout the ownership of
Investment A.
Year 1 – Cost basis

The investment is less than a year old and there are no indications of impairment, therefore
the valuation remains at cost. Total value £25 million.
Year 2 – Earnings basis

The audited accounts for Investment A are now available and the valuation can be prepared
on an earnings basis, using a sector multiple as the most accurate multiple available for
Investment A.
The audited EBITDA of Investment A are £10 million and the sector EBITDA multiple
for the quoted European oil and gas production sector is 10x. There is also £20 million of
external debt within Investment A that ranks above 3i’s investment and needs to be included
in the following valuation calculation:
£m
Earnings – EBITDA 10
Multiple – Oil and Gas sector EBITDA multiple x10
Enterprise value (earnings x multiple) 100
Less:
Higher ranking loans (external debt) (20)
Net enterprise value 80
Less:
Marketability discount 25% (20)
60
Less:
3i Loan (20)
Amount attributable to equity holders 40
3i equity holding at 25% 10
Total value for 3i (loan and equity) 30

Ten largest investments
The table below provides information on our ten largest investments in respect of the Group's holding and excluding any managed or advised external funds. The valuation basis provides
further information on how the Group’s valuation has been derived. Income represents dividends received (inclusive of overseas withholding tax) and gross interest receivable in the year to
31 March 2008. Net assets and earnings figures are taken from the most recently audited accounts of the investee business, and are the net assets of each business and the total earnings
on ordinary activities after tax respectively. It should be noted that, because of the varying rights attached to the classes of shares held by the Group, it could be misleading to attribute a
certain proportion of the earnings and net assets to the proportion of equity capital held by the Group.
Further information on our portfolio investments is provided as case studies within the Business review section, and more generally at 3i.com
First Proportion Residual Income in
Business invested Valuation of equity cost Valuation the year Net assets Earnings
Investment line Geography in basis shares held £m £m £m £m £m
3i Infrastructure Limited1 Infrastructure UK 2007 Quoted
Quoted investment company, investing in infrastructure
Equity shares 46.2% 325 363 6
325 363 6
Giochi Preziosi S.r.l Buyouts Italy 2005 Imminent
sale
Retailer and wholesaler of toys
Equity shares 37.8% 63 151 –
63 151 – 137 3
3i Quoted Private Equity Limited2 QPE UK 2007 Quoted
Quoted investment company, investing in quoted companies
181 140 –
Venture Production plc3 Growth UK 2007 Quoted
Oil and gas production
Equity shares 23.5% 34 50 2
Loans 77 77 1
111 127 3 281 48
Viridis Holding S.p.A. (Global Garden Products) Buyouts Italy 2007 Cost
Garden power tools
Loans 100 111 –
104 116 – 140 6
DNA Oy4 Growth Finland 2007 Cost
Telecom operator
97 113 – 201 (19)
Enterprise Group Holdings Limited5 Buyouts UK 2007 Cost
UK utilities and public sector maintenance outsourcing
Loans 108 108 12
111 111 12 (28) (38)
ACR Capital Holdings Pte Limited Growth Singapore 2006 Other
Reinsurance in large risk segments
105 110 – 307 8
Quintiles Transnational Corporation6 Growth US 2008 Cost
Clinical research outsourcing solutions
100 101 – (228) (93)
Anglian Water Group Limited Infrastructure UK 2006 Other
Provider of drinking water and waste water services
Equity shares 5.5% – 12 7
Loans 86 86 3
86 98 10 1,493 335
Notes
1 3i Infrastructure Limited was incorporated in March 2007 and subsequently listed on the London Stock Exchange. No audited accounts are yet available, consequently no net assets or earnings are disclosed.
2 3i Quoted Private Equity Limited was incorporated in March 2007 and subsequently listed on the London Stock Exchange. No audited accounts are yet available, consequently no net assets or earnings are disclosed.
3 Equity element is valued as listed, and loans are valued using amortised cost.
4 The audited accounts for DNA Oy are for the year ended 31 December 2006 and are proforma accounts. EBIT has been used for the earnings figure.
5 The net liabilities and earnings figures have been extracted from the audited accounts of Enterprise Group Holdings Limited for the seven month period ended 31 December 2007. The acquisition of Accord in September 2007 is included in
these results.
6 The audited accounts of Quintiles Transnational Corporation are for the year ended 31 December 2006.
For further information on 3i’s portfolio valuation

methodology please go to pages 106 and 107

Forty other large investments
In addition to the ten largest investments shown on page 108, detailed below are forty other large investments which are substantially all of the Group's investments valued over
£33 million. This does not include two investments that have been excluded for commercial reasons.
Residual
Business Valuation First cost Valuation
Investment Description of business line Geography basis invested in £m £m
Boxer TV-Access AB Digital TV distributor Growth Sweden Earnings 2005 56 97

Inspicio Sarl Global testing and inspection Buyouts UK Cost 2007 91 91
Sistemas Technicos de Encofrados S.A. (STEN) Sale and rental of formwork and scaffolding equipment Growth Spain Earnings 2006 78 89
Telecity Group plc Services for internet service providers Buyouts UK Quoted 1998 16 83
DEUTZ Power Systems GmbH Provider of decentralised power generation systems Buyouts Germany Cost 2007 68 80
Sortifandus S.L. (GES - Global Energy Services) Wind power service provider Buyouts Spain Earnings 2006 35 79
Ambea AB (H-Careholding) Elderly, primary and specialist care Buyouts Sweden Earnings 2005 20 77
Hyva Investments BV Branded hydraulics for commercial vehicles Buyouts Netherlands Earnings 2004 4 75
Newco Sourcing Limited (British Seafood) Seafood sourcer, processor and importer from Far East Growth UK Cost 2007 72 72
CDH China Growth Capital Fund II LP China growth capital fund Growth China Other 2005 18 67
Mold Masters Luxembourg Holdings Sarl Leading plastic processing technology provider Growth Canada Cost 2007 67 66
Eltel Networks Oy Network services Buyouts Finland Other 2007 74 66
Laholm Intressenter AB (DIAB) Polymer-based sandwich construction laminates Growth Sweden Earnings 2001 8 65
Volnay B.V. (VNU Media) Dutch recruitment classified advertising Buyouts Netherlands Earnings 2007 51 61
Polyconcept Investments B.V. Supplier of promotional products Growth Netherlands Earnings 2005 27 59
Aviapartner Group S.A. Airport ground handling Buyouts Belgium Earnings 2005 49 58
Ultralase Group Limited Laser vision correction surgery Buyouts UK Cost 2008 58 58
Jake Holdings Limited (Mayborn) Manufacture and distributor Buyouts UK Earnings 2006 58 57
of baby and household products
Planet Acquisitions Holdings Limited (Chorion) Owner of intellectual property Buyouts UK Other 2006 58 57
Mundra Port & Special Economic Zone (MPSEZ) Port and Special Economic Zone operator Growth India Quoted 2006 34 53
Nimbus Communications Limited Media and entertainment services Growth India Other 2005 39 53
Navayuga Engineering Company Limited Engineering and construction Growth India Earnings 2006 23 52
NORMA Group holding GmbH Provider of plastic and metal connecting technology Buyouts Germany Earnings 2005 28 52
Gain Capital Holdings Inc Retail online foreign exchange trading Growth US Cost 2008 48 49
Inspecta Holding Oy Supplier of testing and inspection services Buyouts Finland Cost 2007 40 47
Scandferries Holding AG (Scandlines) Ferry operator in the Baltic Sea Buyouts Germany Cost 2007 40 47
Emperor I Limited (Bestinvest) Wealth management Buyouts UK Cost 2007 47 47
Welspun Gujarat Stahl Rohren Limited Oil and gas line pipe manufacturing Growth India Quoted 2007 40 47
Consulting 1 S.p.A (Targetti Sankey) Design and manufacturer of lighting fixtures Growth Italy Cost 2007 38 45
Dockwise Specialist in heavy transport shipping Buyouts Netherlands Quoted 2007 1 44
within the marine and oil and gas industry
Hobbs Holdings No. 1 Limited Retailer of women’s clothing and footwear Buyouts UK Earnings 2004 42 42
Demand Media Inc Internet/media domain name Venture US Further 2006 31 41
registry services advance
Car Interior Design Holding GmbH (CID) Manufacturer of vehicle interior trim Growth Germany Earnings 2004 21 40
3i India Infrastructure Holdings Limited Fund investing in Indian infrastructure Infrastructure India Cost 2007 36 38
Everis Participaciones S.L. IT consulting business Growth Spain Cost 2007 30 35
Goromar XXI, S.L. Manufacture of frites, glazes and colours for tiles Buyouts Spain Earnings 2002 19 35
Azelis Group Distributor of speciality chemicals, Buyouts Italy Cost 2007 30 35
polymers and related services
Pearl (AP) Group Limited (Agent Provocateur) Women’s lingerie and associated products Buyouts UK Cost 2007 35 35
Alö Intressenter AB Manufacture of front end loaders Growth Sweden Earnings 2002 32 33
TS Marine (Contracting) Limited Oil services Growth UK Cost 2008 33 33


Total assets under management include portfolio assets directly owned by the Group, assets and uninvested commitments in funds managed by the Group, and investment companies
advised by the Group.
3i direct portfolio (£m) 2008 2007 2006 2005 2004
Buyouts 2,025 1,281 1,465 1,521 1,487
Growth Capital 2,366 1,460 1,192 1,292 1,233
Infrastructure 501 469 92 – –
QPE 142 20 – – –
SMI 244 391 564 756 960
Venture Capital 738 741 826 748 682
Total 6,016 4,362 4,139 4,317 4,362
Managed funds (£m) 2008 2007 2006 2005 2004

Buyouts 2,594 2,129 1,090 1,292 1,113
Growth Capital 183 227 401 527 574
Infrastructure 348 – – – –
SMI – 16 52 59 88
Total 3,143 2,387 1,573 1,913 1,875
Advised investment companies (£m) 2008 2007 2006 2005 2004

3i Infrastructure Limited1 364 385 – – –
3i Quoted Private Equity Limited1 269 – – – –
Total 633 385 – – –
Quoted investment companies and 3i Group Pension Plan2 – – – – 600
Total assets under management 9,792 7,134 5,712 6,230 6,837

Notes
1 The value of the advised investment companies is based on the most recently disclosed net asset value. For 3i Infrastructure Limited this was as at 30 September 2007. For 3i Quoted Private Equity Limited this was as at 31 March 2008.
2 3i closed its quoted fund management business in 2005. The 3i Group Pension Plan is now managed by a third party.

3i portfolio
3i direct portfolio by geography (£m) 2008 2007 2006 2005 2004

Continental Europe 2,573 1,894 1,923 1,693 1,516
UK 2,250 1,792 1,736 2,258 2,528
India 334 148 56 – –
China 171 60 63 21 8
Other Asia* 174 165 48 68 67
US 497 283 307 277 243
Rest of World 17 20 6 – –
Total 6,016 4,362 4,139 4,317 4,362
*Includes Japan, Singapore, South Korea and Taiwan.
3i direct continental European portfolio value (£m) 2008 2007 2006 2005 2004
Benelux 419 326 124 180 181
France 195 257 344 292 234
Germany/Austria/Switzerland 428 297 489 503 459
Italy 351 113 142 69 53
Nordic 653 491 394 344 332
Spain 443 370 342 249 224
Other European* 84 40 88 56 33
Total 2,573 1,894 1,923 1,693 1,516
*Other European includes investments in countries where 3i did not have an office at 31 March 2008.
3i direct portfolio value by sector* (£m) 2008 2007

Business services 819 586
Consumer 703 494
Financial services 415 222
General industrial 1,423 970
Healthcare 572 501
Media 455 338
Oil, gas and power 316 175
Technology 670 587
Quoted private equity 142 20
Total 6,016 4,362
*The Group’s sector analysis was updated in 2008. The figures in 2007 have been reclassified for comparison.
3i direct portfolio value by valuation method (£m) 2008 2007 2006 2005 2004
Imminent sale or IPO 185 254 340 452 250
Quoted 889 570 259 235 290
Earnings 1,660 1,432 1,490 1,757 1,948
Cost 2,007 1,431 1,239 933 998
Price of recent investment 308 159 122 206 156
Net assets 46 67 121 135 250
Other 921 449 568 599 470
Total 6,016 4,362 4,139 4,317 4,362
3i direct Buyouts portfolio value by valuation method (£m) 2008 2007 2006 2005 2004
Imminent sale or IPO 150 – 115 164 115
Quoted 141 23 26 49 87
Earnings 781 658 719 853 827
Cost 767 490 475 372 336
Net assets – – 2 6 70
Other 186 110 128 77 52
Total 2,025 1,281 1,465 1,521 1,487


3i portfolio continued
3i direct Growth Capital portfolio value by valuation method (£m) 2008 2007 2006 2005 2004
Quoted 174 55 58 71 85
Earnings 710 543 425 448 513
Cost 1,041 481 376 289 326
Net assets 16 17 25 48 62
Other 387 158 167 275 175
Total 2,366 1,460 1,192 1,292 1,233
3i direct Venture Capital portfolio value by valuation method (£m) 2008 2007 2006 2005 2004
Quoted 70 130 159 94 91
Earnings 19 15 17 25 –
Cost 157 315 292 247 286
Net assets 7 2 6 1 1
Other 189 112 213 153 137
Total 738 741 826 748 682
– of which early stage Venture Capital 578 580 629 561 456
3i direct Infrastructure portfolio value by valuation method (£m) 2008 2007 2006 2005 2004
Quoted 362 334 – – –
Cost 38 135 80 – –
Net assets – – 12 – –
Other 101 – – – –
Total 501 469 92 – –
3i direct QPE portfolio value by valuation method (£m) 2008 2007 2006 2005 2004
Quoted 142 19 – – –
Cost – 1 – – –
Total 142 20 – – –
3i direct SMI portfolio value by valuation method (£m) 2008 2007 2006 2005 2004
Quoted – 9 16 21 27
Earnings 150 216 329 431 608
Cost 4 9 16 25 50
Price of recent investment – 4 5 3 17
Net assets 23 48 76 80 117
Other 58 69 60 94 106
Total 244 391 564 756 960


Investment
3i direct investment by business line (£m) 2008 2007 2006 2005 2004
Buyouts 788 498 451 338 282
Growth Capital 990 482 497 263 319
Infrastructure 38 380 – – –
QPE 182 14 – – –
SMI 6 2 6 11 27
Total 2,160 1,576 1,110 755 784
3i direct investment by geography (£m) 2008 2007 2006 2005 2004

Continental Europe 707 560 538 341 401
UK 972 650 405 334 309
India 95 99 52 – –
China 53 39 26 12 7
Other Asia* 23 121 13 17 6
US 303 92 70 51 61
Total 2,160 1,576 1,110 755 784
3i direct continental European investment (£m) 2008 2007 2006 2005 2004
Benelux 24 218 62 17 52
France 40 71 88 73 65
Germany/Austria/Switzerland 155 44 76 92 141
Italy 142 – 65 20 14
Nordic 226 87 126 81 87
Spain 93 124 94 41 23
Other European* 27 16 27 17 19
Total 707 560 538 341 401
*Includes investments in countries where 3i did not have an office at 31 March 2008.
3i direct investment by sector* (£m) 2008 2007

Business services 456 137
Consumer 237 109
Financial services 218 152
General industrial 353 309
Healthcare 234 106
Media 56 380
Oil, gas and power 187 162
Technology 199 86
Quoted private equity 182 121
Total 2,160 1,576
*The Group’s sector analysis was updated in 2008. The figures in 2007 have been reclassified for comparison.

Investment continued
3i direct first and subsequent investment (£m) 2008 2007 2006 2005 2004
First investment in new investee companies 1,617 1,184 755 488 534
Drawdown on existing arrangements for first investments 92 38 12 10 17
Investment by 3i in external funds 253 168 111 26 3
Newly arranged further investment in existing portfolio companies 130 102 162 167 176
Other – including capitalised interest 68 84 70 64 54
Total 2,160 1,576 1,110 755 784
Investment by business line (including managed and advised external funds) (£m) 2008 2007 2006 2005 2004
Buyouts 1,520 781 655 532 438
Growth Capital 991 489 503 274 349
QPE 182 14 – – –
SMI 6 2 8 12 31
Total 3,195 1,866 1,322 962 979
Investment by geography (including managed and advised external funds) (£m) 2008 2007 2006 2005 2004
Continental Europe 1,275 765 652 433 526
UK 1,308 731 498 440 375
Asia 302 263 96 38 17
US 303 92 70 51 61
Total 3,195 1,866 1,322 962 979

Realisations
Realisations proceeds by business line (£m) 2008 2007 2006 2005 2004
Buyouts 858 1,341 877 505 205
Growth Capital 503 691 855 443 391
QPE 18 – – – –
SMI 136 214 268 198 236
Total 1,742 2,438 2,207 1,302 923
Realisations proceeds by geography (£m) 2008 2007 2006 2005 2004

Continental Europe 894 1,159 891 365 245
UK 783 1,169 1,173 897 608
India – – – – –
China 5 39 23 – –
Other Asia* 20 15 44 6 60
US 40 56 76 34 10
Rest of World – – – – –
Total 1,742 2,438 2,207 1,302 923
Realisations proceeds by method (£m) 2008 2007 2006 2005 2004

IPO 94 124 229 41 7
Sale of quoted investments 105 116 143 134 118
Sale of unquoted equity 1,081 1,546 1,271 744 532
Refinancing and loan repayments 462 652 564 383 266
Total 1,742 2,438 2,207 1,302 923

Private equity and venture capital – a lexicon
Like any industry, the Private Equity industry has its own language.
This Lexicon provides a description of some of the key terms.
Definitions Growth capital (or development capital) Venture capital These are typically investments
“Private equity”, as the term suggests, This involves the provision of capital to in “early“ and “late” stage technology and
involves investment of equity capital in private accelerate the growth of established businesses healthcare companies. Here, the investor
businesses. More recently it has become as and generally involves the PE investor taking (“the VC”) typically takes a minority equity
much associated with an investment style a minority equity position. It is a type of stake in the business as part of a syndicate of
as it has with its more literal description. investment suited to a diverse range of growth VCs. “Early-stage” investments typically fund
opportunities, including acquisitions, increasing research or development expenditure and costs
3i’s private equity activities cover:
production capacity, market or product associated with building an organisation for a
Buyouts This involves the purchase of an development, turnaround opportunities, company which is not yet generating revenues.
existing independent business or a subsidiary or shareholder succession and change of ownership “Late-stage” investments tend to fund the
division of a corporate group from its current situations. For 3i from 1 April 2008 this scaling up of a business, once the model is
owners. This category of investment includes category of investing also includes investments proven, for companies which are either yet to
management buyouts, management buy-ins, in later stage technology and healthcare make a profit or in the early stages of
and institutional buyouts. Here, the equity in the businesses. profitability. Both early and late-stage investing
post-buyout business is usually shared between usually involves a number of “funding rounds”.
Examples of growth capital investments can be
the management team and the Private Equity
found on pages 18 and 19. From 1 April 2008, 3i has stopped investing in
investor (“PE investor”), with the PE investor
the early-stage segment of the market and the
usually holding a majority stake. Infrastructure 3i also invests in infrastructure
Venture Capital portfolio has been managed by
assets. These are investments in asset-intensive
The financing for the buyout would generally a separate Venture Portfolio team. Later-stage
businesses which provide essential services such
comprise around 50% of senior and mezzanine investments will continue to be made through
as transport, utilities and social infrastructure
debt (usually provided by banks and mezzanine the Growth Capital business line.
under long-term contracts. These include a
providers), with substantially all of the balance
range of asset maturities, from mature, Examples of venture capital investments can
of the purchase price coming from the PE
typically high-yielding assets to early-stage be found on pages 26 and 27.
investor and a relatively small amount coming
development projects.
from the management team. A large part of
the PE investor’s finance is generally provided Quoted Private Equity (“QPE”) This involves
in the form of redeemable preference shares or the purchase of influential stakes in smaller
shareholder loans. This is to reflect the mismatch quoted companies which have low liquidity
between the equity finance provided by the PE in their shares, little analyst coverage and
investor and that of the management team, as potential to grow significantly. The concept is
well as to provide a significant equity incentive that through taking a private equity value
for management. creation approach to these companies and
working with management their prospects
Examples of buyouts investments can be found
can be significantly improved.
on pages 14 and 15.

Investment objective Structuring and making the investment This Types of investment vehicle
Like any other investor, the objective of the PE phase involves financial structuring, negotiation The predominant vehicle in the industry is the
investor is to earn attractive returns on its and project management skills on the part of the independent, private, fixed-life, closed-end
investment, commensurate with the risk being PE investor. Relationships with banks, mezzanine fund, usually organised as a “Limited
taken. The returns come either in the form of finance providers, intermediaries and others are Partnership”. These funds typically have a fixed
income (interest, dividends or fees) or capital also important. life of ten years. Investments generally consist
gains. The contrast with investment in quoted of an initial commitment of capital by
Implementing the value creation plan This phase
companies is that the PE investor will usually investors in the fund which is then drawn
involves “actually making it happen”, creating
prefer to crystallise its capital gain through a down as the investment manager finds
value between making the investment and exit.
trade sale of the underlying business (ie a sale investment opportunities. Capital is returned to
If the strategy involves corporate acquisitions or
to a corporate purchaser), a sale to a financial the investors via earnings distributions and
mergers, restructuring the business, achieving
purchaser or a flotation on the public markets. sales of investments. Some investment
growth in turnover or operating profits, the
This preference tends to make private equity vehicles are organised as captive or semi-
PE investor would need to have the required
investment medium to long term in nature, since captive funds. A captive fund invests only for
capability to ensure these are achieved.
time is required to implement the value growth the interest of its parent organisation (which
The ability to assess and strengthen the
strategy for the business and there will also be may be, for example, a bank or investment
management team as the life cycle proceeds is
a wish to optimise the timing of the “exit”. bank, insurance company, university). A semi-
as important. This might involve having access
captive fund mixes capital from both outside
to a pool of management talent in order to
Investment lifecycle investors and the parent organisation. Both
match a particular need to a particular
The lifecycle for an investment can be broken captive and semi-captive funds tend to be
management skill-set.
down into five distinct phases, with each “evergreen” in nature – income from
requiring significant resource and capability on Exit This phase generally involves a trade sale, a investments and proceeds received on the
the part of the VC or PE investor: listing on a stock exchange or a sale to another realisation of investments are substantially
private equity firm (“a secondary”). Exit prospects retained for further investment rather than
Origination The ability to access and create
and strategy should generally be reviewed on an being returned to investors. There are also a
investment opportunities. This is a critical
ongoing basis during the investment’s life – and limited number of private equity investment
component of a PE investor’s business model.
the sale or flotation itself requires resource and companies, such as 3i, whose shares are listed
Developing and validating the investment case capability from the PE investor, since both are on a stock exchange. These tend to be
In this phase the PE investor draws upon its lengthy and complex processes. evergreen in nature and offer investors a more
knowledge, experience, commercial judgment liquid exposure to private equity.
and other capabilities to develop and validate
their investment case. This might involve building
a potential board and management team and
working with them to develop the strategy for
value growth and exit; as well as conducting
“due diligence” on all significant assumptions
and inputs to the investment case.

Returns and IRRs – an explanation
Our aim is to achieve consistent market-beating returns measured by using

“cash-to-cash vintage year IRRs”.
How does 3i’s total return equate to What is an IRR measure? Why does 3i track the performance
the IRR measures? The Internal Rate of Return (“IRR”) is the interim of vintage years?
Total return is calculated as the gross portfolio return earned by 3i through investing in an asset Looking at the performance of a vintage enables
return plus other fee income, less costs and net from the date of initial investment up until the 3i to assess the returns on pools of assets
interest payable. Total return can be expressed particular point in time at which it is calculated. invested during a vintage year. It gives a
as a quantum or as a percentage of opening The calculation uses monthly cash flows measure of the performance of each year’s
shareholders’ funds. generated from the asset to work out the investment activity in isolation.
annualised effective compound rate of return.
Gross portfolio return is made up of the income For assets that have yet to be sold, and It also allows an assessment of the return
and value movement (both realised and therefore have not generated a final cash inflow generated from assets over the length of time
unrealised) generated from our portfolio. from sale proceeds, the asset value at the date they are held, rather than just looking at the
of calculation of the IRR is used to calculate the performance between the beginning and end
Costs include expenses and net carried interest
return. An IRR can apply to a single asset or a of a financial year, which is shown in the annual
payable.
pool of assets (eg all new investments made in total return statement. The annual total return
The elements that make up the gross portfolio financial year 2008 can be pooled to calculate analysis has limitations as a measure of longer-
return are the same constituents used in an an IRR for vintage year 2008). term performance, as it is only a representation
IRR calculation. of how the assets have performed in one
An IRR calculated using the current value of the financial year and is heavily influenced by the
Gross portfolio return (stated as a percentage of asset as the terminal cash flow is called a Fund valuation of the asset at the beginning and end
opening portfolio value) will equate to an IRR IRR. A cash-to-cash IRR does not include any of the year. It does not show the evolution of
measure over time. So, if 3i achieves 20% gross terminal value for unsold assets and is a pure, how a vintage year is performing over time.
portfolio returns each year, the long-term IRR more simple measure of cash invested compared
will also move to 20%. to cash returned as it does not include any To achieve this longer-term measure of
judgmental asset valuation for the unsold assets. performance over time, the IRR is the standard
What is total shareholder return? measure used across the private equity industry.
Total shareholder return is the change in In the business line IRR tables included in the
share price over a period, plus dividends Business review, total investment represents all What IRR measures does 3i use to
re-invested. first and further investment in a vintage and assess the performance of a vintage?
investment in externally managed funds, while A cash-to-cash IRR cannot be meaningfully used
return flow consists of capital proceeds and to measure the performance of a vintage until
income. Value remaining represents the value the majority of assets in that vintage are
still held within the vintage’s portfolio based on realised. Therefore, 3i monitors the progress of
our latest valuation. each vintage and the evolution of the IRR using a
combination of the Fund IRRs and the extent to
What is a vintage and a vintage year? which a vintage is realised, to assess the interim
A vintage is a collection of assets in which 3i performance. Case A, depicted in chart 1, is an
makes its first investment during a defined example to show the interim cash-to-cash IRR
period of time. The most common time period of an asset and clearly indicates why, during the
measured in the private equity industry is a year. holding period of an asset, the Fund IRR gives a
A vintage year at 3i includes all new investments more appropriate measure of performance.
made within our financial year, ie vintage year
2008 covers new investments made from
1 April 2007 to 31 March 2008.

Volatility, the portfolio effect and Chart 1: IRR evolution

the holding period
There will always be a range of IRRs achieved 3i equity – value uplift
on each of the individual assets in each vintage 3i equity – cost
year. However, when assets are pooled together, 3i shareholder loan
the portfolio effect will reduce this overall
volatility in each vintage year. For example,
50
the range of volatility expected in any one
vintage year is +/-10% for Buyouts and, 30
35
+/-7% for Growth Capital.
Across the cycle, the volatility is expected to
average out at +/-5% for Buyouts and, +/-3% 25 25 25 25
for Growth Capital.
A 3i vintage year is made up of many assets. 75 75 75 75
All will have their own individual cash flows,
holding periods and will be revalued at different
times. After three years the maturity of a
vintage tends to have developed enough for the
Fund IRR to give a good indication of the final
outcome. By seven years most vintage years
will be largely realised.
Year 1 Year 2 Year 3 Year 4
Tracking our progress Case A

To monitor a vintage year 3i uses a combination Investment (100) – – –
of Fund IRRs and money multiples. The Fund IRR Yield – 6.5 6.5 6.5
gives a measure of performance and the money Value at year end – 130 135 –
multiple shows how much cash has been Sale proceeds – – – 150
returned compared to cost (eg Case A = 1.7x) Fund IRR 0% 36% 22% 20%
so that we can assess the extent to which that Cash-to-cash IRR (100%) (94%) (71%) 20%
performance is “locked-in”.
We have published the Fund IRRs for our
long-established business lines within the
Business review.

Carried interest – an explanation
Private equity firms ensure alignment between the interests

of management teams and investors through a variety of
mechanisms. A key financial mechanism is “carried interest”
or “carry” and this is explained below.
What is carried interest? When is carried interest paid and how What other return does the fund
Carried interest refers to the profits generated is it calculated? manager receive?
in a successful private equity fund that are Carried interest is usually based on the The fund will pay a priority profit share (often
received by the carried interest holders, and performance of the fund as a whole, but in some called the “management fee”) to cover the
which typically amount to 20% of the net profit funds is paid on an investment-by-investment costs of the fund manager. This is typically
in the fund. basis. Usually investors receive their initial capital 1% to 2% of the investors’ commitments to
back plus a “hurdle” to ensure a minimum level of the fund annually.
Who is the carried interest holder? return before any carried interest is paid.
This is often the senior management team of Why does 3i have both carried interest
Typically, this hurdle is based on the Internal Rate
the fund manager, but varies between private receivable and carried interest payable?
of Return (“IRR”) of the fund since its inception
equity firms. 3i’s carried interest receivable is due from the
– for more information on IRRs see page 118.
third-party funds that 3i manages. 3i has raised
An IRR-based hurdle is the most appropriate
Where does the term carried interest a succession of buyout funds, the most recent
mechanism in the private equity industry due
come from? being Eurofund V, a a5 billion mid-market fund,
to the focus on cash-to-cash returns.
The investor who receives the carried interest is and this year a $1.2 billion infrastructure fund to
said to be carried by the other investors since Once the hurdle has been met, most funds invest in the Indian market.
they are willing to allocate up to 20% of their allocate cash flows above the hurdle
3i’s carried interest payable is due to investment
profits to the carried interest holder. disproportionately for a short period, known as
executives employed by 3i. Assets in a vintage
the “catch up” phase, until the carried interest
are grouped together in pools (typically covering
How does carried interest ensure holder has received the right proportion of the
two years of investment), which are specific to
alignment of the parties in a private overall profits in the fund.
a particular investment team. The executives in
equity transaction?
that team purchase the rights to the carried
The main parties in a private equity transaction Why are investors in a private equity fund
interest and, if the pool is profitable, they will
are the management team of the underlying willing to forego as much as 20% of profit
receive an allocation of investment profits.
company in which the fund is investing, the in carried interest?
3i’s internal carry schemes are structured in the
investors in the fund and those who manage Generally investors value the alignment that
same way as external funds, with similar terms
the fund. carried interest provides.
and conditions. Approximately 94% of 3i’s
Management teams of companies backed Carried interest functions in a similar way to a portfolio assets, measured by value at 31 March
with private equity are incentivised by the performance fee. It is directly linked to the 2008, are within carried interest schemes.
potential capital gain on their investment in success of the investment fund and has the
Both carried interest receivable and payable
the company. Investors in private equity funds benefit to the investors of being measured on
are accrued in line with underlying realised and
benefit from the growth in value of these the cash returned to them rather than the value
unrealised profits in the fund but cash payments
underlying companies. of the fund.
are not made until the cash is returned to
Managers of the fund holding the carried In return for paying carried interest, fund investors, as noted above.
interest benefit if the overall performance of investors demand “active” management of their
the fund is successful. capital. Specifically, the fund manager will:
– invest fund investors’ capital in high
quality companies;
– develop and implement a value-creation
strategy for each company in the portfolio;
– participate in the strategic and operational
policy-making through board representation;
– earn an appropriate yield on the investment;
– and provide a profitable exit through a trade
sale, IPO or refinancing.

As the level of carried interest receivable is Worked example

related to the returns in 3i’s co-investment
funds, while the level of carried interest Company A Carried interest
payable is related to the returns from 3i’s Company B Management fee
own investments, carried interest receivable Company C Cash returned to investors
and payable are only indirectly related in
Company D
3i’s accounts.
Company E
However in 3i’s Buyout business line, there is a
correlation between carried interest receivable
£200m £200m
and payable because investments in the same
business are held both by the managed fund £18m*
and held on 3i’s own balance sheet. £10m**
Why does 3i have co-investment

arrangements alongside its carried
interest schemes?
In line with market practice, 3i requires £100m
those investment executives who acquire £172m
carried interest rights also to invest alongside
3i. The terms of these “co-investment”
arrangements are changed from time to time
but typically involve investment executives
personally investing up to 2% of the total 3i
and funds commitment to each new investment.
Gains or losses from the co-investments accrue
Assume a Five companies Assume £200 million How might the
to the investment executives and provide £100 million in portfolio cash received by £200 million
further alignment with 3i and the fund investors. private equity perform investors by the end be split?
fund invests in differently of the fund, ie when *Assume carried interest of
five companies companies are sold 20% of £90 million profits
How does 3i account for carried interest? in the fund (£100 million –
£10 million fees)
3i accounts for carried interest on an accruals **Assume average
basis. As realisations are made and valuations are management fee
of £1 million pa during
adjusted, 3i reviews the impact on each carry the life of the fund
scheme in place and amends its carried interest

accruals accordingly.
3i’s accounting policy means that movements
in gross portfolio return are fully reflected in
the calculation of carried interest payable and
receivable, ultimately reducing year-on-year
volatility to 3i’s total return.

3i and Transparency
For over 60 years, 3i’s objective has been to take an open and
straightforward approach to doing business and describing what we
do to those who have an interest.
Our track record The Walker review

Long before becoming a public company in The review by Sir David Walker in 2007, How did 3i engage and input to
1994, 3i produced an annual report which which produced “Guidelines for Disclosure and the Walker process?
went beyond what was required from a legal Transparency in Private Equity” in November 3i engaged with the Walker process in a very
perspective. We do this because we think it is 2007, was actively supported by 3i. 3i Group’s active way through the BVCA Big Buy Out
good for our business, especially as we have Chairman Baroness Hogg was a member of the committee, through its own submission to
grown 3i internationally and in markets where Review Group and Philip Yea, 3i’s Chief Executive the Working Group and through the input of
the Private Equity model is less familiar. Once 3i and Patrick Dunne, 3i’s Communications Director Baroness Hogg and other senior executives
became listed on the London Stock Exchange in were both members of the committee within at 3i. 3i also gave its support for the
July 1994, and shortly afterwards became a the British Private Equity and Venture Capital recommendations when they were published
FTSE 100 company, its peer group consisted of Association (“BVCA”) which proposed the review. in November 2007.
other members of the FTSE 100 as well as PE
firms. 3i is regularly ranked in surveys against What was the Walker review? What were Sir David Walker’s
these peers. At the UK 2007 Investor Relations In response to the growing debate about the recommendations?
Society Best Practice awards in April 2007, role of Private Equity in the UK, the BVCA Sir David Walker’s recommendations with
our 2006 Annual report was one of four short suggested a review be conducted by respect to reporting for Private Equity firms and
listed for the Best Annual report: Most effective Sir David Walker, the highly-respected City their relevant portfolio companies were on a
communication FTSE 100 award. 3i’s Corporate figure, to examine ways in which levels of “comply or explain” basis. He also had a number
responsibility report for 2006 was awarded disclosure in companies backed by the UK of recommendations for the industry as a whole.
top place. Private Equity industry could be improved. For Private Equity firms:
As the industry’s profile increased, as Sir David, Senior Advisor at Morgan Stanley The guidelines apply exclusively to UK Private
PE became mainstream as an asset class for International (former Chairman of Morgan Equity firms authorised by the FSA, that are
investors and as PE firms have bought larger Stanley International, former Executive Director managing or advising funds that either own or
businesses and businesses with a higher profile, Bank of England, and former Chairman of the control one or more UK companies.
the demand for greater transparency and public Securities and Investments Board) chaired an The guidelines say that such Private Equity firms
disclosure also increased. independent industry working group which should produce an annual review, accessible via
was tasked with drawing up a voluntary code, a website, which:
In 2007, there was a considerable amount of addressing the levels of disclosure in the industry
press coverage in many countries about the and how it should communicate with a wide – communicates how the Private Equity
role of Private Equity and in the UK there was range of stakeholders. practice fits into the firm and confirm that
a formal Treasury Select Committee Review. arrangements are in place to deal with
3i played an active role in this debate and The working group recognised the very different conflicts of interest;
the Group’s Chief Executive, Philip Yea, gave types of investment and issues relating to different
segments of the industry from small start-up – provides some commentary on history,
evidence at the committee with the heads
financing to large buyouts. It also took account of investment approach and investment holding
of other leading Private Equity firms. During
the size of the portfolio companies concerned. periods;
this review, 3i’s 2007 Annual report was
commended by the Chairman of the Treasury It received support from across the industry. – commits to conform to the guidelines on a
Select Committee, John McFall. The working group consulted widely and invited “comply or explain” basis;
3i has also been very active in ensuring that representations from within the private equity – provides details on the leadership of the UK
there is comprehensive and timely information industry, with interested parties and among firm and describes the UK firms meeting the
available online. According to IR WebReport’s other financial institutions, pension funds and the portfolio criteria below; and
2007 survey of 535 large-cap international investment community as well as more broadly
portfolio companies, trade unions and employer – provides a categorisation of the limited
companies, 3i’s investor relations website - partners in its funds and follows established
www.3igroup.com - ranks fifth globally and representatives.
guidelines in reporting to their limited partners.
second in the global Financials sector.

For Private Equity backed portfolio companies: So how does 3i measure up against the Portfolio companies:
The guidelines apply to portfolio companies Walker guidelines? 3i has two portfolio companies which fit
which are: 3i is fully compliant with the Walker guidelines. the Walker criteria for enhanced disclosure.
– acquired by one or more private equity firms As a Private Equity firm: These are Anglian Water Group Limited, an
in a public-to-private transaction, where the – 3i’s annual and half-yearly reports are fully infrastructure investment, and Enterprise
market capitalisation together with the compliant; Group Holdings Limited, a mid-market Buyouts
premium for acquisition of control was in investment. Both of these companies were
– our 3i.com and 3igroup.com websites provide formerly public companies listed on the London
excess of £300 million; and substantially more information than is required Stock Exchange.
– acquired by one or more private equity firms in by the Walker guidelines;
a secondary or other non-market transaction, Anglian Water Group’s year end is 31 March
– we have high levels of employee engagement. and its Annual report and accounts for the
where the enterprise value at the time of the 92% of our staff took part in the latest staff
transaction was in excess of £500 million. year to 31 March 2008 are expected to be
survey and 3i exceeded 19 of the 20 Ipsos published in June 2008 and expected to be
And, in each case, where more than 50% of Mori Top Ten norms. Further information fully Walker compliant. The company’s website –
the revenues were generated in the UK and UK regarding employee engagement is provided in www.awg.com – already contains a high level
employees totalled in excess of 1,000 full-time our Corporate responsibility report on page of disclosure.
equivalents. 44;
Enterprise’s year end is 31 December and
Portfolio companies meeting these criteria – regular surveys of shareholders evidence its Annual report and accounts for the year
should publish annual reports and accounts on strong satisfaction with the level and nature of to 31 December 2007 and website
their websites within six months of the year communications; – www.enterprise.plc.uk – are fully Walker
end and include: – 3i has a well-developed approach to compliant.
– the identity of the private equity fund or funds communicating with the LP investors in the This 3i Annual report also contains 15 detailed
that own the company, the senior managers funds which it manages or advises with a case studies comprising the two largest
or advisers who have oversight of the fund or regular flow of information, as well as events investments and the two largest realisations
funds and detail on the composition of its board; and meetings. Investors are also encouraged by value together with the next largest
– a business review that substantially conforms to provide feedback; investments in the portfolio for our Buyouts,
to section 417 of the Companies Act 2006; – 3i’s website 3i.com contains a large number of Growth Capital and Venture Capital business
and endorsements from the management teams lines. Details of forty other large investments
of portfolio companies who work with 3i; are also included in this report.
– a financial review to cover risk management
objectives and policies, including those relating – regular surveys of journalists’ views on the
to leverage. industry and on the Company undertaken by
Portfolio companies should also: Ipsos Mori show high levels of trust in 3i and
satisfaction with press communications;
– publish a summary mid-year update no later
than three months after mid-year; and – 3i has a well-developed compliance function
which ensures that arrangements are in place
– provide data to the BVCA in support of its to deal with conflicts of interest. As can be
work in aggregating data for the industry as seen from our Risk management report on
a whole. page 38, there is a formal Conflicts
For the industry as a whole: Committee which reports to our Operational
– increase industry-wide reporting and intelligence Risk Committee; and
and, in particular, to undertake rigorous – 3i provides extensive information on the
evidence-based analysis of the economic leadership of the UK firm and the Group
impact of Private Equity activity; and as a whole.
– establish a guidelines review and monitoring
capability.

Information for shareholders
Financial calendar
Ex-dividend date 18 June 2008
Record date 20 June 2008
Annual General Meeting 9 July 2008
Final dividend to be paid 18 July 2008
Half-year results November 2008
Interim dividend expected to be paid January 2009
Information on ordinary shares

Shareholder profile Location of investors at 31 March 2008
UK (including retail shareholders) 62.4%
US 25.0%
Continental Europe 10.8%
Other international 1.8%
Share price
Share price at 31 March 2008 830.0p
High during the year (21 May 2007) 1,231.0p
Low during the year (17 March 2008) 733.5p
Balance analysis summary
Number
Number of holdings
of holdings Corporate Balance as at
Range Individuals bodies 31 March 2008 %
1 – 1,000 23,190 1,911 9,876,257 2.58
1,001 – 10,000 3,300 1,014 9,251,738 2.42
10,001 – 100,000 103 386 16,583,696 4.33
100,001 – 1,000,000 11 255 86,921,413 22.71
1,000,001 – 10,000,000 0 71 205,897,426 53.80
10,000,001 – highest 0 4 54,210,564 14.16
Total 26,604 3,641 382,741,094 100.00
The table above provides details of the number of shareholdings within each of the bands stated in the register of members at 31 March 2008.
Investor relations and general enquiries

For all investor relations and general enquiries about 3i Group Registrars Designed and produced by Radley Yeldar (London) www.ry.com.
plc, including requests for further copies of the Report and For shareholder administration enquiries, including changes Printed by St Ives Westerham Press Ltd, ISO14001, FSC
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Fax +44 (0)20 7928 0058 Telephone +44 (0)870 195 6310 elemental chlorine free (ECF) and the inks in printing this report are
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email ir@3igroup.com
Pages 69 to 124 of this document are printed on Take 2 Offset
or visit our investor relations website, www.3igroup.com, for paper. This paper is made from 100% post consumer waste. It has
full up-to-date investor relations information, including the been certified according to the rules of the Forest Stewardship
latest share price, recent annual and half-yearly reports, Council (FSC) and it is produced at a mill that is certified to the
results presentations and financial news. Frequently used Registrars’ forms may ISO14001 environmental management standards.
be found on our website at
www.3igroup.com/e-comms FSC – Forest Stewardship Council.
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3i Group plc of custody from the tree in the well-
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Registered office: document in the printing factory.
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Electronic communications ISO 14001 – A pattern of control for
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More general information on electronic communications may report and accounts 2007 have been
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project in China.

Investor relations website – 3igroup.com
www.3igroup.com is 3i Group’s dedicated investor relations website, providing convenient access to online
annual and half-yearly reports and presentations, as well as 3i’s latest deal and financial news (with RSS
feeds and an alert service) and a debt section. Our financial calendar and results day centre (including
webcasts), historic AGM and dividend information are also on the site.
Shareholders will find tools such as share price charting, a Blackberry share price service, calculators,
frequently used Registrars’ forms and a dedicated email address for investor relations enquiries
(ir@3igroup.com) on www.3igroup.com.
Home page:
www.3igroup.com/shareholders/
Share price look-up and calculator:
www.3igroup.com/shareholders/shareinfo/calculator/
Results day centre:
www.3igroup.com/shareholders/presreports/
Online Report and accounts:
www.3igroup.com/shareholders/presreports/reports/

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
M60908 May 2008
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3i Group plc Report and accounts 2008

Directors’ report Introduction 01 Business review continued

Directors’ remuneration report Directors’ remuneration report 68

Auditors’ report Independent auditors’ report to

Financial statements Consolidated income statement 80 Balance sheet 82

Information for shareholders Information for shareholders 124

Report and accounts 2008 3i Group plc 01

Year to/as at 31 March 2008 2007

Portfolio value by business line (£m)

Buyouts 2,025 1,281

02 3i Group plc Report and accounts 2008

Report and accounts 2008 3i Group plc 03

Buyouts Growth Capital Infrastructure

Gross portfolio return Gross portfolio return Gross portfolio return

57% (2007: 54%) 21% (2007: 48%) 14% (2007: 16%)

Realised profits 370 Realised profits 75 Realised profits 6

04 3i Group plc Report and accounts 2008

Assets under management

07 61% 39% £7,134 million

08 61% 39% £9,792 million

QPE SMI Venture Capital

Gross portfolio return Gross portfolio return Gross portfolio return

n/a (2007: n/a)* 0% (2007: 13%) (2)% (2007: (6)%)

Realised profits – Realised profits 7 Realised profits 65

Report and accounts 2008 3i Group plc 05

06 3i Group plc Report and accounts 2008

Report and accounts 2008 3i Group plc 07

08 3i Group plc Report and accounts 2008

3i investment teams: 3i’s investments

Report and accounts 2008 3i Group plc 09

Extend our international International expansion supports asset growth,

10 3i Group plc Report and accounts 2008

Key risk factors Performance

3i's direct portfolio Managed and advised by 3i

– Effectiveness of knowledge management and Portfolio value by geography

– Appropriateness of capital structure. Assets under management by business line

Report and accounts 2008 3i Group plc 11

57% £731m IRR returns of 20% through the cycle and is

12 3i Group plc Report and accounts 2008

Report and accounts 2008 3i Group plc 13

Global Garden Products Inspicio

For further information on 3i’s portfolio

For a list of our Top ten and 40 other large

14 3i Group plc Report and accounts 2008

Giochi Preziosi Care Principles Coor Services Management

Report and accounts 2008 3i Group plc 15

21% £302m Europe, Asia and the US with over 100

2008 939 1 1,009 n/a n/a relatively low leverage.

16 3i Group plc Report and accounts 2008

Report and accounts 2008 3i Group plc 17

Quintiles Venture Production plc

18 3i Group plc Report and accounts 2008

DNA Oy Clínica Baviera Hayley Conference Centres

Current trading Developments since 3i invested Developments since 3i invested

Report and accounts 2008 3i Group plc 19

Returns from Infrastructure (£m) Business model

20 3i Group plc Report and accounts 2008

3i Infrastructure Limited is a long-term investor Strategy Investment and realisations

Report and accounts 2008 3i Group plc 21

Returns from QPE (£m) Business model