RNS Number : 7701H
3i Quoted Private Equity PLC
10 November 2008
3i Quoted Private Equity plc
10 November 2008
Results for the six months to 30 September 2008
for the period to / as at 30 Sept 2008 31 Mar 2008
Total return �(37.2)m �15.3m
Total return on opening shareholders* equity (9.0)% 3.9%
Net asset value per share 93.0p 102.3p
Total investment portfolio value �129.8m �103.8m
Cash available to invest �244.1m �307.8m
* 3i QPEP continues to invest cautiously in volatile markets, with �174.4 million invested since inception, of which �70.7 million
in the period;
* The Company is in a robust financial position, with ample liquidity to invest and no leverage;
* Market conditions are affecting portfolio valuation, but underlying operating performance remains stable;
* Market dislocation has deepened the pool of opportunity for 3i QPEP, with new opportunities to be derived from falling valuations,
deleveraging and increasingly scarce debt and equity capital for small and medium cap companies;
* With a strong balance sheet, 3i QPEP is well positioned to take advantage of the market opportunity.
Commenting on the results, David Tyler, Chairman of 3i QPEP, said: "We are long-term holders of our assets and, while we cannot protect
our investments from broader market movements, we, and our Investment Adviser, believe we can manage and add value to our portfolio to
deliver our target return across the cycle."
Bruce Carnegie-Brown, Managing Partner of 3i Investments plc, Investment Adviser to 3i QPEP, added: "Market conditions are likely to
remain turbulent for the foreseeable future and we will remain cautious investors. We continue to believe that market circumstances are
increasing the number of opportunities for the Company."
-ends-
For further information regarding the announcement of 3i QPEP's interim results for the six months to 30 September 2008, please see
www.3iqpe.com.
For further information, please contact:
David Tyler, Chairman +44 1534 711 445
Bruce Carnegie-Brown, Managing Partner, 3i Investments plc +44 20 7975 3435
Silvia Santoro, investor enquiries +44 20 7975 3258
Jennifer Letki, press enquiries +44 20 7975 3190
Lydia Pretzlik, The Maitland Consultancy +44 20 7379 5151
Notes to editors
3i Quoted Private Equity plc ("3i QPEP") is a Jersey incorporated, public closed-end investment company. 3i QPEP was admitted to the
Official List and to trading on the London Stock Exchange on 29 June 2007. 3i Investments plc ("3i Investments"), which is regulated in the
UK by the Financial Services Authority, has been appointed by 3i QPEP to act as its investment adviser.
3i QPEP aims to deliver private equity value creation techniques to public companies, leveraging the international network of its
investment adviser to source attractive opportunities and execute its value creation plan. 3i QPEP is building a portfolio of influential
stakes (typically between 25% and 75%) in selected companies in the UK and continental Europe and across a broad spectrum of sectors to
attain the level of influence necessary to generate significant improvements in operating performance.
The half-yearly results of 3i Quoted Private Equity plc for the six months to 30 September 2008 has been drawn up and presented in
accordance with and in reliance upon applicable English and Jersey law and the liabilities of the Company in connection with that report
shall be subject to the limitations and restrictions provided by such law.
This statement may contain certain statements about the future outlook for 3i Quoted Private Equity plc. Although we believe our
expectations are based on reasonable assumptions, any statements about the future outlook may be influenced by factors that could cause
actual outcomes and results to be materially different.
The half-yearly report of 3i Quoted Private Equity plc for the period to 30 September 2008 has been drawn up and presented in accordance
with and in reliance upon applicable English and Jersey law and the liabilities of the Company in connection with that report shall be
subject to the limitations and restrictions provided by such law. The half-yearly report for the period to 30 September 2008 is unaudited.
This report may contain certain statements about the future outlook for 3i Quoted Private Equity plc. Although we believe our
expectations are based on reasonable assumptions, any statements about the future outlook may be influenced by factors that could cause
actual outcomes and results to be materially different.
Chairman's statement
The first half of this year has posed major challenges for all investors in listed equities. Equity markets worldwide have suffered very
heavy losses in the wake of difficult macroeconomic conditions and a near freezing up of the credit markets. The FTSE All-Share index and
the FTSE Small Cap index lost 17% and 21% of their value respectively between 1 April and 30 September 2008.
In light of market conditions, the Board and the Investment Adviser have adopted a cautious approach to investment. This has so far
proved to have been wise, allowing us to conserve capital for investment until a later date when better terms are likely to be available for
us. We believe that there will be significant opportunities for investors such as 3i QPEP which have cash to invest.
While the net asset value of 3i QPEP over the last six months declined a good deal less than that of the stock market as a whole, its
performance has, nonetheless, still been disappointing. The net asset value at 30 September 2008 was 93.0 pence per share, declining by 9%
compared to the net asset value at 31 March 2008.
The share price performance of the majority of our portfolio has been adversely affected by broader market movements, despite the stable
operating performance of the underlying companies. We are long-term holders of our assets and, while we cannot protect our investments from
broader market movements, we, and our Investment Adviser, believe we can manage and add value to our portfolio to deliver our target return
across the cycle.
The availability of credit has continued to decline over the past few months, in particular for small- to medium-sized enterprises.
While economic growth is likely to slow down very significantly, particularly in the developed economies of Europe and the US, we believe
that there are many healthy companies with ambitious management teams and credible plans to grow their operations, which are experiencing
difficulties in accessing capital in the current environment. 3i QPEP, with �244 million in uninvested cash on the balance sheet, can
provide a solution to such companies seeking expansion capital.
In summary, with funds ready to be deployed against a backdrop of increasingly scarce and expensive capital, and with valuations
becoming more attractive, we believe that our target returns are achievable across the cycle.
David Tyler
Chairman
9 November 2008
Investment Adviser's review
About the Investment Adviser
3i Investments acts as Investment Adviser to the Company through its quoted private equity investment team ("the QPE investment team").
The Investment Adviser provides the Company with advice on the origination and completion of new investments and on funding requirements, as
well as on the management of the existing investment portfolio.
The QPE investment team operates as a separate investment team within 3i Group and, as at 30 September 2008, was staffed by 11 dedicated
investment professionals, including six partners, who have significant experience as senior executives in private equity, in investment
banking and in the executive management of commercial enterprises. The team can also draw on 3i Group's network of investment professionals,
based in 14 countries, to source suitable investments.
3i Group was the largest subscriber to 3i QPEP's initial public offering and owns approximately 45% of the equity in the Company.
Investment activity
As shown in table 1, investment activity since inception to 30 September 2008 totalled �174.4 million, representing 44.5% of the net
proceeds raised by 3i QPEP at its flotation. Of this amount, �70.7 million was invested between 1 April 2008 to 30 September 2008.
Table 1
Summary of investment activity
for the period from 21 March 2007 to 30 September 2008
Equity Total
holding investment
Portfolio asset Sector (%) (�m)
Strategic Recovery Fund II LP ("SRF Investment Fund n/a 6.5
II")(1)
The Character Group plc ("Character") Media 27.8 19.3
Jelf Group plc ("Jelf") Financial Services 27.9 29.8
Phibro Animal Health Corporation Animal Healthcare 29.9 48.9
("Phibro")
Salamander Energy plc ("Salamander") Oil and gas 15.5 69.9
Total 174.4
(1) The Company committed a total of �14.1 million to SRF II, of which �6.5 million had been drawn down
at 30 September 2008. SRF II had final commitments at close of �70.8 million
The balance of flotation proceeds, plus income received and net of costs paid, is currently held in cash or cash equivalents.
An asset-by-asset review of the Company's portfolio, including a strategic update and developments in the period, can be found in the
Portfolio review.
The most significant investment during the period was the purchase of a 15.5% holding in Salamander for a total cost of �69.9 million.
This holding was built through: (i) the purchase of 17.2 million new Salamander shares in a placing and open offer announced by the company
in July, at a price of 300 pence per share; (ii) a purchase, announced in July, of 4.5 million Salamander shares from 3i Group, at a price
of 300 pence per share; and (iii) subsequent on-market purchases of 2.1 million Salamander shares, executed between August and September at
an average price of 237 pence per share.
Salamander, a London-listed independent oil and gas exploration and production company, has built a portfolio of production, development
and exploration assets with interests in Indonesia, Thailand, Vietnam, Lao PDR and the Philippines. The business has proven and probable
reserves of 64 million barrels of oil equivalent and currently produces 10,000 barrels of oil equivalent per day.
Mike Sibson, a Director in 3i Group's oil and gas team, based in Aberdeen, was appointed to the Salamander board of directors in October
2008.
This investment demonstrates clearly the advantages of 3i QPEP's relationship with 3i Group. In completing this transaction, the QPE
investment team was able to leverage the significant knowledge of the oil industry built by 3i Group's Aberdeen-based team. Mike Sibson, an
oil and gas expert with eight years of experience of investing in the sector, will add great value to 3i QPEP's investment in Salamander.
The remainder of the investment during the period was accounted for by a further drawdown of �0.8 million by SRF II. The Company made a
�14.1 million commitment to invest in SRF II, of which �6.5 million had been drawn down at 30 September 2008.
Portfolio performance
The value of 3i QPEP's portfolio as at 30 September 2008 was �129.8 million. The return by asset, before the deduction of any costs, is
shown in table 2. The Company generates returns from the assets principally through unrealised capital movements on the revaluation of the
asset portfolio, the negotiation of underwriting and advisory fees on investment transactions, from the yield earned from the assets through
dividends or interest income, or from any realised capital profits from the sale or partial sale of the asset.
The value of all assets, with the exception of Phibro, declined significantly during the period, reflecting broader market movements.
As outlined in more detail in our Portfolio review section, however, the operating performance of our portfolio companies remains
stable, despite adverse market conditions.
Portfolio composition
3i QPEP has no top-down sector or geographical allocation targets but aims to build, upon full investment of the flotation proceeds, a
portfolio of eight to 12 investments, well diversified by sector and geography. Diversification of the portfolio across sectors and
geographies aims to balance the portfolio's risk profile.
Returns
3i QPEP delivered a total return of �(37.2) million in the period from 1 April 2008 to 30 September 2008. The net asset value as of 30
September 2008 was 93.0 pence per share.
Table 2
Gross portfolio return by asset
for the six months to 30 September 2008 (�m)
Value Value (at
(at 31 March Investment 30 September Value Portfolio Asset
Portfolio asset 2008) in the period 2008) movement income (1) return
SRF II 4.6 0.8 3.4 (2.0) - (2.0)
Character(2) 12.7 - 5.3 (5.2) 0.2 (5.0)
Jelf 34.7 - 21.8 (12.9) - (12.9)
Phibro 51.8 - 58.1 6.3 - 6.3
Salamander - 69.9 41.2 (28.7) 0.2 (28.5)
Total 103.8 70.7 129.8 (42.5) 0.4 (42.1)
(1) Underwriting/advisory fees and dividend income.
(2) Includes the release of a provision taken in relation to the Company's investment in Character of �2.2 million.
Investment return
The value movement was �(42.5) million, net of a �2.2 million gain attributable to the release of a provision in relation to the
Company's investment in Character.
Dividends and fees of �0.4 million were received during the period, to generate a gross portfolio return of �(42.1) million.
Deal costs of �(1.4) million were incurred for the completion of the acquisition of the stake in Salamander, as well as on other aborted
deals.
Interest income
Interest income on financial assets totalled �8.1 million over the period. The Company's liquid assets are held in the form of bank
deposits with counterparties rated AA- or above, that have yielded interest at a blended average rate of 5.7% per annum over the six-month
period.
Operating expenses and advisory fees
Operating expenses of �0.5 million include Board and service provider costs.
An advisory fee of �(1.3) million, payable to 3i Investments, was accrued during the six-month period. This is calculated as 2% per
annum of the Gross Investment Value, excluding cash holdings (further detail on the calculation of the advisory fee is provided in note 5).
No performance fee was accrued during the period, as the Company did not achieve the cumulative growth of 8% per annum since incorporation
that is required for the payment of a performance fee to the Investment Adviser.
Table 3
Summary total return (�m)
For the For the
period from period from
For the 21 March 21 March
six months to 2007 to 2007 to
30 September 30 September 31 March
2008 2007 2008
Unrealised (losses)/profits on the (42.5) (0.3) 3.0
revaluation of investments(1)
Dividend income 0.2 - 0.3
Fee income 0.2 - 1.2
Deal costs (1.4) (0.7) (2.3)
Investment (loss)/return (43.5) (1.0) 2.2
Interest income 8.1 5.7 16.9
Advisory fee (1.3) (0.1) (1.1)
Operating expenses (0.5) (2.3) (2.7)
(Loss)/profit for the period "Total (37.2) 2.3 15.3
return"
(1) Includes the movement in the provision associated with Character.
Balance sheet and net asset value
As at 30 September 2008, the cash and deposits balance stood at �244.1 million. The liquid funds of the Company are invested in
short-term cash deposits and on-demand liquidity funds. These funds invest in a range of instruments, including certificates of deposit,
commercial paper, floating-rate notes and Treasury Bills. The counterparties all have long-term credit ratings of AA- or higher.
The net asset value as at 30 September 2008 was �372.0 million, or 93.0 pence per share. Table 4 shows the reconciliation of the
movements in the net asset value for the period to 30 September 2008.
Table 4
Reconciliation of movement in net asset value per share
for the six months to 30 September 2008 (pence per share)
Opening net asset value at start of the period 102.3
Value movement in investment portfolio (10.6)
Operating expenses and advisory fees (0.3)
Deal costs (0.5)
Interest income 2.1
Closing net asset value 93.0
Portfolio review
Salamander
Location UK
Sector Oil and Gas
Market London main market
Bid price at 30 September 2008 174p
Market cap at 30 September 2008 �267.4m
Website www.salamander-energy.com
Description
Salamander is an independent upstream oil and gas exploration and production company focused on Asia. Salamander, which became a
constituent of the FTSE 250 index within three years of inception, has built a portfolio of production, development and exploration assets
with interests in Indonesia, Thailand, Vietnam, Lao PDR and the Philippines. The business has proven and probable reserves of 64 million
barrels of oil equivalent and currently produces 10,000 barrels of oil equivalent per day.
Portfolio detail
Equity interest 15.5%
Date invested July - September 2008
Cost �69.9m
Valuation �41.2m
Developments
Salamander is in a very solid financial position, having completed a US$200 million syndicated refinancing of its debt in June and a
US$200 million equity raising in August, in which 3i QPEP participated. Salamander announced strong interim results to 30 June 2008, which
showed revenues, operating cash flow and production increasing by 46%, 84% and 7%, respectively. With development drilling completed in
newly discovered fields, the management expects production to increase substantially in the second half of the year, with the Bualuang oil
field now being on-stream. On 29 September 2008, Salamander announced a proposed all-share offer for Serica Energy plc, an exploration and
production company operating principally in the UK and Indonesia, which was withdrawn in October, in light of the continued uncertainty in
the capital markets and volatility in the price of crude oil.
Active partnership
3i QPEP has acquired a 15.5% equity stake in Salamander and intends to work closely with the executive management team. With its strong
balance sheet, Salamander has a wide range of options around development capex and asset acquisitions. Leveraging the 3i Group industry
network has the potential to enhance the management team's ability to balance reserve growth, cash flow generation and downside protection
for shareholders.
Mike Sibson, a Director in 3i Investments' oil and gas team, was appointed to the Salamander board of directors in October 2008.
Phibro
Location US
Sector Animal Healthcare
Market AIM
Bid price at 30 September 2008 US$5.10
Market cap at 30 September 2008 US$360.9m
Website www.pahc.com
Description
Phibro is a leading diversified global manufacturer and marketer of a broad range of animal health and nutrition products, specifically
medicated feed additives and nutritional feed additives, which it sells globally to the poultry, swine and cattle markets. Phibro believes
it is currently the third largest marketer of medicated feed additives. Phibro was admitted to trading on AIM on 4 April 2008.
Portfolio detail
Equity interest 29.9%
Date invested March 2008
Cost �48.9m
Valuation �58.1m
Developments
In recent years, Phibro has consistently reported steady revenue growth and operating cash generation. Phibro's full-year results for
the year to June 2008 were positive, with sales and EBITDA up 13% and 7%, respectively. The company is actively expanding its business in
the fast-growing BRIC economies, leveraging its strong domestic position in the US, and expanding the breadth of its animal health offering.
On 16 October 2008, Phibro agreed to buy Abic, the veterinary products business unit of Teva Pharmaceuticals, for US$47 million. Abic
develops, manufactures and markets 60 products for poultry and large farm animals in Israel (where it is based), South East Asia and Africa.
This acquisition was financed through a combination of new and existing credit facilities, with no further investment on the part of 3i
QPEP. The outlook for the future is stable: in its recent statement, Phibro stated that its expectations are for its business to continue at
similar or improving levels for the new fiscal year.
Active partnership
The shape of Phibro's board of directors was changed to reflect the increasingly global nature of the company's operations, with the QPE
investment team playing an active role in recruiting an additional board member. Alan MacKay, a Partner in the Investment Adviser and lead
Partner in 3i Group's Healthcare sector group, chairs the remuneration committee of Phibro's board, and in that capacity, put in place a
long-term incentive plan which will align management and shareholder interests. Alan has also played an active role in recruiting a new
divisional manager and in optimising the management structure to reflect the company's strategy. The Investment Adviser has also supported
Phibro in the acquisition of Abic and in the review and implementation of other organic growth initiatives.
Jelf
Location UK
Sector Financial Services
Market AIM
Bid price at 30 September 2008 157p
Market cap at 30 September 2008 �80.2m
Website www.jelfgroup.com
Description
Jelf is a leading UK-based independent intermediary, offering advice-led, co-ordinated solutions to companies and individuals across
general insurance, employee benefits (including private medical products) and commercial finance (including asset finance). Jelf controls
around �400 million of gross written premiums (across general insurance, healthcare lines and group risk). The company has grown
significantly through organic growth and acquisitions, having completed 16 acquisitions in the last two years.
Portfolio detail
Equity interest 27.9%
Date invested January 2008
Cost �29.8m
Valuation �21.8m
Developments
Jelf has implemented an aggressive, acquisition-led growth strategy over the last few years, completing seven acquisitions since January
(three significant acquisitions, three smaller Devon-based businesses and a small Reading-based book of business), the consolidation of
which is proceeding to plan. The company issued a trading update in mid-October, in which it confirmed that it had traded strongly in the
year to the end of September 2008, with profits set to grow by approximately 40% compared to the previous year, despite challenging market
conditions, and with operating cash flow generation remaining strong. The company, however, warned that conditions are likely to be
challenging for the year ahead, with premium rates remaining flat and lapse rates increasing, due to an expected rise in business failures.
Jelf's wealth management advisory business is also likely to be negatively affected by market declines.
Active partnership
Bruce Carnegie-Brown (previously head of European operations at Marsh & McLennan) is on Jelf's board of directors, and has significant
experience in the insurance sector which he can contribute at Jelf. The QPE investment team has been involved in many initiatives, such as
the integration of the recent acquisitions, budget planning for the new financial year and introducing a new management incentive programme
to align management incentives with shareholder returns. The Investment Adviser has also contributed to the development of new strategic
initiatives, such as the screening of potential new acquisitions and the development of Jelf's relationships with insurers and investors.
Character
Location UK
Sector Media
Market AIM
Bid price at 30 September 2008 46p
Market cap at 30 September 2008 �19.7m
Website www.thecharacter.com
Description
Character is engaged in the design, development and international distribution of toys, games and giftware. The group's products are
manufactured almost entirely in China, and it sells mainly in the UK to high street, catalogue, online and independent retail channels. The
head office is in the London suburbs and its UK logistics centre is in Oldham. It also has offices in Hong Kong and Shenzhen. Character
directly employs around 160 people worldwide.
Portfolio detail
Equity interest 27.8%
Date invested August 2007
Cost �19.3m
Valuation �5.3m
Developments
Character is experiencing tough trading conditions. The company's latest trading statement, issued at the end of July, indicated that
the company expects its orders for the forthcoming Christmas season to be slower than originally anticipated, despite the strong product
portfolio, which has been enhanced by the addition of licences for Hannah Montana and other selected High School Musical products, as well
as for the new TV series of Postman Pat. Character's balance sheet is well positioned to weather the adverse conditions, with net cash at
bank and substantial undrawn banking facilities, as well as a prudent inventory management policy.
Active partnership
The Investment Adviser continues to work closely with Character in order to identify potential areas of strategic and operational
improvement and to implement actions required to deliver future benefits. In addition, the Investment Adviser will continue to help the
company to review potential acquisition opportunities.
Alan Mackay, a Partner in the Investment Adviser, is a member of Character's board of directors.
SRFII
Location UK
Sector Investment Fund
Market Limited Partnership Fund
Bid price at 30 September 2008 n/a
Market cap at 30 September 2008 n/a
Website www.svgcapital.com
Description
SRF II's portfolio consists of companies that it believes are undervalued and could benefit from specific strategic, operational and
management change. SRF II holds between 5% and 20% of the equity of its portfolio companies, with the intention of working collaboratively
with management to support the underlying companies in effecting change. Investments will typically be held for two to five years. The fund
targets a net 15% IRR over the fund life. The fund is managed by SVG Investment Managers ("SVGIM") at SVG Capital plc.
Portfolio detail
Equity interest n/a
Date invested June 2007
Cost �6.5m
Valuation �3.4m
Developments
SRF II was 46.9% invested as at 30 June 2008. The underlying NAV fell 11.6% over the six-month period. While the majority of portfolio
companies continued to demonstrate robust operating performance over the period, the portfolio was negatively impacted by adverse market
movements. In the interim report, SVGIM confirmed their belief that the long-term value of the investment portfolio remained significantly
above current market value. It is likely that the NAV of SRF II's portfolio in December 2008 will decline further, due to significant market
losses during the intervening period. 3i QPEP's total commitment to the fund is �14.1 million of which �6.5 million has been drawn down to
September 2008.
Active partnership
This is a strategic investment for 3i QPEP that provides valuable access to a "market price driven" investment specialist in the UK and
European public company mid market. The QPE investment team and SVGIM have worked informally together on a number of opportunities.
Income statement
for the six months to 30 September 2008
Period from Period from
21 March 21 March
6 months to 2007 to 2007 to
30 September 30 September 31 March
2008 2007 2008
(unaudited) (unaudited) (audited)
Notes �'000 �'000 �'000
Unrealised movements on the 1 (42,566) (343) 3,066
revaluation of investments and
similar items
Deal related costs (1,405) (655) (2,307)
Dividend income 254 - 277
Fee income 182 - 1,235
Gross portfolio (loss)/return (43,535) (998) 2,271
Advisory fees (1,322) (116) (1,146)
Operating expenses 2 (533) (2,326) (2,724)
Net portfolio (loss)/return (45,390) (3,440) (1,599)
Interest income 8,147 5,786 16,864
(Loss)/profit before tax (37,243) 2,346 15,265
Income taxes - - -
(Loss)/profit before tax and (37,243) 2,346 15,265
(loss)/profit for the period
(Loss)/earnings per share
Basic and diluted (pence) (9.3) 0.6 3.8
Reconciliation of movement in equity
for the six months to 30 September 2008
Period from Period from
21 March 21 March
6 months to 2007 to 2007 to
30 September 30 September 31 March
2008 2007 2008
(unaudited) (unaudited) (audited)
Notes �'000 �'000 �'000
Total equity at start of 409,288 - -
period
Issues of shares 4 - 400,000 400,000
Total (loss)/profit for the (37,243) 2,346 15,265
period
Transaction costs on issue of 4 - (5,977) (5,977)
share capital
Total equity at end of period 372,045 396,369 409,288
Balance sheet
as at 30 September 2008
30 September 30 September 31 March
2008 2007 2008
(unaudited) (unaudited) (audited)
Notes �'000 �'000 �'000
Assets
Quoted equity investments 126,488 19,825 99,188
Unquoted portfolio 3,355 4,983 4,571
Investment portfolio 129,843 24,808 103,759
Other loans and receivables 292 458 375
Total non-current assets 130,135 25,266 104,134
Current assets
Other current assets - 465 2,273
Deposit - - 45,000
Cash and cash equivalents 244,145 377,331 285,198
Total current assets 244,145 377,796 332,471
Total assets 374,280 403,062 436,605
Current liabilities
Trade and other payables (2,235) (933) (25,058)
Provisions - (5,760) (2,259)
Total liabilities (2,235) (6,693) (27,317)
Net assets 372,045 396,369 409,288
Equity
Issued capital 4 4,000 4,000 4,000
Share premium 4 390,023 390,023 390,023
Profit and loss reserve 4 (21,978) 2,346 15,265
Total equity 372,045 396,369 409,288
Cash flow statement
for the six months to 30 September 2008
For the period Period from
from 21 March 21 March
6 months to 2007 to 2007 to
30 September 30 September 31 March
2008 2007 2008
(unaudited) (unaudited) (audited)
�'000 �'000 �'000
Cash flow from operating activities
Purchase of investments (93,266) (19,390) (76,031)
Advisory fee paid (1,146) - -
Deal related costs (1,992) - (837)
Dividend income 254 - 277
Fee income 898 (22) 520
Operating expenses (491) (2,101) (2,574)
Net cash flow from operations (95,743) (21,513) (78,645)
Cash flow from financing activities
Proceeds from issue of share - 400,000 400,000
capital
Transaction costs on issue of - (5,977) (5,977)
share capital
Interest received 9,690 5,321 15,320
Director's loan - (500) (500)
Net cash flow from deposits 45,000 - (45,000)
Net cash flow from financing 54,690 399,344 363,843
activities
Change in cash and cash (41,053) 377,331 285,198
equivalents
Cash and cash equivalents at start 285,198 - -
of period
Cash and cash equivalents at the 244,145 377,331 285,198
end of period
Notes to the accounts
for the six months to 30 September 2008
1 Unrealised movements on the revaluation of investments and similar items
Period from Period from
21 March 21 March
Six months to 2007 to 2007 to
30 September 30 September 31 March
2008 2007 2008
(unaudited) (unaudited) (audited)
�'000 �'000 �'000
Movement in fair value of (44,825) 504 412
investment portfolio
Movement in provisions 2,259 (847) 2,654
(42,566) (343) 3,066
2 Operating expenses (unaudited)
Period from Period from
21 March 21 March
Six months to 2007 to 2007 to
30 September 30 September 30 September
2008 2007 2008
(unaudited) (unaudited) (audited)
�'000 �'000 �'000
Set-up costs - 1,904 1,904
Directors' fees 158 158 316
Auditors' fees 22 30 52
Other operating costs 353 234 450
533 2,326 2,722
3 Share capital (unaudited)(1)
Authorised Number �'000
Ordinary shares of �0.01 each 2,000,000,000 20,000
Issued and fully paid Number �'000
Ordinary shares of �0.01 each 400,000,000 4,000
(1) There has been no change in the authorised, issued and fully-paid share capital of 3i QPEP since its inception on 21 March 2007, or
any change in the nominal value of shares.
4 Equity
for the six months to 30 September 2008 (unaudited)
Share capital Share premium Reserves Total equity
�'000 �'000 �'000 �'000
Opening balance 4,000 390,023 15,265 409,288
Total profit for the period - - (37,243) (37,243)
Closing balance 4,000 390,023 (21,978) 372,045
for the period from 21 March 2007 to 30 September 2007 (unaudited)
Share capital Share premium Reserves Total equity
�'000 �'000 �'000 �'000
Opening balance - - - -
Total profit for the period - - 2,346 2,346
Issue of shares 4,000 396,000 - 400,000
Transaction costs on issue of - (5,977) - (5,977)
share capital
Closing balance 4,000 390,023 2,346 396,369
for the period from 21 March 2007 to 31 March 2008 (audited)
Share capital Share premium Reserves Total equity
�'000 �'000 �'000 �'000
Opening balance - - - -
Total profit for the period - - 15,265 15,265
Issue of shares 4,000 396,000 - 396,000
Transaction costs on issue of - (5,977) - (5,977)
share capital
Closing balance 4,000 390,023 15,265 409,288
5 Related party transactions (unaudited)
3i Group plc ("3i Group") holds 44.9% of the ordinary share capital of the Company.
Transactions between 3i QPEP and 3i Group On 6 August 2008, 3i QPEP acquired 4,462,000 shares, or 4.99% of the called-up share capital
of Salamander Energy plc from 3i Group and subsidiaries as part of the larger transaction. The consideration paid by 3i QPEP was �13.4
million.
Transactions between 3i QPEP and Directors 3i QPEP and the Chairman entered into a loan agreement on 26 June 2007, whereby, subject to
certain conditions, the Company agreed to provide the Chairman with a loan of �500,000 for investment in shares of the Company. The loan
becomes repayable if the Chairman ceases to serve as a Director before the third anniversary of the date on which the loan was advanced to
the Chairman (the "Third Anniversary Date"). An amount equal to one thirty-sixth of the loan will be waived monthly on a pro-rata basis up
until the Third Anniversary Date if he remains a Director at the end of each such monthly period. If the Chairman remains a Director for the
three years up to the Third Anniversary Date, the entire loan (together with any accrued but unpaid interest) will be waived. Any shares
purchased by the Chairman while serving as a Director remain under the ownership of the Chairman and are not repayable to the Company. A
total of �83k was charged to the income statement in relation to amortisation of the loan during the period.
Transactions between 3i QPEP and 3i Investments plc 3i Investments plc, a subsidiary of 3i Group, acts as the exclusive Investment
Adviser and support services provider to the Company.
For the provision of the support services pursuant to the Support Services Agreement, the Company is contracted to pay 3i Investments
plc a fee of �450,000 per annum, such remuneration being payable half-yearly in arrears. The costs incurred in the six months to 30
September 2008 and the outstanding balance as at that date was �250,616.
Under the Investment Advisory Agreement, an annual advisory fee is payable to 3i Investments plc based on the Gross Investment Value
(the total aggregate value of the investments of the Company excluding cash and cash equivalents) of 3i QPEP at the end of each financial
period. The applicable annual rate is 2.0%. The advisory fee accrues throughout the year and semi-annual instalments are payable in arrears
on account of the advisory fee for that period. The advisory fee is not payable in respect of cash or cash equivalent liquid temporary
investments held by the Company throughout a financial period. In the six months to 30 September 2008, an advisory fee of �1.3 million has
been generated. The advisory fee is only payable to the extent the advisory fee exceeds the support services fee for the period, therefore
�1.1 million is payable under the
Investment Advisory Agreement. This balance remains outstanding at the period end.
The Investment Advisory Agreement entitles a performance fee to be payable to 3i Investments plc. This becomes payable when the net
asset value per share at the end of the relevant performance period (the period commencing 29 June 2007 and ending on 30 September 2007 and
each subsequent six month period thereafter) exceeds the performance trigger (the opening NAV per share increased at 8% over the relevant
performance period) with the performance fee payable being 20% of the entire growth in the net asset value. This 8% trigger was not achieved
for the period to 30 September 2008. Hence, no performance fee is payable.
Statement of Directors' responsibilities
The Directors confirm to the best of their knowledge that:
(a) the condensed set of financial statements have been prepared in
accordance with IAS 34; and
(b) the Investment Adviser's review includes a fair review of the
information as required by the FSA's Disclosure and Transparency Rules
(4.2.7 R and 4.2.8 R).
The Directors of 3i Quoted Private Equity plc and their functions are listed below.
By order of the Board:
David Tyler, Non-executive Chairman
Duncan Baxter, Non-executive Director
Antoine Clauzel, Non-executive Director
Richard Harwood, Non-executive Director
Portfolio valuation methodology
A description of the methodology used to value the Company's investment portfolio is set out below in order to provide more detailed
information than is included each period in the accounting policies for the valuation of the portfolio. The methodology complies in all
material aspects with the "International private equity and venture capital valuation guidelines" endorsed by both the British Private
Equity and Venture Capital Association and European Private Equity and Venture Capital Association.
Basis of valuation Investments are reported at the Directors' estimate of fair value at the reporting date. Fair value represents the
amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction.
General In estimating fair value, the Company seeks to use a methodology that is appropriate in light of the nature, facts and
circumstances of the investment and its materiality in the context of the total portfolio. Methodologies are applied consistently from
period to period, except where a change would result in a better estimation of fair value. Given the uncertainties inherent in estimating
fair value, a degree of caution is applied in exercising judgments and making necessary estimates.
Quoted investments Quoted investments are valued at the closing bid price at the reporting date. In accordance with International
Financial Reporting Standards, no discount is applied for liquidity of the stock or any dealing restrictions.
Unquoted investments Most unquoted investments will be valued using one of the methodologies adopted by the Investment Adviser.
Investment funds The fair value of non-equity investment funds is generally estimated from the latest net asset value provided by the
fund manager adjusted for other net assets or liabilities, or contingent assets or liabilities, of the fund.
Risks and uncertainties
The principal risks and uncertainties faced by the Company are set out in the Risks and Uncertainties section of the Company's Annual
Report. The main risks and uncertainties facing the Company in the next period relate to the persisting volatility in the equity and credit
markets and to the vulnerability of certain of the Company's portfolio assets to a slowdown in economic activity. Market volatility and a
slowdown in economic activity are likely to affect both the market performance and the underlying operating performance of the Company's
investments.
Accounting policies
Basis of preparation
These financial statements are the unaudited half-yearly financial statements (the "Half-yearly Financial Statements") of 3i Quoted
Private Equity plc, a company incorporated and registered in Jersey, for the six-month period ended 30 September 2008. The Half-yearly
Financial Statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting ("IAS 34") and
should be read in conjunction with the financial statements for the period to 31 March 2008 ("Report and accounts 2008"), as they provide an
update of previously reported information. The Half-yearly Financial Statements were authorised for issue by the Directors on 9 November
2008.
The Half-yearly Financial Statements have been prepared in accordance with the accounting policies set out in the Report and accounts
2008 as the new and revised International Financial Reporting Standards ("IFRS") and interpretations effective in the period have had no
impact on the accounting policies of the Company. The presentation of the Half-yearly Financial Statements is consistent with the Report and
accounts 2008. Where necessary, comparative information has been reclassified or expanded from the previously reported Half-yearly Financial
Statements to take into account any presentational changes made in the Report and accounts 2008. The Half-yearly Financial Statements do not
constitute statutory accounts. The statutory accounts for the period to 31 March 2008, prepared under IFRS, have been filed with the Jersey
Financial Services Commission Companies Registry on which the auditors issued a report, which was unqualified.
The preparation of the Half-yearly Financial Statements 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 most significant techniques for estimation are described in the accounting policies and in the "Portfolio valuation methodology"
above.
Income taxes
The Company currently has exempt company status in Jersey and is exempt from Jersey income tax on non-Jersey source income. Exempt
company status will cease on the introduction of a general zero rate of corporate tax which is being introduced from 1 January 2009.
Auditor's independent review report to 3i Quoted Private Equity plc
Introduction
We have been engaged by 3i Quoted Private Equity plc to review the condensed set of financial statements in the Half-yearly report for
the six months to 30 September 2008, which comprises the Income statement, Reconciliation of movements in equity, Balance sheet, Cash flow
statement, the related notes 1 to 5 and the Accounting policies. We have read the other information contained in the Half-yearly report
which includes the Financial highlights, Chairman's statement, Investment Adviser's review, Portfolio review, Statement of Directors'
responsibilities, Portfolio valuation methodology, Risk and uncertainties and Investments and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the
conclusions we have formed.
Directors' responsibilities
The Half-yearly report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing
the Half-yearly report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in the basis of preparation note, the endorsed set of financial statements of the Company are prepared in accordance with
IFRS. The condensed set of financial statements included in this Half-yearly report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Half-yearly report
based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the
Half-yearly report for the six months to 30 September 2008 is not prepared, in all material respects, in accordance with International
Accounting Standard 34 and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Ernst & Young LLP
Jersey
9 November 2008
Investments
First Proportion of Directors*
invested Cost equity shares valuation
Investment Geography in �*000 held % �*000
Salamander Energy plcUKoil and UK 2008
gas company, with significant
assets in South-east Asia
Equity shares 69,933 15.5 41,265
69,933 41,265
Phibro Animal Health US 2008
Corporation
Manufacturer and distributor
of animal health
pharmaceuticals and
nutritional additives
Equity shares 48,879 29.9 58,101
48,879 58,101
Jelf Group plc UK 2008
Insurance broker and wealth
adviser
Equity shares 29,846 27.9 21,820
29,846 21,820
The Character Group plc UK 2007
Designer, developer and
international distributor of
toys and games
Equity shares 19,320 27.8 5,302
19,320 5,302
Strategic Recovery Fund II LP UK 2007
Limited Partnership investing
primarily in UK-listed
companies
Capital commitments(1) - -
Limited partnership interest 6,516 3,355
6,516 3,355
Notes
(1) The cost of the capital commitment held in Strategic Recovery Fund II LP is �283.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR XKLFBVFBFFBD
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