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Investment policy
Investment procedures
Relationship management

Investment policy
3i has a portfolio of over 750 investments in businesses across Europe, Asia and the US. As an investor, corporate governance is a priority and account is taken of environmental, ethical and social issues when making investment decisions.

We believe it is important to invest in companies whose owners and managers act responsibly on environmental, ethical and social matters. We therefore aim to invest in companies which:

– respect human rights;

– comply with current environmental, ethical and social legislation;

– have proposals to address defined future legislation; and

– seek to comply with their industry standards and best practice.

We recognise that the most significant risks to 3i's short-term and long-term value from environmental, ethical and social matters arise from its investment business. If a company in which 3i has an investment acts irresponsibly on corporate responsibility issues, this may affect the monetary value of that investment and, as a shareholder in that company, raise reputational issues for 3i.

Although we do not have day-to-day operational control over the companies in which we invest, we do have the opportunity to influence the behaviour of these businesses. We expect and encourage the companies in which we invest to take a responsible approach to the conduct and governance of their business and to put in place governance structures, policies and processes appropriate to the nature and scale of the business and the markets in which it operates. This is supported through the training of investment staff and non-executive Directors who are appointed to the boards of investee companies and the raising of awareness within investee companies of social, environmental and ethical issues. 3i is also active in promoting good governance in the private equity industry through the provision of tutors for courses run by the BVCA and the EVCA.

Investment procedures

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We have policies and procedures to reduce the risks of investing in businesses which operate in an environmentally, ethically or socially unacceptable manner. Details of these policies and procedures may be found on 3i's website at www.3igroup.com.

When reviewing businesses for potential investment, investment executives are required to consider whether any corporate responsibility risks arise and, if any risks are identified, to follow 3i's corporate responsibility investment procedures. Depending on the nature of the risk identified and its seriousness, a condition precedent or post completion undertaking requiring that the situation be remedied may be required from the investee company or its management. Alternatively, it may be decided not to proceed with the investment.

All new investment opportunities are the subject of a process of filtering and review. When a potential new investment opportunity is first identified by an investment professional, it is added to the Company's work in progress list ("Work in Progress"). Following a preliminary appraisal of the potential investment opportunity, a decision is taken by the investment professional's local team as to whether the investment opportunity merits further work. At this stage the opportunity is reviewed in detail by a group of senior and experienced investment executives in the relevant business line (known as the "Partner Review"). If it is agreed through the Partner Review process that a particular investment opportunity should continue to be pursued, the Partner Review process will also agree what further in-depth analysis and due diligence should be undertaken.

The decision to continue to pursue a particular investment opportunity will be taken against a number of criteria and policies, including commercial, financial, sector, geographic, environmental, ethical and social considerations. Following a Partner Review, and providing the results of the detailed analysis and due diligence of the opportunity are positive, the investment opportunity will be submitted for formal approval. At this stage, any potential environmental, ethical or social issues in the investment opportunity will be formally identified and a decision taken against 3i's investment policies and procedures whether to proceed with the proposed investment, and if so, on what basis.

Over the year 1,054 potential new investments were placed in Work in Progress, 196 of which proceeded to a Partner Review and 62 new investments were approved and completed.

Where, after an investment has been made, we become aware that an investee company is not operating in an acceptable way, we will seek to use our influence to encourage improvement. Where that is not possible, we will seek to dispose of the investment. Over the course of the year, all existing investments in the portfolio were the subject of review.

Relationship management
Our key relationships are with the boards of the companies in which we invest, together with the intermediaries, advisers and consultants used to facilitate investment and portfolio management. We actively engage with these groups to benchmark our performance and improve our investment procedures and skills.