3i Group plc

Report and accounts 2007

Skip Links

lines

Directors' remuneration report

Co-investment plans and carried interest plans

Participants in co-investment plans invest their own money in the plan relating to the area of the business in which they work. Plans are organised by business line and geography with each plan investing in all investments made by the Group within the relevant business line and geography over a specified time period (usually two years). Participants provide at least one-third of the capital to finance the plans and the Group not more than two-thirds. The plans invest in investments alongside the Group on terms which are in all material respects the same as the terms on which the Group and its funds under management invest. For the period 2006 to 2008 the plans will fund 1% (2% in the US Growth plan) of the total budgeted investment made by the Group and its funds under management, including the plans. Plans share (in proportion to their investment) in the profits and losses made on those investments in the same way as the Group and its funds under management. Proceeds realised on investments made by the Plans are applied first to repaying the amount invested by the Group together with a management charge and a preferential return fixed by Remuneration Committee. For the period 2006 to 2008 this will be 2% over the relevant inter-bank lending rate per annum compound. The remaining proceeds will be distributed to participants as a return on their investment.

 

Participants in carried interest plans are entitled to the profits made on the proportion of the total carried interest allocated to them subject to the satisfaction of a performance condition which is determined in advance by the Committee, in line with market conditions at the time of the award. 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 his investment team. The carried interest plans are designed to follow best practice in the private equity and venture capital industry.

 

As mentioned in the Directors' renumeration policy, Mr Queen's level of participation in the two-year (2006-08) Growth Capital carried interest arrangement is being cut by half. He will also not be eligible to make any further co-investment after 1 April 2007.

 

In the tables below, interests in co-investment and carried interest plans are expressed in terms of a percentage of the relevant pools of investments in respect of which the participant has an interest, subject to fulfilment of relevant conditions.

 

The tables also show the accrued value of co-investment and carried interest at the end of the year. The carried interest accrued values are calculated on the basis set out in note 5. 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.

 

(a) Co-investment plans Participants in co-investment plans invest their own money in the plans. The amount of capital invested by Directors to acquire interests in co-investment plans was as follows:
  Invested to
1 April
2006
£’000		 Invested
during
the year
£’000		 Total
invested to
31 March
2007
£’000
M J Queen      
Global Growth Co-invest 2006-08 Nil 97 97

Back to top
Interests of Directors in co-investment plans during the year were as follows:
Plan interests, being the percentage of the relevant
pool of investments in which the participant is interested		    
  As at
1 April
2006
 Acquired
in year
 As at
31 March
2007
 End of period
over which
interests
may vest
 Amounts
receivable
in respect
of plan
interests
vested
in year
£’000		 Accrued
value
of plan
interest
as at
31 March
2007
£’000
M J Queen            
Global Growth Co-invest 2006-08 Nil 0.023% 0.023% 31.07.08 Nil 97
Note
Mr Queen will not be eligible to make any further co-investment after 1 April 2007.

(b) Carried interest plans Interests of Directors in carried interest plans during the year were as follows:
  Plan interests, being the percentage of the relevant
pool of investments in respect of which the participant
is entitled to participate in the realised profits		    
  As at
1 April
2006
 Awarded
in year
 As at
31 March
2007
 End of period
over which
interests
may vest
 Amounts
receivable
in respect
of plan
interests
vested
in year
£’000		 Accrued
value
of plan
interest
as at
31 March
2007
£’000
M J Queen            
Pan-european Growth Capital
2005-06		 2.18% Nil 2.18% 31.03.10 Nil 310
Infrastructure 2005-06 0.69% Nil 0.69% 31.03.10 Nil Nil
Primary Infrastructure 2005-06 Nil 0.53% 0.53% 31.03.10 Nil Nil
Global Growth 2006-08 Nil 0.34% 0.34% 31.03.11 Nil Nil
Notes
  1. As explained above, Mr Queen’s level of participation in the Global Growth 2006-08 carried interest plan is being reduced by half following the changes to his responsibilities. The figure shown is after this reduction.
  2. No carried interest plan has been established for infrastructure investments made in the year to 31 March 2007.
  3. 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 1.5% per annum management charge (2% for the Global Growth 2006-08 plans) and a hurdle rate of 8% per annum compound on their investment.

Back to top