Annual Report 2007 Contents
KEY FIGURES 05
THE COMPANY AND ITS ENVIRONMENT 06
The Company 07 2007 highlights 08 Share price and net asset value 08 Chairman’s statement 09 Governing bodies 11 Governance of BIP 13
PORTFOLIO 18
Public equity 19 Private equity 29
FINANCIAL INFORMATION 42
Report of the Board of Directors to the General Meeting of shareholders 43 Consolidated nancial statements for the year ended 31 December 2007 51 Independent auditor’s report 84 Summary separate annual nancial statements for the year ended 31 December 2007 85
This is a translation of the of cial report written in French and has been prepared for the convenience of English-speaking readers. In the event of any discrepancy between this document and the French original, only the French original is authoritative.
5
Key Figures
in EUR 31.12.2007 31.12.2006
Per share data Estimated value 123.85 106.21
Market price 98.00 80.50
Dividend (proposed) 3.40 3.00
Diluted net income per share 15.14 14.94
EUR millions 31.12.2007 31.12.2006
Earnings Net income 71.5 71.0
Balance sheet Equity 580.7 501.8
Total assets 591.0 510.6
EUR millions 31.12.2007 % 31.12.2006 %
Investments Listed companies 384.4 67 318.5 64
Direct private equity investment 84.3 15 92.5 18
Private equity funds 39.6 7 30.9 6 Loans and other accounts 2.8 0 3.8 1 receivable Total non-current investments 511.1 89 445.7 89
Trading assets 7.2 1 10.7 2
Cash at banks 58.8 10 45.3 9
Total investments 577.1 100 501.7 100
31.12.2007 31.12.2006
Shares Total shares issued 4 773 321 4 773 321
Shares held by the Company 84 828 48 534 THE COMPANY AND ITS ENVIRONMENT The Company and its environment / 7
| The Company |
BIP Investment Partners SA (BIP) is an investment company founded in April 2000 under the name BGL Investment Partners at the joint initiative of Banque Générale du Luxembourg (BGl), now Fortis Banque Luxembourg, and a group of private investors in Luxembourg. BIP aims to create value for its shareholders over the medium term through investments in listed and unlisted companies with signi cant growth potential in Luxembourg and neighbouring countries. BIP invests in listed companies and promising unlisted companies, either directly in the form of private equity or indirectly through interests in private equity or venture capital funds. The Board of Directors regularly reviews weightings and limits for these three types of assets.
Investments in listed companies As an active shareholder, BIP promotes entrepreneurship and provides support for the continuing development of the BIP invests in high-capitalization listed companies that are based companies it invests in. in Luxembourg and neighbouring countries or carry signi cant weight in the Luxembourg economy. These investments, which Private equity and venture capital yield attractive returns for a level of risk close to the market average, provide a sound base for the portfolio, generating a investment funds reliable ow of earnings to fuel steady rises in the dividends paid BIP offers its shareholders privileged access to the best- out each year. performing private equity and venture capital funds invest- ing in companies based in Luxembourg and neighbouring BIP also uses its research capabilities and familiarity with busi- countries, focusing on technology centres and high-growth nesses and markets to identify small and medium-sized listed business sectors. companies, a category often neglected by institutional investors, with potential for attractive gains. In most cases, these compa- BIP aims to create value through its expertise in portfolio nies are based in the countries surrounding Luxembourg. management and active support for the companies in which it holds direct interests, in particular by fostering synergies In additional to its geographical pro le, BIP uses in-depth between them. knowledge of speci c economic sectors to acquire interests in companies in these areas. BIP is listed on the Luxembourg stock exchange and is a component of the LuxX index. Private equity Fortis Banque Luxembourg holds a 25.8% equity interest in BIP, BIP intends to win a leading place in Luxembourg and its region La Luxembourgeoise holds 10%. for private equity investments including management buyouts, development capital and later-stage venture capital. 8 \ The Company and its environment
| 2007 highlights | | Share price and net asset value |
- Net income for the 2007 nancial year came to EUR 71.5 140 million, up from EUR 71 million in 2006, in a market environ- 120 ment marked by the impact of the sub-prime crisis in the US. 100
- BIP shares gained 21.7% over the year. With the dividend of 80 EUR 3 per share paid in March, this set total shareholder return 60 for the year at 25.5%. 40 - At December 31, 2007, estimated value per share stood 20 at EUR 123.85 and consolidated shareholders’ equity at EUR 580.7 million. 0 07/07 07/05 10/07 01/07 07/06 07/04 10/05 01/05 10/06 01/08 01/06 10/04 01/04 04/07 04/05 04/06 - Capital gains reached strong totals of EUR 40 million on listed 04/04 investments and EUR 17 million on private equity. BIP share price - BIP’s investment in VOXmobile was sold in full at a multiple BIP estimated fair value of 2.7 times the acquisition price.
- Investments in Option and Arcelor Brasil were sold in full. Indices
- BIP’s interest in Fortis increased signi cantly with a The table below lists performances of main references: EUR 26 million investment relating to the acquisition by Fortis of a part of ABN Amro’s business. 31.12.2007 31.12.2006 Change
- BIP’s private equity portfolio was rounded out with a EUR 3 million investment in Assisteo Europe, a company special - Eurostoxx 50 4 399 4 119 6.79% ized in personal and household services. S&P 500 1 468 1 418 3.53%
- A new investment of EUR 6 million in Nanogate, a listed LuxX 2 419 2 176 11.13% company based in Germany’s Sarreland region, special izing in BIP - nanotechnology for industrial applications. 98.00 80.50 21.74% share price BIP - - A new investment of EUR 5 million in Evertz Technolo gies, a estimated 123.85 106.21 16.61% listed Canadian company offering HD solutions for TV studios. fair value
- A new investment in Field SICAR, a Luxembourg fund specialized in development capital and LBO nancing in Luxembourg and neighbouring areas of other countries. Liquidity
2007 2006
Total number of shares traded 388 295 411 485 The Company and its environment / 9
| Share price | Chairman’s Statement | and net asset value |
In 2007 our Company mourned the death of Mr Marc Meyer, BIP’s investment strategy is fundamentally different. It is based who had been a director of BIP Investment Partners since 2001. on the substance and intrinsic quality of assets maturing to Drawing on his extensive business experience and knowledge create value over the medium-term, a process that is essential to of nance, he made an invaluable contribution to the Board’s sustainable economic growth. The synthetic nancial products operation and the quality of its decisions. We all continue to miss that are the cause of current woes have thus never been part of his sincerity, his openness and his total loyalty to colleagues our Company’s portfolio. and BIP. This strategy was illustrated by several important transactions in Results for the year were once again excellent, with earnings 2007, among them the VOXmobile exit, which is an exemplary slightly higher than the previous records set in 2006. Net case in the current context. BIP was among the founders of this income held high at EUR 71.5 million for the 2007 nancial high-potential business that has made a signi cant contribution year, and total net asset value calculated in accordance with to the quality of Luxembourg’s economic fabric. We followed IFRS rose from EUR 507 million at the end of 2006 to EUR up our initial move with nancial and operational support over 580 million at the end of 2007. Net assets per share rose from several years until the business was pro table, then sold our EUR 106.21 at the end of 2006 to EUR 123.85 at the end of interest to a new shareholder promising to favour continued 2007, with the rise exceeding 19% when including the dividend growth. Well received by employees, management and share- distributed during the year. Over the same period, BIP shares holders, the transaction also generated a healthy pro t for BIP. gained 21.7%, closing the year at EUR 98. During the year, we sold our interest in Belgium’s Option, Considering these favourable developments, the Board of a company that failed to deliver the transparent communi- Directors has proposed that shareholders should approve a 13% cations essential to the trust-based relationships that are a rise in the dividend to EUR 3.4 per share. This sets the current matter of principle in our investment philosophy. This left us no yield close to that available on the savings market, while at the choice. The sale was made at a timely moment and yielded a same time allowing for reinforcement of the shareholders’ funds signi cant pro t. that are the foundations for future prosperity. The ArcelorMittal saga also continued, with the shares gaining The results achieved in 2007 are all the more remarkable as 66% in 2007 to take rst place for CAC 40 index components on the nancial environment was generally unfavourable, with most the Paris market, which was at overall for the year as a whole. of the world’s stock markets on an erratic path over the year, At BIP, we took advantage of the rise to realize a portion of the Asia being an exception. The sub-prime crisis — the result capital gain, but maintained a sizeable interest, re ecting our of hugely reckless lending — rocked the US from July on, continued con dence in the capacity of the world’s leading steel shaking con dence around the globe and squeezing liquidity in group to create value. the interbank market, then the target of massive intervention from central banks. No one had foreseen the calamity, since wide- Similarly, we realized a capital gain on EVS, but maintained spread use of complex derivatives masked real exposure to risk a signi cant interest in the company, whose shares turned in for both regulators and the nancial institutions concerned. an excellent performance in 2007 whereas the Brussels stock market as a whole retreated more than 6% over the year. EVS A more fundament cause was the short-term vision that is remains one of our major holdings. inherent in the culture of many nancial professionals focused on quick results rather than the quality of assets. More generally, there was no letup in the pace of business during the year, and we examined a wide range of proposals to choose investments that ultimately totalled EUR 140 million. At the same time, we took a cautious approach, maintaining an exceptionally high cash position. 10 \ The Company and its environment
Investments included an addition to our existing interest in In 2007, Luxembourg’s parliament adopted a number of Fortis on the occasion of its capital increase, re ecting our belief measures favouring businesses in general and those in the that the bank will reap signi cant bene ts from the integra- service sector in particular. These measures included a provi- tion of ABN Amro, as well as additions to our interest in RTL, a sion in the budget Act of December 21, 2007 reducing the levy well-managed group whose share prices offered opportunities on capital contributions from 1% to 0.5%, although the govern- during the year. We also reached an agreement with management ment has announced the complete abolition of this tax from for the purchase of an equity interest in Nanogate, a recently another age. Another provision of the same Act concerns more oated company based in the Saarland region of Germany, which favourable tax rules in connection with the ownership and use of develops nanotechnology applications for a wide range of intellectual property rights. This is a measure that concerns all industrial applications. businesses, since none can ignore research, invention and crea- tion in today’s economic conditions. Its bene ts should be all the Turning to unlisted investments, our main transaction during the more signi cant at a time when the internet and e-commerce year was the acquisition of a 20% interest in Assisteo Europe, are giving rise to new forms of business. Finally, legislation made which specializes in home and family services, a sector favoured some useful additions to the range of legal structures available by long-term demographic and social trends. to the nancial sector, with the Act dated February 13, 2007 introducing Specialized Investment Funds and that dated May We also topped up investments in private equity funds, 14, 2007 providing for a new type of family and personal invest- joining development capital and LBO fund Field SICAR based ment vehicle dubbed management company of familly asset. in Luxembourg, thereby reinforcing its presence in our home region. We can only welcome legislation that will lead to the creation of new, high value added businesses favouring the development Trading business was an important focus of attention in what of our economy in general and reinforcing the service sector in was a testing year for stock markets. With volatility at exceptional particular. peaks, day-to-day management of our portfolios demanded special vigilance and critical assessment of market trends at On this point, the BIP Board of Directors has acknowledged the every moment. The results are comforting, since earnings were growing importance of nancial and on-line services with the higher than in the previous year despite lower visibility. adoption of an investment strategy placing greater emphasis on these sectors. In a context marked by a credit crunch, declines in liquidity and threats of in ation fuelled by highly accommodating mon- In accordance with the Charter of Corporate Governance, which etary policies, we will be making the defence of our portfolio was adopted in its nal form on March 20, 2007 and governs from market excesses a main priority in 2008. At the same time, BIP’s structure, organization, decision-making processes and declines in share prices will certainly offer some attractive invest- internal operating procedures, in 2007 the Board of Directors ment opportunities. In current conditions, it is more important introduced new internal control and risk management proce- than ever to remember that market prices do not always accu- dures attuned to the company’s business and operations. rately re ect business quality. While the upsets now under way will certainly have some temporary and indirect consequences Drawing strength from passed achievements and growth, as for the underlying economy, they will not be on the same scale well as from the expertise of our management team, in 2008 we as on nancial markets. The companies represented in our port- will be putting the large cash surpluses accumulated in 2007 to folio will continue their growth and development, and we will good use for the consistent pursuit of an investment strategy in be continuing to expand that portfolio with new investments in accordance with our principles, maintaining a rm focus on our high-potential companies. goal of creating added value for shareholders.
Alain Georges Chairman, Board of Directors The Company and its environment / 11
| Governing Bodies |
Board of Directors Norbert Becker 1) 4) Independent Director (since 23 November 2007) Alain Georges 1) 2) 3) Consultant Chairman Born 7 October 1953. After a distinguished 25-year career in Independent Director international audit and consultancy rms, most recently in senior Doctor of law management at Ernst & Young, Norbert Becker is currently Born 23 June 1938, Mr. Georges is a former chairman of the chairman of Atoz Tax Advisors Luxembourg and of Compagnie Executive Committee of Banque Générale de Luxembourg (now de Banque Privée. He is also chairman or director of several Fortis Banque Luxembourg). He is Chairman of BIP and of major Luxembourg and international companies. Luxexpo, and also serves on the boards of several cultural and philanthropic organizations. Camille Fohl 1) 5) Director representing Fortis Banque Luxembourg Robert Scharfe 2) 4) Degree in business administration Deputy Chairman Born 15 January 1956, Mr. Fohl holds a degree in business Director representing Fortis Banque Luxembourg administration from the Catholic University of Leuven, Belgium. Master of Economics and Business Administration He is a member of the Executive Committee of Fortis Banque Born 26 November 1953, Mr. Scharfe holds a master’s degree Luxembourg and CEO of the Commercial Banking business in economics and social sciences from the University of Nancy. line at Fortis Bank. In this capacity he serves as a director of He is a member of the Executive Committee of Fortis Banque several companies. He is deputy chairman of the board of Luxembourg and CEO of the Global Markets business line at Société Alsacienne de Développement et d’Expansion (SADE) Fortis Bank, with several directorships linked to this position. and an elected member of the Main Assembly of the Luxembourg Mr. Scharfe is vice-chairman of the board of the Luxembourg Chamber of Commerce. Stock Exchange. Marc Giorgetti 5) Michel Wurth 5) Independent Director Deputy Chairman Entrepreneur Independent Director Born 19 August 1961, Mr. Giorgetti holds a degree in business Economist administration. He is an entrepreneur and manager of Groupe Born 17 April 1954, Mr Wurth holds degrees in economics (Msc Félix Giorgetti, in which capacity he is also a director of several Economics, London School of Economics), law (Master’s in law, group companies in construction and property development. University of Grenoble) and political science (IEP, Grenoble). He He is a member of the board of Compagnie de Banque Privée. is a member of the general management of ArcelorMittal and in that position also serves as director of several companies in Europe, North America and South Africa. He is president of the Chamber of Commerce of the Grand Duchy of Luxembourg, and vice-president of the Luxembourg Red Cross.
Romain Bausch 4) Independent Director Master of Economics and Business Administration Born 3 July 1953, Mr Bausch holds a Master’s degree in eco- nomics and business administration from the University of Nancy. He is chairman and CEO of SES, and chairman of several companies in the SES group. Mr. Bausch is also on the board of directors of Sal. Oppenheim Jr. & Cie. (Luxembourg) S.A. 12 \ The Company and its environment
Claude Kremer 2) 3) Christian Schaack 4) Independent Director Director representing Fortis Banque Luxembourg Lawyer Engineering degree, Ecole Polytechnique Born 27 July 1956, Mr. Kremer holds Master’s degrees in law Born 21 March 1958, Mr. Schaack is a graduate of Ecole and history from the University of Grenoble, as well as a Master’s Polytechnique, Paris, and holds a PhD in operations research degree in accounting and nance from the London School of and a Master of Science in Management from the Massachusetts Economics. A partner with Arendt & Medernach, he holds various Institute of Technology, Cambridge, Mass. (USA). He is a member positions in legal and industry working groups. He is chairman of of the Executive Committee of Fortis Banque Luxembourg, and the Association of the Luxembourg Fund Industry (ALFI). Within Country Management Coordinator for Fortis Group. He is a direc- the Supervisory Commission for the Financial Sector (CSSF), he tor of Fortis Banque Luxembourg, Fortis Bank Turkey and SES. is a member of the Advisory Committees on Undertakings for Collective Investment, on Securities, on Pension Funds, on Risk Pierre Schneider 3) Capital Investment Companies (SICAR). He is also a member of Independent Director the Committee for the development of the Luxembourg nancial Industrialist centre (CODEPLAFI). Born 14 June 1937, Mr. Schneider holds a degree in business administration and is active in the commodities Marc Meyer 1) 5) (died 5 September 2007) business. He is also a director of several other companies Independent Director including Siderlux S.A. and Téléphonie S.A., and honorary Engineer general consul of Israel in Luxembourg. Mr. Meyer held a degree in metallurgical engineering from the University of Liège and a BSc in industrial management from Independent auditor the Massachusetts Institute of Technology, Cambridge, Mass. Ernst & Young Luxembourg S.A. (USA).
François Pauly 5) Management Director representing Groupe La Luxembourgeoise Marc Faber, Company Director General Manager Born 30 June 1964, Mr. Pauly is a graduate of ESCP-EAP and holds a degree in aeronautical engineering from the University of Chief Executive of Banque S. Oppenheim Jr. & Cie (Luxembourg) Liège, Belgium, and received an MBA from INSEAD, Paris. S.A. Mr. Pauly holds executive positions in several Oppenheim Group subsidiaries and is a director of la Luxembourgeoise S.A., Jean Medernach, Luxembourg, in which capacity he is also director of several Director Finance and Control other companies. He is a member of several professional and holds a Masters degree in economics and a degree in law from philanthropic associations. the University of Nancy II. He is a quali ed CPA (Certi ed Public Accountant) in the US. Georges Prost 1) 3) Independent Director Marc Cardinael, Certi ed tax adviser Senior Investment Manager Born 9 January 1960, Mr. Prost holds a degree in eco nomics graduated in mechanical engineering and industrial manage- from HEC and the University of Lausanne, and a degree in tax ment from the Catholic University in Leuven, Belgium. He is a law. A certi ed tax adviser, he is a director and manager of Certi ed International Investment Analyst. Lausanne-based Prost Consulting S.A. and in this capacity is a member of several Swiss and international professional orders 1) Member of the Audit Committee 2) Member of the Remuneration and Corporate Governance Committee and associations. 3) Member of the Life Science & Services Evaluation Committee 4) Member of the TMT Evaluation Committee 5) Member of the Industry Evaluation Committee
The Company and its environment / 13
| Governance of BIP |
The Governance Charter The Board of Directors From its beginnings, BIP Investment Partners has been fully The Board of Directors, whose members are appointed by committed to strict compliance with the principles of good shareholders at their General Meeting, must have at least three corporate governance. members, appointed for renewable terms that may not exceed six years. The governance framework results from Company articles and the BIP Investment Partners S.A. Governance Charter adopted The Board of Directors acts in the best interest of the Company by the Board of Directors. It also draws on the Ten Principles of and meets the common interests of shareholders by providing Governance published by the Luxembourg Stock Exchange. for the sustainable development of their Company in accordance with its articles and applicable law. The Charter is accessible in full on the BIP website at www.bip.lu and made available to shareholders on request. If a directorship falls vacant, the remaining directors may decide by a majority to appoint a provisional director to this position until The Charter de nes rules for the operation of the Board of the next general meeting of shareholders. Directors and the respective competence of the Board, its com- mittees and management, as well as the rules for the delegation At December 31, 2007, the Board counted 12 members, all of authority to represent BIP in relationships with third parties. non-executive directors. They were elected for terms of three Also included are rules for Directors on con icts of interest, years expiring at the Annual General Meeting in 2009. de nitions of shareholders’ rights and principles governing equal treatment of shareholders and communications between them Eight of the 12 members are independent directors as de ned in and the Company. the BIP Governance Charter under article 1.4.
The Board of Directors endeavours to ensure that its relation- The Board of Directors has the fullest powers for the oversight ships with the businesses BIP invests in comply with the same and operation of BIP. It de nes strategic targets, draws up the principles of transparency and equal treatment that govern its Company’s general business plan and actively monitors all own relationships with shareholders. aspects of BIP’s business. The Board’s approval is required for all signi cant investments and disposals. The principles of corporate governance set out in the Charter are all intended to contribute to optimum operation of the Company. Good corporate governance helps to reinforce investor con - dence and favours the development of business in the interest of all those involved in economic life. 14 \ The Company and its environment
The compensation of directors consists of allowances and xed Evaluation Committees keep close track of the Company’s attendance fees re ecting the extent of individual duties, these business and provide managers with any assistance they may being distributed out of a total allocation made by the General need for the accomplishment of their tasks. Meeting of Shareholders. Compensation is paid in the form of Company shares. They meet as often as may be necessary for the business of BIP. Directors do not receive any bonuses linked to Company earnings and do not bene t from any allocations of shares or Each Committee is presided by a director and schedules its own stock options. The Company has not granted them any advance meetings. They can call on the assistance of outside experts on or credit. a regular or occasional basis for certain aspects of their work. Membership of the Committees is detailed on pages 11 and 12. The Company does not have any retirement or pension plans in favour of Directors. In 2007, the three Evaluation Committees met 15 times.
In 2007 the Board met nine times and attendance averaged Remuneration and Corporate Governance 82%. Committee
Directors’ fees are the object of note nine to the consolidated The Board of Directors has appointed three of its members nancial statements. to make up the Remuneration and Corporate Governance Committee. In 2007, the Board of Directors met 9 times. The Committee proposes allocations of compensation and Evaluation Committees attendance fees to the Chairman and other Directors out of the sum appropriated for this purpose at the General Meeting of Under Company articles, the Board of Directors may appoint Shareholders. Acting within the framework of the powers con- several Evaluation Committees. ferred by the Board and the rules it de nes, the Committee also Those existing at present are charged with: determines all special payments to the Chairman and Directors as well as management compensation. It also de nes general - identifying and assessing investment opportunities principles and guidelines for the compensation of BIP staff.
- monitoring the companies BIP invests in and keeping the Board The Committee allocates the variable portion of staff compen- fully informed of developments sation out of the total amount appropriated by the Board and submits proposals for the Board’s approval regarding the alloca- - taking investment and divestment decisions within limits tion of stock options to managers. de ned by the Board The Committee also considers issues relating to the governance - undertaking any other assignment the Board may entrust of BIP and puts proposals in this area to the Board. them with. The Remuneration and Governance Committee met twice in Committee members appointed by the Board include several 2007. Directors and may also include one or more outside experts and a Company manager. The Board de nes the missions and powers of the Committees and any compensation that may be paid to their members. The Company and its environment / 15
Nominations Committee Management The Board of Directors appoints several of its members to make The Board of Directors appoints the General Manager as well up the Nominations Committee. as one or several analysts, investment managers and other staff members charged with the accounting, nances or tax affairs of The Committee provides its assessments of proposed appoint- the Company, de ning the powers of each. In a general way, the ments to be submitted to the shareholders and may recom- responsibilities of these managers and staff members involve mend individuals it considers suitable for membership of the an active contribution to the daily operation of the Company, BIP Board. If a directorship falls vacant, the Board consults the concerning among other things: Committee before co-opting a director. - identi cation of investment opportunities In its advice, the Nominations Committee gives due considera- tion to the educational level, technical competence and profes- - preparation of investment documentation for the consideration sional experience required for the position of director. It also of Evaluation Committees and the Board of Directors takes into account the age and, where relevant, the seniority of the potential candidates. - implementation of required procedures for equity investments
Before accepting a directorship, those concerned consider - support for the management and administration of companies whether they have the necessary capacities and time to carry in which BIP has stable interests out their duties in the interest of the Company. - management of cash and short-term assets Following a decision of the Board, the members of the Remuneration and Governance Committee also make up the - monitoring of investment portfolios and equity interests Nominations Committee at present. - preparation of reports to the Board of Directors and its Audit Committee Committees The Board has appointed four of its members to make up the - organization of internal control and risk management, and Audit Committee. Three members are independent Directors as veri cation of their continued ef cacy. de ned in the BIP Governance Charter. The Committee elects its own Chairman who may not be the Chairman of the Board The Remunerations Committee ensures that compensation of of Directors. managers is in line with their responsibilities.
The principal mission of the Committee is to assist the Board in In 2006, the Board of Directors initiated a stock option plan the supervision of the Company, evaluating internal and external for its key managers. The shares allotted are to be bought on controls and reviewing the nancial information to be provided the market and the plan does not entail the issue of any new to shareholders and others. shares.
It also advises the Board on accounting rules and principles, and The Board of Directors is to make annual allocations of options on the valuation methods used by the Company. from 2007 on, with the exercise price equal to the average share price in the rst ten trading days in the month preceding the allo- The committee monitors the work of the statutory auditor and cations. The options may be exercised in the four years following meets its representatives for regular consultations. the third annual recurrence of the date of allocation.
The committee met ve times in 2007. 16 \ The Company and its environment
Salaries and related expense, including compensation paid to Company shares are in bearer form; holders can convert them the Company’s managers and conditions for the allocation of into registered shares on request and at their expense. options in 2007, are the object of notes 10 and 31 to the consoli- dated nancial statements. Each share entitles the holder to one vote at any general meeting. At its meeting on February 1, 2008, the Board allocated 12,000 options, allowing bene ciaries to acquire 12,000 BIP BIP ensures equal treatment of shareholders, providing them shares at a unit price of EUR 98.27 during the exercise period. with the relevant information, in particular on the www.bip.lu The Company will recognize a related charge in its 2008 website, enabling them to exercise their rights. nancial statements. This charge will be based on the fair value of the options calculated in accordance with the Black and BIP publishes a report following the close of each six-month Scholes model. period. This report, which will be published on the BIP website, provides clari cation of events and transactions during The Company has not granted employees any advances or the period and their impact on the nancial position of BIP loans. All BIP employees bene t from a supplementary pension and the companies it invests in, together with a general review plan under a pension insurance policy taken out with an insur- of Company nances. ance company. General Meetings of Shareholders Shareholders General Meetings represent shareholders taken as a whole The Company’s issued share capital amounts to EUR and have the fullest powers to order, execute and ratify all acts 119,333,025 and is represented by 4,773,321 shares with relating to the operation of the Company. no par value. General Meetings are called by the Board of Directors. The Company counts several thousand shareholders, among Shareholders together owning 10% or more of share capital them two Luxembourg nancial institutions: may require the Board to call a meeting, as provided under the legislation dated August 10, 1915, as amended, governing - Fortis Banque Luxembourg SA, holding an interest of approxi- commercial companies. mately 25% As provided by law and Company articles, meetings are held - la Luxembourgeoise SA, holding an interest of approxi mately at 10:30 a.m. on the third Tuesday in March at Company 10% headquarters or at any other place indicated in the notice of meeting. Where a person acquires an interest that confers voting rights equal to or exceeding the thresholds of 5%, 10%, 20%, 25%, A shareholder or group of shareholders owning 5% or more of 1/3, 50%, 2/3 of the total, or moving below these thresholds, paid-up share capital may require the addition of one or more noti cation must be made to the Company and the Commission items to the agenda for a meeting. Requests for this purpose de Surveillance du Secteur Financier. must be sent together with evidence of an interest of at least 5% to the Company’ headquarters by registered mail at least ve days before the date of the meeting. If the Company receives such a request after notice of the meeting has been sent to shareholders, it will inform shareholders on its website. The Company and its environment / 17
Con icts of interest de Surveillance du Secteur Financier (CSSF) dated 7 November 2007 concerning the application of this legislation and with all Directors are to take their decisions in the interest of the other related laws and regulatory requirements. Company. This places obligations on the Company directors, managers As provided under article 57 of the legislation dated August and staff that include, among others, the following: 10, 1915, as amended, governing commercial companies, directors are to avoid any con ict of interest with the Company - Directors and staff are required to declare all transactions in or any company that it controls. When such con icts of interest BIP shares to the Company do arise, the directors concerned are to inform the Board and abstain from deliberating or voting on the issues in question. Any - Directors and managers, as well as persons closely associated abstentions for reasons of con icts of interest are to be recorded with them, are required to declare any transaction in BIP shares in the minutes of the meeting and made public in accordance for their own account to the Commission de Surveillance du with the provisions of the law. Secteur Financier, as provided under article 17 of the legisla- tion dated May 9, 2006 The rules set out above do not apply when the decisions of the Board or the directors concern recurrent business transactions - The Company is to draw up a list of persons with access conducted in normal conditions. to insider information as provided under article 16 of this legislation No contract or transaction that the Company enters into with other companies or entities may in any way be invalidated or - The Company is to make insider information that concerns otherwise affected by the fact that one or more directors, it directly available to the public as early as possible in managers or legal representatives have an interest in any com- accordance with the provisions of article 14 of the same pany or other entity, or by the fact they are directors, partners, legislation managers, legal representatives or employees of such another company or entity. - The Company is to make public, effectively and in full, any privileged information that a person acting in its name or on its Rules of conduct concerning insider behalf makes known to a third party in the normal course of information his or her work or in the exercise of his or her profession or function, except cases where the person receiving the infor- To ensure the full transparency of trading in BIP shares, the mation is subject to an obligation of con dentiality by law, Company undertakes to conduct its business in full compliance regulation, company articles or contract. with applicable laws, regulations and of cial recommendations, aiming for the highest standards of nancial ethics and effective prevention of insider trading.
The Company is thus committed to ensuring that all directors as well as all persons within the scope of article 8 (paragraph 1) of the legislation dated May 9, 2006 concerning market abuse and any persons with management responsibilities as de ned in article 1 of this legislation comply with the provisions of the same legislation as well as with the Circular of the Commission PORTFOLIO Portfolio / 19
| Public Equity |
Company Number of shares held Share price at Share price at Percentage change at 31.12.2007 31.12.2007 31.12.2006
ArcelorMittal 1 131 151 53.19 31.98 66%
Vale (in BRL) (2) 570 000 50.75 27.05 88% Evertz Technologies 387 800 29.64 13.74 116% (in CAD) (1) EVS 783 775 79.60 43.80 82%
Fortis (3) 3 076 119 18.01 27.06 -33%
Metris (1) 570 133 13.25 12.57 5%
Nanogate (1) 206 400 29.70 34.50 -14%
RTL Group 941 847 80.77 84.70 -5%
SES 2 400 000 18.00 13.49 33%
(1) New investments made in 2007 (2) For Vale, the stock price at 31.12.2006 is adjusted for a one-for-two split (3) For Fortis, the stock price at 31.12.2006 is adjusted for a new share issue
Listed investments are recognized under “Available-for-sale The portfolio of listed securities also includes investments nancial assets” on the balance sheet. This item also includes appearing under “Financial assets held for trading” on the listed investments not shown above and representing a total balance sheet. They represent an amount of EUR 7,190,500 on amount of EUR 51,726,738 on the basis of market prices at the basis of market prices at 31 December 2007. 31 December 2007. 20 \ Portfolio
www.arcelormittal.com
The world’s largest steel producer, ArcelorMittal results from Outlook the merger that followed Mittal Steel’s tender offer for Arcelor in early 2006. The group employs 120,000 people in over 60 Despite fears of a recession in the US, 2008 could turn out to countries around the world, and operates production sites in 27 be a good year for ArcelorMittal. While inventories remain fairly countries. With production exceeding 115 million metric tons, high in Europe, albeit on a declining path, they are back to low 2007 sales are expected to come in at over USD 100 billion. levels in the US, where demand should thus rm signi cantly, ArcelorMittal is structured around ve business lines: at carbon a trend already showing in prices for carbon steel. In addition, steel, long carbon steel, stainless steels, mining and ArcelorMittal fears of Chinese steel ooding world markets are likely to prove Steel Solutions and Services (AM3S). Rapidly expanding mining unfounded, since the laws of economics also apply in China and operations partly protect it from rising raw material prices. its producers will not be able to go on offering steel at rock- bottom prices given the step rise in raw materials expected this Business in 2007 year. The only real cloud on the horizon for ArcelorMittal is the stainless steel market, hit by soaring nickel prices. Conditions were dif cult for steelmakers in 2007, when global demand slowed and was thus largely met out of the high inven- 60 tories at the beginning of the year. This was particularly true 55 for steelmakers in Europe, where the process of inventory 50 building and unloading got under way a little later than in the 45 40 United States. 35 30 In response, ArcelorMittal stood by its policy of putting price ahead of volume and it thus limited output to buoy prices to 1/07/07 1/11/07 1/10/07
customers. In addition, the group’s worldwide presence enabled 1/01/07 1/12/07 1/05/07 1/09/07 1/03/07 1/02/07 1/06/07 1/04/07 1/08/07 it to take advantage of timing differences in inventory cycles from one region to the next, adjusting production and sales efforts accordingly. Finally, synergies resulting from the merger, captive mines and highly ef cient plant in low-cost countries including Brazil and Mexico make for a cost base signi cantly below the average for the steel industry as a whole. ArcelorMittal was thus able to stick to the targets set at the beginning of the year, with EBITDA expected to come in close to USD 19.5 billion or nearly 25% more than in the previous year. The rise in net income should be comparable.
During the year, the group continued its drive to integrate Arcelor’s South American subsidiaries with successive tender bids for Arcelor Brasil (of which BIP was a shareholder), Acesita, a Brazilian producer of special stainless steels, and Arcinda, which produces carbon steel in Argentina. It also launched several mining projects in Africa, projects for two new plants in India, each with a capacity of 10 million tons, and joint ventures in China. Portfolio / 21
www.vale.com
Brazil’s Vale, until recently named Companhia Vale do Rio Doce, Outlook is one of the world’s leading mining groups, ranking rst for iron ore with output totalling over 270 million tons in 2006. In this Commodity analysts expect demand for minerals to remain area, it bene ts from the high quality of the deposits it mines in strong throughout 2008, as illustrated by the consensus fore- Brazil. With its acquisition of Canada’s Inco in 2006, it is now cast of a 30 to 40% rise in iron ore prices. This should provide also the world’s number-two producer of nickel, a metal mainly continued support for the move to consolidation in the mining used in stainless steel. Other production includes coal, copper, industry that began in 2006, with the resulting mergers and manganese, aluminium, potassium and kaolin, with gold as a acquisitions in turn favouring rises in mining stocks. Finally, by-product. Employing a total of over 100,000 people, Vale is broader geographical presence and diversi cation of production present not only in North and South America, but also in Africa, should mean improved visibility for Vale. Australia and China. 70 65 60 Business in 2007 55 50 In 2007, as in previous years, Vale made the most of surging 45 world demand for base metals, particularly in China, which has 40 35 driven prices from record to record. 30 25
In May 2007, for example, nickel hit a new all-time high at over
USD 55,000 a metric ton, and while it has since declined by /12/07 1/07/07 1/11/07 1/10/07 1/01/07 1 1/05/07 1/09/07 1/03/07 1/02/07 1/06/07 1/04/07 1/08/07 nearly 40% due in particular to the efforts deployed by makers of stainless steel to replace it with other alloys, the price remains three times its long-term average and demand is still very rm.
Vale’s move to increase its nickel production through the acqui- sition of Inco in Canada has thus been a strategic success, and international investors have also shown approval for the lower risk that goes with broader geographical presence and less reliance on a single product. Prior to the acquisition, Vale had been seen as a local Brazilian producer with an exclusive focus on iron ore.
Prices for other minerals produced by Vale have also been on a steep upward path.
The company should thus report another record performance in 2007, with the analysts’ consensus calling for a rise of nearly 90% in EBITDA to over USD 16 billion and an 80% rise in net income to over USD 11.4 billion. 22 \ Portfolio
www.evertz.com
BIP’s interest in Evertz complements that in EVS. Evertz Technologies Ltd. is an integrated Canadian supplier of TV broadcasting equipment, offering state-of-the-art solutions for routing, broadcasting, signal control and labelling. Like EVS, Evertz is getting the full bene t of growth in HDTV, with revenues showing a robust 58% rise.
45 40 35 30 25 20 15 10 /12/07 1/07/07 1/11/07 1/10/07 1/01/07 1 1/05/07 1/09/07 1/03/07 1/02/07 1/06/07 1/04/07 1/08/07 Portfolio / 23
www.evs.tv
Based in Liege, Belgium, EVS develops hardware and software Outlook for media, in particular for live TV coverage of sporting events and studio production. EVS is an undisputed world leader in Prospects for EVS are excellent, since the adoption of HD live slow-motion (LSM) replay systems, widely used in sports as standard production technology has only just begun. broadcasting, and a pioneer in HDTV. The company also The calendar for 2008 features major events including develops tools for the production, editing and distribution the Beijing Olympics, the US presidential elections and the of digital content, which have become an increasingly important European Cup soccer tournament, which should keep order part of its business over recent years, and it is bene ting from books well lled. Business will also gain momentum from the progress of digital cinema through subsidiary XDC. acceleration in the trend to HD technology in studio production.
85 Business in 2007 80 75 Announcing 2006 results, EVS gave prudent guidance for 2007, 70 65 with the lack of major sporting events in Europe, a main source of 60 55 revenues, pointing to a year of transition and moderate growth. 50 45 40 First-half results showed that this caution was founded in Europe, but business in Asia and the US brought welcome surprises, /12/07 1/07/07 1/11/07 1/10/07
with revenues from these sources showing rises of over 50%. 1/01/07 1 1/05/07 1/09/07 1/03/07 1/02/07 1/06/07 1/04/07 1/08/07 As in the case of Evertz, results con rmed the growing success of HDTV in the US and Asia, a trend that is also illustrated by strong in ows of mobile HD production units.
Good news for the year also included the adoption of EVS systems as the standards for studio production, an area where company sales showed rises of over 25%, in Europe as in other parts of the world. 24 \ Portfolio
www.fortis.com
A bancassurance group centred on Belgium and the Netherlands, Factoring in the models it uses for the valuation of asset-backed Fortis is among Europe’s 15 largest nancial institutions and securities, including those with exposure to US sub-primes, as integration of ABN Amro gives it the lead on its domestic market well as the proceeds of the Caifor sale, Fortis expects net income in the Benelux. The bank enjoys strong positions in private for 2007 to come in at close to EUR 4 billion, a little below the banking, asset management, leasing and factoring. gure for the previous year.
Business in 2007 Outlook Fortis had an eventful year in 2007, as did the international In 2008, Fortis will have to show the market that it has the nancial community as a whole, as two successive waves of capacity to deal with the sub-prime crisis and the integration of sub-prime fallout battered stock markets. its share of ABN Amro’s business.
In April, when there had already been a rst warning on 29 sub-primes, Fortis joined up with Royal Bank of Scotland and 27 Banco Santander in a consortium issuing a counterbid for 25 23 ABN Amro of the Netherlands, the target of a tender offer from 21 Barclays. The banks in the consortium agreed to carve up the 19 17 business, with Fortis to take over retail and private banking in 15 Europe. ABN Amro nally agreed to its offer, judging it more favourable than that of rival Barclays. /12/07 1/07/07 1/11/07 1/10/07 1/01/07 1 1/05/07 1/09/07 1/03/07 1/02/07 1/06/07 1/04/07 1/08/07 To nance the acquisition, Fortis backed up sales of selected assets including its interest in Caifor, expected to bring in EUR 980 million, with a call on shareholders to contribute to a capital increase exceeding EUR 13 billion. While the issue was broadly subscribed, it coincided with the second wave of sub-prime woes and Fortis shares thus suffered from both the dilution associated with the capital increase and market punishment for nancial stocks. Portfolio / 25
www.metris.com
Metris, (Euronext-MTRS) designs, develops and markets 3-D Finally, in December Metris acquired X-Tek, a company special- metrology hardware and software used in industrial design ised in X-ray and computer tomography, opening the way for and production. The company’s comprehensive product family moves into markets for the measurement of smaller objects such covers the full range of measurement volumes in both xed and as turbine blades and certain engine components. portable con gurations equipped with optical and touch sensors to meet the requirements of customers in engineering industries Based on the analysts’ consensus, 2007 sales are expected to including automobiles and aerospace. have shown a 48% rise to EUR 91.5 million and generated a net margin of 8%. Headquartered in Leuven, Belgium, Metris has production and technical support centres in Belgium, the UK, Italy, China, India Outlook and Bulgaria. Its network of sales and support of ces extends Metrics should continue expansion in 2008. Now becoming from Europe to Asia and the US. a major contender in its sector, it stands to bene t from the Business in 2007 increased ef ciency of its distribution channels in bringing its broad range of products and services to industry. Micro-metrology is undergoing a fundamental change, with traditional mechanical methods based on point-to-point contact 17 16,5 measurement giving way to optical technology that is faster and 16 15,5 more robust. 15 14,5 14 A pioneer in the sector, Metris is pursuing a strategy of market 13,5 13 consolidation with acquisitions in 2007 extending the reach of 12,5 12 its distribution network to strategic markets and expanding its product and service offering. /12/07 1/07/07 1/11/07 1/10/07 1/01/07 1 1/05/07 1/09/07 1/03/07 1/02/07 1/06/07 1/04/07 1/08/07 In May, it acquired Coord3, an Italian company that has an installed base of 2,300 xed measuring machines made of alu- minium, complementing the existing Metris range of ceramic machines.
In July, this was followed with the acquisition of the Intelligent Laser Systems division of Canada’s Virtek, which specializes in highly accurate large-scale integrated measurement systems used in particular for the aerospace industry. The transaction should speed the adoption of two key Metris products, its indoor GPS and its laser radar. 26 \ Portfolio
www.nanogate.de
Nanogate is a listed German company and a spinout of the Outlook Leibnitz Institute for New Materials (INM) in Sarrebruck. Specialized in chemical nanotechnology, its main focus is on Listed since the end of 2006, Nanogate is one of the few liquid-phase and electrochemical surface treatments. It de nes nanotechnology businesses earning a pro t. Looking ahead, itself as an enabler, developing processes to enhance customer cooperation and licensing agreements with leading multina- products with the improved technical features of surfaces. tionals including Dow Corning, ESK Ceramics and Air Products should enable it to draw continued bene t from rapid growth in Business in 2007 the nanotechnology sector, providing the necessary funding for cutting-edge technology projects. Market studies suggest that In 2007, Nanogate initiated a number of ambitious development Nanogate should see sales growth of around 40% over the next projects offering signi cant business potential, an example being three years. its surface treatment offerings. 35 34 33 Whereas existing applications target passive features such as 32 hydrophobic, anti-bacterial and catalytic properties, these new 31 20 applications could take an active role in substrates. Nanogate 29 28 has thus begun moves into areas including tribology, diffractive 27 26 optics (with applications including LCD screens) and fraud-proof 25 nanomarkers for product security. /12/07 1/07/07 1/11/07 1/10/07 1/01/07 1 1/05/07 1/09/07 1/03/07 1/02/07 1/06/07 1/04/07 Nanogate has already announced a number of scienti c and 1/08/07 business alliances with major international rms in its sector, re ecting the international interest in its technology and know-how. Portfolio / 27
www.rtlgroup.com
Resulting from the merger of CLT-UFA and Pearson TV in As regards the possible buyout of minority shareholders, on July 2000, RTL is Europe’s number-one media group with 42 December 21 Bertelsmann AG indicated that it would not free-to-air TV channels and 32 radio stations. It also invests continue with plans for a tender offer considering what it in content production and has a broad web presence through described as “some uncertainties regarding the applicability of 85 sites. While the business is headquartered in Luxembourg, the Luxembourg legislation of May 19, 2006” governing such its largest market is Germany. Bertelsmann has been its main offers. However Bertelsmann also stated that it “reserved the shareholder with close to 90% of equity since buying out right to continue increasing its interest in RTL Group and to Pearson’s interest in November 2001. review all present and future options allowing it to achieve its ultimate aim, which is to withdraw RTL Group from listing”. Business in 2007 Outlook RTL Group had an excellent year in 2007, due in particular to favourable conditions in Germany, its main market. With the Assuming a possible recession in the US does not cast a shadow possible exception of the UK, other markets yielded steady over Europe, prospects for RTL Group should remain fairly results or improved performances from the previous year. favourable, in particular due to wealth effects on consumption in EBITDA margin was thus up by nearly a full percentage point Germany, where unemployment is at its lowest in 15 years. in the rst half. 95 90 In the earlier part of the year, RTL Group sold its interests in 85 Grupo Media Capital in Portugal and Sport ve in the UK. Results 80 75 for the second half should bene t from more favourable tax con- 70 ditions in Germany, where corporate income tax was cut from 65 40% to 31.5%. The market can thus look forward to a positive 60 impact on net income. /12/07 1/07/07 1/11/07 1/10/07 1/01/07 1 1/05/07 1/09/07 1/03/07 1/02/07 1/06/07 1/04/07 In February, RTL Group, CLT-UFA, Bertelsmann AG and the 1/08/07 government of Luxembourg signed a renewed concession running through to 2020 subject to the continued broadcasting and nancing of programmes in the Luxembourg language. 28 \ Portfolio
www.ses.com
SES, the world’s leading satellite operator with over 25% of the Finally, IP Prime transmission services for internet TV offerings, market, results from the merger of Astra, number one in Europe previously seen as a threat for SES, have met with considerable for direct reception, and Americom, a leading provider of geo- success in the US, demonstrating the group’s capacity to take synchronous satellite broadcasting services in the US. It also up new challenges. holds strategic interests in satellite operators in other parts of the world including AsiaSat in Asia, Star One and Nahuelsat in Latin Outlook America, and NSAB in Europe. SES and partner companies The future holds considerable promise for SES. The develop- currently operate over 40 satellites offering a wide range of ment of HD TV, which requires signi cantly more bandwidth services for TV and radio broadcasting, broadband communica- than digital broadcasting, will boost demand for transponder tions and corporate networks. These are within reach for nearly space, which should easily offset the excess capacities resulting 95% of the world’s population. from the switch from analogue to compressed digital signals. Business in 2007 SES should not suffer too much from the repercussions of the US sub-prime crisis since it had already achieved its target of net In 2007, SES Global took back its original name of SES following debt equal to 3.5 times EBITDA by the beginning of this year. the purchase of the remaining shares held by General Electric for a total of EUR 1,248 million, of which EUR 588 million was in 18 cash and the remainder in the form of an asset contribution from 17 a newly established holding company lodging assets that SES 16 15 considers non-strategic. Markets warmly welcomed this move, 14 which ended the uncertainties surrounding General Electric’s 13 interest. 12
Overall, 2007 was an excellent year for the group, based in 1/07/07 1/11/07 1/10/07 1/01/07 1/12/07 1/05/07 1/09/07 1/03/07 1/02/07 1/06/07 1/04/07 Betzdorf, Luxembourg, which attracted new interest from inves- 1/08/07 tors on publication of quarterly results that beat market expecta- tions. EBITDA margin remains very high at over 80% for its core TV broadcasting operations and the market appears to have nally woken up to the fact that while secondary businesses weigh on EBITDA margin, they have a favourable impact on the group’s bottom line. Investors were particularly pleased with the announcement of a tighter rein on capital spending. Portfolio / 29
| Private Equity |
Direct investments
At December 31, 2007 Cost Percentage interest BIP’s representation (in EUR millions)
Cargolux 30.2 11.5% 1 director
Artelis 9.3 9.5% 1 director
XDC 6.0 12.9% 1 director
Assisteo 3.0 20% 1 director
IEE 2.6 10% 1 director
21Net 2.4 12% 1 director
IP Casting 1.6 25% 1 observer
Technolia 1.6 36% 1 director
The table above lists only major investments. 30 \ Portfolio
www.cargolux.com
Cargolux Airlines International SA is Europe’s largest cargo-only Outlook airline. Its modern eet of fteen B747-400 freighters serves 90 destinations around the world including 50 with regular ights. Air freight will see continued growth in 2008, which will be a year of transition for Cargolux, awaiting delivery of new- The company has 85 of ces in more than 50 countries, and its generation planes offering substantial fuel savings at the end offering is backed up by extensive road-transport networks in of 2009. It has launched a major cost-saving drive and should Europe and the US. reap the rewards in 2008, a year of uncertainty for the global economy with the economic health of the US in doubt. Cargolux employs over 1,500 people around the world.
Business in 2007 With rm trends in the global economy buoying intercontinental trade, world airfreight measured in own ton-kilometres was up 4% and Cargolux outpaced this overall growth.
Margin, however, suffered from adverse factors including a steep rise in capacity to and from China, putting pressure on prices per ton on these routes.
Fuel prices remained on the rise, penalizing operational pro tability, but Cargolux was able to cushion the impact with a combination of hedging, fuel surcharges and optimization of ight parameters.
Continuing its strategic emphasis on exibility and specializa- tion, Cargolux opened highly pro table new routes including deliveries of heavy equipment to oil elds in the Middle East and Kazakhstan, while at the same time expanding services to and from Africa, where its longstanding presence enabled it to respond swiftly to new demand.
Overall, operating income was on a similar level to the previous year’s.
Like its competitors, Cargolux is the object of investigations into possible anti-competitive practices and has set aside a USD 155 million provision for this risk. Portfolio / 31
www.artelis.fr
Resulting from the merger at the end of 2005 of VSE Net, a tele- Outlook com operator in the Saarland region of Germany, and Cegecom, Luxembourg’s leading alternative operator, Artelis has success- Artelis will be continuing its efforts to win professional clients, fully consolidated its competitive position in its region, drawing further enhancing its offerings and infrastructure to meet the strength from an ef cient optical bre network covering the main growing demands on its markets for bandwidth and mobility towns in Saarland and Luxembourg to offer customized solutions for hundreds of professional clients.
Business in 2007 The considerable effort put into integration of operations over the past 18 months are starting to bear fruit. Following the inte- gration of all IT systems on a SAP platform, network control has now been centralized in Luxembourg.
At the same time, Artelis has been able to expand its broadband and voice-over-IP offerings to win new clients in both Germany and Luxembourg. At the end of the year, it was granted a Wimax licence for Luxembourg.
Revenues and earnings were signi cantly higher than in the previous year. 32 \ Portfolio
www.xdcinema.com
XDC, the leading service provider for European digital cinema During the year, XDC also expanded its network of partnerships with 80% of the market, draws on outstanding expertise in in Europe, signing an agreement with Germany’s FTT, a leader digital technologies to offer cinema operators a full, exible range in digital cinema integration. of technical and nancial solutions for projection equipment including servers, projectors and, where necessary, satellite Finally, in December, the company raised EUR 7.5 million reception. XDC is also a preferred supplier for post-production from existing shareholders to nance its continued business specialists and distributors, offering development and opera- development. tional support that meets the highest standards of quality and security at every stage in the process leading up from digital Outlook replication of lms to their screening in theatres across Europe. This is a watershed year for XDC, now under the leadership of a new CEO, Serge Plasch. The large cinema complexes will be Based in Liège, Belgium, XDC employs a multilingual staff of turning to digital technology, and once its VPF offering is ready over 45 with outstanding expertise in digital cinema. It also XDC will have all the technical and commercial resources needed operates ve client service centres in Liège, Berlin, Madrid, to win a con rmed place as the European leader in the eld. Paris and Stockholm.
Business in 2007
The year marked an important stage in the deployment of digital cinema technology in Europe.
Hollywood majors put their seal of approval on the virtual print fee (VPF) solution, which means that they in effect agree to making a signi cant contribution of some 75% to the nancing of digital equipment for European cinemas. The agreements also ensure that top releases will all be available in digital format.
Finally, 3D has won a new lease on life with digital projection, with lms in this format winning large audiences and raising margins for cinema owners, who can charge higher prices.
Together these factors have accelerated the development of digital cinema in Europe but XDC failed to get the full bene t in 2007. While revenues were up to EUR 2.5 million, showing a rise of 25% from the previous year, they fell short of expectations, as the agreements on VPF required lengthy negotiations, delaying the market launch of the company’s offering in this area. Portfolio / 33
www.assisteo.lu
Assisteo Europe is a Luxembourg company aiming for Europe- Outlook wide reach in home and family services. In 2008, Assisteo Europe SA will bene t from varied opportu- nities for expansion and structuring on an international basis. Subsidiary Assisteo France (www.assisteo.fr) is one of the main Business development will be across three fronts: providers of household services in France, with a nationwide - geographical expansion: presence through 30 agencies. In 2007, this network clearly • new agencies to back organic growth in the French established its place as a benchmark for the sector. network • acquisition and integration of household service pro viders Assisteo acts as an agent and provider of quality personal and in different parts of Europe with a view to building the household services including childcare and care for the aged. future sector leader for Europe as a whole Its strategy is based on specialization in complementary activi- - specialized offerings: ties ranging from childcare and lessons, care for the aged and • development and deployment of quality-based personal dependent, in-home computer assistance, housekeeping and services offering a pro table and lasting base for opera- cooking, to home haircare and beauty care. tions on all target markets • development of integrated solutions, particularly in home Business in 2007 care for the aged and dependent Deployment and development of the French network was the - quality assurance and expertise: main focus of Assisteo Europe business in 2007. • continued pursuit of excellence and assured quality in services In this area, a signi cant development was the increased weight • continued development of Assisteo’s know-how and its of services requiring additional skills, in particular in care effective presence in all agencies. for the aged and dependent — assistance with dressing and undressing, bathing and showering, meals, medication, travel, Building on this basis, Assisteo will be continuing its develop- company and nursing. Such higher value added services ment of a network of agencies and competencies that will be one showed a vigorous rise from the previous year to account for over of a kind in Europe. 60% of total French business in 2007.
Growth strategy is founded on partnerships with public and private institutions, nancial groupings, insurers and healthcare organizations. It is backed up by quality assurance and in-house training programmes that have won Assisteo recognition as a standard setter for quality on the French market.
The market for personal and household services in France is estimated to have amounted to EUR 12 billion in 2007. 34 \ Portfolio
www.iee.lu
International Electronics Engineering, a Luxembourg company In China, it established its presence with the launch of a produc- founded in 1989, specializes in the development and production tion site and a technology centre, enabling it to win contracts of intelligent sensors. with local auto manufacturers operating on a market where growth is particularly vigorous. It is a world leader in automobile occupant detection, supply- ing the world’s top manufacturers with sensors that capture all During the year, IEE considered the possibility of market listing the information necessary to optimize safety-belt use and airbag but put plans on hold as market volatility surged. The Board of operation. Directors opted instead to re nance debt in an amount of EUR 165 million, re ecting a signi cant improvement in operating Through its LuSense division, it also develops man-machine performance over recent years. This optimization of the balance interfaces with new intelligent command options and data sheet enabled IEE to pay shareholders a dividend of EUR 61 acquisition capability. million in January 2008.
Employing over 1,200 people, the company has ve service Outlook centres in Luxembourg, Seoul and Auburn Hills (Michigan, IEE’s strategy centres on research and innovation. Its optical and USA), Tokyo and Beijing, while its production sites are located in capacitive technologies offer scope for a variety of new applica- Echternach (Luxembourg), in Kosice (Slovakia) and in Langfang tions, both within the auto industry and beyond it. (China).
The company expects operating results to improve further In July 2004, BIP joined up with APAX Partners and the com- in 2008. pany’s management to acquire IEE in an LBO.
Business in 2007
In the nancial year ended September 30, 2007, IEE posted a rise of nearly 11% rise in revenues to EUR 171.1 million.
The year saw a number of important developments for the company’s business.
In the US, IEE booked a large order from a major customer for its new generation products dedicated to this market, making it the rst auto equipment suppler to place a winning bid for this type of sensor. Portfolio / 35
www.intellicast.lu
IP Casting is a Luxembourg-based investment company special- There was also continued progress in the extension of digital izing in satellite, ADSL and other technologies that enable clients signage to other sectors, with Intellicast set to equip 350 Citroën to deliver the same multimedia data package simultaneously to dealerships. The company has also won a long-term contract several destinations (multicasting). with French mobile telephony operator SFR to equip its 900 boutique outlets by stages. It holds 100% of Intellicast SA, a Luxembourg company specialized in digital signage, replacing traditional point-of-sale Specialized in advertising representation for digital signage, advertising with large screens displaying information, photos and Retail Media, a company in which IP Casting has a 25% videos stored locally. The content of hard disks serving a group interest, also had a very good year and is now moving into of screens on different sites, in different countries and even content production. Together, Intellicast and Retail Media offer on different continents is updated remotely using terrestrial or full end-to-end service in digital signage for all types of outlet. satellite-based communications. Outlook IP Casting also invests in companies using Intellicast technology. Some market consolidation in the digital signage sector can be Business in 2007 expected in 2008, with some smaller operations disappearing while others restrict themselves to narrow niches. Intellicast, Intellicast, the agship company for the IP Casting group, had an the sector leader, will be able to offer clients one-stop excellent year in 2007. service, drawing on the strength of its extensive network of sub-contractors. Both revenues and cash ow should continue The number of sites equipped with its technology rose to 1,300 to show vigorous growth. and the number of screens to over 2 000, while revenues neared EUR 1.5 million.
The company consolidated its leadership with major retailers, placing the winning bid for a contract with Monoprix, one of France’s largest supermarket operators. 36 \ Portfolio
www.21net.com www.technolia.fr
21Net Ltd, which develops and markets solutions for broadband Technolia designs and installs a range of barrier-free solutions access on high-speed trains, in particular the TGV, is head- for the protection of parking places reserved to particular cus- quartered near Birmingham in Malvern, UK, and has an opera- tomer pro les or with time limits. tional base in Belgium. Its solutions are the most effective to date, combining bi-directional satellite-based communications It is the European leader in the sector, in which it has played and on-board wi- connections. An ultra high-speed high gain a pioneering role, revolutionizing parking systems since 2006. antenna is installed on the roof of the train. Technolia’s star product is control posts with communications links, which offer scope for a range of applications in manage- Business in 2007 ment of public and private areas. 21Net signed its rst commercial contract in 2007 as a member Business in 2007 of a consortium alongside Nokia, Siemens Networks and Belgian telecom operator Telenet. This consortium was set up to respond In 2007, Technolia made signi cant progress with the to the call for tenders launched by Thalys at the end of 2006 for acceptance of active management of reserved and restricted the provision of internet access on its entire train eet. parking areas in city centres.
Thalys is a cooperative company bringing together rail operators Media coverage of its technology, particularly at its showcase SNCF in France, SNCB in Belgium, DBahn in Germany and NS system in Le Touquet on the French coast, won nationwide atten- in the Netherlands for the operation of a high-speed rail services tion, and potential was con rmed with the installation of control connecting Amsterdam, Brussels, Cologne and Paris. systems on increasingly large areas. In 2007, this concerned nearly a dozen French towns, inducing Poitiers, Châteaudun, The consortium’s bid was accepted in February and the Bastia, Puteaux, Compiègne and Thorigny. contract signed on September 30. Within this framework, 21Net is charged with supplying and operating the satellite links to Technolia also won entry to markets outside France with its provide Thalys passengers with internet access. rst installations in Spain at the Parque Sur shopping centre in Leganes (Madrid), and distribution agreements covering Belgium By the end of the year, three trains were equipped and the entire and Luxembourg. eet should be equipped by the end of September 2008. Major efforts have been put into research and development to Outlook expand its product and service offering, with innovations such as self-operating control units, wi- control units and multi func- In 2008, 21Net technology will be in commercial operation on tional units con rming its lead in intelligent parking. 26 high-speed trains. Outlook This unique experience will enable the company to extend its know-how and acquire a reputation that will attract other Technolia should make its rst pro t in 2008. European rail operators and open the way for similar initiatives Many of the municipalities and private customers that installed for the development of the embryonic market for broadband Technolia systems in 2007 have placed new orders, often on a internet access on trains. larger scale, which points to promising prospects for intelligent parking in the future.
Portfolio / 37
Investments in Private Equity Funds (Indirect investments)
At 31 December 2007 Cost Paid-in capital Percentage (in EUR millions) of fund held
Hamilton Lane Co-Investment Offshore Fund 5.5 75% 6.1%
Lynx Capital Ventures 4.9 98% 14.7%
Life Sciences Partners III 4.5 60% 6.8%
Apax France VII 3.7 49% 1%
Carlyle Europe Technology Partners 3.0 90% 2.4%
Carlyle Venture Partners II 2.8 86% 0.8%
Denkaria B.V. (BMI) 2.7 100% 25%
Mangrove II 2.5 50% 4.2%
New Tech Venture Capital (NTVC) 2.2 100% 9.7%
Robertsau Investissement 1.9 100% 9.7%
Carlyle Venture Partners III 1.7 23% 1.6%
Millennium Materials Technologies Fund II 1.6 100% 4.9%
Vertex III 1.3 34% 3.4%
Fonds Européen d’Investissement 1.2 21% 0.1%
Saarländische Wagnis nanzierungsgesellschaft 1.0 100% 10.1%
Coller International Partners IV 0.8 82% 0.2%
Field 0.7 15% 14.3%
Carlyle Europe Technology Partners - Co-Investments 0.4 55% 2.4%
Carlyle Europe Technology Partners II 0 0% 1.4% 38 \ Portfolio
By investment type
Commitment (1) Gross paid-in DPI (3) RVPI (4) EUR millions capital(2) EUR millions
Venture capital 34 27 44% 64%
Development capital 32 14 51% 72% Buyout, funds of funds 23 14 23% 88% and secondaries
Total 89 55 41% 72%
(1) Conversion of commitments into euros based on exchange rates in effect on 31.12.2007 (2) Gross paid-in capital (3) Distributed to paid-in (DPI) (4) Residual value to paid-in (RVPI)
Commitment
Buyout, funds of funds Venture Capital 38% and secondaries 26%
Development Capital 36% Portfolio / 39
By vintage (year fund was founded)
Commitment (1) Gross paid-in capital DPI (3) RVPI (4) EUR millions (2) EUR millions
2000 24 21 75% 54%
2001 4 4 26% 51%
2002 3 3 82% 68%
2005 12 9 16% 93%
2006 33 17 10% 90%
2007 13 1 0% 100%
Total 89 55 41% 72%
(1) Conversion of commitments into euros based on exchange rates in effect on 31.12.2007 (2) Gross paid-in capital (3) Distributed to paid-in (DPI) (4) Residual value to paid-in (RVPI) 40 \ Portfolio
Apax France VII Field Like its predecessors, this seventh fund managed by Apax Field is a Luxembourg-based SICAR fund that invests in opera- invests mainly in mature French companies in the manager’s tions related to the transmission/sale of mid-size companies in favoured sectors: technology and telecoms, media, healthcare, traditional industrial sectors in Luxembourg; in the Champagne- business services and retailing. Ardennes, Lorraine, Alsace and Burgundy regions of France; in French-speaking Belgium; and in the Sarre region of Germany. Carlyle Europe Technology Partners (CETP) Shareholders are Luxembourg and French investors active in CETP invests primarily in mature mid-market businesses through regional and cross-border economic life. Fund management lBOs, focusing on telecoms, internet applications, software and focuses on investments of between EUR 2 million and EUR 4 related elds. It aims to ll the gap between early stage capital million that round out regional funds and are upstream from funds and the big LBO funds investing hundreds of millions at a action by larger international funds. time. CETP II will begin investing in 2008. Fonds Européen d’Investissement (FEI) Carlyle Venture Partners II (CVP II) A subsidiary of the European Investment Bank, the European Carlyle Venture Partners II (CVP II) is a US venture capital fund Investment Fund (EIF) invests in venture capital funds and investing mainly in recently founded companies in high-growth provides guarantees to nancial institutions to cover credit to segments relating to telecoms, infrastructure and internet SMEs. applications. Hamilton Lane Co-Investment Fund Carlyle Venture Partners III (CVP III) The fund was set up to take interests in LBOs and similar The successor to CVP II, CVP III has a similar focus on tele- transactions concerning major European and US companies in coms and internet applications. It aims to ll the gap in the US association with the world’s leading private equity funds. market between early stage capital funds and the big LBO funds investing hundreds of millions at a time. Life Science Partners III (LSP) Based in Amsterdam and Munich, LSP is a venture capital fund Coller International Partners IV focusing on biotechnology companies, mainly in the Benelux Coller International Partners IV is the fourth fund launched by and Germany. Coller Capital, an international investment manager special- ized in so-called secondary interests. This involves buying out Lynx Capital Ventures the owners of portfolios of venture capital funds and LBO and Lynx Capital Ventures, a European venture capital fund set up mezzanine nancing, and portfolios wholly or partly invested in at the initiative of investment bank Bear Stearns, focuses on mature companies. The approach makes for considerably less providers of content, services and technology for digital media. risk than occasional investments in start-ups or newly launched funds. Millennium Materials Technologies Fund II (MMT II) Millennium Materials Technologies Fund II, an Israeli venture Denkaria BV (BMI) capital fund set up in April 2000, invests in US and Israeli busi- Denkaria is a Dutch investment company specialized in nesses involved in new materials and nanotechnology. venture capital to nance medical technology and biotechnology in Israel. Its investments were previously held through a trust named Biotech Invest. Portfolio / 41
New Tech Venture Capital Fund (NTVC) NTVC, a Luxembourg fund managed by Mangrove Capital Partners, specializes in rst and second-round seed capital nancing for business in internet-related sectors.
Mangrove II (formerly NTVC II) The second fund managed by Mangrove Capital Partners, Mangrove II pursues a strategy similar to that of its predecessor, specializing in rst and second-round seed capital nancing for businesses in internet-related sectors, mobile technology and software.
Robertsau Investissement The Robertsau Investissement fund mainly invests in north- eastern France, targeting growing unlisted companies in all sectors of the economy. It is managed by Fortis Private Equity France.
Saarländische Wagnis nanzierungsgesellschaft (SWG) Saarländische Wagnis nanzierungsgesellschaft (SWG) is a EUR 12.8 million venture-capital fund based in Sarrebruck. Its main shareholders are the Saarländische Landesbank, a number of local savings institutions and Technologie Beteiligungsgesellschaft, a company providing public venture- capital nancing in Germany.
Vertex III A venture capital fund based in Israel, Vertex III invests in recently founded Israeli technology businesses, focusing on software, semi-conductors, telecoms and related sectors. It draws on the support of Asian investors to back these companies. FINANCIAL INFORMATION Financial Information / 43
| Report of the Board of Direcors to the General Meeting of shareholders |
In its eighth nancial year, BIP again achieved record results, Capital gains of EUR 40 million on available-for-sale generating income of EUR 71.5 million compared to EUR nancial assets 71 million in 2006. This re ected in particular substantial During the 2007 nancial year the Company sold all its Option capital gains, which amounted to EUR 40 million on listed and Arcelor Brasil shares, realizing respective capital gains investments and EUR 16 million for the private equity portfolio. of EUR 5.4 million and EUR 1.9 million. In line with its active portfolio-management strategy, it also sold some ArcelorMittal The estimated fair value per share also increased by 16.6% and EVS shares, realizing respective capital gains of EUR to EUR 123.85 at 31 December 2007. 11.6 million and EUR 9.1 million. Remaining holdings in these two companies represent 10.3% and 10.7%, respectively, Highlights of net assets and thus still represent important investments for BIP. Other investments that were partially sold included Vale Sale of VOXmobile and SES. In 2007, BIP’s venture capital portfolio saw a signi cant exit with the sale of its 37.5% interest in VOXmobile. BIP, which The Company also invests part of its liquid assets in companies had teamed up with managers of the company and another with large market capitalization that are included in the main Luxembourg investment company to found the mobile-phone stock-market indices of neighbouring countries and thus operator in June 2003, then provided its support in the belong to our investment universe. At December 31, 2007, this initial phases of its development on the Luxembourg market. segment of the medium-term investment portfolio included VOXmobile’s shareholders subsequently agreed that the com- shares in Allianz, BASF, Roche and SAP. This portfolio is actively pany could bene t from a tie-up with a major mobile operator managed, as was re ected in some pro t taking in the course in countries neighbouring Luxembourg for the next stages in of the year. its development. They thus agreed to the sale of BIP’s interest to Belgium’s Mobistar. BIP realized an exit multiple of 2.7 on a total investment of EUR 12.8 million. 44 \ Financial Information
Listed investments Evertz Technologies, a Canadian company listed in Toronto and In addition to the sales described above, the year was marked New York, develops and manufactures video and audio equip- by the excellent stock market performances of strategic invest- ment used by TV stations for the production and broadcasting ments, re ecting their strong operational results. The steepest of cable, satellite and internet television (IPTV). Building on its rises in the year were 88% for Vale, 82% for EVS and 66% for sector expertise in TV broadcast production systems, gained ArcelorMittal. through its investment in EVS, BIP decided to acquire a stake in Evertz, investing EUR 5 million. Regarding RTL Group, BIP, along with other minority share- holders, continued its legal action against Bertelsmann and Nanogate, a German company based in Saarbrücken and listed lodged an appeal against the ruling of 12 July 2006 concerning in Frankfurt, specializes in chemical nanotechnology, an area the equal treatment of minority shareholders. where the technology now being developed allows signi cant improvements in anticorrosive, antibacterial, hydrophobic and Capital increase at Fortis other physical properties of existing products. It thus covers Following its participation along side Royal Bank of Scotland and applications across a broad range of sectors, materials and Banco Santander in the acquisition of ABN Amro, Fortis Group surfaces BIP’s investment of EUR 6 million gives it a place in a took over the bulk of ABN Amro’s Dutch and private banking fast-growing sector and makes it a signi cant shareholder in a business. To nance this acquisition, in autumn 2007 the Fortis technology company in its home region. Group made a capital increase of EUR 13 billion, one of the largest ever in Europe. BIP participated in this capital increase, Following a Board decision to set up a special sub-portfolio convinced of the long-term bene ts of the strategy pursued by segment for this purpose, BIP invested EUR 15 million in a diver- Fortis, which has won the top place in bancassurance in the si ed selection of recently founded biotechnology companies Benelux. The new investment in Fortis totals EUR 26 million. listed on European exchanges. These include eight companies active primarily in the development of promising new molecules, New investments in Metris, Nanogate and Evertz mainly for treating cancer, allergies and diagnostics. Risk is Technologies diversi ed in terms of both the scope of the portfolio and the Metris, a Belgian company listed on Euronext Brussels, oper- range of molecules being developed by these businesses. ates in the area of micrometrology and manufactures optical measuring devices mainly used in the automobile and aerospace industries. Following a two-stage investment, which began in November 2006 when the company was rst listed, BIP currently holds around 5% of its share capital for an investment of EUR 7.6 million. Financial Information / 45
Private Equity New venture capital investment in Assisteo Europe BIP’s interest in Cargolux shareholding remained unchanged in BIP has invested EUR 3 million in Assisteo Europe, a Luxembourg 2007. The company’s business development is on a favourable company that intends to develop a Europe-wide platform offering track and the decision to replace its existing eet with new B747- personal and in-home assistance services. After some eighteen 800F models by stages is proving particularly well-advised con- months in operation, its subsidiary, Assisteo France, is among sidering the massive increase in the price of aviation fuel. Like all the leading French providers of home services with over 30 its competitors, Cargolux is under investigation by competition agencies operating across the country. Today it is an industry authorities in connection with possible anti-competitive prac- reference for quality and local provision of childcare, home help tices. BIP has written down the carrying value of its investments and assistance for the aged, with services ranging from help in the company to allow for the resulting risk. with schoolwork to babysitting, care for the elderly and disabled, home assistance for IT, housework, home hairdressing and Artelis, the result of the merger of VSE Net and Cegecom, beautycare. reported second-year operating and nancial results in line with projections made when it was founded at the end of 2005.
IEE’s plans for otation did not materialise. Operating and nancial results remain strong, enabling it to carry out a major re nancing operation at the start of 2008. 46 \ Financial Information
Private Equity funds A second capital commitment of EUR 5 million was made to Brought together through BIP Venture Partners SA, SICAR, a Field SICAR, a Luxembourg fund specializing in development wholly-owned subsidiary of BIP, investments in private equity capital acquisitions and LBOs in the Grande Région comprising funds make up 7% of BIP’s total net assets. They currently Luxembourg, the Saarland and Rhineland-Palatinate regions of represent a balanced portfolio of 18 funds, with business focus Germany, Lorraine in France and the Region of Wallonia. ranging from early-stage venture capital to nancing for expan- Share price of BIP : + 21.7% sion and buyouts of mature companies. Startup dates of the funds are from 2000 to 2007. The average investment of EUR The Company’s shares closed the year at EUR 98, showing a 35 million showed an unrealized capital gain of EUR 2.6 million rise of 21.7% from the end of 2006. With the dividend of EUR at the end of the year. 3.00 per share paid in March 2007, this set total shareholder return for the year at 25.5%. It compares with respective rises Carlyle Europe Technology Partners (CETP) turned in a of 11% and 7% in benchmark LuxX Return and Eurostoxx 50 particularly strong performance during the year, selling off its full indices. investment in NP Aerospace at a multiple of three, and bene t- ing from the listing of Transics on Euronext Burssels at a multiple Altogether 388,295 BIP shares were traded on the Luxembourg of around 3.8. BIP also participated directly in both transactions Stock Exchange during the year. through co-investments in these companies alongside CETP. Estimated fair value of BIP shares up 16.6% New fund investments Estimated fair value per share reached EUR 123.85 at In 2007, BIP made two new capital commitments to private 31 December 2007, showing a rise of 16.6% on a year. This is equity funds. based on the fair value of portfolio investments as determined in accordance with valuation guidelines used by BIP for the The company committed EUR 7.5 million to the new Carlyle preparation of its annual accounts in accordance with IFRS. Europe Technologies Partners II fund. BIP was already present The estimated fair value per share, which is published each in the same management team’s rst European technology month in the press and on the Company’s website, re ects the fund, part of the Carlyle Group and as such bene ting from realizable value of portfolio assets. the know-how, experience and network of one of the world leaders in private equity. Estimated value calculated in this way at 31 December 2007 thus corresponded to shareholders’ equity at that date, divided by the total number of shares outstanding. Financial Information / 47
The Company’s accounts Consolidated pro t and loss account Net income for 2007 came to EUR 71.5 million compared with Accounts are prepared in accordance with IFRS (International EUR 71 million in 2006. Financial Reporting Standards). Those presented are the consolidated annual accounts, comprising the accounts of Dividends and other revenues on available-for-sale nancial BIP and its subsidiary BIP Venture Partners S.A., SICAR. assets totalled EUR 11.8 million compared with EUR 12.6 million Consolidated balance sheet in 2006. BIP’s assets total EUR 591 million. Liabilities mainly consist of Net earnings on the sale of available-for-sale nancial assets equity capital in the amount of EUR 581 million and the Company made up of listed investments amounted to EUR 40 million had no debts at 31 December 2007. compared with EUR 46.3 million in 2006.
Main non-current assets are available-for-sale nancial assets, Value adjustments on available-for-sale nancial assets, consisting of investments in listed companies, totalling EUR 382 representing writedowns of listed investments, came to million and nancial assets at fair value through pro t and loss EUR 2.4 million. There were no such writedowns in the in the amount of EUR 127 million, which mainly consist of previous year. direct private equity investments and interests in private equity funds. Other non-current assets include EUR 2.8 million Net earnings on nancial assets at fair value through pro t in loans to companies in which BIP has invested, and and loss, consisting of unlisted investments, came to EUR 2.8 million in deferred tax assets representing loss carry EUR 24 million compared with EUR 12.8 million in 2006. forwards available for future use. This amount includes EUR 16.4 million in capital gains, EUR 7.2 million in unrealized capital gains and losses result- Current assets included EUR 7.2 million in nancial assets ing from changes in the fair value of investments, and held for trading, made up of short-term investments in shares EUR 0.4 million in other income. listed on Euronext markets, as well as German and Swiss stock markets. Cash at banks came to EUR 58.8 million, and other Net earnings on trading assets, generated by short-term market receivables, including amounts relating to transactions in placements, amounted to EUR 4.2 million compared with process, to EUR 10.3 million. EUR 4.1 million in 2006.
48 \ Financial Information
Other interest and assimilated income came to EUR 2.8 million Fallout from the US sub-prime crisis and the liquidity crunch compared with EUR 1.6 million in 2006. on money markets have made for a highly unsettled nancial environment at the beginning of 2008. The heavy losses Operating expenses relating to management came to EUR 3.2 suffered by some nancial institutions on mortgage-backed million equaling 0.55% of assets under management. This securities have led to a loss of con dence in the solvency of amount includes EUR 1.4 million in other external costs and banks with signi cant exposure to this sector. The related EUR 1.8 million in personnel expense. The other taxes item, risk of a sharp reduction in bank credit to households and representing an amount of EUR 1 million, includes wealth tax and businesses raises fears of weakening consumer demand in the withholding tax on dividends. Valuation adjustments on property US. Considering the danger of slowing or even recession in the and equipment amounted to EUR 0.02 million and interest and US, forecasts for corporate earnings at the beginning of the year assimilated expense to EUR 1.1 million. look very optimistic. European economies cannot be expected to remain unaffected by a downturn in the US. Pre-tax income on ordinary business came to EUR 75 million compared with EUR 73.5 million in 2006. Tax on pro t came to Considering this risk of an economic slowdown, BIP has taken EUR 3.4 million after 2.5 million in 2006, consisting solely of tax steps to protect its listed investments. It will also be using its sub- deferrals as a result of the use of loss carryforwards set against stantial cash reserves to take advantage of investment oppor- taxable income. tunities that may arise in the context of the high stock-market volatility of associated with current uncertainties. Net income for 2007 thus came to EUR 71.5 million compared with EUR 71 million in 2006, setting basic earnings per share at The intrinsic quality of the companies represented in its EUR 15.16 compared with EUR 14.94 and diluted net earnings strategic investment portfolio and their sound market position- per share at EUR 15.14 after EUR 14.94. ing will enable BIP to ride out current market turbulence and create value over the medium term. Younger companies with Annual single-entity accounts entrepreneurial management and bene ting from promising The unconsolidated annual nancial statements of the Company opportunities for growth should also make a positive contribution are also drawn up in accordance with IFRS. They show share- to this creation of value. As in previous years, BIP’s short-term holders’ equity amounting to EUR 581 million and a net pro t of results will depend to a large extent on overall trends on stock EUR 71.5 million for the 2007 nancial year. markets and the operational performance of the companies in its portfolio. Recent events and outlook In January 2008, BIP received a substantial payment from IEE in connection with its recapitalization.
The Court of Appeal is expected to hand down its judgment in the action brought by the Company and other minority shareholders of the RTL Group against the majority shareholder Bertelsmann in the opening months of 2008. Financial Information / 49
Own shares Appropriation of earnings Pursuant to the authorization granted at the General Meeting of The Board of Directors proposes that the Shareholders appropri- 13 March 2007, during which the Company purchased 39,205 ate distributable earnings as follows: own shares, representing 0.82% of issued share capital, for a total of EUR 3,840,611 in the 2007 nancial year. The Company In EUR also sold 2,911 own shares, representing 0.06% of issued share capital, for a total of EUR 241,049. Pro t carried forward from 31 610 055 At 31 December 2007, the Company held 84,828 own shares, previous years representing 1.77% of issued share capital. The par book value Pro t for the year 71 532 406 is EUR 25 per share.
The General Meeting of Shareholders is asked to renew the Distributable total 103 142 461 authorization to purchase own shares for a period of 18 months. Under the proposed authorization, the number of shares purchased may not exceed the limit of 10% of issued share Dividend 16 229 291 capital as established by law, which is to say 477,332 shares. The price paid per share may not be less than EUR 50 nor more Unregulated reserve 30 000 000 than EUR 150. Balance carried forward 56 913 170
Considering the number of own shares held at 31 December 2007 and the maximum indicated above, the amount allo- Total 103 142 461 cated to this buyback programme may in no case exceed EUR 60 million over the 18 months, allowance being made for any shares purchased in the period of 2008 prior to the date of If these proposals are adopted, the dividend for the year, amount- the General Meeting. ing to EUR 3.40 per share before withholding tax, will be payable to shareholders from 24 March 2008 on presentation of coupon Directors no. 7 at the windows of Fortis Banque Luxembourg. Shareholders are asked to ratify the appointment of Norbert Becker, co-opted by the Board of Directors to complete the term Luxembourg, 1 February 2008 of of ce of Marc Meyer, who died on 5 September 2007.
The statutory auditor’s mandate expires on the occasion of the General Meeting and a statutory auditor must be appointed for the coming year. 50 \ Financial Information Financial Information / 51
| Consolidated financial statements for the year ended 31 december 2007 |
In EUR Notes 2007 2006
Dividends and other income on available-for-sale nancial assets 5 11 841 366 12 622 563
Net income on disposal of available-for-sale nancial assets 17 39 972 414 46 317 957
Net income on nancial assets at fair value through pro t or loss 6 24 037 409 12 762 003
Net income on nancial assets held for trading 7 4 203 021 4 081 201
Other interest and similar income 8 2 797 071 1 343 535
Value adjustments on available-for-sale nancial assets 17 (2 434 709) -
Reversal of value adjustments on loans 19 - 283 936
Other external expenses 9 (1 449 928) (1 213 525)
Staff costs 10 (1 794 752) (1 230 945)
Other taxes 12 (1 040 018) (1 010 292)
Depreciation of property, plant and equipment 15 (23 860) (68 002)
Interest and similar expenses 11 (1 127 840) (416 237)
Income from ordinary activities, before tax 74 980 174 73 472 194
Income tax 12 (3 447 768) (2 516 570)
Net income 71 532 406 70 955 624
Basic earnings per share 13 15.16 14.94
Diluted earnings per share 13 15.14 14.94
The accompanying notes form an integral part of the consolidated nancial statements. 52 \ Financial Information
| Consolidated balance sheet at 31 December 2007 |
Assets
In EUR Notes 31.12.2007 31.12.2006
Non-current assets
Property, plant and equipment 2,15 78 150 48 403
Available-for-sale nancial assets 2, 16, 17 381 533 086 318 498 578
Financial assets at fair value through pro t or loss 2, 16, 18 126 762 852 123 408 649
Loans and receivables 2, 16, 19 2 817 342 3 806 553
Deferred tax assets 2, 12 2 774 012 6 218 640
513 965 442 451 980 823
Current assets
Financial assets held for trading 2, 16 7 190 500 10 708 136
Derivative instruments 2, 20 837 436 659 821
Other receivables 2, 21 10 304 926 1 909 271
Cash and cash equivalents 22 58 764 486 45 311 565
77 097 348 58 588 793
Total assets 591 062 790 510 569 616
The accompanying notes form an integral part of the consolidated nancial statements. Financial Information / 53
Shareholders’ Equity and Liabilities
In EUR Notes 31.12.2007 31.12.2006
Shareholders’ equity
Issued share capital 23 119 333 025 119 333 025
Own shares 24 (6 437 035) (2 941 362)
Reserves 25 243 439 372 173 439 372
Revaluation reserve on available-for-sale nancial assets 26 121 188 061 96 188 650
Undistributed income 103 142 461 115 784 416
Total shareholders’ equity 580 665 884 501 804 101
Non-current liabilities
Deferred tax liabilities 2, 12 6 042 821 6 625 859
6 042 821 6 625 859
Current liabilities
Current tax liabilities 12 - 1 058 144
Other liabilities 27 4 354 085 1 081 512
4 354 085 2 139 656
Total shareholders’ equity and liabilities 591 062 790 510 569 616
The accompanying notes form an integral part of the consolidated nancial statements. 54 \ Financial Information
| Consolidated cash flow statement for the year ended 31 December 2007 |
In EUR Year to Year to 31.12.2007 31.12.2006
Cash flows from operating activities
Net income 71 532 406 70 955 624
Depreciation of property, plant and equipment 23 860 68 002
Reversal of value adjustments on loans - (283 936)
Value adjustments on available-for-sale nancial assets 2 434 709 -
Changes in fair value of nancial assets at fair value through pro t or loss (4 172 775) (10 734 921)
Changes in fair value of nancial assets held for trading 217 415 417 316
Net gains on disposal of available-for-sale nancial assets (39 972 414) (46 317 957)
Net gains on disposal of nancial assets at fair value through pro t or loss (16 392 184) -
Other 3 074 354 2 516 570
Operating cash flow 16 745 371 16 620 698
Changes in working capital
Net disposals of nancial assets held for trading 3 300 221 2 929 747
Other changes in working capital requirements (5 861 308) 9 527 046
CASH FLOWS FROM OPERATING ACTIVITIES 14 184 284 29 077 491
Cash flows from investing activities
Acquisitions of property, plant and equipment (53 607) (9 166)
Investments in available-for-sale nancial assets (116 506 865) (80 379 503)
Investments in nancial assets at fair value through pro t or loss (22 000 707) (23 679 125)
New loans and receivables (2 075 376) (1 808 958)
Proceeds from disposals of available-for-sale nancial assets 115 454 796 79 521 313
Proceeds from disposals of nancial assets at fair value through pro t or loss 39 211 463 3 122 644
Repayments of loans and receivables 3 012 857 365 000
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES 17 042 561 (22 867 795)
Cash flows from nancing activities
Repurchase of own shares (3 599 563) (2 442 112)
Dividends paid (14 174 361) (9 511 784)
CASH FLOWS USED IN FINANCING ACTIVITIES (17 773 924) (11 953 896)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 13 452 921 (5 744 200)
Cash and cash equivalents at beginning of year 45 311 565 51 055 765
Cash and cash equivalents at end of year 58 764 486 45 311 565
Additional information
Taxes paid on income for the period - -
Interest paid - (21 605)
The accompanying notes form an integral part of the consolidated nancial statements. Financial Information / 55
| Statement of changes in consolidated shareholders’ equity for the year ended 31 December 2007 |
In EUR Issued share Own shares Reserves Revaluation Undistributed income Total capital reserve on shareholders’ Legal reserve Other available- equity Retained Net income reserves for-sale earnings nancial assets
At 1.1.2006 119 333 025 (499 250) 1 262 684 154 502 685 82 900 633 30 220 164 41 794 415 429 514 356 Dividends and appropriation of 10 670 619 7 003 384 14 608 628 (41 794 415) (9 511 784) 2005 net income Changes in (2 442 112) (2 442 112) own shares Changes in fair value of available- for-sale nancial 13 288 017 13 288 017 assets, net of deferred taxes Total income and expenses 13 288 017 recognised directly in equity Net income 70 955 624 70 955 624 Total 84 243 641
At 31.12.2006 119 333 025 (2 941 362) 11 933 303 161 506 069 96 188 650 44 828 792 70 955 624 501 804 101
At 1.1.2007 119 333 025 (2 941 362) 11 933 303 161 506 069 96 188 650 44 828 792 70 955 624 501 804 101 Dividends and appropriation of 70 000 000 (13 218 737) (70 955 624) (14 174 361) 2006 net income Changes in (3 495 673) (3 495 673) own shares Changes in fair value of available- for-sale nancial 24 999 411 24 999 411 assets, net of deferred taxes Total income and expenses 24 999 411 recognised d irectly in equity Net income 71 532 406 71 532 406 Total 96 531 817
At 31.12.2007 119 333 025 (6 437 035) 11 933 303 231 506 069 121 188 061 31 610 055 71 532 406 580 665 884
The accompanying notes form an integral part of the consolidated nancial statements. 56 \ Financial Information
| Notes to the consolidated financial statements |
Note 1 - General The Company may also provide loans or guarantees to other companies in which it holds direct or indirect investments or BIP Investment Partners SA (“the Company”) is a public limited to companies in the same group, or assist such companies by company (société anonyme) incorporated as BGL Investment other means. Partners SA on 17 April 2000 under the Luxembourg law of 10 August 1915 (as amended) on commercial companies, The Company may also borrow, with or without guarantee or (the “Law”). The Company is listed on the Luxembourg stock collateral (in any form whatsoever, including via the issue of exchange under ISIN code LU0110790085. Its registered of ce convertible and non-convertible bond loans or any other type of is located at 1, rue des Coquelicots, L-1356 Luxembourg. debt instrument), on condition that the borrowings are used to further its corporate objects, or those of its subsidiaries, associ- The Company’s nancial year runs from 1 January to 31 ates or af liates. More generally, the Company may carry out December. any nancial, commercial or industrial activities that are likely to further its corporate objects. As in 2006, the Company is 25.8% owned by Fortis Banque Luxembourg SA, whose registered of ce is located at 50, avenue BIP Venture Partners SA, SICAR (the “SICAR”) is a public J.F. Kennedy, L-2951 Luxembourg. limited company (société anonyme) incorporated on 26 January 2006 for an unlimited period in accordance with the law of 15 The Company is accounted for by the equity method in the June 2004 concerning venture capital investment companies consolidated nancial statements of Fortis Banque Luxembourg (the “SICAR Law”). On 27 January 2006, the Company made SA. Copies of Fortis Banque Luxembourg SA’s consolidated an in-kind contribution of one of its existing investment portfolios nancial statements and management report are available at its to the SICAR. In consideration of this contribution, the SICAR registered of ce. increased its capital by an amount of EUR 22 293 000 through the issue of new shares with no par value. On 27 January The consolidated nancial statements of Fortis Banque 2006, the auditor of the SICAR issued a report on the non Luxembourg SA are consolidated by Fortis Banque SA, whose cash-based contributions made within the scope of this trans- registered of ce is located at 3, Montagne du Parc, B-1000 action. At 31 December 2007 and 31 December 2006, Brussels. Copies of Fortis Banque SA’s consolidated nancial the Company holds all of the SICAR’s share capital. statements and management report are available at its regis- tered of ce. The consolidated nancial statements of BIP Investment Partners SA were adopted by the Board of Directors on 1 February 2008 The Company’s objects are to acquire equity interests and and will be submitted to the General Meeting on 18 March 2008 investments, in any form whatsoever, in companies incorporated for approval and authorisation to issue. in Luxembourg or elsewhere; to buy, sell, exchange, or otherwise transfer shares, bonds, debt certi cates, commercial paper, derivatives and all other marketable securities or nancial instru- ments; and to administer, develop and manage its portfolio. Its object is also to identify innovative companies and companies with signi cant economic potential based in the Grand Duchy of Luxembourg or elsewhere. It may enter into partnerships with these companies, or any other interested parties, for the purpose of providing expertise and advice in the areas of nance, administration, organisation and management. Financial Information / 57
Note 2 - Accounting principles Intercompany transactions and balances, as well as the unre- alised gains, losses, revenues and expenses included in the Basis of preparation carrying value of assets related to internal Group transactions, The consolidated nancial statements of BIP Investment are eliminated in full on consolidation. Partners SA and its subsidiary, BIP Venture Partners SA, SICAR (“the Group”), have been prepared in accordance with the The subsidiary is consolidated from the acquisition date, which historical cost principle, with the exception of available-for-sale corresponds to the date on which the Company acquired nancial assets, nancial assets at fair value through pro t or control, through to the date on which it relinquishes control. loss and derivative instruments, which have been measured at fair value. The consolidated nancial statements are presented The Group has elected to use the exemption available to venture in euros (EUR). capital organizations under IAS 28 and does not apply the equity accounting method to investments in companies over which it The Group’s consolidated nancial statements have been has signi cant in uence. IAS 28 requires such investments to prepared under International Financial Reporting Standards be measured at fair value through pro t or loss by designat- (“IFRS”) as adopted for use by the European Union. ing them upon initial recognition as nancial assets at fair value through pro t or loss. The Group’s consolidated nancial statements at 31 December 2006 were the rst it prepared under IFRS. The adjustments The Group’s consolidated nancial statements comprise the resulting from the transition from Luxembourg GAAP to IFRS are accounts of the Company and its wholly-owned subsidiary, BIP recognised under equity in the opening IFRS balance sheet at Venture Partners SA, SICAR. At 31 December 2007 and 2006, 1 January 2005, in line with the rules on retrospective applica- the Company has exclusive control over its subsidiary, which is tion set out in IFRS 1. fully consolidated within its nancial statements.
The consolidated nancial statements comprise the nancial statements of both BIP Investment Partners SA and the SICAR. The nancial statements of the subsidiary are prepared under IFRS and cover the same reporting period as the Company, thereby ensuring consistent application of accounting policies.
Scope of consolidation and main changes during the period The scope of consolidation comprises the following companies:
Company Holding Note 31.12.2007 31.12.2006
BIP Investment Partners SA - - Parent company
BIP Venture Partners SA, SICAR 100 % 100 % Consolidated upon incorporation on 26 January 2006. 58 \ Financial Information
Changes in accounting policies Signi cant judgments, estimates and assumptions The accounting policies used to prepare the nancial statements Estimates at 31 December 2007 are consistent with those used in the In applying its accounting policies, the Group made an assump- previous nancial year. tion (as well as a number of estimates). This assumption has a material impact on the amounts reported in the nancial During the year, the Group adopted new standards, amend- statements and is discussed below. ments to existing standards and interpretations which did not have a material impact on its performance or nancial position. Financial assets designated at fair value through pro t or loss The Group has invested in unlisted securities and private equity The main impacts of these changes were as follows: funds. These assets are part of a group of nancial assets that is managed and its performance evaluated on a fair value basis IFRS 7 - Financial Instruments: Disclosures in accordance with a documented risk management strategy. Under IFRS 7, the notes to the nancial statements should Accordingly, these assets are presented at fair value through enable users to assess the signi cance of the Group’s nancial pro t or loss in accordance with the Fair Value Option provided instruments as well as the nature and extent of risks arising from for under IAS 39. such nancial instruments. Additional disclosures are included in the notes to the nancial statements. Use of estimates The preparation of nancial statements requires the use of IAS 1 - Presentation of Financial Statements estimates regarding future conditions that affect the reported This standard requires the Group to disclose additional informa- amounts of assets and liabilities, revenues and net income. tion allowing users of nancial statements to assess the Group’s Conditions and circumstances prevailing in the future may differ objectives, policies and processes for managing capital. These from those forecast. Estimates are prepared using available additional disclosures are included in note 23. information but inevitably involve a certain degree of judgment.
IFRIC 9 - Reassessment of Embedded Derivatives Set out below are the main estimates made in respect of future This interpretation stipulates that an embedded derivative exists events and other sources of uncertainty at the balance sheet from the date on which an entity rst becomes a party to the date. Any changes in these estimates during the nancial period contract. Subsequent reassessment is prohibited unless there may have a material impact on the reported amounts of assets is a change in the terms of the contract that signi cantly modi- and liabilities. es the cash ows. As the Group does not have any embedded derivatives that would require separation of the underlying host Fair value of nancial assets at fair value through pro t or loss contract, its nancial position is not affected by the application Financial assets designated at fair value through pro t or loss of IFRIC 9. upon initial recognition include direct private equity investments and investments in private equity funds. The Group has not opted for early application of certain new standards, amendments and interpretations that have been Direct private equity investments are recognised at fair value as published but which are only effective in subsequent accounting determined by the Board of Directors. Fair value is the amount periods. for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length IFRS 8 - Operating segments transaction. IFRS 8 is effective for accounting periods beginning on or after 1 January 2009 and introduces new disclosure requirements in relation to the Group’s operating segments. Financial Information / 59
When estimating the fair value of an investment, the Board of Signi cant accounting policies Directors uses valuation techniques that take account of the Foreign currency translation nature, conditions and circumstances of the investment, as well The consolidated nancial statements are presented in euros, as its importance within the total investment portfolio. Its valua- which is the functional currency of both the Company and its tions are based on reasonable assumptions and estimates. subsidiary. Transactions in foreign currencies are initially recorded in the functional currency at the exchange rate At 31 December 2007, the fair value of direct private equity prevailing at the date of the transaction. At the balance sheet investments in unlisted companies amounts to EUR 84 315 129 date, monetary assets and liabilities denominated in foreign cur- (EUR 92 490 905 at 31 December 2006). Further details are rencies are translated into the functional currency at the closing provided in note 18 “Financial assets at fair value through pro t rate. All exchange differences are recognised in pro t or loss. or loss”. Non-monetary items denominated in a foreign currency and measured at historical cost are translated using the exchange rate Investments in private equity funds are valued at the net asset at the initial transaction dates. Non-monetary foreign currency value reported by the fund managers, based either on the items measured at fair value are translated using the exchange fund’s own accounts or on non-accounting information such rates at the date on which the fair value was determined. as market prices or the fair values of other investment funds. In principle, the valuation is based on information provided by Property, plant and equipment the fund manager used to prepare the fund’s own accounts for Property, plant and equipment are stated at cost, less day-to- the quarter preceding the close of the Company’s consolidated day servicing costs, accumulated depreciation and impair- nancial statements. In exceptional circumstances, the Board of ment. They are depreciated on a straight-line basis over their Directors may adjust such valuations when it has other informa- useful lives. tion concerning the value of the fund due to its knowledge of the investments in question. Property, plant and equipment are derecognised on disposal or when future economic bene ts are no longer expected to be At 31 December 2007, the value of investments in private derived from their use or disposal. Any gains or losses arising equity funds amounts to EUR 39 611 885 (31 December 2006: from derecognition of property, plant and equipment (calculated EUR 30 917 744). as the difference between the net disposal proceeds and the carrying amount of the item) are taken to pro t or loss in the Further details are provided in note 18 “Financial assets at fair period in which the asset is derecognised. value through pro t or loss”.
Deferred tax assets Deferred tax assets are recognised in respect of tax loss carry- forwards when it is likely that the Group will be able to offset such tax losses against future taxable pro t. To calculate the amount of deferred tax assets to be recognised, management has to esti- mate the amount of taxable pro t that will be available in future years based on its tax planning strategy. At 31 December 2007, the book value of recognised deferred tax assets amounts to EUR 2 774 012 (31 December 2006: EUR 6 218 640). Further details are provided in note 12. 60 \ Financial Information
Investments and other nancial assets When a contract includes one or more embedded derivatives, Financial assets included within the scope of IAS 39 are the hybrid contract taken as a whole may be designated as classi ed as either at fair value through pro t or loss upon initial a nancial asset through pro t or loss, unless the embedded recognition, held-for-trading, available-for-sale, held-to-maturity derivative does not cause the cash ows to vary in a signi cant investments or as loans and receivables. Upon initial recognition, way or it is clearly stated that the separation of the embedded nancial assets are measured at their fair value, plus directly derivative is prohibited. attributable transaction costs for investments not measured at fair value through pro t or loss. The Group analyses whether At 31 December 2007 and 31 December 2006, this category any derivatives are embedded in the contracts and these are includes only listed securities. separated from the host contract if the contract as a whole is not accounted for at fair value through pro t or loss, and if the Financial assets designated at fair value through pro t or loss economic characteristics and risks of the embedded derivative upon initial recognition are not closely related to the economic characteristics and risks Financial assets may be designated at fair value through pro t of the host contract. or loss upon initial recognition if one of the following criteria is met: The Group classi es its nancial assets upon initial recognition, and reviews this classi cation at each balance sheet date as and - the use of the fair value option eliminates or signi cantly reduces when appropriate. a measurement or recognition inconsistency (accounting mis- match) that would otherwise arise from measuring assets or All “regular way” purchases and sales of nancial assets are liabilities and the related gains and losses on different bases recognised at the trade date, which corresponds to the date on which the Group undertakes to purchase the asset. A “regular - the assets belong to a group of nancial assets that is way” purchase or sale is a purchase or sale of a nancial asset managed and evaluated on a fair value basis in accordance under a contract whose terms require delivery of the asset within with a documented risk management strategy the timeframe established generally by regulation or convention in the marketplace concerned. - the nancial asset contains an embedded derivative that must be accounted for separately. Financial assets at fair value through pro t or loss Financial assets at fair value through pro t or loss comprise both Financial assets designated at fair value through pro t or loss held-for-trading nancial assets and nancial assets designated upon initial recognition include direct private equity investments upon initial recognition as at fair value through pro t or loss. and investments in private equity funds. Investments in com- panies that were originally unlisted but subsequently obtained Financial assets held for trading a stock market listing continue to be classi ed as nancial Financial assets are classi ed as held for trading if they are assets designated at fair value through pro t or loss upon initial acquired principally for the purpose of selling them in the near recognition. term. Derivatives, including embedded derivatives recognised separately from the host contract, are also included in this category, with the exception of designated and effective hedging derivatives and nancial guarantee contracts. Financial Information / 61
Direct private equity investments in unlisted securities are Barring exceptional circumstances, investments in unlisted measured at fair value as determined by the Board of Directors. securities are generally reviewed at 30 June and 31 December Fair value is the amount for which an asset could be exchanged, each year. or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Investments in companies that were originally unlisted but subsequently obtained a stock market listing are measured at When estimating the fair value of an investment, the Board fair value. Fair value is determined using the same methods as of Directors uses valuation techniques that take account of for available-for-sale nancial assets. the nature, conditions and circumstances of the investment, as well as its importance within the total investment portfolio. Investments in private equity funds are valued at the net asset Its valuations are based on reasonable assumptions and value reported by the fund managers, based either on the estimates. fund’s own accounts or on non-accounting information such as market prices or the fair values of other investment funds. When a transaction takes place for a material amount in the In principle, the valuation is based on information provided shares of the investee company, thus setting a benchmark price by the fund manager used to prepare the fund’s own accounts under normal market conditions, this transaction may be used for the quarter preceding the close of the Company’s consoli- as a basis for valuing the investment. dated nancial statements.
In other cases, the Board applies generally recognized valua- In exceptional circumstances, the Board of Directors may adjust tion techniques. These include multiples of earnings and cash such valuations when it has other information concerning the ows for comparable listed companies – or multiples resulting value of the fund due to its knowledge of the investments in from known transactions in the shares of other comparable question. In the case of investments made in funds over the companies – which are then applied to the investee’s earnings 12 months preceding the balance sheet date, unrealised or cash ows; and methods based on the investee’s net assets, capital losses attributable solely to administrative and manage- the present value of future cash ows from the investee’s opera- ment expenses are not taken into account during this period for tions or the future cash ows expected from the investment, with these recently created funds. due allowance for a lack of liquidity. They may also include any other valuation technique used at the time of the initial invest- ment. Other factors may also be taken into account where necessary, such as the near-term prospects for selling the investee’s shares or for another signi cant transaction in these shares. 62 \ Financial Information
Available-for-sale nancial assets Gains and losses are recognised in pro t or loss when these Available-for-sale nancial assets are non-derivative nan- investments are derecognised or impaired, using the amortised cial assets that are designated as available for sale or are not cost method. classi ed in any of the three preceding categories. After initial recognition, available-for sale nancial assets are measured at The Group had no nancial assets classi ed as held- fair value, with the related gains and losses due to changes in to-maturity investments at either 31 December 2007 or 31 the fair value recognised directly in equity in a special reserve December 2006. account. When the Group disposes of an available-for-sale nan- cial asset, the cumulative gain or loss previously recognised in Loans and receivables equity is transferred to pro t or loss. Dividends received on these Loans and receivables are nancial assets with xed or deter- investments are recognised in pro t or loss under “Dividends minable payments that are not quoted in an active market. and other income on available-for-sale nancial assets” as soon After initial recognition, loans and receivables are measured at as the Group’s right to receive payment has been established. amortised cost using the effective interest rate method, less any reduction for impairment. Amortised cost takes account of any Available-for-sale nancial assets include the Company’s invest- initial premium or discount and includes the commissions that ments in listed companies. are an integral part of the effective interest rate, and transaction costs. Available-for-sale nancial assets are measured at fair value. The fair value of available-for-sale nancial assets which are actively Gains and losses are recognised in pro t or loss when loans and traded on organised nancial markets is based on the market- receivables are derecognised or impaired, based on the amor- close bid price for listed securities at the balance sheet date. tised cost method.
Impairment losses are recognised in pro t or loss if there are Impairment of nancial assets indications at the balance sheet date that the assets may be At each balance sheet date, the Group assesses whether there is impaired. For listed investments, impairment is based on a any objective evidence that a nancial asset or group of nancial series of indicators, including a signi cant or prolonged decline assets is impaired. in market price. The amount of impairment is calculated based on the asset’s recoverable value. Assets recognised at amortised cost If there is objective evidence that loans and receivables Held-to-maturity investments carried at amortised cost are impaired, the amount of the impair- Held-to-maturity investments are nancial assets with xed ment loss is measured as the difference between the asset’s or determinable payments and xed maturity that the Group carrying amount and the present value of estimated future has the positive intention and ability to hold to maturity. After cash ows, discounted at the original effective interest rate. initial recognition, held-to-maturity investments are measured at The carrying amount of the asset is reduced by means of an amortised cost. Amortised cost is the amount at which the nan- allowance account, and the impairment loss is recognised in cial asset is measured at initial recognition, minus any principal pro t or loss. repayments and reduction for impairment, and plus or minus the cumulative amortisation (calculated under the effective interest rate method) of the difference between that initial amount and the maturity amount. The calculation includes all fees and points paid or received between parties to the contract that are an inte- gral part of the effective interest rate, plus transaction costs and any other premiums or discounts. Financial Information / 63
If in a subsequent period the amount of the impairment loss When the Group transfers its rights to receive cash ows from decreases and the decrease can be related objectively to an the nancial asset but neither transfers nor retains substantially event occurring after the impairment was recognised, the all the risks and rewards of ownership of the nancial asset, nor previously recognised impairment loss shall be reversed. The transfers control of the nancial asset, it continues to recognise amount of the reversal is recognised in pro t or loss; however, the nancial asset to the extent of its continuing involvement. the reversal may not result in a carrying amount for the nancial When the entity’s continuing involvement takes the form of asset that exceeds what the amortised cost would have been guaranteeing the transferred asset, the extent of the entity’s had the impairment not been recognised. continuing involvement is measured at the lower of the original carrying value of the asset and the maximum amount that the Available-for-sale nancial assets entity could be required to repay. If an available-for-sale nancial asset is impaired, an amount calculated as the difference between the acquisition cost (net When the entity’s continuing involvement takes the form of a of any principal repayment and amortisation) and current fair written or purchased option (or both) on the transferred asset value, less any impairment loss on that nancial asset previously (including a cash-settled option or similar provisions), the extent recognised in pro t or loss, is transferred from equity to pro t or of the Group’s continuing involvement is the amount of the trans- loss. Impairment losses recognised on equity instruments may ferred asset that the entity may repurchase, except in the case not be reversed through pro t or loss. Impairment losses taken of a written put option (including a cash-settled option or similar on debt instruments may be reversed through pro t or loss if provisions) on an asset that is measured at fair value, where the subsequent increase in fair value of the instrument can be the extent of the entity’s continuing involvement is limited to the related objectively to an event occurring after the impairment lower of the fair value of the transferred asset and the option was recognised in pro t or loss. exercise price.
Derecognition of nancial assets and liabilities Financial liabilities Financial assets A nancial liability is derecognised when the obligation related to A nancial asset (or a part of a nancial asset or a part of a group the liability is discharged or cancelled or expires. of similar nancial assets, if applicable) is derecognised when: Own shares - the contractual rights to the cash ows from the nancial asset In the event that the Group purchases its own equity instruments have expired (own shares), these are deducted from shareholder’s equity. If it purchases, sells, issues or cancels its own equity instruments, - the Group retains its contractual rights to receive cash ows no gain or loss is recognised in the pro t and loss account. from the nancial asset, but assumes a contractual obligation to pass on the cash ows to a third party without delay (“pass Up to 31 December 2006, the Group’s employees, including through arrangements”) its corporate of cers and the members of the Board of Directors, received part of their remuneration in the form of the - the Group transfers its rights to receive cash ows from the Company’s own shares. Since 1 January 2007, employees have nancial asset and either transfers substantially all the risks been awarded stock options under the Company’s new stock and rewards of ownership of the nancial asset, or neither option plan. transfers nor retains substantially all the risks and rewards of ownership of the nancial asset, but transfers control of the nancial asset. 64 \ Financial Information
These transactions do not give rise to the issue of new shares Revenue recognition as the Company systematically buys back the required number Revenues are recognised when it is probable that future of shares on the stock market. When these shares are awarded economic bene ts will ow to the Group and that these can be to the Group’s employees, the cost represented by the market reliably estimated. Revenues are measured at the fair value of value of the shares is recognised in staff costs in the consoli- the consideration received. Speci c criteria are used to deter- dated pro t and loss account. mine whether revenues may be recognised.
Cash and cash equivalents Interest income Cash and cash equivalents carried in the balance sheet include Interest income is recognised for the amount that has been cash at bank and short-term deposits for an initial term of three accrued based on the effective interest rate method. The effec- months or less. tive interest rate is the rate that exactly discounts estimated future cash ows to the net carrying amount of the nancial asset. For the purpose of drawing up the consolidated cash ow statement, cash and cash equivalents include cash and cash Dividends equivalents as de ned above, less current bank overdraft Dividend income is recognised when the Group’s right to receive facilities. payment is established.
Provisions Net income on nancial assets at fair value through pro t or The Group recognises a provision when it has a present obliga- loss tion (legal or constructive) as a result of a past event; it is prob- Net income on nancial assets at fair value through pro t or able that an out ow of resources embodying economic bene ts loss includes dividends, income on disposals and changes in will be required to settle the obligation; and a reliable estimate unrealised income on nancial assets at fair value through pro t can be made of the amount of the obligation. The amount of the or loss. expense relating to the provision is recognised in the pro t and loss account net of any reimbursement. Where the effect of the Net income on nancial assets held for trading time value of money is material, the provisions are discounted Net income on nancial assets held for trading includes divi- using a pre-tax discount rate that re ects those risks speci c dends, income on disposals and changes in unrealised income to the liability. When discounting is used, the increase in the on nancial assets held for trading. provision due to the passage of time is recognised as an interest expense.
Pensions and other post-employment bene ts Premiums paid to the insurance company within the scope of a de ned contribution supplementary pension plan for Company employees are recognised in the consolidated pro t and loss account in the period to which they relate. Financial Information / 65
Employee stock option plan Deferred income tax The Company has set up an employee stock option plan which Deferred taxes are calculated using the balance sheet liability uses an equity-settled formula only. Options under the plan vest method for all temporary differences existing between the tax as soon as they have been granted. base and carrying value of assets and liabilities at the balance sheet date. The cost of the stock options is measured at the fair value of the instruments awarded at the grant date. Fair value is determined Deferred tax liabilities are recognised in respect of all taxable using an appropriate valuation model. Further details are pro- temporary differences. vided in note 10. Deferred tax assets are recognised in respect of all deductible The cost of the stock options is recognised in staff costs at the temporary differences, tax loss carryforwards and unused tax grant date, along with a matching entry to record the corre- credits to the extent that it is probable that taxable pro t will sponding increase in shareholders’ equity. be available against which the deductible temporary differences, The dilutive effect on shares issued and outstanding is re ected tax loss carryforwards and unused tax credits can be utilised. in the diluted earnings per share calculation. Further details are provided in note 13. The carrying value of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that future taxable Taxes pro t is no longer likely to be available against which part or all Current income tax of the deferred tax asset can be utilised. Unrecognised deferred Tax assets and liabilities due for current and prior nancial years tax assets are assessed at each balance sheet date and recog- are estimated at the amount that the Group expects to recover nised in the accounts whenever it is probable that taxable pro t from or settle with the taxation authorities. The tax rate and tax will be available against which they can be utilised. laws applied to determine these amounts are those that have been enacted or substantively enacted at the balance sheet Deferred tax assets and liabilities are calculated at the tax rates date. that are expected to apply to the period when the asset is real- ised or the liability is settled, based on tax rates (and tax laws) Taxes due on items recognised directly in equity are also recog- that have been enacted or substantively enacted at the balance nised directly in equity and not in pro t or loss. sheet date. 66 \ Financial Information
Deferred taxes relating to items recognised directly in equity are At the inception of the hedge there is formal designation and also recognised directly in equity and not in pro t or loss. documentation of the hedging relationship and the Group’s risk management objective and strategy for undertaking the hedge. Deferred tax assets and liabilities are offset if there is a legally That documentation includes identi cation of the hedging enforceable right to set off current tax assets against current tax instrument, the hedged item(s) or transaction(s), the nature of liabilities; and if they relate to income taxes levied by the same the risk being hedged and how the entity will assess the hedging taxation authority on the same entity. instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash ows attributable to the Derivative instruments and hedge accounting hedged risk. The Group expects the hedge to be highly effective The Group uses derivatives such as forward currency contracts in offsetting changes in fair value or cash ows attributable to the and options to hedge against uctuations in foreign currencies hedged risk. The hedge is assessed on an ongoing basis in order and market prices. These derivatives are initially recognised at to demonstrate that it has been highly effective throughout the fair value upon inception of the contract and are subsequently nancial reporting periods for which the hedge was designated. remeasured to fair value. They are recognised as assets when their fair value is positive and as liabilities when their fair value Fair value hedges is negative. Hedging instruments meeting the strict hedge accounting criteria are accounted for as follows: Any gains or losses arising from changes in fair value of deriva- tives that do not qualify as hedging instruments are recognised Changes in the fair value of a derivative that quali es as a fair directly in pro t or loss. value hedge are recognised in pro t or loss. Changes in the fair value of the item hedged that are attributable to the hedged The fair value of forward currency contracts is calculated based risk adjust the carrying amount of the hedged item and are also on current rates for contracts with similar maturities. recognised in pro t or loss.
For accounting purposes, hedges can be classi ed as one of At 31 December 2007 and 31 December 2006, the Company three types: had no designated cash ow hedges.
- as fair value hedges when they hedge the exposure to changes Note 3 - Segment reporting in fair value of a recognised asset or liability, or a rm commit- The Group’s business activity is concentrated in a single market ment (except for foreign currency risk) segment and conducted mostly in Europe. - as cash ow hedges when they hedge the exposure to variability in cash ows that is attributable to a particular risk associated with a recognised asset or liability, a highly probable forecast transaction, or a foreign currency risk in relation to a rm commitment
- as hedges of a net investment in a foreign operation.
Financial Information / 67
Note 4 - Financial risk management Market risk and investment policy Introduction The Group’s exposure to market risk is directly related to its investment activity and the composition of its investment In the conduct of its investment activities, the Group and its portfolio. At 31 December 2007, over 67% of its net assets are assets are exposed to different nancial risks, and in parti cular composed of investments in listed companies (31 December market risk. The Group has developed an investment and risk 2006: 66%). These investments are measured at their market management policy adapted to its business. There were no price at the balance sheet date. For investments in unlisted material changes in the Group’s exposure to nancial risks or in securities, fair value is measured on the basis of earnings its risk management policy in 2007. multiples for comparable listed companies. The price and timing Risk management framework of the sale of investments in unlisted companies may be partially in uenced by market conditions, particularly in the case of a Although the Board of Directors has ultimate responsibility for stock market listing. risk management, other management bodies are also involved in managing and monitoring risks. The Group strives to maintain a diversi ed portfolio by investing in several different types of assets. Board of Directors The Board of Directors is responsible for developing a risk It focuses a signi cant amount of its investing activity on listed management approach and for validating the overall risk companies – mostly large-caps listed on major stock exchanges management strategy. able to generate stable revenue streams and dividends for the Group. Audit Committee The Audit Committee oversees the risk management process. In its direct private equity investment dealings the Group seeks
to realise handsome capital gains upon exit. These invest- Internal Audit ments involve certain inherent risks such as the risk that the Since 1 January 2007, an external rm of auditors has been investments are not realisable in the short term or the risk of tasked with internal audit engagements covering the risk uncertainty as to whether targets will be met. management process, the appropriateness of procedures within the Group and compliance with these procedures. The Internal Audit department discusses the ndings with Group manage- ment and reports back to the Audit Committee. 68 \ Financial Information
The Group’s investments in private equity funds are highly Sensitivity of shareholders’ equity and d i v e r s i e d . earnings to equity market risk
Investments by type, as a percentage of net assets: The value of the Group’s investments in listed securities uctu- ates in line with movements in the major European stock markets 31.12.2007 31.12.2006 (including Luxembourg) on which they are traded. The value of listed securities may even uctuate more than movements in stock market indices due to the high degree of concentration in Investments in listed the portfolio and the signi cant volatility of certain securities. 67.4% 65.6% companies Direct private equity Changes in the value of available-for-sale nancial assets have a 15.1% 18.4% investments direct impact on equity except when impairment is recognised Investments in private directly in pro t or loss. 6.8% 6.2% equity funds Other net assets 10.7% 9.8% The value of private equity investments may uctuate in line with stock market indices insofar as valuation multiples of compara- Total 100% 100% ble listed companies are used to measure these investments. Fluctuations in the value of these investments impact both The Group has also spread its investments over several different Group earnings and equity. economic sectors. Investments in securities listed on the Luxembourg stock The Group takes care to ensure that no single investment exchange and included in this stock market index represent accounts for more than 15% of its total net assets. Although approximately 40% of the Company’s equity. Five-year historical this threshold may be exceeded in certain exceptional circum- data on monthly movements in the Luxembourg stock market stances, this did not happen in either 2006 or 2007. index and in estimated fair value per share published monthly by the Company shows a correlation of 0.6. Estimated fair value Percentage of net assets represented by the Group’s largest per share is equal to shareholders’ equity divided by the number investments: of shares outstanding.
31.12.2007 31.12.2006 Liquidity risk and investment nancing policy At 31 December 2007, the Group had no debt. It holds signi - cant cash balances that can vary over time. Total ve largest 51.7% 54.2% investments Direct private equity investments may be nanced by the debt Total ten largest 66.9% 71.2% acquired on the investee’s balance sheet. Similarly, certain investments companies in the private equity investment portfolio may use debt to nance part of their business activities. The Group uses derivative instruments such as equity options, mainly for the purpose of hedging its assets.
Daily trading volumes in listed securities in which the Group has invested may in some cases be lower than the position held by the Group. Financial Information / 69
Credit risk Exchange rate risk In the course of its business, the Group grants loans to The Group has limited exchange rate exposure since most of its private companies in which it has invested or plans to invest assets are denominated in euros. At 31 December 2007, only in the future. At 31 December 2007 and 31 December 2006, about 17% of assets were exposed to exchange rate risk before loans and receivables amounted to EUR 2 817 342 and taking into account the impact of hedging, and this threshold EUR 3 806 553 respectively, representing only a small portion of was not exceeded during 2007 or 2006. Exchange rate expo- the Group’s total assets. sure arises mainly in relation to the US dollar and Brazilian real. BIP may occasionally hedge all or part of its foreign currency The Group also acts as guarantor for companies in which it has assets against exchange rate risk. invested or pledges these companies’ shares to their creditors. The amounts of these commitments are detailed in note 28. In deciding whether to invest, the Group also takes account of such additional commitments. However, it never commits to becom- ing a companies’ sole nancial backer until the company con- cerned reaches breakeven.
Currency 2007 2006
Assets Liabilities Assets Liabilities
EUR 83% 100% 84% 100%
USD 11% - 13% -
Other 6% - 3% -
100% 100% 100% 100%
Interest rate risk BIP has limited interest-rate exposure as the Group has no debt and assets exposed to interest rate risk account for less than 1% of total assets.
Note 5 - Dividends and other income on available-for-sale nancial assets This heading comprises the following items:
2007 2006 in EUR in EUR
Dividends 10 619 468 11 861 004
Other 1 221 898 761 559
11 841 366 12 622 563 70 \ Financial Information
Note 6 - Net income on nancial assets Note 8 - Other interest and similar income at fair value through pro t or loss This heading comprises the following items: This heading comprises the following items: 2007 2006 in EUR in EUR 2007 2006 in EUR in EUR
Interest on loans 146 295 198 323 and receivables Realised capital gains 16 392 184 Interest on cash at bank 2 121 742 1 145 212 Changes in unrealised 7 201 380 10 734 921 capital gains and losses Unrealised capital gains on hedging transactions 529 034 - Other income 443 845 2 027 082 not eligible for hedge accounting under IAS 39
Total 24 037 409 12 762 003 Total 2 797 071 1 343 535
Note 7 - Net income on nancial assets Note 9 - Other external expenses held for trading Other external expenses include supplies, consulting services and other external services, as well as directors’ fees. Directors’ This heading comprises the following items: fees amounted to EUR 262 333 in 2007 (2006: EUR 135 000) and are paid in the form of Company shares after deduction 2007 2006 of tax. in EUR in EUR Directors’ fees payable by the Company to certain directors in respect of their role representing the Company on the Boards Realised capital gains and losses and changes of investees amounted to EUR 7 000 (2006: EUR 3 500). Fees 3 749 802 3 293 115 in unrealised capital gains received in this respect, which amounted to EUR 41 250 in and losses 2007 (2006: EUR 26 320), are paid in full to the Company and Other income 453 219 788 086 reported in “Net income on nancial assets at fair value through pro t or loss”. This heading includes an amount of EUR 60 000 (2006: EUR 75 000) paid to a director for consulting, research Total 4 203 021 4 081 201 and other services. Financial Information / 71
Note 10 - Staff costs In March 2007, the Board of Directors awarded 7 500 BIP stock options at an exercise price of EUR 80.825 per BIP share. This heading comprises the following items: Details of the stock option plan are as follows: 2007 2006 in EUR in EUR Number of stock options awarded at 31 December 2007 7 500 Exercise price per share EUR 80.825 Salaries and wages 1 577 920 1 118 105 Exercise period March 2010 - March 2014 Social security 69 644 66 484 Share price at grant date EUR 85.75 Dividend yield 3.00% Supplementary pension plans and other insurance 43 298 46 356 Historical volatility 13.091% premiums Interest rate 3.913% Employee stock 103 890 - option plan The Black-Scholes model was used to calculate the fair value of the stock options using the parameters set out above.
Total 1 794 752 1 230 945 Movements in the number of options awarded over the period were as follows: A portion of salaries and wages are paid in the form of the Company’s own shares. Stock options at 1 January 2007 - Stock options awarded during the year 7 500 Supplementary pension plan Stock options at 31 December 2007 7 500 The Company has set up a supplementary pension plan for its employees. This de ned contribution plan is managed by Fortis The total cost of the stock option plan to the Company for the Luxembourg – Vie SA. The total cost to the Company consists of year ended 31 December 2007 amounted to EUR 103 890 the premiums paid to the insurance company managing the plan (2006: zero). assets built up over time through paid-in premiums.
Employee stock option plan Note 11 - Interest and similar expenses The Company has set up a stock option plan for certain This heading comprises interest charged on bank overdrafts, employees. bank charges and foreign exchange losses.
Under the terms of this plan, grantees are entitled to subscribe to BIP shares at an exercise price calculated by reference to the average closing price for the shares over the rst ten trading days of the month preceding the one in which the options are granted. 72 \ Financial Information
Note 12 - Taxation Income tax The tax charge for the nancial years ended 31 December 2007 and 31 December 2006 can be broken down as follows:
2007 2006 in EUR in EUR
Income tax as per the consolidated pro t and loss account (3 447 768) (2 516 570)
Current tax - -
Deferred tax (3 447 768) (2 516 570)
Tax charge recorded in the consolidated pro t and loss account (3 447 768) (2 516 570)
Reconciliation of tax charge
Income before tax 74 980 175 73 472 194
Applicable tax rate 29,63% 29,63% Theoretical income tax, calculated (22 216 626) (21 769 811) on a xed-percentage basis at the applicable tax rate
Less adjustments for tax-exempt revenues less non-deductible expenses 18 768 858 19 253 241
Adjustments to income tax 18 768 858 19 253 241
Income tax (3 447 768) (2 516 570)
The Group is liable for all taxes applicable to fully taxable companies in Luxembourg.
At 31 December 2007 and 31 December 2006, the Group did not record any current income tax liability for income taxes due to the utilisation of tax loss carryforwards and the application of the tax treatment exempting signi cant equity holdings from income tax, as provided for under Article 166 of the legislation governing Luxembourg income tax (LIR) and the Grand Ducal regulation dated 21 December 2001.
Tax assets and liabilities. In EUR 31.12.2007 31.12.2006
Deferred tax assets 2 774 012 6 218 640
Deferred tax liabilities 6 042 821 6 625 859 Current tax liabilities - Wealth tax - 1 058 144 Financial Information / 73
Deferred tax assets can be broken down as follows:
In EUR At Through pro t In equity At 1.1.2007 or loss 31.12.2007
Tax loss carryforwards 6 218 640 (3 444 628) - 2 774 012
Deferred tax assets 6 218 640 (3 444 628) - 2 774 012
In EUR At Through pro t In equity At 1.1.2006 or loss 31.12.2006
Tax loss carryforwards 8 400 000 (2 181 360) - 6 218 640
Deferred tax assets 8 400 000 (2 181 360) - 6 218 640
The deferred tax assets are attributable to tax loss carryforwards which amount to approximately EUR 9 million at 31 December 2007 (EUR 21 million at 31 December 2006).
At 31 December 2007 and 31 December 2006, deferred tax assets had been recognised on all tax loss carryforwards.
Deferred tax liabilities can be broken down as follows:
In EUR At Through pro t In equity At 1.1.2007 or loss 31.12.2007
Financial assets held for trading 149 039 32 560 - 181 599
Financial assets at fair value through pro t or loss 186 172 (29 419) - 156 753
Available-for-sale nancial assets 6 290 648 - (586 179) 5 704 469
Deferred tax liabilities 6 625 859 3 141 (586 179) 6 042 821
At Through pro t In equity At In EUR 1.1.2006 or loss 31.12.2006
Financial assets held for trading - 149 039 - 149 039
Financial assets at fair value through pro t or loss - 186 172 - 186 172
Available-for-sale nancial assets - - 6 290 648 6 290 648
Deferred tax liabilities - 335 211 6 290 648 6 625 859 74 \ Financial Information
Other taxes Note 14 - Dividends paid Wealth tax included in other taxes amounted to EUR 257 820 in and recommended 2007 (2006: EUR 350 000).
Note 13 - Basic and diluted earnings per 2007 2006 share Basic earnings per share are calculated by dividing net income attributable to the Company’s shareholders by the weighted Approved and paid during the year: average number of shares outstanding during the period. Final dividend for 2006: EUR 3.00 14 174 361 9 511 784 Diluted earnings per share are calculated by dividing net income (2005: EUR 2.00) attributable to the Company’s shareholders by the weighted average number of shares outstanding during the period plus Dividend to be recommended at the AGM the number of shares underlying in-the-money options awarded (not recognised in liabilities at 31 December) by the employee stock option plan. Dividends on shares for 2007: EUR 3.40 16 229 291 14 319 963 The following table shows the information used to calculate (2006: EUR 3.00) basic and diluted earnings per share for all of the Group’s business activities:
31.12.2007 31.12.2006
Net income attributable to shareholders of the 71 532 406 70 955 624 parent company Weighted average number of shares (excluding own shares) included 4 717 091 4 749 766 in the calculation of basic earnings per share Weighted average number of shares (excluding own shares) included 4 724 591 4 749 766 in the calculation of diluted earnings per share
Financial Information / 75
Note 15 - Property, plant and equipment Note 16 - Classi cation of nancial assets Changes in property, plant and equipment were as follows: Financial assets are classi ed as either available-for-sale, at fair value through pro t or loss, loans and receivables or held-for- In EUR 31.12.2007 31.12.2006 trading. They can be broken down as follows:
Carrying amount (in EUR) 31.12.2007 31.12.2006 Acquisition cost 617 155 626 321 at 1 January Available-for-sale nancial Additions during the year 53 607 9 166 381 533 086 318 498 578 assets Acquisition cost 679 928 626 321 Financial assets at fair at 31 December 126 762 852 123 408 649 value through pro t or loss Accumulated depreciation and impairment (577 918) (509 916) Loans and receivables 2 817 342 3 806 553 at 1 January Financial assets held 7 190 500 10 708 136 Depreciation expense for trading (23 860) (68 002) for the year Accumulated depreciation and impairment (601 778) (577 918) Total 518 303 780 456 421 916 at 31 December
Net carrying amount 78 150 48 403 at 31 December
Property, plant and equipment mostly comprise of ce equip- ment and xtures and ttings, and have a useful life of between three and ten years. 76 \ Financial Information
Note 17 - Available-for-sale nancial assets
In EUR 31.12.2007 31.12.2006 Net capital gains realised on disposals over the period amounted Carrying Carrying to EUR 39 972 414 (2006: EUR 46 317 957). This included an amount amount amount of EUR 19 075 711 (2006: EUR 19 533 156) booked within “Revaluation reserve on available-for-sale nancial assets” at the end of the previous year. Investments in listed 381 533 086 318 498 578 companies During 2007, the Group recognised against income an amount 381 533 086 318 498 578 of EUR 2 434 709 in impairment losses on available-for-sale nancial assets (2006: zero). At 31 December 2007, availa- ble-for-sale nancial assets against which impairment losses Movements within this category over the nancial year were as had been taken during the year or in prior years represented follows: an amount of EUR 174 673 885 (31 December 2006: EUR 158 494 460). Cumulative impairment losses totalled In EUR 2007 2006 EUR 51 595 287 at 31 December 2007 (EUR 51 288 489 at 31 December 2006). These impairment losses re ect the Board’s opinion that the fair value of the investments is likely At 1 January 318 498 578 251 775 266 to remain below their acquisition cost at the end of previous nancial periods for a prolonged period of time. Acquisitions 116 506 865 127 225 348
Disposals (75 482 381) (80 049 201) Unrealised capital gains 24 444 733 19 547 165 or losses Impairment losses (2 434 709) - recognised against income
At 31 December 381 533 086 318 498 578
Financial Information / 77
Note 18 - Financial assets at fair value through pro t or loss
In EUR 2007 2006 Net capital gains on disposals over the period amounted to EUR 16 392 184 (2006: zero), and were recognised in “Net income on nancial assets at fair value through pro t Direct private equity or loss” (see note 6). 84 315 129 92 490 905 investments Investments in 39 611 885 30 917 744 private equity funds Investments in 2 835 838 - isted companies 126 762 852 123 408 649
Movements within this category over the nancial year were as follows:
In EUR 2007 2006
At 1 January 123 408 649 92 595 232
Acquisitions 22 000 707 33 129 461
Disposals (22 819 279) (12 422 644) Unrealised capital gains 4 172 775 10 106 600 or losses
At 31 December 126 762 852 123 408 649 78 \ Financial Information
Note 19 - Loans and receivables
In EUR 2007 2006
Acquisition Value Carrying Acquisition Value Carrying cost adjustments amount cost adjustments amount
Due from investee companies 4 567 342 (1 750 000) 2 817 342 5 556 553 (1 750 000) 3 806 553
4 567 342 (1 750 000) 2 817 342 5 556 553 (1 750 000) 3 806 553
Loans and receivables have maturities of between 1 and 5 years. Reversals of value adjustments on loans and receivables was zero in 2007 (gains of EUR 283 936 in 2006).
Note 20 - Derivative instruments At 31 December 2007, derivative instruments used for hedging purposes by the Group were as follows:
In EUR Fair value Unrealised gains Maturity Notional amount or losses
Equity instruments 837 436 529 034 March-June 2008 75 600 000 - Share index options
Total 75 600 000
The share index options are used to hedge available-for-sale nancial assets. Unrealised income on these options is recognised in pro t or loss.
At 31 December 2006, derivative instruments used by the Group for hedging purposes were as follows:
In EUR Fair value Unrealised gains Maturity Notional amount or losses
Currency instruments 628 321 628 321 January 2007 43 846 154 Equity instruments 31 500 31 500 February-March 2007 6 200 000 - Equity options Total 50 046 154
Currency instruments were used to hedge a position in nancial assets at fair value through pro t or loss denominated in dollars. Financial Information / 79
Note 21 - Other receivables Note 23 - Issued share capital Other receivables fall due in less than one year. No impairment At 31 December 2007 and 31 December 2006, the Company’s loss had been taken against other receivables at 31 December share capital amounted to EUR 119 333 025, consisting of 2007 or 31 December 2006. This heading includes receivables 4 773 321 shares with no par value. on securities transactions pending settlement. For a ve-year period beginning on the date of publication of Note 22 - Cash and cash equivalents the extraordinary general meeting held on 23 February 2006, the Board of Directors may issue new shares to increase the Company’s issued share capital up to an amount of EUR 1 000 000 000. In EUR 2007 2006
Demand deposits 50 541 746 19 025 133
Short-term deposits 8 222 740 26 286 432
58 764 486 45 311 565
Cash at bank earns interest at variable rates indexed to the daily rates for bank demand deposit accounts. Short-term deposits are left on deposit for periods that vary between one day and three months, depending on the Group’s immediate cash requirements. They earn interest at the corresponding short-term deposit interest rate. The fair value of the cash and short-term deposits heading is EUR 58 764 486 (31 December 2006: EUR 45 311 565). 80 \ Financial Information
Note 24 - Own shares Other reserves “Other reserves” replaces the former revaluation reserve and At 31 December 2007, the Company owned 84 828 of its own own share reserve carried in the nancial statements prepared shares (48 534 at 31 December 2006). under Luxembourg GAAP. The revaluation reserve, as estab- lished by the extraordinary general meeting of 13 May 2003 for The Company’s trading activity in its own shares can be an amount of EUR 146 506 069, is not eligible under IFRS and analysed as follows: has therefore been reclassi ed under “Other reserves”. Similarly, 2007 2006 as IFRS does not provide for the recognition of an own share reserve (recognised under Luxembourg GAAP for an amount of EUR 15 000 000), this reserve was also transferred to “Other Number of own shares 48 534 16 999 reserves”. at 1 January
Acquisitions 39 205 34 965 Other reserves may not be distributed. Disposals (2 911) (3 430) Appropriation to reserves This reserve comprises income appropriated to reserves by the Number of own shares general shareholders’ meeting. 84 828 48 534 at 31 December Note 26 - Revaluation reserve on available-for-sale nancial assets Note 25 - Reserves This reserve covers unrealised gains and losses on available-for- This heading comprises the following: sale nancial assets net of deferred taxes, with the exception of impairment losses which are expensed directly to the pro t and In EUR 31.12.2007 31.12.2006 loss account.
Legal reserve 11 933 303 11 933 303
Other reserves 161 506 069 161 506 069
Appropriation to reserves 70 000 000 -
243 439 372 173 439 372
Legal reserve Luxembourg companies are required by law to transfer a minimum 5% of their annual net pro ts to the legal reserve until it reaches 10% of paid-up share capital. The transfer takes effect in the following nancial year. The legal reserve was raised to the required amount at the General Shareholders’ Meeting of 9 May 2006.
The legal reserve may not be distributed. Financial Information / 81
Note 27 - Other liabilities Note 29 - Securities lending This heading comprises items due in less than one year. The Group did not have any outstanding securities lending arrangements at 31 December 2007. Commission earned on Note 28 - Commitments received from and securities lending operations during 2007 totalled EUR 83 444. given to third parties At 31 December 2006, the Group had lent securities At 31 December 2007, securities classi ed under “ nancial totalling EUR 5 150 000 on which it earned commission assets at fair value through pro t or loss” carried in consolidated of EUR 106 854. assets for a total amount of EUR 13 160 000 (EUR 21 310 000 at 31 December 2006) were pledged as security to the banks of Note 30 - Litigation investee companies through 2014. The Company, together with Audiolux SA, Luxembourg, Investas At 31 December 2007, the Group had not provided guarantees Asbl., Luxembourg and other institutional and private minor- for any third parties. At 31 December 2006, the Group had ity shareholders of RTL Group SA are plaintiffs in several suits provided a total of EUR 1 000 000 in guarantees for investee brought before the Tribunal d’Arrondissement de Luxembourg companies classi ed as nancial assets at fair value through against Bertelsmann AG, Gütersloh, Groupe Bruxelles lambert pro t or loss. (“GBL”) SA, Brussels, RTL Group SA, Luxembourg, and certain directors of RTL Group. At 31 December 2007, uncalled commitments to private equity funds classi ed in nancial assets at fair value through pro t or loss in relation to additional investments amounted to EUR 37 533 418 (EUR 33 263 976 at 31 December 2006). 82 \ Financial Information
In February 2001, Bertelsmann agreed to acquire GBL’s interest Note 31 - Information concerning related in RTL Group in exchange for Bertelsmann shares, thus raising parties its own stake to approximately 67% and giving it effective control of RTL Group. Associated companies Related parties are associated companies over which the Group The plaintiffs are seeking the annulment of the agreement has signi cant in uence, either because it holds between 20% between GBL and Bertelsmann for the sale of RTL Group and 50% of the associate’s capital, or by virtue of agreements shares, and secondarily, compensation for the harm suffered by entered into with some of the associate’s other shareholders. minority shareholders due to Bertelsmann’s acquisition of con- As allowed by IAS 28, these investments are not accounted for trol over RTL Group. They are basing this claim on the principle by the equity method in the Group’s accounts but shown under of equal treatment of shareholders. The compensation sought is “Financial assets at fair value through pro t or loss”. to allow the plaintiffs to exchange their RTL Group shares at the same exchange ratio as that reserved for GBL, or failing that, to The Group’s transactions with associated companies at buy back their RTL Group shares at an equivalent price. 31 December 2007 and 31 December 2006 can be summa- rised as follows: The plaintiffs have also instituted legal proceedings against the same parties for the failure of RTL Group to abide by the under- In EUR 2007 2006 takings provided in its issuing prospectus for its admission to the London Stock Exchange. In the prospectus, RTL Group and the main shareholders represented on its Board of Directors Financial assets at fair value undertook to raise the free oat of its shares from approximately 5 411 698 21 960 325 through pro t or loss 10% to around 15%, in particular to allow for its inclusion in the London Stock Exchange’s leading market indices and in Loans and receivables 825 000 3 312 857 European and worldwide sector indices. This undertaking has Other receivables 44 912 136 036 not been ful lled and the free oat has actually declined. Guarantees given - 1 000 000 The plaintiffs led a third suit following RTL Group’s decision to apply for delisting from the London Stock Exchange. Transactions through pro t or loss with associated companies In a decision handed down on 12 July 2006, the Cour d’Appel de are as follows: Luxembourg rejected the plaintiffs’ claims on appeal. However, the Company, along with Audiolux, Investas and other minority In EUR 2007 2006 shareholders, have taken their case to the Cour de Cassation, Luxembourg’s highest court.
Net income on nancial assets held for trading 650 325 7 963 646
Other interest 63 372 195 669 and similar income Financial Information / 83
Shareholders Fortis Banque Luxembourg SA owns 25.8% of BIP’s capital and is deemed to be a related party.
Fortis Banque Luxembourg SA acts as custodian for most of the Group’s assets, including all portfolios of investments in listed companies; investments in unlisted securities made by the Group’s subsidiary, BIP Venture Partners SA, SICAR; and the Group’s cash at bank. In the course of its ongoing business activities, the Group frequently conducts transactions with Fortis Banque Luxembourg SA. These transactions are carried out under the same commercial terms and conditions as those applied by Fortis Banque Luxembourg SA in transactions with unrelated parties.
Board of Directors and corporate of cers The remuneration paid to the twelve members of the Board of Directors and to the three corporate of cers totalled EUR 1 349 010 in 2007 (2006: EUR 1 009 897). Corporate of cers received 6 000 stock options during the year.
Note 32 - Subsequent events IEE is a portfolio company classi ed within nancial assets at fair value through pro t and loss. In January 2008, IEE re nanced its debt and paid the Company an amount of EUR 5 873 865. The percentage interest in IEE remains unchanged. 84 \ Financial Information
Independent auditor’s report An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated annual To the Shareholders of BIP Investment Partners S.A.1, rue des accounts. The procedures selected depend on the judgement CoquelicotsL-1356 Luxembourg of the “Réviseur d’Entreprises”, including the assessment of the risks of material misstatement of the consolidated annual Report on the consolidated annual accounts accounts, whether due to fraud or error. In making those risk Following our appointment by the General Meeting of the assessments, the “Réviseur d’Entreprises” considers internal Shareholders, we have audited the accompanying consoli- control relevant to the entity’s preparation and fair presentation dated annual accounts of BIP Investment Partners S.A., which of the consolidated annual accounts in order to design audit comprise the consolidated balance sheet as at December 31, procedures that are appropriate in the circumstances, but not 2007, and the consolidated income statement, consolidated for the purpose of expressing an opinion on the effectiveness of statement of changes in equity and consolidated cash ow the entity’s internal control. statement for the year then ended, and a summary of signi cant accounting policies and other explanatory notes to the consoli- An audit also includes evaluating the appropriateness of dated annual accounts. accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating Board of Directors’ responsibility for the consolidated annual the overall presentation of the consolidated annual accounts. We accounts believe that the audit evidence we have obtained is suf cient The Board of Directors is responsible for the preparation and fair and appropriate to provide a basis for our audit opinion. presentation of these consolidated annual accounts in accord- ance with International Financial Reporting Standards as adopted Opinion by the European Union. This responsibility includes: design- In our opinion, the consolidated annual accounts give a true ing; implementing and maintaining internal control relevant to and fair view of the nancial position of BIP Investment Partners the preparation and fair presentation of consolidated annual S.A. as of December 31, 2007, and of its nancial performance accounts that are free from material misstatement, whether due and its cash ows for the year then ended in accordance with to fraud or error; selecting and applying appropriate accounting International Financial Reporting Standards as adopted by the policies; and making accounting estimates that are reasonable European Union. in the circumstances. Report on other legal and regulatory requirements Responsibility of the “Réviseur d’Entreprises” The management report, which is the responsibility of the Board Our responsibility is to express an opinion on these consoli- of Directors, is in accordance with the consolidated annual dated annual accounts based on our audit. We conducted our accounts. audit in accordance with International Standards on Auditing as adopted by the “Institut des Réviseurs d’Entreprises”. Those ERNST & YOUNG standards require that we comply with ethical requirements Société Anonyme and plan and perform the audit to obtain reasonable assurance Réviseur d’Entreprises whether the consolidated annual accounts are free from material misstatement.
Alain Kinsch February 1st, 2008 Financial Information / 85
| Summary separate annual financial statements for the year ended 31 december 2007 |
The Company’s separate annual nancial statements are presented hereinafter in summary format.
The separate annual nancial statements of BIP Investment Partners S.A. have been prepared under IFRS and audited by the Company’s auditors, Ernst & Young, who issued an unquali ed opinion on the separate nancial statements. The separate annual nancial statements and the auditor’s report can be consulted online at www.bip.lu and are also available on request from:
BIP Investment Partners S.A. 1, rue des Coquelicots L-1356 Luxembourg
Pro t and loss account for the nancial year ended 31 December 2006
In EUR 2007 2006
Adjustments of long-term investments in subsidiaries at fair value through pro t or loss 92 307 (4 063 731)
Dividends and other income on available-for-sale nancial assets 11 841 366 12 622 563
Net income on disposal of available-for-sale nancial assets 39 972 414 46 317 957
Net income on nancial assets at fair value throught pro t or loss 23 754 120 16 840 377
Net income on nancial assets held for trading 4 203 021 4 081 201
Other interest and similar income 2 773 877 1 085 888
Value adjustments on available-for-sale nancial assets (2 434 709) -
Reversal of value adjustments on loans - 283 936
Other external expenses (1 380 237) (1 072 489)
Staff costs (1 794 752) (1 230 945)
Other taxes (1 040 018) (1 010 292)
Depreciation of property, plant and equipment (23 860) (68 002)
Interest and similar expenses (983 355) (314 269)
Income from ordinary activities, before tax 74 980 174 73 472 194
Income tax (3 447 768) (2 516 570)
Net Income 71 532 406 70 955 624
Basic earnings per share 15.16 14.94
Diluted earnings per share 15.14 14.94 86 \ Financial Information
| Balance sheet at 31 December 2007 |
Assets
In EUR 31.12.2007 31.12.2006
Non-current assets
Property, plant and equipment 78 150 48 403
Long-term investments in subsidiaries 69 321 576 39 229 269
Available-for-sale nancial assets 381 533 086 318 498 578
Financial assets at faire value through pro t or loss 70 314 468 90 190 782
Loans and receivables 2 375 376 3 312 858
Deferred tax assets 2 774 012 6 218 640
526 396 668 457 498 530
Current assets
Financial assets held for trading 7 190 500 10 708 136
Derivative instruments 837 436 659 821
Other receivables 10 495 598 1 768 109
Cash and cash equivalents 46 063 814 40 042 222
64 587 348 53 178 288
Total assets 590 984 016 510 676 818
Financial Information / 87
Shareholders’ Equity and Liabilities
In EUR 31.12.2007 31.12.2006
Shareholders’ equity
Issued share capital 119 333 025 119 333 025
Own shares (6 437 035) (2 941 362)
Reserves 243 439 372 173 439 372
Revaluation reserve on available-for-sale nancial assets 121 188 061 96 188 650
Undistributed income 103 142 461 115 784 416
Total shareholders’ equity 580 665 884 501 804 101
Non-current liabilities
Deferred tax liabilities 6 042 821 6 625 859
6 042 821 6 625 859
Current liabilities
Current tax liabilities - 1 058 144
Other liabilities 4 275 311 1 188 714
4 275 311 2 246 858
Total shareholders’ equity and liabilities 590 984 016 510 676 818 Société Anonyme - Siège Social n° 1, rue des Coquelicots
L-1356 Luxembourg
T +352 26 00 26-1
F +352 26 00 26-50 [email protected] www.bip.lu
RC Luxembourg B 75324