Intermediate Capital Group PLC Group Capital Intermediate Annual Report and Accounts 2008 Accounts and Report Annual London Frankfurt Paris 20 Old Broad Street 12th floor An der Welle 5 38, avenue Hoche Intermediate Capital Group PLC London EC2N 1DP 60322 Frankfurt 75008 Paris United Kingdom Germany France Annual Report and Accounts 2008 Telephone 0044 20 7628 9898 Telephone 0049 69 254 976 50 Telephone 0033 1 4495 8686 Facsimile 0044 20 7628 2268 Facsimile 0049 69 254 976 99 Facsimile 0033 1 4495 8687 Hong Kong Stockholm Rms 3603-4, 36/Fl. Birger Jarlsgatan 13, 1tr Edinburgh Tower 111 45 Stockholm 15 Queen’s Road Central Sweden Hong Kong Telephone 0046 8 545 04 150 Telephone 00852 2297 3080 Facsimile 0046 8 545 04 151 Facsimile 00852 2297 3081 Sydney Madrid Level 18, 88 Phillip Street Serrano, 30 - 3° Sydney 28001 Madrid NSW 2000 Spain Australia Telephone 0034 91 310 7200 Telephone 0061 2 9241 5525 Facsimile 0034 91 310 7201 Facsimile 0061 2 9241 5526 New York Tokyo 250 Park Avenue 14th Fl., Hibiya Central Bldg Suite 810 1-2-9 Nishi-Shimbashi Minato-ku New York, NY 10177 Tokyo 105-0003 USA Japan Telephone 001 212 710 9650 Telephone 0081 3 5532 7840 Facsimile 001 212 710 9651 Facsimile 0081 3 5532 7843 Authorised and regulated by the Financial Services Authority www.icgplc.com Our People It all comes down to the people behind ICG – About ICG bright, innovative, team players – with their shared sense of vision and service on behalf of our clients. People with integrity and a drive for excellence have been the crystallising force behind ICG’s success over our entire 19 year history. ICG is a listed investment firm and institutional fund manager, serving financial sponsors, management teams, and investors in mid-market companies. With offices in Europe, Asia Pacific and North America, our experienced investment professionals are committed to delivering tailored, flexible and intelligent capital solutions for our clients. It is our aim to be amongst the world’s most innovative and successful investors, doubling in size every five years by employing and motivating great people. Overview Operating Review Financial Accounts 1 Highlights 14 Key Performance Indicators 46 Directors’ Report 2 Global Reach 16 Business Review 54 Corporate Governance 4 Our Business 23 Financial Review 58 Report of the Remuneration Committee 6 Chairman’s Statement 26 Principal Risks and Uncertainties 65 Statement of Directors’ Responsibilities 8 Managing Directors’ Review 28 Portfolio 66 Independent Auditors’ Report – Strategy 40 Repayment 68 Consolidated Income Statement – Outlook 42 Mezzanine Funds 69 Statements of Recognised Income and Expense 12 Sustainability and Corporate 43 Credit Fund Management 70 Balance Sheets Social Responsibility 44 Board of Directors 71 Cash Flow Statements 72 Notes to the Accounts 95 Shareholder Information 96 Company Information Overview Overview Highlights ■ Core income increased by 22% to £36m ■ Gains on investments of £35m, down from record gains of £97m last year, reflecting much lower levels of early repayments ■ Profit before tax up 2% to £230m, £36m of which relates to fair value movements on derivatives held for hedging purposes ■ Proposed final dividend of 45.5p net per share (65.0p for the full year, up 8% adjusted for Rights Issue) 250 ■ Balance sheet investmentsProfit before up tax 32% to £2.3bn 200 ■ Strong balance sheet; recentCore Income (LHS) Rights Issue and a new £500m 150 debt facility to fund growth 100 ■ Third party funds under management increased by 25% to 50 £7.3bn (6% adjusted for foreign exchange movements) 0 ■“1999”New20002001 2002office200320042005 opened200620072008 in New York Year ended Year ended 31 March 2008 3 March 2007 £m £m Change 60 Core income* 136.4 112.0 22% 48 Profit before tax 229.5 224.0 2% Balance sheet investments 2,306.0 1,749.9 36 32% Dividend per share 65.0p** 55.0p*** 124 8% 12 * The defintion of core income can be found on Page 24 under Income Statement. ** Proposed. 0 *** Adjusted for the Rights Issue. 2004 2005 2006 2007 2008 Core income and profit before tax Dividend per share Balance sheet investments £m Pence £m 250 80 2,500 200 2,000 60 150 1,500 40 100 1,000 20 50 500 0 0 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 Source: ICG Core income Profit before tax Intermediate Capital Group PLC Annual Report and Accounts 2008 Source: ICG Dividend per share Source: ICG Loans and Investments Overview Global Reach ICG’s success is based on our international network of offices managed by our experienced investment professionals. Our local expertise and relationships help us to source and manage attractive investments, whilst our global coverage and experience offers world class methodologies and insights. We have a presence in all the key markets for mezzanine investment. London Paris 20 Old Broad Street 38, avenue Hoche London EC2N DP 75008 Paris United Kingdom France Telephone 0044 20 7628 9898 Telephone 0033 4495 8686 Facsimile 0044 20 7628 2268 Facsimile 0033 4495 8687 Madrid Frankfurt Stockholm Serrano, 30 - 3° 2th floor An der Welle 5 Birger Jarlsgatan 3, tr 2800 Madrid 60322 Frankfurt 111 45 Stockholm Spain Germany Sweden Telephone 0034 9 30 7200 Telephone 0049 69 254 976 50 Telephone 0046 8 545 04 50 Facsimile 0034 9 30 720 Facsimile 0049 69 254 976 99 Facsimile 0046 8 545 04 5 2 Intermediate Capital Group PLC Annual Report and Accounts 2008 Overview 4 9 Continents Offices New York Hong Kong Tokyo Sydney 250 Park Avenue Rms 3603-4, 36/Fl. 4th Fl., Hibiya Central Bldg Level 8, 88 Phillip Street Suite 80 Edinburgh Tower -2-9 Nishi-Shimbashi Minato-ku Sydney New York, NY 077 5 Queen’s Road Central Tokyo 05-0003 NSW 2000 USA Hong Kong Japan Australia Telephone 00 22 70 9650 Telephone 00852 2297 3080 Telephone 008 3 5532 7840 Telephone 006 2 924 5525 Facsimile 00 22 70 965 Facsimile 00852 2297 308 Facsimile 008 3 5532 7843 Facsimile 006 2 924 5526 Intermediate Capital Group PLC Annual Report and Accounts 2008 3 Overview Our Business ICG is a leading investment firm and fund manager specialising in providing debt finance Mezzanine Investment and equity to mid-market leveraged buyouts in Europe, Asia Pacific and North America. We are ICG invests alongside private equity sponsors a long term, committed investor, consistent and and management teams, providing the proactive in our approach, with a track record of necessary financial flexibility in a company’s delivering premium returns to our shareholders capital structure for it to grow. We look for and fund investors across market cycles. Our well managed companies, with strong cash performance is driven by the quality of our generation and leading positions in their investment executives, who live in the local markets, in countries which offer robust communities in which we invest, and on financial and regulatory frameworks. Our our unwavering credit discipline. local office network provides a competitive advantage in sourcing, monitoring and managing investments. Over the past 19 years ICG has reviewed thousands of transactions, investing in 327 to date, reflecting the Company’s highly selective nature. 4 Intermediate Capital Group PLC Annual Report and Accounts 2008 Overview £2.3bn £7.3bn Balance sheet Third party investments funds under management Mezzanine Funds Credit Fund Management We offer institutional investors the opportunity ICG was one of the first managers of to invest alongside ICG via a range of Collateralised Debt Obligations (CDOs) Mezzanine funds. Since 1998 we have raised in Europe, launching Eurocredit I in 1999. a number of funds focusing on opportunities The Credit Fund Management (CFM) in Europe and Asia Pacific. Funds under team now manages 10 CDO funds, three management at 31 March 2008 totalled £3bn. institutional mandates and one Unit Trust Fund Our investors include some of the world’s most totalling £4.3bn, attracting institutional respected insurance companies, pension investors from the US, Europe, the Middle East funds, sovereign investors and endowments. and Asia Pacific. The CFM team specialises in investments in primary and secondary senior and subordinated debt in leveraged buyouts, often investing alongside the mezzanine investment team. Intermediate Capital Group PLC Annual Report and Accounts 2008 5 Overview Chairman’s Statement Dear Shareholder The past year has been another one of considerable achievement for ICG. Despite volatile markets, I am pleased to report core income up 22 per cent to £36m (2007: £112m), and profit before tax of £230m (2007: £224m) up two per cent on last year’s record level. This £230m includes a £36m positive adjustment of the fair value of the financial instruments we hold for hedging purposes. The Board has proposed a final dividend of 45.5p, making a total of 65.0p for the year, an increase of 8 per cent compared to last year’s dividend of 55p (adjusted for the Rights Issue). The dividend will be paid on 4 July 2008 to shareholders on the register on 6 June 2008. ICG has an excellent track record of creating significant value for shareholders. Over the past five years we have more than doubled core income, profit before tax, earnings per share and dividend per share. Since we listed in 994, total return for our “ICG’s strong performance is an endorsement of our shareholders – as measured by the rigorous credit culture, the high quality of our employees, increase in the value of a share and the strength of mezzanine as an asset class.” including reinvested dividends – has been top quartile within the FTSE 250.