Gearing

3i's listed status and permanent capital structure enables the Group to enhance returns to shareholders through leveraging our equity. The Board's view is that a gearing ratio of debt to shareholders' funds set between 30% and 40% is appropriate across the cycle, given the current investment profile.

Despite growing our investment by 47% and returning £467 million of capital to shareholders, during the year the exceptionally high level of realisations caused gearing at 31 March 2006 to fall to 1% (2005: 15%).

Taking account of future cashflow projections and the development plans of the business, the Board has proposed a further return of £700 million by means of a bonus issue of listed B shares accompanied by a share consolidation designed to maintain comparability of share price and earnings per share. This is currently expected to take place in July 2006.