Annual report roundup

THE ANNUAL REPORTER:

The Blackstone Group
Report overview:

Blackstone’s 76-page “Annual Report No. 1” is long on style, but also contains plenty of substance. The eye candy is up front, with ample space devoted to beautiful full-page photos of everything from a wax figure of Nicole Kidman (Blackstone indirectly owns Madam Tussauds) to The London Eye
(also controlled by Blackstone). The second half of the book is clunkier and subdued, presenting a solid 43 pages of the firm’s financial statements.

How the portfolio is presented:

Blackstone’ s private equity and real estate portfolio items are not presented in detail. Instead Blackstone provides an overview of each of its four main lines of business (corporate private equity, real estate, marketable alternative asset management and financial advisory), and illustrates each with a case study of one particular portfolio company
or client. For these case studies the firm chose some notable success stories, including Merlin Entertainment Group and LXR Luxury Resorts & Hotels for private equity and real estate, respectively. Blackstone also highlights the advisory work it has done for Taft Hartley (labor) plans.

Notable revelations:
• Chief executive and co-founder Stephen • Schwarzman received $350.2 million in cash distributions last year. While this may seem a princely sum, it’s actually a 12 percent pay cut from 2006. Co-founder Pete Peterson, meanwhile, received $171.5 million in cash distributions last year, a 19 percent pay cut from 2006.
• The report reveals that Blackstone paid Schwarzman $1.4 million for the use of his private jet last year, in addition to $230,000 for the use of a helicopter owned jointly by Schwarzman and Peterson.
• Blackstone wrote down $122 million on its investment in Financial Guaranty Insurance Company. The loss is a key component of a class action lawsuit the firm now faces, whose plaintiffs claim the firm hid losses at the company in its pre-IPO prospectus last year.

THE ANNUAL REPORTER:

Terra Firma Capital Partners
Report overview:

Terra Firma’s annual report set a new standard in the industry in going far beyond the minimum standards set out in Sir David Walker’s recommendations on transparency and disclosure.
The firm invested spent €325,000 and 2000 hours on the 120 document. Though perhaps less streamlined than Blackstone’s offering, the report is substantive and incredibly detailed.

How the portfolio is presented:
In addition to extensive fund-level information, Terra Firma devotes 44 pages to the firm’s eight portfolio companies, describing in detail its strategy and outlook for each company, as well as the financial performance of each company. On the whole, the report presents financial information in a more approachable format than its peers, placing more emphasis on clear layout and explanatory text. The report also contains sections on Terra Firma’s corporate social responsibility initiatives and the economic impact of its activities on communicates around the world.

Notable revelations:
• Terra Firma provides more detail than any of its peers regarding executive compensation, information Walker has said need only be shared with LPs. The firm paid its senior management of 15 an average of £665,053 or a total of £8,978,216 in salaries and bonuses in 2007.
• The report is frank in its assessment of current changes to UK tax laws, and gave warning that the firm might move some of its operations offshore. “Taxing long-term capital gains more like annual income will encourage businesses to be less long term in their approach and will undermine one of the biggest benefits of private equity investment. Such trends in UK taxation, making the UK a less competitive financial centre than it was, have caused us to review our UK activities and may result in future growth being pursued through our other European offices.”

THE ANNUAL REPORTER:

Cinven
Report overview:

Cinven’s slim 44-page annual report is minimalist in design and content. The report includes only basic information about the firm, meeting the basic Walker requirements with information on its business and governance structures, a few paragraphs on market conditions, and a list of the names and transaction values of its portfolio companies. The most voluble section of the report is a four-page section detailing Cinven’s corporate governance initiatives.

How the portfolio is presented:
In addition to three case studies describing its investments in property company NCP, gym chain Fitness First and fashion company CBR, Cinven devotes a total of 18 pages to its portfolio companies, although that includes plenty of white space.
Each company is described in around half a page, including the date and value of Cinven’s investment, the names of its Cinven board representatives, a concise description of its business, and a paragraph on Cinven’s strategy for the company.

Notable revelations:
• Cinven has said that it is in the process of creating full Walker-compliant reports for each of its portfolio companies, both those in the UK and abroad, so the firm might potentially disclose much more detailed information about its investments.
• The firm reveals in the report that it plans to open offices in New York and Hong Kong.