NEW investment in Scottish companies by 3i increased by 14% to #147m in the year to end-March but the venture capital group was less active in the UK as a whole.
Continental Europe proved the happiest hunting ground for 3i. It invested #241m in mainland European businesses - double the previous year's level.
Investment in UK companies dipped to #899m, with 3i put
off by the high price of equity during its first half.
Its Continental European portfolio generated a return of 35%, compared with one of just 1.7% from UK holdings. A fall in the price-earnings multiples of smaller British quoted companies forced 3i to reduce its valuation of unlisted holdings in the UK.
3i enjoyed lucrative realisations of existing holdings in Germany. It was also active in Spain and has recently opened an office in Amsterdam.
The 14% rise in new funds committed north of the Border looked unspectacular in relation to the 40% increase in total venture capital investment in Scotland, to #275m, during 1998. The industry figures were published by the British Venture Capital Association (BVCA).
But 3i's director for Scotland, Willie Watt, claimed yesterday that his group had maintained a market share of around 50% by amount invested and number of deals.
He argued that direct comparison with the BVCA figures, which obviously cover a slightly different period, was difficult.
''It is quite difficult to compare the results and actually work out what is happening,'' he said. ''I think our view is that our market share stood about the same throughout the period. We are not really aware of it having reduced at all.''
3i, which abandoned a #1.3bn hostile bid for rival Electra Investment Trust last month, achieved a 5.1% return on its #3.5bn of shareholders' funds during the year. It was well ahead of its short-term benchmark, the FTSE SmallCap Index (excluding investment trusts), which recorded a negative total return of 6.9%. But its longer-term benchmark, the All-Share Index, posted a 6.8% return.
3i's net asset value rose 3.3% to 601p.
The venture capital group announced a final dividend of 7p. This will take the total payout to 10.3p, up 9.7% on the previous year.
3i was active in Scotland in the oil services sector, injecting #29m into ASCO and putting up #31m for the #104m institutional buy-out of Oiltools International. It also put up #12m for the management buy-out of seismic sofware company Concept Systems.
3i also invested #6m in biotechnology company Roslin Bio-Med, #1m in telecoms group Kymata, #1.5m in wound-treatment developer Phairson Medical, #750,000 in neo-natal test-
kit company Quantase, #1m in internet systems group Orbital Technologies, and #400,000 in Glasgow-based computer games developer Red Lemon Studios.
Watt said 3i's total investment in Scotland included between #30m and #40m of those funds which the venture capital group manages on behalf of third parties and invests alongside its own.
Fast-growing technology businesses soaked up #38m, or 23%, of new Scottish investment in the year to March.
In line with 3i's UK-wide strategy, Watt will be charged with helping ensure technology investments make up about 30% of the total portfolio by 2003.
He highlighted the potential in the information technology and telecoms sectors but believed oil and gas services would continue to feature strongly in future investment.
However, Watt emphasised it was still interested in ''normal'' industrial companies.
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