Notes to the Accounts
11. Partnerships and associated undertakings
| 1997 | 1996 | |||
| All figures in £ millions | Valuations | Book value | Valuations | Book value |
| Partnerships interests | 200.0 | 123.6 | 200.0 | 113.9 |
| Unlisted associated undertakings | 129.9 | (32.2) | 122.6 | 3.9 |
| Loans | 95.3 | 106.5 | 64.8 | 64.8 |
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| 425.2 | 197.9 | 387.4 | 182.6 | |
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Note: Principal associated undertakings are listed on page 79. The valuations of unlisted partnerships and associated undertakings are at directors' valuations as at 31 December 1997. If realised at these values there would be an estimated liability for taxation, at year end rates, of £58.6m. The Group had no capital commitments to subscribe for further capital and loan stock.
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| All figures in £ millions | Equity | Share of loans | Reserves | Total |
| Summary of movements | ||||
| At 31 December 1996 | 101.1 | 64.8 | 16.7 | 182.6 |
| Exchange differences | (1.1) | 0.8 | (3.0) | (3.3) |
| Additions | 3.5 | 63.5 | - | 67.0 |
| Goodwill written back | - | 11.2 | 1.0 | 12.2 |
| Goodwill written off | (2.7) | (11.4) | (3.4) | (17.5) |
| Transfer from fixed assets investments | 0.4 | (0.2) | 0.2 | 0.4 |
| Disposals | (14.3) | (22.2) | 2.8 | (33.7) |
| Retained loss for the year | - | - | (10.0) | (10.0) |
| Write back of provision for diminution in value | 0.2 | - | - | 0.2 |
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| At 31 December 1997 | 87.1 | 106.5 | 4.3 | 197.9 |
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Note: In February 1997 the Group acquired a 50% stake in Business Day and Financial Mail, acquiring assets of £1.0m for consideration of £12.4m.
In July 1997 the Group sold its 44.1% share in Troll Communications LLC for a profit of £12.5m.
| 1997 | 1996 | |||
| All figures in £ millions | Operating
profit |
Net assets |
Operating profit |
Net assets |
| Analysis
of partnerships and associated undertakings Business Sectors |
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| Information | 15.9 | (3.2) | 10.9 | (7.1) |
| Education | 3.5 | 5.5 | 3.0 | 5.1 |
| Entertainment | (20.7) | 72.0 | (1.6) | 70.7 |
| Investment Banking | 43.1 | 123.6 | 40.8 | 113.9 |
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| 41.8 | 197.9 | 53.1 | 182.6 | |
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| Geographical markets supplied and location of net assets | ||||
| United Kingdom | (0.9) | 138.4 | 20.6 | 103.9 |
| Continental Europe | 9.3 | 33.9 | 12.9 | 38.1 |
| North America | 28.5 | 18.5 | 17.2 | 36.7 |
| Rest of World | 4.9 | 7.1 | 2.4 | 3.9 |
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| 41.8 | 197.9 | 53.1 | 182.6 | |
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| 1997 | |
| All figures in £ millions | |
| Reconciliation to retained loss | |
| Net income from partnerships and associated undertakings | 41.8 |
| Loss on sale of a business by an associate | (1.5) |
| United Kingdom taxation | (4.7) |
| Overseas taxation | (5.1) |
| Distributions reveivable in respect of the year from partnership interests | (28.2) |
| Dividends (including tax credits) from unlisted associated undertakings | (12.3) |
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| Retained loss for the year | (10.0) |
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Interests in Lazard Partners Limited Partnership and the three Lazard Houses
| 1997 | 1996 | |
| All figures in £ millions | ||
| A summary of the aggregate net tangible assets at 31 December is as follows: | ||
| Total assets | 9,369 | 8,013 |
| Total liabilities | (8,972) | (7,632) |
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| Net tangible assets | 397 | 381 |
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| Attributable to Pearson | 124 | 114 |
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Note: Pearson's indirect general partnership interest in Lazard Frères et Cie and Maison Lazard et Cie held directly and indirectly through Lazard Partners Limited Partnership is an unlimited liability interest. Pearson holds these partnership interests through a subsidiary undertaking registered in England, with no other material assets. The aggregate liabilities of these partnerships included above are £930m (1996: £831m). Pearson also holds direct interests in Lazard Frères & Co, a New York Limited Liability Company.
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| Country
of incorporation or registration |
Beneficial interest per cent |
Class of share |
Share capital Mmillions |
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| Interests in the Lazard House | ||||
| Lazard
Partners Limited Partnership (which, with direct interests in the USA and French partnerships gives the following interests in the Lazard House): |
USA | 50.0 | Partnership | |
| Lazard Brothers & Co, Ltd | England | 29.2 | Ord £1 | 25.3 |
| Lazard Brothers & Co, Ltd | England | 80.0 | Def £1 | 5.0 |
| Lazard Brothers & Co, Ltd | England | 50.0 | Sw Fr 1 | 0.4 |
| Lazard Frères & Co, 'LLC' | USA | 11.9 | LLC* | |
| Lazard Frères et Cie / Maison Lazard et Cie | France | 9.4 | Partnership | |
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Note: The beneficial percentage held for the investment banking partnership interests are interests in partnership profits.
*Limited Liability Company.
With effect from 1 January 1996, Lazard Frères & Co, 'LLC', Lazard Frères et Cie, Maison Lazard et Cie and Lazard Brothers & Co, Limited (together known as the three Lazard Houses) created a new system of interhouse profit sharing through the establishment of the Three Houses Pooling Partnership (the 'Pool') which became a limited partner of Lazard Partners Limited Partnership. As a result, the members, directors or partners in a particular Lazard House receive an interest in the profits of the other Lazard Houses in exchange for part of their existing profit entitlement in their own House. Pearson received additional income in 1997 (the 'Pearson Adjustment') to reflect the reduction in its profit entitlements from its direct holding in Lazard Frères & Co, 'LLC', Lazard Frères et Cie and Maison Lazard et Cie and accordingly did not receive any income through the Pool. The share of net distributable profits of Lazard Partners Limited Partnership (after the Pool's profit share and the Pearson Adjustment) is divided in accordance with the respective capital interests of the original partners (Pearson plc - 50%).
Interest in The Economist Newspaper Ltd
The net liabilities of The Economist Newspaper Ltd as at 31 March 1997
were £24.8m (1996: net liabilities £33.3m); profit before taxation amounted
to £26.7m (1996: £24.0m).
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