THE Scottish portfolio of 3i, the leading venture capital group, rose strongly in the year to March, finishing at #582m, an increase of 32%, invested in 342 companies.

However, the outlook for 3i's manufacturing customers has deteriorated and the increase in base rates can only extend this trend.

The group's own index of its customers' opinion on the outlook has turned negative for the first time since 1992, showing minus 6 for the second quarter against plus 9 in the first quarter.

The pessimism, though, is confined to manufacturing, where the index read minus 29. For non-manufacturing it was plus 22.

The year 1997-98 was strong for 3i as a whole. It achieved a total shareholder return of 22.4%, while net asset value rose 19.8% to 582p, well ahead of its benchmarks, such as a 14.7% increase in the small companies' index.

A final dividend of 6.4p lifts the total by 12% to 10.3p.

Willie Watt, 3i director in Scotland, said its investment in Scotland had risen by 11.5% in the year. He said: ''Significantly, investment in emerging businesses, including an increased focus on technology, has increased from #4.9m to #11.2m, reinforcing 3i's commitment to investing in young, dynamic companies with high growth potential.''

Deals have included putting #6m into Roslin Bio-Med, which was spun off from Roslin Institute, of Dolly the sheep fame, and #1m into Neuropa, a Glasgow genomics company. Half the Scottish Technology Fund, set up with Scottish Enterprise, was contributed by 3i.

Other deals included backing for the #68m purchase of Grampian Holdings' pharmaceuticals division and for the #33m acquisition of Eagle Taverns.

Over 50% of the market in Scotland is currently held by 3i. Watt sees more deals coming through this year as merger and acquisition activity remains high.

More than #1000m was invested by 3i which ended the year with total assets of #5224m, making it the largest single provider of venture capital in the world.

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