3i Infrastructure Regulatory News (3IN)

10 May 2023

Results for the year to 31 March 2023

3i Infrastructure plc ('3i Infrastructure' or the 'Company') today announces a 14.7% return for the year, delivery of the FY23 dividend target of 11.15 pence and a 6.7% increase in the target dividend for FY24 to 11.90 pence per share.

Richard Laing, Chair of 3i Infrastructure plc, said:

"3i Infrastructure continues to deliver long-term sustainable returns. I am delighted to report that we achieved another year of outperformance, with a total return of 14.7% in the year ended 31 March 2023, well ahead of our target. We have increased the dividend per share in every year of the Company's existence."

Scott Moseley and Bernardo Sottomayor, Managing Partners, Co-Heads of European Infrastructure, 3i Investments plc, added:

"This was another strong year for the Company, materially exceeding its target return. We have carefully selected our portfolio, identifying infrastructure companies that benefit from long-term structural growth trends in their underlying markets. 3i Infrastructure is well positioned to continue to deliver attractive shareholder returns."

Performance highlights

For further information, please contact:

For further information regarding the announcement of the results for 3i Infrastructure plc, please visit www.3i-infrastructure.com. A recording of the analyst presentation will be made available on this website during the day.

Notes to the preliminary announcement

Note 1

The statutory accounts for the year to 31 March 2023 have not yet been delivered to the Jersey Financial Services Commission. The statutory accounts for the year to 31 March 2022 have been delivered to the Jersey Financial Services Commission. The auditor's reports on the statutory accounts for these years are unqualified. This announcement does not constitute statutory accounts. The preliminary announcement is prepared on the same basis as set out in the statutory accounts for the year to 31 March 2022.

Note 2

Subject to shareholder approval, the proposed final dividend is expected to be paid on 10 July 2023 to holders of ordinary shares on the register on 16 June 2023. The ex-dividend date for the final dividend will be on 15 June 2023.

Note 3

This report contains Alternative Performance Measures ('APMs'), which are financial measures not defined in International Financial Reporting Standards ('IFRS'). More information relating to APMs, including why we use them and the relevant definitions, can be found in the Company's 2023 Annual report and accounts and in the Financial review section.

Note 4

The preliminary announcement has been extracted from the Annual report and accounts 2023. The Annual report and accounts 2023 will be available on the Company's website today. Printed copies of the Annual report and accounts 2023 will be distributed to shareholders who have elected to receive printed copy communications on or soon after 22 May 2023.

Notes to editors

About 3i Infrastructure plc

3i Infrastructure plc is a Jersey-incorporated, closed-ended investment company, an approved UK Investment Trust, listed on the London Stock Exchange and regulated by the Jersey Financial Services Commission. The Company's purpose is to invest responsibly in infrastructure, delivering long-term sustainable returns to shareholders and having a positive influence on our portfolio companies and their stakeholders.

3i Investments plc, a wholly-owned subsidiary of 3i Group plc, is authorised and regulated in the UK by the Financial Conduct Authority and is the investment manager of 3i Infrastructure plc.

This statement has been prepared solely to provide information to shareholders. It should not be relied on by any other party or for any other purpose. It and the Company's Annual report and accounts may contain statements about the future, including certain statements about the future outlook for 3i Infrastructure plc. These are not guarantees of future performance and will not be updated. Although we believe our expectations are based on reasonable assumptions, any statements about the future outlook are subject to a number of risks and uncertainties and could change. Factors which could cause or contribute to such differences include, but are not limited to, general economic and market conditions and specific factors affecting the financial prospects or performance of individual investments within the portfolio of 3i Infrastructure plc.

This press release is not for distribution (directly or indirectly) in or to the United States, Canada, Australia or Japan and is not an offer of securities for sale in or into the United States, Canada, Australia or Japan. Securities may not be offered or sold in the United States absent registration under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or an exemption from registration under the Securities Act. Any public offering to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and will contain detailed information about 3i Group plc, 3i Infrastructure plc and management, as applicable, as well as financial statements. No public offering in the United States is currently contemplated.

Our purpose

We invest responsibly in infrastructure, delivering long-term sustainable returns to shareholders and having a positive influence on our portfolio companies and their stakeholders.

Chair's statement

"Another excellent year, with confidence in the future."

Richard Laing

Chair, 3i Infrastructure

3i Infrastructure continues to deliver long-term sustainable returns, with another year of outperformance.

I am delighted to report that we achieved another year of outperformance, with a total return of 14.7% in the year ended 31 March 2023. That return is well ahead of our target to provide shareholders with a total return of 8% to 10% per annum, to be achieved over the medium term. Our total return for the three years since March 2020, the Covid-19 and post-Covid period, was an impressive 13.7% per annum.

We have built a unique portfolio, which benefits from inflation linkage and is aligned with long-term megatrends. Our companies, supported by the engaged asset management approach of 3i, our Investment Manager, are generating attractive and accretive growth investment opportunities.

We made another step forward with our sustainability objectives this year, supported by the establishment of a dedicated environmental, social and governance ('ESG') team at the Investment Manager bringing greater focus and increased engagement with our portfolio companies.

I am grateful to shareholders and the Board of Directors for their support during the year, including during our equity raise in February 2023, as well as to the Investment Manager's team for their continued hard work under the leadership of Scott Moseley and Bernardo Sottomayor.

Our purpose

Our purpose, is to invest responsibly in infrastructure, delivering long-term sustainable returns to shareholders and having a positive influence on our portfolio companies and their stakeholders.

We invest across a broad range of infrastructure investment themes and highlight the strong growth prospects of our portfolio companies in this report. Our portfolio companies invest in, develop and actively manage essential infrastructure. Examples of how our portfolio companies have a positive influence are included in the Sustainability report in the Annual report and accounts 2023.

Performance

The Company generated a total return of £394 million in the year ended 31 March 2023, or 14.7% on opening NAV, ahead of our target of 8% to 10% per annum to be achieved over the medium term. This is discussed in more detail in the Review from the Managing Partners.

The NAV per share increased to 336.2 pence. Our share price has not kept pace with the growth in our NAV, which resulted in a Total Shareholder Return ('TSR') of negative 6.9% in the year, ahead of the FTSE 250, which returned negative 7.9% in the same period. Since IPO, the Company's annualised TSR is 11.7%, comparing favourably with the broader market (FTSE 250: 6.1% annualised over the same period).

Dividend

Following the payment of the interim dividend of 5.575 pence per share in January 2023, the Board is recommending a final dividend for the year of 5.575 pence per share, meeting our target for the year of 11.15 pence per share, 6.7% above last year's total dividend. We expect the final dividend to be paid on 10 July 2023.

Consistent with our progressive dividend policy, we are announcing a total dividend target for the year ending 31 March 2024 of 11.90 pence per share, representing an increase of 6.7%.

Corporate governance

The Company's 2022 Annual General Meeting ('AGM') was held on 7 July 2022. All resolutions were approved by shareholders, including the re-election of the existing Directors.

This year's AGM will be held on 6 July 2023. Further details are provided in the Notice of Meeting and on the Company's website, www.3i-infrastructure.com. In September, we were delighted to welcome Stephanie Hazell as a non-executive Director. Stephanie brings a broad strategic experience in the infrastructure sector from her previous roles at National Grid, Orange and Virgin Group.

Directors' duties

The Directors have a duty to act honestly and in good faith with a view to the best interests of the Company and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

In accordance with the AIC Code of Corporate Governance 2019 (the 'AIC Code'), the Board does this through understanding the views of the Company's key stakeholders and carefully considering how their interests and the matters set out in section 172 of the Companies Act 2006 of England and Wales have been considered in Board discussions and decision making. More detail can be found in the Directors' duties and Section 172 statement sections later in this document.

Capital raise and liquidity

We were pleased with the results of our capital raise and would like to thank our shareholders for their continued support. The equity raise proceeds of £100 million were used to pay down part of the drawings on the revolving credit facility ('RCF') and partly used to fund the £28 million acquisition of Future Biogas. This provides additional flexibility to fund attractive discretionary growth opportunities in our portfolio.

We manage our balance sheet actively, seeking efficiency through low levels of uninvested cash with a range of funding options available to the Company for further investment as described in the Financial review.

Outlook

The past year has seen significant volatility in both equity and credit markets and in energy and power prices. Against this backdrop, the Company has remained disciplined in its investment approach, maintaining adequate liquidity and an appropriate level of gearing in the Company's portfolio.

Our portfolio consists of resilient businesses providing essential services to their customers and the communities they serve, often benefitting from long-term sustainable trends. These businesses are generating discretionary growth opportunities that are accretive to our investment cases, leaving us well positioned to continue to build on our strong performance.

Richard Laing

Chair, 3i Infrastructure plc

9 May 2023

Review from the Managing Partners

"The Company's top quartile track record is the result of our deliberate strategy."

Scott Moseley and Bernardo Sottomayor

Managing Partners, Co-Heads of European Infrastructure

3i Investments plc

This was another strong year for the Company, materially exceeding its target return.

We delivered another strong total return of 14.7% this year.

Since 2015, when we adopted our current strategy of focusing on core-plus infrastructure investments, NAV per share including dividends has grown by 19% per annum. Since 3iN's inception in 2007, we have grown NAV per share including dividends by 14% per annum.

The Company's top quartile track record is the result of our deliberate strategy.

We have carefully selected our portfolio, identifying infrastructure companies that benefit from long-term structural growth trends in their underlying markets.

We work actively with the management teams at our portfolio companies to define and execute plans to capitalise on those growth dynamics. Growing markets provide the catalyst for us to continue to reinvest in our portfolio companies at returns that are likely to outperform 3iN's portfolio target.

Our portfolio companies' earnings are also typically positively correlated to inflation, as well as growing in real terms.

The resulting compounding growth dynamics, together with the resilience that our portfolio companies have displayed throughout the cycle, including during the recent Covid-19 pandemic, demonstrate that the Company offers shareholders very high quality risk-adjusted returns.

Our active management approach also ensured that we locked in attractive debt financing across the portfolio before the recent increases in financing costs. The average level of gearing within our portfolio companies is a relatively modest 33% of enterprise value and there are no material refinancing requirements within the portfolio before 2026.

These conservative levels of gearing within our portfolio companies, combined with strong operational cash generation, available credit in the RCF and the recent £100 million equity raise, ensures that our portfolio companies are well placed to finance these growth investment opportunities as they arise.

Sustainability

The importance of sustainability and meeting ESG standards continues to increase. This year we created a new team to lead ESG and sustainability initiatives across the portfolio. The additional focus that this new team brings helps us to engage on ESG topics in a more meaningful way, to maintain appropriate oversight over new and developing ESG legislation and to collate relevant data regarding the performance of the portfolio companies against certain sustainability indicators. Our companies are now reporting Scope 1 and 2 greenhouse gas ('GHG') emissions and considering opportunities to reduce these.

In the year ahead we plan to build on this progress by working with portfolio companies to measure Scope 3 GHG emissions, further develop Paris-aligned decarbonisation plans and where possible set science-based targets.

Investment and divestment activity

During the year we completed a number of transactions as shown in the table below:

Outlook

Our portfolio is generating strong earnings growth which we are confident is set to continue. Additionally, we continue to see strong demand for high quality infrastructure investments, such as those held by 3iN, amongst private market investors. Our active management strategy includes planning selectively to divest our portfolio companies at an optimal moment in time. The scarcity value of our assets and favourable growth positioning provide confidence in the outlook for continued value creation.

Scott Moseley and Bernardo Sottomayor

Managing Partners and Co-Heads of European Infrastructure, 3i Investments plc

9 May 2023

Our business model

An active investor

Unique offering for shareholders

The Company remains unique, providing public market investors with access to private infrastructure businesses across a variety of megatrends, sectors and geographies.

Origination approach

We remain a disciplined investor and, where possible, seek opportunities to transact off-market, only participating in competitive processes where we believe we have a distinct advantage.

We have a large and focused investment team, with a broad network and access across the geographies in which we invest. Our reputation, local presence and the relationships we develop with management teams provide us with competitive advantages. This allowed us to be successful in signing our new investment this year in Future Biogas on attractive terms.

Asset management

We maintain a significant focus on active asset management and investment stewardship. We identify high calibre management teams and look to implement a clear business strategy. We help identify accretive growth opportunities to the portfolio companies, and actively help them to convert those, including executing add-on M&A opportunities and putting in place adequate capital structures and capex facilities to fund the associated investments.

We actively look to enhance the infrastructure characteristics of the businesses we acquire, ensuring that, where possible, capex is focused on immediate contracted revenue-generating assets, improving the infrastructure characteristics of the business to attract competitive financing, adding elements of service that create customer stickiness, and often implementing operational efficiency programmes to optimise EBITDA margins. All of this helps us position our businesses into the core infrastructure space, thus maximising the potential exit value.

We execute all of the above through ownership control, effective board presence and governance and by being involved directly in the companies' key workstreams.

Competition for new investment primarily comes from private infrastructure funds. Most other UK listed infrastructure funds typically target smaller investments in finite life contracted assets like operational and greenfield Public Private Partnership ('PPP') projects or operational renewable portfolios, which are outside our investment focus.

Our primary investment focus remains mid-market core-plus infrastructure with controlling majority or significant minority positions and strong governance rights, whilst adhering to a set of core investment characteristics and risk factors. More information on our business model can be found below.

We invest responsibly in infrastructure to create long-term value for stakeholders.

How we create value

We have a rigorous approach to identify the best investment opportunities and then actively manage our portfolio companies to drive sustainable growth and value creation.

What enables us to create value

Investment Manager's team

The Company is managed by an experienced and well-resourced team. The European infrastructure team was established by 3i Group plc ('3i Group') in 2005 and now comprises over 50 people, including over 30 investment professionals.

This is one of the largest and most experienced groups of infrastructure investment professionals in Europe, supported by dedicated nance, tax, legal, operations, sustainability and strategy teams.

3i Group's network

3i Group has a network of ofces, advisers and business relationships across Europe. The investment management team leverages this network to identify, access and assess opportunities to invest in businesses, on a bilateral basis where possible, and to position the Company favourably in auction processes.

Engaged asset management

We create value from our investments through the Investment Manager's engaged asset management approach. Through this approach, the Investment Manager partners with our portfolio companies' management teams to develop and execute a strategy to create long-term value in a sustainable way. Examples of this partnership include developing strategies that support investment in the portfolio company's asset base over the long term; continued improvements in operational performance; and establishing governance models that promote an alignment of interests between management and stakeholders.

We develop and supplement management teams, often bringing in a non-executive chair early in our ownership.

Examples of this engaged asset management approach can be found on our website, www.3i-infrastructure.com.

Reputation and brand

The Investment Manager and the Company have built a strong reputation and track record as investors by investing responsibly, managing their business and portfolio sustainably, and by carrying out activities according to high standards of conduct and behaviour. This has been achieved through upholding the highest standards of governance, at the Investment Manager, the Company and in investee companies. This in turn has earned the trust of shareholders, other investors and investee companies, and has enabled the Investment Manager to recruit and develop employees who share those values and ambitions for the future.

The Board seeks to maintain this strong reputation through a transparent approach to corporate reporting, including on our progress on driving sustainability through our operations and portfolio. We are committed to communicating in a clear, open and comprehensive manner and to maintaining an open dialogue with stakeholders.

Dedicated ESG team

In FY23, the Investment Manager created a new team to lead ESG and sustainability initiatives across the portfolio. This will enable an acceleration of the delivery of the Company's ambitions around sustainability.

The new team's role is to ensure the Company's approach is right for the portfolio and to drive genuine ambition and progress at portfolio company level. Dedicated ESG resource enables us to identify, monitor and realise the value creation opportunities linked to sustainability for each portfolio company more effectively.

The team supports each portfolio company on its respective sustainability journey and consideration of the Company's objectives at portfolio company level. The team also leads ESG reporting for the Company and delivers the annual ESG review of the portfolio.

By interfacing with the Company's strategy, the team supports the Board to set the Sustainability strategy and objectives for the Company, and aligns with key stakeholders such as 3i Group, particularly on climate-related risks and opportunities.

Sustainability and ESG standards are discussed throughout this report. Please refer to Our approach, the Sustainability report in the Annual report and accounts 2023 and the Risk report.

"There is a strong link between companies that have high ESG standards and those that are able to achieve long-term sustainable business growth."

Anna Dellis

Partner, 3i Investments plc

Robust policies and procedures

Established investment and asset management processes are supported by the Investment Manager's comprehensive set of best practice policies, including governance, conduct, cyber security and anti-bribery.

Efficient balance sheet

The Company's flexible funding model seeks to maintain an efficient balance sheet with sufficient liquidity to make new investments. In order to capitalise on discretionary growth opportunities in the portfolio, during the year we raised new equity of £100 million.

Since FY15 the Company has raised equity three times and returned capital to shareholders twice following successful realisations.

Our approach

The infrastructure market

Competitive landscape

2022 was another very strong year for fundraising in the unlisted infrastructure space, with over US$300 billion raised in the core, core-plus and value added segments. Fundraising has become more concentrated around successful managers, with fewer funds being raised but the average fund size rising. This makes competition for suitable larger equity investments more intense.

Macro environment

The past year has seen a structural shift in the macroeconomic environment with significant inflation, increases in interest rates and volatile equity markets. This has slowed down M&A activity and impacted stock market performance.

In this environment, demand for infrastructure assets typically increases due to the essential nature of the services they provide and downside protection as they can act as a hedge with revenues directly or indirectly linked to inflation.

Our portfolio companies benefit from direct contract indexation and strong market positions providing pricing power. This is partially offset by the increase in operational costs experienced by a number of those companies.

Central banks raised interest rates in response to rising inflation. The impact on our portfolio has been limited, with over 95% of our portfolio company debt either fixed rate or hedged at 31 March 2023, and with no material refinancing due before 2026.

These trends, and our response to them, are discussed in more detail within the Risk report.

Megatrends

Megatrends are shaping the world around us, influencing decision making and changing the demands placed on our economy and services. Identifying the potential for change is a key driver of our investment decision making - from the businesses, sectors and countries we invest in, to the way we go about finding opportunities.

As the Company's portfolio continues to grow, we seek to diversify our investments across a range of megatrends that will provide a supportive environment for long-term sustainable returns to shareholders. We also continually assess underlying risk factors, both when considering new investment opportunities and in managing the existing portfolio and its exposure to certain risks, such as commodity prices and foreseeable technological disruptions.

Investment themes

Renewable energy generation

There is increasing demand for energy generated from renewable sources such as wind and solar to support the energy transition. Our investments in Infinis, Attero, and Valorem all generate energy from a variety of renewable sources and their combined installed capacity has grown significantly during our ownership.

Electrification/energy transition

The transition towards a low-carbon economy is gathering pace. Rising electricity consumption is increasing the demand for related equipment and services such as those provided by Joulz, which has expanded its offering to include solar and EV charging products.

Shared resources

Developed economies are experiencing a shift towards a shared resources model. This can lead to significant cost savings for users of capital intensive assets and also reduce overall GHG emissions. In the case of TCR, which provides pooled ground support equipment at airports, this has reduced the amount of equipment required.

Waste treatment and recycling

There is a trend towards increasing levels of recycling driven by regulatory requirements and consumer preferences. Attero is one of the largest waste treatment and disposal companies in the Netherlands and is benefitting from this increased demand for its services.

Automation, digital operations and increasing connectivity

Technology is developing rapidly, changing operating models and digitalising industrial processes. Business is increasingly mobile and data driven, which requires increasing levels of connectivity through digital infrastructure. Our communications infrastructure investments, Tampnet, GCX and DNS:NET, are benefitting from this increased demand.

Demand for healthcare

Increasing life expectancy and an ageing population are increasing the demand for healthcare-related services and infrastructure. Our investment in Ionisos, which provides cold sterilisation services to the medical and pharmaceutical industries, is aligned to this trend.

Global trade and transport

Businesses are seeking to increase supply resilience and achieve long-term price stability by establishing deeper, more diversified supplier bases for goods and services. This can help mitigate disruptions from extreme weather events and other localised situations. Advario Singapore (Oystercatcher) supports its customers storing and blending the gasoline used to transport these goods.

Urbanisation and smart cities

Technology is increasingly being used to enhance the efficiency and safety of urban areas. SRL's products allow for greater control of traffic flows, which in turn reduces congestion around roadworks and improves safety.

We have a positive influence on our portfolio companies.

Our influence

As active owners we seek to ensure that our investee companies are run responsibly and that they can make a positive contribution to their employees, customers, suppliers and the local communities in which they operate. This includes supporting and empowering management teams to develop resilient business strategies.

We create a culture at our portfolio companies where the Company's expectation that management teams embed sustainability into their strategy is well known.

We facilitate and encourage the exchange of best practices by portfolio companies by connecting companies that are more advanced in certain sustainability initiatives with others who can benefit from their expertise.

We seek to manage material ESG risks and opportunities during the period of the Company's investment. This includes enhancing portfolio companies' corporate governance and reporting, and encouraging them to improve their performance over time on sustainability issues that are material to them, with a particular focus on health and safety, and climate change.

We require all our portfolio companies to measure their GHG emissions. We encourage them to identify decarbonisation strategies. This year, we asked an initial subset of our portfolio companies to develop GHG emission reduction targets that are aligned with the objectives of the Paris Agreement.

Our portfolio

Many infrastructure businesses have sustainability at their core, providing or enabling the provision of essential services to society, interconnectivity and the appropriate management of resources.

Whilst the Company does not pursue a sustainability-driven investment strategy, it does use its influence in the investments it makes, where appropriate, to seek to contribute positively to environmental and social sustainability objectives, such as transitioning to a low carbon and circular economy, enabling a healthy and safe society and fostering inclusive growth.

We believe such contributions, alongside good ESG performance of our portfolio, can protect and potentially enhance value for the Company's shareholders.

Sustainability in action

Examples of our portfolio companies' sustainability strategies

Contributing to a low-carbon future

·  Invest in the production of clean energy

·  Engage with suppliers on low-carbon innovation

·  Support customers to decarbonise their operations

·  Develop GHG emissions reduction strategies

Supporting safety and good health

·  Adhere to high health and safety standards that protect employees

·  Enable safe operations for customers

·  Embed a safety culture across the organisation

·  Contribute to high quality healthcare through Ionisos

Fostering inclusive growth

·  Adhere to high governance and ethical work standards

·  Be an employer of choice supported by a diverse and inclusive culture

·  Create job opportunities and engage with local communities

·  Support local and international connectivity through our telecommunication businesses

Our strategy

Our strategy is to maintain a balanced portfolio of infrastructure investments delivering an attractive mix of income yield and capital appreciation for shareholders.

Strategic priorities

Our objectives and KPIs

Our portfolio

New investment

Future Biogas

Investment rationale

·  Future Biogas is one of the largest anaerobic digestion ('AD') plant developers and biogas producers in the UK, operating 11 AD plants on behalf of institutional investors under long-term contracts

·  There is strong political support and growing corporate demand for domestically-produced biomethane, which, as a direct substitute for fossil natural gas, has an essential role to play in decarbonising some of the UK's gas-dependent sectors such as heat, transport and manufacturing

·  On a national scale, the use of biomethane (vs. natural gas) allows the existing gas infrastructure to help meet the UK government's net zero and energy security targets without any change to the existing system

·  Future Biogas will develop a new generation of unsubsidised AD plants and sell the resulting biomethane under long-term offtake agreements to corporate buyers

·  In the longer term, Future Biogas intends to enter the nascent but high potential voluntary carbon offset market through carbon capture and storage

·  Future Biogas has a highly experienced management team with a strong track record in the sector

Characteristics

Portfolio review

The portfolio is generating strong growth momentum supported by long-term tailwinds. We are confident that it will continue to generate attractive further investment opportunities and is well positioned to deliver our target returns.

The Company's portfolio was valued at £3,641 million at 31 March 2023 (2022: £2,873 million) and delivered a total portfolio return in the year of £501 million, including income and allocated foreign exchange hedging (2022: £509 million).

Table 1 summarises the valuations and movements in the portfolio, as well as the return for each investment, for the year.

The total portfolio return in the year of £501 million was 15.1% (2022: £509 million, 19.8%) of the aggregate of the opening value of the portfolio and investments less amounts syndicated in the year (excluding capitalised interest), which totalled £3,325 million.

Performance was strong across the portfolio, driven by outperformance from a number of portfolio companies, but particularly TCR, Tampnet, Ionisos, Attero and Valorem, each of which continues to benefit from positive underlying growth trends. The other portfolio companies performed in line with expectations, with the exception of DNS:NET, which continues to face challenges with its fibre network roll out.

Table 2 shows the portfolio return in the year for each asset as a percentage of the aggregate of the opening value of the asset and investments in, and syndication of, the asset in the year (excluding capitalised interest). Note that this measure does not time-weight for investments and syndications in the year and includes foreign exchange movements net of hedging.

Table 2: Portfolio return by asset (year to 31 March 2023, %)

* GCX acquired in August 2022 and Future Biogas acquired in February 2023 and return not annualised.

** Divested in June 2022 and return not annualised.

Movements in portfolio value

The movements in portfolio value were driven principally by the delivery of planned cash flows and other asset outperformance as well as new and follow-on investments and syndications made during the year. A reconciliation of the movement in portfolio value is shown in Table 3 below. The portfolio summary shown in Table 1 details the analysis of these movements by asset. Changes to portfolio valuations arise due to several factors, as shown in Table 4.

The portfolio generated a value gain of £320 million in the year, alongside income of £156 million.

Table 3: Reconciliation of the movement in portfolio value (year to 31 March 2023, £m)

Portfolio activity

Our renewable energy generating companies, Infinis, Valorem and Attero, performed strongly in the year and have made substantial progress in developing their pipelines of new projects towards and into operation. This is reflected in an overall increase in installed capacity from 898MW to 979MW over the year, as shown in the Sustainability report in the Annual report and accounts 2023.

Infinis had a very strong year, generating a value gain of £52 million driven by higher forecast future power prices and price volatility which benefitted the power response assets in particular. Its power response assets experienced higher running hours driven by the UK's power generation capacity constraints.

Infinis made significant progress in further establishing a 1.5GW solar energy generation and battery storage pipeline across various stages of development.

In March 2023, we invested a further £30 million of equity to support the development of this pipeline, with the remainder of the funding coming from the company's own cash generation and debt facilities.

Valorem materially outperformed the prior year despite the French government's 90% windfall tax. Its closed capacity now totals 778MW of wind and solar projects including new projects in France and Finland and its first project in Greece. It has a healthy 5.7GW pipeline of wind and solar projects in Europe as well as long-term feed-in tariffs unaffected by the windfall tax. The market fundamentals in France and the EU for renewable developers remains strong, particularly due to recent availability issues experienced by the French nuclear power sector and France's renewables development targets. French solar and wind auction tariffs increased by c.25% in 2022 versus 2021.

Attero also benefitted from high power prices although its hedging strategy insulates it from short-term price volatility. Despite waste supply volumes being slightly lower than expectations due to lower economic activity, the company outperformed the prior year due to the higher electricity price outlook and good availability at its EfW plants.

The £47 million value increase in Attero is due to several waste supply contracts recontracted at increased gate fees and for longer periods, as well as the higher longer-term electricity price outlook.

Preparations for a potential divestment of Attero are at an advanced stage. Any sale proceeds are expected to contribute towards partially repaying drawings on the Company's RCF.

TCR materially outperformed expectations, increasing in value by £86 million, due to a number of significant contract wins and extensions, higher utilisation rates of the fleet, and stronger than expected repair and maintenance activity.

This outperformance reflects a sustained rebound of air traffic levels as well as an increased post-pandemic demand for its full-service rental model globally. TCR added over 35 airports to its portfolio in 2022 and its off-lease rate has reverted to pre-Covid-19 levels.

In November 2022, TCR completed the bolt-on acquisition of Adaptalift, an Australian-headquartered ground service equipment lessor, adding incremental contracted EBITDA at an attractive valuation with strong expected synergies.

TCR successfully raised additional debt from existing and new lenders to support its next growth phase.

ESVAGT and Joulz, which indirectly contribute to the energy transition, have performed well and are benefitting from the tailwinds in this sector.

ESVAGT had a good year, benefitting from contract rates in excess of our expectations and high utilisation levels. Inflation is generally positive for ESVAGT due to its index-linked contracts, although cost inflation, in particular fuel costs, accelerated in the year.

In January 2023, ESVAGT's joint venture in the United States, CREST, won its first SOV contract in the US offshore wind market. The 15-year SOV contract is with Siemens Gamesa, servicing the Coastal Virginia Offshore Windfarm, the largest offshore wind project in the US (2.6GW), and was an important milestone in ESVAGT's growth ambitions, representing an incremental step up in earnings.

The pipeline for further new SOVs in the North Sea and the rapidly accelerating US wind market is strong and we expect a number of tenders will take place over the next 12 months.

ESVAGT's ERRV segment continued to see good momentum due to the improved oil and gas markets, attractive supply/demand dynamics and an increased focus on security of supply in Europe.

Joulz performed ahead of expectations due to strong growth in the order book, including for its large integrated Energy Transition Solutions. The business made considerable progress diversifying its supplier base to mitigate the risk of delays previously experienced in completing new installations, primarily due to key hardware suppliers struggling to keep up with rising demand.

The company's long-term contracts are directly linked to inflation, and this provided good protection for higher operating and capital costs.

In December 2022, Joulz successfully raised debt financing, which was utilised to replenish its revolving credit facility, supporting the funding of further growth opportunities. As part of a planned transition, a new CEO joined the business in March 2023.

Our communications infrastructure investments, Tampnet, GCX and DNS:NET, are taking advantage of the acceleration in digitalisation trends.

Tampnet performed well in the year, increasing in value by £52 million, driven by higher forecast revenues due to the signing of new private network contracts, identification of new potential growth opportunities and extended life assumptions resulting from higher energy prices and the increased focus on security of energy supply by governments in Europe and the US. It exceeded budgeted revenue and EBITDA targets due to increased offshore activity on the back of improved sentiment in the energy markets and stronger demand for bandwidth upgrades.

Tampnet is progressing a number of new fibre projects in the North Sea and the Gulf of Mexico and signed a number of important new contracts in both regions. The company is also in discussions with several carbon capture and storage projects in the North Sea which are located within Tampnet's existing network. The digitisation proposition offered by Tampnet (combining low-latency connectivity with services such as Private Networks) is continuing to prove popular with customers, and we expect to see an acceleration of the short-term penetration of digitisation projects.

GCX had a good year with strong growth in lease revenues, although indefeasible right of use sales are behind schedule. The business secured a significant managed services contract during the year and is experiencing increasing demand for bandwidth capacity across its network. The business is evaluating a number of opportunities to expand its subsea network as well as the development of terrestrial assets. GCX and Tampnet announced a strategically important partnership which supports the increasing network connectivity demands of the data centre market in the Nordics.

DNS:NET continues to experience delays in the roll out of its fibre network in the Berlin area and specifically in connecting and activating customers. We have updated the forecasts to reflect more conservative roll-out assumptions, which has led to a £54 million value decrease in the year.

Operational performance was below expectations as delays to connect and activate new homes persist, which we see as an industry-wide challenge. The delivery of a network built by a local authority to be transferred to DNS:NET under concession contract is also running behind schedule.

During the year, we invested a further £15 million to support the business's roll out and have worked with the company to optimise its business model and strengthen the management team in order to minimise and recover the roll out delays. A new CFO was appointed in January 2023. He is overseeing the implementation of a new ERP system and other initiatives. Hiring to further strengthen the management team is also underway, aimed at providing the bandwidth and experience to accelerate the network roll out.

Ionisos delivered meaningful growth against prior year due to strong volume growth, notably in the medical and pharmaceutical segments, resulting in a £43 million gain in value.

In order to meet growing demand, Ionisos progressed various expansion opportunities, including extending existing sterilisation facilities, acquiring the Daniken E-Beam plant in Switzerland, and a new greenfield EO plant in Kleve, Germany, which became operational in January 2023. In a capacity constrained market, these initiatives will increase Ionisos's ability to address and meet strong underlying demand growth for sterilisation, whilst diversifying its technology mix and expanding the geographic footprint from which it will service its medical and pharmaceutical client base.

Oystercatcher performed well in the year. Advario Singapore Limited's ('ADS') customer activity levels were high and all available capacity was let. This was despite a backdrop of a backwardation market structure for petroleum products. Our positive medium-term outlook remains unchanged given the terminal is the premier gasoline blending terminal in Singapore and the wider region.

A strategic transition to some green fuel storage is progressing well. In 2022, a first agreement was signed with a customer to start storing and blending sustainable aviation fuel ('SAF') at ADS. The project to convert existing storage to accommodate SAF is on track and is expected to be operational in mid-2023. We believe this gives ADS a first mover advantage for SAF-related business in Singapore.

SRL performed broadly in line with plan during the financial year. Whilst higher than in the previous year, activity levels were slightly lower than expected due to delays in capital expenditure programmes in the public sector and construction sectors resulting in fewer days on hire than forecast. The Investment Manager is working closely with management to professionalise account management processes and optimise fleet utilisation and build.

Summary of portfolio valuation methodology

Investment valuations are calculated at the half-year and at the financial year end by the Investment Manager and then reviewed by the Board. Investments are reported at the Directors' estimate of fair value at the relevant reporting date.

The valuation principles used are based on International Private Equity and Venture Capital ('IPEV') valuation guidelines, generally using a discounted cash flow ('DCF') methodology (except where a market quote is available), which the Investment Manager considers to be the most appropriate valuation methodology for unquoted infrastructure equity investments.

Where the DCF methodology is used, the resulting valuation is checked against other valuation benchmarks relevant to the particular investment, including, for example:

·  earnings multiples;

·  recent transactions; and

·  quoted market comparables.

In determining a DCF valuation, we consider and reflect changes to the two principal inputs, being forecast cash flows from the investment and discount rates.

We consider both the macroeconomic environment and investment-specific value drivers when deriving a balanced base case of cash flows and selecting an appropriate discount rate.

Inflation in the UK and Europe has risen sharply which has put pressure on supply chain and employee costs.

The portfolio is positively correlated to inflation, but the ability to pass cost inflation to customers varies by portfolio company so we take a granular approach to modelling the effects of inflation.

Higher longer-term power prices have positively affected the valuation of our energy generating portfolio companies, although the majority of our power price exposure was hedged in the short to medium term.

Future power price projections are taken from independent forecasters and changes in these assumptions will affect the future value of these investments. Recently introduced taxes on renewable electricity generators vary in their applicability and we have considered their impact on each company individually, based on their circumstances.

TCR operates in the aviation sector, which has been severely affected by travel restrictions over the past three years.

The value of TCR assumes a full recovery in air traffic to pre-Covid-19 levels in 2024, consistent with the assumptions made in the prior year.

As a 'through-the-cycle' investor with a strong balance sheet, we consider valuations in the context of the longer-term value of the investments. This includes consideration of climate change risk and stranded asset risk. Factors considered include physical risk, litigation risk linked to climate change and transition risk (for example, assumptions on the timing and extent of decommissioning of North Sea oil fields, which affects Tampnet and ESVAGT).

We take a granular approach to these risks, for example each relevant offshore oil and gas field has been assessed individually to forecast the market over the long term and a low terminal value has been assumed at the end of the forecast period.

In the case of stranded asset risk, we consider long-term threats that may impact value materially over our investment horizon, for example, technological evolution, climate change, or societal change.

For ESVAGT, which operates ERRVs in the North Sea servicing sectors, including the oil and gas market, we do not assume any new vessels or replacement vessels in our valuation for that segment of the business.

A number of our portfolio companies are set to benefit from these long-term megatrends and, in the base case for each of our valuations, we take a balanced view of potential factors that we estimate are as likely to result in underperformance as outperformance.

Discount rate

Table 5 shows the movement in the weighted average discount rate applied to the portfolio at the end of each year since the Company's inception and the position as at March 2023. The weighted average discount rate increased over the course of FY23 due to the evolution of the portfolio mix following the realisation of the European Projects portfolio and the completion of the GCX and Future Biogas acquisitions.

The range of discount rates used in individual valuations at 31 March 2023 is also shown, which is broadly consistent with the prior year.

During the year, we witnessed an increase in risk-free rates across Europe as central banks took action in response to higher inflation. Given the significant risk premium included in our long-term discount rates and the continued appetite for high-quality infrastructure businesses, rising risk-free rates did not impact the discount rates used to value our portfolio companies at 31 March 2023.

Table 5: Portfolio weighted average discount rate (31 March, %)

Portfolio company debt

Our portfolio companies are funded by long-term senior-secured debt alongside equity from the Company and other shareholders. Valorem also uses project financing in its portfolio of renewable energy projects. There were no mezzanine or junior debt structures within our portfolio at 31 March 2023 (2022: none).

In recent years, the Investment Manager proactively refinanced facilities across the portfolio, extending the term of the debt and securing low fixed rates or hedged interest rates.

When considering the appropriate quantum of debt for a portfolio company, we typically look for an investment grade level of risk. Some portfolio companies have an investment grade credit rating from a credit rating agency. Table 6 below shows the average loan-to-value ('LTV') ratio across the portfolio as well as the portfolio value analysed across a range of loan-to-value levels. The average loan-to-value ratio is 33% (2022: 34%) with all portfolio companies below a ratio of 40% at 31 March 2023 (2022: below 45%).

Table 6: Portfolio company leverage* (3iN value at 31 March 2023)

Investment track record

As shown in Table 7, since its launch in 2007, 3i Infrastructure has built a portfolio that has provided:

·  significant income, supporting the delivery of a progressive annual dividend;

·  consistent capital growth; and

·  strong capital profits from realisations.

These have contributed to a 19% annualised asset Internal Rate of Return ('IRR') since the Company's inception. The European portfolio has generated strong returns, in line with, or in many cases ahead of, expectations.

These returns were underpinned by substantial cash generation in the form of income or capital profits.

The value created through this robust investment performance has been crystallised in a number of instances through well-managed realisations, shown as 'Realised assets' in Table 7.

While the Company is structured to hold investments over the long term, it has sold assets where compelling offers will generate additional shareholder value.

Portfolio asset returns in Table 7 include an allocation of foreign exchange hedging where applicable.

Table 7: Portfolio asset returns throughout holding period (since inception, £m)

Portfolio asset returns include allocation of foreign exchange hedging where applicable. Dates of asset realisations refer to completion dates.

Financial review

James Dawes

CFO, Infrastructure

The Company delivered strong NAV growth and continues to grow its dividend per share.

The Company delivered another year of outperformance, with the portfolio generating strong capital growth and income materially higher than the prior year. The dividend was well covered by net income this year. The target dividend for FY24 of 11.90 pence per share is an increase of 6.7% over FY23.

Total net investment in the year was £452 million, including the closing of the investments in GCX, TCR and Future Biogas, the syndication of a portion of the investments in ESVAGT and TCR and further investments in DNS:NET and Infinis. The Company maintained low levels of uninvested cash throughout the year and actively managed its liquidity position through its £900 million RCF facility and a £100 million capital raise in February 2023.

Returns

Total return

The Company generated a total return for the year of £394 million, representing a 14.7% return on time-weighted opening NAV and equity issued net of the prior year final dividend (2022: £404 million, 17.2%). This performance is significantly ahead of the target return of 8% to 10% per annum to be achieved over the medium term.

This outperformance was driven by strong performance across the portfolio, particularly from TCR, Tampnet, Valorem, Attero and Ionisos, partially offset by underperformance from DNS:NET. Changes in the valuation of the Company's portfolio assets are described in the Movements in portfolio value section of the Portfolio review. The investment cases of our portfolio companies reflected in the valuations at 31 March 2023 are fully funded, with the exception of the DNS:NET fibre roll out. Our companies continue to generate discretionary growth opportunities that are accretive to our investment cases.

Total income and non-income cash of £202 million in the year was significantly higher than last year, due to income from new investments in GCX, ESVAGT, TCR and SRL (2022: £143 million).

Non-income cash receipts reflect distributions from underlying portfolio companies, which would usually be income to the Company, but which are distributed as a repayment of investment for a variety of reasons. Whilst non-income cash does not form part of the total return shown in Table 8, it is included when considering dividend coverage.

An analysis of the elements of the total return for the year is shown in Table 8.

Table 8: Summary total return (year to 31 March, £m)

Table 9: Reconciliation of the movement in NAV (year to 31 March 2023, £m)

Capital return

The capital return is the largest element of the total return. The portfolio generated a value gain of £320 million in the year to 31 March 2023 (2022: £375 million), as shown in Table 9. There was a positive contribution across the majority of the portfolio and the largest contributors were TCR (£86 million), Infinis (£52 million) and Tampnet (£52 million). The only negative contribution was from DNS:NET (£54 million). These value movements are described in the Portfolio review section.

Income

The portfolio generated income of £156 million in the year (2022: £127 million). Of this amount, £1 million was through dividends (2022: £24 million) and £155 million through interest on shareholder loans (2022: £103 million). An additional £2 million of interest was accrued on the vendor loan notes issued in lieu of WIG proceeds (2022: £6 million) together with a further £0.5 million of interest receivable on deposits (2022: £0.1 million).

Total income and non-income cash is shown in Table 10.

A strong income contribution from the new investments in GCX and SRL and higher non-income cash receipts, particularly from Attero, offset the reduction in income from the divestment of the European Projects portfolio. A breakdown of portfolio income is provided in Table 13, together with an explanation of the change from prior year.

Interest income from the portfolio was significantly higher than prior year due to the new investments in GCX, SRL, TCR and ESVAGT. Dividend income was lower than prior year due to a high level of dividend income from Tampnet in the prior year as liquidity preserved during the pandemic was released.

Foreign exchange impact

The portfolio is diversified by currency as shown in Table 11. We aim to deliver steady NAV growth for shareholders, and the foreign exchange hedging programme helps us to do this by reducing our exposure to fluctuations in the foreign exchange markets.

Portfolio foreign exchange movements, after accounting for the hedging programme, increased the net capital return by £25 million (2022: increased by £7 million).

Table 11: Portfolio value by currency (at 31 March 2023)

As shown in Table 12, the reported foreign exchange gain on investments of £19 million (2022: £9 million) included a gain of £13 million from the Company's exposure to the US dollar, largely through Tampnet, which was not hedged in the first half of the year. This was accompanied by a £6 million gain on the hedging programme (2022: loss of £2 million). The positive hedge benefit resulted from favourable interest rate differentials on the euro hedging programme.

Table 12: Impact of foreign exchange ('FX') movements on portfolio value (year to 31 March 2023, £m)

Table 13: Breakdown of portfolio income (year to 31 March, £m)

Costs

Management and performance fees

During the year to 31 March 2023, the Company incurred management fees of £47 million (2022: £43 million), including transaction fees of £3 million (2022: £10 million). The fees, payable to 3i plc, consist of a tiered management fee, and a one-off transaction fee of 1.2% payable in respect of new investments. The management fee tiers range from 1.4%, reducing to 1.2% for any proportion of gross investment value above £2.25 billion.

An annual performance fee is also payable by the Company, amounting to 20% of returns above a hurdle of 8% of the total return. This performance fee is payable in three equal annual instalments, with the second and third instalments only payable if certain future performance conditions are met. This hurdle was exceeded for the year ended 31 March 2023, resulting in a performance fee payable to 3i plc in respect of the year ended 31 March 2023 of £45 million (2022: £54 million).

The first instalment, of £15 million, will be paid in May 2023 along with the second instalment of £18 million relating to the previous year's performance fee and the third instalment of £2 million relating to the FY21 performance fee.

For a more detailed explanation of how management and performance fees are calculated, please refer to Note 18 of the accounts.

Fees payable

Fees payable on investment activities include costs for transactions that did not reach, or have yet to reach, completion and the reversal of costs for transactions that have successfully reached completion and were subsequently borne by the portfolio company. For the year to 31 March 2023, fees payable totalled less than £1 million (2022: £3 million).

Other operating and finance costs

Operating expenses, comprising Directors' fees, service provider costs and other professional fees, totalled £3 million in the year (2022: £3 million).

Finance costs of £16 million (2022: £5 million) in the year comprised arrangement and commitment fees for the Company's £900 million RCF and interest on drawings. Finance costs were higher than in FY22 due to an increase in interest rates and a greater average drawn balance.

Ongoing charges ratio

The ongoing charges ratio measures annual operating costs, as disclosed in Table 14 below, against the average NAV over the reporting period.

The Company's ongoing charges ratio is calculated in accordance with the Association of Investment Companies ('AIC') recommended methodology and was 1.64% for the year to 31 March 2023 (2022: 1.41%). The ongoing charges ratio is higher in periods where new investment levels are high and new equity is raised or capital is returned to shareholders. Realisation of assets reduces the ongoing charges ratio. The cost items that contributed to the ongoing charges ratio are shown below.

The AIC methodology does not include transaction fees, performance fees or finance costs. However, the AIC recommends that the impact of performance fees on the ongoing charges ratio is noted, where performance fees are payable. The ratio including the performance fee was 3.19% (2022: 3.52%). The total return of 14.7% for the year is after deducting this performance fee and ongoing charges.

Balance sheet

The NAV at 31 March 2023 was £3,101 million (2022: £2,704 million). The principal components of the NAV are the portfolio assets, cash holdings, the fair value of derivative financial instruments, borrowings under the RCF and other net assets and liabilities. A summary balance sheet is shown in Table 15.

At 31 March 2023, the Company's net assets after the deduction of the proposed final dividend were £3,050 million (2022: £2,657 million).

Cash and other assets

Cash balances at 31 March 2023 totalled £5 million (2022: £17 million).

Cash on deposit was managed actively by the Investment Manager and there are regular reviews of counterparties and their limits. Cash is principally held in AAA-rated money market funds.

Other net assets and liabilities predominantly comprise a performance fee accrual of £83 million (2022: £64 million), including amounts relating to prior year fees.

The movement from March 2022 is due to an increase in the performance fee payable of £45 million, following the outperformance in the period. £26 million of prior year performance fees were paid during the period. The vendor loan note of £98 million, included as an asset within other net assets at March 2022, was redeemed in July 2022.

Borrowings

The Company increased the commitments under its RCF in July 2022 from £700 million to £900 million in order to maintain a good level and maturity of liquidity for further investment whilst minimising returns dilution from holding excessive cash balances. This is a three-year facility, with a maturity date of November 2025. A further one-year extension option is available under the facility agreement. At 31 March 2023, the total amount drawn was £501 million.

An additional credit facility of £300 million available at the beginning of this financial year, with a maturity of less than one year, was cancelled in July 2022 at the same time as the commitments under the RCF were increased.

Capital raise

In February 2023, the Company successfully completed a capital raise, with net proceeds of £100 million, by way of a placing of ordinary shares in the capital of the Company at 330 pence per share. The placing price represented a discount of approximately 3.4% to the share price immediately prior to the announcement of the placing. A total of 30,915,990 new ordinary shares were admitted to trading on the London Stock Exchange main market for listed securities on 14 February 2023. The Company now has a total of 922,350,000 shares in issue, an increase of 3.5%. Soft pre-emption was followed where possible in allocating the shares.

NAV per share

The total NAV per share at 31 March 2023 was 336.2 pence (2022: 303.3 pence). This reduces to 330.6 pence (2022: 298.1 pence) after the payment of the final dividend of 5.575 pence (2022: 5.225 pence). There are no dilutive securities in issue.

Dividend and dividend cover

The Board has proposed a dividend for the year of 11.15 pence per share, or £101 million in aggregate (2022: 10.45 pence; £93 million). This is in line with the Company's target announced in May last year.

When considering the coverage of the proposed dividend, the Board assesses the income earned from the portfolio, interest received on cash balances and any additional non-income cash distributions from portfolio assets which do not follow from a disposal of the underlying assets, as well as the level of ongoing operational costs incurred in the year. The Board also takes into account any surpluses retained from previous years, and net capital profits generated through asset realisations, which it considers available as dividend reserves for distribution.

Table 16 shows the calculation of dividend coverage and dividend reserves. The dividend was fully covered for the year with a surplus of £35 million (2022: no surplus).

The retained amount available for distribution, following the payment of the final dividend, the realised profit over cost relating to the sale of the European Projects portfolio and the performance fee will be £814 million (2022: £794 million). This is a substantial surplus, which is available to support the Company's progressive dividend policy, particularly should dividends not be fully covered by income in a future year.

A shortfall could arise, for example, due to holding substantial uninvested cash or through lower distributions being received from portfolio companies in order to preserve liquidity.

Table 17 shows that the Company has consistently covered the dividend over the last five years.

Table 17: Dividend cover (five years to 31 March 2023, £m)

Sensitivities

The sensitivity of the portfolio to key inputs to our valuations is shown in Table 18 and described in more detail in Note 7 to the accounts. The portfolio valuations are positively correlated to inflation. The longer-term inflation assumptions beyond two years remain consistent with central bank targets, eg. UK CPI at 2%.

The sensitivities shown in Table 18 are indicative and are considered in isolation, holding all other assumptions constant. Timing and quantum of price increases will vary across the portfolio and the sensitivity may differ from that modelled. Changing the inflation rate assumption may necessitate consequential changes to other assumptions used in the valuation of each asset.

Table 18: Portfolio sensitivities (year to 31 March 2023)

Alternative Performance Measures ('APMs')

We assess our performance using a variety of measures that are not specifically defined under IFRS and are therefore termed APMs. The APMs that we use may not be directly comparable with those used by other companies. These APMs provide additional information of how the Company has performed over the year and are all financial measures of historical performance.

The APMs are consistent with those disclosed in prior years but this year we have added two new APMs, Total liquidity and Portfolio debt to enterprise value. The Directors monitor total liquidity to assess the Company's ability to make further investments, the efficiency of the balance sheet, and short-term viability. Portfolio debt to enterprise value is monitored to assess the underlying gearing of portfolio companies, the consequential risk in the forecast cashflows of those companies and the ability of portfolio companies to fund capital expenditure from their own resources.

·  Total return on opening NAV reflects the performance of the capital deployed by the Company during the year. This measure is not influenced by movements in share price or ordinary dividends to shareholders. This is a common APM used by investment companies

·  The NAV per share is a measure of the underlying asset base attributable to each ordinary share of the Company and is a useful comparator to the share price. This is a common APM used by investment companies

·  Total income and non-income cash is used to assess dividend coverage based on distributions received and accrued from the investment portfolio

·  Investment value including commitments measures the total value of shareholders' capital deployed by the Company

·  Total portfolio return percentage reflects the performance of the portfolio assets during the year

·  Total liquidity is a measure of the Company's ability to make further investments and meet its short-term obligations

·  Portfolio debt to enterprise value is a measure of underlying indebtedness of the portfolio companies

The definition and reconciliation to IFRS of the APMs is shown below.

Risk report

"Thoughtful risk management is a cornerstone of our risk governance framework."

Wendy Dorman

Chair, Audit and Risk Committee

This was the second year of a three-year cycle of risk reviews, whereby the Audit and Risk Committee (the 'Committee'), alongside the Investment Manager, conducted a thorough review to identify and consider the impact and likelihood of the key, principal and emerging risks facing the Company today.

Against the backdrop of the current geopolitical and macroeconomic environment, the Company has continued to perform strongly, supported by our risk management framework and process, which enables appropriate and responsive decision making.

The following sections explain how we identify and manage risks to the Company. We outline the key risks, our assessment of their potential impact on the Company and our portfolio in the context of the current environment and how we seek to mitigate them.

Our risk review process follows a three-year cycle, whereby once every three years we carry out a detailed review involving each Director independently assessing the risks facing the Company, then collating and comparing the results, which we refer to as the 'blank sheet of paper exercise'. This was performed last year as it was the first year of the cycle.

This year, a number of risks were reassessed to reflect developments in the year, and the list of emerging risks was refreshed. The Committee updated the risk register and risk matrix as a result of the analysis conducted during the year, and considered the alignment of the principal risks identified to the Company's strategic objectives.

Approach to risk governance

The Board is ultimately responsible for the risk management of the Company. It seeks to achieve an appropriate balance between mitigating risk and generating long-term sustainable risk-adjusted returns for shareholders. Integrity, objectivity and accountability are embedded in the Company's approach to risk management.

The Board exercises oversight of the risk framework, methodology and process through the Committee. The risk framework is designed to provide a structured and consistent process for identifying, assessing and responding to risks. The Committee ensures that there is a consistent approach to risk across the Company's strategy, business objectives, policies and procedures.

The Company is also reliant on the risk management frameworks of the Investment Manager and other key service providers, as well as on the risk management operations of each portfolio company.

The Board manages risks through reports from the Investment Manager and other service providers and through representation on all portfolio companies' boards by the Investment Manager's team members.

There were no significant changes to the overall approach to risk governance or its operation in FY23, but we continued to refine our framework for risk management where appropriate.

Risk framework

Risk-related reporting

Risk appetite

The Committee discusses the Company's risk appetite annually and this year concluded that it remained broadly stable. As an investment company, the Company seeks to take investment risk. The appetite for investment risk is described previously in the Our business model section, and in the Investment policy towards the end of this document. Investments are made subject to the Investment Manager's Responsible Investment policy, which addresses an important element of our appetite for investment risk. Given the strong competition for new investments, investment discipline remains a key consideration.

The target risk-adjusted objective of delivering 8% to 10% return per annum over the medium term remains consistent with our current portfolio investment cases, including our recent new investments. It is expected that, as the portfolio expands, the range of expected returns in individual investment cases may also expand to include higher risk/return 'value add' cases and lower risk/return 'core' investments. We recognise that this has the potential to result in greater volatility in returns on an individual asset basis.

The benefits of diversification across sectors, countries and types of underlying economic risk will mitigate this volatility, and the Company has sought to build a diverse portfolio while considering carefully the underlying risks to which our portfolio companies are exposed. The Committee concluded that the risk appetite of the Company for core-plus infrastructure investments has not changed, and remains appropriate for our investment mandate and target returns. The Covid-19 pandemic provided a severe test of the appropriateness of the Company's risk appetite, and its attractiveness to investors. The portfolio overall has been resilient, and benefitted from diversification across infrastructure subsectors and types of underlying risks.

The key tools used by the Committee to define the Company's risk appetite and to determine the appetite for key risks are the risk register and the risk matrix.

The process of creating and reviewing the risk register and risk matrix is described below, together with a discussion of the Company's appetite for each of the key risks. Beyond the appetite for investment risk discussed above, the Company seeks to limit or manage exposure to other risks to acceptable levels.

Risk review process

The Company's risk review process includes the monitoring of key strategic and financial metrics considered to be indicators of potential changes in its risk profile. The review takes place three times a year, with the last review in April 2023, and includes, but is not limited to, the following:

·  infrastructure and broader market overviews;

·  key macroeconomic indicators and their impact on the performance and valuation of portfolio companies;

·  regular updates on the operational and financial performance of portfolio companies;

·  experience of investment and divestment processes;

·  compliance with regulatory obligations, including climate-related regulations;

·  analysis of new and emerging regulatory initiatives;

·  liquidity management;

·  assessment of climate risks to the portfolio, including physical, transition and litigation risks;

·  consideration of scenarios that may impact the viability of the Company;

·  assessment of emerging risks; and

·  review of the Company's risk log.

The Committee uses the risk framework to identify emerging and key risks, and to evaluate changes in risks over time. The framework is designed to manage rather than eliminate the risk of failure to achieve objectives and breaches of risk appetite. Developments during the year in the more significant key risks or 'principal risks' are discussed later in this document. These are risks that the Committee considers to have the potential to materially impact the delivery of our strategic objectives.

The Committee evaluates the probability of each identified risk materialising and the impact it may have, with reference to the Company's strategy and business model.

The review process assesses the likelihood and impact of each risk over two timeframes, within three years and beyond three years. The evaluation of these key risks is then presented on a risk matrix. Mitigating controls have been developed for each risk and the adequacy of the mitigation is then assessed and, if necessary, additional controls are implemented and reviewed by the Committee at a subsequent meeting.

The Committee considers the identified principal risks in greater detail in the assessment of the Company's viability.

A number of scenarios have been developed to reflect plausible outcomes should the principal risks be experienced, as well as consideration of stressed scenarios that could result in the Company ceasing to be viable.

As the Company is an investment company, the stressed scenarios reflect reduced cash flows from the Company's investment portfolio, such that debt covenants are breached and liabilities not met.

The Investment Manager models the impact of these scenarios on the Company and reports the results to the Committee. The resulting assessment of viability is included in this Risk report.

Review during the year

In October 2022, the Committee reassessed the identified key risks and considered any update to the list of emerging risks currently facing the Company. This involved a 'blank sheet of paper' exercise where each Director, and several members of the Investment Manager's team, identified the top emerging risks facing the Company, and discussed changes to the impact and likelihood of the principal risks.

In December 2022, the Investment Manager analysed the data collected and identified the emerging and principal risks facing the Company, scoring the principal risks for impact and likelihood (within a three-year period and beyond a three-year period). In January 2023, the results of the principal risk scoring were considered and assessed by the Committee and additional changes made. In April 2023, the Committee reviewed the updated risk register and risk matrix and the Company's appetite for each of the key risks.

We have a relatively diverse spread of assets in the portfolio and it is important that risk diversity is maintained as we evolve the portfolio through new investments, realisations and syndications.

Future realisations and syndications may continue the evolution of risk in the portfolio in line with our strategy and allow the Company to manage its exposure to more sensitive assets, or to take account of where the risk profile of an asset has changed over time.

We are confident that the portfolio remains defensive and resilient, and in a position to benefit from accretive but discretionary growth opportunities as highlighted in the Investment Manager's review. We believe the current appetite for risk is appropriate.

Risk register review process

October 2022

Directors identify potential emerging or new key risks facing the Company

December 2022

Analysis and interpretation of responses

January 2023

Impact and likelihood of the identified risks considered

April 2023

Risk register and risk matrix updated

Emerging risks

The Company is a long-term investor and therefore needs to consider the impact of both identified key risks, as detailed below, and risks that are considered emerging or longer-term. Risk categorisation, including the definition of emerging risk, is shown above.

The Board and the Investment Manager consider these factors when reviewing the performance of the portfolio and when evaluating new investments, seeking to identify which factors present a potential risk and can either be mitigated or converted into opportunities.

As part of the ongoing risk identification and management of the Company, the Committee considers whether these emerging risks should be added to the Company's risk register. The risk register is a 'live' document that is reviewed and updated regularly by the Committee as new risks emerge and existing risks change. Examples of emerging risks that were considered during the year include the impact of energy price caps, UK political change, escalation of the conflict in Ukraine, divergence between the UK and the EU regulation increasing friction over trade in goods and services, and escalating regulatory reporting requirements, including climate-related reporting requirements. In some cases, emerging risks may already be considered within a broader identified key risk, such as market and economic risk.

Key risks

Key risks are mapped by impact and likelihood on a risk matrix. During the year, the Committee considered the development of all the key risks in detail. Within the category of key risks, the principal risks identified by the Committee in the financial year are set out in the Principal risks and mitigation table below alongside how the Company seeks to mitigate these risks.

The risk review showed a high level of consistency with the prior year, with a small number of changes in the key risks identified. The assessment of likelihood and impact of the key risks resulted in some changes to the principal risks facing the Company.

Market and economic risk was considered the top risk facing the Company and was considered to have increased during the year. This includes the consequences of sanctions on Russia and Russian companies, increased commodity and energy prices, rising inflation and interest rates, supply chain constraints and a heightened risk of recession.

Following the high level of new investment, the management of liquidity risk is considered to have increased.

The risk of an inappropriate rate of investment and loss of senior Investment Manager staff is considered to have increased this year, given this liquidity risk.

These changes are reflected in the Principal risks and mitigations table.

Fraud and cyber risk

We remain vigilant to cyber- and other IT-related issues which could result in disruption to the Company, loss of data and/or reputational damage. The Investment Manager has a robust fraud risk assessment and anti-fraud programme in place. The latter includes fraud prevention work by their Internal Audit team, mandatory training to maintain vigilance and awareness, and provision of an independent reporting service or 'hotline' accessible by all staff. The Investment Manager's cyber security programme also aims to identify and mitigate the risks of third-party frauds, for example ransomware and phishing attacks, through the use of IT security tools and regular staff training. There is also a detailed business continuity and disaster recovery plan, should a significant event occur. The Company asks its service providers to inform it of any significant cyber events that they experience.

Environmental sustainability and climate risk

Environmental sustainability and ESG are an increasingly important focus amongst our shareholders and in the wider market.

Climate risk includes the short- to medium-term impacts, including transitional changes (for example, regulation and financial) as well as the long-term emerging risk of climate change (for example, flooding events). Failure to identify and mitigate risks at this stage could result in a reduction in the attractiveness of our assets, reputational damage and a reduction in value of our portfolio in the future.

Although there is still much uncertainty around the extent and timing of the impact of climate change, government and societal action, and future regulations, we recognise that climate-related risk is a key risk as well as an investment theme for the Company. We have separated climate-related risk into two distinct but related risks.

Climate regulation risk addresses the regulatory risk to the Company and the portfolio associated with the transition to a low-carbon economy. Climate risk addresses the physical and transition risks from climate change on the portfolio.

ESG and sustainability is increasingly important in the context of our strategic and investment objectives. Further information on work done in relation to ESG reporting, including climate-related disclosures, and our approach to climate-related risk and opportunities can be found in our Sustainability report. All of the companies in our portfolio recognise the importance of considering climate change and of evolving a sustainable business model. As discussed in the Sustainability report, the physical and transition climate-related risks are also seen as opportunities for all companies in our portfolio.

There are no acute physical nor transition risks identified in the portfolio that would suggest that climate risk is a principal risk, although an example of the impact of a transition risk is the introduction of a tax on imported waste or a carbon tax in the Netherlands, which impacts Attero, and the risk of early decommissioning of oil and gas assets, which impacts some customers of Tampnet and ESVAGT.

We consider that the mitigating controls at the Company and the Investment Manager over climate regulation risk prevent this from being a principal risk at the moment.

Principal risks and mitigations

External

Operational

Strategic

Investment

Development of significant key risks in the year

The disclosures in the Risk report are not an exhaustive list of risks and uncertainties faced by the Company, but rather a summary of significant key risks which are under active review by the Board. These significant key risks have the potential to affect materially the achievement of the Company's strategic objectives and impact its financial performance. This disclosure shows developments in these significant key risks for the year. The risks that have been identified as principal risks are described in more detail in the Principal risks and mitigations table.

External risks - market and competition

In the face of rising interest rates and macroeconomic uncertainty, infrastructure assets have proven relatively resilient when compared to the dislocation in other markets, but a difficult GDP environment remains a key risk for the Company. Infrastructure's fundamental characteristics as an asset class anchored by predictable, long-term revenue streams that are often linked to inflation have positioned the sector well to withstand recessionary risk and volatile markets.

The urgency of tackling climate change has also made investment in some sectors, such as those with a focus on energy transition, relatively insulated from macro headwinds. As a result, the European infrastructure market continues to experience strong demand for new investments. Private funds with a core-plus infrastructure focused mandate have significant amounts of dry powder and these are the Company's primary competition for new investment. Fundraising has increased at a faster pace than the number of funds raised, resulting in larger fund sizes creating intense competition for suitable infrastructure targets. There remains a risk that pricing does change for core-plus infrastructure in the medium term, but at this point we are not seeing any upward pressure on discount rates for core-plus infrastructure investments as these tend to have greater discount rate headroom to risk-free rates and strong inflation protection features. In this environment, the Investment Manager continues to leverage its network and skills to look for investments that can deliver attractive and sustainable risk-adjusted returns to the Company's shareholders.

Inflation in the UK and Europe has risen sharply in the year, driven by rising energy costs, supply chain bottlenecks, labour and raw material shortages and the reopening of economies from pandemic-related lockdowns. The portfolio is positively correlated to inflation as most portfolio companies have revenues at least partially linked to inflation, although higher inflation may also result in increased costs and supply chain disruption and, should it persist, is generally bad for economies as a whole. Sensitivities to macroeconomic assumptions are discussed in the Financial review and in Note 7 to the accounts.

Central bank base rates increased during the year in response to higher inflation and, although there is evidence, particularly in Europe, that this is bringing inflation back towards target levels, there is a risk that inflation will return to a level either above or below our long-term assumptions. There are no material refinancing requirements in the portfolio until 2026 and over 95% of long-term debt facilities are either hedged or fixed rate at 31 March 2023. This mitigates the risk from further near-term interest rate rises.

The Company is exposed to movements in sterling exchange rates against a number of currencies, most significantly the euro.

The Company operates a hedging programme which substantially offsets volatility in returns from exchange rate movements. The Board monitors the effectiveness of the Company's hedging policy on a regular basis.

The valuation of our portfolio companies that generate electricity is affected by the evolution of long-term power price forecasts and by fluctuations in the spot power price. Medium-term power price forecasts have also increased considerably during the year, driven by gas supply concerns, record carbon prices, low wind levels and higher commodity prices, particularly for gas. This has benefitted those portfolio companies that generate electricity and typically sell it on a forward basis in order to avoid spot market volatility: Infinis, Attero and Valorem.

Sanctions on Russia and Russian companies, together with the recovery from the Covid-19 pandemic, led to an increase in oil prices, peaking in June 2022.

Since then prices have come down, due to a softer economic environment and reduced trans-shipment volumes, but the market continues to be backwardated. For Oystercatcher, this may maintain some short-term downward pressure on pricing of contract renewals.

Ionisos is a provider of cold sterilisation and ionising radiation treatment services to the medical, pharmaceutical, plastics and cosmetics industries. Gamma radiation, one of the three methods of cold sterilisation used, relies on the radioactive decay of Cobalt-60, a scarce resource. Although a worldwide shortage of Cobalt-60 is expected until 2028, resulting from increased demand and the permanent closure of a large Russian reactor, Ionisos is in a good position to maintain its capacity as it has recently expanded its supplier base and is in advanced discussions with one supplier for a five-year supply agreement.

During the past three years, TCR was affected by air traffic movements and passenger numbers being substantially below the levels seen before the Covid-19 pandemic.

We are pleased with the performance of TCR over the duration of the pandemic and the strong performance this year and we have maintained our assumption of a return to pre-pandemic levels of air travel by 2024.

DNS:NET is being affected by the industry-wide challenge of rolling out a FTTH network in Germany due to the complexity of the construction process and difficulty in obtaining permits for construction, alongside cost inflation. The German government is planning to accelerate the roll out through a simpler and digitalised approval process.

External risks - regulatory and tax

The Company's investments in Infinis, Valorem and Attero are exposed to electricity market regulation risk in their respective countries. On 1 January 2023, the UK government introduced a levy or price cap on extraordinary returns from electricity generation (the 'EGL').

The EGL is an exceptional and time-limited measure that is due to expire in 2028.

The French and Dutch governments introduced taxes on merchant revenues above a price cap for 2023. The effect of current and proposed legislation is reflected in the valuations of these portfolio companies.

Strategic risks

The Company manages its balance sheet and liquidity position actively, seeking to maintain adequate liquidity to pursue new investment opportunities, while not diluting shareholder returns by holding surplus cash balances. At 31 March 2023 there was £5 million available in cash, with drawings of £501 million under the RCF. During the year the Company raised a further £100 million through an equity placing and extended the maturity of its RCF facility to November 2025.

The portfolio is diversified across sector and geography, with no investment above 15% of portfolio value.

Investment risks

As part of our investment due diligence and active portfolio management, the Investment Manager uses specialist cyber security advisers to ensure that our companies remain vigilant and continue to focus on effective operations of controls against possible cyber-attacks. Some of our portfolio companies do experience fraud attempts, some of which are successful, but none have had a material impact on any of our companies.

Operational risks

The key areas of operational risk include attracting and retaining key personnel at the Investment Manager, and whether the Investment Manager's team can continue to support the delivery of the Company's objectives. The team has strength and depth, and the transition in senior management has been carefully managed. The Board monitors the performance of the Investment Manager through the Management Engagement Committee. It also monitors the performance of key service providers, receiving reports of any significant control breaches.

Resilience statement

Our resilience comes from the effective implementation of our business model. Key elements of our business model relating to resilience include the Investment Manager's disciplined approach to new investment and engaged asset management, the defensive characteristics of our portfolio of investments, high ESG standards, our flexible funding model and efficient balance sheet, and the capability of the Investment Manager's team.

This is underpinned by the strong institutional culture and values of our Investment Manager, high standards of corporate governance, and effective risk management.

Over the life of the Company, the Investment Manager has built a resilient and diversified portfolio with good growth potential and downside protection that delivers an attractive mix of income yield and capital appreciation for shareholders. This has been achieved through consistent delivery of our strategic priorities.

Short-term resilience

The Directors assess the Company's short-term resilience through monitoring portfolio, pipeline and finance reports. These are prepared monthly, and discussed at quarterly scheduled board meetings and board update calls held between scheduled meetings. Six-monthly detailed investment reviews are prepared by the Investment Manager and discussed with the Board, as part of the half-yearly and annual valuation and reporting processes. These reviews describe sources of risk at portfolio company level, and mitigating actions being taken or considered.

The resilience of key suppliers, including the Investment Manager, is considered annually or more frequently if appropriate. The Audit and Risk Committee is provided with relevant extracts of reports from the Investment Manager's internal audit team, which includes an annual report on the Investment Manager's European infrastructure investment team. Further detail is included in the Governance section of the Annual report and accounts 2023.

The Directors manage the Company's liquidity actively, reviewing reports on current and forecast liquidity from the Investment Manager, alongside recommendations for seeking additional liquidity when appropriate. The Directors approved the issue of new equity during the year, raising £100 million net of issue costs, and the extension of the RCF to £900 million of commitments. Further discussion on the RCF can be found in the Financial review.

The identification of material uncertainties that could cast significant doubt over the ability of the Company to continue as a going concern forms the basis of the Going concern statement below.

Going concern

The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic report and in the Financial statements and related Notes to our Annual report and accounts to 31 March 2023. The nancial position of the Company, its cash ows, liquidity position and borrowing facilities are also described in the Financial statements and related Notes to the accounts.

In addition, Note 9 to the accounts includes the Company's objectives, policies and processes for managing its capital, its nancial risk management objectives, details of its nancial instruments and hedging activities, and its exposures to credit risk and liquidity risk.

The Directors have made an assessment of going concern, taking into account the Company's cash and liquidity position, current performance and outlook, which considered the impact of the higher inflationary and interest rate environment, using the information available up to the date of issue of these Financial statements.

The Company has liquid nancial resources and a strong investment portfolio providing a predictable income yield and an expectation of medium-term capital growth.

The Company manages and monitors liquidity regularly, ensuring that it is sufcient.

At 31 March 2023, liquidity remained strong at £404 million (2022: £786 million). Liquidity comprised cash and deposits of £5 million (2022: £17 million) and undrawn facilities of £399 million (2022: £769 million). The £900 million revolving credit facility matures beyond 12 months of the date of this report.

The Company had no contracted investment commitment at 31 March 2023. However, the Company expects to make follow-on investments in portfolio companies to fund growth opportunities.

The Company had ongoing charges of £48 million in the year to 31 March 2023, detailed in Table 14 in the Financial review, which are indicative of the ongoing run rate in the short term. In addition, the FY23 performance fee of £45 million (2022: £54 million) is due in three equal instalments with the rst instalment payable in the next 12 months along with the second instalment of FY22's performance fee and the third instalment of FY21's performance fee, and a proposed nal dividend for FY23 of £51 million which is expected to be paid in July.

Although not a commitment, the Company has announced a dividend target for FY24 of 11.90 pence per share. Income and non-income cash is expected to be received from the portfolio investments during the coming year, some of which will be required to support the payment of this dividend target and the Company's other nancial commitments.

The Directors have acknowledged their responsibilities in relation to the Financial statements for the year to 31 March 2023. After making the assessment on going concern, the Directors considered it appropriate to prepare the Financial statements of the Company on a going concern basis.

The Company has sufcient nancial resources and liquidity and is well-positioned to manage business risks in the current economic environment and can continue operations for a period of at least 12 months from the date of this report. This is supported by the scenario analysis and stress testing described in the medium-term resilience section and the Viability statement. Accordingly, the Directors continue to adopt the going concern basis in preparing the Annual report and accounts.

Medium-term resilience

The assessment of medium-term resilience, which includes modelling of stressed scenarios and reverse stress tests, considers the viability and performance of the Company in the event of specific stressed scenarios which are assumed to occur over a three-year horizon. This stress testing forms the basis of the Viability statement.

The Directors consider that a three-year period to March 2026 is an appropriate period to review for assessing the Company's viability. This reects greater predictability of the Company's cash ows over that time period and increased uncertainty surrounding economic, political and regulatory changes over the longer term.

The stress testing focuses on the principal risks, but also reflects those new and emerging risks that are considered to be of sufficient importance to require active monitoring by the Audit and Risk Committee. The scenarios used are described in the Viability statement. The medium-term resilience of the Company is assessed through analysing the impact of these scenarios on key metrics such as total return, income yield, net asset value, covenants on the RCF and available liquidity.

Viability statement

The Directors consider the medium-term prospects of the Company to be favourable. The Company has a diverse portfolio of infrastructure investments, producing good and reasonably predictable levels of income which cover the dividend and costs. The defensive nature of the portfolio and of the essential services that the businesses in which we invest provide to their customers are being demonstrated in the current climate. The Investment Manager has a strong track record of investing in carefully selected businesses and projects and of driving value through an engaged asset management approach. The Directors consider that this portfolio can continue to meet the Company's objectives.

The Directors have assessed the viability of the Company over a three-year period to March 2026. The Directors have taken account of the current position of the Company, including its liquidity position, with £5 million of cash and £399 million of undrawn credit facilities, and the principal risks it faces, which are documented in this Risk report.

The Directors have considered the potential impact on the Company of a number of scenarios in addition to the Company's business plan and recent forecasts, which quantify the nancial impact of the principal risks occurring. These scenarios represent severe yet plausible circumstances that the Company could experience, including a signicant impairment in the value of the portfolio and a reduction in the cash ows available from portfolio companies from a variety of causes.

The assessment was conducted over several months, during which the proposed scenarios were evaluated by the Board, the assumptions set, and the analysis produced and reviewed. Analysis included the impact of an escalation of the conflict in Ukraine on our portfolio companies and the impact of a resulting economic downturn. Other considerations included the possible impact of climate-related events and transition risks, widespread economic turmoil, a reduction in cash distributions from portfolio companies to the Company, a tightening of debt markets and the failure of a large investment.

The assumptions used to model these scenarios included a fall in value of some or all of the portfolio companies, a reduction in cash ows from portfolio companies, a reduction in the level of new investment and/or realisations, the imposition of additional taxes on distributions from, or transactions in, the portfolio companies, an increase in the cost of debt and restriction in debt availability, and an inability for the Company to raise equity. The implications of changes in the ination, interest rate and foreign exchange environment were also considered, separately and in combination.

The results of this assessment showed that the Company would be able to withstand the impact of these scenarios occurring over the three-year period. The Directors also considered scenarios that would represent a serious threat to its liquidity and viability in that time period. These scenarios were considered to be remote, such as a fall in equity value of the portfolio of materially more than 50% whilst being fully drawn on the RCF including the accordion, or an equivalent fall in income.

Based on this assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three-year period to March 2026.

Long-term resilience

As described above, the long-term resilience of the Company, beyond the Viability statement period, comes from the effective implementation of our business model and consistent delivery of our strategic objectives.

Our approach to origination and portfolio construction, focus on price discipline and engaged asset management approach enable us to adapt in response to new and emerging risks and challenges, including climate change and developments in megatrends.

The characteristics that we look for in infrastructure investments, support the long-term resilience of the Company. The performance of the portfolio through the Covid-19 pandemic provided good evidence of this.

The underlying megatrends supporting the longer-term resilience of each portfolio company are identified in the Our approach section.

We have a long-term investment time horizon made possible by our permanent capital base that is unconstrained by the fixed investment period and fundraising cycle seen in private limited partnership funds.

Although the scenarios and stress testing to support the Viability statement are modelled over a three-year time horizon, the resilience shown by the Company, and its ability to recover from these stressed situations, supports the assessment of our resilience over a longer term than three years.

Directors' duties

Section 172 statement

The Company adheres to the AIC Code of Corporate Governance (the 'AIC Code') and it is the intention of the AIC Code that the matters set out in section 172 of the Companies Act 2006 ('s172') are reported on to the extent they do not conflict with Jersey law.

We recognise that our business can only grow and prosper by acting in the long-term interests of our key stakeholders and that a good understanding of the key issues affecting stakeholders should be an integral part of the Board's decision-making process. The insights that the Board gains through the stakeholder engagement mechanisms it has in place form an important part of the context for all the Board's discussions and decision-making processes.

As an externally managed investment trust, the Company has no employees or customers and its key stakeholders are its shareholders, third-party professional advisers and service providers (most notably the Investment Manager), portfolio companies, communities in which the Company operates, lenders, and government and regulatory bodies.

Day-to-day engagement with our stakeholders is principally managed by the Investment Manager although, where appropriate, the Directors have direct touchpoints with stakeholders during the year.

Throughout this Annual report we provide examples of how the Directors promote the success of the Company for the benefit of its members in line with our purpose and our strategy, while taking into account the likely consequences of decisions in the long term, the need to build relationships with stakeholders, and ensuring that business is conducted responsibly. The governance section of the Annual report and accounts 2023, sets out the Company's stakeholders and how the Board considered matters under s172 during its deliberations.

Under Jersey Law, the Directors are obliged to act honestly and in good faith with a view to the best interests of the Company; and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Pursuant to s172, a Director of a company must act in the way they consider, in good faith, would most likely promote the success of the company for the benefit of its members, and in doing so have regard (amongst other matters) to:

The likely consequences of any decisions in the long term

Our purpose and strategy, combined with the responsible investment approach of the Investment Manager, focus on sustainable returns and outcomes.

The impact of the Company's operations on the community and environment

We use our influence to promote a commitment in our portfolio companies to mitigate any adverse environmental and social impacts, and to enhance positive effects on their communities and the environment.

The interests of the Company's employees

Whilst we do not have any employees, our purpose includes the intention to have a positive influence on our portfolio companies and their stakeholders, which includes the employees of those portfolio companies.

The desirability of the Company maintaining a reputation for high standards of business conduct

Our success relies on maintaining a strong reputation, and our values and ethics are aligned to our purpose, our strategy and our ways of working.

The need to foster the Company's business relationships with suppliers, customers and others

We engage with all our stakeholders either directly or through the Investment Manager.

The need to act fairly between members of the Company

The Board actively engages with its shareholders and considers their interests when implementing our strategy.

Read more in our Annual report and accounts 2023, available on our website

Accounts and other information

Statement of comprehensive income

For the year to 31 March

Statement of changes in equity

For the year to 31 March

Balance sheet

As at 31 March

The Financial statements and related Notes were approved and authorised for issue by the Board of Directors on 9 May 2023 and signed on its behalf by:

Richard Laing

Chair

Cash flow statement

For the year to 31 March

1 Investment income includes dividends of £1 million (2022: £24 million) and interest of £29 million (2022: £30 million).

Reconciliation of net cash flow to movement in net debt

For the year to 31 March

In the above reconciliation there were no non-cash movements.

Significant accounting policies

Corporate information

3i Infrastructure plc (the 'Company') is a company incorporated in Jersey, Channel Islands. The Financial statements for the year to 31 March 2023 comprise the Financial statements of the Company as defined in IFRS 10 Consolidated Financial Statements.

The Financial statements were authorised for issue by the Board of Directors on 9 May 2023.

Statement of compliance

These Financial statements have been prepared in accordance with United Kingdom adopted International Financial Reporting Standards ('IFRS') and International Accounting Standards.

These Financial statements have also been prepared in accordance with and in compliance with the Companies (Jersey) Law 1991.

Basis of preparation

In accordance with IFRS 10 (as amended), entities that meet the definition of an investment entity are required to fair value certain subsidiaries through profit or loss in accordance with IFRS 9 Financial Instruments, rather than consolidate their results. The Company does not have any consolidated subsidiaries, which would include subsidiaries that are not themselves investment entities and provide investment-related services to the Company.

The Financial statements of the Company are presented in sterling, the functional currency of the Company, rounded to the nearest million except where otherwise indicated.

The preparation of financial statements in conformity with IFRS requires the Board to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of determining the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Going concern

The Financial statements are prepared on a going concern basis as disclosed in the Risk report, as the Directors are satisfied that the Company has the resources to continue in business for the foreseeable future. The Directors have made an assessment of going concern, taking into account a wide range of information relating to present and future conditions, including the Company's cash and liquidity position, current performance and outlook, which considered the impact of the higher inflationary and interest rate environment, ongoing geopolitical uncertainties and current and expected financial commitments, using the information available up to the date of issue of these Financial statements. As part of this assessment the Directors considered:

·  the analysis of the adequacy of the Company's liquidity, solvency and capital position. The Company manages and monitors liquidity regularly, ensuring it is adequate and sufficient. At 31 March 2023, liquidity remained strong at £404 million (2022: £786 million). Liquidity comprised cash and deposits of £5 million (2022: £17 million) and undrawn revolving credit facilities of £399 million (2022: £769 million) with a maturity date of November 2025. Income and non-income cash is expected to be received from the portfolio investments during the coming year, a portion of which will be required to support the payment of the dividend target and the Company's other financial commitments;

·  uncertainty around the valuation of the Company's assets as set out in the Key sources of estimation uncertainties section. The valuation policy and process was consistent with prior years. This year a key focus of the portfolio valuations at 31 March 2023 was an assessment of the impact of the macroeconomic environment on the operational and financial performance of each portfolio company. In particular this focused on increasing inflationary pressures, rising interest rates and the impact on the cost of debt, volatility in power prices and ongoing geopolitical uncertainties. We have incorporated into our cash flow forecasts a balanced view of future income receipts and expenses; and

·  the Company's financial commitments. The Company had no investment commitments at 31 March 2023. The Company had ongoing charges of £48 million in the year to 31 March 2023, detailed in Table 14 in the Financial review, which are indicative of the ongoing run rate in the short term. The Company has a FY23 performance fee accrual of £45 million, a third of which is payable within the next 12 months. The Company has a FY22 performance fee accrual of £36 million relating to the second and third instalments of the FY22 fee, the second instalment being due within the next 12 months, an accrual of £2 million relating to the third instalment of the FY21 fee due within the next 12 months and a proposed final dividend for FY23 of £51 million. In addition, while not a commitment at 31 March 2023, the Company has a dividend target for FY24 of 11.90 pence per share.

In addition to the considerations listed above there are a number of actions within management control to enhance available liquidity. These include the timing of certain income receipts from the portfolio and the level and timing of new investments or realisations.

Having performed the assessment of going concern, the Directors considered it appropriate to prepare the Financial statements of the Company on a going concern basis. The Company has sufficient financial resources and liquidity and is well placed to manage business risks in the current economic environment and can continue operations for a period of at least 12 months from the date of approval of these Financial statements.

Key judgements

The preparation of financial statements in accordance with IFRS requires the Directors to exercise judgement in the process of applying the accounting policies defined below. The following policies are areas where a higher degree of judgement has been applied in the preparation of the Financial statements.

(i) Assessment as investment entity - Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair value through profit or loss rather than consolidate them unless they provided investment-related services to the Company. To determine that the Company continues to meet the definition of an investment entity, the Company is required to satisfy the following three criteria:

(a) the Company obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services;

(b) the Company commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and

(c) the Company measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Company meets the criteria as follows:

·  the stated strategy of the Company is to deliver stable returns to shareholders through a mix of income yield and capital appreciation;

·  the Company provides investment management services and has several investors who pool their funds to gain access to infrastructure-related investment opportunities that they might not have had access to individually; and

·  the Company has elected to measure and evaluate the performance of all of its investments on a fair value basis. The fair value method is used to represent the Company's performance in its communication to the market, including investor presentations. In addition, the Company reports fair value information internally to Directors, who use fair value as the primary measurement attribute to evaluate performance.

The Directors are of the opinion that the Company has all the typical characteristics of an investment entity and continues to meet the definition in the standard. This conclusion will be reassessed on an annual basis.

(ii) Assessment of investments as structured entities - A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. Additional disclosures are required by IFRS 12 for interests in structured entities, whether they are consolidated or not. The Directors have assessed whether the entities in which the Company invests should be classified as structured entities and have concluded that none of the entities should be classified as structured entities as voting rights are the dominant factor in deciding who controls these entities.

(iii) Assessment of consolidation requirements - The Company holds significant stakes in the majority of its investee companies and must exercise judgement in the level of control of the underlying investee company that is obtained in order to assess whether the Company should be classified as a subsidiary.

The Company must also exercise judgement in whether a subsidiary provides investment-related services or activities and therefore should be consolidated or held at fair value through profit or loss. Further details are shown in significant accounting policy 'A Classification' below.

During the year, the Company set up three wholly owned subsidiary entities for the new investment in Future Biogas. The Directors have assessed whether any of these entities provide investment-related services and have concluded that they should not be consolidated and that they should all be held at fair value through profit or loss.

The adoption of certain accounting policies by the Company also requires the use of certain critical accounting estimates in determining the information to be disclosed in the Financial statements.

Key sources of estimation uncertainties

Valuation of the investment portfolio

The key area where estimates are significant to the Financial statements and have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year is in the valuation of the investment portfolio. The portfolio is well-diversified by sector, geography and underlying risk exposures. The key risks to the portfolio are discussed in further detail in the Risk report.

The majority of assets in the investment portfolio are valued on a discounted cash flow basis which requires assumptions to be made regarding future cash flows, terminal value and the discount rate to be applied to these cash flows. The methodology for deriving the fair value of the investment portfolio, including the key estimates, is set out in the Portfolio valuation methodology section. Refer to Note 7 for further details of the valuation techniques, significant inputs to those techniques and sensitivity of the fair value of these investments to the assumptions that have been made.

The discount rate applied to the cash flows in each investment portfolio company is a key source of estimation uncertainty. The acquisition discount rate is adjusted to reflect changes in company-specific risks to the deliverability of future cash flows and is calibrated against secondary market information and other available data points, including comparable transactions. The discount rates applied to the investment portfolio at 31 March 2023 range from 10.0% to 13.2% (2022: 10.0% to 13.2%) and the weighted average discount rate applied to the investment portfolio is 11.3% (2022: 10.9%). The increase in the year is due to the evolution of the portfolio mix following the realisation of the European Projects portfolio and the completion of the GCX and Future Biogas acquisitions. In the prior year, the Projects portfolio was valued on a sales basis and was removed from the discount rate range.

The cash flows on which the discounted cash flow valuation is based are derived from detailed financial models. These incorporate a number of assumptions with respect to individual portfolio companies, including: forecast new business wins or new orders; cost-cutting initiatives; liquidity and timing of debtor payments; timing of non-committed capital expenditure and construction activity; the terms of future debt refinancing; and macroeconomic assumptions such as inflation and energy prices. Future power price projections are taken from independent forecasters, and changes in these assumptions will affect the future value of our energy-generating portfolio companies.

The Summary of portfolio valuation methodology section provides further details on some of the assumptions that have been made in deriving a balanced base case of cash flows.

The terminal value attributes a residual value to the portfolio company at the end of the projected discrete cash flow period based on market comparables. The terminal value assumptions consider climate change risk and stranded asset risk. The valuation of each asset has significant estimation in relation to asset specific items but there is also consideration given to the impact of wider megatrends such as the transition to a lower-carbon economy and climate change.

The effects of climate change, including extreme weather patterns or rising sea levels in the longer term could impact the valuation of the assets in the portfolio in different ways. The Summary of portfolio valuation methodology section earlier in this document provides further details on some of the assumptions that have been made in deriving terminal values and some of the risk factors considered in the cash flow forecasts.

New and amended standards adopted for the current year

Standards and amendments to standards applicable to the Company that became effective during the year and were adopted by the Company on 1 April 2022 are listed below:

Amendments to IFRS 17 Insurance contracts (1 January 2023)

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) (1 January 2023)

Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) (1 January 2023)

Annual Improvement to IFRS Standards 2018-2020 Cycle - Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 9 Financial Instruments, IFRS 16 Leases and IAS 41 Agriculture

Amendments to IAS 1 Classification of Liabilities as Current or Non-current (1 January 2023)

Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (1 January 2023)

Amendments to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use (1 January 2022)

Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets - Onerous Contracts (1 January 2022)

Amendments to IFRS 3 Business Combinations (1 January 2022)

Standards and amendments issued but not yet effective

As at 31 March 2023, the following new or amended standards, which have not been applied in these Financial statements, had been issued by the International Accounting Standards Board ('IASB') but are yet to become effective:

Classification of Liabilities as Current or Non-current (Amendments to IAS 1) (1 January 2024)

Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) (1 January 2024)

Non-current Liabilities with Covenants (Amendments to IAS 1) (1 January 2024)

The Company intends to adopt these standards when they become effective, but does not currently anticipate the standards will have a significant impact on the Company's Financial statements. Current assumptions regarding the impact of future standards will remain under consideration in light of interpretation notes as and when they are issued.

A Classification

(i) Subsidiaries - Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed, or has rights, to variable returns from its involvement with the subsidiary entity and has the ability to affect those returns through its power over the subsidiary entity. In accordance with the exception under IFRS 10 Consolidated Financial Statements, the Company only consolidates subsidiaries in the Financial statements if they are deemed to perform investment-related services and do not meet the definition of an investment entity. Investments in subsidiaries that do not meet this definition are accounted for as Investments at fair value through profit or loss with changes in fair value recognised in the Statement of comprehensive income in the year. The Directors have assessed all entities within the structure and concluded that there are no subsidiaries of the Company that provide investment-related services or activities.

(ii) Associates - Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies. Investments that are held as part of the Company's investment portfolio are carried in the Balance sheet at fair value even though the Company may have significant influence over those entities.

(iii) Joint ventures - Interests in joint ventures that are held as part of the Company's investment portfolio are carried in the Balance sheet at fair value. This treatment is permitted by IFRS 11 and IAS 28, which allows interests held by venture capital organisations where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with IFRS 9 with changes in fair value recognised in the Statement of comprehensive income in the year.

B Exchange differences

Transactions entered into by the Company in a currency other than its functional currency are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated to the functional currency at the exchange rate ruling at the balance sheet date.

Foreign exchange differences arising on translation to the functional currency are recognised in the Statement of comprehensive income. Foreign exchange differences relating to investments held at fair value through profit or loss are shown within the line Net gains on investments. Foreign exchange differences relating to other assets and liabilities are shown within the line Exchange movements.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transactions. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency using exchange rates ruling at the date the fair value was determined with the associated foreign exchange difference being recognised within the unrealised gain or loss on revaluation of the asset or liability.

C Investment portfolio

Recognition and measurement - Investments are recognised and de-recognised on a date where the purchase or sale of an investment is under a contract whose terms require the delivery or settlement of the investment.

The Company manages its investments with a view to profiting from the receipt of investment income and obtaining capital appreciation from changes in the fair value of investments. Therefore, all unquoted investments are measured at fair value through profit or loss upon initial recognition and subsequently carried in the Balance sheet at fair value, applying the Company's valuation policy. Acquisition-related costs are accounted for as expenses when incurred.

Net gains or losses on investments are the movement in the fair value of investments between the start and end of the accounting period, or investment disposal date, or the investment acquisition date and the end of the accounting period, including divestment-related costs where applicable, converted into sterling using the exchange rates in force at the end of the period; and are recognised in the Statement of comprehensive income.

Income

Investment income is that portion of income that is directly related to the return from individual investments. It is recognised to the extent that it is probable that there will be an economic benefit and the income can be reliably measured.

The following specific recognition criteria must be met before the income is recognised:

·  dividends from equity investments are recognised in the Statement of comprehensive income when the Company's rights to receive payment have been established. Special dividends are credited to capital or revenue according to their circumstances;

·  interest income from loans that are measured at fair value through profit or loss is recognised as it accrues by reference to the principal outstanding and the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash flows through the expected life of the financial asset to the asset's carrying value or principal amount. The remaining changes in the fair value movement of the loans are recognised separately in the line Net gains on investments in the Statement of comprehensive income;

·  distributions from investments in Limited Partnerships are recognised in the Statement of comprehensive income when the Company's rights as a Limited Partner to receive payment have been established; and

·  fees receivable represent amounts earned from investee companies on completion of underlying investment transactions and are recognised on an accruals basis once entitlement to the revenue has been established.

D Fees

(i) Fees - Fees payable represent fees incurred in the process of acquiring an investment and are measured on the accruals basis.

(ii) Management fees - A management fee is payable to 3i plc, calculated as a tiered fee based on the Gross Investment Value of the Company and is accrued in the period it is incurred. Further details on how this fee is calculated are provided in Note 18.

(iii) Performance fee - The Investment Manager is entitled to a performance fee based on the total return generated in the period in excess of a performance hurdle of 8%. The fee is payable in three equal annual instalments and is accrued in full in the period it is incurred. Further details are provided in Note 18.

(iv) Finance costs - Finance costs associated with loans and borrowings are recognised on an accruals basis using the effective interest method.

E Treasury assets and liabilities

Short-term treasury assets and short- and long-term treasury liabilities are used to manage cash flows and the overall costs of borrowing. Financial assets and liabilities are recognised in the Balance sheet when the relevant company entity becomes a party to the contractual provisions of the instrument.

(i) Cash and cash equivalents - Cash and cash equivalents in the Balance sheet and Cash flow statement comprise cash at bank, short-term deposits with an original maturity of three months or less and AAA-rated money market funds. Money market funds are accounted for at amortised cost under IFRS 9. However, due to their short-term and liquid nature, this is the same as fair value. Interest receivable or payable on cash and cash equivalents is recognised on an accruals basis.

(ii) Bank loans, loan notes and borrowings - Loans and borrowings are initially recognised at the fair value of the consideration received, net of issue costs associated with the borrowings. Where issue costs are incurred in relation to arranging debt finance facilities these are capitalised and disclosed within Trade and other receivables and amortised over the life of the loan.

After initial recognition, loans and borrowings are subsequently measured at amortised cost using the effective interest method, which is the rate that exactly discounts the estimated future cash flows through the expected life of the liabilities. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.

(iii) Derivative financial instruments - Derivative financial instruments are used to manage the risk associated with foreign currency fluctuations in the valuation of the investment portfolio. This is achieved by the use of forward foreign currency contracts. Such instruments are used for the sole purpose of efficient portfolio management. All derivative financial instruments are held at fair value through profit or loss.

Derivative financial instruments are recognised initially at fair value on the contract date and subsequently remeasured to the fair value at each reporting date. All changes in the fair value of derivative financial instruments are taken to the Statement of comprehensive income.

The maturity profile of derivative contracts is measured relative to the financial contract settlement date of each contract and the derivative contracts are disclosed in the Financial statements as either current or non-current accordingly.

F Other assets

Assets, other than those specifically accounted for under a separate policy, are stated at their consideration receivable less impairment losses. Such assets are short-term in nature and the carrying value of these assets is considered to be approximate to their fair value. Assets are reviewed for recoverability and impairment using the expected credit loss model simplified approach. The Company will recognise the asset's lifetime expected credit losses at each reporting period where applicable in the Statement of comprehensive income. An impairment loss is reversed at subsequent financial reporting dates to the extent that the asset's carrying amount does not exceed its carrying value, had no impairment been recognised.

Assets with maturities less than 12 months are included in current assets, assets with maturities greater than 12 months after the Balance sheet date are classified as non-current assets.

G Other liabilities

Liabilities, other than those specifically accounted for under a separate policy, are stated based on the amounts which are considered to be payable in respect of goods or services received up to the financial reporting date. Such liabilities are short-term in nature, the carrying value of these liabilities is considered to be approximate to their fair value.

H Equity and reserves

(i) Share capital - Share capital issued by the Company is recognised at the fair value of proceeds received and is credited to the Stated capital account. Direct issue costs net of tax are deducted from the fair value of the proceeds received.

(ii) Equity and reserves - The Stated capital account of the Company represents the cumulative proceeds recognised from share issues or new equity issued on the conversion of warrants made by the Company net of issue costs and reduced by any amount that has been transferred to Retained reserves, in accordance with Jersey Company Law, in previous years. Share capital is treated as an equity instrument, on the basis that no contractual obligation exists for the Company to deliver cash or other financial assets to the holder of the instrument.

On 15 October 2018, the Company became UK tax domiciled and, with effect from that date, was granted UK approved investment trust status. Financial statements prepared under IFRS are not strictly required to apply the provisions of the Statements of Recommended Practice issued by the UK Association of Investment Companies for the financial statements of Investment Trust Companies (the 'AIC SORP'). However, where relevant and appropriate, the Directors have looked to follow the recommendations of the SORP. From this date, the retained profits of the Company have been applied to two new reserves, being the Capital reserve and the Revenue reserve. These are in addition to the existing Retained reserves which incorporate the cumulative retained profits of the Company (after the payment of dividends) plus any amounts that have been transferred from the Stated capital account of the Company to 15 October 2018.

The Directors have exercised their judgement in applying the AIC SORP and a summary of these judgements are as follows:

·  Net gains on investments are applied wholly to the Capital reserve as they relate to the revaluation or disposal of investments;

·  Dividends are applied to the Revenue reserve except under specific circumstances where a dividend arises from a return of capital or proceeds from a refinancing, when they are applied to the Capital reserve;

·  Fees payable are applied to the Capital reserve where the service provided is, in substance, an intrinsic part of an intention to acquire or dispose of an investment;

·  Movement in the fair value of derivative financial instruments is applied to the Capital reserve as the derivative hedging programme is specifically designed to reduce the volatility of sterling valuations of the non-sterling denominated investments;

·  Management fees are applied to the Revenue reserve as they reflect ongoing asset management. Where a transaction fee element is due on the acquisition of an investment it is applied to the Capital reserve;

·  Performance fees are applied wholly to the Capital reserve as they arise mainly from capital returns on the investment portfolio;

·  Operating costs are applied wholly to the Revenue reserve as there is no clear connection between the operating expenses of the Company and the purchase and sale of an investment;

·  Finance costs are applied wholly to the Revenue reserve as the existing borrowing is not directly linked to an investment; and

·  Exchange movements are applied to the Revenue reserve where they relate to exchange on non-portfolio assets.

(iii) Dividends payable - Dividends on ordinary shares are recognised in the period in which the Company's obligation to make the dividend payment arises. For the period to 15 October 2018, dividends were deducted from Retained reserves. For subsequent periods, dividends are deducted first from the Revenue reserve and then from the Capital reserve if required.

I Income taxes

Income taxes represent the sum of the tax currently payable, withholding taxes suffered and deferred tax. Tax is charged or credited in the Statement of comprehensive income, except where it relates to items charged or credited directly to equity, in which case the tax is also dealt with in equity.

The tax currently payable is based on the taxable profit for the year. This may differ from the profit included in the Statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

To enable the tax charge to be based on the profit for the year, deferred tax is provided in full on temporary timing differences, at the rates of tax expected to apply when these differences crystallise. Deferred tax assets are recognised only to the extent that it is probable that sufficient taxable profits will be available against which temporary differences can be set off. In practice, some assets that are likely to give rise to timing differences will be treated as capital for tax purposes. Given capital items are exempt from tax under the Investment Trust Company rules, deferred tax is not expected to be recognised on these balances. All deferred tax liabilities are offset against deferred tax assets, where appropriate, in accordance with the provisions of IAS 12.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Notes to the accounts

1 Operating segments

The Directors review information on a regular basis that is analysed by portfolio segment; being Economic infrastructure businesses, the Projects portfolio and the India Fund. In prior years they also analysed the portfolio by geography. Since the India Fund reached the end of its life and moved into liquidation and because some of the investments such as GCX, TCR, ESVAGT and Tampnet operate in multiple jurisdictions, this geographic distinction is no longer relevant and is therefore no longer reported. These segments are reviewed for the purpose of resource allocation and the assessment of their performance. In accordance with IFRS 8, the segmental information provided below uses these segments for the analysis of results as it is the most closely aligned with IFRS reporting requirements. The Company is an investment holding company and does not consider itself to have any customers.

The following is an analysis of the Company's investment return, profit before tax, assets, liabilities and net assets by portfolio segment:

During the year, the Company generated 99% (2022: 95%) of its investment return from investments in Economic infrastructure businesses, 1% (2022: 4%) from investments in Projects and none (2021: 1%) from its investment in the India Fund. Given the nature of the Company's operations, the Company is not considered to be exposed to any operational seasonality or cyclicality that would impact the financial results of the Company during the year or the financial position of the Company at 31 March 2023.

2 Management and performance fees payable

Total management and performance fees payable by the Company for the year to 31 March 2023 were £92 million (2022: £97 million). Note 18 provides further details on the calculation of the management fee and performance fee.

3 Operating expenses

Operating expenses include the following amounts:

In addition to the fees described above, audit fees of £0.05 million (2022: £0.05 million) are payable by unconsolidated subsidiary entities for the year to 31 March 2023 to the Company's auditor.

Services provided by the Company's auditor

During the year, the Company obtained the following services from the Company's auditor.

Non-audit services

Deloitte LLP and their associates provided non-audit services for fees totalling £95,891 for the year to 31 March 2023 (2022: £104,635). This related to agreed-upon procedures work in respect of the management and performance fees £8,316 (2022: £7,560), agreed-upon procedures work in respect of Sustainability KPIs for the RCF reporting £27,000 (2022: £27,000) and the review of the interim financial statements £60,575 (2022: £55,575). In line with the Company's policy, Deloitte LLP provided non-audit services to certain investee companies. The fees for these services are ordinarily borne by the underlying investee companies or unconsolidated subsidiaries, and therefore are not included in the expenses of the Company. Details on how such non-audit services are monitored and approved can be found in the Governance section of the Annual report and accounts 2023.

4 Finance costs

The finance costs associated with the debt facilities have increased for the year to 31 March 2023 as a result of higher average drawings, increased SONIA and EURIBOR rates and increases in the total available facilities. The average monthly drawn position during the year was £368 million (2022: £80 million) and the average monthly total available facilities was £562 million (2022: £508 million).

5 Movement in the fair value of derivative financial instruments

The movement in the fair value of derivative financial instruments is included within profit before tax but not included within investment return.

6 Income taxes

Reconciliation of income taxes in the Statement of comprehensive income

The tax charge for the year is different from the standard rate of corporation tax in the UK, currently 19% (2022: 19%), and the differences are explained below:

The Company's affairs are directed so as to allow it to meet the requisite conditions to continue to operate as an approved investment trust company for UK tax purposes. The approved investment trust status allows certain capital profits of the Company to be exempt from tax in the UK and also permits the Company to designate the dividends it pays, wholly or partly, as interest distributions. These features enable approved investment trust companies to ensure that their investors do not ultimately suffer double taxation of their investment returns, ie once at the level of the investment fund vehicle and then again in the hands of the investors.

Under the UK Finance Act 2021, the UK corporation tax rate will increase for large companies from the current rate of 19% to 25% with effect from 1 April 2023. Should the Company recognise any deferred tax assets and liabilities, a rate of 19% or 25% would be used depending on when the assets and liabilities are expected to be crystallised.

7 Investments at fair value through profit or loss and financial instruments

All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

For assets and liabilities that are recognised in the Financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing the categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) for each reporting period.

The table below shows the classification of financial instruments held at fair value into the fair value hierarchy at 31 March 2023. For all other assets and liabilities, their carrying value approximates to fair value. During the year ended 31 March 2023, there were no transfers of financial instruments between levels of the fair value hierarchy (2022: none).

Trade and other receivables in the Balance sheet includes £4 million of deferred finance costs relating to the arrangement fee for the revolving credit facility and additional facilities (2022: £2 million). This has been excluded from the table below as it is not categorised as a financial instrument.

Financial instruments classification

Reconciliation of financial instruments categorised within Level 3 of fair value hierarchy

The fair value movement (including exchange movements) is equal to the Net gains on investments showing in the Statement of comprehensive income. All unrealised movements on investments and foreign exchange movements are recognised in profit or loss in the Statement of comprehensive income during the year and are attributable to investments held at the end of the year.

The holding period of the investments in the portfolio is expected to be greater than one year. Therefore, investments are classified as non-current unless there is an agreement to dispose of the investment within one year and all relevant regulatory or other third-party approvals have been received. It is not possible to identify with certainty whether any investments may be sold within one year.

Investment income of £156 million (2022: £127 million) comprises dividend income of £1 million (2022: £24 million) and interest of £155 million (2022: £103 million).

Unquoted investments

The Company invests in private companies which are not quoted on an active market. These are measured in accordance with the International Private Equity Valuation guidelines with reference to the most appropriate information available at the time of measurement. Further information regarding the valuation of unquoted investments can be found in the Portfolio valuation methodology section.

The Company's policy is to fair value both the equity and shareholder debt investments in infrastructure assets together where they will be managed and valued as a single investment, were invested at the same time and cannot be realised separately. The Directors consider that equity and debt share the same characteristics and risks and they are therefore treated as a single unit of account for valuation purposes and a single class for disclosure purposes. As at 31 March 2023, the fair value of unquoted investments was £3,641 million (2022: £2,873 million). Individual portfolio asset valuations are shown in the Portfolio summary.

The fair value of the investments is sensitive to changes in the macroeconomic assumptions used as part of the portfolio valuation process. As part of its analysis, the Board has considered the potential impact of a change in a number of the macroeconomic assumptions used in the valuation process. By considering these potential scenarios, the Board is well positioned to assess how the Company is likely to perform if affected by variables and events that are inherently outside of the control of the Board and the Investment Manager.

The majority of the assets held within Level 3 are valued on a discounted cash flow basis, hence the valuations are sensitive to the discount rate assumed in the valuation of each asset. Other significant unobservable inputs include the inflation rate assumption, the interest rates assumption used to project the future cash flows, and the forecast cash flows themselves. The sensitivity to the inflation rate and interest rates is described below and the sensitivity to the forecast cash flows is captured in the Market risk section in Note 9.

A discussion of discount rates applied can be found in the Summary of portfolio valuation methodology section. Increasing the discount rate used in the valuation of each asset by 1% would reduce the value of the portfolio by £296 million (2022: £258 million). Decreasing the discount rate used in the valuation of each asset by 1% would increase the value of the portfolio by £343 million (2022: £297 million).

The majority of assets held within Level 3 have revenues that are linked, partially linked or in some way correlated to inflation. The long-term CPI inflation rate assumption across all jurisdictions is 2.0% (2022: 2.0%). The long-term RPI assumption for the UK is 2.5% (2022: 2.5%). The impact of increasing the short-term inflation rate assumption by 1% for the next two years would increase the value of the portfolio by £47 million (2022: £43 million). Decreasing the inflation rate assumption used in the valuation of each asset by 1% for the next two years would decrease the value of the portfolio by £52 million (2022: £46 million). The timing and quantum of price increases will vary across the portfolio and the sensitivity may differ from that modelled. Changing the inflation rate assumption may result in consequential changes to other assumptions used in the valuation of each asset.

The valuations are sensitive to changes in interest rates, which may result from: (i) unhedged existing borrowings within portfolio companies; (ii) interest rates on uncommitted future borrowings assumed within the asset valuations; and (iii) cash deposits held by portfolio companies. These comprise a wide range of interest rates from short-term deposit rates to longer-term borrowing rates across a broad range of debt products. Increasing the cost of borrowing assumption for unhedged borrowings and any future uncommitted borrowing and the cash deposit rates used in the valuation of each asset by 1% would reduce the value of the portfolio by £182 million (2022: £158 million). Decreasing the interest rate assumption for unhedged borrowings used in the valuation of each asset by 1% would increase the value of the portfolio by £175 million (2022: £156 million). This calculation does not take account of any offsetting variances which may be expected to prevail if interest rates changed, including the impact of inflation discussed above.

Over-the-counter derivatives

The Company uses over-the-counter foreign currency derivatives to hedge foreign currency movements. The derivatives are held at fair value which represents the price that would be received to sell or transfer the instruments at the balance sheet date. The valuation technique incorporates various inputs, including foreign exchange spot and forward rates, and uses present value calculations. For these financial instruments, significant inputs into models are market observable and are included within Level 2.

Valuation process for Level 3 valuations

The valuations on the Balance sheet are the responsibility of the Board of Directors of the Company. The Investment Manager provides a valuation of unquoted investments, debt and unlisted funds held by the Company on a half-yearly basis. This is performed by the valuation team of the Investment Manager and reviewed by the valuation committee of the Investment Manager. The valuations are also subject to quality assurance procedures performed within the valuation team. The valuation team verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to relevant documents and market information. The valuation committee of the Investment Manager considers the appropriateness of the valuation methods and inputs, and may request that alternative valuation methods are applied to support the valuation arising from the method chosen. On a half-yearly basis, the Investment Manager presents the valuations to the Board. This includes a discussion of the major assumptions used in the valuations, with an emphasis on the more significant investments and investments with significant fair value changes. Any changes in valuation methods are discussed and agreed with the Audit and Risk Committee before the valuations on the Balance sheet are approved by the Board.

8 Trade and other receivables

9 Financial risk management

A full review of the Company's objectives, policies and processes for managing and monitoring risk is set out in the Risk report. This Note provides further detail on financial risk management, cross-referring to the Risk report where applicable and providing further quantitative data on specific financial risks.

Each investment made by the Company is subject to a full risk assessment through a consistent investment approval process. The Board's Management Engagement Committee, Audit and Risk Committee and the Investment Manager's investment process are part of the overall risk management framework of the Company.

The funding objective of the Company is that each category of investment ought to be broadly matched with liabilities and shareholders' funds according to the risk and maturity characteristics of the assets, and that funding needs are to be met ahead of planned investment.

Capital structure

The Company has a continuing commitment to capital efficiency. The capital structure of the Company consists of cash held on deposit and in AAA-rated money market funds, borrowing facilities and shareholders' equity. The Company's Articles require its outstanding borrowings, including any financial guarantees to support subsequent obligations, to be limited to 50% of the gross assets of the Company. The type and maturity of the Company's borrowings are analysed in Note 11 and the Company's equity is analysed into its various components in the Statement of changes in equity. Capital is managed so as to maximise the return to shareholders, while maintaining a strong capital base that ensures that the Company can operate effectively in the marketplace and sustain future development of the business. The Board is responsible for regularly monitoring capital requirements to ensure that the Company is maintaining sufficient capital to meet its future investment needs.

The Company is regulated by the Jersey Financial Services Commission under the provisions of the Collective Investment Funds (Jersey) Law 1988 as a listed closed-ended collective investment fund and is not required as a result of such regulation to maintain a minimum level of capital.

Capital is allocated for investment in infrastructure across the UK and continental Europe. As set out in the Company's investment policy, the maximum exposure to any one investment is 25% of gross assets (including cash holdings) at the time of investment.

Credit risk

The Company is subject to credit risk on the debt component of its unquoted investments, cash, deposits, derivative contracts and receivables. The maximum exposure to credit risk as a result of counterparty default equates to the current carrying value of these financial assets. Throughout the year and the prior year, the Company's cash and deposits were held with a variety of counterparties, principally in AAA-rated money market funds. The counterparties selected for the derivative financial instruments were all banks with a minimum of a BBB+ credit rating with at least one major rating agency.

The credit quality of unquoted investments, which are held at fair value and include debt and equity elements, is based on the financial performance of the individual portfolio companies. The credit risk relating to these assets is based on their enterprise value and is reflected through fair value movements. This incorporates the impact from macroeconomic factors such as inflation and interest rate rises and the volatility in energy prices. The performance of underlying investments is monitored by the Board to assess future recoverability.

For those assets and income entitlements that are not past due, it is believed that the risk of default is small and capital repayments and interest payments will be made in accordance with the agreed terms and conditions of the investment. If the portfolio company has failed and there is no expectation to recover any residual value from the investment, the Company's policy is to record an impairment for the full amount of the loan. When the net present value of the future cash flows predicted to arise from the asset, discounted using the effective interest rate method, implies non-recovery of all or part of the Company's investment, a fair value movement is recorded equal to the valuation shortfall.

As at 31 March 2023, the Company had no loans or receivables or debt investments considered past due (2022: nil).

The Company actively manages counterparty risk. Counterparty limits are set and closely monitored by the Board and a regular review of counterparties is undertaken by the Investment Manager and reported to the Board. As at 31 March 2023, the Company did not consider itself to have a significant exposure to any one counterparty and held deposits and derivative contracts with a number of different counterparties to reduce counterparty risk (2022: same).

Due to the size and nature of the investment portfolio there is the potential for concentration risk. This risk is managed by diversifying the portfolio by sector and geography.

Liquidity risk

Further information on how liquidity risk is managed is provided in the Risk report. The table below analyses the maturity of the Company's contractual liabilities.