International Public Partnerships Regulatory News (INPP)

24 March 2016

INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED

FULL YEAR RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2015

~ Record level of committed investments ~

International Public Partnerships Limited (INPP), the listed infrastructure investment company which invests internationally in public infrastructure projects, today announces full year results for the twelve months ended 31 December 2015.

Financial Highlights (as at 31 December 2015 unless otherwise stated)

· Strong Net Asset Value ('NAV') growth of 21.5% to £1,290.2 million (31 December 2014: £1,062.1 million) with NAV per share increasing 2.5% to 130.2 pence (31 December 2014: 127.0 pence)1

· Full year 2015 fully covered cash dividend declared, up c.2.5% to 6.45 pence per share (31 December 2014: 6.30 pence per share)2

· Minimum target dividend for 2016 financial year of 6.65 pence per share and 2017 of 6.82 pence per share, an average increase of c.2.5%3 in each period

· IFRS profit before tax of £79.9 million (31 December 2014: £71.2 million)

· Significant degree of inflation linkage within the portfolio with a 0.76% projected annual increase in return for a 1% increase over anticipated portfolio inflation

· Total Shareholder Return since listing in 2006 of 115.0%, compared to 49.2% on the FTSE All Share over that same period4

Portfolio Performance

· Record £311.7 million of investment commitments made in a series of landmark infrastructure assets, including the pathfinding Thames Tideway Tunnel ('Tideway') and US Military Housing project

· Oversubscribed equity capital raising of £198 million (before issue costs) from new and existing investors demonstrating continued confidence in the Investment Adviser to originate attractive pipeline

· Majority ownership of investments for 72% of the overall portfolio

· Underlying investments with external debt represent 84% of the investment portfolio

· Post period end, £26.8m investment in its sixth UK offshore transmission project, Westermost Rough

Outlook

· In spite of persistent volatility in the global equity markets, the Company remains well-placed to deliver steady, predictable returns to its investors over the long-term

· Continued confidence in the Investment Adviser to originate and structure transactions so that shareholders can benefit from early stage investments in the primary market

· Commitment to proactive asset management will serve the Company's best interests by enhancing value across the portfolio as multiple assets move through their relative construction phase

1.See Annual Report and Financial Statements for the twelve months ended 31 December 2015 for further details on NAV methodology.

2.The forecast date for payment of the half year dividend is June 2016.

3.Future profit forecast and dividends cannot be guaranteed. Projections are based on the current individual asset financial models and may vary in the future.

4 Source: Bloomberg. Share price plus dividends assumed to be reinvested.

Rupert Dorey, Chairman of International Public Partnerships Limited, commented: "I am pleased to announce that 2015 was a record year for the Company following the commitment of over £300 million in landmark UK and global infrastructure assets, helping to deliver a fully covered cash dividend increase of 2.5% for the ninth consecutive year."

"Entering the Company's tenth anniversary year, tailored primary market origination of long-term, low-risk and stable investment opportunities combined with unique exposure to the emerging North American PPP market continue to be among the factors that differentiate the Company in the sectors in which it invests. The Company invested in one of the UK's largest infrastructure projects, the £4.2 billion Tideway project, before making its first investment in the United States. I'm confident in the Company's future prospects given its continued robust performance and in the Investment Adviser's judgement and ability to strengthen the portfolio and its pipeline."

http://www.rns-pdf.londonstockexchange.com/rns/1121T_-2016-3-23.pdf

ENDS

INPP will be holding an analyst and investor presentation and conference call at 09.30am on the day of announcement (24 March 2016).

Investors and analysts wishing to attend are asked to RSVP to Mitch Barltrop at FTI Consulting on +44 (0)20 3727 1039 / mitch.barltrop@fticonsulting.com. Investors and analysts wishing to join the conference call should dial +44(0)20 3427 1908 and use the confirmation code 2378324.

A copy of the results presentation can be downloaded from the Company's website:

www.internationalpublicpartnerships.com

About International Public Partnerships:

International Public Partnerships Limited (INPP) is a listed infrastructure investment company which invests in global public infrastructure projects developed under the public private partnerships (PPP) and private finance initiative (PFI) procurement methods.

Listed in 2006, INPP is a long-term investor in over 120 social and transport infrastructure projects, including schools, hospitals, courts, police headquarters, transport, renewable energy and waste water projects in the U.K., Europe, Australia and North America. INPP seeks to provide its shareholders with both a long-term government-backed yield and capital growth through investment across both construction and operational phases of typically 20-40 year concessions.

Visit the INPP website at www.internationalpublicpartnerships.com for more information.

International Public Partnerships Limited

Annual Report and Financial Statements for the year ended 31 December 2015

Registered number: 45241

www.internationalpublicpartnerships.com

Note: Page references in this announcement refer to the full formatted Annual Financial Report for the period ended 31 December 2015 that can be found on the Company's website. Certain charts cannot be reproduced for the RNS format and can also be seen in the PDF version of this document available on the Company's website.

Key Points

Net Asset Value

- Net Asset Value ('NAV')1 per share of 130.2 pence as at 31 December 2015 (127.0 pence - 31 December 2014)

- NAV of £1,290.2 million as at 31 December 2015, up £228.1 million (£1,062.1 million - 31 December 2014)

Shareholder Returns

- 2015 fully covered cash dividend2 of 6.45 pence per share3 (6.30 pence per share - 2014)

- Two year forward looking fully covered cash dividend target for the years ended 31 December 2016 and 2017 of 6.65 and 6.82 pence per share respectively - maintaining a long-term average increase of c.2.5% per annum4

- Total Shareholder Return since listing in 2006 to 31 December 2015 of 115.0%5 compared to 49.2% on the FTSE All Share over that same period or 8.7% and 4.5% (respectively) on an annualised basis

Earnings

- Profit before tax of £79.9 million for the year ended 31 December 2015 (£71.2 million - 31 December 2014) 

Highlights

- £311.7 million of additional investment commitments made during the year and a further £26.8 million since 31 December 2015

- £198 million (before issue costs) of new equity capital raised from shareholders 

- Significant degree of inflation linkage within the portfolio - 0.76% per annum projected increase in return for a 1% increase over anticipated average portfolio inflation6

- Majority ownership of investment for 72% of portfolio

- Underlying investments with external debt7 represent 84% of the investment portfolio

- Underlying investments with no external debt8 represent 16% of the investment portfolio

- Strong set of international and UK investment opportunities

-

1 The methodology used to determine investment fair value is incorporated within the Net Asset Value ('NAV') as described in detail on pages 19 - 24.

2 Cash dividend payments to investors are paid from net operating cash flow (after taking into account financing costs).

3 The forecast date for payment of the full year dividend is May 2016.

4 Future profit projection and dividends cannot be guaranteed. Projections are based on current estimates and may vary in future.

5 Source: Bloomberg. Share price plus dividends assumed to be reinvested.

6 See pages 23 - 24 for information relating to the Company's use of sensitivity analysis.

7 Represent investments in equity and/or subordinated debt in underlying projects ('Risk Capital').

8 Represent investments in Risk Capital and senior debt in underlying projects.

Company Overview

International Public Partnerships Limited (the 'Company'), in accordance with its Investment Policy, invests in equity, subordinated/mezzanine debt and senior loans to entities owning or operating infrastructure concessions, assets or related businesses.

Investments include schools, courthouses, health facilities, police stations, and other public sector buildings, rail operations, rolling stock leasing entities, waste water and offshore electricity transmission asset owning entities. The Company's investments are located in the UK, Europe, Australia and North America.

Whilst the Company is able to invest in a variety of infrastructure projects, to date it has primarily invested in entities holding physical infrastructure and associated services which are regulated or procured under Public Private Partnerships ('PPP')/Private Finance Initiative ('PFI') and similar public procurement processes.

Features of International Public Partnerships Limited and its investment portfolio are:

Portfolio

- Geographically diversified with a portfolio across eight countries in a variety of sectors

- A focus on yielding operational investments but with an element 'in construction' offering prospects for future capital appreciation

- A significant degree of inflation linkage to investment returns - a 1% per annum increase in the anticipated rate of inflation across the portfolio would imply a 0.76% per annum increase in return across the portfolio

- The Investment Adviser has historical success in originating and developing new 'primary market' investment opportunities in new sectors with low risks relative to returns

- A high degree of management and control of underlying investments to support sustained performance

- Access to a pool of pre-emptive and other preferred rights to increase investment in assets that have proven performance within the existing portfolio

- Operational performance and income from underlying investments is predominantly founded on asset availability, not demand, usage or other non-controllable variables

- A significant portion (12.3%) of the portfolio is invested in secured senior debt (where no other debt ranks in preference to the Company's investment in the asset)

Shareholder Returns

- Strong track record of delivering consistent dividend growth and capital appreciation

- Total Shareholder Return since listing in 2006 to 31 December 2015 of 8.7% on an annualised basis

- Share liquidity through listing and trading on the London Stock Exchange

- Target internal rate of return equal to or greater than 8% per annum set at the time of initial public offering in 2006

Governance

- Experienced independent leadership and strong corporate governance

- Long-term alignment of interest with the Investment Adviser and asset manager

Market Information

- Member of the FTSE 250 and FTSE All Share indices

- Listed since November 2006 with an initial market capitalisation of £300 million and current market capitalisation of £1.38 billion as at 31 December 2015 (2014: £1.13 billion)

- 990.6 million shares in issue as at 31 December 2015 (2014: 836.2 million)

- The Company's shares are eligible for ISA/PEPs and SIPPs transfers

- The Company's shares are excluded from the Financial Conduct Authority restrictions which apply to non-mainstream investment products and can therefore be recommended by independent financial advisers to their clients

Investment Adviser Fees

- Competitive fee structure

- For investments bearing construction risk: 1.2% per annum of gross asset value ('GAV')

- For fully operational assets:

· 1.2% per annum of the GAV (excluding uncommitted cash from capital raisings) up to £750 million

· 1.0% per annum where GAV (excluding uncommitted cash from capital raisings) is between £750 million and £1.5 billion

· 0.9% per annum where GAV (excluding uncommitted cash from capital raisings) value exceeds £1.5 billion

- 1.5% asset origination fee of the value of new investments to cover acquisition due diligence and more time/cost intensive primary market new origination activities

- Investment Adviser bears the risk of abortive transaction origination costs

- No incentive or performance fees

1 Source: Bloomberg. Share price plus dividends assumed to be reinvested.

Key Portfolio Facts

As at 31 December 2015

Sector Breakdown

120 investments in infrastructure projects1 across a variety of sectors.

Geographical Split

Invested in selected jurisdictions which meant the Company's risk and return requirements.

Stage of Investment/Asset Status

Primary/early stage investor2 to maximise capital growth opportunities.

Investment Type

Invested across the capital structure taking into account appropriate risks to returns.

Project Ownership

Preference to hold majority stakes.

Investment Life

Weighted average portfolio life of 27 years4

1 Information provided in charts above is based on 31 December 2015 portfolio investment fair value. Unless otherwise stated the Company and its subsidiaries hold investments in equity, subordinated debt and senior loans made to entities owning or operating infrastructure concessions, assets or related businesses most of which are investment subsidiaries.

2 Early stage investor - asset developed or originated by the Investment Adviser or predecessor team in the primary market as a new investment opportunity.

3 Later stage investor - asset acquired from a third party investor in the secondary market.

4 Once the Company has fully invested in the Tideway project the average investment life will, other things being equal, be c.40 years. Twenty-seven years represents the current weighted average investment life based on the £58.9m invested in Tideway as at 31 December 2015.

Top Ten Investments

A complete listing of the Group's investments can be found in note 22 of the financial statements and further information about each of these investments is available on the Company's website.

Significant movements in the Group's portfolio for the year ended 31 December 2015 can be found on page 28 of the Strategic Report.

1 Risk Capital includes both project level equity and subordinated shareholder debt.

2 These projects contain revenues which are not solely dependent on availability but also include an element of linkage to other factors such as passenger numbers, rolling stock releasing assumptions, occupancy and/or are regulated assets. All other investments receive entirely availability based revenues.

Chairman's Letter

Dear Shareholders,

2015 was a very successful year for the Company with record levels of investment into a number of projects including Thames Tideway Tunnel ('Tideway') in London. Through the period, your Company continued to deliver strong underlying returns from the portfolio.

The combination of portfolio growth and the subscription of new capital saw the Company's market capitalisation reach nearly £1.4 billion at the close of the year, up from c.£1.1 billion at the equivalent time last year.

Dividend Growth

The Company was once again able to deliver its dividend target, which for 2015 was 6.45 pence per share or c.2.4% growth over that in 2014, a rate of growth that has been delivered to investors since the Company's inception nine years ago. Against the backdrop of continuing market volatility, our ability to continue to deliver steady, predictable but growing returns to investors remains our prime objective.

The Board have once again published a minimum dividend target, being 6.65 pence per share for 2016, and new guidance of 6.82 pence per share for the 2017 dividend, an average increase of c.2.5% per annum, to give additional clarity to shareholders of our future intentions.1

1 Future profit projection and dividends cannot be guaranteed. Projections are based on current estimates and may vary in future.

Investment Activity and Capital Raising

The infrastructure assets in which the Company invests continue to be highly sought after by UK and international investors alike, resulting in continued strong demand for mature assets in the infrastructure sectors in which we operate. Amidst this sustained demand for infrastructure investment, we believe our ability to originate and structure transactions so that the Company is an early stage investor into the majority of its investments is a major differentiating factor which creates real added value for our shareholders. The majority of our new investments in 2015 were opportunities originated by our Investment Adviser through direct dialogue with public sector and regulatory procuring bodies or through opportunities arising outside of auction processes.

While we will not ignore future auction-based opportunities this self-origination strategy delivered a particularly successful year in 2015 with commitments made to nine infrastructure investments totalling over £311.7 million (2014: £188.2 million); the most capital that the Company has committed in any twelve month period to date. In addition, since the end of the period the Company has invested £26.8 million in Westermost Rough offshore transmission project, its sixth of these projects. The investment decisions on all project opportunities are made by the Board and are closely scrutinised for their appropriateness and their risk and return profile.

Of special note during the year was the Company's investment commitment into the Tideway project, the £4.2 billion, 25 kilometre 'super-sewer' to be built under the River Thames in London. The Company's Investment Adviser had a significant role in originating and developing this opportunity which allowed the project to be structured in a way that suited the cash flow profile, risk/return and longevity requirements of the Company. Of particular attraction was the especially long term duration of cash flows from the Tideway asset which can be expected to result in a near doubling of the projected duration of the Company's cash flows. This project is also anticipated to support the inflation linkage within the portfolio (more information can be found in the Case Study on page 27 of this Report). As at 31 December 2015 £58.9 million has been invested into the project.

In October 2015, the Company also made its first investment in the United States, investing approximately US$48 million (£32 million) into an interest bearing subordinated debt instrument underpinned by security over seven operational PPP military housing projects. The opportunity was identified as a consequence of the relationship between the Investment Adviser and its 50% shareholder Hunt Companies Inc. ('Hunt'); a U.S. corporation specialising in construction and management of infrastructure assets.

The capital required to fund the new investments came from a mix of the Company's existing cash resources, its corporate debt facility and the proceeds from share issuances in the period. In May 2015, the Company revised the terms of its corporate debt facility, increasing the facility from £175 million to £300 million on more favourable terms including securing a reduction in the interest margin by 50 basis points to 175 basis points and allowing for the option of letters of credit in support of future capital commitments. The new facility will become due for renewal in May 2018. Further details of the renewed facility can be found on page 30.

Share issuances undertaken during the year included a £18 million tap issue and a major capital raising in November 2015 which was significantly oversubscribed and raised £180 million from a mix of existing and new investors. This new capital was immediately used to reduce the drawn balance of the Company's revolving credit facility and to invest into committed investment opportunities. We would like to thank all shareholders who participated in the offer for their support and welcome all of our new shareholders to the register.

Operational Highlights and Portfolio Performance

I am pleased to report that the portfolio has performed very strongly during the period. While considerable attention has been paid to new investments during the year, the cash flow and valuation performance of the Company's existing portfolio has also remained very robust. Net Asset Value growth was strong during the period, increasing 21.5% to £1,290.2 million or 2.5% to 130.2 pence on a NAV per share basis.

The existing portfolio has continued to perform in line with expectations with strong asset management of investments being fundamental to the Company's overall long-term success. This approach not only encompasses larger-scale project issues such as ensuring that major construction schemes or project variations are tracking to schedule and budget, but the effective management of day-to-day relationships, such as ensuring that the head teachers in our schools are satisfied with the facility services being delivered and the terms of the concession contracts are being fulfilled.

In addition, the Company's investment in Angel Trains has been positively impacted in 2015 by recent market activity involving all main rolling stock companies in the UK rail sector. The market based evidence that these transactions produced resulted in the Company making a substantial positive revision to its valuation of Angel Trains, currently our fourth largest asset. As reported at the Company's 2015 interim result this investment has, taking into account its new carrying value, generated a total return of 3.6 times since acquisition in 2008.

Corporate Governance and Regulation

In December 2015 we were pleased to announce the appointment, effective 1 January 2016, of John Le Poidevin as a non-Executive Director to the Board. John brings broad financial experience to the role. He is Audit Committee Chair for a number of listed companies and serves as a non-executive director on several plc boards. He was previously a partner of BDO LLP, where as Head of Consumer Markets, he developed an extensive breadth of financial, commercial and accounting experience.

The Board continues to monitor a number of possible changes to the regulatory environment. Of particular note is the current OECD coordinated effort to align certain international tax rules with the aim of preventing tax 'base erosion and profit shifting' ('BEPs'). The OECD delivered its final recommendations in October 2015 in relation to a number of its areas of focus. It is now for individual countries to decide the extent to which they implement these recommendations into local legislation.

Of particular relevance to the infrastructure sector are proposals rules aimed at limiting the tax deductibility of interest charges on related and third party debt. We are encouraged by the OECD's proposals that allow room for individual country authorities to exempt third party debt in relation to public benefit entities as well as proposing the potential for grandfathering of existing transactions. However, the finer detail of how the proposals will be implemented will be decided by individual countries and whilst this is being considered the potential impact remains unknown. In the UK, Her Majesty's Treasury has invited consultation on these recommendations to which the Company and its Investment Adviser have in conjunction with industry participants and forums submitted responses. In last week's UK annual Budget, Her Majesty's Treasury announced planned implementation of these proposals consistent with the OECD guidance on interest deductibility. Further consultation is expected in May 2016 with the intention to legislate in time for 1 April 2017. We will continue to work with our professional advisers and engage with wider industry groups as well as the relevant authorities throughout the consultation and implementation stage with an aim to mitigate unintended consequences, where possible. It should be noted though that until detailed rules are finalised in each jurisdiction there will remain a degree of uncertainty over any potential future impact on the Company.

The Board also notes the 'in-out' referendum in respect of UK EU Membership on 23 June 2016. It is possible that there may be market-related volatility (including but not limited to currency, credit and stock markets) in the months preceding the referendum due to uncertainty with respect to the outcome. The full impact of UK exit is extremely difficult to forecast and we will continue to monitor the outcome and potential impacts which are also outlined in more detail in the Risk Report.

The Board has also considered the requirements imposed on the Company under the Common Reporting Standard ('CRS'). The CRS calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. The Company is working with its registrar, Capita, to ensure that it is meeting its obligations.

In addition to its usual review of risks during the year the Board has considered in more detail the cyber-risks that the Company may face - an increasingly topical area of risk for many businesses. The Board has also commissioned a review of the Company's security protocols in this respect.

As of the date of this report, the Board is required to assess the viability of the Company in light of potential material risks. The Board is of the view that the Company is viable over the period selected for viability assessment. The Viability Statement is included in the Risk Report.

Outlook

Performance of the portfolio in the early stages of 2016 has continued to be positive and we remain confident in the ability of the Company and its Investment Adviser to continue to identify and execute new investments in core markets to strengthen the Company's portfolio further. This includes both infrastructure assets within the primary PPP/PFI space and regulated infrastructure assets.

Where new investment opportunities do arise we will continue to be selective in those acquisitions which we bring into the portfolio to ensure that they bring long-term value to shareholders. Further details are provided within the Outlook section of the Strategic Report.

I thank all shareholders for their support of the Company in 2015 and look forward to continuing to serve them in 2016.

Rupert Dorey

23 March 2016

Chairman

Strategic Report

Investment policies and objectives

Investment Objectives

The Company seeks to provide shareholders with a predictable, attractive and sustainable investment yield in addition to the potential for capital appreciation of the investment portfolio.

The Company targets a minimum annual dividend growth of c.2.5%. The target annual dividend per share for 2016 and 2017 is 6.65 pence and 6.82 pence respectively. The Company seeks to increase this annually by a similar rate where sustainable to do so.

The Company also targets an internal rate of return ('IRR') equal to or greater than 8% per annum on the Initial Public Offer issue price of 100 pence per Ordinary Share to be achieved over the long-term. The Directors seek to achieve this through asset development, future acquisitions, active management and prudent use of gearing. The 2015 Financial and Operating Performance Review section provides further information relating to performance during the year.

Investment Policy

The Company's investment policy is to invest directly or indirectly in public or social infrastructure assets (usually via entities which have been granted a concession to operate and manage those assets) and related businesses located in the UK, Australia, Europe, North America and, it is anticipated, in due course, in other parts of the world where the risk profile meets the Company's risk and return requirements.

The Company intends to continue to acquire operational and construction phase assets and hold them for the long-term or life of the asset (or concession), unless there is a strategic rationale for earlier realisation. The Company will seek to enhance the capital value and the income derived from its investments. The full Investment Policy is available on the Company's website www.internationalpublicpartnerships.com.

Investment parameters

The Company intends to acquire further investments within the following parameters:

- investments with characteristics similar to the existing portfolio;

- investment in other assets or concessions having a public or social infrastructure character and in respect of which:

· availability based payments are or will become payable;

· a property rental is or will become payable, or

· user paid charges (or payments related to amount of use) are or will become payable;

- investments in infrastructure assets or concessions characterised by high barriers to entry and expected to generate an attractive total rate of return over the life of the investment.

The Company may make investments in any location or jurisdiction where the investment meets the parameters set out above, although the Company does not currently expect to invest in projects in non-OECD countries.

The Company will, over the long-term, maintain a spread of investments both geographically and across industry sectors in order to achieve a broad balance of risk in the Company's portfolio.

The actual asset allocation will depend on the maturity of the local infrastructure investment market, wider market conditions and the judgement of the Investment Adviser and the Board as to the suitability of the investment from a risk and return perspective. Key Portfolio Facts on page 5 has details of the current composition of the investment portfolio.

The Company's investment policy restricts it from making any investment of more than 20% of the Company's total assets in any one investment at that time.

This policy does not however oblige the Company to rebalance its investment portfolio subsequently as a result of a change in the Net Asset Value of any investment or the Company as a whole. However, its purpose is to limit the risk of any one investment to the overall portfolio.

The Company is also subject to certain restrictions pursuant to the UKLA Listing rules, i.e. to invest and manage assets with a view to spreading or otherwise managing investment risk in accordance with the Investment Policy; to not conduct a trading activity which is significant to the Group; to not hold more than 10% of its total assets in other listed closed-ended investment funds. Currently the Company has no investment in any listed closed-ended investment funds.

It is expected that further investments will continue to be sourced by the Investment Adviser, Amber Fund Management Limited. It is likely that some of these investments will have been originated and developed by, and in certain cases may be acquired from, members of the Amber Infrastructure Group.

The Company has established detailed procedures to deal with conflicts of interest that may arise and manage conduct in respect of any such acquisition. The Company's Board is required, in accordance with the UKLA Listing Rules, to have a majority of independent members and a Chairman who is independent from the Investment Adviser. The Operating Model section within this Strategic Report sets out the operating model for the Company and the Corporate Governance Report sets out more details on the conflicts management process.

The Company may hold derivative or other financial instruments designed for efficient portfolio management or to hedge interest, inflation or currency risks.

Subject to the strategy approved by the Board, the Investment Adviser manages such hedging activities for the purpose of efficient portfolio management to enhance returns from the portfolio. Hedges are not entered into for speculative purposes. Further details on the Company's use of hedges are provided in the financial statements in note 12.

The underlying entities into which the Company invests often are leveraged. Any debt assumed by these vehicles is non-recourse to the Company and variable interest rate debt is swapped to fixed rates at that project's inception to ensure that the cost of the debt is known over the life of the project concession.

The Company may make prudent use of leverage to enhance returns to investors, to finance the acquisition of investments in the short-term and to satisfy working capital requirements.

Under the Company's Articles, outstanding borrowings at the Company level, including any financial guarantees to support subscription obligations in relation to investments, are limited to 50% of the Gross Asset Value of the Company's investments and cash balances. The Company has the ability to borrow in aggregate up to 66% of such Gross Asset Value on a short term basis (i.e. less than 365 days) if considered appropriate. As at the date of this report the Company's corporate debt facility, which was increased to £300 million in May 2015, was £169 million drawn via letters of credit and the remaining undrawn (see page 30 for further details).

The Company and Group may borrow in currencies other than GBP as part of its currency hedging strategy.

Operating cash surpluses and funds pending investment are held in cash, cash equivalents, near cash instruments, money market instruments and money market funds and cash funds.

Material changes to the investment policy summarised in this section may only be made by ordinary resolution of the shareholders in accordance with the UK Listing Rules

Strategic Report

Strategy

The Company's strategy, which is determined and reviewed by the Board, covers three different but inter-linked areas of focus. In combination, these areas of focus assist the Company to manage its investments and finances throughout the investment cycle and, where justified, identify new investment opportunities which meet its investment objectives. The key objectives in each area are set out below and Company's 2015 performance measured against these is summarised on pages 16 - 17.

[Chart can be found in PDF version of this document on the Company's website].

1. Active Asset Management

- Focus on delivery of anticipated returns from existing assets

- Maintain high levels of public sector satisfaction and asset performance

- Deliver additional capital value from existing assets through management of construction risk and delivery of operational improvements to meet client requirements

The delivery of returns anticipated to be received from the Company's investments is fundamental to the Company's performance. The Company takes an active approach to asset management, encouraging the Investment Adviser and its associates to maximise cash flow from its investments in ways that are consistent with delivering high levels of service to the underlying assets' public sector clients. These relationships and the Company's overall approach are described in more detail in the Operating Model section below. The success of the Company's policy of active asset management can be seen through a combination of the Company's record in receiving investment cash flows in line with projections and the level of satisfaction that public sector clients have with the facilities which they occupy.

2. Value Focussed Portfolio Development

- Through relationships with co-shareholders and pre-emptive rights where applicable increase individual investment holdings to 100% where beneficial

- Make additional acquisitions where possible, ideally off market, at prospective returns that are beneficial in risk/return terms

- Enhance prospects for capital growth by investing as primary investor and/or in construction phase assets where available

- Identify complementary investment sectors within the Company's investment policy offering better returns with a similar risk profile

- Take advantage of infrastructure opportunities internationally where investments have an appropriate risk profile and contractual structures are reliably enforceable to enhance diversification

- Undertake ongoing review of portfolio composition to ensure a suitable blend of risk/return, inflation linkage, yield versus capital characteristics, level of diversification and opportunistic enhancements

The second aspect of the Company's strategy is to seek out further attractive investments that can improve the overall quality of projected returns from the Company's portfolio.

The Company works closely with its Investment Adviser to seek out new opportunities which meet the Company's desired risk and return profile. Historically this has included both 'primary' investments where the Company (or its Investment Adviser) have originated a new project and 'secondary' investments where an existing investment is acquired from a third party.

The Company does not have a preference as to whether the investments it acquires are characterised as senior debt, subordinated debt or equity (or a combination of any of these). What is relevant to the Company is the risk adjusted return available to it from such investment.

The Company's preference is to own majority or 100% holdings in its investments, where possible, in order to have full oversight and control over underlying investment performance. The Company's strategy during the year has therefore been to continue to make incremental investments in existing projects where available and beneficial to the overall risk/return profile of the Company.

The Company has also targeted, and expects to continue to target, overseas markets where it has experience from existing investments and client relationships, and where it and its Investment Adviser have operational experience of the effectiveness of contractual structures, to mitigate risks.

In recent times, the level of market competition for assets sold through open auction processes has led the Company to focus its strategy particularly on identifying niche, off-market, secondary opportunities and continuing to develop its access to primary market transactions. The Company continues to see such opportunities offering attractive returns for the level of risk.

The Company considers that it has sector differentiation and a competitive advantage in being able to take this approach through the strong record of its Investment Adviser (and its associated group) in developing new opportunities and gaining early-mover competitor advantage in relatively new growth sectors such as OFTOs1 and through innovative structures including Tideway and the Priority Schools Scheme Aggregator programme.

As a consequence, the Directors believe that the Company will continue to be well placed to take advantage of similar off-market and emerging sector opportunities in the future as well as on-market opportunities that may emerge. For further details, refer to the Operating Model section of this Strategic Report.

Portfolio development may also include realisation of value for investors through divestment, particularly where investments are no longer core or are minority holdings and where the acquisition of further investment to a majority position is considered unlikely.

3. Efficient Financial Management

- Efficient financial management of cash holdings and debt facilities available for investment and appropriate hedging strategies

The Board seeks to manage returns on operating cash surpluses and efficiently manage cash available for investment through prudent use of a corporate debt facility. The Company also seeks to use foreign exchange derivatives, interest rate swaps and other appropriate hedging strategies to protect investment returns where appropriate to do so, in accordance with the Investment Policy (see Investment Policy section). Currently the Company only has foreign exchange forward contracts in place (excluding hedging arrangements at the underlying investment entity level

1 Offshore electricity transmission owner licensed entities.

Strategic Report

Operating Model

[Diagram can be found in PDF version of this document on the Company's website].

Key Aspects of the Operating Model

The diagram above illustrates the Company's operating model, which is founded upon:

- Strong independent Board leadership and governance

- A long-term alignment of interest with its Investment Adviser and other key suppliers

- Consistent communication and delivery of strategy throughout the Group

- A vertically integrated model which gives the Company visibility of and a relationship with its public sector customers

- An experienced Investor Adviser team, expert in all aspects of infrastructure development, investment and management

- A disciplined approach to asset selection and country risk

- A focus on acquiring controlling stakes (or minority positions where strategically beneficial to do so)

Relationship with the Investment Adviser and its group

[Diagram can be found in PDF version of this document on the Company's website].

Board and Committees

The Board sets the strategy for the Company and makes decisions on changes to the portfolio (including approvals of acquisitions, disposals and valuations). Through committees and the use of external independent advisers it manages risk and governance of the Company. The Board has a majority of Independent Directors - currently five of the six Directors are independent. See the Corporate Governance Report for further details.

Investment Adviser

The Company's Investment Adviser is Amber Fund Management Limited (a member of the Amber Infrastructure Group Holdings Limited group of companies).

The contractual arrangements allow for the provision of investment advisory and certain other financial services to the Board. In return, the Investment Adviser receives fees based on the gross asset value and composition of the investment portfolio as well as a contribution to expenses. The annual base fees are detailed in note 18 to the financial statements and calculated at the following rates:

- 1.2% for that part of the portfolio that bears construction risk (i.e. the asset has not fully completed all construction stages including any relevant defects period and achieved certification by the relevant counterparty and senior lender)

- For fully operational assets:

· 1.2% for the first £750 million of gross asset value of the portfolio

· 1.0% for that part of the portfolio that exceeds £750 million in gross asset value but is less than £1.5 billion

· 0.9% for that part of the portfolio that exceeds £1.5 billion in gross asset value

In addition, gross asset value excludes uncommitted cash from capital raisings.

The Company has a long-standing relationship with the Investment Adviser and the Board believes that the continuation of this relationship, on a long-term basis, is in the Company's best interest. The current Investment Advisory Agreement ('IAA') was renegotiated in 2013 and has a ten year fixed term with a five year notice period. The Board consider that given the long-term nature of the Company's investments and its responsibility for the detailed day-to-day delivery of management services and relationships with public sector clients, it is important that it benefits from the continuity of service provided by a long-term advisory partner. In order to ensure that shareholder interests are protected, termination provisions have been put in place to ensure that, in the event of poor investment performance, the Company has flexibility to remove the Investment Adviser.

The Investment Adviser is also entitled to receive an asset origination fee of 1.5% of the value of new investments acquired by the Group. It should be noted that, generally, the Investment Adviser bears the risk of abortive transaction origination costs and that this fee has been waived or reduced by agreement in the past where it has been deemed appropriate to do so for the transaction in question. Certain discretionary fees that were previously included in the IAA had not in fact been paid to the Investment Adviser. Such equity raising and disposal fees were formally removed from the IAA in October 2015.

Cash receipts from capital raisings and tap issuances are not included in the gross asset value for the purposes of the calculation of base fees until such receipts are invested for the first time.

Further information and details of the Board's process for independent management and review of the relationship between the Investment Adviser and the Company are set out within the Corporate Governance Report.

Group Structure

The Company holds its investments through a number of holding entities including an English law limited partnership of which one of its subsidiaries is the sole limited partner and a company associated with the Investment Adviser is the general partner. Beneath these holding entities the Company's investments are held in special purpose investment entities so that, as far as possible, each investment is held in a separate entity to avoid cross collateralisation between investments.

Underlying investment entities (particularly PPP/PFI entities) do not typically have their own employees, although there are important exceptions to this. Outside of these exceptions, normal practice is for such services to be subcontracted at the time of project inception to specialist asset management entities. The role of the asset manager is to manage all interfaces between the investment entity, the client, financiers and supply chain sub-contractors.

Such services are generally provided directly to each investment under asset management contracts specific to that investment entity. Services typically include day-to-day management, issue resolution, monitoring and reporting for the entity and can cover operational, regulatory, compliance, accounting, tax, company secretarial and other related services specific to each entity.

Typically such services are provided by a third party in return for a fixed fee under contracts put in place at the inception of the project after a period of competition.

The Company's preference for the majority of its investments is for associates of the Investment Adviser to provide such services to the relevant entity. This ensures that financial and operational aspects are performed in house by Amber rather than subcontracted to other third party service providers who have less incentive to focus on delivery of desired outcomes. The contracts and fees payable for such asset management services (whether with third parties or, where Amber provides these services, associates of the Investment Adviser) are generally set in real terms for the life of the project and agreed at the time of documentation of the project with the public sector (which in many cases will be prior to the Company's investment). These form part of the project costs along with other project service related costs (and are thus outside the Company's direct control) but the Company's projected investment returns are calculated after taking account of all such project costs.

In line with IFRS 10 (Investment Entity Consolidation Exemption) all underlying project level costs (and project level revenues) are excluded from the Group's financial statements. Instead and consistent with other investment funds, the financial statements present investment returns received from underlying investments (received out of investee entity net cash flows).

The Investment Adviser plays a key role in identifying, developing and originating investment opportunities that meet the Company's requirements and putting these forward to the Board of Directors for initial consideration and, where appropriate, final approval. These opportunities may lead to the Company investing in such projects and/or acquiring investments from associates of the Investment Adviser. Where investments are acquired from associates of the Investment Adviser, consideration is undertaken in accordance with detailed procedures designed to ensure the fair treatment of the Company and to ensure the valuation is approved independently by a suitably experienced third party valuer. More details are set out in the Corporate Governance Report.

Where associates of the Investment Adviser undertake project origination and development activity (e.g. bidding for new primary projects) they do so at their own risk and bear the risks of lack of success and associated abortive costs (which on large projects can be substantial). The Company does however have a contractual right of first look at such investment opportunities either on financial close or, if originally invested in by an associate of the Investment Adviser, upon disposal of that investment. Following success in project origination and development activity, fees and costs will in the normal course be payable on financial close of the opportunity to a range of service providers (including associates of the Investment Adviser) relating to matters such as reimbursement of bid costs, and in respect of legal, technical, development and financial advisory work. For the avoidance of doubt, such amounts are not paid by the Company but by the project entity formed to carry on that project and any such amounts form part of the overall capital or project bid costs. The Company's projected investment return from any prospective investment is calculated after taking account of all such costs.

Differentiation of Operating Model

The operational structure of the Company and the investee entities it invests in and through is designed to align the interests of those entities with the Company. The Company's preferred operational structure and the structure of the Investment Adviser and its associates (acting as investment adviser, operator and asset manager) effectively extends the Board's oversight to the underlying asset management and finance teams enabling it to be an active rather than a passive investor.

The Investment Adviser and its associates employ more than 80 personnel, the majority to support the Company and its investment entities in the provision of financial and asset management services. This operating model contrasts with competitor models that have tended to employ smaller teams and instead outsource some or all of such services.

The Company believes its operating structure differentiates it within the market and provides it with greater control of the performance of its underlying investments (for example management of lifecycle cost risk or control of contract variations).

The Company's operating model is also differentiated through the capability of the Company's Investment Adviser to originate new primary market transactions which provide the Company with access to off-market opportunities not afforded to other infrastructure investment funds. These opportunities typically take several years or more to gestate and are regularly reviewed between the Company and its Investment Adviser. Under the terms of the Investment Advisory Agreement the Company has a right of 'first look' at investments fitting its investment mandate that are being realised by Amber. This has been extended to include certain opportunities being realised by Hunt Companies (a U.S. based group and 50% shareholder in the Investment Adviser). The access that the Company has had to such 'primary' opportunities (alongside the access that the Company has, in common with other funds, to 'secondary' opportunities) broadens the Company's opportunity set for new investments.

Strategic Report

2015 Financial and Operating Review

Key Performance Indicators

The Key Objectives of the Company are set out below and ten priorities have been identified to assist in meeting these. In order to assess annual performance in meeting these objectives the Company reviews semi-annually its performance against the following key performance

Indicators ('KPIs'). The KPIs and the relative performance for the 2015 financial year are summarised below and further details of each of these elements are provided in the sections that follow:

Key Objectives

Investor Returns

Strategic Priorities

1. Active Asset Management

2. Value-focused Portfolio Development

1 Cash dividends to shareholders are paid from net operating cash flow (including financing costs) before non-recurring operating costs.

2 Residual cash after payment of dividend and corporate costs over the next twelve months.

Performance against key objectives during the year - Investor Returns

Profit before tax was £79.9 million (2014: £71.2 million) with earnings per share of 9.54 pence (2014: 9.49 pence).

Returns from portfolio investments (investment income) in the year were £100.2 million (2014: £90.1 million) including fair value movements, dividends and interest. These returns were partially offset by operating expenses (including finance costs) of £21.6 million (2014: £18.3 million).

These results allowed the Company to deliver a dividend of 6.45 pence per share for the year (2014: 6.30 pence per share).

The Company's Total Shareholder Return (share price growth plus reinvested distributions) for investors since the initial public offer of the Company in November 2006 to 31 December 2015 has been 115.0%, compared to a total return on the FTSE All-Share index over the same period of 49.2%1 or 8.7% and 4.5% (respectively) on an annualised basis. The Company has exhibited relatively low levels of volatility compared to the market, as evidenced by the graph below which shows the Company's share price since IPO against the price performance of the major FTSE indices and the Company's NAV.

INPP Share Price Performance

[Chart can be found in PDF version of this document on the Company's website.]

The Company reported a 21.5% increase in NAV, up to £1,290.2 million at 31 December 2015 from £1,062.1 million at 31 December 2014. This represented an increase of 2.5% of NAV per share, increasing to 130.2 pence per share at 31 December 2015 from 127.0 pence per share at 31 December 2014.

The build-up of NAV is derived from a discounted cash flow calculation to determine the fair value of investments plus the value of cash and other net assets held within the Company's consolidated group.

The key drivers of the change to the NAV between 31 December 2014 and 31 December 2015 are highlighted in the graph that follows and described in more detail below.

1 Bloomberg - share price appreciation plus income.

Net Asset Value Movement (£m)

[Chart can be found in PDF version of this document on the Company's website.]

1 Represents movements in the forward foreign exchange curves used to forecast future international project distributions.

2  The NAV Return represents, amongst other things, (i) variances in both realised and forecast project cash flows, (ii) the unwinding of the discount factor applied to those future project cash flows and (iii) changes in the Company's other net assets (see also more detail below).

During the period a total of £198 million of new capital was raised (before costs) from a tap issue and via a Placing, Open Offer and Offer for Subscription. Proceeds were utilised to repay the drawn balance of the corporate debt facility and acquire new investments.

For the twelve months to 31 December 2015, government bond yields decreased in all countries the Company holds investments in, resulting in a positive impact on the NAV. This was partly offset by an increase in the project premium reflecting observable market based evidence which does not support the full reduction in government bond yields. The portfolio also benefited from a reduction in discount rate risk premia as assets moved out of the construction or defects liability phase and towards full operations.

Sterling strengthened against the Australian dollar, the Canadian dollar and the Euro over the year to 31 December 2015 and this had a negative impact on the NAV. The most significant foreign exchange impact was seen in the valuation of the Company's Euro denominated investments.

Cash distributions reached £48.6 million during the year and represent the cash elements of two dividends made to INPP shareholders.

The NAV Return of £77.1 million, representing a return of 6.4%, captures the following:

- Unwinding of the discount factor - the movement of the valuation date and the receipt of forecast distributions

- Optimisation of cash flows - actual distributions received above the forecast amount due to active management of the Company's portfolio, including negotiating and optimising project cash flows to ensure cash can be extracted from the underlying investments earlier than forecast and optimising Group tax losses

- Movements in the Company's working capital position

- Updated project forecasts - refinement of project model and macroeconomic assumptions to reflect current expectations of future cash flows

Investment Valuation

The Company's investments are expected to exhibit (and historically have exhibited) predictable cash flows. As the Company has a large degree of visibility over expected income from its current investments the chart below sets out the Company's expectation for the evolution of investment receipts from its current portfolio (over the remaining life of current investments).

The majority of the receipts over the life of the concessions are investment income in the form of dividends or interest and principal payments from senior and subordinated debt investments.

The Company generally invests in infrastructure entities with finite lives (determined by concession or licence terms). As the remaining life of each of the Company's investments reduces, the Company's receipts in respect of that investment will represent return of capital as well as income. The line in the chart below illustrates how, in the event that the Company never acquires any additional assets, nor raises any additional capital and other things being equal, the NAV of the Company would reduce to zero over time. Equally however, any future acquisitions (or disposals) or changes to the projected cash flows of any investment (or the assumptions upon which they are based) will change this projection from time to time (although it can be expected to retain the same general amortising profile).

INPP Projected Cash Flow Profile

[Chart can be found in PDF version of this document on the Company's website.]

Note: There are many factors that may influence the actual achievement of long-term cash flows to the Company. These include both internal as well as external factors and investors should not treat the chart above as being more than an indicative profile and not a projection, estimate or profit forecast. The actual achieved profile will almost certainly be different and may be higher or lower than indicated.

The Company's investment portfolio is reviewed semi-annually by the Investment Adviser, and presented for approval by the Directors. The Directors' valuation of the portfolio, Investments at Fair Value, as at 31 December 2015 was £1,201.1, an increase of 16.3% since 31 December 2014.

Investments at Fair Value Movements (£m)

[Chart can be found in PDF version of this document on the Company's website.]

1 The Portfolio Return represents, amongst other things i) variations in forecast project cash flows ii) the unwinding of the discount factor applied to those future project cash flows and iii) any distributions received during the period.

The portfolio return of £101.5 million represents a 9.2% increase in the rebased value of investments and can be attributed to:

- Distributions received over and above the forecast amount due to active management of the Company's portfolio including initiatives such as negotiating and optimising project cash flows to ensure cash can be extracted from project vehicles earlier than forecast and utilisation of group tax loss relief

- Unwinding of the discount factor whereby the movement of the valuation date has a positive impact on the Investments at Fair Value

- Uplift from a revaluation of existing investments to reflect current market pricing, notably the Angel Trains investment where a significant uplift in valuation occurred during the period as stakes in the company were sold by other shareholders and this market-based evidence was incorporated within the portfolio valuation

- Updating and refinement of project model assumptions to reflect current expectations of future cash flows

- Increase in forecast tax outflows in light of potential legislative changes to international tax

In addition there was:

- A net decrease in discount rates across jurisdictions in which the Company invests leading to a £17.7 million increase in portfolio value

- A net decrease of £2.4 million which reflects the changes made to the macroeconomic assumptions

- A net decrease in the portfolio valuation due to foreign exchange rate movements in all four currencies the Company has exposure to

The remaining movements relate to investments of £143.1 million and project distributions of £76.0 million.

The Company reviews the macroeconomic assumptions underlying its forecasts on a regular basis and, following a thorough market assessment during the period, certain adjustments have been made to some of the assumptions used to derive the Company's portfolio valuation.

The key assumptions used as the basis for deriving the Company's portfolio valuation are summarised in the following table with further details provided in note 12. Across the portfolio the weighted average long-term inflation assumption as at 31 December 2015 was 2.57% (2014: 2.55%) and the weighted average deposit rate assumption was 3.11% (2014: 3.47%). The Net Asset Valuation Section above provides further details on the impact of these assumptions on the valuation during the period.

1 The portfolio valuation assumes actual current deposit rates are maintained until 31 December 2018 before adjusting to the long-term rates noted in the table above.

2 The Company made its first US denominated investment in during 2015. It had no USD exposure prior to this time.

3 The reduction in UK tax rates reflects the latest substantively enacted rates at 31 December 2015 and therefore captures the reduction to 19% from 1 April 2017 and 18% from 1 April 2020.

The discount rate used for valuing each investment is based on the appropriate long-term government bond yield plus a risk premium. The risk premium takes into account risks and opportunities associated with each project (including location, phase of operation/construction etc).

The majority of the Company's portfolio (84%) is comprised of investments where the Company only holds the Risk Capital in the underlying projects. The remaining portfolio (16%) is comprised of investments where the Company holds both the Risk Capital and the senior debt. In order to provide investors with a greater level of transparency, the Company publishes both a Risk Capital weighted average discount rate and a portfolio weighted average discount rate across all investments including senior debt interests.

The current discount rates used by the Company are provided in the table below. These rates need to be considered against the assumptions and projections upon which the Company's anticipated cash flows are based.

If the Company's average discount rates are to be compared with those of similar companies, this needs to be done rigorously. In the Company's view comparisons of average discount rates between competitor investment portfolios or funds is only meaningful if there is a comparable level of confidence in the quality of forecast cash flows (and assumptions) the rates are applied to; the risk and return characteristics of different investment portfolios are understood; and the depth and quality of asset management employed to manage risk and deliver expected returns are identical across the compared portfolios. As such assumptions are unlikely to be homogenous, and focus on average discount rates without an assessment of these and other factors could be misleading.

1 Risk Capital is equity and subordinated debt investments.

The change in the weighted average discount rate in the period is principally due to the accretive nature of the assets that were brought into the portfolio together with revaluations of certain assets.

Government bond rates

In the table above the Company has provided an analysis of the weighted average government bond rate used in calculating the discount rate. It should be noted that the nominal (i.e. non inflation linked) bond rate has been used in this calculation. The Company considers, however, that investors may also find a comparison with inflation adjusted government bond rates beneficial. This is the case due to the significant level of inflation linkage inherent in the Company's anticipated cash flows.

Real (i.e. inflation adjusted) bond rates are included in the table below. Using these real rates on a weighted average basis leads to a 'real' portfolio rate of (0.44%) with the difference between the 'real' and 'nominal' rates reflecting in theory the implied rates of future expected inflation. In some countries this is higher than those currently being assumed to calculate the Company's NAV. This information is provided to enable investors to make approximate comparisons of the projected return of the Company with that available from government index linked bonds. It should be noted that any such comparison can only be estimated due in part to the fact that the Company's cash flows are not fully linked to inflation and the Company's cash flows already assume a core level of inflation as set out in the section headed Macroeconomic assumptions on page 21.

1 Includes Belgium, Germany, Ireland, and Italy. Note estimates only for Belgium and Ireland as no index linked bonds available.

The Company is aware that there are subtle differences in approach to the valuation of portfolios of investments among different infrastructure funds. To clarify the Company's position in this regard its key cash flow inputs and broad valuation principles include that:

- Key macroeconomic variables (outlined in the section above) continue to be applicable

- The contracts under which payments are made to the Company and its subsidiaries remain on track and are not terminated before their contractual expiry date

- Where deductions are suffered under such contracts they are fully passed down to subcontractors

- Where possible lifecycle costs/risks are not borne by the Company but are passed down to a third party such as a facilities management contractor

- Cash flows from and to the Company's subsidiaries and the infrastructure asset owning entities in which it has invested will be made and are received at the times anticipated

- Where assets are in construction they are either completed on time or any costs of delay are borne by the contractors not the Company

- Where the operating costs of the Company or the infrastructure asset owning entities in which it has invested are fixed by contract such contracts are performed, and where such costs are not fixed, that they remain within projected budgets

- Where the Company or the infrastructure asset owning entities in which it has invested owns the residual property value in an asset that the projected amount for this value is realised

- Foreign exchange rates remain consistent with current four year forward looking projections

- There are no regulatory changes in the future which negatively impact the cash flow forecasts

Impact of Changes in Key Macroeconomic Variables to 31 December 2015 NAV 130.2p per Share

[Chart can be found in PDF version of this document on the Company's website.]

The Company's NAV is based on the factors outlined above. The Company has also provided sensitivity analysis showing an indication of the impact on NAV per share from changes in macroeconomic assumptions and discount rates, as set out below. Further details can be found in note 12. This analysis is provided as an indication of the likely impact of these variables on the NAV per share on the basis that they apply uniformly across the portfolio whereas in practice the impact is unlikely to be uniform. These sensitivities should be used only for general guidance and not as accurate predictors of outcomes.

The Company's approach to determining the discount rate is described in detail above. Assuming all other things are equal, a reduction of 1% per annum to the underlying project discount rates would increase the 31 December 2015 NAV per share by 14.7 pence. Should the underlying project discount rates increase by 1% per annum the NAV per share would decrease by 12.4 pence.

In an environment where investors are increasingly focused on achieving long-term real rates of return on their investments, inflation protection is an important consideration for the Company. At 31 December 2015 the majority of assets in the portfolio had some degree of inflation linkage and, in aggregate, the weighted return of the portfolio would be expected to increase by 1% per annum in response to a 0.76% per annum inflation increase across the whole portfolio over the currently assumed rates.

Where actual inflation is higher or lower than the assumed levels, it can be expected to impact on the Company's actual future cash flow in a correspondingly positive or negative manner other things being equal. If the underlying project inflation rates were to increase by 1% per annum evenly across the portfolio there would be a 10.7 pence increase to the NAV per share. Conversely, if the rates were to decrease by 1% per annum there would be a 9.5 pence decrease to the NAV per share.

Forecasting the impact of possible future inflation/deflation on projected returns and NAV in isolation cannot be relied on as an accurate guide to the future performance of the Company as actual inflation is unlikely to follow any of these scenarios exactly and in any case, many other factors and variables will combine to determine what actual future returns are available. The analysis provided above should therefore be treated as being indicative only and not as providing any form of profit or dividend forecast.

The Company has a geographically diverse portfolio and therefore revenues are subject to foreign exchange rate risk. Should the assumed exchange rates increase by 10% per annum this could be anticipated to lead to a 4.0 pence increase in the NAV per share while a 10% per annum reduction in the exchange rates would result in a 3.3 pence decrease in NAV per share. Short-term fluctuation in foreign exchange rates are managed through currency forward contracts.

The long-term weighted average deposit rate assumption across the portfolio is 3.11% per annum. While operating cash balances tend to be low given the structured nature of the investments, project finance structures typically include reserve accounts to mitigate certain costs and therefore variations to deposit rates may impact the portfolio. All else being equal, a 1% per annum increase in the underlying deposit rates could be anticipated to lead to a 1.3 pence increase in the NAV per share and a 1% per annum decrease in deposit rate to a 1.4 pence reduction in the NAV per share.

The Company has a geographically diverse portfolio and therefore post-tax investment cash inflows are impacted by tax rates across all relevant jurisdictions. Should the assumed tax rates increase by 1% per annum this could be anticipated to lead to a 0.8 pence decrease in the NAV per share while a 1% per annum reduction in the tax rates could be anticipated to lead to a 0.8 pence increase in NAV per share.

Over a project's lifecycle there is a process of renewal required to keep the physical asset fit for use and at the standard required of it under the agreement with the occupying public sector body. The proportion of total cost that is lifecycle spend will depend on the nature of the asset. In order to enhance the certainty around cash flows, around 93.5% of the Company's assets (by value) are structured such that lifecycle cost risk is taken by a subcontractor for a fixed price (isolating equity investors from such downside risk). As a result, the impact of any changes to the Company's lifecycle cost profile is relatively small. A 10% increase in lifecycle costs would lead to a 0.5 pence reduction in NAV per share. A 10% decrease in lifecycle costs would lead to a 0.5 pence increase in NAV per share.

Under UK group tax loss relief rules, losses within the UK group companies can be, subject to UK tax law, offset against taxable profits in other UK group companies (including controlled project entities). This group tax loss relief can reduce the overall tax charge across the portfolio and potentially reduce taxable profits substantially below the levels currently modelled by the Company. The Company has taken a conservative approach to the valuation of future tax losses and, to date, has not incorporated these into the NAV.

The Company's net cash at 31 December 2015 was £72.4 million (31 December 2014: £29.4 million), an increase of £43 million reflecting proceeds from capital raising and positive investment cash flows offset by new investments made in the year and repayment of outstanding balances on the corporate debt facility.

Cash inflow from the Company's investment portfolio was £76.0 million (31 December 2014: £64.0 million). The increased cash flow was mainly due to the contributions from new investments made during the year.

Recurring operating costs have increased from £12.2 million to £13.7 million, in line with the increase in the Company's NAV and increased audit fees, as detailed in the 'ongoing charges' table below; other operating costs have remained largely consistent. Net financing costs increased from £1.9 million to £3.5 million mainly due to the drawdowns on the corporate debt facility made to provide financing for investments prior to the equity capital raise. Non-recurring operating costs of £2.8 million (31 December 2014: £5.0 million) mainly represent costs associated with the refinancing of the corporate debt facility in the period and one-off transaction costs incurred on new investments.

The Company funded its acquisitions during the period by drawing down on its corporate debt facility which was subsequently repaid using the proceeds from capital issuance. No investments were disposed of in the year (31 December 2014: £22.3 million).

Cash dividends paid in the period of £48.6 million (31 December 2014: £40.7 million) were in respect of the six month periods ended 31 December 2014 and 30 June 2015.

A breakdown of corporate operating costs paid is provided below:

The increase in management fees paid to the Investment Adviser is in line with the growth in managed investments and the growth of the Company's portfolio.

1 The Ongoing Charges ratio was prepared in accordance with the Association of Investment Companies' ('AIC') recommended methodology, noting this excludes non-recurring costs.

2 Average of published NAVs for the relevant period.

Performance against Strategic Priorities - 1. Active Asset Management

Investment cash flow from the Company's portfolio of 120 investments has continued to perform in line with the Company's forecasts. Ensuring that the Company's assets are available for use and are performing in accordance with contractual expectations is a critical task for the Company and its service providers.

The Investment Adviser, on behalf of the Company, closely monitors the relationship between service providers and public sector clients. It is actively involved in the ongoing management of assets to ensure that performance standards are being met. In addition to these day-to-day activities, the Investment Adviser works with public sector clients on assignments as they arise.

During 2015, our public sector clients commissioned c.950 variations resulting in over £10 million of additional works at the project level. All variations were overseen by the Investment Adviser as part of the day-to-day asset management activities it undertakes in conjunction with the project facilities manager and the public sector client. Variations ranged in size from a few hundred pounds to over £2 million and demonstrate the value and flexibility of PFI/PPP contracts to respond to the changing requirements of public sector clients.

The Company also takes an active role in assisting its public sector clients to achieve savings from existing concession arrangements. The Investment Adviser is working with a number of its public sector counterparties to identify and deliver efficiencies and savings in operational PFI and PPP contracts. Across the portfolio a number of benchmarking exercises have been undertaken in relation to both insurance and facility management services that have resulted in reduced costs to the public sector.

On a number of the Company's portfolio of assets the Investment Adviser, facilities management operator and the public sector client work extensively with the local community. Examples include local sports clubs using schools facilities, schools utilising the court facilities for mock trials, workplace experience for students and those who have been long term unemployed, and various out of school hours clubs.

During the latter stages of 2015 work commenced on two new assets in construction. The New Schools PPP Project in Australia (Victorian Schools 2) reached financial close on 29 October 2015. The Project comprises 15 new build schools across twelve different green-field sites in outer metropolitan Melbourne. In order to meet the construction programme, design development commenced shortly after the confirmation of preferred bidder status and design submissions to the State continued through financial close to the end of 2015.

Construction on the project is split into two tranches with the first eight schools due to be completed by 1 January 2017 and the remainder by 1 January 2018. Design and construction progress on the project is on programme and includes:

- Submission of five design packages to the State;

- The establishment of several sites and commencement of ground works.

Works over the next twelve months include completion of the design and construction of the first tranche of eight schools and finalised design for the remaining schools.

In addition since its investment in Thames Tideway Tunnel ('Tideway') significant milestones have been achieved to allow the company to start construction on the 25km 'super sewer'. Thames Water, on Tideway's behalf, is well-advanced with the necessary enabling works which are preparing the 24 sites across London for the driving of the tunnel itself, with the most prominent piece of work taking place in the foreshore by Blackfriars Bridge. Main works construction is anticipated to start slightly earlier than planned, in the first half of 2016.

Projects under construction as at 31 December 2015, all of which are currently on schedule for operational commencement are set out in the table below.

1 The Victoria Schools Project is currently funded via a letter of credit. Investment will be made at construction completion.

Strategic Report

Case Study - Thames Tideway Tunnel

- £210m

- Investment Commitment

- 25km

- Length of tunnel

- 65m

- Maximum tunnel depth

Thames Tideway Tunnel (Tideway) is a new £4.2bn investment in the sewer network which will carry sewage and storm water discharges from the London sewerage network.

Project Overview

- Tideway will be a 25km sewer tunnel running up to 65 metres below the Thames, effectively replacing the Thames as a 'sewer of last resort', feeding overflow sewage to a pumping station at Abbey Mills in East London

- The tunnel will be built under three separate construction contracts each covering a distinct physical section of the network

- The winning construction contractors were selected through a separate competitive tender process run by Thames Water

[Diagram can be found in PDF version of this document on the Company's website.]

Project Background & Financing

- Amber, the Company's Investment Adviser, worked on behalf of the Company and formed the Bazalgette consortium in 2014 to bid on the project alongside other leading investors including:

· Allianz Capital Partners

· Dalmore Capital Limited

· DIF Infrastructure

· Swiss Life

- The investor group includes a significant proportion of UK pension funds through which over 1.7 million

- UK pensioners will have an indirect investment in Tideway

- The Company will invest up to £210m for a 16% stake, in instalments drawn during the construction period

- INPP's commitment is backed by letters of credit against the Company's corporate debt facility. The last instalment is scheduled to occur in early 2018

- Six relationship banks will provide senior non-recourse debt directly to the project

Key features

- A yielding investment through both construction and operating periods (120 years)

- A fully RPI-linked revenue stream

- The investment will significantly extend the Company's portfolio's life; the weighted average concession life of the portfolio to c.40 years once full investment is made

- Strong protections exist to mitigate construction risks, including:

· Experienced management team, project manager and construction contractors already in place

· Significant incentive arrangements under the construction contracts, licence and stakeholder arrangements

· A government support package which provides significant mitigation to the risks of construction

· Bespoke regulatory features to reflect the nature of the construction obligations including a mechanism applied after construction to incentivise cost and time savings

Performance against Strategic Priorities - 2. Value-focused Portfolio Development

During the year the Company made further investment or commitments of £311.7 million across nine projects. The projects acquired were either sourced by the Investment Adviser from project inception (i.e. in response to an initial government procurement process) or were acquired by way of further investment into the Company's existing assets. These methods of procurement remain the Company's preferred route to market as they necessarily avoid investment in the open secondary market which remains very competitive. Details of acquisitions are provided below.

1  Funding for investment solely or partially by way of letter of credit to support future investment commitment.

During the twelve months to 31 December 2015 the Amber Consortium of which the Company is part, reached financial close investing £36.3 million into four of five batches of schools being delivered through the Priority Schools Building Programme ('PSBP').

These projects use an innovative financing model based upon the establishment of a funding vehicle known as the 'Aggregator'. One of the key features of the Aggregator is the ability to warehouse loans and thereby aggregate total financing requirements across all five schools batches. The Aggregator is financed by a Consortium including the Company along with Aviva Investors and the European Investment Bank providing senior debt. 

The Company expects to provide up to an additional c.£7 million funding to the remaining batch. Financial close of this final batch is expected in the early part of 2016.

During the period, the Company acquired an additional 40% investment in the Lewisham BSF concession, increasing the Company's overall exposure to between 41% and 50% in the underlying BSF assets.

The Company invested £14.3 million for an additional 40% interest from Babcock Project Investments Limited. The Lewisham project comprises schools located in south east London boroughs, including Sedgehill and Conisborough Schools; Trinity School; Deptford Green School; and, Bonus Pastor, Pendergast and Drum Beat Schools.

In June the Company acquired an additional 19.9% investment for c.£1.9 million in the Liverpool Central Library PFI concession from Shepherd Construction. The acquisition increased the Company's overall exposure from 80.1% to 100%.

The Liverpool Central Library is one of the flagship legacy projects for the Liverpool City Council, as part of the Liverpool European Capital of Culture programme in 2008. The Company, through its Investment Adviser, acted as Lead Sponsor and Manager for the £50 million project to refurbish three existing historic library buildings which included the demolition and construction of a new main library and archive complex. The Library reached construction completion in January 2013 and opened to the public in May that year.

In August, the Company along with its consortium partners reached financial close on the Thames Tideway Tunnel ('Tideway') project. The Company will invest up to £210 million in relation to its 16% stake in the project. It is the Company's largest investment to date. The remaining Risk Capital is being funded by the consortium partners.

Tideway is one of the most significant UK infrastructure investment opportunities. Up to 39 million tonnes of untreated sewage are currently discharged into London's waterways every year and the project will significantly reduce this.

Tideway will be a new part of the sewer network which will carry sewage and storm water discharges from the broader London sewerage system. Tideway will be a 7.2m diameter 25km sewer tunnel running up to 65 metres below the Thames and will effectively replace the Thames as a 'sewer of last resort'. The Tideway project has a design life of 120 years and is expected to provide yield to its investors throughout this period.

Construction of the estimated £4.2 billion project (2011 prices) will be under three main contracts. The construction preferred bidders were announced in February 2015, with BMB JV (Joint Venture of BAM Nuttall Ltd, Morgan Sindall Plc and Balfour Beatty Group Limited) selected for the West contract, FLO JV (Joint Venture of Ferrovial Agroman UK Ltd, Laing O'Rourke Construction) for the Central contract and CVB JV (Joint Venture of Costain, Vinci Construction Grands Projets and Bachy Soletanche) for the East contract. Construction is expected to commence in 2016 and reach completion by 2023 followed by a 120 year operational life. 

During construction, the Tideway project will benefit from a bespoke regulatory framework that will allow it to start generating revenue when construction begins. Once fully operational, Ofwat will regulate the Tideway project in line with other water and sewerage companies' regulatory cycles.

The Company's commitment to Tideway has been secured through the issue of a letter of credit under the Company's corporate debt facility. The Company's investment will be funded as the project's milestones are met with the final injection expected in early 2018. As a result at 31 December 2015, the Company had invested £58.9 million into the project with the remainder backed by a letter of credit.

The Company invested approximately US$48 million (c.£32 million) into a series of fully yielding subordinated debt instruments with a remaining average life of 37 years. The subordinated debt was acquired by the Company from the Federal Home Loan Mortgage Corporation ('Freddie Mac') and is underpinned by security over seven operational P3 military housing projects relating to a total of 19 operational military bases in the US comprising approximately 21,800 individual housing units. 

The opportunity was identified as a consequence of the Hunt shareholding in the Company's Investment Adviser and the relationship that exists between Hunt and the Company with respect to US opportunities. Hunt are one of the largest owners, managers and providers of ongoing services in the P3 Military Housing sector having interests in approximately 33,000 housing units including those the subject of this transaction where they also provide property management services in respect of most of the units.

The Company reached financial close on a new schools scheme in the State of Victoria, Australia. The Company will invest A$35.6 million (£17.5 million), representing 100% of the Project's risk capital at the end of the project's construction period, expected in 2018. The commitment is currently secured through the issue of a letter of credit under the Company's corporate debt facility.

The Project has been commissioned by the Victorian Department of Education and Training, and comprises the design, building, financing and maintenance of 15 schools across twelve sites. The contract with the Victorian Government is for a period of 25 years from the expected date of construction completion.

The Project is expected to deliver a predictable and high quality cash flow to the Company backed by the credit of the State of Victoria which is rated AAA by both S&P and Moody's. The Company anticipates a return on its investment fully in line with its experience on other comparable projects.

In February 2016, Transmission Capital Partners, the consortium comprising INPP, Amber Infrastructure and Transmission Investment reached financial close for the long-term license and operation of its sixth UK offshore transmission project, Westermost Rough OFTO.

The Company made a £26.8 million investment for 100% of the equity and subordinated debt of the OFTO. The OFTO will connect a windfarm containing 35 6MW turbines located 8km off the coast of Yorkshire to the onshore grid network, providing enough electricity to power around 150,000 UK homes.

Performance against Strategic Priorities - 3. Efficient Financial Management

The Company seeks to generate dividends to investors that are paid from operating cash flow. For the year ended 31 December 2015 the cash dividend paid to investors was 1.2 times covered by net operating cash flow and the Company remains confident that it will be able to grow dividends in the future.

In May 2015, the Company renewed its corporate debt facility ('the facility') with existing providers, Royal Bank of Scotland and the National Australia Bank Limited. The facility size increased from £175 million to £300 million. The margin on the facility is 175 basis points, 50 basis points lower than the original arrangement. The facility is subject to renewal in May 2018. The drawn portion of the facility was fully repaid in December 2015. Currently £169 million is drawn on the facility via letters of credit, which takes into account the Company's investment into Westermost Rough OFTO in February 2016.

It remains the Company's policy not to have long-term corporate level debt and it is anticipated that to the extent that the corporate facility is drawn to fund acquisitions, this would be a short-term arrangement and equity funding, by means of a capital raising, would be sought to repay outstanding debt as soon as practicable.

Strategic Report

Outlook

Current Market Environment and Future Opportunities

The Company anticipates continued benefits arising from the strong outlook in the infrastructure markets in which we invest. Moreover, the governments in the jurisdictions in which our efforts are directed continue to promote new infrastructure projects and broadly favour continued reliance on the private sector as the source of finance and investment expertise in this space.

Most government in developed nations have a policy on renewing and improving infrastructure provision in their countries. In the UK and Australia this is evidenced by the National Infrastructure Plan and many other countries have similar ambitions. This trend for promotion of new infrastructure projects will, in the Company's view, persist in the medium to long term. This offers very positive macroeconomic support for the Company's future growth prospects.

While the Company is confident of the long term opportunities within the sector, the prospects for new investment over any short term period are inevitably more difficult to predict. The investment levels of the past should not necessarily be seen as indicative of the levels of investment that the Company may make going forward. Future investment is dependent on factors including:

- The number and quality of new 'greenfield' infrastructure opportunities being procured by public sector bodies (known as the 'primary market')

- The number and quality of investments being sold by existing owners (known as the 'secondary market')

- The level of competition for primary or secondary opportunities and the resulting impact on pricing and levels of returns

- The macroeconomic environment (e.g. the impact of inflation, interest rates, and the pricing of risk and return for alternative investments)

We also continue to guide investors that competition in the secondary market for assets such as those in which the Company invests remains strong. While the Company is always interested in reviewing mature secondary market investment opportunities being sold by their existing owners, not all of these opportunities are likely to be accretive to the Company's portfolio.

The Company is also selective to enable it to realise an appropriate risk and return balance within the overall portfolio. In the past, this has resulted in the Company taking opportunities to divest smaller, non-strategic assets where there is little prospect of increasing stakes to controlling positions and where market pricing is higher than book value. While no such divestments are currently envisaged, the Company will continue to review its portfolio with this option in mind.

The Company has an international focus and the current market environment in each of the major jurisdictions in which it operates and the potential for future investment within each is outlined in more detail below:

The UK government has continued the previous coalition government's focus and interest in the UK infrastructure sector, and it views high-quality infrastructure as a means to increase productivity and competitiveness. In its Summer 2015 Budget, the UK government pledged to be 'bold in delivering infrastructure' and announced the intention to publish a productivity plan that will 'set out measures to encourage long-term investment in economic capital...including infrastructure'.

In recognition of this it has now streamlined its approach to the development of infrastructure assets in the UK, establishing the Infrastructure and Projects Authority. The Authority will provide support for the major economic projects, centralising the financing and delivery of such projects. In order to assist the planning of major infrastructure projects the government also established the National Infrastructure Commission which is charged with offering unbiased analysis of the UK's long-term infrastructure needs.

While many of the £411 billion projects currently identified in the National Infrastructure Plan fall outside the scope of the Company's investment parameters, there is likely to be a wide variety of projects in which the Company might invest. Although these projects may have risk/return dynamics similar to those found in the Company's existing portfolio, increasingly these assets are not likely to be structured as traditional PFI/PPP procurements. The Company expects more regulated assets to come under consideration by it in 2016.

For example, the Company is particularly interested in the government's willingness to use the regulated asset model as a means for infrastructure procurement - where, simplistically, investors receive a permitted and pre-specified return on capital invested through agreement with the relevant regulator. This methodology was used in the recent Tideway transaction with water regulator, Oftwat's oversight and support. The expectation is that the regulated model could be used to procure other core infrastructure assets and we watch this space, as well as opportunities with existing utilities, with interest.

We have also highlighted for some time the attractive characteristics of the offshore transmission ('OFTO') sector - where investment is made into the cables and substations that link offshore wind farms to the national electricity grid. These projects continue to be amongst some of the most attractive in our sector as they provide long-term income without demand risk i.e. no exposure to volume of electricity generated by the wind farm. The Company has, to date, been a market leader in investment into this space having invested into six projects. The Company expects to continue to benefit from additional opportunities in this sector that will come to market over the coming years; the regulator, Ofgem, has estimated a further £2 billion of investment required in OFTOs within the next two years with the prospect of significantly more in the years thereafter. The government has also been engaged in a consultation process on arrangements for the introduction of competitive tendering of onshore electricity transmission projects.

Australia has long involved private sector organisations in the provision and financing of its public sector infrastructure. It also has a well-developed market for investment, not only by local superannuation funds and similar investors but it has also developed a large pool of international investors who have invested widely there.

Both Federal and State governments have their own long-term infrastructure strategy delivery organisations and there is a unified method for the delivery of PPP projects. A National PPP Policy Framework has been developed which aims to provide a consistent approach by procuring agencies and streamlined procedures that encourage private sector investment in public infrastructure.

Currently Australia's infrastructure priorities include multi-billion Australian Dollar transport projects such as improvements, developments and modernisation of highways and rail transport together with water and communications infrastructure. There are presently six potential PPP projects identified by State governments for development in 2016/17, with a further three greenfield projects in procurement as well as one existing project subject to a major augmentation. It is also anticipated that asset sales in some states may lead to funding availability for further projects.

The Australian government's 2015 Infrastructure Audit identified a number of infrastructure challenges facing Australia, including population growth, a desire to increase productivity and connectivity and improve resilience and maintenance.

Consequently an Australia Infrastructure Plan was released in February 2016 which provides a comprehensive roadmap to address 'infrastructure gaps' and identifies a priority list of project initiatives in each state and territory. Particular focus is placed on solutions that would improve the public funding of infrastructure and enable increased private sector investment.

Select jurisdictions in Northern Europe, including Belgium, the Netherlands, Germany, Austria, Ireland and parts of Scandinavia, continue to offer new primary market infrastructure opportunities across a range of sectors including accommodation and transportation which are attractive to the Company. The Company expects further suitable opportunities to be offered by the European market following the publication of the Investment Plan for Europe (commonly known as the Juncker Plan) by the European Commission in November 2014.

According to European PPP Expertise Centre's '2014 Market Update: Review of the European PPP Market' in 2014, 82 PPP transactions, with a total value of €18.7 billion reached financial close in the European market (including the UK), representing a 15% increase in value from 2013. Whilst the UK was the largest such market in Europe by value and number of transactions in 2014, Germany was named in 2014 as the third largest PPP market, and the Company was recently announced preferred bidder on a PPP opportunity there.

Looking forward, there are further potential new PPP opportunities announced in jurisdictions such as the Netherlands, with twelve projects identified as being prepared to tender through PPP and/or in procurement.

The Investment Plan for Europe, launched in November 2014, was set up to enable €315 billion of investment in strategic projects across Europe in a three year period from January 2015; its aim is to encourage the mobilisation of private funding in Europe.

The plan laid the foundation for the creation of a €16 billion guarantee to be provided by the European Investment Bank ('EIB'), funded from the EU budget, known as the European Fund for Strategic Investments ('EFSI'). The EFSI guarantee offers specific cover to investments financed by the EIB, and will allow the EIB Group to provide additional financing of approximately €61 billion over its investment period.

The strategic investments which the EFSI will support include projects in the transport and energy infrastructure sectors. The EFSI guarantee has already been used for PPP and other infrastructure/energy projects including examples in continental Europe such as the Vienna Hospitals PPP and the €560m West Strasbourg Bypass concession.

In summary therefore the infrastructure markets of Europe continue to grow in ways that offer encouragement to the Company. The same qualification as applies to all the Company's opportunities applies equally to those in Europe: that is that future success will depend on both success in bid processes (both in the primary and secondary markets) and confidence that such opportunities fit within the Company's risk and reward parameters and offer overall benefit to the portfolio.

The infrastructure market in the United States is very significant in size. In 2015 KPMG estimated the historical size of the US P3 market as being around US$8.5 billion per annum with a future forecast of US$12.5 billion per annum. As with infrastructure markets in other developed countries the projected growth is anticipated to be delivered partly as a consequence of the need for infrastructure renewal and partly because of changes in demographics and the future shape of public services. Moody's Investor Services stated in October 2014, "Given the sheer size of its infrastructure and growing urban population the US has the potential of becoming the largest market for public private partnerships in the world".

Following the launch of President Obama's 'Build America Investment Initiative' in July 2014, the US Treasury released recommendations formulated by the Interagency Infrastructure Finance Working Group in order to expand public-private collaboration in infrastructure. The recommendations included eight pathways designed to provide more favourable conditions for private investors across all infrastructure sectors. The Treasury is also working on a white paper exploring options for alternative incentive arrangements that would assist in aligning the incentives of the public and private sector.

Some 33 of the individual states have enacted legal authority to transact public private partnership (PPP/P3) projects and availability based payment schemes (which match the Company's preferred form of project) have seen increasing levels of attention from procurers.

The Company is well positioned to capitalise on developments in this market through its relationship with Hunt (described in more detail on page 15), where it has 'right of first look' over investment opportunities in the United States originated or divested by Hunt which meet the Company's investment criteria.

Infrastructure opportunities are well established in Canada and the Company holds two existing Canadian PPP investments. The Company's Investment Adviser remains active in the Canadian market. However, the market is dominated by very price competitive domestic pension funds making entry into new investment opportunities more challenging. The Investment Adviser continues to believe that there will be attractive investment opportunities in the longer-term as infrastructure is upgraded.  In the short term investment is more likely to be secondary market opportunities rather than primary investments.

New Zealand continues to also be of interest to the Company. The government in that market has been pursuing a privatisation process of several government controlled energy and infrastructure businesses. While relatively small, the Investment Adviser continues to monitor projects as they come to market, resourcing these opportunities from its Australian offices and is reviewing one such opportunity.

The Company keeps a watching brief on opportunities in other international markets including markets such as Scandinavia but will only consider deals in other markets where it is satisfied that the combination of sovereign credit and rule of law makes such investment comparable with the Company's existing investments.

Current Pipeline

Overall, the Company is very positive about its short and longer term prospects, both in terms of the performance of its existing investments and the opportunity to add high quality investments to the portfolio during 2016.

Key areas of current activity within the Company and/or its Investment Adviser (or associates) include:

- Continued activities in the area of UK offshore transmission where the Company has recently closed its sixth project, Westermost Rough OFTO and is actively bidding each new opportunity as it comes to market

- Enhanced access to US P3 opportunities, particularly through the relationship with Amber/Hunt

- Other UK and European primary investment opportunities (for instance in the regulatory, healthcare and judicial sectors)

- Other UK and international regulated assets

- Acquisition of additional investments in projects where the Company already has an investment. Typically these will arise under pre-emption and similar rights

- Appropriately priced proposals from third parties seeking to dispose of projects meeting the Company's investment criteria which have synergies with the Company's existing portfolio

Current opportunities identified by the Investment Adviser are outlined in the table below. It should be noted that it can take a number of months for such opportunities to be awarded to a preferred bidder and many more again to reach financial close. Moreover none of these projects is certain to progress either with the Company or at all.

Finally, and notwithstanding the comments above and the opportunities listed below, it should be noted that the Company's projected economic performance is not dependent upon making future investment commitments in order to deliver its projected returns. These can be delivered in the Company's view from its existing assets. Fundamentally therefore, further investment opportunities will, first and foremost, be judged based on whether they add value and quality to the Company's existing portfolio.

1 Represents current estimated total investment that may be invested by the Company.

2 Represents the estimated current unaudited capital value of the project and includes both debt and equity.

The above represents potential opportunities currently under review by the Investment Adviser (and its associates) including current bids, preferred bidder opportunities and the estimated value of opportunities to acquire additional investments including under pre-emption/first refusal rights. There is no certainty these will translate to actual investment opportunities for the Company. The value referenced in relation to the pre-emption opportunities represents the estimated potential investment value which reflects the current estimate of the total likely acquisition value at that time. In relation to opportunities where the current estimated gross value of the relevant project is given (which includes an estimate of both debt and equity), the estimates provided are not necessarily indicative of the eventual acquisition price for, or the value of, any interest that may be acquired.

Rupert Dorey John Whittle

23 March 2016 23 March 2016

Chairman Director

Strategic Report

Risk Report

Risk Management and Internal Controls

The Board is responsible for overall risk management with delegation provided to the Audit and Risk Committee. The system of risk management and internal control has been designed to manage, rather than eliminate, the risk of failure to meet the business objectives. Regard is given to the materiality of relevant risks in designing systems of internal control but no system of control can provide absolute assurance against the incidence of risk, misstatement or loss.

The Company has in place a risk management framework, with a risk register that is reviewed and updated by the Board and Audit and Risk Committee on a quarterly basis. The Audit and Risk Committee considers the risks facing the Company and controls and other measures in place to mitigate the impact of risks.

There is an ongoing process for identifying, evaluating and managing the risks judged as most significant faced by the Company. The process has been in place for the year under review and up to the date of approval of the Annual Report and financial statements.

Risk management process

The Company's risk management process as overseen by the Board can be summarised as:

[Diagram can be found in PDF version of this document on the Company's website.]

Risk framework and systems of internal control

The Board recognises the importance of identifying and actively monitoring the financial and non-financial risks facing the business. Whilst responsibility for risk management rests with the Board, the aim is that the management of risk is embedded as part of the everyday business and culture of the Company and its principal advisers.

The Board has considered the need for an internal audit function but because of the internal controls systems in place at the key service providers, and the controls process reviews performed, it has decided instead to place reliance on those control and assurance processes.

The overall risk governance framework is the responsibility of the Board, overseen by the Audit and Risk Committee with input from the Management Engagement Committee. It is implemented through the following risk control processes.

Risk identification

The Board and Audit and Risk Committee identify risks with additional input from the Company's Investment Adviser and Administrator. The Board also receives detailed quarterly asset management reports highlighting performance and potential risk issues on an investment-by-investment basis.

Risk assessment

Each identified risk is assessed in terms of probability of occurrence, potential impact on financial performance and movements in the relative significance of each risk from period to period.

Action plans to mitigate risk

Where new risks are identified or existing risks increase in terms of likelihood or impact, the Audit and Risk Committee assists the Company in developing an action plan to mitigate the risk and put in place enhanced monitoring and reporting.

Re-assessment and reporting of risk

Such risk mitigation plans are reassessed by the Audit and Risk Committee, where applicable with the relevant key service providers and reported to The Board on a quarterly basis.

[Diagram can be found in PDF version of this document on the Company's website.]

The direct communication between the Company and its Investment Adviser and the entity level asset manager is regarded as a key element in the effective management of risk (and performance) at the underlying investment level.

The risk framework is applied holistically across the Company and the underlying investment portfolio as illustrated in the Operating Model diagram on page 13.

Principal Risks and Mitigation

The key risks affecting the Company and the investment portfolio have not in the view of the Board, materially changed year to year, largely due to the contractual and long-term nature of the investments with similar risk profiles. Changes in the macroeconomic environment and broader global regulatory and tax environment can impact on fund returns and are a permanent feature of the risk appraisal process.

The Board's views on the principal risks and uncertainties for the Company and the relevance of these risks to meeting the Company's objectives, together with movement of those risks in the period, are set out in detail in the table on pages 37 to 41. This is not intended to highlight all the potential risks to the business. There may be other risks that are currently unknown or regarded as less material which could turn out to be material. Any of these could have the potential to impact materially the performance of the Company, its assets, capital resources and reputation.

A description of broader risk factors relevant to investors is disclosed in the latest Company prospectus available on the Company's website www.internationalpublicpartnerships.com.

Whilst the Company has applied mitigation processes as highlighted below it is unlikely that the techniques applied will fully mitigate the risk.

The chart below provides a summary of the Board's view of the probability and potential impact of the Company's principal risks:

[Diagram can be found in PDF version of this document on the Company's website.]

The following key is used in the table below to highlight the Board's view on how risk exposures are considered to have moved during the period:

Risk exposure has increased in the period

Risk exposure has reduced in the period

No significant change in risk exposure since last reporting period

Viability Statement

In accordance with provision C2:2 of the 2014 revision of the UK Code of Corporate Governance, we have considered the Company's viability as summarised below. Due to the very long term and contractual nature of our investments, we have a significant level of confidence over the endurance and longevity of our business however it is difficult to assess the regulatory, tax and political environment on a long-term basis. Therefore whilst we consider the valuation of investment cash flows for the purposes of NAV over a considerably longer period than five years, we view five years as an the appropriate timeframe for assessing the Company's viability given these inherent uncertainties.

In 2015, the viability assessment process was embedded within the Company's annual risk review cycle and involves the following:

1) An Audit and Risk Committee review and assessment of the risks facing the Company. A summary of the review process is detailed on page 35

2) Identification of those principal risks that are deemed more likely to occur and have a potential impact on the Company's viability over the viability period (this exercise has included consideration of a persistent low inflation rate environment, a persistent weak currency environment impacting on overseas investments, and the impact from the loss of income from investments (whether due to key sub-contractor default or other asset underperformance)). We note that a number of risks identified during the risk review process in step one above may have implications for the Company's valuation but may be considered insignificant from a five year viability perspective

3) Quantification analysis of the potential impact of those principal risks occurring in isolation and under plausible combined sensitivity scenarios over the viability period

4) Assessment of potential mitigation strategies to mitigate the potential impact of principal risks over the viability period. This exercise has considered the potential to liquidate investments and/or refinance investments if necessary

The viability assessment is approved by the Board. Following the assessment, the Board have a reasonable expectation that the Company will be able to continue in operation and meet all its liabilities as they fall due up to March 2021. This assessment is based on the following assumptions which are not within the Company's control:

- No retrospective changes to government policy, laws and regulations affecting the Company or its investments; and

- Continued availability of sufficient capital and market liquidity to allow for the refinancing/repayment of any short term recourse debt facility obligations as they become due

Corporate Governance

Board of Directors

Background and Experience

1 All of the Independent Directors are members of all committees

Listed Company and Other Relevant Directorships

Corporate Governance Report

Introduction

The Board of Directors is committed to high standards of corporate governance and has put in place a framework for corporate governance which it believes is appropriate for an investment company.

Compliance with Corporate Governance Codes

All companies with a Premium Listing on the London Stock Exchange are required to confirm their compliance with (or explain departures from) the UK Corporate Governance Code issued in September 2014 (the 'UK Code'). This requirement applies regardless of where the Company is incorporated.

The Company is a member of the Association of Investment Companies (the 'AIC'). The Financial Reporting Council acknowledges that the AIC Corporate Governance Code issued in February 2015 (the 'AIC Code') can assist externally managed companies in meeting their obligations under the UK Code in areas that are of specific relevance to investment companies.

The Guernsey Financial Services Commission has also confirmed that companies that report against the UK Code or AIC Code are deemed to meet the Guernsey Code of Corporate Governance.

The AIC Code is available from the Association of Investment Companies (www.theaic.co.uk). The UK Code is available from the Financial Reporting Council website (www.frc.co.uk).

The Company has complied throughout the year with all the provisions of the AIC Code and as such also meets the requirements of the UK Code except to the extent highlighted below. In particular the Company notes the following departures from the code (for part or all of the year) for the reasons as set out below:

As an investment company, most of the Company's day-to-day responsibilities are delegated to third parties. The Company does not have any Executive Directors. The UK Code's two separate principles of setting out the responsibilities of the Chief Executive and disclosing the remuneration of executive directors (Section 12 - A.2 of the UK Code) are therefore not applicable.

The Board notes that the AIC Code and UK Code suggest it would be good practice for all Directors to be offered for re-election at regular intervals subject to continued satisfactory performance. In accordance with the Company's articles of incorporation, at least one third of the Independent Directors and Mr Frost (treated for the purposes of the AIC Code as a Non-Independent Director) will retire at each Annual General Meeting (Principle 3 - AIC Code). The Company considers that putting forward all Independent Directors for re-election annually as is recommended for FTSE350 companies under the AIC Code would not be in the best interests of shareholders, given the long-term nature of the Company's assets that benefit from a consistent approach across years both in terms of management and independent Board supervision.

As such the Company takes the view that the benefits to shareholders arising from the Directors' long-term knowledge and experience of these underlying assets and their management (including their ongoing ability to review the performance of the Investment Adviser and other advisers) outweighs the benefit of more frequent re-election being applied to all Directors.

However, as detailed in the 'Board Tenure and Re-election' section below as Mr Dorey's tenure reached nine years in August 2015, the Board determined that it would be appropriate that he offer himself for re-election on an annual basis.

Other Directors seeking re-election this year are detailed in the sections below.

The Board of Directors

The Board of Directors currently consists of six Non-Executive Directors, whose biographies, on pages 43 - 44, demonstrate a breadth of investment and business experience.

The Board consists solely of Non-Executive Directors and is chaired by Mr Dorey who is responsible for leadership of the Board and ensuring its effectiveness in all aspects of its role. Mr Dorey met the independence criteria of the AIC Code and UK Code upon appointment and has continued to meet this condition throughout his term of service. Mr Whittle was appointed as Senior Independent Director on 31 December 2013 and as such, is an alternative point of contact for shareholders and he leads in matters where it is not appropriate for the Chairman to do so.

For the purposes of the AIC Code Mr Frost is treated as not being an Independent Director, due to his relationship with the Company's Investment Adviser. In accordance with the AIC Code all other non-executives are independent of the Company's Investment Adviser.

Board Tenure and Re-election

Directors do not have service contracts. Directors are appointed under letters of appointment, copies of which are available at the registered office of the Company. The Board considers its composition and succession planning on an ongoing basis.

In accordance with the UK Listing Authority Rules, Mr Frost will retire and stand for re-election at the 2016 AGM.

In accordance with the AIC Code, when and if any Director has been in office (or on re-election would at the end of that term of office have been in office) for more than nine years the Company will consider further whether there is a risk that such a Director might reasonably be deemed to have lost independence through such long service.

Mr Dorey has been a Board member since August 2006 and in August 2015 had served as a Board member for over nine years. While the Board is confident that Mr Dorey remains independent, he has agreed to offer himself for re-election on an annual basis until his intended retirement from the Board at the Company's 2018 AGM.

Also, on a rotational basis, one third of the remaining Directors retire and put themselves up for re-election at every AGM; Mrs Whittet will make herself available for re-election at the 2016 AGM.

Any Directors appointed to the Board since the previous AGM also retire and stand for re-election. Mr Le Poidevin was appointed to the Board on 1 January 2016 and will therefore offer himself for re-election at the 2016 AGM.

Taking the above into account Mr Dorey, Mr Frost, Mr Le Poidevin and Mrs Whittet will all retire and stand for re-election at the 2016 AGM.

Directors' Duties and Responsibilities

The Directors have adopted a set of Reserved Powers, which establish the key purpose of the Board and detail its major duties. These duties cover the following areas of responsibility:

- Statutory obligations and public disclosure

- Approval of investment decisions

- Strategic matters and financial reporting

- Board composition and accountability to shareholders

- Risk assessment and management, including reporting, compliance, monitoring, governance and control

- Other matters having material effects on the Company

These reserved powers of the Board have been adopted by the Directors to demonstrate clearly the importance with which the Board takes its fiduciary responsibilities and as an ongoing means of measuring and monitoring the effectiveness of its actions.

The Board monitors the Company's share price and NAV and regularly considers ways in which shareholder value may be enhanced. These may include implementing marketing and investor relations activities, appropriate management of share price premium/discount and the relative positioning and performance of the Company to its competitors. The Board is also responsible for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Individual Directors may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties. The Company maintains appropriate Directors' and Officers' liability insurance in respect of legal action against its Directors on an ongoing basis and the Company has maintained appropriate cover throughout the period.

All new Directors receive introductory support and education about the infrastructure sector and the Company from the Investment Adviser on joining the Board and, in consultation with the Chairman all Directors are entitled to receive other relevant ongoing training as necessary.

Board Diversity

The Board is committed to maintaining the appropriate balance of skills, gender, knowledge and experience among its members to ensure strong leadership of the Company. When appointing Board members, its priority will always be based on merit, but will be influenced by the strong desire to maintain Board diversity. The Board currently has one female Director.

Board Remuneration

The Nomination and Remuneration Committee considers matters relating to the Directors' remuneration, taking into account benchmark information (including taking into account fees paid to directors of comparable companies, although such a review does not necessarily result in any changes to the fees paid) and based upon the amount of work performed by the Board members. In 2015 no advice or services were provided by any external persons in respect of its consideration of Directors' remuneration and no changes were made to Board remuneration.

All fees payable to the Directors should reflect the time spent by the Directors on the Company's affairs and the responsibilities borne by the Directors and be sufficient to attract, retain and motivate Directors of a quality required to run the Company successfully. The Chairman of the Board is paid a higher fee in recognition of additional responsibilities, as is the Chairman of the Audit and Risk Committee. The Chairmen of the Nomination and Remuneration, Management Engagement, and Investment Committees, respectively do not receive additional fees for these roles.

There are no long-term incentive schemes provided by the Company and no performance fees, or bonuses paid to Directors. Any changes to Directors remuneration are considered at the Annual General Meeting of the Company.

During the year, serving Directors were paid the following emoluments: 

1 Includes £10,000 fee payable to Board members with respect to the October 2015 Placing, Open Offer and Offer for Subscription and Placing Programme, paid in January 2016.

2 Mr Dorey became Chairman of the Board on 31 December 2013 for which he receives a higher fee.

3 The emoluments for Mr Frost are paid to his employer Amber Infrastructure Limited, a related company of the Company's Investment Adviser.

4 Mr Whittle became Chairman of the Audit and Risk Committee on 31 December 2013 for which he receives a higher fee.

5 Mr Le Poidevin was appointed to the Board on 1 January 2016.

Directors' Interests

Directors, who held office at 31 December 2015, had the following interests in the shares of the Company:

All shares are beneficially held.

2 Shares owned by Mr Dorey's spouse.

3 Holds shares through a Retirement Annuity Trust Scheme.

4 Mr Le Poidevin was appointed to the Board on 1 January 2016 and had no interests in the shares of the Company prior to his appointment

There have been no changes to any of the above holdings between 31 December 2015 and the date of this report.

Mr Frost is also a Director of International Public Partnerships Lux 1 SARL a wholly-owned subsidiary undertaking of the Company, and a director of a number of other companies in which the Company directly or indirectly has an investment, although he does not control or receive remuneration in relation to these entities.

In December 2015, Mr Whittle was appointed as Director of International Public Partnerships Lux 1 Sarl and International Public Partnerships Lux 2 Sarl. The appointment is effective from January 2016. No Director fees have been accrued or paid for the year ended 31 December 2015.

Committees of the Board

[Diagram can be found in PDF version of this document on the Company's website]

Committees of the Board

The Board has established four committees consisting of the independent Non-Executive Directors. The responsibilities of these Committees are described below. Terms of reference for each Committee have been approved by the Board and are available in full on the Company's website.

Audit and Risk Committee

The Audit and Risk Committee is comprised of the full Board with the exception of Mr Frost as the Non-Independent Director.

Mr Whittle is Chairman of the Audit and Risk Committee and Mr Stares has lead responsibility for Risk within that committee. As a consequence, the Company Chairman is a member of the Audit and Risk Committee, which the Board believes is appropriate as Mr Dorey brings significant independent expertise in investment trusts and finance for the benefit of that Committee.

The duties of the Audit and Risk Committee in discharging its responsibilities are outlined in the Audit and Risk Committee Report.

In respect of its risk management function, the Audit and Risk Committee is also responsible for reviewing the Company's risk management framework including the acquisition and disposal of assets, the valuation of assets and ensuring that the risk management function of the Investment Adviser, Administrator and other third party service providers are adequate and to seek assurance of the same. More detail is provided within the Risk Report.

The Audit and Risk Committee were satisfied that the key risks that could impact the Company and its investments were effectively mitigated and reported upon and were broadly in line with those of Company's more relevant industry peers.

Management Engagement Committee

The Management Engagement Committee is comprised of the full Board, with the exception of Mr Frost as the Non-Independent Director, and is chaired by Mrs Whittet. The duties of the Management Engagement Committee in discharging its responsibilities are outlined in the diagram on page 47.

The Management Engagement Committee carries out its review of the Company's advisers through consideration of a number of objective and subjective criteria and through a review of the terms and conditions of the advisers' appointments with the aim of evaluating performance, identifying any weaknesses and ensuring value for money for the Company's shareholders.

During the year the Management Engagement Committee formally reviewed the performance of the Investment Adviser and other key service providers to the Company and no material weaknesses were identified. Overall the Committee confirmed its satisfaction with the services and advice received. The external evaluation of the Board referred to above also considered the effectiveness of the Board's relationship with the Company's advisers including the Investment Adviser and concluded positively on the these relationships.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee is comprised of the full Board with the exception of Mr Frost as the Non-Independent Director, and is chaired by Mr Stares.

The Committee is formally charged by the Board to consider the structure, size, remuneration and composition of the Board. It also oversees the appointment and re-appointment of directors, taking into account the expertise of the candidates and their independence (see page 47 for more detail on the Committee).

As part of its ongoing remit, the Nomination and Remuneration Committee undertook an evaluation of the performance of the Board and Chairman. Each Director was asked to provide written feedback regarding the performance of the Board as a whole and the Chairman set against a range of best practice corporate governance criteria. A report of this feedback was considered by the Nomination and Remuneration Committee. No material issues were identified by the Directors regarding the performance of the Board and Chairman. The Board notes that in accordance with the Corporate Governance Code for FTSE 350 companies, the Company undertakes externally facilitated evaluation every three years. The last external evaluation was undertaken in 2014.

As part of the Board's ongoing succession planning, ahead of Mr Dorey's planned retirement in 2018 and potential anticipated changes in chairmanship roles of the existing Board at that time, the Nomination and Remuneration Committee were charged with recruiting an additional Board member. The Board's search for a suitable director canvased its advisers and other market participants for a list of suitable candidates. Given the high calibre of applicants through this process the Board did not engage a search consultancy. The candidates were considered against various criteria, notably the breadth of experience and background of the existing Directors to ensure that the new appointee both complemented and enhanced the skill set of the existing Board while also being able to bring a fresh perspective to Company business. One-on-one meetings between the shortlisted candidates and the Directors and senior personnel at the Investment Adviser were conducted and the Nomination and Remuneration Committee recommended the appointment of Mr Le Poidevin. This recommendation was accepted and approved by the Board and Mr Le Poidevin was appointed to the Board on 1 January 2016.

Investment Committee

The Investment Committee is comprised of the full Board with the exception of Mr Frost as the Non-Independent Director, and is chaired by Mr Dorey. The Committee considers proposals relating to the acquisition and disposal of investments and, if thought fit, approve those proposals. Details of the transactions it invested in during the period are outlined on page 28 - 30 of the Strategic Report.

Board and Committee Meeting Attendance

The full Board meets at least four times per year and in addition there is regular contact between the Board, the Investment Adviser, the Administrator and the Company Secretary. The agenda and supporting papers are distributed in advance of quarterly Board and Committee meetings to allow time for appropriate review and to facilitate full discussion at the meetings.

In addition, as part of its commitment to maintaining an active dialogue with investors, in May 2015 the Board was pleased to meet with a number of investors and sell-side analysts at an investor briefing in London. The briefing provided attendees with an overview of current market conditions, case studies on the Company's approach to investment and asset management, current pipeline opportunities, and gave investors the opportunity to meet members of the Board and the Investment Adviser.

The table below lists Directors' attendance at Board and Committee meetings during the year, to the date of this report.

Relationship with Administrator and Company Secretary

Heritage International Fund Managers Limited acts as Administrator and Company Secretary and is responsible to the Board under the terms of the Administration Agreement. The Administrator is also responsible for ensuring compliance with the Rules and Regulations of Guernsey Law, London Stock Exchange listing requirements, anti-money laundering regulations and observation of the Reserved Powers of the Board and in this respect the Board receives detailed quarterly reports.

The Directors have access to the advice and services of the Company Secretary who is responsible to the Board for ensuring that Board procedures are followed and that it adheres to applicable legislation, rules and regulations under Guernsey Law, the Guernsey Financial Services Commission and the London Stock Exchange.

Relationship with the Investment Adviser

The Directors are responsible for the overall management and direction of the affairs of the Company. Under the Investment Advisory Agreement, Amber Fund Management Limited acts as Investment Adviser to the Company to review and monitor investments and to advise the Company in relation to strategic management of the investment portfolio. Details of the Investment Adviser's relationship with the Company are provided on page 14 within the Strategic Report.

In accordance with its normal practice the Board continues to hold discussions relating to the future strategy of the Company with the Investment Adviser and regular formal and informal discussions are held on this subject. The Directors confirm that they believe that it is in shareholders' best interests to continue the appointment of Amber Fund Management Limited ('AFML') as the Company's Investment Adviser.

1 Mr Frost is not a member of the Audit and Risk Committee, Management Engagement Committee or Investment Committee. Mr Frost does not attend Ad-hoc Board Meetings as a Director where recommendations from the Investment Adviser are under consideration.

2 Mr Le Poidevin was appointed to the Board on 1 January 2016 and as such did not attend any meetings during 2015.

Making New Investments

As outlined above the Investment Committee, comprised only of independent Directors of the Company, make investment decisions with respect to new investments after reviewing recommendations made by the Company's Investment Adviser. The Investment Adviser has a detailed set of procedures and approval processes in relation to the recommendation of new investments to the Board.

It is expected that further investments will be sourced by the Investment Adviser. It is likely that some of these investments will have been originated and developed by, and in certain cases may be acquired from other members of the Investment Adviser's group. Where that is the case the conflicts management process summarised below is followed.

Managing Conflicts of Interest

The Company has established detailed procedures to deal with conflicts of interest that may arise on investments acquired from the Investment Adviser's group, and manage conduct in respect of any such acquisitions. As previously mentioned, the Company's Board has a majority of independent members and a Chairman who is independent of the Investment Adviser. Each Director is required to inform the Board of any potential or actual conflicts of interest prior to Board discussions.

The potential conflicts of interest that may arise include when an Amber entity is an existing investor in the target entity while an associated company, AFML, acts on the 'buyside' as Investment Adviser to the Company. The Investment Advisory Agreement contains procedures with the intention of ensuring that the terms on which the vendors of such assets dispose of their assets are fair and reasonable to the vendors; and on the 'buyside' the Company as Investment Adviser must be satisfied as to the appropriateness of the terms for and the price of the acquisition. 

Key features of these procedures include:

- The creation of separate committees representing the interests of the vendors on the one hand (the 'Sellside Committee') and the Company on the other (the 'Buyside Committee'), to ensure arm's length recommendation and approval processes. The membership of each committee is restricted in such a way as to ensure its independence and to minimise conflicts of interest arising

- A requirement for the Buyside Committee to conduct and report to the Company on an independent due diligence process on the assets proposed to be acquired prior to making an offer

- A requirement for any offer made for the assets to be supported by advice on the fair market value for the transaction from an independent expert

- The establishment of 'information barriers' between the Buyside and Sellside Committees to ensure information is kept confidential to one or the other side

- The provision of a 'release letter' to each employee of the relevant associate of the Investment Adviser who is a member of the Buyside and Sellside Committees. The release letter confirms that the employee shall be treated as not being bound by his/her duties as an employee to the extent that such duties conflict with any actions or decisions which are in the employee's reasonable opinion necessary for him/her to carry out as a member of the Buyside Committee or Sellside Committee

- Individuals with material direct or indirect economic interests in the relevant assets will not participate in Buyside Committee and Sellside Committee discussions regarding the relevant assets

- A requirement that the financial statements, policies and records of any such asset offered to the Company be compliant with the Company's accounting policies and procedures

The acquisition of all assets, including those from any associate of the Investment Adviser is considered and approved in advance by the Investment Committee. In considering any such acquisition, the Committee will, as it deems necessary, review and ask questions of the Buyside Committee of the Investment Adviser and the Group's other advisers and the acquisition will be approved by the Committee on the basis of this advice. The purpose of these procedures is to ensure that the terms upon which any investment is acquired from a member of the Amber group is on an arm's length basis.

Risk Management and Internal Controls

The Board is responsible for overall risk management with delegation provided to the Audit and Risk Committee. The system of risk management and internal control has been designed to manage, rather than eliminate, the risk of failure to meet the business objectives. Regard is given to the materiality of relevant risks and therefore the system of internal control cannot provide absolute assurance against material misstatement or loss.

This process is outlined in further detail in the Risk Report found on page 35.

Relations with Shareholders

The Board welcomes shareholders' views and places great importance on communication with shareholders. It has responsibility for communication with the investor base and is directly involved in major communications and announcements.

The Board receives regular reports on the views of shareholders and the Chairman and other Directors, including the Chairman of the Remuneration and Nomination Committee, are available to meet shareholders as required.

In addition to more formal investor events, such as the Investor Briefing mentioned on page 49 above and Results Presentations, the Investment Adviser conducts the day-to-day investor relations activities for the Company. It meets with major shareholders on a regular basis and reports to the Board on these meetings. During 2015 the Investment Adviser and members of the Board held formal meetings with around 100 individual shareholders in addition to day-to-day interaction, including calls and other forms of correspondence. The Board is also informed on a regular basis of all relevant market commentary on the Company by the Investment Adviser, Administrator and the Company's Broker.

The Annual General Meeting ('AGM') of the Company provides a forum for shareholders to meet and discuss issues with the Directors and with the Investment Adviser of the Company. It is the Board's policy to publish the results of the voting at the AGM via RNS at the completion of the meeting.

To promote a clear understanding of the Company, its objectives and financial results, the Board aims to ensure that information relating to the Company is disclosed in a timely manner. The Company has an investor relations section on its website (www.internationalpublicpartnerships.com) where it makes available all its publicly disclosed documents including Annual Reports and RNS announcements together with additional background information on its assets and corporate practices. Investors can register to receive notification (via email) of RNS announcements the Company issues. The Board encourages investors to utilise this useful online resource.

Any shareholder issues of concern including on corporate governance or strategy can be addressed in writing to the Company at its registered office address (see back cover).

Corporate Social and Environmental Responsibility

Introduction

The Company is committed to its responsibility to the environment and having a positive role in the local and global community in which it operates. The Company encourages high standards in sustainability through an integrated approach to managing and influencing our indirect environmental and social impacts. The Company recognises the value of active management in delivering quality services, risk management and resource efficiency.

The Company's most material impacts are indirect, relating to the environmental and social performance of the construction and operation of the buildings and infrastructure which make up its portfolio. Additionally, it recognises the importance of managing its relationship with its Investment Adviser (and associated asset management operations) including the energy and resources used within its operations and their contribution to the local and global community.

The Company's Investment Adviser focuses on sustainability commitments, both within its operations and through the management of the projects and assets within the Company's portfolio. The Investment Adviser operates a Sustainability Policy which looks beyond legislative and regulatory requirements to promote best practice and continual improvement in environmental management and social responsibility.

The Investment Adviser is certified to The Planet Mark and is committed to measuring and reducing its carbon footprint and wider sustainability metrics. It also supports best practice in responsible investment.

The Company sees its key sustainability stakeholders as its Investment Adviser and its employees, and the service providers it works with to deliver and manage infrastructure projects. As a result, the Company encourages its partners to report on sustainability performance.

Many investment entities in which the Company holds investments achieve high standards in sustainability, including building certifications such as BREEAM, LEED and Green Star.

Thames Tideway Tunnel ('Tideway'), UK - Tideway is a major new development under the Thames River in London. Tideway is committed to be a responsible business, a good neighbour and to give back to local communities as part of delivering a lasting legacy for London. Its CSR activities began to widen in 2015 as it prepared for the start of construction in 2016.

· The beginning of 2015 marked the first full year of Thames River Watch, a pioneering citizen science project to monitor the heath of the river. Funded by Tideway and run by environmental charity Thames 21, it measures water quality, quantity and types of litter, and the spread of invasive non-native species. The data collected aims to raise awareness of the threats facing the Thames. The water quality results for year one showed coliform bacteria was in the majority of samples, a key sign of the pollution from sewer overflows that will be drastically reduced by the tunnel.

· As more staff joined the project, Tideway became the first company outside the financial industry to launch a Returners programme to help professionals back into work after a career break. Working with Women Returners, who help professional women re-launch their careers, the project offered twelve-week paid assignments for professionals who have been out of the workforce for two years or more. As a result of the programme, seven 'returners' landed roles with the project, which included opportunities in business planning, legal, stakeholder engagement, operations management, asset management and financial modelling.

· One of the highlights of our community programme was the Row4Results partnership with London Youth Rowing, a schools project that aims to establish an indoor rowing programme and competition across London boroughs that border the River Thames. The scheme forms part of Tideway's efforts to encourage young people to reconnect with the river and take advantage of the leisure opportunities it provides. In July 2015 Kingsford School from Newham were presented with the Row4Results trophy in the presence of the Duke of Edinburgh after they retained their title.

Other project highlights

German Ministry of Education and Research BMBF, Germany - The project was awarded 'Gold Status' for the Evaluation Scheme for Sustainable Construction of Federal Buildings in Germany by the German Federal Ministry of Environment, Nature Conservation, Building and Nuclear Safety.

Pforzheim Schools, Germany - The project was designed for resource efficiency, cost effectiveness and sustainability over the concession term. Since the commencement of operations in 2008 the innovative low energy heating, cooling and ventilation system has resulted in significant savings for the public sector.

Durham Schools, UK - Two combined heat and power plants operate to serve two secondary and one primary school. Pure plant oil verified as being obtained from sustainable sources is used as the fuel source. Surplus electricity that is not used is fed back into the national electricity grid.

South Tyneside and Gateshead Schools, UK - Rainwater harvesting is operational and the water re-used within the building with ground water being directed into a lagoon where plant and insect life has developed.

Moray Schools, UK - Elgin Academy, situated at the base of the Cairngorm Mountains is designed in a unique shape providing protection within the inner playground courtyard from the elements whilst helping to retain heat within the school. Despite harsh conditions utility savings of 10% have been achieved with a 'gain share' for using less than the target consumption of utilities.

Highfields/Pennfields Schools, UK - The project incorporates a renewable combined heat and power unit ('CHP') which meets 62-67% of the schools' total energy requirements and saves 620 tonnes per annum in carbon emissions. The CHP unit is fuelled by sustainable rapeseed oil that is cultivated and crushed in the UK and generates both renewable heat and power for the schools. Excess 'green' electrical energy is supplied onto the grid network benefiting both the schools and the associated local authority.

Derby Courts, UK - Energy saving initiatives have included the fitting of LED lights to the office area together with passive infrared sensors in all retiring and interview rooms. The facilities are utilised to provide a venue for the Court's Magistrates' Court Mock Trial competition, held in conjunction with Derbyshire Secondary Schools, which aims to introduce the legal system to young people in an innovative and exciting way, giving them the opportunity to gain hands on experience.

Northampton Schools, UK - The Project Company, through its designers and contractors has worked with Northamptonshire County Council and the Building Research Establishment to optimise systems and introduce energy efficient and low carbon technologies to the construction of new classrooms at eleven of the project sites. An apprenticeship programme has seen three Apprentices taken on with commitment to award two apprenticeships and one graduate place in 2015. Locally 50% of orders are with suppliers and subcontractors based in Northamptonshire and a minimum of 13 days of free time will be given under the 'Give a Day of Your Time' programme.

Audit and Risk Committee Report

The Audit and Risk Committee (the 'Committee') is an essential part of the Company's governance framework to which the Board has delegated oversight of the Company's financial reporting, internal controls, compliance and external audit. I have set out below an overview of the work of the Committee and details of how we have discharged our duties during the year.

The terms of reference for the Committee, together with details of the standard business considered by the Committee, have been approved by the Board and are available on the Company's website.

Committee Meetings

Our Committee meetings were attended by the Investment Adviser and Administrator by invitation during the year. A representative of the Company's external Auditors, Ernst and Young LLP ('EY'), also attended those meetings at which the financial reporting planning and the Annual Report and Financial Statements and Half-yearly Financial Report were considered.

All of the Committee's members are considered to be appropriately experienced to fulfil their role, having significant, recent and relevant financial experience in line with the AIC Code. Biographies of the Committee members can be found on pages 43 - 44.

Committee Agenda

Our Committee's agenda during the year included:

- Review of the Annual Report and Financial Statements and Half-yearly Financial Report and matters raised by management and external Auditors (including significant financial reporting judgements therein)

- Review of the appropriateness of the Company's accounting policies

- Review of the effectiveness of the Company's internal control systems

- Review of the effectiveness, objectivity and independence of the external Auditors and the terms of engagement, cost effectiveness and the scope of the audit

- Approving the external Auditor's plan for the current year end

- Review of the policy on the provision of non-audit services by the external Auditor

- Consideration and challenge of the draft valuation of the Company's investments prepared by the Investment Adviser and recommendations made to the Board on the appropriateness of the valuation

- Review of the Company's risk profile, specific risks and mitigation practices

- Review of the Company's exposure to cybercrime risks

Key activities considered during the year

We undertook the following activities in discharging our responsibilities during the year:

Financial reporting

The Committee reviewed the Company's Annual Report and Financial Statements, the Half-yearly Financial Report and interim management statements prior to approval by the Board and advised the Board with respect to meeting the Company's financial reporting obligations. We reviewed the Company's accounting policies and practices, including: approval of critical accounting policies; consideration of the appropriateness of significant judgements and estimates; and advising the Board as to their views on whether the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable.

We considered the most significant accounting judgements exercised in preparing the financial statements continued to be: the application of investment entity amendments as required by IFRS 10 (Applying the Consolidation Exemption); and the basis for determining the fair value of the Company's investments as detailed below.

- Investment entity and service entities accounting considerations

A company which qualifies as an investment entity in accordance with IFRS 10 is required to prepare financial statements on an investment basis, that is carry underlying investments (including controlled, jointly controlled or entities over which it has significant influence) in its accounts at fair value.

Service entities that provide services in connection with the investment entity's activities but that are not themselves investment entities under IFRS 10 continue to be consolidated within the investment entity's group accounts rather than accounted for at fair value.

We considered reports from the Investment Adviser setting out the basis on which the Company continues to meet the investment entity definition and certain subsidiary entities continue to meet the service entity definition of IFRS 10 (but are not themselves investment entities), and agreed this with the Company's Auditors. We accordingly recommended that the Board approve the financial statements on this basis (i.e. that investment entities are accounted for at fair value and service entities are consolidated). Further details on the application of investment entity amendments and service entity considerations are detailed in note 1 to the financial statements.

- Fair Value of Investments

The Company's investments are typically in unlisted securities, hence market prices for such investments are not typically readily available. Instead the Company uses a discounted cash flow methodology and benchmarks to market comparables to derive the Directors' valuation of investments.

This methodology requires a series of judgements to be made as explained in note 12 to the financial statements.

The valuation process and methodology were discussed with the Investment Adviser regularly during the year and with the Auditor as part of the year-end audit planning and interim review processes. We challenged the Investment Adviser on the year-end fair value of investments as part of our consideration of the audited financial statements.

During the period, we reviewed the Investment Adviser's quarterly valuation reports, reports on the performance of the underlying assets and the Investment Adviser's assessment of macroeconomic assumptions. The Investment Adviser confirmed that the valuation methodology has been applied consistently with the prior years. We also reviewed and challenged the valuation assumptions (discount rates, deposit rates, foreign exchange rates, inflation rates and tax rates).

The external Auditor explained the results of their review of the valuations, including their assessment of management's underlying cash flow projections and assumptions; macroeconomic assumptions; and discount rate methodology and output. On the basis of their audit work the Auditor confirmed no material adjustments were proposed.

The Committee, having considered the major assumptions applied especially on larger investments, recommended their appropriateness to the Board.

Revenue recognition

The Audit and Risk Committee have considered the risk of inappropriate accounting recognition of revenue to be a relatively low risk given the nature of the Company's activities.

Internal controls over financial reporting

The Committee satisfied itself that the system of internal control and compliance over financial reporting was effective, through consideration of regular reports from the Investment Adviser and Administrator.

We also considered the adequacy of resources, qualifications and experience of staff in the finance function and had direct access and independent discussions with the external Auditor during the course of the year.

Fair, Balanced and Understandable

We reviewed the Company's 2015 Annual Report and Financial Statements and advised the Board that, in our opinion, the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary to assess the Company's performance, operating model and strategy.

Cybercrime review  

As part of the Company's rolling annual controls and processes review, an independent assessment of Company's exposure to cybercrime is in progress.

Viability assessment

During 2015, we carried out a robust assessment of the key risks faced by the Company with a view to identify risks which may impact the Company's viability. Detailed stress tests, including impact assessment on the Company's forecasted cash flows, showed significant resilience in the Company's ability to remain viable. The results of the risk assessment process are detailed in the Viability Statement on page 42.

External Auditor

We recommended to the Board the scope and terms of engagement of the external Auditor. We considered Auditor objectivity and independence, audit tenure and audit tendering and Auditor effectiveness as detailed below:

- Objectivity and independence

In assessing the objectivity of the Auditor, we considered the terms under which the external Auditor may be appointed to perform non-audit services. Work expected to be completed by an external auditor includes formal reporting for shareholders, regulatory assurance reports and work in connection with new investments.

Under the policy there is a specific list of services for which the external Auditor cannot be engaged as we consider that the provision of such services would impact their independence. Any potential services to be provided by the external Auditor that have an expected value of up to £50,000 and which are not prohibited by the policy must be pre-approved by the Chairman of the Committee; any services above this require pre-approval by the full Audit and Risk Committee.

Non-audit fees represented 11.0% of total audit fees, reflecting the relatively low level of non-audit work conducted.

EY undertook its standard independence and objectivity procedures in relation to non-audit engagements and confirmed compliance with these to the Committee. Further details on the amounts of non-audit fees paid to EY are set out in note 8 to the financial statements. These were reported to us and were considered not to be significant as to risk impacting the objectivity and independence of EY external Auditors.

- Audit Tendering and tenure

The Committee considers the reappointment of the external Auditor, including rotation of the audit partner. The external Auditor is required to rotate the audit partner responsible for the Group audit every five years and the year to 31 December 2015 will be the last year for the current lead audit partner. We have challenged EY on its process to transition to a new lead audit partner and are satisfied with progress to date and with the level of continuity of other key audit team members.

In October 2010, the Company put out to full tender the audits of the group and its controlled investee entities. In addition to complying with good practice and satisfying new corporate governance requirements, the tender enabled the Board to benchmark competitiveness and value for money. Following the tender, EY were appointed Auditor of the Company.

As part of our annual review of the objectivity and effectiveness of the audit, the Committee conducted an in depth review of their performance. There were no matters arising from the review in the current year, which require the service to be tendered immediately.

During the year, we reviewed the competitiveness and performance of the Auditor across the group and this led to a small number of changes in auditor at subsidiaries to KPMG LLP.

In accordance with the relevant Corporate Governance Code principles the Committee will continue to review the effectiveness of the external Auditor and seek to retender in line with best practice.

- Review of Auditor effectiveness

For the year ended 31 December 2015 we reviewed the effectiveness and independence of the external Auditor. This was facilitated through the completion of a questionnaire by relevant stakeholders (including members of the Committee and senior members of the Investment Adviser's finance team), review and challenge of the audit plan for consistency with the Company's financial statement risks, and review of the audit findings report.

- Review of Auditor's remuneration

Following the end of a four year fixed scope fee arrangement (negotiated at the time of last audit tender in 2010), the Committee carried out a fresh review of the proposed audit fees for 2015. This resulted in an increase at the group level driven by changes in the underlying accounting standards, higher audit regulatory requirements, changes to scope of work being carried out and general cost inflation. This was partially mitigated through reductions in fees of underlying investee entities (consolidated subsidiary entities), including a number that, following a benchmarking exercise, will be audited for the first time by KPMG LLP. We consider the audit fees for 2015 to be cost effective and present good value for money for the Company's shareholders.

Regulatory environment

We received regular reports from the Administrator and Investment Adviser on regulation and regulatory developments.

- Common Reporting Standard

In recent years, governments have become much more aware of the large amounts of undisclosed wealth held in offshore accounts. Governments see an opportunity to boost revenue by collecting tax relating to these accounts. Implementation of Common Reporting Standard ('CRS') is a step in that direction. All qualifying entities are required to comply with the requirements of CRS from 2016. The Company through its registrar (Capita) has appropriate systems and procedures in place to comply with these regulations. We will continue to review compliance with these rules as the staged implementation continues throughout 2016.

- Retail distribution of unregulated collective investment schemes

Financial Conduct Authority ('FCA') rules came into force on 1 January 2014 relating to the restrictions on the retail distribution of unregulated collective investment schemes and close substitutes came into effect. The Company continues to confirm that its shares will qualify as an 'excluded security' under these rules and will therefore be excluded from the FCA's restrictions which apply to non-mainstream pooled investment products. As such, the Company's shares can continue to be recommended by independent financial advisers ('IFAs') to ordinary retail investors in accordance with the FCA's rules.

The Company is advised that the basis of being excluded from these restrictions is principally due to the Company conducting its affairs in such a manner that it would have qualified for approval by HMRC as an investment that had been resident in the UK in its previous accounting periods. The Company intends to conduct its affairs so that this remains the case for the foreseeable future.

- Foreign Account Tax Compliance Act ('FATCA')

The legislation is aimed at determining the ownership of US assets in foreign accounts and improving US Tax compliance with respect to those assets. The Company continues compliance with the legislation and is registered with IRS.

- Alternative Investment Fund Management Directive ('AIFMD')

The Company is deemed to be an internally managed non-EU fund. An internally managed non-EU fund is outside the full scope of AIFMD and is the subject of lighter AIFMD requirements at the point of marketing within the EU. The Company registered as a non-EU AIF with FCA in 2014 and commenced quarterly reporting from 31 December 2014.

Focus for 2016

In addition to our routine matters and continued monitoring of areas above, the Committee will select a new process for an independent review in 2016 as part of the Company's annual internal controls and procedures rolling review program.

The Committee will also review compliance with new regulations such as Common Reporting Standards and continue to monitor ongoing tax and regulatory developments such as Base Erosion and Profit Shifting.

John Whittle

23 March 2016

Chairman, Audit and Risk Committee

Directors' Report

Introduction

The Directors present their Annual Report on the performance of the Company and Group for the year ended 31 December 2015.

Principal Activity

The Company is a limited liability, Guernsey incorporated authorised closed-ended investment company under Companies (Guernsey) Law, 2008. The Company's shares have a premium listing on the Official List of the UK Listing Authority and are traded on the main market of the London Stock Exchange.

The Chairman's Statement and Strategic Report contain a review of the business during the year. A Corporate Governance Report is provided on pages 45 - 52.

Directors' Indemnities

The Company has made qualifying third-party indemnity provisions for the benefit of its Directors which were made during the period and remain in force at the date of this report.

Substantial Shareholdings

As at 31 December 2015, the Company had been notified, in accordance with chapter five of the Disclosure and Transparency Rules, of the following interests in 5% or more of the Company's Ordinary Shares to which voting rights are attached:

As at 23 March 2016, being the most current information available no further notifications had been received.

Directors' Authority to Buy Back Shares and Treasury Shares

The Company did not purchase any shares for treasury or cancellation during the year.

The current authority of the Company to make market purchases of up to 14.99% of the issued Ordinary Share Capital expires on 2 June 2016. The Company will seek to renew such authority at the Annual General Meeting to take place on 2 June 2016. Any buy back of Ordinary Shares will be made subject to Guernsey law and within any guidelines established from time to time by the Board and the making and timing of any buy backs will be at the absolute discretion of the Board.

Purchases of Ordinary Shares will only be made through the market at prices below the prevailing NAV of the Ordinary Shares (as last calculated) where the Directors believe such purchases will enhance shareholder value. Such purchases will also only be made in accordance with the Listing Rules of the UK Listing Authority which provide that the price to be paid must not be more than 5% above the average of the middle market quotations for the Ordinary Shares for the five business days before the shares are purchased (unless previously advised to shareholders). No such shares were bought back by the Company in the period from 2 June 2015.

In accordance with the Company's Articles of Association up to 10% of the Company's shares may be held as treasury shares.

Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report on pages 9 - 42. The financial position of the Group, its cash flows, liquidity position and borrowing are described in the financial statements from page 62.

The Directors have considered significant areas of possible financial risk and comprehensive financial forecasts have been prepared and submitted to the Board for review. The Directors have, based on the information contained in these forecasts and the assessment of the committed banking facilities in place, formed a judgement, at the time of approving the financial statements, that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future.

After consideration, the Directors are satisfied that it is appropriate to adopt the going concern basis in preparing the financial statements.

Director Declaration

Each of the persons who is a Director at the date of approval of this Annual Report confirms that:

So far as the Director is aware, there is no relevant audit information of which the Company's external Auditor is unaware.

Each Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of Section 249 of the Companies (Guernsey) Law, 2008.

By order of the Board

Rupert Dorey John Whittle

23 March 2016 23 March 2016

Chairman Director

Directors' Responsibilities Statement

The Directors are responsible for preparing financial statements for each year which give a true and fair view, in accordance with applicable Guernsey law and International Financial Reporting Standards as adopted by the European Union, of the state of affairs of the Group and of the profit or loss of the Group for that year. In preparing those financial statements, the Directors are required to:

- Select suitable accounting policies and then apply them consistently

- Make judgements and estimates that are reasonable

- State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements

- Prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time, the financial position of the Group and to enable them to ensure that the financial statements comply with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law and regulations.

The maintenance and integrity of the Company's website is the responsibility of the Directors; the work carried out by the Auditor does not involve considerations of these matters and, accordingly, the Auditor accepts no responsibility for any change that may have occurred to the financial statements since they were initially presented on the website. Legislation in Guernsey governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.

Responsibility Statement of the Directors' in respect of the Consolidated Annual Report and Financial Statements

The Directors each confirm to the best of their knowledge that:

- The Consolidated Financial Statements, prepared in accordance with IFRSs as adopted by the European Union give a true and fair view of the assets, liabilities, financial position and net return of the Group

- The Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties faced.

Directors' Statement under the UK Corporate Governance Code

The Board as advised by the Audit and Risk Committee has considered the Annual Report and Financial Statements and, taken as a whole, consider them to be fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

By order of the Board

Rupert Dorey John Whittle

23 March 2016 23 March 2016

Chairman Director

Independent Auditor's Report To The Members Of International Public Partnerships Limited

Opinion on financial statements

In our opinion the Group financial statements:

- give a true and fair view of the state of the Group's affairs as at 31 December 2015 and of its profit for the year then ended;

- have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and

- have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

What we have audited

International Public Partnerships Limited (the 'Group') financial statements comprise:

- consolidated statement of comprehensive income for the year ended 31 December 2015;

- consolidated balance sheet as at 31 December 2015;

- consolidated statement of changes in equity for the year ended 31 December 2015;

- consolidated cash flow statement for the year ended 31 December 2015; and

- related notes 1 to 22 to the consolidated financial statements.

The financial reporting framework that has been applied in their preparation is applicable law and IFRS as adopted by the European Union.

Overview of our audit approach

Our assessment of risk of material misstatement

We identified the risks of material misstatement described below as those that had the greatest effect on our overall audit strategy, the allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks, we have performed the procedures below which were designed in the context of the financial statements as a whole and, consequently, we do not express any opinion on these individual areas.

The scope of our audit

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope. Taken together, this enables us to form an opinion on the consolidated financial statements.

Our application of materiality

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.

Materiality

Materiality is the magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

We determined materiality for the Group to be £ 12.9 million (2014: £10.6 million), which is 1% (2014: 1%) of equity. We believe that total equity provides us with an appropriate basis for audit materiality as net asset value is a key published performance measure and is a key metric used by management in assessing and reporting on the overall performance of the Group.

During the course of our audit, we reassessed initial materiality and noted that total equity had increased from approx. £1.1bn at 30 June 2015 to £1.3bn as at 31 December 2015 mainly due to capital raise in Nov 2015. This resulted in a higher materiality of £12.9m compared to £10.8m that was originally determined at the audit planning stage.

A lower materiality of £2.9 million (2014: £1.9 million) has been applied to Interest income, Dividend income and Management costs to be responsive to the expectations of the users of the financial statements with regard to misstatements in these balances of a lesser amount than the Group materiality.

Performance materiality

"Performance materiality" is the application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Group's overall control environment, our judgement was that overall performance materiality (i.e. our tolerance for misstatement in an individual account or balance) for the Group should be 50% of materiality, namely £6.4m (2014: 50% of materiality, namely £5.3m). The performance materiality percentage is consistent with last year. Our objective in adopting this approach was to ensure that total uncorrected and undetected audit differences in the financial statements did not exceed our materiality level.

Reporting threshold

"Reporting threshold" is an amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.6 million (2014: £0.5 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's and the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement set out on page 57, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

This report is made solely to the Group's members, as a body, in accordance with Section 262 of the Companies Law. Our audit work has been undertaken so that we might state to the Group's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group and the Group's members as a body, for our audit work, for this report, or for the opinions we have formed.

Matters on which we are required to report by exception

Statement on the Directors' Assessment of the Principal Risks that Would Threaten the Solvency or Liquidity of the Entity

Michael Bane

for and on behalf of Ernst & Young LLP,

Guernsey

Channel Islands

23 March 2016

Financial Statements

Consolidated Statement of Comprehensive Income

Year ended 31 December 2015

All results are from continuing operations in the year.

All income is attributable to the equity holders of the parent. There are no non-controlling interests within the Consolidated Group.

There are no other Comprehensive Income items in the current year (2014: nil). The profit for the year represents the Total Comprehensive Income for the year.

Consolidated Statement of Changes in Equity

Year ended 31 December 2015

Year ended 31 December 2014