International Public Partnerships Regulatory News (INPP)

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Investments have included schools, courts houses, health facilities, police stations, and other public sector buildings, rail operations, rolling stock leasing entities and offshore electricity transmission asset owning entities. The Company's investments are located in the UK, Europe, Australia and Canada.

Whilst the Company is able to invest in regulated infrastructure and other forms of economic infrastructure projects, to date it has primarily invested in entities holding physical infrastructure and associated services procured under Public Private Partnerships ('PPP')/Private Finance Initiative ('PFI') and similar processes. The Case Study on page 28 provides more detail on these structures.

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

Portfolio

> Geographically diversified with a portfolio across seven countries in a variety of sectors

> A focus on yielding operational investments but with some 'in construction' with 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 0.85% per annum increase in return across the portfolio

> The Investment Adviser has historical success in originating and developing 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 (14.3%) of the portfolio is investment 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

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

> 8-9% per annum target internal rate of return 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

> FTSE listed since November 2006 with an initial market capitalisation of £300 million

> Member of the FTSE 250 and FTSE All Share indices

> £1,132 million market capitalisation as at 31 December 2014 (2013: £972.9 million)

> 836.2 shares in issue as at 31 December 2014 (2013: 760.6 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 (see page 47 for detail)

Investment Adviser Fees

> Competitive fee structure

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

> 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

> Investment Adviser bears the risk of abortive transaction origination cost.

> No incentive or performance fees

> Further details can be found in the Strategic Report on pages 15 and 16

1 Information provided in charts above is based on 31 December 2014 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 concession, assets or related businesses most of which are investment subsidiaries.

2 Primary stage investor - asset developed or originated by the Investment Adviser or predecessor team.

3 Later stage investor - asset acquired from another investor in the secondary market.

A complete listing of the Group's investments can be found in note 23 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 2014 can be found on page 19 of the Strategic Report.

1 Lincs OFTO was acquired by the Group in November 2014.

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

3 Northern Diabolo project revenues are dependent on availability but also include an element of linkage to passenger numbers. All other investments receive entirely availability based revenues.

Dear Shareholders,

It is with great pleasure that I am able to report to you on another successful year for the Company.

The year has been an active one with all our assets performing well and record levels of new investment being made. The Company's market capitalisation at year end of over £1.1 billion very much reflects the ongoing positive development of our portfolio of infrastructure projects.

Dividend Growth

The Board understands that the Company's ability to deliver consistent and growing dividends is a key factor in many of our shareholders' decisions to invest in the Company. It is therefore pleasing to report to you that the Company was again able to deliver its dividend target for the year of 6.30p per share or c.2.5% growth, a rate of growth that has been consistent since the Company's inception eight years ago.

We remain focused on the ability of the Company to continue to grow fully covered cash dividends and we are confident that this can be achieved. The Board have therefore once again published a minimum dividend target being 6.45p per share for 2015 and new guidance of 6.65p per share for the 2016 dividend, an average increase of c.2.5% per annum, to give additional clarity to shareholders as to our intentions in the future.

Investment Activity and Capital Raising

The markets in which the Company operates continue to be very buoyant. This is positive for our existing assets as the rates at which comparable assets are traded provide evidence of the value of our own assets. However, as we have previously noted, the strength in the market also provides a challenge for sourcing value-enhancing investments on an ongoing basis. This is particularly the case for assets which are traded in the 'secondary market' where competition for such assets has pushed pricing to levels that we believe would not be accretive to our portfolio. 

The Company believes that its differentiated strategy of preferring to acquire investments off-market, by exercising pre-emption rights in existing investments and via the origination activities of its Investment Adviser, Amber Fund Management Limited ('Amber') continues to be the most effective way to secure new assets for the portfolio - these avenues often have reduced levels of competition and through these better value can be achieved for shareholders. Indeed the five investments made during the period, representing investment of £188.2million (2013: £36.5 million), were all made on this basis. A further £18.2 million has been committed to the first two of five batches of schools being delivered through the Priority Schools Building Programme's 'Aggregator' funding vehicle earlier this month.

This preferred access to new opportunities should be further enhanced through the recently announced link up between Amber and the Hunt Companies (more details of which are referred to below). This has resulted in the grant to the Company of additional rights of first look in respect of certain new investments, of a type consistent with our existing portfolio, within the United States and we look forward to an enhanced flow of projects from this source in the medium term.

New investments in 2014 were funded through a mix of the Company's existing resources, including its corporate debt facility, together with share capital raised (by means of a tap issue) in November 2014. This capital issuance was extremely well supported and closed oversubscribed with a mix of existing and new investors, raising £95 million, well in excess of the £70 million originally targeted. The capital was immediately fully deployed in reducing the balance of the Company's revolving debt facility. We would like to thank all those shareholders who participated in the offer for their support.

Despite the record level of investment in 2014 the Company remains very focused on adding to its portfolio in a measured way, choosing to do so only where it considers an investment represents good value. The addition of such a large volume of investment in 2014 contrasts with the position in 2013 and is reflective of the many years of work that are often required to develop and execute these transaction opportunities. The timing of the completion of these projects is often difficult to predict.

In addition to the acquisitions made during the period, the Company disposed of a number of minority interests within its portfolio generating proceeds of £22.3 million (being substantially in excess of the carrying value of these stakes at the time of their disposal). While the Company does not expect to trade assets regularly, preferring instead to retain the long-term income generation potential of its holdings, these 'secondary market' pricing levels validate the increased popularity and attractions of the asset class in which the Company is invested.

Portfolio Performance

The operational performance of the Company's portfolio continues to be excellent. Significant progress was made during the year in the ongoing management of the portfolio where we continue to focus on delivering our expected returns, managing our public sector customer relationships and enhancing the investments through efficient management and contract variations requested by our public sector clients.

Our control over the operational performance of our investments is a key point of differentiation - other investment vehicles in the sector often outsource responsibility for such asset level management activity to unrelated third party construction/facilities management contractor parties. However, we believe that strong asset-level relationships with public sector clients are a key factor in both protecting our reputation and safeguarding investment performance. The Company continues to benefit from our relationship with Amber in this respect, particularly for the majority of investments where Amber is responsible for the detailed day-to-day delivery of management services and relationships with our public sector clients. Evidence of this is the successful conclusion of a number of construction projects, which were finished on budget and on time, in part because of Amber's oversight of key contractors.

The macro economic environment continues to be of relevance to our performance. Long term inflation expectations continue to run at levels above our base case assumptions but short term inflation rates are low and the prospect of deflation exists in some Eurozone countries. We receive regular enquiries from investors as to how we estimate our portfolio would perform in various inflationary or deflationary scenarios. To assist shareholders we have provided some additional sensitivity forecasts focusing on this point in this report (refer page 24). I am pleased to say we estimate our performance is likely to remain robust in such scenarios.

We are very aware that most of our investors hold our stock with a view to the long term income that we expect to generate and we continue to focus on improving the certainty and quality of this income as much as we can.

Corporate Governance and Regulation

The Board is required by the UK Corporate Governance Code to commission periodic external assessment of its procedures and corporate governance. The first such formal review took place in 2014 and I am pleased to advise that the Board was found to be performing extremely well. Only minor improvements were suggested and all have been implemented.

Two new Board Committees were formed during the period - the Investment Committee and the Nominations and Remuneration Committee. Previously these functions were performed by the full Board (absent the representative of the Investment Adviser as appropriate). However, the new committees reflect the increased importance the Board believe should be given to the process governing these matters and to provide additional transparency to shareholders. Further details of all the Board's committees can be found in the Corporate Governance section and terms of references are available on the Company's website.

The Audit and Risk Committee has also spent time with the Investment Adviser performing a detailed review of existing and emerging risks affecting the Company. The results of this have been captured where relevant within the Principal Risks and Mitigation section of this Annual Report. Of particular note is the current OECD coordinated effort to align certain tax rules with the aim of preventing 'tax base erosion and profit shifting' but which may inherently expose the Company and the sector as a whole to potential unintended consequences. For example, during the period, the OECD issued a consultation paper setting out its proposals for national legislators to consider 'best practice' rules for the restriction of tax relief for debt interest. The OECD paper specifically seeks feedback as to whether the infrastructure sector should benefit from a carve-out from such proposals. However, it is currently uncertain to what extent the proposals will be amended or accepted and it remains to be seen the extent to which they will be adopted by national legislators. The OECD action is set to conclude in September 2015. The Board and Investment Adviser are actively engaging with the relevant industry bodies and advisors and will continue to monitor and report back to Shareholders on significant developments as they evolve.

The other major regulatory change that affected Company in the period was the European Union's Alternative Investment Fund Managers Directive ('AIFMD') which came into force. I am pleased to report that the Company has notified the Financial Conduct Authority in the UK that, as a Guernsey domiciled self-managed Alternative Investment Fund, in accordance with the National Private Placement Regime, the Company is able to market within the UK. We hope, over time, that this will also improve the ability of the Company to market its shares across the EU although this is highly dependent on the differing degrees to which various EU countries facilitate this.

Investment Adviser

As noted above, earlier this month, Amber our Investment Adviser agreed to the Hunt Companies ('Hunt'), a privately owned US group with similar activities to those of the Amber group of Companies, becoming a 50% shareholder in the holding company of the Investment Adviser with existing director and management shareholders continuing to hold the remaining shares. 

The transaction offers the potential to expand the activities of both the Investment Adviser and the Company into the United States which is widely seen as one of the largest growth markets for infrastructure investment in the developed world. The Company believes that this is an exciting and forward looking transaction with an experienced and well-established partner who benefits from strong links to the public sector in the US. 

As part of this transaction the Company has been granted a right of 'first look' in similar terms to the right it already enjoys with Amber which will extend to such of Hunt's activities in public infrastructure projects which meet the Company's investment criteria in the United States.

The terms of the transaction between management and Hunt prohibit any sale of shares by either Hunt or Amber's management for a minimum term of four years and there will be no changes to management personnel within Amber or the way in which the Investment Adviser and the Company interact. The transaction is subject to FCA approval.

Outlook

The Company's performance in the first few months of 2015 has continued to offer promise for the future both in terms of the performance of existing investments and new opportunities. We continue to have a high degree of confidence in the existing portfolio's ability to generate increasing returns for investors in line with published expectations. We are also encouraged by the number of new opportunities which we see.

While there is undoubtedly increased competition for the types of assets in which the Company invests, 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. 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 2014 and look forward to continuing to serve them in 2015.

Rupert Dorey

25 March 2015

Chairman

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 (which for 2015 is targeted to be 6.45 pence per Ordinary Share and for 2016 is targeted to be 6.65 pence per Ordinary Share or a minimum average increase of c.2.5% per annum) and seeks to continue 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 2014 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, seek 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 development of the local infrastructure investment market, wider market conditions and the judgment 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 4 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 13.

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. Currently, the Company's corporate debt facility, which was increased to £175 million in January 2014, as at the date of this report is £27.2 million drawn (see page 65 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.

The Company's strategy, which is determined by and reviewed by the Board, can be divided into 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 Company's 2014 performance is measured against these as summarised on pages 10-11.

1.

1. Active Asset Management

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-focused Portfolio Development

1.

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. To this end 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.

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 also includes 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

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.

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

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 advisors it manages risk and governance of the Company. The Board has a majority of independent directors - currently four of the five 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).

Contractual arrangements and fees

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 19 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

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. No other transaction fees may be paid to the Investment Adviser (otherwise than at the absolute discretion of the Board). No such fees were paid in 2014 or are anticipated to be paid.

For the avoidance of doubt, cash receipts from capital raisings and tap issuances from the gross asset value are not within 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 exceptions to this. Instead, 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.

Under typical PFI/PPP structures such services are generally provided in return for a fixed fee to third party service providers under contracts put in place at the inception of the PFI/PPP 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.

A breakdown of typical project costs in the operational stage of an investment appears on page 17. Following the adoption of IFRS 10 (Investment Entity - Consolidation Exemption) all underlying project level costs (and project level revenues) are now 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 investment 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, such investment 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 costs bid and agreed with the public sector (and are thus outside the Company's control). 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 investment 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 outsourcing some or all of such services (often to associates of the construction/facilities management firms already providing potentially conflicting services to the investment entities).

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 Investment Adviser acts on the Company's behalf, managing the day-to-day issues and interfaces between public sector client and subcontractor supply chain partners. This enables the Company, without additional cost, to:

> De-risk the investment entity through managing the pass-down of risk to subcontractor supply chain

> Oversee service and availability level

> Have greater confidence in the deliverability of forecast cash flow

> Enhance returns through hands-on management of contractual variations and additional service requirements

> Align day to day operational management, financial management, tax and accounting, issue resolution and contract management with investment objectives (not just board representation)

> Avoid conflicts of interest between asset and finance management and the subcontractor supply chain

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 three 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 opportunities by the Investment Adviser with Hunt (as described in the Chairman's Letter). 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. 

This allows the Company to benefit from:

> Primary investment opportunities developed with the Company's long-term strategy and objectives in mind

> A greater ability to structure new projects to meet returns and inflation linkage requirements

> Transactions structured to be low risk based on direct asset management and contract management experience

> Experienced finance, accounting, legal, construction and facilities management expertise familiar with developing new investments and managing them. This leads to the ability to perform due diligence analysis on investments offered for sale in the secondary market based on greater hands-on experience

> Access to senior debt as well as equity and subordinate debt investment opportunities

Public Private Partnerships/Private Finance Initiative

Public Private Partnerships ('PPP') and projects procured in the UK under the Private Finance Initiative ('PFI') regime typically have the following characteristics although individual transactions may exhibit some variations. Offshore transmission assets have similar characteristics but to date have been acquired by the Company with all construction works complete at the time of investment.

> Open competitive process to appoint infrastructure provider

> Concession contracts or license based long-term revenue

> Income based on availability of the infrastructure asset and provision of services to specification with deductions for poor performance/availability

> Income fully or partially linked to inflation

> Procured by the public sector as a purchaser of services - the public sector determines the performance standards it requires (e.g. number and area of classrooms, standard of cleanliness etc) but does not determine how this is achieved

> The public sector passes substantially all the risks associated with cost overruns or construction delay to the Investment Entity, which in turn passes these on to construction/facilities management firms (subject to liability caps); or puts in place suitable insurances to manage its own exposure

> The asset manager is the party responsible for managing the interface between the various parties for the benefit of the investment entity

During construction, equity investment, shareholder loans and senior loans are used to finance construction activity, relevantinsurances and entity administration costs. Once the infrastructure asset is available for use, the investment entity receives revenues from the public sector.

During the operational phase, the investment entity makes payments for the provision of operations and maintenance services by facilities management companies and pays insurance premiums.

PPP/PFI entities generally do not have their own employees. Instead a sub-contracted asset manager is normally engaged to provide financial and physical management of the asset and act as the key interface between stakeholders and contracting parties.

The asset manager role is often performed by an associate of the construction company or facilities management company although in projects where the Company invests this role is usually performed by an associate of the Investment Adviser which serves to reduce conflicts of interest and increase alignment between the Company and its Investment Adviser.

Within a PFI/PPP project, the breakdown of project costs in the operational stage will vary depending on the nature of the services required (e.g. a school typically being less service intensive than a hospital) but in a typical UK school PFI project approximately 64% of project revenues are applied to financing (both debt and equity), about 32% to services (building maintenance, cleaning, lifecycle replacements) and approximately 4% to other costs such as insurance etc.

Key Performance Indicators

The Company has identified ten priorities to assist in meeting its Key Objectives. 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 2014 financial year are summarised below and further details of each of these elements are provided in the sections that follow:

1 Cash dividends to shareholders are paid from net operating cash flow (including financing costs) before one off operating costs.

2 Residual cash after payment of dividend and corporate costs over the next 12 months.

The information required to be included in the Strategic Report relating to environmental and social matters is set out in the Corporate Governance Report on pages 46 and 47.

Profit before tax was £71.2 million (2013: £56.1 million) with earnings per share of 9.49 pence (2013: 7.82 pence).

Returns from portfolio investments (investment income) in the year was £90.1 million (2013: £77.2 million) including fair value movements, dividends and interest. These returns were partially offset by operating expenses (including finance costs) of £18.3 million (2013: £25.3 million), of which £2.9 million (2013: £11.9 million) was non-recurring.

These results allowed the Company to deliver a dividend of 6.30 pence per share for the year (2013: 6.15 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 2014 has been 98.5%, compared to a total return on the FTSE All-Share index over the same period of 47.7%1. 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.

The Company reported a 13.5% increase in NAV, up to £1,062.1 million at 31 December 2014 from £935.4 million at 31 December 2013. This represented an increase of 3.3% of NAV per share, increasing to 127.0 pence per share at 31 December 2014 from 123.0 pence per share at 31 December 2013.

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 2013 and 31 December 2014 are highlighted in the graph [overleaf] and described in more detail below.

1Bloomberg - share price appreciation plus income.

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 thosefuture project cash flows and (iii) changes in the Company's other net assets (see also more detail below).

During the period a total of £95.0 million of new capital was raised (before costs) from investors by means of tap issuance to partly repay the Company's corporate debt facility following the Lincs offshore transmission acquisition.

During the period, government bond yields substantially decreased in all countries the Company holds investments in, resulting in a positive impact on the NAV. The portfolio also benefitted from a reduction in discount rate risk premia as assets moved out of the construction or defects liability phase and towards full operations. 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, especially in Europe which has seen some of the largest negative bond yield movements.

In addition, the Company experienced a weakening of all the currencies in which it holds investments outside the UK which had a £14.3 million negative impact on the NAV. The most significant impact was in the Company's Euro denominated investments although there was also a strengthening of Sterling against both the Australian and Canadian dollars. 

Cash distributions reached £40.7 million during the year and represent the cash elements of two dividends made to INPP shareholders.

The NAV Return of £61.8 million captures the following:

> Unwinding of the discount factor - the movement of the valuation date and the corresponding realisation of distributions received;

> Optimisation of cash flows - actual distributions received 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 the underlying investments earlier than forecast and optimising Group tax losses;

> Value generated through accretive divestments - value accretion from the realisation of divestments above their carrying value;

> Movements in the Company's working capital position - the net movement of the Company's working capital position increased the NAV and;

> Updated project forecasts - refinement of project model assumptions to reflect current expectations of future cash flows.

Investment Valuation

The Company's investments are expected to exhibit (and historically have exhibited) predicable 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).

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 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 13. Across the portfolio the weighted average long-term inflation assumption as at 31 December 2014 was 2.55% (2013: 2.52%) and the weighted average deposit rate assumption was 3.47% (2013: 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 current deposit rates are achieved until 31 December 2017 before adjusting to the long term rates noted in the table above

2 The corporation taxation rate will reduce to 20% from 1 April 2015.

The discount rate used for valuing each investment is based on the appropriate long-term Government Bond rate 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 (81.9%) is comprised of investments where the Company only holds the Risk Capital in the underlying projects. The remaining portfolio (18.1%) 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.

The average blended discount rates need to be interpreted with care. In the Company's view they are relevant only in the context of the cash flows (and cash flow assumptions) they are applied to in calculating the fair value of investments. Comparison of discount rates across 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.

1 Risk Capital is equity and subordinated debt investments.

The change in the weighted average discount rate in the period is principally due to substantial reductions in the average government bond rates. However, this was partly offset by an increase in the weighted average project premium which took into account (i) an increase in the project premium reflecting observable market based evidence which does not support the full reduction in government bond yields, especially in Europe which has seen some of the largest negative bond yield movements and (ii) assets moving out of the construction or defects liability phase and towards full operations.

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 helpful. 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 (0.05%) 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 estimate of 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 22.

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

> That 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

> That where deductions are suffered under such contracts they are fully passed down to subcontractors

> That where possible lifecycle costs are not borne by the Company but are passed down to a third party such as a facilities management contractor

> That 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

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

> That 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

> That 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

> That where assets in which the Company invests are not GBP assets that foreign exchange rates remain consistent with current four year forward looking projections

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 13. 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 2014 NAV per share by 12.8 pence. Should the underlying project discount rates increase by 1% per annum the NAV per share would decrease by 11.0 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 2014 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 0.85% per annum in response to a 1% 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 10.4 pence increase to the NAV per share. Conversely, if the rates were to decrease by 1% per annum there would be a 9.1 pence decrease to the NAV per share.

Given recent macroeconomic conditions in Europe, the Company is cognisant of the risk of low inflation on short-term coverage dividend. Therefore it has also analysed the impact of other inflationary and deflationary scenarios on the portfolio. 

1. Inflation of 0% per annum for the remaining concession life

2. Inflation of 0% per annum for the next four years and then reverting back to the current day assumptions

3. Inflation of -1% per annum for four years and then reverting back to current day assumptions

Analysis above has been performed on the 20 largest investments by value covering c.78% of the portfolio. The analysis indicates the resilience of the portfolio and demonstrates that the Company retains the ability to meet its dividend growth and coverage targets. Full details of the analysis undertaken and assumptions made can be found on the Company's website.

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 proving any form of profit or dividend forecast.

The company has a geographically diverse portfolio and therefore GBP 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 4.6 pence increase in the NAV per share while a 10% per annum reduction in the exchange rates would result in a 3.7 pence decrease in NAV per share. Short-term fluctuation in foreign exchange rates are managed through currency forward contracts

The long-term weighted average future deposit rate across the portfolio is 3.47% 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 1.6 pence increase in the NAV per share and a 1% per annum decrease in deposit rate to a 1.5 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 0.9 pence decrease in the NAV per share while a 1% per annum reduction in the tax rates to a 0.9 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 95% 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 0.4 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 2014 was £29.4 million (31 December 2013: £80.6 million), a decrease of £51.2 million reflecting substantial new investments in the year partially offset by proceeds from capital raising, positive investment cash flows and drawdown on the corporate debt facility.

Cash inflow from the Company's investment portfolio was £64.0 million (31 December 2013: £59.7 million). The increased cash flow was mainly due to the timing of receipt of distributions from underlying investments.

Recurring operating costs have increased from £11.7 million to £12.2 million, in line with the increase in the Company's NAV although, as detailed in the 'ongoing charges' table below, other operating costs have remained largely consistent. Net financing costs increased from £0.5 million to £1.9 million mainly due to the drawdown on the corporate debt facility and the increase in facility size to £175 million (2013: £100 million). One-off operating costs of £5.0 million (31 December 2013: £5.4 million) mainly represent costs associated with the refinancing of the corporate debt facility in the period and one off transaction costs on new investments.

The Company funded its acquisitions during the period by drawing down on its corporate debt facility which was subsequently partly repaid using the proceeds from capital issuance. Disposal proceeds of £22.3 million (31 December 2013: nil) have resulted from strategic divestments designed to optimise the investment portfolio specifically where the Company holds minority shares without expectation of gaining control.

Cash dividends paid in the period of £40.7 million (31 December 2013: £36.9 million) were in respect of the six month period ended 31 December 2013 and 30 June 2014.

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

Investment cash flow from the Company's portfolio of 112 investments has continued to perform at least 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. For example, during 2014, the Investment Adviser worked with a number of schools in the Company's portfolio who wished to convert to 'Academy' status. In assuming Academy status the schools are given more control over their own finances as they receive funding directly from the 'Education Funding Agency' (a government department) rather than via their local authority. The Investment Adviser has assisted these schools navigate a complex set of processes between the school and the various providers who are party to the underlying PFI contract to help ensure that they are not disadvantaged by the change in status. To date the Investment Adviser has assisted ten schools through the transition to Academy status.

The Company also takes an active role in assisting its public sector clients to achieve savings from existing concession arrangements. As a signatory to the Code of Conduct for Operational PFI/PPP Contracts the Investment Adviser has worked with 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 that has resulted in reduced costs to the public sector. In addition, other projects within the portfolio have seen benchmark reports submitted or the benchmarking process commenced. As part of this initiative the Investment Adviser has focused on opportunities to reduce energy consumption within the projects including the installation of LED lighting and motion sensors to help reduce energy spend over time. The Investment Adviser is also currently assisting one of its public sector clients assess the benefits of installing a large solar rooftop array on its buildings in order to reduce energy charges over the longer term.

During 2014 our public sector clients commissioned c.900 variations resulting in over £34 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 £17 million and demonstrate the value and flexibility of PFI/PPP contracts to respond to the changing requirements of public sector clients. 

A number of key construction milestones were also reached on portfolio projects during the period: Stage 2 of the Royal Children's Hospital reached completion in late 2014 some three months in advance of the contractual completion date; the Federal Ministry of Education and Research, Berlin reached construction completion on time and budget at the beginning of August 2014; and, the Gold Coast Rapid Transit also reached completion in July 2014.

Projects under construction as at 31 December 2014, all of which are currently on schedule for operational commencement are set out in the table below. 

Federal Ministry of Education and Research in Berlin (BMBF)

Project summary

The €120 million BMBF project involved the design, construction, operation and financing of the new headquarters of the Federal Ministry of Education and Research in Berlin ('the Ministry') and comprised two connected buildings on a c.13,400 sqm piece of land owned by the German Government Agency for Real Estate ('the Authority'). The new building has a gross area of c.55,000 sqm and provides space for around 1,000 employees.

The Ministry provides funding for research projects and institutions and sets general educational policy in Germany, including providing student loans. The project was the first civil construction project developed under a PPP model by the Federal German Government and is a pioneering project for the German PPP market. It was awarded Project Finance 'Deal of the Year' in 2011.

The Investment Adviser was involved in the project since its inception and in conjunction with its consortium partners was the successful bidder in the Authority's procurement process. Construction on the project commenced on 1 August 2011 and was effectively delivered through a turnkey contract with BAM Deutschland AG as scheduled and to budget on 1 August 2014. Since then the project has been operated in conjunction with the facilities management ('FM') partner BAM Immobilien-Dienstleistungen GmbH with the Investment Manager engaged to provide ongoing asset management ('AM') services to the project until July 2041. 

In January 2015, following the completion of construction (and consequent reduction in the project's risk profile), the Company acquired a 98% equity interest and 100% of subordinated debt from an associate of the Investment Adviser.

Project highlights - 'Green credentials'

The Ministry used the development of BMBF as an opportunity to showcase research and development in sustainable practice and one of the main characteristics of the new building is its 'green footprint' focusing on green energy and energy efficiency. The building achieved Gold Status under the Valuation System for Sustainable Construction of Ministries in Germany which represents the highest possible evaluation for sustainability. Key features include:

> 'Smart Grid' technology, an intelligent heating and cooling system which provides the most efficient air circulation and optimal working conditions while removing the need for heating radiators and air conditioning ventilators;

> The roof and building façade incorporate solar panels and the building also contains a fuel cell and a combined heat/power unit to supply the electrical and thermal power. The fuel cell is the first to be used in a German public office building;

> The materials used during construction include natural stone and recycled glass elements as well as sustainable wooden window frames.

Structuring the project to minimising risks

The structure of the project is designed to minimise risks and includes the following features:

> Availability based revenue stream - a standard availability payment mechanism is supported by the Federal Republic of Germany

> Limited construction risk - all construction milestones were achieved within schedule and on budget

> Limited FM/lifecycle risk - all key operational risks, including lifecycle and hard/soft FM are passed through to the FM partner

> No refinancing or interest rate risk - project debt is matched to the project life and hedging is in place

> Strong yield contribution - the project has been operational since August 2014

> Long project life - 27 year contract following practical completion in August 2014

Key asset management activities

In addition to structuring and financing the project, the project partners provide services to the Authority and the Ministry as well as the financing banks on an ongoing basis. The Investment Adviser takes a proactive approach to managing relationships with all project partners and minimising associated risks. Key asset management services provided by the Investment Adviser include:

> Close coordination with the technical advisor and monthly review of construction progress to ensure that the project's building works were successfully delivered

> Lead partner in all negotiations with the Authority/Ministry and its advisors as well as with the banks ensuring proper documentation and efficient project progression

> Project company management including tax filing and financial statements preparation

> Project agreement negotiations and documentation and financial model adjustments

> Ensuring distributions from the project are paid to the Company in line with expectations

During the year the Company made further investment of £188.2 million across five 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.

In January, the Company acquired a 98% equity interest and 100% subordinated debt of the headquarters of the Federal German Ministry of Education and Research in Berlin ('BMBF'). The Ministry provides funding for research projects and institutions and sets general educational policy, including providing student loans, in Germany.

The BMBF interests were acquired by an investment subsidiary of the Company from an associate of the Investment Adviser for approximately €11.9 million (£9.6 million). The acquisition process was managed in accordance with the Company's policy on dealing with conflicts of interest in such circumstances. This process, which is documented further on pages 44, included the Company obtaining an independent valuation which valued the asset at a price slightly higher than the price at which it was acquired.

The Company also invested further in its Building Schools for the Future ('BSF') portfolio. Three investments were made in existing BSF projects:

> The acquisition of 60% of Kier Project Investments' 80% interest in the Kent BSF (UK PFI schools) project for £7.2 million, taking the Company's ownership in this project to 58%

> A follow-on investment of £0.5 million in the Wolverhampton BSF (UK PFI schools) project where the Company had the opportunity to invest on a minority basis. The project involves the design, construction, financing and operation of two high schools in the second phase of the Wolverhampton BSF programme delivered using a PFI structure

> An additional £2.8 million investment in the second phase of the Nottingham BSF from Carillion Private Finance, taking the Company's interest from 10% to 82%

The Company also reached financial close on a £168.1 million investment in the Lincs OFTO project. The project links the 270MW Lincolnshire wind farm via transmission cables to the National Grid via 100km of subsea cables and other related infrastructure including substations. The Company will take no exposure to electricity production or price risk, rather is paid a pre-agreed revenue stream over 20 years which is fully linked to UK inflation (RPI).

In addition, in July the Company announced that it had been selected as the winning bidder to fund the Priority School Building Programme, a centrally managed UK government scheme designed to address schools most in need of urgent repair. The funding programme, known as the 'Aggregator' will see c. £700 million of investment directed into 46 schools across five batches. The Company's commitment will be up to £79 million, with the residual funding being provided by consortium partners the European Investment Bank and Aviva. The investment will be made progressively over a twelve month period, as each batch of schools reaches financial close. The first two batches reached financial close earlier this month with the Company committing £18.2 million of funding. In recognition of the innovative nature and importance of the transaction it was awarded IJ Global's 2014 European Social Infrastructure Deal of the Year.

The Company made a number of divestments during the period. Minority interests in the Hull, Leeds, Newcastle, Rochdale, Sandwell and Leicester BSF projects were disposed, with £18.8 million being realised. In a separate transaction, the Company's stake in Sheffield BSF was also divested for £3.2 million. The divestments were agreed as the Company had determined that it had no realistic scope to increase its holdings in these particular projects to majority controlling holdings and therefore considered that, based on the price offered, a sale would be in the best interests for the Company. The proceeds of sale are substantially in excess of the price paid for the same stakes on acquisition in August 2011, offering a significant premium to the Company. 

In addition, the Company divested a further asset, the Amiens Hospital PPP project in France, realising a total of £0.3 million. The sale achieved a price in excess of the Company's valuation and was opportunistic. Consistent with the sales conducted in January of this year, this was a non-strategic, subscale project, thereby, this divestment further streamlined the portfolio.

The Company seeks to generate dividends to investors that are paid from operating cash flow. For the year ended 31 December 2014 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.

During the year, the Company has renewed its corporate debt facility. On 20 January 2014 the term of the facility was extended until December 2016 on broadly the same terms as the existing facility but with an increase in the size of the facility to £175 million (previously £100 million) in light of a growing trend in the size of investment opportunities available.

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. As at the date of this report, the corporate debt facility was £27.2 million drawn.

Current Market Environment and Future Opportunities

During 2014 the Company benefited from the significant level of preparatory development work the Investment Adviser had undertaken in previous periods resulting in a record level of investment of £188.2 million in the year. In addition to its willingness to invest in such new 'greenfield' opportunities the Company's ability to increase the value of its investment portfolio also depends on the following market factors:

> 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 impact this has on pricing and level of returns

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

The Company continues to have a very positive outlook with good opportunities to make further investments in the infrastructure markets and sectors where it is most focused. Public finances continue to be stretched and many governments see private sector finance as an enabler of investment in this space.

However, competition in the secondary market for assets such as those in which the Company invests is intense. While the Company is always keen to review mature secondary market investment opportunities being sold by third party developers, many of these opportunities are less likely to be accretive to the portfolio.

The Company is also selective to ensure an appropriate risk and return balance within the overall portfolio. These trends have also 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.

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 continues to view high-quality infrastructure as means to increase productivity and competiveness. Its 2014 edition of the National Infrastructure Plan indicates a programme of over £460 billion in investment until 2020 and a priority list of its top 40 projects. It also notes that over 80% of the investment will either be full or partly financed by the private sector.

Much of the emphasis of the Plan is on energy and transport. It also identifies key projects in other sectors in which the Company is active. For example some of the larger projects are likely to be completed on a PPP-like profile which, while procured under a different regulatory basis, bear similar risk and return characteristics to other assets within the existing portfolio.

It is also actively supporting innovation in private sector infrastructure finance. For example, as an alternative to traditional bank or government financing, the Education Funding Agency procured a funding scheme which aggregated the financing of five batches of schools being delivered through the Priority Schools Building Programme. As noted elsewhere in this report, the Company was the successful bidder on the scheme, and is pleased that it played a lead role in this 'aggregated' model of financing which has the potential to be replicated across other centrally procured government projects.

We have highlighted for some time the attractive characteristics of the offshore transmission ('OFTO') sector - where investment is made into the cables 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. In most cases these have historically also provided full inflation linkage. The Company has, to date, been a market leader in investment into this space. Given the barriers to entry for non-participants, the Company expects to continue to benefit from sizeable new 'primary market' opportunities that will come to market over the coming years; the regulator, Ofgem, has reaffirmed its estimates of a further £8 billion of investment in OFTOS by 2020 with the prospect of significantly more in the years thereafter. 

Although there is a UK general election in May 2015, all main UK political parties appear to currently support the ongoing investment in UK infrastructure.

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 on the basis of the attractive market dynamics. 

While each state government also has its own long-term infrastructure strategy delivery organisation there is a unified method for the delivery of PPP Projects, the National PPP Policy Frameworkwhich provides a consistent approach 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 and developments to highways and rail rebuilding and modernisation together with water and communications infrastructure.

While there are attractive opportunities in the Australian market, until more recently the Australian dollar ('AUD') had been trading at a substantial premium to Sterling compared to longer-term rates. As a result it was less attractive for the Company to consider investing in that market. However, over the past 12 months Sterling has appreciated against the AUD thus potentially making Australian investments more attractive again and the Company will continue to assess opportunities in this market.

The Investment Adviser is currently shortlisted as one of two bidders on both a courts project in Canberra and a grouped schools project in The State of Victoria.

The Company remains very positive about prospects for further investment in Northern Europe. 

Jurisdictions including Belgium, the Netherlands, Germany and Scandinavia continue to offer new primary market PPP opportunities across a range of sectors including accommodation and transportation which are attractive to the Company. Ireland has an active PPP programme where the Company's Investment Adviser is currently bidding on a range of primary market opportunities. 

Elsewhere in Europe, austerity measures and fiscal constraint have limited the capacity of governments to fund infrastructure projects, particularly in southern Europe. These areas where there is a less stable track record of PPP investment are not currently an area of focus for the Company.

Currently, in the addition to the Irish bids mentioned above the greatest focus is being directed to pursue opportunities in Germany (where the Company acquired the BMBF asset during 2014 and also currently invests in two other projects); Belgium (where the Company has an existing investment and further investment opportunities are being reviewed) and the Netherlands (where the Company's Investment Adviser is participating in three separate primary market tender processes).

The PPP (or P3) market in the United States is seen as one of the largest growth markets for infrastructure in the developed world, notwithstanding the additional complexities arising from slightly different procurement processes in the different states. 

As highlighted in the Chairman's Letter, the Investment Adviser has agreed to the Hunt group of companies taking a 50% interest in the holding company of the Investment Adviser. A key element in this has been the right of 'first look' that the Company has been granted as part of the transaction. Hunt are significant participants in public sector infrastructure in the US and the Company is optimistic that as a result it will see an enhanced flow of attractive investment opportunities from North America in future years including those which are being reviewed currently with Hunt.

PPP in Canada is well established and the Company holds two existing Canadian investments. The Company's Investment Adviser remains active in the Canadian market. However, the market is dominated by 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 state-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 currently bidding for one such opportunity.

The Company keeps a watching brief on opportunities in other international markets 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 remains positive about its prospects, both in terms of the performance of its existing investments and the opportunity to add high quality investments to the portfolio during 2015.

Currently, the Investment Adviser has identified a significant investment pipeline for the Company. In addition to these potential investments the Company and its Investment Adviser have a larger number of transactions, which are at an earlier stage of development, under review.

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 fifth project, Lincs OFTO, and is actively bidding each new opportunity as it comes to market

> Enhanced access to US P3 opportunities

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

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

> The growing range of opportunities in Ireland, Northern Europe and Australia and New Zealand which conform to the existing risk profile within the Company's portfolio

> 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 given these are predominantly new 'primary' market investments, 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.

Notwithstanding the opportunities listed below, it should be noted that the Company's performance is not dependent upon making additional investments in order to deliver its projected returns. Further investment opportunities will be judged by their anticipated contribution to overall portfolio returns.

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 the remaining medium term opportunities, the figure represents the current estimated gross value of the relevant project and therefore includes both debt and equity and is not necessarily indicative of the eventual acquisition price for, or the value of, any interest that may be acquired.

1 Represents current estimated total investment committed by the Company.

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

Rupert Dorey John Whittle

25 March 2015 25 March 2015

Chairman Director

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

The Company's approach to risk management is set out within the Corporate Governance Report.

The following table summarises 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. 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 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 entirely eliminate the risk.

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 ('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 UK Code acknowledges that the AIC Corporate Governance Code ('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 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 more frequently 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 advisors) 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 will have been a director for over nine years from 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.

As noted in the sections that follow, the Board formed a Nomination and Remuneration Committee in September 2014 which, among other things, considers the appointment of candidates to the Board. 

Prior to the establishment of this Committee, nomination of candidates to join the Board was considered by the full Board. This approach was in compliance with Principle 9 of the AIC Code, recommending that the independent directors take the lead in the appointment of new directors. Following the establishment of the Committee the Company now also meets the requirement of the UK Code (Section 12 - B.2.4 ). 

The table below details all Directors of the Company at the date of this report.

1 All of the independent Directors are members of all committees.

The Board of Directors

The Board of Directors currently consists of five non-executive Directors, whose biographies, on pages 51-52, 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 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

Recognising the importance of the composition and function of the Board, a Nomination and Remuneration Committee was formally established in September 2014. It is formally charged by the Board for considering the structure, size, remuneration and composition of the Board. It also oversees the appointment or re-appointment of directors, taking into account the expertise of the candidates and their independence (see page 43 for more detail on the Committee).

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 2015 AGM.

In accordance with the AIC Code, when and if any director shall have been in office (or on re-election would at the end of that term of 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 will have been a Board member for over nine years. The Board is confident that Mr Dorey remains independent. However, as a further measure it has been decided that he will now offer himself for re-election on an annual basis. He also intends to retire from the Board at the Company's 2018 Annual General Meeting.

One third of the remaining Directors retire by rotation at every AGM and will therefore be subject to annual re-election by shareholders. Any Directors appointed to the Board since the previous AGM also retire and stand for re-election. 

Mr Whittle will make himself available for re-election at the 2015 AGM on this basis.

Taking this into account Mr Dorey, Mr Frost and Mr Whittle will all retire and stand for re-election at the 2015 AGM.

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, including gender. The Board currently has one female director.

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 Performance Evaluation

During the period, the Board engaged external consultants to conduct an external review of the company's corporate governance processes. This is in accordance with the UK Corporate Governance Code which states that evaluation of the Board of FTSE 350 companies should be externally facilitated at least every three years. 

The evaluation process was facilitated by Trust Associates, an independent consultant specialising in board advisory and corporate governance services with no other connections to the Company. Interviews were held with the Board, directors of the Investment Adviser, Company Secretary and the Company's Corporate Brokers. The review considered a wide variety of areas including: overall strategy; supervision of investment activities; risk management, shareholder accountability; board composition and process; committee structure; composition and effectiveness; overall governance; support and relationship with suppliers; and performance of the Chairman.

Only minor recommendations were made in the course of that review of which over 90% had already been implemented prior to delivery of their final report and those remaining have been implemented subsequently. For example, two new Board committees were established during the period: the Nomination and Remuneration Committee and the Investment Committee. While these functions had previously been undertaken by the independent Board members, the new committees will formalise the processes around each of these areas and provide shareholders with greater visibility of the process and decisions taken by each.

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 future share price performance 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.

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.

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Board Remuneration

The Nomination and Remuneration Committee is comprised only of independent directors. Prior to the establishment of the Committee in September 2014, these matters were considered by the independent directors alone.

The Committee considers matters relating to the Directors' remuneration, taking into account benchmark information and based upon the amount of work performed by the Board members. No advice or services were provided by any external persons in respect of its consideration of Directors' 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 Chairman of the new Nomination and Remuneration and Investment Committees, respectively do not receive additional fees for these roles. The Nomination and Remuneration Committee reviews Director remuneration periodically, taking into account fees paid to directors of comparable companies, although such a review will not necessarily result in any changes to the rates.

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 Mr Dorrian retired from the Board on 12 June 2014.

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

2 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 become Chairman of the Audit and Risk Committee on 31 December 2013 for which he receives a higher fee.

5 Mr Stares joined the Board on 28 August 2013.

Directors' Interests

Directors, who held office at 31 December 2014, had the following interests in the shares of the Company:

1 All shares are beneficially held.

2 Mr Dorrian retired from the Board on 12 June 2014. Previously shares held indirectly through a Retirement Annuity Trust Scheme.

3 Shares owned by Mr Dorey's spouse.

4 Mr Stares joined the Board on 28 August 2013.

There have been no changes to any of the above holdings between 31 December 2014 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.

Committees of the Board

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. 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 table overleaf. The Audit and Risk Committee is also responsible for monitoring the objectivity and effectiveness of the audit process, with particular regard to terms under which the auditor is appointed to perform non-audit services. In advance of non-audit work being undertaken by the Company's Auditors, any potential threats to independence are identified and if they cannot be suitably dealt with an alternative audit firm would be engaged.

In respect to its risk management function, the Audit and Risk Committee is also responsible for reviewing the Company's risk management framework including in connection with 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.

The Audit and Risk Committee, having reviewed the performance of the Auditor, has recommended to the Board that the Auditor be proposed for re-appointment at the Annual General Meeting of the Company.

The Audit and Risk Committee spent time performing a more detailed risk review of the Company during the period, focussed on identification of new emerging risks that could affect the Company and the robustness of processes in place to mitigate those risks. During this review, the Committee identified and discussed a number of emerging global risks, for example those driven by technological advances (such as Cybercrime) and new industry risks as a result of increased external regulation. Of significance the committee considered it important to more specifically raise with shareholders the new emerging risk of OECD proposals to restrict the tax deductibility of interest payments. More detail is provided within the Risk and Mitigation section of this Annual Report. The Audit and Risk Committee were satisfied that the key risks that could impact the Company and its investments were effectively mitigated and were also in line with the Company's peer group.

Management Engagement Committee

The Management Engagement Committee is comprised of the full Board, with the exception of Mr Frost, and is chaired by Ms Whittet. The duties of the Management Engagement Committee in discharging its responsibilities are outlined in the table above.

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 advisors' appointments with the aim of evaluating performance, identifying any weaknesses and ensuring value for money for the Company's shareholders.

The Management Engagement Committee formally reviewed the performance of Investment Adviser and other key service providers to the Company. During the 2014 review, 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 will be chaired by Mr Stares. As noted earlier the Committee was established in September 2014 to formalise the arrangements that had previously existed to consider matters relating to Board appointments, structure and remuneration.

The Committee intends to hold its first meeting during 2015.

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 was established in September 2014 to formalise the arrangements that had previously existed to consider items relating to the acquisition and disposal of investments by the Company. Previously such decisions were taken by the full board (excluding Mr Frost who is not independent) and therefore the Committee was not required to meet during 2014. 

The Committee will meet as necessary when new investment or divestment opportunities are recommended by the Investment Adviser.

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.

As part of its ongoing oversight of the Company's portfolio in June 2014 the Board visited the Federal German Ministry of Education and Research facility in Berlin. It also met with the German-based members of the Investment Adviser's team together with the construction partner on that project, BAM Deutschland. In conjunction with the Investment Adviser, the Board also took the opportunity to take a step back from its usual tasks to spend time considering the Company's broader strategic approach including its position within the markets and future areas of focus for growth.

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

1 Mr Dorrian retired from the Board on 12 June 2014.

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

The Nomination and Remuneration Committee was established on 3 September 2014 and intends to hold its first meeting during 2015. The Investment Committee was also established on 3 September 2014 but no matters came forward that needed to be considered by the Committee during the period.

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 advise the Company in relation to strategic management of the investment portfolio. Details of the Investment Adviser's relationship with the Company are provided 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 shareholder's best interests to continue the appointment of Amber Fund Management Limited ('AFML') as the Company's Investment Adviser.

Making New Investments

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 IAA 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.

The Company has in place a detailed risk management framework, with a comprehensive risk register that is reviewed and updated as necessary 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 significant risks 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:

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 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 independent 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 three risk control levels.

Risk identification

The Board and Audit and Risk Committee identify risks with 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 Board on a quarterly basis.

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 Company benefits from a strong alignment of risk and management performance approach at the Company and underlying investment levels through the provision of services from a vertically integrated Investment Adviser and investment level Asset Manager.

The risk framework is applied holistically across the Company and the underlying investment portfolio through vertically integrated service support as illustrated in the Operating Model diagram on page 14.

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 are available to meet shareholders as required.

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 2014 the Investment Adviser and members of the Board held formal meetings with over 85 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 of the Company provides a forum for shareholders to meet and discuss issues with the directors and with the Investment Adviser of the Company.

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. As a member of the UK Sustainable Investment and Finance Association, it 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.

German Ministry of Education and Research (BMBF), Germany - Following the completion of construction in August 2014 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.

Police Scotland, Recruitment and Training Centre, UK - Motion sensors have been installed to operate lights in the stairwells reducing energy consumption. 

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. The system also attracts additional revenue streams from the sale of renewable obligations certificates for every unit of electricity generated.

Royal Children's Hospital, Australia - Following successful completion of Stage 2 of the project an energy committee was established with representation from all major stakeholders including the Department of Health for the State Government of Victoria, with the objective of delivering financial savings. Over the past two years various energy efficiency initiatives have been implemented resulting in annual savings of A$300,000 and a 6% reduction in carbon emissions. Following the success in achieving these financial and environmental savings the Authority has earmarked an additional A$100,000 for investment in additional efficiency schemes. 

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. 

North Wales Police, UK - In 2014 the car park lights on the project were re-lamped with LED lights in order to improve lighting conditions, enhance CCTV coverage whilst also delivering energy savings and reducing carbon emissions. Future initiatives include assessing the project for its suitability for photo voltaic panels to be installed.

Bootle PFI, UK - During 2014 the project was able to provide four work experience places for local school children in conjunction with the Sefton Council Education Department. In addition compost is being produced from kitchen waste which is then used to grow vegetables on site. Such initiatives have led to the project being declared a zero to landfill by Sita the project's waste removal company. Energy saving measures have included the replacement of 58 standard lights with LED equivalents resulting in a 60% reduction in energy and a CO2 saving of 74% in comparison to standard lights.

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 ofnew classrooms at eleven of the project sites. The 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.

Long Bay Forensic & Prison Hospitals, Australia - During 2014 a Honeywell Attune Energy Management Service became fully operational and there was an upgrade to new LED down lights across the project. These initiatives provide better light quality together with a reduction in light and power consumption of 15% and lower carbon emissions. 

Orange and Associated Health Services PPP, Australia - Operational efficiency improvements and controls optimisation has been the focus of energy efficiency initiatives across the project's three facilities during 2014. Further energy optimisation is expected following the installation of the 'EnteliWEB energy management system' which will allow for real time reporting. 

Changes in Regulation

The Board actively monitors and responds to changes in regulation as it impacts the Company and its policies. A number of significant changes to regulation occurred during the year.

The Company's response to these and significant other policies are set out below:

Alternative Investment Fund Management Directive ('AIFMD')

AIFMD was transposed into law in European Union ('EU') member states on 22 July 2013 with mandatory compliance on expiry of a one year transition period. The Board considers the Company to be an internally managed non-EU fund. A non-EU fund (i.e. it is the AIFM) which is internally managed 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.

Foreign Account Tax Compliance Act ('FATCA')

FATCA became effective on 1 January 2014 and is being gradually implemented internationally. 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 Board in discussion with the Company's service providers and advisers ensured that the Company will comply with the Act's requirements to the extent relevant to the Company. The Company was registered with IRS in 2014.

Non-Mainstream Pooled Investment ('NMPI')

On 1 January 2014 FCA rules relating to the restrictions on the retail distribution of unregulated collective investment schemes and close substitutes came into effect. The Board believes that the Company and its shareholders will not be affected by these changes.

Having taken legal advice, the Company confirms that its shares will qualify as an 'excluded security' under these new rules and will therefore be excluded from the FCA's restrictions which apply to non-mainstream 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.

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. This report provides an overview of the work of the Committee and details how it has discharged its 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

Meetings of the Committee were attended by the Investment Adviser and Administrator by invitation during the year. A representative of the Group's external auditors, Ernst and Young LLP, also attended by invitation those meetings at which the financial reporting planning and the annual and interim reports and financial statements 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 51-52.

Committee Agenda

The Committee's agenda during the year included:

> Review of the final and interim financial statements and matters raised by management and external auditors (including significant financial reporting judgments therein)

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

> Review of the effectiveness of the Group'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 Group'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 controls over cash forecasting

Key activities considered during the year

The Committee undertook the following activities in discharging its responsibilities during the year:

Financial reporting

The Committee reviewed the Company's financial statements, interim reports and interim management statements prior to approval by the Board and advised the Board with respect to meeting the Company's financial reporting obligations. The Committee reviewed accounting policies and practices, including approval of the critical accounting policies; considered the appropriateness of significant judgements and estimates; and advised the Board that the annual report and the financial statements, taken as a whole, is fair, balanced and understandable.

The Committee considered the key accounting judgements exercised in preparing the financial statements continued to be related to the application of investment entity amendments as required by IFRS 10 and the basis for determining the fair value of the Company's investments:

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 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.

The Committee 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. The Committee has accordingly recommended that the Board approves the financial statements on this basis (i.e. that investments are accounted for at fair value and service entities 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 director's valuation of investments.

This methodology requires a series of judgements to be made as explained in note 13 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. The Committee also challenged the Investment Adviser on the year-end fair value of investments as part of its consideration of the audited financial statements. 

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

The auditor explained the results of their review of the valuations, including their challenge of management's underlying cash flow projections and assumptions; macro-economic 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 its appropriateness to the Board.

Internal controls over financial reporting

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

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

Controls and process reviews

Throughout 2014 the Company's governance and assurance functions have continued to be enhanced as set out within the Corporate Governance Report. As part of the Company's rolling annual controls and processes review, an independent assessment of internal controls over the cash flow forecasting process was commissioned. The review confirmed adequate controls were in place and operating in relation to the cash flow forecast process.

External Auditors

The Committee recommended to the Board the scope and terms of engagement of the third party auditors. The Committee considered auditor objectivity and independence, audit tenure and audit tendering, and auditor effectiveness.

Objectivity and independence

In assessing the objectivity of the auditor, the Committee 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 the Committee considers 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 Committee.

Non-audit fees represented 11% of total audit fees, reflecting the relatively low level of non-audit work conducted. 

In order to maintain Ernst and Young's ('EY') independence and objectivity, EY undertook its standard independence procedures in relation to those 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 9 to the financial statements. These were reported to and considered by the Committee as not being so significant so as to risk impacting objectivity and independence.

Audit Tendering and tenure

In October 2010, the Company put the audits of the Company and controlled investment entities out to tender. 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. 

A number of firms were approached to tender for the audit. The list was based upon their experience, industry skills and knowledge, their ability to perform the audit to a high standard and any pre-existing business relationships that might affect their independence. Following a review of the proposals received, a recommendation was made to the Board to appoint EY as the new auditor (previously Deloitte 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 2014 the Committee 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 Group's financial statement risks, and review of the audit findings report.  

Risk review

During 2014, the Committee carried out an in depth review of the key risks faced by the Company. The exercise was aimed at identifying possible gaps in the current risk framework. The review resulted in identification of certain additional risks as well as the alignment of internal and external reporting of risk. The Company's risk register was updated to reflect the results of the deliberations. The Committee was satisfied with the robustness of the risk management framework in place.

Regulatory environment

The Committee received regular reports from the Administrator and Investment Adviser on regulation and regulatory developments. Key regulatory actions taken during the year related to the US Foreign Account Tax Compliance Act ('FATCA') and the European Union Alternative Investment Fund Management Directive ('AIFMD').

As a non EU-Alternative Investment Fund ('AIF') marketing in the United Kingdom, the Company registered with the FCA under the National Private Placement Regime ('NPPR') and carries out periodic reporting on the Company's activities. During the year, the Company has also been registered for FATCA.

Fair, Balanced and Understandable

The Committee introduced a new process in 2014 for the review of the 2013 Annual Report and Financial Statements in order to support it in making the statement that it considers them to be 'fair, balanced and understandable'. This process has continued to apply and included a thorough review of the corporate governance best practice guidance and putting in place processes to ensure consistency, clarity, fairness and balance within the Annual Report and Financial Statements. This also takes into comments provided by the Company's Investment Adviser, Administrator and external auditor.

The Committee has reviewed the Company's 2014 Annual Report and Financial Statements and has advised the Board that, in its 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.

John Whittle

25 March 2015

Chairman, Audit and Risk Committee

Introduction

The Directors present their Annual Report on the performance of the Company and group for the year ended 31 December 2014.

Principal Activity

The Company is a limited liability, Guernsey incorporated authorised closed-ended investment company under Companies (Guernsey) Law, 2008. The Company 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 Statement is provided on pages 39-47.

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 2014, the Company had been notified, in accordance with chapter 5 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 25 March 2015, being the most current information available, the following notification 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 9 June 2014. The Company will seek to renew such authority at the Annual General Meeting to take place on 9 June 2014. 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). 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 10-38. The financial position of the Group, its cash flows, liquidity position and borrowing are described in the financial statements from page 57.

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.

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 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

25 March 2015 25 March 2015

Chairman Director

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 accept 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

25 March 2015 25 March 2015

Chairman Director

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 2014 and of its profit for the year then ended;

> have been properly prepared in accordance with 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

We have audited the financial statements of International Public Partnerships Limited (the Group) for the year ended 31 December 2014 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement and related notes 1 to 23. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards ('IFRS's) as adopted by the European Union.

This Report is made solely to the Company's members, as a body, in accordance with Section 262 of Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company'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 Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors' Responsibilities Statement set out on page 54, 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.

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 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 and Financial Statements 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.

Our assessment of risks of material misstatement

We identified the following risk that has had the greatest effect on the overall audit strategy and scope:

> The assessment of the fair value of investments relies on a number of macro assumptions which are subjective, as well as projected cash flows which are based on estimates made by management. For details of the valuation process followed by management please refer page 69 note 13.4. There is a risk that errors in the assumptions and projected cash flows result in a misstatement of the investment balance in the consolidated balance sheet and the corresponding gain/loss on revaluation of investments recorded in the consolidated statement of comprehensive income

Our response to the risk identified

In assessing the risk of material misstatement to the consolidated financial statements, our Group audit scope as noted above, focused on the valuation of investments at fair value through profit or loss. Our response to the risk of material misstatement identified above included the following procedures:

> we reviewed the valuation process and assessed the effective of controls and tested the controls that related to model integrity; and

> we challenged the Board's assumptions underpinning the fair value of investments, including the key inputs of the forecast cash flows, the discount rates used, and the historical accuracy of forecasts. We used a valuation specialist to assist us with our audit of the discount rates, foreign exchange rates and inflation rates used, by benchmarking to data available in the market

Our application of materiality

We determined materiality for the Group to be £10.6 million (2013: £9.0), which is approximately 1% (2013: 1%) of equity. This provided a basis for determining the nature, timing and extent of risk assessment procedures, identifying and assessing the risk of material misstatement and determining the nature, timing and extent of further audit procedures. We used equity as the basis for determining planning materiality because the Company's primary performance measures for internal and external reporting are based on net asset value. On the basis of our risk assessments, together with our assessment of the Group's overall control environment, our judgement is that overall performance materiality for the Group should be 50% of materiality, namely £5.3 million (2013: £4.5 million). A lower materiality of £1.9 million (2013: £1.2 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 for these balances has been determined to be 50% of materiality, namely £0.95 million (2013: £0.65 million).

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.53 million (2013 £0.45 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

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

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the Director's report is:

> Materially inconsistent with the information in the audited financial statements; or

> Apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of performing our audit; or

> Is otherwise misleading

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the directors' statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed.

Under the Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:

> proper accounting records have not been kept; or

> the financial statements are not in agreement with the accounting records; or

> we have not received all the information and explanations we require for our audit.

Under the Listing Rules we are required to review:

> The directors' statement, set out on page 53, in relation to going concern; and

> The part of the Corporate Governance Statement relating to the company's compliance with the nine provisions of the UK Corporate Governance Code specified for our review.

Michael Bane

for and on behalf of Ernst & Young LLP,

Guernsey

Channel Islands

25 March 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 (2013: nil). The profit for the year represents the Total Comprehensive Income for the year.

As at 31 December 2013

The financial statements were approved by the Board of Directors on 25 March 2015.

They were signed on its behalf by:

Rupert Dorey John Whittle

25 March 2015 25 March 2015

Chairman Director

1 Cashflows received from unconsolidated subsidiary entities in respect of surrender of tax losses

2 Includes restricted cash of nil (2013: £30.9 million) which can only be utilised for new investments.

1. Basis of Preparation

International Public Partnerships Limited is a closed ended authorised investment company incorporated in Guernsey under Companies (Guernsey) Law, 2008. The address of the registered office is given on page 85. The nature of the Group's operations and its principal activities are set out in pages 4 and 10 to 13 respectively.

These financial statements are presented in pounds Sterling as this is the currency of the primary economic environment in which the Group ('parent and consolidated subsidiary entities') operates and represents the functional currency of the Parent and all values are rounded to the nearest (£'000), except where otherwise indicated.

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), adopted by the

European Union; interpretations issued by the International Financial Reporting Interpretations Committee; applicable legal and regulatory requirements of Guernsey; and the Listing Rules of the UK Listing Authority. The financial statements follow the historical cost basis, except for financial assets held at fair value through profit or loss and derivatives that have been measured at fair value. The principal accounting policies adopted are set out in relevant notes to the financial statements.

The Directors have determined that International Public Partnerships Limited is an investment entity as defined by IFRS 10 on the basis that:

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

b) it commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income,

or both; and

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

Accordingly, these financial statements consolidate only those subsidiaries that provide services relevant to its investment activities, such as management services, strategic advice and financial support to its investees. Subsidiaries that do not provide investment-related services are required to be measured at fair value through profit or loss in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

As set out in the Directors' Report, the Directors have reviewed cash flow forecasts prepared by management. Based on those forecasts and an assessment of the Group's committed banking facilities, they have concluded that it is appropriate to prepare the financial statements of the Group on a going concern basis.

In arriving at their conclusion that the Group has adequate financial resources, the Directors were mindful that the Group had unrestricted cash of £29.4 million as at 31 December 2014. The Group has access to an undrawn corporate debt facility balance of £158.1 million, which is available for investment in new and existing projects and is committed until December 2016. The Group can utilise a portion of the undrawn corporate debt facility for working capital purposes. The new facility is forecast to continue in full compliance with the associated banking covenants. The Group also continues to fully cover cost and distributions from underlying operational investment cash flows.

During the year, the Group completed a tap issuance of £95 million which was used to partly repay the drawn down balance of the corporate debt facility. There was also a scrip issuance as disclosed in note 17.

The annual financial statements of International Public Partnerships Limited are prepared in accordance with IFRS as adopted by the European Union.

The same accounting policies, presentation and methods of computation are followed in this set of annual financial statements as applied in the previous financial year. The new and revised IFRS and interpretations becoming effective in the period have had no impact on the accounting policies of the Group. Note 22 sets out a comprehensive listing of all new standards applicable from 1 January 2014.

2. Significant Judgements and Estimates

Following the adoption of IFRS 10 Investment Entity Amendments, the consolidated financial statements incorporate the financial statements of the Company and service entities controlled by the Company up to 31 December 2014, that themselves do not meet the definition of an investment entity. Typically a service entity provides management services, strategic advice and financial support to investee entities. Judgement is therefore required in assessing which entities meet these definitional requirements. The Directors have reviewed and assessed the criteria applied in the assessment of services entities based on the guidance in place as at 31 December 2014 and are satisfied with the resulting conclusion.

2. Significant Judgments and Estimates continued

Fair values are determined using the income approach which discounts the expected cash flows at a rate appropriate to the risk profile of each investment. In determining the discount rate relevant long-term government bond yields, specific investment risks and the evidence of recent transactions are considered. Details of the valuation process and key sensitivities are provided in note 13.

3. Segmental Reporting

Based on a review of information provided to the chief operating decision makers of International Public Partnerships Limited, the Group has identified four reportable segments based on the geographical risk associated with the Group. The factors used to identify the Group's reportable segments are centered on the risk free rates and the maturity of the Infrastructure sector (particularly PFI/PPP) within each region. Further, foreign exchange and political risk is identified, as these also determine where resources are allocated. Management has concluded that the Group is currently organised into four reportable segments being UK, Europe (non UK), Australia and North America.

1 Reporting segment results are stated net of operational costs including management fees.

2 North American segment currently relates entirely to projects in Canada.

Revenue from investments which represents more than 10% of the Group's interest and dividend income approximates £17.0 million (2013: £18.04 million).

4. Investment Income

Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time-apportioned basis, using the effective interest rate of the instrument concerned as calculated at the acquisition or origination date. Interest income is recognised gross of withholding tax, if any.

The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial instrument (or, when appropriate, a shorter period). When calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial instrument, but not future credit losses.

Dividend income is recognised gross of withholding tax in the Consolidated Statement of Comprehensive Income on the date the right to receive payment is established. This is the date when the directors of the underlying project entity approve the payment of a dividend.

Net gain from financial instruments at fair value through profit or loss includes all realised and unrealised fair value changes (including foreign exchange movements) other than interest and dividend income recognised separately.

All dividend and interest income has resulted from transactions with unconsolidated subsidiary entities. Gains on investments at fair value through profit or loss are also recognised on the Group's investments in unconsolidated subsidiaries.