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.
Portfolio composition
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.
Investment restrictions
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.
Managing conflicts of interest
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.
Financial management
The Company may hold derivative or other financial instruments
designed for efficient portfolio management or to hedge interest,
inflation or currency risks.
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