Full Year Results for the 12 Months to 31 Dec 2018

Companies

International Public Partnerships Ltd. (INPP)

UK 100

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Energy Transmission	22%
Transport	21%
Education	19%
Gas Distribution	12%
Waste Water	11%
Health	4%
Courts	3%
Military Housing	3%
Other	5%

U.K.	71%
Australia	10%
Belgium	10%
U.S.	3%
Germany	3%
Canada	2%
Ireland	1%
Italy	<1%

Investments with third party senior debt	91%
Investments with no third party senior debt⁴	9%

Construction	11%
Operational	89%
Early Stage Investor⁵	70%
Later Stage Investor⁶	30%

100%	49%
50%-100%	7%
<50%	44%

Name of Investment	Location	Sector	Status at 31 December 2018	% holding at 31 December 2018	% investment fair value 31 December 2018	% investment fair value 31 December 2017
Cadent	Various, United Kingdom	Gas Distribution	Operational	4% Risk Capital	12.4%	14.0%
Cadent owns four of the U.K.'s eight regional gas distribution networks ('GDNs') and in aggregate provides gas to approximately 11 million consumers. It is expected that INPP will acquire an additional 3% of Cadent from National Grid in June 2019.
Tideway	London, United Kingdom	Waste Water	Under Construction	16% Risk Capital	10.6%	10.8%
Tideway is a £4.2 billion investment and relates to the design, build and operation of a 25km 'super-sewer' under the River Thames.
Diabolo Rail Link	Brussels, Belgium	Transport	Operational	100% Risk Capital	10.0%	10.0%
Diabolo Rail link integrates Brussels Airport with the national rail network allowing passengers to access high-speed trains, such as Amsterdam-Brussels-Paris and NS Hispeed trains.
Lincs Offshore Transmission	Lincolnshire, United Kingdom	Energy Transmission	Operational	100% Risk Capital	9.0%	9.0%
The project connects the 270MW Lincs offshore windfarm, located 8km off the east coast of England, to the national grid. The transmission cables comprise the onshore and offshore substations and under-sea cables, 100km in length.
Ormonde Offshore Transmission	Cumbria, United Kingdom	Energy Transmission	Operational	100% Risk Capital and 100% senior debt	6.2%	6.5%
The project connects 132kV Ormonde offshore windfarm, located 10km off the Cumbrian coast, to the national grid. The transmission assets comprise the onshore and offshore substations and under-sea cables, 41km in length.
Reliance Rail	Sydney, Australia	Transport	Operational	33% Risk Capital	4.3%	4.4%
Reliance Rail is responsible for financing, designing, manufacturing and ongoing maintenance of 78 next-generation, electrified, 'Waratah' train sets serving Sydney in New South Wales, Australia.
Angel Trains	Various, United Kingdom	Transport	Operational	5% Risk Capital	3.5%	3.4%
Angel Trains is a rolling stock leasing company asset base comprising over 4,400 vehicles. Angel trains has invested over £5 billion in new rolling stock and refurbishment since 1994, and is the second largest private investor in the industry after Network Rail.
U.S. Military Housing²	Various, United States	Military Housing	Operational	100% Risk Capital	3.1%	3.0%
Two tranches of mezzanine debt underpinned by security over seven operational PPP military housing projects, relating to a total of 19 operational military bases in the U.S. and comprising c.21,800 individual housing units.
Dudgeon Offshore Transmission	North Norfolk, United Kingdom	Energy Transmission	Operational	100% Risk Capital	2.2%	N/A
The project connects the 402MW Dudgeon offshore windfarm, located 32km off the coast of Cromer in North Norfolk, to the national grid. The transmission asset comprise the onshore and offshore substations and under-sea cables, 89km in length.
BeNEX Rail	Various, Germany	Transport	Operational	49% Risk Capital	2.0%	2.0%
BeNEX leases rolling stock to train operating companies. It holds shares in six rail companies and one bus company, providing transport services of c.39 million train km and c.9 million km by road.

STRATEGIC PRIORITIES	DESCRIPTION	KEY PERFORMANCE INDICATORS	PERFORMANCE IN 2018
VALUE-FOCUSED PORTFOLIO DEVELOPMENT
INVEST IN ASSETS THAT ENHANCE PORTFOLIO RETURNS RELATIVE TO RISK AND MAINTAIN A WELL-BALANCED INVESTMENT PORTFOLIO	- Make new investments that enhance prospects for future value growth and ESG performance contribution	- Value of new investments	- c.£46.2 million investment in Dudgeon OFTO. The investment supports climate mitigation by transmitting clean power to over 410,000 U.K. homes
	- Make additional acquisitions off-market or through preferential access (e.g. sourced through pre-emption rights or via Amber/Hunt Companies LLC ('Hunt')). See page 19 for more information on Hunt	- Proportion of investments in construction - Value of additional investments acquired off-market or through preferred access	- 11% of portfolio currently under construction - Acquisitions totalling £17.1 million secured through pre-emption rights including additional stakes in the Hertfordshire BSF, Gold Coast Light Rail (Phase 2) projects, and further investments through NDIF - Additional commitment in the year to Cadent of c.£35-40 million
	- Manage portfolio composition with complementary investments, in line with the Company's Investment Policy and enhancing at least one of the following aspects: > Blend of risk to return > Inflation linkage > Cash flow profile > Capital attributes (such as construction risk and residual value growth potential)	- Improvement of risk/return, inflation linkage and diversification of cash flows, including geographical diversification	- Assets acquired exhibited robust cash flow profiles - Overall portfolio value inflation linkage increased from 0.79% to 0.82% for every 1.00% p.a. increase over assumed inflation rates (calculated by running a 'plus 1.00%' inflation sensitivity for each investment and solving each investment's discount rate to return the original valuation. The inflation linkage is the increase in the portfolio weighted average discount rate)

ACTIVE ASSET MANAGEMENT
ACTIVE AND EFFECTIVE MANAGEMENT OF ASSETS	- Focus on delivery of target returns from existing investments - Maintain high levels of public sector client satisfaction and asset performance - Deliver additional value from existing assets through management of construction risk and delivery of operational improvements to meet client requirements - Enhance prospects for capital growth by investing in construction phase assets where available - Increase long-term resilience through management of environmental and social performance of assets	- Availability for all controlled investments at 98% or above - returns from investments in line with expectations - Performance deductions below 3% for all projects - Number of change requests from existing contracts - Management of investments during the course of construction projects in line with overall delivery timetable - Number of investments actively managing ESG factors	- Availability for investments at 99.9% or greater - Performance deductions of 0.18% for all projects - Over 881 change requests undertaken - Majority of construction projects managed on time and to budget. Costs of small project delays absorbed by construction partners - Over 90%¹ of the portfolio's total investments (by number) have an ESG policy in place
EFFECTIVE FINANCIAL MANAGEMENT
EFFECTIVE MANAGEMENT OF THE COMPANY'S FINANCES	- Provide efficient management of cash holdings and debt facilities available for investment and appropriate hedging policies - Efficient management of the Company's overall finances, with the intention to reduce ongoing charges where possible - Manage portfolio in a cost-efficient manner	- Dividends paid to investors covered by operating cash flow - New investments made from available cash (after payment of dividend) ahead of using corporate debt - Competitive cash deposit rates - Use of appropriate hedging strategies - Management of ongoing charges	- Cash dividends paid to investors 1.2 times covered by operating cash before capital activity - All investments in 2018 funded through excess cash in priority to the corporate debt facility - Market tested cash deposit rates - £91.6 million of foreign exchange forward contracts in place to mitigate short-term foreign exchange cash flow volatility - Ongoing charges 1.17% p.a. (2017: 1.15%)

INVESTMENTS MADE DURING 2018	LOCATION		KEY ATTRIBUTES					OPERATIONAL STATUS	INVESTMENT	INVESTMENT DATE
		1	2	3	4	5	6
Dudgeon Offshore Transmission Project	U.K.	ü	ü	ü		ü	ü	Operational	£46.2 million	13 November 2018
National Digital Infrastructure Fund	U.K.			ü	ü	ü	ü	Operational	£14.8 million	Various
BSF Hertfordshire Project	U.K.	ü	ü		ü		ü	Operational	£1.7 million	28 March 2018
Gold Coast Light Rail Phase 2	Australia	ü	ü	ü	ü		ü	Operational	£0.6 million¹	2 January 2018
									£63.3 million
INVESTMENT COMMITMENTS MADE DURING THE YEAR TO 31 DECEMBER 2018	LOCATION		KEY ATTRIBUTES					OPERATIONAL STATUS	INVESTMENT	INVESTMENT DATE
		1	2	3	4	5	6
Cadent	U.K.						ü	Operational	c.£35-40 million	30 April 2018
Offenbach Police Centre	Germany	ü		ü	ü	ü	ü	Under construction	£1.6 million¹	26 July 2018

KNOWN/COMMITTED OPPORTUNITIES	LOCATION	ESTIMATED INVESTMENT	EXPECTED INVESTMENT PERIOD	INVESTMENT STATUS
Cadent	U.K.	c.£150-155 million¹	Operational business	Put/call option has been exercised, further investment expected at the end of June 2019
NDIF	U.K.	c.£30 million¹	Operational businesses	Of the £45 million commitment to NDIF, c.£15 million has been invested to 31 December 2018
Offenbach Police Headquarters	Germany	c.£8.8 million^{1, 2}	c.30 years	Investment commitment made. Expected to be funded mid-2021

SECTOR OF INVESTMENT OPPORTUNITY	LOCATION	ESTIMATED CAPITAL VALUE³	EXPECTED INVESTMENT LENGTH	INVESTMENT STATUS
Other, including regulated investments	U.K., Europe	c.£7.0 billion	Various, including operational businesses	Regulated opportunities at varying stages
OFTO	U.K.	c.£3.9 billion	c.20 years	Shortlisted on one OFTO
Education	U.K., Europe	c.£1.0 billion	Various	Opportunities through variations to existing PPP contracts and through the Investment Adviser's wider relationships
Health	Australia	c.£730 million	Various
Transport	Australia, Europe	c.£390 million	Various	Includes follow-on opportunities
Accommodation	U.K., Europe, U.S., Australia	c.£1.0 billion	Various	Variety of opportunities mainly PPP-style investments

ASSET	LOCATION	CONSTRUCTION COMPLETION DATE	DEFECTS COMPLETION DATE	STATUS	% OF FAIR VALUE OF INVESEMENT
Priority Schools Building Programme - Aggregator (batch 4)	U.K.	2019	2020	Outstanding construction works¹	0.4%
Tideway	U.K.	2024²	2027³	On Schedule	10.6%
Offenbach Police Headquarters	Germany	2021	2025	On Schedule	0.0%

SUMMARY OF CONSOLIDATED CASH FLOW	YEAR TO 31 DECEMEBER 2018 £ MILLION	YEAR TO 31 DECEMEBER 2017 £ MILLION
Opening cash balance	33.9	71.0
Cash from investments	138.8	118.9
Corporate costs (for ongoing charges ratio)	(24.5)	(21.5)
Other corporate costs	(0.1)	(3.3)
Net financing costs	(3.2)	(4.1)
Net operating cash flows before capital activity¹	111.0	90.0
Cost of new investments	(63.3)	(464.0)
Investment transaction costs	(1.2)	(7.0)
Net movement of corporate debt facility	(17.8)	17.8
Proceeds of capital raisings (net of costs)	114.9	404.4
Distributions paid	(92.8)	(76.2)
Funds advanced to affiliate entities	-	(2.1)
Net cash at period end	84.7	33.9
Cash dividend cover	1.2x	1.2x

CORPORATE COSTS	YEAR TO 31 DECEMBER 2018 £ MILLION	YEAR TO 31 DECEMBER 2017 £ MILLION
Management fees	(22.7)	(19.4)
Audit fees	(0.3)	(0.3)
Directors' fees	(0.4)	(0.3)
Other running costs	(1.1)	(1.5)
Corporate costs	(24.5)	(21.5)

ONGOING CHARGES RATIO	YEAR TO 31 DECEMBER 2018 £ MILLION	YEAR TO 31 DECEMBER 2017 £ MILLION
Annualised Ongoing Charges¹	(24.5)	(21.5)
Average NAV²	2,097.8	1,865.0
Ongoing Charges	(1.17%)	(1.15%)

<20 years	48%
20-30 years	26%
>30 years	26%

	31 DECEMBER 2018	31 DECEMBER 2017	MOVEMENT
Weighted Average Government Bond Yield - Portfolio	1.83%	1.83%	-
Weighted Average Investment Premium over Government Bond Yield - Portfolio	5.43%	5.69%	(0.26%)
Weighted Average Discount rate - Portfolio	7.26%	7.52%	(0.26%)
Weighted Average Discount rate - Risk Capital only¹	7.55%	7.87%	(0.32%)
NAV per share	148.1p	145.0p	3.1p

Mike Gerrard	John Le Poidevin
Chairman	Director
27 March 2019	27 March 2019

RISK				DESCRIPTION	MITIGATION/APPROACH
MACROECONOMIC RISKS
Inflation				Inflation may be higher or lower than expected. Investment cash flows are positively correlated to inflation therefore increases/decreases to inflation compared to current projections would impact positively or negatively on the Company's future projected cash inflows. Negative inflation (deflation) will reduce the Company's future cash flows in absolute terms. The Company's portfolio has been developed in anticipation of continued inflation at, or above, the levels used in the Company's valuation assumptions. Where inflation is at levels below the assumed levels, investment performance may be impaired. The level of inflation linkage across the investments held by the Company varies and is not consistent. Some investments have no inflation linkage, and some have a geared exposure to inflation. The consequences of higher or lower levels of inflation than that assumed by the Company will not be uniform across its portfolio. The Company is also exposed to the risk of changes to the manner in which inflation is calculated by the relevant authorities.	The Company monitors the effect of inflation on its portfolio through its biannual valuation process. It also provides sensitivities to investors indicating the projected impact on the Company's NAV of a number of alternative inflation scenarios, offering investors an ability to anticipate the likely effects alternative inflation scenarios may have on their investment. The Company uses a long-term view of inflation within its forecasts, benchmarked where possible to independent analysis.
			1
NO SIGNIFICANT CHANGE

Foreign Exchange Movements				The Company indirectly holds part of its investments in entities in jurisdictions with currencies other than sterling, but borrows corporate level debt, reports its NAV and pays dividends in sterling. Changes in the rates of foreign currency exchange are outside the Company's control and may impact positively or negatively on cash flows and valuation.	The Company uses forward foreign exchange contracts to mitigate the risk of short-term volatility in foreign exchange rates on investment returns from overseas investments. These may not be fully effective and rely on the strength of the counterparties to those contracts to be enforceable. The Company monitors the effect of foreign exchange on its portfolio through its biannual valuation process and reports this to investors. The Company also provides sensitivities to investors indicating the projected impact on the NAV of a limited number of alternative foreign exchange scenarios, offering investors an ability to anticipate the likely effects of some foreign exchange scenarios on their investment. We continue to be mindful of the potential for exchange rate volatility in light of international economic and political change, including during the U.K.'s withdrawal from the European Union. We note a devaluation of sterling against the main currencies (in which non-U.K. investments are made) would typically have a positive impact on NAV. The opposite would also be true for an increase in the value of sterling.
			2
NO SIGNIFICANT CHANGE

Interest Rates				Changes in market rates of interest can affect the Company in a variety of different ways: Valuation Discount Rate The Company, in valuing its investments, uses a discounted cash flow methodology. Changes in market rates of interest (particularly government bond yields) may directly impact the discount rate used to value the Company's future projected cash flows and thus its valuation. Higher rates will have a negative impact on valuation while lower rates will have a positive impact.	In determining the discount rates used to value its investments, the Company generally uses nominal government bond yields to which specific investment risk premia are added to determine discount rates. The investment risk premia may provide a buffer against rising bond yields assuming market demand for investment is sustained. Where the Company's cash investment inflows are linked to inflation, higher interest rates can often be precipitated by higher inflation expectations, and therefore any inflation linkage may partly mitigate the effect of interest rate changes.
		3
NO SIGNIFICANT CHANGE

				Corporate Debt Facility The Company has a corporate debt facility that may be drawn from time-to-time. Interest is charged on a floating rate basis, so higher than anticipated interest rates will increase the cost of this facility adversely impacting on cash flow and the Company's valuation.	In the event that the interest rate increases, the Company has the option of repaying its corporate debt facility at any time with minimal notice, providing sufficient funds are available.
				Underlying portfolio considerations Changes in interest rates have potential impacts on the portfolio at underlying investee entity level. Portfolio entities typically choose or can be required to hold various cash balances, including contingency reserves for future costs (such as major lifecycle maintenance or debt service reserves). These are generally held on interest bearing accounts and under the contractual terms applicable to certain investments which in many cases are projected to be held for the long-term. The Company assumes that it will earn interest on such deposits over the long-term. Changes in interest rates may mean that the actual interest receivable by the Company is different to that projected. If the Company receives less interest than it projects this will impact cash flows and NAV adversely. Certain assets within the portfolio contain refinancing assumptions. Increases in lending rates available to these projects would have the potential to increase their cost of financing and therefore impact the overall returns from these assets.		As presented in the sensitivity analysis, variations in cash deposit rates have little impact on the Company's NAV. Due to the spread of cash holdings within ring-fenced SPV structures and relatively smaller balances in the SPVs, it is not economically feasible to hedge against adverse deposit rate movements. The Company monitors the effect of historical and projected interest rates on its portfolio through its biannual valuation process and reports this to investors. It also provides sensitivities to investors indicating the projected impact on the Company's NAV of a limited number of alternative scenarios, offering investors an ability to anticipate the likely effects of some deposit interest rate scenarios on their investment. The risk of adverse movements in debt interest rates for unhedged debt within regulated entities is limited through protections provided by the regulatory regime.
	Tax and Accounting			Change in Tax Rates Headline rates of tax have tended to reduce in recent years, both in the U.K. and overseas jurisdictions in which the Company operates. However, there is a risk that this trend could be reversed if government or policy were to change in the future.		The Company incorporates changes in tax rates within its forecast cash flows and NAV once substantively enacted.
	4 NO SIGNIFICANT CHANGE
				Change in tax legislation Changes in tax legislation across the multiple jurisdictions in which the Company has investments can reduce returns impacting on the Company's future cash flow returns and hence valuation (calculated on a discounted cash flow basis). The OECD's Action Plan on Base Erosion and Profit Shifting ('BEPS'), published in 2013, seeks to address perceived flaws in international tax rules. It sets out 15 actions to counter BEPS in a comprehensive and coordinated way. Countries in which the Company invests have been assessing their compliance or otherwise with this guidance.		The diversified jurisdictional mix of the Company's investments may provide some mitigation to tax changes in any one jurisdiction. The Company believes it takes a cautious approach to tax planning. The Board monitors changes in tax legislation and takes advice as appropriate from external, independent, qualified advisers. While the Board and the Company's Investment Adviser seek to minimise the impact of adverse changes in tax requirements, its ability to do so is naturally limited. The Company's Investment Adviser continues to monitor developments relating to tax reform across the jurisdictions in which the Company has operations. Future legislation in response to the OECD proposals, or changes in approach to existing legislation as a consequence of market practice or updated guidance, continue to have the potential to negatively impact the Company.
				Accounting The Company and its portfolio of investments and holding entities form an international group structure. The Group uses long-term cash flow forecasts from its portfolio as part of its valuation process. These cash flow forecasts are dependent upon distribution profiles/cash tax profiles and therefore can fluctuate because of future changes in accounting standards, or challenges to accounting judgements. Therefore, future changes to accounting standards, or changes in interpretation and application of existing standards, have the potential to impact the distributable profits of entities in the portfolio and so the cash flows available to the Group and overall portfolio valuation.		A portion of the Company's income is received in the form of shareholder debt interest income i.e. from pre-tax cash flows and not constrained by distributable profits tests. However, changes in accounting standards or challenges to accounting judgements can potentially have an impact on distributable profits or post-tax cash flows.
	POLITICAL AND REGULATORY RISKS
				The nature of the businesses in which the Company invests exposes it to potential changes in policy and legal requirements. All investments have a public sector infrastructure service aspect and are exposed to political scrutiny and the potential for adverse public sector or political criticism.		Most of the Company's existing investments benefit from long-term service and asset availability-based pricing contracts or regulatory frameworks and the countries in which the Company operates do not tend to have a tradition of penal retrospective legislation. They tend to be long-term supporters of infrastructure and similar investment and recognise the risk of deterring future investment in the event that penal or disproportionate steps are taken in respect of existing contractual engagements.

INCREASE	Risk exposure has increased in the period
DECREASE	Risk exposure has reduced in the period
NO SIGNIFICANT CHANGE	No significant change in risk exposure since last reporting period

Political Policy			Change in political policy Political policy and financing decisions may adversely impact either on existing investments, or on the Company's ability to source new investments, at attractive prices or at all. This may impact the Company's reputation. A certain degree of reputational risk exists in this area as policy decisions adversely impacting the Company have the potential to be made as a direct or indirect result of reputational developments seen across the wider sector.	Current global policy practice continues to support the use of private sector capital to finance public infrastructure, despite challenge from some political parties, particularly in the U.K., around the role of the private sector in the provision of such services. The Company seeks to maintain strong and positive relationships with its public sector clients where possible. It also has an active relationship with other external stakeholders including investors.
	5
NO SIGNIFICANT CHANGE
			Termination of Contracts Often contracts between public sector bodies and the Company's investment entities contain rights for the public sector to voluntarily terminate contracts in certain situations. While the contracts typically provide for some compensation in such cases, this may be less than required to sustain the Company's valuation, causing loss of value. There have been instances of contracts being voluntarily terminated in the U.K. (although not affecting the Company).	The Company engages with its public sector clients in developing cost-saving initiatives and seeks to act as a 'good partner' including by focusing on the ESG aspects of its investments. None of the Company's investments have been identified, by any government audit or public sector report, as poor value for money or not in the public interest. The Investment Adviser is a signatory to the Code of Conduct for Operational PFI/PPP contracts in the U.K. The voluntary code of conduct sets out the basis on which public and private sector partners agree to work together to make savings in operational PPP contracts. Compensation on termination clauses within such contracts serve to partially mitigate the risk of voluntary termination. Furthermore, in the current financial climate where voluntary termination leads to a requirement to pay compensation, such compensation is likely, in many cases to represent an unattractive immediate call on the public finances for the public sector. Regarding the U.K.'s planned withdrawal from the E.U., there are no specific 'Brexit' termination clauses in the Company's underlying project contracts.
Law and regulation 6 NO SIGNIFICANT CHANGE			Change in Law/Regulation Changes in law or regulation may increase costs of operating and maintaining facilities or impose other costs or obligations that indirectly adversely affect the Company's cash flow from its investments and/or valuation of them.	Some investments maintain a reserve or contingency designed to meet change in law costs and/or have a mechanism to allow some change in law costs (typically building maintenance related) to be passed back to the public sector. There remains the possibility for there to be changes in law or regulation as a result of Brexit which have the potential to impact costs or obligations of the Company or portfolio projects, which may not be fully capable of mitigation.
			Regulatory requirements The Company is subject to changes in regulatory requirements that relate to its business and that of its Investment Adviser (both in terms of its investments and in terms of itself). It is supervised by the Guernsey Financial Services Commission and is required to comply with the U.K. Listing Rules applicable to 'Premium' listings. The Investment Adviser is regulated by the Financial Conduct Authority in the U.K. in accordance with the Financial Services and Markets Act 2000.	The Company and its Investment Adviser monitor regulatory developments and seek independent professional advice in order to manage compliance with changing regulatory requirements. It is unclear currently what impact, if any, Brexit will have on regulatory requirements, however as the Company is a Guernsey-based, self-managed AIF, there is not expected to be a direct impact on the Company's regulatory status or its existing ability to raise capital.
OPERATIONAL AND VALUATION RISKS
Asset Performance			Construction For the Company's assets under construction, there is an element of construction risk that takes the form of cost overruns that could impact on project returns. Operational Performance Assets in the portfolio contain revenues which are based on the availability of the asset, as well as revenues not solely dependent on availability but also have linkage to other factors including being subject to regulatory frameworks. The entitlement of the Company's PPP and OFTO investments to receive revenues is generally dependent on underlying physical assets remaining available for use and continuing to meet certain performance standards. Failure to maintain assets available for use or operating in accordance with pre-determined performance standards may dis-entitle (wholly or partially) the continued receipt of income that the Company has projected to receive. Certain assets in the portfolio which contain revenue streams that are not solely based on availability of the asset may include linkage to other factors or are subject to the regulatory regime		Contractual mechanisms allow for significant pass-down of construction cost overrun risk to sub-contractors or consumers, subject to credit risk (see below). The Board reviews underlying investment performance of each investment, quarterly, allowing asset performance to be monitored in close to real time. Historically, the Company has seen very high levels of asset performance, which suggests a positive trend for the future. For regulated assets, the regulatory regimes under which the assets operate provide a level of protection of cash flows for these assets. Contractual mechanisms and underlying regulatory frameworks also allow for significant pass-down of unavailability and performance risk to sub-contractors in many cases, subject to credit risk (see overleaf).
		7
NO SIGNIFICANT CHANGE

			Termination In serious cases where the terms of the underlying contract with the public sector are breached due to default or force majeure then that contract can usually be terminated without compensation. Failure to receive the amount of revenue projected or termination of a contract will have a consequential impact on the Company's cash flow and value.		In the event of significant and continuing unavailability across the Company's portfolio, it is able to terminate the Investment Advisory Agreement. This serves to reinforce alignment of interest between the Company and the Investment Adviser. The risk of termination of contracts as a result of political policy is addressed in risk five above.

Counterparty Risk		The Company's investments are dependent on the performance of a series of counterparties to contracts including public sector bodies, consortium partners, construction contractors, facilities management and maintenance contractors, asset and investment managers (including the Investment Adviser), banks and lending institutions and others. Failure by one or more of these counterparties to perform their obligations fully or as anticipated could adversely affect the performance of affected investments. There may be disruption or delay to the services provided to investments, or replacement counterparties (where they can be obtained) may only be obtained at a greater cost. These risks would negatively impact the Company's cash flows and valuation. Over recent years there has been particular pressure on construction and facilities management firms operating across the sector, particularly within the U.K. Where borrowings exist in respect of INPP's investments, interest rates are generally fixed through the use of interest rate swaps. INPP is therefore exposed if the counterparties of these swaps were to default or the swaps otherwise become ineffective.	The Company has a broad range of suppliers and believes that supplier counterparty risk is diversified across its investments. All contracts include the provision of a security package from counterparties to mitigate the impact of supplier failure. In addition, generally payments are made in arrears to service providers giving the Company some protection against failures in performance. The credit quality of supplier counterparties is reviewed as part of the Company's due diligence at the time of making its investments and for key supplies on a regular basis. Most of the services provided to the Company's investments are reasonably established with competing providers. Therefore, there are expectations that there will be a pool of potential replacement supplier counterparties in the event that a service counterparty fails, albeit not necessarily at the same cost. Early 2018 saw the collapse of Carillion plc. Facilities management services were provided by Carillion FM to projects making up approximately 3% (by fair value at the valuation date immediately preceding the collapse of Carillion) of the Company's portfolio. The Investment Adviser had been monitoring the issues affecting Carillion plc for some time and had developed contingency plans accordingly. The impact of transitioning projects to alternative service providers, including transaction costs, is expected to be immaterial (see pages 21-22). In addition, in early 2019 Interserve Plc entered administration and the sale of its business and assets to a newly incorporated company (Interserve Group Limited) controlled by its lenders completed immediately afterwards. Interserve Integrated Services Ltd provides facilities management services to c.6% of the Company's portfolio (by fair value). The Company has been monitoring the issues affecting Interserve Plc and has developed contingency plans. All the facilities that have been affected are currently operational with no disruption to service delivery. At this time, it is not believed that the administration of Interserve Plc will adversely impact the Company's valuation (see page 22). The Company continues to monitor the risk of any additional developments occurring in this space relating to its other significant counterparties. The credit risk of such swap counterparties is considered at the time of entering into these arrangements and is regularly reviewed. However, there is a risk of credit deterioration which could impact affected investments.
	8
NO SIGNIFICANT CHANGE

Physical Asset Risk		The Company indirectly invests in physical assets used by the public and thus is exposed to possible risks, both reputational and legal, in the event of damage or destruction to such assets and their users, including loss of life, personal injury and property damage. While the assets the Company invests in benefit from insurance policies, these may not be effective in all cases.	The Company's investments benefit from regular risk reviews and external insurance advice which is intended to ensure that those assets continue to benefit from insurance cover that is standard for such assets.
	9
NO SIGNIFICANT CHANGE

Contract Risk		The performance of the Company's investments is dependent on the complex set of contractual arrangements specific to each investment continuing to operate as intended. The Company is exposed to the risk that such contracts do not operate as intended, are incomplete, contain unanticipated liabilities, are subject to interpretation contrary to its expectations or otherwise fail to provide the protection or recourse anticipated.	Such contracts have been entered into, usually, only after lengthy negotiations and with the benefit of external legal advice. A legal review of contract documentation is undertaken as part of the Company's due diligence at the time of making new investments. See Political Policy on page 45 for further commentary on contractual risk of voluntary termination.
	10
NO SIGNIFICANT CHANGE

Financial Forecasts		The Company's projections depend on the use of financial models to calculate its future projected investment returns. These are in turn dependent on the outputs from other financial model forecasts at the underlying investment entity level. There may be errors in any of these financial models, including calculation errors, incorrect assumptions, programming, logic or formulaic errors and output errors. Once corrected, such errors may lead to a revision in projected cash flows and thus impact valuation. Recent investments in operating infrastructure businesses that can result in more variability in performance than contracted concessions special purpose companies, are inherently more difficult to forecast accurately given the wider range of variables that apply.	Financial forecasts are generally subject to model audit by external accountancy firms, which is a process designed to identify errors. The comparison of past actual performance of investments against past projected performance also gives confidence in financial models where actual performance has closely matched projected performance. However, there can be no assurance that forecast results will be realised, particularly in relation to operational infrastructure businesses where more variables can impact forecast results. Investments in regulated business are considered very long-term, beyond the much shorter regulatory cycles. Valuations of such business should take into account robustness of yield and potential for increases in regulated asset base over time.
	11
increase Recent investment opportunities have been seen more in operating infrastructure businesses that exhibit greater variability to assumptions around growth, refinancing and/or allowed returns

		Sensitivities The Company publishes information relating to its portfolio including projections of how portfolio performance and valuation might be impacted by changes in various factors e.g. interest rates, inflation, deposit rates, etc. The sensitivity analysis and projections are not forecasts and actual performance is likely to differ (possibly significantly) from that projection as in practice the impact of changes to such factors will be unlikely to apply evenly across the portfolio or in isolation from other factors.	Sensitivities are produced for the information of investors and are accompanied by disclaimers and guidance explaining that limited reliance can be placed upon them.

POSITION	2019 FEE P.A. £	2018 FEE P.A. £
Board Chair	85,000	67,500
Audit and Risk Committee Chair	58,000	55,000
Senior Independent Director	47,000	43,000
Risk Sub-Committee Chair	47,000	43,000
Management Engagement Committee Chair	47,000	43,000
Nomination & Remuneration Committee Chair	47,000	43,000
Director (Independent and Non-Independent)	45,000	43,000

DIRECTOR	2018 FEES PAID £	2017 FEES PAID £
Mike Gerrard²	21,683	-
Julia Bond³	43,000	14,333
John Le Poidevin⁴	46,000	53,000
John Stares⁵	43,000	53,000
Claire Whittet	43,000	53,000
John Whittle⁶	49,000	65,000
Giles Frost⁷	43,000	53,000
Rupert Dorey⁸	67,500	77,500

DIRECTOR	31 DECEMBER 2018 NUMBER OF ORDINARY SHARES¹	31 DECEMBER 2017 NUMBER OF ORDINARY SHARES¹
Mike Gerrard²	55,739	-
Julia Bond	14,020	-
John Le Poidevin	97,883	65,333
John Stares	75,000	75,000
Claire Whittet³	69,602	68,017
John Whittle⁴	58,864	58,864
Giles Frost	893,797	880,313
Rupert Dorey⁵	1,037,614	1,037,614

DIRECTORS	QUARTERLY BOARD	AUDIT AND RISK COMMITTEE	INVESTMENT COMMITTEE	MANAGEMENT ENGAGEMENT COMMITTEE	NOMINATION AND REMUNERATION COMMITTEE
Maximum number	4	5	1	1	2
Mike Gerrard²	2	N/A	N/A	1	1
Julia Bond	4	4	-	1	1
John Le Poidevin	4	5	1	1	2
John Stares	4	5	1	1	2
Claire Whittet	4	5	1	1	2
John Whittle	4	5	1	1	2
Giles Frost³	4	N/A	N/A	N/A	N/A
Rupert Dorey	4	5	1	1	2

NAME OF HOLDER	% ISSUED CAPITAL	NO. OF ORDINARY SHARES	DATE NOTIFIED
Investec Wealth & Investment Ltd	12.00%	168,673,159	5 September 2018
Schroders plc	6.66%	93,679,484	27 September 2018

Risk	Misstatement or manipulation of investment fair value £2,097 million (2017: £2,005 million) Investments comprise a portfolio of assets measured at fair value through profit or loss. The fair values of these investments 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, the 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 11 of the financial statements and are discussed in the strategic report - 'Operating Review' and 'Risk Management' sections. The valuation risk includes the risk of an inappropriate valuation model being applied, the risk of manipulation or error in both the assumptions applied and the amount and timing of expected cash flows.
Our response to the risk	Test of Controls: We have tested the effectiveness of controls in operation over investment acquisitions, forecasting cashflows, distributions and model integrity and we have placed reliance on control over these processes. Verification of existence and ownership of Investments: We have tested, on a sample basis, the ownership of investments to ensure the Group is entitled to distributions from the investments. Valuation assumptions: We have been supported in our testing of macroeconomic inputs and discount rates by specialists from our EY Valuation & Business Modelling (EYVBM) team. We selected a sample of investments that cover specific risks identified. The following procedures were performed: Macroeconomic Inputs: We tested that the macroeconomic inputs (inflation rates, foreign exchange rates, deposit rates and tax rates) reviewed by our EYVBM team were applied consistently and accurately in the selected models. Discount Rates: We engaged our EYVBM specialists to test the discount rates used in the selected models. Model integrity: We reviewed management controls including management's use of third-party audits of the initial model and analysis of yields. We engaged our EYVBM specialists to test the year-on-year changes to the logical operation on selected models. Model inputs: We agreed a sample of contractual cash flows to contractual terms and actual cash flows. We engaged KPMG to perform this work for a part of our sample as they are the auditors of some of the underlying unconsolidated subsidiaries which hold the investments selected for testing. We engaged EYVBM specialists to assess the assumptions used to determine the underlying variable cash flows which require significant judgement. Their assessment was based on a combination of market data and experience of valuing other similar investments. We performed the following procedures across the whole portfolio: - We reviewed the changes in discount rate of the assets in the Company's portfolio by analysing the components of the discount rate build up approach adopted by management. Any material movements in the components were discussed with management and explanations obtained were corroborated with appropriate evidence - For a sample of investments, we tested that the macro-economic inputs (inflation rates, foreign exchange rates, deposit rates and tax rates) reviewed by our EYVBM team were applied consistently and accurately - We have performed a detailed analytical review based on year-on-year movement on each investment and validating significant variances from expectation - We tested the historical accuracy of forecasting by comparing the historical forecast distributions from the projects to the actual distributions - We tested all acquisitions during the year. There were no disposals during the year. Market Review: We engaged EYVBM specialists to provide benchmarking information on the variable components e.g. inflation rates, risk free rates, deposit rates etc.
Key Observations communicated to the Audit Committee	We confirmed that there were no material matters arising from our audit work that we wanted to bring to the attention of the Audit Committee. We confirmed that the valuation of the investments is fairly stated and was in line with IFRS as adopted by the European Union.
Risk	Income recognition Income primarily comprises of the dividend and interest income stream generated by the investments held in underlying subsidiaries. Management may seek to overstate income as a result of seeking to report the desired level of return to investors.
Our response to the risk	We updated our understanding of the Group's processes and policies for income recognition including our understanding of the systems and controls implemented. We reviewed minutes of all board meetings during the year to ensure dividends declared have been recognised. We agreed a representative sample of dividend and interest receipts to documentation from unconsolidated subsidiaries and we checked the calculation of interest amounts and the allocation thereof to the appropriate period. We have performed cut off and completeness testing to conclude on accuracy.
Key Observations communicated to the Audit Committee	We confirmed that there were no matters to bring to the attention of the Audit Committee.

Full Year Results for the 12 Months to 31 Dec 2018

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	Notes	Year ended 31 December 2018 £'000s		Year ended 31 December 2017 £'000s
Interest income	4	71,201		69,356
Dividend income	4	32,018		20,655
Net change in investments at fair value through profit or loss	4	63,826		49,808
Total investment income		167,045		139,819
Other operating income	5	622		588
Total income		167,667		140,407

Management costs	17	(22,798)		(20,637)
Administrative costs		(1,520)		(1,700)
Transaction costs	6, 17	(957)		(6,835)
Directors' fees		(359)		(316)
Total expenses		(25,634)		(29,488)
Profit before finance costs and tax		142,033		110,919

Finance costs	8	(3,944)		(4,534)
Profit before tax		138,089		106,385

Tax credit	9	280		114
Profit for the year		138,369		106,499

Earnings per share
From continuing operations
Basic and diluted (pence)	10	9.75	8.36

	NOTES	SHARE CAPITAL	OTHER DISTRIBUTABLE RESERVE	RETAINED EARNINGS	TOTAL
		£'000s	£'000s	£'000s	£'000s
Balance at 31 December 2017		1,441,048	182,481	414,769	2,038,298

Total comprehensive income		-	-	138,369	138,369

Issue of Ordinary shares	15	120,270	-	-	120,270
Issue costs applied to new shares	15	(1,075)	-	-	(1,075)
Distributions in the year	15	-	-	(97,115)	(97,115)
Balance at 31 December 2018		1,560,243	182,481	456,023	2,198,747

	NOTES	31 DECEMBER 2018 £'000S	31 DECEMBER 2017 £'000S
Non-current assets
Investments at fair value through profit or loss	11	2,097,468	2,005,292
Total non-current assets		2,097,468	2,005,292
Current assets
Financial assets at amortised cost	11,13	25,234	26,963
Cash and cash equivalents	11	84,718	33,850
Total current assets		109,952	60,813
Total assets		2,207,420	2,066,105

Current liabilities
Trade and other payables	11,14	8,366	8,303
Derivative financial instruments	11	307	1,704
Total current liabilities		8,673	10,007
Non-current liabilities
Bank loans	8, 11	-	17,800
Total non-current liabilities		-	17,800
Total liabilities		8,673	27,807
Net assets		2,198,747	2,038,298

Equity
Share capital	15	1,560,243	1,441,048
Other distributable reserve	15	182,481	182,481
Retained earnings	15	456,023	414,769
Equity attributable to equity holders of the parent		2,198,747	2,038,298
Net assets per share (pence per share)	16	148.1	145.0

					Year ended 31 December 2018
			U.K. £'000s	Europe (EXCL. U.K.) £'000s			North America £'000s		Australia £'000s		Total £'000s
	Segmental results
	Dividend and interest income		76,463	6,907			8,521		11,328		103,219
	Fair value gain on investments¹		30,184	23,485			6,298		3,859		63,826
	Total investment income		106,647	30,392			14,819		15,187		167,045
	Reporting segment profit²		77,348	30,887			14,570		15,564		138,369
	Segmental financial position
	Investments at fair value		1,496,423	290,406			103,767		206,872		2,097,468
	Current assets		109,952	-			-		-		109,952
	Total assets		1,606,375	290,406			103,767		206,872		2,207,420
	Total liabilities		(8,673)	-			-		-		(8,673)
	Net assets		1,597,702	290,406			103,767		206,872		2,198,747
					Year ended 31 December 2017
		U.K. £'000s				Europe (EXCL. U.K.) £'000s		North America £'000s		Australia £'000s		Total £'000s
Segmental results
Dividend and interest income		69,396				7,759		8,675		4,181		90,011
Fair value gain/(loss) on investments		15,134				31,043		(1,643)		5,274		49,808
Total investment income		84,530				38,802		7,032		9,455		139,819
Reporting segment profit²		50,621				38,855		7,393		9,630		106,499
Segmental financial position
Investments at fair value		1,421,619				277,489		98,349		207,835		2,005,292
Current assets		60,813				-		-		-		60,813
Total assets		1,482,432				277,489		98,349		207,835		2,066,105
Total liabilities		(27,807)				-		-		-		(27,807)
Net assets		1,454,625				277,489		98,349		207,835		2,038,298

	Year ended 31 December 2018 £'000s	Year ended 31 December 2017 £'000s
Interest income
Interest on investments	71,201	69,351
Interest on bank deposits	-	5
Total interest income	71,201	69,356

Dividend income	32,018	20,655
Net change in fair value of investments at fair value through profit or loss	63,826	49,808
Total investment income	167,045	139,819

	Year ended 31 December 2018 £'000s	Year ended 31 December 2017 £'000s

Fair value gain on foreign exchange contracts	1,397	2,923
Other losses on foreign exchange movements	(775)	(2,335)
Total other operating income	622	588

	Year ended 31 December 2018 £'000s	Year ended 31 December 2017 £'000s
Investment advisory costs	935	6,835
Legal and professional costs	22	-
Total transaction costs	957	6,835

	Year ended 31 December 2018 £'000s	Year ended 31 December 2017 £'000s
Fees payable to the Group's auditor for the audit of the Group's financial statements	304	306

Fees payable to the Group's auditor and their associates for other services to the Group
- The audit of the Group's consolidated subsidiaries	46	42
- The audit of the Group's unconsolidated subsidiaries	111	329
Total audit fees	461	677
Other fees
- Audit related assurance services	11	10
- Other services	42	202
Total non-audit fees	53	212

	Year ended 31 December 2018 £'000s	Year ended 31 December 2017 £'000s
Current tax:
U.K. corporation tax credit - current year	(412)	(694)
U.K. corporation tax - prior year	-	399
Other overseas tax - current year	82	181
Other overseas tax - prior year	50	-
Tax credit for the year	(280)	(114)

	Year ended 31 December 2018 £'000s	Year ended 31 December 2017 £'000s
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the parent	138,369	106,499
	Number	Number
Weighted average number of Ordinary shares for the purposes of basic and diluted earnings per share	1,418,962,119	1,273,495,032
Basic and diluted (pence)	9.75	8.36