REG - 3i Infrastructure - Half-yearly report 2017 <Origin Href="QuoteRef">3IN.L</Origin> - Part 3
09/11/2017 07:07
- Part 3: For the preceding part double click ID:nRSI9867Vb
1,656.9 187.5 41.2 20.0 1,905.6
Liabilities (65.3) (0.5) - (105.2) (171.0)
Net assets 1,591.6 187.0 41.2 (85.2) 1,734.6
The following is an analysis of the Group's investment return, profit before
tax, assets, liabilities and net assets by geography for the six months to 30
September 2017:
UK and Continental
For the six months to 30 September 2017 Ireland1 Europe2 Asia Total
(unaudited) £m £m £m £m
Investment return 31.7 125.0 (2.5) 154.2
Profit/(loss) before tax 18.0 105.3 (2.5) 120.8
For the six months to 30 September 2016 (unaudited)
Investment return 28.7 120.8 (0.7) 148.8
Profit/(loss) before tax 17.3 57.2 (0.7) 73.8
As at 30 September 2017
(unaudited)
Assets 848.0 1,093.6 38.5 1,980.1
Liabilities (90.8) (72.6) - (163.4)
Net assets 757.2 1,021.0 38.5 1,816.7
As at 31 March 2017 (unaudited)
Assets 848.8 1,015.6 41.2 1,905.6
Liabilities (105.4) (65.6) - (171.0)
Net assets 743.4 950.0 41.2 1,734.6
1 Including Channel Islands. All centrally incurred costs have been deemed to be incurred in the UK and Ireland while recognising these costs support allocations across geographies.
2 Continental Europe includes all returns generated from and investment portfolio value relating to the Group's investments in Oiltanking, including those derived from its underlying business in Singapore.
The Group generated 20.6% (September 2016: 19.3%) of its investment return in
the period from investments held in the UK and Ireland, 81.0% (September 2016:
81.2%) of its investment return from investments held in continental Europe
and (1.6)% (September 2016: (0.5)%) from its investments held in Asia. During
the period, the Group generated 97.1% (September 2016: 95.6%) of its
investment return from investments in Economic Infrastructure businesses, 4.5%
(September 2016: 3.6%) from investments in Projects and (1.6)% (September
2016: (0.5)%) from its investment in the India Fund. Given the nature of the
Group's operations, the Group is not considered to be exposed to any
operational seasonality or cyclicality that would impact the financial results
of the Group during the period or the financial position of the Group at 30
September 2017.
2 Advisory and performance fees payable
Six months to Six months to
30 September 30 September
2017 2016
(unaudited) (unaudited)
£m £m
Advisory fee payable directly from the Company 10.3 8.9
Performance fee - -
10.3 8.9
Total advisory and performance fees payable by the Company for the period to
30 September 2017 were £10.3 million (September 2016: £8.9 million). In
addition to the fees described above, management fees of £2.4 million
(September 2016: £2.2 million) were paid to 3i plc from unconsolidated
subsidiary entities. Note 9 provides further details on the calculation of
the advisory fee, performance fee and management fees.
3 Income taxes
Profits arising from the operations of the Company are subject to tax at the
standard corporate income tax rate in Jersey of 0% (September 2016: 0%). The
subsidiary of the Company has provided for taxation at the appropriate rates
that are applicable in the country in which the subsidiary operates. The
returns of the subsidiary are largely not subject to tax.
4 Investments at fair value through profit or loss and financial instruments
All financial instruments for which fair value is recognised or disclosed are
categorised within the fair value hierarchy, described as follows, based on
the lowest level input that is significant to the fair value measurement as a
whole:
Level Fair value input description Financial instruments
Level 1 Quoted prices (unadjusted and in active markets) Quoted equity investments
Level 2 Inputs other than quoted prices included in Level 1 that are observable in the market either directly (ie as prices) or indirectly (ie derived from prices) Derivative financial instruments held at fair value
Level 3 Inputs that are not based on observable market data Unquoted investments and unlisted funds
For assets and liabilities that are recognised in the financial statements on
a recurring basis, the Group determines whether transfers have occurred
between levels in the hierarchy by re-assessing the categorisation (based on
the lowest level input that is significant to the fair value measurement as a
whole) for each reporting period.
At 30 September 2017, the Group held the following classes of financial
instruments that are measured at fair value. For all other assets and
liabilities, their carrying value approximates to fair value. During the
period ended
30 September 2017, there were no transfers of financial instruments between
levels of the fair value hierarchy (March 2017: nil).
Financial instruments classification
As at 30 September 2017
(unaudited)
Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets
Investments at fair value through profit or loss - - 1,909.2 1,909.2
Derivative financial instruments - 3.6 - 3.6
- 3.6 1,909.2 1,912.8
Financial liabilities
Derivative financial instruments - (67.6) - (67.6)
As at 31 March 2017
(audited)
Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets
Investments at fair value through profit or loss - - 1,815.6 1,815.6
Derivative financial instruments - 5.7 - 5.7
- 5.7 1,815.6 1,821.3
Financial liabilities
Derivative financial instruments - (61.8) - (61.8)
Reconciliation of financial instruments categorised within Level 3 of fair
value hierarchy
As at 30 September 2017
(unaudited)
Level 3 fair value reconciliation £m
Opening fair value 1,815.6
Additions 16.9
Disposal proceeds and repayment (33.1)
Fair value movement (including exchange movements) 109.8
Closing fair value 1,909.2
As at 31 March 2017
(audited)
Level 3 fair value reconciliation £m
Opening fair value 1,228.8
Additions 469.2
Disposal proceeds and repayment (33.0)
Fair value movement (including exchange movements) 150.6
Closing fair value 1,815.6
All unrealised movements on investments and foreign exchange movements are
recognised in profit or loss in the consolidated statement of comprehensive
income during the period and are attributable to investments held at the end
of the period.
The holding period of the investments in the portfolio is expected to be
greater than one year. Therefore, investments are classified as non-current
unless there is an agreement to dispose of the investment within one year and
all relevant regulatory approvals have been received. It is not possible to
identify with certainty where any investments may be sold within one year.
Unquoted investments
The Group invests in private companies which are not quoted on an active
market. These are measured in accordance with the International Private
Equity Valuation guidelines with reference to the most appropriate information
available at the time of measurement. Further information regarding the
valuation of unquoted investments can be found in the Portfolio valuation
methodology section.
The Group's policy is to fair value both the equity and debt investments in
infrastructure assets together where they will be managed and valued as a
single investment, were invested at the same time and cannot be realised
separately. As at 30 September 2017, the fair value of unquoted investments
was £1,883.4 million (March 2017: £1,788.3 million). Individual portfolio
asset valuations are shown within the Portfolio summary.
The majority of the assets held within Level 3 are valued on a discounted cash
flow basis, hence, the valuations are sensitive to the discount rate assumed
in the valuation of each asset. Other significant unobservable inputs include
the long-term inflation rate assumption and interest rates assumption used to
project the future cash flows.
A discussion of discount rates applied can be found in the Summary of
portfolio valuation methodology. Increasing the discount rate used in the
valuation of each asset by 1% would reduce the value of the portfolio by
£179.4 million (March 2017: £167.4 million). Decreasing the discount rate
used in the valuation of each asset by 1% would increase the value of the
portfolio by £215.3 million (March 2017: £200.1 million).
The majority of assets held within Level 3 have revenues that are linked,
partially linked or in some way correlated to inflation. The long-term
inflation rate assumptions for the country of domicile of the investments in
the portfolio range from 5.0% (India) (March 2017: 5.0%) to 2.0% (Finland)
(March 2017: 2.0%) but with the majority at 2.5% (UK RPI) (March 2017: 2.5%).
Changing the inflation rate assumption may result in consequential changes to
other assumptions used in the valuation of each asset. The impact of
increasing the inflation rate assumption by 1% for the next two years would
increase the value of the portfolio by £41.8 million (March 2017: £41.3
million). Decreasing the inflation rate assumption used in the valuation of
each asset by 1% for the next two years would decrease the value of the
portfolio by £38.6 million (March 2017: £40.9 million).
The valuations are sensitive to changes in interest rates, which may result
from: (i) unhedged existing borrowings within portfolio companies; (ii)
interest rates on uncommitted future borrowings assumed within the asset
valuations; and (iii) cash deposits held by portfolio companies. These
comprise a wide range of interest rates from short-term deposit rates to
longer-term borrowing rates across a broad range of debt products. Increasing
the cost of borrowing assumption for unhedged borrowings and any future
uncommitted borrowing and the cash deposit rates used in the valuation of each
asset by 1% would reduce the value of the portfolio by £121.1 million (March
2017: £111.6 million). Decreasing the interest rate assumption used in the
valuation of each asset by 1% would increase the value of the portfolio by
£120.4 million (March 2017: £114.0 million). This calculation does not take
account of any offsetting variances which may be expected to prevail if
interest rates changed; the most significant impact would be in the portfolio
assets with regulated returns where the future allowed return may also be
influenced by the interest rate.
Unlisted fund
The Company invests in one externally managed fund, the Dalmore Capital Fund,
which is not quoted in an active market. The Company considered the valuation
techniques and inputs used in valuing this fund to ensure they are reasonable
and appropriate and therefore the NAV of this fund may be used as an input
into measuring its fair value. In measuring this fair value, the NAV of the
fund is adjusted, as necessary, to reflect restrictions on redemptions, future
commitments, illiquid nature of the investments and other specific factors of
the fund and fund manager. The Company classifies the fair value of this
investment as Level 3. As at 30 September 2017, the fair value of unlisted
funds was £18.5 million (March 2017: £17.6 million). The fund NAV reflects a
30 September 2017 valuation date (2017: 31 March 2017 valuation date). A 10%
adjustment in the fair value of the fund would result in a £1.8 million (March
2017: £1.8 million) change in the valuation.
Intermediate holding companies
The Company invests in a number of intermediate holding companies that are
used to hold the unquoted investments, valued as referred to above. All other
assets and liabilities of the intermediate holding companies are held either
at fair value or at a reasonable approximation to fair value. The fair value
of these intermediate holding companies therefore approximates to their NAV
and the Company classifies the fair value as Level 3. As at 30 September
2017, the fair value of the other assets and liabilities within these
intermediate holding companies was £7.3 million
(March 2017: £9.7 million).
Over-the-counter derivatives
The Company uses over-the-counter foreign currency derivatives and interest
rate swaps to hedge foreign currency movements and interest rates
respectively. The derivatives are held at fair value which represents the
replacement cost of the instruments at the balance sheet date. The valuation
technique incorporates various inputs including foreign exchange spot and
forward rates, interest rate curves, and uses present value calculations. For
these financial instruments, significant inputs into models are market
observable and are included within Level 2.
Valuation process for Level 3 valuations
Valuations are the responsibility of the Board of Directors of the Company.
The valuation of unquoted investments, debt and unlisted funds held by the
Group is performed on a half-yearly basis by the valuation team of the
Investment Adviser and reviewed by the Investment Committee of the Investment
Adviser. The valuations are also subject to quality assurance procedures
performed within the valuation team. The valuation team verifies the major
inputs applied in the latest valuation by agreeing the information in the
valuation computation to relevant documents and market information. On a
half-yearly basis, the Investment Committee presents the valuations to the
Board. This includes a discussion of the major assumptions used in the
valuations, with an emphasis on the more significant investments and
investments with significant fair value changes. The Investment Committee
considers the appropriateness of the valuation methods and inputs, and may
request that alternative valuation methods are applied to support the
valuation arising from the method chosen. Any changes in valuation methods
are discussed and agreed with the Audit and Risk Committee before being
approved by the Board.
5 Issued capital
The Company is authorised to issue an unlimited number of shares with no fixed
par value (March 2017: same).
As at 30 September 2017 As at 31 March 2017
(unaudited) (audited)
Number £m Number £m
Issued and fully paid
Opening balance 1,026,549,746 1,272.8 793,216,413 887.8
Issued as part of open offer and placing - - 233,333,333 385.0
Closing balance 1,026,549,746 1,272.8 1,026,549,746 1,272.8
Aggregate issue costs of £13.1 million arising from IPO and subsequent share
issues were offset against the stated capital account in previous years. In
addition, the stated capital account was reduced by Court order on 20 December
2007 with an amount of £693.1 million transferred to a new, distributable
reserve which has been combined with retained reserves in these accounts.
In the prior year, the Company issued a further 233.3 million shares further
to an open offer and placing at an issue price of 165.0 pence per share or an
aggregate amount of £385.0 million. Issue costs of £6.2 million arising from
this offer were offset against the stated capital account. As at 30 September
2017, the residual value on the stated capital account was £560.4 million.
6 Per share information
The earnings and net assets per share attributable to the equity holders of
the Company are based on the following data:
Six months to Six months to
30 September 30 September
2017 2016
(unaudited) (unaudited)
Earnings per share (pence)
Basic and diluted 11.8 7.9
Earnings (£m)
Profit after tax for the period 120.8 73.8
Number of shares (million)
Weighted average number of shares in issue 1,026.5 936.0
As at As at
30 September 31 March
2017 2017
(unaudited) (audited)
Net assets per share (pence)
Basic and diluted 177.0 169.0
Net assets (£m)
Net assets 1,816.7 1,734.6
7 Dividends
As at 30 September 2017 As at 30 September 2016
(unaudited) (unaudited)
Declared and paid during pence pence
the period per share £m per share £m
Prior year final dividend paid on ordinary shares 3.775 38.7 3.625 28.7
3.775 38.7 3.625 28.7
The Company proposes paying an interim dividend of 3.925 pence per share
(September 2016: 3.775 pence) which will be payable to those shareholders that
are on the register on 24 November 2017. On the basis of the shares in issue
at 30 September 2017, this would equate to a total interim dividend of £40.3
million (September 2016: £38.7 million).
8 Contingent liabilities
As at 30 September 2017, the Company had issued E35.5 million (re-translated
£31.2 million) in the form of letters of credit, drawn against the Revolving
Credit Facility, for the investments into the A27/A1, RIVM, La Santé, Hart Van
Zuid and Condorcet PPP projects (March 2017: E35.5 million, £30.3 million).
9 Related parties
Transactions between the Company and 3i Group
3i Group plc ("3i Group") holds 33.6% (March 2017: 33.8%) of the ordinary
shares of the Company. This classifies
3i Group as a "substantial shareholder" of the Company as defined by the
Listing Rules.
The Company has committed US$250 million to the 3i India Infrastructure Fund
("the India Fund") to invest in the Indian infrastructure market. 3i Group
also committed US$250 million of investment capital to the India Fund. No
commitments (March 2017: nil) were drawn down by the India Fund from the
Company during the period. In total, commitments of US$183.7 million or
£137.1 million re-translated had been drawn down at 30 September 2017 (March
2017: US$183.7 million or £146.8 million) by the India Fund from the Company.
As the India Fund has reached the end of its investment period, the Company's
outstanding commitment to the India Fund is limited to 15% of the original
US$250 million commitment. At 30 September 2017, the outstanding commitment
was US$37.5 million, or £28.0 million re-translated (March 2017: US$37.5
million or £30.0 million).
3i Networks Finland Limited, a subsidiary of 3i Group, receives a priority
profit share from 3i Networks Finland LP, an unconsolidated subsidiary of the
Company. During the period, £1.1 million (September 2016: £1.0 million) was
payable directly to 3i Group, of which the Company's share was £1.0 million
(September 2016: £0.9 million) and which was therefore offset against the
total advisory fee payable by the Company. As at 30 September 2017, nil
remained outstanding (March 2017: nil).
3i Osprey GP Limited, a subsidiary of 3i Group, receives a priority profit
share from 3i Osprey LP, an unconsolidated subsidiary of the Company. During
the period, £2.1 million (September 2016: £1.9 million) was payable directly
to
3i Group, of which the Company's share was £1.4 million (September 2016: £1.2
million) and which was therefore offset against the total advisory fee payable
by the Company. As at 30 September 2017, £0.4 million remained outstanding
(March 2017: £0.3 million).
3i Investments plc, a subsidiary of 3i Group, acts as the exclusive Investment
Adviser to the Company and provides its services under an Investment Advisory
Agreement ("IAA"). It also acts as the manager for the India Fund. 3i plc,
another subsidiary of 3i Group, together with 3i Investments plc, provides
support services to the Company.
Under the IAA, an annual advisory fee is payable to 3i plc based on the Gross
Investment Value of the Group at the end of each financial period. Gross
Investment Value is defined as the total aggregate value (including any
subscription obligations) of the investments of the Group as at the start of a
financial period plus any investment (excluding cash) made during the period
valued at cost (including any subscription obligations). The applicable
annual rate is 1.5%, dropping to an annual rate of 1.25% for investments that
have been held by the Group for longer than five years. A lower fee of 1% per
annum is applicable for any investments in greenfield projects. The advisory
fee accrues throughout a financial period and quarterly instalments are
payable on account of the advisory fee for that period. The advisory fee is
not payable in respect of cash or cash equivalent liquid temporary investments
held by the Group throughout a financial period. For the period to 30
September 2017, £12.7 million (September 2016: £11.1 million) was payable and
nil (March 2017: nil) remained due to 3i plc at 30 September 2017. This
amount includes fees of £2.4 million (September 2016: £2.2 million) which were
paid directly from unconsolidated subsidiary entities to 3i plc.
The IAA also provides for an annual performance fee to be payable to 3i plc.
This becomes payable when the Adjusted Total Return per ordinary share (being
mainly the closing Net Asset Value per share aggregated with any distributions
made in the course of the financial period and any accrued performance fees
relating to the financial period) for the period exceeds the Target Total
Return per share, being the Net Asset Value per ordinary share equal to the
opening Net Asset Value per ordinary share, adjusted for the issue of new
equity in the period, increased at a rate of 8% per annum ("the performance
hurdle"). If the performance hurdle is exceeded, the performance fee will be
equal to 20% of the Adjusted Total Return per share in excess of the
performance hurdle for the relevant financial period, multiplied by the
weighted average of the total number of shares in issue over the relevant
financial period. In addition, the performance fee includes a high water mark
requirement so that, before payment of a performance fee, besides the 8%
performance hurdle, the return must also exceed the performance level in
respect of which any performance fee has been paid in the previous three
financial years. The performance hurdle and high water mark requirement was
not exceeded for the period to 30 September 2017 and therefore no performance
fee was recognised (September 2016: nil). The outstanding balance payable as
at 30 September 2017 was nil (March 2017: £3.9 million).
Under the IAA, the Investment Adviser's appointment may be terminated by
either the Company or the Investment Adviser giving the other not less than 12
months' notice in writing, to expire no earlier than 8 May 2019, unless
3i Investments plc has previously ceased to be a member of 3i Group, or with
immediate effect by either party giving the other written notice in the event
of insolvency or material or persistent breach by the other party. The
Investment Adviser may also terminate the agreement on two months' notice
given within two months of a change of control of the Company.
Pursuant to the UK Support Services Agreement, the Company also pays 3i plc an
annual fee for the provision of support services. Such remuneration is
payable quarterly in arrears. The cost incurred for the period to 30
September 2017 was £0.4 million (September 2016: £0.4 million). The
outstanding balance payable as at 30 September 2017 was £0.2 million (March
2017: £0.2 million).
Accounting policies
Basis of preparation
These financial statements are the unaudited Half-yearly condensed
consolidated financial statements (the "Half-yearly Financial Statements") of
3i Infrastructure plc (the "Company"), a company incorporated and registered
in Jersey, and its consolidated subsidiary (together referred to as the
"Group") for the six-month period ended 30 September 2017.
The Half-yearly Financial Statements have been prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting ("IAS 34")
and the accounting policies set out in the Annual report and accounts 2017.
They should be read in conjunction with the consolidated financial statements
for the year to 31 March 2017, as they provide an update of previously
reported information. The financial statements are prepared on a going
concern basis, as the Directors are satisfied that the Group has the resources
to continue in business for the foreseeable future. In making this
assessment, the Directors have considered a wide range of information relating
to present and future conditions, including future projections of
profitability and cash flows.
The Half-yearly Financial Statements were authorised for issue by the
Directors on 8 November 2017.
The Half-yearly Financial Statements do not constitute statutory accounts.
The statutory accounts for the year to
31 March 2017, prepared under IFRS as adopted by the European Union, and on
which the auditors issued a report, which was unqualified, have been filed
with the Jersey Financial Services Commission.
The preparation of the Half-yearly Financial Statements in conformity with
IFRS requires the Board to make judgments, estimates and assumptions that
affect the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions
are based on historical experience and other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making the judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in the period
of the revision and future periods if the revision affects both current and
future periods. There is no material impact from new accounting standards
becoming effective during the period. All accounting policies and related
estimates used in the preparation of the Half-yearly Financial Statements are
consistent with those stated in the Annual report and accounts 2017. The
presentation of "Net gains on investments at fair value through profit or
loss" in the consolidated statement of comprehensive income now includes
realised gains and losses over opening fair value on the disposal of
investments which had previously been disclosed separately.
Statement of Directors' responsibilities
The Directors, who are required to prepare the financial statements on a going
concern basis unless it is not appropriate, are satisfied that the Group has
the resources to continue in business for the foreseeable future and that the
financial statements continue to be prepared on a going concern basis.
The Directors confirm to the best of their knowledge that:
· the condensed set of financial statements have been prepared in
accordance with IAS 34 as adopted by the European Union;
· the interim report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the Company's performance; and
· the Half-yearly report includes a fair review of the information
required by the FCA's Disclosure and Transparency Rules (4.2.7 R and 4.2.8
R).
The Directors of 3i Infrastructure plc and their functions are listed below.
By order of the Board
Richard Laing
Chairman
8 November 2017
Board of Directors and their functions
Richard Laing
Non-executive Chairman and chairman of the Nominations Committee and the Management Engagement Committee.
Paul Masterton
Senior Independent Director and chairman of the Remuneration Committee.
Wendy Dorman
Non-executive Director.
Ian Lobley
Non-executive Director.
Doug Bannister
Non-executive Director.
Steven Wilderspin
Non-executive Director and chairman of the Audit and Risk Committee.
Investment policy
The Company aims to build a diversified portfolio of equity investments in
entities owning infrastructure businesses and assets. The Company seeks
investment opportunities globally, but with a focus on Europe, North America
and Asia.
The Company's equity investments will often comprise share capital and related
shareholder loans (or other financial instruments that are not shares but
that, in combination with shares, are similar in substance). The Company may
also invest in junior or mezzanine debt in infrastructure businesses or
assets.
Most of the Company's investments are in unquoted companies. However, the
Company may also invest in entities owning infrastructure businesses and
assets whose shares or other instruments are listed on any stock exchange,
irrespective of whether they cease to be listed after completion of the
investment, if the Directors judge that such an investment is consistent with
the Company's investment objectives. The Company will, in any case, invest no
more than 15% of its total gross assets in other investment companies or
investment trusts which are listed on the Official List.
The Company may also consider investing in other fund structures (in the event
that it considers, on receipt of advice from the Investment Adviser, that that
is the most appropriate and effective means of investing), which may be
advised or managed either by the Investment Adviser or a third party. If the
Company invests in another fund advised or managed by 3i Group, the relevant
proportion of any advisory or management fees payable by the investee fund to
3i plc will be deducted from the annual advisory fee payable under the
Investment Advisory Agreement and the relevant proportion of any performance
fee will be deducted from the annual performance fee, if payable, under the
Investment Advisory Agreement. For the avoidance of doubt, there will be no
similar set-off arrangement where any such fund is advised or managed by a
third party.
For most investments, the Company seeks to obtain representation on the board
of directors of the investee company (or equivalent governing body) and in
cases where it acquires a majority equity interest in a business, that
interest may also be a controlling interest.
No investment made by the Company will represent more than 25% of the
Company's gross assets, including cash holdings, at the time of the making of
the investment. It is expected that most individual investments will exceed
£50 million. In some cases, the total amount required for an individual
transaction may exceed the maximum amount that the Company is permitted to
commit to a single investment. In such circumstances, the Company may
consider entering into co-investment arrangements with 3i Group (or other
investors who may also be significant shareholders), pursuant to which 3i
Group and its subsidiaries (or such other investors) may co-invest on the same
financial and economic terms as the Company. The suitability of any such
co-investment arrangements will be assessed on a transaction-by-transaction
basis and would be subject to Board approval. Depending on the size of the
relevant investment and the identity of the relevant co-investor, such a
co-investment arrangement may be subject to the related party transaction
provisions contained in the Listing Rules and may therefore require
shareholder consent.
The Company's Articles require its outstanding borrowings, including any
financial guarantees to support subsequent obligations, to be limited to 50%
of the gross assets of the Group (valuing investments on the basis included in
the Group's accounts).
In accordance with Listing Rules requirements, the Company will only make a
material change to its investment policy with the approval of shareholders.
Portfolio valuation methodology
A description of the methodology used to value the investment portfolio of 3i
Infrastructure and its consolidated subsidiary ("the Group") is set out below
in order to provide more detailed information than is included within the
accounting policies and the Investment Adviser's review for the valuation of
the portfolio. The methodology complies in all material aspects with the
"International Private Equity and Venture Capital valuation guidelines" which
are endorsed by the British Private Equity and Venture Capital Association and
Invest Europe.
Basis of valuation
Investments are reported at the Directors' estimate of fair value at the
reporting date in compliance with IFRS 13 Fair Value Measurement. Fair value
is defined as 'the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date'.
General
In estimating fair value, the Directors seek to use a methodology that is
appropriate in light of the nature, facts and circumstances of the investment
and its materiality in the context of the overall portfolio. The methodology
that is the most appropriate may consequently include adjustments based on
informed and experience-based judgments, and will also consider the nature of
the industry and market practice. Methodologies are applied consistently from
period to period except where a change would result in a better estimation of
fair value. Given the uncertainties inherent in estimating fair value, a
degree of caution is applied in exercising judgments and making necessary
estimates.
Investments may include portfolio assets and other net assets/liabilities
balances. The methodology for valuing portfolio assets is set out below. Any
net assets/liabilities within intermediate holding companies are valued in
line with the Group accounting policy and held at fair value or approximate to
fair value.
Quoted investments
Quoted equity investments are valued at the closing bid price at the reporting
date. In accordance with International Financial Reporting Standards, no
discount is applied for liquidity of the stock or any dealing restrictions.
Quoted debt investments will be valued using quoted prices provided by
third-party broker information where reliable or will be held at cost less
fair value adjustments.
Unquoted investments
Unquoted investments are valued using one of the following methodologies:
- Discounted Cash Flow ("DCF")
- Proportionate share of net assets
- Sales basis
- Cost less any fair value adjustments required
DCF
DCF is the primary basis for valuation. In using the DCF basis, fair value is
estimated by deriving the present value of the investment using reasonable
assumptions and estimation of expected future cash flows and the terminal
value and date, and the appropriate risk-adjusted discount rate that
quantifies the risk inherent to the investment. The terminal value attributes
a residual value to the investee company at the end of the projected discrete
cash flow period. The discount rate will be estimated for each investment
derived from the market risk-free rate, a risk-adjusted premium and
information specific to the investment or market sector.
Proportionate share of net assets
Where the Group has made investments into other infrastructure funds, the
value of the investment will be derived from the Group's share of net assets
of the fund based on the most recent reliable financial information available
from the fund. Where the underlying investments within a fund are valued on a
DCF basis, the discount rate applied may be adjusted by the Company to reflect
its assessment of the most appropriate discount rate for the nature of assets
held in the fund. In measuring the fair value, the net asset value of the
fund is adjusted, as necessary, to reflect restrictions on redemptions, future
commitments, illiquid nature of the investments and other specific factors of
the fund.
Sales basis
The expected sale proceeds will be used to assign a fair value to an asset in
cases where offers have been received as part of an investment sales process.
This may either support the value derived from another methodology or may be
used as the primary valuation basis. A marketability discount is applied to
the expected sale proceeds to derive the valuation where appropriate.
Cost less fair value adjustment
Any investment in a company that has failed or, in the view of the Board, is
expected to fail within the next 12 months, has the equity shares valued at
nil and the fixed income shares and loan instruments valued at the lower of
cost and net recoverable amount.
Information for shareholders
Financial calendar
Ex-dividend date for interim dividend 23 November 2017
Record date for interim dividend 24 November 2017
Interim dividend expected to be paid 8 January 2018
Full year results May 2018
Registrars
For shareholder services, including notifying changes of address, the
registrar details are as follows:
Link Market Services (Jersey) Limited
12 Castle Street
St. Helier
Jersey JE2 3RT
Channel Islands
e-mail: registrars@linkgroup.je
Telephone: +44 (0)1534 847 000
Shareholder helpline: 0871 664 0300
Calls cost 12p per minute plus your phone company's access charge. If you are
outside the United Kingdom,
please call +44 371 664 0300. Calls outside the United Kingdom will be charged
at the applicable international rate. Link Group are open between
9.00am-5.30pm, Monday to Friday, excluding public holidays in England and
Wales.
Website
For full up-to-date investor relations information including the latest share
price, recent reports, results presentations and financial news, please visit
our investor relations website www.3i-infrastructure.com
If you would prefer to receive shareholder communications electronically,
including your annual reports and notices of meetings, please go to
www.3i-infrastructure.com/shareholder-services/registrar-e-communications for
details of how to register.
Frequently used registrars' forms can be found on our website at
www.3i-infrastructure.com/shareholder-services/registrar-e-communications
3i Infrastructure plc
Registered office
12 Castle Street
St. Helier
Jersey JE2 3RT
Channel Islands
Tel: +44 (0)1534 847 410
www.3i-infrastructure.com
Annual report online
To receive shareholder communications electronically in future, including
annual reports and notices of meetings, please go to:
www.3i-infrastructure.com for details of how to register.
This information is provided by RNS
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