Prospectus • Feb 29, 2012
Prospectus
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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document you should consult a person authorised for the purposes of the Financial Services and Markets Act 2000 who specialises in advising on the acquisition of shares and other securities.
Prospective investors should read this entire document and, in particular, the matters set out under the heading "Risk Factors" on pages 8 to 19, when considering an investment in HICL Infrastructure Company Limited (the "Company").
Application will be made to the UK Listing Authority for all of the C Shares to be admitted to the Official List by way of a standard listing, and for all such C Shares to be admitted to trading on the Main Market for listed securities of the London Stock Exchange. It is expected that such admission will become effective, and that dealings in the C Shares will commence, on 30 March 2012. Notwithstanding the target Issue size of 180 million C Shares, this prospectus relates to the issue by the Company of up to 250 million C Shares.
The C Shares are not dealt in on any other recognised investment exchanges and no applications for the C Shares to be traded on any such other exchanges have been made or are currently expected to be made.
The Company and its Directors, whose names appear on page 24 of this document, accept responsibility for the information contained herein. To the best of the knowledge of the Company and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.
Collins Stewart Europe Limited ("Collins Stewart"), which is authorised by the Financial Services Authority is acting for the Company and no-one else in connection with the Issue and the contents of this document and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Collins Stewart or for affording advice in relation to the Issue and the contents of this document or any matters referred to herein. Nothing in this paragraph shall serve to exclude or limit any responsibilities which Collins Stewart may have under the Financial Services and Markets Act 2000 or the regulatory regime established thereunder.
Apart from the responsibilities and liabilities, if any, which may be imposed on Collins Stewart by the FSMA (or the regulatory regime established thereunder), Collins Stewart accepts no responsibility whatsoever nor makes any representation or warranty, express or implied, for or in respect of the contents of this prospectus, including its accuracy, completeness or verification or regarding the legality of the Issue or for any other statement made or purported to be made by Collins Stewart or on Collins Stewart's behalf, in connection with the Company and/or the Issue and nothing in this prospectus is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or the future. Collins Stewart accordingly disclaims to the fullest extent permitted by applicable law all and any responsibility and liability whether arising in tort, contract or otherwise which it might otherwise be found to have in respect of this prospectus or any such statement.
(incorporated in Guernsey with registered no. 44185)
Placing, Open Offer, and Offer for Subscription of up to 250 million C Shares at an Issue Price of £1.00 per C Share and Admission to the Official List and to trading on the Main Market of the London Stock Exchange
Information relating to the prior issue of 65,899,500 Ordinary Shares
Sponsor and Placing Agent
The C Shares offered by this document have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or under the applicable state securities laws of the United States, and may not be offered, sold pledged or otherwise transferred directly or indirectly in or into the United States, or to or for the account or benefit of any US person within the meaning of Regulation S ("Regulation S") under the Securities Act, except that the C Shares may be offered and sold (a) in the United States to "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act ("Rule 144A") who are "qualified purchasers" as defined in Section 2(a)(51) of the United States Investment Company Act of 1940, as amended (the "Investment Company Act"), in reliance on the exemption from registration provided by Rule 144A and (b) outside the United States only in "offshore transactions" to persons that are not US persons as defined in, and in reliance on, Regulation S. Shareholders and beneficial owners in the United States will not be able to participate in the offer unless they meet the legal requirements needed to establish their eligibility to participate in the offer to the satisfaction of the Company, including making appropriate representations to that effect.
Prospective purchasers are hereby notified that sales of the C Shares may be made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A. Please note that by receiving this prospectus, purchasers shall be deemed by the Company and the Placing Agents to have made, and may further be required to make, certain representations, acknowledgements and agreements set forth herein. Until 40 days after the commencement of the offer, an offer, sale or transfer of the C Shares by a dealer (whether or not participating in the offer) may violate the registration requirements of the Securities Act if such offer, sale or transfer is made otherwise than in accordance with Rule 144A. In addition, the Company has not been, and will not be, registered under the Investment Company Act. See "Important Information" on page 20.
THE C SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE US SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION IN THE UNITED STATES OR ANY OTHER US REGULATORY AUTHORITY, NOR HAS ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OF THE C SHARES OR THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES.
This prospectus is being furnished by the Company in connection with an offering exempt from the registration requirements of the Securities Act, and is being furnished on a confidential basis to persons in the United States. The information in this prospectus is confidential and proprietary to the Company and is being submitted to prospective investors in the Company solely for such investors' confidential use with the express understanding that, without the prior express written permission of the Company, such persons will not release this prospectus or discuss the information contained herein or make reproductions of or use this prospectus for any purpose other than evaluating a potential investment in the C Shares. Any reproduction or distribution of this prospectus in the United States, in whole or in part, and any disclosure of its contents or use of any information herein in the United States for any purpose other than considering an investment in the C Shares offered hereby is prohibited, except to the extent such information is otherwise publicly available. Each prospective investor, by accepting delivery of this prospectus, agrees to the foregoing and further agrees promptly to return to the Company this prospectus and any other prospectus or information furnished if the prospective investor elects not to purchase the C Shares offered hereby.
The Company is not required to file periodic reports under Section 13 or 15 of the US Securities Exchange Act of 1934, as amended (the "Exchange Act"). For so long as the Company is not a reporting company under Section 13 or 15(d) of the Exchange Act, or exempt from reporting pursuant to Rule 12g3-2(b) thereunder, the Company will, upon request, furnish to each holder or beneficial owner of C Shares that are "restricted securities" (within the meaning of Rule 144(a)(3) under the Securities Act) and to each prospective purchaser thereof designated by such holder or beneficial owner upon request of such holder, beneficial owner or prospective purchaser, in connection with a transfer or proposed transfer of any such C Shares pursuant to Rule 144A or otherwise, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
| Clause | Page | |||
|---|---|---|---|---|
| SUMMARY | 3 | |||
| RISK FACTORS | 8 | |||
| IMPORTANT INFORMATION | 20 | |||
| EXPECTED TIMETABLE | 22 | |||
| ISSUE STATISTICS | 23 | |||
| DIRECTORS, AGENTS AND ADVISERS | 24 | |||
| PART I | THE PLACING, OPEN OFFER AND OFFER FOR SUBSCRIPTION | 26 | ||
| PART II | INFORMATION ON THE COMPANY | 31 | ||
| PART III | INVESTMENT BACKGROUND TO AND OUTLOOK FOR THE INFRASTRUCTURE MARKET | 43 | ||
| PART IV | THE CURRENT PORTFOLIO | 50 | ||
| PART V | MANAGEMENT AND ADMINISTRATION | 73 | ||
| PART VI | THE INFRASTRUCTURE INVESTMENT TEAM AND ITS TRACK RECORD | 78 | ||
| PART VII | ISSUE ARRANGEMENTS | 81 | ||
| PART VIII | TAXATION | 87 | ||
| PART IX | TERMS OF THE C SHARES AND THE CONVERSION RATIO | 94 | ||
| PART X | FINANCIAL INFORMATION ON THE COMPANY | 102 | ||
| PART XI | ADDITIONAL INFORMATION | 107 | ||
| NOTICES TO OVERSEAS INVESTORS | 130 | |||
| DEFINITIONS | 136 | |||
| TERMS AND CONDITIONS OF THE OPEN OFFER | 144 | |||
| TERMS AND CONDITIONS OF APPLICATION UNDER THE OFFER 163 |
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| NOTES ON HOW TO COMPLETE THE APPLICATION FORM 171 |
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| INSTRUCTIONS FOR DELIVERY OF COMPLETED APPLICATION FORMS | 174 | |||
| HICL INFRASTRUCTURE COMPANY LIMITED – APPLICATION FORM 175 |
The following information should be read as an introduction to the full text of this prospectus and any investment decision relating to the issue should be based on the consideration of this prospectus as a whole.
Where a claim relating to information contained in this prospectus is brought before a court, the plaintiff investor might, under the national legislation of the EEA States, have to bear the costs of translating this prospectus before legal proceedings are initiated. Civil liability attaches to those persons who are responsible for this summary, including any translation of this summary, but only if this summary is misleading, inaccurate or inconsistent when read together with other parts of this prospectus.
The Company is a limited liability, Guernsey incorporated, closed-ended investment company and its Ordinary Shares are admitted to the Official List with a premium listing and to trading on the Main Market of the London Stock Exchange. It is also a component of the FTSE 250 Index. The Company makes infrastructure investments through a series of entities, including two wholly owned Luxembourg SOPARFIs and an English limited partnership (the "Partnership") (together with the Company, the "Group"). InfraRed Capital Partners Limited ("ICPL"), an investment manager authorised and regulated in the UK by the Financial Services Authority, acts as Investment Adviser to the Company and as Operator of the Partnership.
The Company was launched on 29 March 2006 and has 665,422,215 Ordinary Shares in issue which are admitted to the Official List and to trading on the Main Market of the London Stock Exchange. As at 24 February 2012 (being the latest practicable date prior to the publication of this prospectus), the Company had a market capitalisation of £795.2 million and the Current Portfolio Value was £893.5 million.
This prospectus relates not only to the issue of the C Shares, and the Ordinary Shares into which they will convert, but also sets out information in relation to the 65,899,500 Ordinary Shares issued by way of tap issues between 1 January 2011 and the date of this prospectus (the "Tap Shares").
The Group acquired the Initial Portfolio shortly after launch in March 2006. Over the period since launch the Group has acquired 56 further infrastructure investments, which have been financed by Group Debt, the issues of C Shares in 2008, 2009 and 2010 and tap issues.
Since the Company's last C Share issue in November 2010, the Group has made a number of further investments (of which 34 were investments in new projects), which have been financed by Group Debt and tap issues. It is intended that the net proceeds of the Issue will be used to meet the Group's current funding requirements and to acquire the Conditional Investment and any Additional Investments.
The Company is seeking to raise £180 million (before expenses) through the Placing, Open Offer and Offer for Subscription of C Shares. The Directors have also reserved the right, in consultation with Collins Stewart, to increase the size of the Issue up to a maximum of £250 million in circumstances in which Additional Investments are made or identified and overall demand for C Shares exceeds the target amount.
The net proceeds of the Issue will not in any event exceed the aggregate of: (i) the Group's funding requirements (which as at the date of this prospectus stand at £139 million); (ii) the consideration payable for the Conditional Investment of approximately £39 million; and (iii) the consideration payable for any Additional Investments, including £15 million for an Additional Investment which the Company expects to acquire prior to Admission.
The Issue is being implemented by way of a Placing, Open Offer and Offer for Subscription. The inclusion of an Open Offer ensures that a portion of the new share capital being made available pursuant to the Issue is reserved in the first instance exclusively for Existing Shareholders.
Under the Open Offer, Existing Shareholders are entitled to apply to subscribe for up to an aggregate of 110,903,702 C Shares pro rata to their holdings of Ordinary Shares on the following basis:
The balance of C Shares to be made available under the Issue, together with any C Shares not taken up pursuant to the Open Offer, will be made available for subscription under the Excess Application Facility, the Offer for Subscription and the Placing.
It is anticipated that the Calculation Time and subsequent Conversion of the C Shares into Ordinary Shares will occur in April 2012 based on a valuation for the investment portfolio as at 31 March 2012. The Conversion Ratio will be based on this valuation and the Directors believe that this is more equitable to Existing Shareholders and C Shareholders who will have the benefit of the Conversion being effected on the basis of an updated valuation.
Pending investment, the net proceeds of the Issue (and any interest thereon) will be the sole asset attributable to the C Shares.
The Directors believe that the Issue will have the following benefits:
The Current Portfolio consists of Infrastructure Equity in 70 Project Companies in government accommodation, education, health, transport, utilities and law and order sectors with a Current Portfolio Value of £893.5 million. It includes accommodation projects
for the UK Home Office, Health and Safety Executive and the Ministry of Defence, a number of hospitals, schools, and police projects, a high speed rail project in Holland and highway projects in Canada. As at 31 December 2011, the weighted average PFI/PPP/P3 project concession length remaining in the Current Portfolio was 23.7 years.1
The Company seeks to provide investors with long term distributions, at levels that are sustainable, and to preserve the capital value of its investment portfolio over the long term with potential for capital growth.
The Company targets a progressive distribution policy and growth of its annual distributions to 7.0p per Ordinary Share by 31 March 20132 .
The Company is targeting an IRR of around 7 per cent.3 on the Ordinary Shares to be issued upon conversion of the C Shares, to be achieved over the long term via active management, including the acquisition by the Group of further investments to complement the Current Portfolio, and by the prudent use of gearing.
The Investment Adviser is continually seeking suitable new infrastructure investments which meet the Group's Investment Policy and have the required financial and risk characteristics to enable the Group to meet its investment targets.
Whilst there is no guarantee that suitable new investments will be found, the Investment Adviser is confident that through its leading market position, new attractive investment opportunities will be sourced for the Group.
The Current Portfolio has performed better than the Company's projections at the time of launch. Over the period from 29 March 2006 to 31 December 2011, the Net Asset Value per Ordinary Share increased from 98.4 pence to 114.0 pence.
The Company has outperformed the FTSE All Share Index on a total shareholder return basis by 29.5 per cent. over the period from 29 March 2006 to 31 December 2011 and has provided an annualised total shareholder return of 8.83 per cent. over this period.
The Group's investment policy is to ensure a diversified portfolio which has a number of similarly sized investments and is not dominated by any single investment. The Group will seek to acquire further Infrastructure Equity investments with similar characteristics to the Current Portfolio.
The Group will also seek to enhance returns for Shareholders by acquiring more diverse infrastructure investments. The Directors currently intend that the Group may invest in aggregate up to 35 per cent. of its total assets (at the time the relevant investment is made) in:
and to a lesser extent (but counting towards the same aggregate 35 per cent.) in:
Prospectus 2012 u 5 1 On the assumption that the break options are exercised in relation to the Bishop Auckland Hospital and Helicopter Training Facility projects. 2 This is a target only and is not a profit forecast. There can be no assurance that this target will be met or that the Company will make any distributions
3 This is a target only and is not a profit forecast. There can be no assurance that this target will be met or that the Company will make any distributions whatsoever or that investors will recover all or any of their investments.
u limited partnerships and other funds that make infrastructure investments and/or financial instruments and securities issued by companies that make infrastructure investments, or whose activities are similar or comparable to infrastructure investments.
ICPL (the "Investment Adviser") has been appointed as both the investment adviser to the Company and the operator of the Partnership. Members of the Infrastructure Investment Team are responsible for carrying out the Investment Adviser's investment management and advisory functions for the Group. The Infrastructure Investment Team is one of Europe's most experienced infrastructure investment managers and has a strong track record.
The Investment Adviser receives fees from the Partnership with respect to its acting as both investment adviser to the Company and as operator of the Partnership.
To date, distributions on the Ordinary Shares have been paid twice a year in respect of the six months to 31 March and 30 September, and have been made by way of dividend. Subject to market conditions, this is expected to continue. The Company may also make distributions by way of capital distributions (or otherwise in accordance with the Laws and the Articles) as well as, or in lieu of, by way of dividend if and to the extent that the Directors consider this appropriate.
C Shareholders will not be entitled in respect of their C Shares to any dividend or distribution declared for the financial year ending 31 March 2012, although Ordinary Shares resulting from the conversion of C Shares will rank equally with all other Ordinary Shares in respect of any and all dividends declared after Conversion. The Directors intend to declare a second interim dividend for the year ended 31 March 2012 prior to the Calculation Time.
The Directors intend that the Company will generally restrict distributions (by way of dividend or otherwise) to the level of Distributable Cash Flows, and dividends to the level of income from the Group's investments, as recognised in the relevant financial year. The Directors may, where they consider this to be appropriate in respect of acquisitions where such assets are not fully cash generative, distribute as dividend an amount up to the level of the Group's gross income, i.e. in excess of Distributable Cash Flows. Project Companies which are operational usually make distributions to the Group twice a year, and occasionally these payments may be received shortly after a period end due to timing of payment process. The Directors intend to include such amounts in Distributable Cash Flows where it is clear these payments relate to the period concerned.
The Group makes prudent use of leverage. Under the Articles, the Group's outstanding borrowings, including any financial guarantees to support outstanding investment obligations but excluding internal Group borrowings, or borrowing of the Group's underlying investments, are limited to 50 per cent. of the Adjusted Gross Asset Value of its investments and cash balances at any time.
On 28 February 2012, the Group entered into a £150 million multi-currency revolving credit facility with the Royal Bank of Scotland plc and National Australia Bank Limited which is intended, inter alia, to refinance the existing 2007 £200 million multi-currency revolving credit facility with Bank of Scotland plc.
In order to assist in the narrowing of any discount to the Net Asset Value at which the Ordinary Shares may trade from time to time, the Company may, at the sole discretion of the Directors and subject to compliance with the Law and the terms of the 2012 Facility, make market purchases of up to 14.99 per cent. per annum of its issued Ordinary Shares and make tender offers for Ordinary Shares.
Risk factors affecting the Company, its Ordinary Shares and the C Shares include, but are not limited to, the following:
Investment in the Company carries a degree of risk, including but not limited to the risks in relation to the Group, the Company, the C Shares (and the Ordinary Shares into which they will convert) and the Tap Shares referred to below. The risks referred to below are the risks which are considered to be material, but are not the only risks relating to the Group, the Company, the C Shares and the Tap Shares. There may be other risks that the Company and the Directors do not currently consider to be material or of which the Company and the Directors are not currently aware. Prospective investors should review this prospectus carefully and in its entirety and may wish to consult with their professional advisers before acquiring any C Shares. If any of the risks referred to in this prospectus were to occur, the financial position and prospects of the Group and/or the Company could be materially adversely affected. If that were to occur, the trading price of the C Shares and/or the Ordinary Shares and/or the Tap Shares and/or their Net Asset Value and/or the level of dividends or distributions (if any) received from the C Shares and/or the Ordinary Shares and/or the Tap Shares could decline significantly and investors could lose all or part of their investment.
An investment in the Company is suitable only for investors who are capable of evaluating the risks and merits of such investment, who understand the potential risk of capital loss and that there may be limited liquidity in the underlying investments of the Group, for whom an investment in C Shares constitutes part of a diversified investment portfolio, who fully understand and are willing to assume the risks involved in investing in the Company and who have sufficient resources to bear any loss (which may be equal to the amount invested) which might result from such investment.
If prospective investors are in any doubt as to the consequences of their acquiring, holding or disposing of C Shares, they should consult their stockbroker, bank manager, solicitor, accountant or other independent financial adviser.
The market value of the Ordinary Shares into which the C Shares will be converted can fluctuate, and they are designed to be held over the long term and may not be suitable as short term investments. There is no guarantee that any appreciation in the value of the Group's investments will occur, and investors may not get back the full value of their investment or any value at all. It should be remembered that the price of the C Shares and Ordinary Shares (and the income from them) can go down as well as up.
There is no guarantee that the market value of the Ordinary Shares into which the C Shares will be converted will reflect the underlying NAV of such Ordinary Shares. The Ordinary Shares may trade at a discount to Net Asset Value per Share for a variety of reasons, including market or economic conditions or to the extent investors undervalue the activities of the Investment Adviser, in which event the Shareholders may not be able to realise their investment in the Ordinary Shares at the Net Asset Value per Ordinary Share. While the Directors intend to pursue a proactive policy in seeking to mitigate any discount to Net Asset Value per Ordinary Share, there can be no guarantee that this will be successful.
The creation of Ordinary Shares upon Conversion of the C Shares will dilute the percentage shareholding of any existing Shareholder that does not subscribe for an equivalent proportion of the C Shares being issued pursuant to the Issue. There will, however, be no dilution of the Net Asset Value of Existing Ordinary Shares upon Conversion as the basis upon which the C Shares will convert into Ordinary Shares is such that the number of Ordinary Shares to which the C Shareholders will become entitled will reflect the respective net assets attributed to the Existing Ordinary Shares and to the C Shares, as further described in Part IX of this prospectus. Furthermore, provided that a minimum of £60 million is raised, the costs of the Issue will be fully borne by C Share investors and will not therefore dilute the Net Asset Value of Existing Ordinary Shares.
Any investment objectives of the Group are targets only and should not be treated as assurances or guarantees of performance. The past performance of investments managed and monitored by the Infrastructure Investment Team is not a reliable indication of the future performance of the investments held by the Group. The success of the Company depends on the Investment Adviser's ability to identify, make and realise investments in accordance with the Group's investment objectives. There can be no assurance that the Investment Adviser will be able to do so or that the Group will be able to invest its assets on attractive terms or generate any investment returns for Shareholders, or indeed avoid investment losses.
The Current Portfolio of acquired assets consists of equity, mezzanine debt and subordinated debt in Project Companies responsible for the infrastructure projects described in Part IV at pages 50 to 72 of this prospectus.
The following section details various risks that apply to the Group's investment in the Current Portfolio (a number of which are also generic to investment in Project Companies).
The value of some of the investments in the Current Portfolio is significantly greater than others. For example, as at 24 February 2012, approximately 34.9 per cent. of the Group's portfolio was comprised of investments in the Project Companies responsible for the Home Office Headquarters, DHSRL, Queen Alexandra Hospital, Colchester Garrison and Pontefract and Pinderfields Hospitals projects. If any circumstances arose which materially affected the returns generated by any of those Project Companies (or any other significant part of the Current Portfolio), the effect on the Group's ability to meet its investment objectives could be material.
Under the agreements for asset acquisition, the vendors have typically provided various warranties for the benefit of the Group in relation to the relevant acquisition. Such warranties however are generally limited in scope, and subject to time limitations, materiality thresholds and a liability cap. To the extent that any loss suffered by the Group is not covered by warranties, arises outside of such limitations or exceeds such cap, such loss will be borne by the Group.
Both the Project Company and the Client have the right to terminate a Project Agreement in certain circumstances. The compensation to which the Project Company will be entitled on termination will depend on the reason for termination. In some cases (e.g. termination for force majeure) the compensation payable may only cover the senior debt in the Project Company and may not include amounts to repay the Infrastructure Equity investment, or may only cover the nominal value of the Infrastructure Equity investment in the Project Company. In other cases (e.g. termination for Project Company default) the amount of compensation payable may cover neither the full amount of senior debt nor the nominal value of the Infrastructure Equity investment in the Project Company (or the amount paid in the market for that Infrastructure Equity). For these purposes, senior debt can be taken to include the costs (or gains) arising from breaking any interest rate hedging arrangements. Typically, senior lenders will have security over compensation proceeds. In other termination circumstances such as Client default or termination by notice by the Client, the compensation would be expected to cover senior debt and the original return on the Infrastructure Equity, but not necessarily the amounts paid for the acquisition of the Infrastructure Equity by the Group. Should a termination occur, the net asset value of the investment concerned could be adversely affected.
Infrastructure projects rely on large and detailed financial models. There is a risk that errors may be made in the assumptions or methodology used in a financial model. In such circumstances, the returns generated by the Project Company may be materially different than forecast. This risk may be mitigated by audits of the models performed at the financial close of a project.
Whilst the Investment Adviser undertakes an in-depth due diligence exercise in connection with the purchase of the Group's investments, as detailed on page 75, this may not reveal all facts that may be relevant in connection with an investment and could materially overvalue an acquisition. The contractual arrangements made by a Project Company may not be as effective in passing on risks to its subcontractors as intended and this may result in unexpected costs or a reduction in expected revenues for the Project Company.
Past and future infrastructure investments will be in Project Companies that the Group does not always control. The contractual documentation may include concession, finance and shareholder agreements and may contain certain minority restrictions and protections that may impact on the ability of the Group and the Operator to have control over the underlying investments.
A project usually contains benchmarking and/or market-testing regimes in respect of the cost of providing certain services, which typically operate every five years. In many projects, this risk/reward is either borne by the Client and/or passed down to the subcontractor providing the service. In some projects, these mechanisms may expose the Project Company to losses or gains arising from changes in its costs incurred in procuring the services relative to the charges that it is then entitled to receive from the Client for the services as a result of the benchmarking/market-testing regimes.
During the period of a concession, components of the project facility or building (such as elevators, roofs, air handling plant, road pavement and other structures) may need, inter alia, to be replaced or undergo a major refurbishment. The timing of such replacements or refurbishments is forecast based upon manufacturers' data and warranties, and specialist advisers are usually retained by the Project Company to assist in such forecasting of lifecycle and maintenance timings and costs. However, shorter than anticipated asset lifespans or higher costs or inflation than forecast may result in lifecycle and maintenance costs being higher than anticipated. Any cost implication not otherwise passed down to subcontractors is generally borne by the Project Company.
A Project Company maintains insurance in accordance with industry practices on all its assets. In addition, the Project Company is usually responsible under its Project Agreement for maintaining insurance cover for, amongst other things, buildings, contents and third party risks (for example, risks arising from fire, flood, or terrorism). Typically, the Project Company takes the risk that the cost of maintaining the insurance may be greater than expected or that in some circumstances it may not be able to obtain the necessary insurance. Where insurance is not obtainable, the Client may, in certain circumstances, arrange to insure the relevant risks itself. If a risk subsequently occurs, the Client can typically choose whether to let the Project Agreement continue, and pay to the Project Company an amount equal to the insurance proceeds which would have been payable had the insurance been available, or terminate the Project Agreement and pay compensation on the basis of termination for force majeure (see above under "Termination of Project Agreements"). In this circumstance the net asset value of the investment will be materially and adversely affected.
Governments may in future decide to change the basis upon which Project Companies and government counterparties share any gains arising either on refinancing or on the sale of project equity, in which case the returns ultimately available to the Fund from future PFI/PPP project investments may be reduced. Project Companies generally assume the risk of non-discriminatory changes in law.
The UK Government is under pressure to address the significant debt burden of the UK and is seeking cost savings from existing PFI/PPP projects where feasible, in accordance with guidance issued by HM Treasury in July 2011. This could affect the financial performance of Project Companies.
All except one of the Project Companies comprising the Current Portfolio are fully operational and the relevant public sector clients are contractually bound by the terms of the relevant agreements: consequently only a governmental policy of seeking to renegotiate existing contracts would be likely to have an effect on such operational Project Companies. Renegotiation or termination of the existing contracts might result in reduced returns or a complete loss of the Company's investment.
If a Project Company is responsible for energy supply in relation to the facilities it provides then, subject to certain thresholds, it may be required to comply with the Carbon Reduction Commitment Energy Efficiency Scheme which was introduced in the UK on 1 April 2011. The Group may also fall within the scheme as a result of rules requiring the aggregation by a holding company of energy use by subsidiaries. Compliance with the scheme will entail additional administration costs and would result in increased costs through the purchase of allowances. Protection in respect of these costs is unlikely to be available under project change of law provisions and the obligation may not be passed down to subcontractors.
The subcontractors' liabilities to a Project Company for the risks they have assumed are typically subject to financial caps and it is possible that these caps may be exceeded in certain circumstances. Any loss or expense in excess of such a cap would be borne by the Project Company unless covered by the Project Company's insurance. In certain circumstances, the shareholders in the Project Company may decide to contribute additional equity to fund such loss and expense, which would have a negative impact on the Company's NAV.
The subcontractors responsible for the construction of a project asset normally remain liable for the cost of rectifying any design and construction defects in the asset for 12 years following the construction of the asset, subject to liability caps. In addition to this financial liability, the construction subcontractors also normally have an obligation to return to site in order to carry out any remedial works required during the first year following the construction of the asset. The Project Company may not have recourse to any third party for any defects which arise after the 12 year period.
If a subcontractor fails to perform the services which it has agreed to provide, the Project Company may fail to meet the service standards it has agreed with its Client and there may be a reduction in the payments that the Project Company is entitled to receive and/or claims by the Client for damages. These reductions and/or claims are typically passed on to the relevant subcontractor, subject to any liability caps.
If there is a subcontractor service failure and the relevant subcontractor or its guarantors or insurers fail to meet their obligations in respect of the liabilities that have been passed on to them, then to the extent it is unable to set off the liability against service fees the Project Company will not be compensated for any reductions in payments and/or claims made by the Client which it suffers as a result of the subcontractor's service failure.
Industrial action involving a subcontractor to a Project Company may result in unexpected costs or a reduction in expected revenues for the Project Company.
In some instances, a single subcontractor is responsible for providing services to various Project Companies in which the Group invests. In such circumstances, the default or insolvency of a single subcontractor could adversely affect a number of the Group's investments. As at 24 February 2012, the largest reliance on a single subcontractor was to ETDE (part of the Bouygues Group) which provides facilities maintenance services in respect of 18 per cent. by value of the Group's portfolio.
If there is a subcontractor service failure which is sufficiently serious to cause the Project Company to terminate the subcontract, or the Client to require the Project Company to do so, there may be a loss of revenue during the time taken to find a replacement subcontractor and the replacement subcontractor may levy a surcharge to assume the subcontract or charge more to provide the services: this may render the project uneconomic, resulting in termination for default. There will also be costs associated with the re-tender process. These may not be covered by any recovery from the defaulting subcontractor.
As described in Part IV at pages 50 to 72 of this prospectus, the concessions granted to Project Companies are from a variety of Clients, including but not limited to central government departments, local government and NHS trusts. Although the creditworthiness and power of each such body to enter into Project Agreements has been considered on a case by case basis and with the benefit of legal advice, the possibility of a default remains. It cannot be assumed that central government will in all cases assume liability for the obligations of quasi-government agencies in the absence of a specific guarantee, or that central governments will themselves never default on their obligations.
The covenants provided by a Project Company in connection with its senior debt are normally extensive and detailed. If certain covenants are breached, payments on the Infrastructure Equity are suspended. If an event of default occurs the senior lenders may become entitled to "step-in" and take responsibility for, or appoint a third party to take responsibility for, the Project Company's rights and obligations under the Project Agreement. In addition, in such circumstances the senior lenders will typically be entitled to enforce their security over the shares in the Project Company and to sell the Project Company to a third party. The consideration for any such sale is unlikely to result in any payment in respect of the amount of the Group's investment in the Project Company.
As at the date of this prospectus, the Group has one investment in a Project Company which has not yet completed the construction phase of its concession and which will not be fully cash generative until the end of the construction period. Although it is intended that the main risks of any delay in completion of the construction or any "overrun" in the costs of the construction have been (and, in the case of any future investments which have not yet completed the construction phases of their concessions, will be) passed on by the Project Companies contractually to the relevant subcontractor, there is some risk that the anticipated returns of the Project Companies will be adversely affected.
In some projects, the land and/or buildings remain in the ownership of the Project Company at the end of the concession period. There can be no assurance that actual residual values will equal or exceed those expected or projected at the end of the concession period.
Given the long term nature of infrastructure concession contracts, and the fact that infrastructure is a relatively new investment class (the majority of infrastructure investments have been made in the UK PFI/PPP market since 1997 and the Canadian PPP market commenced in 1993), there is as yet no experience of the long term operational problems that may be experienced in the future and which may affect infrastructure projects and Project Companies and, therefore, the Group's investment returns.
Project Companies generally take an ownership or occupation interest in land for the purpose of carrying out construction or operating the project assets. The Project Company may be exposed to potential environmental liability as a result of such ownership or use of land (e.g. clean up and remediation liability) or from operations carried out on the land, requiring financial contributions from the Project Company. Such contributions may not be restricted by the value of the site or the value of the Group's investment in the Project Company, and this may negatively impact on returns to the Group. Where possible, this risk is mitigated by passing it down to a subcontractor.
Typically, the Client has the right to terminate a Project Agreement where the Project Company or a shareholder or subcontractor (or one of their employees) has committed bribery, corruption or any other fraudulent act in connection with such Project Agreement. The compensation payable on such termination is typically limited to the outstanding senior debt at the time of
termination and would not repay an Infrastructure Equity investment. Where the bribery, corruption or other fraudulent act is committed by a party other than the Project Company, for example by one of the Project Company's main subcontractors, the Project Company can usually avoid termination by replacing the relevant party within a short time period.
On one project in which the Company holds Project Equity, the Client has made an allegation of fraud against a subcontractor in connection with alleged misreporting of performance events. If the allegations were found to be correct, the Client would be entitled to give notice to terminate the Project Agreement. However if such a notice were given the Project Company would have the right to replace the subcontractor and thereby to prevent termination of the Project Agreement.
As at the date of the prospectus, the Company has signed non-binding heads of terms to acquire an interest in the Connect PFI project for approximately £39 million. Completion of the acquisition of the project is dependent on certain conditions being met and certain third party approvals being obtained. The target size of the Issue has been calculated on the assumption that all conditions relating to completion of the acquisition of the Connect PFI project will be satisfied and that all required approvals will be received. There is a chance, however, that money will be raised pursuant to the Issue which reflects the acquisition of the Connect PFI project, but completion of the acquisition never occurs because conditions are not met or approvals are not given. In this situation the Company might hold uninvested cash which could act as a drag on its net asset value.
As further described in the section entitled "Investment Policy" at pages 33 to 34 of this prospectus, the Group intends to make additional investments if suitable opportunities arise. For any new investments the Group makes in the future, the risks described in Part B above will again be relevant. However, the Group may also invest in a broader range of infrastructure assets and the following additional risks should also be noted.
The Group may make an acquisition of an established portfolio of investments in Project Companies. The majority of such Project Companies will already have appointed subcontractors, frequently for the duration of their concessions. Although the Group will aim to avoid an excessive reliance on any single subcontractor, and will have regard to this concern when making additional investments, there may be some degree of risk in this respect either in relation to the acquired portfolio or across the Group's expanded total portfolio.
Certain assets may self-perform the operations and maintenance obligations, and in this case the Project Company employs the staff and assumes associated labour relations and pensions risks.
The Group may make additional investments in Project Companies which have concessions or offtake agreements from private sector Clients. Although the Group will carry out all prudent due diligence on the good standing and financial resources of the relevant Client, there is an increased risk of default by private sector Clients when compared to public sector Clients.
The Group may make additional investments in Project Companies which have "demand" based concessions where the payments received by the Project Companies depend on the level of use made of the project assets. There is a risk that the level of use of the project assets, and therefore the returns from such Project Companies, will be lower than expected.
A prospective investor should be aware that the value of an investment in the Company is subject to normal market fluctuations and other risks inherent in investing in securities. There is no assurance that any appreciation in the value of the C Shares and/or the Ordinary Shares will occur or that the investment objectives of the Company will be achieved. The value of investments and the income derived therefrom may fall as well as rise and investors may not recoup the original amount invested in the Company.
In particular, prospective investors should be aware that the periodic distributions made to Shareholders will comprise amounts periodically received by the Group in repayment of its initial capital investments in Project Companies. Although it is envisaged that receipts from Project Companies over the life of their concessions will generally be sufficient to fund such periodic distributions while preserving the value of the Group's original investments in the Project Companies over the long term, this cannot be guaranteed.
The Company's targeted return is based on assumptions which the Directors consider reasonable. However, there is no assurance that all or any assumptions will be justified, and the Company's return may be correspondingly reduced. In particular, there is no assurance that the Company will achieve its distribution and IRR targets.
The success of the Group depends on the skill and expertise of the Infrastructure Investment Team in identifying, selecting and developing appropriate investments. There is no guarantee that current members of the Infrastructure Investment Team will continue to be associated with the Investment Adviser. Furthermore, the Infrastructure Investment Team has responsibility for managing all infrastructure assets managed by the Investment Adviser. These activities will require a commitment of time and resources that might otherwise be devoted to evaluating and monitoring the Current Portfolio and evaluating potential future investments for the Group.
If an Existing Shareholder does not subscribe under the Issue for such number of C Shares as is equal to his or her proportionate ownership of Existing Ordinary Shares, his or her proportionate ownership and voting interests in the Company will be reduced and the percentage that his or her Ordinary Shares will represent of the total share capital of the Company will be reduced accordingly. Even if an Existing Shareholder takes up his or her full entitlement of C Shares under the Open Offer, his or her interest in the Company will be diluted as a result of the Issue. Securities laws of certain jurisdictions may restrict the Company's ability to allow participation by Shareholders in the Issue. The Issue will not be registered under the Securities Act. Securities laws of certain other jurisdictions may restrict the Company's ability to allow participation by Shareholders in such jurisdictions in any future issue of shares carried out by the Company. Existing Shareholders who have a registered address in, or who are resident in or who are citizens of, countries other than the United Kingdom should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to acquire C Shares under the Issue.
The Investment Adviser, the Administrator, the Luxembourg Administrator, Collins Stewart (in its capacity as placing agent and/or sponsor), any of their directors, officers, employees, agents and connected persons and the Directors, and any person or company with whom they are affiliated or by whom they are employed (each an "Interested Party"), may be involved in other financial, investment or other professional activities which may cause conflicts of interest with members of the Group and their investments. In particular, Interested Parties may provide services similar to those provided to the Group to other entities and will not be liable to account for any profit earned from any such services. The Investment Adviser and its directors, officers, employees and agents and the Directors will at all times have due regard to their duties owed to members of the Group and where a conflict arises they will endeavour to ensure that it is resolved fairly. Subject to the arrangements explained above, the Company may (directly or indirectly) acquire securities from or dispose of securities to any Interested Party or any investment fund or account advised or
managed by any such person. An Interested Party may provide professional services to members of the Group (provided that no Interested Party will act as auditor to the Company) or hold C Shares or Ordinary Shares and buy, hold and deal in any investments for their own accounts, notwithstanding that similar investments may be held by the Group (directly or indirectly). An Interested Party may contract or enter into any financial or other transaction with any member of the Group or with any shareholder or any entity any of whose securities are held by or for the account of the Group, or be interested in any such contract or transaction. Furthermore, any Interested Party may receive commissions to which it is contractually entitled in relation to any sale or purchase of any investments of the Group effected by it for the account of the Group, provided that in each case the terms are no less beneficial to the Group than a transaction involving a disinterested party and any commission is in line with market practice.
The majority of investments made by the Group comprises unquoted interests in Project Companies which are not publicly traded or freely marketable and for which a sale may require the consent of other interested parties. Such investments may therefore be difficult to value and/or realise, and involve significant time and cost.
Other than some holdings in cash or cash equivalents and hedging instruments, the Group invests exclusively in infrastructure investments and will therefore bear the risk of investing in only one asset class.
Although the Ordinary Shares and C Shares are admitted to trading on the Main Market of the London Stock Exchange and will be freely transferable, the ability of Shareholders and C Shareholders to sell their Ordinary Shares and C Shares in the market, and the price which they may receive, will depend on market sentiment. The Ordinary Shares and C Shares may trade at a discount to Net Asset Value and it may be difficult for a Shareholder or a C Shareholder to dispose of all or part of his holding of Ordinary Shares and/or C Shares at any particular time.
The Company has the ability to make tender offers for Ordinary Shares from Shareholders. Such tender offers will however be made entirely at the discretion of the Directors and Shareholders will not have any ability to require the Company to make any such tender offer for all or any part of their holdings of Ordinary Shares.
The structure through which the Group makes investments includes an English limited partnership. Certain provisions contained in the Limited Partnership Agreement limit the liability of the Operator. The Group is also responsible for indemnifying the General Partner and the Operator (and their employees and agents) for any losses or damage incurred by them except for losses incurred as a result of their gross negligence or wilful misconduct.
If an investor's currency of reference is not GBP, currency fluctuations between the investor's currency of reference and the base currency of the Company may adversely affect the value of an investment in the Company.
A proportion of the Group's investments may be denominated in currencies other than GBP. The Current Portfolio includes three investments denominated in Euros, namely the DHSRL project in the Netherlands, the Cork School of Music project and the Irish Grouped Schools project in Ireland, and two Canadian P3 road projects denominated in Canadian dollars.
The Company maintains its books, and intends to pay distributions, in GBP. Accordingly, fluctuations in exchange rates between GBP and the relevant local currencies, and the costs of conversion and exchange control regulations, will directly affect the value of the Group's investments and the ultimate rate of return realised by investors. As at the date of this prospectus, the Company's exposure to currencies other than GBP is hedged by borrowing in the relevant currencies and selling the relevant currencies forward on a monthly basis. Whilst the Group may enter into hedging arrangements to mitigate currency risk to some extent, there can be no assurance that such arrangements will be entered into or that they will be sufficient to cover such risk.
Changes in interest rates may adversely affect the Group's investments. Changes in the general level of interest rates can affect the Group's profitability by affecting the spread between, amongst other things, the income on its assets and the expense of its interest-bearing liabilities, the value of its interest-earning assets and its ability to realise gains from the sale of assets should this be desirable. Interest rates are highly sensitive to many factors, including governmental, monetary and tax policies, domestic and international economic and political considerations, fiscal deficits, trade surpluses or deficits, regulatory requirements and other factors beyond the control of the Group.
The Group may finance its activities with both fixed and floating rate debt. With respect to its floating rate debt, the Group's performance may be affected adversely if it fails to limit the effects of changes in interest rates on its operations by employing an effective hedging strategy, including engaging in interest rate swaps, caps, floors or other interest rate contracts, or buying and selling interest rate futures or options on such futures. There can however be no assurance that such arrangements will be entered into or, in the event that they are entered into, that they will be sufficient to cover such risk.
A number of Project Companies have issued bonds which are insured by monoline insurers to finance their activities. The Group's future investments may be in Project Companies also financed by bonds which are insured by monoline insurers. Any downgrade in the rating of a monoline insurer may have a negative valuation impact and potential performance impact on those Project Companies where such monoline insurer is involved, as well as potentially causing a margin increase on the related senior debt. In some cases the monoline insurance has ceased to provide any security to senior lenders. Although this risk currently applies to a limited number of Project Companies, any downgrade would have a negative effect on the performance of the Company.
Should the Group elect to enter into hedging arrangements to protect against currency risk and interest rate risk as described above (and it will be under no obligation to do so), the use of instruments to hedge a portfolio carries certain risks, including the risk that losses on a hedge position will reduce the Group's earnings and funds available for distribution to investors and that such losses may exceed the amount invested in such hedging instruments. There is no perfect hedge for any investment, and a hedge may not perform its intended purpose of offsetting losses on an investment and, in certain circumstances, could increase such losses. The Group may also be exposed to the risk that the counterparties with which the Group trades may cease making markets and quoting prices in such instruments, which may render the Group unable to enter into an offsetting transaction with respect to an open position.
Although the Group selects the counterparties with which it enters into hedging arrangements with due skill and care, there is a residual risk that the counterparty may default on its obligations.
The Group uses leverage in the financing of its investments. The use of leverage increases the exposure of investments to adverse economic factors such as rising interest rates, severe economic downturns or deteriorations in the condition of an investment or its market.
The 2012 Facility contains certain covenants and restrictions in favour of the lending banks. In particular, notwithstanding that the £50 million tranche is not repayable for 18 months, the 2012 Facility provides that the Company requires the consent of the lending banks to make distributions if this tranche is not repaid or refinanced by 28 February 2013. The Directors will continue to actively monitor and manage the Group's financing requirements with the intention that any such covenants are not breached.
It is possible that the Group may not be able to refinance borrowing which becomes repayable during the life of the Group, in which case the performance of the Group may be adversely affected. The Group's borrowings may be secured on the assets of the Group. A failure to fulfil obligations under any financing documents may permit lenders to demand early repayment of the loan and to realise their security.
If the Group makes an investment with the intention of restructuring, refinancing or selling a portion of the capital structure thereof, there is a risk that the Group will be unable to complete successfully such a restructuring, refinancing or sale. Any such failure could lead to increased risk and cost to the Group and reduced returns.
All investments owned by the Group are valued on a six-monthly basis and the resulting valuations are used, among other things, for determining the basis on which Ordinary Shares are repurchased and additional capital raised.
Valuations of the assets of the Group as a whole also reflect accruals for expected or contingent liabilities, the amount or incidence of which is inevitably uncertain. It follows that some unfairness may arise between departing, continuing and new investors. A valuation is only an estimate of value and is not a precise measure of realisable value. Ultimate realisation of the market value of an asset depends to a great extent on economic and other conditions beyond the control of the Group, and valuations do not necessarily represent the price at which an investment can be sold.
All valuations made by the Investment Adviser are made, in part, on valuation information provided by the Project Companies in which the Group has invested. Although the Investment Adviser evaluates all such information and data, it may not be in a position to confirm the completeness, genuineness or accuracy of such information or data. In addition, the financial reports typically provided by the Project Companies are provided only on a quarterly or half yearly basis and generally are issued one to four months after their respective valuation dates. Consequently, each half yearly Net Asset Value contains information that may be out of date and require updating and completing. Shareholders should bear in mind that the actual Net Asset Values may be materially different from these half yearly valuations.
The Company's assets, including any investments made by the Company and any funds held by the Company, are available to satisfy all liabilities and other obligations of the Company. If the Company becomes subject to a liability, parties seeking to have the liability satisfied may have recourse to the Company's assets generally and may not be limited to any particular asset, such as the asset giving rise to the liability. To the extent that the Company chooses to use special purpose entities for individual transactions to reduce recourse risk (which it may, although will be under no obligation to do so), the bona fides of such entities may be subject to later challenge.
The Group may invest in infrastructure assets in a wide range of jurisdictions and the laws and regulations of foreign countries may impose restrictions that would not exist in the United Kingdom. Investments in foreign entities have their own economic, political, social, cultural, business, industrial and labour environment and may require significant government approvals under corporate, securities, exchange control, foreign investment and other similar laws as well as requiring financing and structuring alternatives that differ significantly from those customarily used in the United Kingdom. In addition, foreign governments from time to time impose restrictions intended to prevent capital flight which may, for example, involve punitive taxation (including high withholding taxes) on certain securities, transfers or the imposition of exchange controls, making it difficult or impossible to exchange or repatriate foreign currency. These and other restrictions may make it impracticable for the Company to distribute the amounts realised from such investment at all, or may force the Company to distribute such amounts other than in GBP, with all or a portion of the distribution being made in foreign securities or currency.
It also may be difficult to obtain and enforce a judgment in a court outside of the United Kingdom.
The Operator analyses information with respect to political and economic environments and the particular legal and regulatory risks in foreign countries before making investments, but no assurance can be given that a given political or economic climate, or particular legal or regulatory risks, might not adversely affect an investment by the Group.
The EU Alternative Investment Fund Managers Directive (No. 2011/61/EU) ("AIFM Directive") is expected to be transposed into the national legislation of each EU Member State in mid-2013 following a series of consultations from both the European Commission and the European Securities and Markets Authority together with the regulatory bodies appointed at national level by European member states. Much of the detail of the legislation is yet to be finalised and the full impact of its implementation on the Company remains uncertain. In January 2012, the FSA issued a discussion paper (DP12/1) in which it was proposed that an investment fund listed on the Official List, such as the Company, should itself be treated as the alternative investment fund manager (the "AIFM") under the AIFM Directive, rather than (as had been anticipated) having the option to appoint a third party manager as its AIFM. Whether or not this proposal is adopted, the implementation of the AIFM Directive is likely to significantly increase regulatory and compliance costs.
The AIFM Directive will initially allow the continued marketing of non-EU alternative investment funds ("AIFs"), such as the Company, by the AIFM or its agent under national private placement regimes where EU Member States choose to retain private placement regimes. Such marketing will be subject to the requirement that appropriate cooperation agreements are in place between the supervisory authorities of the relevant EU member states and the GFSC, that Guernsey is not on the Financial Action Task Force money-laundering blacklist and to compliance with certain aspects of the AIFM Directive (such aspects differing depending on whether the AIFM is based in the EU or not (as would be the case if the Company is the AIFM)). It is intended that, over time, a passport will be phased in to allow the marketing of non-EU AIFs such as the Company and that private placement regimes will be phased out. Both the adoption of the passport and the phasing out of national private placement regimes are subject to certain criteria. Consequently, there may be restrictions on the marketing of the Company's shares in the EU, which in turn may have a negative effect on marketing and liquidity generally.
In 2006, HMRC introduced new legislation intended to counter perceived abuses of the capital allowances regime for plant and machinery arising on the change of ownership of "leasing companies". The legislation is widely drawn and could potentially apply on the change of ownership of Portfolio Companies from 5 December 2005 onwards. These rules apply to companies which carry on the business of leasing plant or machinery, where either at least half of the accounting value of their plant or machinery relates to plant or machinery falling within section 387(7) of the Corporation Tax Act 2010 ("CTA 2010") or where at least half of their income in the previous 12 months is derived from plant or machinery falling within section 387(7) CTA 2010. Section 387(7) CTA 2010 covers plant or machinery which the company or any person connected with the company is leasing out or has at any time in the past 12 months leased out and which is or has been subject to a plant or machinery lease other than an excluded lease of 'background plant or machinery' installed in buildings. 'Background plant or machinery' is plant or machinery which might reasonably be expected to be installed in a variety of buildings for the sole or main purpose of contributing to their functionality. On any change of ownership of a company to which these rules apply, the current accounting period of the company carrying out the leasing business will be deemed to end and a new lease will be deemed to be granted for capital allowances purposes. A tax charge will arise in the company carrying out the leasing business, if the tax written down value of the plant and machinery is lower than its balance sheet value. This tax charge results from a deemed receipt in the company on the day the ownership changes. The deemed receipt is equal to, broadly, the balance sheet value of the plant and machinery less its tax written down value, and is a taxable receipt of the company. The company will have the benefit of a tax deduction which will be deemed to arise the following day and will be equal to the deemed receipt. This will, however, be treated as arising in the new accounting period and any loss resulting from the deduction will not be available to be carried back to relieve the deemed taxable receipt.
New rules were introduced in the Finance Act 2009 which may result in restrictions on the deductibility of financing expenses of certain Project Companies for UK tax purposes which may impact upon the level of income which such Project Companies are able to distribute to the Company and, in turn, reduce the level of distributions received by Shareholders.
These rules, which became effective from 1 January 2010, broadly apply to any period of account of the worldwide group for which the total of the average net debt of each UK company (or UK permanent establishment) in the group exceeds 75 per cent. of the average worldwide gross external debt of the group (the "gateway test").
Where the rules apply, deductions of financing expenses of UK resident companies in which the Company holds a direct or indirect 75 per cent. beneficial interest will broadly be disallowed to the extent that the sum of the net financing expenses of such companies exceeds the sum of the worldwide finance expenses in the consolidated financial statement of the group. Although the Directors currently intend to manage the Group's investments in a way which minimises any disallowance under these rules, no assurance can be given that either the rules or the rules as amended will not apply to restrict the deductibility of financing expenses of certain companies.
If prospective investors are in any doubt as to the consequences of their acquiring, holding or disposing of C Shares, they should consult their stockbroker, bank manager, solicitor, accountant or other independent financial adviser.
In assessing an investment in the Company, investors should rely only on the information in this prospectus. No person has been authorised to give any information or make any representations other than those contained in this prospectus and, if given or made, such information or representations must not be relied on as having been authorised by the Company, the Directors, the Investment Adviser, Collins Stewart or any other person. Neither the delivery of this prospectus nor any subscription or purchase of C Shares made pursuant to this prospectus shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since, or that the information contained herein is correct at any time subsequent to, the date of this prospectus.
This prospectus does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, shares in any jurisdiction in which such offer or solicitation is unlawful. Issue or circulation of this prospectus may be prohibited in some countries.
Prospective investors should consider carefully (to the extent relevant to them) the notices to residents of various countries set out at pages 130 to 135 of this prospectus.
This prospectus relates not only to the issue of the C Shares, and the Ordinary Shares into which they will convert, but also sets out information relating to the Tap Shares. The gross proceeds of the issues of the Tap Shares were £75.9 million and the aggregate expenses of the issues amounted to approximately £600,000. The net proceeds of £75.3 million were used to fund acquisitions and pay down Group Debt.
The contents of this prospectus are not to be construed as advice relating to legal, financial, taxation, investment or any other matters. Prospective investors should inform themselves as to:
Prospective investors must rely upon their own representatives, including their own legal advisers and accountants, as to legal, tax, investment or any other related matters concerning the Company and an investment therein.
Typical investors in the Company are expected to be institutional and sophisticated investors and private clients. An investment in the Company should be regarded as a long term investment. There can be no assurance that the Company's investment objectives will be achieved.
This prospectus should be read in its entirety before making any investment in the C Shares. All Shareholders are entitled to the benefit of, bound by and are deemed to have notice of the provisions of the Memorandum and Articles of Incorporation of the Company, which investors should review.
This prospectus includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts.
All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the Company's actual results to differ materially from those indicated in these statements. These factors include but are not limited to those described in the part of this prospectus entitled "Risk Factors", which should be read in conjunction with the other cautionary statements that are included in this prospectus. Any forward-looking statements in this prospectus reflect the Company's current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Company's operations, results of operations and growth strategy.
These forward-looking statements apply only as of the date of this prospectus. Subject to any obligations under the Prospectus Rules, the Listing Rules and the Disclosure Rules and Transparency Rules, the Company undertakes no obligation publicly to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. Prospective investors should specifically consider the factors identified in this prospectus which could cause actual results to differ before making an investment decision.
For the avoidance of doubt, nothing in the foregoing paragraphs under the heading "Forward-looking statements" constitutes a qualification of the working capital statement contained in paragraph 2.6 of Part X of this prospectus.
The Company is a limited company organised under the laws of Guernsey. None of the Directors reside in the United States and all, or substantially all, of the assets of the Company and of such persons are located outside of the United States. As a result, investors may not be able to effect service of process on, or enforce judgements against, the Company or the Directors in the United States.
Market, economic and industry data used throughout this prospectus is derived from various industry and other independent sources. The Company and the Directors confirm that such data has been accurately reproduced and, so far as they are aware and are able to ascertain from information published from such sources, no facts have been omitted which would render the reproduced information inaccurate or misleading.
Unless otherwise indicated, all references in this prospectus to "GBP", "£", "pence" or "p" are to the lawful currency of the UK, all references to "\$", "US\$" or "US dollars" are to the lawful currency of the US and all references to "€" or "Euro" are to the lawful currency of the Eurozone countries.
Unless otherwise indicated, the latest practicable date for the inclusion of information in this prospectus is close of business on 24 February 2012.
A list of defined terms used in this prospectus is set out at pages 136 to 143.
Unless otherwise stated, statements made in this prospectus are based on the law and practice currently in force in England and Wales or Guernsey (as appropriate) and are subject to changes therein.
All references to times in this prospectus are to London times unless otherwise stated.
| 2012 | |
|---|---|
| Record Date for entitlement under the Open Offer | close of business on Monday, 27 February |
| Announcement of the Issue, publication and posting of the Prospectus, Circular Form of Proxy and Application Forms |
Wednesday, 29 February |
| Offer for Subscription and Placing open | Wednesday, 29 February |
| Ex-entitlement date for the Open Offer | 8.00 a.m. on Thursday, 1 March |
| Open Offer Entitlements and Excess CREST Open Offer Entitlements credited to stock accounts of Qualifying CREST Shareholders into CREST |
Friday, 2 March |
| Recommended latest time for requesting withdrawal of Open Offer Entitlements and Excess CREST Open Offer Entitlements from CREST |
4.30 p.m. on Monday, 19 March |
| Latest time for depositing Open Offer Entitlements and Excess CREST Open Offer Entitlements into CREST |
3.00 p.m. on Tuesday, 20 March |
| Latest time and date for receipt of Forms of Proxy | 11.00 a.m. on Wednesday, 21 March |
| Latest time and date for splitting of Open Offer Application Forms | 3.00 p.m. on Wednesday, 21 March |
| Latest time and date for receipt of completed Application Forms and payment in full under the Offer for Subscription |
1.00 p.m. on Thursday, 22 March |
| Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instruction |
11.00 a.m. on Friday, 23 March |
| General Meeting | 11.00 a.m. on Friday, 23 March |
| Latest time and date for receipt of Placing commitments | Midday on Monday, 26 March |
| Results of the Issue announced | Wednesday, 28 March |
| Admission and commencement of dealings in C Shares | 8.00 a.m. on Friday, 30 March |
| CREST members' accounts credited in respect of C Shares in uncertificated form | As soon as possible on Friday, 30 March |
| Despatch of definitive share certificates for C Shares in certificated form | Week commencing 2 April |
| Conversion of C Shares into Ordinary Shares | End April |
The dates and times specified above are subject to change. In particular, the Directors may with the prior approval of Collins Stewart bring forward or postpone the closing time and date for the Placing, the Open Offer and Offer for Subscription by up to two weeks. In the event that such date is changed, the Company will notify investors who have applied for C Shares of changes to the timetable either by post, by electronic mail or by the publication of a notice through a Regulatory Information Service provider to the London Stock Exchange.
| Issue Price per C Share | £1.00 |
|---|---|
| Estimated initial Net Asset Value per C Share* | £0.987 |
| Number of C Shares being issued* | 180 million |
| International Security Identification Number for the C Shares under the Offer for Subscription and the Placing |
GG00B5SNML04 |
| International Security Identification Number for the Open Offer Entitlements of C Shares | GG00B7MLCF83 |
| International Security Identification Number for Excess Shares | GG00B422P624 |
| Estimated net proceeds of the Issue* | £177.6 million |
* assuming that the Issue is fully subscribed and the Directors proceed at the target Issue size.
| Directors (all non-executive) | Graham Picken (Chairman) Sarah Evans John Hallam Chris Russell |
|---|---|
| Administrator Company Secretary and Registered Office |
Dexion Capital (Guernsey) Limited 1 Le Truchot St Peter Port Guernsey GY1 1WD |
| Registrar | Capita Registrars (Guernsey) Limited Mont Crevelt House Bulwer Avenue St Sampson Guernsey GY2 4LH |
| Receiving Agent | Capita Registrars Corporate Actions The Registry 34 Beckenham Road Beckenham Kent BR3 4TU |
| UK Transfer Agent | Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU |
| Administrator to Luxcos | RSM Henri Grisius & Associés sàrl 6 Rue Adolphe L-1116 Luxembourg Bp 908, L-2019, Luxembourg |
| Investment Adviser and Operator | InfraRed Capital Partners Limited 12 Charles II Street London SW1Y 4QU |
| Sponsor and Placing Agent | Collins Stewart Europe Limited 9th Floor 88 Wood Street London EC2V 7QR |
| Principal Bankers | Bank of Scotland plc Level 6 155 Bishopsgate London EC2M 3YB |
Reporting Accountants KPMG LLP
Legal Advisers to the Company as Hogan Lovells International LLP to English Law Atlantic House
Legal Advisers to the Company as Carey Olsen to Guernsey Law P.O. Box 98
Auditors KPMG Channel Islands Limited 20 New Street St Peter Port
8 Salisbury Square London EC4Y 8BB
Guernsey GY1 4AN
Holborn Viaduct London EC1A 2FG
Carey House Les Banques St Peter Port Guernsey GY1 4BZ
Legal Advisers to Collins Stewart Norton Rose LLP
3 More London Riverside London SE1 2AQ
The Company is a limited liability, Guernsey-incorporated, closed-ended investment company whose Ordinary Shares have a premium listing on the Official List and are traded on the Main Market of the London Stock Exchange. An investment in the Company enables investors to access the income stream from a diversified and established portfolio of quality, predominantly operational infrastructure investments.
Since acquiring the Initial Portfolio shortly after launch in March 2006, it has been the Group's intention to make further infrastructure investments to be funded by cash reserves held pending investment, through borrowing facilities or by raising additional capital from the market. The Group has acquired 56 further new infrastructure investments since launch, and has made 25 follow-on investments which have been financed by Group Debt, the issues of C Shares in 2008, 2009 and 2010 and a number of tap issues.
The Current Portfolio consists of Infrastructure Equity in 70 Project Companies in the government accommodation, education, health, transport, utilities and law and order sectors. It includes:
Since the Company's last C Share issue in November 2010, the Group has made a number of further investments (of which 34 were investments in new projects) which have been financed by Group Debt and tap issues and has redeemed the Kemble Water loan. In summary, these were:
u In June 2011, the Group acquired a 50 per cent. interest in the Pinderfields and Pontefract Hospitals PFI project together with three incremental stakes in existing investments for a total consideration of £32.8 million. The three incremental stakes were in the Oxford John Radcliffe Hospital and the Queen Alexandra Hospital, together with a small stake in the Helicopter Training Facility.
u In November 2011, the Group acquired a 75 per cent. interest in the Sir Robert Hadfield Wing PFI project, a 32 year concession to design, build, finance and maintain a 168 bed after-care facility at the Northern General Hospital in Sheffield.
Further information on the Current Portfolio is set out in Part IV of this document. The Group is continuing to appraise suitable investment opportunities and expects to secure further acquisitions in the future, with the possibility of further commitments or allocations being made prior to the closing of the Issue. The repayment of existing Group Debt will provide the Group with greater flexibility to make further investments in the infrastructure market as suitable opportunities arise.
The Company is now seeking to raise £180 million (before expenses) through the Placing, Open Offer and Offer for Subscription of C Shares. The Directors have also reserved the right, in consultation with Collins Stewart, to increase the size of the Issue up to a maximum of £250 million in circumstances in which Additional Investments are made or identified and overall demand for C Shares exceeds the target amount.
The net proceeds of the Issue will not in any event exceed the aggregate of: (i) the Group's funding requirements (which as at the date of this prospectus stand at £139 million); (ii) the consideration payable for the Conditional Investment of approximately £39 million; and (iii) the consideration payable for any Additional Investments including £15 million for an Additional Investment which the Company expects to acquire prior to Admission.
If the Issue meets its target size of £180 million, it is expected that the Company will receive approximately £177.6 million from the Issue, net of fees and expenses associated with the Issue, which are anticipated to amount to approximately £2.4 million. If the Issue is increased to its maximum size of £250 million and is fully subscribed, it is expected that the Company will receive approximately £246.9 million from the Issue, net of fees and expenses associated with the Issue, which are anticipated to amount to approximately £3.1 million.
The Company will apply the net proceeds of the Issue to meet the Company's funding requirements, to reduce outstanding Group Debt and, depending upon the amount of proceeds raised as described above, to provide the Group with additional resources to make further investments. The Group will only proceed with the Conditional Investment and any further Additional Investments if, after taking account of the net proceeds of the Issue, the Group Debt outstanding after such acquisition or acquisitions would be at a level that the Board considers prudent having regard to the 2012 Facility.
The Directors believe that the use of C Shares is the most appropriate way by which to raise further equity capital, as it will ensure that the portfolio value as at 31 March 2012 forms the basis for determining the price at which new Ordinary Shares are issued to investors upon the conversion of the C Shares. Furthermore, provided that a minimum of £60 million is raised, the costs of the Issue will be fully borne by C Share investors and will not therefore dilute the Net Asset Value of Existing Ordinary Shares.
The Issue is conditional, inter alia, on approval by Existing Shareholders. An ordinary resolution to approve the Issue will be put to Existing Shareholders at an Extraordinary General Meeting of the Company to be held on 23 March 2012.
The Issue is being implemented by way of a Placing, Open Offer and Offer for Subscription. The inclusion of an Open Offer ensures that a portion of the new share capital being made available pursuant to the Issue is reserved in the first instance exclusively for Existing Shareholders.
Under the Open Offer, Existing Shareholders are entitled to subscribe for up to an aggregate of 110,903,702 C Shares pro rata to their holdings of Ordinary Shares on the following basis:
The balance of C Shares to be made available under the Issue, together with any C Shares not taken up pursuant to the Open Offer, will be made available for subscription under the Excess Application Facility, the Offer for Subscription and the Placing.
It is anticipated that the Calculation Time and subsequent Conversion of the C Shares into Ordinary Shares will occur in April 2012 after the Company has published the Valuation for the investment portfolio as at 31 March 2012 and the C Share monies are subsequently applied in repaying Group Debt. The Conversion Ratio will therefore be based upon the 31 March 2012 Valuation which the Directors believe is more equitable to Existing Shareholders and C Shareholders as they will have the benefit of the Conversion being effected on the basis of an updated Valuation.
Pending investment, the net proceeds of the Issue (and any interest thereon) will be the sole asset attributable to the C Shares and will be held on deposit in an interest bearing account in Guernsey with Barclays Bank and/or Royal Bank of Scotland.
Further information relating to the Issue and the terms of the C Shares is set out in Part VII and Part IX respectively.
The Company's low correlation to general equities, coupled with a relatively resilient net asset value, has enabled it to play a valuable strategic role within investors' portfolios. The Company has demonstrated strong share price performance over the medium term, trading at a premium to net asset value since April 2009, and has experienced continued demand for its equity, as evidenced by the tap issues of 65,899,500 Ordinary Shares since the Company's last C Share issue in November 2010. This progress has been based on the performance of the Investment Adviser, whose team of professionals in this asset class provides experience and stability of service, alongside a strong track record.
Given this backdrop, and in light of the positive prospects for further investments by the Group in the short to medium term, the Directors believe that a further issue of C Shares is in the best interests of the Company and of the Shareholders as a whole. By applying the proceeds of the Issue to reduce the Company's net gearing position, the Company will:
The Directors believe that the Issue will have the following benefits:
u The Company will be able to repay existing borrowings, thereby freeing up the full extent of its loan facilities for further investments in the infrastructure market as these opportunities arise.
As at the date of this prospectus, the Directors intend to subscribe for, in aggregate, 100,000 C Shares pursuant to the Issue.
The Company seeks to provide investors with long term distributions, at levels that are sustainable, and to preserve the capital value of its investment portfolio over the long term with potential for capital growth. It also targets a progressive distribution policy, aiming to grow its annual distributions to 7 pence per Ordinary Share by March 20134. The Company is targeting an IRR of around 7 per cent.5 on the Ordinary Shares to be issued upon conversion of the C Shares.
The Group's Investment Policy is to ensure a diversified portfolio which has a number of similarly sized investments and is not dominated by any single investment. The Group will in general seek to acquire Infrastructure Equity with similar characteristics to the Current Portfolio.
The Group's Investment Policy is set out in full on pages 33 and 34 of this prospectus.
The Group has, as part of its Investment Policy, an investment strategy which it has applied consistently since May 2009. The investment strategy is primarily focused on operational concessions and projects in the following core infrastructure sectors:
u the main focus remains PFI/PPP/P3 concessions, most likely to be operational although projects under construction will be considered;
4 This is a target only and is not a profit forecast. There can be no assurance that this target will be met or that the Company will make any distributions whatsoever or that investors will recover all or any of their investments.
5 This is a target only and is not a profit forecast. There can be no assurance that this target will be met or that the Company will make any distributions whatsoever or that investors will recover all or any of their investments.
The Investment Adviser is continually seeking new infrastructure investments which will allow for development and diversification of the portfolio, while meeting the Group's Investment Policy and having the required financial and risk characteristics to enable the Group to meet its investment targets. During 2011, the Investment Adviser considered 20 potential investment opportunities in detail. Of these 6 new investments were secured and 14 did not proceed as either the Investment Adviser decided not to submit a bid after careful consideration or its bid was not successful. Whilst there is no guarantee that suitable new investments will be found in the future, the Investment Adviser is confident that, through its leading market position, new attractive investment opportunities will be sourced for the Group. The investment process is set out in more detail on pages 75 to 77.
In searching for new opportunities, the Company's current geographic focus involves a proactive approach in the UK, Europe, North America and Australia. The Investment Adviser believes there will be opportunities to acquire further PFI investments in the UK as sponsors continue to sell down their interests in projects and portfolios. In Europe, with the developing growth of PFI/PPP as a procurement method in selected countries, there are a growing number of projects in construction which will become operational in due course. The Investment Adviser believes that, in the same way as in the UK, the sponsors of these projects will want, in due course, to sell their investments. A similar situation is developing in Canada and Australia, where there is a welldeveloped PPP/P3 procurement process. A more targeted approach is being taken to the Asia Pacific region, with opportunities in developing countries such as India and China not currently being considered, as the Investment Adviser believes these markets are not yet sufficiently developed to provide investments with the appropriate risk profile for the Group.
Since launch, the Group has acquired 25 follow-on investments in Project Companies in which it already held an investment. In the Current Portfolio, there are a number of shareholders in many of the Project Companies who may decide to dispose of their stakes in the future and, if this is the case, the Group is well placed to acquire any such stakes.
The Company is a limited liability, Guernsey-incorporated, closed-ended investment company and its Ordinary Shares are admitted to the Official List with a premium listing and to trading on the Main Market of the London Stock Exchange. It is also a component of the FTSE 250 Index. An investment in the Company enables investors to access the income stream from a diversified and established portfolio of quality, predominantly operational infrastructure investments.
The Company was launched on 29 March 2006 and currently has 665,422,215 Ordinary Shares in issue which are admitted to the Official List and to trading on the Main Market of the London Stock Exchange. As at 24 February 2012 being the latest practicable date prior to the publication of this prospectus. The Company had a market capitalisation of £795.2 million and the Current Portfolio Value was £893.5 million. The NAV per Ordinary Share, on an investment basis, as at 31 December 2011, was 114.0 pence.
The Company changed its name from HSBC Infrastructure Company Limited to HICL Infrastructure Company Limited on 29 March 2011. The Company has been declared by the GFSC under Section 8 of the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended) and the Authorised Closed-Ended Collective Investment Schemes Rules 2008 to be an Authorised Closed-Ended Collective Investment Scheme. The Company is authorised and regulated by the GFSC.
The Company was incorporated with an authorised share capital of £100,000 divided into 100 Management Shares of 0.01 pence each and 999,999,900 unclassified shares of 0.01 pence each.
An Extraordinary General Meeting of the Company has been convened for 23 March 2012 at which, inter alia, a special resolution to increase the share capital of the Company to £200,000 divided into 100 Management Shares of 0.01 pence each and 1,999,999,900 unclassified shares of 0.01 pence each will be put to Shareholders.
Details of the Shareholders' voting rights and their entitlements to dividends and other distributions and on any winding-up of the Company are described in Part XI on pages 114 to 123 of this prospectus.
The Company makes its investments via a group structure involving two Luxembourg-domiciled investment companies (structured as SOPARFIs) and an English limited partnership. The assets of the Company are therefore held indirectly through the Holding Entities and any subsidiaries wholly owned by the general partner of the English limited partnership on behalf of the English limited partnership. InfraRed Capital Partners Limited (previously HSBC Specialist Fund Management Limited) is authorised and regulated in the UK by the FSA and acts as the Investment Adviser of the Company and as Operator of the Partnership.
The Group invests in infrastructure investments indirectly via the Holding Entities:
The Group's infrastructure investments are registered in the name of the General Partner, the Partnership or wholly owned subsidiaries of the Partnership.
The Company offers investors access to income streams from a Current Portfolio of 70 investments with a Current Portfolio Value of £893.5 million. The Group intends to make further infrastructure investments in the future as suitable opportunities arise. The Directors believe that attractive opportunities are likely to arise outside, as well as within, the UK (where the majority of the projects within the Current Portfolio are based).
The Directors and the Investment Adviser believe that an investment in infrastructure assets offers the following features, and that these compare favourably with an investment in other asset classes such as non-infrastructure equities and real estate:
The Directors also believe that an investment in the Company offers investors seeking an investment in infrastructure assets the following benefits:
The Company seeks to provide investors with long term distributions, at levels that are sustainable, and to preserve the capital value of its investment portfolio over the long term with potential for capital growth. The Company targets a progressive distribution policy and growth of its annual distributions to 7p per Ordinary Share by March 20136. The Company is targeting an IRR of 7 to 8 per cent.7 on the original issue price of its Ordinary Shares in March 2006, to be achieved over the long term via active management, including the acquisition by the Group of further investments to complement the Current Portfolio and by the prudent use of gearing.
The Group's Investment Policy is to ensure a diversified portfolio which has a number of similarly sized investments and is not dominated by any single investment. The Group will seek to acquire Infrastructure Equity with similar risk/reward characteristics to the Current Portfolio, which may include (but is not limited to):
The Group will also seek to enhance returns for Shareholders by acquiring more diverse infrastructure investments. The Directors currently intend that the Group may invest in aggregate up to 35 per cent. of its total assets (at the time the relevant investment is made) in:
The Directors believe that attractive opportunities for the Group to enhance returns for investors are likely to arise outside as well as within the UK (where the majority of the projects in the Current Portfolio are based). The Group may therefore make investments in the European Union, Norway, Switzerland, the Americas and selected territories in Asia and Australasia. The Group may also make investments in other markets should suitable opportunities arise. The Group will seek to mitigate country risk by concentrating on investment opportunities in jurisdictions where it considers that contract structures and enforceability are reliable and where (to the extent applicable) public sector obligations carry what the Investment Adviser believes to be a satisfactory credit rating and where financial markets are relatively mature.
Prospectus 2012 u 33 6 This is a target and not a profit forecast. There can be no assurance that this target will be met or that the Company will make any distributions whatsoever or that investors will recover all or any of their investments.
7 This is a target and not a profit forecast. There can be no assurance that this target will be met or that the Company will make any distributions whatsoever or that investors will recover all or any of their investments.
For each new acquisition made, the Company will ensure that such investment acquired does not have an acquisition value (or, if it is a further stake in an existing investment, the combined value of both the existing stake and the further stake acquired) greater than 20 per cent. of the total gross assets of the Company immediately post acquisition. The total gross assets will be calculated based on the last published gross investment valuation of the portfolio plus acquisitions made since the date of such valuation at their cost of acquisition.
The purpose of this limit is to ensure the portfolio has a number of investments and is not dominated by any single investment.
In selecting new investments to acquire, the Investment Adviser will seek to ensure that the portfolio of investments has a range of public sector clients and supply chain contractors, in order to avoid over-reliance on either a single client or a single contractor.
The Company is subject to certain investment restrictions pursuant to the Listing Rules which are reflected in the Investment Policy. Such investment restrictions are set out in more detail in Part XI on page 109 of this prospectus.
The Group intends to make prudent use of leverage to finance the acquisition of investments, to enhance returns to investors and to finance outstanding investment obligations. Under the Articles, the Group's outstanding borrowings, excluding intra-group borrowings and the debts of underlying investee companies but including any financial guarantees to support subscription obligations, are limited to 50 per cent. of the Adjusted Gross Asset Value (meaning the fair market value, without deductions for borrowed money or other liabilities or accruals, and including outstanding subscription obligations) of its investments and cash balances at any time. The Group may borrow in currencies other than GBP as part of its currency hedging strategy.
Any material amendments to the Investment Policy will require the approval of Shareholders.
It is expected that further investments will be sourced by the Investment Adviser and it is likely that some of these will be investments that have been originated and developed by, and may be acquired from, the Investment Adviser or from a fund managed by the Investment Adviser. In order to deal with these potential conflicts of interest, detailed procedures and arrangements have been established to manage transactions between the Group, the Investment Adviser or funds managed by the Investment Adviser (the "Rules of Engagement"). If the Group invests in funds managed or operated by the Investment Adviser, the Group shall bear any management or similar fees charged in relation to such fund provided, however, that the value of the Group's investments in such funds shall not be counted towards the valuation of the Group's investments for the purposes of calculating the fees/profit share payable to the Investment Adviser or the General Partner (as described on page 74 of this prospectus).
It is possible that in future the Group may seek to purchase certain investments from Fund II (or any other funds managed or operated by the Investment Adviser) once those investments have matured and to the extent that the investments suit the Group's investment objectives and strategy. If such acquisitions are made, appropriate procedures from the Rules of Engagement will be put in place to manage the conflict.
Key features of the Rules of Engagement include:
u the creation of separate committees within the Investment Adviser. These committees represent the interests of the vendors on the one hand (the "Sellside Committee") and the Group on the other (the "Buyside Committee"), to ensure arm's length decision making and approval processes. The membership of each committee is restricted in such a way as to ensure its
independence and to minimise conflicts of interest arising;
In considering any such acquisition the Directors will, as they deem necessary, review and ask questions of the Buyside Committee and the Group's other advisers, to ensure that the Directors are satisfied that the terms of any such acquisitions are negotiated on an arm's length basis.
Over the period from 29 March 2006 to 31 December 2011, the Net Asset Value per Ordinary Share of the Company increased from 98.4 pence to 114.0 pence. The Company announced on 10 February 2012 that the Directors' valuation of the Company's portfolio as at 31 December 2011 was £889.7 million.
The Company made a total first year distribution of 6.1 pence per Ordinary Share, which was ahead of the target of 5.75 pence per Ordinary Share as set out in the launch prospectus, followed by total distributions of 6.25 pence per Ordinary Share, 6.4 pence per Ordinary Share, 6.55 pence per Ordinary Share and 6.7 pence per Ordinary Share for the financial years ended 31 March 2008, 31 March 2009, 31 March 2010 and 31 March 2011 respectively. In November 2011, the Company announced an interim dividend of 3.35 pence per Ordinary Share for the financial year ending 31 March 2012 which was paid on 30 December 2011. The Company remains on course to meet its target of a dividend of 7.0 per share by March 2013.8
The graph below, together with the accompanying statistics in Table 1, show the Company's total shareholder return from listing on the Official List on 29 March 2006 to 24 February 2012 (being the latest practicable date for the purposes of this document), compared with the equivalent information over the same period in respect of the FTSE AllShare Index, the Investment Companies sector as a whole, and each of the UK High Income and Property closed-end fund subsectors. These demonstrate the high level of performance delivered by the Company to Shareholders, over both the short and long term, when set against competing asset classes.
Source: Thomson Datastream
| Shareholder total return since HICL launch – comparison with equity indices | ||||
|---|---|---|---|---|
| 6mth | 1y | 5y | Since HICL launch |
|
| HICL | 6.68 | 8.11 | 41.47 | 65.19 |
| UK Inv Trusts Total Market ex 3i | 8.71 | 1.32 | 11.05 | 20.98 |
| FTSE AllShare Index | 17.15 | 3.58 | 10.98 | 24.55 |
| UK Inv Trusts Property | -3.14 | -0.64 | -28.14 | -21.79 |
| UK Inv Trusts UK High Income | 7.95 | 4.87 | -8.42 | 5.61 |
Source: Thomson Datastream All index figures are on a total return basis in sterling terms to 24 February 2012. HICL Infrastructure Company Limited figures are shareholder total return to 24 February 2012.10
With the Company benefiting from a premium listing on the Official List and for admission to trading on the Main Market of the London Stock Exchange, and with a well-established two-way market for the secondary trading of the Company's share capital, liquidity in the Ordinary Shares is substantial. During the course of 2011, the average monthly turnover in the Company's Ordinary Shares stood at 3.06 per cent., equivalent to 20.4 million Ordinary Shares (on the basis of the Company's issued share capital as at the date of this prospectus).
To date, distributions on the Ordinary Shares have been paid twice a year, in respect of the six month periods to 31 March and 30 September, and have been made by way of dividend. Subject to market conditions, this is expected to continue. The Company may also make distributions by way of capital distributions (or otherwise in accordance with the Laws and the Articles) as well as, or in lieu of, by way of dividend if and to the extent that the Directors consider this to be appropriate.
Further to Shareholder approval the Company may offer a scrip dividend alternative, issuing new Ordinary Shares in lieu of a dividend to those Shareholders who elect to receive the same. As at the date of this prospectus, it is the intention of the Directors to continue to seek Shareholder approval at each annual general meeting to offer a scrip dividend alternative.
C Shares are entitled to receive, and participate in, any dividends declared to the extent that such dividend derives from the net assets of the Company attributable to such C Shares. However, C Shareholders will not be entitled in respect of their C Shares to any dividend or distribution declared for the financial year ending 31 March 2012, although Ordinary Shares resulting from the conversion of C Shares will rank equally with all other Ordinary Shares in respect of any and all dividends declared after Conversion. The Directors intend to declare a second interim dividend for the year ended 31 March 2012 prior to the Calculation Time.
The Directors intend that the Company will generally restrict distributions (by way of dividend or otherwise) to the level of Distributable Cash Flows, and dividends to the level of income from the Group's investments, as recognised in the relevant financial year. The Directors may, where they consider this to be appropriate in respect of acquisitions where such assets are not fully cash generative, distribute as dividend an amount up to the level of the Group's gross income, i.e. in excess of Distributable Cash Flows.
Project Companies which are operational usually make distributions to the Group twice a year, and occasionally these payments may be received shortly after a period end due to timing of payment process. The Directors intend to include such amounts in Distributable Cash Flows where it is clear these payments relate to the period concerned.
A proportion of Distributable Cash Flows includes cash receipts from the repayment of the subordinated debt element of the Infrastructure Equity in Project Companies in which the Group invests. This is because the Directors believe that the value of the future cash distributions expected to be made by such Project Companies in the final years of their concessions should be sufficient to preserve the capital value of the investments until those cash distributions commence.
Subject to market conditions, it is intended that distributions will be paid as interim dividends.
The Company retains the discretion to reinvest the capital proceeds of any investments which are transferred or sold by the Group during the life of the Company.
In December 2007, the Partnership took out a £200 million multi-currency revolving credit facility (the "2007 Facility") with the Principal Bankers to replace the original facility taken out at launch. The 2007 Facility is split into two tranches: a £120 million tranche A and an £80 million tranche B. Tranche A may be used to finance or refinance up to 50 per cent. of certain investments, repay existing debt incurred in relation to those investments and downstream loans to subsidiaries. Tranche B may be used to finance or refinance the investments, related costs, downstream loans to subsidiaries and for general working capital and corporate purposes. The 2007 Facility may be utilised by way of cash advances and letters of credit in GBP and optional currencies (subject to certain limits). The repayment date of the 2007 Facility is 18 December 2012. Further details of the 2007 Facility are set out in Part XI on page 126 of this prospectus.
In February 2012, the Partnership took out a £150 million multi-currency revolving credit facility (the "2012 Facility") with the Royal Bank of Scotland plc and National Australia Bank Limited to replace the 2007 Facility. The 2012 Facility is split into two tranches: a £50m tranche with an 18 month term and a £100m multi-currency tranche with a 3 year term repayable on 28 February 2015. The £50m tranche is only expected to be utilised if the Issue fails to reach its target minimum size of £60 million. The £100m multi-currency tranche is made up of a €50 million Euro tranche, a CAN\$35 million Canadian dollar tranche and a €42 million multi-currency tranche with Euros as its base currency and may be utilised by way of cash advances denominated in the respective currencies of the tranches or, in respect of the multi-currency tranche only, in cash advances in Euros or optional currencies (subject to certain limits) or by the issue of letters of credit. Further details of the 2012 Facility are set out in Part XI on pages 126 to 127 of this prospectus.
A portion of the Group's underlying investments may be denominated in Currencies other than GBP. For example, a portion of the Current Portfolio is denominated in Euros and Canadian dollars. Any dividends or distributions in respect of the Ordinary Shares however will be made in GBP, and the market prices and Net Asset Value of the Ordinary Shares will be reported in GBP.
Currency hedging has been managed on a balance sheet basis through the forward sale of Euros and Canadian Dollars and by debt drawings in Euros and Canadian Dollars under the 2007 Facility. This has minimised the volatility in the Group's NAV from foreign exchange movements.
The Group intends to adjust its foreign currency hedging strategy once the 2012 Facility is drawn, in part to reflect the increased cost of the 2012 Facility. The change will result in increased hedging of investment income from overseas assets coupled with a reduced balance sheet hedge. The net effect of the changes is expected to give more yield certainty and a NAV per share sensitivity of up to 1.0p for a 10 per cent. forex movement.
Interest rate hedging may be carried out to seek to provide protection against increasing costs of servicing Group Debt drawn down to finance investments. This may involve the use of interest rate derivatives. Currency and interest rate hedging transactions will only be undertaken for the purpose of efficient portfolio management and will not be carried out for speculative purposes.
The Group's annual reports are prepared up to 31 March each year and copies are sent to Shareholders in June of that year. Shareholders also receive unaudited interim reports covering the six month period to 30 September in each year. The annual general meeting of the Company is held in Guernsey in each year, the most recent having been held on 25 July 2011.
The audited accounts of the Group are drawn up in GBP and prepared under IFRS. Under IFRS, the Group prepares an income statement which, unlike a statement of total return, does not differentiate between revenue and capital. The Group's management and administration fees, finance costs and all other expenses are charged through the income statement. The Group's accounts consolidate the Partnership and therefore, under IFRS rules, certain interests in Project Companies are consolidated. In addition, fair value changes of equity investments in Project Companies are recognised in the Group's income statement. The Group's accounts include a pro forma statement illustrating the Group's income account and balance sheet on an investment basis rather than a consolidated basis in order to provide Shareholders with a more meaningful representation of the Group's net asset value, its capacity for investment and its capacity to make distributions.
The Company and the Investment Adviser, in conjunction with Collins Stewart, have developed a format and programme of regular investor briefings. These have to date included:
The Investment Adviser is responsible for carrying out the fair market valuation of the Group's investments which is presented to the Directors for their approval and adoption. The Directors receive a report and opinion from a third party, with considerable expertise in valuing these types of investment at each valuation date. The valuation is carried out on a six monthly basis as at 31 March and 30 September each year. The valuation principles used in such methodology are based on a discounted cash flow methodology, and adjusted for EVCA (European Private Equity and Venture Capital Association) guidelines where appropriate to comply with IAS 39, given the special nature of infrastructure investments. In circumstances in which an investment was traded, a market quote would be used.
This is the same methodology as has been used at the time of launch and at each subsequent six month reporting period.
Fair value for each investment is derived from the present value of the investment's expected future cash flows, using reasonable assumptions and forecasts, and an appropriate discount rate. The Investment Adviser exercises its judgment in assessing the expected future cash flows from each investment. Each Project Company produces detailed concession life financial models and the Investment Adviser typically takes, inter alia, the following into account in its review of such models and makes amendments where appropriate:
Discount rates used for valuing each investment are based on the appropriate risk free rate (derived from the relevant government bond or gilt) and a risk premium. The risk premium takes into account risks associated with the financing of a project such as project risks (e.g. liquidity, currency risks, market appetite) and any risks to project earnings (e.g. predictability and covenant of the concession income), all of which may be differentiated by project phase.
The Investment Adviser uses its judgement in arriving at the appropriate discount rate. This is based on its knowledge of the market, taking into account intelligence gained from its bidding activities, discussions with financial advisers in the appropriate market and publicly available information on relevant transactions.
| Launch | 31 March 2007 |
31 March 2008 |
31 March 2009 |
31 March 2010 |
31 March 2011 |
30 Sept 2011 |
31 Dec 2011 |
|
|---|---|---|---|---|---|---|---|---|
| Directors' Valuation (million) |
£250.4 | £342.0 | £437.9 | £445.7 | £501.3 | £673.1 | £719.3 | £889.7 |
| Weighted average discount rate |
8.0% | 7.0% | 7.5% | 8.3% | 8.8% | 8.7% | 8.7% | 8.6% |
| Discount rate range |
n.a. | 6.5% to 9% |
7.0% to 12.0% |
7.8% to 22.4% |
8.4% to 13.2% |
7.8% to 10.0% |
8.4% to 9.4% |
8.3% to 11.0% |
| Weighted average discount rate (excluding Kemble Water) |
8.0% | Not disclosed |
7.4% | 8.1% | 8.7% | 8.7% | 8.7% | 8.6% |
The Directors' valuation of the Group portfolio of investments since launch has been as follows:
The Investment Adviser, on behalf of the Company, calculates the Net Asset Value of an Ordinary Share as at 31 March and 30 September each year and this is reported to Shareholders in the Company's annual report and interim financial statements. All valuations made by the Investment Adviser are made, in part, on valuation information provided by the Project Companies in which the Group has invested. Although the Investment Adviser evaluates all such information and data, it may not be in a position to confirm the completeness, genuineness or accuracy of such information or data. In addition, the financial reports typically provided by the Project Companies are provided only on a quarterly or half yearly basis and generally are issued one to four months after their respective valuation dates. Consequently, each half yearly Net Asset Value contains information that may be out of date and require updating and completing. Shareholders should bear in mind that the actual Net Asset Values at such time may be materially different from these half yearly valuations.
The Directors do not envisage any circumstances in which valuations will be suspended.
The Company has been established with an unlimited life.
The Ordinary Shares have traded at a premium to NAV since April 2009. To regulate the premium at which the Ordinary Shares were trading, and to provide additional funding, the Company has issued 65,899,500 million Ordinary Shares by way of tap issues since January 2011. The Directors will continue to monitor the price at which the Ordinary Shares are trading going forward and may seek to issue further Ordinary Shares in the future.
In accordance with the requirements of the Listing Rules in relation to companies with a premium listing, the Company's Articles give Existing Shareholders pre-emption rights over any issue of further shares of a class held by such existing shareholders. The pre-emption rights may be disapplied pursuant to a special resolution of Shareholders.
An Extraordinary General Meeting of the Company has been convened for 23 March 2012 at which, inter alia, a special resolution will be put to Shareholders proposing that pre-emption rights be waived in respect of 10 per cent. of such number of Ordinary Shares as are in issue immediately following Conversion. This disapplication will expire on the date falling 15 months after the date of the Extraordinary General Meeting or the conclusion of the Company's next annual general meeting, whichever is the earlier.
At the annual general meeting of the Company held on 25 July 2011, a special resolution was passed authorising the Company (subject to the Listing Rules and all other applicable legislation and regulations) to make market purchases of up to 14.99 per cent. per annum of its issued Ordinary Shares for the purpose of addressing any imbalance between the supply of and demand for the Ordinary Shares, to assist in minimising any discount to Net Asset Value at which the Ordinary Shares may be trading and to increase the Net Asset Value per Ordinary Share.
The Directors intend to seek a renewal of this authority from Shareholders at each annual general meeting of the Company. Purchases of Ordinary Shares will be made within guidelines established from time to time by the Directors. The timing of any purchases will be decided by the Directors in light of prevailing market conditions. However, such purchases will only be made in accordance with applicable law, the Listing Rules and the Disclosure Rules in force from time to time or any successor laws, rules or regulations. The Listing Rules currently provide that where the Company purchases its Ordinary Shares the price to be paid must not be more than 105 per cent. of the average of the market values of the Ordinary Shares for the five Business Days before the purchase is made or, if higher, the higher of the latest independent trade and the highest current independent bid.
Additionally, in order to further minimise the risk of the Ordinary Shares trading at a discount to Net Asset Value and to assist in the narrowing of any discount at which the Ordinary Shares may trade from time to time, the Company may make tender offers from time to time. As such, subject to certain limitations (set out below) and the Directors exercising their discretion to operate the tender offer on any relevant occasion, Shareholders may tender for purchase all or part of their holdings of Ordinary Shares for cash. It is envisaged that the tender offers will be effected such that the tender offer calculation date ("Calculation Date") will be 30 September of the relevant year (or the following Business Day). The price at which Ordinary Shares will be purchased will be the prevailing Net Asset Value per Share as at the close of business on the relevant Calculation Date, subject to a discount of 3 per cent. (to cover, inter alia, the costs of the tender offer). Tender offers will, for regulatory reasons, not normally be open to Shareholders in Australia, Canada, Japan or the United States of America.
Implementation of a tender offer is subject to prior Shareholder approval. Renewal of the repurchase authority will be sought at each annual general meeting. In determining whether to operate a tender offer at any particular time, the Directors will, inter alia, take into account whether the Company has sufficient cash available to it at such time.
In order to implement a tender offer, a market maker selected by the Board will, as principal, purchase the Ordinary Shares tendered at the tender price and will sell the relevant Ordinary Shares on to the Company at the same price by way of an on-market transaction unless the Company has agreed with the market maker that the market maker may sell any of the Ordinary Shares in the market. The terms and conditions, and in particular those relating to excluded overseas Shareholders, upon which it is intended that each tender offer will be implemented will be sent to Shareholders at the relevant time. The tender offers will be conducted in accordance with the Listing Rules and the rules of the London Stock Exchange.
Investors should note that the operation of the tender offers is entirely discretionary and they should place no expectation or reliance on the Directors exercising such discretion on any one or more occasions in respect of Ordinary Shares or on the number of Ordinary Shares which may be the subject of a tender offer.
Investors should not expect that they will necessarily be able to realise, within a period which they would otherwise regard as reasonable, their investment in the Company, nor can they be certain that they will be able to realise their investment on a basis that necessarily reflects the value of the underlying investments held by the Group.
Infrastructure investments are generally defined as investments in assets that provide essential services to society. Infrastructure investments fall into different sectors with different risks/returns associated with them and are broadly categorised between social and economic infrastructure (see below). In addition, the infrastructure asset class can be further segmented between primary (capital growth) and secondary (operational and yielding) assets. A subset of economic infrastructure is renewable energy infrastructure projects, wherein the revenue stream is a function of the electricity generated and the tariff/contractual payment regime.
Social infrastructure assets are generally procured and funded by the public sector to provide services for the general public through long term PFI/PPP/P3 concessions and other Government programmes. The preferred model for remuneration is through Client availability payments linked to service performance and availability of the asset for use (e.g. by teachers and pupils at a school). Assets in this subsector include education, health care, prisons, court houses, public sector buildings and public order training facilities. It can also include transportation assets where the revenue is paid by the procuring Client.
Economic infrastructure supports economic development and commerce as well as the movement of goods and people. It includes transportation assets and regulated utilities. Transportation assets include toll transport links (roads, bridges, tunnels), seaports, airports, heavy and light railways and bulk transport terminals. Regulated utilities include electricity/gas transmission, electricity/gas distribution, water and waste water utilities and water and waste water treatment. Usually a long term concession is let, but equally the asset can also be sold outright through privatisation. End-user payments finance the ongoing operations, maintenance and capital/acquisition costs of the assets. Other broader examples of economic infrastructure may include communications infrastructure (fixed line networks, mobile towers, satellite systems, broadcast facilities and cable networks), ferries, oil and gas pipeline/storage, merchant power generation, energy trading, car parks, and motorway service stations.
Substantial political, economic, social and environmental drivers have emerged that underpin the commercial investment opportunity in renewable energy infrastructure. These include increasing concern about sources of energy supply and energy security, scarcity of key natural resources, and climate change, leading to a drive towards a lower carbon economy. Examples of renewable energy infrastructure projects include solar electricity generation, wind farms and hydro electric power schemes. These projects tend to have revenues either based on agreed feed-in tariffs or other contractual mechanisms to ensure that, provided electricity is generated, the revenue earned is known. Properly structured renewable energy projects can produce long term stable investment cash flows in a similar way to social and economic infrastructure assets.
In an infrastructure project, a private sector consortium (usually comprising a construction company, an operator and financial investors) will form a new Project Company which bids for a concession contract from a procuring Client (typically in the public sector). If successful in its bid, the Project Company is appointed by the Client to be responsible for the financing and construction of an infrastructure asset such as a hospital, school or transport link, and its long term maintenance and operation in accordance with agreed service standards. The operational services for which the Project Company is responsible are typically low technology, such as cleaning, catering, maintenance, operation and security. Core 'delivery' services such as teaching or medical care are typically retained by the public sector rather than being provided by the private sector.
Although the Project Company is responsible for the construction of the infrastructure asset it does not usually have full ownership rights over the asset (some rights being retained by the procuring Client). The Project Company does, however, have various valuable rights under the long term concession contract including the right to receive the revenue represented by that contract subject to performance of its obligations and/or proper provision of the required services.
At the outset of the project, the Project Company generally subcontracts the majority of its obligations to third parties, often for the duration of the concession. The Project Company seeks to pass on to those third parties the various risks associated with providing the construction and operational services, subject to appropriate liability and indemnity provisions in the subcontracts. In some instances, the Project Company may perform the operation and maintenance of the asset itself.
The Project Company funds the initial project costs, including the cost of the construction of the infrastructure asset, through a mixture of: (i) long term senior debt contributed by banks or through the issue of bonds; and (ii) Infrastructure Equity contributed by the financial investors and other consortium members participating in the Project Company. From time to time the public sector may also provide some of the funding itself or contribute a subsidy to the capital cost.
In the case of public sector concessions the projects are able to support significant leverage. The long term senior debt typically constitutes between 70-90 per cent. of the relevant Project Company's initial funding, with the balance being provided by Infrastructure Equity. This level of senior debt is generally available because the Project Company's income stream is payable by public sector or equivalent bodies with low counterparty risk, and because the Project Company has contractually allocated a number of key risks that might affect its income stream to subcontractors who have sufficient financial resources and experience to bear those risks. The senior debt is secured, inter alia, on the assets of the Project Company (including the concession contract but generally excluding any land, structures or buildings).
Once the infrastructure asset has been built, and provided the agreed service levels are met, the Client or end users make regular payments to the Project Company for the remainder of the concession (typically 20 – 50 years). These payments are often categorised as either "availability" based, "demand" based, or "feed-in", depending on the nature of the project:
project, the Project Company is paid by the public sector Client according to how steady the traffic is travelling and deductions are levied if traffic congestion builds up.
u "Feed-in" payment arrangements are normally found in renewable energy projects where, provided the electricity is produced, the Project Company will receive a predictable income based on either a contractual tariff or similar arrangement.
Regulated utilities typically represent investments in existing monopoly businesses and offer few opportunities for volume growth but deliver an essential service with little to no demand risk, and little underlying sensitivity with the economic cycle. A regulated utility therefore may offer stable cash flows that are only susceptible to regulatory review.
The payments received by a Project Company from its Client or end users are used to remunerate the Infrastructure Equity investment in the Project Company once the senior debt service, operating costs and other expenses of the Project Company have been met.
As shown in the above table, capital in the form of Infrastructure Equity is committed to finance the construction phase of a project. Senior debt tends to be drawn first, and Infrastructure Equity subscription amounts are typically drawn towards the end of the construction phase. Positive investment cash flow or "income" from an investment in a Project Company is typically received once the project is operational. "Income" from the investment is received in the form of: (i) interest payments on subordinated debt; (ii) repayment of subordinated debt capital; and (iii) dividend payments. Part of the "income yield" received by Infrastructure Equity investors typically therefore will comprise a capital repayment.
Dividend payments by a Project Company tend to be concentrated later in the project life, especially in the last few years once senior debt is fully repaid. This is illustrated in the increase in the cash flows shown in Table 2 above. The present value (on a discounted cash flow basis) of these residual cash flows should be significant enough to largely preserve the capital value of the Project Company, until the distribution of these residual cash flows commences. This is illustrated in the increase in future cash flows shown in Table 4 below on page 50.
Returns on Infrastructure Equity tend to vary as inflation rates vary. In calculating the expected future cash flows of the Current Portfolio, long term inflation rates need to be assumed for each Investment. In the case of the UK investments, the Group's current assumptions as at 31 December 2011 are that RPI (and RPIx) over the long term will be (on an annual basis) 2.75 per cent. per annum. To assist investors, the Investment Adviser has produced in the Company's results a sensitivity analysis on how the valuation of the portfolio varies with changing key economic assumptions (see the Interim Results of the Company to 30 September 2011, available on the website www.hicl.com). In the case of inflation, an increase or decrease of 1 per cent. over or under the assumed annual rate (for each and every year to the end of each project's concessions) would result in an increase or decrease respectively in the Directors' valuation of the Company's portfolio as at 31 December 2011 of approximately 6.6 per cent.
This impact on Infrastructure Equity returns is the result of the net effect of inflation on the revenues and the costs of the Project Company. The revenues and components of the cost base of Project Companies will typically be fixed in real terms under long term contracts and then increased over time with reference to specific inflation indices. At the outset these arrangements are structured so as to achieve, as far as possible within other constraints, a matching of the indexation of the revenue with the indexation of the cost base so as to provide a measure of protection of the real Infrastructure Equity returns against movements in inflation.
The sensitivity of Infrastructure Equity returns to inflation varies between projects but, generally, lower rates of inflation than assumed in the base case will lead to lower nominal returns. Conversely, higher rates of inflation will lead to increased nominal returns, although this may only occur over the longer term. This is because in some projects in the early years of a concession the Project Company may have insufficient distributable profit reserves to pay dividends out of the additional cash generated by incremental inflation. The beneficial effect of inflation on returns may therefore be deferred until dividends are payable.
Subject to the relevant risk factors identified in the section entitled "Risk Factors" at pages 8 to 19 above, the cash flows from Infrastructure Equity investments in projects that have completed their construction phases and are operational are relatively predictable. For infrastructure projects with "availability" based income streams (such as PFI/PPP/P3 schemes), provided that pre-determined contractual standards are met, the Project Company is entitled to receive a pre-determined and usually inflationlinked revenue stream, thereby giving significant protection from economic cycles and competitive pressures.
In the case of "demand" based projects, whilst income streams are inherently less certain due to volatility in, for example, traffic volumes, rigorous research and modelling, together with trading history where available, should enable income streams to be predicted with a reasonable degree of accuracy.
For renewable energy projects, the "feed-in" revenue is a function of the electricity generated. This is dependent on wind speed and duration in the case of wind farms, hours of sunshine and solar panel efficiency in the case of solar parks, and water flow and volume in the case of hydro-electric schemes. Because the tariff regime is contractual and there are good sources of historical climate data available, the revenue from these types of projects can be forecast with a reasonable degree of accuracy. Unlike "demand" based projects, renewable energy projects are not correlated with economic cycle.
Certainty of operating and capital costs is also important in being able to forecast Infrastructure Equity returns. In the case of social infrastructure projects, the majority of the costs associated with a project are contractually pre-determined at its outset. This includes the debt funding which is normally secured for the majority of the concession, so that social infrastructure projects rarely require refinancing to meet their base case investment objectives. Renewable energy projects also tend to have long term debt as part of their initial funding and, again, the operating costs are either contracted at the start of the concession or are predictable based on operating experience.
The PFI concept was established in the UK in 1992 when the Conservative Government launched the PFI in an attempt to increase the involvement of the private sector in the procurement of public infrastructure assets and avoid poorly conceived projects, cost overruns and delays. After a slow start, the PFI/PPP policy gained momentum from 1995 onwards. It was adopted and developed from 1997 by the Labour Government, and has since become an established method of UK procurement.
In the UK, according to the NAO Report "Private Finance Projects" published in October 2009, there were, as at September 2009, over 500 operational PFI projects in England, with a capital value in excess of £28 billion. There are also hundreds of other types of PPPs, which have a capital value of £18 billion. The PPP Forum believes there are now over 600 PPP projects delivering infrastructure investment of over £56 billion. (Source: PPPForum website)
Having been developed in the UK, the use of private sector finance to fund new social infrastructure has been adopted by a number of countries around the world, including in Europe, Canada, and Australia. Each country is developing its own programme of new social infrastructure projects, adapting the UK model to suit their needs and legislative frameworks.
The market in PFI/PPP investments is generally divided into a primary market and a secondary market. The primary market involves an investment in a Project Company made at the outset of a PFI/PPP project and normally entails the investor providing new equity funds that contribute to the financing of the project's construction. The secondary market typically involves the transfer of an investment in an existing Project Company to a new investor. In most cases a secondary market transaction involves a project that has completed or nearly completed the construction phase of its concession and which will often have begun to provide operational services.
Investments in these mature infrastructure projects are now being traded between investors (including specialist investment funds) either as single investments or aggregated into portfolios. These developments have helped to create a more liquid market in infrastructure investments.
In the UK, the Government published its Infrastructure Plan 2011 in November 2011 (being an update to the 2010 Plan) and is actively seeking private sector investors to help fund the £250 billion of proposed expenditure. Most of the Plan relates to new economic infrastructure, although there is still a need for new social infrastructure in sectors like education, social housing and waste.
HM Treasury announced in December 2011 a consultation with all interested parties to see how the PFI model should evolve to fund these new plans. As of November 2011, 49 new projects were still being procured using the previous PFI/PPP model. Source: HM Treasury: website, as of February 2012. From statements made by ministers, it is clear that Infrastructure investment remains a key Government priority, and that private sector capital will play a key role in its funding.
The number of PFI or PPP type projects that have completed their construction phases and are operational is growing. Using data from the HM Treasury website, as at November 2011, over 700 projects are now receiving annual income (Source: HM Treasury: "PFI data summary November 2011" – summation of those projects in the schedule which received contractual income in 2010/11 year).
As the Group tends to acquire operational PFI/PPP/P3 projects which are through their construction phases, the number of operational projects gives an indication of the pool of potential investment opportunities, assuming existing investors in these projects wish to sell at some point.
In 2011, the UK Government has been under pressure to address the significant debt burden of the UK, leading to cuts in all areas of public spending. In relation to signed PFI projects, HM Treasury issued guidance to the public sector in July 2011 to ensure existing contracts were properly managed, assets procured under PFI projects were fully utilized, and that where appropriate, cost savings were agreed between the contracting parties. The Group has been engaged with public sector clients wishing to implement this guidance and where cost savings have been identified, they relate to the scope of the facilities management services provided.
In Europe, the value of PPP transactions reaching financial close in 2010 totalled EUR 18.3 billion, and was EUR 9.7 billion in the first half of 2011. Source: EPEC Market Update: Review of the European PPP Market, First Semester 2011. As Table 4 below shows, the volume of PPP projects signed in the period 2005 to 2008 was above EUR 25.0 billion per annum and as these projects complete their construction phases and become operational, this will create further potential acquisition opportunities (according to the European PPP Centre for Excellence).
Source: EPEC Market Update, Review of the European PPP Market First Semester of 2011
Renewable energy law and policies are mainly geared towards encouraging incentives to reach specific levels of renewable energy as a proportion of total energy use (for example the EU has a target of 20 per cent. renewable energy by 2020 agreed in a Directive on renewable energy, to be shared between Member States under national targets) and removing barriers to the development of renewable energy e.g. by facilitating access to grid networks. The International Renewable Energy Agency (IRENA) was also launched in January 2009 to help countries improve their renewables capacity.
There are a number of different forms of incentives and assistance for renewable energy, including "feed-in" tariffs where electricity producers are guaranteed the offtake of their electricity at a fixed price (typically above market rates) or tradeable certificate schemes (e.g. in the UK the Renewables Obligation Certificate (ROC) system which provides for electricity suppliers to supply specified levels of renewable-source electricity or pay buy-out prices which are then recycled to scheme participants). Other types of incentive include tax credit schemes, which are for instance used in the US.
In order for this type of investment to produce predictable income streams, there needs to be stability in the forms of financial incentives and assistance given. Where governments decide to change these incentives for projects already contracted (as has happened in some EU countries in the last 18 months), this causes uncertainty and can materially affect a renewable project's financial forecast. For this reason, the Group is not actively considering new investments in the renewable energy sector at the present time, but will remain opportunistic when the risk/return conditions for investment are favourable and appropriate for the Group.
The Directors and the Investment Adviser believe that the market in infrastructure investments is continuing to grow and will provide a suitable background against which the Group will be able to make new investments within its target sectors in the future as well as generate returns from the Current Portfolio.
The Current Portfolio consists of Infrastructure Equity in 70 Project Companies in the Government accommodation, education, health, transport, utilities, fire and law and order sectors. It includes accommodation projects for the UK Home Office, Health and Safety Executive and the Ministry of Defence, a number of hospitals, schools, and police projects, a Ministry of Defence helicopter training facility (all of which are based in the UK), two Canadian P3 road projects, and the DHSRL project. As at 31 December 2011, the weighted average PFI/PPP/P3 project concession length remaining in the Current Portfolio was 23.7 years.11
All projects in the Current Portfolio have completed their main construction phases, although the final completion certificate on the M80 Motorway DBFO project is still awaited.
Source: Investment Adviser
1 The illustration represents a target only and is not a profit forecast. There can be no assurance that this target will be met.
2 The illustration assumes a Euro to Sterling exchange rate of 0.83, a Canadian dollar to Sterling exchange rate of 0.63 and a weighted average discount rate of 8.6 per cent. per annum. These assumptions and value of the Group's portfolio may vary over time.
3 The valuation is of the Current Portfolio of 70 investments (excluding the Conditional Investment and any Additional Investment) and does not include other assets or liabilities of the Group, and assumes that during the period illustrated above, (i) no new investments are purchased, (ii) no existing investments are sold and (iii) the Group suffers no material liability to withholding taxes, or taxation on income or gains.
As shown in Table 4 above, cash flows from the Current Portfolio comprise: (i) interest payments on subordinated debt; (ii) repayment of subordinated debt; (iii) dividend payments; and (iv) fees (including directors fees) paid by Project Companies to the Group.
During the "long term income phase" illustrated above it is expected that the Company will pay dividends (as set out in the section headed "Distribution Policy" above) and that such dividends will generally be covered by the Group's Distributable Cash Flows. The Directors believe that the value of future cash flows expected from the Project Companies in the capital repayment phase will preserve the capital value of those investments and therefore Net Asset Value.
During the "capital repayment phase" illustrated above, the Net Asset Value of the Group is depicted to fall because the Group would expect to be returning capital to Shareholders by making capital distributions as well as or in lieu of dividend payments.
It should be noted that Table 4 above is an illustration. In practice, there are risks associated with the cash flows depicted above, and prospective investors should refer to the entitled "Risk Factors" at pages 8 to 19 above. However, there are also circumstances under which investment performance may exceed the level depicted above, and in particular where the Group may be able to increase the level of cash flow achieved from its Current Portfolio investments via, inter alia, enhancements to the value of its investments (see the section headed "Investment Policy" above), and the making of new investments to increase and extend the Group's future cash flows.
A breakdown of the interests in each investment, accurate as at the date of this prospectus, comprising the Current Portfolio is set out below.
| A. Investments as at 31 December 2011 | |||||
|---|---|---|---|---|---|
| Group Holdings | Valuation1 | ||||
| Project | Equity | Subdebt | Mezzaninee Debt | (£m) | |
| Ten largest investments | |||||
| Colchester Garrison | 42.0% | 42.0% | 44.1 | ||
| Blackburn Hospital | 100.0% | 100.0% | 23.9 | ||
| Dutch High Speed Rail Link | 43.0%2 | 43.0% | 79.0 | ||
| Home Office Headquarters | 100.0%3 | 100.0% | 90.4 | ||
| M80 Motorway DBFO4 | 41.6% | 41.6%5 | 29.7 | ||
| North West Anthony Henday Road | 50.0% | 50.0% | 24.7 | ||
| Oxford John Radcliffe Hospital | 100.0% | 100.0% | 28.0 | ||
| Pinderfields and Pontefract Hospitals | 50.0% | 50.0% | 34.6 | ||
| Queen Alexandra Hospital | 100.0% | 100.0% | 63.7 | ||
| Romford Hospital | 50.0% | 50.0% | 25.9 | ||
| Sub total | 444.1 |
1 Valuation based on the Directors' valuation (unaudited) as at 31 December 2011
2 The Group retains the beneficial interest in the shares of the Project Company but the legal title is held by the project security trustee.
3 This is a rounded-up figure as a subsidiary of the Bouygues group has retained one share.
4 The Group has a put and call option to increase its investment to 50.0 per cent.
5 Sub-debt percentage refers to an obligation to subscribe.
| Group Holdings | Valuation1 | |||
|---|---|---|---|---|
| Project | Equity | Subdebt | Mezzaninee Debt | (£m) |
| Remaining Investments | ||||
| A249 | 50.0% | 50.0% | ||
| A92 Road | 50.0% | 50.0% | ||
| Barking & Dagenham Schools | 85.0% | 100.0% | ||
| Barnet Hospital | 100.0%2 | 100.0% | ||
| Bishop Auckland Hospital | 36.0% | 37.0% | 100.0% | |
| Boldon School | 100.0% | 100.0% | ||
| Bradford Schools BSF | 34.0% | 34.0% | ||
| Brentwood Community Hospital | 75.0% | 75.0% | ||
| Central Middlesex Hospital | 100.0%2 | 100.0% | ||
| Conwy Schools | 90.0% | 90.0% | ||
| Cork School Of Music | 50.0% | 50.0% | ||
| Croydon School | 100.0% | 100.0% | ||
| Darlington Schools | 50.0% | 50.0% | ||
| Defence Sixth Form College | 45.0% | 45.0% | ||
| Derby Schools | 80.0% | 80.0% | ||
| Doncaster Mental Health Hospital | 50.0% | 50.0% | ||
| Doncaster Schools | 50.0% | 50.0% | ||
| Dorset Fire & Rescue | 33.5% | 33.5% | ||
| Dorset Police Stations | 80.0% | 80.0% | ||
| D & C Firearms Training Centre | 72.9% | 72.9% | ||
| Ealing Care Homes | 68.0% | 68.0% | ||
| Ealing Schools | 50.0% | 50.0% | ||
| Exeter Crown Courts | 90.0% | 90.0% | ||
| Fife Schools | 40.0% | 40.0% | 100.0% | |
| Glasgow Hospital | 25.0%3 | 25.0% | ||
| GMPA Police Stations | 72.9% | 72.9% |
| Group Holdings | Valuation1 | ||||
|---|---|---|---|---|---|
| Project | Equity | Subdebt | Mezzaninee Debt | (£m) | |
| Haverstock Schools | 50.0% | 50.0% | |||
| Health and Safety Laboratory | 80.0% | 90.0% | |||
| Helicopter Training Facility | AssetCo | 87.6% | 7.2% | ||
| Project Co | 23.5% | 74.1% | |||
| Highland Schools PPP | 50.0% | 50.0% | |||
| HSE Merseyside HQ | 50.0% | 50.0% | |||
| Irish Grouped Schools | 50.0% | 50.0% | |||
| Kent Schools | 50.0% | 50.0% | |||
| Kicking Horse Canyon P3 | 50.0% | 0.0% | |||
| Lewisham Hospital | 100.0% | 100.0% | |||
| Manchester School | 50.0% | 50.0% | |||
| Medway Police Headquarters | 80.0% | 80.0% | |||
| MPA Firearms Training Facility | 72.9% | 72.9% | |||
| MPA SEL Police Stations | 50.0% | 50.0% | |||
| Newcastle Library | 50.0% | 50.0% | |||
| Newport Schools | 80.0% | 80.0% | |||
| Newton Abbot Hospital | 50.0% | 100.0% | |||
| North Tyneside Schools | 50.0% | 50.0% | |||
| Norwich Schools | 75.0% | 75.0% | |||
| Oldham Library | 50.0% | 50.0% | |||
| Oldham Schools | 75.0% | 75.0% | |||
| Oxford Churchill Oncology | 40.0% | 40.0% | |||
| Oxford Nuffield Hospital | 25.0% | 25.0% | |||
| Renfrewshire Schools | 30.0%3 | 30.0% | |||
| Rhondda Cynon Taf Schools | 100.0% | 100.0% | |||
| Sheffield Hospital | 75.0% | 75.0% | |||
| Sheffield Schools | 37.5% | 37.5% |
| Group Holdings | ||||
|---|---|---|---|---|
| Project | Equity | Subdebt | Mezzaninee Debt | Valuation1 (£m) |
| South Ayrshire Schools | 100.0%3 | 100.0% | ||
| Stoke Mandeville Hospital | 90.0% | 90.0% | ||
| Sussex Custodial Centre | 89.9% | 100.0% | ||
| Swindon Police Headquarters | 80.0% | 80.0% | ||
| Tyne & Wear Fire Stations | 100.0% | 0.0% | ||
| West Middlesex Hospital | 100.0%2 | 100.0% | ||
| Willesden Hospital | 50.0% | 50.0% | ||
| Wooldale Learning Centre | 50.0% | 50.0% | ||
| Remaining Investments Sub total | 445.6 | |||
| Total – Directors Valuation1 | 889.7 |
1 Valuation based on the Directors' valuation (unaudited) as at 31 December 2011
2 This is a rounded-up figure as a subsidiary of the Bouygues group has retained one share.
3 The Group retains the beneficial interest in the shares of the Project Company but the legal title is held by the project security trustee.
| B. Investments since 31 December 2011 | |||||
|---|---|---|---|---|---|
| Project | Equity | Group Holdings Subdebt |
Mezzanine Debt |
Acquisition at cost (£m) |
|
| Dorset Fire & Rescue, additional stake in existing investment acquired in February 2012 |
33.5%1 | 33.5%1 | 3.8 | ||
| Conditional Investment expected to be Acquired Connect Project |
19.5% | 19.5% | 39.0 | ||
| Total acquisitions at cost 1 The legal title to the shares in the Project Company remains vested in the vendor, but is expected to transfer shortly, the beneficial interest in the additional stakes has already transferred to the |
42.8 |
Group.
For details of how the Company values the Current Portfolio see pages 39 and 40 of this prospectus.
As at the date of this Prospectus, there were outstanding investment obligations on the M80 Motorway DBFO project totalling £29 million.
The Directors have agreed a valuation of the Group's 70 investments as at 31 December 2011 of £889.7m, and this was announced in the Company's Interim Management Statement published on 10 February 2012. This valuation was performed in order to publish a NAV per share on an investment basis as at 31 December 2011 of 114.0 pence in order to give guidance on how the NAV per share had moved in the 3 months to 31 December 2011.
The weighted average discount rate used was 8.6 per cent. and an analysis of the weighted average discount rates for the portfolio analysed by territory is shown in Table 6 below:
| 31 December 2011 | |||||
|---|---|---|---|---|---|
| Country | Risk free rate | Risk premium | Discount rate | 30 September 2011 |
31 March 2011 |
| UK | 2.9% | 5.7% | 8.6% | 8.6% | 8.6% |
| Holland | 2.5% | 6.3% | 8.8% | 8.8% | 8.9% |
| Canada | 2.5% | 5.8% | 8.3% | 8.8% | 8.8% |
| Ireland | 8.2% | 2.8% | 11.0% | n/a | n/a |
| Portfolio | 2.9% | 5.7% | 8.6% | 8.7% | 8.7% |
The key assumptions used to derive the 31 December 2011 valuation were:
As with previous Directors' valuations of the Group's portfolio, the sensitivity of the valuation to the key assumptions of discount rate, inflation and bank deposit rates were also calculated and they are set out below in Tables 7 to 9 in the same format as used in the interim and Annual Results presentations of the Company (available from the Company's web site).
| Sensitivity to changing the discount rate | |||||
|---|---|---|---|---|---|
| Directors' valuation at 31 December 2011 | NAV per share | ||||
| Valuation | £889.7m | 114.0p | |||
| Change | Implied NAV per share movement | ||||
| +0.5% increase | -£42.3m | -6.4p | |||
| -0.5% decrease | +£45.8m | +6.9p |
| Sensitivity to changing the long term annual inflation assumption | ||||
|---|---|---|---|---|
| Directors' valuation at 31 December 2011 | NAV per share | |||
| Valuation | £889.7m | 114.0p | ||
| Change | Implied NAV per share movement | |||
| +0.5% increase | +£30.9m | +4.7p | ||
| -0.5% decrease | -£28.4m | -4.3p |
| Sensitivity to changing the annual bank deposit rate | |||
|---|---|---|---|
| Directors' valuation at 31 December 2011 | NAV per share | ||
| Valuation | £889.7m | 114.0p | |
| Change | Implied NAV per share movement | ||
| +0.5% increase | +£12.4m | +1.9p | |
| -0.5% decrease | -£12.7m | -1.9p |
A description of each of the infrastructure investments comprising the Current Portfolio is set out below. The investments described are predominantly "availability-based" and public sector backed.
The pie charts below show how the portfolio has developed since 31 March 2011 in terms of sector split, projects still in construction, geographic location and concession lengths remaining. This analysis is based on the Directors' Valuations of the entire portfolio of the Company as at 24 February 2012, 30 September 2011, and 31 March 2011. The change between 30 September 2011 and 24 February 2012 was due to the two acquisitions announced on 10 November 2011 for £19.0 million, the portfolio acquisition of 26 new investments for £143.4 million announced on 20 December 2011 and the follow-on investment of £3.8 million announced on 16 February 2012.
Water Junior loan which was redeemed at par in April 2011.
By value, as at 31 December 2011, using Directors' valuation plus subsequent acquisition(s) at cost. Some projects have more than one contractor so sum of the bars is greater than portfolio valuation. Grey is construction exposure.
The A249 Road project is a 30 year concession, involving the design, construction, financing and operation of the £79 million section from Iwade Bypass to Queensborough of the A249 road, along with routine and major lifecycle maintenance for the life of the concession. The client is the Secretary of State for Transport.
The A249 project has a "steady flow" payment scheme. The Project Company is also responsible for operations and maintenance of the existing A249 section between Junction 5 of the M2 and the docks entrance at the Port of Sheerness.
Operations began in September 2006 with operations and maintenance services being performed by Carillion Highway Maintenance Ltd.
The A92 Road project is a 30 year concession involving the design, construction, financing and operation of the £54 million upgraded A92 shadow toll road between Dundee and Arbroath, for the client Angus Council. Services provided under the contract include routine and major lifecycle maintenance for the life of the concession.
Construction works were carried out by Morgan Sindall plc, and were completed in December 2005 and the ongoing operations and maintenance are carried out by Ringway Infrastructure Services Limited guaranteed by Eurovia Group (formerly Ringway Group Limited), part of the Vinci group, under a 10 year contract to 2021.
The Barking & Dagenham project is a £47 million concession for the design, construction, financing and operation of the Eastbury Comprehensive and Jo Richardson Community Schools, together with carrying out all of the routine and major lifecycle maintenance for the life of the concession. The client is the Mayor and Burgesses of the London Borough of Barking & Dagenham.
The schools benefit from a long term facilities management agreement with Barking and Dagenham School Project Ltd which is controlled by Bouygues Construction SA. The concession contract expires in 2030.
The Barnet General Hospital project is a 33 year concession to design, construct, operate and maintain the rebuilding of Barnet General Hospital in North London for the Barnet and Chase Farm NHS Trust. Financial close was in February 1999. The project involved capital expenditure of approximately £65 million. Construction was completed in March 2002.
Barnet Hospital Project Limited (a joint venture company formed by Bouygues (UK) Limited and ETDE, both subsidiaries of Bouygues Construction S.A.) was responsible for the design and construction. Ecovert South Limited, also a subsidiary of Bouygues Construction S.A., is responsible for hard facilities management (maintenance). Medirest is now responsible for Soft FM Services (catering, portering, cleaning. etc.). Siemens Healthcare Services Limited has installed and is maintaining medical imaging equipment and new IT and telecommunications.
The Bishop Auckland Hospital project is a concession contract for up to 60 years with a break option exercisable by the Client after 30 years, 40 years or 50 years to design, construct, finance, service and maintain a redevelopment of Bishop Auckland General Hospital, County Durham for South Durham Health Care NHS Trust. Financial close was in May 1999, and subsequent investments were made in April 2000 to finance certain changes to the hospital.
The project involved capital expenditure of approximately £66 million. Construction works (which included the demolition of certain existing buildings, provision of temporary accommodation, design and construction of a new building, refurbishing certain existing buildings, commissioning and related works) were carried out by Shepherd Construction Limited and were completed in June 2002. The hospital is now operational.
The operating phase of the project involves the provision of certain non-clinical support services at the hospital including maintenance, catering, housekeeping, porterage, switchboard and car parking services. ISS Mediclean Limited is responsible for both the Hard and Soft FM Services.
The Blackburn Hospital Project is a 38 year concession to design, construct, finance and maintain new facilities at the Queens Park Hospital in Blackburn for the East Lancashire Hospitals NHS Trust. Financial close was on 9 July 2003. The project involved capital expenditure of approximately £100 million. The construction was undertaken by Balfour Beatty Construction Limited and Haden Young Limited (both subsidiaries of Balfour Beatty plc) as a joint venture and was completed in 2006.
Facilities management is being undertaken by Balfour Beatty WorkPlace. Siemens is responsible for the supply and maintenance of certain types of medical equipment.
The Boldon School project is a 26 year concession to design, construct, finance and operate Boldon School, along with routine and major lifecycle maintenance. The Client is the Council of the Borough of South Tyneside.
The project was built by Gleeson Construction services and involved capital expenditure of approximately £18 million. Financial close was in April 2005. The facilities management services are sub-contracted to Mitie PFI.
The Bradford BSF Schools Phase II project is a 26.5 year concession to provide four secondary schools to Bradford Metropolitan District Council (BMDC). The four modern campus environments comprise the Beckfoot & Hazelbeck campus, the Grange School, the Greenhead & Beechcliffe campus and the Hanson & Hanson Campus (HIU). They are also four smaller schools which provide dedicated learning for students with special educational needs. This project is part of Bradford's Building Schools for the Future (BSF) programme. Design and construction of the schools was provided by a joint venture between Costain and Ferrovial Agroman. Construction was completed in 2011.
The facilities management services (caretaking, grounds and building maintenance) are subcontracted to Amey Communities.
The Brentwood Community hospital PFI project is a 30 year operational term concession to design, build, finance, operate and provide on-going maintenance of a community hospital in Essex, providing the South West Essex Primary Care Trust with approximately 50 inpatient beds in an 9000 square metre facility.
Construction was undertaken by Mansell Construction Services Limited (part of the Balfour Beatty Group) and was completed in August 2008. Hard FM services are conducted by Integral UK Limited, whilst Soft FM services are provided by Initial Hospital Services Limited.
The Central Middlesex Hospital project is a 33 year concession to design, construct, finance and maintain new hospital facilities, and to refurbish some existing facilities, for the Brent Emergency Care and Diagnostic Centre on the Central Middlesex Hospital site in North West London. The concession contract is with the North West London Hospitals NHS Trust. Financial close was on 6 November 2003. The project involved capital expenditure of approximately £75 million.
The unit comprises 214 beds and three main theatres. Construction of the project is complete and the hospital is operational. The NHS Trust uses the facilities to provide clinical and non clinical day care and ambulatory care.
The building and maintenance contractor is Central Middlesex Hospital Project Limited, a joint venture company formed by Bouygues (UK) Limited and ETDE, both subsidiaries of Bouygues Construction S.A.
The Colchester Garrison project is a 35 year concession to design, construct, finance and maintain a new garrison facility at Colchester, Essex for The Secretary of State for Defence (the "MOD"). The new garrison has been built partly on an existing garrison site and partly on an adjacent brownfield site owned by the MOD. The project involved capital expenditure of approximately £550 million. Financial close was on 9 February 2004.
The completed garrison facility provides accommodation for approximately 3,500 military and 750 civilian personnel. Construction was by Sir Robert McAlpine Limited and is now complete.
The new configuration enabled approximately 84 hectares of surplus land to be released for development and this has been successfully sold by the Project Company, RMPA Services plc, to Taylor Woodrow Developments Limited. The proceeds from the land sale were used to fund parts of the project.
Catering, cleaning and transport services are provided by Sodexo Defence Services Limited. WS Atkins Facilities Management Limited (now part of the Sodexo group) is responsible for estate and grounds maintenance, contract management and security, waste management and lifecycle.
The Conwy Schools project is a 26.5 year concession to design, build, operate and maintain three schools for Conwy County Borough Council in North Wales. Financial close was on 12 March 2003. The project involved capital expenditure of approximately £40 million.
The project involves schools in the towns of Llandudno (John Bright school), Llanwrst (Duffryn Conwy school) and Conwy (Aberconwy school) and provides some 3,600 pupil places across the three schools. John Bright is a wholly new build at a new site. Aberconwy and Duifryn Conwy remain on their existing sites and involved substantial new build coupled with refurbishment of existing areas.
Alfred McAlpine Construction Limited (now part of Carillion plc) carried out the construction works, which were completed at the end of March 2005.
Sodexo Limited provides maintenance, cleaning, catering, janitorial and security services.
The Cork School of Music PPP project is a 25 year operational term project involving the design, construction, financing and operation of a new €50m school of music in Cork to accommodate 130 academic staff, 400 full time and 2,000 part-time students. The Client is the Irish Ministry for Education and Science.
The project reached financial close in September 2005, and has been operational since July 2007. Hard and Soft FM Services are provided by HSG Zander (a subsidiary of Bilfinger Berger SE). These services include cleaning, catering, security, maintenance, waste disposal, caretaking, telecoms, and mail.
The Croydon Schools project is a 30 year concession for the design, construction, financing and operation of a secondary school and community library in Croydon, along with routine and major lifecycle maintenance for the life of the concession. Financial close was reached in May 2004. The Client is the Mayor and Burgesses of the London Borough of Croydon.
The construction was started by Jarvis and completed by a subsidiary of Vinci. Vinci also provides the Hard and Soft FM Services, which include cleaning, security, catering and helpdesk.
The Darlington Schools project is a 25 year operational term concession to design, build and operate four new schools for Darlington Borough Council. The project consists of an Education Village (which brought together three existing schools) and one primary school. The facilities became available on a phased basis in 2005 and 2006 and between them serve 2,000 staff and pupils.
Designed by RyderHKS and supported by Cundall Johnston and DESCO, the schools were built by Kajima Construction Europe (UK) Limited. The Education Village represents the consolidation of Springfield Primary School, Haughton Community School and Beaumont Hill Special School. It successfully combines existing nursery, primary, secondary and special education needs into a single, cohesive campus, representing a unique approach to inclusive education in Darlington. In addition, each school provides energy efficient accommodation through the use of sustainable engineering and technology.
Operations and maintenance services (FM Services) are provided by Mitie PFI Ltd, a subsidiary of Mitie Group plc.
The Defence Sixth Form College project is a 30 year concession to design, build, operate, finance and maintain a new residential sixth form college for the MOD. The project replaces an existing army sixth form college with a new 350 places 'tri-service' college that is intended to be an important source of technical officer recruitment to the UK armed forces and MOD civil service. Financial close was on 2 May 2003.
The project involved capital expenditure of approximately £40 million. Construction of the new facilities was completed in August 2005, and the college commenced operations in September 2005.
The Project Company is responsible for the day to day operation and maintenance of the college. Education related services are provided under a subcontract with TQ Education and Training Limited, a subsidiary of Pearson PLC, and include teaching, pastoral care, sports and leisure, IT services and library services. Facilities management services are provided under a subcontract with Interserve Defence Limited and include estate management, domestic services and other general contract management services.
The project is essentially availability based but with a minor part of income dependent on student numbers. The performance criteria for "availability" payments include exam performance with any bonus payments or deductions for this passed down to Education and Training Limited.
The Derby Schools project has been operational since December 2006, and involves the design, construction, financing and operation of three primary schools and two secondary schools in Derby for the Derby City Council.
The schools were built by Norwest Holst (now part of the Vinci group), and benefit from a long term facilities management agreement with Vinci Partnerships Limited (guaranteed by Vinci Plc). The concession contract expires in 2031.
The Doncaster Mental Health project is a 28 year concession for the design, construction, financing and operation of a service accommodation for an elderly mental health unit in Doncaster, along with the routine and major lifecycle maintenance for the life of the concession. The Client is Rotherham Doncaster and South Humber Mental NHS Foundation Trust.
The project was successfully constructed by BAM Construct, and since it became operational in May 2005, BAM FM Ltd provides hard facilities management services.
The Doncaster Schools project is a 26 year concession for the design, construction, financing and operation of two new secondary schools in Doncaster, along with routine and major lifecycle maintenance for the life of the concession. The Client is Doncaster Borough Council.
Construction was carried out by Norwest Holst (now part of the Vinci group) and was completed in 2008. The schools are operational. Facilities management services comprising cleaning, waste, security and grounds maintenance are provided by Crispin & Borst Limited (a subsidiary of the Vinci group).
The Dorset Fire & Rescue PPP project is a 27 year concession comprising three sites of fire and police facilities in Dorset, for the Dorset Fire Authority and the Dorset Police Authority. Construction was carried out by Morgan Sindall, with capital expenditure of £45 million, and was completed in August 2008. The Hard FM Services are provided by Cofely, a subsidiary of GDF Suez.
The project is a 31 year concession to finance, construct and maintain a new £15 million divisional headquarters and section stations at Bridport and East Weymouth, for the Dorset Police Authority. It also involves the refurbishment of the Dorchester station and routine and major lifecycle maintenance of these facilities for the rest of the life of the concession.
Construction was undertaken by Norwest Holst (now part of the Vinci group) and was completed in January 2002, with FM Services being provided by WS Atkins Facilities Management (now part of the Sodexo group).
The Durham & Cleveland Firearms Training Centre project is a 25 year operational term concession to design, build, operate, finance and maintain a new training facility for the Cleveland Police Authority. The project involved the construction of a £6 million purpose-built facility designed to train police officers in the use of firearms and was the first of its kind to be developed under PFI. The project became operational in 2001 and currently provides around 6,200 training places per annum.
The project incorporates a number of different facilities, including two different types of firing range, a vehicle stop and search area, an abseil tower and climbing wall, an external baton range and a skills house for close-quarter contact training.
FM Services include catering services, IT systems, grounds and buildings maintenance, security and specialist cleaning. These are all supplied by John Laing Integrated Services (a subsidiary of John Laing plc), who are also providing range, armoury and systems maintenance.
The DHSRL project is a 25 year concession (from the date the assets are available for use) with the State of the Netherlands, represented by the Minister of Transport, Public Works and Water Management and the Minister of Finance (the largest PPP contract ever awarded by the Dutch State) to design, construct, finance, operate and maintain one of the largest high speed railway projects in Europe. The project involved capital expenditure of over £625 million, and involves the construction of the track, noise attenuation, catenary, signalling, traction power distribution and command-control-communication systems that will complete the high speed rail infrastructure. Financial close was on 31 October 2001.
The project involved the design and construction of two new sections of high speed rail track, which were laid between Amsterdam and the Belgian border. Construction has been completed successfully. An unrelated train operating company is responsible for rolling stock and its operation. Train services commenced in September 2009. Revenues are receivable from the State of the Netherlands, varying with the level of performance but independent of the level of traffic.
The project is responsible for maintenance of the system (and substructure) and the undertaking of renewals works towards the end of the concession period, and availability is measured, inter alia, by reference to any delays to trains attributable to the project. The project has additional obligations in relation to safety management and liaison with the State, the regulator, traffic allocator, traffic controller, the owner of the existing and connecting infrastructure as well as the substructure contracts. Maintenance obligations are carried out by a joint venture comprising Siemens Nederland By, Koninklijke BAM NBM NV and Fluor Infrastructure BV.
The Ealing Care Homes project is a 30 year concession to design, construct, finance and operate four care homes for the elderly in the London Borough of Ealing, along with routine and major lifecyle maintenance of the new homes as well as three existing care homes for the life of the concession.
The project involved capital expenditure of approximately £22 million, and financial close was in March 2005.
The project was built by Galliford Try, and operations and maintenance services (FM Services) are currently provided by Viridian Housing.
The Ealing Schools project is a four school education project in the London Borough of Ealing consisting of one secondary school (Brentside) and three primary schools (Downe Manor, Gifford and Ravenor). All four schools became operational in 2004, and between them can serve over 2,800 staff and pupils. The contract has a 27 year operational term that expires in 2031.
Designed by Seymour Harris Keppie, supported by Buro Happold, the schools were built by Kajima Construction Europe (UK) Limited.
Operations and maintenance services (FM Services) are provided by Mitie PFI Ltd, a subsidiary of Mitie Group plc.
The Exeter Crown Court project is a 32 year concession, commissioned by the Ministry of Justice, to build and service a new Crown and County Court building in Exeter. The project involved capital expenditure of approximately £20 million. Financial close was on 22 November 2002.
The facility involved the construction of four criminal courts, one civil court, four District Judge hearing rooms and associated accommodation in a single building. The construction works were contracted to Alfred McAlpine Construction Limited (now part of Carillion plc) and were completed in October 2004.
Sodexo Limited is carrying out FM Services, which commenced in November 2004. These comprise catering, cleaning, security and maintenance.
The Fife Schools project comprises two secondary and one primary school in Scotland and is currently in its fifth year of operation. Construction was carried out by Sir Robert McAlpine and the facilities management contract is with Sodexo. The client is Fife Council and the operational concession length is 25 years.
Of the two secondary schools, Queen Anne School is located at Dunfermline and caters for 1,800 pupils, whilst Beath High School, Cowdenbeith accommodates a further 1,200 pupils. The primary school is based at Anstruther and has capacity for 500 pupils.
The Glasgow Hospital project is a concession for the design, construction, financing and operation of two new ambulatory care and diagnostic hospitals in Glasgow, along with routine and major lifecycle maintenance for the life of the concession.
Financial close was reached in August 2006. Construction was carried out by Balfour Beatty under a £178 million construction contract, and the Hard FM Services are provided by Parsons Brinckerhoff.
This £82 million project involved the design, build, financing and operation of new facilities for the Greater Manchester Police Authority as part of a 29 year concession. The new facilities are a new traffic headquarters and 16 new police stations (four divisional headquarters, five sub-divisional headquarters and seven local community police stations). All the facilities have now been constructed and are fully operational.
Nearly 3,000 police officers have been able to move from 53 old stations into the 17 new buildings. The new buildings cover 38,600 square metres of floor space. Hard and Soft FM services (such as cleaning, grounds maintenance and helpdesk) are being supplied by John Laing Integrated Services Ltd, a subsidiary of John Laing plc.
The Haverstock School project is a single school education PFI project involving the design and construction of a new secondary school on an existing school site on Haverstock Hill in Camden, North London. The school serves 1,100 staff and pupils. The contract for this project has a 26 year operational term that expires in 2030.
Designed by Feilden Clegg Bradley, supported by Whitby Bird and Atelier Ten, the school was built by Kajima Construction Europe (UK) Limited. The old school buildings, the majority of which had been built in Victorian times, were replaced by a single linked block of accommodation with frontage along Haverstock Hill. Phase 1 of the new school became operational in 2004, with subsequent phases handed over one year later.
Operations and maintenance services (FM Services) are provided by Mitie PFI Ltd, a subsidiary of Mitie Group plc.
The HSE Merseyside Headquarters project is a 30 year operational term PFI accommodation project. This four-storey office building is the HSE's operational headquarters and has the capacity for 1,500 employees. It became operational in 2005.
Designed by Cartwright Pickard, supported by Buro Happold, the facility was built by Kajima Construction Europe (UK) Limited. The contract for this project has a 30 year operational term that expires in 2035. Hard FM Services (e.g. maintenance) are provided by Honeywell Control Systems, whilst Soft FM Services (e.g. security and cleaning) are provided by Reliance Integrated Services Limited.
The Health and Safety Laboratory project is a 32 year concession commissioned by the Secretary of State for Local Government Transport and the Regions. The project involved the building of new workshops and offices in Buxton and the disposal of old facilities at Sheffield. The project involved capital expenditure of approximately £60 million. Financial close was on 12 April 2002.
Construction was carried out by Shepherd Construction Limited, and major works were completed in October 2004. The project involves Hard and Soft FM Services for the new building, which are carried out by Interserve (Facilities Management) Limited and include cleaning, waste disposal, portering, catering and security.
The Medium Support Helicopter Aircrew Training Facilities project is a 40 year concession with a break option exercisable by the Client after 20 years for the design, construction, management, operation and financing of a simulator based training facility for RAF helicopter pilots. Two Project Companies were established; CAE Aircrew Training Services plc ("ProjectCo"), which delivers the training services, and CVS Leasing Limited ("AssetCo"), which owns the simulators and leases them to ProjectCo. The project involved capital expenditure of approximately £100 million.
Six simulators (for Chinook, Puma and Merlin transport helicopters) were installed in a new building at RAF Benson in Oxford. Construction was completed in August 2000. Serco Limited provides the instructors and Vega Software Engineering Limited provides PC based training equipment and software.
The project receives revenue based on usage by the Ministry of Defence with guaranteed minimum amounts and from third parties.
The Highland Schools PFI project is a 30 year concession with the Highland Council to design, build and operate eleven urban and rural schools with a total capital value of £143 million. The project comprises five primary schools, three secondary schools, a combined primary and secondary school, and a special needs school. This all new build concession runs until 2037.
Morrison Construction commenced the building phase in 2006 on the 11 new schools and community facilities built through the Highland Council's second Public Private Partnership (PPP) programme. Construction has been completed in stages and, with the exception of some outdoor sporting facilities, is now complete.
Facilities management is the responsibility of Morrison Facilities Services and the project is financed through long term fixed-rate guaranteed senior secured bonds and a European Investment Bank loan. The contractual payment mechanism is an availability payment based on availability of accommodation facilities and the level of service performance.
All the schools have been designed in consultation with the community to include a range of facilities which are available to the public. These facilities include library provision, sports and recreational facilities and community meeting rooms. The project was awarded a "Highly Recommended Award for Community Involvement" at the 2008 PPP Annual Awards.
The Home Office Headquarters project is a 29 year concession commissioned by the Home Office to build finance operate and maintain a new headquarters building to replace their existing London office accommodation with purpose-built serviced offices. The new building occupies the site of the former Department of Environment in Marsham Street in Westminster.
The project involved capital expenditure of approximately £200 million and the demolition of the existing offices on a 4.3 acre site and the construction of a Terry Farrell Partners designed building comprising three purpose built interconnecting office blocks totalling c. 75,000 square meters, for up to 3,450 staff. Construction was carried out by Byhome Limited a joint venture between Bouygues (UK) Limited and its sister facilities management company ETDE (both subsidiaries of Bouygues Construction S.A.).
The project was completed and has been occupied by the Home Office since January 2005. The services being provided include health and safety, cleaning, catering and energy management. Operations are managed by ETDE.
The Irish Grouped Schools project is a concession for the design, construction, financing and operation of five secondary schools in the Republic of Ireland, along with routine and major lifecycle maintenance for the life of the concession. The Client is the Minister of Education and Science.
The €34 million project was built by a number of Irish Contractors including John Sisk & Son Limited and operations began in December 2002. During the 25 years of operation, HSG Zander (formerly Hochtief Facility Management, and now part of Bilfinger Berger) is providing the Hard and Soft FM Services.
The Kent Schools PFI project has been operational since June 2007 and involves the ongoing operation and maintenance of six secondary schools for Kent County Council. The schools were successfully constructed by Costain Ltd and William Verry Ltd and benefit from a long term facilities management agreement with Mitie PFI Ltd. The concession contract expires in 2035.
The Kicking Horse P3 project forms part of the Trans-Canada Highway, extending through the Canadian Rocky Mountains between British Columbia and Alberta. The project comprises the upgrading of approximately six kilometres of highway and the operations and maintenance of a 26 kilometre stretch of highway in total. The key feature is a 400 metre four-lane bridge across Kicking Horse Canyon. Construction works were carried out by Trans-Park Highway Constructors, a joint venture comprising Flatiron Constructors Canada Ltd and Parsons Overseas Company of Canada Ltd.
Operations began in March 2008 with operations and maintenance services being performed by HMC Services Inc. The Project Company is paid a combination of an availability revenue stream and a shadow toll payment by the Ministry of Transportation of British Columbia.
The Lewisham Hospital project is a concession for the design, construction, financing and operation of a new wing in Lewisham Hospital, along with routine and major lifecycle maintenance for the 32 year term of the concession. The Client is the Lewisham Hospital NHS Trust.
The £58 million project was built by Carillion and completion was reached in November 2006. A subsidiary of Carillion provides the Hard FM services for the 32 year term of the concession.
The M80 Motorway DBFO project is a 30-year concession to upgrade a 10 kilometre stretch of the existing M80, between Stepps and Haggs in Scotland, as well as to construct a new eight-kilometre section of motorway, seven new junctions and 60 additional structures. The construction works were performed under a Bilfinger Berger UK, Northstone (NI) Ltd and John Graham (Dromore) Ltd joint venture.
The Project achieved traffic availability in December 2011 and final construction completion is scheduled for February 2012. The project company is paid an availability revenue stream by the Scottish Ministers. The motorway is to be operated and maintained by BEAR Scotland Ltd under a long term services agreement.
The Manchester Schools project is a concession for the design, construction, financing and operation of the Wright Robinson College for the Council of the City of Manchester, along with routine and major lifecycle maintenance for the 26 year term of the concession.
The £29m construction was carried out by the Amec Group and was completed in September 2007. The operation and maintenance services (FM Services) are provided by Hochtief and comprise maintenance, caretaking, security, waste, catering and utilities for the 26 year term of the concession.
The Medway Police project is a 30 year concession for the design, construction, financing and operation of a £21 million divisional police headquarters for Kent Police Authority, along with routine and major lifecycle maintenance for the life of the concession.
Construction was carried out by Norwest Holst (part of the Vinci group) and was completed in December 2006. The project is operational. FM services comprising maintenance, utilities, inquiries assistance, catering, waste, logistics and conferencing are provided by Vinci Partnerships Ltd (a subsidiary of Vinci plc).
The Metropolitan Police Specialist Training Centre is a 25 year operational term £40 million project involving the complete remodelling and refurbishment of the Metropolitan Police's existing training school into two separate disciplines: public order training and specialist firearms training. Construction was completed in January 2003.
Within the public order training arena are a number of realistic facades including a mocked up stadium, an underground station and tube carriage and a complex of houses and flats. The firearms facility incorporates a variety of firing ranges, as well as specialist facilities such as a train carriage and an aeroplane fuselage.
In addition to the training areas, the Centre now contains accommodation for 305 students, plus classrooms, a reception area and canteen, leisure and fitness amenities.
Facilities management services, which include cleaning, catering, security and reception, are being provided by John Laing Integrated Services, a subsidiary of John Laing.
The South East London Police Stations project is a 25 year operational term £80 million PPP project involving the design and construction by John Laing Construction of four new police stations for the Metropolitan Police Authority in South East London. Situated in Bromley, Deptford, Lewisham and Sutton, these stations provide facilities for Borough operations, the Mounted Branch and the Serious Crime Division. Covering 34,000 square metres of internal space, the stations contain 96 custody cells and stabling for 24 horses.
Hard and soft facilities management are provided by John Laing Integrated Services Ltd, under a 25 year contract. These services include cleaning, catering security and building maintenance, together with the provision of property officers, front office staff, typists and custody assistants.
The project is a 25 year concession to finance, construct and maintain the new £30 million city centre library in Newcastle and an additional satellite library in High Heaton, both in the North East of the UK, commissioned by Newcastle City Council. Construction was undertaken by Tolent Construction Limited and was completed in March 2009, since which time the libraries have been running successfully with record visitor numbers.
Maintenance and other facilities management services are provided by Integral UK Limited under a long term contract. Kajima Partnerships Limited holds the remaining 50 per cent. interest in the project.
The Newport Schools project is a concession for the design, construction, financing and operation of a nursery, infant and junior school, along with routine and major lifecycle maintenance for the 25 year term of the concession. The Client is Newport City Council.
The £15 million project was built by Norwest Holst (part of the Vinci group) and has been operational since December 2009. Hard and Soft FM Services are undertaken by Crispin & Borst Ltd (ultimately owned by Vinci), and comprise cleaning, maintenance, waste, porterage, and car park management.
The Newton Abbot Hospital project is a 32 year concession for the design, construction, financing and operation of a £20m community hospital for Devon Primary Care Trust, along with routine and major lifecycle maintenance for the life of the concession.
The construction works were undertaken by Rydon Construction, and were completed in December 2008.
Rydon Property Maintenance is carrying out the Hard FM Services.
The North Tyneside Schools project is a four school education PFI project in North Tyneside consisting of one secondary school (Burnside) and three primary schools (Western, Marine and Coquet). All four schools became operational between 2003 and 2004 and between them serve 2,500 staff and pupils. The client is the Council of the Borough of North Tyneside, and the concession length is 31 years.
Designed by Seymour, Harris Keppie, supported by Buro Happold, the schools were built by Kajima Construction Europe (UK) Limited. The project is complemented by a wide range of extended use facilities which are used frequently by the local community.
Operations and maintenance services (FM Services) are provided by Mitie PFI Ltd, a subsidiary of Mitie Group plc.
The North-West Anthony Henday P3 in Alberta, Canada comprises the design, build, financing and ongoing operation of a 21 kilometre stretch of the four and six lane ring-road surrounding the city of Edmonton. The Client is the Province of Alberta, Ministry of Alberta, Ministry of Transportation, and Ministry of Infrastructure.
The project has recently completed construction, with the road opening to traffic in November 2011. Construction was being carried out by a joint venture comprising Flatiron Constructors Canada Limited, Parsons Overseas Company of Canada Ltd and Graham Infrastructure, itself a JV between Graham Infrastructure LP and Jardeg Construction Service LP.
The ongoing operations and maintenance is being carried out by Carmacks Maintenance Services Ltd, under a long term services agreement. The concession contract lasts for 30 years from the beginning of operations, expiring no later than November 2041.
The Norwich Schools PFI Project is a 26 year concession for the design, financing, construction and subsequent operation and maintenance of six schools, five primary schools and one secondary school, in and around Norwich for Norwich City Council.
The six schools were built by Kier Regional Limited (Kier Eastern) over a phased delivery programme, with final completion achieved in 2008. The total construction cost for the six schools was approximately £44 million. Kier Facilities Services Limited is performing all Soft and Hard FM Services under a long term contract.
The Nuffield Hospital project is a concession for the design, construction, financing and operation of a new £37 million orthopaedic hospital, along with routine and major lifecycle maintenance for the 34 year term of the concession. The Client is the Oxford University Hospitals NHS Trust.
Morrison Construction Ltd carried out the construction works and the project is now operational.
G4S Integrated Services (UK) Limited provides catering, helpdesk, waste, estate maintenance, reception, and security services.
The Oldham Library project is a £15 million concession for the design, construction, financing and operation of Oldham Library and Lifelong Learning Centre, along with routine and major lifecycle maintenance for the life of the concession for Oldham Metropolitan Borough Council.
The construction was carried out by Kier Regional Limited and the project became operational in January 2006.
Caxton Facilities Management (part of the Kier group) provides the Hard and Soft FM Services which include cleaning, waste, grounds maintenance, caretaking, vending and security for the 25 years of operation.
The Oldham Schools PFI Project is a 27 year concession for the financing, design and construction and subsequent operation and maintenance of two 1,500 place secondary schools, the Radclyffe Secondary School and Failsworth Secondary School, on part of each existing school site for Oldham Metropolitan Borough Council. The two schools were built by Kier Regional Limited between May 2006 and February 2008, for a total construction cost of approximately £54 million.
Kier Facilities Services Limited is performing all Soft and Hard FM Services under a long term contract.
The Oxford Churchill Oncology project is a 33 year concession for the design, construction, financing, and operation of a 100 bed oncology unit, including provision of medical equipment, along with routine and major lifecycle maintenance for the life of the concession for the Oxford University Hospitals NHS Trust.
The project involved capital expenditure of approximately £124 million. Construction works were undertaken by a joint venture between Balfour Beatty, Carillion and Impregilo.
The services being provided by G4S Integrated Services include cleaning, maintenance, helpdesk, catering, portering, and utilities.
The Oxford John Radcliffe PFI Hospital project involves the design, construction, management, financing, operation and maintenance of a new wing adjacent to the former Radcliffe Infirmary in Oxford. The concession runs until 31 December 2036.
The new wing was constructed by Carillion Construction Ltd and reached operational completion in December 2006. The new facilities built under the contract formed the 'West Wing' and the 'New Children's Hospital'. A number of adult and children services were relocated from the Radcliffe Infirmary and other sites within the Oxford Radcliffe Hospitals NHS trust to centralise them into one facility.
Facilities management services are subcontracted to Carillion Services.
The Pinderfields and Pontefract Hospitals project involves the financing, design and construction and subsequent operation of two hospital facilities for the Mid Yorkshire NHS Trust, delivering a combined total of 774 beds. Construction of the new hospital facilities on the two sites completed in 2011, with construction works undertaken by subsidiaries of Balfour Beatty plc.
Soft and Hard FM Services are being delivered by Balfour Beatty Workplace Limited under a long term contract.
The completed hospital has 1,026 inpatient beds, 34 neonatal intensive care cots, 3 endoscopy suites and 20 main operating theatres. The concession contract runs until December 2040. The Client is Portsmouth Hospitals NHS Trust.
The new hospital buildings were developed and built by Carillion Construction Ltd, a subsidiary of Carillion. The majority of the new facilities have been operational since June 2009, with final construction completed last month. A subsidiary of Carillion provides facilities management services to the project under a long term services agreement.
The Renfrewshire Schools project is a ten school educational project in the Paisley, Linwood and West Johnstone areas of Renfrewshire, Scotland with a 30 year operational term that expires in 2038 for Renfrewshire Council. The project comprises six primary and four secondary schools. All ten schools became operational in January 2008 and between them serve 6,000 pupils. The schools were designed by JMA and built by Carillion Construction Limited. Operations and maintenance services (FM Services) are provided by Amey BPO Services Limited.
The Rhondda Cynon Taf Schools project is a concession for the design, construction, financing and operation of a primary school, secondary school, a day nursery and an adult learning centre in South Wales for Rhonnda Cynon Taf County Borough Council.
Vinci Construction UK Ltd (formerly Norwest Holst) carried out the £22 million construction works, and the project is now operational.
The services are provided by Vinci Partnerships Ltd (which is guaranteed by Vinci Plc) for the 24 years of operation.
The Romford Project involves the design, build and finance of the Queen's Hospital in Romford, followed by the maintenance of the hospital and the provision of non-clinical services for a total term of 36 years from January 2004. Construction was undertaken by Bovis, a subsidiary of Lend Lease and was completed in October 2006, since which time the hospital has been running successfully. The Client is the Barking, Havering and Redbridge Hospitals NHS Trust.
Non-clinical services are provided under three long term services agreements by subsidiaries of Sodexo Alliance (facilities management), Lend Lease (life cycle management) and Siemens (managed equipment and telephony services).
The Sir Robert Hadfield Wing PFI project is a 32 year concession to design, build, finance and maintain a 168 bed after-care facility at the Northern General Hospital in Sheffield for the Sheffield Teaching Hospitals NHS Foundation Trust. The project reached financial close in December 2004 and construction was completed in March 2007.
The project comprises the provision of Hard FM Services only which are undertaken by Dalkia Utilities Services. The scope of services comprises estate maintenance, helpdesk services and utilities management.
The Sheffield Schools PFI Project is a 26 year concession for the design, construction, financing and subsequent operation and maintenance of two primary schools and two secondary schools for Sheffield City Council. The schools were built by Kier between May 2006 and February 2008, for a total construction cost of approximately £52 million.
Kier Facilities Services is performing all Soft and Hard FM Services under a long term contract.
The SAS Project is a 33 year concession that involved the financing, design and construction and now subsequent operation of three primary schools, two secondary "academy" schools and a perfoming arts annex at an existing secondary school for South Ayrshire Council. The schools were all constructed by Carillion Construction Limited and are now being managed and operated by Mitie PFI Limited. All the schools have been operational since between January 2008 and January 2010.
The Stoke Mandeville Hospital project is a 30 year concession to design, finance, construct, refurbish, operate and maintain a new hospital facility for the Buckingham Hospitals NHS Trust. The project involved capital expenditure of approximately £40 million. Financial close was on 21 May 2004. The facility provides clinical and non-clinical services, focused around day care and ambulatory care. Alfred McAlpine Capital Projects Limited (now part of Carillion plc) carried out the construction (including refurbishment) works in joint venture with Hayden Young. The main construction programme was completed in August 2006. Services are being delivered by Sodexo Limited and comprise building maintenance, catering, cleaning, linen, portering, pest control and car park management.
Sussex Custodial Services is a 30 year concession to build and service three custody centres in Sussex for Sussex Police Authority. The centres are at Worthing, Chichester and Brighton. A fourth centre at Eastbourne was subsequently contracted for as a variation. The project involved capital expenditure of approximately £20 million. Financial close was on 23 August 2001. The construction of the first three centres was undertaken by Ballast plc and completed in October 2002. Ballast plc has subsequently ceased trading. The fourth centre was constructed by YJL Construction Limited and was completed in June 2005. Operations commenced in November 2002. The services provided are, inter alia, custody and processing of detainees, arranging for medical attendance, building maintenance and waste management. Services are being provided by Reliance Secure Task Management Limited, part of the Reliance Security Group.
The Swindon Police project is a 32 year concession involving the design, construction, financing and operation of a new £18 million divisional headquarters for the Wiltshire Police Authority, along with routine and major lifecycle maintenance of these facilities for the life of the concession.
The construction works were contracted to Norwest Holst (part of the Vinci group), and was completed in July 2005.
Vinci Partnerships Ltd is carrying the FM Services.
The Tyne & Wear Fire Stations project is a concession for the design, construction, financing and operation of seven fire station facilities and a headquarters building in Tyne and Wear, along with routine and major lifecycle maintenance for the life of the concession. The Client is Tyne and Wear Fire and Civic Defence Authority.
Construction was carried out by Jarvis and the £23 million project has been operational since April 2006.
John Laing Integrated Services is providing both the Hard and Soft FM Services (management, building maintenance security, health and safety, energy management, caretaking, cleaning, waste management, and grounds maintenance) for the 25 years of operation.
The West Middlesex Hospital project is a 35 year concession to design, construct, finance, operate and maintain a new 228 bed hospital for West Middlesex University Hospital NHS Trust. The project involved capital expenditure of approximately £60 million. Construction was carried out by Bouygues (UK) Limited and was completed on 6 June 2003.
FM Services comprising building management, maintenance, catering, laundry, cleaning, porterage, transport and security services are provided by West Middlesex Hospital Project Limited, a joint venture company formed by Bouygues (UK) Limited and ETDE (both subsidiaries of Bouygues Construction S.A.).
The Willesden Centre for Health & Care project is a 32 year concession for the design, construction, financing and operation of a new £24 million, 11,700m2 multi user health care facility in Willesden, North London. The facility comprises office and training accommodation, ward accommodation and consulting rooms used by a wide range of community based healthcare professionals including GPs and dentists for Brent Primary Care Trust.
The project reached financial close in December 2002, and operations commenced from the new facility in April 2005. Construction was undertaken by Walter Llewellyn & Sons Limited.
Soft FM services (catering, domestic and support services) are included in the PFI project with Accuro FM providing these services.
The Wooldale Centre for Learning project, also known as the Caroline Chisholm School, is a PFI education project consists of a secondary school with sixth form, public library, primary school and nursery on a large site in Northamptonshire. The first phase of the Centre for Learning, or CfL (the primary school, library and part of the secondary school) became operational in 2004. The contract for this project has a 25 year operational term that expires in 2029.
Designed by the Building Design Partnership and built by Kajima Construction Europe (UK) Limited, the CfL seeks to encompass the County Council and Government objectives for inclusive education, from nursery through to sixth form, and provides a community hub as well as a lifelong learning resource centre. The CfL serves over 1,700 staff and pupils. Operations and maintenance services (FM Services) are provided by Mitie PFI Ltd, a subsidiary of Mitie Group plc.
The Group has signed a heads of terms to acquire a 19.5 per cent. interest in the following investment (the "Conditional Investment"):
CityLink Telecommunications Limited ("CityLink"), the project company, has a 20 year concession which runs until November 2019 to upgrade London Underground Limited's existing radio and telecommunications systems and implement and operate a new system.
Fluor Enterprises was subcontracted to provide the engineering, procurement, design and construction for installation of the new transmission network and radio systems. Thales Transport and Security Limited was subcontracted to operate the existing and new systems for the life of the project under an operations and maintenance contract.
CityLink is managed by staff on secondment to the company from Thales.
The Directors are responsible for the overall management of the Company. The Directors, all of whom are non-executive, are listed below:
Graham Picken (British), resident in the UK, is an experienced banker and financial practitioner and has been Chairman of the Company since its launch. Recently appointed a non-executive director of Skipton Building Society, he was formerly a non executive director of the Derbyshire Building Society, where he became Chief Executive in February 2008 and led the society to a merger with Nationwide Building Society in December 2008, before standing down at the end of March 2009. Until 2003, Graham's career spanned over thirty years with Midland and HSBC Banks where, before he retired, he was General Manager of HSBC Bank plc responsible for commercial and corporate banking (including specialised and equity finance). Before that Graham was Chief Executive of Forward Trust Group, an authorised bank, and Chairman of First Direct, a division of HSBC Bank plc.
Sarah Evans (British), resident in Guernsey, is a Chartered Accountant and a non-executive director of several other listed investment funds, as well as an unlisted fund of hedge funds. She spent over six years with the Barclays Bank plc group from 1994 to 2001. During that time she was a treasury director and, from 1996 to 1998, was the Finance Director of Barclays Mercantile, where she was responsible for all aspects of financial control and operational risk management. Prior to joining Barclays she ran her own consultancy business advising financial institutions on all aspects of securitisation. From 1982 to 1988 she was with Kleinwort Benson, latterly as head of group finance. She is a member of the Institute of Directors.
John Hallam (British), resident in Guernsey, is a Fellow of the Institute of Chartered Accountants in England and Wales and qualified as an accountant in 1971. He is a former partner of PricewaterhouseCoopers having retired in 1999 after 27 years with the firm both in Guernsey and in other countries. He is currently chairman of Cazenove Absolute Equity Ltd, Dexion Absolute Ltd and Partners Group Global Opportunities Ltd, as well as being a non-executive director of a number of other financial services companies, some of which are listed on the London Stock Exchange. He served for many years as a member of the Guernsey Financial Services Commission from which he retired in 2006 having been its Chairman for the previous three years.
Chris Russell (British) is a Guernsey resident non-executive director of investment and financial companies in the US, UK, Hong Kong and Guernsey. He is Chairman of F&C Commercial Property Trust Ltd and a Deputy Chairman of the UK trade body, the Association of Investment Companies. Chris was formerly a director of Gartmore Investment Management Plc, where he was Head of Gartmore's businesses in the US and Japan. Before that he was a holding board director of the Jardine Fleming Group in Asia. He is a Fellow of the UK Society of Investment Professionals and a Fellow of the Institute of Chartered Accountants in England and Wales.
Further details of the Directors' current and previous directorships are set out in Part XI of this prospectus on pages 111 to 112.
ICPL is the investment adviser to the Company pursuant to the Investment Advisory Agreement and is the manager and operator of the Partnership. ICPL is authorised and regulated in the UK by the FSA.
ICPL is indirectly 80.1 per cent. owned by 28 partners and 19.9 per cent. owned by a subsidiary of the HSBC Group, having formerly been the infrastructure and real estate investment arm of the HSBC Group until its management buy-out in April 2011.
Members of the Infrastructure Investment Team are responsible for carrying out the Investment Adviser's functions as investment adviser and operator. The Infrastructure Investment Team is comprised of experienced infrastructure professionals with a strong track record in managing infrastructure investments.
Under the Investment Advisory Agreement, the Investment Adviser's appointment may be terminated, inter alia, by either the Company or the Investment Adviser giving 12 months' notice in writing to the other party.
ICPL's appointment as Operator has corresponding termination provisions, and if ICPL's appointment as Investment Adviser is terminated it may unilaterally terminate its appointment as Operator, and vice versa.
The Investment Adviser, in its capacity as Operator, and the General Partner are together entitled to annual fees calculated on the following basis and in the following order: (i) 1.5 per cent. of the proportion of the Adjusted Gross Asset Value of the Group's investments that are in their construction or "ramp-up" phases; (ii) 1.1 per cent. of the proportion of the Adjusted Gross Asset Value of the Group's investments which are not in their construction or "ramp-up" phases and which, together with the investments under (i) above, have a value of up to £750 million in aggregate; and (iii) 1.0 per cent. of the proportion of the Adjusted Gross Asset Value of the Group's investments not accounted for under (i) or (ii) above. The Investment Adviser is also entitled to a fixed advisory fee of £100,000 per annum.
These fees are calculated and payable six monthly in arrears, and are based on the Adjusted Gross Asset Value of the Group's assets at the beginning of the period concerned, adjusted on a time basis for acquisitions and disposals during the period.
The General Partner as part of its profit share is also entitled to receive an amount equal to 1.0 per cent. of the value of new portfolio investments made by the Group that are not sourced from entities, funds or holdings managed by ICPL or an affiliate of ICPL. This amount is payable on completion of the acquisition of the relevant investment and is calculated on the sum of: (i) consideration paid (excluding costs); and (ii) the amount of the outstanding investment obligations assumed in relation to the investment.
The Investment Adviser does not receive any directors or other fees from any Project Company in the Current Portfolio and any fees arising from any Project Company are for the benefit of the Group.
The Directors intend to keep the fees described above under review to ensure they are set at appropriate levels.
If the Group invests in funds managed or operated by ICPL, the Group will bear any management or similar fees charged in relation to such fund, provided however that the value of the Group's investments in such funds will not be counted towards the valuation of the Group's investments for the purposes of calculating the sums payable to the Investment Adviser or the General Partner.
The Company is responsible for other ongoing operational costs and expenses which include (but are not limited to) the fees and expenses of the Administrator, the Registrar, the Directors and the Auditors, as well as listing fees, regulatory fees, expenses associated with any purchases of or tender offers for Ordinary Shares, printing and legal expenses and other expenses (including insurance and irrecoverable VAT). The Luxcos bear the costs of their directors' and administration fees. The Partnership bears the expenses of its operation.
The sourcing of new investments is undertaken by the Operator of the Partnership. The Investment Adviser has a dedicated Infrastructure Investment Team which uses the following methods to source investments:
The Infrastructure Investment Team initially screens new opportunities for quality and compliance with the Group's Investment Policy, the robustness of the cash flows, and the spread of exposure to different types of infrastructure projects and key counterparties. If acceptable, a detailed financial analysis is then undertaken to analyse the cash flows and returns with reference to key operating, financing, tax and accounting assumptions.
Members of the Infrastructure Investment Team evaluate all the risks which they believe are material to making an investment decision. Where appropriate, they complement their analysis through the use of professional advisers including engineering and/or technical consultants, environmental consultants, accountants, taxation, legal, regulatory and economic advisers, financial modellers and insurance experts. These advisers may carry out independent analysis which is intended to provide a second and independent review of key aspects of a project, providing confidence as to the project's performance and likely business plan projections.
All investment evaluations are supported by detailed financial analysis. Investments are considered using a base case set of forecasts which will be assessed together with a sensitivity analysis on key variables, including fluctuations in revenues and costs.
In addition, members of the Infrastructure Investment Team carry out a credit risk assessment on counterparties, contractors, subcontractors, equity investors and other parties, as appropriate, whilst having regard to country risk.
The Investment Adviser has established an investment committee (the "Investment Committee") made up of six senior members of the Infrastructure Investment Team. The transaction leader presents a detailed paper describing the opportunity and the results of the asset review, valuation and due diligence for evaluation and formal approval prior to signing a binding investment agreement. The Investment Committee reviews prospective new investments at various stages up to their acquisition and sanctions the final approval of any acquisition. Prospective acquisitions are reviewed at least at the inception of discussions with the vendors or coshareholders, at the formal offer stage and prior to any investment. The Investment Committee considers, inter alia, the suitability of the acquisition in relation to the existing portfolio, its match with the Group's Investment Policy and the projected returns compared to the Group's targets. Whilst the Operator has full discretion over acquisitions and disposals, it keeps the Directors informed of new opportunities.
The Infrastructure Investment Team has a good understanding of each of the Group's investments and takes a proactive approach to portfolio and asset management. The Infrastructure Investment Team's asset management skills and capabilities provide important support through the appointment of directors to the Project Companies to monitor and deal with any issues as they arise. This capability not only protects the value of the Group's portfolio, but equally allows the team to continually explore opportunities for additional value creation.
The Group receives regular management accounts and annual audited accounts from each Project Company in which it holds equity, as well as management progress reports addressing critical factors such as actual performance against service requirements. These are reviewed by the Infrastructure Investment Team to determine compliance with agreed targets.
The Infrastructure Investment Team reviews all Project Companies in the Current Portfolio on a quarterly, project by project, basis to monitor performance.
The Infrastructure Investment Team has enhanced returns through the implementation of a range of portfolio enhancements and believes it delivers some further growth across the Current Portfolio through its management of the underlying assets. The economies of scale that are achieved from portfolio enhancements can provide a competitive advantage in the acquisition of new assets.
Typical portfolio initiatives that have been, or are, actively analysed include:
Whilst the Group is a long term owner of infrastructure assets and therefore unlikely to dispose of assets, opportunities for value maximisation through disposal will be considered if appropriate.
Dexion Capital (Guernsey) Limited is the Administrator to the Company and also provides company secretarial services and a registered office to the Company. RSM Henri Grisius & Associés Sàrl. provides administrative services to the Luxcos. With the appointment of Dexion Capital (Guernsey) Limited, the Company decided it no longer required a custodian as the Company does not hold listed securities. Dexion Capital (Guernsey) Limited, in its role as Administrator, has responsibility for the safekeeping of the shares and loan certificates of the Company's investments in HICL Infrastructure 1 Sàrl.
Capita Registrars (Guernsey) Limited is the Registrar to the Company and Capita Registrars is the Company's UK transfer agent and receiving agent.
The Investment Adviser was appointed as the investment adviser to the Company at the time of its launch in March 2006 and was appointed as the operator of the Partnership by the General Partner, on behalf of the Partnership, on 22 March 2006. Under the terms of the Limited Partnership Agreement, the Operator manages the Partnership and its assets on a fully discretionary basis, subject to compliance with the Investment Policy and its contractual obligations under the Limited Partnership Agreement.
The Investment Adviser is a wholly owned subsidiary of InfraRed Partners LLP. The Investment Adviser was incorporated in England and Wales on 2 May 1997 (registered number 3364976) and is authorised and regulated in the United Kingdom by the FSA. The Investment Adviser changed its name to InfraRed Capital Partners Limited on 11 April 2011.
The InfraRed Group is a privately owned dedicated property and infrastructure investment business, managing a range of infrastructure and property funds and investments. The Infrastructure Investment Team has a strong record of delivering attractive returns for its investors, which include pension funds, insurance companies, funds of funds, asset managers and high net worth investors domiciled in the UK, Middle East and Asia.
The InfraRed Group comprises of InfraRed Partners LLP and a number of wholly-owned subsidiaries, two of which are regulated by the FSA (including the Investment Adviser and Operator). The InfraRed Group currently manages four infrastructure funds (including the Group) and four real estate funds. The InfraRed Group currently has a staff of around 80 employees and partners, based mainly in offices in London and with smaller offices in Paris, Hong Kong and New York. Further details on the InfraRed Group can be found at www.ircp.com.
Since 1998, the InfraRed Group (including predecessor organisations) has raised eleven private institutional investment funds investing in infrastructure and property in addition to the Company.
InfraRed Partners LLP is 80.1 per cent. owned by 28 partners through InfraRed Capital Partners (Management) LLP, and 19.9 per cent. by a subsidiary of HSBC. This ownership structure was the result of a management buyout of the specialist infrastructure and real estate business which was previously known as HSBC Specialist Investments Limited and was completed successfully in April 2011.
Members of the Infrastructure Investment Team are responsible for carrying out the functions of the Investment Adviser and of the Operator.
The Infrastructure Investment Team specialises in Infrastructure Equity investment, predominantly in Europe to date. The Infrastructure Investment Team was originally established as an advisory business in Charterhouse Bank Limited in the early years of PFI/PPP, initially working as advisers to the UK Government and subsequently advising bidding consortia. This gave the Infrastructure Investment Team a valuable contact network within the UK public sector, which has since been maintained and developed.
By 1996, it was apparent that a funding gap had developed in the market because deal sponsors (contractors or facility management companies) did not have either the desire or the capacity to put up all the risk capital required to fund the flow of projects. In mid-1997, the Infrastructure Investment Team developed its advisory business into an investment business in order to take advantage
of that opening. The Infrastructure Investment Team initially made principal investments on the Investment Adviser's own balance sheet before raising the first of its institutional funds, Fund I, in October 2001. The final closing of Fund I took place in May 2002 with aggregate commitments of £125 million from an international investor base. The majority of the capital of Fund I was fully committed by 2004 and the fund was successfully realised in 2006.
The Infrastructure Investment Team raised Fund II in 2004/2005 with a broader international investor base and aggregate commitments of £300 million. Fund III was raised in 2010 once the capital of Fund II had been substantially committed. The final close of Fund III took place in October 2011 with total capital raised of US\$1.2 billion, ahead of the target of US\$1.0 billion.
Funds I, II and III are "primary" funds which invest in infrastructure projects at their outset. The Investment Adviser has also raised the €235million InfraRed Environmental Infrastructure Fund in 2009, an unlisted capital growth fund which invests in environmental infrastructure projects including renewable energy assets, water related infrastructure and other sectors.
The Infrastructure Investment Team currently consists of 34 investment professionals, all of whom have an infrastructure investment background. The team currently has approximately 455 years' combined experience in the infrastructure sector, and over 256 years with the InfraRed Group (including predecessor organisations) and has a broad range of relevant skills, including private equity, structured finance, construction and facilities management.
The Infrastructure Investment Team is based in offices in London, Paris and New York, enabling the team to source new investment opportunities globally for the InfraRed Group and the funds it manages. The Infrastructure Investment Team takes a proactive approach to monitoring the performance of infrastructure investments for which it is responsible. It will usually take a seat on the boards of the relevant Project Companies. It has an excellent track record for managing investments in infrastructure projects in their construction, commissioning and operational phases. Many of the investments in the Current Portfolio have been in their operational phase for some time and these projects have performed well. The Infrastructure Investment Team has built up substantial experience in dealing with issues presented by the projects so that investment yields are maintained.
The Infrastructure Investment Team has a long and successful proven track record in sourcing, structuring, acquiring, managing and financing Infrastructure Equity investments. It has been responsible for 110 Infrastructure Equity investments for the InfraRed Group (including predecessor organisations) and its funds to date. Its projects have won several awards including awards from the Project Finance Magazine and the Infrastructure Journal. The team has expanded the Group beyond its initial investment pool and is responsible for its continuing development. The Infrastructure Investment Team possesses a range of different skills and core infrastructure experience in the following sectors:
The Investment Committee comprises Werner von Guionneau (CEO), Chris Gill (Deputy CEO), Gareth Craig, Tony Roper, Erwan Fournis, and Keith Pickard and is responsible for structuring, transacting and managing investments for the Group.
The Investment Committee has combined experience of over 77 years in making infrastructure investments and managing investments and projects. The skills and knowledge of its members are augmented by those of the investment professionals within the wider team as required. Further resource is provided from central functions within the business covering finance, risk management and control, document management and credit evaluations.
The Company is seeking to raise £180 million (before expenses) through the Placing, Open Offer and Offer for Subscription of C Shares. The Directors have also reserved the right, in consultation with Collins Stewart, to increase the size of the Issue up to a maximum of £250 million in circumstances in which Additional Investments are made or identified and overall demand for C Shares exceeds the target amount.
The net proceeds of the Issue will not in any event exceed the aggregate of: (i) the Group's funding requirements (which as at the date of this prospectus stand at £139 million); (ii) the consideration payable for the Conditional Investment of approximately £39 million; and (iii) the consideration payable for any Additional Investments.
If the Issue meets its target size of £180 million, it is expected that the Company will receive approximately £177.6 million from the Issue, net of fees and expenses associated with the Issue, which are anticipated to amount to approximately £2.4 million. If the Issue is increased to its maximum size of £250 million and is fully subscribed, it is expected that the Company will receive approximately £246.9 million from the Issue, net of fees and expenses associated with the Issue, which are anticipated to amount to approximately £3.1 million.
The Company will apply the net proceeds of the Issue to meet the Company's funding requirements, to reduce outstanding Group Debt and, depending upon the amount of proceeds raised as described above, to provide the Group with additional resources to make further investments. The Group will only proceed with the Conditional Investment and any further Additional Investments if, after taking account of the net proceeds of the Issue, the Group Debt outstanding after such acquisition or acquisitions would be at a level that the Board considers prudent having regard to the 2012 Facility.
The Issue, which is not underwritten, is conditional upon:
If these conditions are not met, the Issue will not proceed.
The Directors believe that the use of C Shares is the most appropriate way by which to raise further equity capital, as it will ensure that the portfolio value as at 31 March 2012 forms the basis for determining the price at which new Ordinary Shares are issued to investors upon the conversion of the C Shares. Furthermore, provided that a minimum of £60 million is raised, the costs of the Issue will be fully borne by C Share investors and will not therefore dilute the Net Asset Value of Existing Ordinary Shares.
The C Shares will convert into Ordinary Shares, which will rank pari passu in all respects with the Existing Ordinary Shares, at the Conversion Time and on the basis as set out in this prospectus. Conversion is anticipated to occur in April 2012 and in any event no later than 31 May 2012. The Conversion Ratio will be calculated, on an investment basis, by reference to the net asset values attributable to the C Shares and the Ordinary Shares and according to the Conversion terms as set out in Part IX of this prospectus.
Application will be made for the C Shares to be admitted to the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange.
Under the Open Offer, an aggregate amount of 110,903,702 C Shares (or such greater number as may be made available by the Directors in exercising their discretion to reallocate from the Placing and/or the Offer for Subscription in favour of the Excess Application Facility) will be made available to Existing Shareholders at the Issue Price pro rata to their holdings of Existing Ordinary Shares, on the terms and subject to the conditions of the Open Offer, on the basis of:
The balance of C Shares to be made available under the Issue, together with any C Shares not taken up pursuant to the Open Offer, will be made available under the Excess Application Facility, the Placing and the Offer for Subscription.
Existing Shareholders should be aware that the Open Offer is not a rights issue and Open Offer Application Forms cannot be traded.
Fractional entitlements under the Open Offer will be rounded down to the nearest whole number of C Shares and will be disregarded in calculating Open Offer Entitlements. All fractional entitlements will be aggregated and made available to Existing Shareholders under the Excess Application Facility.
The latest time and date for acceptance and payment in full in respect of the Open Offer will be 11.00 a.m. on 23 March 2012. Valid applications under the Open Offer will be satisfied in full up to applicants' Open Offer Entitlements. Existing Shareholders are also being offered the opportunity to subscribe for C Shares in excess of their Open Offer Entitlements under the Excess Application Facility, described below.
The terms and conditions of application under the Open Offer are set out at the end of this document. These terms and conditions should be read carefully before an application is made. Investors who are in any doubt about the Issue arrangements should consult their stockbroker, bank manager, solicitor, accountant or other financial adviser.
Subject to availability, Existing Shareholders who take up all of their Open Offer Entitlements may also apply under the Excess Application Facility for additional C Shares in excess of their Open Offer Entitlement. The Excess Application Facility, will comprise whole numbers of C Shares under the Open Offer which are not taken up by Existing Shareholders pursuant to their Open Offer Entitlements, and any C Shares that the Directors determine, in their absolute discretion, should be reallocated from the Placing and/or the Offer for Subscription to satisfy demand from Existing Shareholders in preference to prospective new investors under the Placing or the Offer for Subscription (together, "Excess Shares").
Existing Non-CREST Shareholders who wish to apply to subscribe for more than their Open Offer Entitlement should complete the relevant sections on the Open Offer Application Form.
Existing CREST Shareholders will have Excess CREST Open Offer Entitlements credited to their stock account in CREST and should refer to paragraph 4.2 of the "Terms and Conditions of the Open Offer" starting on page 144 of this document for information on how to apply for Excess Shares pursuant to the Excess Application Facility.
Excess applications may be allocated in such manner as the Directors determine, in their absolute discretion, and no assurance can be given that applications by Existing Shareholders under the Excess Application Facility will be met in full or in part or at all. In the event of oversubscription under the Excess Application Facility the Directors have the discretion (but are not obliged) to limit applications by Existing Shareholders pro rata to their aggregate holdings of Existing Ordinary Shares. However, the Directors also have the discretion (but are not obliged) to scale back the Placing and Offer for Subscription in favour of the Excess Application Facility by re-allocating C Shares that would otherwise be available under the Offer for Subscription and/or the Placing to Existing Shareholders through the Excess Application Facility. To the extent any C Shares remain unallocated pursuant to Open Offer Entitlements and under the Excess Application Facility, they will be made available under the Offer for Subscription and the Placing at the Directors' discretion.
Existing Non-CREST Shareholders will be sent an Open Offer Application Form giving details of their Open Offer Entitlement.
Persons that have sold or otherwise transferred all of their Existing Ordinary Shares should forward this document, together with any Open Offer Application Form, if and when received, at once to the purchaser or transferee, or the bank, stockbroker or other agent through whom the sale or transfer was effected, for delivery to the purchaser or transferee, except that, such documents should not be sent to any jurisdiction where to do so might constitute a violation of local securities laws or regulations.
Any Existing Shareholder that has sold or otherwise transferred only some of their Existing Ordinary Shares held in certificated form on or before 1 March 2012, should refer to the instruction regarding split applications in the "Terms and Conditions of the Open Offer" at the end of this document and in the Open Offer Application Form.
Existing CREST Shareholders will not be sent an Open Offer Application Form. Instead, Existing CREST Shareholders will receive a credit to their appropriate stock accounts in CREST in respect of their Open Offer Entitlement and their Excess CREST Open Offer Entitlement as soon as practicable after 8.00 a.m. on 2 March 2012.
In the case of any Existing Shareholder that has sold or otherwise transferred only part of their holding of Existing Ordinary Shares held in uncertificated form on or before 1 March 2012, a claim transaction will automatically be generated by Euroclear UK which, on settlement, will transfer the appropriate Open Offer Entitlement and Excess CREST Open Offer Entitlement to the purchaser or transferee.
Full details of the Open Offer are contained in the Terms and Conditions of the Open Offer at the end of this document. If you have any doubt what action you should take, you should seek your own financial advice from your stockbroker, solicitor or other independent financial adviser duly authorised under FSMA who specialises in advice on the acquisition of shares and other securities immediately.
The International Security Identification Number for C Shares under the Open Offer is GG00B7MLCF83.
The International Security Identification Number for Excess Shares under the Excess Application Facility is GG00B422P624.
The Offer for Subscription will open on 29 February 2012 and the latest time for receipt of Application Forms will be 1.00 p.m. on 22 March 2012.
The terms and conditions of application under the Offer for Subscription and an Application Form are set out at the end of this prospectus. These terms and conditions should be read carefully before an application is made. Investors who are in any doubt about the Offer for Subscription should consult their respective stockbroker, bank manager, solicitor, accountant or other independent financial adviser. Application Forms, accompanied by a cheque or duly endorsed banker's draft, should be returned by post (or by hand during normal business hours only) to Capita Registrars Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU by no later than 1.00 p.m. on 22 March 2012.
The Company, the Investment Adviser and Collins Stewart have entered into the Placing, Open Offer and Offer Agreement, pursuant to which Collins Stewart has agreed, subject to certain conditions, to use reasonable endeavours to procure subscribers and placees for up to 250 million C Shares at the Issue Price under the Placing, less the number of C Shares required to satisfy valid applications under the Open Offer, the Excess Application Facility and Offer for Subscription. Placing commitments should be received by no later than 12.00 noon on 26 March 2012.
Pursuant to the Placing, Open Offer and Offer Agreement, Collins Stewart has agreed that it will not offer or sell the C Shares (i) as part of its distribution at any time and (ii) otherwise until 40 days after the completion of the distribution of the C Shares, as determined and certified by Collins Stewart, other than in accordance with Rule 903 of Regulation S or Rule 144A and, at or prior to confirmation of a sale of C Shares (other than a sale pursuant to Rule 144A), it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases C Shares from it during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the C Shares within the United States or to, or for the account or benefit of, US persons.
In addition, until 40 days after the commencement of the offering of the C Shares, an offer or sale of C Shares within the United States by a dealer that is participating in the offering may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A. Terms used in the preceding two paragraphs have the meanings given to them by Regulation S under the Securities Act.
The International Security Identification Number for the C Shares under the Placing and Offer for Subscription is GG00B5SNML04.
Details of the terms of the Placing, Open Offer and Offer Agreement are set out in Part XI on page 125 of this prospectus.
The costs of the Issue will be borne by the C Shares. However, in the event that the Issue proceeds are less than £60 million, the costs of the Issue will be capped at 2.0 per cent. of the gross proceeds of the Issue and the balance of any costs will be attributed to the Existing Ordinary Shares. Such excess amount would be less than the amount which would otherwise be borne by the Company if the Issue were not to proceed.
The Issue expenses (including VAT where relevant and assuming the Issue is fully subscribed and the Directors proceed at the target issue of 180 million C Shares) are expected to be approximately £2.4 million. The Issue expenses (including VAT where relevant and assuming the Issue is fully subscribed and the Directors proceed at the maximum Issue size of 250 million C Shares) are expected to be approximately £246.9 million. Under the terms of the Placing, Open Offer and Offer Agreement (as set out in more detail in section 11 of Part XI of this prospectus), Collins Stewart will receive a corporate finance fee of £125,000 and is entitled to a total commission of 1.00 per cent. of the gross proceeds of the Issue.
The Issue expenses will include an additional fee of £10,000 payable to each Director in connection with the Issue.
The Company has a target of 180 million C Shares for issue under the Placing, the Open Offer and the Offer for Subscription. However, the Directors have reserved the right, in consultation with Collins Stewart, to increase the size of the Issue up to 250 million C Shares to the extent that Additional Investments are made or identified and overall demand for C Shares exceeds the target amount. To the extent that they are not subscribed for under the Offer for Subscription and the Open Offer, such C Shares may be issued under the Placing. In the event that subscriptions exceed the maximum number of C Shares available under the Issue the Directors will scale back subscriptions under the Placing and the Offer for Subscription at their discretion, with preference given to earlier applications.
Subject to those matters on which the Issue is conditional, the Directors, with the consent of Collins Stewart, may bring forward or postpone the closing date for the Placing, the Offer for Subscription and the Open Offer by up to two weeks.
The basis of allocation under the Issue is expected to be announced on 28 March 2012. The basis of allocation shall be determined by the Company after consultation with the Investment Adviser and Collins Stewart. CREST accounts will be credited on the date of Admission.
To the extent that any application for subscription is rejected in whole or in part, or the Directors determine in their absolute discretion that the Issue should not proceed, monies received by Capita Registrars, as Receiving Agent to the Open Offer and Offer for Subscription, will be returned to each relevant applicant by crossed cheque in favour of the applicant(s) within 14 days at the applicant's risk and without interest.
The Company does not propose to accept multiple subscriptions. Financial intermediaries who are investing on behalf of clients should make separate applications or, if making a single application for more than one client, provide details of all clients in respect of whom application is being made. Multiple applications or suspected multiple applications on behalf of a single client are liable to be rejected.
The attention of persons resident outside the UK is drawn to the notices to investors set out on pages 130 to 135 of this prospectus which contains restrictions on the holding of C Shares by such persons.
In particular, investors should note that the C Shares have not been and will not be registered under the Securities Act or under the applicable state securities laws of the United States, and the Company has not registered, and does not intend to register, as an investment company under the Investment Company Act. Accordingly, the C Shares may not be offered, sold, pledged or otherwise transferred directly or indirectly in or into the United States or to, or for the account or benefit of any US person within the meaning of Regulation S, except that the C Shares may be offered and sold (a) in the United States to "qualified institutional buyers" within the meaning of Rule 144A who are "qualified purchasers" as defined in Section 2(a)(51) of the Investment Company Act, in reliance on the exemption from registration provided by Rule 144A and (b) outside the United States in "offshore transactions" to persons that are not US persons as defined in, and in reliance on Regulation S.
Application will be made for the C Shares to be admitted to the Official List and to trading on the Main Market of the London Stock Exchange. It is expected that Admission will become effective, and that dealings in the C Shares will commence, at 8.00 a.m. on 30 March 2012.
Payment for the C Shares applied for under the Open Offer should be made in accordance with the instructions contained in the Terms and Conditions of the Open Offer and, in the case of certificated C Shares, in the Open Offer Application Form. Payment for the C Shares applied for under the Offer for Subscription should be made in accordance with the instructions contained in the Application Form set out at the end of this prospectus. Payment for the C Shares to be acquired under the Placing should be made in accordance with settlement instructions provided to investors by Collins Stewart. To the extent that any application or subscription for C Shares is rejected in whole or in part, monies will be returned to the applicant(s) within 14 days at the risk of the applicant(s) without interest.
Pursuant to anti-money laundering laws and regulations with which the Company must comply in the UK and/or Guernsey, the Company and its agents, the Administrator, the Investment Adviser and Collins Stewart may require evidence in connection with any application for C Shares, including further identification of the applicant(s), before any C Shares are issued.
The Company and its agents, the Administrator, the Receiving Agent, the Investment Adviser and Collins Stewart reserve the right to request such information as is necessary to verify the identity of a C Shareholder or prospective C Shareholder and (if any) the underlying beneficial owner or prospective beneficial owner of a C Shareholder's C Shares. In the event of delay or failure by the C Shareholder or prospective C Shareholder to produce any information required for verification purposes, the Directors, in consultation with the Receiving Agent, Collins Stewart and the Investment Adviser, may refuse to accept a subscription for C Shares, or may refuse the transfer of C Shares held by any such C Shareholder.
The following summary is given as a general guide to the tax treatment of the Group and certain types of investors. It does not purport to cover all taxation issues which might be applicable to the Group or such investors and is not intended to be, nor should be construed to be, legal, tax or investment advice to any particular investor. The summary is based on current laws and tax authority practices in the UK, Guernsey and Luxembourg, which may change, but the summary is believed to be correct at the date hereof. Nevertheless, prospective investors are strongly advised to seek their own advice on the taxation consequences of an investment in the Company, especially those prospective investors who are not resident for tax purposes in the UK as they may be subject to taxation law in their respective jurisdictions. Individuals who are citizen of, or resident in the United States and corporations or other entities taxable as corporations that were created or organised in or under the laws of the United States or any political subdivision thereof, must seek their own advice as to the consequences of the purchase, beneficial ownership and/or disposition of the C Shares under US Federal, State, local and other tax laws, including the possible effects of changes to such laws. Individuals who are citizens of, or resident in, the United States and corporations or other entities taxable as corporations that were created or organized in or under the laws of the United States or any political subdivision thereof, must seek their own advice as to the consequences of the purchase, beneficial ownership and/or disposition of the C Shares under US federal, state, local and other tax laws, including the possible effects of changes to such laws.
Under current law and practice in Guernsey, the Company is eligible for and has been granted exemption from Income Tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 (the "Ordinance"). Under the provisions of the Ordinance, the Company will be treated as if it were not resident in Guernsey for the purposes of liability to Guernsey income tax and will not be liable to income tax in Guernsey save in respect of income arising in Guernsey (other than bank deposit interest). It is anticipated that no income other than bank deposit interest will arise in Guernsey and therefore the Fund should not incur any additional liability to Guernsey tax. It is intended to conduct the affairs of the Company so as to ensure it retains such exempt status which is granted on application on an annual basis and on payment of the annual fee, currently £600 per application, and provided the Company continues to qualify under the applicable legislation for exemption.
Guernsey currently does not levy taxes upon capital inheritances, capital gains, gifts, sales or turnover (unless the varying of investments and the turning of such investments to account is a business or part of a business), nor are there any estate duties, (save for registration fees and ad valorem duty for a Guernsey Grant of Representation where the deceased dies leaving assets in Guernsey which require presentation of such a Grant).
No stamp duty is chargeable in Guernsey on the issue, transfer or redemption of shares in the Company.
In keeping with its ongoing commitment to meet international standards, Guernsey is currently undertaking a review of its corporate tax regime. Until such time as the review is complete, the existing corporate tax regime remains in place. At the date of this document, no announcements have been made regarding specific changes to Guernsey's tax regime or the time of implementation of any changes that may arise as a result of the review.
Although not a Member State of the European Union, Guernsey, in common with certain other jurisdictions, entered into agreements with EU Member States on the taxation of savings income. From 1 July 2011 paying agents in Guernsey must automatically report to the Director of Income Tax in Guernsey any interest payment to individuals resident in the contracting EU Member States which falls within the scope of the EU Savings Directive (2003/48/EC) (the "Directive") as applied in Guernsey. However, whilst such interest payments may include distributions from the proceeds of shares or units in certain collective investment schemes which are equivalent to a UCITS, guidance notes issued by the States of Guernsey on the implementation of the bilateral agreements indicate that the Company is not equivalent to a UCITS. Accordingly, any payments made by the Company to Shareholders will not be subject to reporting obligations pursuant to the agreements between Guernsey and EU Member States to implement the Directive in Guernsey.
The scope and operation of the Directive is currently being reviewed in accordance with the European Council's findings published on 13 November 2008. Any review will affect EU Member States. Guernsey, along with other dependent and associated territories, will consider the effect of any proposed changes to the Directive in the context of existing bilateral treaties and domestic law, once the outcome of that review is known. If changes are implemented, the position of Shareholders in relation to the Directive as applied in Guernsey may be different to that set out above.
Shareholders who are resident for tax purposes in Guernsey (which includes Alderney and Herm) will incur Guernsey income tax at the applicable rate on a distribution paid to them by the Company. The Company will be required to provide the Director of Income Tax in Guernsey such particulars relating to any distribution paid to Guernsey resident Shareholders as the Director of Income Tax may require, including the names and addresses of the Guernsey resident Shareholders, the gross amount of any distribution paid and the date of the payment. Provided the Company maintains its exempt status, there would currently be no requirement for the Company to withhold tax from the payment of a distribution to a Guernsey resident Shareholder. Furthermore, exempt companies are currently not subject to the deemed distribution provisions of the Income Tax (Guernsey) Law, 1975, as amended.
In the case of Shareholders who are not resident in Guernsey for tax purposes and provided the Company maintains its exempt status the Company's distributions can be paid to such Shareholders without giving rise to a liability to Guernsey income tax, nor will the Company be required to withhold Guernsey tax on such distributions.
Luxco 1 and Luxco 2 (the "Luxcos") are fully taxable SOPARFI companies resident for tax purposes only in Luxembourg. It is expected that the Luxcos will be subject to minimal taxation in Luxembourg on the basis of the availability of the participation exemption (see below), internal financing arrangements and the minimum flat tax regime applicable for financing and holding companies.
The Luxcos' interest income will be fully taxable in Luxembourg. Interest expense will be fully deductible subject to an arm's length margin on the financing activity. The Luxcos will be liable to Luxembourg corporate income tax and municipal business tax (currently at an aggregate rate of 28.80 per cent. for a company with its registered seat in Luxembourg City) on the amount of that arm's length margin on their financing activities.
Dividends received by the Luxcos from qualifying participations will be exempt from tax under the Luxembourg participation exemption provided that certain conditions are met. Similarly, the disposal of shares by any of the Luxcos will also be exempt from tax by virtue of the participation exemption provided that certain conditions are met. The Directors intend to manage the holdings in subsidiaries so that the participation exemption conditions are met.
The Luxcos should be entitled to receive dividend and interest payments from UK and other EU subsidiaries without a withholding on account of taxation, subject to the provisions of the EU Parent Subsidiary Directive, the EU Interest and Royalties Directive and, in the case of UK source interest specifically, on receipt of clearance from HMRC for interest to be paid without deduction of UK income tax.
Similarly, the Luxcos can make interest payments to the Company without a withholding on account of taxation as there is no requirement to withhold tax under Luxembourg law. As the Company is a legal person, the Luxembourg Savings Law (which has transposed the EU Savings Tax Directive, see above) should not apply. In principle, dividends payable by the Luxcos to the Company will be subject to 15 per cent. withholding tax, although measures will be taken to mitigate such withholding tax.
Net worth tax of 0.5 per cent on the Luxembourg entities' worldwide net worth is payable annually. However the Directors consider that the amount charged should be nominal on the basis that equity funded shareholdings that qualify for the participation exemption are considered exempt assets and the debts of the Luxcos are tax deductible for net worth tax purposes unless they are financing exempt assets.
As from 1 January 2009, no capital duty applies to subscribed capital. Nevertheless, a registration tax should be due upon amendment of the by-laws of €75.
As previously stated, Luxco 2 will invest in the Partnership which is transparent for UK and Luxembourg tax purposes.
The following comments only apply to Shareholders who are resident or ordinarily resident solely in the UK for taxation purposes and who hold their interest in the Company for investment purposes. They do not apply to persons who hold their interest in the Company as trustees or in any other capacity other than that of absolute beneficial owner; nor do they apply to persons who carry on a banking, financial or insurance trade.
As the Company is a closed ended company and there is no guarantee or undertaking being given that could give rise to an expectation that a reasonable investor could realise their investment either entirely or almost entirely by reference to net asset value (or by reference to an index), it is not expected that the Company will be treated as an offshore fund for the purposes of the offshore funds rules.
Where an individual Shareholder who is resident or ordinarily resident in the UK, and if domiciled outside of the UK is not subject to the remittance basis of taxation, receives a dividend from the Company this is a foreign source dividend and will be subject to income tax at (generally) 10 per cent. if the individual is a basic rate taxpayer, 32.5 per cent. if the individual is a higher rate taxpayer or 42.5 per cent. if the individual is an additional rate taxpayer (i.e. if the individual has an annual taxable income in excess of £150,000). Such Shareholders will also be entitled to a non-payable dividend tax credit of one ninth of the amount or value of the distribution provided that they own less than a 10 per cent. holding in this Company. This will have the effect of eliminating the income tax liability on such dividend income for Shareholders who are liable to tax only at the basic rate of income tax, reducing the effective rate payable by individuals liable to higher rate income tax to 25 per cent. and reducing the effective rate payable by individuals liable to additional rate income tax to just over 36.1 per cent.
As a general rule, where dividends do not qualify for the non-payable dividend tax credit, the UK will give credit relief for direct tax paid on dividends to such Shareholders. "Direct tax" means foreign tax directly charged on a dividend by deduction at source or charged directly on the Shareholder if neither the Company nor the Shareholder would have borne the tax if the dividend had not been paid.
Individual Shareholders who are resident but not domiciled in the UK and to whom the remittance basis of taxation applies will only be taxed to the extent that the dividends are remitted or deemed to be remitted to the UK. Such Shareholders will not be entitled to the non-payable dividend tax credit.
On the basis that it is not expected that the Company will be treated as an offshore fund for the purposes of the offshore funds rules, gains on disposal of the Ordinary Shares and C Shares by individual UK resident Shareholders should not be subject to UK income tax, but may, depending on the Shareholders' individual circumstances, give rise to liability to UK taxation on capital gains. Capital gains tax will be charged at 18 per cent. where the total chargeable gains (save for any chargeable gains actually arising before 23 June 2010) and total taxable income arising to that individual in a tax year, after all allowable deductions (including losses, the income tax personal allowance and the capital gains tax annual exempt amount) are less than the upper limit of the income tax basic rate band (which is currently £35,000). To the extent that any such chargeable gains (or part of any such chargeable gains) arising in a tax year exceed the upper limit of the income tax basic rate band (when aggregated with total taxable income in that tax year as referred to above), capital gains tax will be charged at 28 per cent. on such chargeable gains. If the offshore funds rules do apply, there will be income tax at 40 per cent. for UK higher rate individual taxpayers and 50 per cent. for additional rate taxpayers.
Individual Shareholders who are resident but not domiciled in the UK and to whom the remittance basis of taxation applies will only be taxed on gains arising on disposal (whether by sale or redemption) of Shares to the extent that the gains are remitted or deemed to be remitted to the UK.
The attention of individuals that are ordinarily resident in the UK for tax purposes is drawn to the provisions of section 714 of the Income Tax Act 2007 et seq. Broadly under these provisions a UK tax resident individual may be charged to income tax on certain amounts following a transfer of assets to a person not resident or domiciled within the UK for tax purposes. Non-UK domiciled investors to whom the remittance basis of taxation applies should not be subject to UK income tax under these provisions unless the attributed income is remitted to the UK.
The UK government has announced that it will propose amendments to these provisions in Finance Bill 2013. A further announcement will be made around Budget 2012 and the UK government intends to publish a consultation including draft legislation at that time.
Individuals who are resident for tax purposes in jurisdictions other than the UK will be taxed according to the rules of that jurisdiction.
Where a UK resident individual Shareholder receives a capital distribution this will be treated as a part disposal of their holding. The capital gain or loss is calculated as proceeds less base cost. As this is deemed to be a part disposal only part of the base cost can be brought into account. The fraction of base cost which is allowable as a deduction is A/(A+B), where A is the consideration and B is the value of the part retained.
Where the distribution is small, compared with the value of the holding in respect of which it is made, it is not treated for capital gains purposes as giving rise to a part disposal. In such a case, the amount of the distribution is deducted from any expenditure allowable as a deduction in computing a gain or loss on a subsequent disposal by the recipient. Therefore the charge is postponed until a subsequent disposal of the holding. This treatment is not compulsory: the recipient can elect to have the distribution treated as a part disposal.
HMRC automatically treats a distribution as being "small" if it is 5 per cent. or less than the value of the shares at the date of distribution or it is not more than £3,000 (irrespective of whether the 5 per cent. test is satisfied).
Where a distribution does not fall within the above categories, HMRC considers each case on its merits.
This paragraph applies to any UK resident or ordinarily resident Shareholders (irrespective of domicile) whose interest (when aggregated with persons connected with them) in the chargeable gains of the Company or the Luxcos or any other non-UK company in which the Company may invest (together, the "non-UK Companies") exceeds one tenth of the gain. In the event that any non-UK company would be treated as 'close' under UK tax legislation if it were resident in the UK, then part of any chargeable gain accruing to such non-UK company may be attributed to such a Shareholder and the Shareholder may (in certain circumstances) be liable to UK tax on capital gains (section 13 Taxation of Chargeable Gains Act 1992). The part of the capital gain attributed to the Shareholder corresponds to the Shareholder's proportionate interest in such non-UK Company. Subject to certain time limits, such tax will be deductible in computing any gains arising on the disposal of the Shareholder's shares in the Company.
Individual Shareholders who are resident but not domiciled in the UK and to whom the remittance basis of taxation applies would only be taxed on the attributed capital gain when it is remitted to the UK.
The UK government has announced that it will propose amendments to this provision in Finance Bill 2013. A further announcement will be made around Budget 2012 and the UK government intends to publish a consultation including draft legislation at that time.
The following assumes that the corporate Shareholder will not be holding the investment with a view to realising trade profits under section 35 of the Corporation Tax Act 2009 ("CTA 2009").
UK resident corporate Shareholders may be able to rely upon legislation in the CTA 2009 which exempts certain classes of dividend and other company distributions from the charge to UK corporation tax. In particular, provided the Company meets certain conditions (which are anticipated to be met), dividends paid by the Company to a UK resident corporate Shareholder which is not a "small company" for the purposes of section 931 S CTA 2009 should not be subject to UK corporation tax.
Where a UK resident corporate Shareholder receives a capital distribution this will be treated as a part disposal of its holding. The capital gain or loss is calculated as proceeds less base cost. As this is deemed to be a part disposal only part of the base cost can be brought into account. The fraction of base cost which is allowable as a deduction is A/(A+B), where A is the consideration and B is the value of the part retained.
Where the distribution is small, compared with the value of the holding in respect of which it is made, it is not treated for chargeable gains purposes as giving rise to a part disposal. In such a case, the amount of the distribution is deducted from any expenditure allowable as a deduction in computing a gain or loss on a subsequent disposal by the recipient. Therefore the charge is postponed until a subsequent disposal of the holding. This treatment is not compulsory: the recipient can elect to have the distribution treated as a part disposal.
HMRC automatically treats a distribution as being "small" if it is 5 per cent. or less than the value of the shares as at the date of distribution or if it is not more than £3,000 (irrespective of whether the 5 per cent. test is satisfied). Where a distribution does not fall within the above categories, HMRC considers each case on its merits.
On the basis that it is not expected that the Company will be treated as an offshore fund for the purposes of the offshore funds rules, gains on disposal of the Ordinary Shares and C Shares by UK resident corporate Shareholders will be taxable as chargeable gains subject to any tax reliefs available. If the offshore funds rules do apply, such gains will be taxable as income.
If a corporate Shareholder is resident for tax purposes in a country other than the UK then it will be taxed according to the rules of that jurisdiction.
UK resident exempt funds will not be liable to tax on dividends paid by the Company or chargeable gains arising upon a disposal of investments held for the purposes of the Company.
As it is possible that the Company will be owned by a majority of persons resident in the UK, the UK legislation applying to controlled foreign companies may apply to any corporate Shareholders and/or C Shareholders who are resident in the UK. Under these rules, part of any undistributed income accruing to any non-UK company may be attributed to such a Shareholder, and may in certain circumstances be chargeable to UK corporation tax in the hands of the Shareholder. However, this will only apply if the apportionment to that Shareholder (when aggregated with persons connected or associated with them) is at least 25 per cent. of the relevant profits of the controlled foreign company.
HMRC's published practice is to treat a subscription for shares by an existing shareholder up to his pro rata entitlement pursuant to the terms of an open offer as a reorganisation of share capital such that their original shares and the new C Shares will be treated as the same asset acquired at the time the original shares were acquired, and the base cost of the original shares and the new C shares will be spread pro rata across their entire holding. To the extent that the original shares and the new C Shares represent more than one class of shares, the base cost will need to be apportioned by reference to the quoted market value of each class of share.
Any C Shares subscribed for in excess of the minimum entitlement will, however, be treated as a separate acquisition, and their base cost will only be deductible upon disposal of such new shares.
Any C Shares subscribed for in excess of the minimum entitlement under the open offer will be treated as a separate acquisition, and the shareholder's base cost will only be deductible upon disposal of such new shares.
The issue of C Shares pursuant to the Placing will not constitute a reorganisation of the share capital of the Company for the purposes of the UK taxation of chargeable gains and, accordingly, any C Shares so acquired will be treated as acquired as part of a separate acquisition of C Shares.
The subsequent conversion of C Shares into Ordinary Shares and Deferred Shares would also constitute a reorganisation of the Company's share capital and would not, therefore, result in any disposal by the Shareholders of the C Shares for the purposes of UK tax on chargeable gains. Instead, the new Ordinary Shares and Deferred Shares would be regarded as the same asset as the C Shares, acquired on the same date and for the same consideration as such C Shares were deemed to be acquired. The base cost of the C Shares will be divided between the new Ordinary Shares and the Deferred Shares arising upon conversion in proportion to the respective market values of those shares.
On the basis of case law, UK resident shareholders should not receive any income liable to UK income tax or corporation tax to the extent that they elect to receive Scrip Shares instead of the cash dividend. Nor should they make any disposal for chargeable gains tax purposes at the time the Scrip Shares are allotted. Instead the Scrip Shares and the original registered holding of Ordinary Shares (the "Original Holding") should be treated as a single holding acquired at the time of the Original Holding. There will be no allowable expenditure for chargeable gains tax purposes arising in respect of the Scrip Shares and the allowable expenditure
arising in respect of the Original Holding will be apportioned across the Original Holding and the Scrip Shares. A disposal for chargeable gains tax purposes will only arise at the time the shareholder subsequently disposes of the Scrip Shares or the Original Holding (a "Subsequent Disposal").
UK resident individual shareholders may be subject to capital gains tax in respect of chargeable gains arising on a Subsequent Disposal depending on their individual circumstances. UK resident corporate shareholders may be subject to corporation tax in respect of chargeable gains arising on a Subsequent Disposal depending on their individual circumstances. UK resident exempt funds will not be liable to tax on chargeable gains arising upon a Subsequent Disposal of investments held for the purposes of the fund.
The following comments are intended as a guide to the general stamp duty and SDRT position and do not relate to persons such as market makers, brokers, dealers, intermediaries and persons connected with depository arrangements or clearance services, to whom special rules apply.
No Guernsey or UK stamp duty or SDRT will be payable on the issue of Ordinary Shares, the C Shares or the Scrip Shares.
UK stamp duty (at the rate of 0.5 per cent. of the amount of the value of the consideration for the transfer rounded up where necessary to the nearest £5) is payable on any instrument of transfer of the Ordinary Shares executed within the UK other than when the value of the consideration for the transfer is less than £1,000 and the transfer is not part of a larger transaction. There may, however, be no practical necessity to pay such stamp duty as United Kingdom stamp duty is not an assessable tax. However, an instrument of transfer which is not duly stamped cannot be used for any purpose in the UK; for example it will be inadmissible in evidence in civil proceedings in a UK court. Provided that there is no register of the Company kept in the UK and transfer is settled electronically via CREST, any agreement to transfer the Ordinary Shares will not be subject to UK SDRT.
In the event of the death of an individual Shareholder, a Guernsey grant of probate or administration may be required in respect of which certain fees will be payable to the Ecclesiastical Court in Guernsey.
It is expected that the Ordinary Shares and the C Shares will be eligible for inclusion in ISAs (subject to applicable subscription limits) provided that they have been acquired by purchase in the market (which will include any C Shares acquired directly under the Offer for Subscription but not any C Shares acquired directly under the Placing) and that they will be permissible assets for SIPPs.
The C Shares will convert into Ordinary Shares on the basis of the Conversion Ratio which will be calculated on an investment basis when at least 80 per cent. of the assets attributable to the C Shares have been invested (as defined in paragraph 4 below). Once the Conversion Ratio has been calculated, the C Shares will convert into Ordinary Shares on the basis set out below. In order that the portfolio value as at 31 March 2012 forms the basis for the calculation of the Conversion Ratio, it is intended that the proceeds from the Issue will be applied at the beginning of April 2012 with Conversion occurring later that month.
1.2 Pending investment, the net proceeds of the Issue (and any interest thereon) will be the sole asset attributable to the C Shares and will be held on deposit in an interest bearing account in Guernsey with Barclays Bank and/or Royal Bank of Scotland.
| Example | |
|---|---|
| Number of C Shares subscribed | 1,000 |
| Amount subscribed (£) | 1,000 |
| Net Asset Value attributable to a C Share at Calculation Time (p) | 98.72 |
| Net Asset Value attributable to an Ordinary Share at Calculation Time (p) | 112.25 |
| Conversion Ratio | 0.8795 |
| New Ordinary Shares arising on conversion | 879 |
The rights and restrictions attaching to the C Shares are set out in the Articles. The relevant provisions are as set out below.
The following definitions apply for the purposes of Part IX of this prospectus in addition to, or (where applicable) in substitution for, the definitions applicable elsewhere in this prospectus.
"C Shares" means the shares of 0.01 pence each in the capital of the Company issued and designated as C Shares of whatever tranche and having the rights described in the Articles;
"C Share Surplus" in relation to any tranche of C Shares means the net assets of the Company attributable to the C Shares, being the assets attributable to the C Shares (including for the avoidance of doubt, any income and/or revenue (net of expenses) arising from or relating to such assets) less such proportion of the Company's liabilities as the Directors shall reasonably allocate to the assets of the Company attributable to the C Shares;
"Calculation Time" in relation to any tranche of C Shares means the earliest of:
"Conversion" means in relation to any tranche of C Shares the subdivision and conversion of that tranche of C Shares in accordance with Article 162(8) and paragraph 12 below;
"Conversion Ratio" is A divided by B calculated to four decimal places (with 0.00005 being rounded upwards) where:
$$
A = \frac{C - D}{E}
$$
and
$$
B = \frac{F - G}{H}
$$
and where:
"C" is the aggregate of:
prices shall be used. If any such investments are traded under the London Stock Exchange Daily Electronic Trading Service ("SETS") and the latest recorded prices at which such investments have been traded as shown in the London Stock Exchange Daily Official List differ materially from the bid and offer prices of the investments quoted on SETS as at the Calculation Time, the value of such investments shall be adjusted to reflect the fair realisable value as determined by the Directors. Investments of the Company which are listed, quoted or dealt in on any other recognised stock exchange shall be valued by reference to the closing middle market prices on the principal stock exchange or market where the relevant investment is listed, quoted or dealt in as at the Calculation Time, as shown by the relevant exchange's or market's recognised method of publication of prices for such investments. Debt related securities (including Government stocks) shall be valued by reference to the closing middle market price, subject to any adjustment to exclude any accrual of interest which may be included in the quoted price, as at the Calculation Time; or
(i) calculated in the case of investments of the Company which are listed on the London Stock Exchange according to the prices issued by the London Stock Exchange as at the Calculation Time, being the closing middle market prices for all investments other than the FTSE 100 constituents and FTSE 100 reserve list constituents for which the last trade prices shall be used. If any such investments are traded under SETS and the latest recorded prices at which such investments have been traded as shown in the London Stock Exchange Daily Official List differ materially from the bid and offer prices of the investments quoted on SETS as at the Calculation Time, the value of such investments shall be adjusted to reflect the fair realisable value as determined by the Directors. Investments of the Company which are listed, quoted or dealt in on any other recognised stock exchange shall be valued by reference to the closing middle market prices on the principal stock exchange or market where the relevant investment is listed, quoted or dealt in as at the Calculation Time, as shown by the relevant exchange's or market's recognised method of publication of prices for such investments. Debt related securities (including Government stocks) shall be valued by reference to the closing middle market price, subject to any adjustment to exclude any accrual of interest which may be included in the quoted price, as at the Calculation Time; or
(ii) where such published prices are not available, calculated by reference to the Directors' belief as to a fair current trading price for those investments, after taking account of any other price publication services reasonably available to the Directors;
"Conversion Time" means a time which falls after the Calculation Time and is the time at which the admission of the New Shares to the Official List becomes effective and which is the earlier of:
"Deferred Shares" means the redeemable deferred shares of 0.01 pence each in the capital of the Company arising on the conversion of the C Shares of the relevant tranche into New Shares and Deferred Shares;
"Force Majeure Circumstances" means in relation to any tranche of C Shares any political and/or economic circumstances and/or actual or anticipated changes in fiscal or other legislation which, in the reasonable opinion of the Directors, renders Conversion necessary or desirable notwithstanding that less than 80 per cent. of the assets attributable to the relevant tranche of C Shares are invested (as defined below) in accordance with the Company's investment policy;
"Independent Accountants" means KPMG Channel Islands Limited or such other firm of chartered accountants as the Directors may appoint for the purpose;
"Laws" means the Companies (Guernsey) Law 2008, as amended, extended or replaced and any ordinance, statutory instalment or regulation made thereunder;
"Member" includes a registered holder of a share in the Company and any person entitled thereto on death, disability or insolvency of a member;
"New Shares" means the Ordinary Shares arising on the conversion of the C Shares of the relevant tranche;
"Nominal Shares" means unclassified shares of 0.01 pence in the capital of the Company issued and designated as nominal shares and having the rights described in these Articles; and
"Share Surplus" means the net assets of the Company less the C Share Surplus.
For the purposes of paragraph (a) of the definition of Calculation Time and the definition of Force Majeure Circumstances, in relation to any tranche of C Shares, the assets attributable to the C Shares of that tranche shall be treated as having been "invested" if they have been expended by or on behalf of the Company in the acquisition or making of an investment (whether by subscription or purchase) or in the repayment of all or part of an outstanding loan of any member of the Group or if an obligation to make such payment has arisen or crystallised (in each case unconditionally or subject only to the satisfaction of normal preissue conditions) in relation to which the consideration amount has been determined or is capable of being determined by operation of an agreed contractual mechanic.
The capital and assets of the Company shall, on a winding-up or on a return of capital prior, in each case, to Conversion be applied as follows:
The C Shares shall carry the right to receive notice of, and to attend or vote at, any general meeting of the Company. The C Shares shall be transferable in the same manner as the Ordinary Shares. The Deferred Shares shall not be transferable and shall not carry any rights to receive notice of, attend or vote at any general meeting of the Company.
Without prejudice to the generality of the Articles, until Conversion the consent of the holders of the C Shares as a class shall be required for, and accordingly, the special rights attached to the C Shares shall be deemed to be varied, inter alia, by:
Until Conversion, and without prejudice to its obligations under the Laws the Company shall in relation to each tranche of C Shares:
whereupon, subject to any proviso in the definition of Conversion Ratio above, such calculations shall become final and binding on the Company and all Members.
(a) such number of issued C Shares of the relevant tranche then in issue shall convert (by subdivision and/or consolidation and/or combination of both or otherwise as appropriate) into such number of New Shares as shall be necessary to ensure that, upon Conversion being completed, the number of New Shares equals the number of C Shares of that tranche in issue at the Calculation Time multiplied by the Conversion Ratio (rounded down to the nearest whole New Share). Each C Share which does not so convert into a New Share shall automatically convert into a Deferred Share having the rights set out above and shall be dealt with in accordance with paragraph (b) below.
(b) each C Share which does not convert into a New Share in accordance with paragraph (a) above and is converted into a Deferred Share shall immediately upon Conversion be redeemed by the Company for an aggregate consideration of 1p for all of the Deferred Shares so redeemed. The Company shall not be obliged to account to any holder of C Shares for the redemption monies in respect of such shares. If at the relevant time such shares would otherwise fall to be redeemed and the Company may not lawfully effect such redemption except out of the proceeds of a fresh issue of shares made for the purpose of a redemption, the Company shall issue such number of Nominal Shares at a sufficient price per share in order to provide the Company with the funds to effect such redemption.
As set out above, Deferred Shares shall only be issued in respect of Conversion of C Shares. In a winding-up after Conversion, Deferred Shares shall be entitled to return an amount equal to their nominal value after return of capital on Ordinary Shares, paid up on Nominal Shares and Management Shares. The provisions of the Articles as to dividends, voting and redemption of the Deferred Shares are set out above in sub-paragraphs 6, 8 and 9.
Statutory accounts of the Company prepared in accordance with International Financial Reporting Standards for the financial year ended 31 March 2011, in respect of which the Company's auditors, KPMG Channel Islands Limited of St. Peter Port, Guernsey made unqualified reports, have been delivered to the Guernsey Financial Services Commission and such reports did not contain any qualifications.
The published annual report and audited accounts of the Company for the financial years ended 31 March 2011, 31 March 2010 and 31 March 2009, as well as the unaudited interim reports for the six month period ended 30 September 2011 (all of which have been incorporated in this prospectus by reference), included, on the pages specified in the table below, the following information:
| Nature of information | For the 6 month period ended 30 September 2011 Page No(s) |
For the year ended 31 March 2011 Page No(s) |
For the year ended 31 March 2010 Page No(s) |
For the year ended 31 March 2009 Page No(s) |
|---|---|---|---|---|
| Consolidated Income statement | 15 | 47 | 46 | 38 |
| Consolidated Balance sheet | 16 | 48 | 47 | 39 |
| Consolidated Cash flow statement | 17 | 50 | 49 | 41 |
| Consolidated Statement of Changes in equity | 23 | 49 | 48 | 40 |
| Accounting policies | 25 | 51-58 | 50-57 | 42-49 |
| Notes to the financial statements | 25-35 | 51-85 | 50-84 | 42-70 |
| Audit report | n/a | 46 | 45 | 37 |
| Independent Review Report | — | — | — | — |
| Unaudited results on an investment basis | 15-18 | 22-24 | 21-24 | 20-23 |
| Portfolio valuation | 7-9 | 12-15 | 13-16 | 16-19 |
The key figures that summarise the financial condition of the Company in respect of the financial years ended 31 March 2011, 31 March 2010, and 31 March 2009, and the 6 month interim accounts to 30 September 2011, which have been extracted directly on a straightforward basis from the historical financial information referred to in paragraph 2.1 above of this Part X are set out in the following table:
| Net Asset Values on an Investment basis | As at 30 September 2011 (unaudited) |
As at 31 March 2011 (unaudited) |
As at 31 March 2010 (unaudited) |
As at 31 March 2009 (unaudited) |
|---|---|---|---|---|
| Net assets (£m) | 726.1 | 673.2 | 502.9 | 373.7 |
| Net Asset Value per Share (p) | 114.8 | 113.1 | 110.7 | 110.5 |
| Net Asset Value per Share after deducting the interim/final distribution (p) |
111.5 | 109.7 | 107.4 | 107.2 |
| Net Asset Values on a Consolidated IFRS basis | As at 30 September 2011 (unaudited) |
As at 31 March 2011 (audited) |
As at 31 March 2010 (audited) |
As at 31 March 2009 (audited) |
|---|---|---|---|---|
| Net assets (£m) | 737.8 | 666.9 | 499.4 | 380.2 |
| Net Asset Value per Share (p) | 116.7 | 110.4 | 107.1 | 111.1 |
| Net Asset Value per Share after deducting the interim/final distribution (p) |
113.4 | 107.0 | 103.8 | 107.8 |
| Results on an investment basis | For the 6 month period ended 30 September 2011 (unaudited) |
For the year ended 31 March 2011 (unaudited) |
For the year ended 31 March 2010 (unaudited) |
For the year ended 31 March 2009 (unaudited) |
|---|---|---|---|---|
| Profit before tax and gains on investments (revenue)(£m) | 15.7 | 24.3 | 17.8 | 20.4 |
| Gains on investments (capital) (£m) | 15.0 | 20.9 | 7.2 | (42.4) |
| Profit before tax (£m) | 30.7 | 45.2 | 25.0 | (22.0) |
| Earnings per share (p) | 5.0 | 8.9 | 6.5 | (6.8) |
| Interim/final distribution per share (p) | 3.35 | 3.425 | 3.35 | 3.275 |
| Results on a Consolidated IFRS basis | For the 6 month period ended 30 September 2011 (unaudited) |
For the year ended 31 March 2011 (audited) |
For the year ended 31 March 2010 (audited) |
For the year ended 31 March 2009 (audited) |
|---|---|---|---|---|
| Profit before tax and gains on investments (revenue)(£m) | 10.8 | 19.6 | 25.3 | 18.0 |
| Gains on investments (capital) (£m) | 53.5 | 18.7 | (17.6) | (30.4) |
| Profit before tax (£m) | 64.3 | 38.3 | 7.7 | (12.4) |
| Earnings per share (p) | 9.6 | 9.0 | 1.6 | (4.3) |
| Interim/final distribution per share (p) | 3.35 | 3.425 | 3.35 | 3.275 |
The published annual reports and audited accounts of the Company for the financial years ended 31 March 2011, 31 March 2010 and 31 March 2009, as well as the unaudited interim report ended 30 September 2011 (which have been incorporated in this prospectus by reference), included, on the pages specified in the table below, descriptions of the Company's financial condition (in both capital and revenue terms), changes in its financial condition and details of the Group's portfolio of investments for each of those periods.
| As at 30 September 2011 Page No(s) |
As at 31 March 2011 Page No(s) |
As at 31 March 2010 Page No(s) |
As at 31 March 2009 Page No(s) |
|
|---|---|---|---|---|
| Chairman's Statement | 3-4 | 4-7 | 4-6 | 4-6 |
| Investment Adviser's Report | 6-10 | 11-17 | 10-16 | 14-19 |
| Report of the Directors | n/a | 35-37 | 34-36 | 32-35 |
Copies of the published annual report and audited accounts of the Company for the financial years ended 31 March 2011, 31 March 2010 and 31 March 2009, as well as the unaudited interim report for the period ended 30 September 2011, are available for inspection at the addresses set out in Part XI of this prospectus.
The last year of audited information is the financial period ended 31 March 2011, which is less than 15 months prior to the publication of this prospectus.
Save for investments made by the Group for an aggregate consideration of £166.2 million as detailed on pages 26 to 27, the issue of 30.7 million Tap Shares and the payment of a 3.35 pence interim dividend on 30 December 2011, there has been no significant change in the trading or financial position of the Group since 30 September 2011, being the end of the last financial period for which interim financial information has been published.
In the Company's opinion, the Group has sufficient working capital for its present requirements (that is, for at least the 12 months following the date of this prospectus).
The following tables show the capitalisation and indebtedness of the Group as at 30 September 2011 and the indebtedness of the Group as at 31 December 2011. The figures for capitalisation and indebtedness as at 30 September 2011 have been extracted from the unaudited financial statements of the Group for the six months ended 30 September 2011. There has been no material change in the capitalisation of the Group since 30 September 2011, save for the issue of 2.5 million Ordinary Shares pursuant to the scrip dividend alternatives as detailed on pages 107 to 108 and the issue of 30.7 million Tap Shares.
The figures in the indebtedness table as at 31 December 2011 have been extracted from the underlying accounting records of the Group as at 31 December 2011, and show the external net financial indebtedness of the Group, and exclude balances between entities that comprise the Group.
| Investment Basis1 (£m) |
Consolidation Adjustments (£m) |
Consolidated IFRS basis (£m) |
|
|---|---|---|---|
| Total Current debt | |||
| Loans and Borrowing | |||
| Secured | — | (42.3) | (42.3) |
| Unguaranteed/Unsecured | — | — | — |
| Total Non-Current debt (excluding current portion of long term debt) | |||
| Loans and Borrowings | |||
| Secured2 | — | (1,134.1) | (1,134.1) |
| Unguaranteed/Unsecured | — | — | — |
| Other financial liabilities (fair value of derivatives)3 | (1.6) | (207.0) | (208.6) |
| Total indebtedness | (1.6) | (1,383.4) | (1,385.0) |
| Cash and cash equivalents | 60.7 | 76.4 | 137.1 |
| Total net indebtedness | 59.1 | (1,307.0) | (1,247.9) |
| Shareholders' equity (excluding retained reserves): | |||
| Share capital4 | — | — | — |
| Share premium | 433.1 | — | 433.1 |
| Minority interests | — | 7.9 | 7.9 |
| Total capitalisation | 433.1 | 7.9 | 441.0 |
Notes
1 In order to provide Shareholders with a more meaningful representation of the Group's capitalisation and indebtedness, coupled with greater transparency in the Group's capacity for investment and ability to make distributions, the results have been restated and set out in the tables above. The tables are prepared with all investments accounted for on an investment basis. By deconsolidating the subsidiary investments, the capitalisation and indebtedness under consolidated IFRS basis may be compared with the results under the investment basis.
2 At 30 September 2011 included in 'Trade and other receivables' was £0.6m of capitalised debt costs (relating to the Company only).
3 Other financial liabilities (fair value of derivatives) relate to (i) interest rate swaps and inflation rate swaps entered into by the Group and Project Companies and (ii) forward forex contracts of the Group In order to manage exposure to movements in interest rates, Project Companies financed by floating rate debt swap their floating rate exposure for fixed rates using interest rate swaps. Similarly, in order to manage exposure to movements in inflation rates, some Project Companies use inflation rate swaps.
4 Share Capital is £63,227 and is made up of 632,270,249 issued and fully paid ordinary shares of 0.01p each.
| Investment Basis1 (£m) |
Consolidation Adjustments (£m) |
Consolidated IFRS basis (£m) |
|
|---|---|---|---|
| Total Current debt | |||
| Loans and Borrowing | |||
| Secured | (103.4) | (54.0) | (157.4) |
| Unguaranteed/Unsecured | — | — | — |
| Total Non-Current debt (excluding current portion of long term debt) | |||
| Loans and Borrowings | |||
| Secured | — | (1,340.5) | (1,340.5) |
| Unguaranteed/Unsecured | — | — | — |
| Other financial liabilities (fair value of derivatives)2 | (2.6) | (285.2) | (287.8) |
| Total indebtedness | (106.0) | (1,679.7) | (1,785.7) |
| Cash and cash equivalents | 10.3 | 128.1 | 138.4 |
| Total net indebtedness | (95.7) | (1,551.6) | (1,647.3) |
Notes
1 In order to provide Shareholders with a more meaningful representation of the Group's capitalisation and indebtedness, coupled with greater transparency in the Group's capacity for investment and ability to make distributions, the results have been restated and set out in the tables above. The tables are prepared with all investments accounted for on an investment basis. By deconsolidating the subsidiary investments, the capitalisation and indebtedness under consolidated IFRS basis may be compared with the results under the investment basis.
2 Other financial liabilities (fair value of derivatives) relate to interest rate swaps and inflation rate swaps entered into by the Group and Project Companies. In order to manage exposure to movements in interest rates, Project Companies financed by floating rate debt swap their floating rate exposure for fixed rates using interest rate swaps. Similarly, in order to manage exposure to movements in inflation rates, some Project Companies use inflation rate swaps.
1.13 As a result of the scrip dividend alternative announced on 20 May 2009, the Company issued 139,142 Ordinary Shares to Shareholders who had elected to receive the same in lieu of an interim dividend of 3.275 pence per Ordinary Share.
1.14 As a result of the scrip dividend alternative announced on 12 November 2009, the Company issued 917,049 Ordinary Shares to Shareholders who had decided to receive the same in lieu of an interim dividend of 3.2 pence per Ordinary Share.
As explained on page 31, the Company holds its assets through the Luxcos, which are two Luxembourg companies each being a SàrI (broadly the equivalent of a private company), and each qualifying as a SOPARFI. The status of SOPARFIs is relevant for the tax treatment of the investment structure as explained in Part II of this prospectus. Luxco 2 holds the limited partnership interest in the Partnership.
As such, the Operator, which has been authorised by the FSA to carry on, amongst other things, the regulated activity of operating a collective investment scheme, has been appointed as Operator to manage and operate the Partnership. Under the Limited Partnership Agreement, the Operator has full discretion to acquire, dispose of and manage the assets of the Partnership, subject to investment guidelines which reflect the investment strategy, policy and restrictions applying to the Group as set out in this prospectus. The Operator may effect borrowings for the Partnership within limits to be prescribed by the limited partner.
No Director has a service contract with the Company, nor are any such contracts proposed. The Directors were confirmed as non-executive directors by the Ordinary Shareholders at the annual general meeting following their appointment, and their appointment is subject to the Articles. The Directors' appointments can be terminated in accordance with the Articles without notice and without compensation.
In addition to their directorships of the Company and other companies in the Group, the Directors are, or have been, members of the administrative, management or supervisory bodies or partners of the following companies or partnerships, at any time in the previous five years:
| Name | Current Directorships and Partnerships | Past Directorships and Partnerships |
|---|---|---|
| Graham Picken (Chairman) Skipton Building Society | Skipton Group Holdings Limited | Blue Lake Services Ltd. Derbyshire Building Society Derbyshire Home Loans Ltd Derbyshire IFS Ltd SL Commercial Ltd. |
| Sarah Evans | Celadon PCC Ltd Crystal Amber Fund Limited CQS Diversified Fund Limited Evans Property Holdings Ltd La Bigoterie Holdings Ltd Harbourvest Senior Loans Europe Limited |
FAP Hedge Fund Opportunities Fund GP Ltd FAP Hedge Fund Opportunities Fund Ltd FAP Hedge Fund Opportunities Master Fund Ltd Japan Leisure Hotels Limited Phaunos Timber Fund Limited |
| John Hallam | Barclays Insurance Guernsey PCC Ltd Baring Coller Secondaries Fund Ltd Baring Coller Secondaries Fund II Ltd BH Global Ltd Bracken Partners Investments Channel Islands Ltd Calabash House Ltd Cazenove Absolute Equity Ltd Cognetas Fund (GP) Ltd Cognetas Fund II (GP) Ltd Develica Asia Pacific Ltd Develica Deutschland Ltd Dexion Absolute Ltd EFG Private Bank (Channel Islands) Ltd Genesis Asset Managers LLP IGA LP GP Ltd Investec Expert Investment Funds PCC Ltd Investec Premier Funds PCC Ltd NB Distressed Debt Investment Fund Ltd NB Private Equity Partners Ltd Olivant Ltd Partners Group Global Opportunities Ltd Ruffer Illiquid Strategies Fund of Funds 2009 Ltd Ruffer Illiquid Strategies Fund 2011 Ltd Sienna Investment Co Ltd Sienna Investment Co 2 Ltd |
Abroad Spectrum PCC Ltd Anfre Insurance PCC (Guernsey) Ltd BSkyB Guernsey Ltd Ciel Bleu Ltd Ciel Clair Ltd Danube Property Investments Ltd Develica Asia Pacific Real Estate Fund (GP) Ltd Develica Equity Partners Ltd Develica Germany (GP) Ltd EFG Offshore Ltd Emperor Marine Ltd Genesis Assets Managers LLP Genesis Emerging Markets Investment Co SICAV Genesis Emerging Markets Opportunities Fund Ltd Genesis Emerging Markets Opportunities Fund Ltd II Genesis Emerging Markets Opportunities Fund Ltd III Genesis Smaller Companies SICAV Harlequin Insurance PCC Ltd Investec Emerging Markets Currency Alpha Fund Ltd Investec Global Energy Long Short Fund Ltd M&G Recovery Investment Co Ltd Mannequin Insurance PCC Ltd New Star RBCHedge 250 Index Exchange Traded Securities PCC Ltd Partners Group Alternative Strategies PCC Ltd Prodesse Investment Ltd |
| Name | Current Directorships and Partnerships | Past Directorships and Partnerships |
|---|---|---|
| Sienna Investment Co 3 Ltd | Septup Ltd | |
| Sienna Investment Co 4 Ltd | Standard Life Investments Property Income Trust Ltd | |
| Stapleford Insurance Co Ltd | Tapestry Investment Co PCC Ltd | |
| Vision Opportunity China Fund Ltd | ||
| Weightman Vizards Insurance Ltd | ||
| Chris Russell | Absolute Return Objective SA | British Airways Pensions Investment |
| Association of Investment Companies Ltd | Management Company Ltd | |
| Enhanced Index Funds pcc | Candover plc | |
| F & C Commercial Property Trust Ltd | Castle Asia Alternative pcc Ltd | |
| JP Morgan Fleming Japanese Smaller | Dalton Capital Asia Ltd | |
| Companies Investment Trust plc | FAP Hedge Fund Opportunities Fund GP Ltd | |
| Hanseatic Asset Management LBG | FAP Hedge Fund Opportunities Fund Ltd | |
| Korea Fund Inc | FAP Hedge Fund Opportunities Master Fund Ltd | |
| Schroders (C.I.) Ltd. | F&C Event Driven Limited | |
| Investec All Africa Fund Ltd | ||
| Investec High Income Trust plc | ||
| LIM Japan Fund |
6.1 At the date of this prospectus, none of the Directors:
Sarah Evans has been a director of the following companies which were dissolved or which went into solvent voluntary liquidation during the past five years:
FAP Hedge Fund Opportunities Fund GP Ltd FAP Hedge Fund Opportunities Fund Ltd FAP Hedge Fund Opportunities Master Fund Ltd Japan Leisure Hotels Limited
John Hallam has been a director of the following companies which were dissolved or which went into solvent voluntary liquidation during the past five years:
BSkyB Guernsey Ltd CEDR Investment Company Ltd Ciel Bleu Ltd Ciel Clair Ltd Danube Property Investments Ltd
Develica Asia Pacific Real Estate Fund (GP) Ltd Develica German (GP) Ltd M&G Recovery Investment Co. Ltd New Star RBC Hedge 250 Index Exchange Traded Securities PCC Ltd Prodesse Investment Ltd Tapestry Investment Co PCC Ltd
Chris Russell has been a director of the following companies which were dissolved or which went into solvent voluntary liquidation during the past five years:
F&C Event Driven Ltd – Voluntary liquidation Investec High Income Trust plc – voluntary liquidation FAP Hedge Fund Opportunities Fund Ltd FAP Hedge Fund Opportunities Fund GP Ltd FAP Hedge Fund Opportunities Master Fund Ltd Castle Asia Alternative PCC Ltd Investec All Africa Fund Dalton Capital Asia
7.1 In so far as is known to the Company, as at the close of business on 24 February 2012 (the latest practicable date prior to publication of this prospectus) the following registered holdings representing a direct or indirect interest of 3 per cent. or more of the Company's issued share capital were recorded on the Company's share register:
| Number of Ordinary Shares Held |
Percentage Held |
|
|---|---|---|
| Rathbone Nominees Limited | 30,115,152 | 4.5257% |
| Giltspur Nominees Limited | 29,796,106 | 4.4778% |
| BDS Nominees Limited | 29,333,679 | 4.4083% |
| Ferlim Nominees Limited | 27,338,733 | 4.1085% |
| Chase Nominees Limited | 20,443,663 | 3.0723% |
7.2 Those interested, directly or indirectly, in three per cent. or more of the issued share capital of the Company do not now and, following the Issue, will not have different voting rights from other Shareholders.
The Memorandum of the Company provides that the objects of the Company include carrying on business as an investment company. The objects of the Company are set out in full in clause 3 of the Memorandum, a copy of which is available for inspection at the addresses specified in paragraph 13 of this Part XI.
The following are excerpts from or summaries of the Articles of Incorporation of the Company and are set out in full in the relevant Articles.
Subject to Articles 11 and 162(4) (and to the restrictions referred to below) and subject to any special rights or restrictions for the time being attached to any class of shares, every member (being an individual) present in person or by proxy or (being a corporation) present by a duly authorised representative at a general meeting has, on a show of hands, one vote and, on a poll, one vote for every share held by him.
The Law previously required that shares must have a preference over another class of shares if they are to be redeemable. Accordingly, the Management Shares were created so that the Ordinary Shares may be redeemable at the discretion of the Directors. The Management Shares are owned for and on behalf of a Guernsey charitable trust by First Ovalap Limited and Second Ovalap Limited respectively. The Management Shares carry one vote each on a poll, do not carry any right to dividends and, in a winding-up, rank only for a return of the amount of the paid-up capital on such shares after return of capital on Ordinary Shares and Nominal Shares. The Management Shares are not redeemable.
Holders of Ordinary Shares are entitled to participate in any dividends or other distributions out of the profits of the Company available for dividend or distribution and resolved to be distributed in respect of any accounting period or any other income right to participate therein.
Holders of Ordinary Shares are entitled on the winding-up of the Company to receive out of the assets of the Company available for distribution an amount equal to the nominal value of the Ordinary Shares plus the surplus (if any) remaining after payment of the nominal values of the Management Shares and Nominal Shares then in issue.
The Directors have the power (but no obligation) to redeem some or all of the Ordinary Shares on dates determined in their discretion (each a "Redemption Date"). The Directors are entitled in their absolute discretion to determine the procedures for redemption on and after the Redemption Date (subject to the facilities and requirements of CREST). Without prejudice to the foregoing, the Company shall notify Shareholders of the number of Ordinary Shares to be redeemed (if any) and the discount to be applied to the Net Asset Value of the Ordinary Shares in arriving at the redemption price.
Payment of the redemption price in respect of any Ordinary Shares in certificated form may be made by cheque or warrant made payable to the relevant Shareholders or, in the case of joint Shareholders, to such relevant joint Shareholders or to such person or persons as the relevant Shareholder or all the relevant joint Shareholders may in writing direct and sent (at the risk of the Shareholder or Shareholders) to the address specified by that Shareholder (or, if none is specified, to the address of the Shareholder as entered on the register, or in the case of joint Shareholders, to that one of the relevant joint Shareholders who is first named on the register in respect of such Ordinary Shares). Due payment of the cheque or warrant will be in satisfaction of the redemption price represented thereby. The Company may alternatively make such payment by electronic transfer to a bank account nominated by the relevant Shareholder or all the relevant joint Shareholders and notified to the Registrar not less than three Business Days before the Redemption Date, at the Shareholder's or Shareholders' expense.
Each payment in respect of Ordinary Shares held in uncertificated form (that is, in CREST) will be made by electronic transmission to an account in accordance with the mandate instruction in writing acceptable to the Company given by the relevant Shareholder or all the relevant joint Shareholders.
The holder or holders of Nominal Shares shall have the right to receive notice of and to attend general meetings of the Company but shall not be entitled to vote thereat. Nominal Shares shall carry no right to dividends. In a windingup, holders of Nominal Shares shall be entitled to be repaid an amount equal to their nominal value out of the assets of the Company.
In order to prevent the issue of further shares diluting existing Shareholders' share of the NAV of the Company, if the Directors consider it appropriate they may issue further shares as "C Shares". C Shares constitute a temporary and separate class of shares which are issued at a fixed price determined by the Company. The issue proceeds from the issue of C Shares will be invested in investments which initially will be attributed solely to the C Shares. Once the investments have been made, the C Shares will be converted into Ordinary Shares on a basis which reflects the respective net assets per share represented by the two classes of shares. Further details of the rights attaching to C Shares and of the conversion mechanism into Ordinary Shares are set out in Part IX of this prospectus.
(b) The Company in general meeting may declare a dividend but no dividend shall exceed the amount recommended by the Directors or permitted by the Law.
(c) The distribution by way of dividend of the Company's surpluses arising from the realisation of investments is prohibited. Whenever a dividend or a distribution falls to be considered by the Board, the Directors will consider whether to distribute a dividend or otherwise.
If the Company proposes to allot any new Ordinary Shares or C Shares for cash ("Equity Shares") or to sell treasury shares for cash (together with the Equity Shares, "Relevant Securities"), those Relevant Securities shall not be allotted to any person unless the Company has first offered them to the existing holders (as at a record date selected by the Directors) of that class of shares (if any) on the same terms, and at the same price, as those Relevant Securities are proposed to be offered to other persons, on a pro rata basis to the number of shares of the relevant class held by those holders.
The Company will not be required to make any offer of Ordinary Shares allotted by reason of or in connection with a conversion of C Shares or Ordinary Shares then in issue.
These provisions may be modified or excluded in reaction to any proposed allotment by special resolution of the shareholders.
These provisions will not apply to scrip dividends effected in accordance with the Articles.
If at any time the capital of the Company is divided into separate classes of share, the special rights attached to any class of shares may (unless otherwise provided by the terms of issue) be varied with the consent in writing of the holders of three-quarters of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of such shares. The necessary quorum shall be two persons holding or representing by proxy at least one third of the voting rights of the class in question. Every holder of shares of the class concerned shall be entitled at such meeting to one vote for every share held by him on a poll. The rights conferred upon the holders of any shares or class of shares issued with preferred, deferred or other rights shall not be deemed to be varied by the creation or issue of further shares ranking pari passu therewith or the exercise of any power under the disclosure provisions requiring shareholders to disclose an interest in the Company's shares as set out in the Articles.
A member of the Company shall not be entitled in respect of any share held by him to attend or vote (either personally or by representative or by proxy) at any general meeting or separate class meeting of the Company:
The Directors may serve notice on any member requiring that member to disclose to the Company to the satisfaction of the Directors the identity of any person (other than the member) who has an interest in the shares held by the member and the nature of such interest. Any such notice shall require any information in response to such notice to be given within such reasonable time as the Directors may determine.
The Directors may be required to exercise their powers under the relevant Article on a requisition of members holding not less than one tenth of the paid up capital of the Company carrying the right to vote at general meetings. If any member is in default in supplying to the Company the information required by the Company within the prescribed period, the Directors in their absolute discretion may serve a direction notice on the member. The direction notice may direct that in respect of the shares in respect of which the default has occurred (the "default shares") and any other shares held by the member, the member shall not be entitled to vote in general meetings or class meetings. Where the default shares represent at least 0.25 per cent. of the class of shares concerned the direction notice may
additionally direct that dividends and distributions on such shares will be retained by the Company (without interest) and that no transfer of the shares (other than a transfer authorised under the Articles) shall be registered until the default is rectified.
The Articles provide that the Directors may implement such arrangements as they may think fit in order for any class of shares to be admitted to settlement by means of the CREST UK system. If the Directors implement any such arrangements no provision of the Articles shall apply or have effect to the extent that it is in any respect inconsistent with:
Where any class of shares is for the time being admitted to settlement by means of the CREST UK system such securities may be issued in uncertificated form in accordance with and subject as provided in the CREST Guernsey Requirements. Unless the Directors otherwise determine such securities held by the same holder or joint holder in both certificated form and uncertificated form shall be treated as separate holdings. Such securities may be changed from uncertificated to certificated form and from certificated to uncertificated form in accordance with and subject as provided in the CREST Guernsey Requirements.
Title to such of the shares as are recorded on the register as being held in uncertificated form may be transferred only by means of the CREST UK system. Every transfer of shares from a CREST account of a CREST member to a CREST account of another CREST member shall vest in the transferee a beneficial interest in the shares transferred, notwithstanding any agreements or arrangements to the contrary however and whenever arising and however expressed.
Subject as provided below, any member may transfer all or any of his shares which are in certificated form by instrument of transfer in any form which the Directors may approve. The instrument of transfer of a certificated share shall be signed by or on behalf of the transferor. The Directors may refuse to register any transfer of certificated shares unless the instrument of transfer is lodged at the Company's registered office accompanied by the relevant share certificate(s) and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer. The Directors may refuse to register a transfer of any share which is not fully paid up or on which the Company has a lien provided that this would not prevent dealings from taking place on an open and proper basis.
Subject to the provisions of the CREST Guernsey Requirements the registration of transfers may be suspended at such times and for such periods as the Directors may from time to time determine provided that such suspension shall not be for more than 30 days in any year.
If it shall come to the notice of the Directors that any shares:
(a) are or may be owned or held directly or beneficially by any person whose ownership or holding or continued ownership or holding of those shares (whether on its own or in conjunction with any other circumstances appearing to the directors to be relevant) might in the sole and conclusive determination of the Directors cause a pecuniary or tax disadvantage to the Group; or
(such shares being "Prohibited Shares"), the Directors shall give notice in writing to the holder of a share requiring him to make a declaration as to whether or not the share is a Prohibited Share in circumstances in which it is unclear to the Directors whether or not the share is a Prohibited Share.
The Directors shall give written notice to the holder of any share which appears to them to be a Prohibited Share requiring him within 21 days (or such extended time as the Directors consider reasonable) to transfer (and/or procure the disposal of interests in) such share to another person so that it will cease to be a Prohibited Share. From the date of such notice until registration for such a transfer or a transfer arranged by the Directors as referred to below, the share will not confer any right on the holder to receive notice of or to attend and vote at general meetings of the Company and of any class of shareholders) and those rights will vest in the Chairman of any such meeting, who may exercise or refrain from exercising them entirely at his discretion). If the notice is not complied with within 21 days to the satisfaction of the Directors, the Directors shall arrange for the Company to sell the share at the best price reasonably obtainable to any other person so that the share will cease to be a Prohibited Share. The net proceeds of sale (with interest at such rate as the Directors consider appropriate) shall be paid over by the Company to the former holder upon surrender by him of the relevant share certificate.
The Company may from time to time by ordinary resolution increase its authorised share capital if such has been specified by such sum to be divided into shares of such amount as the resolution may prescribe.
The Company may from time to time, subject to the provisions of the Law, purchase its own shares (including any redeemable shares) in any manner authorised by the Law.
The Company may by ordinary resolution: consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares; subdivide all or any of its shares into shares of a smaller amount than is fixed by the Memorandum of Incorporation; cancel any shares which at the date of the resolution have not been taken or agreed to be taken and diminish the amount of its authorised share capital by the amount of shares so cancelled; convert all or any of its shares into a different currency or denominate or redenominate the share capital in a particular currency.
The Company may reduce its share capital, any capital account or any share premium account in any manner and with and subject to any incident authorisation and consent required by the Law.
(g) If any resolution(s) for the appointment or re-appointment of the persons eligible for appointment or re-appointment as Directors are put to an annual general meeting and are lost and at the end of that meeting there are fewer than the minimum number of Directors required for the Company then all retiring Directors of the Company who stood for re-appointment (the "Retiring Directors") shall be deemed to have been reappointed and shall remain in office. The Retiring Directors may only act for the purpose of filling vacancies and convening general meetings and perform such duties as are appropriate to maintain the Company as a going concern and to comply with the Company's legal and regulatory obligations but not for any other purpose.
(h) The Retiring Directors shall convene a general meeting as soon as reasonably practicable following the annual general meeting referred to in (g) above and they shall retire from office at that meeting. If at the end of that further meeting the number of Directors is fewer than the minimum number required then the provisions outlined in (g) above shall also apply to that meeting.
Notice for any general meeting shall be sent by the secretary or officer of the Company or any other person appointed by the Directors not less than fourteen clear days before the meeting. The notice must specify the time, date, and place of the general meeting and, in the case of any special business, the general nature of the business to be transacted. A meeting may be convened by a shorter notice or at no notice in any manner the members think fit, with the consent in writing of all the members pursuant to the Law. The accidental omission to give notice of any meeting or the non-receipt of such notice by any Shareholder shall not invalidate any resolution, or any proposed resolution otherwise duly approved, passed or proceeding at any meeting. The quorum for the general meeting shall be two members present in person or by proxy.
(i) if any C Shares are in issue then:
(ii) the Share Surplus shall be applied in the following priority:
The Directors may exercise all the powers of the Company to borrow money (in whatever currency (the Directors determine from time to time) and to give guarantees, mortgage, hypothecate, pledge or charge all or part of its undertaking, property or assets and uncalled capital and to issue debentures and other securities whether outright or as collateral security for any liability or obligation of the Company or of any third party, provided always that the aggregate principal amount from time to time outstanding of all borrowings by the Group (excluding intra-Group borrowings and the debts of underlying investee companies, but including any financial guarantees to support investment obligations) shall not at any time exceed 50 per cent. of the Adjusted Gross Asset Value of the Group's investments and cash balances.
The Company is not (and is not required to be) regulated or authorised by the FSA but, in common with other investment companies admitted to the UK Official List, is subject to the Listing Rules and the Prospectus Rules and is bound to comply with applicable law such as the relevant parts of the FSMA.
The Board currently consists of four non-executive Directors, all of whom are independent of the Company's Investment Adviser. This independence allows all the Directors to sit on the Company's various Committees. The provision of the Combined Code which relates to the combination of the roles of the chairman and chief executive does not apply as the Company has no executive directors.
Consistent with the UK Corporate Governance Code, it is the policy of the Directors that each of their number will retire from office and may stand for re-election at every annual general meeting.
The Company's remuneration committee is comprised of Chris Russell (chairman of the committee), Graham Picken, Sarah Evans and John Hallam. The remuneration committee's remit is to meet annually and to consider, inter alia:
The Company has also established a nomination committee and a management engagement committee, each of which are comprised of Graham Picken, Chris Russell, Sarah Evans and John Hallam.
The Company will also bear all reasonable costs, charges and expenses of or incidental to or incurred in connection with the Placing. Provided that the targeted minimum of £60 million is raised, such costs will be borne by the C Shareholders.
The Placing, Open Offer and Offer Agreement contains certain representations and warranties from the Company to Collins Stewart concerning, amongst other things, its authority to issue the C Shares and the accuracy of this prospectus. Collins Stewart also have the benefit of an indemnity from the Company in relation to liabilities incurred by Collins Stewart in the discharge of its duties under the Placing, Open Offer and Offer Agreement save (amongst other things) to the extent that the same is finally judicially determined to have arisen as a result of fraud, negligence or wilful default of Collins Stewart or its associates.
(b) A receiving agent agreement (the "Receiving Agent Agreement") dated 15 February 2012 between the Company and the Receiving Agent pursuant to which the Receiving Agent agrees to provide receiving agent services to the Company in relation to the Issue. The Receiving Agent Agreement may be terminated by either party in the event of a material breach by, or the insolvency, dissolution or administration of, the other party. In the event of termination, the Company will pay to the Receiving Agent fees and expenses for work actually performed or by the Company on payment of various amounts of compensation. The Receiving Agent is entitled to receive various fees for services provided, including a minimum aggregate advisory fee of £2,000, a minimum processing fee in relation to the Open Offer of £5,000 and a minimum aggregate processing fee in relation to the Offer for Subscription of £5,000, as well as reasonable out-of-pocket expenses.
The Company has agreed to indemnify the Receiving Agent for all losses, damages, liabilities and professional fees arising from the Company's breach of the Receiving Agent Agreement and from certain third party claims by the Receiving Agent of its duties. The aggregate liability of the Receiving Agent arising out of or in connection with the Receiving Agent Agreement will be limited to the lesser of £250,000 or an amount equal to five times the total fee payable to the Receiving Agent.
(c) A £200 million Multi-Currency Revolving Credit Facilities Agreement dated 19 December 2007 between: (i) the Partnership; (ii) Infrastructure Investments General Partner Limited; and (iii) the Principal Bankers (the "2007 Facility").
The 2007 Facility is split into two tranches: a £120 million tranche A and an £80 million tranche B. Tranche A may be used to finance or refinance up to 50 per cent. of certain investments, repay existing debt incurred in relation to those investments and downstream loans to subsidiaries. Tranche B may be used to finance or refinance the investments, related costs, downstream loans to subsidiaries and general working capital and corporate purposes. The 2007 Facility may be utilised by way of cash advances, letters of credit and optional currencies (subject to certain limits). The repayment date of the 2007 Facility is five years after the signing date of the 2007 Facility. Voluntary cancellation and voluntary prepayment is allowed in minimum amounts of £250,000.
Interest is calculated by way of the margin, LIBOR and the mandatory cost. The margin is capped at 0.85 per cent. per annum. There will also be a commitment fee of 0.425 per cent. per annum on the undrawn commitments plus an arrangement fee, administration fee and fronting fees of 0.1 per cent. on any letters of credits. Various interest cover ratios are imposed.
The 2007 Facility is secured by, amongst others, a debenture from the Partnership, charges over partnership interests granted by the General Partner and Luxco 2 and a charge over shares of the General Partner. There is also a mechanism to bring additional borrowers into the 2007 Facility at which stage cross guarantees and indemnities will become effective.
The 2007 Facility contains further representations, warranties, covenants, events of defaults and other obligations, including indemnities on the part of the Partnership.
(d) A £150 million multi-currency revolving credit facility agreement dated 28 February 2012 between: (i) the Partnership; (ii) Infrastructure Investments General Partner Limited; (iii) Infrastructure Investments Holdings Limited; (iv) the Company (together the "Obligors"); (v) the Royal Bank of Scotland plc; and (vi) National Australia Bank Limited (the "2012 Facility"). The 2012 Facility is split into two tranches: a £50 million tranche with an 18 month term and a £100 million multi-currency tranche with a 3 year term.
The £100 million multi-currency tranche is made up of a €50 million Euro tranche, a CAN\$35 million Canadian dollar tranche and a €42 million multi-currency tranche with Euros as its base currency. Each of the tranches may be utilised by way of cash advance denominated in their respective currencies, and the multi-currency tranche may also be utilised by way of letters of credit and advances in currencies other than Euros (subject to certain restrictions). Interest is
calculated by way of the margin, LIBOR (or, in respect of loans denominated in Euros only, EURIBOR) and the mandatory cost. The margin is 2.30 per cent. per annum. There is also a commitment fee of 1.0 per cent. per annum on the undrawn commitments plus an arrangement fee, administration fee and a letter of credit fee equal to the margin on any letters of credit. The repayment date of the tranche is 28 February 2015.
The £50 million tranche is expected to be utilised if the issue fails to reach its target minimum size of £60 million. This tranche can only be drawn once and is repayable 18 months after the signing date of the 2012 Facility. To the extent that the tranche is not repaid or refinanced by 28 February 2013 the Company would thereafter require bank consent to declare dividends until this was remedied. Interest is calculated by way of the margin, LIBOR and the mandatory cost. The margin is 2.75 per cent. per annum to 28 February 2013 and 3.25 per cent. thereafter. There is also a commitment fee of 40 per cent. of the margin per annum on the undrawn commitments plus an arrangement fee.
The 2012 Facility may be used to (i) finance or refinance the Current Portfolio and any further investments by the Company, subject to certain restrictions on the class and concentration of the portfolio; (ii) related costs; (iii) general corporate working capital purposes; and (iv) the repurchase by the Company of issued share capital up to an aggregate maximum of £10 million. Voluntary prepayment is allowed in minimum amounts of £250,000 and voluntary cancellation is allowed in respect of the Euro tranche, the Canadian dollar tranche and the multi-currency tranche in minimum amounts of €250,000, CAN\$250,000 and £250,000 respectively. Various interest cover and loan to value ratios are imposed. The proceeds of any disposal by an Obligor or equity raising by the Company are required to be paid into a series of specified accounts and must either be applied in prepayment of the 2012 Facility or, subject to confirmation that the financial covenants are and will continue to be achieved, in the acquisition of further investments.
The 2012 Facility is secured by, amongst other security, a debenture from the Partnership, charges over partnership interests granted by the General Partner and Luxco 2 and a charge over shares of the General Partner and Luxco 2. There are also cross guarantees and indemnities between the Obligors, including the Company in its capacity as a guarantor under the 2012 Facility. The 2012 Facility contains provisions for the introduction of additional borrowers. The 2012 Facility contains further representations, warranties, covenants, events of defaults and other obligations, including indemnities on the part of the Partnership. The first utilisation of the 2012 Facility is conditional on, inter alia, the provision of evidence that the 2007 Facility has been discharged or will be discharged out of the proceeds of the first utilisation.
In addition to the material contracts set out above, details of various ongoing contracts relating to the Company are set out below for information purposes only.
(e) An investment advisory agreement dated 31 March 2011, between the Company and the Investment Adviser whereby the Investment Adviser was appointed to provide investment advisory services to the Company (the "Investment Advisory Agreement"). The Investment Adviser is paid a fee as is set out in, and calculated in accordance with, this prospectus (see page 74), which fee shall be reduced by the amount of any commissions or other remuneration (except for the fee the Investment Adviser receives as Operator of the Partnership) received by the Investment Adviser in relation to any transaction carried out on behalf of the Company. The Investment Adviser shall also be entitled to all reasonable out of pocket expenses properly incurred by the Investment Adviser in carrying out its duties under the Investment Advisory Agreement. The fee paid to the Investment Adviser is subject to review from time to time by the Company.
The Investment Advisory Agreement may be terminated by either party giving the other party one year's written notice. In addition, either party (the "Terminating Party") may terminate the Investment Advisory Agreement immediately by giving the other party written notice, if the other party commits a material breach of the Investment Advisory Agreement (or a breach that is not material but is recurrent or continuing) and does not remedy it within 30 days of being notified by the Terminating Party of such breach, has had an administrator, encumbrancer, receiver or similar
body appointed in respect of it or any of its assets, is unable to pay its debts or an order has been made or an effective resolution passed for its liquidation (except a voluntary liquidation or terms previously approved in writing by the Terminating Party). The Investment Advisory Agreement may also be terminated if the Operator Agreement is terminated in accordance with its terms, a force majeure event occurs preventing a party from performing its obligations for 30 days or the Investment Adviser is no longer permitted to perform its services within all the applicable laws and regulations.
The Investment Advisory Agreement provides that the Company shall indemnify the Investment Adviser and its officers, directors, employees and agents for losses of any nature arising in connection with the Investment Advisory Agreement (except where fraud, negligence or wilful default are involved on the part of the Investment Adviser and its officers, directors, employees and agents). The Investment Advisory Agreement also provides that the Investment Adviser shall indemnify the Company and its group for all losses suffered due to the negligence, wilful default or fraud of the Investment Adviser.
(f) An administration and secretarial agreement, dated 15 December 2010, between the Company and the Administrator whereby the Administrator was appointed to provide administrative, secretarial and cash management services to the Company (the "Administration Agreement"). Such services include in particular, keeping the accounts of the Company, providing all information and assistance required by the Investment Adviser in relation to the Investment Adviser's preparation of the NAV of the Ordinary Shares, arranging for and administering the issue of shares in the Company, safekeeping of the Company's shares in Luxco 1 and providing all administrative services required by the Company. In performance of such duties, the Administrator is at all times subject to the control and review of the Board.
The Administrator is paid a fee of 0.015 per cent. of NAV up to £100 million plus 0.01 per cent. of NAV over £100 million (subject to a total minimum of £10,000 per annum) and subject to additional charges, on a time spent basis, for special projects, accounting fees of £4,000 for interim accounts and £5,000 for final accounts and secretarial fees of £20,000 per annum for its services, or as otherwise agreed in writing between the Company and the Administrator from time to time. The Administrator is also entitled to receive all expenses properly incurred.
The Administration Agreement provides that the Administrator shall not be liable for any loss or damage suffered by the Company or the Investment Adviser as a result of the Administrator carrying out its duties under the Administration Agreement unless the loss or damage arises out of the Administrator's fraud, negligence or wilful default. The Company has indemnified the Administrator against any liabilities of whatever nature arising out of the Administrator properly performing its duties under the Administration Agreement (provided that fraud, negligence and wilful default on the part of the Administrator are absent).
The Administration Agreement can be terminated by either party on sixty days' written notice to the other. It can be terminated immediately by either party (the "Terminating Party"), if the other party breaches its obligations under the Administration Agreement and does not remedy the breach within 30 days of notice of the breach from the Terminating Party, passes a resolution for its own winding-up (except a voluntary liquidation for the purpose of reconstruction or amalgamation upon terms previously approved in writing by the Terminating Party) or if the Royal Court of Guernsey shall order its winding-up or if it shall be declared "en désastre" or if a receiver shall be appointed over the whole or a substantial part of its assets or, in the case of the Company being the Terminating Party, if the Administrator ceases to hold the authorisations, licences and consents necessary for the conduct of its business under the Administration Agreement.
As at the date of this prospectus, the Company has not entered into any related party transactions in the period covered by the historical financial information set out in Part X of this prospectus or the period between the latest date of such historical financial information and the date of this prospectus.
Copies of this prospectus may be collected, free of charge during normal business hours, from any of the following:
HICL Infrastructure Company Limited Hogan Lovells International LLP c/o Dexion Capital (Guernsey) Limited Atlantic House 3rd Floor, 1 Le Truchot Holborn Viaduct St. Peter Port London Guernsey EC1A 2FG Channel Islands GY1 1WD
This document is also available for download at: www.hicl.com
Copies of the following documents may be inspected at the offices of Hogan Lovells International LLP, Atlantic House, Holborn Viaduct, London EC1A 2FG and at the registered office of the Company during usual business hours on any day (except Saturdays, Sundays and public holidays) from the date of this prospectus until the Open Offer, the Offer for Subscription and Placing closes:
Dated 29 February 2012
This document has been approved by the FSA as a prospectus which may be used to offer securities to the public for the purposes of section 85 FSMA and Directive 2003/7/EC. No arrangement has however been made with the competent authority in any other EEA State (or any other jurisdiction) for the use of this prospectus as an approved prospectus in such jurisdiction and accordingly no public offer is to be made in such jurisdictions. Issue or circulation of this prospectus may be prohibited in countries other than those in relation to which notices are given below. This document does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, shares in any jurisdiction in which such offer or solicitation is unlawful.
This document has been produced for the sole purpose of providing information about the C Shares to qualified investors as such term is defined by sec. 1/1/5a Austrian Capital Market Act 1991 (Kapitalmarktgesetz 1991 or "CMA") or a maximum of 99 investors in Austria (respectively a maximum of 149 investors on or after 1 July 2012) carefully and individually selected in line with relevant market-related criteria. This document is made available on the condition that it is for the use only by the recipient and may not be passed on to any other person or reproduced in any part. The C Shares will not be offered in the course of a public offering, a public solicitation to offer or of an equivalent marketing in Austria and, therefore, the provisions of the CMA, as amended, relating to prospectus requirements for securities do not apply. The C Shares have thus neither been registered for public distribution in Austria with the Austrian Financial Market Authority ("FMA") nor been the subject-matter of a prospectus compliant with the CMA or approved by or notified to the FMA. Any order by any person other than the initial recipient of this document will be rejected. The C Shares may be qualified as "black" foreign investment fund units for Austrian income tax purposes if neither an Austrian tax representative will be appointed vis-a-vis the Oesterreichische Kontrollbank AG nor a self-evidence of capital gains, ordinary income and withholding tax is conducted by the investor. The Company does not envisage appointing an Austrian tax representative vis-a-vis Oesterreichische Kontrollbank AG. The qualification as "black" foreign investment fund unit results in a disadvantageous tax treatment as compared to the tax treatment of foreign shares under Austrian law. The tax treatment of the C Shares depends on the individual circumstances of the investor and may be subject to changes in the future. Potential investors should take their own tax advice in relation to a potential investment in the C Shares. Past performance is no reliable indicator for the future performance.
No action has been taken, or is intended to be taken, to permit a public offer of C Shares in Belgium. In particular, this prospectus and any related documentation have not been submitted to the Belgian Banking, Finance and Insurance Commission (Commissie voor het Bank-, Financie- en Assurantiewezen/Commission Bancaire, Financière et des Assurances, the "CBFA"). The CBFA has not reviewed or approved this prospectus, or commented on its accuracy or adequacy.
Accordingly, C Shares may not be offered or sold and this prospectus, any offering material or other similar document relating to the C Shares may not be advertised, distributed or made available to any individual or legal entity in Belgium other than in circumstances which do not constitute a public offer for subscription of the C Shares in Belgium under the Belgian law of 16 June 2006 on the public offer of investment instruments and the admission to trading of investment instruments on a regulated market and the Belgian law of 20 July 2004 on certain forms of collective management of portfolios, as amended from time to time.
Prospective purchasers shall only acquire C Shares for their own account.
In addition, C Shares may not be offered or sold to any person qualifying as a consumer within the meaning of the Belgian law of 6 April 2010 on market practices and the protection of the consumer unless such sale is made in compliance with this law and any applicable implementing regulation. Belgian investors should seek advice from their own advisers about the consequences of the investment in C Shares, including the tax consequences.
This document has not been and will not be filed with or approved by the Danish Financial Supervisory Authority or any other regulatory authority in Denmark and the C Shares have not been and are not intended to be listed on a Danish regulated market.
Consequently, this prospectus may not be made available nor may the C Shares otherwise be marketed or offered for sale directly or indirectly in Denmark, except to qualified investors within the meaning of, or otherwise in compliance with an exemption set forth in, Executive Order No. 223 of 10 March 2010.
The C Shares are only offered by means of this prospectus and are not, may not and will not be offered, distributed, sold, transferred or delivered, directly or indirectly, in or from the Netherlands, as part of the initial distribution or at any time thereafter other than (i) to 'Qualified Investors' (gekwalificeerde beleggers), within the meaning of section 1:1 of the Dutch Financial Supervision Act (Wet op het financieel toezicht) ("DFSA"), provided that these parties acquire the relevant C Shares for their own account or that of another 'Qualified Investor', (ii) to less than 100 individuals or legal entities who or which are not a 'Qualified Investor', (iii) to investors who acquire C Shares for a total consideration of at least EUR 50,000 per investor, for each separate offer, (iv) an offer of C Shares whose denomination per unit amounts to at least EUR 50,000 and (v) an offer of C Shares with a total consideration of less than EUR 100,000, which limit shall be calculated over a period of 12 months.
The C Shares may not be offered or sold, directly or indirectly, to any resident of the Republic of Finland or in the Republic of Finland, except pursuant to applicable Finnish laws and regulations. Specifically, the C Shares may not be offered or sold, directly or indirectly, to the public in the Republic of Finland as defined in the Finnish Securities Market Act of 1989 (495/1989, as amended or superseded by a corresponding new Securities Market Act) (the "Finnish Securities Market Act"). This Prospectus may not be distributed in the Republic of Finland, other than (i) to a limited number of less than one hundred pre-selected investors, (ii) to an unlimited number of qualified investors as defined under the Finnish Securities Market Act or (iii) provided that the C Shares may only be acquired for a consideration of not less than EUR 50,000 or in denominations of not less than EUR 50,000 per investor, to an unlimited number of pre-selected investors, and the offering of the New Shares does not constitute a public offering as defined in the Finnish Securities Market Act. This Prospectus has not been approved by the Finnish Financial Supervisory Authority.
This prospectus has not been prepared in the context of a public offering of securities in France within the meaning of Article L.411-1 et seq. of the French Code monétaire et financier and Article 211-1 et seq. of the Autorité des marchés financiers (the "AMF") General Regulations, and has therefore not been submitted to the AMF for prior approval or otherwise.
Accordingly, the C Shares may not be offered or sold, directly or indirectly, to the public in France and neither this prospectus nor any other offering material relating to the C Shares has been distributed or caused to be distributed or will be distributed or caused to be distributed to the public in France, except to qualified investors (investisseurs qualifiés), provided that such investors are acting for their own account and/or to persons providing portfolio management financial services (personnes fournissannt le services d'investissement de gestion de portefeuillle pour compte de tiers), all as defined and in accordance with Articles L. 411-1, L.411-2, D.411-1 to D.411-3, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier.
C Shares may only be offered or sold, directly or indirectly, to the public in the Republic of France in accordance with applicable laws relating to public offerings (which are in particular embodied in Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Code monétaire et financier and Article 211-1 et seq. of the AMF General Regulations).
The C Shares may not be distributed to the public in Germany. Collins Stewart (in its capacity as placing agent) making this prospectus available to individually selected members of their existing customer base only. This document is only directed to such recipients to whom it is directly addressed; it is not directed to the public in Germany and may not be disseminated to the public in Germany.
Any document relating to the C Shares may be promoted in Guernsey by persons regulated by the Guernsey Financial Services Commission as licensees under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended). Persons appointed by the Company and not so licensed may not promote the Company in Guernsey to private investors and may only distribute and circulate any document relating to C Shares in Guernsey to persons regulated as licensees under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended), the Banking Supervision (Bailiwick of Guernsey) Law, 1994 (as amended), the Insurance Business (Bailiwick of Guernsey) Law, 2002 (as amended) or the Regulation of Fiduciaries, Administration Business and Company Directors etc. (Bailiwick of Guernsey) Law, 2000 (as amended). Promotion is not being made in any other way.
This prospectus is being distributed in Ireland only to, and is directed only at, persons who are (i) "qualified investors" within the meaning of the Prospectus (Directive 2003/71/EC) Regulations 2005 (the "Regulations") or (ii) persons to whom this prospectus may otherwise lawfully be issued or passed on (all such persons together also being referred to as "relevant persons"). No offer, sale, underwriting or placement of the C Shares in, from or otherwise involving Ireland shall occur other than in conformity with the provisions of the Regulations and EU prospectus law (as such term is defined in section 38 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005 of Ireland).
The Company shall not advertise or market the C Shares in any way in Ireland without the prior approval of the Irish financial regulator. The Company is not supervised by the Irish financial regulator and the Company is not otherwise supervised or authorised in Ireland. The Company is incorporated in Guernsey and is supervised by the Guernsey Financial Services Commission.
Nothing in this prospectus implies any representation, recommendation or advice (including investment advice) of any kind by the Company, its management, employees or affiliates with respect to its contents.
No action has been taken or will be taken which would allow the offering of C Shares in the Republic of Italy.
The offering of C Shares has not been authorised by the competent Italian Authorities, i.e. the Bank of Italy and the CONSOB pursuant to Article 42 and Article 94 et seq. of Legislative Decree No. 58 of 24 February 1998 as subsequently amended, and, accordingly, C Shares may not be offered, sold, or marketed, directly or indirectly, to Italian investors of any kind nor any investment in the C Shares may be otherwise solicited in the Republic of Italy.
The C Shares may be exclusively sold upon express and autonomous request of the investor who has directly contacted the Company on his own initiative and this prospectus may be only sent to the investor at the investor's request.
Subject to certain exemptions (if applicable), the Company shall not raise money in Jersey by the issue anywhere of the C Shares (or the Ordinary Shares or the Tap Shares), and this prospectus relating to the C Shares shall not be circulated in Jersey, without first obtaining consent from the Jersey Financial Services Commission pursuant to the Control of Borrowing (Jersey) Order 1958,
as amended. No such consents have been obtained by the Company. Subject to certain exemptions (if applicable), offers for securities in the Company may only be distributed and promoted in or from within Jersey by persons with appropriate registration under the Financial Services (Jersey) Law 1998, as amended.
In relation to the Grand Duchy of Luxembourg ("Luxembourg"), which has implemented the Prospectus Directive by the Law of 10 July 2005 Relative Aux prospectus Pour Valeurs Mobilières (the "Prospectus Law"), the shares which are subject of the offering contemplated by this prospectus may not be offered to the public in Luxembourg, except that the shares may be offered to the public in Luxembourg:
For the purposes of this provision, the expression an "offer of shares to the public" in relation to any share in Luxembourg means the communication to persons in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe to the shares and the expression "Prospectus Directive" means Directive 2003/71/EC.
This Prospectus has not been produced in accordance with the prospectus requirements laid down in the Norwegian Securities Trading Act 2007, nor in accordance with the prospectus requirements laid down in the Norwegian Securities Fund Act of 2011 as amended. This Prospectus has not been approved or disapproved by, or registered with, the Oslo Stock Exchange, the Norwegian Financial Services Authority (Finanstilsynet) nor the Norwegian Registry of Business Enterprises. The C Shares described herein have not been and will not be offered or sold to the public in Norway, and no offering or marketing materials relating to the C Shares may be made available or distributed in any way that would constitute, directly or indirectly, an offer to the public in Norway. This Prospectus is for the recipient only and may not in any way be forwarded to any other person or to the public in Norway.
This offer is only available on a private placement basis, and it is not available for the general public in Portugal. This document does not constitute a public offer or solicitation. The C Shares are only being offered or marketed to recipients to whom this document is personally addressed, and this document and other marketing materials relating to the C Shares are strictly confidential and may not be distributed to any person or entity other than the intended recipients hereof. In addition, potential investors should confirm for themselves that the securities are eligible for inclusion in their portfolios in accordance with relevant specific Portuguese laws and regulations. Subsequently, this offer has not been subject to approval of the Portuguese Securities Commission who has not confirmed its compliance with Portuguese public offering regulations.
Recipients to whom this document is personally addressed agree that the information and documentation are provided in English language, confirm that they understand English language and hereby waive the translation of such documents to Portuguese language.
Neither the C Shares nor this document have been authorised or registered in the administrative registries of the Spanish Securities Markets Commission (Comisión Nacional del Mercado de Valores). Accordingly, the C Shares may not be offered, sold or delivered in Spain (and the Placing Agent may not distribute any prospectus or any other offering or publicity material relating to the C Shares) except in circumstances which do not constitute a public offering of securities in Spain (or which otherwise qualify as an exception permitted) within the meaning of Article 30-bis of the Spanish Securities Market Law of July 28, 1988 (Ley 24/1988, de 28 de julio, del Mercado de Valores), Royal Decree 1310/2005 of 4 November (Real Decreto 1310/2005 de 4 de noviembre), both as amended and restated, and supplemental rules enacted thereunder or in substitution thereof from time to time.
The Company is not an investment fund (Sw. fondföretag) for the purpose of the Swedish Investment Funds Act 2004 (Sw. lag (2004:46) om investeringsfonder). This prospectus is only directed to such recipients to whom it is directly addressed and may not be copied or, directly or indirectly, be distributed or made available to other persons without the express consent of the Investment Adviser.
The C Shares may not be offered to the public in Sweden. The C Shares may only be offered (i) to "Qualified Investors" (Sw. kvalificerade investerare), within the meaning of the Swedish Financial Instruments Trading Act 1991 (Sw. lag (1991:980) om handel med finansiella instrument)); (ii) to less than 100 individuals or legal entities who or which are not a "Qualified Investor"; (iii) to investors who acquire C Shares for a total consideration of at least EUR 50,000 per investor, for each separate offer; (iv) with an offer of C Shares whose denomination per unit amounts to at least EUR 50,000; or (v) with an offer of C Shares with a total consideration of less than EUR 100,000, which limit shall be calculated over a period of 12 months.
Neither this prospectus nor the offering of C Shares hereunder is subject to any registration or approval requirements in Sweden under the Swedish Financial Instruments Trading Act 1991 (Sw. lag (1991:980) om handel med finansiella instrument). Accordingly, the document has not been, nor will it be, registered or approved by the Swedish Financial Supervisory Authority (Sw. Finansinspektionen).
Neither this prospectus nor any other offering or marketing material relating to the Company constitutes an issue prospectus pursuant to article 652a or article 1156 of the Swiss Federal Code of Obligations. The Company has not been approved as a foreign collective investment scheme pursuant to article 120 of the Swiss Federal Act on Collective Investment Schemes of 23 June 2006 ("CISA", as amended from time to time) by the Swiss Financial Market Supervisory Authority (FINMA). Accordingly, neither the C Shares nor any other participation in the Company may be publicly offered or distributed in or from Switzerland and neither this prospectus nor any other document or offering material relating to the Company and/or the C Shares may be distributed in connection with any such offering or distribution. The Company is not subject to the supervision of any Swiss supervisory authority. C Shares may only be offered and this prospectus may only be distributed in or from Switzerland to "qualified investors" according to CISA such that there is no public marketing in or from Switzerland as defined pursuant to the most restrictive interpretation of the applicable Swiss laws and regulations.
The C Shares have not been and will not be registered under the Securities Act, or under the applicable state securities laws of the United States and the Company has not registered, and does not intend to register as an investment company under the Investment Company Act. Accordingly, the C Shares may not be offered, sold, pledged or otherwise transferred directly or indirectly in or into the United States, or to or for the account or benefit of any US person within the meaning of Regulation S, except that the C Shares may be offered and sold (a) in the United States to "qualified institutional buyers" within the meaning of Rule 144A who are "qualified purchasers" as defined in Section 2(a)(51) of the Investment Company Act in reliance on the exemption from registration provided by Rule 144A and (b) outside the United States only in "offshore transactions" to persons that are not US persons as defined in, and in reliance on, Regulation S.
Each purchaser of C Shares offered by this prospectus, in receiving this prospectus and making its purchase, will be deemed by the Company and Collins Stewart to have made, and may further be required to make, the representations, acknowledgments and agreements as described under the section "Terms and Conditions of Application under the Offer" in this prospectus. Any purchaser of C Shares in the United States or who is a US person within the meaning of Regulation S will be required to execute and return to the Company a US purchaser letter in order to effect their purchase of C Shares.
The following definitions apply throughout this prospectus unless the context requires otherwise:
| "2007 Facility" | means the £200 million Multi-Currency Revolving Credit Facilities Agreement dated 19 December 2007 between the Partnership, the General Partner and the Principal Bankers, details of which are set out in Part XI of this prospectus; |
|---|---|
| "2012 Facility" | means the £150 million Multi-Currency Revolving Credit Facility Agreement dated 28 February 2012 between: (i) the Partnership; (ii) Infrastructure Investments General Partner Limited; (iii) Infrastructure Investments Holdings Limited; (iv) the Company; (v) the Royal Bank of Scotland plc; and (vi) National Australia Bank Limited, details of which are set out in Part XI of this prospectus; |
| "Additional Investment" | means an investment made or contracted to be made by the Group on or prior to Admission or any investment identified by the Investment Adviser on or prior to Admission which the Directors reasonably believe will be made or contracted to be made by the Group by no later than 31 May 2012; |
| "Adjusted Gross Asset Value" | means fair market value, without deductions for borrowed money or other liabilities or accruals, and including outstanding subscription obligations; |
| "Administration Agreement" | means the administration agreement dated 19 September 2008 between the Company and the Administrator, details of which are set out in Part XI of this prospectus; |
| "Administrator" | means Dexion Capital (Guernsey) Limited; |
| "Admission" | means admission of the C Shares to be issued pursuant to the Issue to the premium segment of the Official List and/or to trading on the Main Market of the London Stock Exchange as the context may require; |
| "AIFM Directive" | means the European Directive on Alternative Investment Fund Managers (No. 2011/61/EU); |
| "Application Form" | means the application form attached to this prospectus for use in connection with the Offer for Subscription; |
| "Articles of Incorporation" or "Articles" | means the Articles of Incorporation of the Company in force from time to time; |
| "Auditors" | means KPMG Channel Islands Limited; |
| "Business Day" | means any day (other than a Saturday or Sunday) on which commercial banks are open for business in London and Guernsey; |
| "Calculation Time" | has the meaning given in Part IX of this prospectus; |
| "Capita Registrars" | a trading name of Capita Registrars Limited; |
| "certificated" or "in certificated form" | means in relation to a share or other security, a share or other security, title to which is recorded in the relevant register of the share or other security concerned as being held in certificated form (that is, not in CREST); |
| "Client" | means the procuring client which appoints a Project Company under a PFI/PPP concession and to whom the construction and operational services are provided during the project; |
|
|---|---|---|
| "Collins Stewart" | means Collins Stewart Europe Limited, in its capacity as the Company's sponsor and/or placing agent (as the context requires); |
|
| "Company" | means HICL Infrastructure Company Limited; | |
| "Conditional Investment" | means an investment in Infrastructure Equity in the LUL Connect PFI project in respect of which the Group has signed heads of terms and which is subject to signing a sale and purchase agreement with the seller and certain other conditions (including raising sufficient proceeds from the Issue and obtaining Shareholder and certain other third party approvals); |
|
| "Conversion" | has the meaning given in Part IX of this prospectus; | |
| "Conversion Ratio" | has the meaning given in Part IX of this prospectus; | |
| "Conversion Time" | has the meaning given in Part IX of this prospectus; | |
| "Court" | means the Royal Court of the Bailiwick of Guernsey; | |
| "CREST" or "CREST system" | means the paperless settlement procedure operated by Euroclear UK & Ireland enabling system securities to be evidenced otherwise than by certificates and transferred otherwise than by written instrument; |
|
| "CREST Guernsey Requirements" | means rule 22 and such other of the rules and requirements of Euroclear UK & Ireland as may be applicable to issuers from time to time specified in the CREST Reference Manual issued by from time to time; |
|
| "C Shares" | means C shares of 0.01 pence each in the Company; | |
| "C Shareholders" | means the holders of the C Shares (prior to the conversion of the C Shares to Ordinary Shares); |
|
| "Currency" | means a currency other than GBP in which one or more of the Company's investments are denominated from time to time; |
|
| "Current Portfolio" | means the portfolio of infrastructure investments which the Group has acquired on or prior to the date of this prospectus, as further described in Part IV of this prospectus; |
|
| "Current Portfolio Value" | means the value of the Company's portfolio of assets attributed by the Directors' valuation as at 31 December 2011, plus the consideration payable for investments made between 1 January 2012 and the date of this prospectus (excluding the Conditional Investment), assuming a Euro to Sterling exchange rate of 0.83 and a Canadian dollar to Sterling exchange rate of 0.63; |
|
| "DHSRL" | means the Dutch High Speed Rail link project described in Part IV on page 63 of this prospectus; |
| "Directors" or "Board" | means the directors of the Company, whose names appear on page 24 of this prospectus, or the board of directors from time to time of the Company, as the case may require, and "Director" is to be construed accordingly; |
|---|---|
| "Distributable Cash Flow" | means, in any year: (i) all cash received by the Group from its investments that is supported by a sufficiency of distributable reserves for accounting purposes and under the Laws, including but not limited to: (a) interest payments on subordinated debt; (b) repayments of subordinated debt; and (c) dividend payments; less (ii) management and advisory fees, interest on external borrowings, running costs and taxation; |
| "EEA" | means the European Economic Area; |
| "EU" | means the European Union; |
| "Euroclear UK & Ireland" | means Euroclear UK & Ireland Limited the operator of CREST; |
| "Excess Application Facility" | means the arrangement pursuant to which Existing Shareholders may apply for additional C Shares in excess of their Open Offer Entitlement in accordance with the terms and conditions of the Open Offer; |
| "Excess CREST Open Offer Entitlement" | means, in respect of each Existing CREST Shareholder, the entitlement (in addition to their Open Offer Entitlement) to apply for C Shares using CREST pursuant to the Excess Application Facility; |
| "Excess Shares" | means: (a) C Shares which are not taken up by Existing Shareholders pursuant to their Open Offer Entitlement together with (b) C Shares that the Directors have reallocated from the Placing and/or the Offer for Subscription to be available to Existing Shareholders, in each case that are offered to other Existing Shareholders under the Excess Application Facility; |
| "Excluded Overseas Shareholder" | means a holder of Ordinary Shares with a registered mailing address in an Excluded Territory; |
| "Excluded Territory" | means Australia, Canada, Japan, South Africa or the United States; |
| "Existing CREST Shareholders" | means Existing Shareholders holding Ordinary Shares in uncertificated form in CREST; |
| "Existing Non-CREST Shareholders" | means Existing Shareholders holding Ordinary Shares in certificated form; |
| "Existing Ordinary Shares" | means Ordinary Shares in issue as at the Record Date; |
| "Existing Shareholder" | means a holder of an Ordinary Share as at the Record Date that is not restricted in holding C Shares as set out on pages 159 to 161 of this prospectus; |
| "Extraordinary General Meeting" | means the extraordinary general meeting of the Company to be held at 11 a.m. on 23 March 2012. |
| "Fair Market Value" | means the amount for which an asset could be exchanged between willing parties who are under no compulsion to transact, who are acting for self interest and gain, and both of whom are equally well informed about the Current Portfolio and the infrastructure market; |
|
|---|---|---|
| "FSA" | means the UK Financial Services Authority; | |
| "FSMA" | means the Financial Services and Markets Act 2000 of the United Kingdom, as amended; |
|
| "Fund I" | means the HSBC Infrastructure Fund; | |
| "Fund II" | means the InfraRed Infrastructure Fund II; | |
| "Fund III" | means the InfraRed Infrastructure Fund III; | |
| "General Partner" | means Infrastructure Investments General Partner Limited; | |
| "GFSC" | means the Guernsey Financial Services Commission; | |
| "Group" | means the Company, the Luxcos and the Partnership (together, individually or in any combination as appropriate); |
|
| "Group Debt" | means the aggregate amount of outstanding debt, from time to time, drawn down under the 2007 Facility and/or the 2012 Facility; |
|
| "Hard FM Services" | means hard facilities management services such as maintenance services and the periodic refurbishment and replacement of components; |
|
| "HMRC" | means Her Majesty's Revenue and Customs; | |
| "Holding Company" | means a special purpose company formed to hold the equity and subordinated debt in a Project Company: references in this prospectus to "investments in Project Companies", "making investments in Project Companies" or Infrastructure Equity in Project Companies or Project Company etc. shall be deemed to include a reference to investments or making investments etc. in Holding Companies as and when the context requires; |
|
| "Holding Entities" | means all or any of Luxco 1, Luxco 2 and the Partnership; | |
| "HSBC" or "HSBC Group" | means HSBC Holdings plc, together with its subsidiaries and associates; | |
| "HSIL" | means HSBC Specialist Investments Limited; | |
| "ICPL" | means InfraRed Capital Partners Limited; | |
| "IFRS" | means International Financial Reporting Standards; | |
| "InfraRed Group" or "InfraRed" | has the meaning given in Part VI of this prospectus; | |
| "Infrastructure Equity" | means the subordinated debt (or the entitlement to acquire subordinated debt) and equity of a Project Company, a Holding Company or any other Portfolio Company (as appropriate); |
| "Infrastructure Investment Team" | means the infrastructure investment team of the Investment Adviser; | |
|---|---|---|
| "Initial Portfolio" | means the initial portfolio of 15 infrastructure investments which the Group acquired from Fund I and HSBC Infrastructure Limited; |
|
| "Internal Rate of Return" or "IRR" | means the total return calculated as being the discount rate which when applied to expected cash flows would give a net present value of zero; |
|
| "Investment Adviser" | means ICPL acting in its capacity as investment adviser to the Company pursuant to the Investment Advisory Agreement; |
|
| "Investment Advisory Agreement" | means the Investment Advisory Agreement between the Investment Adviser and the Company, further details of which are set out in Part XI on pages 127 to 128; |
|
| "Investment Committee" | means the investment committee established by the Operator as described on page 76 of this prospectus; |
|
| "Investment Company Act" | means the United States Investment Company Act of 1940, as amended; | |
| "Investment Policy" | means the investment policy of the Group, as set out on pages 33 and 34 of this prospectus; |
|
| "IPO" | means the initial public offering of 250 million Ordinary Shares; | |
| "ISA" | means an Individual Savings Account; | |
| "ISA Regulations" | means the Individual Savings Account Regulations 1998 (SI 1998/1870) (as amended); |
|
| "Issue" | means the issue of the C Shares pursuant to the Placing, the Open Offer and the Offer for Subscription described in this prospectus; |
|
| "Issue Price" | means £1 per C Share; | |
| "Law" or "Laws" | means the Companies (Guernsey) Law, 2008 (as amended); | |
| "Limited Partnership Agreement" | has the meaning given in paragraph 3.1. of Part XI of this prospectus; | |
| "Listing Rules" | means the rules, including the listing rules, the disclosure rules, the transparency rules and the prospectus rules made by the UK Listing Authority under section 73A of the FSMA; |
|
| "London Stock Exchange" or "LSE" | means London Stock Exchange plc; | |
| "Luxco 1", "Luxco 2", together the "Luxcos" | have the respective meanings given on page 31 of this prospectus; | |
| "Luxembourg Administrator" | means RSM Henri Grisius & Associés Sàrl; | |
| "Management Shares" | means shares of 0.01p each in the capital of the Company, classed as management shares and having the rights attached thereto; |
|
| "Memorandum of Incorporation" or "Memorandum" |
means the memorandum of incorporation of the Company; |
| "Net Asset Value" or "NAV" | means the net asset value of the Company in total or (as the context requires) per C Share or Ordinary Share calculated in accordance with the Company's valuation policies and as described in this prospectus; |
|
|---|---|---|
| "NHS" | means the National Health Service of the United Kingdom; | |
| "Offer for Subscription" or "Offer" | means the offer for subscription to the public in the UK of C Shares on the terms set out in this prospectus; |
|
| "Official List" | means the official list maintained by the UK Listing Authority; | |
| "Open Offer" | means the offer to Existing Shareholders, constituting an invitation to apply for C Shares under the Issue, on the terms and subject to the conditions set out in this prospectus and, in the case of Existing Non-CREST Shareholders only, the Open Offer Application Form; |
|
| "Open Offer Application Form" | means the personalised application form on which Existing Shareholders may apply for C Shares under the Open Offer; |
|
| "Open Offer Entitlement" | means the entitlement of Existing Shareholders to apply for C Shares under the Open Offer as set out in Part VII of this prospectus; |
|
| "Operator" | means ICPL acting in its capacity as operator of the Partnership; | |
| "Ordinary Shares" | means shares of 0.01p each in the capital of the Company, classed as ordinary shares and having the rights attached thereto; |
|
| "Overseas Shareholders" | means all Shareholders that are not resident in the United Kingdom; | |
| "Partnership" | means the limited partnership which will hold and manage the Company's investments, as further described in Part II of this prospectus; |
|
| "P3" | means Canadian public private partnership; | |
| "PFI" | means the Private Finance Initiative; | |
| "Placing" | means the placing of the C Shares pursuant to the Issue Agreement and, details of which are contained in this prospectus; |
|
| "Placing, Open Offer and Offer Agreement" | means the conditional placing, open offer and offer agreement between the Company, Collins Stewart and the Investment Adviser, details of which are set out in Part XI on page 125 of this prospectus; |
|
| "Portfolio Company" | means a Project Company or a company which undertakes an activity permitted by the Investment Policy; |
|
| "PPP" | means the Public Private Partnership; | |
| "Principal Bankers" | means Bank of Scotland plc; | |
| "Project Agreement" | means the agreement between a Project Company and the Client under which the Project Company agrees to procure the construction of the project and the provision of the services; |
| "Project Company" | means any investment in an infrastructure project including a special purpose company formed to undertake an infrastructure project; |
|
|---|---|---|
| "Prospectus Rules" | means the prospectus rules made by the FSA under section 73A of the FSMA; | |
| "ramp-up phase" | means the period after a project's completion of its construction phase during which it is building up to being fully operational with full service provision; |
|
| "Receiving Agent" | means Capita Registrars Limited; | |
| "Receiving Agent Agreement" | means the receiving agent agreement dated 15 February 2012 between the Company and the Receiving Agent, details of which are set out in Part XI on page 126 of this prospectus; |
|
| "Record Date" | means close of business (UK time) on 17 February 2012; | |
| "Registrar" | means Capita Registrars (Guernsey) Limited; | |
| "Regulation S" | means Regulation S under the Securities Act; | |
| "Regulatory Information Service" | means a regulatory information service approved by the FSA and on the list of Regulatory Information Services maintained by the FSA; |
|
| "Rule 144A" | means Rule 144A under the Securities Act; | |
| "Rules of Engagement" | means the rules established to manage transactions between the Group, the Investment Adviser, or any fund managed by the Investment Adviser; |
|
| "Sàrl" | means a Luxembourg société à responsabilité limitée; | |
| "Scrip Shares" | means shares which are issued instead of a cash dividend; | |
| "Securities Act" | means the United States Securities Act of 1933, as amended; | |
| "Shareholders" | means the holders of Ordinary Shares (including Ordinary Shares converted from C Shares following such conversion); |
|
| "Soft FM services" | means soft facilities management services such as cleaning, catering, security and grounds maintenance services; |
|
| "SOPARFI" | means a Luxembourg société à participations financières; | |
| "Tap Shares" | means the 65,899,500 Ordinary Shares issued by way of tap issues between 1 January 2011 and the date of this prospectus; |
|
| "Transfer Agent" | means Capita Registrars, a trading name of Capita Registrars Limited; | |
| "UK Listing Authority" | means the Financial Services Authority in its capacity as the competent authority for listing in the UK pursuant to Part VI of the FSMA; |
|
| "uncertificated" or "in uncertificated form" | means, in relation to a share or other security, a share or other security, title to which is recorded in the relevant register of the share or other security concerned as being held in uncertificated form (that is, in CREST) and title to which may be transferred by means of CREST; |
| "United Kingdom" or "UK" | means the United Kingdom of Great Britain and Northern Ireland; | |
|---|---|---|
| "United States" or "US" | means the United States of America, its territories and possessions, any state of the United States and the District of Columbia; |
|
| "US person" | has the meaning given in Regulation S under the Securities Act; | |
| "Valuation" | means the Directors' calculation of the Fair Market Value of the Current Portfolio as at 31 December 2011; and |
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| "VAT" | means value added tax. |
Existing Shareholders must hold Existing Ordinary Shares as at the date the Existing Ordinary Shares go ex-entitlements as to the Open Offer to be eligible to partake in the Open Offer. Open Offer Application Forms are expected to be posted to Existing Non-CREST Shareholders on or around 29 February 2012 and Open Offer Entitlements are expected to be credited to stock accounts of Existing CREST Shareholders in CREST on 2 March 2012. The latest time and date for receipt of completed Open Offer Application Forms and payment in full under the Open Offer and settlement of relevant CREST instructions (as appropriate) is expected to be 11.00 a.m. on 23 March 2012 with Admission and commencement of dealings in C Shares expected to take place at 8.00 a.m. on 30 March 2012.
This document and, for Existing Non-CREST Shareholders only, the Open Offer Application Form contain the formal terms and conditions of the Open Offer. Your attention is drawn to paragraph 4 of these Terms and Conditions which gives details of the procedure for application and payment for the C Shares available under the Open Offer. The attention of Overseas Shareholders is drawn to paragraph 6 of these Terms and Conditions.
The Open Offer is an opportunity for Existing Shareholders to apply for C Shares pro rata to their current holdings at the Issue Price of £1 per C Share in accordance with these Terms and Conditions.
The Excess Application Facility is an opportunity for Existing Shareholders who have applied for all of their Open Offer Entitlements to apply for additional C Shares. The Excess Application Facility will be comprised of C Shares that are not taken up by Existing Shareholders under the Open Offer pursuant to their Open Offer Entitlements, aggregate fractional entitlements under the Open Offer and any C Shares that the Directors determine should be reallocated from the Offer for Subscription and/or the Placing to satisfy demand from Existing Shareholders in preference to prospective new investors under the Offer for Subscription and/or the Placing. There is no limit on the amount of C Shares that can be applied for by C Shareholders under the Excess Application Facility, save that the maximum amount of C Shares to be allotted under the Excess Application Facility shall be limited by the maximum size of the Issue (as may be increased by the Directors up to £250 million) less C Shares issued under the Placing and the Open Offer pursuant to Existing Shareholders' Open Offer Entitlements and any C Shares that the Directors determine to issue under the Offer for Subscription. Allotments under the Excess Application Facility shall be allocated in such manner as the Directors may determine in their absolute discretion, and no assurance can be given that applications by Existing Shareholders will be met in part or at all. In the event of oversubscription under the Excess Application Facility the Directors intend to limit application by Existing Shareholders pro rata to their aggregate holdings of Existing Ordinary Shares. However, the Directors also have the discretion (but are not obliged) to scale back the Placing and/or Offer for Subscription in favour of the Excess Application Facility by reallocating C Shares that would otherwise be available under the Placing and/or Offer for Subscription to Existing Shareholders through the Excess Application Facility.
Any Existing Shareholder who has sold or transferred all or part of his/her registered holding(s) of Existing Ordinary Shares prior to 8:00 a.m. on 1 March 2012 is advised to consult his or her stockbroker, bank or other agent through or to whom the sale or transfer was effected as soon as possible since the invitation to apply for C Shares under the Open Offer may be a benefit which may be claimed from him/her by the purchasers under the rules of the London Stock Exchange.
Subject to the terms and conditions set out below (and, in the case of Existing Non-CREST Shareholders, in the Open Offer Application Form), Existing Shareholders are being given the opportunity to apply for any number of C Shares at the Issue Price (payable in full on application and free of all expenses) up to a maximum of their Open Offer Entitlement which shall be calculated on the basis of:
1 C Share for every 6 Existing Ordinary Shares held at the Record Date (being close of business on 27 February 2012)
Subject to the terms and conditions set out below, applications by Existing Shareholders will be satisfied in full up to the amount of their individual Open Offer Entitlement.
Open Offer Entitlements will be rounded down to the nearest whole number and any fractional entitlements to C Shares will be disregarded in calculating Open Offer Entitlements. Fractions will be aggregated and made available to Existing Shareholders under the Excess Application Facility.
Existing Shareholders may apply to acquire less than their Open Offer Entitlement should they so wish. In addition, Existing Shareholders may apply to acquire excess C Shares using the Excess Application Facility. Please refer to paragraphs 4.1(c) and 4.2(c) of these Terms and Conditions for further details of the Excess Application Facility.
If you are an Existing Non-CREST Shareholder, the Open Offer Application Form shows the number of Existing Ordinary Shares registered in your name on the Record Date (in Box 1).
Existing CREST Shareholders will have C Shares representing their Open Offer Entitlement credited to their stock accounts in CREST and should refer to paragraph 4.2 of these Terms and Conditions and also to the CREST Manual for further information on the relevant CREST procedures.
The Open Offer Entitlement, in the case of Existing Non-CREST Shareholders, is equal to the number of C Shares shown in Box 2 on the Open Offer Application Form or, in the case of Existing CREST Shareholders, is equal to the number of their C Shares representing Open Offer Entitlement standing to the credit of their stock account in CREST.
The Excess Application Facility enables Existing Shareholders to apply for any whole number of excess C Shares in excess of their Open Offer Entitlement. Existing Non-CREST Shareholders who wish to apply to subscribe for more than their Open Offer Entitlement should complete Boxes 5, 6 and 7 on the Open Offer Application Form. Excess applications may be allocated in such manner as the Directors may determine, in their absolute discretion, and no assurance can be given that applications by Existing Shareholders will be met in full or in part or at all.
Existing Shareholders should be aware that the Open Offer is not a rights issue. Existing Non-CREST Shareholders should also note that their respective Open Offer Application Forms are not negotiable documents and cannot be traded. Existing CREST Shareholders should note that, although the C Shares representing their Open Offer Entitlement and Excess CREST Open Offer Entitlements will be credited to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Existing Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear UK & Ireland's Claims Processing Unit. C Shares not applied for under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Existing Shareholders who do not apply to take up C Shares available under the Open Offer will have no rights under the Open Offer. Any C Shares which are not applied for in respect of the Open Offer may be allotted to Existing Shareholders to meet any valid applications under the Excess Application Facility or may be issued to the subscribers under the Placing and/or the Offer for Subscription, with the proceeds retained for the benefit of the Company.
The Open Offer is conditional on the Placing, Open Offer and Offer Agreement becoming unconditional in all respects and Admission of the C Shares to the Official List becoming effective by not later than 8.00 a.m. on 30 March 2012 (or such later time and/or date as the Company and Collins Stewart may determine, not being later than 8.00 a.m. on 30 April 2012).
Accordingly, if these conditions are not satisfied or waived (where capable of waiver) the Issue will not proceed and any applications made by Existing Shareholders will be rejected. In such circumstances, application monies will be returned (at the applicant's sole risk), without payment of interest, as soon as practicable thereafter.
No temporary documents of title will be issued in respect of C Shares under the Open Offer held in uncertificated form. Definitive certificates in respect of C Shares taken up are expected to be posted to those Existing Shareholders who have validly elected to hold their C Shares in certificated form in them week commencing 2 April 2012. In respect of those Existing Shareholders who have validly elected to hold their C Shares in uncertificated form, the C Shares are expected to be credited to their stock accounts maintained in CREST on 30 March 2012.
The action to be taken by you in respect of the Open Offer depends on whether, at the relevant time, you have an Open Offer Application Form in respect of your entitlement under the Open Offer or you have C Shares representing your Open Offer Entitlement and Excess CREST Open Offer Entitlement credited to your CREST stock account in respect of such entitlement.
Existing Shareholders who hold their Existing Ordinary Shares in certificated form will be allotted C Shares in certificated form. Existing Shareholders who hold part of their Existing Ordinary Shares in uncertificated form will be allotted C Shares in uncertificated form to the extent that their entitlement to C Shares arises as a result of holding Existing Ordinary Shares in uncertificated form. However, it will be possible for Existing Shareholders to deposit Open Offer Entitlements into, and withdraw them from, CREST. Further information on deposit and withdrawal from CREST is set out in paragraph 4.2(g) of these Terms and Conditions.
CREST sponsored members should refer to their CREST sponsor, as only their CREST sponsor will be able to take the necessary action specified below to apply under the Open Offer in respect of the Open Offer Entitlements and Excess CREST Open Offer Entitlements of such members held in CREST. CREST members who wish to apply under the Open Offer in respect of their Open Offer Entitlements and Excess CREST Open Offer Entitlements in CREST should refer to the CREST Manual for further information on the CREST procedures referred to below.
4.1 If you have an Open Offer Application Form in respect of your entitlement under the Open Offer:
(a) General
Subject as provided in paragraph 6 of these Terms and Conditions in relation to Overseas Shareholders, Existing Non-CREST Shareholders will receive an Open Offer Application Form. The Open Offer Application Form shows the number of Existing Ordinary Shares registered in their name on the Record Date in Box 1. It also shows the maximum number of C Shares for which they are entitled to apply under the Open Offer set out in Box 2. Box 3 shows how much they would need to pay if they wish to take up their Open Offer Entitlements in full. Any fractional entitlements to C Shares will be disregarded in calculating Open Offer Entitlements and will be aggregated and made available to Existing Shareholders under the Excess Application Facility. Any Existing Non-CREST Shareholders with fewer than 6 Existing Ordinary Shares will not receive an Open Offer Entitlement but may apply for Excess Shares pursuant to the Excess Application Facility (see paragraph 4.1(c) of these Terms and Conditions). Existing Non-CREST Shareholders may apply for less than their entitlement should they wish to do so. Existing Non-CREST Shareholders may also hold such an Open Offer Application Form by virtue of a bona fide market claim. Existing Non-CREST Shareholders may also apply for Excess Shares under the Excess Application Facility by completing Boxes 5, 6 and 7 in the Open Offer Application Form.
The instructions and other terms set out in the Open Offer Application Form form part of the terms of the Open Offer in relation to Existing Non-CREST Shareholders.
Applications to acquire C Shares may only be made on the Open Offer Application Form and may only be made by the Existing Non-CREST Shareholder named in it or by a person entitled by virtue of a bona fide market claim in relation to a purchase of Existing Ordinary Shares through the market prior to the date upon which the Existing Ordinary Shares were marked "ex" the entitlement to participate in the Open Offer. Open Offer Application Forms may not be assigned, transferred or split, except to satisfy bona fide market claims up to 3.00 p.m. on 21 March 2012. The Open Offer Application Form is not a negotiable document and cannot be separately traded. An Existing Non-CREST Shareholder who has sold or otherwise transferred all or part of his holding of Existing Ordinary Shares prior to the date upon which the Existing Ordinary Shares were marked "ex" the entitlement to participate in the Open Offer, should consult his broker or other professional adviser as soon as possible, as the invitation to acquire C Shares under the Open Offer may be a benefit which may be claimed by the transferee. Existing Non-CREST Shareholders who have sold all or part of their registered holdings should, if the market claim is to be settled outside CREST, complete Box 8 on the Open Offer Application Form and immediately send it to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. The Open Offer Application Form should not, however be forwarded to or transmitted to any "Excluded Overseas Shareholders" (being a holder of Ordinary Shares with a registered mailing address in Australia, Canada, Japan, South Africa or the United States). If the market claim is to be settled outside CREST, the beneficiary of the claim should follow the procedures set out in the accompanying Open Offer Application Form. If the market claim is to be settled in CREST, the beneficiary of the claim should follow the procedure set out in paragraphs 4.2(b) below.
Existing Shareholders may apply to acquire Excess Shares using the Excess Application Facility, should they wish. Existing Non-CREST Shareholders wishing to apply for Excess Shares, may do so by completing Box 5 of the Open Offer Application Form. The maximum number of C Shares to be allotted under the Excess Application Facility (the "Maximum Excess Application Number") shall be limited to: (a) the maximum size of Issue; less (b) C Shares issued under the Placing and the Open Offer pursuant to Existing Shareholders' Open Offer Entitlements and any C Shares that the Directors determine to issue under the Offer for Subscription. Applications under the Excess Application Facility shall be allocated in such manner as the Directors may determine, in their absolute discretion, and no assurance can be given that the applications by Existing Shareholders will be met in full or in part or at all. Excess monies in respect of applications which are not met in full will be returned to the applicant (at the applicant's risk) without interest as soon as practicable thereafter by way of cheque or CREST payment, as appropriate.
A credit of 30 million Excess CREST Open Offer Entitlements will be made to each Qualifying CREST Shareholder; if a Qualifying CREST Shareholder would like to apply for a larger Excess CREST Open Offer Entitlement, such Qualifying CREST Shareholder should contact Capita Registrars to arrange for a further credit of C Shares to its Excess CREST Open Offer Entitlement, subject at all times to the maximum number of C Shares available.
All enquiries in connection with the procedure for application of Excess CREST Open Offer Entitlements should be made to Capita Registrars on the Shareholder helpline 0871 664 0321 or, if calling from overseas, +44 208 639 3399. Calls to the 0871 664 0321 number are charged at ten pence per minute from a BT landline, other telephone provider costs may vary. Call to the helpline from outside the UK will be charge at the applicable international rate. Different charges may apply to call from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. Lines are open from 9.00 a.m. to 5.00 p.m. on Monday to Friday. Please note Capita Registrars cannot provide financial advice on the merits of the Open Offer or as to whether applicants should take up their Open Offer Entitlement or apply for Excess Shares.
Existing Non-CREST Shareholders wishing to apply to acquire all or any of the C Shares should complete the Open Offer Application Form in accordance with the instructions printed on it. Completed Open Offer Application Forms should be posted in the accompanying pre-paid envelope for use within the UK only or returned by post (during normal business hours only) or by hand to Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU (who will act as Receiving Agent in relation to the Open Offer) so as to be received by Capita Registrars by no later than 11:00 a.m. on 23 March 2012, after which time Open Offer Application Forms will not be valid. Existing Non-CREST Shareholders should note that applications, once made, will be irrevocable and receipt thereof will not be acknowledged. If an Open Offer Application Form is being sent by first-class post in the UK, Existing Shareholders are recommended to allow at least four working days for delivery.
All payments must be in GBP and made by cheque or banker's draft made payable to Capita Registrars Limited re HICL Infrastructure Company Limited Open Offer A/c and crossed "A/C Payee Only". Cheques or banker's drafts must be drawn on a bank or building society or branch of a bank or building society in the United Kingdom or Channel Islands which is either a settlement member of the Cheque and Credit Clearing Company Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques and banker's drafts to be cleared through the facilities provided by any of those companies or committees and must bear the appropriate sort code in the top right hand corner and must be for the full amount payable on application. Third party cheques will not be accepted with the exception of building society cheques or banker's drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the back of the cheque or draft to such effect. The account name should be the same as that shown on the application. Post-dated cheques will not be accepted. Third party cheques (other than building society cheques or banker's drafts where the building society or bank has confirmed that the relevant Existing Shareholder has title to the underlying funds by printing the Existing Shareholder's name on the back of the draft and adding the branch stamp) will be subject to the Money Laundering Regulations which will delay Shareholders receiving their C Shares (please see paragraph 5 below).
Cheques or banker's drafts will be presented for payment upon receipt. Funds will be held in a non-interest bearing account and no interest will be paid on payments. It is a term of the Open Offer that cheques shall be honoured on first presentation and the Company may elect to treat as invalid acceptances in respect of which cheques are not so honoured. All documents, cheques and banker's drafts sent through the post will be sent at the risk of the sender. Payments via CHAPS, BACS or electronic transfer will not be accepted.
If cheques or banker's drafts are presented for payment before the conditions to the Issue are fulfilled, the application monies will be kept in a separate non-interest bearing bank account. If the Open Offer does not become unconditional, no C Shares will be issued and all monies will be returned (at the applicant's sole risk), without payment of interest, to applicants as soon as practicable following the lapse of the Open Offer.
The Company may in its sole discretion, but shall not be obliged to, treat an Open Offer Application Form as valid and binding on the person by whom or on whose behalf it is lodged, even if not completed in accordance with the relevant instructions or not accompanied by a valid power of attorney where required, or if it otherwise does not strictly comply with the terms and conditions of the Open Offer. The Company further reserves the right (but shall not be obliged) to accept either:
Multiple applications will not be accepted. All documents and remittances sent by post by or to an applicant (or as the applicant may direct) will be sent at the applicant's own risk.
By completing and delivering an Open Offer Application Form the applicant:
(ix) confirms that in making the application he is not relying and has not relied on Collins Stewart or any person affiliated with Collins Stewart in connection with any investigation of the accuracy of any information contained in this document or his investment decision.
All enquiries in connection with the procedure for application and completion of the Open Offer Application Form should be addressed to the Receiving Agent, at Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU or by calling Capita Registrars on 0871 664 0321 from within the UK or on + 44 20 8639 3399 if calling from outside the UK. Calls to the 0871 664 0321 number cost 10 pence per minute from a BT landline. Other network providers' costs may vary. Lines are open 9.00 a.m. to 5.00 p.m. (London time) Monday to Friday. Calls to the helpline from outside the UK will be charged at the applicable international rate. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. The helpline cannot provide advice on the merits of the Open Offer nor give any financial, legal or tax advice.
4.2 If you have Open Offer Entitlements and Excess CREST Open Offer Entitlements credited to your stock account in CREST in respect of your entitlement under the Open Offer:
Subject as provided in paragraph 6 of these Terms and Conditions in relation to certain Overseas Shareholders, each Existing CREST Shareholder will receive a credit to his stock account in CREST of his Open Offer Entitlements equal to the maximum number of C Shares for which he is entitled to apply to acquire under the Open Offer. Entitlements to C Shares will be rounded down to the nearest whole number and any fractional Open Offer Entitlement will therefore also be rounded down. Any fractional entitlements to C Shares will be disregarded in calculating Open Offer Entitlements and will be aggregated and made available to Existing Shareholders under the Excess Application Facility.
The CREST stock account to be credited will be an account under the participant ID and member account ID that apply to the Existing Ordinary Shares held on the Record Date by the Existing CREST Shareholder in respect of which the Open Offer Entitlement and Excess CREST Open Offer Entitlement have been allocated.
If for any reason the Open Offer Entitlements and/or Excess CREST Open Offer Entitlements cannot be admitted to CREST by, or the stock accounts of Existing CREST Shareholders cannot be credited by 2 March 2012, or such later time and/or date as the Company may decide, an Open Offer Application Form will be sent to each Existing CREST Shareholder in substitution for the Open Offer Entitlement and Excess CREST Open Offer Entitlement which should have been credited to his stock account in CREST. In these circumstances the expected timetable as set out in this document will be adjusted as appropriate and the provisions of this document applicable to Existing Non-CREST Shareholders with Open Offer Application Forms will apply to Existing CREST Shareholders who receive such Open Offer Application Forms.
CREST members who wish to apply to acquire some or all of their entitlements to C Shares should refer to the CREST Manual for further information on the CREST procedures referred to below. Should you need advice with regard to these procedures, please contact Capita Registrars on 0871 664 0321 from within the UK or on + 44 20 8639 3399 if calling from outside the UK. Calls to the 0871 664 0321 number cost 10 pence per minute from a BT landline. Other network providers' costs may vary. Lines are open 9.00 a.m. to 5.00 p.m. (London time) Monday to Friday. Calls to the helpline from outside the UK will be charged at the applicable international rate. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. The helpline cannot provide advice on the merits of the Open Offer nor give any financial, legal or tax advice.
Please note Capita Registrars cannot provide financial advice on the merits of the Open Offer or as to whether applicants should take up their Open Offer Entitlements or Excess CREST Open Offer Entitlements. If you are a CREST sponsored member you should consult your CREST sponsor if you wish to apply for C Shares as only your CREST sponsor will be able to take the necessary action to make this application in CREST.
Each of the Open Offer Entitlements and the Excess CREST Open Offer Entitlements will constitute a separate security for the purposes of CREST. Although Open Offer Entitlements and the Excess CREST Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of Open Offer Entitlements and the Excess CREST Open Offer Entitlements may only be made by the Existing Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim transaction. Transactions identified by the Euroclear UK & Ireland's Claims Processing Unit as "cum" the Open Offer Entitlement and the Excess CREST Open Offer Entitlements will generate an appropriate market claim transaction and the relevant Open Offer Entitlement(s) and Excess CREST Open Offer Entitlement(s) will thereafter be transferred accordingly.
Existing Shareholders may apply to acquire Excess Shares using the Excess Application Facility, should they wish. The Excess Application Facility enables Existing CREST Shareholders to apply for Excess Shares in excess of their Open Offer Entitlement.
An Excess CREST Open Offer Entitlement may not be sold or otherwise transferred. Subject as provided in paragraph 6 of these Terms and Conditions in relation to overseas Shareholders, the CREST accounts of Existing CREST Shareholders will be credited with an Excess CREST Open Offer Entitlement in order for any applications for Excess Shares to be settled through CREST.
Existing CREST Shareholders should note that, although the Open Offer Entitlements and the Excess CREST Open Offer Entitlements will be admitted to CREST, they will have limited settlement capabilities (for the purposes of market claims only). Neither the Open Offer Entitlements nor the Excess CREST Open Offer Entitlements will be tradable or listed and applications in respect of the Open Offer may only be made by the Existing Shareholders originally entitled or by a person entitled by virtue of a bona fide market claim.
To apply for Excess Shares pursuant to the Excess Application Facility, Existing CREST Shareholders should follow the instructions in paragraph 4.2(f) below and must not return a paper form and cheque.
Should a transaction be identified by the Euroclear UK & Ireland's Claims Processing Unit as "cum" the Open Offer Entitlement and the relevant Open Offer Entitlement be transferred, the Excess CREST Open Offer Entitlements will not transfer with the Open Offer Entitlement claim, but will be transferred as a separate claim. Should a Existing CREST Shareholder cease to hold all of his Existing Ordinary Shares as a result of one or more bona fide market claims, the Excess CREST Open Offer Entitlement credited to CREST and allocated to the relevant Existing Shareholder will be transferred to the purchaser. Please note that a separate USE Instruction must be sent in respect of any application under the Excess CREST Open Offer Entitlement.
All enquiries in connection with the procedure for applications in respect of Excess CREST Open Offer Entitlements should be made to Capita Registrars on the Shareholder helpline 0871 664 0321, or, if calling from overseas, +44 208 639 3399. Calls to 0871 664 0321 are charged at 10 pence per minute from a BT landline, other telephone provider costs may vary. Lines are open from 9:00 a.m. to 5:00 p.m. on Monday to Friday. Calls to the helpline from outside the UK will be charged at the applicable international rates. Different charges may apply to calls from mobile telephones and calls may be recorded and randomely monitored for security and training purposes. Please note the helpline cannot provide advice on the merits of the Open Offer nor give any financial, legal or tax advice.
Existing CREST Shareholders who are CREST members and who want to apply for C Shares in respect of all or some of their Open Offer Entitlements and/or Excess CREST Open Offer Entitlements in CREST must send (or, if they are CREST sponsored members, procure that their CREST sponsor sends) a USE Instruction to Euroclear which, on its settlement, will have the following effect:
The USE Instruction must be properly authenticated in accordance with Euroclear UK & Ireland's specifications and must contain, in addition to the other information that is required for settlement in CREST, the following details:
In order for an application under the Open Offer to be valid, the USE Instruction must comply with the requirements as to authentication and contents set out above and must settle on or before 11.00 a.m. on 23 March 2012. In order to assist prompt settlement of the USE Instruction, CREST members (or their sponsors, where applicable) may consider adding the following non-mandatory fields to the USE Instruction:
CREST members and, in the case of CREST sponsored members, their CREST sponsors, should note that the last time at which a USE Instruction may settle on 23 March 2012 in order to be valid is 11.00 a.m. on that day. If the Open Offer does not become unconditional by 8.00 a.m. on 30 March 2012 or such later time and date as the Company and
Collins Stewart determine (being no later than 30 April 2012), the Open Offer will lapse, the Open Offer Entitlements admitted to CREST will be disabled and the Receiving Agent will refund the amount paid by an Existing CREST Shareholder by way of a CREST payment, without interest, as soon as practicable thereafter. The interest earned on such monies will be retained for the benefit of the Company.
The USE Instruction must be properly authenticated in accordance with Euroclear UK & Ireland's specifications and must contain, in addition to the other information that is required for settlement in CREST, the following details:
In order for the application in respect of an Excess CREST Open Offer Entitlement under the Excess Application Facility to be valid, the USE instruction must comply with the requirements as to authentication and contents set out above and must settle on or before 11 a.m. on 23 March 2012.
In order to assist prompt settlement of the USE instruction, CREST members (or their sponsors, where applicable) may consider adding the following non-mandatory fields to the USE instruction:
CREST members and, in the case of CREST sponsored members, their CREST sponsors, should note that the last time at which a USE instruction may settle on 23 March 2012 in order to be valid is 11:00 a.m. on that day. Please note that automated CREST generated claims and buyer protection will not be offered on the Excess CREST Open Offer Entitlement security.
In the event that the Open Offer does not become unconditional by 8:00 a.m. on 30 March 2012 or such later time and date as the Company and Collins Stewart determine (being no later than 30 April 2012), the Open Offer and the Excess Application Facility will lapse, the Open Offer Entitlements and Excess CREST Open Offer Entitlements admitted to CREST will be disabled and the Receiving Agent will refund the amount paid by an Existing CREST Shareholder by way of a CREST payment, without interest, as soon as practicable thereafter. The interest earned on such monies will be retained for the benefit of the Company.
An Existing Non-CREST Shareholder's entitlement under the Open Offer as shown by the number of Open Offer Entitlements set out in his Open Offer Application Form may be deposited into CREST (either into the account of the Existing Shareholder named in the Open Offer Application Form or into the name of a person entitled by virtue of a bona fide market claim). Similarly, Open Offer Entitlements and Excess CREST Open Offer Entitlements held in CREST may be withdrawn from CREST so that the entitlement under the Open Offer is reflected in an Open Offer Application Form. Normal CREST procedures (including timings) apply in relation to any such deposit or withdrawal, subject (in the case of a deposit into CREST) as set out in the Open Offer Application Form.
A holder of an Open Offer Application Form who is proposing to deposit the entitlement set out in such form into CREST is recommended to ensure that the deposit procedures are implemented in sufficient time to enable the person holding or acquiring the Open Offer Entitlement and the entitlement to apply under the Excess Application Facility following their deposit into CREST to take all necessary steps in connection with taking up the entitlement prior to 3.00 p.m. on 20 March 2012. After depositing their Open Offer Entitlement into their CREST account, CREST holders will, shortly after that, receive a credit for their Excess CREST Open Offer Entitlement, which will be managed by Capita Registrars.
In particular, having regard to normal processing times in CREST and on the part of Capita Registrars, the recommended latest time for depositing an Open Offer Application Form with the CREST Courier and Sorting Service, where the person entitled wishes to hold the entitlement under the Open Offer set out in such Open Offer Application Form as an Open Offer Entitlement and Excess CREST Open Offer Entitlements in CREST, is 3:00 p.m. on 20 March 2012 and the recommended latest time for receipt by Euroclear UK & Ireland of a dematerialised instruction requesting withdrawal of Open Offer Entitlements and Excess CREST Open Offer Entitlements from CREST is 4:30 p.m. on 19 March 2012 in either case so as to enable the person acquiring or (as appropriate) holding the Open Offer Entitlements and Excess CREST Open Offer Entitlements following the deposit or withdrawal (whether as shown in an Open Offer Application Form or held in CREST) to take all necessary steps in connection with applying in respect of the Open Offer Entitlements and Excess CREST Open Offer Entitlements prior to 11:00 a.m. on 23 March 2012. CREST holders inputting the withdrawal of their Open Offer Entitlement from their CREST account must ensure that they withdraw both their Open Offer Entitlement and the Excess CREST Open Offer Entitlement.
Delivery of an Open Offer Application Form with the CREST deposit form duly completed whether in respect of a deposit into the account of the Existing Shareholder named in the Open Offer Application Form or into the name of another person, shall constitute a representation and warranty to the Company and Capita Registrars by the relevant CREST member(s) that it/they is/are not in breach of the provisions of the notes under the paragraph headed "Instructions for depositing entitlements under the Open Offer into CREST" on page 2 of the Open Offer Application Form, and a declaration to the Company and the Registrar from the relevant CREST member(s) that it/they is/are not an Excluded Overseas Shareholder or a person in any jurisdiction in which the application for C Shares is prevented by law and, where such deposit is made by a beneficiary of a market claim, a representation and warranty that the relevant CREST member(s) is/are entitled to apply under the Open Offer or the Excess Application Facility by virtue of a bona fide market claim.
A USE Instruction complying with the requirements as to authentication and contents set out above which settles by no later than 11.00 a.m. on 23 March 2012 will constitute a valid application under the Open Offer.
CREST members and (where applicable) their CREST sponsors should note that Euroclear UK & Ireland does not make available special procedures in CREST for any particular corporate action. Normal system timings and limitations will therefore apply in relation to the input of a USE Instruction and its settlement in connection with the Open Offer and the Excess Application Facility. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST sponsored member, to procure that his CREST sponsor takes) such action as shall be necessary to ensure that a valid application is made as stated above by 11.00 a.m. on 23 March 2012. In this connection CREST members and (where applicable) their CREST sponsors are referred in particular to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
If a USE Instruction includes a CREST payment for an incorrect sum, the Company, through the Receiving Agent, reserves the right:
A CREST member who makes or is treated as making a valid application in accordance with the above procedures thereby:
(iv) confirms that in making the application he is not relying on any information or representation in relation to the Company other than that contained in this document, and the applicant accordingly agrees that no person responsible solely or jointly for this document or any part thereof, or involved in the preparation thereof, shall have any liability for any such information or representation not so contained and further agrees that, having had the opportunity to read this document, he will be deemed to have had notice of all the information in relation to the Company and the C Shares contained in this document;
(v) represents and warrants that he is the Existing Shareholder originally entitled to the Open Offer Entitlement and Excess CREST Open Offer Entitlement or that he has received such Open Offer Entitlement and Excess CREST Open Offer Entitlement by virtue of a bona fide market claim;
The Company may in its sole discretion:
35(5)(a) of the CREST Regulations in relation to the first instruction. These matters include notice that any information contained in the first instruction was incorrect or notice of lack of authority to send the first instruction; and
(iv) accept an alternative instruction or notification from a CREST member or CREST sponsored member or (where applicable) a CREST sponsor, or extend the time for settlement of a USE Instruction or any alternative instruction or notification, in the event that, for reasons or due to circumstances outside the control of any CREST member or CREST sponsored member or (where applicable) CREST sponsor, the CREST member or CREST sponsored member is unable validly to apply for C Shares by means of the above procedures. In normal circumstances, this discretion is only likely to be exercised in the event of any interruption, failure or breakdown of CREST (or any part of CREST) or on the part of the facilities and/or systems operated by the Receiving Agent in connection with CREST.
In the event that the Open Offer does not become unconditional by 8.00 a.m. on 30 March 2012 or such later time and date as the Company and Collins Stewart may agree being no later than 30 April 2012, the Open Offer and the Excess Application Facility will lapse, the Open Offer Entitlements and Excess CREST Open Offer Entitlements admitted to CREST will be disabled and the Receiving Agent will refund the amount paid by an Existing CREST Shareholder by way of a CREST payment, without interest, as soon as practicable thereafter. The interest earned on such monies, if any, will be retained for the benefit of the Company.
To ensure compliance with the Money Laundering Regulations, Capita Registrars and/or the Receiving Agent may require, at its absolute discretion, verification of the identity of the person by whom or on whose behalf the Open Offer Application Form is lodged with payment (which requirements are referred to below as the "verification of identity requirements"). If the Open Offer Application Form is submitted by a UK regulated broker or intermediary acting as agent and which is itself subject to the Money Laundering Regulations, any verification of identity requirements are the responsibility of such broker or intermediary and not of the Registrar or Receiving Agent. In such case, the lodging agent's stamp should be inserted on the Open Offer Application Form.
The person lodging the Open Offer Application Form with payment and in accordance with the other terms as described above (the "acceptor"), including any person who appears to the Registrar to be acting on behalf of some other person, accepts the Open Offer in respect of such number of C Shares as is referred to therein (for the purposes of this paragraph 5 the "relevant C Shares") shall thereby be deemed to agree to provide the Registrar with such information and other evidence as the Registrar may require to satisfy the verification of identity requirements.
If Capita Registrars determines that the verification of identity requirements apply to any acceptor or application, the relevant C Shares (notwithstanding any other term of the Open Offer) will not be issued to the relevant acceptor unless and until the verification of identity requirements have been satisfied in respect of that acceptor or application. Capita Registrars and/or the Receiving Agent is entitled, in its absolute discretion, to determine whether the verification of identity requirements apply to any acceptor or application and whether such requirements have been satisfied, and neither Capita Registrars nor the Company will be liable to any person for any loss or damage suffered or incurred (or alleged), directly or indirectly, as a result of the exercise of such discretion.
If the verification of identity requirements apply, failure to provide the necessary evidence of identity within a reasonable time may result in delays in the despatch of share certificates or in crediting CREST accounts. If, within a reasonable time following a request for verification of identity, Capita Registrars have not received evidence satisfactory to it as aforesaid, the Company may, in its absolute discretion, treat the relevant application as invalid, in which event the monies payable on acceptance of the Open Offer or under the Excess Application Facility will be returned (at the acceptor's risk) without interest to the account of the bank or building society on which the relevant cheque or banker's draft was drawn.
Submission of an Open Offer Application Form with the appropriate remittance will constitute a warranty to each of the Company, Capita Registrars, the Receiving Agent, and Collins Stewart from the applicant that the Money Laundering Regulations will not be breached by application of such remittance.
The verification of identity requirements will not usually apply:
In other cases the verification of identity requirements may apply. Satisfaction of these requirements may be facilitated in the following ways:
To confirm the acceptability of any written assurance referred to in (b) above, or in any other case, the acceptor should contact Capita Registrars by telephone on 0871 664 0321 from within the UK or on + 44 20 8639 3399 if calling from outside the UK. Calls to the 0871 664 0321 number cost 10 pence per minute from a BT landline. Other network providers' costs may vary. Lines are open 9.00 a.m. to 5.00 p.m. (London time) Monday to Friday. Calls to the helpline from outside the UK will be charged at the applicable international rate. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. The helpline cannot provide advice on the merits of the Open Offer nor give any financial, legal or tax advice.
If the Open Offer Application Form(s) is/are in respect of C Shares with an aggregate subscription price of €15,000 (approximately £12,750) or more and is/are lodged by hand by the acceptor in person, or if the Open Offer Application Form(s) in respect of C Shares is/are lodged by hand by the acceptor and the accompanying payment is not the acceptor's own cheque, he or she should ensure that he or she has with him or her evidence of identity bearing his or her photograph (for example, his or her passport) and separate evidence of his or her address.
If, within a reasonable period of time following a request for verification of identity, and in any case by no later than 11:00 a.m. on 23 March 2012, Capita Registrars has not received evidence satisfactory to it as aforesaid, Capita Registrars may, at its discretion, as agent of the Company, reject the relevant application, in which event the monies submitted in respect of that application will be returned without interest to the account at the drawee bank from which such monies were originally debited (without prejudice to the rights of the Company to undertake proceedings to recover monies in respect of the loss suffered by it as a result of the failure to produce satisfactory evidence as aforesaid).
If you hold your Open Offer Entitlements and Excess CREST Open Offer Entitlements in CREST and apply for C Shares in respect of all or some of your Open Offer Entitlements and Excess CREST Open Offer Entitlements as agent for one or more persons and you are not a UK or EU regulated person or institution (e.g. a UK financial institution), then, irrespective of the value of the application, Capita Registrars is obliged to take reasonable measures to establish the identity of the person or persons on whose behalf you are making the application. You must therefore contact Capita Registrars before sending any USE or other instruction so that appropriate measures may be taken.
Submission of a USE Instruction (which on its settlement constitutes a valid application as described above) constitutes a warranty and undertaking by the applicant to provide promptly to Capita Registrars such information as may be specified by Capita Registrars as being required for the purposes of the Money Laundering Regulations. Pending the provision of evidence satisfactory to Capita Registrars as to identity, Capita Registrars may in its absolute discretion take, or omit to take, such action as it may determine to prevent or delay issue of the C Shares concerned. If satisfactory evidence of identity has not been provided within a reasonable time, then the application for the C Shares represented by the USE Instruction will not be valid. This is without prejudice to the right of the Company to take proceedings to recover any loss suffered by it as a result of failure to provide satisfactory evidence.
This document has been approved by the FSA, being the competent authority in the United Kingdom.
Accordingly, the making of the Open Offer to persons resident in, or who are citizens of, or who have a registered address in, countries other than the United Kingdom may be affected by the law or regulatory requirements of the relevant jurisdiction. The comments set out in this paragraph 6 are intended as a general guide only and any Overseas Shareholders who are in any doubt as to their position should consult their professional advisers without delay.
The distribution of this document and the Open Offer Application Form and the making of the Open Offer to persons who have registered addresses in, or who are resident or ordinarily resident in, or citizens of, or which are corporations, partnerships or other entities created or organised under the laws of countries other than the United Kingdom or to persons who are nominees of or agents, custodians, trustees or guardians for citizens, residents in or nationals of, countries other than the United Kingdom may be affected by the laws or regulatory requirements of the relevant jurisdictions. Those persons should consult their professional advisers as to whether they require any governmental or other consents or need to observe any applicable legal requirement or other formalities to enable them to apply for C Shares under the Open Offer or the Excess Application Facility.
No action has been or will be taken by the Company, Collins Stewart, or any other person, to permit a public offering or distribution of this document (or any other offering or publicity materials or Open Offer Application Form(s) relating to the C Shares) in any jurisdiction where action for that purpose may be required, other than in the United Kingdom.
Receipt of this document and/or an Open Offer Application Form and/or a credit of Open Offer Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST will not constitute an invitation or offer of securities for subscription, sale or purchase in those jurisdictions in which it would be illegal to make such an invitation or offer and, in those circumstances, this document and/or the Open Offer Application Form must be treated as sent for information only and should not be copied or redistributed. Open Offer Application Forms will not be sent to, and Open Offer Entitlements nor Excess CREST Open Offer Entitlements will not be credited to stock accounts in CREST of, Excluded Overseas Shareholders or their agent or intermediary, except where the Company is satisfied that such action would not result in the contravention of any registration or other legal requirement in any jurisdiction.
No person receiving a copy of this document and/or an Open Offer Application Form in any territory other than the United Kingdom and/or a credit of Open Offer Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST may treat the same as constituting an invitation or offer to him or her, nor should he or she in any event use any such Open Offer Application Form and/or credit of Open Offer Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST unless, in the relevant territory in which the Open Offer Application Form is received or in which the person is resident or located, such an invitation or offer could lawfully be made to him or her and such Open Offer Application Form and/or credit of Open Offer Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST could lawfully be used, and any transaction resulting from such use could be effected, without contravention of any registration or other legal or regulatory requirements. In circumstances where an invitation or offer would contravene any registration or other legal or regulatory requirements, this document and/or the Open Offer Application Form must be treated as sent for information only and should not be copied or redistributed. It is the responsibility of any person (including, without limitation, custodians, agents, nominees and trustees) outside the United Kingdom wishing to apply for C Shares under the Open Offer or the Excess Application Facility to satisfy himself or herself as to the full observance of the laws of any relevant territory in connection therewith, including obtaining any governmental or other consents that may be required, observing any other formalities required to be observed in such territory and paying any issue, transfer or other taxes due in such territory.
None of the Company, Collins Stewart, nor any of their respective representatives, is making any representation to any offeree or purchaser of the C Shares regarding the legality of an investment in the C Shares by such offeree or purchaser under the laws applicable to such offeree or purchaser.
Persons (including, without limitation, custodians, agents, nominees and trustees) receiving a copy of this document and/or an Open Offer Application Form and/or a credit of Open Offer Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST, in connection with the Open Offer or otherwise, should not distribute or send either of those documents nor transfer Open Offer Entitlements or Excess CREST Open Offer Entitlements in or into any jurisdiction where to do so would or might contravene local securities laws or regulations. If a copy of this
document and/or an Open Offer Application Form and/or a credit of Open Offer Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST is received by any person in any such territory, or by his or her custodian, agent, nominee or trustee, he or she must not seek to apply for C Shares in respect of the Open Offer or the Excess Application Facility unless the Company and Collins Stewart determine that such action would not violate applicable legal or regulatory requirements. Any person (including, without limitation, custodians, agents, nominees and trustees) who does forward a copy of this document and/or an Open Offer Application Form and/or transfers Open Offer Entitlements or Excess CREST Open Offer Entitlements into any such territory, whether pursuant to a contractual or legal obligation or otherwise, should draw the attention of the recipient to the contents of these Terms and Conditions and specifically the contents of this paragraph 6.
Any person (including, without limitation, custodians, agents, nominees and trustees) outside of the United Kingdom wishing to apply for C Shares in respect of the Open Offer must satisfy himself or herself as to the full observance of the applicable laws of any relevant territory, including obtaining any requisite governmental or other consents, observing any other requisite formalities and paying any issue, transfer or other taxes due in such territories.
The Company reserves the right to treat as invalid any application or purported application for C Shares that appears to the Company or its agents to have been executed, effected or dispatched from the United States or another Excluded Territory or in a manner that may involve a breach of the laws or regulations of any jurisdiction or if the Company or its agents believe that the same may violate applicable legal or regulatory requirements or if it provides an address for delivery of the share certificates of C Shares or in the case of a credit of Open Offer Entitlements or Excess CREST Open Offer Entitlements to a stock account in CREST, to a CREST member who is an Excluded Overseas Shareholder or any other jurisdiction outside the United Kingdom in which it would be unlawful to deliver such share certificates or make such a credit.
Existing Shareholders in jurisdictions outside the United Kingdom other than the United States, Canada, Japan, the Republic of South Africa or Australia may, subject to the laws of their relevant jurisdiction, take up C Shares in accordance with the instructions set out in this document and the Open Offer Application Form. Such Existing Shareholders who have registered addresses in, or who are resident in, or who are citizens of, countries other then the United Kingdom should, however, consult their appropriate professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their C Shares. Notwithstanding any other provision of this document or the Open Offer Application Form, the Company reserves the right to permit any person to apply for C Shares in respect of the Open Offer or under the Excess Application Facility if the Company, in its sole and absolute discretion, is satisfied that the transaction in question is exempt from, or not subject to, the legislation or regulations giving rise to the restrictions in question.
Overseas Shareholders who wish, and are permitted, to apply for C Shares should note that payment must be made in sterling denominated cheques or bankers' drafts or where such Overseas Shareholder is a Existing CREST Shareholder, through CREST.
The result of the Open Offer is expected to be announced on 28 March 2012. Applications will be made to the UKLA for the C Shares to be admitted to the standard segment of the Official List and to the London Stock Exchange for the C Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and that dealings in the C Shares, fully paid, will commence at 8.00 a.m. on 30 March 2012.
The Existing Ordinary Shares are already admitted to CREST. No further application for admission to CREST is accordingly required for the New Shares, being the Ordinary Shares arising on the conversion of the C Shares of the relevant tranche. All such shares, when issued and fully paid, may be held and transferred by means of CREST.
Open Offer Entitlements and Excess CREST Open Offer Entitlements held in CREST are expected to be disabled in all respects after 11:00 a.m. on 23 March 2012 (the latest date for applications under the Open Offer). If the condition(s) to the Open Offer described above are satisfied, C Shares will be issued in uncertificated form to those persons who submitted a valid application for C Shares by utilising the CREST application procedures and whose applications have been accepted by the Company. The stock accounts to be credited will be accounts under the same CREST participant IDs and CREST member account IDs in respect of which the USE Instruction was given.
Notwithstanding any other provision of this document, the Company reserves the right to send Existing CREST Shareholders an Open Offer Application Form instead of crediting the relevant stock account with Open Offer Entitlements and Excess CREST Open Offer Entitlements, and to allot and/or issue any C Shares in certificated form. In normal circumstances, this right is only likely to be exercised in the event of any interruption, failure or breakdown of CREST (or of any part of CREST) or on the part of the facilities and/or systems operated by the Registrar in connection with CREST.
For Existing Non-CREST Shareholders who have applied by using an Open Offer Application Form, share certificates in respect of the C Shares validly applied for are expected to be despatched by post in the week commencing 2 April 2012. No temporary documents of title will be issued and, pending the issue of definitive certificates, transfers will be certified against the UK share register of the Company. All documents or remittances sent by or to applicants, or as they may direct, will be sent through the post at their own risk. For more information as to the procedure for application, Existing Non-CREST Shareholders are referred to paragraph 4.1 above and their respective Open Offer Application Form.
The Company shall, in agreement with Collins Stewart and after consultation with its financial and legal advisers, be entitled to amend the dates that Open Offer Application Forms are despatched or amend or extend the latest date for acceptance under the Open Offer and all related dates set out in this document and in such circumstances shall notify the UK Listing Authority, and make an announcement on a Regulatory Information Service and, if appropriate, by Shareholders but Existing Shareholders may not receive any further written communication. If a supplementary prospectus is issued by the Company two or fewer Business Days prior to the latest time and date for acceptance and payment in full under the Open Offer specified in this document, the latest date for acceptance under the Open Offer shall be extended to the date that is three Business Days after the date of issue of the supplementary prospectus (and the dates and times of principal events due to take place following such date shall be extended accordingly).
The terms and conditions of the Open Offer and the Excess Application Facility as set out in this document, the Open Offer Application Form and any non-contractual obligation related thereto shall be governed by, and construed in accordance with, English law. The courts of England and Wales are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with the Open Offer and the Excess Application Facility, this document or the Open Offer Application Form. By taking up C Shares in accordance with the instructions set out in this document and, where applicable, the Open Offer Application Form, Existing Shareholders irrevocably submit to the jurisdiction of the courts of England and Wales and waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.
Your attention is drawn to the further information set out in this document and also, in the case of Existing Non-CREST Shareholders and other Existing Shareholders to whom the Company has sent Open Offer Application Forms, to the terms, conditions and other information printed on the accompanying Open Offer Application Form.
The C Shares are only suitable for investors who understand the potential risk of capital loss and that there may be limited liquidity in the underlying investments of the Company, for whom an investment in one or more classes of shares is part of a diversified investment programme and who fully understand and are willing to assume the risks involved in such an investment programme.
In the case of a joint Application, references to you in these terms and conditions of Application are to each of you, and your liability is joint and several. Please ensure you read these terms and conditions in full before completing the Application Form.
In these terms and conditions, which apply to the Offer for Subscription:
"Applicant" means a person or persons (in the case of joint applicants) whose name(s) appear(s) on the registration details of an Application Form;
"Application" means the offer made by an Applicant by completing an Application Form and posting (or delivering it by hand during normal business hours only) it to Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU, as specified in the Prospectus;
"Money Laundering Regulations" means the Money Laundering Regulations 2007 of the United Kingdom, the Handbook for Financial Services Business on Countering Financial Crime and Terrorist Financing issued by the GFSC and The Criminal Justice (Proceeds of Crime) (Financial Services Businesses) (Bailiwick of Guernsey) Regulations 2007, as such handbook and/or regulations may be amended from time to time;
"Prospectus" means the prospectus dated 29 February 2012 published by the Company;
"Receiving Agent" means Capita Registrars and/or the Administrator, as the context permits;
"US person" has the meaning given in Regulation S of the US Securities Act of 1933, as amended.
To ensure compliance with the Money Laundering Regulations, Capita Registrars may require, at its absolute discretion, verification of the identity of the person by whom or on whose behalf an Application Form is lodged with payment. If the Application Form is submitted by a UK regulated broker or intermediary acting as agent and which is itself subject to the Money Laundering Regulations, any verification of identity requirements are the responsibility of such broker or intermediary and not of Capita Registrars.
The person lodging the Application Form with payment and in accordance with the other terms as described above, including any person who appears to the Receiving Agent to be acting on behalf of some other person, accepts the Offer in respect of such number of offered C Shares as is referred to therein and shall thereby be deemed to agree to provide the Receiving Agent with such information and other evidence as the Receiving Agent may require to satisfy the verification of identity requirements.
If the Receiving Agent determines that the verification of identity requirements apply to any Application, the relevant C Shares (notwithstanding any other term of the Offer) will not be issued to the relevant acceptor unless and until the verification of identity requirements have been satisfied in respect of that acceptor or Application. The Receiving Agent is entitled, in its absolute discretion, to determine whether the verification of identity requirements apply to any application and whether such requirements have been satisfied, and neither the Receiving Agent nor the Company will be liable to any person for any loss or damage suffered or incurred (or alleged), directly or indirectly, as a result of the exercise of such discretion.
If the verification of identity requirements apply, failure to provide the necessary evidence of identity within a reasonable time may result in delays in the despatch of share certificates or in crediting CREST accounts. If, within a reasonable time following a request for verification of identity, the Receiving Agent has not received evidence satisfactory to it as aforesaid, the Company may, in its absolute discretion, treat the relevant Application as invalid, in which event the monies payable on acceptance of the Offer will be returned (at the acceptor's risk) without interest to the account of the bank or building society on which the relevant cheque or banker's draft was drawn.
Submission of an Application Form with the appropriate remittance will constitute a warranty to each of the Company, the Receiving Agent and Capita Registrars from the applicant that the Money Laundering Regulations will not be breached by application of such remittance. The verification of identity requirements will not usually apply:
In other cases the verification of identity requirements may apply. Satisfaction of these requirements may be facilitated in the following ways:
(a) If payment is made by cheque or banker's draft in GBP drawn on a branch in the United Kingdom of a bank or building society which bears a UK bank sort code number in the top right hand corner the following applies. Cheques should be made payable to "Capita Registrars re: HICL Infrastructure Company Limited – Offer for Subscription A/C" in respect of an application and crossed "A/C Payee Only". Third party cheques will not be accepted with the exception of building society cheques or banker's drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the back of the cheque/banker's draft to such effect. However, third party cheques may be subject to the Money Laundering Regulations which would delay Shareholders receiving their C Shares. The account name should be the same as that shown on the Application Form; or
(b) If the Application Form is lodged with payment by an agent which is an organisation required to comply with the Money Laundering Directive (2005/60/EC of the European Parliament and of the EC Council of 26 October on the prevention of the use of the use of the financial system for the purpose of money laundering and terrorist financing) or which is subject to anti-money laundering regulation in a country which is a member of the Financial Action Task Force (the non-European Union members of which are Argentina, Australia, Brazil, Canada, China, Gibraltar, Hong Kong, Iceland, Japan, Mexico, New Zealand, Norway, Russian Federation, Singapore, South Africa, Switzerland, Turkey, UK Crown Dependencies and the US and, by virtue of their membership of the Gulf Cooperation Council, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), the agent should provide with the Application Form written confirmation that it has that status and a written assurance that it has obtained and recorded evidence of the identity of the person for whom it acts and that it will on demand make such evidence available to Capita Registrars. If the agent is not such an organisation, it should contact Capita Registrars at Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.
To confirm the acceptability of any written assurance referred to in (b) above, or in any other case, the acceptor should telephone the Shareholder helpline on 0871 664 0321 (calls to this number are charged at 10 pence per minute from a BT Landline, other network providers' costs may vary) or +44 208 639 3399 if calling from outside the United Kingdom. Calls to the helpline from the UK will be charged at applicable international rates. Lines are open 9.00 a.m. to 5.00 p.m. (London time) Monday to Friday. Different charges may apply to calls made from mobile telephones and calls may be recorded and monitored for security and training purposes. The helpline cannot provide advice on the merits of the Offer nor give any financial, legal or tax advice.
The following is provided by way of guidance to reduce the likelihood of difficulties, delays and potential rejection of an Application Form (but without limiting the Receiving Agent's right to require verification of identity as indicated above):
By completing and delivering an Application Form, you, as the Applicant (and, if you sign the Application Form on behalf of somebody else or a corporation, that person or corporation, except as referred to in paragraph (viii) below):
(vii) authorise the Receiving Agent to procure that your name (together with the name(s) of any other joint Applicant(s)) is/are placed on the register of members of the Company in Guernsey in respect of such C Shares and to send a crossed cheque for any monies returnable by post without interest, at the risk of the persons entitled thereto to the address of the person (or in the case of joint holders, the first-named person) named as an Applicant in the Application Form;
(viii) warrant that, if you sign the Application Form on behalf of somebody else or on behalf of a corporation, you have due authority to do so on behalf of that other person or corporation, and such person or corporation will also be bound accordingly and will be deemed also to have given the confirmations, warranties and undertakings contained herein and undertake to enclose your power of attorney or a copy thereof duly certified by a solicitor or bank with the Application Form;
qualified purchasers; or (z) outside the United States to a person that is not a US person in an offshore transaction as defined in, and in reliance on, Regulation S, in each case in accordance with any applicable securities laws of any state or other jurisdiction of the United States; (ii) you: (a) are not a US person within the meaning of Regulation S and are not acting on behalf of a US person; (b) are, or at the time the C Shares are purchased will be, the beneficial owner of the C Shares and are located outside the United States; (c) are not an affiliate of the Company or a person acting on behalf of the Company or such affiliate; (d) are not purchasing with a view to re-sale in the United States or to or for the account of a US person; (e) are aware that the C Shares have not been and will not be registered under the Securities Act and are being offered and sold outside the United States in reliance on Regulation S; (f) prior to the expiration of the applicable "distribution compliance period" (within the meaning of Regulation S) for the C Shares you will not offer, sell, pledge or otherwise transfer the C Shares except: (y) outside the United States to a person that is not a US persons in an offshore transaction as defined in, and in reliance on, Regulation S; or (z) to a "qualified institutional buyer" that is also a "qualified purchaser" in accordance with Rule 144A; (g) agree that all hedging transaction with respect to the C Shares will be conducted in compliance with the Securities Act; (iii) acknowledge that the Company and Collins Stewart and their respective affiliates, and others, will rely upon the truth and accuracy of the above acknowledgements, representations and agreements and agree that, if any of the acknowledgements, representations or agreements deemed to have been made by you by your purchase of C Shares is no longer accurate, you shall promptly notify the Company and Collins Stewart. If you are acquiring any C Shares as a fiduciary or agent for one or more investor accounts, you represent that you have sole investment discretion with respect to each such account and that you have full power to make the above acknowledgements, representations and agreements on behalf of each account;
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT: (1) IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A US PERSON WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT ("REGULATION S") IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S; OR (2) IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QUALIFIED INSTITUTIONAL BUYER") AND THAT IS A QUALIFIED PURCHASER ("QUALIFIED PURCHASER") WITHIN THE MEANING OF SECTION 2(A)(51) OF THE US INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE
"INVESTMENT COMPANY ACT"), PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE QUALIFIED INSTITUTIONAL BUYERS EACH OF WHICH IS A QUALIFIED PURCHASER WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A AND, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS REFERRED TO ABOVE. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF ANY EXEMPTION UNDER THE SECURITIES ACT FOR RESALES OF THIS SECURITY.
IF THE BENEFICIAL OWNER HEREOF IS A US PERSON WITHIN THE MEANING OF REGULATION S, SUCH BENEFICIAL OWNER REPRESENTS THAT: (1) IT IS A QUALIFIED INSTITUTIONAL BUYER THAT IS ALSO A QUALIFIED PURCHASER; (2) IT IS NOT A BROKER DEALER WHICH OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN US\$25,000,000 IN SECURITIES OF UNAFFILIATED ISSUERS; (3) IT IS NOT A PARTICIPANT DIRECTED EMPLOYEE PLAN, SUCH AS A 401(K) PLAN; (4) IT IS HOLDING AN INTEREST IN THIS SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE QUALIFIED INSTITUTIONAL BUYERS, EACH OF WHICH IS A QUALIFIED PURCHASER; (5) IT WAS NOT FORMED FOR THE PURPOSE OF INVESTING IN HSBC INFRASTRUCTURE COMPANY LIMITED (THE "COMPANY") OR THIS SECURITY; AND (6) IT WILL PROVIDE NOTICE OF THE FOREGOING TRANSFER RESTRICTIONS TO ITS SUBSEQUENT TRANSFEREES.
THE BENEFICIAL OWNER HEREOF HEREBY ACKNOWLEDGES THAT IF AT ANY TIME WHILE IT HOLDS AN INTEREST IN THIS SECURITY IT IS A US PERSON WITHIN THE MEANING OF REGULATION S THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER AND A QUALIFIED PURCHASER, THE COMPANY MAY: (A) COMPEL IT TO SELL ITS INTEREST IN THIS SECURITY TO A PERSON WHO IS: (I) A US PERSON WHO IS A QUALIFIED INSTITUTIONAL BUYER AND A QUALIFIED PURCHASER THAT IS, IN EACH CASE, OTHERWISE QUALIFIED TO PURCHASE AN INTEREST IN THIS SECURITY IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT; OR (II) NOT A US PERSON WITHIN THE MEANING OF REGULATION S; OR (B) COMPEL THE BENEFICIAL OWNER TO SELL ITS INTEREST IN THIS SECURITY TO THE COMPANY OR AN AFFILIATE OF THE COMPANY OR TRANSFER ITS INTEREST IN THIS SECURITY TO A PERSON DESIGNATED BY OR ACCEPTABLE TO THE COMPANY. THE COMPANY HAS THE RIGHT TO REFUSE TO HONOUR A TRANSFER OF AN INTEREST IN THIS SECURITY TO A US PERSON WHO IS NOT A QUALIFIED INSTITUTIONAL BUYER AND A QUALIFIED PURCHASER.
THE COMPANY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE INVESTMENT COMPANY ACT. THE COMPANY MAY COMPEL EACH BENEFICIAL OWNER OF THIS SECURITY THAT IS A US PERSON WITHIN THE MEANING OF REGULATIONS TO CERTIFY PERIODICALLY THAT SUCH BENEFICIAL OWNER IS A QUALIFIED INSTITUTIONAL BUYER AND A QUALIFIED PURCHASER; and
(xxii) agree, on request by the Company, or the Receiving Agent on behalf of the Company to disclose promptly in writing to the Company or the Receiving Agent any information which the Company, or the Receiving Agent, may reasonably request in connection with your Application and authorise the Company or the Receiving Agent on behalf of the Company, to disclose any information relating to your Application as it considers appropriate.
No person receiving a copy of this Prospectus and/or an Application Form in any territory other than the UK may treat the same as constituting an invitation or an offer to him; nor should he in any event use an Application Form unless in the relevant territory, such an invitation or offer could lawfully be made to him or the Application Form could lawfully be used without contravention of any, or compliance with any unfulfilled registration or other legal or regulatory requirements. It is the responsibility of any person outside the UK wishing to apply for C Shares under the Offer for Subscription to satisfy himself as to full observance of the laws of any relevant territory in connection with any such Application, including obtaining any requisite governmental or other consents, observing any other formalities requiring to be observed in any such territory and paying any issue, transfer or other taxes required to be paid in any such territory.
The relevant clearances have not been, and will not be, obtained from the Securities Commission of any province of Canada, Australia, South Africa or Japan and, accordingly, unless an exemption under any relevant legislation or regulations is applicable, none of the Shares may be offered, sold, renounced, transferred or delivered, directly or indirectly, in Canada, Australia or Japan. Unless the Company has expressly agreed otherwise in writing, you represent and warrant to the Company that you are not a resident of Canada, South Africa, Australia or Japan and that you are not subscribing for such Shares for the account of any resident of Canada, Australia, South Africa or Japan and that you will not offer, sell, renounce, transfer or deliver, directly or indirectly Shares subscribed for by you in the United States, Canada, Australia, South Africa or Japan or to any resident of Canada, Australia, South Africa or Japan. Subject to certain exceptions, no Application will be accepted if it bears an address in the United States, Canada, Australia, South Africa or Japan unless an appropriate exemption is available.
Pursuant to The Data Protection (Bailiwick of Guernsey) Law 2001 (the "DP Law"), the Company the Administrator and/or the Registrar may hold personal data (as defined in the DP Law) relating to past and present shareholders.
Such personal data held is used by the Administrator and the Registrar to maintain the Company's register of shareholders and mailing lists and this may include sharing such data with third parties in one or more of the countries mentioned below when: (i) effecting the payment of dividends and redemption proceeds to Shareholders and the payment of commissions to third parties; and (ii) filing returns of Shareholders and their respective transactions in shares with statutory bodies and regulatory authorities. Personal data may be retained on record for a period exceeding six years after it is no longer used.
The countries referred to above include, but need not be limited to, those in the European Economic Area and any of their respective dependent territories overseas, Argentina, Australia, Brazil, Canada, Hong Kong, Hungary, Japan, New Zealand, Singapore, South Africa, Switzerland and the United States of America.
By becoming registered as a holder of C Shares in the Company, a person becomes a data subject (as defined in the DP Law) and is deemed to have consented to the processing by the Company, the Administrator or the Registrar of any personal data relating to them in the manner described above.
The basis of allocation will be determined by the Directors after consultation with the Investment Adviser, at their absolute discretion. The right is reserved to reject in whole or in part and/or scale down and/or ballot any Application or any part thereof. The right is reserved to treat as valid any Application not in all respects completed in accordance with the instructions relating to the Application Form, including if the accompanying cheque or banker's draft is for the wrong amount.
Save where the context otherwise requires, words and expressions defined in the Prospectus have the same meanings when used in these terms and conditions and in the Application Form and explanatory notes in relation thereto.
Applications should be returned so as to be received by Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU no later than 1.00 p.m. on 22 March 2012.
HELP DESK: If you have a query concerning the completion of this Application Form, please telephone Capita Registrars between 9.00 a.m. and 5.00 p.m. (London time) Monday to Friday on 0871 664 0321 from within the UK or +44 20 8639 3399 if calling from outside the UK. Calls to the 0871 664 0321 number cost 10 pence per minute from a BT landline (other network providers' costs may vary). Calls to the helpline from outside the UK will be charged at applicable international rates. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. The helpline cannot provide advice on the merits of the Offer for Subscription nor give any financial, legal or tax advice.
Fill in (in figures) in Box 1 the amount of money being subscribed for the C Shares. The amount being subscribed must be for a minimum of £1,000 and thereafter in multiples of £500. Financial intermediaries who are investing on behalf of clients should make separate applications for each client.
Fill in (in block capitals) the full name(s) of each holder and the address of the first named holder. Applications may only be made by persons aged 18 or over. In the case of joint holders only the first named may bear a designation reference. A maximum of four joint holders is permitted. All holders named must sign the Application Form in section 2.
If you wish your C Shares to be deposited in a CREST Account in the name of the holders given in section 2A, enter in section 2B the details of that CREST Account. Where it is requested that C Shares be deposited into a CREST Account please note that payment for such C Shares must be made prior to the day such C Shares might be allotted and issued. It is not possible for an applicant to request that C Shares be deposited in their CREST Account on an against payment basis. Any Application Form received containing such a request will be rejected.
All holders named in section 2A must sign section 3 and insert the date. The Application Form may be signed by another person on behalf of each holder if that person is duly authorised to do so under a power of attorney. The power of attorney (or a copy duly certified by a solicitor or a bank) must be enclosed for inspection (which originals will be returned by post at the addressees risk). A corporation should sign under the hand of a duly authorised official whose representative capacity should be stated and a copy of a notice issued by the corporation authorising such person to sign should accompany the Application Form.
Payment must be made by a cheque or banker's draft and must accompany your Application. All payments by cheque or banker's draft must accompany your Application Form and be for the exact amount inserted in section 1 of your Application Form. Your cheque or banker's draft must be made payable to Capita Registrars Limited Re "HICL Infrastructure Company Limited – Offer for Subscription A/C" and crossed "A/C Payee". If you use a banker's draft or a building society cheque you should ensure that the bank or building society issuing the payment enters the name, address and account number of the person whose account is being debited on the reverse of the banker's draft or cheque and adds its stamp. Cheques should be drawn on the personal account to which you have sole or joint title to the funds. Your cheque or banker's draft must be drawn in GBP on an account at a bank branch in the United Kingdom or the Channel Islands which is either a settlement member of the Cheque and Credit Clearing Company
Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques and banker's drafts to be cleared through the facilities provided by any of those companies or committees and must bear a United Kingdom bank sort code number in the top right hand corner. Third party cheques will not be accepted with the exception of building society cheques or banker's drafts where the bank or building society has confirmed the name of the account holder by stamping and endorsing the cheque to such effect. Your payment must relate solely to this Application. No receipt will be issued.
Applications with a value greater than €15,000 (approximately £12,750) will be subject to Guernsey's verification of identity requirements. This will involve you providing the verification of identity documents listed below UNLESS you can have the declaration provided at section 5 of the Application Form given and signed by a firm acceptable to the Registrar and Receiving Agent. In order to ensure your Application is processed timely and efficiently all Applicants are strongly advised to have the declaration provided in section 5 of the Application Form completed and signed by a suitable firm.
If the declaration in section 5 cannot be completed and the value of the Application is greater than €15,000 (approximately £12,750), in accordance with internationally recognised standards for the prevention of money laundering, the documents listed below must be provided with the completed Application Form as appropriate. Notwithstanding that the declaration in section 5 has been completed and signed the Receiving Agent reserves the right to request of you the identity documents listed below and/or to seek verification of identity of each holder and payor (if necessary) from you or their bankers or from another reputable institution, agency or professional adviser in the applicable country of residence. If satisfactory evidence of identity has not been obtained within a reasonable time your Application may be rejected or revoked. Where certified copies of documents are requested below, such copy documents should be certified by a senior signatory of a firm which is either a governmental approved bank, stockbroker or investment firm, financial services firm or an established law firm or accountancy firm which is itself subject to regulation in the conduct of its business in its own country of operation and the name of the firm should be clearly identified on each document certified.
(4) a list of the names and residential addresses of each director of the holder company; and
(5) for each director provide documents and information similar to that mentioned in A above; and
Capita Registrars or the Receiving Agent reserves the right to ask for additional documents and information.
To ensure the efficient and timely processing of your Application Form, please provide contact details of a person who Capita Registrars may contact with all enquiries concerning your Application. Ordinarily this contact person should be the person signing in section 3 on behalf of the first named holder. If no details are entered here and Capita Registrars requires further information, any delay in obtaining that additional information may result in your Application being rejected or revoked.
Completed Application Forms should be returned, by post (or by hand during normal business hours only) to Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, so as to be received no later than 1.00 p.m. on 22 March 2012, together in each case with payment by cheque or duly endorsed banker's draft in full in respect of the application. If you post your Application Form, you are recommended to use first class post and to allow at least two days for delivery. Application Forms received after this date may be returned.
Please send this completed form by post or by hand (during normal business hours only) to Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to be received by no later than 1.00 p.m. on 22 March 2012.
Important: Before completing this form, you should read the accompanying notes. To: HICL Infrastructure Company Limited and Capita Registrars
I/We the person(s) detailed in section 2A below offer to subscribe the amount shown in Box 1 for C Shares subject to the Terms and Conditions set out in the Prospectus dated 29 February 2012 and subject to the Memorandum and Articles of Incorporation of the Company.
Box 1
(Minimum of £1,000 and in multiples of £500 thereafter)
| Mr Mrs, Miss or Title | Forenames (in full) | ||
|---|---|---|---|
| Surname/Company Name | |||
| Mr Mrs, Miss or Title | Forenames (in full) | ||
| Address | |||
| Surname/Company Name | |||
| Mr Mrs, Miss or Title | Forenames (in full) | ||
| Address | |||
| Surname/Company Name | |||
| Mr Mrs, Miss or Title | Forenames (in full) | ||
| Address | |||
| Surname/Company Name | |||
(Only complete this section if C Shares allotted are to be deposited in a CREST account, which must be in the same name as the holder(s) given in section 2A).
CREST Participant ID: ....................................................... CREST Member Account ID .......................................................
| First holder signature: | Second holder signature: | |||
|---|---|---|---|---|
| Name (Print) | Name (Print) | |||
| Third holder signature: | Fourth holder signature: | |||
| Name (Print) | Name (Print) | |||
| Dated: | 2012 |
Pin or staple to this form your cheque or duly endorsed banker's draft for the exact amount inserted by you in Box 1. Cheques and banker's drafts should be made payable to Capita Registrars Limited Re: "HICL Infrastructure Company Limited – Offer for Subscription A/C" and crossed "A/C Payee". Cheques and banker 's payments must be drawn in GBP on an account at a bank branch in the United Kingdom or the Channel Islands and must bear a United Kingdom bank sort code number in the top right hand corner.
Completion and signing of this declaration by a suitable person or institution may avoid presentation being requested of the identity documents detailed in section 6 of this form. The declaration below may only be signed by a person or institution (such as a governmental approved bank, stockbroker or investment firm, financial services firm or an established law firm or accountancy firm) ("the firm") which is itself subject in its own country to operation of "know your customer" and anti-money laundering regulations no less stringent than those which prevail in Guernsey. Acceptable countries include Austria, Belgium, Canada, Denmark, Finland, France, Germany, Gibraltar, Greece, Hong Kong, Iceland, Ireland, Isle of Man, Italy, Japan, Jersey, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, the United Kingdom and the United States of America.
With reference to the holder(s) detailed in section 2A, all persons signing at section 3 (collectively "the subjects") WE HEREBY DECLARE:
The above information is given in strict confidence for your own use only and without any guarantee, responsibility or liability on the part of this firm or its officials.
| Signed: | |
|---|---|
| Name: | |
| Position having authority to bind the firm. | |
| Name of regulatory authority | |
| Firm's Licence number: | |
|---|---|
| Website address or telephone number of regulatory authority | |
| STAMP of firm giving full name and business address |
To ensure the efficient and timely processing of this application please enter below the contact details of a person the Registrar or the Receiving Agent may contact with all enquiries concerning this Application. Ordinarily this contact person should be the person signing in section 3 on behalf of the first named holder. If no details are entered here and the Registrar or the Receiving Agent requires further information, any delay in obtaining that additional information may result in your Application being rejected or revoked.
| Contact name | E-mail address | |
|---|---|---|
| Contact address | ||
| Postcode | ||
| Telephone No | Fax No | |
| For Official Use only | ||
1 Le Truchot St Peter Port GY1 3SZ Guernsey
t +44 (0)1481 743 940
w www.hicl.com
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