TIDMBBGI

RNS Number : 4146T

BBGI Global Infrastructure S.A.

25 March 2021

25 March 2021

BBGI GLOBAL INFRASTRUCTURE S.A.

('BBGI' or the 'Company')

Annual Results for financial year ended 31 December 2020

The information contained within this Announcement is deemed by the Company to constitute inside information. Upon the publication of this Announcement via a Regulatory Information Service this inside information is now considered to be in the public domain.

ABOUT BBGI

BBGI Global Infrastructure S.A. (BBGI, the 'Company', and together with its subsidiaries, the 'Group') is a global infrastructure investment company helping to provide the responsible capital required to build and maintain critical social infrastructure[i] in the countries where we do business.

These are the important infrastructure assets that citizens rely on every day. They are building blocks of the local economy, and as a long-term custodian, we partner with the public sector to help deliver and manage them.

In doing so, we follow a low-risk, globally diversified and internally managed investment strategy to deliver long-term and predictable shareholder returns.

COMPANY OVERVIEW

WHY INVEST IN BBGI

BBGI provides access to a diversified portfolio of infrastructure investments that generate long-term, sustainable returns and serve an inherent social purpose in supporting local communities. The healthy demand for responsible private sector finance for public infrastructure is underpinned by the widening infrastructure spending gap in the developed countries where BBGI invests.

In return for long-term investment in and active ownership of essential social infrastructure investments such as, schools, healthcare, blue light[ii] and justice facilities, and transport procured using availability-based investment models, BBGI receives stable, predictable and contracted cash flows. These are underpinned by government or government-backed counterparties.

The predictability of these contracted revenues allows BBGI to return to investors a stable and progressive income stream in the form of a semi-annual dividend. The Management Board follows a proven operating model of value-driven active asset management, prudent financial management and a selective acquisition strategy to preserve value and achieve portfolio growth. Environmental, Social and Governance ('ESG') considerations are embedded in our business strategy, operations and investment processes. These operational pillars are fundamental to the Company's low-risk, globally diversified and internally managed investment strategy.

1. Low-risk[iii]

The Company is committed to an availability-based social infrastructure investment platform. This commitment to an availability-based investment strategy generates stable, predictable cash flows backed by secure, contracted public sector revenues. This is the Management Board's area of expertise, avoiding style drift by maintaining a disciplined approach to this strategy.

2. Globally diversified

The investment strategy is deployed in stable, well-established developed markets where governments and local authorities maintain support for availability-based models to finance public infrastructure. This provides focused exposure to highly-rated investment grade countries, across UK, North America, Australia and Continental Europe.

3. Strong ESG approach

By aligning our value-driven active asset management approach to relevant UN Sustainable Development Goals ('SDGs'), ESG principles are integrated into the Company's investment cycle to strengthen the non-financial returns the portfolio generates for all stakeholders. This enables the Company to deliver, monitor and report social impact effectively, and incentivise strong ESG performance by directly linking results to executive compensation.

4. Internally managed

The Company's in-house management team is focused on delivering shareholder value, incentivised by shareholder returns and growth in Net Asset Value ('NAV') per share. This means that no NAV-based management or acquisition fees are charged, and the internal management team's interests are fully aligned with those of the shareholders, resulting in full pricing discipline when managing the portfolio and assessing investment opportunities. As a result, the Company consistently maintains the lowest comparative ongoing charges to its shareholders in the sector.[iv]

YEAR IN NUMBERS

Financial highlights

 
 Investment Basis        NAV per Share                Total Shareholder Return 
  NAV                     up 1.2% as at 31             ('TSR') 
  up 6.7% as at 31        December 2020                since IPO[vii] 
  December 2020           (31 December 2019: 
  (31 December 2019:      136.2pps)[vi]                157.5% 
  GBP858.6 million)[v]    137.8pps 
  GBP916.0m 
 Annualised Total        2020 Dividend Distribution   2021 Target Dividend[ix] 
  Shareholder Return      per Share 
  since IPO[viii]         7.18pps                      7.33pps 
  11.0% 
                        ---------------------------  ------------------------- 
 2022 Target Dividend    Cash Dividend Cover[x]       Ongoing Charges[xi] 
  (viii) 
  7.48pps                 1.27x                        (2019: 0.88%) 
                                                       0.86% 
                        ---------------------------  ------------------------- 
 

Portfolio highlights

-- Globally diversified portfolio of 50 availability-based Public-Private Partnership (PPP) infrastructure investments with a strong social impact.

-- Portfolio performance and cash receipts ahead of business plan, underpinning BBGI's progressive dividend policy.

-- Consistently high level of asset availability at over 99.8 per cent. with no material lock-ups or defaults reported over the period.

-- The Company did not experience any material Covid-19 related operational or financial impacts.

-- A combined GBP59.2 million of new cash investments in six new and follow-on acquisitions in lower-risk availability-based healthcare, as well as road and bridge investments.

-- Strong support for the Company's investment case demonstrated by oversubscribed equity issue in November 2020 which raised gross proceeds of GBP55 million.

-- As at 31 December 2020, the Group had a net cash position of GBP20.5 million with no cash borrowings outstanding under the Revolving Credit Facility ('RCF') .

-- The Company has an attractive pipeline of availability-based investments in highly-rated investment grade countries across Europe and North America.

PORTFOLIO AT A GLANCE

The fundamentals

Based on portfolio value at 31 December 2020.

Investment type

100% availability-based revenue stream.

 
 Investment Type 
==================================    ===== 
      Availability-Based Revenue 
       Assets                          100% 
      Regulated Assets                    - 
      Demand-Based Assets                 - 
                                       100% 
 
 

Investment status

Low-risk operational portfolio.

 
 Investment Status 
====================    ===== 
      Operational        >99% 
      Construction        <1% 
                         100% 
 
 

Geographical split

Geographically diversified in stable developed countries.

 
 Geographic Split 
====================    ===== 
      Canada              38% 
      UK                  30% 
      Australia           13% 
      Cont. Europe        10% 
      USA                  9% 
                         100% 
 

Sector split

Social impact portfolio with well diversified sector exposure.

 
 Sector Split 
========================     ===== 
 Transport                     51% 
 Health(1)                     23% 
 Blue Light and Justice        14% 
 Education                     10% 
 Other                          2% 
                              100% 
 

(1) Less than 1% exposure to UK acute health (by NAV).

Investment life

Long investment life with 58% of portfolio by value with a duration of greater than 20 years; weighted average life of 20.4 years. Average portfolio debt maturity of 17.2 years.

 
 Investment Life 
======================    ===== 
      >=25 years            14% 
      >=20 years and 
       <25 years            44% 
      >=10 years and 
       <20 years            40% 
      <10 years              2% 
                           100% 
 

Top five investments

Well-diversified portfolio with no major single asset exposure.

 
 Top Five Investments 
======================================    ===== 
      Golden Ears Bridge                     9% 
      Ohio River Bridges                     9% 
      Northern Territory Secure 
       Facilities                            7% 
      McGill University Health 
       Centre                                5% 
      A1/A6 Diemen - Almere motorway         5% 
      Next five largest investments         19% 
      Remaining investments                 46% 
                                           100% 
 
 

Investment ownership

80% of assets by value in the portfolio are 50% owned or more.

 
 Investment Ownership 
=======================      ===== 
      100%                     47% 
      >=75% <100%               6% 
      >=50% <75%               27% 
      <50%                     20% 
                              100% 
 

Country rating

All assets located in countries with ratings between AA and AAA.

 
 Country Rating 
=================    ===== 
      AAA              61% 
      AA+               9% 
      AA               30% 
                      100% 
 

Projected portfolio cash flow

The cash flows are stable and long-term, with their predictability enhanced by government or government-backed counterparties as well as their contracted nature. The index-linked provisions provide a positive link to inflation of approximately 0.45 per cent.

The investments made over the period contributed positively to both stable cash flows and the weighted average length of the portfolio. Based on current estimates and assuming no further investments, the existing portfolio is forecast to enter into the repayment phase in 2035, after which cash inflows from the portfolio will be paid to the Company's shareholders as capital. By acquiring accretive investments, the intention is that the capital repayment phase is pushed further into the future.

As at 31 December 2020, BBGI has a weighted average portfolio life of 20.4 years, a decrease of 0.3 years compared with 31 December 2019.

CHAIRMAN'S STATEMENT

Dear Shareholders,

As I reflect on my first period as your Chairman, I am proud of the way the Company - which was renamed BBGI Global Infrastructure S.A. in November 2020 - has performed. At a time when we are all searching for certainty and predictability, the portfolio has generated financial results ahead of our expectations.

This has reaffirmed the value of the 50 availability-based investments we manage, all of which continue to deliver well-maintained global infrastructure to local communities and end-users, and robust, long-term, stable income to shareholders. This performance, in a difficult year for many because of the Covid-19 pandemic, would not have been possible without the dedication of the Company's employees who have worked tirelessly to support all of our stakeholders.

We provide the responsible capital required to build and maintain the developed world's social infrastructure. Our purpose is now more relevant than ever, and the significant progress we have made over the period on embedding ESG factors into our investment and asset management activities is reflected in the Our Approach To ESG section of this Annual Report, and the Company's inaugural Environmental, Social and Governance Report ('ESG Report') which can be viewed via our website.

Portfolio performance

Over the year, our priority was to preserve the value of the Company's portfolio and continue providing essential infrastructure services to our public sector clients by maintaining a high level of asset availability of 99.8 per cent. We are pleased to report that the Company did not experience any material Covid-19 related operational or financial impacts. This strong performance was again underpinned by the Company's proven business model of investing in low-risk, availability-based infrastructure in highly-rated investment grade countries. In practice, our value-driven active asset management approach enabled safe and secure working, learning and health environments, and fully functioning transport infrastructure and other facilities across the UK, North America, Australia and Continental Europe.

This contributed to an increase in the Company's NAV from 136.2 pence per share to 137.8 pence per share, representing an increase of 1.2 per cent. In the challenging circumstances of 2020 this demonstrates the resilience of our investment proposition.

Cash receipts during the year were ahead of business plan and none of our investments recorded a material lock-up or default. Any deductions over the period were either borne by third-party facility managers and road operators, or as part of planned lifecycle budgets.

Asset availability

99.8%

Long-term sustainable shareholder returns and progressive dividends

The Company has delivered a Total Shareholder Return since IPO of 157.5 per cent, or 11 per cent on a compounded annual basis, while the high cash flow visibility we receive from creditworthy government counterparties enabled the Company to achieve dividend cover of 1.27x.

Accordingly, the Company has met our full year dividend target of 7.18pps for 2020, and we continue to deliver a progressive dividend. I am pleased to reaffirm the dividend target of 7.33pps for 2021 and provide a new dividend target of 7.48pps for 2022.

Delivering value for money for shareholders remains a fundamental component of our investment case and we have maintained the lowest comparative ongoing charge in our sector at 0.86 per cent.[xii]

Dividend target 2021

   7.33pps    2.1% 

Dividend target 2022

7.48pps 2.0%

Selective acquisition strategy

The Management Board has effectively mobilised its network and tracked a number of primary and secondary opportunities over the period. As with previous years, the Company assessed considerably more investments than it committed to. This has enabled us to gauge pricing and competitive trends to ensure the investments the Company makes accurately reflect our conservative investment criteria.

Using existing cash resources and our RCF, the Company made six acquisitions - these are detailed in the Portfolio Review. We increased the Company's allocation to lower-risk roads and bridges with investments into Canada's Highway 104 and Samuel De Champlain Bridge Corridor, as well as a follow-on acquisition in the Dutch N18 motorway.

We also increased our exposure to healthcare assets in Canada with the completion of two follow-on acquisitions in Stanton Territorial Hospital and Kelowna and Vernon Hospitals, respectively. These transactions were sourced using our strong existing client and industry relationships and increased the Company's respective interests to 100 per cent.

Total acquisitions (new and follow-on)

GBP59.2m

Prudent financial management

In pursuing a selective acquisition strategy, the Company invests responsibly using a tried and tested financing method, typically drawing on our GBP180 million RCF before raising capital to fund debt repayments. This limits cash drag on our balance sheet and enables both existing and new shareholders to invest in our portfolio with certainty over where proceeds are allocated. We are grateful to our shareholders' support for the oversubscribed issue in November 2020 which raised gross proceeds of GBP55 million.

The Company continues to manage the risk of currency volatility as part of our globally diversified investment portfolio via a hedging strategy which limits foreign exchange sensitivity. We explain this in more detail in the Valuation section of this Annual Report.

Corporate governance and ESG

As an investment fiduciary, the Company is committed to good corporate governance. During the year, and in accordance with the AIC Code of Corporate Governance, the Company proactively engaged an independent and externally facilitated evaluation of the Supervisory Board. This evaluation was undertaken in the spirit of The Chartered Governance Institute's ('ICSA') recently published principles of good practice for FTSE-listed companies using external board reviewers. I am pleased to report that the Company received a very encouraging assessment with the review finding the Board to be well constituted, highly effective and well-run.

During the year, the Supervisory Board formally constituted separate committees for Nomination and Remuneration to further strengthen the independence and objectivity of our decision-making. The Remuneration Committee, with the support of an independent adviser, undertook a comprehensive review of the existing remuneration for the Management Board and the Company's executives, including peer and wider FTSE 250 benchmarking to ensure that the approach is competitive and aligned with our business strategy. Further detail is provided in the Remuneration Report.

The Nomination Committee assessed, amongst other things, the renewal of Management Board members' appointments, the development of a distinct policy concerning Group diversity and equality and succession planning. Following an extensive search, the Company is also delighted to announce the appointment of Chris Waples to the Supervisory Board, subject to shareholder approval at the 2021 AGM. Chris has 35 years' global experience of managing the acquisition, construction and divestment of infrastructure projects and has extensive asset management experience.

The Company also established an ESG Committee during the year to oversee the management of material ESG activities, including climate-related issues. We understand the value of maintaining a disciplined focus and strive to integrate ESG factors into our business strategy, operations and investment processes. Crucially, while much of the focus in 2020 has been responding effectively to the global pandemic, we have not lost sight of managing short, medium and long-term risks posed by ESG issues relevant to the Company and our portfolio. We continue to align our investment portfolio to contribute to five of the SDGs, recognising the important role that investors can play in helping to meet global sustainable development priorities.

During the year, we formalised our approach to managing climate risks and the impacts they have on our Company and our portfolio. This included the development of a climate resilient infrastructure screening tool to better monitor and predict how our assets are impacted as the environment around us changes. This year, we began to report our progress against the Task Force on Climate-related Financial Disclosures ('TCFD') recommendations. Whilst we recognise that we have further work to do to improve our understanding of the finance-related risks on the Company and our portfolio of transitioning to a low carbon economy, and of the physical risks of climate change, this is a significant step forward for our Company.

Post period end, the Company made disclosures relating to specific Articles of the EU Sustainable Finance Disclosure Regulation ('SFDR'). This is a regulation requiring EU based companies to make certain disclosures on the subject of sustainability risk and on the manner in which sustainability factors are integrated into investment decisions, and it allows companies that meet certain sustainability criteria to self-classify if they promote environmental or social characteristics. The Company takes the view that it falls within the scope of Article 8 and meets the criteria for socially positive investment.

We are proud to have been awarded an 'A' in our inaugural assessment by the UN's Principles for Responsible Investment ('PRI'), more about which is detailed in the Company's ESG Report. We are committed to continuously reviewing and improving our approach to Responsible Investment, collaborating with our stakeholders and the wider industry to ensure we remain responsible custodians.

Risk monitoring and management

Over the period, we implemented the Company's business continuity plan ('BCP') globally. With most staff working remotely, IT security and an additional management focus on introducing workplace mental healthcare programmes for our employees were critical in ensuring the Company was effective in the transition.

The Company has continued its focus on monitoring the potential concentration and failure risk of operational and maintenance contractors who provide counterparty services to the Company's investments. We have not identified any significant risk exposure and the Management and Supervisory Boards remain comfortable with the current contractors. Despite the pandemic, the contractors have performed in line with expectations. The Company benefits from a diversified contractor base and supply chain with no concentrated exposure, combined with rigorous supply chain monitoring and contingency planning.

The direct knock-on effects on the Company from the UK's departure from the EU were largely technical in nature and were dealt with by the Management Board over the course of the year to ensure a seamless continuity of listing post-completion of the Brexit transition period.

Our outlook

The Management and Supervisory Boards have been reassured by the resilience of our portfolio and the positive response to the global pandemic by governments of the countries in which we invest. We continue to believe in the power of private finance to deliver essential public infrastructure, and the Portfolio Snapshot in our Strategic Report is testament to the quality of the services our investments provide.

The fiscal commitment to infrastructure spending is likely to generate a medium-term pipeline of opportunities and further affirms the inherent attractiveness of our asset class and the benefits of infrastructure investment allocation through the economic cycle.

We have confidence in our ability to continue sourcing attractive acquisition opportunities thanks to the strength of the Company's relationships, our proven track record in value-driven active asset management, and the dedication of our people and partners.

We are therefore confident in our ability to maintain a robust long-term, predictable and stable income derived from our diversified global portfolio of infrastructure investments.

Sarah Whitney

Chairman

24 March 2021

STRATEGIC REPORT

CO-CEO Q&A

The Company's co-CEOs, Frank Schramm and Duncan Ball, share their thinking for the year in review and look ahead to the positive outlook for global infrastructure investment.

Q: What was the focus in 2020?

A: If you asked us for our 2020 predictions last year, many of them would have been wrong. It's been a challenging period for all, but one thing has remained the same as before: our ability to deliver long-term, stable and predictable returns to our shareholders. We believe this is because of the way we responsibly build and manage our portfolio, and the strength of our industry relationships.

Indeed, the services delivered by our investments have never been more important than in this global health and economic crisis. Active management of our 50 investments has been vital to ensuring that healthcare, educational, blue light, judicial and transport facilities are able to stay open and serve people and local communities in a secure way.

We remain nimble, and our BCP - which we have tested every year since IPO - has proven robust as the pandemic has evolved. Even though elements of our daily working life have changed, the fundamentals of our business have not. While investor meetings, client visits, partnering sessions and staff reviews, all of which are usually done in person, were replaced with video conferences, stakeholder engagement has remained a principal focus for the Company's senior leadership. Communication became even more important as we prioritised checking-in on our people, our public sector clients, our investors and our partners.

We have remained prudent in our financial management. This has enabled us to preserve value and continue to receive predictable cash flows which underpin the delivery of stable and reliable income to our shareholders. During 2020, approximately two thirds of London Stock Exchange ('LSE') listed companies cancelled, cut or suspended their dividends[xiii]. We are very proud of the fact that we delivered our target dividend and stand behind our guidance for a further dividend increase in 2021. We are also very proud that we were able to honour all of our hiring commitments without having to lay-off or furlough any of our people or accept grants or revenue support from any source.

Q: How has the portfolio performed and what changes have you made to it?

A: As the portfolio continued to perform above expectations, 2020 has again proven the resilience of all our investments and the sectors in which we invest. This performance amidst unpredictable market volatility, disruption to global supply chains and changes to consumer behaviour has reinforced why we stay true to our founding principles of investing in low-risk, availability-based investments.

The pandemic has in fact strengthened the structural demand for our facilities across UK, North America, Australia and Continental Europe. Patients still need high-quality healthcare facilities, pupils and teachers must have safe, secure buildings in which to teach and learn; road-users still expect well-maintained highways and bridges; and local governments need blue light[xiv] and other public buildings to uphold their commitment to local communities. We are proud to enable the delivery of all these services at a time when society arguably needs them more than ever.

We have seen a greater bifurcation in pricing as the financial profile of many demand-based asset classes have been adversely impacted by the pandemic and now more accurately reflects the inherent risks associated with demand versus availability-based investments. None of our investments have been materially impacted, either operationally or financially, by the pandemic, the associated lockdowns or the economic slowdown, and we are pleased to report another period of high asset availability.

We anticipate a continued trend of construction companies accelerating their plans to sell availability-based investments to realise value, and our network of vendors has continued to open up otherwise hard-to-access investment opportunities over the period.

The six acquisitions we made over the year that are detailed in the Portfolio Review combine new investments and follow-on interests, increasing our exposure to lower-risk social infrastructure projects in highly-rated investment grade countries.

Q: How has your approach to Responsible Investment evolved?

A: As long-term responsible investors in social infrastructure, we take our stewardship role very seriously. The landscape for responsible investment is shifting, and we welcome the heightened expectation from all our stakeholders to pursue, deliver and report non-financial returns and any adverse sustainability impacts across our portfolio. This is manifested in our 'A' rating for the Company's inaugural assessment by the PRI, more about which can be found in the Our Approach to ESG section and in our standalone ESG Report.

Over the period, we further refined and formalised our governance systems and processes to enable us to better meet these expectations. This included establishing a dedicated ESG Committee to further integrate ESG priorities into all parts of our business including our business strategy, operations and investment processes. Key developments included linking remuneration to our ESG goals, running dedicated sustainability training for all staff, improved ESG related disclosure in this report and on our website, and overseeing the production of BBGI's inaugural stand-alone ESG report.

During the period, we also became signatories to the UN Global Compact, further demonstrating our commitment to being responsible stewards. We use the SDG framework to guide our investment strategy; and we have identified five SDGs where our investments can make a positive contribution to our public sector clients in meeting the goals by 2030. See the 'Our Approach To ESG' section for more detail.

These top-down changes were complemented by bottom-up action where we strengthened our focus on climate change mitigation, specifically with the development of a climate resilient infrastructure screening tool, which will support us in measuring and managing our climate impact going forward.

On reporting, we fully endorse the need for greater clarity and integration of disclosure requirements and standards. During the period, we communicated our support for the TCFD recommendations, demonstrating our commitment to enhanced transparency and positive action on climate change. We also welcome the standardisation of reporting on other ESG topics through the introduction of the Sustainable Finance Disclosure Regulations ('SFDR'), ensuring that our shareholders have the information they need to understand the positive and adverse sustainability impacts of our investment portfolio. We have updated our policies to meet the first phase of requirements (available on our website), and our first standalone ESG Report for the year 2020 is also a significant step forward.

Q: What is your outlook for BBGI and for global infrastructure investment?

A: We are confident that the resilience of the Company's financial and operational performance will continue.

On a macro level, the future for global infrastructure investment also looks strong. Ongoing low interest rates and a substantial premium over risk free rates continue to drive demand from investors that are looking for yield and to increase their exposure to long-duration investments, and this has provided a boost to infrastructure investment valuations. We believe there is further room for valuation uplifts in the future. BBGI also continues to believe that it is well placed to source attractive investment opportunities.

What's more, the type of much-needed public infrastructure we provide is universally supported in all the markets in which we operate, and this remains a bipartisan issue for all governments. This focus on infrastructure as a fiscal stimulus tool to back national economies has only been bolstered this year, with more infrastructure spending committed to by governments in order to stimulate the economic recovery.

As a long-term custodian and trusted partner to the public sector, we believe BBGI is well placed to benefit from this renewed interest as economies rebuild, and we look forward to playing a critical role in that.

Q. How is BBGI addressing the global threat of climate change?

A: As responsible stewards of global infrastructure, BBGI fully acknowledges the existential threat to humanity from the physical impacts of climate change. We remain optimistic that by working collaboratively, governments, society and the investment sector can make the necessary and timely transition to a low carbon economy that will minimise the impacts of future climate change by keeping the global temperature rise below two degrees Celsius. We take our role in this transition to a low carbon economy and preparing our assets to adapt to future climate change very seriously, and we are taking steps to understand how this period of change translates into investment risk.

In 2020, we have made progress by integrating climate-related risk into our governance and risk management processes. These top-down changes were complemented by bottom-up action where we strengthened our focus on climate change mitigation specifically, with the development of a climate resilient infrastructure screening tool, which will support us in measuring and managing our climate impact going forward. But we know that we have more to do to get better visibility of the granularity of our climate risks, how this translates to financial risk and how we can mitigate these risks through our stewardship and management of our assets.

In 2021, our next step is to measure our direct carbon footprint and identify what we need to put in place to meet carbon reduction targets for the emissions that we control. More importantly, as an investor in global infrastructure, we have a pivotal role in influencing the management and operation of our assets and to increase the disclosure of carbon-related risks. And by the end of 2021, we expect to have a full picture of the impact our investment decisions have on the sustainability factors such as the environment and climate risk.

INVESTMENT PROPOSITION

We are a responsible global social infrastructure investor with a low-risk investment strategy focused on delivering long-term sustainable returns.

 
  Strategic Pillars 
 
 Low-risk(1) Investment         Globally diversified          Strong ESG approach           Internally managed 
 Strategy 
 
 Availability-based            Focus on highly-rated                    ESG integration               Alignment of 
 investment strategy           investment grade countries               in investment                 interests 
 Secure public sector-backed   Stable, well-developed                   cycle                         Shareholder 
 contracted revenues           operating environments                                                 value first, 
 Stable and predictable cash   A global portfolio serving               Focus on                      portfolio growth 
 flows with progressive        society through supporting               delivering                    second 
 long-term dividend growth     local communities                        social impact                 Lowest 
                                                                        Executive                     comparative 
                                                                        compensation                  ongoing 
                                                                        linked to ESG                 charges(2) 
                                                                        performance 
                              ----------------------------  ----------------------------  ---------------------------- 
                                 Consistent delivery of 
                                  objectives 
                 Robust total                  Progressive                   Sustainable 
                 shareholder                    long-term                       growth 
                   returns                   dividend growth 
 

(1) In comparison to other equity infrastructure asset classes.

(2) In comparison to the latest publicly available information for all closed-ended, LSE-listed equity infrastructure investment companies.

The Company seeks to provide its shareholders with unique access to a global portfolio of social infrastructure investments which generate stable, predictable cash flows over the life of government or government-backed contracts that typically extend to 20 years and more in length.

The predictability of these government-backed revenues enables BBGI to return to investors a sustainable and progressive income stream in the form of a semi-annual dividend.

The Company's investment policy dictates that no more than 25 per cent of the Company's portfolio value calculated at the time of investment will be derived from investments whose revenue streams are not public sector or government-backed (currently zero per cent). To ensure a spread of investment risk, any new acquisition will not have an acquisition value greater than 25 per cent of portfolio value of the Company immediately post-acquisition.

Avoiding style drift

As the competition to acquire availability-based assets at attractive valuations has intensified, the Company's Management Board has consciously worked to avoid 'style drift'. This refers to the practice of moving up the risk spectrum, particularly where pricing does not accurately reflect inherent risks, both to find investible assets and to make the targeted returns to investors.

The Management Board has made the conscious decision to avoid investing in infrastructure transactions where the revenue stream is demand-based which is typically highly correlated to Gross Domestic Product or subject to uncertainty due to regulatory review periods and political interventions.

While this disciplined approach may at times result in periods of lower portfolio growth, we believe the benefits of this continued specialisation and focus on a low-risk, availability-based investment model result in dependable and consistent income and returns with low volatility. By staying focused on the availability sector and by remaining within our sphere of expertise, we believe we offer a less complex business proposition, and consequently, there should be fewer surprises and the returns to our shareholders should remain predictable and consistent. The robustness of this strategy has been validated during the recent global pandemic - as the Company does not have any demand-based assets and the portfolio is greater than 99 per cent operational. Consequently, the portfolio performance has been strong and there has been no material impact on our distributions due to Covid-19.

Strategic investment partnerships

The Company continues to leverage strong relationships with leading construction companies to source a potential pipeline that supports a low-risk and globally diversified investment strategy.

One notable relationship is the North American strategic partnership with SNC-Lavalin which covers five assets. The Company estimates that further investment opportunities in excess of C$250 million could result from the pipeline agreement over the next years; all of which will be assessed on a case-by-case basis.

Typically, these contractors have secured the mandate to design and build new assets but continue to look to divest financially after the construction period has finished - thereafter often maintaining facility management contracts through a long-term partnership. The Company is an attractive partner for a number of reasons:

-- We have extensive asset credentials and a strong track record that can assist with the shortlisting process for new projects.

-- Having a financial partner is a pre-requisite for some construction companies so they can avoid consolidating the Portfolio Company debt onto the balance sheet of the Parent Company.

-- Our cost of capital is typically lower than construction companies, so involving BBGI can make the bid more competitive.

-- We are a long-term investor which is attractive to government and government-backed counterparties.

-- We are considered a reliable source of liquidity should a construction partner decide to sell in the future.

OPERATING MODEL

The Management Board follows a proven operating model of value-driven active asset management, prudent financial management and a selective acquisition strategy to preserve value, achieve portfolio growth and ensure ESG considerations are embedded in our investment processes. These three operational pillars are fundamental to the Company's success.

We ensure stable operational performance through an active asset management approach, where we actively seek to preserve value and where possible also to identify and incorporate value enhancements over the lifetime of asset ownership. In turn, this helps to reduce cost to our public sector clients and the asset's end-users, and enhance the operational efficiency of each asset. This active asset management approach allows the Company to generate a high level of asset availability, which supports high client satisfaction rates and underpins the strong social purpose of our entire portfolio.

Our prudent financial management is focused on efficient cash management and implementation of our foreign exchange hedging strategy. The portfolio's geographical diversification results in exposure to multiple currencies. We actively seek to manage geographical concentration and mitigate foreign exchange risk by balance sheet hedging through foreign exchange forward contracts, hedging of forecast portfolio distributions and borrowing in non-Sterling currencies. Furthermore, Euro-denominated running costs provide a natural hedge against the Euro-denominated portfolio distributions.

The Company's selective acquisition strategy ensures that the Management Board's focus remains within its area of expertise and that the strategic pillars defined by the Company's investment proposition are upheld.

We actively consider acquisitions that have inflation-protection characteristics which supports the portfolio's inflation linkage.

Value-driven active asset management

We pursue a standardised approach across all investments in the portfolio to help derive operational and value enhancements and preserve value, including:

-- Preserving value and where possible identifying and delivering value enhancements to improve customer experience and financial performance.

-- Focused management at the asset level to ensure distributions are on time, and on or above budget.

   --      Applying a high-quality corporate governance framework. 

-- ESG KPI tracking tool introduced in 2018 to evaluate non-financial performance of each investment.

-- Climate resilience questionnaire introduced in 2020 considers climate risks and opportunities within the portfolio.

-- Comprehensive monitoring to ensure fulfilment of contractual and legal obligations, which additionally serves to maintain high availability levels and prevent deductions.

-- Strong client relationship management, including regular meetings to uphold client satisfaction and monitor ESG performance.

-- Focused and active asset management including site visits to all significant investments annually and proactive management of issues.[xv]

-- Focused cost management and portfolio-wide cost-saving initiatives leveraging economies of scale (e.g. portfolio insurance and standardised management contracts for project companies).

-- Identifying and continuing initiatives at the individual asset level to outperform base case (e.g. lifecycle reviews).

-- Measured exposure to construction risk to support NAV uplift by de-risking assets over the construction period.

Prudent financial management

We maintain focus and attention to cash performance at the asset and portfolio level to drive efficiencies, including:

   --      Maintaining modest cash balances to limit cash drag. 

-- The portfolio's geographical diversification by necessity involves exposure to multiple currencies. We actively seek to manage and mitigate foreign exchange risk through our hedging strategy.

-- Maintaining a low ongoing charge through an efficient and cost-effective internal management structure.

   --      Progressive future dividend growth underpinned by strong portfolio distributions. 

Selective acquisition strategy

We maintain strategic discipline in our acquisition strategy and portfolio composition to ensure we pursue growth that is accretive to shareholder value, not just for growth's sake, including:

   --      Broad industry relationships in multiple geographies. 
   --      Pre-emption rights to acquire co-shareholders' interests. 
   --      Global exposure to avoid geographical concentration. 
   --      Robust framework embedding ESG principals into investment due diligence. 
   --      Revolving corporate debt facility to support transaction execution. 
   --      Visible pipeline through a North American strategic partnership. 
   --      Maintaining focus on the Management Board's core areas of expertise. 

OUR APPROACH TO ESG

Responsible stewardship, strong corporate citizenship and sustainable growth guide our business decisions

To accompany this Annual Report, we have published our inaugural ESG Report, which provides a more detailed explanation of our performance, case studies and our forward-looking plans. Here, we provide a summary of our approach to responsible investment and our ESG activities.

As well as ensuring that through our investment portfolio we are influencing our partners to reduce adverse sustainability impacts, we are also integrating ESG principles and approaches into how we run our Company. In 2020, we implemented a number of initiatives at our portfolio companies to reduce our greenhouse gas emissions. In 2021, we will measure our own carbon footprint and set reduction targets. We will continue to work with our staff and our portfolio companies which employ staff to ensure the promotion of a diverse and inclusive culture, and support our people to stay healthy and safe.

Investment Strategy

Our investment strategy embodies the Company's purpose to provide responsible capital required to build and maintain the developed world's social infrastructure. To demonstrate how we deliver social value, we have aligned our investment strategy with the UN's SDGs. Specifically, our investment strategy helps to deliver Target 9.1 by developing quality, reliable, sustainable and resilient infrastructure to support economic development and human well-being, with a focus on affordable and equitable access for all. All of our capital investments in our portfolio enable our public sector clients to deliver quality services and contribute to the following SDGs:

-- SDG3: Ensure healthy lives and promote wellbeing for all at all ages (we provide capital for 41 hospitals and health care facilities).

-- SDG4: Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all (capital investment in 34 schools and colleges).

-- SDG9: Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation (a central tenet of the BBGI portfolio of social infrastructure investments).

-- SDG11: Making cities and human settlements inclusive, safe, resilient and sustainable (17 transportation infrastructure investments).

-- SDG16: Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels (10 fire stations, four police facilities and three modern correctional facilities).

To further develop the maturity of our approach to responsible investment, we are identifying a set of social value indicators which will improve the transparency of how we are fulfilling our social purpose.

Our approach to Responsible Investment

BBGI became signatories to the PRI, and in our first reporting cycle, we received an 'A' rating for our strategy, governance and infrastructure. We are using the six principles as a framework to integrate ESG into the Company's whole investment process and lifecycle of the asset.

-- We have implemented a robust framework to integrate ESG into all aspects of our investment lifecycle, from initial screening through to end of investment life. ESG outcomes also affect discretionary performance related remuneration for staff.

-- Our approach to active management, at both a corporate level and the portfolio company level is aligned with and guided by the SDGs, as explained above.

-- In 2018 we implemented a standardised ESG KPI tracking tool across our portfolio of assets, and we publish on our website an updated individual ESG information sheet for each of our investments.

-- We engage with our co-investors and sponsors on the rationale for responsible investment, and we communicate ESG expectations to investment service providers.

-- We participate in ESG and RI industry initiatives, and we participated in the IMP+ACT Alliance in 2020, undertaking its SDG screening tool.

-- We report regularly on our responsible investment activities each year, submitting a Public Signatory Report to the PRI, and publishing our first ESG Report.

Adverse Sustainability Impacts Disclosures

At BBGI, we recognise that, whilst the purpose of our investments is to provide responsible capital for social infrastructure, the construction, operation and decommissioning of such assets can have adverse sustainability impacts. We take a stewardship approach towards our investments, and we continue to invest in the assets throughout the investment lifecycle and take an active management role in order to mitigate risks and minimise their impacts. We are committed to the 'do no significant harm' principle, and we are working to develop a set of sustainability indicators, aligned to the SFDR, which will allow us to monitor and disclose our performance over time, demonstrating how we are meeting this principle. For a qualitative review of our performance to the end of 2020 on our key sustainability issues, please refer to our ESG Report.

Climate Related Financial Disclosures

This is our first year reporting against TCFD recommendations, and we will continue to refine and develop our approach as we progress our understanding of the financial risks and opportunities of climate change to our business in order to meet the recommendations in full.

-- Governance: In the Corporate Governance section of the 2020 Annual Report, we describe how the Supervisory Board and the Management Board maintain oversight of the Company's climate-related risks and opportunities. Specifically, in 2020, we established an ESG Committee as a sub-committee of the Management Board which governs the Company's approach to climate-related risks and opportunities. In 2021, we also hired an ESG Director in order to further strengthen our commitment to sustainability.

-- Strategy: We are currently focused on identifying current and evolving climate risks and mitigating these risks. We are also working towards obtaining a better understanding of the potential financial impacts and our resilience with regards to different scenarios. We are considering physical risks such as rising temperatures, rising sea-levels, changes in precipitation, changes in storm patterns, and changes to resource quality and availability; as well as transition risks such as increased regulation, litigation and reputational risks. This will enable us to start to quantify the potential financial impacts of climate change to our business and provide further insights to take into our strategic approach to mitigating these impacts.

-- Risk: In the Risk section of the 2020 Annual Report, we describe the Company's processes for identifying, assessing and managing climate-related risks. We have a comprehensive risk management framework which integrates the assessment and management of climate risk as a subset of the wider risks which include economic and market risk, taxation risk, political risk, financial risk, operational risk and strategic risk.

-- All new investments are screened for climate risk, and we are systematically reviewing existing investments for climate change considerations. We have a target that all 50 investments will be individually screened against our climate change questionnaire by mid-2021. When analysing climate risks, we consider the short (one year), medium (five year) and long-term (10-year+) impacts.

-- Metrics: We take our environmental impact and responsibilities seriously and recognise the value of measurement, target setting and reporting in driving our emissions down. We are currently working with a specialist external consultancy to collect the necessary data in 2021 that will allow us to voluntarily report our Scope 1, 2 and 3 emissions in next year's Annual Report. We will then look at setting reduction targets. In addition, we use our proprietary ESG KPI tracking tool to drive enhanced ESG performance in our investment portfolio. Further information on this is included in our 2020 ESG Report.

Our Purpose and our Stakeholders

We are stewards of important social infrastructure investments and there are many stakeholders who are impacted by our actions: users of the infrastructure, communities, employees, investors, partners, the environment, and society at large. We take this job seriously. While the importance of considering our stakeholders is not new, we are taking the opportunity this year to explain in more detail how the Supervisory Board and the Management Board engage with stakeholders. Further detail is also provided in our inaugural ESG Report which is available on the Company's website.

This section serves as our Section 172 Statement. Section 172 of the UK Companies Act 2006 requires Directors to take into consideration the interests of stakeholders in their decision-making. While, as a Luxembourg-based company, BBGI is not obliged to comply with the UK Companies Act, we are voluntarily complying with the spirit of the Section 172 requirement by including details describing how the decision-making of our Directors considers the interest of our stakeholders.

Effective engagement with stakeholders is crucial to the Company's success and to fulfilling BBGI's purpose of providing responsible capital required to build and maintain the developed world's social infrastructure.

The stakeholder voice is heard by the Management Board throughout the year by direct engagement with various stakeholders.

During 2020, the impact of the pandemic on the mental health of our people remained an important concern of the Management Board. To address this, mental health was added to the agenda of all employee semi-annual reviews and continually prioritised on a one-to-one basis. We solicited feedback from our people and took steps to support them as they worked remotely for much of the year.

Typically, members of the Management Board routinely visit our infrastructure investments over the course of the year and receive direct feedback from public sector clients, partners and employees. This is a great way for our Directors to experience BBGI from a customer and community perspective and receive information directly from people working on site at those assets. While Covid-19 restrictions have prevented these physical visits in 2020, we continued to engage but did so predominantly via virtual meetings.

Members of the Management Board conduct two roadshows per annum after the Annual and Interim Reports, respectively. During these two roadshows, they usually meet with more than 75% of the share register (by shareholding) over the course of the year to discuss the Company's performance and hear any concerns the shareholders may have. Throughout the year, shareholders are also able to contact the Chairman or members of the Board via email, telephone or through the website. Again, in 2020, these meetings continued unabated, but were done virtually.

To best understand BBGI's purpose, one can look at the various stakeholders we serve and our aspirations towards these groups via a multi-pronged mission statement:

-- Our public sector clients: To deliver a high standard of long-term investment stewardship by delivering value for money to our public sector clients, enabling them to provide robust, safe and secure public facilities and services.

-- Our communities: To support the lives of the people in the communities our investments serve by delivering well maintained, responsibly managed infrastructure.

-- Our people: To maintain BBGI as a diverse and inclusive place of work by having a clear vision; providing honest leadership, open communication, and promoting a collaborative meritocracy where performance is duly recognised and rewarded.

-- Our partners and suppliers: To create a productive and fair working relationship through collaboration and shared values which puts high-quality client service to the public sector as our mutual objective.

-- Our investors: To be the preferred low-risk responsible global infrastructure investment company with strong sustainability credentials.

While BBGI has consistently engaged with our stakeholders through a variety of channels over the years, the Company plans to undertake a formal materiality assessment in 2021. BBGI plans to reach out to stakeholders and solicit their views on which ESG matters are most important and will prioritise based on stakeholder expectations and feedback.

PORTFOLIO REVIEW

Portfolio summary

The Company's investments at 31 December 2020 consist of interests in 50 availability-based social infrastructure investments. The portfolio has no exposure to demand-based or regulatory risk investments, and is well diversified across sectors in education, health[xvi], blue light and justice, and transport.

All portfolio companies in the portfolio are in the stable, well-developed and highly-rated investment grade countries of Europe, North America and Australia.

Portfolio breakdown[xvii]

 
 No   Investment                                Country       Legal holding % 
      Transportation Infrastructure Investments 
     ------------------------------------------------------------------------ 
 1    A1/A6 Motorway                            Netherlands   37.1 
     ----------------------------------------  ------------  ---------------- 
 2    Canada Line                               Canada        26.7 
     ----------------------------------------  ------------  ---------------- 
 3    E18 Motorway                              Norway        100 
     ----------------------------------------  ------------  ---------------- 
 4    Golden Ears Bridge                        Canada        100 
     ----------------------------------------  ------------  ---------------- 
 5    Highway 104                               Canada        50 
     ----------------------------------------  ------------  ---------------- 
 6    Kicking Horse Canyon                      Canada        50 
     ----------------------------------------  ------------  ---------------- 
 7    M1 Westlink                               UK            100 
     ----------------------------------------  ------------  ---------------- 
 8    M80 Motorway                              UK            50 
     ----------------------------------------  ------------  ---------------- 
 9    Mersey Gateway Bridge                     UK            37.5 
     ----------------------------------------  ------------  ---------------- 
 10   N18 Motorway                              Netherlands   52 
     ----------------------------------------  ------------  ---------------- 
 11   North Commuter Parkway                    Canada        50 
     ----------------------------------------  ------------  ---------------- 
 12   North East Stoney Trail                   Canada        100 
     ----------------------------------------  ------------  ---------------- 
 13   Northwest Anthony Henday Drive            Canada        50 
     ----------------------------------------  ------------  ---------------- 
 14   Ohio River Bridges                        US            66.7 
     ----------------------------------------  ------------  ---------------- 
 15   Samuel De Champlain Bridge Corridor       Canada        25 
     ----------------------------------------  ------------  ---------------- 
 16   South East Stoney Trail                   Canada        40 
     ----------------------------------------  ------------  ---------------- 
 17   William R. Bennett Bridge                 Canada        80 
     ----------------------------------------  ------------  ---------------- 
      Social Infrastructure Investments 
     ------------------------------------------------------------------------ 
 18   Avon & Somerset Police HQ                 UK            100 
     ----------------------------------------  ------------  ---------------- 
 19   Barking Dagenham & Havering (LIFT)        UK            60 
     ----------------------------------------  ------------  ---------------- 
 20   Bedford Schools                           UK            100 
     ----------------------------------------  ------------  ---------------- 
 21   Belfast Metropolitan College              UK            100 
     ----------------------------------------  ------------  ---------------- 
 22   Burg Correctional Facility                Germany       90 
     ----------------------------------------  ------------  ---------------- 
 23   Clackmannanshire Schools                  UK            100 
     ----------------------------------------  ------------  ---------------- 
 24   Cologne Schools                           Germany       50 
     ----------------------------------------  ------------  ---------------- 
 25   Coventry Schools                          UK            100 
     ----------------------------------------  ------------  ---------------- 
 26   East Down Colleges                        UK            100 
     ----------------------------------------  ------------  ---------------- 
 27   Frankfurt Schools                         Germany       50 
     ----------------------------------------  ------------  ---------------- 
 28   Fürst Wrede Military Base            Germany       50 
     ----------------------------------------  ------------  ---------------- 
 29   Gloucester Royal Hospital                 UK            50 
     ----------------------------------------  ------------  ---------------- 
 30   Kelowna and Vernon Hospital               Canada        100 
     ----------------------------------------  ------------  ---------------- 
 31   Kent Schools                              UK            50 
     ----------------------------------------  ------------  ---------------- 
 32   Lagan College                             UK            100 
     ----------------------------------------  ------------  ---------------- 
 33   Lisburn College                           UK            100 
     ----------------------------------------  ------------  ---------------- 
 34   Liverpool & Sefton Clinics (LIFT)         UK            60 
     ----------------------------------------  ------------  ---------------- 
 35   McGill University Health Centre           Canada        40 
     ----------------------------------------  ------------  ---------------- 
 36   Mersey Care Hospital                      UK            79.6 
     ----------------------------------------  ------------  ---------------- 
 37   North London Estates Partnership (LIFT)   UK            60 
     ----------------------------------------  ------------  ---------------- 
 38   North West Regional College               UK            100 
     ----------------------------------------  ------------  ---------------- 
 39   Northern Territory Secure Facilities      Australia     100 
     ----------------------------------------  ------------  ---------------- 
 40   Restigouche Hospital Centre               Canada        80 
     ----------------------------------------  ------------  ---------------- 
 41   Rodenkirchen Schools                      Germany       50 
     ----------------------------------------  ------------  ---------------- 
 42   Royal Women's Hospital                    Australia     100 
     ----------------------------------------  ------------  ---------------- 
 43   Scottish Borders Schools                  UK            100 
     ----------------------------------------  ------------  ---------------- 
 44   Stanton Territorial Hospital              Canada        100 
     ----------------------------------------  ------------  ---------------- 
 45   Stoke & Staffs Rescue Service             UK            85 
     ----------------------------------------  ------------  ---------------- 
 46   Tor Bank School                           UK            100 
     ----------------------------------------  ------------  ---------------- 
 47   Unna Administrative Centre                Germany       90 
     ----------------------------------------  ------------  ---------------- 
 48   Victoria Correctional Facilities          Australia     100 
     ----------------------------------------  ------------  ---------------- 
 49   Westland Town Hall                        Netherlands   100 
     ----------------------------------------  ------------  ---------------- 
 50   Women's College Hospital                  Canada        100 
     ----------------------------------------  ------------  ---------------- 
 

For portfolio statistics, refer to Portfolio at a Glance.

Operating model in action

Active asset management and value preservation

The Management Board's continued focus on active asset management and preserving investment value resulted in modest NAV growth through operational and value--accretive enhancements.

The Company's portfolio of over 99 per cent operational investment proved resilient during the reporting period thanks to its low-risk composition, with cash receipts ahead of business plan and a high level of asset availability, recorded at approximately 99.8 per cent.

There were no material lock-ups or events of default reported, and deductions were either borne by third-party facility management companies and road operators or were part of planned lifecycle expenditures.

We evolved our active asset management approach over the period, working in even closer collaboration with our public sector clients as they responded and adapted to the impacts of the Covid-19 pandemic. This has proven the adaptability and value of our operating model, particularly in times of prolonged stress and uncertainty for our public sector clients.

At the asset level, we provided enhanced support in particular to the healthcare facilities operating through 11 of our investments. We worked with these public sector clients throughout the year, helping to reconfigure facilities, setting up Covid-19 testing sites, providing pro-bono financial contributions, and even arranging pre-packed lunches from local merchants to support the surrounding communities.

Through our active and hands-on asset management approach, we also achieved a net value enhancement amount of GBP11.6 million. The activities included, inter alia, managing change orders and earning a fee for this service, tax optimisation, cost savings due to lower fees on management service agreements, cash optimisations and further de-risking of selected investments.

Where appropriate, we have also made use of reduced occupancy at some of our assets to accelerate maintenance or improvement works. For example, on one of our roads we were able to take advantage of the low oil price to accelerate re-pavement works which resulted in an overall lifecycle saving.

Prudent financial management

Robust portfolio performance and prudent financial management has supported the Company's established progressive dividend policy in this challenging market environment and allowed us to again meet our full-year dividend target of 7.18pps and reconfirm the 7.33pps target for 2021. Furthermore, the Company is targeting a dividend of 7.48pps for 2022.

BBGI has an RCF of GBP180 million in place which matures in 2022, with the potential to increase the total size to GBP250 million by the exercise of an accordion provision. This enables the Company to be a trusted and repeat partner in its key markets and supports the Management Board's ability to efficiently execute portfolio acquisitions.

During the course of the year, the Company managed its borrowings responsibly and drew down on the RCF to make acquisitions. As at 31 December 2020, there were no cash borrowings outstanding under the RCF. GBP1.2 million continued to be utilised to cover letters of credit and BBGI had a net cash position of GBP20.5 million.

In November, the Company raised gross proceeds of GBP55 million through an oversubscribed issue of new ordinary shares, the proceeds of which were used to repay existing debt, maintaining a modest cash balance, and providing additional balance sheet flexibility.

The Company has no requirement to raise equity in the immediate future. All debt financing at the portfolio company level is issued on a non-recourse basis. Only the Northern Territory Secure Facility portfolio company is subject to refinancing risk when a portion of the debt matures in 2025.

The Company's hedging strategy aims to limit a 10 per cent adverse foreign exchange sensitivity to approximately 3 per cent of NAV movement. We also hedge 100 per cent of anticipated portfolio distributions on a four-year rolling basis (excluding EUR and GBP), which provides additional comfort as it shields the Company's forecasted dividend payment from adverse foreign exchange movements, de-risking the portfolio[xviii].

Selective acquisition strategy

The Company continued to pursue a selective acquisition strategy over the year in line with its proven operating model, with the Management Board consciously working to avoid style drift.

Over the last year, the Management Board sourced attractive investment opportunities and grew the portfolio - but only where it made sense to do so. Here, the Company continues to demonstrate the selectiveness of our approach, the strength of our industry networks, and the effectiveness of our operating model.

Over the period, the Company made six new and follow-on acquisitions with a total aggregate value of GBP59.2 million. These included:

   --      Highway 104 (Canada): In May, the Company acquired a 50 per cent stake in Highway 104, an availability-based motorway investment in Nova Scotia. Preparations to start construction work began in May 2020, with an estimated completion date of the end of 2023. The concession will run until 2043 and availability payments will be received from the Government of Nova Scotia, which is rated Aa2 by Moody's and AA- by Standard & Poor's ('S&P'). Despite initial delays in receiving certain environmental permits for in-water works, the construction remains on schedule with no material impact resulting from Covid-19. 

-- N18 Motorway (Netherlands): In April, the Company completed a follow-on acquisition in the N18 Motorway, bringing BBGI's total equity interest in the investment to 52 per cent. The concession runs until 2043 and availability payments are received from the State of the Netherlands, which is rated Aaa by the credit rating agency Moody's.

-- Stanton Territorial Hospital (Canada): During the period, the Company completed two follow-on acquisitions in Stanton Territorial Hospital, increasing BBGI's interest in the investment from 25 per cent to 100 per cent. Stanton is an operational 27,000m(2) hospital with 100 patient rooms located in Yellowknife, Northwest Territories. The concession runs until 2048 and availability payments are received from the Government of Northwest Territories, which is rated Aa1 by the credit rating agency Moody's.

-- Kelowna and Vernon Hospitals (Canada): In August, the Company completed a follow-on acquisition for the remaining 50 per cent interest in Kelowna and Vernon Hospitals. The concession runs until 2042 and availability payments are received from the Interior Health Authority, funded by the Province of British Columbia which is rated Aaa by Moody's and AAA by S&P. BBGI's equity interest in the investment is now 100 per cent.

-- Samuel De Champlain Bridge Corridor (Canada): In December, BBGI completed the acquisition of a 25 per cent equity interest in Signature on the Saint-Lawrence Group, the concessionaire of the Samuel De Champlain Bridge Corridor in Montreal. The investment consists of the design, construction, financing, operation, maintenance and rehabilitation of a new bridge spanning the St. Lawrence River between Montreal and Brossard, Quebec. Availability payments are received from the Government of Canada, which is rated AAA by both Moody's and S&P credit rating agencies. The bridge opened to traffic in summer 2019 and the concession runs until 2049.

As availability-style assets, these acquisitions further strengthened the global footprint of the Company's portfolio of investments in AAA/AA rated countries.

Monitoring the supply chain

The Management Board continually reviews the potential concentration and/or failure risk of operational and maintenance ('O&M') contractors that provide counterparty services to the Company's assets. The table below illustrates the level of O&M contractor exposure as a percentage of portfolio value.[xix]

 
 Facility manager / O&M contractor 
===================================  ===== 
 SNC-Lavalin O&M Inc                  10% 
 Capilano Highway Services            9% 
 Portfolio Company inhouse            9% 
 Honeywell                            7% 
 Black & McDonald                     7% 
 Cushman and Wakefield                6% 
 Integral FM                          4% 
 Carmacks Maintenance Services        4% 
 BEAR Scotland                        4% 
 Graham AM                            3% 
 Amey Community Ltd                   3% 
 Intertoll Ltd                        3% 
 Galliford Try FM                     3% 
 ENGIE FM Limited                     3% 
 Johnson Controls LP                  2% 
 Remaining contractors                23% 
                                      100% 
 

The Management Board has not identified any material risk exposure and remains comfortable with the current level of contractor exposure. Our immediate response, in the wake of the Covid-19 pandemic, was to request all Facility Managers ('FM') and O&M contractors (together the 'Subcontractors') to conduct an immediate review of their respective BCPs under severely stressed scenarios. These BCPs continue to perform in line with expectations.

The Company benefits from a diversified Subcontractor supply chain with no concentrated exposure, combined with rigorous monitoring and contingency planning. We pay close attention to how Subcontractors are performing on an ongoing basis and have risk mitigation procedures in place in case of any supply chain failures.

As an active asset manager, the Company continues to be in close dialogue with its Subcontractors. This is to ensure that where the Company can take mitigating actions to support the health and well-being of its stakeholders, it will. Despite the unprecedented strain on some operating companies resulting from the pandemic, we have not recorded any material adverse Subcontractor issues during the reporting period, and we believe we are well positioned to handle any service quality issues should they arise.

Construction defects

The Company routinely monitors the quality of its assets to identify any potential construction defects early on and to implement the appropriate remediation measures before they impact user accessibility and experience.

A key component of our effective counterparty risk management approach is that the responsibility for, and cost of remediation falls to the relevant construction subcontractor on each asset, subject to statutory limitation periods.

Latent defects risk was mitigated over the reporting period with 65 per cent of portfolio value covered by either limitation or warranty periods and there were no material defects on any of the Company's portfolio assets reported or if there were any issues, they are in the process of being resolved with no material impact on the NAV.

 
 Latent Defects Limitations 
  / Warranty Period 
  Remaining 
============================     ===== 
 Expired                          35% 
 Within 1 year                    7% 
 1-2 years                        1% 
 2-5 years                        29% 
 5-10 years                       18% 
 10+ years                        10% 
                                  100% 
 

PORTFOLIO SNAPSHOT

Our five largest assets

   1)   Golden Ears Bridge: Building Canadian roads & bridges at unprecedented scale 
   --      Type: Availability-based 
   --      Status: Operational 
   --      Equity Holding (%) BBGI: 100% 
   --      Total Investment Volume (Debt & Equity): C$1.1 billion 
   --      Financial Close/Operational: March 2006/June 2009 
   --      Concession Period: 32 years (post construction) ending in 2041 

Golden Ears Bridge represented the largest private financing for a greenfield PPP in Canada at the time of its launch. The project involves the design, build, financing, operation and maintenance of the Golden Ears Bridge near Vancouver, which is a 1km, six-lane cable-stayed bridge that spans the Fraser River and connects the cities of Maple Ridge and Pitt Meadows to the cities of Langley and Surrey. The road opened in June 2009 and includes more than 3.5km of ramps, viaducts, small bridges and underpasses, and more than 13km of mainline roadway; a large part of which has been landscaped.

The investment has brought close to C$1 billion in construction-related activity to the area, while commuters that use the bridge now save up to 40 minutes per peak-hour round-trip from Maple Ridge to Langley. In coordination with the asset operator, we have implemented an LED conversion for all lighting, which is expected to deliver C$72K in annual savings to the operator and to reduce consumption by 450,000 kWh per annum.

   2)   Ohio River Bridges: Breaking down barriers to US transport P3 
   --      Type: Availability-based 
   --      Status: Operational 
   --      Equity Holding (%) BBGI: 66.7% 
   --      Total Investment Volume (Debt & Equity): US$1.175 billion 
   --      Financial Close/Operational: March 2013/December 2016 
   --      Concession Period: 35 years (post construction) ending in 2051 

One of the largest transportation assets ever undertaken in the US, this asset is at the cutting-edge of public partnerships currently in operation in the US PPP market and reached commercial close just ten months after final tender documents were issued. It was the first US PPP transport deal not to use the Transportation Infrastructure Finance and Innovation Act ('TIFIA') in its capital structure, demonstrating to other US states how even the most complex of transactions can be structured without reliance on federal funding. Instead, the scheme uses a private activity bond issue[xx] - the first of its kind for a US PPP highway availability-based asset.

The investment includes a 760m cable-stay bridge; a 500m long twin vehicular tunnel and 2.25km of associated six-lane Interstate Highway, with more than 21 bridges and multiple roundabout style interchanges.

The investment addresses cross-river mobility challenges in the Louisville Metropolitan Area, by improving safety, alleviating traffic congestion, and better integrating existing highways. This supports the economic development of the Louisville Southern Indiana region such that the project achieved the Platinum award from the Institute of Sustainable Infrastructure in 2016.

3) Northern Territory Secure Facilities (NTSF): A modern detention and rehabilitation centre to serve the people of Northern Territories.

   --      Type: Availability-based 
   --      Status: Operational 
   --      Equity Holding (%) BBGI: 100% 
   --      Total Investment Volume (Debt & Equity): A$620 million 
   --      Financial Close/Operational: October 2011/November 2014 
   --      Concession Period: 30 years (post construction) ending in 2044 

Located near Darwin, Northern Territory (the 'Territory'), the investment involves the design, build, financing, operation and maintenance of three separate centres. This includes a 1,000-bed multi-classification male and female correctional centre, a 30-bed secure mental health and behavioural management centre (the first of its kind in the Territory), and a 48-bed supported accommodation and programme centre for community-based offenders, which is designed to support the government's goals of enhanced rehabilitation, education and reduced reoffending rates in the Territory. NTSF is also designed to accommodate an on-site Learning System, which allows inmates to participate in online learning tutorials to improve key skills and ensure better integration into the community following release.

The asset is one of the largest social infrastructure investments in the Territory. BBGI acquired its initial 50 per cent interest in the asset while it was still in construction and subsequently acquired the remaining 50 per cent stake in July 2015.

4) McGill University Health Centre (MUHC): Financing Canada's first truly sustainable health campus

   --      Type: Availability-based 
   --      Status: Operational 
   --      Equity Holding (%) BBGI: 40% 
   --      Total Investment Volume (Debt & Equity): C$2 billion 
   --      Financial Close/Operational: July 2010/October 2014 
   --      Concession Period: 34 years ending in 2044 

The investment involves the design, build, finance, operation and maintenance of MUHC's Glenn campus. It comprises two hospitals, a cancer centre and a research institute in Montreal.

MUHC is one of the most innovative academic health centres in North America and at 214,000m(2) , it is the largest English-speaking hospital in Quebec. One integrated campus consolidates the Montreal Children's Hospital, the Royal Victoria Hospital and the Montreal Chest Institute, as well as the new Cedars Cancer Centre and the Research Institute of the MUHC. MUHC is the workplace of over 12,000 hospital staff, 1,356 physicians, dentists, pharmacists and 720 medical students.

The Glenn campus investment achieved a Gold certification for Leadership in Energy and Environmental Design ('LEED') in 2016 - the first hospital in Quebec to do so.

   5)   A1/A6 Diemen Almere Motorway: Connecting more communities via Dutch roads 
   --      Type: Availability-based 
   --      Status: Operational 
   --      Equity Holding (%) BBGI: 37.14% 
   --      Total Investment Volume (Debt & Equity): EUR727 million 
   --      Financial Close/Operational: February 2013 /July 2017 
   --      Concession Period: 25 years (post construction) ending in 2042 

The A1/A6 investment is the largest of the five sub-projects for the Dutch Road Directorate (Rijkswaterstaat), part of the upgrading of the road network linking Schiphol Airport via Amsterdam to Almere in the Netherlands.

The enlargement of the A1/A6 involves the reconstruction and widening of this section of the SAA motorway and the subsequent long-term maintenance. The A1 and the A6 motorway sections were transformed into a road with 2x5 lanes and partly 4x2 lanes, while reversible lanes were also built, allowing two lanes to change direction twice a day. It facilitates road traffic from the east into Amsterdam during the morning rush hour, and then in the opposite direction in the afternoon.

After construction, completion was achieved well in time in 2017, and SAAOne is now responsible for maintaining the infrastructure for a 25-year period.

During the year, the high-pressure sodium SON-T lighting was completely replaced by an energy efficient LED lighting system. This is projected to reduce the future CO(2) emissions from lighting by 53 per cent and reduce the CO(2) footprint of the project by approximately 350 tons per year.

OUR RESPONSE TO COVID-19

We are pleased to report that, despite the challenging back drop, there has been no material impact on the performance of our investment portfolio over the reporting period. The Management Board maintained its focus on value preservation of our diversi ed portfolio of 50 infrastructure assets. Combined with our focused approach of investing in low-risk, availability-based infrastructure [xxi] , the Company did not experience any interruption to the expected cash flows received from a globally diversi ed group of creditworthy government counterparties. During 2020, our investment availability level remained very high at 99.8 per cent and we continued to operate without any material interruptions.

Our People

   --      The Company provided support and guidance to staff to aid working from home including early identification and sourcing of equipment, increased cyber security initiatives and all staff receiving additional cyber security training. 

-- Mental and physical health were prioritised with risk assessment and regular contact to support wellbeing, and increased communication to combat isolation and boost morale.

   --      No staff employed directly by the Group were furloughed. 
   --      Outstanding hiring commitments were honoured and new staff were successfully on-boarded. 

-- The Company initiated its BCP with all staff working remotely for much of the year and always in compliance with the latest public health guidance.

   --      We oversaw a seamless transition to remote working. 
   --      Business travel was cancelled. 

-- BBGI has senior staff located in jurisdictions where we invest which enabled BBGI to lead and respond in real-time to any project level issues that were encountered.

-- The BCP in place proved to be robust and appropriate to ensure uninterrupted delivery of services by BBGI as an investment manager.

Our Clients

-- All of BBGI's assets continued to be available for our public sector clients, communities and end-users.

-- Availability-based transportation assets make up 51 per cent of the portfolio by value. These assets have been largely unaffected by Covid-19.

-- The Company has 11 healthcare investments which account for 23 per cent of the portfolio value. Our 11 healthcare investments consist of 42 different healthcare buildings which include clinics, ambulatory care facilities and traditional hospitals. In total, this represents over 2,000 hospital beds. We worked closely with the various health authorities and supported them, often reconfiguring key facilities to help them navigate the changing environment. Much of our focus during the pandemic was targeted towards helping healthcare workers and the communities they serve.

-- For much of the year, the schools in our portfolio, representing 10 per cent by portfolio value, either closed or operated at reduced capacity for children of those providing essential services in the Covid-19 effort. Nonetheless, the availability fee continued to be paid.

Our Suppliers

-- The Management Board remained in active dialogue with all facilities managers and operators of our assets.

-- We worked closely with our suppliers, supporting them to prioritise the health of their teams and to apply best practice guidance.

   --      The Company prioritised prompt payment of invoices to aid supplier cash flow. 
   --      No material service delivery issues occurred, and no material disruptions were reported. 

-- The Company increased sub-contractor monitoring to ensure integrity of its supply chain. We will continue to rigorously monitor performance and supply chain exposure.

-- BBGI has a diversified supply chain in place and a geographically-diversified portfolio which helps mitigate this exposure. Furthermore, our supply chain partners have BCPs in place and to date performance continues to be strong.

Our Communities

BBGI, through its investment companies, contributed over GBP33,000 to various Covid-19 relief funds and initiatives. Additional detail is available in our ESG report. Total charitable donations made through our investment companies in the year exceeded GBP132,000.

Our Investors

-- Our resilient business model delivering essential infrastructure to governments and government-backed entities performed as expected with no impact on dividends for 2020 or expected dividends for 2021 and 2022.

-- Despite not being able to travel, the Company participated in over 70 virtual meetings with investors to provide updates on performance.

While the rollout of several successful vaccines is encouraging, significant uncertainty surrounding Covid-19 still remains, and all the consequences and potential disruptions are difficult to foresee. While we believe our resilient business model can continue to withstand this challenging market environment over the long-term, we will remain vigilant and ready to adapt as needed. Further detail of the Company's risk mitigation can be found in the Risk section of this Annual Report.

MARKET TRS & PIPELINE

2021 and beyond

The pandemic impacted the global economy and caused widespread unemployment. Interest rates are either at or close to historic lows, as many central banks undertook further monetary easing. In this environment of low rates and uncertainty, the stability and resilience associated with availability-based social infrastructure investments has maintained its status as an attractive asset class and competition for investments remains strong.

The levels of competition for the availability-based assets in which we invest vary between markets. In all of BBGI's target markets, infrastructure under-investment persists, and public finance budget constraints necessitate the involvement of the private sector to deliver the finance and expertise required to build, maintain and operate much-needed assets. Many governments have ambitious plans to make major infrastructure commitments to create jobs, revitalise communities, move towards a low carbon economy, and to act as a catalyst for economic recovery.

At the same time, the financial challenges of the pandemic have stressed many construction companies' balance sheets and encouraged them to consider the divestments of availability-based infrastructure investments that they may hold. As a result of this trend, BBGI undertook considerable acquisition activity in 2020 and we continue to see significant scope to make further investments during the course of 2021.

Investment activity in 2021 will involve sourcing and originating, bidding for and winning new operational availability- based investments, with consideration for measured exposure to construction assets to support future valuation uplift.

The pipeline for availability-based transactions remains generally strong within the Company's key markets. We anticipate these will come from a variety of sources, including:

-- A North American strategic partnership with SNC-Lavalin which has already resulted in the acquisition of five assets amounting to approximately C$191 million and provides the opportunity for potentially five more assets with an expected value in excess of C$250 million;

-- Soliciting off-market transactions through BBGI's extensive network of market participants in Australia, Europe and North America;

-- Participating in primary investment opportunities and bidding on new availability-based assets as part of public sector procurement processes;

   --      Acquiring accretive equity interests from co-shareholders in existing assets; and 
   --      Participating in competitive sale processes, not least to test pricing assumptions. 

The Company will continue to source assets that fit the requirements of its low-risk and globally diversified investment strategy, and which also support its approach to Responsible Investment.

Canada

Canada has remained one of the world's most prolific PPP markets and is one of the most mature and stable of the Company's markets. A total of 291 assets across Canada are procured under the PPP model, with those already in operation or under construction valued at C$139.4 billion - including hospitals, schools, courthouses, and transportation assets.

The Investing in Canada Infrastructure Program was adjusted so that provinces and territories can use federal funding to act quickly on a wider range of more pandemic-resilient infrastructure projects. Under a new Covid-19 resilience funding stream worth up to C$3.3 billion, projects will be eligible for a significantly larger federal cost share and a simplified funding application process will ensure that projects can get underway as soon as possible.

These changes are designed as short-term measures to address the current situation while the Federal Government works towards its long-term infrastructure objectives, including better public transit, more high-speed broadband, wastewater infrastructure and clean energy projects.

With 15 assets in Canada, BBGI is well positioned to participate in an attractive primary pipeline and is considered a very credible purchaser for and manager of secondary assets. In 2020, there was a well-defined pipeline of availability-based transactions and the Company completed one primary investment and four secondary investments in Canada.

The Company also benefits from its North American strategic partnership with SNC-Lavalin which covers five assets. The Company estimates that further investment opportunities in excess of C$250 million could result from the pipeline agreement over the next few years; all of which will be assessed on a case-by-case basis.

The Canadian secondary market is expected to be active in 2021 and beyond, as assets developed over the last several years come into operation and may come to market.

UK

The UK availability-based infrastructure market has been impacted by both positive and negative influences. The decisive parliamentary victory for the Conservative Party in December 2019 has significantly reduced the threat of the Labour Party nationalising certain PFI assets.

Whilst Brexit has dominated Britain's political agenda, it is difficult to say how the UK's decision to leave the EU will affect private investment in infrastructure in the longer-term. The UK is now at a crossroads, with the Conservative Government having made the decision to abolish the PF2 model in October 2018 but also having made an ambitious 100 billion infrastructure pledge. The sentiment among many in the public and private sectors is that some type of public-private partnership is inevitable, but the exact form it will take remains in question.

The Government has promised to use infrastructure spending as a means to kick-start the economy post-Brexit and 'level up' regions within the UK. The Government is committed to major infrastructure investment including health, education, science and defence, with the 2020 Spending Review delivering a GBP100 billion total investment programme in 2021-22 to support the recovery. This is part of the Government's plans to invest over GBP600 billion over the next five years, delivering the highest sustained levels of public sector net investment as a proportion of GDP since the late 1970s.

The Government will continue to develop new revenue support models and consider how existing models - such as the Regulated Asset Base model and Contracts for Difference - can be applied in new areas, and it remains open to new ideas from the market. The Government will not reintroduce the private finance initiative model (PFI/PF2) but we remain optimistic that there will continue to be a role for private capital, particularly where it demonstrates good value for money.

The Management Board notes that some other asset classes are demonstrating a risk-return profile that increasingly matches the Company's low-risk, availability-based investment strategy. The Mutual Investment Model in Wales is a good example of how there continue to be attractive investment opportunities in the UK which are very similar to P3s and include a long-term availability income stream from creditworthy counterparties.

The UK market continues to be a source of secondary market transactions. However, the reduction in secondary market PPP deal flow reflects the slowdown in public sector procurement since 2010 and the large amount of secondary activity in previous years. While supply has decreased, there has been no corresponding decrease in demand. This has resulted in a trend of lower discount rates for stable, mature secondary assets since around 2010.

The Company's appetite for the selective acquisition of quality availability-based assets has not diminished. We will continue to pursue mainly secondary availability-based opportunities in the UK.

US

2020 saw an increase in greenfield P3s in the US. In the first half of the year, ten transactions reached financial close with a total value of $10 billion.

While the PPP delivery method can be instrumental in getting projects operational, US municipalities and states have historically been much more reluctant to adopt PPPs than their Canadian counterparts. Since 2010, 59 greenfield PPP deals reached financial close in the US for $42.2 billion compared to 151 greenfield P3 deals in Canada for C$58.8 billion.

With an increasing number of state legislatures taking steps to make P3s more acceptable for stakeholders, the number of US projects adopting PPPs increased from 7 per cent of closed greenfield deals in 2017 to 8.7 per cent of greenfield deals in 2019. PPP made up 11.5 per cent of all greenfield deals in the first half of 2020.

While some states such as Maryland, Virginia and Texas have a state procurement agency, projects in the US are being procured at all levels - municipal, county and state. This means there can be multiple procurement agencies in one state which makes it more difficult for projects to move forward.

Despite these challenges, the US P3 market remains one of great potential. President Joe Biden has explained his 'Build Back Better' plan will serve as a way to make historic investments in infrastructure . This 'Build Back Better' proposal of about $2 trillion is expected to focus on addressing climate change concerns, the adoption of autonomous vehicles, expanding rural access to broadband, guaranteeing safe drinking water, and modernising highways, bridges and tunnels.

We are currently tracking several transactions and are in active discussions regarding upcoming social infrastructure opportunities. Going forward, we expect that the success of the Ohio River Bridges/East End Crossing asset, which opened on time and on budget, will create opportunities for BBGI.

Continental Europe

47 European PPPs reached financial close during 2020, which is just over half the number of deals in 2019. 19 of these were projects over EUR100 million. While some countries in Europe have slowed down their PPP programmes, there are others which are pushing ahead. Primary and secondary opportunities remain in the Netherlands, Germany and Belgium, and there are also expectations of opportunities arising in France and Poland. Overall, Continental European infrastructure markets remain active with certain countries offering an attractive pipeline of new assets as well as secondary opportunities. We believe these markets are likely to provide attractive investment opportunities over the medium-term.

Scandinavia

Norway has a EUR1 billion road and bridge PPP tender ongoing, and more projects are in the making on a smaller scale elsewhere in the Nordics.

Netherlands

Over the past decade, the Netherlands has built up a reputation for stable, predictable infrastructure deal flow. While no greenfield transport transactions reached financial close during 2020, we are expecting some meaningful secondary opportunities in the Netherlands. Following our investment in three assets in the Netherlands in 2018, we are actively investigating further investment opportunities in this market.

Belgium

BBGI is part of a consortium which successfully pre-qualified for the R4 Ghent project. The project is a 30-year availability-based PPP project involving the upgrade of the R4 West and East in Ghent to primary roads, removing intersections and creating new cycle highways.

Germany

13 PPP transactions closed in Germany in 2020, compared to an average of just three deals per year since 2017, although the majority of those closed in 2020 did not require any equity investment. Germany alone accounted for a third of the overall European greenfield PPP market by deal volumes with EUR5 billion of investment; a ten-fold increase compared to an average of just over EUR500 million in the past three years. The expectation is that the road PPP schemes will continue. With six existing assets in Germany, strong credentials and German language skills amongst our senior executive and asset management team, BBGI is well positioned to consider these upcoming opportunities.

Southern Europe

Countries including Spain, Italy, Portugal and Greece have P3 pipelines. While some of these programmes may be viewed as attractive in terms of their size and the availability-based nature of the assets, the credit rating of the counterparties and certain risk transfer expectations make these investment opportunities unattractive to the Company. Consequently, BBGI has not focused on these opportunities.

Australia

Australia presents a very reliable investment market for availability-style projects, which are vital to the development of infrastructure in the country. The National PPP Policy and Guidelines provide a consistent framework for the public and private sector to work together. The treasury departments of some states have also issued their own PPP guidelines. Furthermore, the central state and territory governments produce strategic infrastructure plans. The country presents a strong pipeline of PPP projects since the establishment of the National PPP Policy Framework in 2008.

The P3 model seems to retain attractiveness to government authorities in Australia - Victoria in particular seems set to continue to use this model not only for social infrastructure but also for large scale infrastructure transport projects. Other states such as New South Wales have indicated a continuing interest in using the model where appropriate. New South Wales and Victoria, the two biggest states, are each spending AUD$90 billion over four years on major projects.

BBGI has three large operational assets in Australia and will continue to monitor the market. The Company is hopeful that some select opportunities may emerge in 2021.

Pipeline assets

 
 Asset                              Sector          Estimated        Concession Length after 
                                                     Asset Capital    construction completion 
                                                     Value 
 Confederation Line (Ottawa,        Rail            C$3.2 billion    30 years 
  ON) 
                                   --------------  ---------------  ------------------------- 
 Eglinton Crosstown LRT (Toronto,   Rail            C$9.1 billion    30 years 
  ON) 
                                   --------------  ---------------  ------------------------- 
 Highway 407 East Extension Phase   Road            C$1.2 billion    30 years 
  I (Ontario) 
                                   --------------  ---------------  ------------------------- 
 John Hart Generating Station       Energy          C$1.1 billion    15 years 
  (Campbell River, BC) 
                                   --------------  ---------------  ------------------------- 
 New Corridor for the Champlain     Road & Bridge   C$3.2 billion    30 years 
  Bridge (Montreal, QC) 
                                   --------------  ---------------  ------------------------- 
 

Expected potential equity investment opportunity of these pipeline assets is in excess of C$250 million.

Primary bidding opportunities

 
 Region          Sector   Estimated        Expected      Investment Status 
                           Asset Capital    Concession 
                           Value[xxii]      Length 
 North America   Road     GBP1 billion     35 years      Shortlisted bidder. 
                                                          Financial submission 
                                                          due in May 2021. 
                -------  ---------------  ------------  ---------------------- 
 Continental     Road     GBP750 million   30 years      Shortlisted as one 
  Europe                                                  of three bidders. 
                -------  ---------------  ------------  ---------------------- 
 

OPERATING & FINANCIAL REVIEW

The Management Board is pleased to present the Operating and Financial Review for the year ended 31 December 2020.

Highlights and Key Performance Indicators

Please see Financial Highlights for a summary of the Year in Numbers for 2020. Certain key performance indicators ('KPIs') for the last four years are highlighted below:

 
KPI                                                               Target                           Dec-17   Dec-18   Dec-19      Dec-20     Commentary 
                                         --------------------------------------------------------  -------  ------  ---------  ----------- 
Dividends                                Progressive long-term dividend growth in pence per share   6.50     6.75     7.00        7.18       Achieved: 
 (paid or declared)                                                                                                                         Second 2020 
                                                                                                                                              interim 
                                                                                                                                            dividend of 
                                                                                                                                              3.59pps 
                                                                                                                                            declared in 
                                                                                                                                             February 
                                                                                                                                               2021 
                                         --------------------------------------------------------  -------  ------  ---------  -----------  ----------- 
NAV per share                                         Positive NAV per share growth                 3.0%     2.8%     2.0%        1.2%       Achieved 
                                         --------------------------------------------------------  -------  ------  ---------  -----------  ----------- 
Compound annual Shareholder Return 
 Since IPO[xxiii]                             7% to 8% on IPO issue price of GBP1 per share         10.5%   11.2%     11.3%       11.0%      Achieved 
                                         --------------------------------------------------------  -------  ------  ---------  -----------  ----------- 
Ongoing Charge                                          Competitive cost position                   0.99%   0.93%     0.88%    0.86%[xxiv]   Achieved 
                                         --------------------------------------------------------  -------  ------  ---------  -----------  ----------- 
Cash Dividend Cover                                               >1.0x                             1.51x   1.50x     1.30x       1.27x      Achieved 
                                         --------------------------------------------------------  -------  ------  ---------  -----------  ----------- 
Refinancing Risk                                        Minimise refinancing risk                    9%       7%       6%          7%        Achieved: 
 (as a percentage of portfolio)                                                                                                              Northern 
                                                                                                                                             Territory 
                                                                                                                                              Secure 
                                                                                                                                            Facilities 
                                                                                                                                            is the only 
                                                                                                                                            asset with 
                                                                                                                                            refinancing 
                                                                                                                                               risk 
                                         --------------------------------------------------------  -------  ------  ---------  -----------  ----------- 
Asset availability                                       > 98% asset availability                    Yes     Yes       Yes         Yes       Achieved 
                                         --------------------------------------------------------  -------  ------  ---------  -----------  ----------- 
Single asset concentration risk          To be less than 25% of portfolio at time of acquisition     12%     11%    10% (GEB)      9%        Achieved 
  (as a percentage of portfolio value)                                                               (GEB)   (GEB)                (GEB) 
                                         --------------------------------------------------------  -------  ------  ---------  -----------  ----------- 
Availability-based assets (as a 
 percentage of portfolio)                           Maximise availability-based assets              100%     100%     100%        100%       Achieved 
                                         --------------------------------------------------------  -------  ------  ---------  -----------  ----------- 
 

Asset Management

Cash Performance

The Company's portfolio of 50 availability-based infrastructure investments continued to perform well during the year, with cash flows ahead of the expectations and the underlying financial models.

Construction exposure

The Company's investment policy is to invest principally in assets that are operational and that have completed construction. Accordingly, investment in construction assets will be limited to 25 per cent of the portfolio value. The rationale for this approach is to be able to produce a stable dividend for our shareholders, while at the same time gaining some exposure to the potential NAV uplift that occurs when assets move from a successful construction stage to the operational stage. The Company has demonstrated in the past that it can manage such assets during the construction period and its successful transition into a stable operational asset.

The Management Board believes that the Company's ability to meet its dividend targets is not compromised by having some construction exposure.

As at 31 December 2020, more than 99 per cent of the assets were operational with only one project in construction. On 5 March 2020, BBGI, together with its consortium partners, was named as the preferred bidder for a PPP motorway project in Canada that will twin Highway 104 between Sutherlands River and Antigonish in Nova Scotia. Financial close occurred in May 2020 and construction is progressing according to plan.

The Company is currently pursuing two primary investment opportunities which, if successful, will add some construction exposure over the course of 2021.

Investment performance

Returns track record

The Company's share price maintained a strong premium to NAV through the majority of the reporting period although there was a period of volatility during the height of the market-wide sell-off in March 2020 due to Covid-19.

BBGI's share price quickly rebounded after this initial adjustment phase, likely due to investors realising that Covid-19 would have a limited impact on BBGI's future cash flows, which come exclusively from long-term availability-based government or government-backed contracts. Against the FTSE All-Share, the Company has shown a low five-year correlation of 27.3 per cent and a beta of 0.24. ([xxv])

Save for the brief period in March 2020, the Company's share price has performed well and has maintained a strong premium to NAV during the reporting period. This was against the backdrop of economic uncertainty which saw two thirds[xxvi] of companies listed on the London Stock Exchange cut, suspend or cancel dividends during 2020 due to the effects of the pandemic.

We continue to believe that a key benefit of the portfolio is the high-quality cash flows derived from long-term availability-based government or government-backed contracts. As a result, the portfolio performance has been largely uncorrelated to the many wider economic factors that may cause market volatility in other sectors.

The share price closed the year at 174pps, an increase of 4.5 per cent (excluding dividends) in 2020 and representing a 26.3 per cent premium to the NAV per share at the year-end.

TSR in the calendar year 2020 was 9.0 per cent whilst TSR since IPO to 31 December 2020 was 157.5 per cent or 11 per cent on a compounded annual basis.

The total accounting return per share in the calendar year 2020 was 6.38 per cent[xxvii], with a dividend yield of 4.1 per cent.

Distribution policy

Distributions on the ordinary shares are planned to be paid twice a year, normally in respect of the six months to 30 June and the six months to 31 December.

Dividends

On 2 April 2020, the Company paid a second interim dividend of 3.50pps for the period 1 July 2019 to 31 December 2019. The 2020 interim dividend of 3.59pps was paid on 22 October 2020. In February 2021, subsequent to the year-end, the Company declared a second interim dividend of 3.59pps in respect of the six-month period ended 31 December 2020; resulting in a total dividend of 7.18pps for the year ended 31 December 2020.

As previously reported, the Company is targeting an increase in the 2021 dividend to 7.33pps, which represents a further increase of 2.1 per cent for the year and a progressive long-term dividend growth averaging 3.3 per cent since IPO. Furthermore, the Company is targeting a dividend of 7.48pps for 2022.

Proven progressive dividend policy

Average dividend increase of 3.3 per cent from 2012 to 2021

   --      FY 2021 target dividend of 7.33pps[xxviii], up 2.1 per cent 
   --      FY 2022 target dividend of 7.48pps([xxviii]) 

Investor communications

The Company places great importance on communication with its shareholders and welcomes their views. The Company intends to remain at the forefront of disclosure and transparency in its asset class, and therefore the Management Board and Supervisory Board regularly review the level and quality of the information that the Company makes public.

The Company formally reports twice a year through the Annual and Interim Reports and Financial Statements. Other current information on the Company is provided through the Company's website and through market announcements. At Shareholder General Meetings, each share is entitled to one vote, all votes validly cast at such meetings (including by proxy) are counted, and the Company announces the results on the day of the relevant meeting.

The Management and Supervisory Boards are keen to develop and maintain positive relationships with the Company's shareholders. As part of this process, immediately following release of the Annual and Interim Reports at the end of March and August each year, the co-CEOs present the Company's results to market analysts and subsequently conduct investor roadshows and offer shareholder meetings to discuss the results, explain the ongoing strategy of the Company, and receive feedback.

Outside of these formal meetings, feedback from investors is received via the Management Board and the Corporate Brokers and - together with the feedback from results meetings - this is reported to the Supervisory Board. Throughout the year under review, the co-CEOs have made themselves available to shareholders and key sector analysts, for discussion of key issues and expectations around Company performance. The co-CEOs intend to continue to be available to meet with shareholders periodically to facilitate an open two-way communication on the development of the Company. Shareholders may contact members of both the Management and Supervisory Boards at the registered office of the Company, the address for which can be found at the end of the Annual Report or on the Company's website at www.bb-gi.com.

While shareholder engagement is typically conducted by the Co-CEOs, it should be noted that the Chairman also makes herself available throughout the year to understand the views of shareholders on governance and performance against the Company's investment objectives and investment policy. Given this level of engagement with shareholders, the Management and Supervisory Boards consider that they meet the requirements of AIC Code Principle 5D.

Share capital

The issued share capital of the Company is 664,691,283 ordinary shares of no-par value. All of the ordinary shares

issued rank pari passu. During the year ended 31 December 2020, the Company issued 34,478,057 shares.

Voting rights

There are no special voting rights, restrictions or other rights attached to any of the ordinary shares. There are no restrictions on the voting rights attaching to ordinary shares.

Discount management

Although the Company's shares have continuously traded at a premium since IPO in December 2011, except for a brief period in March 2020, the Management Board will actively monitor any discount to the NAV per share at which the ordinary shares may trade in the future. The Management Board will report to the Supervisory Board on any such discount and propose actions to mitigate this.

Purchase of ordinary shares by the Company in the market

In order to assist in the narrowing of any discount to the NAV at which the ordinary shares may trade from time to time and/or to reduce discount volatility, the Company may, subject to shareholder approval:

-- make market purchases of up to 14.99 per cent annually of its issued ordinary shares; and

-- make tender offers for ordinary shares.

No shares have been bought back during the year ended 31 December 2020. The most recent authority to purchase ordinary shares which may be held in treasury or subsequently cancelled was granted to the Company on 30 April 2020. This authority expires on the date of the next Annual General Meeting ('AGM') to be held on 30 April 2021, at which point the Company will propose that its authority to buy back shares be renewed.

Continuation vote

The Company's Articles of Association ('Articles') require the Boards to offer a continuation vote to the Company's shareholders at the AGM to allow the Company to continue in its current form, with a further vote every two years. On 30 April 2019, at the Company's AGM, the shareholders voted unanimously for the continuation of the Company. In accordance with the Articles, a further continuation vote will be offered to shareholders at the AGM due to be held in 30 April 2021.

VALUATION

The Management Board is responsible for carrying out the fair market valuation of the Company's investments, which it then presents to the Supervisory Board for their consideration and, if appropriate, approval of this Report. The valuation is carried out on a six-monthly basis as at 30 June and 31 December each year and is reviewed by an independent third-party valuation expert.

The valuation is determined using the discounted cash flow methodology. The Company makes forecast assumptions for key macro-economic factors having an effect on the cash flows forecast of investments such as inflation rates and deposit rates based on market data, publicly available economic forecasts and long-term historical averages, and adjusts for any enacted changes in taxation during the reporting period. In addition, the Company exercises its judgement in assessing the expected future cash flows from each investment based on the detailed financial models produced by each Portfolio Company, and adjusting these where necessary to reflect the Company's assumptions as well as any specific cash flow assumptions.

The fair value for each investment is then derived from the application of an appropriate discount rate, alongside reporting period-end currency exchange rate and withholding taxes (if applicable). The discount rate considers risks associated with the investment including the phase the investment is in such as construction, ramp-up or stable operation, investment specific risks and opportunities as well as country specific factors. The Company uses its judgement in determining the appropriate discount rates. This is based on its knowledge of the market, considering information obtained from its investment and bidding activities, benchmark analysis with comparable companies and sectors, discussions with advisers in the relevant markets, and publicly available information. The valuation methodology remains unchanged from previous reporting periods.

A breakdown of the movements in the portfolio value and net asset value is shown in the chart and table below.

Portfolio movement 31 December 2019 to 31 December 2020

The Company's portfolio value at 31 December 2020 was GBP895.7 million (31 December 2019: GBP846.0 million), representing an increase of 5.9 per cent.

 
  NAV movement 31 December 2019 to 31 December    GBP million 
                      2020 
NAV at 31 December 2019                                 858.6 
================================================  =========== 
Deduct: other net assets at 31 December 2019(1)        (12.6) 
================================================  =========== 
Portfolio value at 31 December 2019                     846.0 
================================================  =========== 
Acquisitions(2)                                          59.2 
================================================  =========== 
Distributions from investments(3)                      (69.1) 
================================================  =========== 
Rebased opening portfolio value at 1 January 
 2020                                                   836.0 
================================================  =========== 
Unwinding of discount                                    59.8 
================================================  =========== 
Change in market discount rate                           18.5 
================================================  =========== 
Change in macro-economic assumptions                   (33.5) 
================================================  =========== 
Value enhancements                                       11.6 
================================================  =========== 
Foreign exchange gain(4)                                  3.2 
================================================  =========== 
Portfolio value at 31 December 2020                     895.7 
================================================  =========== 
Other net assets at 31 December 2020(1)                  20.3 
NAV at 31 December 2020                                 916.0 
                                                  ----------- 
 

(1) These figures represent the net assets of the Group after excluding the investments at fair value through profit or loss (Investments at FVPL). Refer to the Pro forma balance sheet in the Financial Results section of this Annual Report for further breakdown.

(2) Refer to the Portfolio Review for further details on the acquisitions during the period.

(3) While distributions from investments reduce the portfolio value, there is no impact on the Company's NAV as the effect of the reduction in the portfolio value (investments at fair value through profit or loss) is offset by the receipt of cash at the consolidated Group level. Distributions are shown net of withholding tax.

(4) The result from balance sheet hedging is recorded at the consolidated Group level, and while inversely correlated, does not directly impact portfolio value. The net foreign exchange loss on hedging over the period, recorded at the consolidated Group level, was GBP1.5 million.

Key drivers for NAV change

The rebased opening portfolio value after considering acquisitions in the reporting period of GBP59.2 million and cash distributions from investments of GBP69.1 million was GBP836.0 million.

Unwinding the discount and value enhancements:

During the period, the Company recognised GBP71.4 million, or an 8.3 per cent increase in NAV, from the unwinding of discounts and value accretive enhancements. As the Company moves closer to forecasted investment distribution dates, the time value of those cash flows increases on a net present value basis. The portfolio value growth from unwinding of discount during the period was approximately GBP59.8 million or a 7.0 per cent change in NAV.

The remaining GBP11.6 million, or a 1.4 per cent change in NAV, represents inter alia the net effect of value accretive enhancements across the portfolio through active management. This includes amongst others the net valuation effect of enhanced operational performance through our active and hands on asset management approach. The activities involved inter alia managing change orders and earning a fee for this service, tax optimisation, cost savings due to lower fees on management service agreements and cash optimisations. Where appropriate, we have also made use of reduced occupancy at some of our assets to accelerate maintenance or improvement works. For example, we were able to take advantage of the low oil price to accelerate re-pavement works on one of our roads which resulted in an overall lifecycle saving. Other positive effects derived from adjusting risk premiums reflected in specific investment discount rates as well as reducing premiums for investments moving towards the stable operational phase.

Change in discount rate:

The market for availability-based transactions continues to be very competitive and discount rates are compressing further. This is a result of a continued low interest environment and a high investment demand in the availability-based social infrastructure sector, while the supply of new greenfield infrastructure investments is not keeping pace. Based on data from transactional activity, benchmark analysis with comparable companies and sectors, discussions with advisers in the relevant markets, and publicly available information, BBGI has reduced its weighted average discount rate to approximately 6.77 per cent (31 December 2019: 7.07 per cent), representing a reduction of 30 bps from 31 December 2019.

Change in macro-economic assumptions:

During the period, the Company recognised a reduction in the portfolio value due to changes in the macro-economic assumptions: changes in corporate tax rates in the UK, Netherlands and Province of Alberta resulting in a portfolio value decrease of GBP4.1 million; a change in the forecasted deposit rates; replacing the retail price index ('RPI') with the consumer price index including owner occupiers' housing ('CPIH') beginning 1 January 2031 in the UK[xxix]; and the actual indexation against the previously modelled indexation resulting in a further portfolio value decrease of GBP29.4 million.

In total, the Company recognised a reduction of GBP33.5 million, or a 3.9 per cent decrease in NAV, from changes in these assumptions.

The net effect of inflation, against the 31 December 2019 modelled macro-economic assumptions, on the portfolio value has been negative, and is included in the value above.

Foreign Exchange:

The forecasted distributions from investments are converted to Sterling at either the hedged rate, for a predetermined percentage of cash flows forecast to be received over the next four years, or at the closing rate for unhedged future cash flows.

A significant proportion of the Company's underlying investments are denominated in currencies other than Sterling. The Company maintains its accounts, prepares the valuation and pays dividends in Sterling. Accordingly, fluctuations in exchange rates between Sterling and the relevant local currencies will affect the value of the Company's underlying investments.

During the year ended 31 December 2020, the depreciation of Sterling against the Australian Dollar and the Euro, and the appreciation of Sterling against the Canadian Dollar, the US Dollar and the Norwegian Krone accounted for a net increase in the portfolio value of GBP3.2 million. Since listing in December 2011, the net cumulative effect of foreign exchange movements on the portfolio value, after considering the effect of balance sheet hedging, has been a decrease of GBP7.8 million which is less than 0.9 per cent of the 31 December 2020 NAV.

The table below shows those closing rates, which were used to convert unhedged future cash flows into the reporting currency at 31 December 2020.

 
 GBP/    Valuation impact    FX rates as       FX rates as       FX rate change 
                              of 31 December    of 31 December 
                              2020              2019 
 AUD     Positive            1.771             1.880             5.80% 
        ==================  ================  ================  =============== 
 CAD     Negative            1.739             1.716             (1.34%) 
        ==================  ================  ================  =============== 
 EUR     Positive            1.113             1.176             5.36% 
        ==================  ================  ================  =============== 
 NOK     Negative            11.670            11.595            (0.65%) 
        ==================  ================  ================  =============== 
 USD     Negative            1.365             1.319             (3.49%) 
        ==================  ================  ================  =============== 
 

Although the closing rate is the required conversion rate to use, it is not necessarily representative of future exchange rates as it reflects a specific point in time.

The Group uses forward currency swaps to (i) hedge 100 per cent of forecasted cash flows over the next four years on an annual rolling basis and (ii) to implement balance sheet hedging in order to limit the decrease in the NAV to approximately 3 per cent for a 10 per cent adverse movement in foreign exchange rates ([xxx]) . This is achieved by hedging a portion of the non-Sterling and non-Euro portfolio value. The benefit of the Company's hedging strategy can also be expressed as a theoretical or implicit portfolio allocation to Sterling exposure. In other words, on an unhedged basis, the portfolio allocation to Sterling exposure would need to be approximately 72 per cent to obtain the same NAV sensitivity to a 10 per cent adverse change in foreign exchange rates as shown below.

Covid-19

The portfolio continued its strong performance over the reporting period with no material adverse effect on valuation resulting from Covid-19. This strong performance is primarily as a result of the Company holding a low-risk, 100 per cent availability-based portfolio, coupled with strong stakeholder collaboration during the reporting period. There continues to be uncertainty surrounding Covid-19 with the consequences and potential disruptions difficult to foresee, but currently our portfolio remains resilient in this challenging market environment. We will continue to work very closely with all stakeholders to help mitigate the risks and effects of this global pandemic.

Discount rates

The discount rates used for individual investments range between 6.20 per cent and 8.75 per cent. The weighted average rate is approximately 6.77 per cent (31 December 2019: 7.07 per cent), representing a reduction of 30 bps from 31 December 2019, which management believes to be towards the conservative end of the range for a portfolio of availability-based social infrastructure investments. This methodology calculates the weighted average based on the value of each investment in proportion to the total portfolio value i.e. based on the net present value of their respective future cash flows.

The discount rate considers risks associated with the investment including the phase the investment is in, such as construction, ramp-up or stable operation, investment specific risks and opportunities as well as country specific factors.

BBGI applies a risk premium for investments in construction to reflect the higher-risk inherent in the construction phase of any investment's lifecycle. Currently, the portfolio has one investment in construction, Highway 104, which represents 0.5 per cent of the overall portfolio value. BBGI has also applied a risk premium to a limited number of other investments to reflect the individual situations. For example, adjustments have been applied to acute hospitals in the UK where a risk premium of 50bps continues to be applied. This risk premium reflects the continued situation in the UK where some public health clients are under cost pressure and are actively looking for cost savings including deductions. To date, BBGI has not been affected. The only UK acute hospital in the portfolio is Gloucester Royal Hospital, which represents less than one per cent of the overall NAV.

General market activity

Through the course of the Covid-19 pandemic, there has been an increased focus on valuation from investors as the varied risk profiles of the different investment classes within the infrastructure sector have become more pronounced. For example, demand-based investments such as airports, and (shadow) toll roads have generally suffered severe traffic reductions, thereby reducing revenue. Investors in demand-based investments have had to revisit traffic growth assumptions, at least in the short-term. In addition, lower than forecasted volumes will not only impact demand-based income but also other third-party income such as retail business in airports and rail stations, motorway service stations and other income sources reliant on customer footfall.

On the other hand, availability-based investments passed the stress test and proved to be very robust as the sector has not experienced any material negative impact. This, coupled with the historically low interest rate environment, has further contributed to increased competition for PPP investments. The deal volume in 2020 shows that demand for stable yielding investments is strong even with continued uncertainty surrounding Covid-19, and market intelligence suggests discount rates in the secondary market remain very competitive and likely to decrease further in the future.

Macro-economic assumptions

Apart from the discount rates, the Company uses the following assumptions for the cash flows:

 
                                    31 December 2020          31 December 2019 
 Indexation       UK(1) RPI/CPIH    2.75% / 2.00%             2.75% 
                 ================  ========================  ======================== 
                  Canada            2.00% / 2.35%             2.00% / 2.35% 
                 ================  ========================  ======================== 
  Australia                         2.50%                     2.50% 
 ================================  ========================  ======================== 
  Germany                           2.00%                     2.00% 
 ================================  ========================  ======================== 
  Netherlands(2)                    2.00%                     2.00% 
 ================================  ========================  ======================== 
  Norway(2)                         2.25%                     2.25% 
 ================================  ========================  ======================== 
  USA(3)                            2.50%                     2.50% 
 ================================  ========================  ======================== 
 Deposit          UK                0.25% to Q4 2023, then    1.00% to Q4 2023, then 
  rates (p.a.)                       1.00%                     2.50% 
                 ================  ========================  ======================== 
                  Canada            0.75% to Q4 2023, then    1.00% to Q4 2023, then 
                                     1.50%                     2.50% 
                 ================  ========================  ======================== 
                  Australia         0.50% to Q4 2023, then    2.00% to Q4 2023, then 
                                     2.00%                     3.00% - 4.00% (medium 
                                                               term) 
                 ================  ========================  ======================== 
                  Germany           0.00% to Q4 2023, then    1.00% to Q4 2023, then 
                                     0.50%                     2.50% 
                 ================  ========================  ======================== 
                  Netherlands       0.00% to Q4 2023, then    1.00% to Q4 2023, then 
                                     0.50%                     2.50% 
                 ================  ========================  ======================== 
                  Norway            0.25% to Q4 2023, then    1.80% to Q4 2023, then 
                                     2.00%                     3.00% 
                 ================  ========================  ======================== 
                  USA               0.25% to Q4 2023, then    1.00% to Q4 2023, then 
                                     1.50%                     2.50% 
                 ================  ========================  ======================== 
 Corporate        UK                19%                       19% to 2019, then 17% 
  tax rates 
  (p.a.) 
                 ================  ========================  ======================== 
                                    23.0% / 26.5% / 27% / 
  Canada(4)                          29%                      26.5% / 27% / 29% 
 ================================  ========================  ======================== 
  Australia                         30%                       30% 
 ================================  ========================  ======================== 
                  Germany(5)        15.8% (incl. solidarity   15.8% (incl. solidarity 
                                     charge)                   charge) 
                 ================  ========================  ======================== 
                  Netherlands(6)    25%                       25% to 2020, then 21.7% 
                 ================  ========================  ======================== 
  Norway                            22%                       22% 
 ================================  ========================  ======================== 
  USA                               21%                       21% 
 ================================  ========================  ======================== 
 

(1) On the 25th of November 2020, the UK Government announced the phasing out of RPI after 2030, and replacement with CPIH; the Company's UK portfolio indexation factor changes from RPI to CPIH beginning on 1 January 2031.

(2) CPI indexation only. Where investments are subject to a basket of indices, these non-CPI indices are not considered.

(3) 80 per cent of ORB indexation factor for revenue is contractual and is not tied to CPI.

(4) Individual tax rates vary among Canadian Provinces.

(5) Individual local trade tax rates are considered in addition to the tax rate above.

(6) In September 2020, the Dutch Government confirmed that the planned reduction of the headline corporate income tax rate (CIT) to 21.7 per cent will not be introduced in 2021.

Sensitivities

Discount rate sensitivity

The weighted average discount rate that is applied to the Company's portfolio of investments is the single most important judgement and variable.

The following table shows the sensitivity of the NAV to a change in the discount rate.

 
                            Change in NAV 31 December 
Discount Rate Sensitivity    2020 
                            (GBP73.6) million, i.e. 
Increase by 1% to 7.77%(1)   (8.0)% 
                            ========================== 
Decrease by 1% to 5.77%(1)  GBP85.1 million, i.e. 9.3% 
                            ========================== 
 

(1) Based on the weighted average discount rate of 6.77 per cent.

Inflation sensitivity

The Company's investments are contractually entitled to receive availability-based income streams from public sector clients, which are adjusted every year for inflation. Facilities management subcontractors for accommodation investments and operating and maintenance subcontractors for transport investments have similar indexation arrangements. The investment cash flows are positively correlated with inflation (e.g. RPI, CPI, or a basket of indices).

The table below shows the sensitivity of the NAV to a change in inflation rates compared to the assumptions in the table above:

 
Inflation Sensitivity  Change in NAV 31 December 
                        2020 
Inflation +1%          GBP37.8 million, i.e. 4.1% 
                       ========================== 
                       (GBP31.0) million, i.e. 
Inflation -1%           (3.4)% 
                       ========================== 
 

Foreign exchange sensitivity

As described above, a significant proportion of the Company's underlying investments are denominated in currencies other than Sterling.

The following table shows the sensitivity of the NAV to a change in foreign exchange rates:

 
                              Change in NAV 31 December 
Foreign Exchange Sensitivity   2020 
                              (GBP25.5) million, i.e. 
Increase by 10%(1)             (2.8)% 
                              ========================== 
Decrease by 10%(1)            GBP25.4 million, i.e. 2.8% 
                              ========================== 
 

(1) Sensitivity in comparison to the spot foreign exchange rates at 31 December 2020 and considering the contractual and natural hedges in place, derived by applying a 10 per cent increase or decrease to the Sterling/foreign currency rate.

Deposit rate sensitivity

Project Companies typically have cash deposits which are required to be maintained as part of the senior debt funding requirements. (e.g. six-month debt service reserve accounts, maintenance reserve accounts). The asset cash flows are positively correlated with the deposit rates.

The table below shows the sensitivity of the NAV to a percentage point change in long-term deposit rates compared to the assumptions in the table above:

 
                          Change in NAV 31 December 
Deposit Rate Sensitivity   2020 
Deposit rate +1%          GBP17.1 million, i.e. 1.9% 
                          ========================== 
                          (GBP16.6) million, i.e. 
Deposit rate -1%           (1.8)% 
                          ========================== 
 

Lifecycle costs sensitivity

Lifecycle is the cost of planned interventions or replacing material parts of an asset to maintain it over the concession term. It involves larger items that are not covered by routine maintenance and for roads it will include items such as replacement of asphalt, rehabilitation of surfaces, or replacement of electromechanical equipment. Lifecycle obligations, are generally passed down to the facility maintenance provider with the exception of transportation investments where these obligations are typically retained by the Portfolio Company.

Of the 50 investments in the portfolio, 17 investments retain the lifecycle obligations. The remaining 33 investments have this obligation passed down to the subcontractor.

The table below shows the sensitivity of the NAV to of a change in lifecycle costs:

 
Lifecycle Costs Sensitivity  Change in NAV 31 December 
                              2020 
                             (GBP17.6) million, i.e. 
Increase by 10%(1)            (1.9)% 
                             ========================== 
Decrease by 10%(1)           GBP17.4 million, i.e. 1.9% 
                             ========================== 
 

(1) Sensitivity applied to the 17 investments in the portfolio which retain the lifecycle obligation i.e. the obligation is not passed down to the subcontractor.

Corporate tax rate sensitivity

The profits of each Portfolio Company are subject to corporation tax in the country where the Portfolio Company is located.

The table below shows the sensitivity of the NAV to of a change in corporate tax rates compared to the assumptions in the table above:

 
                                Change in NAV 31 December 
Corporate Tax Rate Sensitivity   2020 
                                (GBP6.6) million, i.e. 
Tax rate +1%                     (0.7)% 
                                ========================= 
Tax rate -1%                    GBP6.6 million, i.e. 0.7% 
                                ========================= 
 

On 3 March, 2021, the UK Chancellor of the Exchequer announced a plan to increase the UK Corporate Tax rate to 25 per cent from April 2023. Whilst this increase is not currently enacted and is still to be approved by the UK Parliament, the Company recognises that any change in the UK Corporate Tax rate will have an effect on the portfolio valuation. It is the Company's policy to value those tax rates that have been enacted into law at the reporting period date. Notwithstanding this, and to aid transparency, we have calculated that this increase of the UK Corporation Tax rate would result in a GBP8.9 million or 1.0 per cent reduction in NAV.

Senior debt refinancing sensitivity

Assumptions are used where a refinancing of senior debt financing is required for an investment during the remaining investment concession term. There is a risk that such assumptions may not be achieved.

The table below shows the sensitivity of the NAV to a +100bps adjustment to the forecasted margins. The base rate for senior debt is either fixed or a long-term interest swap is available with the effect that none of our investments are subject to changes in base rates.

 
                                     Change in NAV 31 December 
Senior Debt Refinancing Sensitivity   2020 
                                     (GBP7.7) million, i.e. 
Margin +1%(1)                         (0.8)% 
                                     ========================= 
 

(1) The Northern Territory Secure Facilities investment is the only remaining investment in the BBGI portfolio with refinancing risk.

GDP sensitivity

The BBGI portfolio is not sensitive to GDP.

The principal risks faced by the Group and the mitigants in place are outlined in the Risk section.

Key Portfolio Company and portfolio cash flow assumptions underlying NAV calculation include:

   --      Discount rates and the assumptions as set out above continue to be applicable. 

-- The updated financial models used for valuation accurately reflect the terms of all agreements relating to the Portfolio Companies and represent a fair and reasonable estimation of future cash flows accruing to the Portfolio Companies.

-- Cash flows from and to the Portfolio Companies are received and made at the times anticipated.

-- Non-UK Portfolio Companies are valued in local currency and their cash flows converted to Sterling at either the period-end exchange rates or the contract hedge rate.

-- Where the operating costs of the Portfolio Companies are fixed by contract, such contracts are performed, and where such costs are not fixed, they remain within the current forecasts in the valuation models.

-- Where lifecycle costs/risks are borne by the Portfolio Companies, they remain in line with the current forecasts in the valuation models.

-- An assessment is made of construction defect remediation where the risk sits with the Portfolio Company.

-- Contractual payments to the Portfolio Companies remain on track and contracts with public sector or public sector backed counterparties are not terminated before their contractual expiry date.

-- Any deductions or abatements during the operational period of Portfolio Companies are fully passed down to subcontractors under contractual arrangements or are part of the planned (lifecycle) forecasts.

-- Where the Portfolio Companies own the residual property value in an investment, the projected amount for this value is realised.

-- In cases where the Portfolio Companies have contracts that are in the construction phase, they are either completed on time or any delay costs are borne by the construction contractors.

-- There are no tax or regulatory changes in the future which negatively impact cash flow forecasts.

In forming the above assessments, BBGI works with Portfolio Company management teams, as well as using due diligence information from, or working with, suitably qualified third parties such as technical advisers, legal advisers and insurance advisers.

FINANCIAL RESULTS

The Consolidated Financial Statements of the Group for the year ended 31 December 2020 are in the Financial Statements section of this Annual Report .

BASIS OF ACCOUNTING

The Group has prepared its Consolidated Financial Statements in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU'). In accordance with IFRS the Company qualifies as an Investment Entity and as such, does not consolidate its investments in subsidiaries that qualify as investments at fair value through profit or loss ('Investments at FVPL'). Certain subsidiaries that are not Investments at FVPL, but instead provide investment-related services or activities that relate to the investment activities of the Group, are consolidated. As an Investment Entity, the Company recognises distributions from investments at FVPL as a reduction in their carrying value. These distributions reduce the estimated future cash flows which are used to determine the fair value of the Investments at FVPL.

INCOME AND COSTS

 
 Pro forma Income Statement                        Year ended    Year ended 
                                                       31 Dec 
                                                           20     31 Dec 19 
                                                  GBP million   GBP million 
===============================================  ============  ============ 
 Income from investments at fair value through 
  profit or 
 loss ('FVPL income')                                    63.3          69.8 
 Other operating income                                   0.2             - 
===============================================  ============  ============ 
 Operating income                                        63.5          69.8 
===============================================  ============  ============ 
 
 Administrative expenses                                (9.6)         (8.5) 
 Other operating expenses                               (7.3)         (7.3) 
 Net loss on balance sheet hedging and net              (2.3)             - 
  finance result 
===============================================  ============  ============ 
 Profit before tax                                       44.3          54.0 
 Tax expense                                            (2.6)         (3.0) 
===============================================  ============  ============ 
 
 Profit from continuing operations                       41.7          51.0 
===============================================  ============  ============ 
 
 Basic earnings per share (pence)                        6.58          8.43 
===============================================  ============  ============ 
 

During the year, the Group recognised FVPL income of GBP63.3 million (31 December 2019: GBP69.8 million). This FVPL income is made up of a combination of the positive effect of the unwinding of discount, changes in market discount rates, value enhancements, the net effect of foreign exchange on the underlying investment portfolio with a partial offset resulting from changes in macro-economic assumptions. A more detailed analysis of the movement in Investments at FVPL is outlined in the Valuation section of this Report.

Administration expenses include, amongst others, personnel costs, legal and professional fees and office and administration costs. See further detail in the Corporate Cost analysis.

The Group has implemented a policy of using forward currency swaps to hedge its anticipated non-Sterling and non-Euro denominated cash flows on a four-year rolling basis, referred to as cash flow hedging, and also uses 12-month forward currency swaps to hedge part of the non-Sterling, non-Euro denominated portfolio values, referred to as balance sheet hedging. During the year, the Company recognised a net loss GBP0.9 million on cash flow hedging (31 December 2019: GBP3.0 million net loss) and is reflected in 'Other operating expenses' in the table above.

During the year the Company recognised a net loss from balance sheet hedging of GBP0.6 million (31 December 2019: GBP2.1 million net gain).

Profit from continuing operations for the year ended 31 December 2020 decreased by 18.2 per cent to GBP41.7 million (31 December 2019: GBP51.0 million).

Group Level Corporate Cost Analysis

The table below is prepared on an accrual basis.

 
                                   Year ended    Year ended 
                                       31 Dec 
                                           20     31 Dec 19 
 Corporate costs                  GBP million   GBP million 
=============================  ==============  ============ 
 Net finance costs                        1.6           2.0 
 Personnel costs                          6.2           4.8 
 Legal and professional fees              2.6           2.4 
 Office and administration                0.8           1.3 
 Acquisition related costs                1.6           1.1 
 Taxes                                    2.6           3.0 
=============================  ==============  ============ 
 
 Corporate costs                         15.4          14.6 
=============================  ==============  ============ 
 

Net finance costs for the year were GBP1.6 million (31 December 2019: GBP2.0 million). The Company used the proceeds from distributions from its investments and the proceeds from its November 2020 placing to repay outstanding borrowings, resulting in a decrease in finance costs in the year. The cash flow analysis section of this report provides further information regarding utilisation and repayments under the RCF during the year.

Personnel costs for the year were GBP6.2 million (31 December 2019: GBP4.8 million) reflecting an increase in staff numbers as well as remuneration. Refer to the 'Remuneration Report' section of this report for further detail on Management Board and Supervisory Board remuneration.

During the year, the Company acquired a 50 per cent equity interest in the Highway 104 project and a 25 per cent equity interest in Champlain bridge, both projects are located in Canada. In addition, the Company acquired follow-on interests in the Stanton Territorial Hospital, the KVH Hospital in Canada and the N18 Motorway in the Netherlands. Acquisition related costs incurred during the year amounted to GBP1.6 million (31 December 2019: GBP1.1 million) and includes unsuccessful bid costs amounting to GBP0.8 million (31 December 2019: GBP0.7 million).

Ongoing Charges

The Ongoing Charges ('OGC') percentage presented in the table below is prepared in accordance with the AIC recommended methodology, latest update published in October 2020[xxxi]. The percentage represents the annualised reduction or drag on shareholder returns as a result of recurring operational expenses incurred in managing the Group's consolidated entities, and provides an indication of the level of recurring costs likely to be incurred in managing the Group in the future.

 
                                                         Year ended    Year ended 
                                                             31 Dec 
                                                                 20     31 Dec 19 
 Ongoing Charges Information                            GBP million   GBP million 
-----------------------------------------------------  ------------  ------------ 
 Ongoing Charges (using AIC recommended methodology)          0.86%         0.88% 
-----------------------------------------------------  ------------  ------------ 
 

In prior reporting periods, fees linked directly to investment performance were included in the reported OGC. It is however the view of the AIC that compensation schemes which are linked directly to investment performance could be viewed as analogous to performance fees paid by externally managed investment companies and should therefore be excluded from the principal OGC calculation. Therefore, the reported OGC for 31 December 2020 excludes such fees.

The Management Board will continue to follow this AIC recommended methodology in future reporting periods, thereby facilitating a direct comparison with externally managed investment companies which follow the AIC recommended methodology for calculating the Ongoing Charge.

Fees directly linked to investment performance recorded in 2020 as a percentage of average NAV were 0.08 per cent. Combined therefore the aggregate of Ongoing Charges plus investment performance fees was 0.94% in the year.

For the year ended 31 December 2020, and in line with AIC recommendations, certain non-recurring costs were excluded from the Ongoing charges, most notably acquisition-related advisory costs of GBP1.6 million, taxation of GBP2.6 million and net finance costs of GBP1.6 million.

The table below provides a reconciliation of the Ongoing Charges and the Ongoing Charges Percentage to the administration expenses under IFRS.

 
                                                             Year ended     Year ended 
                                                                 31 Dec 
                                                                     20 
                                                            GBP million      31 Dec 19 
                                                                (except    GBP million 
                                                                     %)     (except %) 
========================================================  =============  ============= 
 Administration expenses to 31 December                             9.6            8.5 
 Less: Non-recurring costs as per AIC guidelines 
          Non-recurring professional and external 
           advisory costs                                         (0.4)          (0.3) 
          Personnel costs related to acquisition 
           or non-recurring                                       (0.4)          (0.4) 
          Compensation linked to investment performance           (0.8)              - 
          Other non-recurring costs                               (0.3)          (0.3) 
========================================================  =============  ============= 
 Ongoing Charges                                                    7.7            7.5 
 Divided by: 
 Average undiluted Investment Basis NAV for 
  2020 (average of 31 
            December 2020: GBP916.0 million and 30 
             June 2020: GBP860.8 million) million)                888.4          858.3 
========================================================  =============  ============= 
 Ongoing Charges percentage(1)                                    0.86%          0.88% 
========================================================  =============  ============= 
 

(1) Percentage calculation is based on actual results rather than rounded numbers

During the year, in response to the UK's departure from the EU and a requirement from Euroclear UK and Ireland, the Company was required to interpose an EEA-based Central Securities Depository into the shareholding structure, in order to ensure uninterrupted trade settlement of the Company's non-certified shares on the LSE post the completion of the Brexit transition period on 31 December 2020. The non-recurring advisory and set up costs of this restructuring amounted to approximately GBP0.2 million and are reflected in the Non-recurring professional and external advisory costs in the table above.

Cash flows

The table below summarises the sources and uses of cash and cash equivalents for the Group.

 
                                                 Year ended    Year ended 
                                                  31 Dec 20     31 Dec 19 
                                                GBP million   GBP million 
=============================================  ============  ============ 
 Distributions from Investments at FVPL(1)             72.8          64.0 
 Net cash flows from operating activities            (18.5)        (10.9) 
 Additional Investments at FVPL                      (59.2)        (62.9) 
 Net cash flows from financing activities             (9.5)          33.9 
 Impact of foreign exchange gain on cash and 
  cash equivalents                                      0.2           0.3 
=============================================  ============  ============ 
 Net cash (outflow) inflow                           (14.2)          24.4 
=============================================  ============  ============ 
 

(1) These distributions are shown gross of withholding tax and include the realisation of distributions in transit at 31 December 2019. The associated withholding tax outflow is included in 'Net cash flows from operating activities'.

The Group's portfolio of investments performed well during the year, with rebased cash flows ahead of business plan.[xxxii] Distributions from Investments at FVPL, increased during the year by 13.8 per cent to GBP72.8 million.

Additional investments during the year were financed through a combination of borrowings under the RCF, placing proceeds and reinvestment of distributions received from Investments at FVPL.

The Company borrowed an additional amount of GBP41.0 million under the RCF during the year and also repaid a total of GBP62.0 million over the same period. There were no borrowings outstanding under the RCF at 31 December 2020. The net proceeds from the November 2020 capital raise were used to part finance the acquisition of the Champlain Bridge investment, acquired in December 2020, and also to repay those amounts borrowed under the RCF.

Cash dividends paid during the year ended 31 December 2020 amounted to GBP42.6 million, an increase of GBP1.8 million on the previous year.

The Consolidated Statement of Cash Flows provides further details of cash flows during the year ended 31 December 2020.

For the year ended 31 December 2020, the Group has a cash dividend cover ratio[xxxiii] of 1.27x (year ended 31 December 2019: 1.30x) and is calculated as follows:

 
                                                     31 Dec 20     31 Dec 19 
                                                   GBP million   GBP million 
                                                       (except       (except 
                                                        ratio)        ratio) 
================================================  ============  ============ 
 
 Distributions received from Investments                  72.8          64.0 
 Less: Net cash flows from operating activities 
  under 
       IFRS (consolidated)                              (18.5)        (10.9) 
================================================  ============  ============ 
 Net distributions                                        54.3          53.1 
 Divided by: Cash dividends paid under IFRS 
  (consolidated)                                          42.6          40.8 
================================================  ============  ============ 
 Cash Dividend Cover (ratio)                             1.27x         1.30x 
================================================  ============  ============ 
 

The strong cash dividend coverage in 2020 was again supported by BBGI's contracted portfolio cash flows which, unlike demand-based assets, are not sensitive to the performance of the wider economic environment. The Company has reaffirmed the target dividend of 7.33pps for 2021 and is providing a new dividend target of 7.48pps for 2022.

Balance Sheet

Pro forma Balance Sheet

 
 
                                             31 December 2020                  31 December 2019 
                                =========================================  =======================  ============= 
                                  Investment                 Consolidated    Investment              Consolidated 
                                    Basis(1)        Adjust           IFRS         Basis     Adjust           IFRS 
                                                                                               GBP 
                                 GBP million   GBP million    GBP million   GBP million    million    GBP million 
==============================  ============  ============  =============  ============  =========  ============= 
 Investments at FVPL                   895.7             -          895.7         846.0          -          846.0 
 Trade and other receivables             1.6             -            1.6           3.9          -            3.9 
 Other assets and liabilities 
  (net)                                (1.9)         (0.1)          (2.0)         (5.1)        0.9          (4.2) 
 Net cash                               20.5             -           20.5          13.8        0.7           14.5 
 Derivative financial 
  asset                                  0.1         (0.1)              -             -        1.4            1.4 
==============================  ============  ============  =============  ============  =========  ============= 
 NAV attributable to 
  ordinary shares                      916.0         (0.2)          915.8         858.6        3.0          861.6 
==============================  ============  ============  =============  ============  =========  ============= 
 
 

(1) Represents the value of the Group's total assets less the value of its total liabilities under the Investment Basis NAV. The Investment Basis NAV represents the residual interest of the shareholders in the Group, after all the liabilities of the Group, if any, have been settled.

As at 31 December 2020, the Group has 50 availability-based Investments at FVPL (31 December 2019: 48). The main drivers of the net movement in Investments at FVPL are:

-- + GBP59.2 million: from new portfolio acquisitions in Highway 104 and Champlain Bridge and additional equity interests in Stanton Territorial Hospital, KVH Hospital and N18 motorway.

-- + GBP63.3 million: from the net effect of unwinding of discount, revised macro-economic assumptions on portfolio value, changes in market discount rates, value enhancements and the impact of net foreign exchange gains during the year .

   --      - GBP72.8 million: from net distributions from the Investments at FVPL during the year . 

At 31 December 2020, the fair value of forward currency swaps used to hedge future portfolio distributions over the next four years was GBP0.1 million net liability position. This figure is excluded under the Investment Basis NAV as the related contracted forward rates are directly applied to hedged future distributions and therefore embedded in the Investments at FVPL. The unhedged distributions are converted at the 31 December 2020 closing rate.

As at 31 December 2020, cash and cash equivalents amounted to GBP20.5 million (GBP34.8 million as at 31 December 2019).

A reconciliation of net cash as compared to net borrowings under IFRS is as follows:

 
                                                            31 Dec        31 Dec 
                                                                20            19 
                                                       GBP million   GBP million 
====================================================  ============  ============ 
 Cash and cash equivalent under IFRS (consolidated)           20.5          34.8 
====================================================  ============  ============ 
 
 Loans and borrowings under IFRS (consolidated)              (0.2)        (20.4) 
 Gross up: Unamortised debt issuance costs 
  under IFRS (consolidated) (1)                                  -         (0.7) 
 Less: Interest payable under IFRS (consolidated)              0.2           0.1 
====================================================  ============  ============ 
 Outstanding loan drawdowns                                      -        (21.0) 
 Net cash under Investment Basis NAV                          20.5          13.8 
====================================================  ============  ============ 
 

(1) During the year, unamortised debt issuance costs amounting to GBP0.4 million were reclassed from the 'loans and borrowings non-current liabilities' to 'other current assets'. Accordingly, no gross up was required for the 2020 reconciliation of net cash.

Three-year comparative of Investment Basis NAV

 
                          31 Dec 20  31 Dec 19  31 Dec 18 
=======================  ==========  =========  ========= 
 NAV (millions)               916.0      858.6      774.5 
 NAV per share (pence)        137.8      136.2      133.5 
=======================  ==========  =========  ========= 
 

The Investment Basis NAV increased by 6.7 per cent to GBP916.0 million at 31 December 2020 (31 December 2019: GBP858.6 million). This equates to a growth in Investment Basis NAV per share of 1.2 per cent to 137.8p at 31 December 2020 (31 December 2019: 136.2p). The Investment Basis NAV per share is the Investment Basis NAV divided by the number of Company shares issued and outstanding. This information presents the residual claim of each shareholder to the net assets of the Group.

CORPORATE GOVERNANCE

INTRODUCTION

The Company is internally managed with a two-tier governance structure that comprises a Supervisory Board and a Management Board, with the responsibilities of each as indicated in this Report.

Primary responsibilities of the Supervisory Board include the supervision of the activities of the Management Board and the establishment and monitoring of compliance with the Company's investment policy. Notwithstanding this, the Directors on both the Management Board and the Supervisory Board are accountable under the Listing Rules as the Listing Rules do not make a distinction between different types of directors. In particular, for such time as the Company's shares are listed on the Official List of the UK Listing Authority, the Supervisory Board and the Management Board act as one in approving any circular or corporate action where the Listing Rules require the recommendation of the board of directors of a publicly listed company (or where such recommendation is customarily given). Any responsibility applied to directors under the Listing Rules applies to all directors of the Company.

The Management Board's principal responsibility is the day-to-day management of the Company, including the discretionary investment management of the Company's investments and those of the rest of the Group. In carrying out the function of investment manager via the Management Board, the Company does not engage an external investment manager to provide such investment management services.

The Management Board is otherwise responsible for the overall administration of the Company including the preparation of semi-annual valuations; statutory financial statements; management accounts and the business plan that defines the Company's active approach to asset management. Given its role as investment manager, the Management Board is the primary interface for investor relations, including engagement with the Supervisory Board on shareholders' behalf.

The Company is regulated by the CSSF under Part II of the amended Luxembourg law of 17 December 2010 on undertakings for collective investments, and is subject to the Luxembourg amended law of 12 July 2013 on Alternative Investment Fund Managers ('AIFM Law') that implemented the EU Alternative Investment Funds Managers Directive ('AIFMD') into national legislation.

Governance and Regulatory Environment

As an internally managed investment company, having effective controls in place is paramount to securing the sound financial and operational performance of the Company's investments. The Company recognises the importance of effective engagement with its stakeholders, viewing it as a key part of its own long-term success and sustainability.

BBGI is a member of the AIC and as such reports against the AIC Code of Corporate Governance (the 'AIC Code').

Both the Management Board and the Supervisory Board of the Company have considered the Principles and Provisions of the AIC Code. The AIC Code addresses the Principles and Provisions set out in the UK Corporate Governance Code 2018 (the 'UK Code'), as well as setting out additional Provisions on issues that are of specific relevance to the Company. The Management and Supervisory Boards consider that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council ('FRC'), provides relevant information to shareholders.

Whilst BBGI is a non-domiciled publicly listed entity on the UK London Stock Exchange, to which the UK Companies Act 2006 (the 'CA2006') has limited application, the Company recognises the value that all its stakeholders bring to the business. As such, BBGI acknowledges the requirement for most UK publicly listed companies to make a s172(1) CA2006 statement. Consideration of BBGI's stakeholders, and details of how the Company adopts the spirit of those provisions can be found in the Our Approach To ESG section of this Annual Report, and also in the Company's inaugural standalone ESG Report, both of which detail the Company's commitment to generating positive non-financial returns for all our stakeholders.

For the most part, the Company has complied with the Principles and Provisions of the AIC Code and where it currently does not, we have explained why not. Those specific Provisions are outlined below along with the section reference for the accompanying explanation:

-- AIC Code Provision 10 (at least half the board excluding the chairman, should be non-executive directors which the board considers to be independent): Management Board - General section ;

-- AIC Code Provision 13 (circumstances likely to impair, or appear to impair a non-executive director's independence - serving in excess of nine years): Board Tenure and Diversity ;

-- AIC Provision 17 (in relation to establishing separate Management Engagement Committee): Committees of the Supervisory Board;

-- AIC Provision 23 (All directors should be subject to annual re-election by the shareholders): Management Board - General section ;

-- AIC Provision 29 (in relation to chairman as a member of the Audit Committee): Audit Committee Report .

AIFM

During 2020, the Company was required to interpose an EEA-based Central Securities Depository ('CSD') into the shareholding structure, in order to ensure uninterrupted trade settlement of the Company's non-certified shares on the LSE post the completion of the Brexit transition period on 31 December 2020. Refer to the Delegated Functions section of this report for an update on this and further functions delegated by the Company. There have been no other material changes in respect of Art. 20 Para. 2(d) of the AIFM Law that would warrant further disclosure to shareholders.

Sustainable Finance Disclosure Regulation

Post period end, the Company made disclosures relating to Articles 3, 4, 5, 6, 7(2), 8 and 10 of EU Regulation 2019/2088, known as the Sustainable Finance Disclosure Regulation or SFDR. SFDR requires EU based companies to make certain disclosures on the subject of sustainability risk, the manner in which sustainability factors are integrated into investment decision and allows companies that meet certain sustainability characteristics to self-classify if they promote environmental or social characteristics. The Company takes the view that it falls within the scope of Article 8 and meets the criteria for socially positive investment.

SUPERVISORY BOARD AND MANAGEMENT BOARD

As at 31 December 2020

 
 Name            Function                      Independence      Age   Original       Next renewal 
                                                                        appointment    date 
 Supervisory Board 
 Sarah Whitney   Chairman of Supervisory       Independent       57    1 May 2019     30 April 
                  Board                                                                2021 
 Howard Myles    Senior Independent Director   Independent       71    3 October      30 April 
                                                                        2011           2021 
 Jutta af        Chairman of Audit Committee   Independent       62    1 July 2018    30 April 
  Rosenborg                                                                            2021 
 Management Board 
 Duncan Ball     Member of the Management      Non-independent   55    5 October      5 October 
                  Board                                                 2011           2021 
 Frank Schramm   Member of the Management      Non-independent   52    5 October      5 October 
                  Board                                                 2011           2021 
 Michael         Member of the Management      Non-independent   43    30 April       30 April 
  Denny           Board                                                 2013           2021 
--------------  ----------------------------  ----------------  ----  -------------  ------------- 
 

This table sets out the expiry dates of the current terms of the Directors' appointments. All appointments may be renewed in accordance with the provisions of the Company's Articles.

BIOGRAPHIES OF DIRECTORS

Supervisory Board

Sarah Whitney

Chairman

Ms Whitney has extensive experience in the real estate and finance sectors. She was a corporate finance partner at PricewaterhouseCoopers. She set-up and led the Government & Infrastructure Team at CB Richard Ellis, and was Managing Director of the Consulting & Research business at DTZ Holdings plc (now Cushman & Wakefield).

For the last 15 years, Ms Whitney's career has been focused on the provision of consultancy services to national and local governments, investors, and real estate companies on matters pertaining to real estate, economic growth, infrastructure and investment. Her early career was spent as an investment banker advising major corporates on M&A transactions.

Ms Whitney became Chairman with effect from 31 July 2020 following Mr Colin Maltby stepping down from his role as a Non-Executive Director of the Company. Ms Whitney was appointed Chairman of the Nomination Committee with effect from 29 June 2020.

Ms Whitney has a BSc in Economics & Politics from the University of Bristol and is a fellow of the Institute of Chartered Accountants of England and Wales.

Ms Whitney serves as a Non-Executive Director of two other listed companies.

Howard Myles

Senior Independent Director

Howard Myles began his career in stockbroking in 1971 as an equity salesman, before joining Touche Ross in 1975 where he qualified as a chartered accountant. In 1978, he joined W. Greenwell & Co in the corporate broking team, and in 1987 moved to SG Warburg Securities where he was involved in a wide range of commercial and industrial transactions, in addition to leading Warburg's corporate finance function for investment funds. Mr Myles worked for UBS Warburg until 2001 and was subsequently a partner in Ernst & Young LLP from 2001 to 2007, where he was responsible for the Investment Funds Corporate Advisory team.

Mr Myles became Senior Independent Director on 31 August 2018, and Chairman of the Remuneration Committee on 29 June 2020.

Mr Myles holds an MA from Oxford University.

He is a Fellow of the Institute of Chartered Accountants, a Fellow of the Chartered Institute for Securities and Investment.

Mr Myles serves as a Non-Executive Director of three other listed investment companies.

Jutta af Rosenborg

Chairman of the Audit Committee

Jutta af Rosenborg has extensive experience in management and strategy derived from senior operational roles in a number of companies and significant experience with group finance and auditing, risk management, mergers & acquisitions and streamlining of business processes.

Ms af Rosenborg served as the Chief Financial Officer, Executive Vice President of Finance and IT, and Member of the Board of Management at ALK-Abelló A/S until 2010. Prior to this, Ms af Rosenborg served at Chr. Hansen Holding A/S as its Vice President of Group Accounting from 2000 to 2003. From 1978 to 1992, she worked for the Audit Group at Deloitte.

Ms af Rosenborg became Chairman of the Audit Committee on 31 August 2018.

Ms af Rosenborg obtained a certificate in Business Administration from Copenhagen Business School in 1982, gained an MSc in Business Economics and Auditing from Copenhagen Business School in 1987 and qualified as a state authorised public accountant in 1992.

Ms af Rosenborg serves as a Non-Executive Director on four other listed companies.

Management Board

Duncan Ball

Co-CEO and member of the Management Board

Duncan Ball has been co-CEO of BBGI from inception and was actively involved in the establishment and IPO listing of BBGI in 2011 and the subsequent growth from 19 assets at IPO to 50 assets at the end of the reporting period.

Mr Ball has worked in the infrastructure sector, investment banking and advisory business for over 30 years. As co-CEO of BBGI, he is responsible for overall strategy and management of the Company. He is one of three members of the Management Board and sits on the Group's Investment and ESG Committees.

Additionally, he is a shareholder representative and holds directorships in key assets of BBGI.

Frank Schramm

Co-CEO and member of the Management Board

Frank Schramm has been co-CEO of BBGI from inception and was actively involved in the establishment and IPO listing of BBGI in 2011 and the subsequent growth from 19 assets at IPO to 50 assets at the end of the reporting period.

Mr Schramm has worked in the infrastructure sector, investment banking and advisory business for over 24 years. As co-CEO of BBGI, he is responsible for overall strategy and management of the Company. He is one of three members of the Management Board and sits on the Group's Investment and ESG Committees.

Additionally, he is a shareholder representative and holds directorships in key assets of BBGI.

Michael Denny

CFO and member of the Management Board

Michael Denny has over 20 years' experience in corporate finance with a focus on the infrastructure and real estate sectors.

He joined BBGI in early 2012, shortly after the Company's IPO. As CFO of the Group, he is primarily responsible for all corporate financial matters including but not limited to financial reporting, UK listing requirements, taxation, foreign exchange hedging and regulatory compliance. Mr Denny is a member of the Management Board and sits on the Group's Investment and ESG Committees.

SUPERVISORY BOARD

General

The Supervisory Board consists of three Independent Non-Executive Directors. Ms Sarah Whitney became Chairman of the Supervisory Board on 31 July 2020 following Mr Colin Maltby stepping down from his role as Non-Executive director of the Company.

In accordance with the Articles, all members of the Supervisory Board are elected for a period ending at the AGM of the Company in April each year, at which time they are required to retire. They may, if they so wish, offer themselves for re-election by shareholders. However, re-appointment is not automatic.

The Supervisory Board believes that its members continue to have an appropriate combination of skills, experience and knowledge to enable them to fulfil their obligations.

The Supervisory Board members have a breadth and diversity of experience relevant to the Company, and the Company believes that any future changes to the composition of the Supervisory Board can be managed without undue disruption.

The Supervisory Board meets at least four times a year and between these formal meetings, there is regular contact with the Management Board and the Company's corporate brokers. Where necessary, both Supervisory and Management Board members also have access to independent professional advice at the expense of the Company.

The Supervisory Board considers items laid out in the Notices and Agendas of meetings which are formally circulated to its members in advance of the meeting as part of the Board papers. At each meeting, members are required to advise of any potential or actual conflicts of interest prior to discussion.

Role and Responsibilities of the Supervisory Board

The Supervisory Board is responsible for establishing and monitoring compliance with the Company's investment policy, appointing and replacing the Management Board, supervising and monitoring the appointment of the Company's service providers and those of its subsidiaries, considering any prospective issues, purchases or redemptions of shares that are proposed by the Management Board, reviewing and monitoring compliance with the corporate governance framework and financial reporting procedures within which the Company operates, reviewing and (if thought fit) approving interim and annual financial statements and providing general supervisory oversight to the Management Board and the operations of the Group as a whole.

The Supervisory Board meets at least quarterly where it reviews investment performance and associated matters, compliance and risk management activities, the performance of key service providers, investment and financial controls, marketing and investor relations, general administration, peer group information, industry issues and other matters relevant to their remit.

The Supervisory Board will continue to regularly consider the Company's strategy taking account of market conditions and feedback from the Management Board, the Company's joint corporate brokers and engagement with shareholders. The Company's strategy is considered regularly in conjunction with the Management Board.

In addition, the Supervisory Board is responsible for establishing and monitoring compliance with the Company's investment policy, providing general supervisory oversight to the operations of the Group as a whole; and supervising and monitoring the appointment and performance of the Company's third-party service providers (and those of its subsidiaries). In the case of the latter role, the Supervisory Board acts in its capacity as the Management Engagement Committee, further detailed below under Committees of the Supervisory Board.

Climate related risk and other material ESG issues are also reviewed at least quarterly by the Supervisory Board, ensuring that issues are appropriately addressed through the Company's strategy, Responsible Investment approach and other key processes such as risk management.

The Company has a formally constituted Audit Committee, to which the Supervisory Board has delegated its responsibility for the general oversight and monitoring of the Company's compliance with various financial and regulatory controls in accordance with AIC Code and Disclosure and Transparency Rules requirements.

During the year, a formally constituted Remuneration Committee was established, to which the Supervisory Board delegated its responsibilities for establishing the general principles of the policy for Directors' remuneration and for setting remuneration for the Management Board, as well as supervising the general remuneration structure and levels for other employees. In addition, a formally constituted Nomination Committee was established, to which the Supervisory Board delegated its responsibilities for appointing the members of the Management Board and the appointment of any further Supervisory Board members. Prior to these Committees being formally constituted, the Supervisory Board Directors would meet as a whole and carry out the respective roles of the Remuneration and Nomination Committees. Further details on the roles of each of the Committees and their activities undertaken during the year can be found in the section titled Committees of the Supervisory Board.

Each of the Supervisory Board members continues to be considered as independent, and the Supervisory Board is not aware of any circumstances which are likely to impair, or could appear to impair, the independence of any of the Supervisory Board members.

Annual performance evaluation

In accordance with AIC Code Provision 26, an externally facilitated evaluation of the Supervisory Board was conducted in 2020 by BoardAlpha Limited ('BoardAlpha'). BoardAlpha evaluated the performance of the Supervisory Board, its committees, the Chairman and individual directors. BoardAlpha was independent of the Company and there was no connection between the evaluator and the Company or any of its individual Directors.

Following the publication post-period end of a review undertaken by ICSA into the quality of independent board evaluation in the UK listed sector (commissioned by the UK's Department of Business, Energy and Industrial Strategy), the Supervisory Board believes BoardAlpha' s evaluation of the Company was done in the spirit of ICSA's principles of good practice.

Individual interviews were held with each of the four Supervisory Board members, including the Chairman at the time, Mr Colin Maltby. Additional meetings were also held with each member of the Management Board, the Company Secretary and a representative from the Company's Corporate Brokers. BoardAlpha was presented with Committee and Board packs from the Board meetings held in the preceding year and two BoardAlpha representatives were invited to attend and observe meetings held by the Supervisory Board and Audit Committee.

BoardAlpha found that the Supervisory Board as a whole and the Directors individually had a clear understanding of their role and discharged their governance duties with a high degree of vigilance, integrity and competence. The Supervisory Board as a whole held an appropriate spread of skills and experience with a high degree of collective knowledge of good corporate governance, and provided a good level of challenge to the Management Board. With its most recent appointments, the Supervisory Board had enhanced its gender diversity. The Supervisory Board was kept well informed both in terms of day-to-day operations and strategic overview, with comprehensive reporting received sufficiently in advance of any meetings. The report concluded in summary that the Supervisory Board appeared to be well constituted, highly effective and well run. Where findings of the evaluation were deemed relevant and in the interest of the Company and its stakeholders to implement, the Company has done so. These changes, although limited in nature, are highlighted in the corresponding parts of this Annual Report.

In presenting the results of its evaluation, BoardAlpha made recommendations, a number of which corresponded with actions the Company had independently determined to undertake prior to receiving the evaluation results. These are outlined below, including the principal outcomes and actions taken as a result of the BoardAlpha recommendations.

-- Establishment of separate, formally constituted, Nomination and Remuneration Committees with Terms of Reference developed in line with good corporate governance practice and regulatory requirements. Each of the Committees (including the existing Audit Committee) are chaired by a different Director, to allow each of them to focus on their designated areas.

-- Establishment of a clear, formal, and written Chairman's succession plan. Whilst succession planning has always remained high on the Supervisory Board's agenda, a formal policy documenting the succession plans for the Chairman was developed on recommendation from the external evaluation.

-- Recruitment of a further Supervisory Board Director, which was already part of the Company's long-term director succession plans, was also recommended by the evaluation.

-- Improving reporting of the Company's sustainability measures across the portfolio and ESG credentials, primarily through the introduction of BBGI's inaugural ESG report made available on the Company's website, an area which was very much on the Management Board's agenda prior to the Board evaluation.

-- Introduction of a maintained register of any relevant training undertaken by the Directors, to ensure adequate training continued to be made available to the directors, whether through the Company or any of the Directors' externally held mandates. The Company has expanded upon this recommendation and, in addition to the Directors, also maintains a register of training undertaken by all key personnel.

-- BoardAlpha's recommendation for the establishment of a formally structured induction process has been incorporated into the appointment process, retaining elements of the existing bespoke induction process in order to maximise the benefit of the induction process to each individual Director.

An externally-facilitated performance review of the Chairman, being Mr Maltby at the time of the evaluation, was also undertaken through BoardAlpha. BoardAlpha's report was initially considered by the Senior Independent Director before sharing and discussing it with the rest of the Supervisory Board. Mr Maltby was considered to have been an excellent Chairman and an asset to the dual Board structure of the Company and to shareholders. His pre-existing tenure length was noted and BoardAlpha's main recommendations were for greater interaction between the Chairman and the wider management team and a more proactive approach to shareholder engagement. With his retirement and as his successor, Ms Whitney noted the recommendations made for the role of Chairman.

In the intervening years between externally-facilitated performance evaluations, the Supervisory Board conducts formal self-evaluations of its performance, that of its Chairman, and considers the term and independence of each member on an annual basis. Such evaluation is normally conducted by way of questionnaire and is undertaken to ensure that the composition of the Supervisory Board and its Committees continue to reflect a suitable mix of skills, experience and knowledge; that each body is functioning effectively; and that the performance of each individual member continues to be effective. The Chairman's evaluation is also conducted by way of questionnaire, led by the Senior Independent Director, in accordance with Provision 14 of the AIC Code, and the results subsequently discussed with the Chairman and the remaining members as necessary.

Attendance at Supervisory Board meetings during the financial year ended 31 December 2020

 
                     Total meetings 
Name                  and attendance 
Supervisory Board          12 
                     --------------- 
Colin Maltby(1)             3 
                     --------------- 
Howard Myles(2)            11 
                     --------------- 
Jutta af Rosenborg         12 
                     --------------- 
Sarah Whitney              12 
                     --------------- 
 

(1) Mr Maltby stepped down from his role on the Supervisory Board with effect from 31 July 2020. He did not attend any meetings at which his succession was discussed, and attended all other meetings held during his appointment.

(2) Mr Myles was unable to attend one meeting due to illness.

Other listed company directorships

The members of the Supervisory Board held the following additional non-executive directorship mandates in publicly quoted companies as at 31 December 2020. Any mandates accepted subsequent to the balance sheet date are included below.

 
Sarah Whitney                     Howard Myles 
 
 St Modwen Properties plc          Baker Steel Resources Trust Limited 
 JPMorgan Global Growth & Income   Aberdeen Latin America Income Fund Limited 
 plc                               Chelverton UK Dividend Trust plc 
--------------------------------  ------------------------------------------- 
Jutta af Rosenborg 
 
 Standard Life Aberdeen PLC 
 JP Morgan European Investment 
 Trust PLC 
 NKT A/S 
 Nilfisk Holding A/S 
--------------------------------  ------------------------------------------- 
 

As part of the Supervisory Board's annual performance evaluation process, it was concluded that throughout the reporting period each member had, and was expected to continue to have, sufficient capacity to carry out their duties properly with no one member being over-boarded by their current directorship mandates.

COMMITTEES OF THE SUPERVISORY BOARD

During the year, the Supervisory Board determined that it was now appropriate for the functions of the Nomination Committee and the Remuneration Committee to be separately conducted through the formal establishment of the relevant committees.

Oversight of delegates and key service providers is highly regulated by the Luxembourg CSSF, including formal reporting structures, regular visits and compliance monitoring plans in accordance with the Company's Oversight of Delegated Activities framework. In recognition of the Management Board's primary involvement in the process, the Company being internally managed, and considering the size of the Supervisory Board, the functions of a Management Engagement Committee continue to be conducted by the Supervisory Board as a whole, with Ms Whitney acting as Chairman. As a result, the establishment of a separate management engagement committee, as prescribed under AIC Code Provision 17, was considered to be unnecessary as there is no material benefit to the Company and its shareholders.

Audit Committee

In accordance with provision 29 of the AIC Code and the Disclosure Guidance and Transparency Rules ('DTR') rule 7.1, the Supervisory Board has a formally constituted Audit Committee.

The Audit Committee operated throughout the year in accordance with the AIC Code. As indicated above, it does so within clearly defined terms of reference including all matters indicated by DTR 7.1 and the AIC Code. It comprises the three independent Non-Executive Directors who are also members of the Supervisory Board: Jutta af Rosenborg is Chairman of the Committee, and Sarah Whitney and Howard Myles are the other members. Colin Maltby stepped down as a member of the Committee on 31 July 2020.

The Audit Committee is required to report its findings to the Supervisory Board, identifying any matters on which it considers that action or improvement is recommended. In the event of any conflict between the provisions of the AIC Code and the provisions of the law on the Audit Profession, the Company will comply with the provisions of the law on the Audit Profession and will disclose any such conflict.

The External Auditor is invited to attend and present the conclusions of its work at those Audit Committee meetings at which the annual and interim financial statements are considered, and at other times if considered necessary by the Audit Committee.

The Audit Committee meets not less than three times per year, and at such other times as the Audit Committee Chairman may require. Additional meetings may be requested by any other member of the Audit Committee, or the External Auditor, if deemed necessary. Other Directors and third parties may be invited by the Audit Committee to attend meetings as and when appropriate.

Further details on the Audit Committee and its work during the year can be found in the Audit Committee report.

The Audit Committee Chairman attends each AGM of the Company and is prepared to respond to any shareholder questions on the Committee's activities.

The Audit Committee terms of reference are available on the Company's website and can also be requested directly from the Company Secretary.

Remuneration Committee

As described above, the Supervisory Board established a formally constituted Remuneration Committee during the year, in accordance with AIC Code provision 37.

It comprises the three independent Non-Executive Directors who are also members of the Supervisory Board: Howard Myles is Chairman of the Committee, Sarah Whitney and Jutta af Rosenborg are the other members.

During the year, the Remuneration Committee met four times (including meetings held by the Supervisory Board in its capacity as the Remuneration Committee) to review the levels and structure of the remuneration, compensation, and other benefits and entitlements of the Management Board of the Company. Further information in relation to both Executive and Non-Executive Directors remuneration can be found in the Remuneration Report.

The Remuneration Committee meets no less than two times per year, and at such other times as the Remuneration Committee Chairman may require. Additional meetings may be requested by any other member of the Remuneration Committee, if deemed necessary. Other Directors and third parties may be invited by the Remuneration Committee to attend meetings as and when appropriate.

The Remuneration Committee Chairman attends each AGM of the Company and is prepared to respond to any shareholder questions on the Committee's activities.

The Remuneration Committee terms of reference are available on the Company's website and can also be requested directly from the Company Secretary.

Nomination Committee

As described above, during the year, the Supervisory Board established a formally constituted Nomination Committee, in accordance with AIC Code provision 22.

It comprises the three independent Non-Executive Directors who are also members of the Supervisory Board: Sarah Whitney is Chairman of the Committee, and Howard Myles and Jutta af Rosenborg are the other members.

During the year, the Nomination Committee met four times (including meetings held by the Supervisory Board in its capacity as the Nomination Committee) to consider the renewal of the appointments of the Management Board members (which appointments are renewable annually for one year only), the appointment of a new Supervisory Board member and to review the succession plans for both the Management and Supervisory Boards.

Given the significant growth of the Company since IPO and the size and complexity of its organisation and scope of Supervisory Board's responsibilities, an assessment of the Supervisory Board's size and composition was undertaken by the Nomination Committee during the year. In order to further strengthen the overall governance of the Company, the Nomination Committee has recommended that the size of the Supervisory Board and number of Non-Executive Directors increases to five members. As outlined in the Remuneration Report, the Remuneration Committee consider the Non-Executive Directors' fees annually within the approved maximum aggregate remuneration cap as approved by the Company's shareholders. These fees will remain unchanged for 2021. However, to accommodate the potential addition of a new Non-Executive Director to the Supervisory Board, it is proposed that an increase in the maximum aggregate remuneration cap from GBP300,000 to GBP400,000 will be put, by way of resolution, to the Company's shareholders at the 2021 AGM.

The Nomination Committee oversaw the re-appointment of Cornforth Consulting Limited, an external search consultancy firm, who had previously assisted in facilitating the appointments of Ms af Rosenborg and Ms Whitney. With their knowledge of investment companies and an understanding of the Company's requirements, Cornforth Consulting Limited was separately engaged to assist with the search for a replacement Supervisory Board member following Mr Maltby's resignation as Non-Executive Director in 2020.

Following a successful conclusion to this search, the Company will seek at the upcoming AGM approval from its shareholders to appoint Mr Chris Waples CDir FloD as a new member of the Supervisory Board with effect from 1 May 2021. Mr Waples has 35 years' global experience of managing the acquisition, construction and divestment of infrastructure projects. Mr Waples has an extensive track record of asset management in progressive high profile companies, including 12 year with John Laing Group plc where he held the position of Executive Director, Asset Management and led the management of an international portfolio of PPP assets across Europe, North America and Asia Pacific regions. Apart from this engagement, there was no other connection between Cornforth Consulting Ltd and the Company, or individual Directors.

As outlined in the Annual Performance Evaluation section, the Supervisory Board in its capacity as Nomination Committee further oversaw the appointment of BoardAlpha, an independent external specialist, to facilitate the Supervisory Board's inaugural external board performance evaluation, and the implementation of responses to BoardAlpha's recommendations.

During the year, the Nomination Committee implemented a formal, written policy documenting the succession plans for the Chairman of the Supervisory Board, as well as the development of a distinct Group Diversity and Equality Policy.

As stated under 'Management Board - Performance Evaluation and Reappointment', each member of the Management Board was reappointed for a further year. In respect of succession planning, the detailed plans developed for all senior positions were reviewed. These plans are regularly updated by the Management Board and reviewed with the Supervisory Board at least annually.

In accordance with AIC Code provision 22, the Chairman does not chair any Committee meeting at which her succession is discussed.

The Nomination Committee meets not less than two times per year, and at such other times as the Nomination Committee Chairman may require. Additional meetings may be requested by any other member of the Nomination Committee, if deemed necessary. Other Directors and third parties may be invited by the Nomination Committee to attend meetings as and when appropriate.

The Nomination Committee Chairman attends each AGM of the Company and is prepared to respond to any shareholder questions on the Committee's activities.

The Nomination Committee terms of reference are available on the Company's website and can also be requested directly from the Company Secretary.

Management Engagement Committee

In its role as Management Engagement Committee, the Supervisory Board met on five occasions during the year under review to consider, together with the Management Board, the performance, effectiveness and appropriateness of the ongoing appointments of the Company's third-party service providers under Principle H of the AIC Code. During these meetings, the Management Board provides feedback and key findings resulting from any onsite meetings with third-party service providers as part of the Company's programme of oversight of delegates and key service providers.

Re-election of Supervisory Board members

In accordance with the Articles, Supervisory Board members are elected for a period ending at the Company's next AGM, at which time they are eligible for reappointment. With the exception of Mr Maltby, who stepped down on 31 July 2020, all members of the Supervisory Board have decided to offer themselves for re-election at the forthcoming AGM and, as a result of the successful performance evaluation, the Supervisory Board recommends the re-election of each member.

Scheduled meetings and attendance during 2020

 
Name                 Audit Committee  Remuneration Committee  Nomination Committee 
                       (4 meetings)       (4 meetings)(1)        (5 meetings)(1) 
Colin Maltby(2)             2                   3                      3 
Jutta af Rosenborg          4                   4                      5 
Howard Myles(3)             3                   3                      4 
Sarah Whitney               4                   4                      5 
                     ---------------  ----------------------  -------------------- 
 

(1) Remuneration and Nomination Committee meetings include meetings held through the Supervisory Board acting in its capacity as those committees prior to their formal constitution.

(2) Mr Maltby stepped down from the Supervisory Board and Audit Committee with effect from 31 July 2020. He was not appointed to the formally constituted Remuneration and Nomination Committees and did not attend meetings at which his succession was discussed, but attended all other meetings held during his appointment, including where the Supervisory Board acted in its capacity as Remuneration and Nomination Committees.

(3) Mr Myles was unable to attend one meeting for each Committee due to illness.

MANAGEMENT BOARD

General

The Management Board comprises three members, each contractually engaged by BBGI Management HoldCo S.à r.l., a direct consolidated 100% held subsidiary of the Company. As a result, no member is deemed independent under AIC Code Provision 10. However, the Management Board's functions are overseen by the Supervisory Board which itself meets the independence criteria set out in Provision 10. Whilst this two-tier structure is not explicitly covered by the AIC Code, the Company considers that an independent Supervisory Board ensures the Company is compliant with AIC Code Provision 10. Under AIC Code Provision 3, it is the co-CEOs of the Management Board who primarily seek regular engagement with the Company's major shareholders in order to understand their views concerning significant matters. The Chairman of the Supervisory Board is, however, always available to undertake such engagement at shareholders' request.

The Company's Articles require that the Management Board's members be elected on an annual basis by the Supervisory Board, and not by shareholders. As a result, this does not meet the requirements of AIC Code Provision 23, which requires that directors should be subject to election by shareholders. However, as the Management Board carries out the role of investment manager, the Supervisory Board deems it appropriate that it elects the members of the Management Board. The Articles also require that the members of the Supervisory Board themselves be subject to annual election by shareholders, who may also dismiss any such member. Accordingly, the Company considers that this procedure satisfies the requirements of AIC Code Provision 23.

Internal controls

The Management Board has established an ongoing process and system of robust internal controls designed to meet the particular needs of the Company in managing the risks to which it is exposed. This process included establishing procedures to manage risk, oversee the internal control framework, and determine the nature and extent of principal risks the Company is willing to take to achieve its long-term strategic objectives. The policies and procedures are reviewed at least annually, together with continual, ongoing monitoring.

During the year, the Company continued its work to further refine and reinforce its existing robust governance and internal controls frameworks in compliance with circular 18/698 from the CSSF, governing the authorisation and organisation of investment fund companies based in Luxembourg. To this end, the Luxembourg regulator, CSSF, provided formal approval of the appointment of a new Head of Compliance and Risk, with effect from January 2020. Internalising the appointment to a full-time dedicated employee has enabled BBGI to further reinforce its existing governance and risk controls frameworks, including oversight of delegated activities and the appointed delegates.

Furthermore, at each quarterly meeting, the Supervisory Board monitors the Company's investment performance against its stated objectives and reviews its activities to ensure that the Management Board is adhering to the investment policy and guidelines - including clearly defined investment criteria, returns targets, risk profile and compliance framework. During these meetings, the Management Board reports in relation to Key Performance Indicators ('KPIs') on operating performance, cash projections, investment valuations and corporate governance matters. The Head of Compliance and Risk presents the Company's interim and annual Risk report and annual Compliance report separately to meetings of both the Management Board and Supervisory Board.

In 2020, the Management Board established an ESG Committee to oversee the management of material ESG activities, including climate-related issues. The ESG Committee meets at least quarterly, and membership comprises the Co-CEOs, the CFO and the Company Secretary. Through the ESG Committee the Management Board remains informed about the dual risks to the Company of transitioning to a low carbon economy (with associated increased regulation) and the risk of physical impacts of climate change on the assets in the portfolio. In March 2021, BBGI has employed a full-time dedicated ESG Director who has also become a member of the ESG Committee.

The Company continues to delegate the Internal Audit function to Grant Thornton Vectis in Luxembourg. Internal Audit reviews are performed within the framework of a triennial audit plan as agreed upon by the Management Board and Audit Committee and communicated to the CSSF. Within this timeframe, the nature, timing and extent of the internal audit procedures are determined by an assessment of the risk related to specific activities, and by the complexity and sophistication of the Company's operations and systems, including the method of controlling information processing. The Internal Audit summary report is presented to the Audit Committee in April each year and is subsequently submitted to the CSSF.

The Company recognises that effective control systems can only seek to manage and mitigate the risks of failure to achieve business objectives. They cannot eliminate them. By their very nature, these procedures are not able to provide absolute assurance against material misstatement or loss.

Performance evaluation and reappointment

As stated above, the Management Board carries out the functions of the Company's investment manager, and its Directors are appointed by the Supervisory Board for a period of one year, which is renewable. Mr Ball and Mr Schramm were both originally appointed on 5 October 2011 at the time of the Company's IPO, with Mr Denny originally appointed to the Management Board on 30 April 2013.

Re-election of the Management Board members

The Supervisory Board evaluates the performance of the Management Board and its Directors annually to ensure that the Management Board and its individual members continue to operate effectively and efficiently, and that the continued appointment of the individual Directors is in the best interests of the Company and its shareholders. Satisfied with the evaluations carried out in 2020, the Supervisory Board resolved to renew Mr Denny's appointment for a further term of one year with effect from 30 April 2020, and those of Mr Ball and Mr Schramm for a further term of

one year with effect from 5 October 2020.

Attendance at Management Board meetings during the financial year ended 31 December 2020

 
                   Total meetings 
Name                and attendance 
Management Board         37 
Frank Schramm            37 
Duncan Ball              37 
Michael Denny            37 
                   --------------- 
 

Delegated functions

Amongst other requirements, the Company is required under the AIFM Law to have dedicated Risk Management, Compliance, and Internal Audit functions; each of which is required to be both functionally and hierarchically separate from the functions of the operating units. Accordingly, Grant Thornton Vectis has been appointed to the role of Internal Audit and was engaged for the full year ended 31 December 2020.

   Internal Audit:              Grant Thornton Vectis 

As previously reported, in recognition of the Company's continued growth and as a result of a market-wide increase in regulatory oversight and the complexity of compliance requirements, the decision was taken in 2019 to internalise the Compliance and Risk Management functions. In October 2019, the Company hired a new full-time employee as Head of Risk and Compliance. Formal approval of this appointment was received from the regulator with effect from 10 January 2020, prior to which the functions were delegated to the providers detailed below:

   Risk Management:        IQ EQ Fund Management (Luxembourg) SA (to January 2020) 
   Compliance:                 99 Advisory Luxembourg (to January 2020) 

An orderly handover from these delegated functions to the new Head of Risk and Compliance commenced in 2019 and concluded in January 2020. The Head of Risk and Compliance performs the risk management and compliance functions and reports to the Supervisory Board independently of the Management Board, as well as reporting to the respective Designated Board Members who retain responsibility for overseeing the performance of the respective functions.

Notwithstanding the above, the Company's Management Board retains overall responsibility for the correct and effective operation of the delegated functions.

Other key delegates and providers are noted below:

Central Administrative Agent, Depositary,

   Paying Agent, Registrar and Transfer Agent:                RBC Investor Services Bank S.A ('RBC'). 

Depository (UK): Link Market Services Trustees (Nominees) Limited ('Link')

   Information Technology:                                                G.I.T.S. PSF 

Principal Agent: Banque Internationale à Luxembourg S.A. ('BIL')

   Central Securities Depository:                                       LuxCSD S.A. ('Lux CSD') 

The Company's shares are admitted to trading on the LSE main market for listed securities. In this context, the Company has engaged Link as depository, receiving agent and UK transfer agent. Listing on the LSE provides liquidity for investors in what is otherwise a closed-ended investment company, holding a portfolio of illiquid assets.

Link, acting in its depository capacity, as holder of in excess of 99.9 per cent of the issued ordinary shares in the Company, represents all the ordinary shares that are ultimately subscribed for in dematerialised, non-certified form. Link holds such dematerialised ordinary shares and issues uncertificated depository interest holdings in order to facilitate indirect holding of the Company's shares by non-certified depository interest holders. These non-certified dematerialised shareholdings are held via shareholder nominee accounts. The remaining issued ordinary shares are held directly on the certified share register maintained by RBC. Accordingly, the Company's share register only lists the Certified Investors.

During the year, in response to the UK's departure from the EU and a requirement from Euroclear UK and Ireland, the Company was required to interpose an EEA-based CSD into the shareholding structure, in order to ensure uninterrupted trade settlement of the Company's non-certified shares on the LSE, post the completion of the Brexit transition period on 31 December 2020. The Company appointed LuxCSD as its EEA-based CSD. A Luxembourg principal agent, BIL, was appointed to act as a required intermediary between the Company and LuxCSD. Both LuxCSD and BIL are classified as delegates and as such will be subject to the appropriate level of delegate oversight in accordance with the Company's delegate oversight framework.

In accordance with the Luxembourg law of 6 April 2013, creating a new category of dematerialised securities, in addition to securities in bearer or registered form (the Dematerialisation Law), transfer of the shares to LuxCSD involved the shares being converted from their former issued registered form (recorded on the official register maintained by RBC) to a dematerialised form, held by LuxCSD on their Clearstream account, and further credited to Link.

Approval was sought by way of a general meeting of the shareholders held on 30 November 2020, with shareholders voting in favour of the proposals. Accordingly, those shares which were issued in registered form to the account of Link were converted to dematerialised form on 8 December 2020. Those shareholders who continue to hold their shares in issued registered form have, in accordance with the Dematerialisation Law, a period of up to two years from the 30 November 2020 general meeting to instruct their shares to be converted from issued registered form to a dematerialised form after which those issued registered shares will be required to be mandatorily converted.

Board members and other interests

The members of the Management Board are also BBGI Management HoldCo S.à r.l. managers. Mr Ball and Mr Schramm both hold service contracts and Mr Denny holds a management contract in respect of BBGI Management HoldCo S.à r.l. Otherwise, no other member of the Group held service or management contracts during the year under review. Notice periods to and from the Company of 12 months apply in respect of Mr Ball, Mr Denny and Mr Schramm.

No loan has been granted to, nor any guarantee provided for the benefit of, any Director by the Company.

Ms Whitney, Mr Myles and Ms af Rosenborg are all considered to be independent Board members as they: (i) have not been employees of the Company; (ii) have not had material business relationships with the Company; (iii) have not received performance-based remuneration from the Company; (iv) do not have family ties with any of the Company's advisers, Directors or senior employees; (v) do not hold cross-directorships or have links with other Directors through involvement on other companies; (vi) do not represent a significant shareholder; and (vii) have not, with the exception of Mr Myles, served on the Board for more than nine years. For further information on tenure, refer to the section Board tenure and diversity.

Refer to the Remuneration Report for details of the Director's holdings in the Company's shares.

Board tenure and diversity

The Nomination Committee and the Management Board regularly reviews the succession plans for the Company. As part of a structured succession plan, each of the original Non-Executive Directors planned to retire on a staggered basis and the Company is recruiting additional Non-Executive Directors over a timeframe that enables the knowledge and experience built up over the preceding years to be both retained and enhanced. Three of the original four Non-Executive Directors have now retired, with Mr Myles expected to step down at the Company's 2022 shareholders' Annual General Meeting in accordance with internal succession planning and the managed rotation of the Supervisory Board members.

As at the date of the Company's next Annual General Meeting of shareholders, Mr Myles will have served a term in excess of nine years. The Supervisory Board acknowledge that, in accordance with Provision 13 of the AIC Code, a tenure of more than nine years is only one of a number of circumstances which could impair, or appear to impair, a Non-Executive Director's independence. Nonetheless, Mr Myles continues to demonstrate independent judgement and challenge to the Management Board and the Company does not consider his independence to be compromised or impaired. As the sole remaining Non-Executive Director to have been appointed at the time of the Company's IPO, Mr Myles holds significant legacy knowledge of the business. The succession plan for Mr Myles to step down in 2022 will therefore ensure there is a suitable transition period for his replacement to be recruited, inducted and become fully familiarised with BBGI.

The Management and Supervisory Boards of BBGI take into full consideration both the gender and ethnic diversity of their composition. They fully acknowledge the Hampton-Alexander Review on Women on Boards and the Parker Review on Ethnic Diversity on Boards. Female representation on the Supervisory Board at the reporting date / currently stood at two thirds, exceeding the aim of the Hampton-Alexander Review of having at least one third representation of women on the Boards of FTSE 350 companies by the end of 2020. The Company prides itself on being one of the few FTSE 350 companies with both a female Chairman and Audit Committee Chairman. To further its commitment to the goals of both the Hampton Alexander Review and Parker Review, the Nomination Committee oversaw the development of a separate Group Diversity and Equality Policy which seeks to enhance BBGI's existing culture of diversity, equality and inclusion.

The Company recognises that the aims set by Hampton-Alexander extend down to the Management Board, as well as direct reports to them. With a relatively low turnover and small number of staff employed across the Group, the Management and Supervisory Boards are mindful of the limited opportunities that exist to promote greater diversity of gender and ethnicity to senior roles within the Company. As at 31 December 2020, 14 different nationalities were represented by the Group's employee base of 23 people.

In recruiting new Directors, the Nominations Committee actively seeks greater diversity by gender, ethnicity, nationality and other criteria, whilst remaining committed to selecting members on merit with relevant and complementary skills to help the Company maximise stakeholder value.

The Company will continue to make future appointments at all levels on the basis of the full merits of the individual candidates, and the strengths, skills and experience that they would bring to the composition and balance of the Management and Supervisory Boards or Company as a whole. The process of appointing any new Directors is led by the Nomination Committee.

In accordance with Provision 24 of the AIC Code, the Company has a formal policy on the tenure of the Supervisory Board Chairman. The Company acknowledges the Supplementary Guidance under Provision 24 of the AIC Code with regard to a more flexible approach in respect of chair tenure. In the case of the Chairman, the need for regular refreshment and diversity must be balanced with the skills and experience of the existing Board and Committee members, and the benefit of retained historic knowledge of the Company's business, all of which are taken into account when considering succession of the role.

General Meetings

2020

The AGM was held on 30 April 2020. There were two further shareholder meetings held during the year:

27 October 2020 - to approve the change of name of the Company to BBGI Global Infrastructure S.A.

30 November 2020 - to approve the dematerialisation of the issued registered shares.

The notices for all of these meetings (and associated documents) as well as the results of the meetings can be found in the Investor Relations section of the Company's website. Under AIC Code Provision 4, no votes of 20 per cent or more were cast against the Board recommendation for a resolution.

2021

The next Company AGM will be held on Friday 30 April 2021. Given the extraordinary circumstances, and in accordance with the Law of 23 September 2020, as amended (the 'Covid-19 Law'), the meeting will be organised without the physical presence of participants The Notice of Meeting, proposed Resolutions and Explanatory Notes, and the associated Proxy Form, will be circulated to shareholders to meet the regulatory deadlines. These will also be made available on the Company's website.

Substantial shareholdings

As at 31 December 2020, the Company had 664,691,283 shares in issue. Pursuant to DTR5 of the FCA's Disclosure Guidance and Transparency Rules, the Company had received notice of substantial interests (5 per cent or more) in the total voting rights of the Company as follows, in compliance with DTR 7.2.6R:

 
                                                      % of total 
Name                                      Held      share capital(1) 
M&G plc                                59,502,903        9.42% 
Schroders plc(2)                       47,392,362        8.96% 
Newton Investment Management Limited   39,947,825        8.46% 
Investec Wealth & Investment Limited   31,569,569        5.01% 
Smith & Williamson Holdings Limited    28,885,124        5.00% 
                                       ----------  ----------------- 
 

(1) The percentage of voting rights detailed in the table above was calculated at the time of the relevant disclosure made in accordance with Rule 5 of the Disclosure Guidance and Transparency Rules and the shareholders' percentage interests in the Company may have changed since that date.

(2) The Company was notified on 5 January 2021 that Schroders plc's holding stood at 56,340,964 shares, representing 8.48 per cent of total issued share capital

REMUNERATION

Annual Statement from Remuneration Committee Chairman

Dear Shareholders,

I am pleased to present the Remuneration Committee (the 'Committee') report for the financial year ended 31 December 2020 on behalf of the Supervisory Board. This is the first annual report of the Committee, which was formally constituted during the year.

Composition of the Committee

The Committee consists of a minimum of two members. The Committee and the Chairman thereof (who cannot be the Chairman of the Supervisory Board) are appointed by the Supervisory Board. Membership is confined to Independent Non-Executive Directors. Each of the three Independent Non-Executive Directors is a member of the Committee, which is chaired by me, and our biographies can be found in the Corporate Governance section of this Annual Report.

Responsibilities

The Committee is responsible for establishing the general principles of the policy for Directors' remuneration and for setting remuneration for the Management Board, in accordance with the Principles and Provisions of the Code, and the terms of the Remuneration Policy.

This Remuneration report has been prepared in compliance with the reporting obligations as outlined in the relevant Luxembourg legislation. Furthermore, and in the interest of greater transparency, the Company has taken the voluntary decision to disclose additional remuneration detail, beyond its legal reporting obligations.

The Company continues to comply with the provisions of the AIC Code in respect of remuneration and is subject to the relevant AIFMD regulations.

Business context and external environment

Against a backdrop of global economic uncertainty, the Company has achieved another year of robust long-term, predictable and stable income derived from our diversified global portfolio of social infrastructure investments. During 2020, we closely monitored the impact of Covid-19, prioritising the health and safety of our employees and the continued provision of essential infrastructure services to our public sector clients by maintaining a high level of asset availability. We supported employees in adapting to the new ways of working resulting from the pandemic and remained committed to providing the responsible capital required to build and maintain some of the critical social infrastructure essential to the countries in which we operate.

A key theme during the year was one of preserving and where possible enhancing the value of the Company's portfolio. It is reassuring that despite the global disorder caused by the pandemic, the Company did not experience any material Covid-19 related operational or financial impacts. For further information refer to the section of the Annual Report titled 'Our Response to Covid-19'.

Our proven investment strategy of acquiring and managing low-risk, availability-based assets has supported a 6.7 per cent increase in NAV to GBP916.0 million and a 1.2 per cent increase in NAV per share during 2020. In turn, the Company has met its full-year dividend target of 7.18pps, an increase of 2.6 per cent compared to the prior year.

Key activities during the year

During the year, the Committee, with the support of Deloitte LLP as independent adviser, undertook a comprehensive review of the existing remuneration framework for the Management Board (comprising two Co-CEOs and the Chief Financial Officer) and other executives. This included appropriate benchmarking with FTSE 250 listed companies of similar size, and other relevant sector comparators to ensure that, on completion of the review, remuneration is competitive and aligned with our business strategy.

The last independent remuneration review of the remuneration of the Co-CEOs was conducted in 2014. Given the significant growth of the business since then and the market in which we compete for senior executive talent, a number of changes were recommended to more closely reflect the size and complexity of the organisation and the scope of Management Board responsibilities. In addition, changes were also made to improve governance through alignment of interests and to bring remuneration structures in line with UK FTSE 250 best practice. A summary of the revised remuneration framework is set out below:

-- Salary levels from 1 May 2020 will be C$842,162 and EUR555,977 for the Co-CEOs, Duncan Ball and Frank Schramm respectively, and EUR356,097 for the CFO.

-- Salaries remain in the lower quartile against companies in the FTSE 250 market and are based on Sterling amounts converted at the exchange rates on 1 May 2020.

-- Increase in the maximum opportunity under the annual short-term incentive plan ('STIP') for the Co-CEOs from 125 per cent to 150 per cent of salary from FY 2020. This increase has been made alongside a reduction in opportunity for target performance - from 100 per cent of salary to 75 per cent of salary (50 per cent of maximum). The CFO will also participate in a maximum annual bonus opportunity of 150 per cent of salary (target at 50 per cent of maximum).

-- Introduction of bonus deferral under the STIP. From 2020, one-third of any bonus earned will be used to purchase shares to be held for a period of three years.

-- Increase in maximum opportunity under the long-term incentive plan ('LTIP') from 150 per cent to 200 per cent of salary for the Co-CEOs, subject to shareholder approval at the 2021 AGM. The CFO will be eligible for an annual award of up to 150 per cent of salary. Awards will be subject to stretching NAV Total Return performance targets over a three-year period, and will be satisfied entirely in shares.

-- Introduction of post-employment shareholding requirements, in line with best practice in UK listed companies, with Management Board members being required to hold 100 per cent of salary in shares for a period of two years after leaving the Company.

Other key decisions during the year

Annual bonus (FY20) outcome

For the financial year ended 31 December 2020, the Co-CEOs and CFO were eligible for a maximum bonus of 150 per cent of base salary at 31 December 2020 respectively. The annual bonus was assessed against a range of stretching financial and strategic KPIs, as outlined further in this report. The Management Board delivered excellent performance and progress against the targets set, and annual bonus outcomes were 97 per cent of the maximum opportunity in respect of the 2020 financial year. One-third of the earned bonus will be used to purchase shares to be held for three years.

LTIP outcome (2017 award)

In December 2017, LTIP awards were granted to the Co-CEOs and CFO. These equated to an award value of 150 per cent of salary for the Co-CEO and EUR100,000 for the CFO, and were based on stretching TSR and NAV growth targets. The 2017 award will vest and be released following the publication of the Company's 2020 audited accounts. 2017 awards will vest at 81.8 per cent and 97.6 per cent of maximum for the TSR and NAV elements respectively, reflecting performance against targets in the three-year period to 31 December 2020.

No discretion was exercised in determining the incentive outcomes described above.

Howard Myles

Remuneration Committee Chairman

24 March 2021

Remuneration at a glance

Key remuneration principles

 
 BBGI's remuneration framework is based on the following key principles: 
 
   *    Attract and retain highly qualified executives and 
        employees with a history of proven success. 
 
 
   *    Align the interests of BBGI's Management Board and 
        employees with shareholders' interests, the execution 
        of the Company's investment policy and the fulfilment 
        of the Company's investment objectives. 
 
 
   *    Support strategy and promote long-term sustainable 
        success. 
 
 
   *    Establish performance goals that, if met, are 
        expected to be accretive to long-term shareholder 
        value. 
 
 
   *    Link compensation to performance goals and provide 
        meaningful rewards for achieving these goals. This 
        includes performance on ESG and health & safety 
        factors. 
 
 
  BBGI's remuneration policy encourages sound and efficient management 
  of risks, and does not encourage excessive risk-taking. In considering 
  Management Board remuneration during 2020, the Committee had regard 
  to the principles of transparency, clarity, simplicity, risk management, 
  proportionality and alignment to culture. 
 

Summary of Management Board remuneration framework

 
 Element 
--------------  ---------------------------------------------------------- 
 Base salary     Base salaries effective from 1 May 2020: 
                  Co-CEOs: $C842,162 and EUR555,977[xxxiv] CFO: EUR356,097 
--------------  ---------------------------------------------------------- 
 Pension         Co-CEOs and CFO: 15% of salary (cash allowance) 
  and benefits    The Co-CEOs receive a monthly car allowance 
--------------  ---------------------------------------------------------- 
 Annual          Co-CEOs and CFO: Maximum opportunity: 150% of salary. 
  Bonus (STIP)    Target opportunity: 75% of salary (50% of maximum) 
 
                  From 2020, one-third of bonus will be used to purchase 
                  shares to be held for a period of three years. 
 
                  STIP is based on a balance of financial, strategic 
                  and ESG/H&S metrics with robust quantitative performance 
                  requirements set for threshold, target and maximum 
                  performance. 
--------------  ---------------------------------------------------------- 
 Long-term       Co-CEOs: Performance measures established entitling 
  Incentive       beneficiaries to 50% of salary at threshold, 100% 
  Plan (LTIP)     of salary at target and 200% at maximum (Subject 
                  to approval at the 2021 AGM). 
                  CFO: Threshold: 50% of salary, Target: 75% of salary, 
                  Maximum: 150% of salary. 
 
                  Performance is measured over three years. For 2020, 
                  awards will be subject to stretching Net Asset Value 
                  (NAV) Total Return targets. 
--------------  ---------------------------------------------------------- 
 Shareholding    All Management Board members are required to build 
  requirements    and maintain a minimum holding of BBGI shares with 
                  a value of 200% of salary[xxxv] : 
 
                  Post-employment shareholding requirements : From 
                  September 2020, Management Board members will be 
                  required to hold 100% of salary in shares for a period 
                  of two years after leaving the Company. 
--------------  ---------------------------------------------------------- 
 

Annual report on remuneration

Single total figure table - Management Board

The following table sets out total remuneration for each member of the Management Board in respect of the year ending 31 December 2020[xxxvi].

 
                       Duncan Ball   Frank Schramm   Michael Denny 
 In Pounds Sterling       (Co-CEO)        (Co-CEO)           (CFO) 
 Salary                    456,921         467,173         275,758 
 Benefits                   13,799          13,874               - 
 Annual Bonus              713,994         720,917         461,739 
 Pension                    73,456          74,168          47,504 
 LTIP(1)                   565,204         593,770         106,526 
 Other                           -               -               - 
 Total fixed               544,176         555,215         323,262 
 Total variable          1,279,198       1,314,687         568,265 
--------------------  ------------  --------------  -------------- 
 Total remuneration      1,823,374       1,896,902         891,527 
--------------------  ------------  --------------  -------------- 
 

(1) The 2017 LTIP vests by reference to performance in the three-year period to 31 December 2020, and shares will be released to Executive Directors following the AGM in May 2021. The value included in the single figure for the year ended 31 December 2020 is based on an average share price over the last quarter of FY20 (GBP1.7317).

The figures in the table above are derived from the following:

 
(a)    Base salary     The amount of salary earned in respect of the year, 
                        shown in the reporting currency of the Group (Pound 
                        Sterling). Both Mr Denny and Mr Schramm receive all 
                        cash entitlements in Euro. Mr Ball receives all cash 
                        entitlements in Canadian Dollars. The amounts shown 
                        in sterling are converted using the average exchange 
                        rate for the respective financial year. For the year 
                        ended 31 December 2020, the relevant exchange rates 
                        were GBP1 = C$0.581 and GBP1 = EUR0.889. 
(b)    Benefits        The taxable value (gross) of benefits received in the 
                        year. These are principally car allowance. 
     --------------  ------------------------------------------------------------- 
(c)    Annual bonus    The value of the bonus earned in respect of the financial 
        (STIP)          year of which one third will be paid in shares and held 
                        for a period of three years. A description of achievements 
                        against the performance measures which applied for the 
                        financial year is provided below. 
     --------------  ------------------------------------------------------------- 
(d)    Pension         The pension figure represents the cash value of any 
                        pension contributions including any cash payments in 
                        lieu of pension contributions made in the year. 
     --------------  ------------------------------------------------------------- 
(e)    Long-term       The value of LTIP shares vesting, calculated by the 
        incentives      estimated number of shares that vest in respect of the 
                        2017 LTIP award multiplied by the average share price 
                        over the last quarter of the year ended 31 December 
                        2020. 
     --------------  ------------------------------------------------------------- 
 

Additional disclosures in respect of the single figure table

Base salary

Each member of the Management Board receives an annual base salary payable monthly in arrears.

Details of annual base salary for the Management Board are set out below. Base salaries were reviewed in 2020 and revised salaries were set with effect from 1 May 2020.

 
                 Base salary from 
                    1 May 2020 
--------------  ----------------- 
 Duncan Ball         GBP484k 
 Frank Schramm       GBP484k 
 Michael Denny       GBP315k 
 

The combined annual base salary received by the members of the Management Board during the year ended 31 December 2020 was GBP1,199,852 (2019: GBP989,046).

Taxable benefits and pension-related benefits

The Co-CEOs received a monthly car allowance amounting to a total amount of GBP27,763 for the year.

As shown in the Single Total Figure table, the Co-CEOs and the CFO also received a supplementary annual payment to provide pension, retirement or similar benefits equating to 15 per cent of their annual base salary at 31 December 2020, in line with market practice.

STIP - Annual Bonus in respect of year ended 31 December 2020

The following table summarises the STIP performance metrics and achievements in respect of the financial year ended 31 December 2020. The Remuneration Committee is responsible for determining both whether the relevant financial and non-financial performance objectives have been satisfied and the level of award under the STIP for the relevant year. The Management Board delivered excellent performance and progress against the targets set at the start of the year. No payment under the STIP is made if performance is below the Threshold criteria.

The maximum STIP opportunity for the Co CEOs and the CFO is 150 per cent of base salary.

 
Performance assessed          Threshold performance     Target performance     Maximum performance    Outcome 
 - summary                         (33% vesting             (50% vesting          (100% vesting        (% of 
                                   equating to              equating to            equating to        maximum) 
                                   50% of base              75% of base            150% of base 
                                     salary)                  salary)                salary) 
                                  Assessment based on key financial achievements 
                                   during the year including: 
                                    *    Dividends paid and declared for the year 
 
 
                                    *    Growth in NAV per share 
 
 
                                    *    Portfolio performance KPIs 
 
 
                                    *    Ongoing charge 
 
Key financial metrics 
 (25% weighting)                    *    Other key financial performance metrics                        89% 
                            =======================================================================  ========= 
                                  Assessment based on key disciplined 
                                   growth metrics including: 
                                    *    The value, quality and pricing of projects acquired 
 
 
Disciplined growth                  *    The prospective investment pipeline at 31 December 
 (25% weighting)                         2020                                                          100% 
                            =======================================================================  ========= 
                            Assessment based on key metrics relating 
                             to strategic projects and investments, 
                             including portfolio control and also 
Strategic projects           organisational effectiveness through 
 and investments             the assessment of capacity, risk management, 
 (25% weighting)             overruns and delays.                                                      100% 
                            =======================================================================  ========= 
                            Assessment of key compliance and regulatory 
                             metrics including, AIFMD compliance, 
Compliance and regulation    regulator relationship, management 
 (10% weighting)             of issues related to Brexit.                                              100% 
                            =======================================================================  ========= 
                            Assessment of key health and safety 
                             policies and reporting, ESG performance 
                             in accordance with BBGI's ESG Best 
                             Practices Guidance where appropriate 
ESG, Health and Safety       or equivalent standards, ESG reporting 
 (15% weighting)             standards.                                                                100% 
                            =======================================================================  ========= 
 

For 2020, awards of 146 per cent of base salary were achieved by the Co-CEOs and CFO. One-third of the earned bonus will be settled in shares, with the net number of shares after settling the associated tax liability to be held for a period of three-year period. The remaining STIP awards will be paid in cash in May 2021. During the year ended 31 December 2020, the total amount accrued in respect of the 2020 STIP amounted to GBP1,896,650 (2019: GBP1,089,522). Payments under the STIP are made in Canadian Dollars and Euros.

Long-term incentive plan ('LTIP') - awards granted during the financial year

LTIP awards of 200 per cent of base salary were granted to the Co-CEOs in December 2020, subject to shareholder approval at the 2021 AGM. The CFO's maximum LTIP award is set at 150 per cent of base salary and is within the approved limits under the current LTIP Plan. Awards under the LTIP are subject to stretching Net Asset Value ('NAV') Total Return targets over a three-year period, as set out below. NAV Total Return reflects both capital returns generated and dividends returned to shareholders.

 
                                 NAV Total Return over three-year period 
                 Threshold performance       Target performance       Maximum performance 
                 (33% vesting equating      (50% vesting equating    (100% vesting equating 
                     to 50% of base            to 75% of base           to 150% of base 
                        salary)                    salary)                  salary) 
              --------------------------  -----------------------  ------------------------ 
 Performance       Dividend of 7.18p          Dividend growth           Dividend growth 
  metric           per annum to 2023,          of 2% per annum          of 2% per annum 
                          and                   to 2023; and              to 2023; and 
                NAV per share maintained      1% per annum NAV          2% per annum NAV 
                    from 31 December          per share growth          per share growth 
                  2020 to 31 December          to 31 December            to 31 December 
                         2023.                      2023.                    2023. 
              --------------------------  -----------------------  ------------------------ 
 

A key feature of these awards is that they will be settled entirely by way of Company shares and not in cash. All LTIP awards, which are to be settled by shares, fall under the scope of IFRS 2 'Share-Based Payments' and its specific requirements. The Company continues to engage Ernst & Young Advisory ('EY') to carry out the valuation of LTIP awards falling under the scope of IFRS 2. Refer to Note 20 of the Consolidated Financial Statements for further detail on share-based payments.

The 2020 award was issued in December 2020 subject to shareholder approval at the 2021 AGM as referred to above. No expense was accrued for this particular award during the reporting period.

During the year ended 31 December 2020, the Company settled the 2016 award obligation by issuing the respective gross share entitlement to each member of the Management Board. In total the Company issued and allotted 690,274 shares by way of settlement.

As at the date of this Report, there are no amounts set aside, needing to be set aside or accrued by the Company to provide pension, retirement or similar benefits to any member of the Management Board.

Total basic and variable remuneration for the financial year

The total basic remuneration paid to all members of staff (including the Management Board members) during the year ended 31 December 2020 was GBP2.65 million (2019: GBP2.45 million). The total amount accrued for cash settled variable remuneration at 31 December 2020 was GBP1.64 million. The total variable remuneration paid in cash in 2020 relating to the financial year ended 31 December 2019 was GBP1.53 million (2019: GBP1.43 million).

Payments made to former Directors and payments for loss of office during the year

No payments for loss of office and no payments to any former Management Board member were made in the year.

Single total figure table - Supervisory Board

The Supervisory Board members are the Company's independent Non-Executive Directors and are paid a fixed quarterly fee. The Remuneration Committee consider the Non-Executive Directors' fees annually within the approved maximum aggregate remuneration cap as approved by the Company's shareholders. No member of the Supervisory Board is entitled to vote on his or her own individual remuneration. Supervisory Board members are not entitled to any other fees, pension payments, incentive plans, performance-related payments or any other form of compensation; with the exception of ex gratia fees that are considered in the event of an exceptional and substantial increase in the members' workload.

Single total figure of remuneration - Supervisory Board

The table below outlines the fees paid in Sterling to each of the Supervisory Board members in 2020 and 2019.

 
                              Colin Maltby(2)        Sarah Whitney(3)         Howard Myles(4)      Jutta af Rosenborg 
                       ----------------------  ----------------------  ----------------------  ---------------------- 
                             2020        2019        2020        2019        2020        2019        2020        2019 
 Base                   GBP37,917   GBP65,000   GBP53,333   GBP30,000   GBP45,000   GBP45,000   GBP45,000   GBP45,000 
 Senior Non-Executive           -           -           -           -    GBP5,000    GBP5,000           -           - 
  Director 
 Committee Chair                -           -           -           -    GBP2,500           -    GBP5,000    GBP5,000 
 Other - additional             -    GBP5,000    GBP5,000    GBP5,000    GBP5,000    GBP5,000    GBP5,000    GBP5,000 
  fees(1) 
 Total                  GBP37,917   GBP70,000   GBP58,333   GBP35,000   GBP57,500   GBP55,000   GBP55,000   GBP55,000 
---------------------  ----------  ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
 

(1) In addition to the standard fees each of the sitting directors was entitled to ex gratia fees in 2019 and 2020 in relation to equity issues.

(2) Colin Maltby stood down from the Supervisory Board on 31 July 2020.

(3) Sarah Whitney was appointed as Chairman of the Board, effective from 31 July 2020.

(4) Howard Myles was appointed as the Chairman of the Remuneration Committee on 3 July 2020.

Supervisory Board fees

Details of Supervisory Board fees are set out below(.)

 
                                  Fees from 1 January   Fees from 1 January 
                                          2020                  2019 
-------------------------------  --------------------  -------------------- 
 Chairman                              GBP65,000             GBP65,000 
 Senior Independent Director(1)        GBP55,000             GBP50,000 
 Audit Committee Chairman              GBP50,000             GBP50,000 
 

(1) An additional fee of GBP5,000 is paid to the Chairman of the Remuneration Committee and is included in the above amount for 2020.

During the year, Deloitte LLP also carried out a review of the Supervisory Board fee structure. Following this review, it was decided to leave the fees unchanged for 2021. Supervisory Board fees were last changed in 2017.

However, to accommodate the potential addition of a new Non-Executive Director to the Supervisory Board, it is proposed that an increase in the maximum aggregate remuneration cap from GBP300,000 to GBP400,000 will be put, by way of resolution, to the Company's shareholders at the 2021 AGM.

Share interests and statement of Directors' shareholdings

Total share interests as at 31 December 2020

The interests of the Directors and their connected persons in the Company's ordinary shares as at 31 December 2020 were as set out below.

Shares owned by Directors:

 
  Number of shares     At 01/01/2020     At 31/12/2020 (or, if 
                                        earlier, date of stepping 
                                          down from the Board) 
--------------------  --------------  --------------------------- 
 Management Board 
 Duncan Ball              430,679               548,490 
 Frank Schramm            418,080               500,000 
 Michael Denny            137,569               262,015 
 
 Supervisory Board 
 Sarah Whitney            25,000                 39,000 
 Howard Myles                -                     - 
 Jutta af Rosenborg          -                     - 
 Colin Maltby(1)          122,804               132,000 
 

(1) Colin Maltby retired from the Supervisory Board on 31 July 2020.

Awards under share plans:

 
                                               Granted                    Lapsed/ 
                                                in the   Vested in      Forfeited 
                    Award   At 31/12/2019(1)      year    the year    in the year   At 31/12/2020 
----------------  -------  -----------------  --------  ----------  -------------  -------------- 
 Management 
  Board 
 Duncan Ball         LTIP          1,499,863   574,165   (328,902)       (49,742)       1,695,384 
 Frank Schramm       LTIP          1,513,637   596,200   (301,160)       (45,546)       1,763,131 
 Michael Denny       LTIP            231,760   286,394    (60,212)              -         457,942 
 
 

(1) Reflects maximum potential number of shares under all the awards granted, including the 2016 award which was settled in March 2020.

Shareholding guidelines:

The Committee has adopted a shareholding guideline for the Management Board, which requires a shareholding equivalent to 200 per cent of salary (increased from 150 per cent of salary in 2020 for the Co-CEOs). Prior to adopting the shareholding guideline, the CFO had no contractual shareholding requirement. Management Board members have until December 2021 to meet the minimum shareholding requirements. The respective Management Board members achievement of this guideline at 31 December 2020 is summarised below:

 
                     Shares counting towards                                   Percentage of 
                         the guideline at 31   Required shareholding            shareholding 
 Management Board              December 2020           to achieve(1)    requirement achieved 
------------------  ------------------------  ----------------------  ---------------------- 
 Duncan Ball                         548,490                 576,190                   95.2% 
 Frank Schramm                       500,000                 576,190                   86.8% 
 Michael Denny                       262,015                 375,000                   69.9% 
 
 

(1) Two times the revised base salary with effect from 1 May 2020 divided by the share price on date revised terms were agreed. The minimum holding requirement is fixed for a period of three years.

Post-employment shareholding requirements : From September 2020, Management Board members will be required to hold shares to the value of 100 per cent of salary for a period of two years after leaving the Company.

Other information

Advisers

Deloitte LLP is retained to provide independent advice to the Committee as required. Deloitte is a member of the Remuneration Consultants Group and, as such, voluntarily operated under the Code of Conduct in relation to executive remuneration consulting in the UK. Deloitte LLP fees for providing remuneration advice to the Committee were GBP34k for the year ended 31 December 2020. The Committee assesses from time to time whether this appointment remains appropriate or should be put out to tender and considers the Remuneration Consultants Group Code of Conduct when considering this.

Consideration by the Directors of matters relating to Directors' remuneration

Committee responsibilities and composition

BBGI's Remuneration Committee comprises three members including Howard Myles, Sarah Whitney and Jutta af Rosenborg. The Chairman of the Remuneration Committee is Howard Myles.

The Committee is responsible for ensuring that the remuneration of the Management supports the delivery of BBGI's strategic goals without encouraging undesirable risk-taking behaviour. This is achieved through the Committee approving all aspects of Management Board remuneration, and monitoring pay arrangements for the wider workforce.

There were four scheduled Committee meetings plus further ad-hoc meetings during the year. During the year, all members of the Committee were and remain independent, and represent a broad range of backgrounds and experience to provide balance and diversity.

The following parties may attend Committee meetings by invitation during the year in relation to its consideration of matters relating to Directors' remuneration: Co-CEOs, CFO, Company Secretary and Deloitte LLP. No Management Board member is involved in deciding their own remuneration outcome and no attendee is present when their own remuneration is being discussed.

Remuneration and AIFM law

In 2013, the European Securities and Markets Authority ('ESMA') published its final guidelines on sound remuneration policies under the AIFMD. These guidelines indicate that remuneration disclosures may be made on a 'proportional' basis and acknowledge that the application of proportionality may lead exceptionally to the 'disapplication' of some requirements, provided this is reconcilable with the risk profile, risk appetite and strategy of the AIFM and the AIFs it manages. According to the Guidelines, the different risk profiles and characteristics among AIFMs justify a proportionate implementation of the remuneration principles and, where a company chooses to disapply requirements, it must be able to explain the rationale to a competent authority. No such requirements were disapplied by the Company during or in respect of 2020.

Employee remuneration

At BBGI, we provide development opportunities for our employees to build their careers and enhance their skills. We encourage and embrace employee diversity, equality and inclusion. We support and invest in individuals to achieve their potential across the business.

Each of the remuneration components are combined to ensure an appropriate and balanced remuneration package that reflects the business units, job grade within the Company and professional activity, as well as market practice.

Statement of implementation of Directors' Remuneration Policy for the financial year commencing 1 January 2021

Base salary and benefits

Management Board salaries were reviewed with effect from 1 May 2020 and are as follows:

 
 Duncan Ball     Co-CEO   GBP484k 
 Frank Schramm   Co-CEO   GBP484k 
 Michael Denny   CFO      GBP315k 
 

The next expected review will be in May 2021.

Annual bonus (STIP)

The maximum bonus opportunity for FY21 will remain at 150 per cent of salary for the Co-CEOs and 150 per cent of salary for the CFO. The target opportunity will be 50 per cent of maximum. One-third of any bonus earned will be used to purchase shares to be held for a period of three years.

The annual bonus will be subject to stretching financial and strategic targets. The Committee considers the targets are commercially sensitive and therefore they should remain confidential. However, the Committee will disclose an overview of the bonus performance measures and out-turns retrospectively in the 2021 Directors' Remuneration Report

LTIP

Subject to shareholder approval at the 2021 AGM, the current intention of the Committee is to grant ongoing annual maximum LTIP awards of 200 per cent of salary to the Co-CEOs and 150 per cent of salary to the CFO, subject to stretching NAV Total Return targets

Approval

This Report was approved by the Board on 24 March 2021 and signed on its behalf by:

Howard Myles

Chairman of the Remuneration Committee

AUDIT COMMITTEE REPORT

I am pleased to present the Audit Committee's (the 'Committee') report to shareholders on its activities in respect of the year ended 31 December 2020. The Committee has been operating throughout the year in line with its terms of reference.

Composition of the Committee

Each of the three Independent Non-Executive Directors is a member of the Committee, which is chaired by me, and our biographies can be found in the Corporate Governance section of this Annual Report. The Supervisory Board considers that at least one Committee member has recent and relevant financial experience for the Committee to discharge its functions effectively. Due to the size of the Supervisory Board, its Chairman, Sarah Whitney, is also a member of the Committee.

Colin Maltby stepped down as a member of the Committee on 31 July 2020.

Responsibilities

The Committee's terms of reference include all matters indicated by the Disclosure and Transparency Rule 7.1 and the AIC Code. The terms of reference are reviewed at each formally scheduled meeting by the Committee and any changes are then referred to the Supervisory Board for approval. A copy of the terms of reference is available on the Company website.

The Committee's main responsibilities are as follows:

-- Providing advice to the Supervisory Board on whether the Group's Annual and Interim Reports and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

-- Monitoring the integrity of the financial statements of the Group and any formal announcements relating to the Group's financial performance, and reviewing significant financial reporting judgements contained therein.

-- Reviewing the Group's internal financial controls including consistency of accounting policies and practices on a year-to-year basis, and, unless expressly addressed by the Supervisory Board itself, the Group's internal control and risk management systems, including reviewing the Internal Auditors annual regulatory report.

-- Monitoring and reviewing the effectiveness of the Company's internal audit function, including the appointment and removal of the third-party service provider and reviewing and approving the tri-annual internal audit plan.

-- Making recommendations to the Supervisory Board for resolutions to be put to shareholders for approval at the AGM on the appointment, re-appointment and removal of the External Auditor, and for approval of their associated remuneration and terms of engagement.

-- Reviewing and monitoring the External Auditor's independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK and Luxembourg professional and regulatory requirements.

-- Developing and implementing a policy on the engagement of the External Auditor to supply non-audit services, considering relevant guidance and legislation regarding the provision of non-audit services by the external audit firm.

-- Reviewing the Company's procedures for detecting and reporting any wrongdoing in financial reporting, fraud, bribery and other matters, including arrangements for employees and contractors to do so in confidence via BBGI's whistle-blower hotline.

   --      Reviewing the Group's Annual and Interim Reports and Financial Statements. 

2020 overview

The Committee met four times in the year to 31 December 2020 and member attendance can be found within the Corporate Governance section of this Annual Report, under the heading 'Committees of the Supervisory Board'. At these meetings, the Committee considered, inter alia:

   --      The Committee's terms of reference. 
   --      The 2019 Annual and 2020 Interim Reports and Financial Statements. 
   --      The valuation reports in respect of the Company's investments. 
   --      The Reports of the External Auditor. 

-- The External Auditor's terms of appointment and remuneration (including overseeing the independence of the Auditor, particularly as it relates to the provision of non-audit services).

-- Review and approval of the External Auditor's plan for the following financial year and the key business risks relevant to the audit.

-- The conducting of a transparent market tender process during 2021 in accordance with the mandatory external audit firm rotation requirements per EU audit legislation as transposed into National law.

   --      The appropriateness of the Group's accounting policies. 

-- New IFRS reporting standards, Amendments to IFRS 3: 'Definitions of Business' and Amendments to IAS 1 and IAS 8: 'Definition of Material', as well as the impact, if any, that new IFRS reporting standards might have on Group financial reporting.

-- The non-financial impact of Covid-19 and in particular the effectiveness of the Company's BCP, the controls in place to mitigate the increased cyber threat and the impact that remote working, if any, was having on employees.

   --      The Company's Risk Profile and Key Risk Indicators. 

-- The Company's approach to managing the risks associated with the Covid-19 pandemic and associated market communication.

-- The adequacy of the internal control systems and standards including feedback on the revised controls implemented as part of the 2019 18/698 gap analysis.

   --      The 2019 Internal Auditor's Annual Report and the 2020-2022 triennial internal audit plan. 

Covid-19

The emergence of the Covid-19 pandemic was inevitably a key area of focus for the Audit Committee during the reporting period. While the Committee continued to be briefed by members of the Management Board on financial matters, a key focus of the briefings during the year was in respect of non-financial matters. Management periodically briefed the Committee on the effectiveness of the Company's internal controls on mitigating the risks posed by the pandemic when the vast majority of staff were working from home for prolonged periods of time. The Committee was also briefed on training programmes which were rolled out in order to further mitigate specific risks either resulting from, or augmented by Covid-19, such as the annual Cyber Awareness training and the Anti Money Laundering training programmes.

The Committee is satisfied that staff appear to have adapted particularly well to the remote working solution and that the Company's BCP operated very effectively during the year with minimum disruption to the effectiveness and implementation of the internal control framework.

Significant risks considered

During the year under review, the Committee held discussions with each of the Management Board, the External Auditor and the Internal Auditor. Once again, the Committee concluded from these discussions that the most significant risk of material misstatement in the Company's financial statements continues to be the fair valuation of the investment portfolio which makes up 97.8 per cent of the Company's NAV at 31 December 2020. The valuation of the Company's portfolio of assets requires significant judgement. The Management Board carries out a fair market valuation of the investments every six months at 30 June and 31 December respectively, which is then reviewed by an independent third-party valuer, after which it is presented to the Supervisory Board.

The External Auditor was invited to attend the Committee meetings at which the Annual and Interim Financial Statements were considered in order to present the conclusion of its work, which included a review of the adequacy of the valuation. The External Auditor, including the External Auditor's valuation specialist, delivered a review of the Company's Annual and Interim Financial Statements, paying particular attention to the portfolio valuation, discount rates applied, and key assumptions used in deriving the fair valuation of the investments. Furthermore, the External Auditor briefed the Audit Committee on the outcome of their controls testing and the audit procedures performed. This risk of material misstatement is therefore carefully considered when the Committee reviews the Company's annual and interim financial statements.

The Management Board members were available during the Committee review process to provide detailed explanations of the rationale used for the valuation of investments and the assumptions applied.

Subsequent to the valuation and ensuing reviews, the Committee concluded that the valuation process of the Company's investments for the year ended 31 December 2020 had been properly carried out and the investments fairly valued.

Over the year the Committee considered the UK's exit from the European Union and in particular the risk it could pose to the Company's listing on the London Stock Exchange ('LSE'). The Committee obtained sufficient comfort that appropriate plans were in place to ensure continuity of listing post the end of the Brexit transition period.

Non-Audit Services

The Committee considered the extent of non-audit services ('NAS') provided by the External Auditor. To the extent that the NAS are not prohibited, the Committee will continue to review and, where appropriate, approve NAS engagements performed by the External Auditor on controlled subsidiaries. As a general principle the Company will not look to retain the services of the External Auditor for NAS unless there is a specific justification for doing so, for example legacy knowledge whereby the appointment of another adviser would potentially be sub optimal to the business. There were no NAS provided by the External Auditor the to the Group during 2020.

Audit Tender

In accordance with the European Audit Reform, KPMG would conduct its last audit under its current ten-year tenure as external auditor in respect of the financial year ending 31 December 2021. In November 2020, the Company announced its intention to conduct an audit tender with a view to selecting a firm to audit the Company's consolidated IFRS financial statements starting for the fiscal period beginning 1 January 2022.

The Tender was initiated in compliance with European Audit Reform as adopted by the EU legislators in 2014 and with Luxembourg law on 23 July 2016 on the audit profession ('Law ndeg6929') which requires Public Interest Entities to put their statutory audit engagement out to tender at least every ten years.

The Tender process is being led by the Audit Committee in consultation with the Management Board.

The request for proposal for the tender was issued during the last quarter of 2020 with the tender process to be conducted during the first half of 2021.

Appointment of External Auditor

As stated above in the '2020 overview', the Committee annually reviews the performance of KPMG Luxembourg, Société coopérative ('KPMG'), the Company's External Auditor. In doing so, we consider a range of factors including the quality of service, specialist expertise and the level of audit fee. Following that review, the Committee remains satisfied with KPMG's effectiveness. There are no contractual obligations restricting the choice of External Auditor. The reappointment of the External Auditor is subject to shareholder approval at the Annual General Meeting.

As a result of its work during the period, the Committee concludes that it has acted in accordance with its terms of reference and has ensured the independence and objectivity of the External Auditor. The Committee has recommended to the Board to re-appoint KPMG Luxembourg, Société coopérative as the Group's External Auditor.

On behalf of the Audit Committee

Jutta af Rosenborg

Chairman of the Audit Committee

24 March 2021

VIABILITY

Viability statement

As part of their ongoing process of monitoring risk, and as required by the AIC Code Principle N and Provision 36, the Directors have considered the viability and prospects of the Company for a period of the next five years.

Whilst the average remaining life of the portfolio of assets is 20.4 years, we continue to consider that five years is an appropriate and acceptable length of time in which to consider the risks of the Company continuing in existence. In making this judgement, the Directors have considered detailed information provided at Board meetings, including:

   --      The Company's investment policy and the investment pipeline. 
   --      The long-term and contractual nature of the Company's investments. 
   --      Investment reviews. 

-- The Company's risk profile and key risk indicators (including the principal risks and uncertainties).

   --      Current relevant financial and economic information. 
   --      Long-term economic assumptions. 
   --      Scenario testing. 
   --      Annual and semi-annual valuations. 

This judgement forms part of the overall annual risk review process carried out by the Company. Each of the principal risks and uncertainties the Company faces, along with detailed descriptions of the areas and factors of the risks as well as explanations of the processes by which the Management and Supervisory Boards monitor, review and assess them, can be found in the Risk section of this Annual Report.

The Company has put in place a robust risk and internal controls framework with the objectives of reducing the likelihood and impact of poor decision-making, risk-taking above agreed levels, and human error. More about this framework can be found within the corresponding section under the heading Committees of the Supervisory Board.

The Management and Supervisory Boards regularly review and assess the principal risks facing the Company including and in particular those that could threaten its business model, strategy, solvency, liquidity and future performance. All risks identified are assessed based on (i) probability or likelihood of occurrence, (ii) impact and (iii) mitigation measures in place. They are then scored and ranked in accordance with remaining residual risk and monitored on an ongoing basis by the Management Board.

In addition to the risk management and the mitigation measures in place, a valuation of each asset is carried out every six months at each of the Company's financial half-year and year-ends (30 June and 31 December, respectively). Such valuations are based on long-term discounted future cash flows that are themselves predominantly based on long-term contracts and other assumptions which together form a key part of the overall viability assessment. Once complete, each portfolio valuation is independently reviewed by an independent third-party valuer and is also subject to audit/review by the Company's External Auditor.

A key part of the viability assessment is analysing how the Company's NAV will be impacted in stressed macro-economic scenarios. This provides further insight into how the Company is likely to perform when affected by variables and events that are inherently outside of the control of the Management and Supervisory Boards and its risk management framework. As part of this assessment, the Management Board continues to consider the risk posed by Covid-19 and the impact it could have on the Company and the performance of its underlying investment portfolio. To date, the Company has not experienced any material Covid-19 related operational or financial impact.

A more detailed description of the valuations, assumptions and stress-testing applied can be found in the Valuation section of the Strategic Report.

Following the assessment, the Board has a reasonable expectation that the Company will be able to continue in operation and meet all of its liabilities as they fall due up to March 2026. This assessment is subject to the following conditions: that the availability of sufficient capital and market liquidity continues to allow for the refinancing/repayment of any short-term recourse RCF obligations which may be due; and that the Company's investments are not materially affected by retrospective changes to government policy, laws, regulations or other risks which are currently not considered material or probable by the Company.

The Company is also subject to a biennial shareholder continuation vote, the next of which is scheduled to take place at the forthcoming AGM of shareholders scheduled to be held on 30 April 2021.

RISK

The Company's approach to internal controls is risk based. The Company's Risk Management Function which is performed by the Risk Manager facilitates the Management Board's responsibility to effectively govern and manage the Company's approach to risk. The Company does not operate in a risk-free environment. In an uncertain environment, proactive action is required to address risks in order to achieve the business and investment objectives.

All material risks are identified, analysed, assessed, reported and managed. Risks to the Company are identified as early as possible so as to minimise their impact and are classified according to the following risk types:

   --      Economic and Market risk 
   --      Taxation risk 
   --      Political risk 
   --      Financial risk 
   --      Operational risk 
   --      Strategic risk 

All identified risks are analysed during the risk reporting process to identify the range of possible impacts on the Company. A review is undertaken to determine which risks are the material risks to pursue and respond to, and which risks require no further attention, thus arriving at a material risk universe. The Risk Management Function performs a risk assessment to determine the likelihood that a predefined event will occur and the impact it would have. This includes an estimation of the levels of risks involved in a particular situation, their comparison against benchmarks or standards, and determination of an acceptable level of risk.

The Risk Profile is designed to assess material risks. For the material risks identified, the Company's Risk Manager advises on the key risk indicators to be included in the Risk Profile and suggests appropriate quantitative and qualitative limits to mitigate the potential impact of those risks, which are discussed and approved by the Management Board before being formally included in the Risk Profile.

Below is a list of material risks related to the reporting period, as identified by the Risk Management Function, and validated by the Management Board. The inherent risk has been assessed and relevant mitigating factors been applied, to arrive at a remaining residual risk, which has been deemed acceptable by the Management Board. The risks to which the Company is exposed have not materially changed since those set out in detail in the 28 August 2020 Interim Report.

 
                       Risk description         Risk mitigation 
 ECONOMIC AND MARKET RISKS 
 Foreign Exchange      A significant            Currency-hedging arrangements 
                       proportion                in respect of the non-Sterling 
                       of the Company's          portfolio distributions denominated 
                       underlying                in Australian Dollars, Canadian 
                       investments - 70 per      Dollars, Norwegian Kroner and 
                       cent                      US Dollars are in place for 
                       of portfolio value at     a period of four years, on a 
                       31                        rolling basis, in order to mitigate 
                       December 2020 - are       some of this risk. 
                       denominated 
                       in currencies other       In addition to cash flow hedging, 
                       than                      our strategy is also to hedge 
                       Sterling. The Company     a portion of the non-Sterling, 
                       maintains                 non-Euro portfolio to reduce 
                       its financial             NAV sensitivity to approximately 
                       statements,               3 per cent for a 10 per cent 
                       prepares the valuation    adverse FX movement. 
                       and 
                       pays distributions in     Euro-denominated fund running 
                       Sterling.                 costs provide a natural hedge 
                                                 against the Euro-denominated 
                       There is a risk that      portfolio distributions. 
                       fluctuations 
                       in exchange rates         Furthermore, the ability to 
                       between                   draw on the RCF in the currency 
                       Sterling and the          of the underlying asset distributions 
                       relevant                  provides an additional hedging 
                       local currencies will     possibility. 
                       adversely 
                       affect the value of       BBGI has investments in five 
                       the Company's             currencies other than Sterling, 
                       underlying                so there is some natural diversification 
                       investments, the          amongst the underlying currencies. 
                       distributions and the 
                       ultimate                  Refer to the sensitivity analysis 
                       rate of return            in the Valuation section of 
                       realised by               the 2020 Annual Report in relation 
                       investors.                to foreign exchange rates. 
                      -----------------------  ----------------------------------------------------------------------- 
 Interest and          The Company's            The Portfolio Companies have 
  deposit rates        performance               sought to hedge substantially 
                       may be adversely          all of their floating rate interest 
                       affected                  liabilities against changes 
                       by changes in interest    in underlying interest rates 
                       rates.                    with interest rate swaps. 
                       BBGI has an exposure 
                       to interest               At the Group level, BBGI maintains 
                       rates through             deposits at low levels with 
                       borrowings                the Company only raising capital 
                       under the RCF, debt at    when there is a clear strategy 
                       the                       for the deployment of proceeds. 
                       Portfolio Company 
                       level and                 Refer to the sensitivity analysis 
                       cash deposits.            in the 2020 Annual Report in 
                                                 relation to deposit rates of 
                       The Portfolio             the Portfolio Companies. 
                       Companies typically 
                       have some cash 
                       reserves and 
                       deposits. From a 
                       financial 
                       modelling perspective, 
                       an 
                       assumption is usually 
                       made 
                       that the deposits can 
                       be 
                       placed at a forecast 
                       rate 
                       that varies depending 
                       on 
                       country and historical 
                       long-term 
                       averages. The effect 
                       on investment 
                       returns if deposit 
                       rates 
                       exceed or fall below 
                       the 
                       projections for this 
                       long-term 
                       rate is dependent on 
                       the 
                       amount of deposits. 
                      -----------------------  ----------------------------------------------------------------------- 
 Inflation             The Company's            Portfolio Companies typically 
                       performance               mitigate this risk to some extent 
                       may be adversely or       by seeking to match the indexation 
                       positively                of the revenues to the indexation 
                       affected by lower or      of the operational cost. 
                       higher 
                       than expected             The Company and the service 
                       inflation and             providers for the underlying 
                       prolonged periods of      Portfolio Companies continually 
                       deflation                 monitor any potential or actual 
                       could result in           changes. 
                       defaults 
                       under loan                Refer to the sensitivity analysis 
                       arrangements in           in the 2020 Annual Report in 
                       Portfolio Companies.      relation to inflation rates 
                                                 of the Portfolio Companies. 
                       The revenues and 
                       expenditure 
                       of Portfolio Companies 
                       developed 
                       under 
                       availability-based 
                       schemes are often 
                       partly 
                       or wholly subject to 
                       indexation. 
                       From a financial 
                       modelling 
                       perspective, an 
                       assumption 
                       is usually made that 
                       inflation 
                       will increase at an 
                       assumed 
                       rate (which may vary 
                       depending 
                       on country). The 
                       effect on 
                       investment returns if 
                       inflation 
                       exceeds or falls below 
                       the 
                       projections for this 
                       rate 
                       is typically dependent 
                       on 
                       the nature of the 
                       underlying 
                       asset earnings, the 
                       extent 
                       to which the Portfolio 
                       Company's 
                       costs are affected by 
                       inflation 
                       and any unitary charge 
                       indexation 
                       provisions agreed with 
                       the 
                       client on any 
                       investment. 
                      -----------------------  ----------------------------------------------------------------------- 
 Volatility            The Company uses a       BBGI uses a market-based evaluation 
  of discount          discounted                to determine a base discount 
  rates                cash flow methodology     rate for steady-state, operational 
                       to                        availability-based investments 
                       value its portfolio of    and the Company uses its judgement 
                       investments.              in arriving at the appropriate 
                       Higher discount rates     discount rate. Adjustments may 
                       may                       then be applied to the base 
                       have a negative impact    rate to reflect variances from 
                       on                        the average benchmark when determining 
                       valuation while lower     the investment-specific adjustments. 
                       rates                     Changes in market rates of interest 
                       may have a positive       (including government bond yields) 
                       impact.                   may among other factors impact 
                                                 the discount rate used to value 
                                                 the Company's future projected 
                                                 cash flows and thus its valuation. 
                                                 The NAV is sensitivity tested 
                                                 periodically for changes in 
                                                 discount rates. 
 
                                                 Refer to the sensitivity analysis 
                                                 in the 2020 Annual Report in 
                                                 relation to discount rates of 
                                                 the Portfolio Companies. 
                      -----------------------  ----------------------------------------------------------------------- 
 Covid-19              Since the outbreak of    The Company's portfolio is 99.5 
                       Covid-19                  per cent operational and relies 
                       in December 2019, it      on availability-based revenues. 
                       was                       At the time of producing this 
                       declared a global         Annual Report, there was no 
                       pandemic                  evidence to suggest of material 
                       by the World Health       disruption to the Company and 
                       Organization              financial performance is not 
                       (WHO).                    expected to be materially affected. 
                       As a result, there has    However, there is naturally 
                       been                      significant uncertainty around 
                       materially increased      how the pandemic will evolve 
                       market                    and therefore it is difficult 
                       volatility and            to foresee all consequences 
                       macro-economic            or disruptions potentially arising 
                       uncertainty, prompting    from the pandemic. 
                       several 
                       monetary and fiscal       The timing of potential equity 
                       policy                    issuances may be impacted, but 
                       interventions to          this will not likely restrict 
                       manage what               the Company's access to capital 
                       has become a severe       in the medium-term. The Group 
                       global                    has a four-year GBP 180 million 
                       economic shock.           RCF, with a further GBP 70 million 
                       Due to a period of        incremental uncommitted accordion 
                       likely                    tranche. As at 31 December 2020, 
                       prolonged                 the Group had utilised GBP 1 
                       macro-economic            million of the facility. 
                       uncertainty, the 
                       ultimate                  Global travel restrictions imposed 
                       long-term impact of       in response to the pandemic 
                       Covid-19                  have meant that meetings of 
                       remains unclear.          the Company's Supervisory Board, 
                                                 Management Board and the various 
                       Near-term, the            Committees have been held via 
                       operations                video conference. Notwithstanding 
                       of Portfolio Companies    this, the general consensus 
                       could                     among the respective Board members 
                       potentially be            was that the technology deployed 
                       impacted due              ensured that all virtual meetings 
                       to supply-chain           held during 2020 continued to 
                       disruptions.              be effective. It is expected 
                                                 that meetings will continue 
                                                 to be held by way of video conferencing 
                                                 for as long as such travel restrictions 
                                                 remain in place. 
 
                                                 As an active asset manager, 
                                                 the Company continues to be 
                                                 in close dialogue with its facilities 
                                                 managers and operators. At the 
                                                 time of producing this Report 
                                                 there were no indications from 
                                                 any contractor that they would 
                                                 not be able to continue to deliver 
                                                 contracted services to the respective 
                                                 Portfolio Companies. 
 
                                                 The Company does not foresee 
                                                 any material impact on its own 
                                                 workforce, given the already 
                                                 decentralised nature of the 
                                                 Management Board, asset management 
                                                 teams and our internal infrastructure 
                                                 (e.g. information technology), 
                                                 as well as the Company's inherent 
                                                 flexibility to work from remote 
                                                 locations. The impact of global 
                                                 travel restrictions does mean 
                                                 that personal engagement with 
                                                 the Company's public sector 
                                                 clients will be more limited, 
                                                 although this is mitigated through 
                                                 remote communication. 
                      -----------------------  ----------------------------------------------------------------------- 
 TAXATION RISKS 
 Changes to            There is a continued     Certain risks, such as changes 
  tax legislation,     risk                      to corporation tax rates (including 
  treaties and         that enacted changes      those due to fiscal constraints), 
  rates                in tax                    cannot be prevented or mitigated. 
                       law, tax rates and        BBGI values its Portfolio Companies 
                       global                    based on enacted tax rates. 
                       tax initiatives           Management works closely with 
                       including                 the Group's global tax advisers 
                       the OECD's                and are briefed periodically 
                       recommendation            on relevant tax developments. 
                       in relation to Base 
                       Erosion                   BBGI has a globally diversified 
                       and Profit Shifting       portfolio of assets, thereby 
                       could                     reducing the tax concentration 
                       have an adverse effect    risk of any one country. 
                       on 
                       the Group's cash flows    Refer to the sensitivity analysis 
                       thereby                   in the 2020 Annual Report. 
                       reducing the returns 
                       to investors. 
                       Furthermore, there is 
                       a risk 
                       that governments may 
                       seek 
                       to increase corporate 
                       tax 
                       rates in a response to 
                       the 
                       Covid-19 crisis. 
                      -----------------------  ----------------------------------------------------------------------- 
 POLITICAL RISKS 
 Change in             Different laws and       The Management Board seeks regular 
  law/regulation       regulations               briefings from its legal and 
                       apply within the          tax advisers to stay abreast 
                       countries                 of impending or possible changes 
                       where the Company and     in law. 
                       the 
                       Portfolio Companies       Change in law provisions are 
                       are located.              included in some contracts, 
                       There is a risk that      thus providing further mitigation. 
                       changes 
                       in laws may have an       BBGI has a globally diversified 
                       adverse                   portfolio of assets, thereby 
                       effect on the             reducing the Group's exposure 
                       performance               to changes in any one country. 
                       of the underlying 
                       investment 
                       that in turn will 
                       affect 
                       the cash flows derived 
                       from 
                       the investments and/or 
                       the 
                       valuation of the 
                       investments. 
                      -----------------------  ----------------------------------------------------------------------- 
 Brexit                The Company is           The UK Temporary Permissions 
                       incorporated              Regime 
                       in Luxembourg and is      As part of the UK's preparations 
                       listed                    for Brexit, the UK Government 
                       on the London Stock       established a temporary permissions 
                       Exchange,                 regime ('TPR') enabling European 
                       raising questions         Economic Area ('EEA') AIFs with 
                       around                    EEA AIFMs passporting into the 
                       the continuity of         UK at the end of the transition 
                       listing                   period to continue to access 
                       and marketing in the      the UK market in the same manner 
                       UK.                       as before the transition period 
                                                 ended for a limited period of 
                       The UK's departure        time. 
                       from the 
                       EU also poses a risk      BBGI has made the necessary 
                       to performance            notification to the FCA (and 
                       of the wider UK           the CSSF) under the TPR of its 
                       economy,                  intention and as a result has 
                       which may adversely       temporary permission to be marketed 
                       impact                    in the UK. 
                       the performance of 
                       certain                   To continue marketing the Company 
                       infrastructure asset      in the UK after the end of the 
                       classes.                  TPR, the Company must notify 
                                                 under the UK national private 
                                                 placement regime and will be 
                                                 directed by the FCA to make 
                                                 this notification within two 
                                                 years from the end of the transition 
                                                 period. 
 
                                                 Regarding portfolio performance, 
                                                 while the long-term economic 
                                                 outcome of the UK's departure 
                                                 from the EU will remain uncertain 
                                                 for some time, BBGI's portfolio 
                                                 cash flows are availability-based 
                                                 and, unlike demand-based assets, 
                                                 are not sensitive to the performance 
                                                 of the wider economic environment. 
                      -----------------------  ----------------------------------------------------------------------- 
 Voluntary             There remains a risk     We remain unconvinced by the 
  Termination          that                      practicalities of terminating 
  Risk                 public sector clients     the contracts given the complexities 
                       of                        involved and the overall compensation 
                       portfolio companies       that would currently be required 
                       choose                    to terminate these contracts. 
                       to exercise their         The Management Board believes 
                       right to                  there are several mitigants 
                       voluntarily terminate     or deterrents to the risk of 
                       the                       voluntary termination of contracts: 
                       contracts. In case of 
                       such                       *    Most transactions were agreed at a time when interest 
                       a voluntary                     rates were significantly higher than currently. As 
                       termination,                    interest rates have fallen, swaps have become 'out of 
                       the public sector is            the money' for the Portfolio Companies, so any public 
                       typically                       body wishing to terminate a contract in the current 
                       contractually obliged           interest environment would need to cover the cost of 
                       to                              the swap breakage fee. 
                       pay compensation 
                       amounts 
                       on termination to both     *    The Portfolio Company equity investors would 
                       the                             typically also need to be (at least partially) 
                       equity holders and the          compensated, often requiring a compensation payment, 
                       debt                            as well as the public sector being required to budget 
                       providers and -                 for the ongoing provision of the service. 
                       depending 
                       on the circumstances - 
                       to 
                       other parties. While 
                       the 
                       provisions vary 
                       between contracts, 
                       they generally ensure 
                       that 
                       the investor is paid 
                       either 
                       market value for the 
                       equity 
                       interests or a value 
                       to achieve 
                       the originally 
                       projected 
                       IRR, and in these 
                       cases, 
                       where the compensation 
                       amount 
                       is materially less 
                       than current 
                       valuation levels, the 
                       Company 
                       would suffer a loss. 
                      -----------------------  ----------------------------------------------------------------------- 
 FINANCIAL RISKS 
 Valuation             The most significant     The Company's portfolio value 
                       risk                      is prepared semi-annually by 
                       of material               an experienced internal team, 
                       misstatement              overseen by the Management Board. 
                       in the Company's          The valuation is then reviewed 
                       financial                 by an independent, third-party 
                       statements continues      valuer, and finally reviewed 
                       to be                     and audited by the Company's 
                       the fair valuation of     auditor. 
                       the 
                       investment portfolio,     All key assumptions used in 
                       the                       the valuation process are subject 
                       discount rates applied    to sensitivity testing. However, 
                       and                       sensitivity testing has its 
                       the key assumptions       limitations. It cannot provide 
                       when                      a comprehensive assessment of 
                       valuing these             all of the risks and should 
                       investments.              be treated accordingly. 
 
                       There is a risk that 
                       errors 
                       may be made in the 
                       assumptions, 
                       calculations or 
                       methodology 
                       used in a periodic 
                       valuation 
                       process. 
 
                       Financial models, 
                       either 
                       for the Group or the 
                       underlying 
                       Portfolio Companies, 
                       may 
                       contain errors, or 
                       incorrect 
                       inputs, resulting in 
                       inaccurate 
                       projections of the 
                       distributions. 
                       These could adversely 
                       impact 
                       the valuation on 
                       individual 
                       investments and the 
                       overall 
                       assessment of the 
                       Company's 
                       financial position. 
                      -----------------------  ----------------------------------------------------------------------- 
 Poor investment       There is a risk that     BBGI has developed a robust 
  selection            errors                    asset acquisition due diligence 
                       may be made in the        process. Typical due diligence 
                       assumptions,              includes model audit or review, 
                       calculations or           legal, tax, technical, ESG, 
                       methodology               anti-money laundering and insurance 
                       during the acquisition    reviews. 
                       due 
                       diligence process. In 
                       such 
                       circumstances, the 
                       figures 
                       and/or the returns 
                       generated 
                       by the Portfolio 
                       Company 
                       may be lower to those 
                       estimated 
                       or projected. 
                      -----------------------  ----------------------------------------------------------------------- 
 OPERATIONAL RISKS 
 Construction          The budget, and          In general, Portfolio Companies 
  defects              therefore                 are able to submit claims against 
                       the risk, of certain      construction subcontractors 
                       key                       when it comes to defects in 
                       operational costs in      the design, construction or 
                       relation                  commissioning of project assets. 
                       to construction           This right to claim applies 
                       defects lies              for a pre-determined period 
                       with the Portfolio        of time following the completion 
                       Company.                  of construction (the 'statutory 
                       There is a risk that      limitations period') and this 
                       the                       may differ between jurisdictions. 
                       budget to rectify         If disputes were to arise, an 
                       defects                   arbitration or court process 
                       could prove to be         may be used. At the point that 
                       insufficient.             the statutory limitations period 
                                                 has ended, the risk of remediation 
                                                 of construction defects which 
                                                 are identified after this point 
                                                 typically falls to the Portfolio 
                                                 Company itself and is the risk 
                                                 of the Portfolio Company. In 
                                                 addition, there may be other 
                                                 situations, for example where 
                                                 a subcontractor becomes insolvent, 
                                                 and may no longer be able to 
                                                 fulfil its obligations to correct 
                                                 these defects. 
                      -----------------------  ----------------------------------------------------------------------- 
 Lifecycle             During the life of an    Of the 50 assets in the BBGI 
  risk/ Operational    investment,               portfolio, 17 Portfolio Companies 
  cost                 components of the         retain the lifecycle obligations. 
                       assets                    The remaining 33 assets have 
                       (such as asphalt or       this obligation passed down 
                       concrete                  to the subcontractor. 
                       in the case of roads 
                       and                       The timing and costs of such 
                       elevators, or roofs       replacements or refurbishments 
                       and air                   is forecast, modelled and provided 
                       handling plants in the    for by each Portfolio Company 
                       case                      based upon technical advisers 
                       of buildings) are         to assist in such forecasting 
                       likely                    of lifecycle timings, scope 
                       to need to be replaced    of work and costs. 
                       or                        Refer to the sensitivity analysis 
                       undergo a major           in the 2020 Annual Report in 
                       refurbishment.            relation to lifecycle costs. 
                       There is a risk that 
                       the                       As part of the acquisition due 
                       actual cost of            diligence the budgeted cost 
                       replacement               are reviewed and assessed if 
                       or refurbishment will     they are adequate. 
                       be                        In the case of insurance cost, 
                       greater than the          this risk of increasing premiums 
                       forecast                  is on the majority of investments 
                       cost, or that the         taken by the public sector or 
                       timing                    mitigated by a contractual premium 
                       of the intervention       risk-sharing mechanism. 
                       may be 
                       earlier than forecast. 
 
                       There is the general 
                       risk 
                       that costs are higher 
                       than 
                       budgeted. This 
                       typically 
                       relates to insurance 
                       cost 
                       and management service 
                       contracts. 
                      -----------------------  ----------------------------------------------------------------------- 
 Subcontractor         The risk of a                       For assets under construction, 
  performance          subcontractor                       there are a number of mitigants 
  or credit            service failure, poor               and steps taken to manage this 
  risk (construction   performance                         risk: 
  contractors,         or subcontractor                     *    In the case of a construction joint venture 
  facility managers,   insolvency                                consisting of two or more counterparties, these are 
  operation            which is sufficiently                     typically jointly and severally liable, meaning if 
  and maintenance      serious                                   one party fails, the other is obligated to take over 
  contractors)         to cause a Portfolio                      the obligations. 
                       Company 
                       to terminate or to be 
                       required                             *    A contractor replacement analysis is performed as 
                       by the client or                          part of the initial investment due diligence. 
                       lenders 
                       to terminate a 
                       subcontract.                         *    The construction subcontractors are typically 
                       There may be a loss of                    required by lenders to provide a robust security 
                       revenue                                   package often consisting of letters of credit, Parent 
                       during the time taken                     Company guarantees and performance bonding. 
                       to 
                       find a replacement 
                       subcontractor. 
                       Furthermore, the                    The latter two mitigants are 
                       replacement                         in place for investments once 
                       subcontractor may levy              they become operational. Other 
                       a                                   mitigants during operations 
                       surcharge to assume                 include: 
                       the subcontract 
                       or charge more to                    *    Periodic benchmarking of defined facility services on 
                       provide                                   some investments. 
                       the services. 
 
                                                            *    Diversified group of subcontractors with no 
                                                                 substantial concentration risk. 
 
 
                                                            *    Ongoing subcontractor monitoring. 
                      -----------------------  ----------------------------------------------------------------------- 
 Cyber security        A breach of data         BBGI has taken a number of measures 
  attack               security                  to reduce the risk of a cyber-attack, 
                       could occur by            some of which are outlined below. 
                       accident or 
                       as a result of an         The Company has outsourced the 
                       external                  hosting of its IT platform to 
                       cyber-attack. A           an industry specialist. In doing 
                       cyber-attack              so, BBGI obtains the benefit 
                       could affect the IT       of having access to IT security 
                       systems                   experts, with the platform being 
                       of the BBGI or a          monitored by an advanced IT 
                       Portfolio                 security system, something that 
                       Company, causing theft    might not be cost effective 
                       or                        if the Company's IT infrastructure 
                       loss of data, or          was maintained onsite. 
                       damage to 
                       the infrastructure's      BBGI engages an external expert 
                       control                   to carry out an annual intrusion 
                       systems and equipment.    test on the IT platform in order 
                                                 to identify and patch any vulnerabilities 
                       The threat of             that might be identified. 
                       cyber-attack 
                       has meant that            Business continuity tests are 
                       businesses                performed regularly, disaster 
                       can no longer afford      recovery tests are performed 
                       to be                     annually, and all staff undergo 
                       reactive. A               cyber security training. 
                       cyber-attack 
                       could not only affect     Portfolio Companies typically 
                       BBGI's                    operate through a subcontracted 
                       reputation but could      management structure, and tend 
                       also                      not to have their own IT systems 
                       affect the Group          and rely on the management service 
                       legally,                  provider. Data is normally backed 
                       financially and           up and the risk, should data 
                       operationally.            be corrupted or stolen, is considered 
                                                 low. 
                       The risk of cybercrime 
                       has 
                       increased during the 
                       pandemic 
                       with cyber criminals 
                       looking 
                       to exploit the 
                       vulnerabilities 
                       caused by many people 
                       working 
                       from home. The Company 
                       therefore 
                       needs to remain 
                       vigilant 
                       to this risk. 
                      -----------------------  ----------------------------------------------------------------------- 
 STRATEGIC 
  RISKS 
                      -----------------------  ----------------------------------------------------------------------- 
 Premium/discount      The risk of share        To assist the Company in managing 
  to NAV               price volatility          any share price premiums or 
                       or trading at a           discounts to NAV, the Company 
                       discount                  has the ability to make market 
                       to NAV leading to         purchases of up to 14.99 per 
                       shareholder               cent per annum of the ordinary 
                       dissatisfaction.          shares in issue. 
 
                                                 In addition, a continuation 
                                                 vote is offered to shareholders 
                                                 every two years, the next of 
                                                 which will be proposed at the 
                                                 Company's AGM on 30 April 2021. 
 
                                                 Furthermore, the Management 
                                                 Board meets regularly with shareholders 
                                                 and receives regular briefings 
                                                 from the Company's brokers to 
                                                 manage investor relations. 
                      -----------------------  ----------------------------------------------------------------------- 
 Access to             There is a risk that a   The need to issue new equity 
  capital              disruption                capital primarily relates to 
                       to the equity markets     the repayment of drawings under 
                       could                     the RCF in connection with the 
                       lead to an inability      acquisition of new investments. 
                       to raise 
                       new capital. Such a       The Board and its Corporate 
                       disruption                Brokers regularly assess market 
                       could limit the           sentiment. 
                       Company's 
                       ability to grow and       Furthermore, the Board can consider 
                       its ability               refinancing the RCF to extend 
                       to repay debt drawn       its maturity and reduce the 
                       under                     near-term requirement to repay 
                       its RCF. To the extent    drawings, though it is not the 
                       that                      Company's intention to be drawn 
                       the Company does not      for substantial periods of time. 
                       have 
                       cash reserves pending     The Company's RCF expires in 
                       investment,               January 2022. 
                       the Company expects to 
                       bridge 
                       finance further 
                       investments 
                       by way of the credit 
                       facility. 
                       Although the Company 
                       has 
                       had a credit facility 
                       in 
                       place since July 2012 
                       (which 
                       has been subsequently 
                       refinanced), 
                       there can be no 
                       guarantee 
                       that this will always 
                       be 
                       the case or that it 
                       will 
                       be able to issue 
                       further 
                       shares in the market. 
                      -----------------------  ----------------------------------------------------------------------- 
 Climate risk          Climate risks can        Events arising from adverse 
                       affect                    climate change are typically 
                       BBGI in a multitude of    mitigated through insurance 
                       ways.                     coverage, pass-down to subcontractors, 
                       The political             and public sector client relief 
                       uncertainty               events. However, in severe cases 
                       inherent in regulation    adverse climate change events 
                       may                       could lead to early termination 
                       lead to a wide range      of concession agreements and 
                       of potential              compensation payments which 
                       outcomes. Direct          are lower than the valuation 
                       physical                  of an investment. 
                       climate impacts may be 
                       a                         BBGI has established an ESG 
                       significant risk for      Committee which provides oversight 
                       BBGI                      to this risk and has begun implementing 
                       in the medium to          a climate-resilient infrastructure 
                       long-term.                screening tool which will assess 
                       Climate-change-related    the risks and opportunities 
                       threats                   relating to climate change associated 
                       such as extreme           with each Portfolio Company. 
                       weather events,           BBGI engages with each infrastructure 
                       lost productivity and     investment to influence the 
                       effects                   increased disclosures of climate-related 
                       on physical               risks to enable the Company 
                       infrastructure            to assess climate-related risks 
                       from longer-term          across the investment portfolio. 
                       shifts in 
                       climate patterns. 
                       Failure 
                       of the Company to 
                       transition 
                       to a low carbon 
                       economy may 
                       also alienate certain 
                       investors 
                       and reduce access to 
                       capital. 
                      -----------------------  ----------------------------------------------------------------------- 
 

ADMINISTRATION

Incorporation and administration

The ordinary shares were created in accordance with Luxembourg law and conform to the regulations made thereunder, have all necessary statutory and other consents, and are duly authorised according to, and operate in conformity with, the Articles.

Articles of Association

The Articles were originally approved and formalised before a Luxembourg notary public on 24 November 2011. The Articles are filed with the Luxembourg Registre de Commerce et des Sociétés and are published in the Mémorial. The Articles may be amended in accordance with the rules set out in article 32 of the Articles.

A copy of the current Articles, which were most recently amended by shareholder approval on 30 November 2020, is available for inspection on the Company's website https://www.bb-gi.com/investors/policies/articles-of-association/ .

MANAGEMENT BOARD RESPONSIBILITIES STATEMENT

The Management Board of the Company is responsible for ensuring proper preparation of the Company's Annual Report and financial statements for each financial period in accordance with applicable laws and regulations, which require it to:

i) Give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group as of and at the end of the financial period, in accordance with International Financial Reporting Standards as adopted by the European Union and the Listing Rules.

ii) Give a true and fair view of the development and performance of the business and the position of the Group.

iii) Give a true and fair description of the principal risks and uncertainties the Group may encounter and put in place an appropriate control framework designed to meet the Group's particular needs and the risks to which it is exposed.

In addition, the Management Board is responsible for ensuring that the Company complies with applicable company law and other UK or Luxembourg applicable laws and regulations.

In preparing such Financial Statements, the Management Board is responsible for:

   --      Selecting suitable accounting policies and applying them consistently. 
   --      Making judgements and estimates that are reasonable and prudent. 

-- Stating whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.

-- Preparing the financial statements on a going concern basis, unless it is inappropriate to presume that the Group will continue in business.

-- Maintaining proper accounting records which disclose with reasonable accuracy the financial position of the Group and enable it to ensure that the financial statements comply with all relevant regulations.

-- Safeguarding the assets of the Group and taking reasonable steps for the prevention and detection of fraud and other irregularities.

Management Board Responsibilities Statement

We confirm that to the best of our knowledge:

-- The financial statements have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and Group included in the consolidation as a whole.

-- The Chairman's Statement and the Report of the Management Board ('Strategic Report') include a fair review of the development and performance of the business and the position of the Company and Group included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that it faces.

Luxembourg, 24 March 2021

Duncan Ball

Co-CEO

Frank Schramm

Co-CEO

Michael Denny

CFO

AUDIT OPINION

To the Shareholders of

BBGI Global Infrastructure S.A. (formerly BBGI SICAV S.A.)

6E, route de Trèves

L-2633 Senningerberg

Luxembourg

 
 
REPORT OF THE REVISEUR D'ENTREPRISES AGREE 
 

Report on the audit of the consolidated financial statements

Opinion

We have audited the consolidated financial statements of BBGI Global Infrastructure S.A. (formerly BBGI SICAV S.A.) and its subsidiaries (the "Group"), which comprise the consolidated statement of financial position as at 31 December 2020, and the consolidated income statement, consolidated statement of other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards ("IFRSs") as adopted by European Union.

Basis for opinion

We conducted our audit in accordance with the Law of 23 July 2016 on the audit profession ("Law of 23 July 2016") and with International Standards on Auditing ("ISAs") as adopted for Luxembourg by the "Commission de Surveillance du Secteur Financier" ("CSSF"). Our responsibilities under the Law of 23 July 2016 and ISAs are further described in the << Responsibilities of "réviseur d'entreprises agréé" for the audit of the consolidated financial statements >> section of our report. We are also independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants ("IESBA Code") as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the consolidated financial statements, and have fulfilled our other ethical responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Investments at fair value through profit or loss

a) Why the matter was considered to be one of most significance in our audit of the consolidated financial statements of the current period

We refer to the accounting policy "Investments at FVPL" and to Note 9 in the consolidated financial statements. Over 97% of the Group's assets are infrastructure assets that have been developed predominantly under the PPP/PFI or similar procurement models ("Infrastructure Investments"), held at fair value through profit or loss. The valuation of infrastructure investments is a significant judgement area resulting from a number of assumptions in the financial models. The valuation is inherently subjective due to the absence of a liquid market for these investments. The complexity of this methodology as well as assumptions taken in the financial models mean that there is a risk that the fair value of these investments may not be appropriate. The key assumptions used by the Management Board are among others in respect of discount rates and components of budgets used being part of long term forecast cash flows. In addition, the Management Board also used assumptions such as inflation, deposit interest and tax rates that have an impact on the long term forecast cash flows.

The significance of the estimates and judgements involved, coupled with the fact that a small percentage difference in the key assumptions in individual infrastructure investment valuations, when aggregated, could result in a material misstatement on the consolidated income statement and consolidated statement of financial position, warrants specific audit focus in this area.

b) How the matter was addressed in our audit

Our audit procedures over the valuation of investments at fair value through profit or loss included, but were not limited to the following:

- We tested the design, implementation and effectiveness of the controls around the determination and monitoring of the discounted cash flows and the determination and monitoring of related key macroeconomic assumptions;

- We used our own valuation specialists and their market knowledge to perform the following procedures:

Ø We considered and commented the approach and methodology documented by Management Board used in BBGI's Valuation Report against International Private Equity and Venture Capital Valuation Guidelines;

Ø We obtained market benchmarks for discount rates from public and private sources. We considered the discount rates applied in BBGI's Valuation Report against market benchmarks in the light of market, project, sector and country issues;

Ø We performed research on key assumptions and commented and compared those against the assumptions applied in BBGI's Valuation Report;

Ø We reviewed the results of the sensitivity analysis on key assumptions taken by Management;

Ø We challenged and determined the appropriateness of the Management Board's assumptions used for the valuation of a sample of Infrastructure Investments applying following procedures:

-- We agreed the underlying shareholder cash flows inputs (such as dividends, subordinated debt interest and principal repayment and director's fees) from the underlying project model to the Group's valuation model;

-- We considered if the methodology for assessing fair value has been applied consistently across the assets;

-- We read the latest board minutes, board packages and other supporting documents and information in respect of the sampled investments and raised Q&A comments to challenge the inputs in the valuation;

- We reviewed the Valuation Report prepared by the Management Board and assessed whether the valuation inputs and results are consistent with our other audit procedures performed as part of our audit of the consolidated financial statements;

- We obtained and reviewed the valuation review opinion issued by the independent third party valuation expert engaged by the Group, in connection with the appropriateness of the portfolio value prepared by the Management Board; and

- We tested the design, implementation and effectiveness of the management review controls over the valuation process.

Other information

The Management Board is responsible for the other information. The other information comprises the information stated in the annual report but does not include the consolidated financial statements and our report of "réviseur d'entreprises agréé" thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report this fact. We have nothing to report in this regard.

Responsibilities of the Management Board for the consolidated financial statements

The Management Board is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as the Management Board determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the Management Board is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Responsibilities of the réviseur d'entreprises agréé for the audit of the consolidated financial statements

The objectives of our audit are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report of "réviseur d'entreprises agréé" that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 
 
-  Identify and assess the risks of material misstatement of 
    the consolidated financial statements, whether due to fraud 
    or error, design and perform audit procedures responsive 
    to those risks, and obtain audit evidence that is sufficient 
    and appropriate to provide a basis for our opinion. The risk 
    of not detecting a material misstatement resulting from fraud 
    is higher than for one resulting from error, as fraud may 
    involve collusion, forgery, intentional omissions, misrepresentations, 
    or the override of internal control. 
-  Obtain an understanding of internal control relevant to the 
    audit in order to design audit procedures that are appropriate 
    in the circumstances, but not for the purpose of expressing 
    an opinion on the effectiveness of the Group's internal control. 
-  Evaluate the appropriateness of accounting policies used 
    and the reasonableness of accounting estimates and related 
    disclosures made by the Management Board. 
-  Conclude on the appropriateness of the Management Board' 
    use of the going concern basis of accounting and, based on 
    the audit evidence obtained, whether a material uncertainty 
    exists related to events or conditions that may cast significant 
    doubt on the Group's ability to continue as a going concern. 
    If we conclude that a material uncertainty exists, we are 
    required to draw attention in our report of the "réviseur 
    d'entreprises agréé" to the related disclosures 
    in the consolidated financial statements or, if such disclosures 
    are inadequate, to modify our opinion. Our conclusions are 
    based on the audit evidence obtained up to the date of our 
    report of the "réviseur d'entreprises agréé". 
    However, future events or conditions may cause the Group 
    to cease to continue as a going concern. 
-  Evaluate the overall presentation, structure and content 
    of the consolidated financial statements, including the disclosures, 
    and whether the consolidated financial statements represent 
    the underlying transactions and events in a manner that achieves 
    fair presentation. 
-  Obtain sufficient appropriate audit evidence regarding the 
    financial information of the entities and business activities 
    within the Group to express an opinion on the consolidated 
    financial statements. We are responsible for the direction, 
    supervision and performance of the Group audit. We remain 
    solely responsible for our audit opinion. 
 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our report unless law or regulation precludes public disclosure about the matter.

Report on other legal and regulatory requirements

We have been appointed as "réviseur d'entreprises agréé" by the General Meeting of the Shareholders on and the duration of our uninterrupted engagement, including previous renewals and reappointments, is ten years.

The annual report is consistent with the consolidated financial statements and has been prepared in accordance with applicable legal requirements.

 
 
Luxembourg, 24 March 2021    KPMG Luxembourg 
                              Société coopérative 
                              Cabinet de révision 
                              agréé 
                             Joseph de Souza 
                              Partner 
 
 

CONSOLIDATED INCOME STATEMENT FOR THE YEARED 31 DECEMBER 2020

 
 In thousands of Pounds Sterling                                    Note       2020       2019 
=================================================================  =====  =========  ========= 
 Continuing operations 
            Income from investments at fair value through profit 
             or loss                                                   9     63,337     69,772 
            Other operating income                                              186          - 
=================================================================  =====  =========  ========= 
 Operating income                                                            63,523     69,772 
=================================================================  =====  =========  ========= 
 
 Administrative expenses                                               6    (9,607)    (8,488) 
 Other operating expenses                                              7    (7,268)    (7,331) 
=================================================================  =====  =========  ========= 
 Operating expenses                                                        (16,875)   (15,819) 
=================================================================  =====  =========  ========= 
 
 Results from operating activities                                           46,648     53,953 
 
 Net finance result                                                    8    (1,647)    (2,029) 
 Net gain(loss) on balance sheet hedging                              18      (642)      2,060 
=================================================================  =====  =========  ========= 
 
 Profit before tax                                                           44,359     53,984 
 Tax expense - net                                                    11    (2,649)    (3,000) 
=================================================================  =====  =========  ========= 
 
 Profit from continuing operations                                           41,710     50,984 
=================================================================  =====  =========  ========= 
 
 Profit from continuing operations attributable to 
  the owners of the 
    Company                                                                  41,710     50,984 
=================================================================  =====  =========  ========= 
 
 Earnings per share 
   Basic earnings per share (pence)                                   14       6.58       8.43 
   Diluted earnings per share (pence)                                 14       6.57       8.41 
=================================================================  =====  =========  ========= 
 

The accompanying notes form an integral part of the consolidated financial statements

 
 In thousands of Pounds Sterling                         Note      2020     2019 
======================================================  ======  =======  ======= 
 
 Profit from continuing operations attributable to 
  the owners 
            of the Company                                       41,710   50,984 
 
 Other comprehensive income for the year                              -        - 
======================================================  ======  =======  ======= 
 
 Total comprehensive income for the year attributable 
  to the 
    owners of the Company                                        41,710   50,984 
==============================================================  =======  ======= 
 

The accompanying notes form an integral part of the consolidated financial statements

 
 In thousands of Pounds Sterling                     Note      2020      2019 
==================================================  =====  ========  ======== 
 
 Assets 
 Property plant and equipment                                    58        61 
 Investments at fair value through profit or loss     9     895,674   845,967 
 Deferred tax assets                                  11        225         - 
 Derivative financial assets                          18         12       605 
==================================================  =====  ========  ======== 
 Non-current assets                                         895,969   846,633 
==================================================  =====  ========  ======== 
 
 Trade and other receivables                          19      1,631     3,876 
 Other current assets                                 12      2,164       594 
 Derivative financial assets                          18        247       756 
 Cash and cash equivalents                            10     20,532    34,778 
==================================================  =====  ========  ======== 
 Current assets                                              24,574    40,004 
==================================================  =====  ========  ======== 
 
 Total assets                                               920,543   886,637 
==================================================  =====  ========  ======== 
 
 Equity 
 Share capital                                        13    770,942   714,280 
 Additional paid-in capital                           20      1,517       965 
 Translation reserves                                 13      (597)     (597) 
 Retained earnings                                          143,978   146,984 
==================================================  =====  ========  ======== 
 Equity attributable to the owners of the Company           915,840   861,632 
==================================================  =====  ========  ======== 
 
 Liabilities 
 Loans and borrowings                                 15          -    20,318 
 Derivative financial liabilities                     18        218         - 
 Non-current liabilities                                        218    20,318 
==================================================  =====  ========  ======== 
 
 Loans and borrowings                                 15        177       116 
 Trade payables                                                  73       353 
 Accruals and other payables                          16      2,643     2,515 
 Derivative financial liabilities                     18         25         - 
 Tax liabilities                                      11      1,567     1,703 
==================================================  =====  ========  ======== 
 
 Current liabilities                                          4,485     4,687 
 
 Total liabilities                                            4,703    25,005 
==================================================  =====  ========  ======== 
 
 Total equity and liabilities                               920,543   886,637 
==================================================  =====  ========  ======== 
 
 Net asset value attributable to the owners of 
  the Company                                         13    915,840   861,632 
 Net asset value per ordinary share (pence)           13     137.78    136.72 
 
 

The accompanying notes form an integral part of the consolidated financial statements

 
                                                        Additional 
                                                Share      paid-in   Translation   Retained      Total 
 In thousands of Pounds Sterling      Notes   capital      capital       reserve   earnings     equity 
===================================  ======  ========  ===========  ============  =========  ========= 
 
 As at 1 January 2019                         639,160          837         (597)    137,620    777,020 
 Total comprehensive income 
  for 
 the year ended 31 December 
  2019 
 Profit from continuing operations 
 attributable to the owners 
 of the Company                                     -            -             -     50,984     50,984 
===================================  ======  ========  ===========  ============  =========  ========= 
 Total comprehensive income 
  for year                                          -            -             -     50,984     50,984 
===================================  ======  ========  ===========  ============  =========  ========= 
 
 Transactions with the owners 
  of the 
 Company, recognised 
 directly in equity 
 Issuance of shares from 
  placing of 
 ordinary shares - net of 
  issue cost                           13      73,915            -             -          -     73,915 
 Scrip dividends                       13         772            -             -      (772)          - 
 Cash dividends                        13           -            -             -   (40,848)   (40,848) 
 Equity settlement of share 
  based 
            compensation              13,20       433        (433)             -          -          - 
 Share-based payment                   20           -          561             -          -        561 
===================================  ======  ========  ===========  ============  =========  ========= 
 
 Balance as at 31 December 
  2019                                        714,280          965         (597)    146,984    861,632 
===================================  ======  ========  ===========  ============  =========  ========= 
 

The accompanying notes form an integral part of the consolidated financial statements

 
                                                        Additional 
                                                Share      paid-in   Translation   Retained      Total 
 In thousands of Pounds Sterling      Notes   capital      capital       reserve   earnings     equity 
===================================  ======  ========  ===========  ============  =========  ========= 
 
 Balance as at 1 January 
  2020                                        714,280          965         (597)    146,984    861,632 
 Total comprehensive income 
  for 
 the year ended 31 December 
  2020 
 Profit from continuing operations 
 attributable to the owners 
 of the Company                                     -            -             -     41,710     41,710 
===================================  ======  ========  ===========  ============  =========  ========= 
 Total comprehensive income 
  for year                                          -            -             -     41,710     41,710 
===================================  ======  ========  ===========  ============  =========  ========= 
 
 Transactions with the owners 
  of the 
 Company, recognised 
 directly in equity 
 Issuance of shares from 
  placing of 
 ordinary shares - net of 
  issue cost                           13      54,169            -             -          -     54,169 
 Scrip dividends                       13       2,068            -             -    (2,068)          - 
 Cash dividends                        13           -            -             -   (42,648)   (42,648) 
 Equity settlement of share 
  based 
            compensation              13,20       425        (425)             -          -          - 
 Share-based payment                   20           -          977             -          -        977 
===================================  ======  ========  ===========  ============  =========  ========= 
 
 Balance as at 31 December 
  2020                                        770,942        1,517         (597)    143,978    915,840 
===================================  ======  ========  ===========  ============  =========  ========= 
 

The accompanying notes form an integral part of the consolidated financial statements

 
 In thousands of Pounds Sterling                         Notes       2020       2019 
======================================================  ======  =========  ========= 
 
 Operating activities 
 Profit from continuing operations                                 41,710     50,984 
 Adjustments for: 
   Depreciation expense                                    6           27         21 
   Net finance results                                     8        1,647      2,029 
   Income from investments at fair value through 
    profit or loss                                         9     (63,337)   (69,772) 
   Loss on derivative financial instruments - net         18        1,495        930 
   Foreign currency exchange loss - net                    7        4,767      3,250 
   Share-based compensation                               20          977        561 
   Tax expense - net                                      11        2,649      3,000 
======================================================  ======  =========  ========= 
                                                                 (10,065)    (8,997) 
 Working capital adjustments: 
   Trade and other receivables                                    (1,094)          8 
   Other current assets                                           (2,822)         75 
   Trade and other payables                                         (168)      (126) 
======================================================  ======  =========  ========= 
 Cash used in operating activities                               (14,149)    (9,040) 
   Interest paid and other borrowing costs                        (1,219)      (721) 
   Interest received                                                   10         62 
   Realised gain (loss) on derivative financial 
    instruments - net                                     18        (151)      1,164 
   Taxes paid                                                     (3,010)    (2,379) 
======================================================  ======  =========  ========= 
 Net cash flows used in operating activities                     (18,519)   (10,914) 
======================================================  ======  =========  ========= 
 
 Investing activities 
 Acquisition of/additional investments at fair 
  value through profit 
   or loss                                                 9     (59,185)   (62,900) 
 Distributions received from investments at fair 
  value through 
   profit or loss                                          9       72,815     63,988 
 Acquisition of property, plant and equipment                        (24)       (49) 
======================================================  ======  =========  ========= 
 Net cash flows from investing activities                          13,606      1,039 
======================================================  ======  =========  ========= 
 
 Financing activities 
 Issuance of share capital through placing (net 
  of issuance cost)                                       13       54,169     73,915 
 Dividends paid                                           13     (42,648)   (40,848) 
 Repayment of loans and borrowings                        15     (62,000)   (80,057) 
 Proceeds from issuance of loans and borrowings           15       41,000     81,780 
 Debt issue cost                                                     (27)      (934) 
======================================================  ======  =========  ========= 
 Net cash flows from/(used in) financing activities               (9,506)     33,856 
======================================================  ======  =========  ========= 
 
 Net increase (decrease) in cash and cash equivalents            (14,419)     23,981 
 Impact of foreign exchange gain on cash and cash 
  equivalents                                                         173        353 
 Cash and cash equivalents at 1 January                            34,778     10,444 
======================================================  ======  =========  ========= 
 
 Cash and cash equivalents at 31 December                 10       20,532     34,778 
======================================================  ======  =========  ========= 
 

The accompanying notes form an integral part of the consolidated financial statements

   1.         Corporate information 

BBGI Global Infrastructure S.A., formerly BBGI SICAV S.A.,('BBGI', or the 'Company' or, together with its consolidated subsidiaries, the 'Group') is an investment company incorporated in Luxembourg in the form of a public limited liability company (société anonyme) with variable share capital (société d'investissement à capital variable, or 'SICAV') and regulated by the Commission de Surveillance du Secteur Financier ('CSSF') under Part II of the amended Luxembourg law of 17 December 2010 on undertakings for collective investments with an indefinite life. The Company qualifies as an alternative investment fund within the meaning of Article 1 (39) of the amended law of 12 July 2013 on alternative investment fund managers ('2013 Law') implementing Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 and is authorised as an internal alternative investment fund manager in accordance with Chapter 2 of the 2013 Law. The Company was admitted to the official list of the UK Listing Authority (premium listing, closed-ended investment company) and to trading on the

main market of the London Stock Exchange on 21 December 2011.

As of 1 January 2021, the main market of the London Stock Exchange is not considered as an EU regulated market (as defined by the MiFID II). As a result, Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004, on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, and amending Directive 2001/34/EC (the Transparency Directive) as implemented in the Luxembourg law by the act dated 11 January 2008 on transparency requirements for issuers (the Transparency Act 2008), among other texts, do not apply to the Company.

The Company's registered office is EBBC, 6E, route de Trèves , L-2633 Senningerberg , Luxembourg. On 27 October 2020, the Company changed its registered name from BBGI SICAV S.A. to BBGI Global Infrastructure S.A.

The Company is a closed-ended investment company that invests principally in a diversified portfolio of Public Private Partnership ('PPP')/Private Finance Initiative ('PFI') infrastructure or similar style assets. At 31 December 2020, the Company has one investment that is under construction.

As at 31 December 2020, the Group employed 23 staff (31 December 2019: 21 staff) .

Reporting period

The Company's reporting period runs from 1 January to 31 December each year. The Company's consolidated statement of financial position, consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows include comparative figures as at 31 December 2019.

The amounts presented as 'non-current' in the consolidated statement of financial position are those expected to be recovered or settled after more than one year. The amounts presented as 'current' are those expected to be recovered or settled within one year.

These consolidated financial statements were approved by the Management Board on 24 March 2021.

   2.         Basis of preparation 

Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU').

The Group follows, to the fullest extent possible, the provisions of the Standard of Recommended Practices issued by the Association of Investment Companies ('AIC SORP'). If a provision of the AIC SORP is in direct conflict with IFRS as adopted by the EU, the standards of the latter shall prevail.

The consolidated financial statements have been prepared on a historical cost basis, except for investments at fair value through profit or loss ('Investments at FVPL') and derivative financial instruments that have been measured at fair value.

Changes in accounting policy

New and amended standards applicable to the Group are as follows:

- Amendments to IFRS 3: Definition of a Business (effective 1 January 2020)

The amendment to IFRS 3 clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Furthermore, it clarified that a business can exist without including all of the inputs and processes needed to create outputs. These amendments had no significant impact on the consolidated financial statements of the Group but may impact future periods should the Group enter into any business combinations.

- Amendments to IAS 1 and IAS 8: Definition of Material (effective 1 January 2020)

The amendments provide a new definition of material that states, 'information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity'.

The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements.

A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no significant impact on the consolidated financial statements.

- Conceptual Framework for Financial Reporting (effective 1 January 2020)

The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist the IASB in developing standards, to help preparers develop consistent accounting policies where there is no applicable standard in place and to assist all parties to understand and interpret the standards. This will affect those entities which developed their accounting policies based on the Conceptual Framework. The revised Conceptual Framework includes some new concepts, updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. These amendments had no impact on the consolidated financial statements of the Group.

Functional and presentation currency

These consolidated financial statements are presented in Pounds Sterling, the Company's functional currency. All amounts presented in tables throughout the report have been rounded to the nearest thousand, unless otherwise stated.

The Company as an Investment Entity

The Management Board has assessed that the Company is an Investment Entity in accordance with the provisions of IFRS 10. The Company meets the following criteria to qualify as an Investment Entity:

a) Obtains funds from one or more investors for the purpose of providing those investors with investment management services - The Group is internally managed with management focused solely on managing those funds received from its shareholders in order to maximise investment income/returns.

b) Commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both - The investment objectives of the Company are to:

-- Provide investors with secure and highly predictable long-term cash flows whilst actively managing the investment portfolio with the intention of maximising return over the long-term.

-- Target an annual dividend payment with the aim to increase this distribution progressively over the longer-term.

-- Target an IRR which is to be achieved over the longer-term via active management and to enhance the value of existing investments.

The above-mentioned objectives support the fact that the main business purpose of the Company is to seek to maximise investment income for the benefit of its shareholders.

c) Measures and evaluates performance of substantially all of its investments on a fair value basis - The investment policy of the Company is to invest in equity, subordinated debt or similar interests issued in respect of infrastructure assets that have been developed predominantly under the PPP/PFI or similar styled procurement models. Each of these assets is valued at fair value. The valuation is carried out on a six-monthly basis as at 30 June and 31 December each year.

Based on the Management Board's assessment, the Company also meets the typical characteristics of an Investment Entity as follows:

a) it has more than one investment - as at 31 December 2020, the Company has 50 investments;

b) it has more than one investor - the Company is listed on the London Stock Exchange with its shares held by a broad pool of investors;

c) it has investors that are not related parties of the entity - other than those shares held by the Supervisory Board and Management Board Directors, and certain other employees, all remaining shares in issue (more than 99 per cent) are held by non-related parties of the Company; and

d) it has ownership interests in the form of equity or similar interests - ownership in the Company is through equity interest.

   3.         Summary of significant accounting policies 
   a)   Basis of consolidation 

Business combination

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to direct the relevant activities, i.e. the activities that significantly affect the investee's returns and to obtain those returns. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

The Group measures goodwill at the acquisition date as:

   -       the fair value of the consideration transferred; plus 
   -       the recognised amount of any non-controlling interests in the acquiree; plus 

- if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less

- the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When there is an excess of value over consideration, a bargain purchase gain is recognised immediately in the consolidated income statement.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognised in the consolidated income statement. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes in fair value of the contingent consideration are recognised in the consolidated income statement.

Subsidiaries

Subsidiaries are investees controlled by the Company (directly or indirectly). The Company controls an investee if it is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The Company is an Investment Entity and measures investments in certain subsidiaries at fair value through profit or loss. In determining whether the Company meets the definition of an Investment Entity, the management considered the Group structure as a whole (see also Note 2).

Although the Company qualifies as an Investment Entity and is required to value certain subsidiaries at fair value, the Company has a number of subsidiaries which provide services that relate to the Company's investment activities. These subsidiaries are consolidated on a line-by-line basis (see Note 19).

Acquisition of non-controlling interests (consolidated subsidiaries)

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result. Adjustments to non-controlling interest arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.

Loss of control (consolidated subsidiaries)

For subsidiaries which are consolidated on a line-by-line basis, upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the consolidated income statement. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an investment at fair value through profit or loss or as an available-for-sale financial asset depending on the level of influence retained.

Transactions eliminated on consolidation (consolidated subsidiaries)

Intra-group receivables, liabilities, revenue and expenses are eliminated in their entirety when preparing the consolidated financial statements. Gains that arise from intra-group transactions and that are unrealised from the standpoint of the Group, at the date of the consolidated statement of financial position, are eliminated in their entirety. Unrealised losses on intra-group transactions are also eliminated in the same way as unrealised gains, to the extent that the loss does not correspond to an impairment loss.

   b)         Foreign currency transactions 

Transactions in foreign currencies are translated into Pounds Sterling at the exchange rate at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into Pounds Sterling at the exchange rate on that date.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into Pounds Sterling at the exchange rate on the date that the fair value was determined. Foreign currency differences arising on translation are recognised in the consolidated income statement as a gain or loss on currency translation.

   c)         Foreign currency translations 

The assets and liabilities of foreign operations are translated to Pounds Sterling at the exchange rates on the reporting date. The income and expenses of foreign operations are translated to Pounds Sterling at the average exchange rates during the year, if such does not significantly deviate from the exchange rates at the date on which the transaction is entered into. If significant deviations arise, then the exchange rate at the date of the transaction is used.

Foreign currency differences are recognised in consolidated statement of other comprehensive income, and presented in 'translation reserve' in equity, except for exchange differences from intra-Group monetary items which are reflected in the consolidated income statement. However, since the Company qualifies as an investment entity under IFRS 10 and records its investments in subsidiaries and associates at investment at FVPL, 'translation reserve' movements during the reporting period relating to investments are classified as 'Income from investments at fair value through profit or loss' (income from Investments at FVPL). If the foreign operation is a non-wholly owned consolidated subsidiary, then the relevant portion of the translations difference is allocated to non-controlling interest. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to consolidated income statement as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a consolidated subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign currency gains and losses arising from such an item are considered to form part of a net investment in the foreign operation and are recognised in other comprehensive income, and presented in the translation reserve in equity.

   d)         Financial instruments 

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets

Financial assets are classified at initial recognition at either: (i) amortised cost; (ii) fair value through other comprehensive income - debt instruments; (iii) fair value through other comprehensive income - equity instruments; or (iv) fair value through profit or loss.

In general, the Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate financial asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

At the date of the consolidated statement of financial position, except for Investments at FVPL and derivative financial assets, all non-derivative financial assets of the Group have been classified as financial assets at amortised cost.

Investments at FVPL

The Company is an Investment Entity and therefore values its investment in subsidiaries at fair value through profit or loss, except where the subsidiary provides investment related services or activities. The fair value of an investment in subsidiary includes the fair value of the equity, loans and interest receivable and any other amounts which are included in the discounted estimated cash flow (which is used to compute the fair value) from such subsidiary. The Company subsequently measures its investment in certain subsidiaries at fair value in accordance with IFRS 13, with changes in fair value recognised in consolidated income statement in the period of change. The fair value estimation of investments in subsidiaries is described in Note 18.

In addition to valuing certain subsidiaries at fair value through profit or loss, the Company also values investments in associates and jointly controlled entities at fair value.

The Company meets the definition of IAS 28 paragraph 18 for a venture capital organisation or a similar entity and upon initial recognition has designated its investment in joint ventures and associates at fair value through profit or loss. The Group manages the performance of each of the joint ventures and associates on a fair value basis in accordance with the Group's investment strategy. The information about associates and joint ventures is provided internally on a fair value basis to the Group's Management Board and Supervisory Board. The Group therefore measures its associates and joint ventures at fair value in accordance with IFRS 9 with changes in fair value recognised in the consolidated income statement in the period of change.

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 per cent and 50 per cent of the voting power of another entity. Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions.

Financial assets at amortised cost (debt instruments)

Financial assets at amortised cost are subsequently measured using the effective interest rate ('EIR') method and are subject to impairment. Gains and losses are recognised in the consolidated statement of income when the asset is derecognised, modified or impaired.

The Group recognises an allowance for expected credit losses ('ECLs') for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate.

The Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date.

Non-derivative financial liabilities

The Company classifies non-derivative financial liabilities as liabilities at amortised cost. Such financial liabilities are recognised initially at fair value less any direct attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the EIR method.

The Company derecognises a financial liability (or part of a financial liability) from the consolidated statement of financial position when, and only when, it is extinguished or when the obligation specified in the contract or agreement is discharged or cancelled or has expired. The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is considered in the consolidated income statement.

   e)   Fair value measurement 

The Group accounts for its investments in PPP/PFI entities ('Project Companies') as Investments at FVPL. The valuation is determined using the discounted cash flow methodology. The cash flows forecasted to be received by the Company or its consolidated subsidiaries, generated by each of the underlying assets, and adjusted as appropriate to reflect the risk and opportunities, have been discounted using asset-specific discount rates. The valuation methodology is the same one used in previous reporting periods.

The fair value of other financial assets and liabilities, other than current assets and liabilities, is determined by discounting future cash flows at an appropriate discount rate and with reference to recent market transactions, where appropriate. Further information on assumptions and estimation uncertainties are disclosed in Note 18.

Fair values are categorised into different levels in a fair value hierarchy based on the inputs in the valuation methodology, as follows:

-- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.

-- Level 2: inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

-- Level 3: inputs for the asset or liability that are not based on observable market data ('unobservable inputs').

If the inputs to measure fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety at the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognises transfers between levels of fair value hierarchy at the end of the reporting period in which the change has occurred.

   f)    Provisions 

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to a liability. The unwinding of such discount is recognised as finance cost.

   g)   Cash and cash equivalents 

Cash and cash equivalents comprise of cash balances and term deposits with maturities of three months or less from the date when the deposits were made and that are subject to an insignificant risk of change in their fair value, and are used by the Group in the management of its short-term commitments.

   h)   Share capital 

Ordinary shares are classified as equity. Costs directly attributable to the issue of ordinary shares, or which are associated with the establishment of the Company, that would otherwise have been avoided are recognised as a deduction from equity, net of any tax effects.

   i)    Segment reporting 

Segment results that are reported to the Management Board include items directly attributable to segments as well as those that can be allocated on a reasonable basis.

   j)    Employee benefits 

Short-term and other long-term employee benefits are expensed as the related services are provided. A liability is recognised for the amount expected to be paid, and discounted at present value if necessary, if the Group has present legal or constructive obligation to pay this amount as a result of a past service provided by the employee and the obligation can be estimated reliably.

For share-based payment arrangements, the grant-date fair value of the equity settled share-based payment arrangement is recognised as an expense, with a corresponding increase in additional paid in capital over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect related service and non-market performance conditions. The market condition related to the award is measured at the date of grant and there is no adjustment of expense/income to the consolidated income statement for differences between expected and actual outcomes.

   k)   Finance income and finance costs 

Interest income and expenses are recognised in the consolidated income statement using the EIR method.

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

Interest received or receivable and interest paid or payable are recognised in the consolidated income statement as finance income and finance costs, respectively.

   l)    Leases 

Under IFRS 16, upon lease commencement, a lessee recognises a right-of-use asset and a lease liability. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove any improvements made to office premises.

m) Tax

According to the Luxembourg regulations regarding SICAV companies, the Company itself, as an undertaking for collective investment, is exempt from paying income and/or capital gains taxes in Luxembourg. It is, however, liable to annual subscription tax of 0.05 per cent on its consolidated net asset value ('NAV'), payable quarterly and assessed on the last day of each quarter.

Income tax on the consolidated subsidiaries' profits for the year comprises current and deferred tax. Current and deferred tax is recognised in consolidated income statement except to the extent that it relates to a business combination, or items recognised directly in equity or in the consolidated statement of other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

-- Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

-- Temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that the Company is able to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future; and

-- Taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

   n)   Current versus non-current classification 

The Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

-- Expected to be realised or intended to be sold or consumed in the normal operating cycle

-- Held primarily for the purpose of trading

-- Expected to be realised within 12 months after the reporting period or

-- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period

All other assets are classified as non-current.

A liability is current when:

-- It is expected to be settled in the normal operating cycle

-- It is held primarily for the purpose of trading

-- It is due to be settled within 12 months after the reporting period

or

-- There is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period

The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

The Group classifies all other liabilities as non-current.

   4.         Significant accounting judgements, estimates and assumptions 

The preparation of consolidated financial statements in conformity with IFRS requires the Management Board to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

In the process of applying the Group's accounting policies, the Management Board has made the following judgements that would have the most significant effect on the amounts recognised in the consolidated financial statements.

4.1 Assessment as an investment entity

Refer to Note 2 for the discussion on this topic.

4.2 Fair value determination

Refer to Note 3 e) for the discussion on this topic.

4.3 Share-based payments

Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option or appreciation right, volatility and dividend yield and making assumptions about them.

For the measurement of the fair value of equity-settled transactions for the Long-Term Incentive Plan ('LTIP'), the Group uses a Monte Carlo simulation model. For the measurement of the fair value of equity-settled transactions for the Deferred Short-Term Incentive Plan ('Deferred STIP'), the Group recognises a portion of the annual estimated bonus of the Management Board. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 20.

4.4 Going concern basis of accounting

As part of its assessment, the Management Board has considered the risk posed by the Covid-19 pandemic. The Group's portfolio is more than 99 per cent operational and relies on availability-based revenues. At the time of producing these consolidated financial statements, there was no evidence to suggest of material disruption to the Group and financial performance is not expected to be materially affected. However, there is naturally significant uncertainty around how the pandemic will evolve and therefore it is difficult to foresee all consequences or disruptions potentially arising from the pandemic.

The Management Board has satisfied itself that the Group has adequate resources to continue in operational existence for at least 12 months from the date of approval of the consolidated financial statements. After due consideration, the Management Board believes it is appropriate to adopt the going concern basis of accounting in preparing the consolidated financial statements.

   5.         Segment reporting 

IFRS 8 - Operating Segments adopts a 'through the eyes of the management' approach to an entity's reporting of information relating to its operating segments, and also requires an entity to report financial and descriptive information about its reportable segments.

Based on a review of information provided to the Management Board, the Group has identified five reportable segments based on the geographical concentration risk. The main factor used to identify the Group's reportable segments is the geographical location of the asset. The Management Board has concluded that the Group's reportable segments are:

(1) UK; (2) North America; (3) Australia; (4) Continental Europe; and (5) Holding Activities. These reportable segments are the basis on which the Group reports information to the Management Board.

Segment information is presented below:

 
 For the year ended 31 December                 North               Continental      Holding     Total 
  2020 
 In thousands of Pounds Sterling         UK   America   Australia        Europe   Activities     Group 
==================================  =======  ========  ==========  ============  ===========  ======== 
 Income from investments 
  at FVPL                            18,715    15,685      22,062         6,875            -    63,337 
 Administration expenses                  -         -           -             -      (9,607)   (9,607) 
 Other operating expenses 
  - net                                   -         -           -             -      (7,082)   (7,082) 
==================================  =======  ========  ==========  ============  ===========  ======== 
 
Results from operating activities    18,715    15,685      22,062         6,875     (16,689)    46,648 
 
Finance cost                              -         -           -             -      (1,657)   (1,657) 
Finance income                            -         -           -             -           10        10 
Net loss on derivative financial 
           instruments                    -         -           -             -        (642)     (642) 
 Tax expense - net                        -         -           -             -      (2,649)   (2,649) 
==================================  =======  ========  ==========  ============  ===========  ======== 
 
Profit or loss from continuing 
 operations                          18,715    15,685      22,062         6,875     (21,626)    41,710 
 
 
 
 For the year ended 31 December                North              Continental      Holding    Total 
  2019 
 In thousands of Pounds Sterling        UK   America  Australia        Europe   Activities    Group 
==================================          ========             ============  ===========  ======= 
 Income from investments 
  at FVPL                           24,709    40,720      2,024         2,319            -   69,772 
 Administration expenses                 -         -          -             -      (8,488)  (8,488) 
 Other operating expenses                -         -          -             -      (7,331)  (7,331) 
================================== 
 
Results from operating activities   24,709    40,720      2,024         2,319     (15,819)   53,953 
 
Finance cost                             -         -          -             -      (2,091)  (2,091) 
Finance income                           -         -          -             -           62       62 
Net gain on derivative financial 
           instruments                   -         -          -             -        2,060    2,060 
 Tax expense - net                       -         -          -             -      (3,000)  (3,000) 
================================== 
 
Profit or loss from continuing 
 operations                         24,709    40,720      2,024         2,319     (18,788)   50,984 
 
 

Statement of financial position per segment information as at 31 December 2020 and 2019 are presented below:

 
As at 31 December 2020                North             Continental     Holding    Total 
In thousands of Pounds          UK  America  Australia       Europe  Activities    Group 
 Sterling 
Assets 
Investments at FVPL        264,797  418,063    117,984       94,830           -  895,674 
Other non-current assets         -        -          -            -         295      295 
Current assets                   -        -          -            -      24,574   24,574 
Total assets               264,797  418,063    117,984       94,830      24,869  920,543 
 
Liabilities 
Non-current                      -        -          -            -         218      218 
Current                          -        -          -            -       4,485    4,485 
Total liabilities                -        -          -            -       4,703    4,703 
 
 
as at 31 December 2019                North             Continental     Holding    Total 
In thousands of Pounds 
 Sterling                       UK  America  Australia       Europe  Activities    Group 
Assets 
Investments at FVPL        272,281  372,696    103,410       97,580           -  845,967 
Other non-current assets         -        -          -            -         666      666 
Current assets                   -        -          -            -      40,004   40,004 
Total assets               272,281  372,696    103,410       97,580      40,670  886,637 
 
Liabilities 
Non-current                      -        -          -            -      20,318   20,318 
Current                          -        -          -            -       4,687    4,687 
Total liabilities                -        -          -            -      25,005   25,005 
 

The Holding Activities of the Group include the activities which are not specifically related to a specific asset or region, but to those companies which provide services to the Group. The total current assets classified under Holding Activities mainly represent cash and cash equivalents.

Transactions between reportable segments are conducted at arm's length and are accounted for in a similar way to the basis of accounting used for third parties. The accounting methods used for all the segments are similar and comparable with those of the Company.

   6.   Administrative expenses 
 
                                    Year ended   Year ended 
                                   31 December  31 December 
In thousands of Pounds Sterling           2020         2019 
Personnel expenses                       6,246        4,842 
Legal and professional fees              2,570        2,040 
Office and other expenses                  764        1,585 
Depreciation expense                        27           21 
 
                                         9,607        8,488 
 

The Group has engaged certain third parties to provide legal, depositary, custodian, audit, tax and other services to the Group. The expenses incurred in relation to such services are treated as legal and professional fees. Depositary and custodian related charges during the year amounted to GBP347,000 (2019: GBP287,000).

During the year, the Company and its consolidated subsidiaries obtained the following services from the external auditors.

 
                                                                    Year ended   Year ended 
                                                                   31 December  31 December 
In thousands of Pounds Sterling                                           2020         2019 
Group auditor remuneration: 
           Statutory audit fees to the Group's external auditor        187,088      195,543 
           Audit-related fees                                           65,620       59,714 
Other statutory audit fees                                              29,185       24,218 
 
                                                                       281,893      279,475 
 

Audit-related fees includes the fees in respect to the interim review of the Group's condensed consolidated financial statements and other permitted audit-related services.

There were no non-audit related fees charged by the Group's external auditor during the year (31 December 2019: nil).

   7.   Other operating expenses 
 
                                                        Year ended   Year ended 
                                                       31 December  31 December 
In thousands of Pounds Sterling                               2020         2019 
Foreign currency exchange loss - net                         4,767        3,250 
Acquisition-related and unsuccessful bid costs               1,626        1,086 
Loss on derivative financial instruments at FVPL(1)            853        2,990 
Others                                                          22            5 
 
                                                             7,268        7,331 
 

(1) Relates to foreign exchange hedging on forecasted distributions from Investments at FVPL. Refer to Note 18 for the reclassification made on the prior year comparative.

   8.   Net finance result 
 
                                                      Year ended   Year ended 
                                                     31 December  31 December 
In thousands of Pounds Sterling                             2020         2019 
Interest expense on loan and borrowings (Note 15)        (1,657)      (2,091) 
Interest income on bank deposits                              10           62 
 
                                                         (1,647)      (2,029) 
 
   9.   Investments at FVPL 
 
                                                     Year ended    Year ended 
                                                    31 December   31 December 
In thousands of Pounds Sterling                            2020          2019 
Balance at 1 January                                    845,967       780,356 
Acquisitions of/additions in Investments at FVPL         59,185        62,900 
Income from investments at FVPL (1)                      63,337        69,772 
Distributions received from Investments at FVPL        (72,815)      (63,988) 
Reclassification to other receivables                         -       (3,073) 
 
Balance at 31 December                                  895,674       845,967 
 
   (1)   This account relates purely to unrealised gain on revaluation of investments. 

The impact of foreign exchange gains or losses on income from Investments at FVPL for the year ended 31 December 2020 amounted to a gain of GBP3.2 million (year ended 31 December 2019: loss of GBP6.2 million). Refer to Note 17 of the consolidated financial statements for further information on investments at FVPL.

Distributions from Investments at FVPL are received after either: (a) financial models have been tested for compliance with certain ratios; or (b) financial models have been submitted to the external lenders of the Project Companies; or (c) approvals of the external lenders on the financial models have been obtained.

As at 31 December 2020 and 2019, loan and interest receivable from unconsolidated subsidiaries is embedded within Investments at FVPL.

The valuation of Investments at FVPL considers all cash flows related to individual assets.

Interest income, dividend income, asset-related management fee income and other income, recorded under the accruals basis at the level of the consolidated subsidiaries for the year ended 31 December 2020, amounted to GBP65,689,000 (31 December 2019: GBP62,322,000). The associated future cash flows deriving from these items are taken into account when fair valuing the investments.

Over the period, the Group made six new and follow-on acquisitions as follows:

   --      Highway 104 (Canada): In May, the Company acquired a 50 per cent stake in Highway 104, an availability-based motorway investment in Nova Scotia. Preparations to start construction work began in May 2020, with an estimated completion date of the end of 2023. The concession will run until 2043 and availability payments will be received from the Government of Nova Scotia, which is rated Aa2 by Moody's and AA- by Standard & Poor's ('S&P'). Despite initial delays in receiving certain environmental permits for in-water works, the construction remains on schedule with no material impact resulting from Covid-19. 

-- N18 Motorway (Netherlands): In April, the Company completed a follow-on acquisition in the N18 Motorway, bringing BBGI's total equity interest in the investment to 52 per cent. The concession runs until 2043 and availability payments are received from the State of the Netherlands, which is rated Aaa by the credit rating agency Moody's.

-- Stanton Territorial Hospital (Canada): During the period, the Company completed two follow-on acquisitions in Stanton Territorial Hospital, increasing BBGI's interest in the investment from 25 per cent to 100 per cent. Stanton is an operational 27,000m(2) hospital with 100 patient rooms located in Yellowknife, Northwest Territories. The concession runs until 2048 and availability payments are received from the Government of Northwest Territories, which is rated Aa1 by the credit rating agency Moody's.

-- Kelowna and Vernon Hospitals (Canada): In August, the Company completed a follow-on acquisition for the remaining 50 per cent interest in Kelowna and Vernon Hospitals. The concession runs until 2042 and availability payments are received from the Interior Health Authority, funded by the Province of British Columbia which is rated Aaa by Moody's and AAA by S&P. BBGI's equity interest in the investment is now 100 per cent.

-- Samuel De Champlain Bridge Corridor (Canada): In December, BBGI completed the acquisition of a 25 per cent equity interest in Signature on the Saint-Lawrence Group, the concessionaire of the Samuel De Champlain Bridge Corridor in Montreal. The investment consists of the design, construction, financing, operation, maintenance and rehabilitation of a new bridge spanning the St. Lawrence River between Montreal and Brossard, Quebec. Availability payments are received from the Government of Canada, which is rated AAA by both Moody's and S&P credit rating agencies. The bridge opened to traffic in summer 2019 and the concession runs until 2049.

Details of various asset investments in the Group's portfolio and their respective acquisition dates are as follows:

 
                Country        Ownership      Year 
                 of 
Company  Asset  Incorporation   Interest  Acquired 
 
 
RW Health Partnership          Royal Women's Hospital            Australia            100%        2012 
 Holdings Pty Limited* 
Victorian Correctional         Victoria Correctional Facilities  Australia            100%        2012 
 Infrastructure Partnership 
 Pty Limited 
BBPI Sentinel Holdings         Northern Territory Secure         Australia            100%    2014 and 
 Pty Limited* BBGI Sentinel     Facilities                                                        2015 
 Holdings 2 Pty Limited*, 
 and Sentinel Financing 
 Holdings Pty Limited* 
Golden Crossing Holdings       Golden Ears Bridge                Canada               100%    2012 and 
 Inc.*                                                                                            2013 
Trans-Park Highway             Kicking Horse Canyon              Canada                50%        2012 
 Holding Inc.* 
NorthwestConnect Holdings      Northwest Anthony Henday          Canada                50%        2012 
 Inc.*                          Drive 
BBGI KVH Holdings Inc.*        Kelowna and Vernon Hospital       Canada               100%    2013 and 
                                                                                                  2020 
WCP Holdings Inc.*             Women's College Hospital          Canada               100%        2013 
Stoney Trail Group             Northeast Stoney Trail            Canada               100%        2013 
 Holdings Inc.* 
BBGI NCP Holdings Inc.*        North Commuter Parkway            Canada                50%        2015 
SNC-Lavalin Infrastructure     William R. Bennet Bridge          Canada                80%        2017 
 Partners LP* 
                                Southeast Stoney Trail            Canada               40%        2017 
                                Canada Line                       Canada             26.7%        2017 
                                Restigouche Hospital Centre       Canada               80%        2017 
                                McGill University Health          Canada               40%        2018 
                                 Centre 
BBGI Canada Holding            Stanton Territorial Hospital      Canada               100%      2018 and 
 5 Inc.*                                                                                            2020 
BBGI 104 GP Inc.               Highway 104                       Canada                50%          2020 
BBGI Champlain Holding         Champlain Bridge                  Canada                25%          2020 
 Inc.* 
Kreishaus Unna Holding         Unna Administrative Centre        Germany               90%      2012 and 
 GmbH*                                                                                              2020 
PJB Beteiligungs -             Burg Correctional Facility        Germany               90%          2012 
 GmbH* 
Hochtief PPP 1 Holding         Cologne Schools                   Germany               50%              2014 
 GmbH & Co.KG*                  Rodenkirchen Schools              Germany 
                                Frankfurt Schools                 Germany 
                                Fürst Wrede Military         Germany 
                                Base 
Noaber18 Holding B.V.*         N18 Motorway                      Netherlands           52%        2018, 2019 
                                                                                                    and 2020 
De Groene SchakelHolding       Westland Town Hall                Netherlands          100%          2018 and 
 B.V. *                                                                                                 2019 
SAAone PPP B.V*                A1/A6 Motorway                    Netherlands        37.14%          2018 and 
                                                                                                        2019 
Agder OPS Vegselskap           E18 Motorway                      Norway               100%          2013 and 
 AS                                                                                                     2014 
Kent Education Partnership     Kent Schools                      UK                    50%              2012 
 (Holdings) Limited* 
Healthcare Providers           Gloucester Royal Hospital         UK                    50%              2012 
 (Gloucester) Ltd.* 
Highway Management             M80 Motorway                      UK                    50%              2012 
 M80 Topco Limited* 
Bedford Education Partnership  Bedford Schools                   UK                   100%              2012 
 Holdings Limited* 
Lisburn Education Partnership  Lisburn College                   UK                   100%              2012 
 Holdings Limited* 
Clackmannanshire Schools       Clackmannanshire Schools          UK                   100%              2012 
 Education Partnership 
 (Holdings) Limited* 
Primaria (Barking &            Barking & Havering Clinics        UK                    60%              2012 
 Havering) Limited*             (LIFT) 
East Down Education            East Down Colleges                UK                   100%          2012 and 
 Partnership (Holdings)                                                                                 2018 
 Limited* 
Scottish Borders Education     Scottish Borders Schools          UK                   100%              2012 
 Partnership (Holdings) 
 Limited* 
Coventry Education             Coventry Schools                  UK                   100%              2012 
 Partnership Holdings 
 Limited* 
Fire Support (SSFR)            Stoke & Staffs Rescue Service     UK                    85%              2012 
 Holdings Limited* 
GB Consortium 1 Limited*       North London Estates Partnership  UK             60% (both)        2012, 2014 
                                (LIFT)                            UK                                and 2018 
                                Liverpool & Sefton Clinics 
                                (LIFT) 
Mersey Care Development        Mersey Care Hospital              UK                  79.6%          2013 and 
 Company 1 Limited*                                                                                     2014 
MG Bridge Investments          Mersey Gateway Bridge             UK                  37.5%              2014 
 Limited* 
Tor Bank School Education      Tor Bank School                   UK                   100%              2013 
 Partnership (Holdings) 
 Limited* 
Lagan College Education        Lagan College                     UK                   100%              2014 
 Partnership (Holdings) 
 Limited* 
Highway Management             M1 Westlink                       UK                   100%              2014 
 (City) Holding Limited* 
Blue Light Partnership         Avon and Somerset Police            UK                 100%    2014, 2015 
 (ASP) NewCo Limited*           HQ                                                              and 2016 
 Blue Light Partnership 
 (ASP) NewCo 2 Limited* 
Northwin Limited               North West Regional College         UK                 100%          2015 
Northwin (Intermediate)        Belfast Metropolitan College        UK                 100%          2016 
 (Belfast) Limited* 
BBGI East End Holdings         Ohio River Bridges                  USA              66.67%      2014 and 
 Inc.*                                                                                              2019 
 
 

*and its subsidiary companies.

10. Cash and cash equivalents

Cash and cash equivalents relate to bank deposits amounting to GBP20,532,000 (31 December 2019: GBP34,778,000).

11. Taxes

 
                                                      Year ended   Year ended 
                                                     31 December  31 December 
In thousands of Pounds Sterling                             2020         2019 
 
Current tax: 
Income tax and other taxes                                 2,449        2,594 
Subscription tax                                             427          406 
                                                           2,876        3,000 
 
Deferred tax: 
Recognition of previously unrecognised tax losses          (227)            - 
 
                                                           2,649        3,000 
 

The Company, as an undertaking for collective investment, is exempt from corporate income tax in Luxembourg and instead pays an annual subscription tax of 0.05 per cent on the value of its total net assets. Moreover, the Company as a SICAV is not subject to taxes on capital gains or income. All other consolidated companies are subject to taxation at the applicable rate in their respective jurisdictions.

Reconciliation of tax expense and the accounting profit multiplied by the Company's effective corporate tax rate for the year is as follows:

 
                                                              Year ended   Year ended 
                                                             31 December  31 December 
In thousands of Pounds Sterling                                     2020         2019 
Profit before tax                                                 44,359       53,984 
 
Income tax using the Luxembourg domestic tax rate 
 of 24.94%                                                        11,063       13,464 
Subscription tax during the year                                     427          406 
Reconciling difference mainly due to fair valuation 
 of 
     assets, net of gain/loss on derivatives (unrealised)        (8,841)     (10,870) 
 
Tax charge for the year                                            2,649        3,000 
 

A significant portion of the profit before tax results from fair valuation of Investments at FVPL. The net income of the unconsolidated subsidiaries is taxed in their respective jurisdictions.

As a consequence of the adoption of IFRS 10, the Company is classified as an Investment Entity (see Note 2), meaning the tax expenses of the unconsolidated subsidiaries are not included within these consolidated financial statements. Therefore, the consolidated tax expense and tax assets/liabilities, if any, do not include those of the Project Companies. The tax liabilities of the Project Companies are embedded in the fair value calculation of the Investments at FVPL.

Deferred tax asset of GBP225,000 relates to taxable losses available for offsetting against future taxable income (31 December 2019: nil). Furthermore, the Group has additional tax losses carried forward amounting to GBP5,823,000 (2019: GBP5,931,000) in which no deferred tax asset was recognised.

Tax liability as at 31 December 2020 amounted to GBP1,567,000 (31 December 2019: GBP1,703,000).

12. Other current assets

 
                                   31 December  31 December 
In thousands of Pounds Sterling           2020         2019 
Prepaid taxes                            1,627          437 
Prepaid expenses                           413           69 
Other current assets                       124           88 
 
                                         2,164          594 
 

13. Capital and reserves

Share capital

Changes in the Company's share capital are as follows:

 
                                                      31 December  31 December 
In thousands of Pounds Sterling                              2020         2019 
Share capital as at 1 January                             714,280      639,160 
Issuance of ordinary shares through placing                55,000       75,000 
Shares issuance cost on placing                             (831)      (1,085) 
Share capital issued through scrip dividends                2,068          772 
Equity settlement of share-based compensation (see 
 Note 20)                                                     425          433 
 
                                                          770,942      714,280 
 

The changes in the number of ordinary shares of no-par value issued by the Company are as follows:

 
                                                    31 December  31 December 
In thousands of shares                                     2020         2019 
In issue at beginning of the year                       630,213      580,005 
Shares issued through placing of ordinary shares         32,544       49,020 
Shares issued through scrip dividends                     1,244          491 
Shares issued as share based compensation                   690          697 
 
                                                        664,691      630,213 
 

In November 2020, the Company raised gross proceeds of GBP55,000,000 through a placing of 32,544,379 new ordinary shares of no-par value ('Placing'). The Placing price was 169.0 pence per Placing share. The related share issuance cost amounted to GBP831,000.

All shares rank equally with regard to the Company's residual assets. The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at general meetings of the Company.

The Company meets the minimum share capital requirement as imposed under the applicable Luxembourg regulation.

Translation reserve

Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity except for exchange differences from intragroup monetary items which are reflected in the consolidated income statement. The translation reserve comprises foreign currency differences arising from the translation of the financial statements of foreign operations.

Dividends

The dividends declared and paid by the Company during the year ended 31 December 2020 are as follows:

 
                                                                     31 December 
In thousands of Pounds Sterling except as otherwise stated                  2020 
2019 2(nd) interim dividend of 3.5 pence per qualifying ordinary 
 share - for the period 
           1 July 2019 to 31 December 2019                                22,057 
 
2020 1(st) interim dividend of 3.59 pence per qualifying ordinary 
 share - for the period                                                   22,659 
           1 January 2020 to 30 June 2020 
 
Total dividends declared and paid during the year                         44,716 
 

The 31 December 2019 2(nd) interim dividend was paid in April 2020. The value of the scrip election was GBP429,000, with the remaining amount of GBP21,628,000 paid in cash to those investors that did not elect for the scrip.

The 30 June 2020 1(st) interim dividend was paid in October 2020. The value of the scrip election was GBP1,639,000 with the remaining amount of GBP21,020,000 paid in cash to those investors that elected for a cash dividend.

The dividends declared and paid by the Company during the year ended 31 December 2019 are as follows:

 
                                                                      31 December 
In thousands of Pounds Sterling except as otherwise stated                   2019 
2018 2(nd) interim dividend of 3.375 pence per qualifying ordinary 
 share - for the period 
           1 July 2018 to 31 December 2018                                 19,575 
 
2019 1(st) interim dividend of 3.5 pence per qualifying ordinary 
 share - for the period 
           1 January 2019 to 30 June 2019                                  22,045 
 
Total dividends declared and paid during the year                          41,620 
 

The 31 December 2018 2(nd) interim dividend was paid in April 2019. The value of the scrip election was GBP181,000, with the remaining amount of GBP19,394,000 paid in cash to those investors that did not elect for the scrip.

The 30 June 2019 1(st) interim dividend was paid in October 2019. The value of the scrip election was GBP591,000 with the remaining amount of GBP21,453,000 paid in cash to those investors that elected for a cash dividend.

Net Asset Value ('NAV')

The consolidated NAV and NAV per share as at 31 December 2020, 31 December 2019 and 31 December 2018 were as follows:

 
In thousands of Pounds Sterling/pence              2020     2019     2018 
 
NAV attributable to the owners of the Company   915,840  861,632  777,020 
 
NAV per ordinary share (pence)                   137.78   136.72   133.97 
 

14. Earnings per share

   a)         Basic earnings per share 

The basic earnings per share is calculated by dividing the profit attributable to the owners of the Company by the weighted average number of ordinary shares outstanding.

 
                                                        Year ended   Year ended 
                                                       31 December  31 December 
In thousands of Pounds Sterling / in thousands                2020         2019 
 of shares 
Profit attributable to the owners of the Company            41,710       50,984 
Weighted average number of ordinary shares in issue        633,662      605,115 
 
Basic earnings per share (in pence)                           6.58         8.43 
 
 

The weighted average number of ordinary shares outstanding for the purpose of calculating the basic earnings per share is computed as follows:

 
                                                                   Year ended   Year ended 
                                                                  31 December  31 December 
In thousands of shares                                                   2020         2019 
Shares outstanding as at 1 January                                    630,213      580,005 
Effect of shares issued on placing of ordinary shares 
           participating for the interim and final dividend of 
            the year                                                        -       24,510 
Effect of shares issued on placing of ordinary shares 
           participating for the second interim dividend of the 
            year                                                        2,712            - 
Effect of scrip dividends issued                                          363          164 
Shares issued as share based compensation                                 374          436 
 
Weighted average - outstanding shares                                 633,662      605,115 
 
   b)         Diluted earnings per share 

The diluted earnings per share is calculated by dividing the profit attributable to the owners of the Company by the weighted average number of ordinary shares outstanding, after adjusting for the effects of all potential dilutive ordinary shares.

The weighted average number of potential diluted ordinary shares for the purpose of calculating the diluted earnings per share is computed as follows:

 
                                                         Year ended   Year ended 
                                                        31 December  31 December 
In thousands of shares                                         2020         2019 
Weighted average number of ordinary shares for basic 
           earnings per share                               633,662      605,115 
Effect of potential dilution from share-based payment         1,122        1,152 
 
Weighted average - outstanding shares                       634,784      606,267 
 

The price of the Company's shares for the purpose of calculating the potential dilutive effect of award letters (Note 20) was based on the average market price for the year ended 2020 and 2019, during which period the awards were outstanding.

15. Loans and borrowings

The Group has a four-year GBP180 million Revolving Credit Facility from ING Bank and KfW IPEX-Bank and DZ Bank AG ("RCF') which commenced in January 2018 and matures in January 2022. The borrowing margin amounts to 165 bps over LIBOR. Under the RCF, the Group retains the possibility to consider larger transactions by virtue of having structured a further GBP70 million incremental accordion tranche, for which no commitment fees are payable.

As at 31 December 2020, the Group had utilised GBP1.2 million (31 December 2019: GBP22.2 million) of the GBP180 million RCF, of which GBP1.2 million (31 December 2019: GBP1.2 million) was being used to cover letters of credit. There was no outstanding principal from the RCF as at the 31 December 2020 (31 December 2019: GBP21,000,000).

The interest payable and other related RCF fee payables under the credit facility as at 31 December 2020 amounted to GBP177,000 (31 December 2019: GBP287,000).

The RCF unamortised debt issuance cost amounted to GBP358,000 as at 31 December 2020 (2019: GBP682,000). The unamortised debt issuance cost is presented as part of the 'Other current assets' in the consolidated financial position (31 December 2019: netted against the amount borrowed under the credit facility).

The total finance cost incurred under the RCF for the year ended 31 December 2020 amounted to GBP1,655,000 (31 December 2019: GBP2,091,000) which includes amortisation of debt issue expense of GBP351,000 (31 December 2019: GBP339,000).

Changes in liabilities arising from financing activities

 
                                   1 January                        Foreign          31 December 
In thousands of Pounds                  2020  Proceeds  Repayment  Exchange  Others         2020 
 Sterling 
Loans and borrowings_non-current      20,318    41,000   (62,000)         -     682            - 
 
 
                                   1 January                        Foreign          31 December 
In thousands of Pounds                  2019  Proceeds  Repayment  Exchange  Others         2019 
 Sterling 
Loans and borrowings_non-current      14,311    81,780   (80,057)     4,000     284       20,318 
 

Pledges and collaterals

As of 31 December 2020, and 31 December 2019, the Group has provided a pledge over shares issued by consolidated subsidiaries, pledge over receivables between consolidated subsidiaries and a pledge over the bank accounts of the consolidated subsidiaries.

Based on the provisions of the RCF, in the event of continuing event default, the lender, among other things, will have the right to cancel all commitments and declare all or part of utilisations to be due and payable, including all related outstanding amounts, and exercise or direct the security agent to exercise any or all of its rights, remedies, powers or discretions under the RCF.

The Group operated comfortably within covenant limits of the RCF during the year.

16. Accruals and other payables

Accruals and other payables are non-interest bearing and are usually settled within six months.

17. Financial risk review and management

The Group has exposure to the following risks from financial instruments:

-- Credit risk

-- Liquidity risk

-- Market risk

This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk and the Group's management of capital. This note also presents the result of the review performed by management on the above-mentioned risk areas.

Risk management framework

The Management Board has overall responsibility for the establishment and control of the Group's risk management framework.

Credit risk

Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group, resulting in:

1) impairment or reduction in the amounts recoverable from receivables and other current and non-current assets; and

   2)    non-recoverability, in part or in whole, of cash and cash equivalents deposited with banks. 

Exposures to credit risks

The Group is exposed to credit risks on the following items in the consolidated statement of financial position:

 
                                  31 December  31 December 
In thousands of Pounds Sterling          2020         2019 
Derivative financial assets               259        1,361 
Trade and other receivables             1,631        3,876 
Cash and cash equivalents              20,532       34,778 
 
                                       22,422       40,015 
 

The maximum exposure to credit risk on receivables that are neither overdue nor impaired as of 31 December 2020, amounts to GBP1,631,000 (2019: GBP3,876,000).

As of 31 December 2020, the Group is also exposed to credit risk on the loan receivable, interest and other receivable components of Investments at FVPL (loans provided to Project Companies) totalling to GBP216,631,000 (2019: GBP187,474,000).

Cash and cash equivalents and foreign currency forwards

The cash and cash equivalents and foreign currency forward contracts are maintained with reputable banks with ratings that are acceptable based on the established internal policy of the Group. Based on the assessment of the Management Board, there are no significant credit risks related to the cash and cash equivalents and foreign currency forward contracts maintained. The main counterparty banks of the Group have S&P/Moody's credit rating of A+/Aa3 and AA-/Aa2.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

The Group's policy over liquidity risk is that it will seek to have sufficient liquidity to meet its liabilities and obligations when they fall due.

The Group manages liquidity risk by maintaining adequate cash and cash equivalents and access to borrowing facilities to finance day-to-day operations and medium to long-term capital needs. The Group also regularly monitors the forecast and actual cash requirements and matches the maturity profiles of the Group's financial assets and financial liabilities.

The following are the undiscounted contractual maturities of the financial liabilities of the Group, including estimated interest payments:

 
                                                Contractual cash flows 
31 December 2020                   Carrying              Within     1-5 
In thousands of Pounds Sterling      amount    Total     1 year   years 
                                  ========= 
 
Loans and borrowings (Note 15)          177    1,220      1,220       - 
Trade payables                           73       73         73       - 
Other payables                        2,643    2,643      2,643       - 
 
                                      2,893    3,936      3,936       - 
 
 
                                                Contractual cash flows 
31 December 2019                   Carrying             Within      1-5 
In thousands of Pounds Sterling      amount     Total   1 year    years 
                                  ========= 
 
Loans and borrowings (Note 15)       20,434    21,056       56   21,000 
Trade payables                          353       353      353        - 
Other payables                        2,515     2,515    2,515        - 
 
                                     23,302    23,924    2,924   21,000 
 

The Group needs to maintain certain financial covenants under the RCF. Non-compliance with such covenants may trigger an event of default (see Note 15). At 31 December 2020 and 2019, the Group was not in breach of any of the covenants under the credit facility. The Group has operated and continues to operate comfortably within covenant limits.

The Company has the possibility of raising capital through the issuance of shares in order to finance further acquisitions or repay debt.

All external financial liabilities of the Group have maturities of less than one year except for loans and borrowings, which have a maturity of more than one year. The Group has sufficient cash and cash equivalents and sufficient funding sources to pay and/or refinance currently maturing obligations.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the returns.

UK departure from the European Union

As part of the UK's preparations for Brexit, the UK Government established a temporary permissions regime ('TPR') enabling European Economic Area ('EEA') AIFs with EEA AIFMs passporting into the UK at the end of the transition period to continue to access the UK market in the same manner as before the transition period ended for a limited period of time.

The Company has made the necessary notification to the FCA (and the CSSF) under the TPR of its intention and as a result has temporary permission to be marketed in the UK.

To continue marketing the Company in the UK after the end of the TPR, the Company must notify under the UK national private placement regime and will be directed by the FCA to make this notification within two years from the end of the transition period.

Regarding portfolio performance, while the long-term economic outcome of the UK's departure from the EU will remain uncertain for some time, the Group's portfolio cash flows are contracted and, unlike demand-based assets, are not sensitive to the performance of the wider economic environment.

The Group buys derivative financial instruments, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out within certain internal guidelines. The Group, via its hedge counterparty, reports all trades under these hedging instruments, for European Market Infrastructure Regulations purposes, to an EU branch of the derivative repository.

Currency risk

The Group is exposed to currency risk as a result of its underlying Investments at FVPL and cash and cash equivalents being denominated in currencies other than Pounds Sterling. The currencies in which these items are primarily denominated are Australian dollars (A$), Canadian dollars (C$), Euros (EUR), Norwegian kroner (NOK) and US dollars (US$).

The Group actively seeks to manage geographical concentration and mitigate foreign exchange risk by balance sheet hedging through foreign exchange forward contracts, hedging of forecast portfolio distributions and borrowing in non-Sterling currencies. Furthermore, Euro-denominated running costs provide a natural hedge against the Euro-denominated portfolio distributions.

In respect of other monetary assets and liabilities denominated in currencies other than Pounds Sterling, the Group's policy is to ensure that its net exposure is kept at an acceptable level. The Company believes that foreign exchange exposure is part of an international portfolio, but believes the risk is partially mitigated by having exposure to a number of different currencies including the Australian dollar, Canadian dollar, US dollar, Euro and Norwegian krone, all of which can provide diversification benefits. The Management Board spends considerable time reviewing its hedging strategy and believes it remains both appropriate and cost effective to continue with its four-year rolling hedge policy.

The summary of the quantitative data about the Group's exposure to foreign currency risk are as follows:

31 December 2020

 
In thousands of Pounds Sterling                    A$       C$      EUR     NOK      US 
                                                                                      $ 
Financial assets measured at fair value 
           Investments at FVPL                117,984  337,417   66,615  28,216  80,645 
 
Financial assets measured at amortised 
 cost 
           Cash and cash equivalents               24   11,542    1,020       3   2,125 
           Trade and other receivables            341      589       84       -     526 
                                                  365   12,131    1,104       3   2,651 
 
Financial liabilities measured at amortised 
 cost 
           Trade payables                         (2)        -     (11)       -       - 
           Accruals and other payables            (2)    (687)  (1,730)       -       - 
                                                  (4)    (687)  (1,741)       -       - 
 

31 December 2019

 
In thousands of Pounds Sterling                    A$       C$      EUR     NOK      US 
                                                                                      $ 
Financial assets measured at fair value 
           Investments at FVPL                103,410  296,335   67,753  29,827  76,362 
 
Financial assets measured at amortised 
 cost 
           Cash and cash equivalents               22   13,172    1,851       3      29 
           Trade and other receivables            250      214    1,194       -   2,034 
                                                  272   13,386    3,045       3   2,063 
 
Financial liabilities measured at amortised 
 cost 
           Trade payables                           -     (54)    (104)       -       - 
           Accruals and other payables              -      (1)  (1,847)       -       - 
                                                    -     (55)  (1,951)       -       - 
 

The significant exchange rates applied during the year ended 31 December 2020 and 31 December 2019 are as follows:

 
         31 December 2020 
       Average  Spot rate 
           GBP        GBP 
A$ 1     0.538      0.565 
C$ 1     0.581      0.575 
EUR 1    0.889      0.899 
NOK 1    0.083      0.086 
US$ 1    0.780      0.733 
 
 
        31 December 2019 
       Average  Spot rate 
           GBP        GBP 
A$ 1     0.544      0.531 
C$ 1     0.590      0.582 
EUR 1    0.877      0.850 
NOK 1    0.089      0.086 
US$ 1    0.783      0.758 
 

The sensitivity of the NAV to a 10 per cent positive and adverse movement in foreign exchange rates is disclosed in Note 18 to the consolidated financial statements. This is a scenario that the Group considers to be reasonably possible at the reporting date. The analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecasted revenues and other related costs.

Interest rate risk

Except for the loans and other receivables from Project Companies which are included as part of Investments at FVPL, the Group does not account for other fixed-rate financial assets and liabilities at fair value through profit or loss. For the years ended 31 December 2020 and 2019, the main variable interest rate exposure of the Group is on the interest rates applied to the Group's cash and cash equivalents, including deposit rates used in valuing the Investments at FVPL and the loans and borrowings of the Group. A change in the deposit rates used in valuing Investments at FVPL would have an impact on the value of such and a corresponding impact on the Group's NAV. Refer to Note 18 for a sensitivity analysis of the impact of a change in deposit rates on the Group's NAV.

Investment risk

The valuation of Investments at FVPL depends on the ability of the Group to realise cash distributions from Project Companies. The distributions to be received from the Project Companies are dependent on cash received by a particular Portfolio Company from the service concession agreements. The service concession agreements are predominantly granted to the Portfolio Company by a variety of public sector clients including, but not limited to, central government departments and local, provincial and state government and corporations set up by the public sector.

The Group predominantly makes investments in countries where the Management Board consider that asset structures are reliable, where (to the extent applicable) public sector counterparties carry what the Management Board consider to be an appropriate credit risk, or alternatively where insurance or guarantees are available for the sovereign credit risk, where financial markets are relatively mature and where a reliable judicial system exists to facilitate the enforcement of rights and obligations under the assets.

The Management Board continuously monitors the ability of a particular Portfolio Company to make distributions to the Group. During the year, there have been no material concerns raised in relation to current and future distributions to be received from any of the Project Companies.

Capital risk management

The Company's objective when managing capital is to ensure the Group's ability to continue as a going concern in order to provide returns to shareholders and benefits for further stakeholders and to maintain an optimal capital structure. The Company, at a Group level, views the share capital (see Note 13) and the RCF (see Note 15) as capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to shareholders, return capital to shareholders, avail itself of additional debt financing, pay down debt or issue new shares.

The Group regularly reviews compliance with Luxembourg regulations regarding restrictions on minimum capital. During the year, the Group complied with all externally imposed capital requirements and made no changes in its approach to capital management.

Derivative financial assets and liabilities for which hedge accounting is not applied

The Group has entered into foreign currency forwards to fix the foreign exchange rates on certain investment distributions that are expected to be received and on a portion of the non-Pounds Sterling denominated portfolio value. The derivative financial instruments (asset/liability) in the consolidated statement of financial position represent the fair value of foreign currency forwards which were not designated as hedges. The movements in their fair value are directly charged/credited in the consolidated income statement within the administrative expenses and net gain(loss) on derivative financial instruments group.

18. Fair value measurements and sensitivity analysis

The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated statement of financial position are presented below. This does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value (ie, cash and cash equivalents; trade and other receivables; trade payables, accruals and other payables, loans and borrowings).

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

-- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.

-- Level 2: inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

-- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 
31 December 2020                                Fair value 
In thousands of Pounds Sterling            Level  Level   Level    Total 
                                             1      2       3 
Financial assets measured at fair value 
Investments at FVPL                            -      -  895,674   895,674 
Derivative financial assets                    -    259        -       259 
 
Financial liabilities measured at fair 
 value 
Derivative financial liabilities               -  (243)        -     (243) 
 
 
 
31 December 2019                                Fair value 
In thousands of Pounds Sterling            Level  Level   Level    Total 
                                             1      2       3 
Financial assets measured at fair value 
Investments at FVPL                            -      -  845,967  845,967 
Derivative financial assets                    -  1,361        -    1,361 
 
 

The following table shows a reconciliation of the movements in the fair value measurements in level 3 of the fair value hierarchy:

 
                                                   31 December  31 December 
In thousands of Pounds Sterling                           2020         2019 
Balance at 1 January                                   845,967      780,356 
Acquisitions of/additions in Investments at FVPL        59,185       62,900 
Income from investments at FVPL                         63,337       69,772 
Distributions received from Investments at FVPL       (72,815)     (63,988) 
Reclassification to other receivables                        -      (3,073) 
 
Balance at 31 December                                 895,674      845,967 
 

Investments at FVPL

The Management Board is responsible for carrying out the fair market valuation of the Company's investments, which it then presents to the Supervisory Board. The portfolio valuation is carried out on a six-monthly basis as at 30 June and 31 December each year. The portfolio valuation is reviewed by an independent third-party professional.

The valuation is determined using the discounted cash flow methodology. The cash flow forecasts, generated by each of the underlying assets, are received by the Company or its subsidiaries, adjusted as appropriate to reflect risks and opportunities, and discounted using asset-specific discount rates. The portfolio valuation methodology remains unchanged from previous reporting periods.

Covid-19

The portfolio continued its strong performance over the reporting period with no material adverse effect on valuation resulting from Covid-19. This strong performance is primarily as a result of the Group holding a low-risk, 100 per cent availability-based portfolio, coupled with strong stakeholder collaboration during the reporting period. There continues to be uncertainty surrounding Covid-19 with the consequences and potential disruptions difficult to foresee, but currently our portfolio remains resilient in this challenging market environment. We will continue to work very closely with all stakeholders to help mitigate the risks and effects of the global pandemic.

Key Portfolio Company and portfolio cash flow assumptions underlying NAV calculation include:

-- The discount rates and the Assumptions as set out below continue to be applicable.

-- The updated financial models used for valuation accurately reflect the terms of all agreements relating to the Portfolio Companies and represent a fair and reasonable estimation of future cash flows accruing to the Portfolio Companies.

-- Cash flows from and to the Portfolio Companies are received and made at the times anticipated.

-- Non-UK Portfolio Companies are valued in local currency and their cash flows converted to Sterling at either the period-end exchange rates or the contract hedge rate.

-- Where the operating costs of the Portfolio Companies are fixed by contract, such contracts are performed, and where such costs are not fixed, they remain within the current forecasts in the valuation models.

-- Where lifecycle costs/risks are borne by the Portfolio Companies, they remain in line with the current forecasts in the valuation models.

-- An assessment is made of construction defect remediation where the risk sits with the Portfolio Company.

-- Contractual payments to the Portfolio Companies remain on track and contracts with public sector or public sector backed counterparties are not terminated before their contractual expiry date.

-- Any deductions or abatements during the operations period of Portfolio Companies are fully passed down to subcontractors under contractual arrangements or are part of the planned (lifecycle) forecasts.

-- Where the Portfolio Companies own the residual property value in an investment, the projected amount for this value is realised.

-- In cases where the Portfolio Companies have contracts that are in the construction phase, they are either completed on time or any delay costs are borne by the construction contractors.

-- There are no tax or regulatory changes in the future which negatively impact cash flow forecasts.

In forming the above assessments, the Group works with Portfolio Company management teams, as well as using due diligence information from, or working with, suitably qualified third parties such as technical, legal and insurance advisers.

Macro-economic assumptions

Apart from the discount rates, the Company uses the following assumptions for the cash flows:

 
                                 31 December 2020          31 December 2019 
Indexation      UK(1) RPI/CPIH   2.75% / 2.00%             2.75% 
                Canada           2.00% / 2.35%             2.00% / 2.35% 
 Australia                       2.50%                     2.50% 
 Germany                         2.00%                     2.00% 
 Netherlands(2)                  2.00%                     2.00% 
 Norway(2)                       2.25%                     2.25% 
 USA(3)                          2.50%                     2.50% 
Deposit         UK               0.25% to Q4 2023, then    1.00% to Q4 2023, then 
 rates (p.a.)                     1.00%                     2.50% 
 Canada                          0.75% to Q4 2023, then    1.00% to Q4 2023, then 
                                  1.50%                     2.50% 
 Australia                       0.50% to Q4 2023, then    2.00% to Q4 2023, then 
                                  2.00%                     3.00% - 4.00% (medium term) 
 Germany                         0.00% to Q4 2023, then    1.00% to Q4 2023, then 
                                  0.50%                     2.50% 
 Netherlands                     0.00% to Q4 2023, then    1.00% to Q4 2023, then 
                                  0.50%                     2.50% 
 Norway                          0.25% to Q4 2023, then    1.80% to Q4 2023, then 
                                  2.00%                     3.00% 
 USA                             0.25% to Q4 2023, then    1.00% to Q4 2023, then 
                                  1.50%                     2.50% 
Corporate       UK               19.00% long-term          19.00% to 2019, then 17.00% 
 tax rates 
 (p.a.) 
 Canada(4)                       23.00% / 26.50% / 27.00%  26.50% / 27.00% / 29.00% 
                                  / 29.00% 
 Australia                       30% long-term             30% long-term 
 Germany(5)                      15.8% long-term (incl.    15.8% long-term (incl. 
                                  solidarity charge)        solidarity charge) 
 Netherlands(6)                  25% long-term             25% till 2020, then 21.7% 
 Norway                          22% long-term             22% long-term 
 USA                             21% long-term             21% long-term 
 

(1) On the 25th of November 2020, the UK Government announced the phasing out of RPI after 2030, and replacement with CPIH; the Company's UK portfolio indexation factor changes from RPI to CPIH beginning on 1 January 2031.

(2) CPI indexation only. Where investments are subject to a basket of indices, these non-CPI indices are not considered.

(3) 80 per cent of ORB indexation factor for revenue is contractual and is not tied to CPI.

(4) Individual tax rates vary among Canadian Provinces.

(5) Individual local trade tax rates are considered in addition to the tax rate above.

(6) In September 2020, the Dutch Government confirmed that the planned reduction of the headline corporate income tax rate (CIT) to 21.7 per cent will not be introduced in 2021.

Discount rate sensitivity

The weighted average discount rate that is applied to the Company's portfolio of investments is the single most important judgement and variable.

The following table shows the sensitivity of the NAV, by applying a change in the discount rate on Investments at FVPL:

 
                                            +1% to 7.77% in     -1% to 5.77% in 
                                                2020 (1)            2020 (1) 
                                                    Profit or          Profit or 
Effects in thousands of Pounds Sterling     Equity       loss  Equity       loss 
 
31 December 2020                          (73,609)   (73,609)  85,076     85,076 
 
31 December 2019                          (70,769)   (70,769)  82,003     82,003 
 

(1) Based on the weighted average discount rate of 6.77 per cent (31 December 2019: 7.07 per cent).

Inflation rate sensitivity

The Company's investments are contractually entitled to receive availability-based income streams from public sector clients, which are adjusted every year for inflation. Facilities management subcontractors for accommodation investments and operating and maintenance subcontractors for transport investments have similar indexation arrangements. The investment cash flows are positively correlated with inflation (e.g. RPI, CPI, or a basket of indices).

The following table shows the sensitivity of the NAV, by applying a change in the inflation rate to Investments at FVPL:

 
                                        +1%                 -1% 
Effects in thousands of Pounds           Profit or            Profit or 
 Sterling                        Equity       loss    Equity       loss 
 
31 December 2020                 37,787     37,787  (30,983)   (30,983) 
 
31 December 2019                 40,405     40,405  (33,236)   (33,236) 
 

Foreign exchange rate sensitivity

A significant proportion of the Group's underlying investments are denominated in currencies other than Pounds Sterling.

The following table shows the sensitivity of the NAV, by applying a change to foreign exchange rates on Investments at FVPL:

 
                                                         Decrease by 10% 
                                  Increase by 10% (1)          (1) 
Effects in thousands of Pounds               Profit or          Profit or 
 Sterling                           Equity        loss  Equity       loss 
 
31 December 2020                  (25,491)    (25,491)  25,396     25,396 
 
31 December 2019                  (26,578)    (26,578)  24,643     24,643 
 

(1) Sensitivity in comparison to the spot foreign exchange rates at 31 December 2020 and considering the contractual and natural hedges in place, derived by applying a 10 per cent increase or decrease to the Sterling/foreign currency rate.

Deposit rate sensitivity

Project Companies typically have cash deposits which are required to be maintained as part of the senior debt funding requirements. (e.g. six months debt service reserve accounts, maintenance reserve accounts). The asset cash flows are positively correlated with the deposit rates.

The table below shows the sensitivity of the NAV, by applying a change in the long-term deposit rates compared to the assumptions above:

 
                                        +1%                    -1% 
Effects in thousands of Pounds            Profit or                 Profit or 
 Sterling                         Equity       loss         Equity       loss 
 
31 December 2020                  17,065     17,065       (16,641)   (16,641) 
 
31 December 2019                  14,711     14,711       (14,616)   (14,616) 
 

Lifecycle costs sensitivity

Lifecycle is the cost of planned interventions or replacing material parts of an asset to maintain it over the concession term. It involves larger items that are not covered by routine maintenance and for roads it will include items such as replacement of asphalt, rehabilitation of surfaces, or replacement of electromechanical equipment. Lifecycle obligations, are generally passed down to the facility maintenance provider with the exception of transportation investments where these obligations are typically retained by the Portfolio Company.

Of the Group's 50 Investments at FVPL, 17 Investments at FVPL retain the lifecycle obligations. The remaining 33 assets have this obligation passed down to the subcontractor.

The following table shows the sensitivity of the NAV, by applying a change in lifecycle costs to Investments at FVPL:

 
                                   Increase by 10%       Increase by 10% 
                                         (1)                    (1) 
Effects in thousands of Pounds             Profit or               Profit or 
 Sterling                          Equity       loss       Equity       loss 
 
31 December 2020                 (17,621)   (17,621)       17,390     17,390 
 
31 December 2019                 (16,975)   (16,975)       16,417     16,417 
 

(1) Sensitivity applied to the 17 investments in the portfolio which retain the lifecycle obligation i.e. the obligation is not passed down to the subcontractor.

Corporate tax rate sensitivity

The profits of each portfolio company are subject to corporate tax in the country where that company is located. The following table shows the sensitivity of the NAV, by applying a change in the corporate tax rate to Investments at FVPL:

 
                                    +1% in 2020           -1% in 2019 
Effects in thousands of Pounds            Profit or               Profit or 
 Sterling                         Equity       loss       Equity       loss 
 
31 December 2020                 (6,606)    (6,606)        6,563      6,563 
 
31 December 2019                 (7,230)    (7,230)        7,161      7,161 
 

On March 3rd, 2021, the UK Chancellor of the Exchequer announced a plan to increase the UK Corporate Tax rate to 25 per cent from April 2023. Whilst this increase is not currently enacted and is still to be approved by the UK Parliament, the Company recognises that any change in the UK Corporate Tax rate will have an effect on the portfolio valuation. It is the Company's policy to value those tax rates that have been enacted into law at the reporting period date. Notwithstanding this, and to aid transparency, we have calculated that this increase of the UK Corporation Tax rate would result in a GBP8.9 million or 1.0 per cent reduction in NAV.

Senior debt refinancing sensitivity

Assumptions are used where a refinancing of senior debt financing is required for an investment during the remaining concession term. There is a risk that such assumptions may not be achieved.

The following table shows the sensitivity of the NAV, by applying a change in base rate to the Investments at FVPL, of a +100bps adjustment to the forecasted margins. The base rate for senior debt is either fixed or a long-term interest swap is available with the effect that none of our assets is subject to changes in base rates.

 
                                            Margin +1% (1) 
In thousands of Pounds Sterling             Equity  Profit or loss 
 
2020                                       (7,745)         (7,745) 
 
2019                                       (6,943)         (6,943) 
 
 

(1) The Northern Territory Secure Facilities ('NTSF') asset is the only remaining asset in the Group's portfolio with refinancing risk.

Derivative financial instruments

The fair value of derivative financial instruments ('foreign exchange forwards') is calculated by the difference between the contractual forward rate and the estimated forward exchange rates at the maturity of the forward contract. The foreign exchange forwards are fair valued periodically by the counterparty bank. The fair value of derivative financial instruments as of 31 December 2020 amounted to a net asset of GBP16,000 (31 December 2019: GBP1,361,000 - net asset). The counterparty bank has an S&P/Moody's long-term credit rating of A+/Aa3.

The net loss on the valuation of foreign exchange forwards for the year ended 31 December 2020 amounted to a net loss of GBP1,495,000 (31 December 2019: GBP930,000 - net loss).

During the year ended 31 December 2020, the Group realised a net loss of GBP151,000 on the cash settlement of foreign exchange forwards (31 December 2019: GBP1,164,000 - realised net gain).

The 2019 net gain on the derivative financial instruments have been reclassified for consistency with the current year presentation from 'Other operating expenses' to 'Net gain(loss) on balance sheet hedging'. This reclassification had no effect on the reported results in the prior year.

19. Subsidiaries

During the year ended 31 December 2020, the Company had the following consolidated subsidiaries ('Holding Companies' if referred to individually) which are included in the consolidated financial statements:

 
                                                Effective 
                                    Country of  Ownership                  Year 
            Company              Incorporation   Interest  Acquired/Established 
BBGI Global Infrastructure S.A.     Luxembourg   Ultimate                  2011 
                                                   Parent 
BBGI Management HoldCo S.à     Luxembourg     100.0%                  2011 
 r. l. ('MHC') 
BBGI Inv, S.à r. l.            Luxembourg     100.0%                  2012 
BBGI Investments S.C.A.             Luxembourg     100.0%                  2012 
BBGI Holding Limited                        UK     100.0%                  2012 
BBGI (NI) Limited                           UK     100.0%                  2013 
BBGI (NI) 2 Limited                         UK     100.0%                  2015 
BBGI CanHoldco Inc.                     Canada     100.0%                  2013 
BBGI Guernsey Holding Limited         Guernsey     100.0%                  2013 
BBGI Ireland Limited                   Ireland     100.0%                  2017 
 

The Company's subsidiaries which are not consolidated, by virtue of the Company being an Investment Entity, and are accounted for as Investments at FVPL, are as follows:

 
                                                                                             Date 
                                                    Country           Effective            Acquired 
                                                       of 
      Company              Asset Name            Incorporation        Ownership           Controlled 
     RW Health           Royal Women's             Australia           100.0%                2012 
Partnership Holdings        Hospital 
    Pty Limited 
     RWH Health          Royal Women's             Australia           100.0%                2012 
  Partnership Pty           Hospital 
      Limited 
  RWH Finance Pty        Royal Women's             Australia           100.0%                2012 
      Limited               Hospital 
     Victorian              Victoria               Australia           100.0%                2012 
    Correctional          Correctional 
   Infrastructure          Facilities 
  Partnership Pty 
      Limited 
   BBPI Sentinel       Northern Territory          Australia           100.0%                2014 
    Holdings Pty             Secure 
      Limited              Facilities 
   BBPI Sentinel       Northern Territory          Australia           100.0%                2014 
   Holding Trust             Secure 
                           Facilities 
 BBPI Sentinel Pty     Northern Territory          Australia           100.0%                2014 
      Limited                Secure 
                           Facilities 
 BBPI Member Trust     Northern Territory          Australia           100.0%                2014 
                             Secure 
                           Facilities 
Sentinel Partnership   Northern Territory          Australia           100.0%           2014 and 2015 
        Pty                  Secure 
      Limited              Facilities 
    Sentinel UJV       Northern Territory          Australia           100.0%           2014 and 2015 
                             Secure 
                           Facilities 
 Sentinel Financing    Northern Territory          Australia           100.0%           2014 and 2015 
      Holdings               Secure 
    Pty Limited            Facilities 
 Sentinel Financing    Northern Territory          Australia           100.0%           2014 and 2015 
    Pty Limited              Secure 
                           Facilities 
  Sentinel Finance     Northern Territory          Australia           100.0%           2014 and 2015 
      Holding                Secure 
       Trust               Facilities 
  Sentinel Finance     Northern Territory          Australia           100.0%           2014 and 2015 
       Trust                 Secure 
                           Facilities 
 
   BBGI Sentinel      Northern Territory        Australia             100.0%           2015 
     Holdings 2             Secure 
    Pty Limited           Facilities 
   BBGI Sentinel      Northern Territory        Australia             100.0%           2015 
   Holding Trust            Secure 
         2                Facilities 
BBGI Sentinel 2 Pty   Northern Territory        Australia             100.0%           2015 
      Limited               Secure 
                          Facilities 
BBGI Sentinel Trust   Northern Territory        Australia             100.0%           2015 
         2                  Secure 
                          Facilities 
   BBGI Champlain      Champlain Bridge          Canada               100.0%           2020 
    Holding Inc. 
 BBGI SSLG Partner     Champlain Bridge          Canada               100.0%           2020 
        Inc. 
  Signature on the     Champlain Bridge          Canada                25.0%           2020 
   Saint_Laurent 
     Group G.P. 
  SSL Finance Inc.     Champlain Bridge          Canada                25.0%           2020 
  Golden Crossing     Golden Ears Bridge         Canada               100.0%         2012 and 
      Holdings                                                                         2013 
        Inc. 
  Golden Crossing     Golden Ears Bridge         Canada               100.0%         2012 and 
      Finance                                                                          2013 
        Inc. 
Golden Crossing Inc.  Golden Ears Bridge         Canada               100.0%         2012 and 
                                                                                       2013 
       Global         Golden Ears Bridge         Canada               100.0%         2012 and 
   Infrastructure                                                                      2013 
      Limited 
    Partnership 
  Golden Crossing     Golden Ears Bridge         Canada               100.0%         2012 and 
      General                                                                          2013 
    Partnership 
 BBGI KVH Holdings    Kelowna and Vernon         Canada               100.0%           2013 
        Inc.              Hospitals 
   BBGI KVH Inc.      Kelowna and Vernon         Canada               100.0%           2013 
                          Hospitals 
BBGI KVH Holdings 2   Kelowna and Vernon         Canada               100.0%           2020 
        Inc.              Hospitals 
  BBGI KVH 2 Inc.     Kelowna and Vernon         Canada               100.0%           2020 
                          Hospitals 
Infusion Health KVH   Kelowna and Vernon         Canada               100.0%         2013 and 
      General             Hospitals                                                    2020 
    Partnership 
  BBGI 104 GP Inc        Highway 104             Canada               100.0%           2020 
Dexter Nova Alliance     Highway 104             Canada                50.0%           2020 
         GP 
 WCP Holdings Inc.     Women's College           Canada               100.0%           2013 
                           Hospital 
      WCP Inc.         Women's College           Canada               100.0%           2013 
                           Hospital 
WCP Investments Inc.   Women's College           Canada               100.0%           2013 
                           Hospital 
  Women's College      Women's College           Canada               100.0%           2013 
    Partnership            Hospital 
 Stoney Trail Group    Northeast Stoney          Canada               100.0%           2013 
      Holdings              Trail 
        Inc. 
Stoney Trail LP Inc.   Northeast Stoney          Canada               100.0%           2013 
                            Trail 
    Stoney Trail       Northeast Stoney          Canada               100.0%           2013 
    Investments             Trail 
        Inc. 
 Stoney Trail Inc.     Northeast Stoney          Canada               100.0%           2013 
                            Trail 
Stoney Trail Global    Northeast Stoney          Canada               100.0%           2013 
      Limited               Trail 
    Partnership 
Stoney Trail General   Northeast Stoney          Canada               100.0%           2013 
    Partnership             Trail 
 BBGI NCP Holdings      North Commuter           Canada               100.0%           2015 
        Inc.               Parkway 
BBGI Stanton Holdco        Stanton               Canada               100.0%           2018 
       1 Inc.            Territorial 
                           Hospital 
BBGI Stanton Holdco     Stanton Territorial          Canada            100.0%                  2020 
       2 Inc.                 Hospital 
BBGI Stanton Holdco     Stanton Territorial          Canada            100.0%                  2020 
       3 Inc.                 Hospital 
BBGI Stanton Holdco     Stanton Territorial          Canada            100.0%                  2020 
       4 Inc.                 Hospital 
BBGI Canada Holding     Stanton Territorial          Canada            100.0%                  2020 
       5 Inc.                 Hospital 
   Boreal Health        Stanton Territorial          Canada            100.0%                2018 and 
    Partnership               Hospital                                                         2020 
        PJB              Burg Correctional           Germany           100.0%                2018 and 
 Beteiligungs-GmbH            Facility                                                         2020 
Projektgesellschaft      Burg Correctional           Germany            90.0%                  2012 
   Justizvollzug              Facility 
 Burg GmbH & Co. KG 
PJB Management-GmbH      Burg Correctional           Germany           100.0%                  2012 
                              Facility 
   Kreishaus Unna       Unna Administrative          Germany           100.0%                2012 and 
    Holding GmbH               Center                                                          2020 
    Projekt- und        Unna Administrative          Germany            90.0%                2012 and 
Betriebsgesellschaft           Center                                                          2020 
 Kreishaus Unna mbH 
BBGI PPP Investment        Holding entity          Luxembourg          100.0%                  2018 
      S.à 
        r.l. 
 De Groene Schakel       Westland Town Hall        Netherlands         100.0%                2018 and 
      Holding                                                                                  2019 
        B.V. 
 De Groene Schakel       Westland Town Hall        Netherlands         100.0%                2018 and 
        B.V.                                                                                   2019 
  Noaber18 Holding          N18 Motorway           Netherlands          52.0%               2018, 2019 
        B.V.                                                                                 and 2020 
   Noaber18 B.V.            N18 Motorway           Netherlands          52.0%               2018, 2019 
                                                                                             and 2020 
Agder OPS Vegselskap            E18                Norway             100.0%              2013 and 102014 
         AS 
 Bedford Education        Bedford Schools            UK              100.0%                    2012 
    Partnership 
  Holdings Limited 
 Bedford Education        Bedford Schools            UK              100.0%                    2012 
    Partnership 
      Limited 
 Lisburn Education        Lisburn College            UK              100.0%                    2012 
    Partnership 
 (Holdings) Limited 
 Lisburn Education        Lisburn College            UK              100.0%                    2012 
    Partnership 
      Limited 
  Clackmannanshire    Clackmannanshire Schools       UK              100.0%                    2012 
      Schools 
     Education 
    Partnership 
 (Holdings)Limited 
  Clackmannanshire    Clackmannanshire Schools       UK              100.0%                    2012 
      Schools 
     Education 
Partnership Limited 
Primaria (Barking &      Barking & Havering          UK              100.0%                    2012 
     Havering)                Clinics 
      Limited                  (LIFT) 
  Barking Dagenham       Barking & Havering          UK               60.0%                    2012 
      Havering                Clinics 
 Community Ventures            (LIFT) 
      Limited 
 Barking & Havering      Barking & Havering          UK               60.0%                    2012 
        LIFT                  Clinics 
  (Midco) Limited              (LIFT) 
 Barking & Havering      Barking & Havering          UK               60.0%                    2012 
        LIFT                  Clinics 
   Company (No.1)              (LIFT) 
      Limited 
  Scottish Borders    Scottish Borders Schools       UK              100.0%                    2012 
     Education 
    Partnership 
 (Holdings) Limited 
   Scottish Borders       Scottish Borders             UK             100.0%                        2012 
      Education                Schools 
 Partnership Limited 
  Coventry Education      Coventry Schools             UK             100.0%                        2012 
     Partnership 
   Holdings Limited 
  Coventry Education      Coventry Schools             UK             100.0%                        2012 
     Partnership 
       Limited 
 Fire Support (SSFR)       Stoke & Staffs              UK              85.0%                        2012 
       Holdings            Rescue Service 
       Limited 
 Fire Support (SSFR)       Stoke & Staffs              UK              85.0%                        2012 
       Limited             Rescue Service 
Highway Management M80      M80 Motorway               UK             100.0%                        2012 
        Topco 
       Limited 
   Tor Bank School        Tor Bank School              UK             100.0%                        2013 
      Education 
Partnership (Holdings) 
       Limited 
   Tor Bank School        Tor Bank School              UK             100.0%                   2013 and 2014 
      Education 
 Partnership Limited 
     Mersey Care        Mersey Care Hospital           UK             100.0%                   2013 and 2014 
 Development Company           (LIFT) 
      1 Limited 
MG Bridge Investments      Mersey Gateway              UK             100.0%                        2014 
       Limited                 Bridge 
    Lagan College          Lagan College               UK             100.0%                        2014 
Education Partnership 
  (Holdings) Limited 
    Lagan College          Lagan College               UK             100.0%                        2014 
Education Partnership 
       Limited 
  Highway Management        M1 Westlink                UK             100.0%                        2014 
        (City) 
   Holding Limited 
   GB Consortium 1      North London Estates           UK             100.0%                2012, 2014 and 2018 
       Limited           Partnership (LIFT) 
                                 and 
                            Liverpool and 
                           Sefton Clinics 
                               (LIFT) 
 East Down Education     East Down Colleges            UK               100.0%                      2012 and 
     Partnership                                                                                      2018 
  (Holdings) Limited 
 East Down Education     East Down Colleges            UK               100.0%                      2012 and 
     Partnership                                                                                      2018 
       Limited 
  Highway Management        M1 Westlink                UK               100.0%                        2014 
        (City) 
     Finance Plc 
  Highway Management        M1 Westlink                UK               100.0%                        2014 
        (City) 
       Limited 
Blue Light Partnership   Avon and Somerset             UK               100.0%                     2014, 2015 
        (ASP)                 Police HQ                                                             and 2016 
    NewCo Limited 
Blue Light Partnership   Avon and Somerset             UK               100.0%                     2014, 2015 
        (ASP)                 Police HQ                                                             and 2016 
   Holdings Limited 
Blue Light Partnership   Avon and Somerset             UK               100.0%                        2015 
        (ASP)                 Police HQ 
   NewCo 2 Limited 
    GT ASP Limited       Avon and Somerset             UK               100.0%                        2015 
                              Police HQ 
Blue Light Partnership   Avon and Somerset             UK               100.0%                        2015 
        (ASP)                 Police HQ 
       Limited 
   Northwin Limited     North West Regional            UK               100.0%                        2015 
                               College 
       Northwin         Belfast Metropolitan           UK               100.0%                        2016 
    (Intermediate)             College 
      (Belfast) 
       Limited 
  Northwin (Belfast)    Belfast Metropolitan           UK               100.0%                        2016 
       Limited                 College 
BBGI East End Holdings   Ohio River Bridges            USA              100.0%                        2014 
         Inc. 
  East End Crossings     Ohio River Bridges            USA              66.67%                      2014 and 
      Partners,                                                                                       2019 
         LLC 
 
 

Trade and other receivables

As at 31 December 2020, trade and other receivables include short-term receivables from non-consolidated subsidiaries amounting to GBP1,631,000 (2019: GBP3,876,000).

20. Related parties and key contracts

All transactions with related parties were undertaken on an arm's length basis.

Supervisory Board fee

The members of the Supervisory Board of the Company were entitled to a total of GBP209,000 in fees for the year ended 31 December 2020 (2019: GBP215,000).

Directors' shareholding in the Company

 
                          31 December  31 December 
In thousands of shares           2020         2019 
Duncan Ball                       548          431 
Frank Schramm                     500          418 
Michael Denny                     262          138 
Colin Maltby (1)                    -          123 
Sarah Whitney                      39           25 
 
                                1,349        1,135 
 

(1) Mr. Maltby stepped down from his role on the Supervisory Board with effect from 31 July 2020.

Remuneration of the Management Board

Under the current remuneration programme, all staff are entitled to an annual base salary payable monthly in arrears, which is reviewed annually by the Management Board. The Management Board members are entitled to a fixed remuneration under their contracts and are also entitled to participate in a short-term incentive plan and a long-term incentive plan. Compensation under their contracts is reviewed annually by the Remuneration Committee.

The total short-term and other long-term benefits recorded in the consolidated income statement for the Management Board, as the key management personnel, are as follows:

 
                                   Year ended   Year ended 
                                  31 December  31 December 
In thousands of Pounds Sterling          2020         2019 
Short-term benefits                     2,717        2,097 
Share-based payment                       953          561 
 
                                        3,670        2,658 
 

Share-based compensation

Each of the members of the Management Board received award letters ('2019 Award', '2018 Award', and '2017 Award', respectively) under the Group's long-term incentive plan. These awards are to be settled by MHC in the Company's own shares. Of the awards granted, 50 per cent vests by reference to a performance measure based on the Company's Total Shareholder Return ('TSR condition') over the Return Periods (below), and the remaining vests by reference to a performance measure based on the increase in the Company's Investment Basis NAV per share ('NAV condition'). Further details are as follows:

 
                                                          2019 Award              2018 Award              2017 Award 
                                              December 2019-December  December 2018-December  December 2017-December 
Return Period                                                   2022                    2021                    2020 
 
Vesting period (by reference to performance           36 mos. Ending          36 mos. Ending          36 mos. Ending 
           Measure - NAV condition and TSR                31/12/2022              31/12/2021              31/12/2020 
            condition) 
Maximum number of shares which will 
 vest                                                        757,893                 820,189                 881,626 
 

The fair value of the equity instruments awarded to the Management Board was determined using a Monte Carlo model, the key parameters of which are listed in the following table:

 
                                         2019 Award           2018 Award           2017 Award 
Share price at grant date                 GBP 1.675            GBP 1.565            GBP 1.405 
Maturity                                    3 years              3 years              3 years 
Annual target dividend (2020)             GBP0.0718                    -                    - 
Annual target dividends (2021             GBP0.0733                    -                    - 
 to 2022) 
Annual target dividends (2019                     -            GBP0.0700                    - 
 to 2021) 
Annual target dividends (2018                     -                    -            GBP0.0650 
 to 2020) 
Volatility                                      11%                  11%                  10% 
Risk free rate                  Between 0.53%-0.60%  Between 0.75%-0.79%  Between 0.38%-0.56% 
 

The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the plan is indicative of future trends, which may not necessarily be the actual outcome.

During the year, the Group started to implement a 'Staff Award Plan' to selected employees. The 'Staff Award Plan' entitles the employee to a right to receive shares in the Company upon meeting a service condition.

The fair value of the awards and amounts recognised as additional paid in capital in the Group's consolidated statement of financial position are as follows:

 
                                                  31 December  31 December 
In thousands of Pounds Sterling                          2020         2019 
2019 Award                                                148            - 
2018 Award                                                315          157 
2017 Award                                                402          268 
2016 Award                                                  -          540 
Deferred STIP                                             627            - 
Staff Award Plan                                           25            - 
 
Amount recognised in additional paid-in capital         1,517          965 
 

During the year ended 31 December 2020, the Company settled the outstanding obligation under the 2016 Award through (a) issuance of 690,274 shares at 144.5 pence per share. The total accrued amount under the 2016 Award as at 31 December 2019 was GBP540,000. This amount was transferred from Additional paid in capital to Share capital at the settlement date, less the adjustment of GBP114,000.

The share-based compensation expenses amount recognised as part of 'administrative expenses' in the Group's consolidated income statement are as follows:

 
                                                Year ended   Year ended 
                                               31 December  31 December 
In thousands of Pounds Sterling                       2020         2019 
2019 Award                                             148            - 
2018 Award                                             157          157 
2017 Award                                             134          134 
2016 Award                                           (114)          270 
Deferred STIP                                          627            - 
Staff Award Plan                                        25            - 
 
Amount recognised in administrative expenses           977          561 
 

In December 2020, each of the members of the Management Board received an award letter ('2020 Award'). The maximum number of shares that could be issued under this award was determined by using the closing price of the Company's share price on 23 December 2020, as ascertained from the Official List, which was 170.00 pence per share. Subject to the achievement of the performance conditions, the awards will vest after 21 December 2023.

Deferred STIP

Commencing in 2020, the Company introduced a bonus deferral under the STIP with one-third of any bonus earned being deferred into shares for three year holding period. The deferral component of the STIP differs from the Company's share-based compensation in that there are no further vesting conditions on this earned bonus.

The Deferred STIP is valued at 33.3% of the outcome of the annual bonus plan for the Management Board. The total value of the Deferred STIP as at 31 December 2020 was GBP627,000 (31 December 2019: nil).

21. Commitments and contingencies

The Group has engaged, in the ordinary course of business, the services of certain entities to provide legal, custodian, audit, tax and other services to the Company. The expenses incurred in relation to such are treated as legal and professional fees under the administrative expenses grouping in the consolidated income statement.

As at 31 December 2020, the Group had utilised GBP1.2 million (31 December 2019: GBP22.2 million) of the GBP180 million RCF, of which GBP1.2 million (31 December 2019: GBP1.2 million) was being used to cover letters of credit. Refer to Note 15 for further details on the RCF.

MHC leases its current office under a cancellable operating lease agreement. The expenses incurred in relation to such are recognised as office and other expenses under administrative expenses (see Note 6).

22. Service Concession Agreements

As at 31 December 2020, the Group has a portfolio of 50 assets (see also Note 9), with a weighted average remaining concession length of 20.4 years. The Group has a diverse asset mix from which the service concession receivables are derived. All assets are availability-based. The rights of both the concession provider and concession operator are stated within the specific asset agreement.

The following table summarises the main information about the Group's outstanding service concession agreements:

 
                                                                                                          Period of 
                                                                                                          Concession 
                                                                                                         (Operational 
                                                                                                            Phase) 
     Sector            Asset Name       % Equity       Short Description           Phase          Start Date         End Date      Investment 
                                        Owned on          of Concession                                                               Volume 
                                         Asset             Arrangement 
  Availability        Kicking Horse      50.0%           Design, build,         Operational        September         October         C$ 148 
      Roads               Canyon                           finance and                                2007             2030          million 
                                                         operate a 26-km 
                                                         stretch of the 
                                                          Trans-Canada 
                                                        Highway, a vital 
                                                       gateway to British 
                                                            Columbia. 
                       Golden Ears       100.0%          Design, build,         Operational        June 2009        June 2041       C$ 1,117 
                          Bridge                           finance and                                                               million 
                                                           operate the 
                                                           Golden Ears 
                                                           Bridge that 
                                                        spans the Fraser 
                                                       River and connects 
                                                           Maple Ridge 
                                                        and Pitt Meadows 
                                                         to Langley and 
                                                          Surrey, near 
                                                       Vancouver, British 
                                                            Columbia. 
                        Northwest        50.0%           Partly design,         Operational        November          October        C$ 1,170 
                         Anthony                         build, finance                               2011             2041          million 
                       Henday Drive                        and operate 
                                                        a major transport 
                                                         infrastructure 
                                                        asset in Canada, 
                                                           a ring road 
                                                        through Edmonton, 
                                                         capital of the 
                                                           province of 
                                                            Alberta. 
                      M80 Motorway       50.0%           Design, build,         Operational        July 2011        September        GBP310 
                                                           finance and                                                 2041          million 
                                                          operate 18 km 
                                                        of dual two/three 
                                                          lane motorway 
                                                         with associated 
                                                         slip roads and 
                                                         infrastructure 
                                                           from Stepps 
                                                      in North Lanarkshire 
                                                           to Haggs in 
                                                       Falkirk (Scotland). 
                      E18 Motorway       100.0%          Design, build,         Operational       August 2009         August        NOK 3,604 
                                                        finance, operate                                               2034          million 
                                                          and maintain 
                                                          a 38 km dual 
                                                           carriageway 
                                                      in Norway, including 
                                                         61 bridges and 
                                                         structures and 
                                                       75 km of secondary 
                                                         roads, carving 
                                                        through a rugged 
                                                          and beautiful 
                                                        landscape between 
                                                          Grimstad and 
                                                          Kristiansand. 
                        Northeast        100.0%          Design, build,         Operational        November          October      C$424 million 
                       Stoney Trail                     finance, operate                              2009             2039 
                                                          and maintain 
                                                         a 21 km section 
                                                           of highway, 
                                                          forming part 
                                                           of a larger 
                                                       ring road developed 
                                                           in Calgary, 
                                                        Alberta, Canada. 
                        Ohio River           66.67%          Design, build,     Operational        December         September        US$ 1,175 
                          Bridge                            finance, operate                          2016             2051           million 
                                                              and maintain 
                                                             East End Bridge 
                                                               asset which 
                                                               includes a 
                                                               cable-stay 
                                                            bridge, a tunnel 
                                                           and the connecting 
                                                              highway with 
                                                             a total length 
                                                               of 8 miles 
                                                              crossing the 
                                                               Ohio river 
                                                             in the greater 
                                                           Louisville-Southern 
                                                             Indiana region. 
                      Mersey Gateway         37.5%           Design, build,     Operational         October         March 2044        GBP650 
                          Bridge                            finance, operate                          2017                            million 
                                                              and maintain 
                                                              a new circa 
                                                           1-km long six-lane 
                                                            toll cable-stay 
                                                             bridge (three 
                                                              towers) over 
                                                               the Mersey 
                                                            river to relieve 
                                                             the congested 
                                                               and ageing 
                                                             Silver Jubilee 
                                                               Bridge and 
                                                            upgrading works 
                                                               for 9.5 km 
                                                              of existing 
                                                          roads and associated 
                                                              structures. 
                       M1 Westlink           100.0%          Design, build,     Operational        February          February         GBP161 
                                                            finance, operate                          2006             2036           million 
                                                              and maintain 
                                                            with significant 
                                                               amount of 
                                                              construction 
                                                             work completed 
                                                               in 2009 to 
                                                              upgrade key 
                                                              sections of 
                                                               approx. 60 
                                                             km of motorway 
                                                            through Belfast 
                                                           and its vicinity, 
                                                             including O&M 
                                                            of the complete 
                                                               motorway. 
                      North Commuter         50.0%           Design, build,     Operational         October         September         C$ 311 
                          Parkway                           finance, operate                          2018             2048           million 
                                                              and maintain 
                                                            two new arterial 
                                                              roadways and 
                                                               a new river 
                                                            crossing located 
                                                              in the north 
                                                           area of Saskatoon, 
                                                              Saskatchewan, 
                                                               Canada, and 
                                                           design, construct, 
                                                            finance, operate 
                                                              and maintain 
                                                              a replacement 
                                                             river crossing 
                                                               located in 
                                                               Saskatoon's 
                                                             downtown core. 
                       Canada Line           26.7%           Design, build,     Operational       August 2009       July 2040        C$ 1,895 
                                                            finance, operate                                                          million 
                                                              and maintain 
                                                              a 19km rapid 
                                                              transit line 
                                                               connecting 
                                                               the cities 
                                                              of Vancouver 
                                                              and Richmond 
                                                             with Vancouver 
                                                              International 
                                                               Airport in 
                                                            British Columbia, 
                                                                 Canada. 
                       Southeast             40.0%           Design, build,     Operational        November         September     C$ 524 million 
                      Stoney Trail                          finance, operate                          2013             2043 
                                                              and maintain 
                                                             a 25km section 
                                                               of highway, 
                                                              forming part 
                                                               of a larger 
                                                           ring road developed 
                                                               in Calgary, 
                                                            Alberta, Canada. 
                      William R.             80.0%           Design, build,     Operational        May 2008         June 2035     C$ 184 million 
                     Bennett Bridge                         finance, operate 
                                                              and maintain 
                                                              a 1.1km long 
                                                             floating bridge 
                                                               in Kelowna, 
                                                            British Columbia, 
                                                                 Canada. 
                                                             Design, build 
                                                             finance operate 
                                                              and maintain 
                                                             the enlargement 
                                                              of the A1/A6 
                                                           in the Netherlands, 
                                                             which involves 
                                                           the reconstruction 
                                                              and widening 
                                                               of this 2x5 
                                                             lanes motorway 
                                                            plus 2 reversible 
                                                            direction lanes. 
                                                           The asset involves 
                                                               some 70 new 
                                                               engineering 
            A1/A6 Motorway                  37.14%*            structures.      Operational        July 2017        June 2042     EUR 727 million 
                                                             Design, build, 
                                                             finance operate 
                                                              and maintain 
                                                              the extension 
                                                               of the N18 
                                                            motorway between 
                                                               Varsseveld 
                                                              and Enschede 
                                                             in the eastern 
                                                               part of the 
                                                              Netherlands. 
                                                              It comprises 
                                                               of 15 km of 
                                                              existing and 
                                                              27km of a new 
                                                            2x2-lane motorway 
                                                             with more than 
                                                              30 ecological 
                                                            passages, aiming 
                                                             at a reduction 
                                                               in traffic 
                                                               in certain 
                                                              villages and 
             N18 Motorway                    52.0%         safety improvement.  Operational       April 2018        April 2043    EUR 130 million 
                      Highway 104             50%            Design, build,     Construction       May 2020           August       C$718 million 
                                                            finance, operate                                           2043 
                                                              and maintain 
                                                              PPP following 
                                                               completion 
                                                            of construction. 
                                                               The project 
                                                               consists of 
                                                            the construction 
                                                             of a four-lane 
                                                             divided highway 
                                                           corridor beginning 
                                                               at the end 
                                                             of the existing 
                                                             divided highway 
                                                               east of New 
                                                              Glasgow near 
                                                               Exit 27 at 
                                                               Sutherlands 
                                                            River and running 
                                                             for a distance 
                                                            of approximately 
                                                               38km to the 
                                                            existing divided 
                                                              highway just 
                                                               west of the 
                                                             Addington Fork 
                                                               Interchange 
                                                              (Exit 31) at 
                                                               Antigonish. 
                       Champlain              25%               Design,         Operational        December          October      C$2,260 million 
                         Bridge                              construction,                            2020             2049 
                                                               financing, 
                                                               operation, 
                                                              maintenance 
                                                           and rehabilitation 
                                                            of a new bridge 
                                                              spanning the 
                                                              St. Lawrence 
                                                             River between 
                                                              Montreal and 
                                                           Brossard, Quebec. 
    Social             Victoria              100.0%          Design, build,     Operational       March 2006         May 2031        A$ 244.5 
 Infrastructure       Correctional                         finance, operate,                     (MRC)/February                       million 
                       Facilities                             and maintain                         2006 (MCC) 
                                                              for a period 
                                                              of 25 years, 
                                                          two new correctional 
                                                               facilities 
                                                             for the State 
                                                              of Victoria, 
                                                             Australia (MCC 
                                                               and MRC). 
                                                             Design, build, 
                                                            finance, operate, 
                                                              and maintain 
                                                            for a concession 
                                                              period of 25 
                                                              years, a new 
                                                              correctional 
                                                              facility for 
                                                              the state of 
                   Burg Correctional                         Saxony-Anhalt,                                                           EUR 100 
                        Facility             90.0%              Germany.        Operational        May 2009         April 2034        million 
                                             100.0%          Design, build,     Operational     July 2014/July      March 2039     GBP83 million 
                         Avon and                           finance, operate                          2015 
                         Somerset                             and maintain 
                        Police HQ                            four new build 
                                                               police and 
                                                           custody facilities 
                                                               in the Avon 
                                                              and Somerset 
                                                              region (UK). 
                        Northern             100.0%          Design, build,     Operational        November          October       A$620 million 
                        Territory                           finance, operate                          2014             2044 
                    Secure Facilities                         and maintain 
                                                           a new correctional 
                                                           facility, located 
                                                              near Darwin, 
                                                            including three 
                                                            separate centres 
                                                              of the 1,048 
                                                                  bed 
                                                          multi-classification 
                                                           men's and women's 
                                                              correctional 
                                                               centre and 
                                                             24-bed Complex 
                                                            Behaviour Unit. 
                    Bedford Schools          100.0%          Design, build,     Operational        June 2006         December      GBP29 million 
                                                            finance, operate                                           2035 
                                                              and maintain 
                                                            the redevelopment 
                                                            of two secondary 
                                                               schools in 
                                                               the County 
                                                            of Bedfordshire. 
                       Coventry              100.0%          Design, build,     Operational        In stages         December      GBP27 million 
                        Schools                             finance, operate                       from March          2034 
                                                              and maintain                          2006 to 
                                                             one new school                        June 2009 
                                                              and community 
                                                               facilities 
                                                            for the Coventry 
                                                              City Council. 
                     Kent Schools            50.0%           Design, build,     Operational        June 2007        September     GBP106 million 
                                                            finance, operate                                           2035 
                                                              and maintain 
                                                           the redevelopment, 
                                                             which included 
                                                            the construction 
                                                              of new build 
                                                              elements for 
                                                              each school 
                                                               as well as 
                                                               extensive 
                                                            reconfiguration 
                                                           and refurbishment 
                                                            of six schools. 
                       Scottish              100.0%          Design, build,     Operational        July 2009         November      GBP92 million 
                    Borders Schools                         finance, operate                                           2038 
                                                              and maintain 
                                                           three new secondary 
                                                                 schools 
                                                              for Scottish 
                                                            Borders Council. 
                   Clackmannanshire          100.0%          Design, build,     Operational        In stages        March 2039     GBP77 million 
                        Schools                             finance, operate                     from January 
                                                              and maintain                        to May 2009 
                                                            the redevelopment 
                                                           of three secondary 
                                                               schools in 
                                                            Clackmannanshire, 
                                                                Scotland. 
                       East Down             100.0%          Design, build,     Operational        June 2009         May 2036     GBP73.8 million 
                        Colleges                            finance, operate                                                       (with Lisburn 
                                                              and maintain                                                            College) 
                                                              the East Down 
                                                               Colleges in 
                                                            Northern Ireland 
                    Lisburn College          100.0%          Design, build,     Operational       April 2010         May 2036     GBP73.8 million 
                                                            finance, operate                                                         (with East 
                                                              and maintain                                                         Down College) 
                                                             Lisburn College 
                                                               in Northern 
                                                                Ireland. 
                       Tor Bank              100.0%          Design, build,     Operational         October          October       GBP13 million 
                         School                             finance, operate                          2012             2037 
                                                              and maintain 
                                                              a new school 
                                                               for pupils 
                                                              with special 
                                                             education needs 
                                                               in Northern 
                                                                Ireland. 
                     Lagan College           100.0%         Design , build,     Operational         October         June 2038      GBP33 million 
                                                             finance operate                          2013 
                                                              and maintain 
                                                            the redevelopment 
                                                              of school in 
                                                            Northern Ireland. 
                                                             Design, build, 
                                                             finance operate 
                                                              and maintain 
                                                            the redevelopment 
                                                             of five schools                                         December 
            Cologne Schools                  50.0%             in Cologne.      Operational       April 2005           2029        EUR32 million 
                                                             Design, build, 
                                                             finance operate 
                                                              and maintain 
                                                              a school for 
                      Rodenkirchen                            approx. 1200                         November          November 
                         Schools             50.0%         pupils in Cologne.   Operational           2007             2034        EUR40 million 
                                                             Design, build, 
                                                             finance operate 
                                                              and maintain 
                                                            the redevelopment 
                       Frankfurt                             of four schools 
                         Schools             50.0%            in Frankfurt.     Operational       August 2007       July 2029      EUR89 million 
                       North West            100.0%          Design, build,     Operational        February          January       GBP9 million 
                        Regional                            finance, operate                          2001             2026 
                         College                              and maintain 
                                                             the North West 
                                                            Regional College 
                                                               educational 
                                                            campus in Derry, 
                                                            Northern Ireland 
                  Belfast Metropolitan       100.0%          Design, build,     Operational        September          August       GBP20 million 
                         College                            finance, operate                          2002             2027 
                                                              and maintain 
                                                              the Belfast 
                                                            Met educational 
                                                          campus in Millfield, 
                                                           Belfast, Northern 
                                                                Ireland 
                                                             Design, build, 
                                                            finance, operate 
                                                              and maintain 
                                                             Westland Town 
                                                              Hall, a PPP 
                                                             accommodation 
                                                            asset consisting 
                                                                of a new 
                                                             approximately 
                                                               11,000m(2) 
                                                             town hall for 
                                                               the Dutch 
                        Westland                              Municipality                                            August 
                        Town Hall            100.0%           of Westland.      Operational       August 2017          2042        EUR33 million 
                       Gloucester            50.0%           Design, build,     Operational       April 2005         February      GBP38 million 
                     Royal Hospital                         finance, operate                                           2034 
                                                              and maintain 
                                                               a hospital 
                                                               scheme in 
                                                              Gloucester, 
                                                                  UK. 
                       Liverpool             60.0%           Design, build,     Operational      In 7 tranches         In 7        GBP97 million 
                       and Sefton                           finance, operate                        starting         tranches 
                     Clinics (LIFT)                           and maintain                         April 2005        starting 
                                                               the primary                         and ending        November 
                                                               healthcare                           February         2037 and 
                                                               facilities                             2013            ending 
                                                              in Liverpool                                           February 
                                                               and Sefton,                                             2043 
                                                                   UK. 
                      North London           60.0%           Design, build,     Operational      In 4 tranches         In 4        GBP72 million 
                   Estates Partnership                      finance, operate                        starting         tranches 
                         (LIFT)                               and maintain                          February         starting 
                                                               the primary                          2006 and         January 
                                                               healthcare                         ending June        2031 and 
                                                               facilities                             2013            ending 
                                                             of the Barnet,                                         June 2043 
                                                               Enfield and 
                                                              Haringey LIFT 
                                                               programme, 
                                                                   UK. 
                    Barking Dagenham     60.0%           Design, build,         Operational      In 3 tranches         In 3       GBP65 million 
                         Havering                       finance, operate                            starting         tranches 
                          (LIFT)                          and maintain                              October          starting 
                                                      10 facilities/clinics                         2005 and        September 
                                                         in East London,                         ending October      2030 and 
                                                          UK with asset                               2008            ending 
                                                          construction                                              September 
                                                           completions                                                 2033 
                                                          between 2005 
                                                            and 2009. 
                      Royal Women's      100.0%          Design, build,         Operational        June 2008        June 2033     A$316 million 
                         Hospital                       finance, operate 
                                                          and maintain 
                                                        a new nine-storey 
                                                          Royal Women's 
                                                           Hospital in 
                                                           Melbourne. 
                       Mersey Care       79.6%           Design, build,         Operational        December          December     GBP25 million 
                         Hospital                       finance, operate                              2014             2044 
                         (part of                         and maintain 
                        Liverpool                         a new mental 
                      Sefton Clinics                    health in-patient 
                      (LIFT) above)                        facility on 
                                                        the former Walton 
                                                          hospital site 
                                                          in Liverpool, 
                                                               UK. 
                       Kelowna and       100.0%          Design, build,         Operational         January           August         C$432.9 
                     Vernon Hospital                    finance, operate                              2012             2042          million 
                                                          and maintain 
                                                          a new Patient 
                                                           Care Tower, 
                                                        a new University 
                                                       of British Columbia 
                                                        Okanagan Clinical 
                                                         Academic Campus 
                                                          and car park 
                                                       at Kelowna General 
                                                          Hospital, and 
                                                          a new Patient 
                                                          Care Tower at 
                                                         Vernon Jubilee 
                                                            Hospital. 
                     Women's College     100.0%          Design, build,         Operational        May 2013          May 2043     C$345 million 
                         Hospital                       finance, operate                          (Phase 1), 
                                                          and maintain                             September 
                                                         the new Women's                          2015 (Phase 
                                                        College Hospital                              2), 
                                                           in Toronto,                            March 2016 
                                                        Ontario, Canada.                      (final completion). 
                       Restigouche       80.0%           Design, build,         Operational        June 2015         October      C$210 million 
                         Hospital                       finance, operate                                               2044 
                          Centre                          and maintain 
                                                       the new Psychiatric 
                                                           Care Centre 
                                                         in Restigouche, 
                                                         New Brunswick, 
                                                             Canada. 
                    McGill University   40 .0 %          Design, build,         Operational         October         September        C$2,012 
                      Health Centre                     finance, operate                              2014             2044          million 
                                                          and maintain 
                                                         the new McGill 
                                                        University Health 
                                                        Centre, Montreal, 
                                                             Canada. 
                   Stanton Territorial   100 .0          Design, build,         Operational        December          December     C$298 million 
                         Hospital           %           finance, operate                              2018             2048 
                                                          and maintain 
                                                         the new Stanton 
                                                           Territorial 
                                                     Hospital, Yellowknife, 
                                                     Northwest Territories, 
                                                             Canada. 
                     Stoke & Staffs      85.0%           Design, build,         Operational        November          October      GBP47 million 
                      Rescue Service                    finance, operate                              2011             2036 
                                                          and maintain 
                                                        10 new community 
                                                          fire stations 
                                                        in Stoke-on-Trent 
                                                       and Staffordshire, 
                                                               UK. 
                                                         Design, build, 
                                                        finance, operate 
                                                          and maintain 
                                                       the administration 
                                                           building of 
                                                        the Unna District 
                   Unna Administrative                in Rhine-Westphalia, 
                          Centre         90.0%              Germany.            Operational        July 2006        July 2031     EUR24 million 
                                                         Design, build, 
                                                        finance, operate 
                                                          and maintain 
                                                        the refurbishment 
                                                      and new construction 
                       Fürst                        of a 32 hectare 
                      Wrede Military                      army barracks 
                           Base          50.0%         in Munich, Germany.      Operational       March 2008        March 2028    EUR48 million 
 
 

23. Standards issued but not yet effective

A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2021 and earlier application is permitted; however, the Group has not early adopted any of the forthcoming new or amended standards in preparing these condensed consolidated interim financial statements. The Group intends to adopt these new and amended standards, if applicable, when they become effective.

Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

On 27 August 2020, the IASB published Interest Rate Benchmark Reform - Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. With publication of the phase two amendments, the IASB has completed its work in response to IBOR reform.

The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate ('IBOR') is replaced with an alternative nearly risk-free interest rate ('RFR').

The amendments include a practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest. Inherent in allowing the use of this practical expedient is the requirement that the transition from an IBOR benchmark rate to an RFR takes place on an economically equivalent basis with no value transfer having occurred.

The adoption of this new standard is not expected to have a significant impact on the Group's consolidated financial statements.

24. Events after the end of the reporting period

In February 2021, Company declared a 2(nd) interim dividend of 3.59 pence per share with scrip alternative for qualifying shareholders for the period 1 July - 31 December 2020, to be paid in April 2021.

Impact of coronavirus (Covid-19)

At the date of publication of these consolidated financial statements, the Group and its portfolio has not experienced any material adverse operational or financial impact related to the implications of Covid-19. The portfolio continued its strong performance over the reporting period with no material adverse effect on valuation resulting from Covid-19. This strong performance is primarily as a result of the Group holding a low-risk, 100 per cent availability-based portfolio, coupled with strong stakeholder collaboration during the reporting period. There continues to be uncertainty surrounding Covid-19 with the consequences and potential disruptions difficult to foresee, but currently our portfolio remains resilient in this challenging market environment. We will continue to work very closely with all stakeholders to help mitigate the risks and effects of the global pandemic.

AUDIT OPINION

To the Shareholders of

BBGI GLOBAL INFRASTRUCTURE S.A. (formerly BBGI SICAV S.A.)

6E, route de Trèves

L-2633 Senningerberg

Luxembourg

 
 
REPORT OF THE REVISEUR D'ENTREPRISES AGREE 
 

Report on the audit of the financial statements

Opinion

We have audited the financial statements of BBGI GLOBAL INFRASTRUCTURE S.A. (formerly BBGI SICAV S.A.) (the "Company"), which comprise the statement of financial position as at 31 December 2020, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2020 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards ("IFRSs") as adopted by European Union.

Basis for opinion

We conducted our audit in accordance with the Law of 23 July 2016 on the audit profession ("Law of 23 July 2016") and with International Standards on Auditing ("ISAs") as adopted for Luxembourg by the "Commission de Surveillance du Secteur Financier" ("CSSF"). Our responsibilities under the Law of 23 July 2016 and ISAs are further described in the << Responsibilities of the "réviseur d'entreprises agréé" for the audit of the financial statements >> section of our report. We are also independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants ("IESBA Code") as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the financial statements, and have fulfilled our other ethical responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of the audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Impairment of investment in subsidiary and loans receivable from subsidiaries (including interest)

a) Why the matter was considered to be one of most significance in our audit of the financial statements of the current period?

We refer to the accounting policy for "Impairment testing for investments" and to Note 13 and 14 in the financial statements. Over 97% of the Company's total assets are investment in subsidiary and loans receivable from subsidiaries (including interest) subject to an impairment assessment at each reporting date.

The conclusion whether there is objective evidence of impairment on investment in subsidiary is a significant judgement area resulting from a number of assumptions in the financial models. The valuation is inherently subjective due to the absence of a liquid market for these investments, and the fact that their fair value is determined using the fair value of the underlying infrastructure investments which, in turn, is determined using a discounted cash flow methodology applied by the Management Board. The complexity of this methodology as well as assumptions taken in the financial models mean that there is a risk that the fair value of these investments may not be appropriate. The key assumptions used by the Management Board are in respect of discount rates and components of budgets used being part of long term forecast cash flows. In addition, the Management Board also used key macroeconomic assumptions such as inflation, deposit interest and tax rates that have an impact on the long term forecast cash flows.

As for the loans receivable from subsidiaries (including interest), valuation of the underlying investments is an important consideration in the determination of expected credit losses (ECL). The significance of the estimates and judgements involved, coupled with the fact that a variance in the key assumptions used in the valuation of investment in subsidiary and in the impairment assessment of loans receivable from subsidiaries (including interest), when aggregated, could result in a material misstatement on the statement of comprehensive income and statement of financial position, warrants specific audit focus in this area.

b) How the matter was addressed in our audit

Our audit procedures to determine if there is any impairment of investment in subsidiary and loans receivable from subsidiaries (including interest) consist of the analysis of the valuation of the underlying infrastructure assets that have been developed predominantly under PPP/PFI or similar procurements models ("Infrastructure Investments") and of ECL, as appropriate, which included, but were not limited to the following:

- We tested the design, implementation and effectiveness of the controls around the determination and monitoring of the discounted cash flows and the determination and monitoring of related key macroeconomic assumptions;

- We involved KPMG valuation specialists and their market knowledge to perform the following procedures:

Ø We considered and commented the approach and methodology documented by Management Board used in Company's Valuation Report against International Private Equity and Venture Capital Valuation Guidelines;

Ø We obtained market benchmarks for discount rates from public and private sources. We considered the discount rates applied in Company's Valuation Report against market benchmarks in the light of market, project, sector and country issues;

Ø We performed research on key assumptions and commented and compared those against the assumptions applied in Company's Valuation Report;

Ø We reviewed the results of the sensitivity analysis on key assumptions taken by Management;

Ø We challenged and determined the appropriateness of the Management Board's assumptions used for the valuation of a sample of Infrastructure Investments applying following procedures:

-- We agreed the underlying shareholder cash flows inputs (such as dividends, subordinated debt interest and principal repayment and director's fees) from the underlying project model to the Company's valuation model;

-- We considered if the methodology for assessing fair value has been applied consistently across the assets;

-- We read the latest board minutes, board packages and other supporting documents and information in respect of the sampled investments and raised Q&A comments to challenge the inputs in the valuation ;

- We reviewed the Valuation Report prepared by the Management Board and assessed whether the valuation inputs and results are consistent with our other audit procedures performed as part of our audit of the consolidated financial statements;

- We obtained and reviewed the valuation review opinion issued by the independent third party valuation expert engaged by the Company, in connection with the appropriateness of the portfolio value prepared by the Management Board;

- We tested the design, implementation and effectiveness of the management review controls over the valuation process;

- We gained an understanding of the process and controls that management has established to identify, account for and disclose loans from subsidiaries (including interest) and to authorize and approve significant transactions and arrangements with related parties.

- We verified whether the Company's investment in subsidiary and loans receivables from subsidiaries (including interest) are not carried at more than their recoverable amount (fair value determined) and assessed that there are no external or internal indicators of impairment.

- We obtained management's assessments of the arm's length principle and challenged the inputs used.

- We obtained the management impairment analysis by the Management Board on the impairment of investment in subsidiary and loans receivable from subsidiaries (including interest) and performed the following procedures:

Ø We challenged the criteria and inputs used in the impairment analysis;

Ø We performed an overall assessment of the assumptions and models used to calculate the ECL; and

Ø We performed impairment testing of non-financial assets (investment in subsidiary).

Other information

The Management Board is responsible for the other information. The other information comprises the information stated in the annual report but does not include the financial statements and our report of "réviseur d'entreprises agréé" thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report this fact. We have nothing to report in this regard.

Responsibilities of the Management Board for the financial statements

The Management Board is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, and for such internal control as the Management Board determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Management Board is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Responsibilities of the réviseur d'entreprises agréé for the audit of the financial statements

The objectives of our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report of the "réviseur d'entreprises agréé" that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 
 
-  Identify and assess the risks of material misstatement of the 
    financial statements, whether due to fraud or error, design and 
    perform audit procedures responsive to those risks, and obtain 
    audit evidence that is sufficient and appropriate to provide a 
    basis for our opinion. The risk of not detecting a material misstatement 
    resulting from fraud is higher than for one resulting from error, 
    as fraud may involve collusion, forgery, intentional omissions, 
    misrepresentations, or the override of internal control. 
-  Obtain an understanding of internal control relevant to the audit 
    in order to design audit procedures that are appropriate in the 
    circumstances, but not for the purpose of expressing an opinion 
    on the effectiveness of the Company's internal control. 
-  Evaluate the appropriateness of accounting policies used and the 
    reasonableness of accounting estimates and related disclosures 
    made by the Management Board. 
-  Conclude on the appropriateness of the Management Board's use 
    of the going concern basis of accounting and, based on the audit 
    evidence obtained, whether a material uncertainty exists related 
    to events or conditions that may cast significant doubt on the 
    Company's ability to continue as a going concern. If we conclude 
    that a material uncertainty exists, we are required to draw attention 
    in our report of the "réviseur d'entreprises agréé" 
    to the related disclosures in the financial statements or, if 
    such disclosures are inadequate, to modify our opinion. Our conclusions 
    are based on the audit evidence obtained up to the date of our 
    report of the "réviseur d'entreprises agréé". However, 
    future events or conditions may cause the Company to cease to 
    continue as a going concern. 
-  Evaluate the overall presentation, structure and content of the 
    financial statements, including the disclosures, and whether the 
    financial statements represent the underlying transactions and 
    events in a manner that achieves fair presentation. 
 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our report unless law or regulation precludes public disclosure about the matter.

Report on other legal and regulatory requirements

We have been appointed as "réviseur d'entreprises agréé" by the Shareholders on 30 April 2020 and the duration of our uninterrupted engagement, including previous renewals and reappointments, is ten years.

The management report is consistent with the financial statements and has been prepared in accordance with the applicable legal requirements.

 
 
Luxembourg, 24 March 2021    KPMG Luxembourg, Société 
                              coopérative 
                              Cabinet de révision agréé 
                             Joseph de Souza 
 

COMPANY STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 31 DECEMBER 2020

 
In thousands of Pounds Sterling                        Notes     2020      2019 
                                                              ======= 
 
Administrative expenses                                  5    (8,615)   (7,415) 
Other operating expenses                                 6    (3,107)   (7,991) 
Other operating income                                   7      5,181         - 
Results from operating activities                             (6,541)  (15,406) 
 
Finance income                                           8     18,773    17,278 
 
Profit before tax                                              12,232     1,872 
Tax expense                                              9      (427)     (406) 
 
Profit from continuing operations                              11,805     1,466 
 
Profit from continuing operations attributable 
 to owners of the 
   Company                                                     11,805     1,466 
 
Other comprehensive income for the year                             -         - 
 
Total comprehensive income for the year attributable 
 to 
   owners of the Company                                       11,805     1,466 
 

The accompanying notes form an integral part of the Company's financial statements

 
 In thousands of Pounds Sterling                    Notes       2020      2019 
================================================== 
 
 Assets 
 Loans receivable from subsidiaries                  13      217,182   201,342 
 Investment in subsidiary                            14      333,048   293,303 
Non-current assets                                           550,230   494,645 
 
 Loans receivable from subsidiaries                  13       94,784   124,595 
 Interest and other receivables from subsidiaries    13       14,325       976 
 Other current assets                                            256       148 
 Cash and cash equivalents                           10        5,636    20,918 
================================================== 
 Current assets                                              115,001   146,637 
================================================== 
 
 Total assets                                                665,231   641,282 
================================================== 
 
 Equity 
 Share capital                                       11      772,640   715,406 
 Retained earnings                                         (108,743)  (75,832) 
================================================== 
 Equity attributable to owners of the Company                663,897   639,574 
================================================== 
 
 Liabilities 
 Trade payables                                                  301       288 
 Other payables                                                  931     1,313 
 Current tax liabilities                              9          102       107 
================================================== 
 Current liabilities                                           1,334     1,708 
================================================== 
 
 Total liabilities                                             1,334     1,708 
================================================== 
 
 Total equity and liabilities                                665,231   641,282 
================================================== 
 
 Net asset value attributable to the owners of 
  the Company                                        11      663,897   639,574 
 Net asset value per ordinary share (pence)          11        99.88    101.49 
================================================== 
 

The accompanying notes form an integral part of the Company's financial statements.

 
 
                                                   Share   Retained     Total 
In thousands of Pounds Sterling           Notes  Capital   Earnings    Equity 
 
Balance at 1 January 2019                        639,642   (35,678)   603,964 
 
Total comprehensive income for 
 the year 
   attributable to the owners of 
    the Company                                        -      1,466     1,466 
Transactions with owners of the 
 Company, recognised directly in 
 equity 
Issuance of shares from placing 
 of ordinary shares 
   - net of issue cost                       11   73,915          -    73,915 
Cash dividends                               11        -   (40,848)  (40,848) 
Scrip dividends                              11      772      (772)         - 
Shares issued on behalf of a subsidiary      11    1,077          -     1,077 
 
Balance at 31 December 2019                      715,406   (75,832)   639,574 
 
Total comprehensive income for 
 the year 
   attributable to the owners of 
    the Company                                        -     11,805    11,805 
Transactions with owners of the 
 Company, 
   recognised directly in equity 
Issuance of shares from placing 
 of ordinary shares 
    - net of issue cost                      11   54,169          -    54,169 
Cash dividends                               11        -   (42,648)  (42,648) 
Scrip dividends                              11    2,068    (2,068)         - 
Shares issued on behalf of a subsidiary      11      997          -       997 
 
Balance at 31 December 2020                      772,640  (108,743)   663,897 
 
 

The accompanying notes form an integral part of the Company's financial statements.

 
 In thousands of Pounds Sterling                             Notes      2020       2019 
==========================================================  ======  ========  ========= 
 
 Operating activities 
 Profit from continuing operations                                    11,805      1,466 
 Adjustments for: 
      Finance income                                         8,13   (18,773)   (17,278) 
      Foreign currency exchange loss (gain) - net             7,6    (5,173)        168 
      Tax expense                                              9         427        406 
                                                                    (11,714)   (15,238) 
 Working capital adjustments: 
     Other receivables from subsidiary                              (11,448)     11,178 
     Other current assets                                              (108)         71 
     Trade and other payables and current tax liabilities              (429)       (81) 
Cash used in operating activities                                   (23,699)    (4,070) 
      Taxes paid                                                       (432)      (386) 
Net cash flows used in operating activities                         (24,131)    (4,456) 
 
 Investing activities 
Loan repayment from subsidiaries                              13      34,741     26,348 
Loans provided to subsidiaries                                13    (15,802)   (45,681) 
Investment in subsidiaries                                    14    (39,745)   (29,932) 
Interest received                                                     17,949     38,971 
Net cash flows used in investing activities                          (2,857)   (10,294) 
 
 Financing activities 
 Proceeds from issuance of ordinary shares-net                11      54,169     73,915 
 Dividends paid                                               11    (42,648)   (40,848) 
==========================================================  ======            ========= 
 Net cash flows from financing activities                             11,521     33,067 
==========================================================  ======            ========= 
 
 Net increase (decrease) in cash and cash equivalents               (15,467)     18,317 
 Impact of foreign exchange gain on cash and cash 
  equivalents                                                            185        469 
 Cash and cash equivalents at 1 January                       10      20,918      2,132 
==========================================================  ======            ========= 
 
 Cash and cash equivalents at 31 December                     10       5,636     20,918 
==========================================================  ======            ========= 
 

The accompanying notes form an integral part of the Company's financial statements

1. Corporate information

BBGI Global Infrastructure S.A., formerly BBGI SICAV S.A., ('BBGI', or the 'Company') is an investment company incorporated in Luxembourg in the form of a public limited company (société anonyme) with variable share capital (société d'investissement à capital variable, or 'SICAV') and regulated by the Commission de Surveillance du Secteur Financier ('CSSF') under Part II of the amended Luxembourg law of 17 December 2010 on undertakings for collective investments with an indefinite life. The Company qualifies as an alternative investment fund within the meaning of Article 1 (39) of the amended law of 12 July 2013 on alternative investment fund managers ('2013 Law') implementing Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 and is authorised as an internal alternative investment fund manager in accordance with Chapter 2 of the 2013 Law. The Company was admitted to the official list of the UK Listing Authority (premium listing, closed-ended investment fund) and to trading on the main market of the London Stock Exchange on 21 December 2011.

As of 1 January 2021, the main market of the London Stock Exchange is not considered as an EU regulated market (as defined by the MiFID II). As a result, Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (the Transparency Directive) as implemented in the Luxembourg law by the act dated 11 January 2008 on transparency requirements for issuers (the Transparency Act 2008), among other texts, does not apply to the Company.

The Company's registered office is EBBC, 6E, route de Treves, L-2633 Senningerberg, Luxembourg. On 27 October 2020, the Company changed its registered name from BBGI SICAV S.A. to the current BBGI Global Infrastructure S.A.

The Company is a closed-ended investment company that invests principally in a diversified portfolio of operational Public-Private Partnership ('PPP')/Private Finance Initiative ('PFI') infrastructure assets or similar style assets. At 31 December 2020, the Company has one investment that is under construction.

The Company had no employees as of 31 December 2020 and 2019, respectively.

Reporting period

The Company's reporting period runs from 1 January to 31 December each year. The Company's statement of comprehensive income, statement of financial position, statement of changes in equity and statement of cash flows include comparative figures as at 31 December 2019.

The amounts presented as 'non-current' in the Company's statement of financial position are those expected to be recovered or settled after more than one year. The amounts presented as 'current' are expected to be recovered settled within one year. These financial statements were approved by the Management Board on 24 March 2021.

2. Basis of preparation

Statement of compliance

The separate financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU'), and applying IAS 27 - Separate Financial Statements, recognition and measurement requirements, in accounting for its investment in subsidiary. Please refer to Note 3 d) for the accounting policy for the investment in subsidiary.

The Company also prepares consolidated financial statements in accordance with IFRS as adopted by the EU.

The Company follows, to the fullest extent possible, the provisions of the Standard of Recommended Practices issued by the Association of Investment Companies ('AIC SORP'). If the provisions of the AIC SORP are in direct conflict with IFRS as adopted by the EU, the standards of the latter shall prevail.

Changes in accounting policy

New and amended standards applicable to the Company are as follows:

Amendments to IAS 1 and IAS 8: Definition of Material (effective 1 January 2020)

The amendments provide a new definition of material that states, 'information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity'.

The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements.

A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no significant impact on the financial statements.

Conceptual Framework for Financial Reporting (effective 1 January 2020)

The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist the IAS in developing standards, to help preparers develop consistent accounting policies where there is no applicable standard in place and to assist all parties to understand and interpret the standards. This will affect those entities which developed their accounting policies based on the Conceptual Framework. The revised Conceptual Framework includes some new concepts, updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. These amendments had no impact on the financial statements of the Company.

Functional and presentation currency

These financial statements are presented in Pounds Sterling, the Company's functional currency. All amounts presented in tables throughout the report have been rounded to the nearest thousand, unless otherwise stated.

Impairment testing for investments

Investment in subsidiary and loans receivable from subsidiaries are measured at cost less accumulated impairment losses. The impairment losses are based on expected credit loss ('ECL') on such receivables. The loans and receivables of the Company from its subsidiaries are directly linked to the PPP/PFI assets financed by these subsidiaries either through loans and/or equity investments. The ECL, if any, of the Company from its loans and receivables from subsidiaries has a direct link with the fair value of the Group's portfolio of investments ('PPP/PFI investments'). The Company performs a fair valuation of the PPP/PFI investments every six months and considers any ECL on the loans and receivables, among others based on the results of the valuation. The fair valuation of the subsidiaries' PPP/PFI assets is done by calculating the net present value of the cash flows from its PPP/PFI assets, based on internally generated models. The net present value of each asset is determined using future cash flows, applying certain macroeconomic assumptions for the cash flows which include indexation rates, deposit interest rates, corporate tax rates and foreign currency exchange rates. The cash flows are discounted at the applicable discount rate for companies involved in service concession assets. A material change in the macroeconomic assumptions and discount rates used for such valuation could have a significant impact on the net present value of the cash flows. The determined fair value will be considered as the recoverable amount to be compared to the carrying amount of investment in subsidiary to determine possible impairment. Excess of the carrying amount of the investment in subsidiary over the recoverable amount is recognised as impairment loss. As of 31 December 2020, the Company identified no ECL to be recorded on its loans and receivables from subsidiaries (2019: nil) nor impairment on its investment in subsidiary.

3. Summary of significant accounting policies

a) Foreign currency transactions

Transactions in foreign currencies are translated into Pounds Sterling at the exchange rate on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into Pounds Sterling at the exchange rate on that date.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into Pounds Sterling at the exchange rate on the date that the fair value was determined. Foreign currency differences arising on translation are recognised in the statement of comprehensive income as a gain or loss on currency translation.

b) Foreign currency translations

The assets and liabilities of foreign operations are translated to Pounds Sterling at the exchange rates on the reporting date. The income and expenses of foreign operations are translated to Pounds Sterling at the average exchange rates during the year, if such does not significantly deviate from the exchange rates at the date on which the transaction is entered into. If significant deviations arise, then the exchange rate at the date of the transaction is used.

c) Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets

Financial assets are classified at initial recognition at either: (i) amortised cost; (ii) fair value through other comprehensive income - debt instruments; (iii) fair value through other comprehensive income - equity instruments; or (iv) fair value through profit or loss.

In general, the Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks

and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Company is recognised as a separate financial asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

At the date of the statement of financial position, all financial assets of the Company have been classified as financial assets at amortised cost. Financial assets of the Company consist of investment in subsidiary, loans receivables from subsidiaries, interest and other receivables from subsidiaries and cash and cash equivalents.

Financial assets at amortised cost (debt instruments)

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in the statement of income when the asset is derecognised, modified or impaired.

Financial liabilities

The Company classifies financial liabilities at amortised cost. Such financial liabilities are recognised initially at fair value less any direct attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the EIR method.

The Company derecognises a financial liability (or part of a financial liability) from the statement of financial position when, and only when, it is extinguished or when the obligation specified in the contract or agreement is discharged or cancelled or has expired. The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is considered in the statement of comprehensive income.

d) Investments in subsidiary

The investment in subsidiary is held at cost less any impairment.

e) Provisions

A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to a liability. The unwinding of such discount is recognised as a finance cost.

   f)   Cash and cash equivalents 

Cash and cash equivalents comprise of cash of balances and term deposits with maturities of three months or less from the date when the deposits were made and that are subject to an insignificant risk of change in their fair value, and are used by the Company in the management of its short-term commitments.

g) Share capital

Ordinary shares are classified as equity. Costs directly attributable to the issue of ordinary shares, or which are associated with the establishment of the Company, that would otherwise have been avoided are recognised as a deduction from equity, net of any tax effects.

h) Finance income and finance costs

Interest income and expenses are recognised in statement of comprehensive income using the EIR method.

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

Interest received or receivable and interest paid or payable are recognised in statement of comprehensive income as finance income and finance costs, respectively.

   i)   Tax 

According to the Luxembourg regulations regarding SICAV companies, the Company itself, as an undertaking for collective investment, is exempt from paying income and/or capital gains taxes in Luxembourg. It is, however, liable to annual subscription tax of 0.05 per cent on its consolidated net asset value ('NAV') payable quarterly and assessed on the last day of each quarter.

   j)   Current versus non-current classification 

The Company presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

-- Expected to be realised or intended to be sold or consumed in the normal operating cycle

-- Held primarily for the purpose of trading

-- Expected to be realised within 12 months after the reporting period or

-- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period

All other assets are classified as non-current.

A liability is current when:

-- It is expected to be settled in the normal operating cycle

-- It is held primarily for the purpose of trading

-- It is due to be settled within 12 months after the reporting period or

-- There is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period

The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

The Company classifies all other liabilities as non-current.

4. Significant accounting judgements, estimates and assumptions

The preparation of financial statements in conformity with IFRS requires the Management Board to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

In the process of applying the Company's accounting policies, the Management Board has made the following judgements that would have the most significant effect on the amounts recognised in the Company's financial statements.

4.1 Impairment testing for investments

Refer to Note 2 for the discussion of this topic.

4.2 Going concern basis of accounting

The Management Board has examined significant areas of possible financial risk including cash and cash requirements. It has not identified any material uncertainties which would cast significant doubt on the Company's ability to continue as a going concern for a period of 12 months from the date of approval of the Company's financial statements. The Management Board has satisfied itself that the Company has adequate resources to continue in operational existence for the foreseeable future. As part of its assessment, the Management Board has considered the risk posed by the Covid-19 pandemic. The Management Board has satisfied itself that the Company has adequate resources to continue in operational existence for the foreseeable future. After due consideration, the Management Board believes it is appropriate to adopt the going concern basis of accounting in preparing the financial statements.

5. Administrative expenses

 
                                        Year ended    Year ended 
                                       31 December   31 December 
In thousands of Pounds Sterling               2020          2019 
 
Support agreement fees (see Note 13)         6,637         5,623 
Legal and professional fees                  1,614         1,395 
Supervisory Board fees and expenses            231           223 
Others                                         133           174 
 
                                             8,615         7,415 
 

The legal and professional fees during the year includes amounts charged by the Company's external auditor which include audit fees of GBP159,000 (2019: GBP168,000) and audit related fees of GBP66,000 (2019: GBP60,000). There are no non-audit related fees charged by the Company's external auditors in the above amounts (2019: nil). These administrative expenses also include depositary and custodian related charges which amounted to GBP347,000 (2019: GBP287,000).

   6.   Other operating expenses 
 
                                                     Year ended   Year ended 
                                                    31 December  31 December 
In thousands of Pounds Sterling                            2020         2019 
 
Foreign exchange indemnity agreement expense (see 
 Note 13)                                                 1,891        6,411 
Acquisition-related and unsuccessful bid costs              830          991 
Non-recoverable VAT                                         386          344 
Foreign currency exchange loss - net                          -          168 
Others                                                        -           77 
 
                                                          3,107        7,991 
 
   7.   Other operating income 
 
                                       Year ended   Year ended 
                                      31 December  31 December 
In thousands of Pounds Sterling              2020         2019 
 
Foreign currency exchange gain -net         5,173            - 
Others                                          8            - 
 
                                            5,181            - 
 
   8.   Finance income 
 
                                                         Year ended   Year ended 
                                                        31 December  31 December 
In thousands of Pounds Sterling                                2020         2019 
 
Finance income from multi-currency facility (see Note 
 13)                                                         18,768       17,258 
Interest income from deposits                                     5           20 
 
                                                             18,773       17,278 
 
   9.   Tax expense 

Current tax payable in 2020 amounting to GBP102,000 relates to subscription tax due (2019: GBP107,000).

A reconciliation of the tax expense and the tax at applicable tax rate is as follows:

 
                                                     Year ended   Year ended 
                                                    31 December  31 December 
In thousands of Pounds Sterling                            2020         2019 
 
Profit before tax                                        12,232        1,872 
 
Income tax using the Luxembourg domestic tax rate 
 of 24.94%                                                3,051          467 
Effect of tax-exempt income                             (3,051)        (467) 
Subscription tax expense                                    427          406 
 
Tax charge for the year                                     427          406 
 

The Company, as an undertaking for collective investment, pays an annual subscription tax of 0.05 per cent on its consolidated NAV. For the year ended 31 December 2020, the Company incurred a subscription tax charge of GBP427,000 (2019: GBP406,000). All direct and indirect subsidiaries of the Company are subject to corporation tax at the applicable rate in their respective jurisdictions.

10. Cash and cash equivalents

Cash and cash equivalents relates to bank deposits amounting to GBP5,636,000 (2019: GBP20,918,000).

11. Share capital

Changes in the Company's share capital are as follows:

 
                                               31 December  31 December 
In thousands of Pounds Sterling                       2020         2019 
 
Share capital as at 1 January                      715,406      639,642 
Issuance of ordinary shares through placing         55,000       75,000 
Shares issuance cost on placing                      (831)      (1,085) 
Share capital issued through scrip dividends         2,068          772 
Shares issued as share based compensation              997        1,077 
 
                                                   772,640      715,406 
 

In November 2020, the Company raised gross proceeds of GBP55,000,000 through a placing of 32,544,379 new ordinary shares of no par value ('Placing'). The Placing price was set at 169.0 pence per Placing share. The related share issuance cost amounted to GBP831,000.

BBGI Management HoldCo S.à r.l. ('MHC'), a wholly owned subsidiary of the Company, provides share-based compensation to senior executives whereby it will issue a certain number of shares of the Company to entitled executives calculated based on the conditions of the Long-Term Incentive Plan ('LTIP') rules and the respective LTIP Award letters. During the year, in accordance with the LTIP agreement, the Company issued 690,274 shares, in connection with the LTIP, at 144.5 pence per share for a total amount of GBP997,000 (2019: GBP1,077,000). The amount of GBP997,000 was recorded as an advance made by the Company to MHC during the year (2019: GBP1,077,000).

The changes in the number of ordinary shares of no-par value issued by the Company are as follows:

 
                                                   31 December  31 December 
In thousands of shares                                    2020         2019 
 
In issue at beginning of the year                      630,213      580,005 
Shares issued through placing of ordinary shares        32,544       49,020 
Shares issued through scrip dividends                    1,244          491 
Shares issued as share based compensation                  690          697 
 
                                                       664,691      630,213 
 

All shares rank equally with regard to the Company's residual assets. The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at general meetings of the Company.

The Company meets the minimum share capital requirement as imposed under the applicable Luxembourg regulation.

Dividends

The dividends declared and paid by the Company during the year ended 31 December 2020 are as follows:

 
                                                                     Year ended 
                                                                    31 December 
In thousands of Pounds Sterling except as otherwise stated                 2020 
 
2019 2(nd) interim dividend of 3.5 pence per qualifying ordinary 
 share - for the period 
    1 July 2019 to 31 December 2019                                      22,057 
 
2020 1(st) interim dividend of 3.59 pence per qualifying ordinary 
 share- for the period 
    1 January 2020 to 30 June 2020                                       22,659 
 
Total dividends declared and paid during the year                        44,716 
 

The 31 December 2019 2(nd) interim dividend was paid in April 2020. The value of the scrip election was GBP429,000, with the remaining amount of GBP21,628,000 paid in cash to those investors that did not elect for the scrip.

The 30 June 2020 1(st) interim dividend was paid in October 2020. The value of the scrip election was GBP1,639,000 with the remaining amount of GBP21,020,000 paid in cash to those investors that elected for a cash dividend.

The dividends declared and paid by the Company during the year ended 31 December 2019 are as follows:

 
                                                                      Year ended 
                                                                     31 December 
In thousands of Pounds Sterling except as otherwise stated                  2019 
 
2018 2(nd) interim dividend of 3.375 pence per qualifying ordinary 
 share 
    for the period 1 July 2018 to 31 December 2018                        19,575 
 
2019 1(st) interim dividend of 3.5 pence per qualifying ordinary 
 share 
     for the period 1 January 2019 to 30 June 2019                        22,045 
 
Total dividends declared and paid during the year                         41,620 
 

The 2(nd) 2018 interim dividend was paid in April 2019. The value of the scrip election was GBP181,000, with the remaining amount of GBP19,394,000 paid in cash to those investors that did not elect for the scrip.

The 1(st) 2019 interim dividend was paid in October 2019. The value of the scrip election was GBP591,000 with the remaining amount of GBP21,453,000 paid in cash to those investors that elected for a cash dividend.

Net asset value

The Company net asset value and net asset value per share as of 31 December 2020, 2019 and 2018 are as follows:

 
In thousands of Pounds Sterling/pence              2020     2019     2018 
 
Net asset value attributable to the owners of 
 the Company                                    663,897  639,574  603,964 
 
Net asset value per ordinary share (pence)        99.88   101.49   104.13 
 

12. Financial risk and capital risk management

The Company has exposure to the following risks from financial instruments:

-- Credit risk

-- Liquidity risk

-- Market risk

This note presents information about the Company's exposure to each of the above risks, the Company's objectives, policies and processes for measuring and managing risk and the Company's management of capital. This note also presents the result of the review performed by management on the above-mentioned risk areas.

Risk management framework

The Management Board has overall responsibility for the establishment and control of the Company's risk management framework.

Credit risk

Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company, resulting in:

1) impairment or reduction in the amounts recoverable from receivables and other current and non-current assets; and

   2)   non-recoverability, in part or in whole, of cash and cash equivalents deposited with banks. 

A significant part of receivables of the Company are receivables from subsidiaries. These subsidiaries have the ability to pay based on the projected cash flows to be received by such subsidiaries from its investments.

Exposures to credit risks

The Company is exposed to credit risks on the following items in the Company's statement of financial position:

 
                                                        31 December  31 December 
In thousands of Pounds Sterling                                2020         2019 
 
Loans and other receivable to subsidiaries (including 
 accrued interest)                                          326,291      326,913 
Cash and cash equivalents                                     5,636       20,918 
 
                                                            331,927      347,831 
 

The maximum exposure to credit risk on receivables that are neither overdue nor impaired as of 31 December 2020, amounts to GBP326,291 (2019: GBP326,913).

Recoverable amounts of receivables and other current and non-current assets

The Company establishes when necessary an allowance for impairment, based on ECL specific to the asset. Currently there are no recorded allowances for impairment. All the Company's receivables are recoverable and no significant amounts are considered as overdue, impaired or subject to ECL.

Cash and cash equivalents

The cash and cash equivalents are maintained with reputable banks with ratings that are acceptable based on the established internal policy of the Company. Based on the assessment of the Management Board, there are no significant credit risks related to the cash and cash equivalents. The main counterparty banks of the Company have S&P/Moody's credit rating between A+/Aa3 and AA-/Aa2.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

The Company's policy over liquidity risk is that it will seek to have sufficient liquidity to meet its liabilities and obligations when they fall due.

The Company manages liquidity risk by maintaining adequate cash and cash equivalents and access to borrowing facilities to finance day-to-day operations and medium to long-term capital needs. The Group also regularly monitors the forecast and actual cash requirements and matches the maturity profiles of the Group's financial assets and financial liabilities.

The Company has the possibility to raise capital through the issuance of shares in order to finance further acquisitions.

All external financial liabilities of the Company have maturities of less than one year. The Company has sufficient cash and cash equivalents and sufficient funding sources to pay and/or refinance currently maturing obligations.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the returns.

UK departure from the European Union

As part of the UK's preparations for Brexit, the UK government established a temporary permissions regime ('TPR') enabling European Economic Area ('EEA') AIFs with EEA AIFMs passporting into the UK at the end of the transition period to continue to access the UK market in the same manner as before the transition period ended for a limited period of time.

The Company has made the necessary notification to the FCA (and the CSSF) under the TPR of its intention and as a result has temporary permission to be marketed in the UK.

To continue marketing the Company in the UK after the end of the TPR, the Company must notify under the UK national private placement regime and will be directed by the FCA to make this notification within two years from the end of the transition period.

Regarding portfolio performance, while the long-term economic outcome of the UK's departure from the EU will remain uncertain for some time, the Group's portfolio cash flows are contracted and, unlike demand-based assets, are not sensitive to the performance of the wider economic environment.

The Company together with its Subsidiaries (collectively referred to as the 'Group'), in which the Company is the ultimate parent entity, maintains a pure-play PPP-style investment platform, fully committed to a strict investment strategy into availability-based assets. This generates stable, predictable cash flows backed by secure, highly visible contracted public-sector revenues and significantly carry no exposure to demand or regulatory risk. While the Brexit outcome remains uncertain we can say that, regardless of the outcome, the Group's portfolio cash flows are contracted and, unlike demand-based assets, are not sensitive to the performance of the wider economic environment.

The Company is exposed to currency risk as a result of its cash and cash equivalents being denominated in currencies other than Pounds Sterling. The currencies in which these items are primarily denominated are Australian Dollar (A$), Canadian Dollar (C$), Euro (EUR), Norwegian Krone (NOK) and US Dollar (US$).

In respect of other monetary assets and liabilities denominated in currencies other than Pounds Sterling, the Company's policy is to ensure that its net exposure is kept at an acceptable level. The management believes that there is no significant concentration of currency risk in the Company.

The summary of the quantitative data about the Company's exposure to foreign currency risk provided to the management is as follows:

31 December 2020

 
In thousands of Pounds Sterling   A$  C$    EUR  NOK  US 
                                                       $ 
Cash and cash equivalents         22  18    202    2   5 
Trade payables                     -   -  (245)    -   - 
Other payables                     -   -  (786)    -   - 
 
                                  22  18  (829)    2   5 
 

31 December 2019

 
In thousands of Pounds Sterling   A$   C$    EUR  NOK  US 
                                                        $ 
Cash and cash equivalents         21  564  1,346    2   8 
Trade payables                     -    -   (23)    -   - 
Other payables                     -  (1)  (385)    -   - 
 
                                  21  563    938    2   8 
 

The Company has loans and receivables from MHC denominated in foreign currency but the Company is not exposed to fluctuations in foreign exchange rates in relation to these receivables due to the foreign exchange indemnity agreement entered into between the Company and MHC (see Note 13).

The significant exchange rates applied during the year ended 31 December 2020 and 31 December 2019 are as follows:

 
        31 December 2020 
       Average  Spot rate 
           GBP        GBP 
 
A$ 1     0.538      0.565 
C$ 1     0.581      0.575 
EUR 1    0.889      0.899 
NOK 1    0.083      0.086 
US$ 1    0.780      0.733 
 
 
        31 December 2019 
       Average  Spot rate 
           GBP        GBP 
 
A$ 1     0.544      0.531 
C$ 1     0.590      0.582 
EUR 1    0.877      0.850 
NOK 1    0.089      0.086 
US$ 1    0.783      0.758 
 

The impact of a strengthening or weakening of Pounds Sterling against the A$, C$, NOK and U$, as applicable, by 10 per cent at 31 December 2020 and 31 December 2019 would not have a significant impact on the Company's cash and cash equivalents and therefore on the statement of comprehensive income. This assumes that all other variables, in particular, interest rates, remain constant and ignores any impact of forecast revenues, hedging instruments and other related costs.

Fair values versus carrying amounts

The below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.

Level 2: inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The carrying amounts of cash and cash equivalents, receivables and payables approximates their fair value due to their short-term nature with maturity of one year or less, or on demand.

The fair value of loans and other receivables from subsidiaries and investment in subsidiary, with a total carrying value of GBP659,647,000 (2019: GBP620,216,000), amounts to GBP897,305,000 (2019: GBP849,843,000). The fair value of these loans receivable and investment in subsidiary is determined by discounting the future cash flows to be received from such assets using applicable market rates (Level 3).

Capital risk management

The Company's objective when managing capital is to ensure the Company's ability to continue as a going concern in order to provide returns to shareholders and benefits for further stakeholders and to maintain an optimal capital structure. The Company views the share capital (see Note 11) as capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to shareholders, return capital to shareholders, avail of additional debt financing, pay down debt, or issue new shares.

The Company regularly reviews compliance with Luxembourg regulations regarding restrictions on minimum capital. During the year, the Company complied with all externally imposed capital requirements and made no changes in its approach to capital management.

The portfolio continued its strong performance over the reporting period with no material adverse effect on valuation resulting from Covid-19. This strong performance is primarily as a result of the Company holding a low-risk, 100 per cent availability-based underlying portfolio, coupled with strong stakeholder collaboration during the reporting period. There continues to be uncertainty surrounding Covid-19 with the consequences and potential disruptions difficult to foresee, but currently our portfolio remains resilient in this challenging market environment. We will continue to work very closely with all stakeholders to help mitigate the risks and effects of the global pandemic.

13. Related parties and key contracts

All transactions with related parties were undertaken on an arm's length basis.

Supervisory Board fees

The aggregate remuneration of the Directors of the Supervisory Board in their capacity as such was GBP209,000 (2019: GBP215,000).

Loans and receivables from subsidiaries - multicurrency facility agreement ('MCF')

On 1 January 2017, the Company as a lender and MHC as a borrower, entered into a MCF. Pursuant to this agreement the Company has and will continue to make available an interest-bearing loan to MHC for the purposes of funding its initial and subsequent acquisitions of interests in PPP/PFI and similar styled infrastructure assets. The maximum amount that can be withdrawn from the MCF is GBP680,000,000. The interest rate charged on the withdrawn amount shall be the interest rate on loans charged to the underlying projects less an appropriate margin.

Movements in the MCF during the year are as follows:

 
                                       31 December  31 December 
In thousands of Pounds Sterling               2020         2019 
 
1 January                                  201,342      192,036 
Additions                                   15,802       15,749 
Capitalisation of interest under MCF           100          128 
Principal payments received                (4,930)      (4,442) 
Foreign exchange movements                   4,868      (2,129) 
 
                                           217,182      201,342 
 

During the year, the finance income from the MCF amounted to GBP18,768,000 (2019: GBP17,258,000).

Loans receivable from subsidiaries - interest free loan agreements ('IFL')

The Company has entered into various IFL with MHC and BBGI Investments S.C.A. ('SCA'), an indirect 100 per cent owned subsidiary. These IFLs have a term of one year with the possibility to extend and to introduce an arm's length interest rate. The details of the interest free loans receivable from subsidiaries are as follows:

 
                                  31 December  31 December 
In thousands of Pounds Sterling          2020         2019 
 
IFL receivable from MHC                94,784      123,310 
IFL receivable from SCA                     -        1,285 
 
                                       94,784      124,595 
 

Interest and other receivables from subsidiaries

The details of the interest and other receivables from subsidiaries are as follows:

 
                                  31 December  31 December 
In thousands of Pounds Sterling          2020         2019 
 
Interest receivable from MCF            1,880          976 
Other advances to MHC                  12,445            - 
 
                                       14,325          976 
 

Foreign exchange indemnity agreement

The Company and MHC have entered into a foreign exchange indemnity agreement (Indemnity Agreement) whereby the Company will indemnify MHC for any net losses incurred by MHC in relation to foreign exchange movements, including losses incurred on foreign exchange forward contracts. The agreement also stipulates that where MHC makes a net gain on foreign transactions, then it shall pay an equivalent amount to the Company.

During the year, MHC incurred a net foreign exchange loss of GBP1,891,000 thus resulting in an Indemnity Agreement expense of the Company (2019: GBP6,411,000). As of 31 December 2020, all obligations of the Company to MHC resulting from the Indemnity Agreement were settled.

Support agreement with MHC

The Company and MHC have entered into a support agreement (Support Agreement) whereby MHC provides support and assistance to the Company with respect to the day-to-day operations. As at 31 December 2020, the Company recorded Support Agreement expenses amounting to GBP6,637,000 (2019: GBP5,623,000).

During 2020, the Company settled all outstanding liabilities to MHC in relation to the above.

14. Investment in subsidiary

MHC, the Company's wholly-owned direct subsidiary, is a Company incorporated and domiciled in Luxembourg. The Company's total equity investment in MHC amounted to GBP333,048,000 as of 31 December 2020 (2019: GBP293,303,000). The movements in the Company's investment in MHC are as follows:

 
                                                     31 December  31 December 
In thousands of Pounds Sterling                             2020         2019 
 
1 January                                                293,303      263,371 
Additional investment through capital contribution        39,745       29,932 
 
                                                         333,048      293,303 
 

The Company's investments in PPP/PFI infrastructure assets, or similar assets, were made and will continue to be made through MHC.

15. Commitments and contingencies

The Company is an obligor under the Group RCF, and as a result has pledged all its current and future financial assets and shares in its investments in subsidiaries.

Based on the provisions of the RCF, in the event of continuing event of default by MHC, as borrower, the lenders will, among other things, have the right to cancel all commitments and declare all or part of utilisations to be due and payable, including all related outstanding amounts, and exercise or direct the security agent to exercise any or all of its rights, remedies, powers or discretions under the RCF. There were no outstanding principal from the RCF as at the 31 December 2020.

16. Standards issued but not yet effective

The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company's financial statements are disclosed below. Where applicable, the Company intends to adopt these new and amended standards and interpretations, when they become effective.

Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

On 27 August 2020, the IASB published Interest Rate Benchmark Reform - Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. With publication of the phase two amendments, the IASB has completed its work in response to IBOR reform.

The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR).

The amendments include a practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest. Inherent in allowing the use of this practical expedient is the requirement that the transition from an IBOR benchmark rate to an RFR takes place on an economically equivalent basis with no value transfer having occurred.

The adoption of this new standard is not expected to have a significant impact on the Company's financial statements.

17. Events after the reporting period.

In February 2021, Company declared a 2(nd) interim dividend of 3.59 pence per share with scrip alternative for the period 1 July - 31 December 2020, to be paid in April 2021.

At the date of publication of these financial statements, the Company and its portfolio has not experienced any material adverse operational or financial impact related to the implications of Covid-19. The focus on value preservation will continue as the pandemic evolves.

Whilst there continues to be significant uncertainty surrounding Covid-19 with the consequences and potential disruptions difficult to foresee; currently, our portfolio remains resilient in this challenging market environment. We will continue to work very closely with all stakeholders in an effort to mitigate the risks of this global pandemic.

BOARD MEMBERS, AGENTS & ADVISERS

 
            Supervisory Board                                              Management Board                  -- 
              *    Sarah Whitney (Chairman as of 31 July 2020)               *    Duncan Ball 
 
 
              *    Howard Myles                                              *    Michael Denny 
 
 
              *    Jutta af Rosenborg                                        *    Frank Schramm 
 
 
             Colin Maltby (retired 31 July 2020) 
 Registered Office                                              Receiving Agent and UK Transfer 
  EBBC, 6E route de Trèves                                 Agent 
  L-2633 Senningerberg                                          Link Market Services Trustees 
  Grand Duchy of Luxembourg                                     Limited 
                                                                The Registry 
                                                                34 Beckenham Road 
                                                                Beckenham 
                                                                Kent BR3 4TU 
                                                                United Kingdom 
 Central Administrative Agent, Luxembourg Registrar 
  and Transfer Agent, Depositary and Principal Paying Agent 
  RBC Investor Services Bank S.A. 
  14 Porte de France 
  L-4360 Esch-sur-Alzette 
  Grand Duchy of Luxembourg 
 Depository                                                     Auditors 
  Link Market Services Trustees Limited                         KPMG Luxembourg, 
  The Registry                                                  Société 
  34 Beckenham Road                                             cooperative 
  Beckenham                                                     39 Avenue John F. Kennedy 
  Kent BR3 4TU                                                  L-1855 Luxembourg 
  United Kingdom 
 Corporate Brokers                                              Winterflood Securities Limited 
  Jefferies International Limited                                Cannon Bridge House 
  100 Bishopsgate                                                25 Dowgate Hill 
  London EC2N 4JL                                                London 
  United Kingdom                                                 EC4R 2GA 
 EEA based Centralised Securities Depository                    Luxembourg CSD Principal Agent 
  LuxCSD                                                        Banque Internationale à 
  42 Avenue John F. Kennedy                                     Luxembourg 
  L-1855 Luxembourg                                             69 route d'Esch 
                                                                Office PLM 018A 
                                                                L-2953 Luxembourg 
 Communications Adviser 
  Maitland/AMO 
  3 Pancras Square 
  London N1C 4AG 
  United Kingdom 
 

Registre de Commerce et des Sociétés Luxembourg B163879

 
Listing  Chapter 15 premium listing, closed-ended investment 
          company 
Trading  Main Market 
ISIN     LU0686550053 
SEDOL    B6QWXM4 
Ticker   BBGI 
Indices  FTSE 250, FTSE 350, FTSE 350 High Yield and FTSE All-Share 
 

CAUTIONARY STATEMENT

Certain sections of this Annual Report, including but not limited to, the Chairman's Statement and the Strategic Report of the Management Board, have been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. This additional information should not be relied on by any other party or for any other purpose.

These sections may include 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', 'forecasts', 'projects', 'expects', 'intends', 'may', 'will' or 'should' or, in each case, their negative or other variations or comparable terminology.

These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this document and include statements regarding the intentions, beliefs or current expectations of the Management and Supervisory Boards concerning, amongst other things, the investment objectives and investment policy, financing strategies, investment performance, results of operations, financial condition, liquidity, prospects and distribution policy of the Group, and the markets in which it invests.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. The Group's actual investment performance, results of operations, financial condition, liquidity, distribution policy and the development of its financing strategies may differ materially from the impression created by the forward-looking statements contained in this document.

Subject to their legal and regulatory obligations, the Management and Supervisory Boards expressly disclaim any obligations to update or revise any forward-looking statement contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

In addition, these sections may include target figures and guidance for future financial periods. Any such figures are targets only and are not forecasts.

This report has been prepared for the Group as a whole and therefore gives greater emphasis to those matters that are significant to BBGI Global Infrastructure S.A. and its subsidiaries when viewed as a whole.

[i] Social infrastructure is the provision of public infrastructure assets and services and includes schools, healthcare, blue light (fire and police), justice facilities and transport. In exchange for the provision of these assets and services BBGI receives a revenue stream that is paid directly by the public sector.

([ii]) Fire and police stations.

[iii] References to 'low-risk' throughout this Annual Report are made in comparison to investments in other infrastructure asset classes.

[iv] In comparison to the latest publicly available information for all closed-ended, LSE-listed equity infrastructure investment companies.

[v] Please refer to the Pro Forma Balance Sheet in the Financial Section for further detail on Investment Basis NAV.

[vi] 'Pence per share.'

[vii] The TSR combines share price appreciation and dividends paid since IPO in December 2011 to show the total return to the shareholder expressed as a percentage. Based on share price at 31 December 2020 and after adding back dividends paid or declared since listing.

[viii] On a compounded annual growth rate basis. This represents the steady state annual growth rate based on share price at 31 December 2020 and after adding back dividends paid or declared since listing.

[ix] These are targets only and are not a profit forecast. There can be no assurance that these targets will be met or that the Company will make any distribution at all.

[x] Calculated as: (Distributions received from investments at fair value through profit or loss less net cash flows from operating activities) / (Cash Dividends paid). Please refer to the Pro Forma Balance Sheet in the Financial Section for further details.

[xi] Please refer to the Ongoing Charges in the Financial Section for further details.

[xii] In comparison to the latest publicly available information for all closed-ended, LSE-listed equity infrastructure investment companies.

([xiii]) Link Group, UK Dividend Monitor (Q4 2020); analyses all the dividends paid out on the ordinary shares of companies listed on the UK Main Market.

([xiv]) Fire and police stations.

[xv] Covid-19 constraints prevented physical visits in many cases in 2020.

[xvi] Includes a limited exposure to UK acute healthcare of less than one per cent of NAV.

   [xvii]   In alphabetical order per section. 
   [xviii]   Please refer to the Valuation Section for more details on the Company's hedging strategy. 

([xix]) When a project has more than one FM contractor and/or O&M contractor, the exposure is allocated equally among the contractors.

([xx]) US tax exempt bonds.

[xxi] The Group does not have any demand-based assets and the portfolio is greater than 99 per cent operational. The Group's financial performance was not materially affected due to the reliance on 100 per cent availability-based revenues.

   [xxii]   Includes both debt and equity. 

[xxiii] On a compounded annual growth rate basis. This represents the steady state annual growth rate based on share price at 31 December 2020 and after adding back dividends paid or declared since the Company's IPO.

[xxiv] Refer to the Ongoing Charges of the Financial Results section of this report for further detail on how the Ongoing Charge is calculated.

   [xxv]   The FTSE All-Share, five-year data represents the five years preceding 31 December 2020. 

[xxvi] Link Group, UK Dividend Monitor (Q4 2020); analyses all the dividends paid out on the ordinary shares of companies listed on the UK Main Market.

[xxvii] The sum of the change in NAV per share plus the dividends paid per share in the year, taken as a percentage of the NAV per share at 31 December 2019.

[xxviii] These are targets only and are not a profit forecast. There can be no assurance that these targets will be met or that the Company will make any distribution at all.

[xxix] On the 25th of November 2020, the UK Chancellor of the Exchequer announced that the retail price index ('RPI') will be discontinued in 2030 and replaced with the consumer price index including housing costs ('CPIH'). Given this announcement, the Company has replaced RPI at 2.75% with CPIH at 2.0% across the UK portion of the portfolio beginning 1st of January 2031.

[xxx] Based on the portfolio composition on the date the balance sheet hedge contracts are entered into.

[xxxi] Additional information regarding Ongoing Charges and ongoing charges percentage can be obtained from the AIC website www.theaic.co.uk .

   [xxxii]   Cash flows rebased for investment acquisitions during the year. 

[xxxiii] The cash dividend cover ratio is a multiple that divides the total net cash generated in the period (available for distribution to investors) by the total cash dividends paid in the period based on the IFRS cash flows. If the Group has a high dividend cover ratio, there is a lesser risk that the Group will not be able to continue making dividend payments.

[xxxiv] The Co-CEOs, Duncan Ball and Frank Schramm, are paid in Canadian Dollars and Euro, respectively. The CFO is paid in Euro.

[xxxv] This minimum holding is calculated based on the Director's salary at 1 May 2020 and is fixed for a period of three years.

[xxxvi] The detail provided in the table above goes significantly beyond that which is required to be disclosed under the relevant Luxembourg law. This additional detail is provided on a voluntary basis commencing for the reporting period ended 31 December 2020.

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March 25, 2021 03:00 ET (07:00 GMT)