ELECTRONIC TRANSMISSION DISCLAIMER STRICTLY NOT TO BE FORWARDED TO ANY OTHER PERSONS IMPORTANT: You must read the following disclaimer before continuing. This electronic transmission applies to the attached document and you are therefore advised to read this disclaimer carefully before reading, accessing or making any other use of the attached prospectus (the “Prospectus”) relating to John Laing Group plc (the “Company”) dated 8 March 2018 received by means of electronic communication. In accessing the attached document, you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from us as a result of such access. You acknowledge that this electronic transmission and the delivery of the attached Prospectus is confidential and intended for you only and you agree you will not forward, reproduce or publish this electronic transmission or the attached Prospectus to any other person. The Prospectus has been prepared solely in connection with the 1 for 3 rights issue (the “Rights Issue”) of 122,320,044 new ordinary shares of 177 pence each (the “Rights Issue Shares”) in the capital of the Company, the offer and sale of any Rights Issue Shares not taken up in the Rights Issue to certain institutional and professional investors (together with the Rights Issue, the “Offer”). The attached Prospectus has been approved by the UK Financial Conduct Authority (the “FCA”) in accordance with section 85 of the Financial Services and Markets Act 2000, and will be made available to the public and has been filed with the FCA in accordance with the Listing Rules and Prospectus Rules of the FCA. The attached Prospectus together with the documents incorporated into it by reference (as set out in Part 14 “Documentation Incorporated by Reference” of the attached Prospectus) will be made available to the public in accordance with Prospectus Rule 3.2.1 by the same being made available, free of charge, at www.laing.com. Prospective investors are advised to access such information prior to making an investment decision. THIS ELECTRONIC TRANSMISSION AND THE ATTACHED PROSPECTUS MAY ONLY BE DISTRIBUTED, OUTSIDE THE UNITED STATES, IN “OFFSHORE TRANSACTIONS” AS DEFINED IN, AND IN RELIANCE ON, REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR, WITHIN THE UNITED STATES, TO PERSONS WHO ARE BOTH QUALIFIED INSTITUTIONAL BUYERS (“QIBs”) AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) AND QUALIFIED PURCHASERS (“QPs”) AS DEFINED IN SECTION 2(A)(51) OF THE U.S. INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE “INVESTMENT COMPANY ACT”) (COLLECTIVELY, “QIB/QP”) OR IN RELIANCE ON ANOTHER EXEMPTION FROM, OR TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THE ATTACHED PROSPECTUS IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS NOTICE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. NOTHING IN THIS ELECTRONIC TRANSMISSION AND THE ATTACHED PROSPECTUS CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1), WITHIN THE UNITED STATES, TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QIB/QP OR IN RELIANCE ON ANOTHER EXEMPTION FROM, OR TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (2), OUTSIDE THE UNITED STATES, IN AN OFFSHORE TRANSACTION IN RELIANCE ON REGULATION S UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THE COMPANY HAS NOT BEEN AND WILL NOT BE REGISTERED, AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT PURSUANT TO SECTIONS 7(D) AND 3(C)(7) THEREOF AND THAT THE COMPANY HAS ELECTED TO IMPOSE THE TRANSFER AND SELLING RESTRICTIONS WITH RESPECT TO PERSONS IN THE UNITED STATES AND US PERSONS DESCRIBED HEREIN SO THAT THE COMPANY WILL QUALIFY FOR THE EXEMPTION PROVIDED UNDER SECTION 3(C)(7) OF THE INVESTMENT COMPANY ACT AND WILL HAVE NO OBLIGATION TO REGISTER AS AN INVESTMENT COMPANY EVEN IF IT WERE OTHERWISE DETERMINED TO BE AN INVESTMENT COMPANY. This electronic transmission and the attached Prospectus and the Offer when made are only addressed to and directed at persons in member states of the European Economic Area who are “qualified investors” within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC and amendments thereto) (“Qualified Investors”). In addition, in the United Kingdom, this electronic transmission and the attached Prospectus are only addressed to and directed at (a) Qualified Investors who are persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”), or (b) Qualified Investors who are high net worth entities falling within Article 49 of the Order, and (c) other persons to whom it may otherwise lawfully be communicated, (all such persons together referred to as “Relevant Persons”). Any investment or investment activity to which this Prospectus relates is available only to (i) in the United Kingdom, Relevant Persons, and (ii) in any member state of the European Economic Area other than the United Kingdom, Qualified Investors, and will be engaged in only with such persons. The making or acceptance of the offer of nil paid rights, fully paid rights and/or Rights Issue Shares to persons who have registered addresses outside the UK, or who are resident in, or citizens of, countries other than the UK may be affected by the laws of the relevant jurisdiction. Those persons should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their rights. It is also the responsibility of any person (including, without limitation, custodians, nominees and trustees) outside the UK wishing to take up rights under or otherwise participate in the Rights Issue to satisfy himself, herself or itself as to the full observance of the laws of any relevant territory in connection therewith, including the obtaining of any governmental or other consents which may be required, the compliance with other necessary formalities and the payment of any issue, transfer or other taxes due in such territories. Subject to certain exceptions, the provisional allotment letters, the nil paid rights, the fully paid rights and the Rights Issue Shares may not be transferred or sold to, or renounced or delivered in, Australia, Canada, Japan, the United States or any other jurisdiction where the extension or availability of the Rights Issue (and any other transaction contemplated thereby) would breach any applicable law or regulation. Subject to certain exceptions, no offer of Rights Issue Shares is being made by virtue of this Prospectus or the provisional allotment letters into Australia, Canada, Japan or the United States. Confirmation of Your Representation: This electronic transmission and the attached Prospectus is delivered to you on the basis that you are deemed to have represented to the Company and Barclays Bank PLC and HSBC Bank plc (Barclays Bank PLC and HSBC Bank plc together, the “Joint Bookrunners”) that (i) you are (a) if located within the United States or a US person (as defined in Regulation S of the Securities Act), a QIB/ QP acquiring such securities for its own account or for the account of another QIB/QP or (b) acquiring such securities in “offshore transactions”, as defined in, and in reliance on, Regulation S under the Securities Act; (ii) if you are in the UK, you are a relevant person, and/or a relevant person who is acting on behalf of, relevant persons in the United Kingdom and/or Qualified Investors to the extent you are acting on behalf of persons or entities in the UK or the EEA; (iii) if you are in any member state of the European Economic Area other than the UK, you are a Qualified Investor and/or a Qualified Investor acting on behalf of, Qualified Investors or relevant persons, to the extent you are acting on behalf of persons or entities in the EEA or the UK; and (iv) you are an institutional investor that is eligible to receive the attached Prospectus and you consent to delivery by electronic transmission. You are reminded that you have received this electronic transmission and the attached Prospectus on the basis that you are a person into whose possession this Prospectus may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not nor are you authorised to deliver the attached Prospectus, electronically or otherwise, to any other person. The attached Prospectus has been made available to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither the Company, the Joint Bookrunners nor any of their respective subsidiaries, branches or affiliates accepts any liability or responsibility whatsoever in respect of any difference between the Prospectus distributed to you in electronic format and the hard copy version. By accessing the attached Prospectus, you consent to receiving it in electronic form. Apart from the responsibilities and liabilities, if any, which may be imposed on the Joint Bookrunners by the FSMA or the regulatory regime established thereunder, or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, neither of the Joint Bookrunners, nor any of their respective subsidiaries, branches or affiliates accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person for any acts or omissions of the Company in relation to the Offer and for the contents of the attached Prospectus, including its accuracy or completeness, or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company or the Rights Issue Shares and matters referred to in the attached Prospectus. Save for the aforementioned responsibilities and liabilities, if any, which may be imposed under the FSMA, the Joint Bookrunners and each of their respective subsidiaries, branches and affiliates accordingly disclaim all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of any act or omissions of the Company in relation to the Offer and for the attached and for the attached Prospectus or any such statement. No representation or warranty express or implied, is made by any of the Joint Bookrunners or any of their respective subsidiaries, branches and affiliates as to the accuracy, completeness or sufficiency of the information set out in the attached Prospectus. The Joint Bookrunners are acting exclusively for the Company and no one else in connection with the Offer and other matters referred to in the attached Prospectus. They will not regard any other person (whether or not a recipient of the attached Prospectus) as their client in relation to the Offer or the contents of the attached Prospectus and are not, and will not be, responsible to anyone other than the Company for providing the protections afforded to their respective clients or for giving advice in relation to the Offer, the contents of the attached Prospectus or any transaction or arrangement referred to in the attached Prospectus. You are responsible for protecting against viruses and other destructive items. Your receipt of the attached Prospectus via electronic transmission is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. THIS DOCUMENT AND ANY ACCOMPANYING DOCUMENTS ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION. If you are in any doubt as to what action you should take, you are recommended to seek immediately your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser, duly authorised under the Financial Services and Markets Act 2000 (the “FSMA”) if you are resident in the United Kingdom or, if not, by another appropriately authorised independent financial adviser. This document, which comprises a prospectus relating to the Rights Issue prepared in accordance with the Prospectus Rules of the Financial Conduct Authority (“FCA”) made under section 73A of the FSMA (the “Prospectus”), has been approved by the FCA in accordance with section 85 of the FSMA and made available to the public in accordance with Rule 3.2.1 of the Prospectus Rules. If you have sold or otherwise transferred all of your Existing Shares (other than ex rights) in certificated form before 9 March 2018 (the “Ex Rights Date”), you should send this Prospectus together with any Provisional Allotment Letter, if and when received, as soon as possible to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for delivery to the purchaser or the transferee. This Prospectus and any Provisional Allotment Letter should not, however, be distributed, forwarded to or transmitted in or into any jurisdiction where to do so would constitute a violation of local securities laws or regulations, including but not limited to (subject to certain exemptions) the United States or any of the Excluded Territories. If you have sold or transferred part of your holding of Existing Shares (other than ex rights) held in certificated form before the Ex Rights Date, please consult the stockbroker, bank or other agent through whom the sale or transfer was effected immediately. Instructions regarding split applications are set out in Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus and in the Provisional Allotment Letter. If your registered holding of Existing Shares which was sold or transferred was held in uncertificated form and was sold or transferred before the Ex Rights Date, a claim transaction will automatically be generated by Euroclear which, on settlement, will transfer the appropriate number of Nil Paid Rights to the purchaser or transferee. The directors of the Company, whose names appear on page 57 of this Prospectus (the “Directors”), and the Company accept responsibility for the information contained in this Prospectus. To the best of the knowledge of the Directors and the Company (each of whom has taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in accordance with the facts and contains no omission likely to affect the import of such information.
John Laing Group plc (Incorporated under the Companies Act 1985 and registered in England and Wales with registered number 5975300 and re registered as a public limited company under the Companies Act 2006) 1 for 3 Rights Issue of 122,320,044 Rights Issue Shares at 177 pence per Rights Issue Share to raise approximately £216.5 million
Joint Sponsors, Joint Global Coordinators and Joint Bookrunners Barclays HSBC This Prospectus does not constitute an offer to sell, or the solicitation of an offer to buy, securities in any jurisdiction where such offer or solicitation would be unlawful for such person to make such an offer or solicitation. The distribution of this Prospectus and/or any accompanying documents and/or the transfer of the Nil Paid Rights, Fully Paid Rights and/or Rights Issue Shares, into jurisdictions other than the United Kingdom may be restricted by law. Therefore, persons into whose possession this Prospectus or any accompanying documents comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, subject to certain exceptions, this Prospectus and the accompanying documents (including the Provisional Allotment Letter) should not be distributed, forwarded to or transmitted in or into the United States or any of the Excluded Territories. The Existing Shares are listed on the premium listing segment of the Official List of the UK Listing Authority and have been admitted to trading on the London Stock Exchange’s main market for listed securities. Application will be made to the FCA and to the London Stock Exchange for admission of all Rights Issue Shares (nil and fully paid) (i) to the premium listing segment of the Official List of the UK Listing Authority; and (ii) to the London Stock Exchange’s market for listed securities (together, “Rights Issue Admission”). It is expected that Rights Issue Admission will become effective and that dealings in the Rights Issue Shares (nil paid) will commence on the London Stock Exchange at 8.00 a.m. (London time) on 9 March 2018. This Prospectus should be read as a whole, including any document incorporated herein by reference. In particular, prospective investors’ attention is drawn to the section of this Prospectus entitled Risk Factors which contains a discussion of certain factors, risks and uncertainties that should be taken into account when considering what action to take in relation to the Rights Issue or considering whether to purchase Nil Paid Rights, Fully Paid Rights or Rights Issue Shares. The latest time and date for acceptance and payment in full for the Rights Issue Shares by holders of Nil Paid Rights is 11.00 a.m. on 23 March 2018. The procedure for acceptance and payment is set out in Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus and, for Qualifying Non-CREST Shareholders only, also in the Provisional Allotment Letter. Qualifying CREST Shareholders (other than, subject to certain exemptions, Qualifying CREST Shareholders with a registered address or located, in the United States or any of the Excluded Territories) should refer to paragraph 7 of Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus. It is expected that Qualifying Non-CREST Shareholders (other than, subject to certain exemptions, Qualifying Non-CREST Shareholders with a registered address, or located, in the United States or any of the Excluded Territories) will be sent a Provisional Allotment Letter on 8 March 2018 and the Qualifying CREST Shareholders (other than, subject to certain exemptions, Qualifying CREST Shareholders with a registered address or located, in the United States or any of the Excluded Territories) will receive a credit to their appropriate stock accounts in CREST in respect of Nil Paid Rights to which they are entitled on 9 March 2018. Nil Paid Rights so credited are expected to be enabled for settlement by Euroclear as soon as practicable after Rights Issue Admission. Barclays Bank PLC, acting through its Investment Bank (“Barclays”) and HSBC Bank plc (“HSBC” and together with Barclays, the “Joint Bookrunners”), which are authorised by the PRA and regulated by the PRA and the FCA in the United Kingdom, are acting as joint sponsors, joint global coordinators and joint bookrunners exclusively for the Company and no one else in connection with the Rights Issue and other matters referred to in this Prospectus and will not regard any other person (whether or not a recipient of this Prospectus) as a client of Barclays or HSBC in relation to the Rights Issue, the contents of this Prospectus or Rights Issue Admission and are not, and will not be, responsible to anyone other than the Company for providing the protections afforded to Barclays’ clients or HSBC’s clients or for giving advice in relation to the contents of this Prospectus, Rights Issue Admission or the Rights Issue. Apart from the responsibilities and liabilities, if any, which may be imposed on Barclays or HSBC by FSMA or the regulatory regime established thereunder, or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, neither Barclays nor HSBC, nor any of their respective subsidiaries, branches or affiliates, owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person for any acts or omissions of the Company in relation to the Rights Issue and for the contents of this Prospectus, including its accuracy or correctness, or for any other statement made or purported to be made by it, or on its behalf in connection with the Company or the Rights Issue and other matters referred to in this Prospectus. Save for the aforementioned responsibilities and liabilities, if any, which may be imposed under FSMA, Barclays and HSBC, their subsidiaries, branches and affiliates accordingly disclaim all and any liability whether arising in tort, contract or otherwise in respect of any acts or omissions of the Company in relation to the Rights Issue and for this Prospectus or any such statement. Nothing in this Prospectus excludes, or attempts to exclude, Barclays’ or HSBC’s liability for fraud or fraudulent misrepresentation. Barclays and HSBC, in accordance with applicable legal and regulatory provisions and subject to the Underwriting Agreement, may engage in transactions in relation to Nil Paid Rights, Fully Paid Rights, the Rights Issue Shares and/or related instruments for their own account for the purpose of hedging their underwriting exposure or otherwise. Except as required by applicable law or regulation, Barclays and HSBC do not propose to make any public disclosure in relation to such transactions. In making an investment decision, investors must rely on their own examination, analysis and enquiry of the Company and the terms of the Rights Issue, including the merits and risks involved. The investors also acknowledge that: (i) they have not relied on Barclays or HSBC or any person affiliated with Barclays and HSBC in connection with any investigation of the accuracy of any information contained in this Prospectus or their investment decision; and (ii) they have relied only on the information contained in this Prospectus and the documents (or parts thereof) incorporated herein by reference, and that no person has been authorised to give any information or to make any representation concerning the Company or its subsidiaries or the Rights Issue Shares (other than as contained in this Prospectus) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company, Barclays or HSBC.
Information to Distributors Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended (“MiFID II”); (b) Articles 9 and 10 of Commission Delegated
1 Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the “MiFID II Product Governance Requirements”), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any “manufacturer” (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Nil Paid Rights, the Fully Paid Rights and the Rights Issue Shares have been subject to a product approval process, which has determined that such securities are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the “Target Market Assessment”). Notwithstanding the Target Market Assessment, distributors should note that: the price of the Nil Paid Rights, the Fully Paid Rights and the Rights Issue Shares may decline and investors could lose all or part of their investment; the Nil Paid Rights, the Fully Paid Rights and the Rights Issue Shares offer no guaranteed income and no capital protection; and an investment in Nil Paid Rights, the Fully Paid Rights and the Rights Issue Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Rights Issue. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Joint Bookrunners will only procure investors who meet the criteria of professional clients and eligible counterparties. For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Nil Paid Rights, the Fully Paid Rights or the Rights Issue Shares. Each distributor is responsible for undertaking its own target market assessment in respect of the Nil Paid Rights, the Fully Paid Rights and the Rights Issue Shares and determining appropriate distribution channels.
Notice to US Investors The Nil Paid Rights, the Fully Paid Rights, the Provisional Allotment Letters and the Rights Issue Shares have not been and will not be registered under the US Securities Act of 1933, as amended (the “Securities Act”) or under the securities laws of any state or other jurisdiction of the United States and accordingly may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States, except pursuant to registration under the Securities Act or an applicable exemption from, or transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of Nil Paid Rights, Fully Paid Rights or Rights Issue Shares in the United States. In addition, the Company has not been and will not be registered under the US Investment Company Act of 1940, as amended (the “US Investment Company Act”), and related rules. None of the Nil Paid Rights, the Fully Paid Rights, the Rights Issue Shares, the Provisional Allotment Letter, this Prospectus or any other offering document has been approved or disapproved by the US Securities and Exchange Commission (the “SEC”), any state securities commission in the United States or any US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the Rights Issue or the accuracy or adequacy of this Prospectus or the Provisional Allotment Letter. Any representation to the contrary is a criminal offence in the United States. Subject to certain exceptions, neither this Prospectus nor the Provisional Allotment Letter constitutes, or will constitute, or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, Rights Issue Shares, Nil Paid Rights and/or Fully Paid Rights to any Shareholder with a registered address in, or who is located in, the United States. If you are in the United States or are a US person (as defined in Regulation S under the Securities Act), you may not exercise your Nil Paid Rights or Fully Paid Rights and/or acquire any Rights Issue Shares offered hereby unless you are a “qualified institutional buyer” (“QIB”) as defined in Rule 144A under the Securities Act (“Rule 144A”) and a qualified purchaser (“QP”) as defined in Section 2(a)(51) of the US Investment Company Act (collectively, “QIB/QPs”). Notwithstanding the foregoing, the Company reserves the right to offer and deliver the Nil Paid Rights to, and the Fully Paid Rights and the Rights Issue Shares may be offered to and acquired by, a limited number of persons in the United States reasonably believed to be QIB/QPs, in offerings exempt from or in a transaction not subject to, the registration requirements under the Securities Act. If you are located in the United States or are a US person, in order to exercise your Nil Paid Rights or Fully Paid Rights and/or acquire any Rights Issue Shares upon exercise thereof, you must sign and deliver an investor letter, substantially in the form described in Part 7
2 (Terms and Conditions of the Rights Issue) of this Prospectus. Subject to certain exceptions, neither this Prospectus nor any accompanying documents (including the Provisional Allotment Letter) will be posted to any person with a registered address in the United States. The Joint Bookrunners may arrange for any Rights Issue Shares not taken up in the Rights Issue to be offered and sold only (i) outside the United States in an offshore transaction in compliance with Regulation S (“Regulation S”) under the Securities Act or (ii) inside the United States to persons reasonably believed to be QIB/QPs in reliance on an exemption from the registration requirements of the Securities Act. Such purchasers located in the United States or who are US persons will be required to execute and deliver a US Investment Letter set forth in Appendix A. Prospective investors are hereby notified that such sellers of the Nil Paid Rights, Fully Paid Rights or Rights Issue Shares may be relying on the exemption from the registration requirements of the Securities Act provided by Rule 144A. In addition, until 40 days after Rights Issue Admission, an offer, sale or transfer of the Nil Paid Rights, the Fully Paid Rights or the Rights Issue Shares within the United States by a dealer (whether or not participating in the Rights Issue) may violate the registration requirements of the Securities Act, if such offer or sale is made otherwise than in accordance with Rule 144A. The Company is not subject to the periodic reporting requirements of the US Securities and Exchange Act of 1934, as amended (the “Exchange Act”). In order to permit compliance with Rule 144A in connection with resales of the Rights Issue Shares, the Company agrees to furnish upon the request of a Shareholder or a prospective purchaser from any Shareholder the information required to be delivered under Rule 144A(d)(4) of the Securities Act if at the time of such request it is not a reporting company under section 13 or section 15(d) of the Exchange Act and is not exempt from reporting pursuant to Rule 12g3-2(b) thereunder. Prospective investors should note that the Rights Issue Shares may not be acquired by investors using assets of any employee benefit plan or plan that is subject to Part 4 of Title 1 of the US Employee Retirement Income Security Act of 1974, as amended from time to time, and the applicable regulations thereunder (“ERISA”), or Section 4975 of the US Internal Revenue Code of 1986, as amended (the “Tax Code”). For further details see “ERISA Considerations” in Part 7 (Terms and Conditions of the Rights Issue). Any plan, account or other arrangement that is subject to laws and regulations that are substantially similar to the provisions of Title I of ERISA or Section 4975 of the Tax Code and which contain rules pursuant to which the underlying assets of the Company could be deemed to include “plan assets” by reason of investment of the Company by any such plan, account or arrangement should consider the advisability of its investment in the Shares.
Notice to “covered banking entities” The Company is a “covered fund” for the purposes of the “Volcker Rule” contained in the Dodd Frank Act (Section 619: Prohibitions on Proprietary Trading and Certain Relationships with Hedge Funds and Private Equity Funds). Accordingly, entities that may be “covered banking entities” for the purposes of the Volcker Rule, including, without limitation, non US banks with a banking presence in the United States, may be restricted from holding the Company’s securities and should take specific advice before making an investment in the Company.
Notice to all investors Any reproduction or distribution of this Prospectus, in whole or in part, and any disclosure of its contents or use of any information contained in this Prospectus for any purpose other than considering an investment in the Nil Paid rights, the Fully Paid Rights or the Rights Issue Shares is prohibited. By accepting delivery of this Prospectus, each offeree of the Nil Paid Rights, the Fully Paid Rights and/or the Rights Issue Shares agrees to the foregoing. The distribution of this Prospectus and/or the Provisional Allotment Letter and/or the transfer of the Nil Paid Rights, the Fully Paid Rights and/or the Rights Issue Shares into jurisdictions other than the United Kingdom may be restricted by law. Accordingly, neither this Prospectus nor any advertisement or any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession these documents come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, such documents should not be distributed, forwarded to or transmitted in or into the United States or any of the Excluded Territories. The Nil Paid Rights, the Fully Paid Rights, the Rights Issue Shares and the Provisional Allotment Letter are not transferable, except in accordance with, and the distribution of this Prospectus is subject to the restrictions set out in, Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus. No action has been taken by the
3 Company or the Joint Bookrunners that would permit an offer of the Rights Issue Shares or rights thereto or possession or distribution of this Prospectus or any other offering or publicity material, the Nil Paid Rights, the Fully Paid Rights or the Provisional Allotment Letter in any jurisdiction where action for that purpose is required, other than in the United Kingdom. No person has been authorised to give any information or make any representations other than those contained in this Prospectus and, if given or made, such information or representations must not be relied upon as having been authorised by the Company or the Joint Bookrunners. None of the Company and the Joint Bookrunners, or any of their respective representatives, is making any representation to any investor regarding the legality of an investment in the Rights Issue Shares by a subscriber under the laws applicable to such subscriber. Each investor should consult with his or her own advisers as to the legal, tax, business, financial and related aspects of a purchase of the Rights Issue Shares. Neither the delivery of this Prospectus nor any subscription or sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this Prospectus or that the information in this Prospectus is correct as at any time subsequent to its date. In connection with the Rights Issue, each of the Joint Bookrunners and any of their respective affiliates, may take up a portion of the Nil Paid Rights, Fully Paid Rights or Rights Issue Shares in the Rights Issue as a principal position and in that capacity may retain, purchase or sell for its own account such securities and any Nil Paid Rights, Fully Paid Rights or Rights Issue Shares and may offer or sell such securities or other investments otherwise than in connection with the Rights Issue. Accordingly, references in this Prospectus to Nil Paid Rights, Fully Paid Rights or Rights Issue Shares being offered or placed should be read as including any offering or placement of Nil Paid Rights, Fully Paid Rights or Rights Issue Shares to either of the Joint Bookrunners or any of their respective affiliates acting in such capacity. In addition, certain of the Joint Bookrunners or their affiliates may enter into financing arrangements (including swaps or contracts for differences) with investors in connection with which such Joint Bookrunners (or their affiliates) may from time to time acquire, hold or dispose of Nil Paid Rights, Fully Paid Rights or Rights Issue Shares. Neither of the Joint Bookrunners intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so. The contents of the websites of the Company and its recourse subsidiaries (“John Laing” or the “Group”) do not form part of this Prospectus.
4 CONTENTS
PART PAGE Summary ...... 6 PART 1 Letter from the Chairman ...... 20 PART 2 Risk Factors ...... 27 PART 3 Presentation of Financial and Other Information ...... 49 PART 4 Directors, Secretary, Registered and Head Office and Advisers ...... 57 PART 5 Expected Timetable of Principal Events and Rights Issue Statistics ...... 58 PART 6 Questions and Answers about the Rights Issue ...... 60 PART 7 Terms and Conditions of the Rights Issue ...... 66 PART 8 Industry Overview ...... 93 PART 9 Business Description ...... 96 PART 10 Directors, Senior Managers and Corporate Governance ...... 117 PART 11 Selected Financial Information ...... 122 PART 12 Operating and Financial Review ...... 126 PART 13 Capitalisation and Indebtedness ...... 146 PART 14 Information Incorporated by Reference ...... 147 PART 15 Unaudited Pro Forma Financial Information ...... 148 PART 16 Additional Information ...... 151 PART 17 Definitions and Glossary ...... 188
5 SUMMARY Summaries are made up of disclosure requirements known as “Elements”. These Elements are numbered in Sections A–E (A.1–E.7).This summary contains all the Elements required to be included in a summary for this type of security and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of “not applicable”.
SECTION A—INTRODUCTION AND WARNINGS
A.1 Warning This summary should be read as an introduction to the Prospectus. Any decision to invest in the securities should be based on a consideration of the Prospectus as a whole by the investor. Where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of European Economic Area member states, have to bear the costs of translating the Prospectus before the legal proceedings are initiated. Civil liability attaches only to those persons who are responsible for this summary, including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in such securities.
A.2 Any consents to and conditions regarding use of this Prospectus Not applicable. No consent has been given by the Company or any person responsible for drawing up this Prospectus to use it for subsequent resale or final placement of securities by financial intermediaries.
SECTION B—ISSUER
B.1 Legal and commercial name John Laing Group plc (the “Company”).
B.2 Domicile and legal form The Company’s registered office is in the United Kingdom. The Company was incorporated and registered in England and Wales on 23 October 2006 as a private company limited by shares under the Companies Act 1985 with the name Henderson Infrastructure Holdco (UK) Limited and with the registered number 5975300 and reregistered with the name John Laing Group plc as a public limited company under the Companies Act 2006 on 28 January 2015. The principal legislation under which the Company operates, and under which the Rights Issue Shares will be created, is the Companies Act 2006.
B.3 Current operations and principal activities John Laing is an originator, active investor and manager of international infrastructure projects. As at 31 December 2017, the book value of its investment portfolio (“Portfolio Value”) (included within the “investments at fair value through profit or loss” line item in the Group balance sheet) was £1,193.8 million (Gross Value: £1,529.2 million) and the Group managed £1,648.5 million of assets on behalf of third parties (“External AUM”). John Laing’s business is focused on major transport, social and environmental infrastructure projects awarded under governmental public-private partnership (“PPP”) programmes and renewable energy projects across a range of international markets including Asia Pacific, North America (the United States and Canada) and Europe, including the United Kingdom. The Group originates and invests in greenfield infrastructure, and then actively manages its investments in projects through their construction phase. Once operational, the Group either continues to hold and
6 SECTION B—ISSUER
actively manage its interests over the lifetime of the projects (usually up to 30 years) or sells its interests in the projects to secondary market investors. As at 31 December 2017, the Group had interests in a large, diversified portfolio comprising 41 investments in infrastructure projects, with a value of £1,183.5 million (excluding the Group’s 2.5 per cent. shareholding in JLEN valued at £10.3 million), comprising £580.3 million of investments in projects in the construction phase and £603.2 million in the operational phase. The Group has committed investments to more than 130 projects, thereby establishing itself as a leading name in its core international markets and chosen sectors. John Laing’s business, which integrates origination, investment and asset management capabilities, is organised across three key areas of activity: • Primary investments: John Laing’s primary investment activities involve sourcing and originating, bidding for and winning greenfield infrastructure projects, typically as part of a Consortium in the case of PPP projects. The Group classifies its interests in projects which are in the construction phase as its “primary investment portfolio”. • Secondary investments: John Laing’s secondary investment activities involve ownership of a substantial portfolio of interests in operational PPP and renewable energy projects. The Group classifies its investments in operational projects as its “secondary investment portfolio”. Almost all of the Group’s secondary investments were previously part of John Laing’s primary investment portfolio. • Asset management: The Group actively manages its own primary and secondary investment portfolios and provides investment advice and asset management services to two external listed funds (John Laing Infrastructure Fund Limited (“JLIF”) and John Laing Environmental Assets Group Limited (“JLEN”)) through its wholly owned and FCA-regulated subsidiary, John Laing Capital Management Limited (“JLCM”). As at 31 December 2017, JLCM’s External AUM were £1,648.5 million. One of the key characteristics of the Group’s investments is the relative predictability of their cash flows given the structure of PPP contracts (typically, a Project Company’s revenue is from a governmental or other public sector authority (a “Governmental Entity”) based on the availability for use, or level of use, of the project’s infrastructure asset) and the revenue regime of renewable energy projects (typically backed in part by government support mechanisms).
B.4a Significant recent trends affecting the Group and the industry in which it operates John Laing’s activities are focused on major transport, social and environmental infrastructure projects awarded under governmental PPP programmes, and renewable energy projects. Infrastructure can be defined as the physical assets and systems that support a country or community. Infrastructure assets typically support services such as transportation, utilities and communications and also cater to social needs such as housing, health and education. The development and modernisation of infrastructure usually requires significant initial investment and is essential to national economic growth. However, government procurement has not kept pace with the structural demand for infrastructure, and the Directors believe that continued investment will be required. Over time, there has also been a steadily increasing trend for Governmental Entities to turn to the private sector to assist in the procurement of infrastructure, to help with financing, and to seek private sector expertise to manage and take long term delivery risks. Private sector involvement in infrastructure typically comprises: (i) procurement models such as PPP where the core infrastructure asset reverts back to the Governmental Entity at the end of the contract, (ii) models with support mechanisms provided by Governmental Entities, for example, feed-in-tariff arrangements in a number of European countries and a tax credit system in the United States, in both cases to promote the development of renewable energy generation and (iii) other models in which John Laing has no existing investment, for example, investment supported by a formal regulatory framework governing the private sector ownership of essential infrastructure assets, such as airports, utilities and communication networks.
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B.5 Group description The Company is the ultimate parent company of the Group comprising the Company and its recourse subsidiaries. The terms “Group” and “John Laing” refer to the Company and its recourse subsidiaries, save where specifically indicated otherwise.
B.6 Major shareholders As at 1 March 2018, the following are the interests (within the meaning of Part VI of Companies Act 2006, as amended) which represent, or will represent, directly or indirectly, three per cent. or more of the issued share capital of the Company:
% of existing Number of issued share Shares as at capital as at Name 1 March 2018 1 March 2018 Standard Life Aberdeen ...... 39,095,255 10.65% Schroder Investment Management ...... 35,182,637 9.59% Fidelity Investment International ...... 32,742,522 8.92% BlackRock Inc ...... 26,872,095 7.32% Morgan Stanley Investment Management ...... 18,357,885 5.00% Janus Henderson Investors ...... 17,637,916 4.81% Baillie Gifford & Co ...... 16,326,597 4.45% GLG Partners ...... 11,318,069 3.08% Norges Bank Investment Management ...... 11,132,384 3.03% The Vanguard Group, Inc ...... 11,117,877 3.03% Save as set out above, the Company is not aware of any person who holds, or who will immediately following Rights Issue Admission, hold, as shareholder (within the meaning of the Disclosure Guidance and Transparency Rules published by the FCA), directly or indirectly, three per cent. or more of the voting rights of the Company None of the Shareholders referred to above has different voting rights from any other holder of Shares in respect of any Shares held by them. The Company is not aware of any person who, immediately following Rights Issue Admission, directly or indirectly, jointly or severally, will own or could exercise control over the Company.
B.7 Historical financial information The tables below set out the Group’s summary financial information for the periods indicated, reported in accordance with IFRS. Unless otherwise stated the audited consolidated financial information for the Group for the three years ended 31 December 2017, 2016 and 2015 has been extracted without material adjustment from the Group’s 2017 Final Results Announcement, the Group’s 2016 Annual Report and Accounts and the Group’s 2015 Annual Report and Accounts, respectively. In its financial statements for the years ended 31 December 2015 and 2016, the Group presented certain pro forma financial information in respect of its results of operations for the year ended 31 December 2015 and as at 31 December 2014 on the basis that the restructuring associated with the Company’s admission to listing in February 2015 had been in place throughout the year ending 31 December 2014 and as at 31 December 2014 and throughout the year ending 31 December 2015. Accordingly, where indicated with the caption “pro forma”, the consolidated financial information for the Group for the year ended 31 December 2015 has been extracted from the “pro forma” presentation included in the Group income statement, Group balance sheet and Group cash flow statement included in its 2015 Annual Report and Accounts, which are incorporated by reference in this Prospectus. This “pro forma” information should be considered as non-IFRS financial information. This presentation is not, and is not intended to constitute, “pro forma” financial information within the meaning of Rule 2.3.1 of the Prospectus Rules or within the meaning of Article 11 of Regulation S-X under the US federal securities laws.
8 SECTION B—ISSUER
Group income statement
Year ended 31 December 2017 2016 2015 (audited) (statutory) (pro forma) (statutory) (£ millions) Continuing operations Net gain on investments at fair value through profit or loss 166.3 218.8 133.1 129.7 Other income ...... 30.4 42.0 34.5 31.5 Operating income ...... 196.7 260.8 167.6 161.2 Cost of sales ...... — — (0.1) (0.1) Gross profit ...... 196.7 260.8 167.5 161.1 Administrative expenses ...... (58.9) (58.4) (55.3) (52.3) Profit from operations ...... 137.8 202.4 112.2 108.8 Finance costs ...... (11.8) (10.3) (11.3) (11.3) Profit before tax ...... 126.0 192.1 100.9 97.5 Tax credit/(charge) ...... 1.5 (1.8) (2.1) (2.1) Profit from continuing operations ...... 127.5 190.3 98.8 95.4 Discontinued operations Profit from discontinued operations (after tax) ...... — — 5.7 5.7 Profit for the year attributable to the Shareholders of the Company ...... 127.5 190.3 104.5 101.1
9 SECTION B—ISSUER
Group balance sheet
As at 31 December 2017 2016 2015 (audited) (£ millions) Non-current assets Intangible assets ...... — — 0.2 Plant and equipment ...... 0.1 0.3 1.0 Investments at fair value through profit or loss ...... 1,346.4 1,257.5 965.3 Deferred tax assets ...... 0.5 1.0 1.4 1,347.0 1,258.8 967.9 Current assets Trade and other receivables ...... 7.6 7.4 8.3 Cash and cash equivalents ...... 2.5 1.6 1.1 10.1 9.0 9.4 Total assets ...... 1,357.1 1,267.8 977.3 Current liabilities Current tax liabilities ...... (1.4) (4.1) (2.7) Borrowings ...... (173.2) (161.4) (14.9) Trade and other payables ...... (17.3) (14.7) (19.6) (191.9) (180.2) (37.2) Liabilities directly associated with assets classified as held for sale . — — (4.2) Net current liabilities ...... (181.8) (171.2) (32.0) Non-current liabilities Retirement benefit obligations ...... (40.3) (69.3) (46.2) Provisions ...... (1.0) (1.5) (0.1) (41.3) (70.8) (46.3) Total liabilities ...... (233.2) (251.0) (87.7) Net assets ...... 1,123.9 1,016.8 889.6 Equity Share capital ...... 36.7 36.7 36.7 Share premium ...... 218.0 218.0 218.0 Other reserves ...... 5.9 2.7 0.7 Retained earnings ...... 863.3 759.4 634.2 Equity attributable to the Shareholders of the Company . . . . . 1,123.9 1,016.8 889.6
10 SECTION B—ISSUER
Group cash flow statement
Year ended 31 December 2017 2016 2015 (audited) (statutory) (pro forma) (statutory) (£ millions) Net cash outflow from operating activities ...... (47.3) (37.1) (70.5) (70.5) Investing activities Net cash transferred from/(to) investments held at fair value through profit or loss ...... 77.4 (73.4) (54.0) (54.0) Cash acquired on acquisition of subsidiaries ...... — — — 2.2 Purchase of plant and equipment ...... (0.1) (0.1) (0.6) (0.6) Net cash from/(used in) investing activities ...... 77.3 (73.5) (54.6) (52.4) Financing activities Dividends paid ...... (30.1) (26.2) (5.9) (5.9) Finance costs paid ...... (10.0) (8.9) (13.7) (13.7) Proceeds from borrowings ...... 11.0 165.0 50.0 50.0 Repayment of borrowings ...... — (19.0) (31.0) (31.0) Net proceeds on issue of share capital ...... — — 124.7 124.7 Net cash (used in)/from financing activities ...... (29.1) 110.9 124.1 124.1 Net increase/(decrease) in cash and cash equivalents . 0.9 0.3 (1.0) 1.2 Cash and cash equivalents at beginning of the period 1.6 1.1 2.2 — Effect of foreign exchange rate changes ...... — 0.2 (0.1) (0.1) Cash and cash equivalents at end of period ...... 2.5 1.6 1.1 1.1
Certain changes to the Group’s financial condition and results of operations occurred during the years ended 31 December 2017, 2016 and 2015. These changes are set out below. The Group’s net gain on investments at fair value through profit and loss was £166.3 million for the year ended 31 December 2017, as compared to £218.8 million for the year ended 31 December 2016 and £133.1 million (pro forma) for the year ended 31 December 2015. The decrease from the year ended 31 December 2016 to the year ended 31 December 2017, as well as the increase from the year ended 31 December 2015 to the year ended 31 December 2016, were primarily attributable to foreign exchange rate movements. Other income was £30.4 million for the year ended 31 December 2017, as compared to £42.0 million in the year ended 31 December 2016 and £34.5 million (pro forma) in the year ended 31 December 2015. This decrease from the year ended 31 December 2016 to the year ended 31 December 2017 was primarily attributable to the sale in late 2016 of the project management services activities in the UK. The increase from the year ended 31 December 2015 to the year ended 31 December 2016 was primarily attributable to increased fee income from managing external AuM, as well as higher recovery of bidding costs on financial closes of new investments. Profit for the period was £127.5 million for the year ended 31 December 2017, as compared to £190.3 million in the year ended 31 December 2016 and £98.8 million in the year ended 31 December 2015. Save as set out above, there has been no significant change in the financial condition and results of operations of the Group during or after the period covered by the historical financial information of the Group set out in this Prospectus.
B.8 Pro forma financial information The unaudited consolidated pro forma statement of net assets as at 31 December 2017 set out below has been prepared to illustrate the effect of the Rights Issue on the net assets of the Group as if the Rights Issue had occurred on 31 December 2017.
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The information, which has been produced for illustrative purposes only by its nature addresses a hypothetical situation and, therefore, does not represent the Group’s actual financial position. The unaudited pro forma statement of net assets is compiled on the basis set out in the notes below and in accordance with the accounting policies of the Group for the year ended 31 December 2017. The unaudited pro forma financial information does not constitute financial statements within the meaning of section 434 of the Companies Act 2006.
Unaudited consolidated pro forma statement of net assets as at 31 December 2017
Pro forma Net assets statement of of the net assets of Group as at Net proceeds the Group as at 31 December of the 31 December 2017 Rights Issue 2017 £’000 £’000 (note 4) £’000 Non-current assets Plant and equipment ...... 0.1 — 0.1 Investments at fair value through profit or loss . . . . 1,346.4 — 1,346.4 Deferred tax assets ...... 0.5 — 0.5 1,347.0 — 1,347.0 Current assets Trade and other receivables ...... 7.6 — 7.6 Cash and cash equivalents ...... 2.5 210.2 212.7 10.1 210.2 220.3 Total assets ...... 1,357.1 210.2 1,567.3 Current liabilities Current tax liabilities ...... (1.4) — (1.4) Borrowings ...... (173.2) — (173.2) Trade and other payables ...... (17.3) — (17.3) (191.9) — (191.9) Net current (liabilities)/assets ...... (181.8) 210.2 28.4 Non-current liabilities Retirement benefit obligations ...... (40.3) — (40.3) Provisions ...... (1.0) — (1.0) (41.3) — (41.3) Total liabilities ...... (233.2) — (233.2) Net assets ...... 1,123.9 210.2 1,334.1
Notes: (1) The financial information as at 31 December 2017 has been extracted, without material adjustment, from the audited consolidated financial information.
(2) This pro forma statement of net assets does not constitute financial statements within the meaning of section 434 of the Companies Act 2006. (3) No adjustment has been made to reflect the trading results of the Group since 31 December 2017 or any other change in its financial position in that period. (4) The total net proceeds receivable by the Company from the Rights Issue are estimated to be approximately £210.2 million, after deduction of the aggregate expenses of, or incidental to, the Rights Issue to be borne by the Company of approximately £6.3 million.
B.9 Profit forecast Not applicable. There is no profit forecast or estimate included in this Prospectus.
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B.10 Qualifications in the audit report on the historical financial information Not applicable. The audit reports on the historical financial information incorporated by reference into this Prospectus are not qualified.
B.11 Insufficient working capital Not applicable. In the opinion of the Company, the Group has sufficient working capital for its present requirements, that is for at least the next 12 months following the date of this Prospectus.
SECTION C—SECURITIES
C.1 Type and class of securities The Rights Issue is being made to all Qualifying Shareholders on the register of members of the Company at close of business on 6 March 2018 (the “Record Date”). Pursuant to the Rights Issue, the Company is offering 1 Rights Issue Share for 3 Existing Shares to Qualifying Shareholders at 177p per Rights Issue Share. Each Rights Issue Share will be issued at a premium of 167p to its nominal value of £0.10. When admitted to trading, the Rights Issue Shares will be registered with ISIN number GB00BVC3CB83. The ISIN number for the Nil Paid Rights is GB00BFX0WB65 and the ISIN number for the Fully Paid Rights is GB00BDRNS199.
C.2 Currency The currency of the issue is United Kingdom pounds sterling.
C.3 Issued Share Capital As at the Latest Practicable Date, the nominal value of the issued share capital of the Company was £36,696,013.40 divided into 366,960,134 Shares (fully paid) of £0.10 each.
C.4 Rights attaching to the Shares The Rights Issue Shares will, when issued and fully paid, rank equally in all respects with the Existing Shares, including the right to receive all dividends and other distributions made, paid or declared after the date of issue of the Rights Issue Shares, including the final base dividend and special dividend for the year ended 31 December 2017.
C.5 Restrictions on transfer There are no restrictions on the free transferability of the Shares.
C.6 Admission Application will be made to the FCA and to the London Stock Exchange for the Rights Issue Shares to be admitted to the premium listing segment of the Official List of the FCA and to the London Stock Exchange for such Shares to be admitted to trading on the London Stock Exchange’s main market for listed securities. It is expected that Rights Issue Admission will become effective on 9 March 2018 and that dealings in the Rights Issue Shares (nil paid) will commence at 8.00 a.m. on that date.
C.7 Dividend policy The Company will continue with its existing dividend policy, namely: (i) a progressive base dividend targeting growth at least in line with inflation; and (ii) a special dividend of approximately 5 to 10 per cent. of gross proceeds from the sale of investments on an annual basis, subject to specific investment requirements in any one year.
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Interim base dividends will continue to be paid in October of the relevant financial year and final base dividends in May of the following financial year along with any special dividend. The Rights Issue Shares, when issued and fully paid, will rank pari passu in all respects with the Existing Shares, including the right to receive dividends or distributions made, paid or declared after the date of issue of the Rights Issue Shares including the final base dividend and special dividend for the year ended 31 December 2017. For the year ended 31 December 2017 and, in accordance with its existing dividend policy, the Company intends to pay a final dividend of £31.9 million comprising: (i) a final base dividend of £14.0 million, equating to 3.82 pence per share before taking into account the effects of the Rights Issue; and (ii) a special dividend of £17.9 million equivalent to 6.2% of total realisations in 2017 of £289 million, equating to 4.88 pence per share before taking into account the effects of the Rights Issue. The total final base dividend of £14.0 million will be increased to include the Rights Issue Shares issued pursuant to the Rights Issue, while the Special dividend of £17.9 million will be paid over the Existing Shares and the Rights Issue Shares issued pursuant to the Rights Issue. The record date for the final dividend will be 20 April 2018, with the final dividend to be paid on 18 May 2018. Shareholders will be given the opportunity to vote on the Company’s proposed final dividend for the year ended 31 December 2017 at the Company’s next annual general meeting on 10 May 2018.
SECTION D—RISKS
D.1 Key information on the key risks specific to the Company and its industry Changes to legislation or public policy in the jurisdictions in which the Group operates could negatively impact the volume of potential opportunities available to the Group and the returns from existing opportunities. Many of John Laing’s infrastructure investments are structured through PPP frameworks. The use of PPP programmes by Governmental Entities in the countries in which the Group operates or may wish to operate may decrease as a result of general economic conditions, changes in interest rates, fiscal pressures arising from public sector deficits, changes in governmental policy or otherwise, which would be likely to have an adverse effect on the Group’s business as the Group may be unable to secure new investments, maintain its targeted volume of investment opportunities or achieve its targeted rates of return on its potential future infrastructure investments. Additionally, changes to legislation or public policy related to renewable energy could negatively impact the economic returns on the Group’s investments in renewable energy projects, which would adversely affect the demand for and attractiveness of such projects. At present, the economic returns on many of the Group’s investments in renewable energy projects are dependent in part on government support mechanisms, tax credits and exemptions in the jurisdictions in which the Group operates, which encourage uptake of renewable energy technologies. If feed-in-tariffs and other incentives designed to benefit the renewable energy industry were to be reduced or emission reduction and carbon reduction policies were to be changed, the Group’s economic returns from renewable energy investments as well as the demand for and attractiveness of such projects could be adversely affected.
The valuation of an investment in a project may not reflect its ultimate realisable value. Valuations for each of its investments are carried out by the Group as at 30 June and 31 December, with the objective being to establish a fair value for each investment in the portfolio assuming that forecast project cash flows are received until maturity of the underlying asset. For each asset in the portfolio the Group maintains detailed cash flow models which form the basis for the Group’s regular revaluation of the portfolio as part of its financial reporting procedures. The valuation of the
14 SECTION D—RISKS
Group’s investments is only an estimate of realisable value and is not typically based on third party offers for such investments. Ultimate realisation of the market value of an asset depends to a great extent on economic and other conditions beyond the control of the Group, and valuations do not necessarily represent the price at which an investment can be sold. Valuations for certain investments and a review of the investment portfolio as a whole are also carried out as at 31 March and 30 September.
The Group’s investment pipeline is not a guarantee of actual bidding activity or future investments. The Group’s investment pipeline comprises specifically identified projects that are expected to be procured or be available in the near term, and such pipeline as at a specific date may change at any time as opportunities at any stage are added or removed for various reasons. A number of factors influence whether a PPP bid by the Group or a Consortium moves from the pre-qualification stage to a shortlist and thereafter to the Group or a Consortium being named the preferred bidder and awarded the project. In addition, Governmental Entities can delay or indefinitely postpone the awarding of projects.
The Group operates in highly competitive markets and may not be able to compete effectively or profitably. The Group is subject to competition from a range of businesses active in international, national and local infrastructure markets, including financial investors or competitors with contracting businesses or support services businesses. Some of the Group’s competitors are larger than the Group and may have greater financial, technical and operating capabilities, or may be willing to accept (for whatever reason) lower rates of return. As a result of this competition and with the possibility that this competition may intensify, there is a risk that the Group may fail to secure new investments in its chosen markets or be required to accept lower returns in order to secure investments.
The amount of the deficit in the Group’s main defined benefit pension scheme can vary significantly. The amount of the deficit in the Group’s main defined benefit pension scheme can vary significantly due to gains or losses on scheme investments and movements in the assumptions used to value scheme liabilities (in particular life expectancy, discount rate and inflation rate). The next triennial actuarial valuation of JLPF will be as at 31 March 2019.
Risks relating to the Group’s investments in Project Companies and other project-level risks. Many of John Laing’s infrastructure investments are structured through public private partnership (“PPP”) frameworks whereby anticipated revenues are derived from government or other public sector payments to a standalone project company (typically, a non recourse special purpose vehicle (“SPV”)) in which the Group has an interest (a “Project Company”). The Project Companies the Group invests in are structured as standalone, non-recourse special purpose vehicles (“SPVs”). As a result, the project financing, activities, liabilities and performance obligations of each individual Project Company (including such Project Companies in which the Group owns a controlling interest and which are therefore “subsidiary undertakings” of the Company within the meaning of section 1162 of the Companies Act 2006) are ring-fenced from each other and from the Group as a whole, and the Group’s commitments as a shareholder and subordinated debt provider to each of the Project Companies (including subsidiary Project Companies) are limited to its investment amount. If certain risks were to occur in relation to one of the Project Companies, the value of the Group’s investment in the affected Project Company, as well as the timing and quantum of distributions from such Project Company, could be negatively impacted. These risks include adverse financial performance by a Project Company affecting the financial covenants in its project finance loan documents resulting in the Project Company being unable to make distributions to the Group and other shareholders or subordinated debt providers and may enable senior project finance debt providers to declare default of the financing terms and exercise their security; the inability of a Project Company to refinance existing maturing medium term project finance facilities periodically during the life of a project; any violations of or changes in regulations to which the Project
15 SECTION D—RISKS
Companies are subject; exposure of the Project Companies to counterparty credit risk with regards to Governmental Entities, subcontractors, lenders, suppliers and consortium partners, including counterparties for renewable energy projects; and variations affecting wind or sunlight or changes in power and gas prices which would have a material adverse effect on the revenues in renewable energy projects. While the manifestation of such risks may not individually have a material adverse effect on the Group as a whole, the manifestation of any of these risks in relation to multiple Project Companies simultaneously, or to a Project Company in which the Group’s investment comprised a significant portion of the Group’s total investment portfolio, could adversely affect the total value of the Group’s investment portfolio and the cash yields from the portfolio, which in turn could have a material adverse effect on the Group’s business, results of operations, financial condition and future prospects.
With respect to the Group’s external asset management business, the past performance of JLIF and JLEN should not be considered indicative of the future performance of such funds or of the Group’s future fee income from such funds. The historical performance of JLIF and JLEN, respectively, has benefited from investment opportunities and general market conditions that may not repeat themselves and there can be no assurance that the Group’s investments being sold to JLIF or JLEN will be profitable in the future. Poor performance of JLIF and JLEN could result in damage to the Group’s brand as an investment adviser, a reduction in John Laing’s External AUM and a corresponding reduction in fee income. Moreover, if JLIF or JLEN were unable to finance further acquisition of Project Companies in which the Group’s interests are up for disposal, the Group would have to seek and rely on other secondary market investors in order to realise the value of its investments in such Project Companies.
D.3 Key information on the key risks specific to the Shares. The market price of the Shares could be volatile and subject to significant fluctuations due to a variety of factors, which could result in a decline in the market price of the Shares. Shareholders who do not take up their entitlements to the Rights Issue Shares in the Rights Issue will have their proportionate shareholdings in the Company diluted as a consequence of the Rights Issue. Shareholders outside of the United Kingdom may not be able to take up the Rights Issue Shares in the Rights Issue or further issues of Shares and therefore may suffer dilution. The Company is not, and does not intend to become, regulated in the United States as an investment company under the US Investment Company Act. As a result, transfer restrictions for Shareholders in the United States or that are US persons (as defined in Regulation S) have been imposed and may make it difficult to resell the Shares, other than in “offshore transactions” within the meaning of Regulation S, or may have an adverse impact on the market price of the Shares generally. The Company may be a passive foreign investment company (“PFIC”) for US federal income tax purposes for any taxable year, which could result in adverse US federal income tax consequences for US investors.
SECTION E—RIGHTS ISSUE
E.1 Net proceeds and costs of the Rights Issue Through the issue of Rights Issue Shares pursuant to the Rights Issue, the Company expects to raise gross proceeds of £216.5 million. The aggregate expenses of, or incidental to, the Rights Issue to be borne by the Company are estimated to be approximately £6.3 million, which the Company intends to pay out of the proceeds of the Rights Issue.
E.2a Reasons for the Rights Issue and use of proceeds As at 31 December 2017, the Group’s total pipeline comprised 84 projects giving a total investment opportunity of £2,150 million, made up of £1,585 million in PPP projects and £565 million in
16 SECTION E—RIGHTS ISSUE
renewable energy projects. Within these totals, the Group’s primary investment teams have been successful in securing near term positions for John Laing in nine shortlisted PPP consortiums, with an investment opportunity of approximately £200 million, as well as exclusive positions on four potential renewable energy investments, with an investment opportunity of approximately £150 million. John Laing will use the proceeds of the Rights Issue to make investment commitments in PPP projects, in renewable energy projects and in other appropriate greenfield infrastructure investments which fit its business model and meet its investment criteria. At this stage, John Laing cannot be certain as to which projects it will invest in. This depends on the success of its Consortium in the case of PPP projects or the outcome of negotiations for renewable energy projects. Proceeds will also be used to pay costs relating to the Rights Issue, estimated at approximately £6.3 million. If, under unforeseen circumstances or due to adverse market conditions, the Group fails to win the expected number of projects, or a material proportion of projects in the pipeline are significantly delayed or cancelled, and the Group is not able to deploy the additional capital from the Rights Issue for these specific and other investment opportunities over the medium term, consistent with the three-year time horizon of the Group’s current pipeline of investment opportunities, it will consider returning any excess capital to shareholders on the basis of the opportunities that are prevailing at that particular time.
E.3 Terms and conditions of the Rights Issue John Laing is raising approximately £210.2 million net of expenses, by way of a rights issue of 122,320,044 Rights Issue Shares. Qualifying Shareholders who do not, or are not able or permitted to, take up their Nil Paid Rights in full will have their proportionate shareholdings in the Company diluted by approximately 25 per cent. as a result of the Rights Issue. The Rights Issue Price of 177p per Rights Issue Share represents a discount of approximately 29.2 per cent. to the theoretical ex-rights price based on the closing middle-market price of a Share as derived from the Stock Exchange Daily Official List (“SEDOL”) of 274.20p per Existing Share on 7 March 2018 (being the last Business Day before the announcement of the terms of the Rights Issue). Subject to the terms and conditions set out below (and, in the case of Qualifying Non-CREST Shareholders, the Provisional Allotment Letter), the Rights Issue Shares will be offered for subscription by way of a rights issue to Qualifying Shareholders on the following basis: 1 Rights Issue Share at 177p each for every 3 Existing Shares held and registered in the name of each Qualifying Shareholder at the close of business on the Record Date (and so in proportion for any other number of Existing Shares then held). Qualifying Shareholders with fewer than 3 Existing Shares will not be entitled to any Rights Issue Shares. Entitlements to Rights Issue Shares will be rounded down to the nearest whole number (or to zero in the case of Qualifying Shareholders holding fewer than 3 Existing Shares at the close of business on the Record Date) and fractions of Rights Issue Shares will not be allotted to Qualifying Shareholders but will be aggregated and, if possible, sold in the market as soon as practicable after the commencement of dealings in the Rights Issue Shares, nil paid. The net proceeds of such sales (after deduction of expenses) will be aggregated and ultimately accrue for the benefit of the Group. Holdings of Existing Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue. The Nil Paid Rights (also described as Rights Issue Shares, nil paid) are entitlements to buy Rights Issue Shares at the Rights Issue Price. The Fully Paid Rights are entitlements to receive Rights Issue Shares for which subscription and payment has already been made. Alternatively, Qualifying Shareholders can sell or transfer the Nil Paid Rights. Rights Issue Shares will be provisionally allotted (nil paid) to all Qualifying Shareholders on the Register at the Record Date. However, subject to certain exceptions, Qualifying Shareholders who have a registered address in the Excluded Territories have not been and will not be sent Provisional
17 SECTION E—RIGHTS ISSUE
Allotment Letters and have not and will not have their CREST accounts credited with Nil Paid Rights. The Existing Shares are listed on the premium segment of the Official List and traded on the London Stock Exchange’s Main Market for listed securities. Application will be made to the UK Listing Authority and to the London Stock Exchange for the Rights and the Rights Issue Shares to be admitted to the premium segment of the Official List and to trading on the London Stock Exchange’s Main Market for listed securities, respectively. It is expected that Rights Issue Admission will become effective on 9 March 2018 and that dealings in the Rights Issue Shares, nil paid, will commence at 8.00 a.m. on the same day. The Rights and the Rights Issue Shares will be issued pursuant to the authority granted under the resolutions passed at the Annual General Meeting of the Company held in May 2017. The Rights Issue Shares, when fully paid, will rank pari passu with the Existing Shares. None of the Rights nor the Rights Issue Shares are being made available to the public other than pursuant to the Rights Issue on the terms and subject to the conditions set out in this Prospectus and, in the case of Qualifying Non-CREST Shareholders holding certificated shares, any relevant Provisional Allotment Letter. The Rights Issue has been fully underwritten by the Joint Bookrunners in accordance with the terms of the Underwriting Agreement and is conditional on, inter alia: (a) the Company complying with its obligations under the Underwriting Agreement to the extent they fall to be performed before Rights Issue Admission; (b) no supplementary prospectus being published by or on behalf of the Company prior to Rights Issue Admission; (c) in the good faith opinion of the Joint Bookrunners there having been no material adverse change in, nor any development reasonably likely to result in a material adverse change in or affecting, the condition, earnings, business affairs or projects of the Company or the Group taken as a whole, whether or not arising in the ordinary course of business, at any time before Rights Issue Admission; (d) Rights Issue Admission becoming effective by not later than 8.00 a.m. on 9 March 2018 (or such later time and/or date (being not later than 8.00 a.m. on 5 April 2018) as the Joint Bookrunners may determine); and (e) Euroclear having approved admission and enablement of the Nil Paid Rights and Fully Paid Rights as participating securities within CREST on or prior to Rights Issue Admission and such Shares continuing to be participating securities within CREST. The Underwriting Agreement may be terminated by the Joint Bookrunners prior to Rights Issue Admission upon the occurrence of certain specified events, in which case the Rights Issue will not proceed. The Joint Bookrunners may arrange sub-underwriting for some, or none, of the Rights Issue Shares. The Underwriting Agreement is not capable of termination following Rights Issue Admission. In addition, the Company reserves the right to decide not to proceed with the Rights Issue if the Underwriting Agreement is terminated at any time prior to Rights Issue Admission and commencement of dealings in the Rights Issue Shares, nil paid. If for any reason it becomes necessary to adjust the expected timetable as set out in this document, John Laing will make an appropriate announcement to a Regulatory Information Service giving details of the revised dates.
E.4 Material interests There are no interests, including conflicting interests, that are material to the Offer, other than those disclosed in B.6 above.
18 SECTION E—RIGHTS ISSUE
E.5 Selling Shareholders and lock-up Not applicable. The Rights Issue comprises Rights Issue Shares being issued by the Company. There are no lock-up arrangements in respect of the Rights Issue Shares.
E.6 Dilution Qualifying Shareholders who do not take up their entitlements to Rights Issue Shares will have their proportionate shareholdings in the Company diluted by approximately 25 per cent. as a consequence of the Rights Issue.
E.7 Expenses charged to the investor Not applicable. There are no commissions, fees or expenses to be charged to subscribers for Rights Issue Shares by the Company.
19 PART 1 Letter from the Chairman
Board: Registered Office: Phil Nolan Non-Executive Chairman 1 Kingsway Will Samuel Non-Executive Chairman Designate London Olivier Brousse Chief Executive Officer WC2B 6AN Patrick O’Donnell Bourke Group Finance Director David Rough Senior Independent Non-Executive Director Jeremy Beeton Independent Non-Executive Director Toby Hiscock Independent Non-Executive Director Anne Wade Independent Non-Executive Director
8 March 2018 FULLY UNDERWRITTEN 1 FOR 3 RIGHTS ISSUE OF 122,320,044 RIGHTS ISSUE SHARES AT 177 PENCE PER RIGHTS ISSUE SHARE Dear Shareholder,
1. Introduction I am writing to give you details of the Rights Issue, including the background to and reasons for it, and to explain why the Board considers it to be in the best interests of John Laing and Shareholders as a whole.
2. Reasons for the Rights Issue In 2017, the Group made investment commitments of £383 million, well ahead of both guidance for the year of approximately £200 million and investment commitments of £182 million and £180 million in 2016 and 2015, respectively. There are two principal factors leading to this increase: • The US market has shown faster growth than the Group had been anticipating. In 2017, the Group committed more to investments in the US (including its largest ever investment commitment) than it did across all three of its geographical regions in either 2016 or 2015. • The Group has focused strongly on developing its relationships with international partners, including construction companies, rolling stock manufacturers and renewable energy developers, and this is resulting in more investment opportunities. As a consequence, the Group has seen growth in its pipeline of new investment opportunities in both PPP and renewable energy across its existing geographical regions: North America, Asia Pacific and Europe. As at 31 December 2017, the Group’s investment pipeline stood at £2,150 million, significantly higher than the £1,331 million identified as at 31 December 2014, shortly before the Company’s initial public offering (“IPO”) in February 2015. Some 95 per cent. of the Group’s pipeline consists of investments outside the UK. The Group’s activities remain focused on investment in greenfield infrastructure projects (social, transport and environmental) awarded under Governmental PPP programmes and in renewable energy. Outside the current pipeline, we also see opportunities to invest alongside established partners in other infrastructure asset classes as well as new geographies, such as selected countries in Latin America and Asia Pacific, that could feed into our pipeline. Historically, the Group has operated under a “self-funding model” whereby new investment commitments are financed through operational cash flows and realisations of investments in operating assets, together with the benefit of flexible corporate banking facilities. Realisations in the years ended 31 December 2017, 2016 and 2015 were, £289 million, £147 million and £86 million, respectively. Other than the new funds of £121.3 million raised at the Company’s IPO, this self-funding model has operated since 2007. The Board believes strongly in the discipline the self-funding model brings. While the Group assesses each investment on a hold-to-maturity basis, it also has to be confident that any investment it makes can ultimately be realised. However, while realisations have increased each year since the Company’s IPO, they have not kept pace with investment commitments in part because of the construction periods for the underlying projects. The recent increase in investment opportunities available to the Group, including the potential size of some opportunities, could lead to a situation where the Group has to realise assets earlier than the optimal time in order to fund new investments.
20 The Rights Issue will enable the Group to take advantage of a higher proportion of the attractive investment opportunities currently available to the Group and maintain its appeal to international partners. It will also give the Group increased flexibility on the timing of realisations of investments in operating assets (“secondary assets”) to allow maximisation of value creation for shareholders. The increased equity base resulting from the Rights Issue will also facilitate more debt funding should that be required. Before the proceeds from the Rights Issue, the Board’s expectation for investment commitments in 2018 is approximately £250 million, with realisations for 2018 broadly in line with this. With the benefit of the Rights Issue, John Laing will have greater ability both to position itself for, and execute on, investment commitments in excess of £250 million. This is consistent with the Board’s intention to continue to increase the scale of the Group over the medium term. The principal value creation mechanic inherent in John Laing’s business model is the difference between the discount rate implied by the hold-to-maturity IRR at the financial close of an investment and the discount rate applied to that investment once the underlying project has entered the operational phase (as a secondary investment). Although John Laing has in recent years experienced pressure on hold-to-maturity IRRs as its Primary teams bid for new greenfield projects, this has typically been accompanied by a reduction in secondary discount rates. This has allowed the Group to maintain attractive “yield shifts”, which drive one of the principal measures applied to the Group’s investments, namely annualised rate of return (“ARR”). The Board’s strategy is to create value for shareholders through growth in Net Asset Value (“NAV”) and dividends. The Group is looking to raise £216.5 million via the Rights Issue in order to access additional investment opportunities which generate ARRs consistent with this strategy. Over the three years ended 31 December 2017, the Group achieved compound average growth of 15.5 per cent. in NAV per share (after adjusting for dividends paid and funds raised at the Company’s IPO). In the year ended 31 December 2017, NAV per share grew by 13.5 per cent. (including dividends paid in the period). Following the Rights Issue, the Group plans to continue to operate its self-funding model. We plan to retain our disciplined approach as to which investment opportunities we invest in. Consistent, and in parallel with the self-funding model, the Group is actively considering a number of disposals which are yet to be confirmed. One potential disposal which is at a reasonably advanced stage is the disposal of the Group’s remaining 15 per cent. shareholding in IEP (Phase 1), which could be announced during the rights issue period.
3. Use of proceeds As at 31 December 2017, the Group’s total pipeline comprised 84 projects giving a total investment opportunity of £2,150 million, made up of £1,585 million in PPP projects and £565 million in renewable energy projects. Within these totals, the Group’s primary investment teams have been successful in securing one preferred bidder position with an investment opportunity of approximately £20 million, nine shortlisted PPP positions, with an investment opportunity of approximately £200 million, and exclusive positions on four potential renewable energy investments, with an investment opportunity of approximately £150 million. John Laing will use the proceeds of the Rights Issue to make investment commitments in PPP projects, in renewable energy projects and in other appropriate greenfield infrastructure investments which fit its business model and meet its investment criteria. At this stage, John Laing cannot be certain as to which projects it will invest in. This depends on the success of its Consortium in the case of PPP projects or the outcome of negotiations for renewable energy projects. Proceeds will also be used to pay costs relating to the Rights Issue, estimated at approximately £6.3 million. If, under unforeseen circumstances or due to adverse market conditions, the Group fails to win the expected number of projects, or a material proportion of projects in the pipeline are significantly delayed or cancelled, and the Group is not able to deploy the additional capital from the Rights Issue for these specific and other investment opportunities over the medium term, consistent with the three-year time horizon of the Group’s current pipeline of investment opportunities, it will consider returning any excess capital to shareholders on the basis of the opportunities that are prevailing at that particular time.
4. Background and Information on John Laing John Laing is an international originator, active investor and manager of greenfield infrastructure projects. The Group aims to create value for shareholders through originating, investing in and managing infrastructure assets internationally.
21 The Group is focused on major transport, energy, social and environmental projects in regions of the world with the right attributes, including a legal and commercial environment supportive of long-term investment in privately-financed infrastructure. The Group holds a portfolio of investments in projects awarded under government-backed PPP programmes and RE projects and has developed capabilities in other closely linked sectors which have similar operational and financial characteristics. The Group operates within a wider infrastructure market in which there has been historical under-investment. In a June 2016 report, McKinsey estimated that global investment in infrastructure needed to be approximately US$3.3 trillion per annum to support expected growth rates but that at current estimated rates of underinvestment, global infrastructure investment will fall short of this figure by approximately US$350 billion per year (source: McKinsey Global Institute). This under-investment provides a strong incentive for governmental and other public sector bodies to use PPP programmes, which benefit from fixed price arrangements and transfer very significant risks to the private sector, especially design, construction and operational risks. The Group typically invests in infrastructure projects at the greenfield, pre-construction stage. The Group applies its management, engineering and technical expertise and invests equity and subordinated debt into special purpose companies which have rights to the underlying infrastructure asset. These special purpose companies are financed with ring-fenced senior debt with no recourse to the Group. Our business, which integrates origination, investment and asset management capabilities, has three key areas of activity: a) Primary Investment: the Group sources, originates, bids for and wins greenfield infrastructure projects, typically as part of a consortium in the case of PPP projects. The Group’s Primary Investment portfolio comprises interests in infrastructure projects which are in the construction phase. b) Secondary Investment: The Group owns a substantial portfolio of investments in operational infrastructure projects, almost all of which were previously part of its Primary Investment portfolio. c) Asset Management: The Group actively manages its own Primary and Secondary Investment portfolios and provides investment advice and asset management services to two external funds, John Laing Infrastructure Fund (“JLIF”) and John Laing Environmental Assets Group (“JLEN”), through John Laing Capital Management (“JLCM”) which is regulated by the FCA. The Board believes that John Laing’s track record as a highly experienced and active investor that combines independence, investments in more than 130 projects, the ability to commit its own funds, as well as technical and financial expertise, appeals strongly to public sector bodies, contractors and lenders.
5. Information on recent investments The Group made investment commitments of £383 million in 2017, well ahead of its original guidance for the year of approximately £200 million. These investment commitments included: a) £118 million in the Transform 66 P3 Project (Outside the Beltway) in Northern Virginia. This project involves the development of 22.5 miles of managed lanes along the I-66 corridor between the I-495 (Capital Beltway) in Fairfax County, Virginia and West of University Boulevard in Prince William County, Virginia. The project, which will enhance one of the key commuter routes within the Washington DC metropolitan area, has a total concession period of 50 years, including construction. This investment was not in the Group’s investment pipeline as at 31 December 2016 and so is an example of one of the Group’s recent late stage entry opportunities. b) £63 million in the Rocksprings wind farm in Val Verde County, Texas. This 149MW project, which is now operational, benefits from power purchase agreements with two investment grade corporate off-takers. c) £79 million in the New Grafton Correctional Centre in New South Wales, Australia. The project, which comprises a 1,700 bed correctional centre servicing the northern part of New South Wales, includes among its objectives a reduction in reoffending rates. Once completed, it is expected to be the largest correctional facility in Australia. d) £43 million in the Melbourne Metro project in Melbourne, Australia. The project comprises the Tunnel and Stations Package of the overall Metro Tunnel project, the state of Victoria’s biggest ever public transport project. The SPV will deliver twin nine-kilometre tunnels and five new underground stations at North Melbourne (Arden), Parkville, State Library, Town Hall and Anzac.
22 6. Financial effects of the Rights Issue Subject to the specific investment commitments entered into with the proceeds of the Rights Issue and the timing thereof, the Directors’ belief is that the Rights Issue should be accretive to NAV per share (adjusted for the Rights Issue) within two years following the Rights Issue, compared to the position without the Rights Issue. Part 15 (Unaudited Pro Forma Financial Information) of this Prospectus contains an unaudited pro forma statement of net assets, which illustrates the effect of the Rights Issue on the consolidated net assets of the Group as if it had occurred on 31 December 2017. This information has been prepared for illustrative purposes only.
7. Financial position, current trading and prospects On 8 March 2018, the Group announced its results for the year ended 31 December 2017. The financial highlights are set out below: • 10.5 per cent. increase in NAV, from £1,017 million at 31 December 2016 to £1,124 million; • 13.5 per cent. increase in NAV including dividends paid in 2017; • NAV per share at 31 December 2017 of 306p (31 December 2016–277p); • New investment commitments of £383 million (2016–£182 million); • Realisations of £289 million from the sale of investments (2016–£147 million); • Profit before tax of £126 million (2016–£192 million); • 12 per cent. increase in external AUM to £1,649 million; and • Cash yield from investment portfolio of £40 million (2016–£35 million).
8. Principal Terms of the Rights Issue Pursuant to the Rights Issue the Company is offering 122,320,044 Rights Issue Shares to Qualifying Shareholders. The offer is to be made at 177p per Rights Issue Share, payable in full on acceptance by no later than 11.00 a.m. on 23 March 2018. The Rights Issue is expected to raise approximately £210.2 million, net of expenses. The Rights Issue Price represents a 29.2 per cent. discount to the theoretical ex rights price based on the closing middle market price of 274.20p per Share on 7 March 2018 (being the last Business Day before the announcement of the terms of the Rights Issue). The Rights Issue will be made on the basis of 1 Rights Issue Share at 177p per Rights Issue Share for every 3 Existing Shares held by Qualifying Shareholders at the close of business on the Record Date (and so in proportion for any other number of Existing Shares then held) and otherwise on the terms and conditions set out in this Prospectus. Entitlements to Rights Issue Shares will be rounded down to the nearest whole number and fractional entitlements will not be allotted to Shareholders but will be aggregated and issued into the market for the benefit of the Company. Holdings of Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue. The Rights Issue has been fully underwritten by the Joint Bookrunners pursuant to the Underwriting Agreement. The principal terms of the Underwriting Agreement are summarised in paragraph 7.1 of Part 16 (Additional Information) of this Prospectus. The Rights Issue will result in 122,320,044 Rights Issue Shares being issued, representing approximately 33 per cent, of the existing issued share capital and 25 per cent, of the enlarged issued share capital immediately following completion of the Rights Issue. The Rights Issue Shares, when issued and fully paid, will rank pari passu in all respects with the Existing Shares, including the right to receive dividends or distributions made, paid or declared after the date of issue of the Rights Issue Shares, including the final base dividend and special dividend for the year ended 31 December 2017. Application will be made to the FCA and to the London Stock Exchange for the Rights and the Rights Issue Shares to be admitted to the premium listing segment of the Official List and to trading on the London
23 Stock Exchange’s main market for listed securities, respectively. It is expected that Rights Issue Admission will become effective and that dealings on the London Stock Exchange in the Rights Issue Shares, nil paid, will commence at 8.00 a.m. on 9 March 2018. Some questions and answers, together with details of further terms and conditions of the Rights Issue, including the procedure for acceptance and payment and the procedure in respect of Rights not taken up, are set out in Parts 6 (Questions and Answers about the Rights Issue) and 7 (Terms and Conditions of the Rights Issue) of this Prospectus and, where relevant, will also be set out in the Provisional Allotment Letter.
9. Dividends and Dividend Policy The Company will continue with its existing dividend policy, namely: (i) a progressive base dividend targeting growth at least in line with inflation; and (ii) a special dividend of approximately 5 to 10 per cent. of gross proceeds from the sale of investments on an annual basis, subject to specific investment requirements in any one year. Interim base dividends will continue to be paid in October of the relevant financial year and final base dividends in May of the following financial year along with any special dividend. The Rights Issue Shares, when issued and fully paid, will rank pari passu in all respects with the Existing Shares, including the right to receive dividends or distributions made, paid or declared after the date of issue of the Rights Issue Shares including the final base dividend and special dividend for the year ended 31 December 2017. For the year ended 31 December 2017 and, in accordance with its existing dividend policy, the Company intends to pay a final dividend of £31.9 million comprising: (i) a final base dividend of £14.0 million, equating to 3.82 pence per share before taking into account the effects of the Rights Issue; and (ii) a special dividend of £17.9 million equivalent to 6.2% of total realisations in 2017 of £289 million, equating to 4.88 pence per share before taking into account the effects of the Rights Issue. The total final base dividend of £14.0 million will be increased to include the Rights Issue Shares issued pursuant to the Rights Issue, while the Special dividend of £17.9 million will be paid over the Existing Shares and the Rights Issue Shares issued pursuant to the Rights Issue. The record date for the final dividend will be 20 April 2018, with the final dividend to be paid on 18 May 2018. Shareholders will be given the opportunity to vote on the Company’s proposed final dividend for the year ended 31 December 2017 at the Company’s next annual general meeting on 10 May 2018.
10. Further Information Your attention is drawn to the further information set out in Part 2 (Risk Factors) and Parts 9 (Business Description) to 12 (Operating and Financial Review) of this Prospectus. Shareholders should read the whole of this Prospectus and not rely solely on the information set out in this letter.
11. Overseas Shareholders The attention of Shareholders who have registered addresses outside the United Kingdom, or who are citizens or residents of or located in countries other than the United Kingdom (including US persons within the meaning of Regulation S), is drawn to the information in paragraph 7 of Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus. The Rights Issue Shares will be provisionally allotted (nil paid) to all Shareholders on the register at the Record Date, including overseas Shareholders. However, subject to certain exceptions, Provisional Allotment Letters will only be sent to Qualifying Non-CREST Shareholders with registered addresses outside the United States and the Excluded Territories and only the CREST stock accounts of Qualifying CREST Shareholders with registered addresses outside the United States and the Excluded Territories will be credited. Notwithstanding any other provision of this Prospectus or the Provisional Allotment Letter, the Company reserves the right to permit any Shareholder on the register at the Record Date to take up his/her rights if the
24 Company in its sole and absolute discretion is satisfied that the transaction in question will not violate applicable laws. The provisions of paragraph 6 of Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus apply generally to overseas Shareholders who cannot or do not take up the Rights and the Rights Issue Shares provisionally allotted to them.
12. UK and US Taxation Certain information about United Kingdom and United States taxation in relation to the Rights Issue is set out in Part 16 (Additional Information) of this Prospectus. If you are in any doubt as to your tax position, or you are subject to tax in a jurisdiction other than the United Kingdom or the United States, you should consult your own independent tax adviser without delay.
13. Action to be Taken If you are a Qualifying Non-CREST Shareholder with a registered address outside the United States and the Excluded Territories (subject to certain exceptions), you will be sent a Provisional Allotment Letter giving you details of your Nil Paid Rights by post on or about 8 March 2018. If you are a Qualifying CREST Shareholder, you will not be sent a Provisional Allotment Letter. Instead, provided that you have a registered address outside the United States and the Excluded Territories (subject to certain exceptions), you will receive a credit to your appropriate stock accounts in CREST in respect of Nil Paid Rights, which it is expected will take place as soon as practicable after 8.00 a.m. on 9 March 2018. Such crediting does not in itself constitute an offer. If you sell or have sold or otherwise transferred all of your Existing Shares held (other than ex rights) in certificated form before 6 March 2018, please forward this Prospectus and any Provisional Allotment Letter, if and when received, at once to the purchaser or transferee or the bank, stockbroker or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee, except that such documents should not be sent to any jurisdiction where to do so might constitute a violation of local securities laws or regulations, including, but not limited to, the United States and the Excluded Territories. If you sell or have sold or otherwise transferred all or some of your Existing Shares (other than ex rights) held in uncertificated form before the Ex Rights Date, a claim transaction will automatically be generated by Euroclear which, on settlement, will transfer the appropriate number of Nil Paid Rights to the purchaser or transferee. If you sell or have sold or otherwise transferred only part of your holding of Existing Shares (other than ex rights) held in certificated form before the Ex Rights Date, you should refer to the instruction regarding split applications in Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus and in the Provisional Allotment Letter. The latest time and date for acceptance and payment in full in respect of the Rights Issue is expected to be 11.00 a.m. on 23 March 2018, unless otherwise announced by the Company. The procedure for acceptance and payment is set out in Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus and, if applicable, in the Provisional Allotment Letter. For Qualifying Non-CREST Shareholders who take up their Rights, the Rights Issue Shares will be issued in certificated form and will be represented by definitive share certificates, which are expected to be despatched by no later than 6 April 2018 to the registered address of the person(s) entitled to them. For Qualifying CREST Shareholders who take up their rights, the Registrar will instruct CREST to credit the stock accounts of the Qualifying CREST Shareholders with their entitlements to Rights Issue Shares. It is expected that this will take place as soon as practicable after 8.00 a.m. on 26 March 2018. Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsor regarding the action to be taken in connection with this Prospectus and the Rights Issue. Alternatively, if you do not want to take up your Rights, you can sell or transfer your Nil Paid Rights. If you are in any doubt as to the action you should take, you should immediately seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the FSMA or, if you are outside the United Kingdom, from another appropriately authorised independent financial adviser.
25 14. Directors’ Intentions The Directors currently beneficially own, in aggregate, 512,838 Existing Shares, representing approximately 0.14 per cent. of the Group’s share capital at 7 March 2018. Each of the Directors intends, to the extent that he or she is able, either to take up his or her rights to subscribe for the Rights Issue Shares under the Rights Issue or to sell sufficient of his or her Nil Paid Rights during the nil paid dealing period to meet the cost of taking up the balance of his or her entitlements to Rights Issue Shares. In addition, Will Samuel, the Chairman Designate, has indicated his intention to acquire Shares with a value of £100,000. This acquisition is expected to take place following completion of the Rights Issue.
Yours faithfully, Phil Nolan, Chairman John Laing Group plc
26 PART 2 Risk Factors An investment in the Company and the Nil Paid Rights, Fully Paid Rights, Rights Issue Shares and/or related instruments is subject to a number of risks. Accordingly, investors and prospective investors should carefully consider all information set out in this Prospectus including, in particular, the risks described below, prior to making an investment in the Nil Paid Rights, Fully Paid Rights, Rights Issue Shares and/or related instruments. Prospective investors should note that the risks relating to the Group, its industry and the Shares summarised in the section of this Prospectus headed “Summary” are the risks that the Directors and the Company believe to be the most essential to an assessment by an investor of whether to consider an investment in the Company. However, as the risks which the Group faces relate to events and depend on circumstances that may or may not occur in the future, investors should consider not only the information on the key risks summarised in the section of this Prospectus headed “Summary” but also, among other things, the risks and uncertainties described below. The risk factors described below are not an exhaustive list or an explanation of all the risks which investors may face when making an investment in the Nil Paid Rights, Fully Paid Rights, Rights Issue Shares and/or related instruments and should be used as guidance only. Additional risks and uncertainties relating to the Group that are not currently known to the Group, or that the Group currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group’s business, results of operations and/or financial condition and, if any such risk should occur, the price of the Shares may decline and investors could lose all or part of their investment. An investment in the Shares involves complex financial risks and is suitable only for investors who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. Investors should consider carefully whether an investment in the Shares is suitable for them in the light of the information in this Prospectus and their personal circumstances.
1. Risks relating to the Group’s business and industry
1.1 Changes to legislation or public policy in the jurisdictions in which the Group operates could negatively impact the volume of potential opportunities available to the Group and the returns from existing opportunities. Many of John Laing’s infrastructure investments are structured through public-private partnership (“PPP”) frameworks whereby anticipated revenues are derived from government or other public sector payments to a standalone project company (typically, a non-recourse special purpose vehicle (“SPV”)) in which the Group has an interest (a “Project Company”, together with other project companies in which the Group has an interest, the “Project Companies”). The use of PPP programmes by governmental or other public sector authorities (“Governmental Entities”) to finance public infrastructure projects in their jurisdictions has become more common in recent years, but the typical terms under which they operate may vary from time to time and they are not the only means of funding public infrastructure projects. Accordingly, the use of such programmes by Governmental Entities in the countries in which the Group operates or may wish to operate may decrease, thereby limiting opportunities for private sector infrastructure investors in the future, or be structured such that the returns to private sector infrastructure investors are reduced. Whether as a result of general economic conditions, changes in interest rates, fiscal pressures arising from public sector deficits, changes in governmental policy or otherwise, any reduction in government or other public sector investment and funding of infrastructure resulting in a reduction in the use of PPP procurement thereof would be likely to have an adverse effect on the Group’s business. Due to the nature of the Group’s partnership with Governmental Entities, the Group is also subject to risks and uncertainties associated with periodic changes in central and local governments following national and local elections, in particular in the UK, Europe, Australia and the US, from which the Group derives the majority of its revenue. The results of elections and the consequences for the Group following such elections cannot be predicted with certainty. Changes in governmental policy, regulations and budget priorities following elections may have an adverse effect on the Group. Such government policy changes and public spending constraints are potentially material risks for the Group as they could result in decisions not to, or no longer to, outsource services or activities or use contractors; delays in placing work; cancellation, abandonment or significant reduction in the scope of activities; pressure on pricing or margins; withdrawal of projects; the bringing back “in-house” of services; or adoption of less favourable contracting models.
27 Accordingly, following any shifts in public sector policies, programmes or procurement methodologies, or changes in national, regional or local government policies following an election, or accession to or exit from supranational bodies by a state in a jurisdiction in which the Group operates, the Group may be unable to secure new investments, maintain its targeted volume of investment opportunities or achieve its targeted rates of return on its potential future infrastructure investments, which could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.2 Governments or other public bodies may seek the early termination of PPP contracts. Governmental Entities may in the future seek to terminate or renegotiate the terms applying to existing PPP projects. With respect to the Group’s investments, any such termination or renegotiation could have a material adverse effect on the financial condition and results of operation of the relevant Project Company. Governments in the countries in which the Group operates may, for example, decide to introduce new policies or legislation that seek to impose higher or “windfall” tax obligations on existing PPP projects or otherwise adversely impact the value or potential financial returns from such projects. Although Project Companies typically have contractual rights against any attempt to renegotiate their terms and it is usual for the underlying PPP arrangements to contain compensation mechanisms in the event of unilateral termination, any such changes in policies or regulations or a renegotiation or termination of existing contracts might result in a reduction of anticipated returns leading to a reduction in the value of the Group’s investments in affected Project Companies or the ability of the Group to realise full value in any disposal of such investments, which could in turn have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects. For example, the Group has experienced termination of a PPP contract by a public body on two of its infrastructure investments in the last five years. In 2017, the Manchester Waste PFI contract between the Greater Manchester Waste Disposal Authority (GMWDA) and the Project Company in which the Group held a 50% interest was terminated. Secondly, following a change of State Government in Victoria, Australia, the new Labour Government cancelled the East West Link PPP project soon after it reached financial close in October 2014. On both occasions, the Group recovered at least its original investment sum but there can be no assurance that this will always be the case. In addition, following the June 2017 general election in the UK, (which jurisdiction comprises 35 per cent. of the Group’s current investments and 5 per cent. of its PPP pipeline (in each case by value as at 31 December 2017)) the Conservative party is operating as a minority government, with the Democratic Unionist Party having agreed to support the Conservative government in motions of confidence and appropriation or budget votes via a confidence-and-supply agreement. Although under the terms of the Fixed Term Parliament Act the next general election is not scheduled until 2022, a minority government is inherently less stable and another general election in the near term as a result of a failed vote of confidence or otherwise could result in a change in the UK’s governing party. The opposition Labour party has expressed policies that support the termination of existing PPP agreements and sharply limiting new ones, the implementation of which could, in the event of a change of government, have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.3 The valuation of an investment in a project may not reflect its ultimate realisable value. Valuations for each of its investments are carried out by the Group as at 30 June and 31 December and are principally based on a discounted cash flow (“DCF”) methodology, with the objective being to establish a fair value for each investment in the portfolio assuming that forecast project cash flows are received until maturity of the underlying asset. Valuations for certain investments and a review of the investment portfolio as a whole are also carried out as at 31 March and 30 September. For each asset in the portfolio the Group maintains detailed cash flow models which form the basis for the Group’s regular valuation of the portfolio as part of its financial reporting procedures. The valuation of the Group’s investments is only an estimate of realisable value and is not typically based on third party offers for such investments. Ultimate realisation of the market value of an asset depends to a great extent on economic and other conditions beyond the control of the Group, and valuations do not necessarily represent the price at which an investment can be sold. For example, forecast project cash flows may not be achieved for the full life of the project due to a variety of reasons as described further below in “—Risks relating to the Group’s investments in Project Companies and other project-level risks”. In addition, the Group may, as part of its semi-annual valuation exercise, determine that the discount rate used in calculating DCF-derived valuations should be increased from time to time due to the condition of the secondary market, the status of construction, perception of risk around the project, disputes that arise as a result of construction and delays. As a result, John Laing’s valuation of its investment portfolio is not a guarantee of the realisable
28 value of the investments comprising such portfolio, and any shortfall in such realisable value or any impairment of such value made under the Group’s valuation methodology as a result of such factors could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.4 The Group’s historical returns, cash yields and investment profile may not be indicative of future results. The Group uses annualised rate of return (“ARR”) and money multiple (“MM”) to measure returns generated from disposed investments, hold-to-maturity internal rates of return (“HTM IRRs”) and estimated ARRs to appraise new investments and cash yields to measure dividends and/or subordinated debt interest and repayments from secondary investments. The historical returns generated by the Group relating to disposed investments and the cash yields from secondary investments in the Group’s portfolio may not be indicative of future returns and cash yields. The measures of return presented in this Prospectus, whether in relation to disposed investments or to ongoing investments, may not be indicative of future returns and are not a guarantee of future results.
1.5 Changes to legislation or public policy related to renewable energy could negatively impact the economic returns on the Group’s investments in renewable energy projects, which would adversely affect the demand for and attractiveness of such investments. The Group could be affected by changes in legislation or public policy relating to renewable energy. As at 31 December 2017, the Group had a renewable energy pipeline of approximately £565 million, including exclusive positions representing potential renewable energy investment commitments of approximately £150 million. At present, the economic returns on many of the Group’s investments in renewable energy projects are dependent in part on government support mechanisms, such as feed-in-tariffs, renewable obligations, green certificates or other schemes, and tax credits and exemptions in the jurisdictions in which the Group operates. These support mechanisms encourage uptake of renewable energy technologies, including wind, solar and biomass. For example, if global economic conditions were to weaken, some governments might implement austerity measures that reduce the feed-in-tariffs and other incentives designed to benefit the renewable energy industry. Furthermore, lower global electricity prices in the long term could lead to a reduction in the volume of renewable energy projects being developed by the private sector, as well as impact the valuation of existing renewable energy investments held by the Group. If any of the above were to occur, the Group’s economic returns from renewable energy investments as well as the demand for and attractiveness of such projects could be adversely affected. This could in turn have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.6 The Group’s investment pipeline is not a guarantee of actual bidding activity or future investments. The Group’s investment pipeline comprises specifically identified projects that are expected to be procured or be available over the next three years. Actual bidding activity is predicated upon the opportunities and investment capital available at the time of bidding, as well as a determination at such time as to which projects will be economically favourable, and the naming of the Group or a consortium in which it is a member (a “Consortium”) as the successful bidder is generally subject to the Governmental Entity’s (in the case of PPP opportunities) or the vendor’s (in the case of renewable energy opportunities) final determination and is outside the Group’s or such Consortium’s control. Furthermore, John Laing’s investment pipeline evolves as specific opportunities are removed and new opportunities at any stage are added. This can include opportunities which are about to reach financial close shortly. For example, the investment pipeline has grown positively in light of an increasing number of US states adopting PPP as a method of financing public infrastructure. However, if these initiatives were to lose support from the US federal or state government(s), the opportunities identified by the Group may no longer be economically favourable, and the Group may decide to remove such opportunities from its pipeline. As a result, the Group’s investment pipeline as at a specific date may change at any time as opportunities are added or removed for various reasons. In addition, the Group or a Consortium may bid for a project in the pipeline but be unsuccessful, or a project in the Group’s pipeline may be delayed. For the reasons set out above, the Group’s investment pipeline is not a guarantee of the Group’s actual bidding activity nor of the value of the investments the Group will ultimately make. A number of factors, both within and outside the Group’s or a Consortium’s control, influence whether a PPP bid by the Group or a Consortium moves from the pre-qualification stage to a shortlist and thereafter to the Group or a Consortium being named the preferred bidder and awarded the project. In addition, Governmental
29 Entities can delay or indefinitely postpone the awarding of projects. For these reasons, there can be no assurance that the bidding “Win Rate” (as defined in “The Group’s historical bidding Win Rate may decline and is an uncertain indicator of new investments that the Group may make in the future.” below) will accurately forecast the percentage of new PPP investments that the Group will make or future movements in the fair value of the Group’s investment portfolio, revenue or financial results.
1.7 The Group operates in highly competitive markets and may not be able to compete effectively or profitably. The Group is subject to competition from a range of businesses active in international, national and local infrastructure markets, including financial investors or competitors with contracting businesses or support services businesses. Some of the Group’s competitors are larger than the Group and may have greater financial, technical and operating capabilities, including greater ability to attract high quality consortium partners. In particular, the Group’s competitors may be willing to accept (for whatever reason) lower rates of return, and hence offer lower pricing to Governmental Entities or vendors, in order to win a tender. Competitors which have core contracting businesses may also be willing to accept lower rates of return on investment in a project SPV in consideration for winning the construction contract underlying the project. As a result of this competition and with the possibility that this competition may intensify, there is a risk that the Group may fail to secure new investments in its chosen markets or be required to accept lower returns in order to secure investments. In addition, the Group is subject to competition from other investment advisers in relation to its external asset management activities; there is therefore a risk that the Group may lose its position as investment adviser in connection with the external secondary funds it manages if such funds were to engage another investment adviser. The occurrence of any of these risks could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.8 Compliance with public tender regulations is complex and the outcomes may be subject to third party challenge and reversed. Awards under public tender processes may be subject to challenge or cancellation based on actual or alleged procedural deficiencies, even after the Group or a Consortium has incurred significant expenditures associated with winning such a tender. EU public procurement rules apply to the Group’s bidding activity in Europe, and probity and process deeds (“Probity Deeds”) are usually required to be executed in connection with the Group’s bidding activity for public projects in Australia and New Zealand. In the United States and Canada, procurement rules vary by state/province. Breach of applicable procurement rules could lead to the cancellation of public sector tenders or contracts. Of the PPP contracts to which the Group has been a party, none have been cancelled due to breach of procurement rules. However, in other sectors, including for example rail franchise tenders in the UK, tender processes have been required to be re-run and there can be no assurance that the Group, a Consortium or a tendering authority will not face actions seeking to challenge existing or future tender awards. There can also be no assurance that the Group or a Consortium would be successful in securing a project in any re-tendering process, the failure of which could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.9 The Group’s historical bidding Win Rate may decline and is an uncertain indicator of new investments that the Group may make in the future. The Group’s bidding “Win Rate” for a particular period is calculated by reference to the value of John Laing’s potential PPP investment commitments in respect of which John Laing or a Consortium is successfully appointed as preferred bidder in that period (i.e. a win), as a percentage of the total value of John Laing’s potential PPP investment commitments in the same period in respect of which the Group or a Consortium has been shortlisted for projects and preferred bidder status has been subsequently reached for such shortlisted projects, either by the Group or a Consortium or a third party (i.e. all won or lost bids, rather than the investment pipeline as a whole). In view of the multi-year length of PPP procurements and the variation in the size of the value of PPP projects, short-term trends and short-term Win Rate can vary considerably from period to period and hence the Group considers its medium-term Win Rate when preparing its budget and business plan. The Group currently assumes an average Win Rate of 30 per cent. in its budgeting. It achieved a weighted average Win Rate of 48 per cent., across all the PPP projects for which John Laing or a Consortium bid over the period from 31 December 2014 to 31 December 2017. The Win Rate can vary significantly from period to period and may not be a good indicator of future successful bidding activity. The Win Rate concept is not
30 directly applicable to investments in renewable energy projects, as these projects are not subject to a formal procurement process.
1.10 The Group’s expected HTM IRRs are based on a variety of assumptions which (i) may not be correct at the time they are made and (ii) may not be achieved in the future. The Group’s primary investment origination activities are focused on securing new infrastructure investments (in the form of equity and subordinated debt) that, at financial close, will meet John Laing’s internal investment targets. HTM IRRs are based on a wide range of assumptions which involve judgments made by the Group, such as project construction period, future availability or usage as well as forecast cash flows from future value enhancements and, for renewable energy investments, energy yield and future power prices, and as a result, may be subject to error from incorrect assumptions at the time they are calculated. The principal value creation mechanic inherent in John Laing’s business model is the difference between the discount rate implied by the HTM IRR at the financial close of an investment and the discount rate applied to that investment once the underlying project has entered the operational phase (as a secondary investment). Although, John Laing has in recent years experienced pressure on HTM IRRs as its Primary teams bid for new greenfield projects, this has typically been accompanied by a reduction in secondary discount rates. This has allowed the Group to maintain attractive “yield shifts”, which drives one of the principal measures applied to the Group’s investments, namely ARR. However, the erosion of such “yield shifts” could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.11 The Group and/or a Consortium may not be able to recover certain costs from new investments. The bidding process for both PPP and renewable energy projects requires a significant investment of resources. If the Group or a Consortium does not win a particular project for which it has put in a bid, it will usually not recover the associated bid costs from that bid. It is difficult for the Directors to predict whether or when the Group or a Consortium will be awarded such projects, and for PPP projects in particular, they frequently involve a lengthy bidding and selection process. This process can be affected by a number of factors, such as market conditions, the behaviour and qualifications of the Group’s consortium partners, and governmental approvals and decisions which may be beyond the Group’s or a Consortium’s control. While the Group aims to recover the aggregate total bidding costs payable by the Group in relation to contracts bid by it or a Consortium, there can be no assurance that costs recovered under contracts won (which may include success fees) will compensate for the bidding costs incurred in relation to projects lost, either in that year or subsequent years. Although certain jurisdictions, such as the United States and the Netherlands, may pay a stipend where a bidder is unsuccessful, it is unlikely that such stipend will cover the entire cost of the bid, and there can be no assurance that such stipends will be available in the future. Furthermore, there is a risk that a bid may be cancelled even after the Group or a Consortium has been appointed preferred bidder, before the underlying project reaches financial close. The Group has experienced one cancellation of a significant PPP bid before the underlying project reached financial close after having been appointed as preferred bidder. On the cancellation of the Leicester Hospital PFI bid in 2007, after a part recovery from a claim for wasted bid costs, the Group was left with immaterial unrecovered bidding costs, but there can be no assurance that such unrecovered costs will not be material in the event of future cancellations. In addition, the Group typically seeks a fee from Project Companies to compensate John Laing for the period during which it is required by project finance lenders to provide letters of credit (“LCs”) (drawn under the Group’s banking facilities) and/or cash collateral deposits, either or both of which are posted as security for John Laing’s future equity subscription obligations. Such fees payable by the Project Companies may not fully compensate for the costs incurred by the Group in providing a LC and the interest earned on cash collateral deposits may not fully cover the cost to the Group of such cash provision. The costs associated with failed bids for projects which are not otherwise compensated by stipends and/or recoveries from contracts won, and the cost of providing security to project finance lenders not otherwise compensated by fees charged to Project Companies, could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
31 1.12 Weakness in the secondary market for investments in PPP or renewable energy may affect the Group’s ability to realise full value from its divestments. Demand in the secondary market for PPP and renewable energy infrastructure investments can be expected to be linked to general economic conditions. If general economic conditions (such as interest rates, inflation, GDP growth or political conditions) change and, as a result, investment appetite in the secondary market reduces, or if purchasers in the secondary market (including John Laing Infrastructure Fund Limited (“JLIF”) and John Laing Environmental Assets Group Limited (“JLEN”)) are otherwise unable to raise funds, the Group may not be able to realise full value from divestments from its investment portfolio. The demand in the secondary market for renewable energy projects, in particular, can be expected to be influenced by: the price of renewable certificates and other governmental support mechanisms; the price of wholesale electricity which in turn is affected by the price of oil, gas, nuclear, hydro and other fuels; and governmental regulations and policies concerning the electricity sector and the renewable energy industry. If wholesale prices or the prices of competing energy products become cheaper, or if governmental regulations and policies towards the renewable energy industry change unfavourably, demand for renewable energy investments may weaken. Such weaknesses in demand could limit the Group’s ability to recycle capital for new investment commitments or otherwise have a material adverse effect on the Group’s business, financial condition, results of operations, future prospects and ultimately, the level of dividends payable to Shareholders.
1.13 Any shortfall in the financial resources that are available to the Group to satisfy its financial obligations may make it necessary for the Group to constrain its business development, refinance its outstanding obligations, forego investment and acquisition opportunities and/or sell assets. The Group expects to have cash reserves and other resources (including under the Facilities Agreement described below) available to meet its target investment volumes and investment commitments for the next 12 months. On 19 January 2015, the Group entered into a Facilities Agreement providing for £350 million senior unsecured bank facilities, comprising two revolving credit facility tranches (the “Facilities”). The maturity date of the Facilities is 9 March 2020. In June 2016 and October 2017, the Group increased the Facilities from £350 million to £400 million and from £400 million to £475 million, respectively. On 24 November 2016, the Group entered into two committed term loan facilities of £25 million each with Barclays Bank PLC and HSBC Bank plc both expiring in March 2018. These facilities back surety facilities of £50 million both expiring in March 2018. These £50 million facilities have been extended until February 2019. As at 31 December 2017, the Group had £153.1 million headroom available under the Facilities. Beyond the next 12 months, to the extent that the Group does not have sufficient cash reserves or other then-existing financial resources or is unable to complete anticipated divestments it may not be able to achieve its target investment volumes absent further borrowing or Share offerings. The Group can make no assurances that further borrowing or Share offerings will be achievable on commercially reasonable terms, which may require the Group to forgo otherwise attractive investment opportunities or to prematurely divest assets. In addition, any new borrowing by the Group to fund such future investment commitments over and above its existing expectations will have to comply with any limits on borrowing imposed by the Group’s existing financing arrangements or otherwise which are applicable to the Group at the relevant time. In particular, the Facilities Agreement contains covenants which may limit the Group’s ability to incur such additional indebtedness or to make secondary portfolio sales. The Group’s ability to make scheduled payments on its indebtedness, comply with any then-applicable financial covenants or to refinance its obligations under its then-existing debt agreements over the longer term will depend on the Group’s financial and operating performance, which in turn, will be subject to prevailing economic and competitive conditions and to financial and business risks, many of which may be beyond the Group’s control. If, in the medium term, the Group is unable to maintain sufficient cash generation to make payments under its then-outstanding LCs as they come due, maintain payments under its schedule of pension contributions, put up cash collateral for new investment commitments, comply with financial covenants or avoid default under the applicable terms of the Facilities Agreement, the Group may face increased finance charges, an acceleration of its obligations to make payments under those LCs or the cancellation of those facilities, any of which could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
32 Furthermore, the covenants applicable under the Group’s debt facilities and the lack of headroom availability could hinder the Group’s strategy and future growth in the medium term in a number of ways, such as: • causing the Group to reprioritise the uses of its capital to the potential detriment of the Group’s investment opportunities, which, depending on the level of the Group’s borrowings, prevailing interest rates and exchange rate fluctuations, could result in reduced funds being available for new investments, acquisitions, dividend payments and other general corporate purposes; • restricting the ability of the Company to pay dividends; • causing the Group to consider disposing of its interests in Project Companies at unattractive prices to raise additional cash proceeds to reduce debt; • causing the Group to consider selling-down interests in new investment commitments at or shortly after financial close; • limiting the Group’s flexibility in planning for, or reacting to, changes in market conditions and competitive pressures; • placing the Group at a disadvantage to competitors that have greater access to financial resources, and adversely affecting the Group’s reputation; • limiting the Group’s ability to provide, or substantially increasing the expense of providing, bonds, including performance bonds and bid bonds, advance payment bonds, demand guarantees, cash collateral and LCs, as required, to secure new investments; • increasing the Group’s vulnerability to continued adverse economic, financial and industry conditions, including increases in interest rates and credit spreads; and • increasing the cost of servicing the Group’s then-existing borrowings in the event then-applicable terms or covenants are renegotiated, any of which could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.14 Inability to secure project finance could hinder the ability of the Group or a Consortium to make a bid or, where the Group or a Consortium has a preferred bidder position, could impact negatively whether an underlying project reaches financial close. PPP projects are principally financed through non-recourse SPVs with funds provided by a mix of investment from sponsors (such as the Group) and secured loans from outside lenders, generally with up to 90 per cent. of funding coming from external non-recourse debt providers, such as banks or other financial institutions. Typically, a renewable energy project is 60 per cent. to 85 per cent. externally debt-funded. Where the Group or a Consortium plans to make a bid which requires new project financing facilities, there can be no assurance that it will be able to obtain such loans on favourable terms, or at all. For example, in 2009 during the Global Financial Crisis, the Consortium that was awarded the Manchester Waste PFI Project was unable to obtain sufficient funding from a syndicate of banks which therefore had to be supplemented by loans from the UK Treasury and the Greater Manchester Waste Disposal Authority itself. If one of the Group’s PPP projects obtains insufficient financing, there can be no assurance that similar alternative financing sources will be available if such situations were to arise in the future. The ability of the Group or a Consortium to obtain project financing for a particular project on behalf of the relevant Project Company is subject to a number of uncertainties, including, among other things, the Project Company’s financial strength; the type of project; the conditions of the global and domestic financial markets; and changes in monetary and regulatory policy with respect to bank lending practices and conditions in the countries where it operates. Inability to secure project finance at the bidding stage or at the preferred bidder stage due to such uncertainties could impact negatively whether an underlying project reaches financial close, which could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
33 1.15 The amount of the deficit in the Group’s main defined benefit pension scheme can vary significantly due to gains or losses on scheme investments and movements in the assumptions used to value scheme liabilities (in particular life expectancy, discount rate and inflation rate). Consequently the Group is exposed to the risk of increases in cash contributions payable and volatility in the deficit reported in the Group balance sheet and in the gains/losses recorded in the Group’s income statement. John Laing operates two defined benefit pension schemes in the United Kingdom, the John Laing Pension Fund (“JLPF”) and the John Laing Pension Plan (“JLPP”), as well as a post-retirement medical scheme. Both JLPF and JLPP are closed to future accrual and no longer have active members. The combined accounting deficit under IAS 19 in the Group’s defined benefit pension and post-retirement medical schemes at 31 December 2017 was £40.3 million, primarily as a result of the pension deficit in JLPF. Following a triennial actuarial review as at 31 March 2016, the JLPF Trustee and John Laing Limited agreed a seven-year plan to repay the actuarial deficit of £171.0 million, under which John Laing Limited would pay a deficit contribution of £26.5 million in March 2018, £29.1 million in March 2019 and £24.9 million in March 2020 and annual deficit contributions through 2023 thereafter. The next triennial actuarial valuation of JLPF will be as at 31 March 2019. Approximately 20 per cent. of JLPF’s liabilities as at 31 December 2017 were hedged under a buy-in policy implemented with Aviva in 2008. The nature of the pension arrangement with JLPF means that the Group is exposed to volatile cash, balance sheet and profit and loss impacts. In particular, the funding level of the scheme is sensitive to changes in a wide range of actual or assumed factors, which may be beyond the Group’s control, including gains or losses on scheme investments, discount rates for valuing liabilities, life expectancy, inflation and elections by members to take lump sums at retirement. As a result, it may not be possible to predict the future funding level or employer cash contribution obligations and accounting charges with certainty. Assets and investments held by JLPF may not grow to anticipated levels in the expected time periods. In the case of losses in respect of scheme investments, the Group may be required to make additional contributions to make up any prospective deficits. At its last triennial valuation as at 31 March 2017, JLPP’s future liabilities were valued at £12.0 million while its assets were valued at £13.1 million representing a funding surplus of £1.1 million on a scheme specific funding basis and a funding level of 109.2%. Consequently, the Company is not currently making contributions and all expenses are met from JLPP’s assets as and when they arise. An increase in the value of ongoing funding liabilities as a result of any of the above factors could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.16 The Group may be exposed to changes in taxation in the jurisdictions in which it operates, or it may cease to satisfy the conditions for relevant reliefs. Tax authorities may disagree with the positions the Group has taken or intends to take. Companies in the Group account for and pay tax in the jurisdictions where they are resident and, if applicable, in any other jurisdiction in which they have a permanent establishment or other taxable presence. Significant changes to and interpretation of tax laws and regulations, including changes in the basis or rate of corporation tax, withdrawal of allowances or credits, deductibility of pension contributions, deductibility of interest, imposition of new taxes or changes to withholding taxes in any of the markets the Group operates in could have a material impact upon the Group’s tax charges, valuation of the Group’s investment portfolio and returns from the Group’s investments. For example, two major jurisdictions in which the Group operates have recently adopted changes in tax legislation: the EU and the United States. With regards to the EU, the Organisation for Economic Co-operation and Development (“OECD”) published its final reports in relation to its action plan on Base Erosion and Profit Shifting (“BEPS”) on 5 October 2015. The OECD final reports were endorsed by G20 leaders and have been supported at an EU level by the adoption of the Anti-Tax Avoidance Directive (“ATAD”). The ATAD requires EU member states to make changes to their national tax laws to adopt certain of the OECD final report recommendations, including the introduction of a general limitation on tax deductions for interest and economically equivalent payments under which, broadly speaking, a company would be denied those deductions to the extent they exceeded a particular percentage of the company’s EBITDA ranging from 10 to 30 per cent (“Interest Limitation Rules”). Under ATAD, EU member states are expected to have Interest Limitation Rules in place as from 1 January 2019. Interest Limitation Rules have already been introduced in certain jurisdictions in which the Group has operations, including the United Kingdom. However, the scope of Interest Limitation Rules in the remaining EU states and in other OECD member states in which the Group has operations, including the Netherlands and France, is not yet known. The introduction and application of such
34 Interest Limitation Rules could limit the deductibility of interest payable as part of the Group’s funding costs, which could have a material impact on the Group’s tax charges, valuation of the Group’s investment portfolio and returns from the Group’s investments. With regards to the United States, the Tax Cuts and Jobs Act (“TCJA”) was enacted on 22 December 2017 and made substantial changes to US federal tax law, generally with effect from 1 January 2018. Certain of the changes made by the TCJA could materially affect the Group’s investments in the United States. In particular, the TCJA (i) introduced a new limit on the deductibility of net interest expense in excess of 30% of a US taxpayer’s EBITDA, (ii) a new provision disallowing a deduction for a US taxpayer’s otherwise deductible payments to non-US affiliates and (iii) a limitation on the amount of taxable income that can be offset by carried forward net operating losses that could materially affect the financing of US Project Companies and the after-tax returns of US Project Companies in the future. How changes made by the TCJA will be interpreted in future Treasury Department regulations and other guidance from the US Internal Revenue Service is uncertain, and could also potentially have a material impact on the Group. Future changes to US federal, state and local tax law that would have a material effect on the Group are also possible. For example, the US Project Companies benefit from certain arrangements that provide tax advantages to PPP programmes, such as financing of PPP programmes through “private activity bonds.” Private activity bonds are bonds issued by state or local jurisdictions to finance nongovernmental activities that qualify for an exemption from US federal income tax on interest for certain taxable investors and, consequently, generally are issued with lower yields. Earlier versions of the recent tax reform legislation included a provision omitted from the TCJA that would have eliminated tax exemption for interest on private activity bonds. If the tax exemption for private activity bond interest were eliminated in the future, the Group’s operations in the United States could be materially impacted. Earlier versions of the recent tax reform legislation also included a provision omitted from the TCJA that would have significantly reduced US federal tax credits for investment in wind and solar energy projects and for production of renewable energy. As enacted, the TCJA fixed the amount of US federal tax credits per kilowatt hour only for electricity produced from wind, which had been subject to annual indexation based on the US consumer price index. Future changes to US federal tax credits for investment in or production of renewable energy could affect the Group’s Project Companies in the United States that invest in wind, solar, biomass and other renewable energy projects. Future changes to US tax law also could negatively impact the investment portfolio and returns from the Group’s existing investments and might lead to additional tax cash payments in the United States. Additionally, companies in the Group sometimes benefit from the application of reliefs or exemptions in the jurisdictions in which they are liable. Should the relevant companies cease to meet the conditions for such reliefs or exemptions, this could have a material impact on the Group’s tax charges. For example, the substantial shareholdings exemption (“SSE”) regime in the United Kingdom provides that a gain on a disposal by a company of shares (or an interest in shares or certain assets related to shares) will not be a chargeable gain for corporate tax purposes provided certain conditions are met. The Group has, in the past, benefitted from SSE in relation to the disposal of certain of its interests in Project Companies. If in the future the conditions of SSE were not satisfied, the Group would be liable for corporation tax on any such gains at the then prevailing rates of corporation or equivalent tax. Certain tax positions taken by the Group are based on industry practice and external tax advice and/or are based on assumptions that involve a degree of judgement. The tax authorities in any applicable jurisdiction, including the United Kingdom, may disagree with the positions the Group has taken or intends to take regarding the tax treatment of any of the Group’s transactions. If challenges to the Group’s tax positions (through audits or otherwise) were to be successful, the Group may be required to pay additional taxes, penalty charges and interest, and it may incur costs in defending litigation or reaching a settlement with the relevant tax authority. If any of the above were to occur, this could lead to a negative impact on the Group’s effective tax rate, valuation of the investment portfolio and returns from the Group’s investments and might lead to additional tax cash payments to the extent that the Group’s existing tax losses were unavailable or insufficient to offset such additional tax liabilities. This could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.17 The Group may fail to retain key senior management and skilled personnel or fail to find high-quality personnel in, or relocate high-quality personnel to, the jurisdictions in which it operates or seeks to expand. The success of the Group’s businesses is dependent on recruiting, retaining, motivating and developing highly skilled and competent people. The Group faces competition for personnel from other companies and
35 organisations. There may at any time be shortages in the availability of appropriately skilled people at key levels within the Group and these shortages may have a negative effect on the Group. The members of the management team contribute to the Group’s ability to obtain, generate and manage investment opportunities. If the Group is unable to attract and retain high-quality personnel, it may not be able to continue to grow the Group’s businesses as anticipated. The loss of such personnel, or the inability to attract and retain additional highly skilled employees required for the Group’s activities, could impair the Group’s ability to execute its business plan and achieve its objectives or lead to the loss of other important employees, any of which could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects. In addition, as part of its strategy, the Group plans to continue to expand its investments in jurisdictions outside the UK. The success of the Group’s strategy is dependent in part on its ability to find local staff of the appropriate quality or relocate personnel with the requisite skills into these jurisdictions. Consequently, any failure to secure such staff could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.18 The Group engages in consortiums to bid for new projects, and an inability to secure appropriate consortium partners may limit the ability of the Group to source new investments or the selection of inappropriate partners might negatively impact the Group’s reputation through association. The Group bids for contracts through Project Companies which, for PPP projects, are typically formed by a consortium of partners. If the Group is unable to identify appropriate consortium partners, or if appropriate partners are unwilling to enter into a consortium with the Group, the Group may be unable to secure investments in these projects. In addition, the ability of a Consortium to win bids could be adversely affected if one of its members has engaged in misconduct during the bidding process for the envisaged project or another project altogether. This could also negatively impact the reputation of the Group as a whole if the John Laing brand becomes associated with such a partner. Accordingly, any such actions by the Group’s consortium partners, or an inability to identify and attract appropriate partners, could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.19 The valuation of the Group’s investment portfolio is affected by movements in foreign exchange rates, which will be reflected in the Group’s financial statements. In addition, there are foreign exchange risks associated with any conversion of foreign currency cash flows into and out of sterling. The Group reports its results in sterling. Accordingly, the valuation of the Group’s investment portfolio is affected by movements in foreign exchange as a majority of the Group’s investments is denominated in currencies other than sterling. The Group’s current investment portfolio includes investments denominated in Euros, US dollars, Australian dollars and New Zealand dollars. Fluctuations in exchange rates between sterling and the relevant local currencies will directly affect the valuation of the Group’s investment portfolio. Such fluctuations in valuation are reflected in the Group’s balance sheet and through the Group’s income statement. In addition, an exchange risk arises whenever the Group is required to convert non-sterling investment cash flows (including equity subscriptions, cash yields and divestment proceeds) relating to a project that is predominantly based in a foreign currency. In particular, the Group’s dividend policy envisages sterling dividend payments, in part calculated as a proportion of the proceeds of divestments, which may necessitate conversion back into sterling. Whilst the Group’s foreign exchange risk hedging policy allows the Group to enter into hedging arrangements to mitigate cash flow currency risk, there can be no assurance that such arrangements will be entered into or that they will be sufficient to cover such risk. The Group’s exposure to foreign exchange risk as described above could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
1.20 Changes in interest rates may adversely affect the Group’s finance costs. The Group currently has a Facilities Agreement under which floating rate debt is available, and may, in the future, finance its activities with floating rate debt. With respect to such interest-bearing liabilities, the Group’s performance may be adversely affected if it fails to fully counteract the effects of changes in interest rates on its operations by employing an effective hedging strategy, including engaging in interest rate swaps or other interest rate derivative contracts. Interest rates are highly sensitive to many factors beyond the control of the Group. There can be no assurance that hedging arrangements will be entered into or, in the event that they are entered into, that they will be sufficient to cover such risk. Accordingly, changes in interest rates could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
36 For a discussion of interest rate risk in respect of the project finance raised by Project Companies, see paragraph 2.9 of this Part 2 (Risk Factors).
1.21 A significant portion of the total value of the Group’s investments is, and may in the future be, in a small number of projects, and changes to the value of these projects may materially affect the Group’s financial position and results of operations. The values of some of the investments in the Group’s investment portfolio are significantly greater than others, and the concentration of such investments has increased over time. For example, approximately 34 per cent. of the Group’s Portfolio Value as at 31 December 2017 was attributable to four investments, including those in the two Intercity Express Programme (“IEP”) projects, Denver Eagle P3 and Sydney Light Rail. Although these investments are diversified by sector, counter-party and by geography, a substantial change in the value of any one of these investments could have a material impact on the Group’s business, financial condition, results of operations and future prospects.
1.22 The United Kingdom’s anticipated withdrawal from the European Union could adversely affect the Group On 23 June 2016, a majority of UK voters voted in favour of the United Kingdom’s exit from the EU (commonly referred to as “Brexit”) in a national referendum, and on 29 March 2017, the UK government triggered Article 50 of the Treaty on European Union, which initiated the withdrawal procedure and set the United Kingdom on track to exit the EU by no later than April 2019. Brexit has created significant political, social and macroeconomic uncertainty for the United Kingdom and Europe and could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which EU laws to replace or replicate. Worsening of general economic conditions in the UK could significantly affect Project Companies located in the UK through, for example, heightened counterparty risk and management of market risk. In addition, regulatory regimes applicable to the Group may be affected by Brexit, including certain employment regulations, duties and taxation. Any changes to the foregoing or other regulatory regimes could require the Group to develop new policies and procedures or reorganise its operations. As negotiations with the EU are ongoing, it is not clear what the impact on the Group will be when the United Kingdom eventually withdraws from the EU. However, any of the aforementioned possible effects of Brexit, and others the Group cannot anticipate, could materially adversely affect the Group’s business, prospects, results of operations and financial position.
1.23 The political and economic climate in the European Union could impact the value of, or the return generated from, any or all of the Group’s investments located in the European Union. Political and economic changes in the European Union, such as the full or partial break-up of the Eurozone or the depreciation of the Euro, could have a significant impact on the fair value of the Group’s investments in Project Companies located in the European Union. Such changes could result in heightened counterparty risk at a project level as well as adversely affect the management of market risk and in particular asset and liability management due, in part, to redenomination of financial assets and liabilities at a project level. Should the scope and severity of the adverse economic conditions recently experienced by some Member States and elsewhere worsen or reoccur, the risks faced by Eurozone domiciled Project Companies would be exacerbated. In addition, the Group’s or a Consortium’s bidding activity may be suspended in certain Member States as a result of such factors. Developments relating to the current economic conditions and unfavourable financial environment, including those discussed above, could have a material adverse effect on the fair value of the Group’s investments in Project Companies located in Europe as well as the extent of the Group’s or a Consortium’s bidding activity within the Eurozone, which in turn could have a material adverse effect on the Group’s business, prospects, results of operations and financial position.
1.24 Failure to maintain secure IT systems and to combat cyber and other security risks to information and physical sites could adversely affect the Group’s ability to perform current contracts and to win future contracts. A prolonged loss of critical IT systems (corporate applications and infrastructure) due to failure or loss of network connectivity, security failure or commercial failure of a third party supplier could lead to the inability of the Group to meet contract requirements, an inability to perform core business processes, loss of business, media attention and future scrutiny. Additionally, the Group must comply with restrictions on the handling of sensitive information (including personal information). Despite existing security measures, the Group’s data
37 infrastructure could be vulnerable to break-ins, computer viruses, programming errors, infiltration or attacks by third parties. A security breach of the Group’s computer systems could damage its reputation, increase regulatory scrutiny, disrupt its business or result in liability. The Group could also be required to significantly increase capital expenditure and other resources as a consequence of such breaches or to alleviate problems caused by such breaches. Any of the foregoing could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
2. Risks relating to the Group’s investments in Project Companies and other project-level risks The Project Companies are structured as standalone, non-recourse SPVs. As a result, the project financing, activities, liabilities and performance obligations of each individual Project Company (including such Project Companies in which the Group owns a controlling interest and which are therefore “subsidiary undertakings” of the Company within the meaning of section 1162 of the Companies Act 2006) are typically ring-fenced from each other and from the Group as a whole. The Group’s commitments as a shareholder and subordinated debt provider to each of the Project Companies (including subsidiary Project Companies) are limited to its investment amount. If the risks described below were to occur in relation to one of the Project Companies, the value of the Group’s investment in the affected Project Company, as well as the timing and quantum of distributions from such Project Company, could be negatively impacted. However, because such risks are generally borne by the affected Project Company with no recourse to the Group as a whole, their manifestation may not individually have a material adverse effect on the Group. Nevertheless, the manifestation of any of these risks in relation to multiple Project Companies simultaneously, or to a Project Company in which the Group’s investment comprised a significant portion of the Group’s total investment portfolio, could adversely affect the total value of the Group’s investment portfolio and the cash yields from the portfolio, which in turn could have a material adverse effect on the Group’s business, results of operations, financial condition and future prospects.
2.1 Adverse financial performance by a Project Company which affects the financial covenants in its project finance loan documents may result in the Project Company being unable to make distributions to the Group and other shareholders or subordinated debt providers and may enable senior project finance debt providers to declare default of the financing terms and exercise their security. The covenants provided by each of the Project Companies in connection with their respective senior debt are normally extensive and detailed. If certain covenants are breached, payments or distributions on the subordinated debt and equity (which are the type of investment instruments typically held by the Group) of the breaching Project Company are liable to be suspended. If an event of default occurs on the Project Company senior debt, then the senior lenders may become entitled to step in and take responsibility for, or appoint a third party to take responsibility for, the Project Company’s rights and obligations under the relevant project agreement, although the senior lenders will have no recourse against the Group beyond its investment commitment in such circumstances. Such event of default could ultimately give the relevant Governmental Entity the right to terminate the project which could result in a write-off of the Group’s investment. The senior lenders may also be entitled to enforce their security over the breaching Project Company or over its assets and to sell such Project Company or its assets to a third party. While such enforcement of security and selling of assets have not affected any of the Project Companies during the period in which the Group has held an investment in such Project Companies to date, the Group is aware that such enforcement has affected other participants in the PPP market, and there is no guarantee that it will not happen to any of the Project Companies in the future. The consideration for any such sale is unlikely to result in any payment in respect of the Group’s investment in the Project Company. Should payments be suspended or investments be sold in the manner described in this paragraph, the fair values of the investments in the affected Project Companies are likely to be reduced, perhaps significantly, which in turn could have a material adverse effect on the Group’s business, results of operations, financial condition and future prospects.
2.2 The inability of a Project Company to refinance existing maturing medium-term project finance facilities periodically during the life of a project could affect the Group’s future returns on investments from such projects. Project finance arrangements may not provide for a loan term which coincides with the term of the relevant Project Company’s PPP concession agreements, which are typically for a period of up to 30 years, or the lives of the relevant renewable energy assets. The project finance arrangements in respect of the Group’s US, Europe and UK PPP investments are typically secured at financial close on terms that are similar to the underlying project concessions and at fixed rates of interest. The finance agreements in respect of its Australia and New
38 Zealand PPP investments are generally medium-term and require successive refinancings during the life of the project, although the first refinancing is always scheduled to occur after full debt drawdown on construction completion. There can be no assurance that the Project Companies will be able to renew their loans for projects on terms that are commercially acceptable or in the required amounts or at the required time. In such cases, the existing lenders may exercise their security and seek a sale of the affected Project Company or its assets to repay their loans. Alternatively, the terms upon which a refinancing can be secured may have a material and adverse effect on the distribution profile to shareholders and subordinated debt providers including the Group. These outcomes, in turn, could negatively impact the Group’s valuation of its investment portfolio and its future returns on investments from the affected project, which could have a material adverse effect on the Group’s business, results of operations, financial condition and future prospects.
2.3 The Project Companies can be subject to various complex regulations and any violations of or changes in such regulations could adversely impact the Group’s investments. The jurisdictions in which the Project Companies operate can impose a number of complex, demanding and changing legal, administrative and regulatory requirements. Examples of such requirements include, inter alia, building and construction laws and regulations, planning requirements, utilities regulations, employment laws, health and safety regulations and environmental and sustainability requirements. These regulations often rely on the judgment of the administering authorities in relation to enforcement. Violations of, or changes in, relevant law, regulations or policies, or the interpretation thereof, or delays in such interpretations being delivered, may delay or increase the cost of ongoing projects or subject the Project Companies to penalties, fines, criminal prosecutions, civil claims or other unforeseen costs or debarment, which could have an adverse impact on the fair value of the Group’s investment in the affected Project Company and on the Group’s other investments, prospects or future bids in the same jurisdiction. This in turn could have a material adverse effect on the Group’s business, results of operations, financial condition and future prospects.
2.4 Project Companies are exposed to counterparty credit risk and counterparty performance risk with regards to Governmental Entities, subcontractors, lenders, suppliers and consortium partners, including counterparties to renewable energy projects. A key consideration for the Group prior to making an investment commitment is the creditworthiness of the commercial and financial counterparties involved in the project given that it is possible that Governmental Entities or other project clients, subcontractors, consortium partners, suppliers, or financial institutions such as banks and insurance providers (“counterparties”) may become insolvent or default under their contracts. If a counterparty were to default on a payment or delivery obligation to a Project Company, such Project Company may be unable to meet its obligations to other counterparties. As the Group expands its operations internationally, public sector counterparty risks may arise by virtue of investments in certain countries being subject to greater risks given the less developed PPP markets and/or lack of long term experience of PPP projects compared to other jurisdictions, such as the United Kingdom, as well as the lower credit rating of some public sector clients. With respect to state or local authorities, it cannot be assumed that the relevant central government will in all cases assume liability for the obligations of quasi-government agencies in the absence of a specific guarantee. In addition, there can be no assurance that central governments will themselves never default on their obligations. If a counterparty, such as a Governmental Entity, subcontractor, supplier or consortium partner, including a counterparty to a renewable energy project, were to become insolvent or otherwise be unable to meet its obligations in connection with a particular project including performance in line with project agreements, the affected Project Company may need to find a replacement to carry out that party’s obligations, which may increase the costs of such project or reduce its revenue. In extreme cases, this could lead to the failure of a project in its entirety, which would require a write-down of the Group’s investment in such project, which in turn could materially adversely affect the Group’s business, results of operations, financial conditions and future prospects. For example, the success of the Group’s investment in the IEP projects is dependent on Hitachi’s delivery of the high-speed trains (which are the underlying assets to be delivered under the projects) which will operate on the Great Western and the East Coast Rail networks in the United Kingdom. A default by a financial counterparty in respect of contracts, such as bank facilities, interest rate swaps and other hedging arrangements, could also impose costs on the affected Project Company associated with replacing such facilities, swaps or financial derivatives, and additional costs associated with any related loss of liquidity or exposure to unhedged interest rate and currency risk could be incurred. If the institutions and lenders,
39 including banks, with which a Project Company does business, or to which securities have been entrusted, were to encounter financial difficulties, it may impair the Group’s investments or such Project Company’s operational capabilities or capital position. Accordingly, any significant defaults, financial difficulties or performance delays or service underperformance on the part of public sector, commercial or financial counterparties could increase costs or liabilities for the affected Project Company and adversely impact its profitability and financial condition, which in turn, could have a material adverse impact on the Group’s business, prospects, results of operations and financial position.
2.5 A Project Company or a service provider to a Project Company may fail to manage contracts efficiently or effectively. The success of a Project Company depends in part on managing multi-year contracts between such Project Company, on the one hand, and Governmental Entities or other project clients, on the other hand, efficiently and effectively in order to adequately safeguard such Project Company against risk and ensure profitability. Project Companies must also manage subcontracts through which risks are passed to construction contractors and service providers. They must manage these contracts in accordance with their terms and must adapt to developing and unanticipated circumstances during the life of a project. A failure to deploy sufficiently capable project managers, a failure to manage relationships with and the performance of subcontractors, a failure to manage a labour dispute or a lack of focus on service quality and client relationships could result in delayed or substandard completion of a project, poor performance, a reduction in the financial return to investors in the Project Company or ultimately the failure of the Project Company which could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
2.6 Investments with consortium partners potentially involve risks not associated with wholly-owned investments made by the Group. The Group often invests in projects alongside consortium partners and may rely on consortium partners or other third parties for the delivery of such projects. In circumstances where the Group will not be able to control the decisions taken in respect of a Project Company, the success of the particular investment may depend on continued effective performance by or co-operation with consortium partners. If disagreements with a consortium partner were to arise in relation to a Project Company and were to remain unresolved, the Group may be unable to pursue its preferred strategy with respect to such Project Company and this may potentially require the Group to divest its interest in such Project Company. A divestment in any such circumstances may be for a reduced value which could in turn have a material adverse effect on the Group’s business, results of operations, financial condition and future prospects.
2.7 The Project Companies may be exposed to changes in taxation in the jurisdictions in which they operate. The Project Companies account for and pay tax in the jurisdictions where they are resident and, if applicable, in any other jurisdiction in which they have a permanent establishment or other taxable presence. Significant changes to and interpretation of tax laws and regulations, including changes in the basis or rate of corporation tax, withdrawal of allowances or credits, or imposition of new taxes in any of the jurisdictions in which the Project Companies operate, could have a material impact upon the Project Companies’ tax charges. For example, changes to tax laws based on recommendations made by the OECD in relation to the BEPS project (as described in paragraph 1.16 above) could have a material impact upon the Project Companies’ tax charges, which could negatively impact the fair value of the Group’s investment in the affected Project Companies. The United States has also recently enacted major tax reform legislation (as described in—“The Group may be affected by recent changes in United States tax law” above). The interpretation of this new legislation in the Treasury Department regulations and other guidance from the US Internal Revenue Service could also have a material impact on the Project Companies. This in turn could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
2.8 A Project Company could be liable to Governmental Entities or other project clients for damages and could be subject to criminal liability and the John Laing brand could be damaged if information systems are breached or client data are compromised. Project Companies may be liable to Governmental Entities or other project clients for the disclosure of confidential information as a result of system failures or otherwise, including in relation to the General Data Protection Regulation in the European Union, which will be effective from May 2018. Project Companies, in particular, those in the social infrastructure sector, may be required to collect and store sensitive or confidential
40 client data to perform the services they provide under their contracts with Governmental Entities. These contracts may not limit a Project Company’s potential liability for breaches of confidentiality, although the non-recourse nature of the Group’s investment commitments in Project Companies ring-fences liability at the project level (including in respect of majority-owned Project Companies). If any person, including any of the current or former employees of the affected Project Company, penetrates such Project Company’s network security or misappropriates sensitive data or if the affected Project Company does not adapt to changes in data protection legislation, it could be subject to significant liabilities to Governmental Entities or other project clients, or to the people for whom such Project Company performs services on behalf of such project clients, for breaching contractual confidentiality provisions or privacy laws, as well as reputational damage. For example, authorities in Australia and New Zealand require compliance with the duties of confidentiality and restriction of access to information under Probity Deeds which are executed in connection with bidding for public projects. In turn, any lack of compliance can result in serious reputational issues which could cause major damage to prospects on future bids, in addition to the consequences of breach in relation to the bid concerned. A Project Company may also be subject to civil actions and criminal prosecution by Governmental Entities for breaches of applicable data protection laws. Any mismanagement, breach or resulting litigation could have a negative impact on the value of the Group’s investment in the affected Project Company and/or the reputation of the Group, which in turn could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
2.9 To the extent that a Project Company’s actual costs incurred differ from forecast costs, for example, because of late construction or the whole or a part of an asset of an availability-based Project Company concession is not available for use, and costs and/or performance deductions cannot be passed on to subcontractors or other third parties, investment returns may be adversely affected. Infrastructure projects rely on large and detailed financial models to project, inter alia, the construction cost of the relevant infrastructure, the costs of service provision and maintenance and the costs of debt service, taxation and shareholder distributions. Furthermore, such models also project revenues from Governmental Entities or in respect of energy generation. Such models may also contain macro assumptions relating to future trends such as tax rates, foreign exchange, interest rates and rates of inflation and power prices (to the extent not hedged or borne by the relevant Governmental Entity or other counterparty). These assumptions may prove to be inaccurate and thus the outputs projected to be received in the financial models at any time may not be actually realised by the Project Company. As a result, the fair value of the cash flows to equity from the affected Project Companies may be reduced. During the construction phase of a project, the Group’s investment returns may be adversely affected if construction costs are greater than expected. In addition, significant additional financial costs can be incurred or a project could be terminated where construction milestones are not met or a project is not delivered on time. If construction or other long stop dates are exceeded, this may enable public sector counter-parties and/or project finance debt providers to declare a default and, in the case of the latter, to exercise their security. While John Laing’s policy is to invest in Project Companies that allocate substantially all construction delay risk through their subcontracting arrangements, which typically include fixed-price, date-certain subcontracts, and to select subcontractors with experience and financial strength, there can be no assurance that such risks can be passed on in whole or in part to subcontractors or any other parties. In addition, the Group’s investment returns may be adversely affected if components of the assets or the assets themselves do not, once operational, perform as forecast or are otherwise unavailable for use. Where such construction, operational and performance risks are not borne by subcontractors, Governmental Entities or other project clients or other parties along the supply chain, this could result in a decrease in the operating profit and cash flows of the affected Project Company and its ability to make distributions or the termination of its contracts. During the life of a project, components of the underlying assets relating to the project (such as elevators, roofs, train doors, air conditioning plant, road pavement, turbines, inverters and other structures) may need to be replaced or undergo major refurbishment. Shorter than anticipated asset lifespans or higher replacement costs or inflation higher than forecasted may result in such lifecycle costs being much higher than anticipated. Conversely, longer lifespans and lower than forecast inflation may result in lifecycle costs being less than anticipated. Practice in respect of the allocation of lifecycle expenditure risk varies, and it may be retained by a Project Company or subcontracted to a third party. A failure to accurately estimate lifecycle costs by a Project Company and retain or accumulate sufficient cash balances to meet such costs could negatively impact the fair
41 value of the equity cash flows of the affected Project Companies. This in turn could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
2.10 In circumstances where revenue from a PPP project is related to patronage (i.e. customer usage), actual revenues may vary materially from assumptions at the time the investment commitment is made. The Group may invest in PPP projects which have demand-based concessions where the payments received once the underlying infrastructure asset is operational depend on the level of use made of the asset. There is a risk that the level of use of such assets, and therefore the fair value of such investments, will be lower than expected. For example, projected revenues from the Group’s I-77 and I-66 Managed Lanes investments are based on actual volumes of traffic, and less traffic than anticipated could impact the return on capital for equity investors. Other PPP projects (including availability-based projects where the bulk of payments is based on making the facilities available for use and does not depend substantially on the demand for or use of the project) may depend in part on additional revenue from ancillary activities. The amount of additional revenue received from any such activities may be variable and less than projected. There is a risk that the level of use of PPP project assets and therefore the returns from such Project Companies will be different to those expected, which could in turn have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
2.11 Revenues from renewable energy projects may be affected by the volume of power production, restrictions on the electricity grid, plant asset availability and other factors such as noise restrictions, as well as by changes in power and gas prices. The revenues from renewable energy projects are reliant in part on the amount of energy generated, and thus may be exposed to the risk that volumes fall below projections, which would result in a reduction in expected revenues for these Project Companies. In addition, revenues relating to wind farm or solar photovoltaic (“solar PV”) park projects will be dependent upon the meteorological conditions and efficiency and reliability of the installed equipment at such projects invested in by the Group as well as site-specific conditions. Meteorological conditions at any site can vary across seasons and time. Variations in meteorological conditions can occur as a result of fluctuations in the levels of wind and sunlight on a daily, monthly and seasonal basis, and over the long term as a result of more general changes or trends in climate. Any such variations affecting wind or sunlight could have a material adverse effect on the revenues from the Group’s investments in renewable energy projects. Biomass, solar and wind investments may be affected by the efficiency and reliability of the installed equipment as well as by access to sufficient fuel supplies at the right cost and of the right quality. Revenues from renewable energy investments may also be affected by restrictions on the electricity grid and other factors such as noise restrictions, as well as by changes in electricity prices. The wholesale market price of electricity is volatile and is affected by a variety of factors, including market demand for electricity, the generation mix of power plants, availability and price of sources of generation, governmental support for various forms of power generation, as well as fluctuations in the market prices of commodities and foreign exchange. While some of the Group’s renewable energy investments benefit from fixed prices or other governmental support mechanisms, these may not cover the whole expected output and/or useful life of the underlying asset. The remaining life is based on revenue which is based on wholesale power prices. A reduction in the wholesale market price for electricity or adverse wind conditions and/or levels of sunlight and/or significant electricity grid restrictions could all negatively affect the revenues generated by the renewable energy projects invested in by the Group, which could then have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
2.12 A major incident at any of the projects invested in by the Group, such as a natural disaster, a terrorist attack or war, could lead to a loss of crucial business data, technology, buildings and reputation and harm to the public and, as a result, potentially impact the Group’s ability to sell its investment in such project. The operations and performance of the Project Companies may, directly or indirectly, be affected by reason of force majeure events, such as a terrorist attacks, natural disasters or war, which are outside the control of the Group and the Project Companies and may not be covered by insurance. The occurrence of such events may result in delay in a Project Company’s construction activities in the primary stage or in an operational asset of a Project Company being unavailable for use. In particular, the impact of such events would be exacerbated in relation to projects in the social and transport sectors, such as hospitals or bridges. Such a catastrophic event could result in the personal injury or death of one or more persons, including employees of subcontractors working on the project or members of the public, significant environmental harm, and/or extensive damage to third party property. Under certain project agreements, the occurrence of a force majeure event may give rise to
42 a right by the Governmental Entity to suspend payments (as well as a right by the affected Project Company to suspend performance) while the force majeure event persists. If such event were to continue for a protracted period of time (as specified in the relevant project agreements and which varies by project), it could give rise to a right by the Governmental Entity to terminate the project in its entirety, with limited or no compensation for the equity contributed by the Group to the affected Project Company. The occurrence of force majeure events could therefore negatively impact the fair value of the Group’s investment in the affected Project Company and in turn have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
2.13 The Project Companies may have inadequate insurance cover and may face increased costs to obtain insurance cover. The insurance for each of the Project Companies and its contractual limitations on liability may not adequately protect an affected Project Company against liability for events involving, amongst other things, environmental liability or business interruption losses in excess of insurance cover. While the Group maintains insurance typical in size and scope for a business of the Group’s nature and risk profile, the scope of insurance coverage for each project varies and is typically stipulated by the respective project agreements and is the responsibility of the relevant Project Company. Any claims made under an affected Project Company’s insurance policies may cause such Project Company’s premiums to increase. In addition, broader economic pressures may put pressure on insurance costs. Any future damage caused by the affected Project Company’s services that are not covered by insurance, are in excess of policy limits, are subject to substantial deductibles or are not limited by contractual limitations of liability could have a negative impact on the fair value of the Group’s investment in the affected Project Company, which in turn would have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects. In addition, while the Project Companies review subcontractor insurance as part of their due diligence process, indemnities which such Project Companies receive from their respective subcontractors may not be easily enforced if the relevant subcontractors do not maintain adequate insurance. If a Project Company is unable to secure adequate insurance and/or is unable to be indemnified by its subcontractors due to their lack of adequate insurance, it could impact negatively the fair value of the Group’s investment in the affected Project Company, which could in turn have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
2.14 Failure at the project level to obtain consents or waivers in respect of a Project Company’s financing or other project documents could result in a termination of the affected project(s) and/or a loss of the Group’s investment in such project(s). Failure at the project level to obtain waivers and/or consents in respect of a Project Company’s financing documents could have a material adverse effect on such Project Company’s ongoing business and/or operations. For example, if construction is delayed, for any reason, beyond the long-stop date set out in an affected Project Company’s project financing documents and the lenders fail to waive such delay or fail to extend such long-stop date, such Project Company would be in breach of its project financing documents, which in turn could give the relevant lenders a right to stop providing financing to the affected project. Each of these consequences in turn could have a material adverse effect on the Group’s business, results of operations, financial condition and future prospects.
3. Risks relating to the Group’s external asset management business 3.1 The Group’s external asset management business and the infrastructure investment advisory and management industries as a whole are sensitive to adverse economic, political and market factors that are beyond the Group’s control. The Group manages assets on behalf of third parties (“External AUM”) under arm’s length investment management contracts with two (separately listed) infrastructure funds through a wholly owned subsidiary, John Laing Capital Management Limited (“JLCM”), comprising a portfolio value of £1,227.8 million for JLIF as at 30 September 2017 and a portfolio value of £420.7 million for JLEN as at 31 December 2017. The infrastructure investment market in which JLCM offers its services (which comprised 8.5 per cent. of the Group’s operating income) is directly affected by many national and international factors that are beyond its control, such as the prevailing economic environment, including changes in inflation and interest rates and the supply and/or demand of new infrastructure projects.
43 Accordingly, any of these factors could lead to a reduction in External AUM and/or the Group’s fee income from investment management services, which in turn could have a material adverse effect on the Group’s business, results of operations, financial condition and future prospects. In addition, under the Investment Adviser Agreements (as defined in paragraph 3.3 below), JLCM receives an investment management fee from each of JLIF and JLEN, which is tied to the amount of assets JLCM manages for the relevant fund. If either JLIF or JLEN were unable to maintain investor appetite for its fund or were unable to raise capital for any reason, it would have a negative impact on the amount of fees received by JLCM from the affected fund, which in turn could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
3.2 The past performance of JLIF and JLEN should not be considered indicative of the future performance of such funds or of the Group’s future fee income from such funds. The past performance of JLIF and JLEN is not a guarantee of future performance. The fee income earned by JLCM pursuant to its Investment Adviser Agreements (as defined in paragraph 3.3 below) with each of JLIF and JLEN is a percentage of the respective fund’s “adjusted portfolio value”, which approximates to the value of such fund’s investment portfolio, at a particular point in time. The historical performance of JLIF and JLEN, respectively, (and thereby the growth in portfolio value of each fund) has benefited from investment opportunities and general market conditions that may not repeat themselves and there can be no assurance that the Group’s investments sold to JLIF or JLEN will be profitable in the future. Poor performance of JLIF and JLEN could result in damage to the Group’s brand as an investment adviser (as well as to the John Laing name which JLIF and JLEN use under licence), a reduction in External AUM and a corresponding reduction in fee income, any of which could have a material adverse effect on the Group’s business, results of operations, financial condition and future prospects.
3.3 Termination of JLCM’s investment adviser agreements with JLIF and JLEN, respectively, would be materially detrimental to the Group’s asset management business. JLCM provides investment management services to (a) JLIF pursuant to an investment adviser agreement dated 27 October 2010 (as amended and restated on 10 September 2014 and further amended on 18 December 2014, 8 April 2015, 12 November 2015 and 8 August 2017, the “JLIF Investment Adviser Agreement”) and (b) to JLEN pursuant to an investment adviser agreement dated 19 February 2014 (as amended on 21 March 2014 and 25 June 2014, the “JLEN Investment Adviser Agreement”, together with the JLIF Investment Adviser Agreement, the “Investment Adviser Agreements”). The JLIF Investor Adviser Agreement may be terminated by either party giving one year’s written notice of termination at any time. JLIF may also terminate the JLIF Investment Adviser Agreement by giving six months written notice at any time and paying a termination fee to JLCM in lieu of the remaining six months’ notice period. The JLEN Investment Adviser Agreement may be terminated by either party giving one year’s written notice of termination at any time after 31 March 2018 (being the fourth anniversary of the listing of JLEN on the London Stock Exchange). If either JLIF or JLEN were to terminate or materially renegotiate its respective Investment Adviser Agreement with JLCM, it would have a material adverse effect on the Group’s External AUM and fee income from investment management services, which in turn could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
3.4 The ability of JLIF and JLEN to finance further investments may have an impact on both the Group’s secondary market for investments in PPP and renewable energy projects and the Group’s asset management business more generally. To the extent that JLIF and/or JLEN cannot finance further investments for any reason, including a lack of cash reserves or an inability to borrow or issue further shares, the Group’s ability to sell investments in PPP and renewable energy projects to either JLIF or JLEN may be significantly impaired. Under John Laing’s first offer agreements with JLIF and JLEN, respectively (the “First Offer Agreements”), JLIF and JLEN (as applicable) have the right of first offer with respect to certain of the Project Companies in which John Laing seeks to dispose of its interest and which fall within the investment policy of the relevant fund. This arrangement benefits both JLIF and JLEN, on the one hand, which have a pipeline of investment opportunities, and John Laing, on the other hand, which has a natural buyer for the investments it seeks to dispose of that are within the scope of the First Offer Agreements. Accordingly, if JLIF or JLEN were unable to finance further acquisition of Project Companies in which the Group’s interests are up for disposal, John Laing would have to
44 seek and rely entirely on other secondary market investors in order to realise the value of its investments in such Project Companies. In such circumstances, there is no guarantee that the Group would be able to find suitable alternative investors, which could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
3.5 The Group may fail to manage conflicts of interest as investment adviser to JLIF and JLEN. Given the nature of the Group’s relationship with JLIF and JLEN, there may be circumstances in which the Group as investment adviser has, directly or indirectly, a material interest in a transaction being considered by JLIF or JLEN or a conflict of interest with it. Under the First Offer Agreements, JLIF and JLEN respectively have rights of first offer in relation to certain planned disposals of the Group’s interests in Project Companies which fall within the investment objective of the relevant fund. While the JLCM fund management teams operate behind Chinese walls to ensure the separation of “buyside” and “sellside” teams where John Laing is selling investments to JLIF or JLEN, there is no assurance that the Group will not face conflicts in its duties to JLIF and/or JLEN, including as between them. The Group may suffer reputational damage or potential regulatory liability if its procedures and systems to identify, record and manage such potential conflicts of interest fail. Any such failures may negatively impact the Group’s reputation and brand, and could have a material adverse effect on the Group’s business, financial condition, results of operations and future prospects.
3.6 The investment management industry is highly regulated and any regulatory non-compliance or adverse changes in the regulatory environment could have a material adverse effect on JLCM and consequently, the Group. The FCA is the primary regulator of JLCM. The withdrawal of, or an amendment to, any regulatory approval required by JLCM or any of its directors or employees could result in the cessation of, or an adverse change in, JLCM’s business or a part thereof. The FCA has broad regulatory powers dealing with all aspects of financial services, including the authority to grant, and in specific circumstances to vary or cancel, permissions previously granted. The FCA has effected greater regulatory scrutiny over the financial institutions it regulates in recent years and it is expected that this will continue for the foreseeable future. The FCA and other regulators have in the past and may in the future make enquiries of companies operating within their jurisdiction regarding compliance with regulations governing the conduct of business or the operation of a regulated business and the handling and treatment of clients or conduct investigations where it is alleged that regulations (including insider trading laws) have been breached. Any regulatory proceedings resulting from such enquiries could result in adverse publicity or negative perceptions regarding JLCM and/or the Group, restrictions on business activities and/or key personnel or fines and other penalties, any of which could result in a loss of External AUM, as well as diverting the attention of John Laing’s management from the day-to-day management of the Group. A significant regulatory action against JLCM could also lead to a reduction in the Group’s fee income from investment management services and/or External AUM. Changes in: (i) the extent of the FCA’s oversight of JLCM; (ii) the FCA’s interpretation or application of the current rules in respect of regulatory capital; or (iii) JLCM’s regulatory capital requirements, could, in the longer term, have a negative impact upon the ability of JLCM to conduct its business, which in turn would have a material adverse effect on the Group’s business, results of operations, financial condition and future prospects.
4. Risks Relating to the Shares The value of an investment in the Nil Paid Rights, Fully Paid Rights or the Rights Issue Shares may go down as well as up and any fluctuations may be material. The Company’s share price has fluctuated and may continue to fluctuate. The market price of the Nil Paid Rights, Fully Paid Rights and the Rights Issue Shares could also be subject to significant fluctuations due to a change in sentiment in the market regarding these securities. The factors which may affect the Company’s share price, and the price of the Nil Paid Rights, the Fully Paid Rights and the Rights Issue Shares, include (but are not limited to): • the Company’s expected and actual performance and the performance of the industries in which it operates; • changes in government spending and/or policy and the level of activity in the geographies in which the Company operates;
45 • regulatory changes affecting the Group’s operations; • speculation regarding mergers or acquisitions involving, and/or major divestments by, the Company or its competitors; • significant changes in macro-economic factors such as foreign exchange rates, inflation, interest rates, and power prices; and • future issues of Shares, or large purchases or sales of Shares in the market. Furthermore, the Company’s share price, and the price of the Nil Paid Rights, the Fully Paid Rights and the Rights Issue Shares, may fall in response to market appraisal of its current strategy or if the Group’s operating results and/or prospects from time to time are below the prior expectations of market analysts and investors. In addition, stock markets have from time to time experienced significant price and volume fluctuations that have affected the market price of securities and which may be unrelated to the Group’s operating performance and prospects. Any of these events could result in a decline in the market price of the Nil Paid Rights, Fully Paid Rights or Shares.
4.1 The market price for the Shares may decline below the Rights Issue Price. The public trading market price of the Shares may decline below the Rights Issue Price. Should that occur prior to the latest time and date for acceptance under the Rights Issue, Shareholders who exercise their rights in the Rights Issue would suffer an immediate loss as a result. Moreover, following the exercise of their rights, Shareholders may not be able to sell their Rights Issue Shares at a price equal to or greater than the subscription price for those shares. Shareholders who decide not to exercise their Nil Paid Rights may also sell or transfer them. If the public trading market price of the Shares declines below the Rights Issue Price, investors who have acquired any such Nil Paid Rights in the secondary market will likely suffer a loss as a result.
4.2 Shareholders located outside the United Kingdom may not be permitted to take up their entitlements under the Rights Issue. Securities laws of certain jurisdictions may restrict the Company’s ability to allow participation by Shareholders located in such jurisdictions in the Rights Issue. In particular, the Rights Issue will not be registered under the Securities Act and therefore Shareholders located in the United States may not be permitted to take up their entitlements under the Rights Issue unless an exemption from the registration requirements of the Securities Act is available. Qualifying Shareholders with a registered address in, or who are located in or are citizens of, countries other than the United Kingdom should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their Nil Paid Rights or to acquire Fully Paid Rights or the Rights Issue Shares.
4.3 Shareholders who do not (or are not permitted to) subscribe for Rights Issue Shares in the Rights Issue will experience dilution in their ownership of the Company. If any Shareholder does not take up the offer of Rights Issue Shares under the Rights Issue, either because the Shareholder is in the United States or another jurisdiction where its participation is restricted for legal, regulatory and other reasons or because the Shareholder does not respond by 11.00 a.m. on 23 March 2018 (the expected latest time and date for acceptance and payment in full for that Shareholder’s provisional allotment of the Rights Issue Shares) and that Shareholder’s Nil Paid Rights to subscribe for the Rights Issue Shares lapse, the Shareholder’s proportionate ownership and voting interests as well as the percentage that its shares will represent of the total issued ordinary share capital of the Company will be reduced accordingly. Even if a Shareholder elects to sell its unexercised Nil Paid Rights, or such Nil Paid Rights are sold on its behalf, the consideration the Shareholder receives may not be sufficient to compensate it fully for the dilution of its percentage ownership of the Company’s share capital that may be caused as a result of the Rights Issue. If the Joint Bookrunners are unable to find subscribers for such Rights Issue Shares or are unable to achieve a price at least equal to the Rights Issue Price and the related expenses of procuring such subscribers, Shareholders will not receive any consideration for the Nil Paid Rights they have not taken up. Furthermore, to the extent that Shareholders do not exercise their Nil Paid Rights to subscribe for the Rights Issue Shares, their proportionate ownership and voting interest in the Company will be reduced and the percentage that the Shares of that Shareholder would represent of the total share capital of the Company will
46 also be reduced accordingly. Any consideration received may not be sufficient to compensate that Qualifying Shareholder fully for the dilution of its percentage ownership of the Company’s issued ordinary share capital that may be caused as a result of the Rights Issue.
4.4 The issuance of additional Shares in the Company in connection with future investments or otherwise may further dilute all other shareholdings and could adversely affect the market price of the Shares. The Company may seek to raise financing to fund future investments and other growth opportunities. The Company may, for these and other purposes, such as in connection with an offer of additional Shares, in the future issue additional equity or convertible equity securities. If Shareholders did not take up such offer of Shares or were not eligible to participate in such offering, their proportionate ownership and voting interests in the Company would be reduced and the percentage that their Shares would represent of the total share capital of the Company would be reduced accordingly. Any additional offering, issues of Shares or significant sales of Shares by major Shareholders could have a material adverse effect on the market price of the Shares as a whole.
4.5 The ability of non-UK Shareholders to bring actions, or to enforce judgments, against the Company or its directors or officers may be limited. The Company is a public limited company incorporated in England. The rights of Shareholders of the Shares are governed by English law and the Articles. These rights differ from the rights of shareholders in typical US corporations and some other non-UK corporations. A non-UK Shareholder may not be able to enforce a judgment against some or all the Company’s Directors and executive officers. As the majority of the Directors and executive officers are resident in the UK and most of their assets are inside the UK, it may not be possible for a non-UK Shareholder to effect service of process upon the Company’s Directors and executive officers within that non-UK Shareholder’s country of residence, or to enforce against the Company’s Directors and executive officers judgments of courts of that non-UK Shareholder’s country of residence based on civil liabilities under that country’s securities laws. There can be no assurance that a non-UK Shareholder will be able to enforce any judgments in civil and commercial matters or any judgments under the securities laws of countries other than the United Kingdom against the Company’s Directors and executive officers who are residents of the United Kingdom or countries other than those in which the judgment is made. In addition, English or other courts may not impose civil liability on the Company or the Company’s Directors and executive officers in any original action based solely on foreign securities laws brought against the Company or the Company’s Directors and executive officers in a court of competent jurisdiction in England or other countries.
4.6 A trading market for the Nil Paid Rights, the Fully Paid Rights and the Rights Issue Shares may not occur when, or develop as, expected. Application for admission of the Nil Paid Rights, the Fully Paid Rights and the Rights Issue Shares is subject to the approval (and satisfaction of any conditions subject to which such approval is expressed) of the UK Listing Authority and Rights Issue Admission will become effective as soon as a dealing notice has been issued by the UK Listing Authority and the London Stock Exchange has acknowledged that the Nil Paid Rights, the Fully Paid Rights and the Rights Issue Shares, respectively, will be admitted to trading. It is expected that dealings in the Rights Issue Shares, nil paid, will commence on the London Stock Exchange’s main market for listed securities at 8.00 a.m. on 9 March 2018. There can be no guarantee that any conditions to which Rights Issue Admission is subject will be met or that the UK Listing Authority will issue a dealing notice. Furthermore, there can be no assurance that an active trading market in the Nil Paid Rights or Fully Paid Rights will develop upon or following Rights Issue Admission and, because the trading price of the Nil Paid Rights depends on the trading price of the Shares, the price of the Nil Paid Rights and Fully Paid Rights may be volatile and subject to the same risks as noted elsewhere in this Prospectus in respect of the Shares. The volatility of the price of Shares may have the effect of magnifying the price volatility of the Nil Paid Rights and Fully Paid Rights.
4.7 The Company’s ability to pay dividends in the future depends, among other things, on the Group’s financial performance and capital requirements and is therefore not guaranteed. The Company’s results of operations and financial condition are entirely dependent on the performance of the members of the Group, which includes proceeds received from disposals of the Group’s interests in Project Companies. The Company’s ability to pay dividends will depend, among other things, on its financial
47 performance, any restrictions relating to regulatory capital in subsidiaries and the availability of distributable profits and reserves and cash available for this purpose. As a holding company, the Company’s ability to pay dividends in the future is affected by a number of factors, principally the Company’s ability to receive sufficient dividends from its subsidiaries and the extent to which those subsidiaries receive distributions from their investments in Project Companies as well as the ability of the Group to profitably dispose of its interests in Project Companies. The payment of dividends by the Group is also affected by the existence of sufficient distributable reserves and cash in its subsidiaries and Project Companies, legislatively imposed repatriation requirements in certain jurisdictions which are applicable to its subsidiaries and Project Companies and compliance with covenants in the Group’s debt financing arrangements. In addition, the successful disposal of the Group’s interests in Project Companies is dependent on various factors, including whether there is investor appetite in the secondary market for such Project Companies. Furthermore, the Company could choose to recycle profits received from such disposals into new primary and/or secondary investments which would limit the amount of distributable profits available for dividend payments. These restrictions and considerations could limit or prohibit the payment of dividends to the Company by its subsidiaries, which could restrict the Company’s ability to pay dividends to Shareholders.
4.8 Overseas shareholders may be subject to exchange rate risk. The Shares are, and any dividends to be paid in respect of them will be, denominated in pounds sterling. An investment in Shares by an investor whose principal currency is not pounds sterling exposes the investor to foreign currency exchange rate risk. Any depreciation of pounds sterling in relation to such foreign currency will reduce the value of the investment in the Shares or any dividends in foreign currency terms.
4.9 The Company is not, and does not intend to become, regulated in the United States as an investment company under the US Investment Company Act. As a result, transfer restrictions for Shareholders in the United States or that are US persons (as defined in Regulation S) have been imposed and may make it difficult to resell the Shares or may have an adverse impact on the market price of the Shares generally. The Company has not been, does not intend to be, and would most likely be unable to become, registered in the United States as an investment company under the US Investment Company Act and is relying on the exemption provided by Section 3(c)(7) thereof. The US Investment Company Act provides certain protections to investors and imposes certain restrictions on companies that are registered as investment companies. As the Company is not so registered and does not plan to be registered, none of these protections or restrictions is or will be applicable to the Company. As a result of the Section 3(c)(7) exemption relied on, there are additional restrictions on the resale of Shares by Shareholders who are in the United States or who are US persons (as defined in Regulation S) and on the resale of Shares by any Shareholders to any person who is in the United States or is a US person. These restrictions make it more difficult to resell the Shares, other than in “offshore transactions” within the meaning of Regulation S, and this could have an adverse effect on the market value of the Shares generally. There can be no assurance that US persons will be able to locate acceptable purchasers or obtain any required certifications to effect a sale.
4.10 The Company may be a passive foreign investment company (“PFIC”) for US federal income tax purposes for any taxable year, which could result in adverse US federal income tax consequences for US investors. A non US corporation will be a PFIC for any taxable year if either: (i) at least 75 per cent. of its gross income is “passive income” or (ii) at least 50 per cent. of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a non US corporation that directly or indirectly owns at least 25 per cent. by value of the shares of another corporation is treated as if it directly held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties and capital gains. If the Company were a PFIC for any taxable year during which a US investor owned the Offer Shares, such US investor might then be subject to certain adverse US federal income tax consequences, including increased tax liability on gains from dispositions of the Offer Shares and certain distributions and a requirement to file annual reports with the US Internal Revenue Service. Based on all information available to the Company, it does not believe that it should be treated as a PFIC. However, because the PFIC determination is a factual determination made at the end of each taxable year, there can be no assurance in this regard. US investors should consult their own tax advisers regarding the PFIC status of the Company and its subsidiaries, as well as the US federal income tax consequences that apply to an investment in a PFIC.
48 PART 3 Presentation of Financial and Other Information
1. General The contents of this Prospectus are not to be construed as legal, business or tax advice. Each prospective investor should consult his or her own lawyer, financial adviser or tax adviser for legal, financial or tax advice. Investors should rely solely on the information contained in this Prospectus and the information incorporated by reference into this Prospectus (and any supplementary prospectus produced to supplement the information contained in this Prospectus) when making a decision as to whether to make an investment in the Nil Paid Rights, Fully Paid Rights and/or Rights Issue Shares. No person has been authorised to give any information or make any representations other than those contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been so authorised by the Company, the Directors or the Joint Bookrunners. In particular, the content of the Company’s website does not form part of this Prospectus and prospective investors should not rely on such content. Without prejudice to any obligation of the Company to publish a supplementary prospectus pursuant to section 87G(1) of FSMA and Rule 3.4 of the Prospectus Rules, neither the delivery of this Prospectus nor any issue or sale made under this Prospectus shall, under any circumstances, create any implication that there has been no change in the business or affairs of the Company, or of the Company and its subsidiaries taken as a whole, since the date of this Prospectus or that the information contained herein is correct as at any time subsequent to its date. No statement in this Prospectus or incorporated by reference into this Prospectus is intended as a profit forecast or profit estimate for any period and no statement in this Prospectus or incorporated by reference into this Prospectus should be interpreted to mean that the earnings or earnings per share will necessarily be greater or lesser than those for the relevant preceding financial statements of the Company. Apart from the responsibilities and liabilities, if any, which may be imposed on the Joint Bookrunners by the FSMA or the regulatory regime established thereunder, or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Joint Bookrunners, nor any of their respective affiliates, directors, officers, employees or advisers accepts any responsibility whatsoever for, or makes any representation or warranty, express or implied, as to the contents of this Prospectus, including its accuracy, completeness or verification, or for any other statement made or purported to be made by it or on behalf of it, the Company, the Directors or any other person, in connection with the Company, the Rights Issue Shares, the Rights Issue or Rights Issue Admission, and nothing in this Prospectus should be relied upon as a promise of representation in this respect, whether as to the past or the future. Each of the Joint Bookrunners and their respective affiliates, directors, officers, employees and advisers accordingly disclaims to the fullest extent permitted by law all and any responsibility or liability whatsoever, whether arising in tort, contract or otherwise (save as referred to above), which it might otherwise have in respect of this Prospectus or any such statement.
2. Presentation of financial information The financial information in this Prospectus, including the financial information incorporated by reference into this Prospectus, comprises the results of John Laing Group plc and its subsidiaries (together, the “Group” or “John Laing”). Financial information, unless otherwise stated, has been extracted without material adjustment from the 2017 Final Results Announcement and from the 2016 and 2015 Annual Reports and Accounts, each of which is incorporated by reference into this Prospectus (the “Historical Financial Information”). The Historical Financial Information with respect to the Group presented and incorporated by reference in this Prospectus has been prepared in accordance with the requirements of the PD Regulation and the Listing Rules, and has been prepared in accordance with IFRS as adopted by the European Union, except as set out below. The Group’s financial year runs from 1 January to 31 December. In its financial statements for the years ended 31 December 2015 and 2016, the Group presented certain pro forma financial information in respect of its results of operations for the year ended 31 December 2015 and as at 31 December 2014 on the basis that the restructuring associated with the Company’s admission to listing in February 2015 had been in place throughout the year ending 31 December 2014 and as at 31 December 2014 and throughout the year ending 31 December 2015. Accordingly, where indicated with the caption “pro forma”, the consolidated financial information for the Group for the year ended 31 December 2015 has been extracted from the “pro forma” presentation included in the Group income statement, the Group balance sheet and the Group cash flow statement included in its 2015 Annual Report and Accounts, which are incorporated by reference in this Prospectus. This “pro forma” information should be considered as non-IFRS Financial
49 information. This presentation is not, and is not intended to constitute, “pro forma” financial information within the meaning of Rule 2.3.1 of the Prospectus Rules or within the meaning of Article 11 of Regulation S-X under the US federal securities laws. The significant accounting policies are set out within note 2 of the 2017 Final Results Announcement, which is incorporated by reference in this Prospectus as described in Part 14 (Information Incorporated by Reference). Investors should ensure that they read the whole of this Prospectus and not only rely on the key information or information summarised within it. The Company meets the definition of an investment entity as set out in IFRS 10 Consolidated Financial Statements. Investment entities are required to account for all investments, including subsidiaries, associates and joint ventures, at fair value through profit or loss, except for those subsidiaries that provide services that relate to the investment entity’s investment activities. Such subsidiaries are consolidated, rather than recorded at fair value through profit or loss. Project Companies in which the Group invests are described as “non-recourse”, which means that providers of debt to such Project Companies do not have recourse to John Laing beyond its equity commitments in the underlying projects. Subsidiaries through which the Company holds its investments in Project Companies, which are held at fair value through profit or loss (“FVTPL”), and subsidiaries that are Service Companies, which are consolidated, are described as “recourse”. Transactions and balances receivable or payable between recourse entities held at fair value and those which are consolidated are eliminated in the Group accounts. Unless otherwise indicated, none of the financial information relating to the Group or any operating information relating to the Group has been audited (even where such operating information includes certain financial metrics). None of the financial information used in this Prospectus has been audited in accordance with auditing standards generally accepted in the United States (“US GAAS”) or auditing standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”).
3. Non-IFRS financial information The Group uses certain financial measures that are not defined under IFRS but that it finds useful in analysing its investments. These measures include hold-to-maturity internal rates of return (“HTM IRR”), annualised rate of return (“ARR”), money multiple (“MM”), Gross Value and the pro forma information in respect of its results of operations for the year ended 31 December 2015 and as at 31 December 2014 as described in paragraph 2 above, which do not form part of the Group’s accounting records (except with respect to Gross Value) and, in each case, are not subject to an audit or review process by the Group’s independent external auditors or reporting accountants. In calculating these measures, the Group maintains detailed financial models for each of the projects in which it invests which reflect the specifics of the relevant project and that forecast, inter alia, the revenues, costs, debt service, tax and equity cash flows for the project, typically on a semi-annual basis, from financial close until the end of the project’s life and/or disposal of its investment in such project. Typically, financial models are built by third party professional firms initially during the bidding phase of a project (the “financial close model”). Then, early during the operational phase of the project, the financial close model may be amended or rebuilt either to reflect material contract changes or to make it more functional for reporting purposes (the “operational model”). This often involves a simplification of the financial model as detailed construction phase calculations are no longer required and can be replaced with actual historic data. Both the financial close model and any operational model will typically be the subject of an independent review before being accepted by the Project Company and senior debt providers for project purposes. Each financial model requires a large number of assumptions in order to be able to forecast the financial performance of a project. The source of the assumptions may be the terms of the project contracts (for example, the construction price and the construction payment schedules from the construction contract, the availability payments from the project agreement, the service payments to the operations subcontractor) or the financing documents (such as the senior debt amount, the drawdown terms, the interest margin, the fees and the interest swap rates) or other revenue projections (such as energy yield, traffic volumes and ancillary income) or applicable laws (for example, tax rates and tax allowances) or more general economic assumptions (such as power prices, inflation or the interest rate that might be earned on cash deposits). Financial models are kept under regular review, and changes may require the approval of the senior debt lenders. The Group uses these financial models as the source for the equity cash flows it uses in its investment portfolio valuations and more generally in its business forecasting. In estimating the equity cash flows from project financial models, the Group may make adjustments for matters which it considers should be properly reflected. Examples of such
50 adjustments might be revised timings of equity cash flow receipts due to project delays, additional costs in relation to outstanding disputes, expected savings in future costs based upon the Group’s experience or additional revenues from the use of an asset after a PPP concession contract expires. Because of the discretion that the Group and other companies have in defining these measures and calculating the reported amounts, care should be taken in comparing these various measures with similar measures used by other companies. These measures should not be used as a substitute for evaluating the performance of the Group based on its audited income data and balance sheet data.
3.1 HTM IRR “HTM IRR” is the hold-to-maturity internal rate of return. The HTM IRR is calculated on the actual and estimated post-project tax cash flows, including all equity and debt payments received by the Group from Project Companies (“post-project tax cash flows”) on the assumption that a project is held for the remainder of (i) its PPP concession life (and in some circumstances beyond, where the assets continue to be owned by the Project Company and have a continuing economic life) in the case of PPP projects or (ii) the length of its useful life in the case of renewable energy projects. The HTM IRR at financial close is thus the forecast return for John Laing as an equity investor based on the cash flows forecast over the life of the project (typically up to 30 years) using the financial close model and the assumptions used to prepare that model. The HTM IRR thereafter will be derived from equity cash flow forecasts from the latest version of the project’s financial model (with updated assumptions) together with any actual cash flows that have occurred between John Laing and the relevant Project Company (such as equity subscriptions and distributions) since financial close.
3.2 ARR “ARR” means the annualised rate of return. It is expressed as a percentage and is calculated using the following formula: (a) / (b) / (c), where: (a) is the value uplift on an investment, calculated as all post-project tax cash flows received by the Group from its investment in a project including disposal proceeds, net of any third party costs of disposals, and any cash distributions prior to disposal minus the total amount invested by the Group into the project; (b) is the total amount invested by the Group into the project; and (c) is the period expressed in years over which the Group has held its investment in the project (the period from financial close/the date of acquisition to the divestment date). ARR, unlike HTM IRR, is not affected by the timing of when John Laing’s equity is injected into the project.
3.3 MM “MM” means a money multiple expressed by the fraction (x) / (y), where (x) equals all post-project tax cash flows received by the Group from its investment in a project including disposal proceeds, net of any third party costs of disposals, and any cash distributions prior to disposal; and (y) equals the total amount invested by the Group into the project. MM is considered by the Group as an investment metric because it is an indicator of the scale of investment gain compared to original cost.
3.4 Gross Value “Gross Value” is the fair value of the Group’s investment in a project (“Portfolio Value”), plus the amount of future investment that has been committed to such projects secured by letters of credit (“LCs”) or cash
51 collateral. The reconciliation of Portfolio Value to Gross Value in respect of all the Group’s investments is as follows:
As at 31 December 2017 2016 2015 (unaudited) (£ millions) Portfolio Value ...... 1,194 1,176 841 Cash collateral ...... 133 24 124 LCs outstanding ...... 202 163 154 Portfolio Gross Value ...... 1,529 1,362 1,119
For a further discussion of these measures (i) in relation to the Group’s business model, see paragraph 3 “John Laing’s Business Model” in Part 9 (Business Description), or (ii) in the context of the Group’s results of operations for the years ended 31 December 2017, 2016 and 2015, see Part 12 (Operating and Financial Review).
4. Other performance indicators In addition to the non-IFRS measures described above, the Group uses certain other performance indicators as supplemental measures of its performance. For a further discussion of these measures in the context of the Group’s results of operations for the years ended 31 December 2017, 2016 and 2015, see Part 12 (Operating and Financial Review).
4.1 New investment commitments John Laing’s business model aims to secure new PPP and renewable energy investments at attractive risk-adjusted base case HTM IRRs in its target sectors and geographies. In order to secure new investments, John Laing or a Consortium enters competitive procurement processes (or ‘bids’) where the outcome is uncertain and John Laing or a Consortium may not ultimately be successful in securing an investment. PPPs are procured by Governmental Entities and are publicly advertised. Consortiums are typically formed to bid for a PPP to deliver a range of defined services during the concession period, often including a mixture of design, construction, maintenance and service delivery. Consortiums are also typically required to arrange the financing of a project, which will include a portion of equity finance. John Laing’s economic interests in a project are mainly concerned with investing equity as part of the financing package. John Laing will also typically take an active role in managing the bid process and setting the bid consortium strategy. Multiple consortiums will typically bid for a project and ultimately it is a decision for the Governmental Entity responsible for procuring the project, as to which consortium offers the best value for money solution and best prospects for service delivery. Once a preferred consortium has been selected, a process that can take many months (if not years), the preferred bidder finalises all contracts and service delivery plans and binding contracts are entered into including committed financing (“financial close”). Financial close is the point when equity investors, including John Laing, commit to an investment. Renewable energy opportunities typically derive from private auction processes or negotiations. John Laing typically targets renewable energy schemes at the pre-construction phase where planning consent has been granted but project finance, including equity, needs to be structured and secured. John Laing will seek to acquire the project ‘rights’ from a vendor, which include viability studies, natural resource assessments, preliminary agreements with subcontractors and technology supplies, lease agreements and network connection agreements. John Laing will fund this purchase by way of an initial equity investment. John Laing will then develop all the required contracts and arrange project finance. The point at which contracts are signed, including finance (i.e. financial close), is when John Laing will typically commit to a further equity investment. For renewable energy investments, John Laing may invest on its own or form part of a Consortium. John Laing may also enter either PPP or renewable energy projects at a relatively late stage before or at financial close. For more information on the bid process see paragraph 6.1 in Part 9 (Business Description). During the PPP or renewable energy procurement or auction process, John Laing has no certainty over which schemes it will be successful on as this decision ultimately lies at the discretion of the Governmental Entity or private vendor, respectively. It is therefore necessary for John Laing to bid for multiple opportunities to ensure that it is successful on a sufficient number to achieve its targeted new investment commitments in a given year. John Laing’s ability to maintain multiple bidding processes in its target geographies and sectors at its targeted
52 risk-adjusted returns is dependent on there being a bid pipeline of sufficient size and sufficient opportunities being procured in the investment time horizon targeted by the Group. The propensity for a PPP bid to be converted into a future equity commitment is expressed as a “Win Rate” and is described in further detail in paragraph 4.3 below. As John Laing experiences a lower Win Rate, it is necessary for a greater number of bids to be pursued for the Group to successfully deliver on its targeted new investment commitments, which may or may not be possible given the size of its pipeline and the time horizon for such bids to reach financial close. Conversely, a higher Win Rate will mean fewer bids being necessary for John Laing to deliver its new investment commitment targets, or such targets being exceeded.
4.2 Investment pipeline The Group’s current investment pipeline comprises the Group’s potential investment commitment in identified PPP and renewable energy project opportunities that are expected to be procured or be available in the near term (as described below), and includes, inter alia, project opportunities where John Laing or a Consortium is either shortlisted or has already been appointed preferred bidder (in the case of PPP projects), or has secured exclusive positions (in the case of renewable energy projects). In this Prospectus, the PPP pipeline, as at 31 December 2017, primarily comprised potential opportunities expected to reach financial close during the course of the following three years while the renewable energy pipeline primarily comprised potential opportunities expected to reach financial close during the course of the following two years. John Laing’s investment pipeline evolves as specific opportunities are removed and new opportunities at any stage are added. This can include opportunities which are about to reach financial close shortly. Actual bidding activity is predicated upon the opportunities and investment capital available at the time of bidding, as well as a determination at such time as to which projects will be economically favourable. Movement in the pipeline over time can be attributable to, inter alia, the Group targeting higher volumes of investments and larger projects as well as the number of PPP tenders announced by Governmental Entities, the Group’s own strategic decision to bid for certain contracts, the Group’s or a Consortium’s win (or loss) or withdrawal from bidding of contracts, an expansion in the geographies or markets in which the Group considers investing, availability of renewable energy projects and improvements in the visibility of potential bids.
4.3 Win Rate The Group uses “Win Rate” in its budgeting for allocation of future bid costs based on targeted new investment commitment. The Group’s bidding Win Rate for a particular period is calculated by reference to the value of John Laing’s potential PPP investment commitments in respect of which John Laing or a Consortium is successfully appointed as preferred bidder in that period (i.e. a win), as a percentage of the total value of John Laing’s potential PPP investment commitments in the same period in respect of which the Group or a Consortium has been shortlisted for projects and preferred bidder status has been subsequently reached for such shortlisted projects, either by the Group or a Consortium or a third party (i.e. all won or lost bids, rather than the investment pipeline as a whole). In view of the multi-year length of PPP procurements and the variation in the size of the value of PPP projects, short-term trends and the Group’s short-term Win Rate can vary significantly from period to period. The Win Rate concept is not directly applicable to investments in renewable energy projects as these projects are not subject to a formal procurement process, with John Laing typically negotiating and investing in renewable energy projects as opportunities arise.
4.4 External AUM External AUM comprise John Laing’s assets under management on behalf of JLIF, JLEN and, as at 31 December 2016 and 2015, JLPF. John Laing’s External AUM as at 31 December 2017, 2016 and 2015 were £1,649 million, £1,472 million and £1,136 million, respectively.
4.5 Cash yield from investments “Cash yield from investments” comprises payments from a Project Company, either in the form of dividends (on capital provided in the form of equity) or debt interest and repayments (in respect of capital provided in the form of a subordinated shareholder loan). Cash yield from investments is considered by the Group as a useful investment metric because it is a return on investments held.
53 5. Currency presentation Unless otherwise indicated, all references in this Prospectus to “sterling”, “pounds sterling”, “GBP”, “£”, or “pence” are to the lawful currency of the United Kingdom. The Company prepares its financial statements in pounds sterling. All references to the “euro”, “€” or “EUR” are to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended. All references to “US dollars”, “US$” or “USD” are to the lawful currency of the United States. All references to “Canadian dollars”, “C$” or “CAD” are to the lawful currency of Canada. All references to “Australian dollars”, “AUD$” or “AUD” are to the lawful currency of Australia. All references to “New Zealand dollars” or “NZD” are to the lawful currency of New Zealand. All references to “Swedish Krona” or “SEK” are to the lawful currency of Sweden. The following tables set out, for the periods set forth below, the high, low, average and period-end Bloomberg Composite Rate expressed as US dollar per £1.00, euro per £1.00 and Australian dollar per £1.00. The Bloomberg Composite Rate is a “best market” calculation, in which, at any point in time, the composite bid rate is equal to the highest bid rate of all currently active, contributed, bank indications, and the composite ask rate is equal to the lowest ask rate offered by these same bank indications. The Bloomberg Composite Rate is a mid-value rate between the composite bid rate and the composite ask rate. The rates may differ from the actual rates used in the preparation of the Historical Financial Information and other financial information appearing in this Prospectus.
Average rate against pounds sterling
US dollar Year Period End Average High Low 2013 ...... 1.6557 1.5649 1.6557 1.4867 2014 ...... 1.5577 1.6476 1.7166 1.5517 2015 ...... 1.4736 1.5285 1.5883 1.4632 2016 ...... 1.2340 1.3554 1.4877 1.2123 2017 ...... 1.3524 1.2888 1.3582 1.2068 2018 (up to January 2018) ...... 1.4184 1.3828 1.4256 1.3517
Euro Year Period End Average High Low 2013 ...... 1.2014 1.1779 1.2343 1.1433 2014 ...... 1.2802 1.2408 1.2836 1.1908 2015 ...... 1.3571 1.3778 1.4416 1.2743 2016 ...... 1.1731 1.2242 1.3654 1.0790 2017 ...... 1.1250 1.1415 1.1968 1.0758 2018 (up to January 2018) ...... 1.1424 1.1330 1.1456 1.1219
Australian dollar Year Period End Average High Low 2013 ...... 1.8558 1.6230 1.8558 1.4442 2014 ...... 1.9082 1.8267 1.9216 1.7365 2015 ...... 2.0210 2.0363 2.2048 1.8424 2016 ...... 1.7106 1.8245 2.0860 1.5897 2017 ...... 1.7312 1.6810 1.7862 1.5969 2018 (up to January 2018) ...... 1.7613 1.7376 1.7632 1.7177
Source: Bloomberg
6. Roundings Certain data in this Prospectus, including financial, statistical, and operating information has been rounded. As a result of the rounding, the totals of data presented in this Prospectus may vary slightly from the actual arithmetic totals of such data. Percentages in tables have been rounded and accordingly may not add up to 100 per cent.
54 7. Market, economic and industry data Unless the source is otherwise stated, the market, economic and industry data in this Prospectus constitute the Directors’ estimates, using underlying data from independent third parties. The Company obtained market data and certain industry forecasts used in this Prospectus from internal surveys, reports and studies, where appropriate, as well as market research, publicly available information and industry publications, including publications and data compiled by McKinsey Global Institute, Bloomberg New Energy Finance and Frankfurt School-UNEP Centre. While the Directors believe the third-party information included herein to be reliable, the Company has not independently verified such third-party information, and neither the Company nor the Joint Bookrunners make any representation or warranty as to the accuracy or completeness of such information as set forth in this Prospectus. The Company confirms that all third-party data contained in this Prospectus has been accurately reproduced and, so far as the Company is aware and able to ascertain from information published by that third party, no facts have been omitted that would render the reproduced information inaccurate or misleading. Where third-party information has been used in this Prospectus, the source of such information has been identified.
8. Service of process and enforcement of civil liabilities The Company has been incorporated under English law. Service of process upon Directors and officers of the Company who reside outside the United States may be difficult to obtain within the United States. Furthermore, since most directly owned assets of the Company are outside the United States, any judgment obtained in the United States against it may not be collectible within the United States. There is doubt as to the enforceability of certain civil liabilities under US federal securities laws in original actions in English courts, and, subject to certain exceptions and time limitations, English courts will treat a final and conclusive judgment of a US court for a liquidated amount as a debt enforceable by fresh proceedings in the English courts.
9. No incorporation of website information The contents of the Company’s websites do not form part of this Prospectus.
10. Definitions and glossary Certain terms used in this Prospectus, including all capitalised terms and certain technical and other items, are defined and explained in Part 17 (Definitions and Glossary).
11. Information not contained in this Prospectus No person has been authorised to give any information or make any representation other than those contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been so authorised. Neither the delivery of this Prospectus nor any subscription or sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Group since the date of this Prospectus or that the information in this Prospectus is correct as of any time subsequent to the date hereof unless required to do so by the applicable law, the Prospectus Rules, the Listing Rules and the Disclosure Guidance and Transparency Rules of the FCA.
12. Information regarding forward-looking statements This Prospectus includes forward looking statements. These forward looking statements involve known and unknown risks and uncertainties, many of which are beyond the Group’s control and all of which are based on the Directors’ current beliefs and expectations about future events. Forward looking statements are sometimes identified by the use of forward looking terminology such as “believe”, “expects”, “may”, “will”, “could”, “should”, “shall”, “risk”, “intends”, “estimates”, “aims”, “plans”, “predicts”, “continues”, “assumes”, “positioned” or “anticipates” or the negative thereof, other variations thereon or comparable terminology. These forward looking statements include all matters that are not historical facts. They appear in a number of places throughout this Prospectus and include statements regarding the intentions, beliefs or current expectations of the Directors or the Group concerning, among other things, the results of operations, financial condition, liquidity, prospects, growth, strategies, and dividend policy of the Group and the industry in which it operates. In particular, the statements under the headings “Summary”, “Risk Factors”, “Business Description” and “Operating and Financial Review” regarding the Company’s strategy and other future events or prospects are forward looking statements.
55 These forward looking statements and other statements contained in this Prospectus regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Group. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed, or implied in such forward looking statements. Such forward looking statements contained in this Prospectus speak only as at the date of this Prospectus. The Company, the Directors and the Joint Bookrunners expressly disclaim any obligation or undertaking to update these forward looking statements contained in the document to reflect any change in their expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules, or the Disclosure Guidance and Transparency Rules of the FCA.
56 PART 4 Directors, Secretary, Registered and Head Office and Advisers
Directors ...... Phil Nolan (Non-Executive Chairman) Will Samuel (Non-Executive Chairman Designate) Olivier Brousse (Chief Executive Officer) Patrick O’Donnell Bourke (Group Finance Director) David Rough (Senior Independent Director) Jeremy Beeton (Independent Non-Executive Director) Toby Hiscock (Independent Non-Executive Director) Anne Wade (Independent Non-Executive Director) Company Secretary ...... Carolyn Cattermole Registered and head office of the Company ...... 1 Kingsway London WC2B 6AN United Kingdom Joint Global Co-ordinators, Joint Bookrunners and Joint Sponsors ...... Barclays Bank PLC 5 The North Colonnade London E14 4BB United Kingdom HSBC Bank plc 8 Canada Square London E14 5HQ United Kingdom English and US legal advisers to the Company ...... Freshfields Bruckhaus Deringer LLP 65 Fleet Street London EC4Y 1HS English and US legal advisers to the Joint Global Co-ordinators, Joint Bookrunners and Joint Sponsors ...... Simmons & Simmons LLP CityPoint One Ropemaker Street London EC2Y 9SS Reporting Accountants and Auditors ...... Deloitte LLP 2 New Street Square London EC4A 3BZ United Kingdom Registrars ...... Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA United Kingdom
57 PART 5 Expected Timetable of Principal Events and Rights Issue Statistics Expected timetable of principal events
Event Time and Date Record Date for entitlement under the Rights Issue ...... close of business on 6 March 2018 Announcement of the Rights Issue ...... 8 March 2018 Publication and posting of the Prospectus . . . . 8 March 2018 Despatch of Provisional Allotment Letters (to Qualifying Non-CREST Shareholders only)(1) 8 March 2018 Ex entitlement date for the Rights Issue . . . . . 8.00 a.m. on 9 March 2018 Rights Issue Admission and commencement of dealings in Rights Issue Shares, nil paid, on the London Stock Exchange ...... 8.00 a.m. on 9 March 2018 Stock accounts credited with Nil Paid Rights (for Qualifying CREST Shareholders only)(1) . . . . as soon as practicable after 8.00 a.m. on 9 March 2018 Nil Paid Rights and Fully Paid Rights enabled in CREST ...... as soon as practicable after 8.00 a.m. on 9 March 2018 Recommended latest time and date for requesting withdrawal of Nil Paid Rights or Fully Paid Rights from CREST (i.e. if your Nil Paid Rights or Fully Paid Rights are in CREST and you wish to convert them into certificated form) ...... 4.30 p.m. on 19 March 2018 Latest time and date for depositing renounced Provisional Allotment Letters, nil paid or fully paid, into CREST or for dematerialising Nil Paid Rights or Fully Paid Rights into a CREST stock account (i.e. if your Nil Paid Rights or Fully Paid Rights are represented by a Provisional Allotment Letter and you wish to convert them to uncertificated form) ...... 3.00 p.m. on 20 March 2018 Latest time and date for splitting Provisional Allotment Letters, nil paid or fully paid . . . . 3.00 p.m. on 21 March 2018 Latest time and date for acceptance and payment in full and registration of renounced Provisional Allotment Letters . . 11.00 a.m. on 23 March 2018 Results of Rights Issue to be announced through a Regulatory Information Service ...... by 8.00a.m. on 26 March 2018 Commencement of dealings in Rights Issue Shares fully paid on the London Stock Exchange ...... 8.00 a.m. on 26 March 2018 Rights Issue Shares credited to CREST accounts (for Qualifying CREST Shareholders only)(1) . as soon as practicable after 8.00 a.m. on 26 March 2018 Despatch of definitive share certificates for Rights Issue Shares in certificated form (to Qualifying Non-CREST Shareholders only)(1) by no later than 6 April 2018 Record Date for Final Dividend ...... 20 April 2018
Note: (1) Subject to certain restrictions relating to overseas Shareholders. See paragraph 7 of Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus.
58 Each of the times and dates in the above timetable, mentioned throughout this Prospectus and in the Provisional Allotment Letter is subject to change in which event details of the new times and dates will be notified to the UK Listing Authority, the London Stock Exchange and, where appropriate, Qualifying Shareholders through a Regulatory Information Service. References to times are to London time unless otherwise stated.
RIGHTS ISSUE STATISTICS
Rights Issue Price ...... 177 pence Basis of Rights Issue ...... 1 Rights Issue Share for every 3 Existing Shares Number of Existing Shares in issue as at the Latest Practicable Date . 366,960,134 Number of Rights Issue Shares to be provisionally allotted pursuant to the Rights Issue(1) ...... 122,320,044 Number of Shares in issue immediately following the completion of the Rights Issue(1) ...... 489,280,178 Rights Issue Shares as a percentage of the enlarged issued share capital of the Company immediately following completion of the Rights Issue(1) ...... 25 per cent. Estimated gross proceeds of the Rights Issue ...... £216.5 million Estimated net proceeds of the Rights Issue receivable by the Company, after deduction of the estimated aggregate expenses of, or incidental to, the Rights Issue to be borne by the Company ...... approximately £210.2 million
Notes: (1) On the assumption that no further Shares are issued from the date of this Prospectus until completion of the Rights Issue other than the Rights Issue Shares. The actual number of Rights Issue Shares will be subject to rounding to eliminate fractions.
59 PART 6 Questions and Answers about the Rights Issue The questions and answers set out in this Part 6 (Questions and Answers about the Rights Issue) are intended to be in general terms only and you should read Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus for full details of what action you should take. If you are in any doubt as to what action you should take, you are recommended to seek immediately your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser, duly authorised under the FSMA if you are resident in the UK or, if not, from another appropriately authorised independent financial adviser. This Part 6 (Questions and Answers about the Rights Issue) deals with general questions relating to the Rights Issue and more specific questions relating to Existing Shares held by persons resident in the UK who hold their Existing Shares in certificated form only. If you are an overseas Shareholder, you should read paragraph 7 of Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus and you should take professional advice as to whether you are eligible and/or you need to observe any formalities to enable you to take up your rights. If you hold your Existing Shares in uncertificated form (that is, through CREST) you should read Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus for full details of what action you should take. If you are a CREST sponsored member, you should also consult your CREST sponsor. If you do not know whether your Existing Shares are in certificated or uncertificated form, please call the Shareholder Helpline on 0371 384 2050 (from within the UK) or on +44 121 415 0259 (if calling from outside the UK). The Shareholder Helpline is open from 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the Shareholder Helpline from outside the UK will be charged at the applicable international rate. Please note that calls may be recorded and randomly monitored for security and training purposes. Please note that for legal reasons, the Shareholder Helpline cannot provide advice on the merits of the Rights Issue nor give financial, tax, investment or legal advice. Times and dates referred to in this Part 6 (Questions and Answers about the Rights Issue) have been included on the basis of the expected timetable for the Rights Issue set out on page 58.
1. What is a Rights Issue? A rights issue is a way for companies to raise money. Companies do this by giving their existing shareholders a right to buy further shares in proportion to their existing shareholdings. The offer under this Rights Issue is at a price of 177 pence per Rights Issue Share. If you hold Existing Shares on the Record Date and, subject to certain exceptions, do not have a registered address in the United States or the Excluded Territories, you will be entitled to buy Rights Issue Shares pursuant to the Rights Issue. If you hold your Existing Shares in certificated form, your entitlement will be set out in your Provisional Allotment Letter. Rights Issue Shares are being offered to Qualifying Shareholders in the Rights Issue at a discount to the Existing Share price prior to the publication of this Prospectus. The Rights Issue Price of 177 pence per Rights Issue Share represents a 29.2 per cent, discount to the theoretical ex rights price based on the closing middle market price quotation as derived from the Stock Exchange Daily Official List (“SEDOL”) of 274.2 pence per Existing Share on 7 March 2018, the last Business Day before the announcement of the terms of the Rights Issue. As a result of this discount and while the market value of the Existing Shares exceeds the Rights Issue Price, the right to buy the Rights Issue Shares is potentially valuable. The Rights Issue is on the basis of 1 Rights Issue Share for every 3 Existing Shares held by Qualifying Shareholders. If you are a Qualifying Shareholder and you do not want to buy the Rights Issue Shares to which you are entitled, you can instead sell or transfer your rights (called Nil Paid Rights) to those Rights Issue Shares and receive the net proceeds, if any, of the sale or transfer in cash. This is referred to as “dealing nil paid”.
2. What happens next? The Provisional Allotment Letters are due to be despatched on or about 8 March 2018 to Qualifying Non-CREST Shareholders with registered addresses outside the United States and the Excluded Territories (subject to certain exceptions) and the Nil Paid Rights are due to be credited to the CREST stock accounts of Qualifying CREST Shareholders with registered addresses outside the United States and the Excluded Territories (subject to certain exceptions) as soon as practicable after 8.00 a.m. on 9 March 2018.
60 3. Can I sell some Rights and use the proceeds to take up my remaining Rights? Yes—this is known as a cashless take up or “tail swallowing”. You should contact your stockbroker or financial adviser who may be able to help if you wish to do this. Your ability to sell your Rights is dependent on demand for such Rights. Please ensure that you allow enough time so as to enable the person acquiring your Rights to take all necessary steps in connection with taking up the entitlement prior to 11.00 a.m. on 23 March 2018.
4. I hold my Existing Shares in certificated form. How do I know if I am able to take up my Rights and acquire Rights Issue Shares under the Rights Issue? If you receive a Provisional Allotment Letter and are a Qualifying Non-CREST Shareholder with a registered address outside the United States and the Excluded Territories (subject to certain exceptions), then you should be eligible to take up your Rights and acquire Rights Issue Shares under the Rights Issue (as long as you have not sold all of your Existing Shares before the Ex Rights Date, in which case you will need to follow the instructions on the front page of this Prospectus).
5. I hold my Existing Shares in certificated form. How will I be informed of how many Rights Issue Shares I am entitled to buy? If you hold your Existing Shares in certificated form and are a Qualifying Non-CREST Shareholder with a registered address outside the United States and the Excluded Territories (subject to certain exceptions), you will be sent a Provisional Allotment Letter that shows: 5.1 how many Existing Shares you held at the close of business on 6 March 2018 (the record date for the Rights Issue); 5.2 how many Rights Issue Shares you are entitled to buy; and 5.3 how much you need to pay if you want to take up your right to buy all the Rights Issue Shares provisionally allotted to you in full. Subject to certain exceptions, if you have a registered address in the United States or the Excluded Territories, you will not receive a Provisional Allotment Letter.
6. I am a qualifying Shareholder with a registered address in the United Kingdom and I hold my Existing Shares in certificated form. What are my choices and what should I do with the Provisional Allotment Letter? 6.1 If you want to take up all of your Rights If you want to take up all of your Rights to acquire the Rights Issue Shares to which you are entitled, all you need to do is send the Provisional Allotment Letter, together with your cheque or banker’s draft for the full amount, payable to “Equiniti Limited re: John Laing Group plc Rights Issue” and crossed “A/C payee only”, by post or by hand (during normal business hours only) to Equiniti Limited (the “Receiving Agent”) at Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, to arrive by no later than 11.00 a.m. on 23 March 2018. Within the United Kingdom only, you can use the reply paid envelope which will be enclosed with the Provisional Allotment Letter. Full instructions are set out in Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus and will be set out in the Provisional Allotment Letter. Please note third party cheques may not be accepted other than building society cheques or banker’s drafts. If payment is made by a building society cheque (not being drawn on account of the applicant) or a banker’s draft, the building society or bank should insert details of the name of the account holder and have either added the building society or bank branch stamp, or have provided a supporting letter confirming the source of funds. The name of such account holder should be the same as the name of the shareholder shown on page 1 or page 4 of the Provisional Allotment Letter. A definitive share certificate will then be sent to you for the Rights Issue Shares that you take up. Your definitive share certificate for the Rights Issue Shares is expected to be despatched to you by no later than 6 April 2018. You will need your Provisional Allotment Letter to be returned to you if you want to deal in your Fully Paid Rights. Your Provisional Allotment Letter will not be returned to you unless you tick the appropriate box on the Provisional Allotment Letter.
61 6.2 If you do not want to take up your Rights at all If you do not want to take up your Rights, you do not need to do anything. If you do not return your Provisional Allotment Letter subscribing for the Rights Issue Shares to which you are entitled by 11.00 a.m. on 23 March 2018, the Company has made arrangements under which the Joint Bookrunners (as agents for and on behalf of the Company) will try to find investors to take up your rights and the rights of others who have not taken up their Rights. If the Joint Bookrunners find investors who agree to pay a premium above the Rights Issue Price and the related expenses of procuring those investors (including any applicable brokerage and commissions and amounts in respect of value added tax), you will be sent a cheque for your share of the amount of that premium, provided that this is £5.00 or more. Cheques are expected to be despatched by no later than 6 April 2018 and will be sent to your existing address appearing on the Company’s register of members (or to the first named holder if you hold your Existing Shares jointly). If investors cannot be found who agree to pay a premium over the Rights Issue Price and related expenses so that your entitlement would be £5.00 or more, you will not receive any payment, and any amounts of less than £5.00 will be aggregated and ultimately accrue for the benefit of the Company. Alternatively, if you do not want to take up your Rights, you can sell or transfer your Nil Paid Rights (see paragraph 6.4 below).
6.3 If you want to take up some but not all of your rights If you want to take up some but not all of your rights and wish to sell some or all of those you do not want to take up, you should first apply to have your Provisional Allotment Letter split by completing Form X on the Provisional Allotment Letter, and returning it by post or by hand (during normal business hours only) to the Receiving Agent at Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, to be received by 3.00 p.m. on 21 March 2018, together with a covering letter stating the number of split Provisional Allotment Letters required and the number of Nil Paid Rights to be comprised in each split Provisional Allotment Letter. You should then deliver the split Provisional Allotment Letter representing the Rights Issue Shares that you wish to accept together with your cheque or banker’s draft to the Receiving Agent to be received by 11.00 a.m. on 23 March 2018. Your ability to sell your Rights is dependent on demand for such Rights. Please ensure that you allow enough time so as to enable the person acquiring your rights to take all necessary steps in connection with taking up the entitlement prior to 11.00 a.m. on 23 March 2018. Alternatively, if you only want to take up some of your Rights (but not sell some or all of the rest), you should complete Form X on the Provisional Allotment Letter and return it with a cheque or banker’s draft together with an accompanying letter indicating the number of Nil Paid Rights that you wish to take up, in accordance with the provisions set out in the Provisional Allotment Letter. In this case, the Provisional Allotment Letter and cheque or banker’s draft must be received by the Receiving Agent by 3.00 p.m. on 21 March 2018, being the latest time and date for splitting Provisional Allotment Letters, nil paid. Further details are set out in Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus and will be set out in the Provisional Allotment Letter.
6.4 If you want to sell all of your Rights If you want to sell all of your Rights, you should complete and sign Form X on the Provisional Allotment Letter (if it is not already marked “Original Duly Renounced”) and pass the entire letter to your stockbroker, bank manager or other appropriate financial adviser or to the transferee (provided they are not in the United States or the Excluded Territories). Your ability to sell your Rights is dependent on demand for such Rights. Please ensure that you allow enough time so as to enable the person acquiring your Rights to take all necessary steps in connection with taking up the entitlement prior to 11.00 a.m. on 23 March 2018.
7. I acquired my Existing Shares prior to the Record Date and hold my Existing Shares in certificated form. What if I do not receive a Provisional Allotment Letter? If you do not receive a Provisional Allotment Letter but hold your Existing Shares in certificated form, this probably means that you are not able to take up your Rights or acquire Rights Issue Shares under the Rights Issue. Some Non-CREST Shareholders, however, will not receive a Provisional Allotment Letter but may still be eligible to take up their Rights or acquire Rights Issue Shares under the Rights Issue, namely: 7.1 Qualifying CREST Shareholders who held their Existing Shares in uncertificated form on 6 March 2018 and who have converted them to certificated form;
62 7.2 Shareholders who bought Existing Shares before 6 March 2018 and who hold such Shares in certificated form but were not registered as the holders of those Shares at the close of business on 9 March 2018; and 7.3 certain overseas Shareholders. If you do not receive a Provisional Allotment Letter but think that you should have received one, please call the Shareholder Helpline on 0371 384 2050 (from within the United Kingdom) or on +44 121 415 0259 (if calling from outside the United Kingdom). The Shareholder Helpline is open from 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the Shareholder Helpline from outside the UK will be charged at the applicable international rate. Please note that calls may be recorded and randomly monitored for security and training purposes. Please note that for legal reasons, the Shareholder Helpline cannot provide advice on the merits of the Rights Issue nor give financial, tax, investment or legal advice.
8. If I buy Shares after the Record Date, will I be eligible to participate in the Rights Issue? If you bought Shares after the Record Date but prior to 8.00 a.m. on the Ex Rights Date, you may be eligible to participate in the Rights Issue. If you are in any doubt, please consult your stockbroker, bank or other appropriate financial adviser, or whoever arranged your share purchase, to ensure you claim your entitlement. If you buy Shares at or after 8.00 a.m. on the Ex Rights Date, you will not be eligible to participate in the Rights Issue in respect of those Shares.
9. I hold my Existing Shares in certificated form. If I take up my Rights, when will I receive the certificate representing my Rights Issue Shares? If you take up your rights under the Rights Issue, share certificates for the Rights Issue Shares are expected to be posted by no later than 6 April 2018.
10. What if the number of Rights Issue Shares to which I am entitled is not a whole number? Am I entitled to fractions of Rights Issue Shares? Your entitlement to Rights Issue Shares will be calculated at the Record Date (other than in the case of those who bought shares after the Record Date but prior to 8.00 a.m. on the Ex Rights Date who are eligible to participate in the Rights Issue). If the result is not a whole number, you will not be provisionally allotted a Rights Issue Share in respect of the fraction of a Rights Issue Share and your entitlement will be rounded down to the nearest whole number. The Rights Issue Shares representing the aggregated fractions that would otherwise be allotted to Shareholders will be sold in the market nil paid for the benefit of the Company.
11. Will I be taxed if I take up or sell my Rights or if my Rights are sold on my behalf? If you are resident in the United Kingdom for tax purposes, you should not have to pay UK tax when you take up your Rights, although the Rights Issue will affect the amount of UK tax you may pay when you subsequently sell your Shares. However, assuming that you hold your Existing Shares as an investment, rather than for the purposes of a trade, you may (subject to any available exemption or relief) be subject to capital gains tax on any proceeds that you receive from the sale of your Rights. Similarly, assuming that you hold your Existing Shares as an investment, if you allow, or are deemed to allow, your Rights to lapse and receive a cash payment in respect of them, you may (subject to any available exemption or relief) be subject to capital gains tax on any proceeds. However, if the proceeds are “small” as compared to the value of the Existing Shares in respect of which the rights arose (broadly, the proceeds do not exceed £3,000 or five per cent. of the value of the Existing Shares), a capital gains tax charge should not generally arise at that time. Rather, the proceeds will be deducted from the base cost of the holding of the Existing Shares for the purposes of computing a chargeable gain or allowable loss on a subsequent disposal. This treatment will not apply if the proceeds are greater than the base cost of the holding of Existing Shares. Further information for Qualifying Shareholders who are resident in the United Kingdom for tax purposes is contained in Part 16 (Additional Information) of this Prospectus. This information is intended as a general guide to the current tax position in the United Kingdom and Qualifying Shareholders should consult their own tax advisers regarding the tax treatment of the Rights Issue in light of their own circumstances. Qualifying
63 Shareholders who are in any doubt as to their tax position, or who are subject to tax in any other jurisdiction, should consult an appropriate professional adviser as soon as possible. Please note that the Shareholder Helpline will not be able to assist you with taxation issues.
12. I understand that there is a period when there is trading in the Nil Paid Rights. What does this mean? If you do not want to buy the Rights Issue Shares being offered to you under the Rights Issue, you can instead sell or transfer your Nil Paid Rights and receive the net proceeds of the sale or transfer in cash. This is referred to as “dealing nil paid”. This means that, during the Rights Issue period (between 9 March 2018 and 11.00 a.m. on 23 March 2018) you can either trade in Existing Shares (which, by then, will not carry any entitlement to participate in the Rights Issue) or you can trade in the Nil Paid Rights.
13. I hold my Existing Shares in certificated form. What if I want to sell the Rights Issue Shares for which I have paid? Provided the Rights and the Rights Issue Shares have been paid for and you have requested the return of the receipted Provisional Allotment Letter, you can transfer the Fully Paid Rights by completing Form X (the form of renunciation) on the receipted Provisional Allotment Letter in accordance with the instructions set out in the Provisional Allotment Letter until 3.00 p.m. on 20 March 2018. After that time, you will be able to sell your Rights Issue Shares in the normal way. The share certificate relating to your Rights Issue Shares is expected to be despatched to you by no later than 6 April 2018. Pending despatch of the share certificate, instruments of transfer will be certified by the Registrar against the register. Further details are set out in Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus.
14. What should I do if I live outside the United Kingdom? Whilst you may have an entitlement to participate in the Rights Issue, your ability to take up or sell your Rights may be affected by the laws of the country in which you live and you should take professional advice as to whether you require any Governmental or other consents or need to observe any other formalities to enable you to take up your Rights. Shareholders with registered addresses or who are located in the United States or the Excluded Territories, or who are US persons are, subject to certain exceptions, not able to take up their Rights or acquire Rights Issue Shares under the Rights Issue. Your attention is drawn to the information in paragraph 7 of Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus. The Company has made arrangements under which the Joint Bookrunners (as agents for and on behalf of the Company) will try to find investors to take up your Rights and those of other Shareholders who have not taken up their Rights. If the Joint Bookrunners find investors who agree to pay a premium above the Rights Issue Price and the related expenses of procuring those investors (including any applicable brokerage and commissions and amounts in respect of value added tax), you will be sent a cheque for your share of the amount of that premium provided that this is £5.00 or more. Cheques are expected to be despatched by no later than 6 April 2018 and will be sent to your address appearing on the Company’s register of members (or to the first named holder if you hold your Existing Shares jointly). If investors cannot be found who agree to pay a premium over the Rights Issue Price and related expenses so that your entitlement would be £5.00 or more, you will not receive any payment and any such amount of less than £5.00 will be aggregated and ultimately accrue for the benefit of the Company.
15. Will the Rights Issue affect the future dividends the Company pays? The Company will continue with its existing dividend policy, namely: (i) a progressive base dividend targeting growth at least in line with inflation; and (ii) a special dividend of approximately 5 to 10 per cent. of gross proceeds from the sale of investments on an annual basis, subject to specific investment requirements in any one year. Interim base dividends will continue to be paid in October of the relevant financial year and final base dividends in May of the following financial year along with any special dividend. The Rights Issue Shares, when issued and fully paid, will rank pari passu in all respects with the Existing Shares, including the right to receive dividends or distributions made, paid or declared after the date of issue of the Rights Issue Shares including the final base dividend and special dividend for the year ended 31 December 2017.
64 For the year ended 31 December 2017 and, in accordance with its existing dividend policy, the Company intends to pay a final dividend of £31.9 million comprising: (i) a final base dividend of £14.0 million, equating to 3.82 pence per share before taking into account the effects of the Rights Issue; and (ii) a special dividend of £17.9 million equivalent to 6.2% of total realisations in 2017 of £289 million, equating to 4.88 pence per share before taking into account the effects of the Rights Issue. The total final base dividend of £14.0 million will be increased to include the Rights Issue Shares issued pursuant to the Rights Issue, while the Special dividend of £17.9 million will be paid over the Existing Shares and the Rights Issue Shares issued pursuant to the Rights Issue. The record date for the final dividend will be 20 April 2018, with the final dividend to be paid on 18 May 2018. Shareholders will be given the opportunity to vote on the Company’s proposed final dividend for the year ended 31 December 2017 at the Company’s next annual general meeting on 10 May 2018.
16. What if I hold options and awards under the John Laing Share Schemes? Participants in the John Laing Share Schemes will be contacted separately with further information on how their options and awards granted under such plans may be affected by the Rights Issue.
17. How do I transfer my Rights into the CREST system? If you are a Qualifying Non-CREST Shareholder, but are a CREST member and want your Rights and the Rights Issue Shares to be in uncertificated form, you should complete Form X and the CREST Deposit Form (both on the Provisional Allotment Letter) and ensure they are delivered to CCSS to be received by 3.00 p.m. on 20 March 2018 at the latest. CREST sponsored members should arrange for their CREST sponsors to do this. If you have transferred your rights into the CREST system, you should refer to paragraph 5 of Part 7 (Terms and Conditions of the Rights Issue) of this Prospectus for details on how to pay for the Rights Issue Shares.
18. What should I do if I think my holding of Existing Shares is incorrect? If you have recently bought or sold Existing Shares, your transaction may not be entered on the register of members in time to appear on the register at the Record Date. If you are concerned about the figure in the Provisional Allotment Letter or otherwise concerned that your holding of Existing Shares is incorrect, please call the Shareholder Helpline on 0371 384 2050 (from within the United Kingdom) or on +44 121 415 0259 (if calling from outside the United Kingdom).
19. Where to find further help If you have any questions relating to the Rights Issue or completion and return of your Provisional Allotment Letter, please contact the Shareholder Helpline on the numbers set out below. Shareholder Helpline telephone numbers: 0371 384 2050 (from within the UK) or on +44 121 415 0259 (from outside the UK) The Shareholder Helpline is open from 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the Shareholder Helpline from outside the UK will be charged at the applicable international rate. Please note that calls may be recorded and randomly monitored for security and training purposes. Please note that for legal reasons, the Shareholder Helpline cannot provide advice on the merits of the Rights Issue nor give financial, tax, investment or legal advice.
65 PART 7 Terms and Conditions of the Rights Issue 1. Summary of the Rights Issue 1.1 John Laing is raising approximately £210.2 million net of expenses, by way of a Rights Issue, which involves the issue of 122,320,044 Rights Issue Shares. 1.2 Qualifying Shareholders who do not, or are not able or permitted to, take up their Nil Paid Rights in full will have their proportionate shareholdings in the Company diluted by approximately 25 per cent. as a result of the Rights Issue. 1.3 The Rights Issue Price of 177p per Rights Issue Share represents a discount of approximately 29.2 per cent. to the theoretical ex-rights price based on the closing middle-market price of a Share as derived from SEDOL of 274.20p per Existing Share on 7 March 2018 (being the last Business Day before the announcement of the terms of the Rights Issue).
2. Terms and Conditions of the Rights Issue 2.1 Subject to the terms and conditions set out below (and, in the case of Qualifying Non-CREST Shareholders, the Provisional Allotment Letter), the Rights Issue Shares will be offered for subscription by way of a Rights Issue to Qualifying Shareholders on the following basis: 1 Rights Issue Share at 177p each for every 3 Existing Shares held and registered in the name of each Qualifying Shareholder at the close of business on the Record Date and so in proportion for any other number of Existing Shares then held. Qualifying Shareholders with fewer than 3 Existing Shares will not be entitled to any Rights Issue Shares. Entitlements to Rights Issue Shares will be rounded down to the nearest whole number (or to zero in the case of Qualifying Shareholders holding fewer than 3 Existing Shares at the close of business on the Record Date) and fractions of Rights Issue Shares will not be allotted to Qualifying Shareholders but will be aggregated and, if possible, sold in the market as soon as practicable after the commencement of dealings in the Rights Issue Shares, nil paid. The net proceeds of such sales (after deduction of expenses) will accrue for the benefit of the Company. Holdings of Existing Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue. 2.2 The Nil Paid Rights (also described as Rights Issue Shares, nil paid) are entitlements to buy Rights Issue Shares at the Rights Issue Price. The Fully Paid Rights are entitlements to receive Rights Issue Shares for which subscription and payment has already been made. 2.3 The attention of all Qualifying Shareholders and any other person (including, without limitation, custodians, nominees and trustees) who has a contractual or legal obligation to forward this Prospectus into a jurisdiction other than the UK is drawn to paragraph 7 of this Part 7 (Terms and Conditions of the Rights Issue) below. Rights Issue Shares will be provisionally allotted (nil paid) to all Qualifying Shareholders on the register at the Record Date. However, subject to certain exceptions, Qualifying Shareholders who have a registered address in the Excluded Territories or who are otherwise located in the Excluded Territories have not been and will not be sent Provisional Allotment Letters and have not and will not have their CREST accounts credited with Nil Paid Rights. 2.4 The Existing Shares are listed on the premium segment of the Official List and traded on the London Stock Exchange’s main market for listed securities. Application will be made to the UK Listing Authority and to the London Stock Exchange for the Rights and the Rights Issue Shares to be admitted to the premium segment of the Official List and to trading on the London Stock Exchange’s Main Market for listed securities, respectively. 2.5 It is expected that Rights Issue Admission will become effective on 9 March 2018 and that dealings in the Rights Issue Shares, nil paid, will commence at 8.00 a.m. on the same day. 2.6 The Rights Issue Shares and the Existing Shares are in registered form and can be held in certificated and uncertificated form via CREST. 2.7 The Existing Shares are already admitted to CREST. No further application for admission to CREST is required for the Rights Issue Shares. All such Rights Issue Shares, when issued and fully paid, may be held and transferred by means of CREST. Applications will be made for the Nil Paid Rights and the Fully Paid Rights to be admitted to CREST. Euroclear requires the Company to confirm to it that certain conditions are satisfied before Euroclear will admit the Nil Paid Rights and Fully Paid Rights to
66 CREST. It is expected that these conditions will be satisfied on Rights Issue Admission. As soon as practicable after Rights Issue Admission, the Company will confirm this to Euroclear. 2.8 The Rights and the Rights Issue Shares will be issued pursuant to the authority granted under the resolutions passed at the Annual General Meeting of the Company held in May 2017. The Rights Issue Shares, when fully paid, will rank pari passu with the Existing Shares. 2.9 The ISIN for the Rights Issue Shares will be the same as the ISIN for the Existing Shares, being ISIN number GB00BVC3CB83. The ISIN for the Nil Paid Rights will be GB00BFX0WB65 and the SEDOL will be BFX0WB6. The ISIN for the Fully Paid Rights will be GB00BDRNS199 and the SEDOL will be BDRNS19. 2.10 None of the Rights nor the Rights Issue Shares are being made available to the public other than pursuant to the Rights Issue on the terms and subject to the conditions set out in this Prospectus and, in the case of Qualifying Non-CREST Shareholders holding certificated shares, any relevant Provisional Allotment Letter. 2.11 The Rights Issue has been fully underwritten by the Joint Bookrunners in accordance with the terms of the Underwriting Agreement and is conditional on, inter alia: (a) the Company complying with its obligations under the Underwriting Agreement to the extent they fall to be performed before Rights Issue Admission; (b) no supplementary prospectus being published by or on behalf of the Company prior to Rights Issue Admission; (c) in the good faith opinion of the Joint Bookrunners there having been no material adverse change in, nor any development reasonably likely to result in a material adverse change in or affecting, the condition, earnings, business affairs or projects of the Company or the Group taken as a whole, whether or not arising in the ordinary course of business, at any time before Rights Issue Admission; (d) Rights Issue Admission becoming effective by not later than 8.00 a.m. on 9 March 2018 (or such later time and/or date (being not later than 8.00 a.m. on 5 April 2018) as the Joint Bookrunners may determine); and (e) Euroclear having approved admission and enablement of the Nil Paid Rights and Fully Paid Rights as participating securities within CREST on or prior to Rights Issue Admission and such Shares continuing to be participating securities within CREST. 2.12 The Underwriting Agreement may be terminated by the Joint Bookrunners prior to Rights Issue Admission upon the occurrence of certain specified events, in which case the Rights Issue will not proceed. The Joint Bookrunners may arrange sub-underwriting for some, or none, of the Rights Issue Shares. The Underwriting Agreement is not capable of termination following Rights Issue Admission. A summary of the principal terms of the Underwriting Agreement is set out in Part 16 (Additional Information) of this Prospectus. 2.13 The Joint Bookrunners and their respective affiliates may, in accordance with the applicable legal and regulatory provisions, engage in transactions in relation to the Nil Paid Rights, the Fully Paid Rights or the Rights Issue Shares and/or related instruments for their own account for the purpose of hedging their underwriting exposure or otherwise. Except as required by applicable law or regulation, The Joint Bookrunners do not propose to make any public disclosure in relation to such transactions. 2.14 In connection with the Rights Issue, the Joint Bookrunners and their respective affiliates, acting as an investor for their own account, may take up Rights in the Rights Issue and in that capacity may retain, purchase or sell for their own account such securities and any Rights and the Rights Issue Shares or related investments and may offer to sell such Rights Issue Shares or other investments otherwise than in connection with a Rights Issue. Accordingly, references in this Prospectus to Rights and the Rights Issue Shares being offered or placed should be read as including any offering or placement of Rights and the Rights Issue Shares to the Joint Bookrunners or any of their respective affiliates acting in such capacity. Neither the Joint Bookrunners nor their respective affiliates intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so. In addition, the Joint Bookrunners or their respective affiliates may enter into financing arrangements (including swaps or contract for differences) with investors in connection with which the Joint Bookrunners may from time to time acquire, hold or dispose of Shares.
67 2.15 Applications will be made for the Nil Paid Rights and the Fully Paid Rights to be admitted to CREST. Euroclear requires the Company to confirm to it that certain conditions are satisfied before Euroclear will admit any security to CREST. As soon as practicable after Rights Issue Admission, the Company will confirm this to Euroclear. It is expected that these conditions will be satisfied on Rights Issue Admission. 2.16 In addition, the Company reserves the right to decide not to proceed with the Rights Issue if the Underwriting Agreement is terminated at any time prior to Rights Issue Admission and commencement of dealings in the Rights Issue Shares, nil paid. 2.17 Subject, inter alia, to the conditions to the Underwriting Agreement being satisfied (other than the condition relating to Rights Issue Admission) and save as provided in paragraph 7 of this Part 7 (Terms and Conditions of the Rights Issue), it is intended that: (a) Provisional Allotment Letters (which constitute temporary documents of title) in respect of Nil Paid Rights will be despatched to Qualifying Non-CREST Shareholders (other than, subject to certain exceptions, Qualifying Shareholders with a registered address in the Excluded Territories or any agent or intermediary of those Qualifying Shareholders; (b) the Receiving Agent will instruct Euroclear UK & Ireland to credit the appropriate stock accounts of Qualifying CREST Shareholders (other than Qualifying CREST Shareholders with a registered address in the Excluded Territories or any agent or intermediary of those Qualifying CREST Shareholders, except where the Company is satisfied that such action would not result in the contravention of any registration or other legal requirement in any jurisdiction) with their entitlements to Nil Paid Rights with effect from 8.00 a.m. on 9 March 2018; (c) the Nil Paid Rights and Fully Paid Rights will be enabled for settlement by Euroclear UK & Ireland on 9 March 2018, as soon as practicable after the Company has confirmed to Euroclear UK & Ireland that all the conditions for admission of the Nil Paid Rights and the Fully Paid Rights to CREST have been satisfied; (d) the Rights Issue Shares will be credited to the appropriate CREST accounts of the relevant Qualifying CREST Shareholders (or relevant renouncees) who validly take up their Nil Paid Rights as soon as practicable after 8.00 a.m. on 9 March 2018; and (e) share certificates in respect of the Rights Issue Shares taken up are expected to be posted to the relevant Qualifying Non-CREST Shareholders (or relevant renouncees) on or around 6 April 2018 at their own risk. 2.18 This Prospectus constitutes the offer of Rights Issue Shares to all Qualifying CREST Shareholders (other than, subject to certain exceptions, Qualifying CREST Shareholders with a registered address in the Excluded Territories or any agent or intermediary of those Qualifying Shareholders, except where the Company and the Joint Bookrunners are satisfied that such action would not result in the contravention of any registration or other legal requirement in any jurisdiction) by way of enablement of the Nil Paid Rights and the Fully Paid Rights (as set out in paragraph 2.17(c) above); and to Qualifying Non-CREST Shareholders (other than, subject to certain exceptions, Qualifying Non-CREST Shareholders with a registered address in the Excluded Territories or any agent or intermediary of those Qualifying Non-CREST Shareholders, except where the Company is satisfied that such action would not result in the contravention of any registration or other legal requirement in any jurisdiction) by way of a Provisional Allotment Letter (as set out in paragraph 2.17(a) above). 2.19 All documents, including Provisional Allotment Letters (which constitute temporary documents of title), cheques and certificates posted to or by or from Qualifying Shareholders and/or their respective transferees or renouncees (or their agents, as appropriate) will be posted at their own risk. Any person accepting and/or renouncing a Provisional Allotment Letter or requesting registration of the Rights and the Rights Issue Shares comprised therein and any CREST member or CREST sponsored member who makes a valid acceptance in accordance with the procedures set out in paragraphs 4 and 5 of this Part 7 (Terms and Conditions of the Rights Issue) is deemed to have made the representations and warranties set out in paragraphs 5 and 7 of this Part 7 (Terms and Conditions of the Rights Issue). 2.20 If for any reason it becomes necessary to adjust the expected timetable as set out in this Prospectus, the Company will make an appropriate announcement to a Regulatory Information Service giving details of the revised dates.
68 2.21 The attention of overseas Shareholders is drawn to paragraph 7 of this Part 7 (Terms and Conditions of the Rights Issue). 2.22 The Rights Issue Shares will, when issued and fully paid, rank pari passu in all respects with the Existing Shares, including the right to receive all dividends or other distributions made, paid or declared after the date of issue of the Rights Issue Shares. There will be no restrictions on the free transferability of the Rights Issue Shares save as provided in the Articles. The rights attaching to the Rights Issue Shares are governed by the Articles, a summary of which is set out in paragraph 2 of Part 16 (Additional Information) of this Prospectus. 2.23 Shareholders taking up their rights by completing a Provisional Allotment Letter or by sending MTM instruction to Euroclear will be deemed to have given the representations and warranties set out in paragraph 5 and 7 of this Part 7 (Terms and Conditions of the Rights Issue), unless the requirement is waived by the Company.
3. Action to be Taken 3.1 The action to be taken in respect of Rights and Rights Issue Shares depends on whether, at the relevant time, the Nil Paid Rights or Fully Paid Rights in respect of which action is to be taken are in certificated form (that is, are represented by Provisional Allotment Letters) or in uncertificated form (that is, are in CREST). 3.2 If you are a Qualifying Non-CREST Shareholder and (subject to certain limited exceptions, as set out in paragraph 7 of this Part 7 (Terms and Conditions of the Rights Issue)) do not have a registered address in the Excluded Territories, please refer to paragraphs 1, 2, 4 and 7 to 14 (inclusive) of this Part 7 (Terms and Conditions of the Rights Issue). 3.3 If you are a Qualifying CREST Shareholder and (subject to certain limited exceptions, as set out in paragraph 7 of this Part 7) do not have a registered address in the Excluded Territories, please refer to paragraphs 1, 2, 5 and 7 to 14 (inclusive) of this Part 7 (Terms and Conditions of the Rights Issue) and to the CREST Manual for further information on the CREST procedures referred to below. 3.4 If you are a Qualifying CREST Shareholder or a Qualifying Non-CREST Shareholder, either (i) with a registered address in an Excluded Territory, or (ii) holding Shares on behalf of, or for the account or benefit of any person on a non-discretionary basis who is in an External Territory, please refer to paragraph 7 below. 3.5 CREST sponsored members should refer to their CREST sponsors, as only their CREST sponsors will be able to take the necessary actions specified below to take up the entitlements or otherwise to deal with the Nil Paid Rights or Fully Paid Rights of CREST sponsored members. 3.6 If you have any questions, please call 0371 384 2050 (from within the UK) or on +44 121 415 0259 (from outside the UK). The Shareholder Helpline is open from 8.30 a.m. to 5.30 p.m. (UK time) Monday to Friday (excluding English and Welsh public holidays). Calls to the Shareholder Helpline from outside the UK will be charged at the applicable international rate. Please note that calls may be recorded and randomly monitored for security and training purposes. Please note that for legal reasons, the Shareholder Helpline cannot provide advice on the merits of the Rights Issue nor give financial, tax, investment or legal advice.
4. Paid Rights Represented by Provisional Allotment Letters 4.1 General (a) Provisional Allotment Letters are expected to be despatched to Qualifying Non-CREST Shareholders (other than, subject to certain limited exceptions, as set out in paragraph 7 of this Part 7 (Terms and Conditions of the Rights Issue), Qualifying Non-CREST Shareholders with registered addresses in the Excluded Territories) on 8 March 2018. (b) Each Provisional Allotment Letter will set out: (1) in box 1, the holding at the close of business on the Record Date of Existing Shares on which a Qualifying Non-CREST Shareholder’s entitlement to Rights Issue Shares has been based; (2) in box 2, the aggregate number of Rights and the Rights Issue Shares provisionally allotted to that Qualifying Non-CREST Shareholder;
69 (3) in box 3, the amount payable by a Qualifying Non-CREST shareholder at the Rights Issue Price to take up his, her or its entitlement in full; (4) the procedures to be followed if a Qualifying Non-CREST Shareholder wishes to take up all of his, her or its entitlement to Rights Issue Shares; (5) the procedures to be followed if a Qualifying Non-CREST Shareholder wishes to dispose of all or part of his, her or its entitlement or to convert all or part of such entitlement into uncertificated form; and (6) instructions regarding acceptance and payment, consolidation, splitting and registration of renunciation. (c) If you sell or have sold or otherwise transferred all of your Existing Shares (other than ex-Rights) in certificated form before the Ex-Rights Date, please send any Provisional Allotment Letter, if and when received, at once to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee except that no Provisional Allotment Letter should be distributed, forwarded to or transmitted in or into any jurisdiction where to do so might constitute a violation of local securities laws or regulations, including but not limited to the United States or any of the other Excluded Territories. (d) If you sell or transfer or have sold or otherwise transferred only part of your holding of Existing Shares (other than ex-Rights) held in certificated form before the Ex-Rights Date, you should refer to the instruction regarding split applications in paragraph 4.7 of this Part 7 (Terms and Conditions of the Rights Issue). (e) If you do not receive a Provisional Allotment letter or you think that the holding of Existing Shares in certificated form on which your entitlement to Rights and Rights Issue Shares in the Provisional Allotment Letter has been based does not reflect your holding of Existing Shares in certificated form on the Record Date, please telephone the Receiving Agent on the numbers set out in paragraph 3 of this Part 7 (Terms and Conditions of the Rights Issue). (f) If the Rights Issue is delayed so that Provisional Allotment Letters cannot be despatched on 8 March 2018, the expected timetable on page 58 of this Prospectus will be adjusted accordingly and the revised dates will be set out in the Provisional Allotment Letters and announced through a Regulatory Information Service. References to dates and times in this Prospectus should be read as subject to any such adjustment. (g) On the basis that Provisional Allotment Letters are posted on 8 March 2018 and that dealings commence at 8 a.m. on 9 March 2018, the latest time and date for acceptance and payment in full will be 11.00 a.m. on 23 March 2018.
4.2 Procedure for acceptance and payment (a) Qualifying Non-CREST Shareholders who wish to take up all of their Nil Paid Rights must return the Provisional Allotment Letter in accordance with the instructions thereon, together with a cheque or banker’s draft, made payable to “Equiniti Limited re: John Laing Group plc Rights Issue” (and crossed “A/C Payee Only”) for the full amount payable on acceptance, in accordance with the instructions printed on the Provisional Allotment Letter, by post or by hand (during normal business hours) to the Receiving Agent Equiniti at Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing BN99 6DA, so as to be received as soon as possible and, in any event, not later than 11.00 a.m. on 23 March 2018. A reply-paid envelope is enclosed for use within the United Kingdom only. If you post your Provisional Allotment Letter, it is recommended that you allow sufficient time for delivery. Please note that payments via CHAPS, BACS or electronic transfer will not be accepted. Once your Provisional Allotment Letter duly completed and payment has been received by the Receiving Agent in accordance with the above, you will have accepted the offer to subscribe for the number of Rights and the Rights Issue Shares specified on your Provisional Allotment Letter. (b) Qualifying Non-CREST Shareholders who wish to take up some, but not all, of their Nil Paid Rights should refer to paragraph 4.7 of this Part 7 (Terms and Conditions of the Rights Issue). (c) Qualifying Non-CREST Shareholders who do not wish to take up their rights at all do not need to do anything. If Qualifying Non-CREST Shareholders do not return the Provisional Allotment Letter by 11 a.m. on 23 March 2018, the Company has made arrangements under which the Joint Bookrunners will try to find investors to take up such Shareholders’ rights. If they do find investors and are able to
70 achieve a premium over the Rights Issue Price and the related expenses of procuring those investors (including any applicable brokerage and commissions and amounts in respect of value-added tax (“VAT”)), Qualifying Non-CREST Shareholders so entitled will be sent a cheque for the amount of that aggregate premium above the Rights Issue Price less related expenses (including any applicable brokerage and commissions and amounts in respect of VAT), so long as the amount in question is at least £5.00. (d) All payments must be made in pounds sterling by cheque or banker’s draft made payable to “Equiniti Limited re: John Laing Group plc Rights Issue” and crossed “A/C Payee Only”. Third-party cheques may not be accepted. Cheques or banker’s drafts must be drawn on the personal account to which the Qualifying Non-CREST Shareholder (or their nominees) has sole or joint title to the funds. Such payments will be held by the Receiving Agent to the order of the Company. Cheques or banker’s drafts must be drawn on an account at a branch (which must be in the United Kingdom, the Channel Islands or the Isle of Man) of a bank or building society which is either a settlement member of the Cheque and Credit Clearing Company Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques and banker’s drafts to be cleared through facilities provided by either of these companies. Such cheques and banker’s drafts must bear the appropriate sorting code in the top right-hand corner. Neither post-dated cheques nor payments via CHAPS, BACS or electronic transfer will be accepted. Cheques and banker’s drafts will be presented for payment on receipt. The Company reserves the right to instruct the Receiving Agent to seek special clearance of cheques or banker’s drafts to allow value to be obtained for remittances at the earliest opportunity. No interest will be paid on payments made before they are due and any interest on such payments ultimately will accrue for the benefit of the Company. It is a term of the Rights Issue that cheques shall be honoured on first presentation, and the Company and the Joint Bookrunners may elect to treat as invalid any acceptances in respect of which cheques are not so honoured. Return of the Provisional Allotment Letter with a cheque will constitute a warranty that the cheque will be honoured on first presentation. All documents, cheques, and banker’s drafts sent through the post will be sent at the risk of the sender. If Rights Issue Shares have already been issued to Qualifying Non-CREST Shareholders prior to any payment not being so honoured or such Qualifying Non-CREST Shareholders’ acceptances being treated as invalid, the Company may (in its absolute discretion as to manner, timing and terms) make arrangements for the sale of such Rights Issue Shares on behalf of those Qualifying Non-CREST Shareholders and hold the proceeds of sale (net of the Company’s reasonable estimate of any loss that they have suffered as a result of the payment not being honoured or the acceptance being treated as invalid and of the expenses of sale, and of all amounts payable by such Qualifying Non-CREST Shareholders pursuant to the provisions of this Part 7 (Terms and Conditions of the Rights Issue) in respect of the acquisition of such Rights Issue Shares) on behalf of such Qualifying Non-CREST Shareholders. None of the Company, the Joint Bookrunners or any other person shall be responsible for, or have any liability for, any loss, expenses or damage suffered by Qualifying Non-CREST Shareholders as a result. If payment is made by a building society cheque (not being drawn on account of the applicant) or a banker’s draft, the building society or bank should insert details of the name of the account holder and have either added the building society or bank branch stamp, or have provided a supporting letter confirming the source of funds. The name of such account holder should be the same as the name of the shareholder shown on page 1 or page 4 of the Provisional Allotment Letter. (e) If a cheque or banker’s draft sent by a Qualifying Non-CREST Shareholder is drawn for an amount different from that set out in Box 3 of that Qualifying Non-CREST Shareholder’s Provisional Allotment Letter, that Shareholder’s application shall be treated as an acceptance in respect of such whole number of Rights Issue Shares which could be acquired at the Rights Issue Price with the amount for which the cheque or banker’s draft is drawn (and not the amount set out in Box 3 of the Provisional Allotment Letter). Any balance from the amount of the cheque will be retained for the benefit of the Company.
4.3 Discretion as to validity of acceptances (a) If payment is not received in full by 11.00 a.m. on 23 March 2018, whether from the original allottee or any other person in whose favour the Rights have been renounced, the provisional allotment will (unless the Company has exercised its right to treat as valid an acceptance, as set out below) be deemed to have been declined and lapsed. The Company and the Joint Bookrunners may elect, but shall not be obliged, to treat as valid: (a) Provisional Allotment Letters and accompanying remittances that are received through the post not later than 5:00 p.m. on 23 March 2018; and (b) acceptances in respect of which a remittance is received prior to 11.00 a.m. on 23 March 2018 from an authorised person (as defined in
71 section 31(2) of FSMA) specifying the number of Rights Issue Shares to be acquired and undertaking to lodge the relevant Provisional Allotment Letter, duly completed, in due course. (b) The Company may also (having consulted with the Joint Bookrunners) treat a Provisional Allotment Letter as valid and binding on the person(s) by whom or on whose behalf it is lodged even if it is not completed in accordance with the relevant instructions or is not accompanied by a valid power of attorney where required. (c) The Company (having consulted with the Joint Bookrunners) reserves the right to treat as invalid any acceptance or purported acceptance of the Rights that appears to the Company and the Joint Bookrunners to have been executed in, despatched from or that provides an address for delivery of share certificates for Rights Issue Shares in the United States or any Excluded Territory unless the Company and the Joint Bookrunners are satisfied that such action would not result in the contravention of any registration or other legal requirement in any jurisdiction. (d) The provisions of this paragraph 4.3 and any other terms of the Rights Issue relating to Qualifying Non-CREST Shareholders may be waived, varied or modified as regards specific Qualifying Non-CREST Shareholder(s) or on a general basis by the Company and the Joint Bookrunners. (e) A Qualifying Non-CREST Shareholder who makes a valid acceptance and payment in accordance with this paragraph 4 is deemed to request that the Rights Issue Shares to which they will become entitled be issued to them on the terms set out in this Prospectus and subject to the Articles.
4.4 Money Laundering Regulations (a) It is a term of the Rights Issue that, to ensure compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the “Money Laundering Regulations”), the Receiving Agent may require, at its absolute discretion, verification of the identity of the person by whom or on whose behalf the Provisional Allotment Letter is lodged with payment (which requirements are referred to below as the “verification of identity requirements”). If the Provisional Allotment Letter is submitted by a UK regulated broker or intermediary acting as agent and which is itself subject to the Money Laundering Regulations, any verification of identity requirements are the responsibility of such broker or intermediary and not of the Receiving Agent. In such case, the lodging agent’s stamp should be inserted on the Provisional Allotment Letter. The person lodging the Provisional Allotment Letter with payment and in accordance with the other terms as described above (the “acceptor”), including any person who appears to the Receiving Agent to be acting on behalf of some other person, shall thereby be deemed to agree to provide the Receiving Agent with such information and other evidence as the Receiving Agent may require to satisfy the verification of identity requirements. (b) The Receiving Agent may therefore undertake electronic searches, including using a credit reference agency, for the purposes of verifying identity. To do so, the Receiving Agent may verify the details against the applicant’s identity, but also may request further proof of identity. A record of the search will be retained. If the Receiving Agent determines that the verification of identity requirements apply to any acceptor or application, the relevant Rights Issue Shares (notwithstanding any other term of the Rights Issue) will not be issued to the relevant acceptor unless and until the verification of identity requirements have been satisfied in respect of that acceptor or application. The Receiving Agent is entitled, in its absolute discretion, to determine whether the verification of identity requirements apply to any acceptor or application and whether such requirements have been satisfied, and neither the Receiving Agent, the Joint Bookrunners, nor the Company will be liable to any person for any loss or damage suffered or incurred (or alleged), directly or indirectly, as a result of the exercise of such discretion. (c) If the verification of identity requirements apply, failure to provide the necessary evidence of identity within a reasonable time may result in delays and potential rejection of an application. If, within a reasonable time and in any event by not later than 11.00 p.m. on 23 March 2018 following a request for verification of identity, the Receiving Agent has not received evidence satisfactory to it as aforesaid, the Company will be entitled to make arrangements (in its absolute discretion as to manner, timing and terms) to sell the relevant shares (and for that purpose the Company will be expressly authorised to act as agent of the acceptor). Any proceeds of sale (net of expenses) of the relevant shares which shall be issued to and registered in the name of the purchaser(s) or an amount equivalent to the original payment, whichever is the lower, will be held by the Company on trust for the acceptor, subject to the requirements of the Money Laundering Regulations (at the acceptor’s risk) without interest to the
72 account of the bank or building society on which the relevant cheque or banker’s draft was drawn (without prejudice to the right of the Company to take proceedings to recover the amount by which the net proceeds of sale of the relevant Rights fall short of the amount payable thereon). (d) None of the Receiving Agent, the Joint Bookrunners or the Company will be liable to any person for any loss suffered or incurred as a result of the exercise of any such discretion or as a result of any sale of relevant Shares. (e) Submission of a Provisional Allotment Letter with the appropriate remittance will constitute a warranty to each of the Company, the Receiving Agent and the Joint Bookrunners from the acceptor that the Money Laundering Regulations will not be breached by application of such remittance and an undertaking to provide promptly to the Registrar such information as may be specified by the Registrar as being required for the purpose of the Money Laundering Regulations. If the verification of identity requirements apply, failure to provide the necessary evidence of identity may result in your acceptance being treated as invalid or in delays in the despatch of a receipted fully paid Provisional Allotment Letter, share certificate or other documents relating to the Rights Issue (as applicable). (f) The verification of identity requirements will not usually apply for the UK purposes if: (1) the acceptor is an organisation required to comply with the EU Money Laundering Directive 2005/60/EC of the European Parliament and of the EC Council of 26 October 2005; (2) the acceptor is a regulated United Kingdom broker or intermediary acting as agent and is itself subject to the Money Laundering Regulations; (3) the acceptor is a company whose securities are listed on a regulated market subject to specified disclosure obligations; (4) the acceptor (not being an applicant who delivers his/her application in person) makes payment through an account in the name of such acceptor with a credit institution which is subject to the Money Laundering Regulations or with a credit institution situated in a non-EEA State which imposes requirements equivalent to those laid down in that directive; or (5) the aggregate subscription price for the Rights Issue Shares is less than EUR15,000 (or its pounds sterling equivalent). (g) In other cases the verification of identity requirements may apply. The following guidance is provided in order to assist in satisfying the verification of identity requirements and to reduce the likelihood of difficulties or delays and potential rejection of an application (but does not limit the right of the Registrar to require verification of identity as stated above). Satisfaction of these requirements may be facilitated in the following ways: (1) if payment is made by cheque or banker’s draft in pounds sterling drawn on a branch in the United Kingdom of a bank or building society which bears a UK bank sort code number in the top right-hand corner the following applies. Cheques, which must be drawn on the personal account of the individual investor where they have sole or joint title to the funds, should be payable to John Laing Group plc re John Laing Group plc Rights Issue” in respect of an application by a Qualifying Non-CREST Shareholder. Third party cheques may not be accepted with the exception of building society cheques or banker’s drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the cheque/ banker’s draft to such effect. The account name should be the same as that shown on the Provisional Allotment Letter; or (2) if a Provisional Allotment Letter is lodged with payment by an agent which is an organisation of the kind referred to in sub-paragraph 4.4(f)(1) above or which is subject to anti-money laundering regulation in a country which is a member of the Financial Action Task Force (the non-European Union members of which are Argentina, Australia, Brazil, Canada, China, Hong Kong, Iceland, India, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Norway, Russian Federation, Singapore, South Africa, Switzerland, Turkey and the United States and, by virtue of their membership of the Gulf Co-operation Council, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), the agent should provide with the Provisional Allotment Letter written confirmation that it has that status and a written assurance that it has obtained and recorded evidence of the identity of the person for whom it acts and that it will on demand make such evidence available to the Receiving Agent and/or any relevant regulatory or
73 investigatory authority, or if the agent is not such an organisation, it should contact the Receiving Agent at the address set out in “Directors and Advisers”; or (3) if a Provisional Allotment Letter is lodged by hand by the acceptor in person, he or she should ensure that he or she has with him or her evidence of identity bearing his or her photograph (for example, his or her passport) and evidence of his or her address (for example, a recent bank statement).
4.5 Dealings in Nil Paid Rights Subject to the fulfilment of the conditions set out in paragraph 2 of this Part 7 (Terms and Conditions of the Rights Issue), dealings on the London Stock Exchange in the Nil Paid Rights are expected to commence at 8.00 a.m. on 9 March 2018. A transfer of Nil Paid Rights can be made by renunciation of the Provisional Allotment Letter in accordance with the instructions printed on it and delivery of the Provisional Allotment Letter to the transferee or to a stockbroker, bank or other appropriate financial adviser. The latest time for registration of renunciation of Provisional Allotment Letters, nil paid, is expected to be 4.30 p.m. on 19 March 2018.
4.6 Dealings in Fully Paid Rights After acceptance of the provisional allotment and payment in full in accordance with the provisions set out in this Prospectus and in the Provisional Allotment Letter, the Fully Paid Rights may be transferred by renunciation of the relevant Provisional Allotment Letter and lodging of the same, by post or by hand (during normal business hours only) to the Receiving Agent at Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, so as to be received not later than 11.00 a.m. on 23 March 2018. To do this, Qualifying Non-CREST Shareholders will need to have their fully paid Provisional Allotment Letter returned to them after their acceptance has been effected by the Receiving Agent. However, fully paid Provisional Allotment Letters will not be returned to Qualifying Non-CREST Shareholders unless their return is requested by ticking the appropriate box on the Provisional Allotment Letter. Thereafter, the Rights Issue Shares will be registered and transferable in the usual common form or, if they have been issued in or converted into uncertificated form, in electronic form under the CREST system.
4.7 Renunciation and splitting of Provisional Allotment Letters The Provisional Allotment Letters are fully renounceable (save as required by the laws of certain overseas jurisdictions) and may be split prior to 3.00 p.m. on 21 March 2018 nil paid and fully paid. Qualifying Non-CREST Shareholders who wish to transfer all of their Nil Paid Rights or, after acceptance of the provisional allotment and payment in full, Fully Paid Rights comprised in a Provisional Allotment Letter may (save as required by the laws of certain overseas jurisdictions) renounce such allotment by completing and signing Form X on page 4 of the Provisional Allotment Letter (if it is not already marked “Original Duly Renounced”) and passing the entire Provisional Allotment Letter to their stockbroker or bank or other appropriate financial adviser or to the transferee. Once a Provisional Allotment Letter has been so renounced, it will become a negotiable instrument in bearer form and the Nil Paid Rights or Fully Paid Rights (as appropriate) comprised in such letter may be transferred by delivery of such letter to the transferee, provided that a transferee must not have a registered address in, or be resident or located in, the United States or any other Excluded Territory. The latest time and date for registration of renunciation of Provisional Allotment Letters is 3.00 p.m. on 20 March 2018 and after such date the Rights Issue Shares will be in registered form, transferable by written instrument of transfer in the usual common form or, if they have been issued in or converted into uncertificated form, in electronic form under the CREST system. Qualifying Non-CREST Shareholders should note that fully paid Provisional Allotment Letters will not be returned to Qualifying Non-CREST Shareholders unless their return is requested. If a holder of a Provisional Allotment Letter wishes to have only some of the Rights registered in his or her name and to transfer the remainder, or wishes to transfer all the Nil Paid Rights, or (if appropriate) Fully Paid Rights but to different persons, he or she may have the Provisional Allotment Letter split, for which purpose he or she must sign and date Form X of the Provisional Allotment Letter. The Provisional Allotment Letter must then be delivered by post or by hand (during normal business hours only) to the appropriate address as set out in paragraph 4.6 of this Part 7 (Terms and Conditions of the Rights Issue) by no later than 3.00 p.m. on 21 March 2018, to be cancelled and exchanged for the split Provisional Allotment Letters required. The number of split Provisional Allotment Letters required and the number of Nil Paid Rights or (as appropriate) Fully Paid Rights to be comprised in each split Provisional Allotment Letter should be stated in an accompanying letter.
74 Form X of split Provisional Allotment Letters will be marked “Original Duly Renounced” before issue. The holder of the split Provisional Allotment Letters should then follow the instructions in the preceding paragraph in relation to transferring the Nil Paid Rights or (if appropriate) Fully Paid Rights represented by each of the Provisional Allotment Letters. Alternatively, Qualifying Non-CREST Shareholders who wish to take up some of their Rights, without transferring the remainder, should complete Form X of the original Provisional Allotment Letter and return it by post or by hand (during normal business hours only) to the Registrar at the appropriate address as set out in paragraph 4.6 of this Part 7 (Terms and Conditions of the Rights Issue), together with a covering letter confirming the number of Rights Issue Shares to be taken up and a cheque or banker’s draft in pounds sterling for the appropriate amount made payable to “Equiniti Limited re: John Laing Group plc Rights Issue” and crossed “A/C payee only” detailing the allotment number (which is on page 1 of the Provisional Allotment Letter) written on the reverse of the cheque or banker’s draft to pay for this number of shares. In this case, the Provisional Allotment Letter and the cheque or banker’s draft must be received by the Registrar by 11.00 a.m. on 23 March 2018, being the last date and time for acceptance. The Company reserves the right to refuse to register any renunciation in favour of any person in respect of which it believes such renunciation may violate applicable legal or regulatory requirements including (without limitation) any renunciation in the name of any person with an address outside the United Kingdom.
4.8 Registration in the names of Qualifying Non-CREST Shareholders A Qualifying Non-CREST Shareholder who wishes to have all his or her entitlement to Rights Issue Shares registered in his or her name must accept and make payment for such allotment prior to the latest time for acceptance and payment in full, which is 11.00 a.m. on 23 March 2018, in accordance with the provisions set out in the Provisional Allotment Letter and this Prospectus, but need take no further action. A share certificate shall be sent to such Shareholder by post not later than 6 April 2018.
4.9 Registration in the names of persons other than Qualifying Non-CREST Shareholders originally entitled In order to register Fully Paid Rights in certificated form in the name of someone other than the Qualifying CREST Shareholders originally entitled, the renouncee or his or her agent(s) must complete Form Y of the Provisional Allotment Letter (unless the renouncee is a CREST member who wishes to hold such shares in uncertificated form, in which case Form X and the CREST Deposit Form must be completed—as set out in paragraph 4.11 of this Part 7 (Terms and Conditions of the Rights Issue)) and lodge the entire letter when fully paid by post or by hand (during normal business hours only) with the Receiving Agent at the appropriate address as set out in paragraph 4.6 of this Part 7 (Terms and Conditions of the Rights Issue) not later than the latest time for registration of renunciation which is 3.00 p.m. on 20 March 2018. Registration cannot be effected unless and until the Rights Issue Shares comprised in a Provisional Allotment Letter are fully paid. The Rights Issue Shares comprised in two or more Provisional Allotment Letters (duly renounced where applicable) may be registered in the name of one holder (or joint holder) if Form Y is completed on of one of the Provisional Allotment Letters (the “Principal Letter”) and all other relevant Provisional Allotment Letters are delivered in one batch. Details of each relevant Provisional Allotment Letter (including the Principal Letter) should be listed in an attached letter and the allotment number of the Principal Letter should be entered into the space provided on each of the other Provisional Allotment Letters.
4.10 Deposit of Nil Paid Rights or Fully Paid Rights into CREST (a) The Nil Paid Rights or Fully Paid Rights represented by a Provisional Allotment Letter may be converted into uncertificated form, that is deposited into CREST (whether such conversion arises as a result of a renunciation of those rights or otherwise). Similarly, Nil Paid Rights or Fully Paid Rights held in CREST may be converted into certificated form that is withdrawn from CREST. Subject as provided in the next paragraph or in the Provisional Allotment Letter, normal CREST procedures and timings apply in relation to any such conversion. You are recommended to refer to the CREST Manual for details of such procedures. (b) The procedure for depositing the Nil Paid Rights or Fully Paid Rights represented by a Provisional Allotment Letter into CREST, whether such rights are to be converted into uncertificated form in the name(s) of the person(s) whose name(s) and address(es) appear on page 1 of the Provisional Allotment Letter or in the name of a person or persons to whom the Provisional Allotment Letter has been renounced, is as follows: Form X and the CREST Deposit Form (both set out on the Provisional
75 Allotment Letter) will need to be completed and the Provisional Allotment Letter deposited with the CREST Courier and Sorting Service (“CCSS”); in addition, the normal CREST stock deposit procedures will need to be carried out, except that: (a) it will not be necessary to complete and lodge a separate CREST Transfer Form (prescribed under the Stock Transfer Act 1963) with the CCSS; and (b) only the whole of the Nil Paid Rights or Fully Paid Rights represented by the Provisional Allotment Letter may be deposited into CREST. If you wish to deposit only some of the Nil Paid Rights or Fully Paid Rights represented by the Provisional Allotment Letter into CREST, you must first apply for split Provisional Allotment Letters. If the rights represented by more than one Provisional Allotment Letter are to be deposited, the CREST Deposit Form on each Provisional Allotment Letter must be completed and deposited. A Consolidation Listing Form (as defined in the CREST Regulations) must not be used. A holder of the Nil Paid Rights or Fully Paid Rights represented by a Provisional Allotment Letter who is proposing to convert those rights into uncertificated form (whether following a renunciation of such rights or otherwise) is recommended to ensure that the conversion procedures are implemented in sufficient time to enable the person holding or acquiring the Nil Paid Rights or Fully Paid Rights in CREST following the conversion to take all necessary steps in connection with taking up the entitlement prior to 11.00 a.m. on 23 March 2018. (c) In particular, having regard to processing times in CREST and on the part of the Receiving Agent, the latest recommended time for depositing a renounced Provisional Allotment Letter (with Form X and the CREST Deposit Form on the Provisional Allotment Letter duly completed) with the CCSS (to enable the person acquiring the Nil Paid Rights or Fully Paid Rights in CREST as a result of the conversion to take all necessary steps in connection with taking up the entitlement prior to 11.00 a.m. on 23 March 2018) is 3.00 p.m. on 20 March 2018. (d) When Form X and the CREST Deposit Form (both set out on the Provisional Allotment Letter) have been completed, the title to the Nil Paid Rights or the Fully Paid Rights represented by the relevant Provisional Allotment Letter will cease forthwith to be renounceable or transferable by delivery and, for the avoidance of doubt, any entries in Form X on such Provisional Allotment Letter will not be recognised or acted upon by the Registrar. All renunciations or transfers of the Nil Paid Rights or Fully Paid Rights must be effected through the means of the CREST system once such rights have been deposited into CREST. (e) CREST sponsored members should contact their CREST sponsor as only their CREST sponsor will be able to take the necessary action to take up their entitlement or otherwise to deal with the Nil Paid Rights or Fully Paid Rights of the CREST sponsored member. Note: Surrender of the Provisional Allotment Letter with (a) Form X purporting to have been signed by the same person(s) in whose name(s) it was issued or, in the case of a split PAL, marked “Original Duly Renounced”, and (b) where applicable, Form Y or the CREST Deposit Form duly completed, shall be conclusive evidence in favour of the Company and the Registrar of: (1) the right of the person(s) named in Form Y or the CREST Deposit Form of the Provisional Allotment Letter to be registered as the holder(s) of the Rights and the Rights Issue Shares comprised in the Provisional Allotment Letter; (2) the title of the person(s) lodging the Provisional Allotment Letter to deal with the same and to receive split Provisional Allotment Letters and/or a share certificate or a deposit to their CREST member’s account (as appropriate); and (3) the authority of the person(s) completing Form Y or the CREST Deposit Form. All documents will be despatched by post at the risk of the person(s) entitled to them. For the avoidance of doubt, each Provisional Allotment Letter deposited with the CCSS is not considered to be a bearer document unless delivered. Liability is limited to standard stock deposit replacement costs in accordance with Euroclear UK’s standard terms and conditions.
4.11 Issue of Rights Issue Shares in definitive form Definitive share certificates in respect of the Rights Issue Shares to be held in certificated form are expected to be despatched by post by no later than 6 April 2018 at the risk of the person(s) entitled to them, to accepting Qualifying Non-CREST Shareholders and renouncees or their agents or, in the case of joint holdings, to the first-named Shareholder at their registered address (unless lodging agent details have been completed in box 5 of the Provisional Allotment Letter). After despatch of definitive share certificates, Provisional Allotment Letters will cease to be valid for any purpose whatsoever. Pending despatch of definitive share certificates and
76 the inscription of the member in the Company’s register of members, instruments of transfer of the Rights Issue Shares will be certified by the Registrar against the lodgement of fully paid Provisional Allotment Letters and/ or, in the case of renunciations, against the Provisional Allotment Letters held by the Registrar.
5. Action to be Taken by Qualifying Crest Shareholders in Relation to Nil Paid Rights in CREST 5.1 General (a) Subject as provided in paragraph 7 of this Part 7 (Terms and Conditions of the Rights Issue) in relation to certain overseas Shareholders, each Qualifying CREST Shareholder is expected to receive a credit to his or her CREST stock account of his or her entitlement to Nil Paid Rights as soon as practicable after 8.00 a.m. on 9 March 2018. For such Qualifying CREST Shareholders, the CREST stock account to be credited will be an account under the participant ID and member account ID that apply to the Existing Shares held on the Record Date by the Qualifying CREST Shareholder in respect of which the Nil Paid Rights are provisionally allotted. (b) The maximum number of Rights Issue Shares that a Qualifying CREST Shareholder may take up is that which has been provisionally allotted to that Qualifying CREST Shareholder and for which he, she or it receives a credit of entitlement into his, her or its stock account in CREST. The minimum number of Rights Issue Shares a Qualifying CREST Shareholder may take up is one. (c) The Nil Paid Rights will constitute a separate security and can accordingly be transferred, in whole or in part, by means of CREST in the same manner as any other security that is admitted to CREST. If, for any reason, it is impracticable to credit the stock accounts of such Qualifying CREST Shareholders or to enable the Nil Paid Rights by 8.00 a.m. on 9 March 2018, Provisional Allotment Letters shall, unless the Company decides otherwise, be sent out in substitution for the Nil Paid Rights which have not been so credited or enabled and the expected timetable as set out in this Prospectus may be adjusted as appropriate. References to dates and times in this Prospectus should be read as subject to any such adjustment. The Company will make an appropriate announcement to a Regulatory Information Service giving details of the revised dates but Qualifying CREST Shareholders may not receive any further written communication. (d) CREST members who wish to take up all or part of, or otherwise to transfer all or part of, their entitlements in respect of or otherwise to transfer Nil Paid Rights or Fully Paid Rights held by them in CREST (including effecting a cashless take-up of Nil Paid Rights), should refer to the CREST Manual for further information on the CREST procedures referred to below. If you are a CREST sponsored member, you should consult your CREST sponsor if you wish to take up your entitlement as only your CREST sponsor will be able to take the necessary action to take up your entitlements or otherwise deal with your Nil Paid Rights or Fully Paid Rights.
5.2 Procedure for acceptance and payment (a) MTM instructions CREST members who wish to take up all or part of their entitlement in respect of Nil Paid Rights in CREST must send (or, if they are CREST sponsored members, procure that their CREST sponsor sends) an MTM instruction to Euroclear which, on its settlement, will have the following effect: (1) the crediting of a stock account of the Receiving Agent under the participant ID and member account ID specified below, with the number of Nil Paid Rights to be taken up; (2) the creation of a settlement bank payment obligation (as this term is defined in the CREST Manual), in accordance with the RTGS payment mechanism (as this term is defined in the CREST Manual), in favour of the RTGS settlement bank (as this term is defined in the CREST Manual) of the Receiving Agent in pounds sterling, in respect of the full amount payable on acceptance in respect of the Nil Paid Rights referred to in sub-paragraph 5.2(a)(1) above; and (3) the crediting of a stock account of the accepting CREST member (being an account under the same participant ID and member account ID as the account from which the Nil Paid Rights are to be debited on settlement of the MTM instruction) of the corresponding number of Fully Paid Rights to which the CREST member is entitled on taking up his or her Nil Paid Rights referred to in sub-paragraph 5.2(a)(1) above.
77 (b) Contents of MTM instructions The MTM instruction must be properly authenticated in accordance with Euroclear’s specifications and must contain, in addition to the other information that is required for settlement in CREST, the following details: (1) the number of Nil Paid Rights to which the acceptance relates; (2) the participant ID of the accepting CREST member; (3) the member account ID of the accepting CREST member from which the Nil Paid Rights are to be debited; (4) the participant ID of the Receiving Agent, in its capacity as a CREST receiving agent. This is 2RA92; (5) the member account ID of the Receiving Agent, in its capacity as a CREST receiving agent. This is RA269601; (6) the number of Fully Paid Rights that the CREST member is expecting to receive on settlement of the MTM instruction. This must be the same as the number of Nil Paid Rights to which the acceptance relates; (7) the amount payable by means of the CREST assured payment arrangements on settlement of the MTM instruction. This must be the full amount payable on acceptance in respect of the number of Nil Paid Rights to which the acceptance relates (referred to in paragraph 5.2(a)(1) above); (8) the intended settlement date (which must be on or before 11.00 a.m. on 23 March 2018); (9) the Nil Paid Rights ISIN. This is GB00BFX0WB65; (10) the Fully Paid Rights ISIN. This is GB00BDRNS199; (11) the Corporate Action Number (as this term is defined in the CREST Manual) to the Rights Issue. This will be available by viewing the relevant corporate action details in CREST; (12) contact name and telephone numbers in the shared notes field; and (13) a priority of at least 80.
(c) Valid acceptance (1) An MTM instruction complying with each of the requirements as to authentication and contents set out in paragraph 5.2(b) will constitute a valid acceptance where either: (A) the MTM instruction settles by not later than 11.00 a.m. on 23 March 2018; or (B) at the discretion of the Company and the Joint Bookrunners: (A) the MTM instruction is received by Euroclear by not later than 11.00 a.m. on 23 March 2018; and (B) the number of Nil Paid Rights inserted in the MTM instruction is credited to the CREST stock member account of the accepting CREST member specified in the MTM instruction at 11.00 a.m. on 23 March 2018; and (C) the relevant MTM instruction settles by 2.00 p.m. on 23 March 2018 (or such later date as the Company and the Joint Bookrunners have determined). (2) An MTM instruction will be treated as having been received by Euroclear for these purposes at the time at which the instruction is processed by the Network Provider’s Communications Host (as this term is defined in the CREST Manual) at Euroclear of the network provider used by the CREST member (or by the CREST sponsored member’s CREST sponsor). This will be conclusively determined by the input time stamp applied to the MTM instruction by the Network Provider’s Communications Host. (3) The provisions of this paragraph 5.2 and any other terms of the Rights Issue relating to Qualifying CREST Shareholders may be waived, varied or modified as regards specific Qualifying CREST Shareholder(s) or on a general basis by the Company and the Joint Bookrunners.
78 (d) Representations, warranties and undertakings of CREST members (1) A CREST member, or CREST sponsored member who makes a valid acceptance in accordance with this paragraph 5.2, represents, warrants and undertakes to the Company and the Joint Bookrunners that he or she has taken (or procured to be taken), and will take (or will procure to be taken), whatever action is required to be taken by him or her or by his or her CREST sponsor (as appropriate) to ensure that the MTM instruction concerned is capable of settlement at 11.00 a.m. on 23 March 2018 and remains capable of settlement at all times after that until 2.00 p.m. on 23 March 2018 (or until such later time and date as the Company and the Joint Bookrunners may determine). In particular, the CREST member or CREST sponsored member represents, warrants and undertakes that at 11.00 a.m. on 23 March 2018 and at all times thereafter until 2.00 p.m. on 23 March 2018 (or until such later time and date as the Company and the Joint Bookrunners may determine) there will be sufficient Headroom within the Cap (as those terms are defined in the CREST Manual) in respect of the cash memorandum account to be debited with the amount payable on acceptance to permit the MTM instruction to settle. CREST sponsored members should contact their CREST sponsor if they are in any doubt. (2) If there is insufficient Headroom within the Cap in respect of the cash memorandum account of a CREST member or CREST sponsored member for such amount to be debited or the CREST member’s or CREST sponsored member’s acceptance is otherwise treated as invalid and Rights Issue Shares have already been allotted to such CREST member or CREST sponsored member, the Company and the Joint Bookrunners may (in their absolute discretion as to manner, timing and terms) make arrangements for the sale of such shares on behalf of that CREST member or CREST sponsored member and hold the proceeds of sale (net of the Company’s reasonable estimate of any loss that it has suffered as a result of the acceptance being treated as invalid and of the expenses of sale, and of all amounts payable by the CREST member or CREST sponsored member pursuant to the provisions of this Part 7 (Terms and Conditions of the Rights Issue) in respect of the acquisition of such shares) on behalf of such CREST member or CREST sponsored member. None of the Company nor the Joint Bookrunners nor any other person shall be responsible for, or have any liability for, any loss, expenses or damage suffered by such CREST member or CREST sponsored member as a result. (3) A Qualifying CREST Shareholder will be deemed to have made the representations and warranties set out in paragraph 5.2(d) of this Part 7 (Terms and Conditions of the Rights Issue) and the agreement and acknowledgement set out in paragraph 5.3 of this Part 7 (Terms and Conditions of the Rights Issue).
(e) CREST procedures and timings CREST members and CREST sponsors (on behalf of CREST sponsored members) should note that Euroclear does not make available special procedures in CREST for any particular corporate action. Normal system timings and limitations will therefore apply in relation to the input of an MTM instruction and its settlement in connection with the Rights Issue. It is the responsibility of the CREST member concerned to take (or, if a CREST sponsored member, to procure that his or her CREST sponsor takes) the action necessary to ensure that a valid acceptance is received as stated above by 11.00 a.m. on 23 March 2018. In this connection, CREST members and (where applicable) CREST sponsors are referred in particular to those sections of the CREST Manual concerning the practical limitations of the CREST system and timings.
(f) CREST member’s undertaking to pay A CREST member or CREST sponsored member who makes a valid acceptance in accordance with the procedures set out in this paragraph 5.2 undertakes to pay to the Registrar, or to procure the payment to the Registrar of, the amount payable in pounds sterling on acceptance in accordance with the above procedures or in such other manner as the Company may require (it being acknowledged that, where payment is made by means of the RTGS payment mechanism (as defined in the CREST Manual), the creation of a RTGS settlement bank (as this term is defined in the CREST Manual) payment obligation in pounds sterling in favour of the Registrar’s RTGS settlement bank, in accordance with the RTGS payment mechanism, shall, to the extent of the obligation so created, discharge in full the obligation of the CREST member (or CREST sponsored member) to pay the amount payable on acceptance); and requests that the Fully Paid Rights and/or Rights Issue Shares to which they will become entitled be issued to them on the terms set out in this Prospectus and subject to the Company’s Articles. If the payment obligations of the relevant CREST member in relation to such Rights Issue Shares are not discharged in full and such Rights Issue Shares have already been issued to the CREST
79 member or CREST sponsored member, the Company and the Joint Bookrunners may (in their absolute discretion as to the manner, timing and terms) make arrangements for the sale of such shares on behalf of that CREST member or CREST sponsored member and hold the proceeds of sale (net of expenses, and all amounts payable by the CREST member or CREST sponsored member pursuant to the provisions of this Part 7 (Terms and Conditions of the Rights Issue) in respect of the acquisition of such shares) or an amount equal to the original payment of the CREST member or CREST sponsored member (whichever is lower) on trust for such CREST member or CREST sponsored member. In these circumstances, none of the Joint Bookrunners or the Company shall be responsible for, or have any liability for, any losses, expenses or damages arising as a result.
(g) Discretion as to rejection and validity of acceptances The Company may in its absolute discretion (after consulting with the Joint Bookrunners): (1) reject any acceptance constituted by an MTM instruction, which is otherwise valid, in the event of breach of any of the representations, warranties and undertakings set out or referred to in this Part 7 (Terms and Conditions of the Rights Issue). Where an acceptance is made as described in this paragraph 5.2(g) which is otherwise valid, and the MTM instruction concerned fails to settle by 2.00 p.m. on 23 March 2018 (or by such later time and date as the Company and the Joint Bookrunners may determine), the Company and the Joint Bookrunners shall be entitled to assume, for the purposes of the Company’s right to reject an acceptance as described in this paragraph 5.2(g), that there has been a breach of the representations, warranties and undertakings set out or referred to in this paragraph 5.2(g) unless the Company is aware of any reason outside the control of the CREST member or CREST sponsor (as appropriate) concerned for the MTM instruction to settle; (2) treat as valid (and binding on the CREST member or CREST sponsored member concerned) an acceptance which does not comply in all respects with the requirements as to validity set out or referred to in this paragraph; (3) accept an alternative properly authenticated dematerialised instruction from a CREST member or (where applicable) a CREST sponsor as constituting a valid acceptance in substitution for, or in addition to, an MTM instruction and subject to such further terms and conditions as the Company and the Joint Bookrunners may determine; (4) treat a properly authenticated dematerialised instruction (the “first instruction”) as not constituting a valid acceptance if, at the time at which the Receiving Agent receives a properly authenticated dematerialised instruction giving details of the first instruction, either the Company or the Receiving Agent has received actual notice from Euroclear of any of the matters specified in CREST Regulation 35(5)(a) in relation to the first instruction. These matters include notice that any information contained in the first instruction was incorrect or notice of lack of authority to send the first instruction; and (5) accept an alternative instruction or notification from a CREST member or (where applicable) a CREST sponsor, or extend the time for acceptance and/or settlement of an MTM instruction or any alternative instruction or notification, if, for reasons or due to circumstances outside the control of any CREST member or CREST sponsored member or (where applicable) CREST sponsor, the CREST member or CREST sponsored member is unable validly to take up all or part of his/her Nil Paid Rights by means of the above procedures. In normal circumstances, this discretion is only likely to be exercised in the event of any interruption, failure or breakdown of CREST (or of any part of CREST) or on the part of facilities and/or systems operated by the Receiving Agent in connection with CREST.
5.3 Money Laundering Regulations (a) If you hold your Nil Paid Rights in CREST and apply to take up all or part of your entitlement as agent for one or more persons and you are not a UK or EU regulated person or institution (e.g. a bank, a broker or another UK financial institution), then, irrespective of the value of the application, the Receiving Agent is required to take reasonable measures to establish the identity of the person or persons (or the ultimate controller of such persons) on whose behalf you are making the application and any submission of a MTM instruction constitutes agreement for the Receiving Agent to make a search via a credit reference agency where deemed necessary. A record of search results will be retained. Such Qualifying CREST Shareholders must therefore contact the Receiving Agent before sending any MTM instruction or other instruction so that appropriate measures may be taken.
80 (b) Submission of an MTM instruction which constitutes, or which may on its settlement constitute, a valid acceptance as described above constitutes a warranty and undertaking by the applicant to provide promptly to the Receiving Agent any information the Receiving Agent may specify as being required for the purposes of the Money Laundering Regulations. Pending the provision of evidence satisfactory to the Receiving Agent as to identity, the Receiving Agent, having consulted with the Company and the Joint Bookrunners, may take, or omit to take, such action as it may determine to prevent or delay settlement of the MTM instruction. (c) If satisfactory evidence of identity has not been provided within a reasonable time, the Receiving Agent will not permit the MTM instruction concerned to proceed to settlement; but without prejudice to the right of the Company and the Joint Bookrunners to take proceedings to recover any loss suffered by it/ them as a result of failure by the applicant to provide satisfactory evidence.
5.4 Dealings in Nil Paid Rights in CREST Subject to the fulfilment of the conditions under the Underwriting Agreement (summarised in paragraph 2 of this Part 7 (Terms and Conditions of the Rights Issue)), dealings in the Nil Paid Rights on the London Stock Exchange are expected to commence at 8.00 a.m. on 9 March 2018. Dealings in Nil Paid Rights can be made by means of CREST in the same manner as any other security that is admitted to CREST. The Nil Paid Rights are expected to be disabled in CREST after the CREST close of business on 23 March 2018.
5.5 Dealings in Fully Paid Rights in CREST (a) After acceptance and payment in full in accordance with the provisions set out in this Prospectus, the Fully Paid Rights may be transferred (in whole or in part) by means of CREST in the same manner as any other security that is admitted to CREST. The last time for settlement of any transfer of Fully Paid Rights in CREST is expected to be 11.00 a.m. on 23 March 2018. The Fully Paid Rights are expected to be disabled in CREST at the close of CREST business on 23 March 2018. (b) After 26 March 2018, the Rights Issue Shares will be registered in the name(s) of the person(s) entitled to them in the Company’s register of members and will be transferable in the usual way.
5.6 Withdrawal of Nil Paid Rights or Fully Paid Rights from CREST (a) Nil Paid Rights or Fully Paid Rights held in CREST may be converted into certificated form, that is withdrawn from CREST. Normal CREST procedures (including timings) apply in relation to any such conversion. (b) The recommended latest time for receipt by Euroclear of a properly authenticated dematerialised instruction requesting withdrawal of Nil Paid Rights from CREST is 4.30 p.m. on 19 March 2018, so as to enable the person acquiring or (as appropriate) holding the Nil Paid Rights following the conversion to take all necessary steps in connection with taking up the entitlement prior to 11.00 a.m. on 23 March 2018. You are recommended to refer to the CREST Manual for details of such procedures.
5.7 Issue of Rights Issue Shares in CREST Fully Paid Rights in CREST are expected to be disabled in CREST after the close of CREST business on 23 March 2018 (the latest date for settlement of transfers of Fully Paid Rights in CREST). Rights Issue Shares (in definitive form) will be issued in uncertificated form to those persons registered as holding Fully Paid Rights in CREST at the close of business on the date on which the Fully Paid Rights are disabled. The Registrar will instruct Euroclear to credit the appropriate stock accounts of those persons (under the same participant ID and member account ID that applied to the Fully Paid Rights held by those persons) with their Rights Issue Shares with effect from the next Business Day (expected to be 26 March 2018).
5.8 Right to allot/issue in certificated form Despite any other provision of this Prospectus, the Company reserves the right to allot and to issue any Nil Paid Rights, Fully Paid Rights or Rights Issue Shares in certificated form. In normal circumstances, this right is only likely to be exercised in the event of an interruption, failure or breakdown of CREST (or of any part of CREST) or of a part of the facilities and/or systems operated by the Receiving Agent in connection with CREST.
81 6. Procedure in Respect of Rights Issue Shares Not Taken Up If an entitlement to Rights Issue Shares is not validly taken up by 11.00 a.m. on 23 March 2018 in accordance with the procedure laid down for acceptance and payment, then that provisional allotment will be deemed to have been declined and will lapse. Subject to the terms and conditions of the Underwriting Agreement, the Joint Bookrunners (as agents for and on behalf of the Company) have agreed to severally (and not jointly or jointly and severally) use reasonable endeavours to procure, by not later than 5.00 p.m. on the second dealing day after the last date for acceptance of the Rights Issue, subscribers for all (or as many as possible) of those Rights Issue Shares not taken up at a price per Rights Issue Share which is at least equal to the aggregate of the Rights Issue Price and the expenses of procuring such subscribers (including any applicable brokerage and commissions and amounts in respect of VAT). Notwithstanding the above, the Joint Bookrunners may cease to endeavour to procure any such subscribers if, in the opinion of the Joint Bookrunners, it is unlikely that any such subscribers can be so procured at such a price by such time. If and to the extent that subscribers cannot be procured on the basis outlined above, the relevant Rights Issue Shares will be subscribed for by the Joint Bookrunners as principal pursuant to the Underwriting Agreement or by the sub-underwriters (if any) procured by the Joint Bookrunners, in each case, at the Rights Issue Price and on the terms and subject to the conditions of the Underwriting Agreement. Any premium over the aggregate of the Rights Issue Price and the expenses of procuring subscribers (including any applicable brokerage and commissions and amounts in respect of VAT) shall be paid (subject as provided in this paragraph 6): (a) where the Nil Paid Rights were, at the time of its lapsing, represented by a Provisional Allotment Letter, to the person whose name and address appeared on page 1 of the Provisional Allotment Letter; (b) where the Nil Paid Rights were, at the time they lapsed, in uncertificated form, to the person registered as the holder of those Nil Paid Rights at the time of their disablement in CREST; and (c) to the extent not provided above, where an entitlement to Rights and the Rights Issue Shares was not taken up by an overseas Shareholder, to that overseas Shareholder. Rights Issue Shares for which subscribers are procured on this basis will be re-allotted to such subscribers and the aggregate of any premiums (being the amount paid by such subscribers after deducting the price at which the Rights Issue Shares are offered pursuant to the Rights Issue and the expenses of procuring such subscribers including any applicable brokerage and commissions and amounts in respect of VAT), if any, will be paid (without interest) to those persons entitled (as referred to above) pro rata to the entitlements not taken up, save that no payment will be made of amounts of less than £5.00 per holding, which amounts will ultimately accrue for the benefit of the Company. Cheques for the amounts due (if any) will be sent in pounds sterling, by first class post, at the risk of the person(s) entitled, to their registered addresses (the registered address of the first named in the case of joint holders), provided that where any entitlement concerned was held in CREST, the amount due will, unless the Company (in its absolute discretion) otherwise determines, be satisfied by the Company procuring the creation of an assured payment obligation in favour of the relevant CREST member’s (or CREST sponsored member’s) RTGS settlement bank in respect of the cash amount concerned in accordance with the RTGS payment mechanism. Any transactions undertaken pursuant to this paragraph 6 shall be deemed to have been undertaken at the request of the persons who did not take up their entitlements and none of the Company, the Joint Bookrunners nor any other person procuring subscribers shall be responsible for any loss or damage (whether actual or alleged) arising from the terms of or timing of any such acquisition, any decision not to endeavour to procure subscribers or the failure to procure subscribers on the basis described above. The Joint Bookrunners will be entitled to retain any brokerage, fees, commissions or other benefits received in connection with these arrangements. It is a term of the Rights Issue that all Rights Issue Shares validly taken up by subscribers under the Rights Issue may be allotted to such subscribers in the event that not all of the Rights Issue Shares offered for subscription under the Rights Issue are taken up.
7. Overseas Shareholders and Selling and Transfer Restrictions 7.1 General (a) Whilst overseas Shareholders (other than those, subject to certain exceptions, in the United States or the Excluded Territories or who are US persons) are entitled to participate in the Rights Issue, the offer of Nil Paid Rights, Fully Paid Rights and/or Rights Issue Shares pursuant to the Rights Issue and the
82 distribution of this Prospectus or any other document relating to the Rights Issue (including the Provisional Allotment Letter) to persons located in, or who are citizens of, or who have a registered address in a jurisdiction other than, the United Kingdom may be affected by the laws of the relevant jurisdiction. Those persons should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their rights under the Rights Issue. It is the responsibility of all persons outside the United Kingdom (including, without limitation, custodians, nominees and trustees) receiving this Prospectus and/or a Provisional Allotment Letter and/or a credit of Nil Paid Rights to a stock account in CREST and wishing to accept the offer of Rights Issue Shares to satisfy themselves as to full observance of the laws of the relevant territory, including obtaining all necessary governmental or other consents which may be required, observing all other requisite formalities needing to be observed and paying any issue, transfer or other taxes due in such territory. (b) This paragraph 7.1 is intended as a general guide only. Any overseas Shareholder who is in doubt as to his or her position should consult his or her own Independent Professional Adviser without delay. It sets out certain restrictions applicable to Qualifying Shareholders who have registered addresses outside the United Kingdom, who are located in or are citizens of countries other than the United Kingdom, or who are persons (including, without limitation, custodians, nominees and trustees) who have a contractual or legal obligation to forward this Prospectus to a jurisdiction outside the United Kingdom or who hold Existing Shares for the account or benefit of any such person. The restrictions set out in this paragraph will also apply to any investors who acquire Rights or Rights Issue Shares in connection with the placement of Rights Issue Shares not subscribed for in the Rights Issue. (c) Having considered the circumstances, the Board have formed the view that, subject to certain exceptions, it is necessary or expedient to restrict the ability of persons in the United States and the Excluded Territories and US persons to take up rights to the Rights Issue Shares or otherwise participate in the Rights Issue due to the time and costs involved in the registration of this Prospectus and/or compliance with the relevant local, legal or regulatory requirements in those jurisdictions. (d) Receipt of this Prospectus and/or a Provisional Allotment Letter or the crediting of Nil Paid Rights to a stock account in CREST will not constitute an offer of securities for subscription, sale or purchase in those jurisdictions in which it would be illegal to make such an invitation or offer and, in those circumstances, this Prospectus and/or a Provisional Allotment Letter must be treated as sent for information only and should not be copied or redistributed. Rights Issue Shares will be provisionally allotted (nil paid) to all Shareholders on the register at the Record Date. However, a Provisional Allotment Letter will not be sent to, and Nil Paid Rights will not be credited to CREST accounts of, persons with registered addresses in the United States or any other Excluded Territory or their agent or intermediary, except where the Company and the Joint Bookrunners are satisfied that such action would not result in the contravention of any registration or other legal requirement in any jurisdiction. (e) No person receiving a copy of this Prospectus and/or a Provisional Allotment Letter and/or receiving a credit of Nil Paid Rights to a stock account in CREST in any territory other than the United Kingdom may treat the same as constituting an invitation or offer to him or her nor should he or she in any event use the Provisional Allotment Letter or deal with Nil Paid Rights or Fully Paid Rights in CREST unless, in the relevant territory, such an invitation or offer could lawfully be made to him or her or the Provisional Allotment Letter could lawfully be used or dealt with without contravention of any registration or other legal requirements. (f) Accordingly, persons (including, without limitation, custodians, nominees and trustees) receiving a copy of this Prospectus and/or a Provisional Allotment Letter or whose stock account in CREST is credited with Nil Paid Rights or Fully Paid Rights should not, in connection with the Rights Issue, distribute or send the same in or into, or transfer Nil Paid Rights or Fully Paid Rights to any person in or into, the United States or any Excluded Territory or to any US person. If a Provisional Allotment Letter or credit of Nil Paid Rights or Fully Paid Rights in CREST is received by any person in the United States or any Excluded Territory, or by their agent or nominee in any such territory, or any US person, he or she must not seek to take up the rights referred to in the Provisional Allotment Letter or in this Prospectus or renounce the Provisional Allotment Letter or transfer the Nil Paid Rights or Fully Paid Rights in CREST unless the Company determines that such actions would not violate applicable legal or regulatory requirements. Any person (including, without limitation, custodians, nominees and trustees) who does forward this Prospectus or a Provisional Allotment Letter into any such territories (whether under contractual or legal obligation or otherwise) should draw the recipient’s attention to the contents of this paragraph 7.1.
83 (g) Subject to this paragraph 7.1, any person (including, without limitation, nominees, agents and trustees) outside the United Kingdom wishing to take up his or her rights under the Rights Issue (or to do so on behalf of someone else) must satisfy himself/herself as to full observance of the applicable laws of any relevant territory including obtaining any requisite governmental or other consents, observing any other requisite formalities and paying any issue, transfer or other taxes due in such territories. (h) None of the Company, the Joint Bookrunners, nor any of their respective representatives, is making any representation to any offeree or purchaser of the Rights Issue Shares, Nil Paid Rights or Fully Paid Rights regarding the legality of an investment in the Rights Issue Shares, Nil Paid Rights or Fully Paid Rights by such offeree or purchaser under the laws applicable to such offeree or purchaser. (i) The Company reserves the right to treat as invalid and will not be bound to allot or issue any Rights Issue Shares in respect of any acceptance or purported acceptance of the offer of Rights Issue Shares which: (1) appears to the Company (having consulted with the Joint Bookrunners) or its agents to have been executed, effected or despatched from the United States or any Excluded Territory unless the Company is satisfied that such action would not result in the contravention of any registration or other legal requirement; or (2) in the case of a Provisional Allotment Letter, provides an address for delivery of the share certificates or other statements of entitlement or advice in an Excluded Territory or any other jurisdiction outside the UK in which it would be unlawful to deliver such certificates, statements or advice or if the Company (having consulted with the Joint Bookrunners) or its agents believe that the same may violate applicable legal or regulatory requirements; or (3) in the case of a credit of Rights or Rights Issue Shares in CREST, to a CREST member or CREST sponsored member whose registered address would be in the United States or any Excluded Territory or any other jurisdiction outside the UK in which it would be unlawful to make such a credit or if the Company (having consulted with the Joint Bookrunners) or its agents believe that the same may violate applicable legal or regulatory requirements. (j) The attention of overseas Shareholders with registered addresses in the United States or any of the Excluded Territories is drawn to paragraphs 7.2 to 7.7 below. (k) The provisions of paragraph 6 above will apply to overseas Shareholders who do not take up Rights Issue Shares provisionally allotted to them or are unable to take up Rights Issue Shares provisionally allotted to them because such action would result in a contravention of applicable law or regulatory requirements. Accordingly, such Shareholders will be treated as Shareholders that have not taken up their entitlement for the purposes of paragraph 6 above and, subject to the terms and conditions of the Underwriting Agreement, the Joint Bookrunners (as agents for and on behalf of the Company) have agreed to severally (and not jointly or jointly and severally) use reasonable endeavours to procure subscribers for the relevant Rights Issue Shares. The aggregate of any premiums (being the amount paid by such subscribers after deducting the price at which the Rights Issue Shares are offered pursuant to the Rights Issue and the expenses of procuring such subscribers including any applicable brokerage and commissions and amounts in respect of VAT), if any, will be paid (without interest) to those persons entitled (as referred to above) pro rata to the entitlements not taken up, save that no payment will be made of amounts of less than £5.00 or for amounts in respect of fractions, which amounts will be aggregated and ultimately accrue for the benefit of the Company. None of the Company, the Joint Bookrunners or any other person shall be responsible or have any liability whatsoever for any loss or damage (actual or alleged) arising from the terms or the timing of the acquisition or the procuring of it or any failure to procure subscribers. (l) Notwithstanding any other provision of this Prospectus or the Provisional Allotment Letter, the Company reserves the right to permit any Qualifying Shareholder to take up rights, if (having consulted with the Joint Bookrunners), it is satisfied that the transaction in question is exempt from, or not subject to, the legislation or regulations giving rise to the restrictions in question. If the Company is so satisfied, the Company will arrange for the relevant Qualifying Shareholder to be sent a Provisional Allotment Letter if he or she is a Qualifying Non-CREST Shareholder or, if he or she is a Qualifying CREST Shareholder, arrange for Nil Paid Rights to be credited to the relevant CREST stock account. (m) Those Qualifying Shareholders who wish, and are permitted, to take up their entitlement should note that payments must be made as described in paragraph 4.2 in relation to Qualifying
84 Non-CREST Shareholders and paragraph 5.2 in relation to Qualifying CREST Shareholders of this Part 7. (n) The provisions of paragraph 6 of this Part 7 (Terms and Conditions of the Rights Issue) will apply generally to Qualifying Shareholders with registered addresses in the Excluded Territories who do not or are unable to take up Rights Issue Shares provisionally allotted to them.
7.2 Offering and transfer restrictions relating to the United States (a) The Rights, the Rights Issue Shares and the Provisional Allotment Letters have not been nor will they be registered under the Securities Act or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, in or within the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in accordance with any applicable securities laws of any states or other jurisdiction of the United States. In addition, the Company has not been and will not be registered under the US Investment Company Act, and related rules. (b) Subject to certain exceptions, the Company is not extending the Rights Issue into the United States and, subject to certain exceptions, none of this Prospectus and the Provisional Allotment Letters constitute or will constitute an offer or invitation to apply for an offer or an invitation to acquire any Rights or Rights Issue Shares in the United States or to US persons (as defined in Regulation S), except to persons who are both (a) a “qualified institutional buyer” (“QIB”) as defined in Rule 144A under the Securities Act (“Rule 144A”) and (b) a qualified purchaser (“QP”) as defined in Section 2(a)(51) of the US Investment Company Act (collectively, “QIB/QPs”) in reliance on Rule 144A or pursuant to another exemption from, the registration requirements of the Securities Act and in compliance with any applicable securities law of any state or other jurisdiction in the United States. Subject to certain exceptions, Provisional Allotment Letters have not been, and will not be, sent to, and Rights have not been, and will not be, credited to the CREST account of, any Qualifying Shareholder with a registered address in the United States. (c) Subject to certain exceptions, Provisional Allotment Letters or renunciations thereof sent from or post-marked in the United States will be deemed to be invalid and all persons acquiring Rights Issue Shares and wishing to take up their Rights and hold such Rights Issue Shares in registered form must provide an address for registration of the Rights and the Rights Issue Shares outside the United States. (d) Subject to certain exceptions, any person who acquires Rights or Rights Issue Shares will be deemed to have declared, warranted and agreed, by accepting delivery of this Prospectus or the Provisional Allotment Letters, taking up their entitlement or accepting delivery of the Rights or the Rights Issue Shares, that they are not, and that at the time of acquiring the Rights or Rights Issue Shares they will not be, (i) a US person, (ii) in the United States or (iii) acting on a non-discretionary basis for a person located within the United States or a US person and that they are not acquiring the Rights and the Rights Issue Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any Rights or Rights Issue Shares in the United States or to a US person or anywhere the Company believes will result in the contravention of any applicable legal requirements in any jurisdiction. (e) Subject to certain exceptions, each such person further will be deemed to have declared, warranted and agreed that: it acknowledges (or if it is a broker-dealer acting on behalf of a customer, its customer has confirmed to it that such customer acknowledges) that the Rights and the Rights Issue Shares have not been and will not be registered under the US Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and are being distributed and offered outside the United States in reliance on Regulation S; it is acquiring the Rights and the Rights Issue Shares from the Company in an “offshore transaction” as defined in and meeting the requirements of Regulation S; and the Rights and the Rights Issue Shares have not been offered to it by the Company by means of any “directed selling efforts” as defined in Regulation S. (f) The Company (having consulted with the Joint Bookrunners) reserves the right to treat as invalid any acceptance or purported acceptance of Rights Issue Shares that appears to the Company and the Joint Bookrunners to have been executed in, despatched from or that provides an address for delivery of share certificates for Rights and the Rights Issue Shares in the United States. The Company will not be bound to allot (on a non-provisional basis) or issue any Rights, or accept to take up such Rights and issue Rights Issue Shares to any person with an address in, or who is otherwise located in, the United States
85 in whose favour a Provisional Allotment Letter or any Rights and the Rights Issue Shares may be transferred or renounced. (g) The provisions of paragraph 6 of this Part 7 (Terms and Conditions of the Rights Issue) will apply to any Rights and the Rights Issue Shares not taken up. Accordingly, subject to certain exceptions, Qualifying Shareholders with registered addresses in the United States will be treated as holders who are not participating in the Rights Issue, and the Joint Bookrunners will endeavour to sell the Rights and the Rights Issue Shares relating to such holders’ entitlements on such holders’ behalf.
7.3 US transfer restrictions in respect of Rights Issue Shares not taken up in the Rights Issue Any US person and any person within the United States that subscribes for any Rights Issue Shares that were not taken up in the Rights Issue must meet certain requirements and will be deemed to have represented, acknowledged and agreed that it has received a copy of this Prospectus and such other information as it deems necessary to make an investment decision and to have further represented, acknowledged and agreed as follows (terms defined in Rule 144A or Regulation S shall have the same meaning in this section): (a) it has received a copy of the Prospectus and understands and agrees that the Prospectus speaks only as of its date and that the information contained therein may not be correct or complete as of any time subsequent to that date; (b) (i) if it is located in the United States, it is (x) a QIB as defined in Rule 144A under the Securities Act and (y) a QP as defined in Section 2(a)(51) and related rules of the Investment Company Act or (ii) if it is a US person, it is a QP as defined in Section 2(a)(51) and related rules of the Investment Company Act; (c) it is not a broker dealer which owns and invests on a discretionary basis less than US$25 million in securities of unaffiliated issuers; (d) it is not subscribing to, or purchasing, the Rights Issue Shares with a view to, or for offer or sale in connection with, any distribution thereof (within the meaning of the Securities Act) that would be in violation of the securities laws of the United States or any state thereof; (e) it is not a participant director employee plan, such as a plan described in subsection (a)(1)(i)(D), (E) or (F) of Rule 144A; (f) no portion of the assets used by it to purchase, and no portion of the assets used by it to hold, the Rights Issue Shares or any beneficial interest therein constitutes or will constitute the assets of: (i) an “employee benefit plan” that is subject to Title I of the US Employee Retirement Income Security Act of 1974, as amended (“ERISA”); (ii) a plan, individual retirement account or other arrangement that is subject to section 4975 of the US Internal Revenue Code of 1986, as amended (the “Tax Code”); (iii) entities whose underlying assets are considered to include “plan assets” of any plan, account or arrangement described in preceding clause (i) or (ii); or (iv) any governmental plan, church plan, non US Plan or other investor whose purchase or holding of Shares would be subject to any state, local, non US or other laws or regulations similar to Title I of ERISA or section 4975 of the Tax Code or that would have the effect of the regulations issued by the US Department of Labor set forth at 29 CFR section 2510.3 101, as modified by section 3(42) of ERISA (each entity described in preceding clause (i), (ii), (iii) or (iv), a “Plan Investor”); (g) (i) no transfers of the Rights Issue Shares or any interest therein to a person using assets of a Plan Investor to purchase or hold such Shares or any interest therein will be permitted and (ii) if the ownership of Rights Issue Shares by an investor will or may result in the Company’s assets being deemed to constitute “plan assets” under the Plan Asset Regulations, the Directors may serve a notice upon the holder of such Shares requiring the holder to transfer the Shares to an eligible transferee within 30 days, and if within 30 days, the transfer notice has not been complied with, the Company may seek, subject to applicable laws and regulations, to sell the relevant Shares on behalf of the holder by instructing a member of the LSE to sell them to an eligible transferee; (h) the Rights Issue Shares are being offered in a transaction not involving any public offering within the United States within the meaning of the Securities Act and that the Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States; (i) the Rights Issue Shares (whether in physical, certificated form or in uncertificated form held in CREST) are “restricted securities” within the meaning of Rule 144(a)(3) under the U.S. Securities Act, the Rights
86 Issue Shares are being offered and sold in a transaction not involving any public offering in the U.S. within the meaning of the Securities Act and no representation is made as to the availability of the exemption provided by Rule 144 for resales of Shares; (j) the Company has not been and will not be registered, as an investment company under the Investment Company Act pursuant to sections 7(d) and 3(c)(7) thereof and that the Company has elected to impose the transfer and selling restrictions with respect to persons in the United States and US persons described herein so that the Company will qualify for the exemption provided under section 3(c)(7) of the Investment Company Act and will have no obligation to register as an investment company even if it were otherwise determined to be an investment company; (k) if in the future it decides to offer, resell, transfer, assign, pledge or otherwise dispose of any Rights Issue Shares, such Rights Issue Shares will be offered, resold, transferred, assigned, pledged or otherwise disposed of by the Investor solely in a transaction (a “Disposition”) executed in, on or through the facilities of the LSE, and neither the Investor nor any person acting on its behalf will pre arrange such Disposition with a buyer in the United States or known to be a US person; (l) notwithstanding anything to the contrary in this letter, the Rights Issue Shares may not be deposited into any unrestricted depositary receipt facility in respect of the Company’s securities, established or maintained by a depositary bank; (m) it is knowledgeable, sophisticated and experienced in business and financial matters and it fully understands the limitations on ownership and transfer and the restrictions on sales of such Shares; (n) it is able to bear the economic risk of its investment in the Rights Issue Shares and is currently able to afford the complete loss of such investment and the Investor is aware that there are substantial risks incidental to the purchase of the Rights Issue Shares, including those summarized under Part 2 (Risk Factors) in the Prospectus; (o) it understands and acknowledges that, to the extent permitted by applicable law and regulation, (i) the Company and its agents will not be required to accept for registration of transfer any Shares acquired by the Investor made other than in compliance with the restrictions set forth in this Prospectus, (ii) the Company may seek to require any US person or any person within the United States who was not a Qualified Purchaser at the time it acquired any Shares or any beneficial interest therein (which for the avoidance of doubt does not include any investor signing this letter who has truthfully made the representations, warranties and agreements herein) to transfer the Shares or any such beneficial interest immediately in a manner consistent with the restrictions set forth in this Prospectus, and (iii) if the obligation to transfer is not met, the Company is irrevocably authorized, without any obligation, to transfer the Shares, as applicable, in a manner consistent with the restrictions set forth in this Prospectus and, if such Shares are sold, the Company shall be obliged to distribute the net proceeds to the entitled party; (p) it became aware of the offering of the Shares by the Company and the Rights Issue Shares were offered to it solely by means of the Prospectus (which was available to it solely via the Company’s website) and it did not become aware of, nor were the Rights Issue Shares offered to it by any other means, including, in each case, by any form of general solicitation or general advertising, and in making the decision to purchase or subscribe to the Rights Issue Shares, it relied solely on the information set forth in the Prospectus; (q) (i) neither of the Joint Bookrunners nor any of their respective subsidiaries, branches or affiliates have made or will make any representation or warranty as to the accuracy or completeness of the information in the Prospectus or any other information provided by the Company; (ii) it has not relied and will not rely on any investigation by any Joint Bookrunner, its affiliates or any person acting on its behalf that may have been conducted with respect to the Company, or the Rights Issue Shares; and (iii) neither of the Joint Bookrunners nor any of their respective subsidiaries, branches or affiliates makes any representation as to the availability of an exemption from the Securities Act for the transfer of the Rights Issue Shares; (r) upon a proposed transfer of the Rights Issue Shares, it will notify any purchaser of such Rights Issue Shares or the executing broker, as applicable, of any transfer restrictions that are applicable to the Rights Issue Shares being sold;
87 (s) neither it, nor any of the its affiliates, nor any person acting on its behalf, will make any “directed selling efforts” as defined in Regulation S under the Securities Act in the United States with respect to the Rights Issue Shares; (t) it understands that the Shares (to the extent they are in certificated form), unless otherwise determined by the Company in accordance with applicable law, will bear a legend substantially to the following effect: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND THE COMPANY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE “INVESTMENT COMPANY ACT”). THE SHARES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT (“REGULATION S”) OUTSIDE THE UNITED STATES TO A PERSON NOT KNOWN BY YOU TO BE A US PERSON (AS DEFINED IN REGULATION S), BY PRE ARRANGEMENT OR OTHERWISE, OR (2) TO THE COMPANY OR A SUBSIDIARY THEREOF. EACH HOLDER, BY ITS ACCEPTANCE OF SHARES, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING RESTRICTIONS. THE COMPANY AND ITS AGENTS WILL NOT BE REQUIRED TO ACCEPT FOR REGISTRATION OF TRANSFER ANY SHARES MADE OTHER THAN IN COMPLIANCE WITH THESE RESTRICTIONS. THE COMPANY MAY REQUIRE ANY US PERSON OR ANY PERSON WITHIN THE UNITED STATES WHO WAS NOT A QUALIFIED PURCHASER (AS DEFINED IN SECTION 2(A)(51) OF THE INVESTMENT COMPANY ACT) AT THE TIME IT ACQUIRED ANY SHARES OR ANY BENEFICIAL INTEREST THEREIN TO TRANSFER THE SHARES OR ANY SUCH BENEFICIAL INTEREST IMMEDIATELY IN A MANNER CONSISTENT WITH THESE RESTRICTIONS, AND IF THE OBLIGATION TO TRANSFER IS NOT MET, THE COMPANY IS IRREVOCABLY AUTHORIZED, WITHOUT ANY OBLIGATION, TO TRANSFER THE SHARES, AS APPLICABLE, IN A MANNER CONSISTENT WITH THESE RESTRICTIONS AND, IF SUCH SHARES ARE SOLD, THE COMPANY SHALL BE OBLIGED TO DISTRIBUTE THE NET PROCEEDS TO THE ENTITLED PARTY; and (v) no agency of the United States or any state thereof has made any finding or determination as to the fairness of the terms of, or any recommendation or endorsement in respect of, the Shares.
7.4 Australia This Prospectus and the Rights Issue is only made available in Australia to persons to whom a “disclosure document” is not required to be given under Chapter 6D of the Corporations Act 2001 (Cth) of Australia (the “Corporations Act”). This Prospectus is not a prospectus, product disclosure statement or any other form of formal “disclosure document” for the purposes of the Corporations Act. This Prospectus is not required to, and does not, contain all the information which would be required in a disclosure document under the Australian Corporations Act. Accordingly, the Nil Paid Rights, the Fully Paid Rights and the Rights Issue Shares may not be offered, issued, sold or distributed in Australia by any person other than by way of, or pursuant to, an offer or invitation that does not need disclosure to investors under Chapter 6D of the Corporations Act. This Prospectus has not been, and will not be, lodged or registered with the Australian Securities and Investments Commission or the Australian Securities Exchange or any other regulatory body or agency in Australia. The persons referred to in this Prospectus may not hold Australian financial services licences and may not be licensed to provide financial product advice in relation to the securities. This Prospectus does not take into account the investment objectives, financial situation or needs of any particular person. Accordingly, before making any investment decision in relation to this Prospectus, you should assess whether the acquisition of any interest in the Company is appropriate in light of your own financial circumstances or seek professional advice. Any Nil Paid Rights, Fully Paid Rights or Rights Issue Shares issued upon acceptance of the Rights Issue may not be offered for sale or transferred to any person located in, or a resident of, Australia for a period of at least 12 months after the issue, except in circumstances where the person is a person to whom a disclosure document is not required to be given under Chapter 6D of the Corporations Act or in circumstances under which another exemption from the requirement to give a disclosure document is available. Accordingly, each investor
88 acknowledges these restrictions and, by applying for the securities under this Prospectus, gives an undertaking not to sell or offer to sell these securities in Australia (except in the circumstances referred to above) for 12 months after their issue.
7.5 Other overseas territories Provisional Allotment Letters will be posted to Qualifying Non-CREST Shareholders (other than to, subject to certain limited exceptions, Qualifying Shareholders with registered addresses in the Excluded Territories) and Fully Paid Rights will be credited to the CREST stock accounts of Qualifying CREST Shareholders with registered addresses in any country other than, subject to certain limited exceptions, the United States or any other Excluded Territory. Subject to certain limited exceptions, no offer of or invitation to subscribe for Rights or Rights Issue Shares is being made by virtue of this Prospectus or the Provisional Allotment Letters into any of the Excluded Territories. Qualifying Shareholders in jurisdictions other than, subject to certain limited exceptions, the Excluded Territories may, subject to the laws of their relevant jurisdiction, accept their rights under the Rights Issue in accordance with the instructions set out in this Prospectus and, in the case of Qualifying Non-CREST Shareholders only, the Provisional Allotment Letters. Qualifying Shareholders who have registered addresses in or who are located in, or who are citizens of, countries other than the United Kingdom should consult their appropriate professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their Nil Paid Rights or to acquire Fully Paid Rights or Rights and the Rights Issue Shares. If you are in any doubt as to your eligibility to accept the offer of Rights and Rights Issue Shares or to deal with Nil Paid Rights or Fully Paid Rights, you should contact your appropriate professional adviser immediately.
(a) EEA States In relation to the EEA States that have implemented the Prospectus Directive (each, a “relevant member state”), with effect from and including the date on which the Prospectus Directive was implemented in that relevant member state (the “relevant implementation date”), no Rights Issue Shares, Nil Paid Rights or Fully Paid Rights have been offered or will be offered pursuant to the Rights Issue to the public in that relevant member state prior to the publication of a prospectus in relation to the Rights Issue Shares, Nil Paid Rights and Fully Paid Rights which has been approved by the competent authority in that relevant member state or, where appropriate, approved in another relevant member state and notified to the competent authority in the relevant member state, all in accordance with the Prospectus Directive, except that with effect from and including the relevant implementation date, offers of Rights Issue Shares, Nil Paid Rights or Fully Paid Rights may be made to the public in that relevant member state at any time under the following exemptions under the Prospectus Directive, if they are implemented in that relevant member state: (1) to any legal entity which is a qualified investor, as defined in the Prospectus Directive; (2) to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) in such relevant member states; or (3) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Rights Issue Shares, Nil Paid Rights or Fully Paid Rights shall result in a requirement for the publication by the Company of a prospectus pursuant to Article 3 of the Prospectus Directive. For this purpose, the expression “an offer of any Rights Issue Shares, Nil Paid Rights or Fully Paid Rights to the public” in relation to the Rights Issue Shares, Nil Paid Rights and Fully Paid Rights in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the Rights Issue and any Rights Issue Shares, Nil Paid Rights and Fully Paid Rights to be offered so as to enable an investor to decide to acquire any Rights Issue Shares, Nil Paid Rights or Fully Paid Rights, as the same may be varied in that relevant member state by any measure implementing the Prospectus Directive in that relevant member state.
89 7.6 Representations and warranties relating to Shareholders (a) Qualifying Non-CREST Shareholders (1) Any person accepting and/or renouncing a Provisional Allotment Letter or requesting registration represents and warrants to the Company and the Joint Bookrunners that, except where proof has been provided to the Company’s satisfaction that such person’s use of the Provisional Allotment Letter will not result in the contravention of any applicable legal requirements in any jurisdiction: (A) such person is not accepting and/or renouncing the Provisional Allotment Letter from within the United States or any other Excluded Territory; (B) such person is not a US person and is not in any territory in which it is unlawful to make or accept an offer to subscribe for Rights Issue Shares or to use the Provisional Allotment Letter in any manner in which such person has used or will use it; (C) such person is not acting on a non-discretionary basis for a US person or a person located within the United States or any other Excluded Territory (except as agreed with the Company) or any territory referred to in paragraph 7.6(a)(1)(B) above at the time the instruction to accept or renounce was given; and (D) such person is not acquiring Rights Issue Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such Rights Issue Shares into the United States or any other Excluded Territory or to any US person. (2) The Company (having consulted with the Joint Bookrunners) may treat as invalid any acceptance or purported acceptance of the allotment of Rights Issue Shares comprised in, or renunciation or purported renunciation of, a Provisional Allotment Letter if it: (A) appears to the Company and the Joint Bookrunners to have been executed in or despatched from the United States or any other Excluded Territory or otherwise in a manner which may involve a breach of the laws of any jurisdiction or if they believe the same may violate any applicable legal or regulatory requirement; (B) provides an address in the United States or any other Excluded Territory for delivery of definitive share certificates for Rights Issue Shares (or any jurisdiction outside the United Kingdom in which it would be unlawful to deliver such certificates); or (C) purports to exclude the warranty required by this paragraph. (b) Qualifying CREST Shareholders (1) A Qualifying CREST Shareholder who makes a valid acceptance in accordance with paragraph 5.2 of this Part 7 (Terms and Conditions of the Rights Issue) represents and warrants to the Company and the Joint Bookrunners that, except where proof has been provided to the Company’s satisfaction that such person’s acceptance will not result in the contravention of any applicable legal requirement in any jurisdiction: (A) he or she is not within the United States or any other Excluded Territory; (B) he or she is not a US person and is not in any territory in which it is unlawful to make or accept an offer to acquire or subscribe for the Rights Issue Shares; (C) he or she is not accepting on a non-discretionary basis for a US person or a person located within the United States or any other Excluded Territory or any territory referred to in 7.5(b)(1)(B) above at any time the instruction to accept was given; and (D) he or she is not acquiring any Rights Issue Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such or Rights Issue Shares into the United States or any other Excluded Territory or into any territory referred to at 7.5(b)(1)(B) above or to any US person. (2) The Company may (having consulted with the Joint Bookrunners) treat as invalid any MTM instruction which (a) appears to the Company and the Joint Bookrunners to have been despatched from the United States or an Excluded Territory or otherwise in a manner which may involve a breach of the laws of any jurisdiction or they or their agents believe may violate any
90 applicable legal or regulatory requirement; or (b) purports to exclude the warranty required by this paragraph. (3) All Qualifying Shareholders will also be deemed to have agreed and acknowledged that: (A) the Joint Bookrunners: (i) are acting exclusively for the Company and no one else in connection with the Rights Issue and other matters referred to in this Prospectus; and (ii) are not, and will not be, responsible to anyone other than the Company for providing the protections afforded to their clients for providing advice in relation to the the Rights Issue, Rights Issue Admission or the contents of this Prospectus; (B) apart from the responsibilities and liabilities, if any, which may be imposed on the Joint Bookrunners by FSMA, the regulatory regime established thereunder or otherwise under law neither of the Joint Bookrunners nor any of their respective subsidiaries, branches or affiliates: (i) owes or accepts any duty, responsibility or liability to any person for the acts or omissions of the Company in relation to the Rights Issue and for the contents of this Prospectus; (ii) makes any representation or warranty, express or implied, as to the contents of this Prospectus (including as to its accuracy, completeness or verification) or for any other statement made or purported to be made by or on behalf of any of them, by the Company or on its behalf or by any other person in connection with the Company, the Rights and the Rights Issue Shares or the Rights Issue, and nothing in this Prospectus shall be relied upon as a promise or representation in this respect (whether as to the past or the future); and (iii) shall have any liability whatsoever to such Qualifying Shareholders, whether arising in tort, contract or otherwise (save as referred to above) in respect of any acts or omissions of the Company in relation to the Rights Issue and for this Prospectus or any such statement; (C) such Qualifying Shareholder has not relied on the Joint Bookrunners or any person affiliated with them in connection with any investigation as to the accuracy of any information contained in this Prospectus or their investment decision; and (D) such Qualifying Shareholder has relied only on the information contained in this Prospectus, and that no person has been authorised to give any information or to make any representation concerning the Group or the Rights or the Rights Issue Shares (other than as contained in this Prospectus) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company or the Joint Bookrunners.
7.7 Waiver The provisions of this paragraph 7 and of any other terms of the Rights Issue relating to all Qualifying Shareholders with registered addresses in any of the Excluded Territories may be waived, varied or modified as regards specific Shareholders or on a general basis by the Company its absolute discretion. Subject to this, the provisions of this paragraph 7 supersede any terms of the Rights Issue inconsistent herewith. References in this paragraph 7 to Qualifying Shareholders shall include references to the person or persons executing a Provisional Allotment Letter and, in the event of more than one person executing a Provisional Allotment Letter, the provisions of this paragraph 7 shall apply to them jointly and to each of them.
7.8 Payment All payments must be made in the manner set out in paragraphs 4.2 and 5.2 of this Part 7 (Terms and Conditions of the Rights Issue) (as applicable).
8. Withdrawal Rights Persons who have the right to withdraw their acceptances under Section 87Q(4) of the FSMA after a supplementary prospectus (if any) has been published and who wish to exercise such right of withdrawal must do so by lodging a written notice of withdrawal (which shall not include a notice sent by facsimile), which must include the full name and address of the person wishing to exercise such statutory withdrawal rights and, if such person is a CREST member, the participant ID and the member account ID of such CREST member, with the the Receiving Agent so as to be received no later than two Business Days after the date on which the supplementary prospectus was published, withdrawal being effective upon receipt of the written notice of
91 withdrawal. Notice of withdrawal given by any other means or which is deposited with or received by the Registrar after the expiry of such period will not constitute a valid withdrawal. Furthermore, the Company will not permit the exercise of withdrawal rights after payment by the relevant Shareholder of its subscription amount in full and the allotment of the Rights Issue Shares to such Shareholder becoming unconditional. In such circumstances, Shareholders are advised to consult their professional advisers. Provisional allotments of entitlements to Rights Issue Shares which are the subject of a valid withdrawal notice will be deemed to be declined. Such entitlements to Rights Issue Shares will be subject to the provisions of paragraph 6 above as if the entitlement had not been validly taken up.
9. Times and Dates The Company shall, at its discretion and after consultation with its financial and legal advisers, be entitled to amend the dates that Provisional Allotment Letters are despatched or dealings in Nil Paid Rights commence and amend or extend the latest date for acceptance under the Rights Issue and all related dates set out in this Prospectus and in such circumstances shall notify the UKLA, via a Regulatory Information Service approved by the UKLA and, if appropriate, Qualifying Shareholders. However, Qualifying Shareholders may not receive any further written communication. If a supplementary prospectus is issued by the Company two or fewer Business Days prior to the latest time and date for acceptance and payment in full under the Rights Issue specified in this Prospectus, the latest date for acceptance under the Rights Issue shall be extended to the date that is three Business Days after the date of issue of the supplementary prospectus (and the dates and times of principal events due to take place following such date shall be extended accordingly).
10. Taxation Certain statements regarding United Kingdom taxation in respect of the Rights Issue are set out in Part 16 (Additional Information). Shareholders who are in any doubt as to their tax position in relation to taking up their entitlements under the Rights Issue, or who are subject to tax in any jurisdiction other than the United Kingdom should immediately consult a suitable professional adviser.
11. John Laing Share Schemes The Board may, if it determines that it is appropriate, and subject to the necessary approvals, adjust the number of Shares under outstanding options or awards granted under the John Laing Share Schemes, in accordance with the rules of each of the schemes. No adjustments will be made until after the ex-rights date.
12. Dilution Qualifying Shareholders who do not take up their Nil Paid Rights in full will experience dilution of their shareholdings by 25 per cent. as a result of the Rights Issue.
13. Governing Law and Jurisdiction This Prospectus (including the terms and conditions of the Rights Issue), the Provisional Allotment Letters and any non-contractual obligation related thereto shall be governed by, and construed in accordance with, the laws of England and Wales. The Rights and the Rights Issue Shares will be created and issued pursuant to the Company’s Articles and under the Companies Act. The courts of England and Wales are to have exclusive jurisdiction to settle any dispute which may arise out of or in connection with the Rights Issue, this Prospectus or the Provisional Allotment Letter including, without limitation, disputes relating to any non-contractual obligations arising out of or in connection with the Rights Issue, this Prospectus or the Provisional Allotment Letter. By taking up Rights under the Rights Issue in accordance with the instructions set out in this Prospectus and, in the case of Qualifying Non-CREST Shareholders only, the Provisional Allotment Letter, Qualifying Shareholders irrevocably submit to the jurisdiction of the courts of England and Wales and waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.
14. Further Information Your attention is drawn to the further information set out in this Prospectus and also, in the case of Qualifying Non-CREST Shareholders and any other Qualifying Shareholders to whom the Company has sent Provisional Allotment Letters, to the terms, conditions and other information printed on the Provisional Allotment Letter.
92 PART 8 Industry Overview The following information relating to the Group’s industry has been provided for background purposes only. The information has been extracted from a variety of sources released by public and private organisations. The information has been accurately reproduced and, as far as the Company is aware and is able to ascertain from information published by such sources, no facts have been omitted which would render the reproduced information inaccurate or misleading. Investors should read this Part 8 in conjunction with the more detailed information contained in this Prospectus including Part 2 (Risk Factors) and Part 12 (Operating and Financial Review).
1. Introduction Infrastructure can be defined as the physical assets and systems that support a country or community. Infrastructure assets typically support services such as transportation, utilities, and communications and also cater to social needs such as housing, health and education. The development and modernisation of infrastructure usually require significant initial investment and are essential to economic growth. However, government procurement has not kept pace with the structural demand for infrastructure and the Directors believe that continued investment will be required. • It is estimated that global investment in infrastructure needs to be approximately 3.8 per cent. of GDP from 2016 to 2030, or an estimated average of US$3.3 trillion invested each year, just to support expected growth rates. However, at current estimated rates of underinvestment, global infrastructure investment will fall short of this figure by approximately 11 per cent., or US$350 billion per year (source: McKinsey Global Institute). This historical underinvestment has added pressure to the demand for infrastructure. • Infrastructure investment has fallen as a share of GDP in 11 of the G20 economies since the global financial crisis of 2007. Years of underinvestment in critical infrastructure are now catching up with countries around the globe and there is an urgent need to get finance flowing back into projects to plug this infrastructure gap and promote economic growth. (source: McKinsey Global Institute) Historically, public sectors (in jurisdictions in which the Group now operates) had often procured and funded infrastructure using public finance, with the risk of asset delivery, cost and operational risk lying with the taxpayer. Over time, there has also been a steadily increasing trend for governmental and other public sector authorities (“Governmental Entities”) to turn to the private sector to assist in the procurement of infrastructure, to help with financing, and to seek private sector expertise to manage and take long-term delivery risks. Private sector involvement in infrastructure typically comprises: (i) procurement models such as public-private partnership (“PPP”) where the core infrastructure asset reverts back to the Governmental Entity at the end of the contract, (ii) models with support mechanisms provided by Governmental Entities, for example, feed-in-tariff arrangements in a number of European countries and a tax credit system in the United States, in both cases to promote the development of renewable energy generation and (iii) other models in which John Laing has no existing investment, for example, investment supported by a formal regulatory framework governing the private sector ownership of essential infrastructure assets, such as airports, utilities and communication networks.
2. PPP The PPP concept is based on the principle of a partnership between the public and private sectors to deliver infrastructure projects. The concept varies on a global basis, however common features include: • long-term contracts or agreements between private organisations and Governmental Entities; • cash flows underpinned by (i) availability-based revenue to the extent that the asset is available for use in accordance with contractually-agreed service levels and performance standards, or (ii) volume-linked revenues with a pre-agreed or variable price per unit; • a meaningful private funding component; • provision of infrastructure/services by the private sector to or on behalf of Governmental Entities following the fulfilment of design and construction responsibilities; • transfer of certain risks to the private sector, such as design, construction and operational risks; • detailed contractual responsibilities and deliverables that vary over the contract period as the project moves through its life (i.e. from financial close to construction, operation and hand-back risks);
93 • return of the relevant infrastructure to Governmental Entities at the end of the concession period; and • procurement driven by a long-term “whole life” value-for-money objective. The diagram below shows the main contract parties and contractual structure for a typical PPP project. PPP projects are principally financed on a non-recourse basis through SPVs with funds provided by a mix of equity from investors and up to approximately 90 per cent. of funding coming from external debt providers on a non-recourse basis. Public sector capital contributions may also be provided for certain projects. The pure equity can comprise a relatively nominal or “pin-point” amount with the balance comprising subordinated shareholder debt. John Laing typically holds between 15 per cent. and 100 per cent. of the equity in a project SPV. The project agreement itself is entered into between the SPV, on the one hand, and the Governmental Entity, on the other hand. Construction works are carried out by contractors under fixed-price, date-certain contracts, which typically allow the SPV and equity investors to pass down many material construction risks. Day-to-day operation of the project is typically carried out by a service provider under an operating contract.
Investor(s)
Invest equity/subordinated debt (10% – 15%) Receives interest, dividends and principal repayments
Shareholders’ Agreement
Senior Lender
Governmental Entity Up to approximately Project Agreement 90% leverage in Special Purpose Vehicle Finance Procurement 25-35 year project (SPV) Agreements Makes payments to concession Medium-long term SPV interest rate hedging Receives interest and principal
Design & Build Agreement O&M Agreement
Contractors/ Contractor Service providers Operator
Fixed price Fixed price, subject to indexation
3. Renewable Energy Market On a global level, the regulation of greenhouse gases is directed by the United Nations Framework Convention on Climate Change (the “UNFCCC”), the Kyoto Protocol and the Paris Agreement. The Kyoto Protocol implemented the objectives of the UNFCCC and set binding greenhouse gas emissions targets for 37 industrialised countries, on average a reduction of 5 per cent. relative to 1990 levels in the first commitment period from 2008 to 2012. Parties to the Kyoto Protocol are also required to reduce greenhouse gas emissions by 20 per cent. and reduce consumption of primary energy by 18 per cent. by 2020. The parties to the UNFCCC and the Kyoto Protocol met again in Paris in December 2015 to negotiate an international climate change agreement to succeed the second commitment period of the Kyoto Protocol from 2020. This resulted in the Paris Agreement, which was adopted by 195 countries. The Paris Agreement is the first-ever universal, legally binding global climate deal. The Paris Agreement provided further support for decarbonisation initiatives on an increasingly co-ordinated basis, including efforts to limit global warming to below two degrees Celsius and the further build-out of renewable generation capacity and supporting technologies. Parties to the Paris Agreement are required to prepare and submit nationally determined contributions every five years and to pursue domestic measures with the aim of achieving such contributions. In order to implement emission reduction targets, the EU introduced the Directive on the Promotion of the Use of Energy from Renewable Sources (No. 2009/28/EC, the “Renewable Energy Directive”). Under the Renewable Energy Directive, EU Member States are required to achieve national targets for renewable energy
94 that are consistent with reaching the European Commission’s overall EU target of generating 20 per cent. of energy consumed from renewable energy sources. Other governments also continue to promote policies and investment priorities to reduce greenhouse gas emissions in the near future. In the United States, the federal Business Energy Investment Tax Credit (“ITC”) is a support mechanism which encourages investment in renewable energy. The ITC was most recently amended by the Consolidated Appropriations Act of 2015, which extended the expiration date for solar technologies and Production Tax Credit eligible wind generation, with a gradual step down of the credits between 2019 and 2022. In Australia, the Large-Scale Renewable Energy Target creates a financial incentive for the establishment of renewable energy generation. The current target of 33TWh means that about 23 per cent. of Australia’s electricity generation in 2020 should come from renewable sources. As a result, Bloomberg estimates in its New Energy Outlook 2017 that wind and solar energy will make up 48 per cent. of the world’s installed generation capacity and 34 per cent. of electricity generation by 2040 compared to just 12 per cent. and 5 per cent., respectively, in June 2017 (source: Bloomberg New Energy Finance). The key parties involved in a renewable energy project are similar to a PPP project (i.e. an SPV is set up with contractors, equity investors and lenders all being key contract counterparties). Some key differences compared with PPP are as follows: • Generally, revenues earned by the SPV are receivable from a private sector company (where the counterparty under the power purchase agreement is not a Governmental Entity) or from a wholesale market. • SPV revenue is usually volume-linked and based on a price per unit of power generated. Typically, power is sold through a medium- to long-term power purchase agreement with a supplier and supplemented by a long-term feed-in-tariff and/or other government support mechanisms. • Gearing is lower in renewable energy projects. Typically, a renewable energy project is 60 per cent. to 85 per cent. debt-funded compared with up to 90 per cent. in a PPP project, due to the more variable nature of the SPV’s revenue from renewable energy generation. • Key contracts for onshore wind farms will often include a turbine supply agreement and a balance of plant contract, whereas for a solar farm project, the key contract is often a single engineering, procurement and construction (“EPC”) contract for the supply and installation of solar PV panels. For biomass plants, the key construction contract may comprise an engineering and procurement contract. Medium term operation and maintenance contracts may be entered into by the SPV in respect of wind farms, biomass plants or solar farms.
95 PART 9 Business Description Investors should read this Part 9 (Business Description) in conjunction with the more detailed information contained in this Prospectus including the financial and other information appearing in Part 12 (Operating and Financial Review). Where stated, financial information in this section has been incorporated by reference as described in Part 14 (Information Incorporated by Reference).
1. Introduction John Laing is an originator, active investor and manager of international infrastructure projects. As at 31 December 2017, the book value of its investment portfolio (“Portfolio Value”)(1) was £1,193.8 million (Gross Value: £1,529.2 million) and the Group managed £1,648.5 million of External AUM. John Laing’s business is focused on major transport, social and environmental infrastructure projects awarded under governmental public-private partnership (“PPP”) programmes, and renewable energy projects, across a range of international markets including Asia Pacific, North America (the United States and Canada) and Europe, including the United Kingdom. The Group originates and invests in greenfield infrastructure, and then actively manages its investments in projects through their construction phase. Once operational, the Group either continues to hold and actively manage its interests over the lifetime of the projects (usually up to 30 years) or sells its interests in the projects to secondary market investors (in which case, the Group may retain an asset management role). As at 31 December 2017, the Group had a large, diversified investment portfolio comprising interests in 41 infrastructure projects, comprising £580.3 million of investments in projects in the construction phase and £603.2 million in the operational phase, together with a 2.5 per cent. shareholding in JLEN with a Portfolio Value of £10.3 million. The Group has committed investments to more than 130 projects, thereby establishing itself as a leading name in its core international markets and chosen sectors. John Laing’s business, which integrates origination, investment and asset management capabilities, is organised across three key areas of activity: • Primary investments: John Laing’s primary investment activities involve sourcing and originating, bidding for and winning greenfield infrastructure projects, typically as part of a consortium in the case of PPP projects. The Group classifies its interests in projects which are in the construction phase as its “primary investment portfolio”. • Secondary investments: John Laing’s secondary investment activities involve ownership of a substantial portfolio of interests in operational PPP and renewable energy projects. The Group classifies its investments in operational projects as its “secondary investment portfolio”. Almost all of the Group’s secondary investments were previously part of John Laing’s primary investment portfolio. • Asset management: The Group actively manages its own primary and secondary investment portfolios and provides investment advice and asset management services to two external listed funds (JLIF and JLEN) through its wholly owned and FCA-regulated subsidiary, JLCM. As at 31 December 2017, JLCM’s External AUM were £1,648.5 million. One of the key characteristics of the Group’s investments is the relative predictability of their cash flows given the structure of PPP contracts (typically, a Project Company’s revenue is from a Governmental Entity based on the availability for use, or level of use, of the project’s infrastructure asset) and the revenue regime of renewable energy projects (backed by government support mechanisms). As at 31 December 2017, approximately 59 per cent. of the portfolio valuation of £1,193.8 million was attributable to investments in projects with availability-based cash flows. John Laing aims to deliver predictable returns and to actively manage and reduce risk across its primary and secondary portfolios.
2. History John Laing was originally established in 1848 as a building company based in Carlisle, in the North West of England. It grew to become a major construction company in the United Kingdom and internationally, working on assets as diverse as the M1 motorway, Sizewell B nuclear power station and Coventry Cathedral. In 1953, John Laing was listed on the London Stock Exchange.
(1) The Portfolio Value is included within the “investments at fair value through profit or loss” line item in the Group balance sheet (£1,346.4 million in total as at 31 December 2017, including the value of other assets and liabilities in recourse subsidiaries held at FVTPL of £152.6 million).
96 The Group made its first infrastructure investment in 1969 in a toll road in Spain (the 65km Europistas project) and its first PPP investment in 1990 in a cable-stayed river crossing linking England and Wales (the Second Severn River Crossing project). In 2001, John Laing redefined its strategy to focus principally on infrastructure assets for Governmental Entities with a particular emphasis at that time on the UK Private Finance Initiative. In line with this strategy, the Group sold its construction activities to O’Rourke (now Laing O’Rourke), followed by the sale of its house building activities to George Wimpey plc, and the sale of its property development business to Kier. In early 2007, John Laing was taken private by the Henderson Funds. It continued to develop its primary infrastructure activities by expanding internationally and into new sectors, such as renewable energy, and divested further non-core activities, such as Chiltern Railways in 2008 and its facilities management business in 2013. In 2015, John Laing returned to the London Stock Exchange. The Group has also created a significant external asset management platform with the launch of two listed secondary infrastructure funds (JLIF in 2010 and JLEN in 2014), to both of which it provides investment management services through JLCM, earning fee income.
3. John Laing’s Business Model John Laing’s business model is based on its primary investment origination and asset management capabilities and the current strong demand in secondary markets for operational PPP and renewable energy assets. The Group initially creates value from its primary investment activities by originating new greenfield infrastructure investments which, post-construction, aim to produce long-term (usually up to 30 years) predictable cash flows, either backed by a Governmental Entity or, for renewable energy projects, partly-backed by government support mechanisms. John Laing’s asset management activities create additional value through the enhancement of these project cash flows, and the management and reduction of project risks (in particular, construction risk). John Laing’s disposal of operational infrastructure assets to secondary market investors provides additional funding for new primary investments based on securing divestment proceeds (usually based on the net present value of then-projected investment cash flows) at a significant capital uplift to original cost. The Group’s primary investment origination activities are focused on securing new infrastructure investments (in the form of equity and subordinated debt) that, at financial close, will meet John Laing’s investment targets. In addition, new primary infrastructure investments must satisfy John Laing’s detailed risk allocation requirements which include that Project Companies subcontract substantially all construction risk to reputable contractors providing appropriate security. The Group’s asset management activities during the construction and operational phases of each project focus on ensuring that subcontractors meet their contractual obligations in particular in terms of the financial consequences of the risks allocated to them. In addition, John Laing aims to create additional value by identifying and implementing enhancement initiatives that can increase future cash flows to investors compared to those forecast at financial close. Opportunities for such value enhancements may arise at any time during a project’s life and may vary significantly from investment to investment. They may also arise from near term additional cash flow opportunities or they may be enhancements that are forecast to give rise to additional cash flows over the medium to long term. John Laing includes forecast cash flows from future value enhancements within its portfolio valuations where it considers such enhancements to be achievable. The value arising from these initiatives can be crystallised either through holding the relevant investment until the enhancement has been implemented and the additional cash flow distributed or by divesting the investment to secondary market purchasers at a price which reflects the value of these future enhancements. John Laing believes that opportunities will continue to arise for it to secure value enhancements from investments within its Current Portfolio and from new investments in years to come. John Laing has made 28 new investments, including additional commitments to four existing investments, between 31 December 2014 and 31 December 2017 and in the same period has made 21 divestments of entire or part interests in Project Companies. Recycling funds from divestments into new investments has helped the Group achieve a CAGR in NAV per share (after adjusting for dividends paid and funds raised at the Company's IPO) between 31 December 2014 and 31 December 2017 of 15.5 per cent. Figures 1 and 2 illustrate how the equity value from a PPP investment and a renewable energy investment respectively evolve over the life of a project. HTM IRRs and discount rates indicated are for illustrative purposes only.
97 Figure 1—PPP
HTM IRR Initial Construction Construction Period Final Construction Operations Period Period D C B A Discount rate at financial close
Benchmark operational discount rate
20% 60% 20% Time
Figure 2—Renewable Energy
HTM IRR Construction Period Ramp Up Period Operations
C B A Discount rate at financial close
Benchmark operational discount rate
x months 12 months Time
Source: Company information. The benchmark operational discount rate is arrived at from publicly available information, such as the weighted average discount rates published by listed infrastructure funds, input from advisers active in the secondary market and the Company’s own experience in selling assets. Risk premia are then added to the benchmark operational discount rate to reflect the additional risk during construction and in certain cases to reflect project-specific risks. These premia are highest at the beginning of construction and reduce over time as the project progresses through construction. An immediate valuation uplift will typically be recorded at financial close resulting from the application of a valuation discount rate (calculated as the benchmark operational discount rate plus the construction risk premia and any project-specific risk premia) that is lower than the hold-to-maturity internal rate of return (“HTM IRR”) of the investment. This valuation uplift and the subsequent increase in the valuation of a PPP or renewable energy project arising from the decline in valuation discount rates as a project progresses through construction and becomes operational, provide the Group with an important source of returns from its investment portfolio. The difference between the forecast average primary HTM IRRs, as increased by any value enhancement strategies, and the secondary rates of return typically sought by investors in operational infrastructure assets is described by the Group as the “yield shift”. As well as the HTM IRRs, the investment metrics John Laing uses to analyse divestment returns are annualised rate of return (“ARR”) and money multiple (“MM”) and their calculations are set out in paragraphs 3.2 and 3.3 of Part 3 “Presentation of Financial and Other Information”. ARR is used because it takes into account undrawn investment commitments and the estimated hold period which aids the like-for-like comparisons of returns between investments. John Laing’s future divestment returns are subject to a number of factors beyond the Group’s control, including the strength of competition in primary markets and the level of demand in secondary markets for the Group’s investments. John Laing’s current objective in respect of ARR and MM returns is to achieve, in the medium term, returns which are consistent with the Board’s strategy to create value for Shareholders by growing NAV.
98 John Laing has a strong track record of achieving aggregate selling prices for its investments in line with their portfolio valuations.
4. Competitive Strengths 4.1 John Laing has a unique and integrated platform John Laing has a scalable business platform that is differentiated from its competitors in terms of intellectual capital, integrated business model and independence. The Directors believe these attributes taken together allow the Group to access new investment opportunities and deliver investment returns in line with its strategy. • Intellectual capital: The Group’s primary investment and asset management teams include employees with sector-specific technical, design, development and operational experience, as well as project finance and commercial skills, all of which apply across geographies. In addition, the Group’s executive team is highly experienced across the Group’s key market sectors. This intellectual capital, which has in part been built up from its historical construction and operations activities, and the relationships of the executive team are important for securing access to strong consortiums, bidding and mitigating investment risk. • Integrated business model: The Group’s integration of investment origination, structuring, delivery, financing and asset management functions facilitates the value enhancement of in-construction and operational assets, providing attractive investment returns. With over 30 years of infrastructure investment experience, including holding investments in certain projects all the way through to their maturity, the Group has the ability to recycle the knowledge it has gained from long-term asset management back into its origination activities. • Independence: John Laing has experience in partnering with a wide range of co-investors, support service providers, project lenders and design and construction partners, and a majority of the PPP projects the Group invests in are undertaken with one or more co-investors through a consortium. John Laing’s status as an independent investor gives it the ability to join consortiums and help to assemble the support service providers and contractors best placed to optimise each individual bid. John Laing is independent of supply chain partners which enables it to shift its geographic and sector focus as markets change, close or open. John Laing’s independence sets it apart from those competitors who have construction or service businesses at their core, and allows it to work with the strongest partners on a bid-by-bid basis. The Group’s investment function and process are not subject to influence by a tied construction arm unlike some of its competitors, a factor which the Group believes Governmental Entities and project lenders value and which avoids conflicting economic objectives.
4.2 John Laing is well-positioned for a growing market opportunity John Laing has established geographic and sector based teams, comprising a network of seven overseas offices (Toronto, New York, Los Angeles, Amsterdam, Auckland, Sydney and Melbourne) and its head office in London, with the skills and resources required to support its activities in its chosen markets. The Group has established these offices and teams to address the growing demand for private capital for PPP projects and renewable energy assets and has been at the forefront of investing in early PPP projects in these jurisdictions. This offers the flexibility to allocate the Group’s resources as the scope of the market opportunity and its investment pipeline evolve over time. John Laing invests in an international market that is large and growing. It is estimated that global investment in infrastructure needs to be approximately 3.8 per cent. of GDP from 2016 to 2030, or an estimated average of US$3.3 trillion invested each year, just to support expected growth rates. However, with current rates of underinvestment, global infrastructure investment will fall short of this figure by approximately 11 per cent., or US$350 billion per year. (source: McKinsey Global Institute) This historical underinvestment has added pressure to the demand for infrastructure. Infrastructure investment has fallen as a share of GDP in 11 of the G20 economies since the global financial crisis of 2007. Years of underinvestment in critical infrastructure are now catching up with countries around the globe and there is an urgent need to get finance flowing back into projects to plug this infrastructure gap and promote economic growth. (source: McKinsey Global Institute). The adoption and use of PPP structures within developed nations is growing internationally. Early adopters such as the United Kingdom and Canada have been joined by numerous countries in Europe, Australia, New Zealand, many individual states within the United States and, more recently, certain countries in Latin America. Whilst John Laing has been active in many traditional PPP and renewable energy sectors, the Group continues to research new investment opportunities in emerging sectors, such as managed lanes and broadband.
99 Investment in renewable energy projects has grown over the past 10 to 15 years, driven principally by decarbonisation policies, concerns around energy security and economic factors. Total new global investment (excluding large hydro) is estimated to have been approximately US$240 billion in 2016, providing significant potential for John Laing to increase the Group’s investment in its chosen markets (source: Frankfurt School-UNEP Centre).
4.3 John Laing has a strong track record of value creation and investment John Laing has continued to deliver strong growth: • The Group’s NAV has increased from £771.1 million (pro forma, as described in paragraph 2 of Part 3 “Presentation of Financial and Other Information”) as at 31 December 2014 to £1,123.9 million as at 31 December 2017, a CAGR of 15.5% after adding back dividends paid in the three year period of £62.2 million; • The Group’s Portfolio Value has increased from £772.0 (pro forma) million as at 31 December 2014 to £1,193.8 million as at 31 December 2017; • The Gross Value of the Group’s investment portfolio has increased from £1,076.3 (pro forma) million as at 31 December 2014 to £1,529.2 million as at 31 December 2017; and • External AUM have risen from £1,020 million (pro forma) as at 31 December 2014 to £1,649 million as at 31 December 2017. Between 31 December 2014 and 31 December 2017, the Group committed £745 million of investment (across both PPP and renewable energy projects) into 28 projects including additional commitments to four existing investments.
4.4 John Laing’s business model is hard to replicate John Laing integrates the specialist expertise required to originate, structure and manage greenfield PPP investments. Its experience in managing the supply chain, long term relationships with Governmental Entities, contractors, project lenders and advisers, together with its credibility as an investor of its own capital and its track record in delivering on previous investments, are attributes that would take new entrants significant time and cost to build up. This track record has enabled John Laing to build up strong relationships and therefore, opportunities to form Consortiums with many of the largest international infrastructure contractors. John Laing’s business model is differentiated from those of investors with construction businesses who frequently use equity investment into a project to help secure their position as the main construction contractor for the project. As such, they are competitors for the equity required. Similarly, support services companies may also provide equity to a project to secure long-term operating contracts and thus compete with the Group for the provision of equity. However, these competitors typically have less flexibility to invest in certain sectors or geographies and may seek to limit the size of their investment to avoid consolidation of Project Companies for accounting purposes. In addition, they may face pressures to support their construction or support services activities, as applicable, at the expense of their equity participation. John Laing’s business model enables the Group to readily apply its skills and knowledge to access new geographical markets, potentially Latin America, and new sectors, such as managed lanes.
4.5 John Laing applies risk investment criteria rigorously The project structures through which John Laing invests are designed to ensure effective allocation of risk and reward between Governmental Entities, equity investors, lenders, contractors, service providers and other counterparties. These structures are applied rigorously by the Group prior to entering into any new investment commitment. Each project is structured as a non-recourse SPV, with contractual terms such that the Group’s equity returns are effectively protected from a wide range of risks, including ensuring that third-party project lenders do not have contractual recourse to equity investors beyond their committed equity, and to ensure that substantially all cost overruns are passed through to subcontractors. In particular, the structures mitigate many construction risks, such as risks associated with design, workmanship, cost overruns and delays, through effective transmission of the financial consequences of such risks to construction partners. These structures also mitigate operational risks by passing key risks to service providers through pass-through contracts. Other measures for protecting the value of the Group’s investments include the use of interest rate swaps on third-party project finance debt to mitigate the risk of increased interest costs over the life of an infrastructure project, structuring projects such that there is a positive
100 correlation between investment returns and inflation rates, targeting PPP projects which have government-backed revenue streams based mainly on availability of the underlying asset rather than revenues based on patronage or volume and entering into short/medium term power purchase agreements with electricity suppliers to reduce the impact of short-term volatility on revenues from renewable energy projects. The Group’s investments are diversified across a range of sectors and geographies. Within PPP, the Group originates, invests in and manages social, transport and environmental infrastructure across Asia Pacific, North America and Europe, including the United Kingdom. In the renewable energy sector, the Group has invested in and managed solar PV parks, onshore and offshore wind farm projects and biomass CHP plants and has established a presence in the United Kingdom, United States, Australian, German, French, Irish and Swedish markets. The Group has benefitted from its disciplined approach to risk management with a strong track record in terms of performance. For more information, see paragraph 3.1 “Fair value movements in the Group’s investment portfolio” in Part 12 (Operating and Financial Review).
4.6 John Laing has access to a strong pipeline of projects John Laing’s business model requires a steady supply of new investment opportunities. The Group’s current investment pipeline comprises the Group’s potential investment commitment in identified PPP and renewable energy project opportunities that are expected to be procured or be available within the next three years and two years, respectively, and includes, inter alia, projects where John Laing or a Consortium is either shortlisted or has already been appointed preferred bidder (in the case of PPP projects), or has secured exclusive positions (in the case of renewable energy projects). John Laing’s total investment pipeline has grown strongly, increasing from approximately £1,331 million as at 31 December 2014 to approximately £2,150 million as at 31 December 2017, 95 per cent. of which represents opportunities outside the United Kingdom. This growth is attributable to, inter alia, the Group targeting higher volumes of investments and larger projects as well as the number of PPP tenders announced by Governmental Entities, the Group’s own strategic decision to bid for certain contracts, the Group’s or a Consortium’s win (or loss) or withdrawal from bidding of contracts, an expansion in the geographies or markets in which the Group considers investing, availability of renewable energy projects and improvements in the visibility of potential bids. As at 31 December 2017, the Group’s PPP pipeline comprised approximately £1,585 million of specifically identified PPP project opportunities. Within this total, the Group’s primary investment teams have been successful in securing near term positions for John Laing in one preferred bidder consortium and nine shortlisted PPP consortiums, with an investment opportunity of approximately £200 million. John Laing also had a strong renewable energy pipeline of approximately £565 million as at 31 December 2017, including four exclusive positions representing potential renewable energy investment commitments of approximately £150 million. Over the longer term, John Laing’s investment pipeline, and its ability to convert this into investment commitments, is expected to be supported by several other factors: • Market demand: the on-going need for infrastructure investment and for such investment to be wholly or partly funded by private capital support has increased activity in key markets (for example, Europe, Australia and the United States) as well as the growing use of the PPP model internationally. • Flexibility: John Laing has established geographic and sector based teams with the skills and resources required to support its primary investment activities in its chosen markets and has the flexibility to allocate its resources as the scope of the market opportunity and its pipeline evolve over time. • Access to long term non-resource debt finance at the project level: debt markets have improved significantly since the global financial crisis and are active in the jurisdictions in which the Group operates.
5. Strategy John Laing’s strategy is to create value for shareholders through originating, investing in and managing infrastructure assets internationally and is focused on the following core strategic objectives: • Growth in primary investment volumes (new investment capital committed to greenfield infrastructure projects) over the medium term; • Growth in the value of external AUM and related fee income; and
101 • Management and enhancement of the Group’s investment portfolio, with a clear focus on active management during construction, accompanied by realisation of investments which, combined with the Group’s Facilities and operational cash flows, enable the Group to finance new investments.
5.1 Strategy for growing primary investment volumes over the medium term John Laing’s strategy for growing the volume of capital committed to PPP infrastructure projects is based on the concentration of its resources on countries or geographic regions carefully selected against five key criteria: 1. a stable political, legal, regulatory and taxation framework; 2. a commitment to the development of privately-financed infrastructure; 3. the ability to form relationships with strong supply chain partners, preferably companies John Laing has worked with before; 4. the likelihood of target financial returns, on a risk-adjusted basis, being realised; and 5. the existence of a market for operational investments or a strong expectation that such a market will develop. This core strategy is linked to identifying markets with growing demand, finding partners who John Laing can work with who have strong prospects of winning as well as a need for John Laing’s capital and expertise. John Laing targets the following markets that currently meet these criteria: Asia Pacific, North America and Europe, including the United Kingdom. In addition, the Group aims to ensure that the right skills and internal resources are put in place to match the sectors which are active in those relevant jurisdictions. Within the PPP sector, John Laing aims to maximise the opportunities within its existing markets as well as explore new markets and opportunities in sectors falling outside its traditional transport, social infrastructure and environmental sectors. In the renewable energy sector, the Group focuses on entering new markets which support its objective of establishing a balanced portfolio of assets with exposure to different power markets, geographic locations (with respect to wind and solar resource levels) and government support mechanisms. Beyond the PPP and renewable energy markets, the Group continues to research other infrastructure asset classes that could potentially fit its business model. The due diligence carried out before investing in new markets follows a rigorous process that eventually rules out many opportunities. Potential sectors which have been or are being considered include: broadband, driven in Europe by the EU Directive to see 100 per cent. high speed coverage by 2025; water resource management, driven by climate change; energy storage, driven by the changing way in which electricity is generated across networks; and other forms of renewable energy such as pumped storage. In addition, the Group continues to monitor new geographic markets which offer potential. These include countries in Latin America, such as Chile and Colombia, and certain other countries in the Asia Pacific region.
5.2 Strategies for growth in External AUM and related fee income John Laing’s strategy to grow the value of its External AUM is linked to its asset management activities as an investment adviser to JLIF and JLEN. The Group not only advises the portfolios of JLIF and JLEN, earning fee income based on the funds’ portfolio values, but also sources new investments for both funds. Both JLIF and JLEN have a right of first offer over certain portfolio investments when they are offered for sale by the Group. The investment strategies of these two listed funds are differentiated (from each other and from the Group) and cover investments in predominantly operational PPP and environmental infrastructure assets (respectively) and the long-term holding of such investments, with the aim of producing dividends that increase progressively with inflation. While the Group has no obligation to sell assets to either listed fund, approximately 70 per cent. of the assets sold (by sale proceeds) by the Group between 31 December 2014 and 31 December 2017 have been acquired by the funds. As at 31 December 2017, JLIF had acquired 53 investments from John Laing since launch, while JLEN had acquired 13 investments from John Laing since launch. When investments are sold to JLIF or JLEN, the value of such investments contributes to growth in the value of the respective fund’s portfolio; if the trend were to continue, then future asset disposals by the Group would lead to an increase in External AUM and accordingly, the Group’s fee income. In addition to making acquisitions from the Group, both JLIF and JLEN, advised by JLCM, have also been successful in acquiring assets from other parties. Both JLIF and JLEN have independent boards who ultimately make the decision as to acquisitions by the funds, whether from John Laing or from other parties.
102 5.3 Strategies for growing portfolio valuation and optimising cash yield from investments John Laing’s business model aims to secure new investments at attractive risk-adjusted base case returns and to enhance these returns through active asset management. John Laing employs sophisticated financial analysis and investment appraisal techniques in assessing each new investment opportunity. The Group considers the specific risk profiles for each prospective investment with the aim of optimising risk adjusted returns and securing new investments that are likely to best meet the investment appetites of secondary market investors. Based upon its investment track record, John Laing has established a range of value enhancement strategies that it considers in relation to each investment, both pre-financial close and at any time thereafter. Such strategies continue to evolve and include: optimising lifecycle management and asset renewal costs over the life of an infrastructure project (either to reduce forecast costs or to defer expenditure); reducing Project Company management costs and project insurance premiums through bulk purchasing or efficiency gains; and earning additional revenues (either during the operational phase or at the end of the project) for the Project Company over and above those forecast at financial close. The Group actively manages assets throughout construction and operation to deal with issues that arise as soon as practically possible. John Laing’s active approach recognises that an investment’s fair value may be protected through the quick resolution of ongoing disputes.
6. Primary and Secondary Investments 6.1 Primary investment As at 31 December 2017, John Laing’s primary investment portfolio comprised the Group’s interests in 11 PPP projects, as well as in three renewable energy projects, which are in the construction phase. The Portfolio Value of the Group’s primary investment portfolio was £580.3 million as at 31 December 2017. The Group sources and bids for traditional PPP projects typically through a Consortium, and typically on its own behalf for renewable energy projects. The Group undertakes market research, project selection, negotiations with consortium partners, bid coordination and finalisation of negotiations with Governmental Entities, vendors, suppliers, project lenders and other project counterparties through to financial close. Activities are currently focused in Asia Pacific, North America and Europe, including the United Kingdom. John Laing aims to work with strong delivery partners in each market. Activities cover a wide variety of sectors, including all the main social infrastructure areas such as healthcare, education, police and criminal justice, government and local authority accommodation, social housing and defence, as well as transport (roads, street lighting, highways maintenance and rail, including rolling stock) and environmental projects (waste management and renewable energy, including biomass CHP and onshore and offshore wind).
6.1.1 Primary investment process Prior to financial close, the primary investment origination process involves two main forms of activity: (i) identification of attractive opportunities, assembly of consortium partners and/or joining existing Consortiums to bid for such opportunities and (ii) bidding and investing. These two activities are mutually reinforcing, with the bidding process building contacts and experience that further strengthen John Laing’s access to future investment opportunities, thereby creating an on-going pipeline of potential investments. New investment and bidding activity are managed and controlled in each geographical region. The Group’s long history of project delivery and investment has allowed it to build up an extensive international network of established relationships and strategic partners comprising Governmental Entities, legal, financial and technical advisers, construction and service delivery partners and project lenders. This network acts as an important source of market intelligence and provides an effective means to identify opportunities at the earliest possible stage. Once the Group has decided to pursue an investment in a project, progress is monitored to ensure that it continues to meet John Laing’s current investment criteria and that the Group’s assessment of its competitive position and the potential probability of success remain acceptable. During the construction period, John Laing provides investment management services, including monitoring construction and asset mobilisation, as well as playing an active part in the management of disputes that may arise during this period. The Group’s PPP and renewable energy investment criteria are reviewed regularly by the Board, which also establishes the delegated approval authorities of the Group’s investment committee.
103 The ability to assemble and participate in high quality bidding consortiums to secure a PPP concession is central to the Group’s ability to complete a primary investment that meets its investment criteria once an opportunity has been identified. In each case, John Laing undertakes a review of potential partners’ capabilities to assess strengths and weaknesses following which it seeks to secure participation in the strongest Consortium. The Group has strong working relationships with many leading industry participants across various sectors. When John Laing is required to lead on specific areas of a bid within a particular Consortium, it supplements its in-house team by engaging specialist external advisers for legal, financial or technical advice. During the bidding process, John Laing also draws on the expertise of its project finance specialists who are tasked with securing debt funding for projects on the most competitive terms and have deep experience in the negotiation of specialist financial structures. The Group’s ability to raise debt for projects in which it invests contributes to its success in securing investment commitments. Over the last three years, the Group’s project finance specialists have worked on projects which have successfully raised project finance debt across Asia Pacific, North America, Europe and the United Kingdom. This debt has been raised principally from banks active in the project finance market and, in North America, from the capital markets. Both the bid process and the construction phase for PPP investments are typically longer than for renewable energy investments: • PPP—The PPP bidding process follows a structured process and usually takes up to 18 to 24 months from the point at which John Laing first assembles or joins a Consortium to bid for that project, up until the point at which the project reaches “financial close”, although this period can be substantially shorter where the Group joins a Consortium at a later stage in the bidding process. Financial close of a PPP project is a key milestone at which full contractual commitment (including John Laing’s commitment to invest and lenders’ commitments to provide debt finance) is made to a project so that project implementation (i.e. construction and operation) can start. As the bid process proceeds, the bidding consortiums compete and are narrowed down, initially into a shortlist, until a single preferred bidder is selected by the relevant Government Entity. Once this has happened, it is almost certain the project will then proceed to financial close and the investment committed. • Renewable energy—The timescale between when an investment opportunity is identified and financial close is typically six to 12 months for a renewable energy project, which makes it significantly shorter than for PPP investments. In addition, renewable energy projects generally have shorter construction timetables. John Laing typically targets renewable energy projects at the pre-construction stage, when they have planning consent and a grid connection offer. Projects are therefore normally acquired by John Laing from existing developers (that have taken the project through the initial planning stages), rather than “won” through a formalised procurement process as with PPP. The Group may act as the interface between lenders, contractors and offtakers, assuming responsibility for managing the overall relationship and delivering a consortium and structured investment.
6.1.2 Primary investment costs The direct costs associated with the sourcing, bidding and capital commitment process can be broadly divided into two categories: • Staff costs—Staff costs comprise costs of John Laing staff supporting bids across all sectors and geographies. • Third party bid costs—The extent to which third party advisers and consultants are appointed, and associated bid costs incurred, depends on how far John Laing progresses through the bidding process. In general, the majority of third party costs are incurred from a relatively advanced stage in the process, in particular, following shortlisting or appointment as preferred bidder. Third party costs on PPP bids are generally incurred over a period of time, potentially several years in the case of the largest projects, and can be incurred directly or as the Group’s share within a Consortium. The Group aims to charge sufficient fees, including success fees, in relation to projects bid where it or a Consortium is appointed preferred bidder, to recover total bidding costs, including the costs of unsuccessful bids. In certain jurisdictions, such as the United States and the Netherlands, the Group may be entitled to a stipend from the relevant Government Entity to defray its costs where its bid is unsuccessful.
6.1.3 Primary investment value protection and enhancement From when a project reaches financial close, the Group, through its Asset Management division, systematically looks to identify opportunities for resolving and mitigating project risks and delivering equity returns and
104 valuations in excess of those assumed at the bidding stage. Examples of opportunities that arise during the construction period include: • contract variations, where a Governmental Entity requests changes to the scope of existing construction which could give rise to additional SPV fee income for project management; and • in the context of renewable energy investments, the release of cost or time contingencies, as actual costs are incurred. In addition, Governmental Entities may decide to exercise pre-agreed options to expand the construction scope of a project that may require additional private sector capital, resulting in additional investment opportunity for John Laing.
6.1.4 Bidding “Win Rate” Given the nature of the PPP procurement process to secure investment commitments, the “Win Rate” (a measure of the efficiency with which the Group converts PPP bids to committed investments) is a relevant metric. In particular, by monitoring medium-term Win Rate (on an overall, geographic-specific and sector-specific basis) the Group may be able to establish adverse or beneficial trends that it can apply to its origination approach and also to its origination costs including the level of success fees sought on winning bids to compensate for the losses incurred on failed bids. The Group’s bidding Win Rate for a particular period is calculated by reference to the value of John Laing’s potential PPP investment commitments in respect of which John Laing or a Consortium is successfully appointed as preferred bidder in that period (i.e. a win), as a percentage of the total value of John Laing’s potential PPP investment commitments in the same period in respect of which the Group or a Consortium has been shortlisted for projects and preferred bidder status has been subsequently reached for such shortlisted projects, either by the Group or a Consortium or a third party (i.e. all won or lost bids, rather than the investment pipeline as a whole). In view of the multi-year length of PPP procurements and the variation in the size of the value of PPP projects, short-term trends and short-term Win Rate can vary significantly from period to period, and hence the Group considers its medium-term Win Rate when preparing its budget and business plan. The Group currently assumes an average Win Rate of 30 per cent. in its budgeting. It achieved a weighted average Win Rate of 48 per cent. across all the PPP projects for which John Laing or a Consortium bid from 31 December 2014 to 31 December 2017. The Win Rate concept is not directly applicable to investments in renewable energy projects as these projects are not subject to a formal procurement process, with John Laing typically negotiating and investing in renewable energy projects as opportunities arise. See also paragraph 1.9 “The Group’s historical bidding Win Rate may decline and is an uncertain indicator of new investments that the Group may make in the future” in Part 2 (Risk Factors).
6.2 Secondary investment As at 31 December 2017, John Laing’s secondary investment portfolio comprised the Group’s interests in 11 PPP projects, as well as in 16 renewable energy projects, which are in the operational stage. These projects had a Book Value of £603.2 million as at 31 December 2017. The Group’s secondary investment portfolio also includes the Group’s 2.5 per cent. shareholding in JLEN, valued at £10.3 million as at the same date, bringing the total Portfolio Value of the Group’s secondary investment portfolio to £613.5 million. Since 31 December 2014, the Group has made 21 divestments of entire or part interests in Project Companies from its investment portfolio, predominantly of investments from within its secondary investment portfolio. Of these 21 divestments, 17 were divested to JLIF and JLEN. Cash yield from secondary investments was £40.2 million, £34.8 million and £38.9 million for the years ended 31 December 2017, 2016 and 2015, respectively. “Cash yield from investments” comprises payments from a Project Company, either in the form of dividends (on capital provided in the form of equity) or debt interest and repayments (in respect of capital provided in the form of a subordinated shareholder loan), and dividends from John Laing’s shareholding in JLEN. See paragraph 2.6 of Part 12 (Operating and Financial Review) for further details.
105 Cash flows to equity from projects from the Group’s secondary investment portfolio are constantly reviewed for value enhancement opportunities. Examples of such opportunities include: • optimisation of facilities management and utility costs, such as promoting energy efficiency across the portfolio; • lifecycle management, for example, the extension of the useful life of assets to reduce capital replacement costs; • contract amendments and variations, including negotiation of lease extensions and new planning permissions to accommodate new equipment; and • third party agreements, for example, seeking opportunities to generate additional cash flow streams from third parties for the use of all or part of their project facilities.
7. External Asset Management The Group’s external asset management activities principally comprise investment management services and, to a lesser extent, project management services. The principal profit driver for these activities is third party fee income from investment management services which is earned from JLIF and JLEN. The table below sets out the Group’s External AUM at 31 December 2017, 2016 and 2015 and External AUM fees related to JLIF and JLEN for the years ended 31 December 2017, 2016 and 2015.
Year ended Year ended Year ended 31 December 31 December 31 December 2017 2016 2015 (unaudited) (£ millions) External AUM(1) ...... 1,648.5 1,472 1,136 External AUM fees ...... 16.7 15.8 12.0
Note: (1) External AUM at 31 December 2017 based on published portfolio values for JLIF as at 30 September 2017 and JLEN as at 31 December 2017. JLIF is a Guernsey-incorporated investment company which was launched on 29 November 2010 and is listed on the Main Market of the London Stock Exchange. JLIF’s investment policy is to invest predominantly in equity and/or subordinated debt issued in respect of infrastructure projects that are predominantly PPP projects. It predominantly invests in projects that have completed construction and are in their operational phase and whose revenue streams are public sector or government-based, and are predominantly availability-based. As at 31 December 2017, JLIF had acquired 53 investments from John Laing since launch. JLEN is a Guernsey-incorporated investment company which was launched on 31 March 2014 and is listed on the Main Market of the London Stock Exchange. JLEN’s investment policy is to invest in environmental infrastructure projects that have the benefit of long-term, predictable cash flows supported by long-term contracts or stable regulatory frameworks. As at 31 December 2017, JLEN had acquired 13 investments from John Laing since its launch. The investment strategies of these two listed funds are differentiated (from each other and the Group) and cover investments in predominantly operational PPP and environmental infrastructure assets (respectively) and the long-term holding of such investments.
7.1 Investment management services Investment management services are provided by JLCM to JLIF and JLEN. As at 30 September 2017, JLIF had a portfolio value of £1,227.8 million and as at 31 December 2017 JLEN had a portfolio value of £420.7 million. JLCM has two separate dedicated fund management teams whose senior staff are authorised and regulated by the FCA. The fund management teams focus primarily on sourcing new investments and capital raisings on behalf of JLIF and JLEN, respectively. The two teams operate behind information barriers in view of the market sensitive nature of their activities and to ensure the separation of “buyside” and “sellside” teams where John Laing is selling investments to either fund. The services provided by JLCM to JLIF pursuant to an investment adviser agreement (the “JLIF Investment Adviser Agreement”) include making recommendations to the board of JLIF on the terms of the investment policy; advising JLIF in respect of its investment portfolio; locating, evaluating and negotiating investment opportunities for JLIF in accordance with instructions on implementation of the investment policy from the
106 board; and reviewing and monitoring the investment portfolio. Additionally, JLCM provides valuation, accounting and reporting services to JLIF. Pursuant to the investment adviser agreement between JLCM and JLEN (the “JLEN Investment Adviser Agreement”, together with the JLIF Investment Adviser Agreement, the “Investment Adviser Agreements”), JLCM provides services to JLEN which are similar to those described above. The fee income earned by JLCM pursuant to the Investment Adviser Agreements is a percentage of the respective fund’s “adjusted portfolio value”, which approximates to the value of such investment portfolio, at a particular point in time. The base fee from each fund accrues quarterly in arrears as at a valuation day, and is calculated by reference to the adjusted portfolio values as at such valuation day. Under the JLIF Investment Adviser Agreement, JLCM is entitled to a base fee at an annual rate of 1.1 per cent. of the JLIF adjusted portfolio value up to and including £500 million, plus 1.0 per cent. of the JLIF adjusted portfolio value over £500 million and up to £1 billion, plus 0.9 per cent. of the JLIF adjusted portfolio value over £1 billion. Under the JLEN Investment Adviser Agreement, JLCM is entitled to a base fee at an annual rate of 1.0 per cent. of the JLEN adjusted portfolio value up to and including £500 million, plus 0.8 per cent. of the JLEN adjusted portfolio value over £500 million. With respect to JLIF, JLCM is also entitled to an asset origination fee of 0.375 per cent. of the purchase price of new investment capital acquired by JLIF that is not sourced from the Group or funds or holdings managed by the Group. To the extent that the Group may decide to dispose of investments in PPP and renewable energy projects, JLIF and JLEN have rights of first offer in respect of certain investments which are set out in their respective first offer agreements with John Laing (the “First Offer Agreements”); however, both funds are wholly separate entities from the Group, each maintaining fully independent board of directors. For more information on the Group’s Investment Adviser Agreements and First Offer Agreements with JLIF and JLEN, see paragraphs 9.3 and 9.4 in Part 16 (Additional Information).
7.2 Project management services As part of its asset management activities, the Group also provides project management services, or services of an administrative nature, directly to Project Companies in which John Laing, JLIF and JLEN are shareholders. These services are provided under Management Services Agreements (“MSAs”). On 30 November 2016, the Group completed the divestment of its project management services activities in the UK to HCP Management Services Limited (“HCP”). As part of the sale, 81 staff roles and 52 MSAs transferred to HCP. The activities sold contributed £7.9 million of the total project management service revenues of £14.9 million in the year ended 31 December 2016. The remaining project management services activities are principally focused on MSAs relating to projects outside the UK. At 31 December 2017, the Group held 24 MSAs. Each MSA typically covers: project management activities, such as undertaking regular monitoring and reporting of construction and services activities; management of subcontractors/service providers, including the preparation and distribution of a schedule of project deliverables; provision of commercial support to Project Companies; provision of company secretarial and financial administrative services to Project Companies; and oversight and management of all financial operations of Project Companies, including payments and preparation of management and statutory accounts. Staff who deliver these services are located at the projects themselves and at John Laing’s network of offices, in both cases supported by central staff in London. For the year ended 31 December 2017, the Group received £6.1 million in such income, compared to £14.9 million and £17.0 million for the years ended 31 December 2016 and 2015, respectively.
8.1 Portfolio overview The Group’s investment activity is spread across a broad range of sectors, comprising the social infrastructure, transport, environmental and renewable energy sectors: • social infrastructure comprises healthcare, education, police and criminal justice, government and local authority accommodation and social housing. • transport comprises rail (including rolling stock), roads, bridges, street lighting and highways maintenance. • environmental comprises waste management and waste water treatment, and renewable energy comprises biomass, onshore and offshore wind and solar PV.
107 The figures below show the profile of the Group’s investment portfolio by geography, sector, project size and revenue basis, each on a Portfolio Value basis and as at 31 December 2017.
The projects comprising the Group’s investment portfolio as at 31 December 2017 are set out in the table below (with associated projects listed together). For changes to the Group’s investment portfolio since 31 December 2017, see paragraph 9 “Recent Portfolio Developments” in this Part 9.
Period of concession or estimated John operational life Laing’s Total interest in Investment Asset Revenue Start No.of No. Project Name Project (par value) Region Sector Type basis Status date years 1 IEP (Phase 1) ...... 15% £50–£100 million UK Transportation Rolling Stock Availability Construction May 2012 41 2 IEP (Phase 2) ...... 30% £50–£100 million UK Transportation Rolling Stock Availability Construction April 2014 41 3 A6 Parkway Netherlands . . 85% <£10 million Europe Transportation Road Availability Construction November 2016 23 4 I-77 Managed Lanes . . . . . 10% £10–£25 million North Transportation Road Volume Construction May 2015 53 America 5 Sydney Light Rail ...... 32.5% £50–£100 million Asia Pacific Transportation Light rail Availability Construction February 2015 19 6 Cramlington Biomass . . . . 44.7% £25–£50 million UK Environmental Biomass Volume Construction September 2015 22 7 Solar House ...... 80% £10–£25 million Europe Renewable Energy Rooftop solar Volume Construction July 2017 26 8 Hornsdale Wind Farm (phase 1) ...... 30% £10–£25 million Asia Pacific Renewable Energy Wind farm Volume Operations August 2015 26 9 Hornsdale Wind Farm (phase 2) ...... 20% <£10 million Asia Pacific Renewable Energy Wind farm Volume Operations June 2016 26 10 Hornsdale Wind Farm (phase 3) ...... 20% <£10 million Asia Pacific Renewable Energy Wind farm Volume Operations February 2017 22 11 Kiata Wind Farm ...... 72.3% £10–£25 million Asia Pacific Renewable Energy Wind farm Volume Operations November 2016 26 12 Nordergünde offshore Wind Farm ...... 30% £25–£50 million Europe Renewable Energy Wind farm Volume Operations August 2016 26 13 Horath Wind Farm ...... 81.82% £10–£25 million Europe Renewable Energy Wind farm Volume Operations November 2016 24 14 St Martin Wind Farm . . . . 100% <£10 million Europe Renewable Energy Wind farm Volume Construction November 2016 27 15 Sommette Wind Farm . . . . 100% £10–£25 million Europe Renewable Energy Wind farm Volume Construction September 2016 27 16 Sterling Wind Farm . . . . . 92.5% £10–£25 million North Renewable Energy Wind farm Volume Operations October 2016 31 America 17 Klettwitz Wind Farm . . . . . 100% £25–£50 million Europe Renewable Energy Wind farm Volume Operations October 2015 25 18 Pasilly Wind Farm ...... 100% <£10 million Europe Renewable Energy Wind farm Volume Operations December 2015 26 19 Glencarbry Wind Farm . . . 100% £10–£25 million Europe Renewable Energy Wind farm Volume Operations January 2016 26 20 New Grafton Correctional Social Centre ...... 80% £50–£100 million Asia Pacific Infrastructure Prison Availability Construction June 2017 23 21 I-66 Managed Lanes . . . . . 10% >£100 million North Transportation Road Volume Construction November 2017 50 America 22 Buckthorn Wind Farm . . . . 90.05% £25–£50 million North Renewable Energy Wind farm Volume Operations October 2017 30 America 23 Rocksprings Wind Farm . . . 95.3% £50–£100 million North Renewable Energy Wind farm Volume Operations September 2017 30 America 24 Manchester Waste TPS Co . 37.43% £10–£25 million UK Environmental Waste Treatment Availability Operations April 2009 25 25 New Royal Adelaide 17.26% £25–£50 million Asia Pacific Social Hospital Availability Operations November 2011 35 Hospital ...... Infrastructure 26 Denver Eagle P3 ...... 45% £10–£25 million North Transportation Rail Availability Construction August 2010 34 America 27 I-4 Ultimate ...... 50% £10–£25 million North Transportation Road Availability Construction September 2014 40 America 28 Severn River Crossing . . . . 35% £10–£25 million UK Transportation Bridge Availability Operations April 1992 * 29 Svartvallsberget Wind Farm 100% £10–£25 million Europe Renewable Energy Wind Farm Volume Operations March 2013 26 30 Auckland South Corrections 30% £10–£25 million Asia Pacific Social Prison Availability Operations September 2012 28 Facility ...... Infrastructure 31 A130 ...... 100% <£10 million UK Transportation Road Shadow Toll Operations February 2000 30 32 New Perth Stadium ...... 50% £25–£50 million Asia Pacific Social Stadium Availability Operations August 2014 28 Infrastructure 33 Alder Hey Children’s 40% <£10 million UK Social Hospital Availability Operations July 2015 30 Hospital ...... Infrastructure 34 A15 Netherlands ...... 28% £10–£25 million Europe Transportation Road Availability Operations December 2010 25 35 New Generation Rolling Stock ...... 40% £10–£25 million Asia Pacific Transportation Rolling Stock Availability Construction January 2014 32 36 Speyside Biomass ...... 43.35% £10–£25 million UK Environmental Biomass Volume Operations August 2014 33 37 DARA Red Dragon . . . . . 100% <£10 million UK Social Military Availability Operations August 2003 16 Infrastructure Accommodation 38 A1 Germany ...... 42.5% £25–£50 million Europe Transportation Road Volume Operations August 2008 30 39 Melbourne Metro ...... 30% £25–£50 million Asia Pacific Transportation Rail Availability Construction December 2017 25 40 Rammeldalsberget Wind Farm ...... 100% £10–£25 million Europe Renewable Energy Wind Farm Volume Operations November 2014 24 41 Lambeth Housing ...... 50% <£10 million Europe Social Social Housing Availability Operations May 2012 25 Infrastructure
Note:
* The earlier of 30 years or until a pre-determined level of revenue achieved.
108 8.2 Key project investments Descriptions of the key projects within the Group’s primary and secondary investment portfolio are set out below. These seven projects comprised 47 per cent. of the Group’s portfolio as at 31 December 2017.
8.2.1 Intercity Express Programme (“IEP”) (Phase 1) and IEP (Phase 2) John Laing is in partnership with Hitachi to manage the contracts that cover the design, manufacture, finance and delivery into daily service and maintenance of a fleet of 122 intercity express trains for the UK’s Great Western Main Line (Phase 1) and the East Coast Main Line (Phase 2). The UK Department for Transport (the “DfT”) signed contracts with Agility Trains for the delivery of trains, maintenance and services in connection with the DfT’s IEP. John Laing has a 15 per cent. interest in IEP (Phase 1) (with Hitachi Rail Europe and JLIF having a 70 per cent. and a 15 per cent. interest, respectively), which achieved financial close in July 2012, and a 30 per cent. interest in IEP (Phase 2) (with Hitachi Rail Europe having the remaining 70 per cent. interest), which achieved financial close in April 2014. As referred to in Part 1 (Letter from the Chairman), one potential disposal which is at a reasonably advanced stage is the disposal of the Group’s remaining 15 per cent. shareholding in IEP (Phase 1), which could be announced during the rights issue period. IEP (Phase 1) was financed with equity and subordinated debt of £286 million and senior debt of £2.2 billion. IEP (Phase 2) was financed with equity and subordinated debt of £243 million and senior debt of £2.0 billion. The IEP projects cover the finance, design, manufacture, delivery into daily service and maintenance, over a guaranteed minimum usage period of 26 years of a fleet of 122 Hitachi Super Express trains for the Great Western Main Line (Phase 1) and the East Coast Main Line (Phase 2). The new rolling stock will provide faster, higher capacity, more comfortable and more environmentally friendly services and will support growth on the United Kingdom’s intercity rail routes. The IEP projects combined are one of the largest PPPs to be awarded. Construction is well advanced on both Phases 1 and 2, with Phase 1 expected to be completed by November 2018 and Phase 2 expected to be completed by June 2020. As a result of a delay and reduction in scope to the electrification of certain parts of the Great Western Main Line, agreement was reached with the DfT to provide all trains on IEP (Phase 1) as bi-mode which can be powered by diesel or electricity. Under the project arrangements, Hitachi Rail Europe is the subcontractor in charge of supplying the trains and ensuring that they perform reliably on a daily basis. In the fourth quarter of 2017, the first ten trains for IEP (Phase1) were accepted into passenger operations, achieving a key milestone for the project known as Minimum Fleet Acceptance. As at 2 March 2018, 24 trains have been accepted into operational service. All trains for IEP (Phase 1) are scheduled to be in operation in late 2018. The trains have a design life of 35 years. During the guaranteed minimum usage period, the DfT procures that there is an appropriate train operating company in place to contract with the Project Company. Train operating companies are typically granted 10 year franchise contracts to operate trains on a specified section of the UK rail network. After the guaranteed minimum usage period, the Project Company will maintain ownership of the train fleet and expects to continue contracting with train operating companies until operation of the fleet is no longer commercially viable (presently anticipated to be at the end of the assumed 35 year useful economic life).
8.2.2 New Royal Adelaide Hospital In June 2011, the State of South Australia signed a 35 year contract with the SA Health Partnership Consortium (now Celsus) to finance, design, construct and operate the New Royal Adelaide Hospital. John Laing has a 17.26 per cent. interest in Celsus, alongside Pacific Partnerships (circa. 10 per cent.), and four financial investors. The SPV’s capital structure comprises AUD$343 million of total equity and AUD$2.5 billion in senior debt. The New Royal Adelaide Hospital project, with capital expenditure of AUD$1.85 billion, is the single largest infrastructure project in South Australia to date, designed to deliver the most advanced hospital in Australia with a modern environment and green initiatives. Containing 700 single bedrooms and 100 same-day beds, the hospital has the capacity to admit over 80,000 patients per year. Construction of the New Royal Adelaide Hospital commenced in 2011 and technical completion was originally scheduled for April 2016. However, the project was delayed resulting in disputes between the Government of South Australia, Celsus and the builder. Following mediation discussions in late 2016, technical completion was achieved in March 2017 followed by commercial acceptance in June 2017, and the first patients were admitted in September 2017. Remaining disputes are being dealt with through a process of arbitration. The project company has recently agreed with its syndicate of senior lenders to a two year extension of the project’s senior debt facility beyond June 2018 to allow a sufficient period for refinancing. Since the start of
109 full operations, the project company has been closely monitoring the performance of the facilities management services, which is steadily improving.
8.2.3 Denver Eagle P3 The Denver Eagle P3 project is to design, build, finance, maintain and operate two new commuter rail lines and a section of a third in the Denver Metropolitan area. The three rail lines run for a total of 36 miles, connecting Denver International Airport and Denver Union Station to each other and to other parts of the Denver Metropolitan area. In August 2010, the Denver Regional Transportation District (the “RTD”) reached financial close with the Denver Transit Partners (“DTP”) Consortium for the project. The project capital expenditure is projected to be in excess of US$1.3 billion. John Laing has a 45 per cent. interest in DTP, alongside Fluor Enterprises (10 per cent.) and Aberdeen Asset Management (45 per cent.). DTP’s capital structure consists of US$54 million in equity, US$398 million in public activity bonds and US$1.14 billion in state contributions. The concession ends in December 2044, with the construction phase scheduled for six years. The three rail lines run for a total distance of 36 miles, connecting Denver International Airport and Denver Union Station to each other and to other parts of the Denver Metropolitan area. Delays were encountered with obtaining a right of access that impacted on the construction programme. Such risk is borne by the Governmental Entity, and in this case resulted in relief events to cover the additional cost and time. The RTD has also issued a number of high value variations since financial close, all of which have been or will be funded by it. Following opening of the “A” line in 2016 and the “B” line in 2017, testing and commissioning of the “G” line is currently underway. The project company is appealing against the Colorado Public Utility Commission’s decision not to issue the required permit for the level crossings on the “A” line. The outcome should be known in the first quarter of 2018.
8.2.4 Sydney Light Rail In February 2015, the ALTRAC Light Rail Consortium which consists of Transdev Sydney, Alstom Transport Australia, Acciona Infrastructure Australia, John Laing and two financial investors reached financial close on the Sydney Light Rail Project. The Sydney Light Rail project will form part of Sydney’s public transport infrastructure network and pedestrianise one of its busiest streets, providing a commuter route into the Central Business District and easy access to the south east of the city. The project will provide innovative wire-free technology along parts of George Street and Circular Quay, to enhance the aesthetic appeal of the Sydney Central Business District. The state-of-the-art Alstom Citadis light rail vehicles will provide efficient and comfortable travel with each vehicle carrying more people than nine standard buses. The Sydney Light Rail Project has the potential to improve traffic flows and reduce congestion. While the overall programme is approximately 12 months behind schedule, the first light rail vehicles arrived in Australia in 2017 and the total length of track installed is now 12.9 kilometres, more than 50% of the total.
8.2.5 1-66 In November 2017, the Group announced it had reached financial close on its $155 million (£118 million) investment in the Transform 66 P3 Project (Outside the Beltway) in Northern Virginia, USA as part of the Express Mobility Partners Consortium, Express Mobility Partners, comprising Ferrovial’s Cintra (50 per cent.), Meridiam Infrastructure North America (26.7 per cent.), APG Group (13.3 per cent.) and John Laing (10 per cent.). The project involves a 50-year concession to Design, Build, Finance, Operate and Maintain 22.5 miles of managed lanes along the I-66 corridor between US Route 29 near Gainesville in Prince William County and Interstate 495 (Capital Beltway) in Fairfax County, Virginia. The project will enhance one of the key commuter routes within the Washington DC metropolitan area over a total concession period of 50 years. Managed lanes projects combine toll lanes and free lanes within an existing highway corridor and typically provide users with the option of a reliable travel time, including during peak hours. This is achieved through varying tolls dynamically in response to changing traffic conditions, thereby enabling motorists to assess immediately the travel time value of moving to the managed lanes or staying in the free lanes. Unlike traditional toll roads, managed lanes are designed primarily to reduce congestion. Having been used in the US for several years, their implementation is increasing in response to growing congestion in dense urban corridors. The works will provide three general lanes in each direction free of tolls, plus another two express lanes where drivers in vehicles with three or more occupants will travel for free. All other drivers will instead pay a toll rate that will be adjusted to current demand in a way to maintain a contractually obligated minimum speed of
110 55 mph. The project also includes the design, construction and financing of park-and-ride facilities at strategic points along the corridor, as well as additional transit services. The express lanes are scheduled to open to traffic in mid-2022.
8.2.6 Rocksprings Wind Farm In September 2017, the Group brought the majority of the 150 MW Rocksprings Wind Farm project in Verde County, Texas, USA from Akuo, a French renewable energy producer. The Group invested $85 million (£63 million) in acquiring the majority equity interest in the partnership that controls the project. This is John Laing’s third renewable energy investment in the United States. The Rocksprings project, which started operating in late 2017, involved the installation of 53 General Electric 2.3 MW wind turbines and 16 of its 1.72 MW machines. The wind park will be selling its output to two investment grade corporate off-takers.
8.2.7 New Grafton Correctional Centre The new Grafton Correctional Centre, located approximately 12.5 kilometres southeast of Grafton in New South Wales, Australia, will accommodate 1,700 inmates. It will feature state of the art security and surveillance and focus on rehabilitation to help reduce the rate of reoffending. The project will create up to 1,100 construction jobs and 600 operational jobs whilst addressing the critical shortage of correctional centre beds within New South Wales. The project is being delivered by the New South Wales Government in partnership with the Northern Pathways Consortium consisting of John Holland, Serco and John Laing (whose shareholding is 80 per cent.). John Laing’s investment is £79.3 million. Construction works on the new prison have started and planning approvals are in place. The facility is scheduled to be completed by 2020.
9. Recent Portfolio Developments 9.1 Disposals In the year ended 31 December 2017, the Group announced disposals of all of its interests in nine projects to a number of third party infrastructure investors, including JLIF and JLEN, for total proceeds of £298.9 million. The interests sold or agreed to be sold were: • 30 per cent. holding in M6 road, Hungary to a third party infrastructure investor; • 29.69 per cent. holding in A1 motorway, Poland to a third party infrastructure investor; • 50 per cent. holding in Croydon & Lewisham street lighting project to JLIF; • 50 per cent. holding in Lambeth Social Housing to JLIF (to be completed in the first quarter of 2018); • 100 per cent. holding in Coleshill Parkway to JLIF; • 50 per cent. holding in Aylesbury Vale Parkway to JLIF; • 5 per cent. holding in City Greenwich Lewisham (DLR) to JLIF; • 100 per cent. holding in Llynfi Wind Farm to JLEN; and • 9 per cent. holding in IEP (Phase 1) to JLIF.
9.2 New investment commitments In the year ended 31 December 2017, the Group made investment commitments in seven new projects totalling £382.9 million: • Melbourne Metro (Australia): £43.1 million; • New Grafton Correctional Centre (Australia): £79.3 million; • Buckthorn wind farm (North America): £47.6 million; • Rocksprings wind farm (North America): £62.9 million; • I-66 Managed Lanes (Transform 66 P3) project (North America): £118 million;
111 • Solar House (France): £22 million; and • Hornsdale wind farm 3 (Australia): £10 million.
9.3 Preferred bidder positions Massachusetts Bay Transportation Authority (“MBTA”) In November 2017, John Laing’s Consortium was appointed preferred bidder for the 13-year MBTA fare collection project in Massachusetts, which is expected to reach financial close in the first quarter of 2018. This will be the first PPP fare payment project in the United States, and involves the design, implementation, operation and maintenance of a fare collection system that will utilise account-based ticketing and allow riders to board trains, trolleys, ferries and buses with, amongst other things, the tap of a credit card or smartphone. Equipment is expected to include fare validators, redesigned wider fare gates to more easily accommodate passengers with wheelchairs, baby strollers or luggage and vending machines for all MBTA subway and rail states, as well as for more than 1,000 buses. The San Diego-based Cubic Corporation will not only design and implement the system but will also operate and maintain it through to the end of the concession in 2031, although the contract includes two five-year options, conceivably extending the concession to a possible 23 years. Cubic has deployed similar systems in cities including London, Sydney, Chicago, Vancouver, Miami and San Francisco. The system is expected to be available to the general public by spring 2020 and full transition to the new system and retirement of the existing system is expected to be complete by spring 2021.
10. Investment Pipeline The Group’s current investment pipeline comprises the Group’s potential investment commitments in identified PPP and renewable energy project opportunities that are expected to be procured or be available in the near term, and includes, inter alia, projects where John Laing or a Consortium is either shortlisted or has already been appointed preferred bidder (in the case of PPP projects), or has secured exclusive positions (in the case of renewable energy projects). Actual bidding activity is predicated upon the opportunities and investment capital available at the time of bidding, as well as a determination at such time as to which projects will be economically favourable. As at 31 December 2017, the Group’s total pipeline comprised 84 projects giving a total investment opportunity of £2,150 million, made up of £1,585 million in PPP projects and £565 million in renewable energy projects. Within these totals, the Group’s primary investment teams have been successful in securing near term positions for John Laing in nine shortlisted PPP consortiums, with an investment opportunity of approximately £200 million, as well as exclusive positions on four potential renewable energy investments, with an investment opportunity of approximately £150 million. Six of the PPP consortiums for which the Group has been shortlisted are for potential investments in North America and three are in Europe. These projects are as follows: Gordie Howe International Bridge (US/Canada); Hurontario LRT (Ontario); Los Angeles CONRAC (California); Hamilton Rail (Ontario); Pennsylvania Broadband (Pennsylvania); I-75 Road (Michigan); National Broadband (Republic of Ireland); Silvertown Tunnel (United Kingdom); and A16 (Netherlands). The tables below show the Group’s investment pipeline as at 31 December 2017, split by project status and by geography.
Total potential Number of Renewable investment projects PPP energy commitment (£ millions) (unaudited) Preferred bidder ...... 1 19 — 19 Shortlisted/exclusive ...... 13 197 141 338 Other active bids ...... 6 112 129 241 Other pipeline ...... 64 1,257 295 1,552 Total ...... 84 1,585 565 2,150
112 Total potential Renewable investment PPP energy commitment (£ millions) (unaudited) Asia Pacific ...... 431 174 605 North America ...... 631 233 864 Europe (including UK) ...... 523 158 681 Total ...... 1,585 565 2,150
Movement in the pipeline over time can be attributable to, inter alia, the Group targeting higher volumes of investments and larger projects as well as the number of PPP tenders announced by Governmental Entities, the Group’s own strategic decision to bid for certain contracts, the Group’s or a Consortium’s win (or loss) or withdrawal from bidding of contracts, an expansion in the geographies or markets in which the Group considers investing, availability of renewable energy projects and improvements in the visibility of potential bids.
10.1 PPP pipeline As at 31 December 2017, John Laing’s investment pipeline included approximately £1,585 million of specifically identified PPP project opportunities expected to reach financial close during the course of the next three years. Of this £1,585 million pipeline, projects where John Laing or a Consortium was shortlisted comprised £197 million and projects where John Laing or a Consortium had already been appointed preferred bidder comprised £19 million (as at 31 December 2017). The pipeline was weighted more towards international markets, with Asia Pacific accounting for approximately 27 per cent., North America accounting for approximately 40 per cent., Europe (excluding the United Kingdom) accounting for approximately 28 per cent. and the United Kingdom accounting for only approximately 5 per cent. Currently, the majority of projects in the pipeline are within the transport sector, specifically road and rail projects, spread across each of the Group’s geographic markets. In North America, which makes up 40 per cent. of the pipeline, the Group’s focus is on the PPP market in the United States, whilst continuing to progress its presence in the renewable energy market, following its first US wind farm investment in 2016. The Canadian market also continues to demonstrate strong PPP commitment. Approximately 27 per cent. of the Group’s pipeline relates to the Asia Pacific region, where the Group’s bidding activities are focused on Australia and New Zealand. The Group also has a growing presence in the renewable energy sector in Australia. The balance of the Group’s pipeline is in Europe, where PPP activity remains at a satisfactory level in countries such as the Netherlands. The focus is on those countries which have, or will be, initiating active PPP programmes, such as the Netherlands, Spain, Germany and Norway.
10.2 Renewable energy pipeline The Group’s investment pipeline for renewable energy projects is generally more near-term than for PPP. As at 31 December 2017, John Laing’s investment pipeline included £565 million of specifically identified renewable energy project opportunities that are expected to reach financial close during the course of the next two years. Of this £565 million, approximately £141 million related to projects where the Group had secured exclusive positions (as at 31 December 2017). This pipeline currently takes into account investment opportunities within the United Kingdom (approximately 5 per cent.), Europe (excluding the United Kingdom, approximately 23 per cent.), Australia (approximately 31 per cent.) and North America (approximately 41 per cent.).
113 10.3 Evolution of pipeline The Group’s investment pipeline has grown in the three years ended 31 December 2017, as illustrated in the figure below.
Total 31 Dec 2014 31 Dec 2015 31 Dec 2016 31 Dec 2017 # of equity projects opportunity Preferred Asia 1 £19m
P bidder Pacific North Asia 27% P Shortlisted 9 £197m America Pacific P 40% Other active 28% 4 £112m North £1,585m bids America Other pipeline 53 £1,257m 40% Europe 33% Total 67 £1,585m £2,150m £1,494m £1,859m Total £1,331m # of R equity North Asia projects America Pacific e opportunity 41% 31% n e Exclusive 4 £141m w
Europe £565m a Other pipeline 13 £424m
32% b l e Total 17 £565m Europe 28%
10.4 Late Stage Entry opportunities From time to time, the Group is invited to join an existing consortium, bringing its expertise and capital to a project at a relatively late stage to help ensure its successful completion. These opportunities can emerge with relatively limited notice and often originate from partners with whom the Group has established relationships. Such projects present an attractive opportunity for John Laing as the Group incurs lower bidding costs prior to financial close. The I-66 Managed Lanes project in the United States is a recent example. Past examples include the Denver Eagle P3 investment in the United States and the New Royal Adelaide Hospital investment in Australia.
11. Dividend Policy The Company will continue with its existing dividend policy, namely: (i) a progressive base dividend targeting growth at least in line with inflation; and (ii) a special dividend of approximately 5 to 10 per cent. of gross proceeds from the sale of investments on an annual basis, subject to specific investment requirements in any one year. Interim base dividends will continue to be paid in October of the relevant financial year and final base dividends in May of the following financial year along with any special dividend. The Rights Issue Shares, when issued and fully paid, will rank pari passu in all respects with the Existing Shares, including the right to receive dividends or distributions made, paid or declared after the date of issue of the Rights Issue Shares including the final base dividend and special dividend for the year ended 31 December 2017. For the year ended 31 December 2017 and, in accordance with its existing dividend policy, the Company intends to pay a final dividend of £31.9 million comprising: (i) a final base dividend of £14.0 million, equating to 3.82 pence per share before taking into account the effects of the Rights Issue; and (ii) a special dividend of £17.9 million equivalent to 6.2% of total realisations in 2017 of £289 million, equating to 4.88 pence per share before taking into account the effects of the Rights Issue. The total final base dividend of £14.0 million will be increased to include the Rights Issue Shares issued pursuant to the Rights Issue, while the Special dividend of £17.9 million will be paid over the Existing Shares and the Rights Issue Shares issued pursuant to the Rights Issue. The record date for the final dividend will be 20 April 2018, with the final dividend to be paid on 18 May 2018.
114 Shareholders will be given the opportunity to vote on the Company’s proposed final dividend for the year ended 31 December 2017 at the Company’s next annual general meeting on 10 May 2018.
12. Information Technology In addition to the standard applications within the Microsoft Productivity Suite (Word, Outlook, Excel and Powerpoint), John Laing’s principal business applications are Agresso (general accounting system), CCH (accounts production), TracePay (Human Resources), SharePoint (document / record management, Intranet and internal and external collaboration sites), Profund and Aviary (pensions) and Blueprint (company secretarial). Consistent with industry practice, substantial use is made of Excel, for example, for financial modelling and managing bidding activities and costs. Outlook/Exchange and SharePoint have recently been migrated from on-premises (supplier data centre) to Microsoft Office365. Agresso, TracePay and Blueprint are Cloud-based applications. Service configurations are highly resilient and have backup facilities with a short return to operation timeframe. The Agresso financial management system has been in use since 2011 and was upgraded and migrated to the Cloud with effect from January 2014. The Group uses Agresso for financial management across the Group. The Group currently outsources its IT requirements to a third party, Timico, which (including in its previous form Wirebird) has been the Group’s outsourced IT provider since 2011. The Group is currently conducting a request for proposal and selection process for the appointment of a supplier, under a new contract, to manage the future provision of its IT infrastructure and support requirements across its various international locations. The new contract is expected to start in March or April 2018. Transitional services will be provided to ensure an orderly transfer to the new arrangements.
13. Environment The Group aspires to reduce the impact on the environment of the infrastructure projects in which it invests, for example, in terms of greenhouse gas emissions and the volume of waste going to landfill. Environmental considerations play an important part in any PPP procurement, ongoing construction and operations and are a central feature of the planning approvals granted for renewable energy projects. John Laing’s objective to reduce the volume of waste it and its end-users produce is embedded within the culture of the business, from top management to staff. Where possible, the Group aims to educate end-users by raising awareness of the negative environmental impact waste has and of the small changes that can be made to lessen the volume of materials sent to landfill. For example, the majority of the Group’s office accommodation is fitted with energy efficient technology. Through its investments in renewable energy projects, John Laing is contributing to reduced CO2 emissions.
14. Health and Safety John Laing believes that proper attention to the health and safety of its employees, subcontractors, and the community within which the Group operates is a key element of effective business management and sees health and safety as an important measure of business performance and essential to its reputation. The Group is committed to ensuring the health, safety and welfare of all its employees and all other persons who may be affected by its direct activities, or those under its control. The projects in which the Group invests each have their own health and safety policy.
15. Insurance John Laing has used Jardine Lloyd Thompson Group plc as its broker for Group insurance cover (excluding the Project Companies) since 2003. Group insurance is purchased on a worldwide basis wherever possible and covers, inter alia, employers’ liability, public and product liability, professional indemnity, directors’ and officers’ liability, crime and material damage and terrorism. Where worldwide cover is not available local overseas policies are used. The Group policies are tendered at least every three years and the insurer may differ by policy. Levels of cover for each policy are reviewed each year. Insurance at the project level is the responsibility of each Project Company, and the scope of coverage is often stipulated by the respective project and credit agreements. With respect to certain of the Project Companies, John Laing together with Aon UK (as insurance broker) has created “insurance portfolios” to benefit from the bulk buying of insurance cover for projects in which John Laing, JLIF or JLEN has an investment interest. The costs of such insurance coverage are paid for by the relevant Project Companies and are included in the
115 financial models for the relevant projects. Such insurance portfolios do not provide construction phase insurance, which is always arranged by a Project Company as a condition of reaching financial close. For other Project Companies (where John Laing is not the arranger of cover), required insurance policies are arranged by other means (for example, directly by the Project Company or via other investor insurance portfolios) and are not included within the John Laing insurance portfolios.
16. Corporate Social Responsibility The Group works closely with its employees and strategic charitable partners to deliver its community investment agenda and participates in several community-based welfare schemes. The John Laing Charitable Trust (“JLCT”) supports the work of welfare visitors who look after the needs of certain of the Group’s former employees and their surviving partners. Its trustees set aside funds each year to provide financial help and assistance to current and former employees. JLCT also provides employees, through its “Make a Difference” and “Matched Giving” schemes, opportunities to make donations to support charitable organisations and good causes.
17. Employees The following table details the numbers of the Group’s employees by division as at 31 December 2017, 2016 and 2015:
As at 31 December Employees by division 2017 2016 2015 Primary Investment ...... 46 46 52 Asset Management (excluding JLCM)(1) ...... 50 59 160 JLCM ...... 27 14 12 Central(2) ...... 35 41 41 Total ...... 158 160 252
(1) The Asset Management division provides investment management services to both JLIF and JLEN and also to the Group’s own investments. The division also provides project management services under Management Services Agreements (MSAs) to project companies in which the Group, JLIF or JLEN are investors.
(2) The staff in Central cover a variety of Group support functions and include, inter alia, Board, Legal, Company Secretarial, Compliance, Finance, Treasury, Tax, Internal Audit, HR and IT. The number of employees in the JLCM division has increased during the period under review due to the internal transfer of Asset Management employees to JLCM, as well as in response to the growth of the JLIF and JLEN funds. The decreased headcount in the Asset Management division since 31 December 2015 was primarily as a result of the sale of the Group’s project management services activities in the United Kingdom in November 2016. None of the Group’s employees is covered by a collective bargaining agreement or represented by a labour organisation. The Group considers its relations with its employees to be good.
116 PART 10 Directors, Senior Managers and Corporate Governance Directors The following table lists the names, ages and positions of the Directors.
Name Age Position Phil Nolan** ...... 64 Non-Executive Chairman Will Samuel** ...... 66 Non-Executive Chairman Designate Olivier Brousse* ...... 53 Chief Executive Officer Patrick O’Donnell Bourke* ...... 60 Group Finance Director David Rough** ...... 67 Senior Independent Director Jeremy Beeton** ...... 64 Independent Non-Executive Director Toby Hiscock** ...... 58 Independent Non-Executive Director Anne Wade** ...... 45 Independent Non-Executive Director
* Executive Directors ** Non-Executive Directors
Phil Nolan (Non-Executive Chairman) Phil has been Chairman since joining John Laing in January 2010. He has a wealth of experience on the boards of many companies, private and public and in both an executive and non-executive capacity. He is also non-executive Chairman of Associated British Ports Holding Limited. He previously served as non-executive Chairman of Affinity Water Limited, Chairman of Ulster Bank Ireland Limited and non-executive director of Providence Resources Plc and EnQuest PLC. He was Chairman of Infinis, a then privately held, leading renewable energy generator between 2007 and 2010, Chairman of Sepura plc, a listed, global supplier of TETRA radios between 2007 and 2010 and CEO of Eircom, Ireland’s national telecommunications supplier from 2002 to 2006. Prior to that, he served as an Executive Director of BG Group plc and CEO of Transco plc from 1998 and in 2000, led the demerger of Transco as CEO of the Lattice Group.
Will Samuel (Non-Executive Chairman Designate) Will joined John Laing in December 2017 as a non-executive director and Chairman Designate. Will is also Chairman of Tilney Group Limited. Prior to this he was Chairman of TSB Bank plc, which he took through its initial public offering after its de-merger from Lloyds Bank plc, Chairman of Howdens Joinery Group, Chairman of Ecclesiastical Insurance Group plc, Chairman of H P Bulmer plc, Deputy Chairman of Inchcape plc, Senior Advisor to Lazard & Co Ltd and Senior Advisor to the Prudential Regulation Authority (formerly the Financial Services Authority), a director of Schroders plc, Co-Chief Executive Officer at Schroder Salomon Smith Barney (a division of Citigroup Inc), a non-executive director of the Edinburgh Investment Trust plc and a Trustee and Honorary Treasurer of International Alert. Will is a Fellow of the Institute of Chartered Accountants in England and Wales and has a First Class Honours Degree in Chemistry from Durham University and a Degree in Mathematics from the Open University.
Olivier Brousse (Chief Executive Officer) Olivier joined John Laing in March 2014 as Chief Executive Officer. Following his graduation from École Polytechnique and École Nationale des Ponts et Chaussées in France, he became Commercial Director of Unic Systems and then Chief of Staff to the Chairman and CEO of Compagnie Générale des Eaux in 1994, both in France. In 1998, he moved to London as CEO of Connex Trains after which he moved to Washington, DC in 2003 as CEO of Veolia Transportation Inc. Olivier came back to France in 2007 as Deputy CEO of Veolia Transport Group, responsible for French and US businesses. From 2008 to 2014, he served as CEO and then Executive Chairman of Saur SA in France. In 2016, he was awarded the Légion d’Honneur by the French President François Hollande.
Patrick O’Donnell Bourke (Group Finance Director) Patrick joined John Laing in 2011 as Group Finance Director. He graduated from Cambridge University and qualified as a chartered accountant with Peat Marwick (now KPMG) before spending nine years in investment banking first with Hill Samuel and then with Barclays de Zoete Wedd. In 1995, he joined Powergen plc where he was responsible for mergers and acquisitions before becoming Group Treasurer. From 2000 to 2006, he was Group Finance Director of Viridian Group PLC, the Northern Ireland based energy group, becoming Group
117 Chief Executive in 2007 after Viridian was taken private. He joined the Board of Affinity Water Limited in 2013 as a non-executive director.
David Rough (Senior Independent Director) David joined John Laing in December 2014 as a non-executive director. He has spent his life working in the financial services sector predominantly in the investment management business. He joined Legal and General in 1988 and was made head of securities in 1989. In 1991, David was appointed to the group board as Group Director (Investments) responsible for the group’s investment operations. He retired from the business in 2002. During that time he also served as chairman of the Association of British Insurers’ Investment Committee. David has been a non-executive and senior independent director on a number of boards, including Land Securities, London Metal Exchange, Friends Provident and Xstrata. Since 2003, David has been a non-executive director of Brown Shipley, a wealth management business. He was appointed as a non-executive director of Hansteen Holdings plc in October 2015.
Jeremy Beeton (Independent Non-Executive Director) Jeremy joined John Laing in December 2014 as a non-executive director. He is a Fellow of the Institution of Civil Engineers with 40 years of international experience in project and programme management over very large multi-site, multiple project operations portfolios for and within government, public companies and private companies. He is also currently an independent non-executive director of SSE plc, an independent non-executive director of WYG plc, an Advisory Board member of PricewaterhouseCoopers LLP and Chairman of Merseylink Ltd. He has also been appointed as an independent non-executive director of OPG Power Ventures Plc. Additionally, Jeremy sits on the governing Court of Strathclyde University. He was Director General of the London 2012 Olympic and Paralympic Games from 2007 until the Olympic Baton was passed on to Rio de Janeiro in 2012. For eight years prior to this, he was a Principal Vice President with Bechtel, responsible for their worldwide civil operations and has lived and worked extensively in the Middle East and Asia Pacific. He was awarded CB in the 2013 New Year Honours and holds an honorary Doctorate of Engineering from Napier University.
Toby Hiscock (Independent Non-Executive Director) Toby joined John Laing in June 2009 as a non-executive director. He is a Fellow of the Institute of Chartered Accountants in England & Wales with 36 years’ experience as a finance professional. He was the Chief Financial Officer and an Executive Director of Henderson Group plc from 2003 until his retirement in 2009, and was responsible for all aspects of financial stewardship of the Henderson Group. Before Henderson, he was a senior manager at Midland Bank Group in London and from 1981 to 1988 worked for Binder Hamlyn, Chartered Accountants after graduating from Oxford University. Toby is also a non-executive director of and consultant to a number of other public and private institutions.
Anne Wade (Independent Non-Executive Director) Anne joined John Laing in December 2014 as a non-executive director. An asset manager by background, Anne has extensive experience in capital markets. From 1995 to 2012, she was Senior Vice President and Director of Capital International. Throughout her 17 year career with Capital, she was responsible for infrastructure-related investments. Anne is a Director and member of the Audit Committee of Summit Materials Inc in the US, of the Heron Foundation in New York, and of Big Society Capital in London. She is also a partner with Leader’s Quest. Anne was previously a non-executive director and member of the Governance and Strategy Committee of Holcim, based in Switzerland. Anne has a BA from Harvard and an MSc from the London School of Economics.
118 Senior Managers The Company’s current senior management team, in addition to the Executive Directors listed above, is as follows:
Name Age Position Carolyn Cattermole ...... 57 Group General Counsel and Company Secretary Chris Waples ...... 59 Group Managing Director, International Projects Justin Bailey ...... 44 Regional Managing Director, Asia Pacific Ross McArthur ...... 46 Regional Managing Director, Europe Anthony Phillips ...... 43 Regional Managing Director, North America Romina Dawson-Hall ...... 44 Group Human Resources Director Mark Westbrook ...... 49 Chief Risk Officer
Carolyn Cattermole (Group General Counsel and Company Secretary) Carolyn joined John Laing in September 2012 as Group General Counsel and Company Secretary. Her previous roles were General Counsel and Company Secretary of DS Smith Plc, the international supplier of recycled packaging, for ten years, and Company Secretary of Courtaulds Textiles plc for three years. Prior to that, she was a senior legal adviser with Courtaulds plc, having qualified as a solicitor with Norton Rose.
Chris Waples (Group Managing Director—International Projects) Chris joined John Laing in 2007. He is responsible for the Group’s large divestments, complex project delivery and information technology. Chris represents John Laing around the world, with particular focus in exploring and understanding new countries and asset classes. He is a trustee of the John Laing Charitable Trust. Chris formerly held senior management positions with Amey plc, Scottish Power plc and Blue Circle plc.
Justin Bailey (Regional Managing Director, Asia Pacific) Justin joined John Laing in 2011 when the Group first established an investment team in the region and in 2014 took over responsibility for the Group’s primary investment activities. In January 2018, Justin was appointed Regional Managing Director, Asia Pacific and is responsible for all the Group’s activities in the region. Justin is an infrastructure development professional with 18 years’ experience in infrastructure investment. Prior to joining John Laing, Justin held senior positions with ABN AMRO, Babcock & Brown and KPMG Corporate Finance focussed on the infrastructure sector. Justin graduated with Bachelor of Commerce (Hons in Finance) from the University of Melbourne.
Ross McArthur (Regional Managing Director, Europe) Ross joined John Laing in 2007. He is responsible for the Group’s activities across Europe having previously lead John Laing’s entry into the renewable energy sector. Ross has been involved in infrastructure projects throughout his career and as a sponsor and equity investor for over 10 years, working across the social, economic and energy sectors. He is a Chartered Engineer, Member of the Institution of Civil Engineers and a graduate of Edinburgh University.
Anthony Phillips (Regional Managing Director, North America) Anthony is responsible for the Group’s activities in North America. Anthony has over 15 years’ experience in Infrastructure Investment in North America, Europe and Asia Pacific. Anthony joined John Laing in 2005 and during this time has been based in London and Sydney where he successfully led John Laing’s entry into the Australia and New Zealand PPP markets before to relocating to the USA in 2014. Prior to joining John Laing, Anthony qualified as a Chartered Certified Accountant and gained 8 years’ experience with KPMG and Grant Thornton. Anthony is on the board of the Association for the Improvement of American Infrastructure.
Romina Dawson-Hall (Group Human Resources Director) Romina joined John Laing in January 2016 as Group Human Resources Director. She is responsible for the creation and delivery of John Laing’s Global HR strategy as well as day to day accountability of the HR function across Europe, North America and Asia Pacific. Romina’s background is in financial services, working for such institutions as HSBC, Millennium Capital Management, Lombard Odier Asset Management and Davidson Kempner. She has lived and worked in Geneva, London and New York and has an MSc from Cranfield School of Management in International Human Resources Management.
119 Mark Westbrook (Chief Risk Officer) Mark joined John Laing in April 2007 and was appointed Chief Risk Officer in 2018. He was previously a Managing Director in the Group’s Primary Investment business. He has served on the Group Investment Committee since 2015. Mark previously worked for international contractors in the design, construction, financing and maintenance of infrastructure projects including ALSTOM (10-years) and United Group (4-years). Mark holds Bachelor of Engineer and Bachelor of Science degrees (UNSW), a Master of Commerce (UNSW) and a Masters of Applied Finance (Macquarie University). He is a Senior Certified Finance and Treasury Professional (FTA) and a member of Engineers Australia.
Corporate governance UK Corporate Governance Code The Board is committed to the highest standards of corporate governance. The Company is currently in compliance with the UK Corporate Governance Code (the “Governance Code”) published in September 2014 by the Financial Reporting Council. As envisaged by the Governance Code, the Board has established an audit & risk committee, a nomination committee and a remuneration committee and has also established a separate market disclosure committee. If the need should arise, the Board may set up additional committees as appropriate. The Governance Code recommends that, in the case of a FTSE 350 company, at least half the board of directors, excluding the chair, should comprise non-executive directors determined by the board to be independent in character and judgement and free from relationships or circumstances which may affect, or could appear to affect, the director’s judgement. The Board considers that the Company complies with the requirements of the Governance Code in this respect.
Audit & risk committee The audit & risk committee’s role is to assist the Board with the discharge of its responsibilities in relation to financial reporting, including reviewing the Group’s annual and half year financial statements and accounting policies, internal and external audits and controls, reviewing and monitoring the scope of the annual audit and the extent of the non-audit work undertaken by external auditors, advising on the appointment of external auditors and reviewing the effectiveness of the internal audit, internal controls, whistleblowing and fraud systems in place within the Group. The audit & risk committee normally meets not less than four times a year. The audit & risk committee is chaired by Toby Hiscock and its other members are David Rough and Jeremy Beeton. The Governance Code recommends that all members of the audit & risk committee be non-executive directors, independent in character and judgment and free from any relationship or circumstance which may, could or would be likely to, or appear to, affect their judgement and that one such member has recent and relevant financial experience. The Board considers that the Company complies with the requirements of the Governance Code in this respect. Nomination committee The nomination committee assists the Board in reviewing the structure, size and composition of the Board. It is also responsible for reviewing succession plans for the Directors, including the Chairman and Chief Executive Officer and other senior executives. The nomination committee normally meets twice a year. The nomination committee is chaired by Phil Nolan and its other members are Anne Wade, David Rough, Jeremy Beeton and Toby Hiscock. The Governance Code recommends that a majority of the nomination committee be non-executive directors, independent in character and judgement and free from any relationship or circumstance which may, could or would be likely to, or appear to, affect their judgement. The Board considers that the Company complies with the requirements of the Governance Code in this respect.
Remuneration committee The remuneration committee recommends the Group’s policy on executive remuneration, determines the levels of remuneration for Executive Directors and the Chairman and other senior executives and prepares an annual remuneration report for approval by the Shareholders at the annual general meeting. The remuneration committee will normally meet not less than three times a year. The remuneration committee is chaired by Anne Wade and its other members are Jeremy Beeton, Toby Hiscock and David Rough. The Governance Code recommends that all members of the remuneration committee be non-executive directors, independent in character and judgement and free from any relationship or circumstance
120 which may, could or would be likely to, or appear to, affect their judgement. The Board considers that the Group complies with the requirements of the Governance Code in this respect.
Investment committee The purpose of the investment committee is to make recommendations to the Board, or to approve proposals within its delegated authority, in relation to the Group’s investments in infrastructure projects. The investment committee also reviews the Group’s portfolio valuation process and monitors the balance of risk across the portfolio. The activities, recommendations and approvals of the investment committee are reported to the Board. The investment committee’s delegated authorities are reviewed annually by the Board and are currently set at £30 million for PPP investments and £30 million for renewable energy investments (including biomass). Members of the investment committee are appointed by the Board and comprise the Executive Directors, the Group Managing Director—International Projects, the Company Secretary (or the Group Head of Legal as alternate), the Chief Risk Officer and up to five other persons as the Chief Executive Officer shall nominate from time to time. The investment committee is currently chaired by the Chief Executive Officer and usually meets at least fortnightly.
Divestment committee During 2017 the Company established a divestment committee. The purpose of the divestment committee is to provide oversight and recommendations on all proposed disposals. Establishing the divestment committee recognises the importance of disposals in the Group’s business model. The divestment committee generally meets once per month, with other meetings scheduled as necessary. The divestment committee comprises the Executive Directors, the Group Managing Director—International Projects, the Company Secretary, the Chief Risk Officer and up to three other senior managers. The divestment committee is currently chaired by the Group Finance Director.
Management risk committee The management risk committee’s role is to assist the audit & risk committee in monitoring financial, legal and regulatory risk, by reviewing the internal control and risk policy management systems of the Group and to assist the audit & risk committee and the Board in monitoring the Group’s risk management policy. The management risk committee normally meets six times per year. Members of the management risk committee comprise at least three members of the senior management team, including the Group Finance Director. The management risk committee is currently chaired by the Chief Risk Officer. Share dealing code The Company has adopted a code of securities dealings in relation to its Shares which is based on the requirements of the Market Abuse Regulation. The code adopted applies to the Directors and all employees of the Group.
Conflicts of interest There are no potential conflicts of interest between any duties owed by the Directors or Senior Managers to the Company and their private interests or other duties.
121 PART 11 Selected Financial Information The selected financial information set out below shows the Group’s audited historical consolidated financial information as at and for the years ended 31 December 2017, 2016 and 2015. The selected Group income statement, Group balance sheet and Group cash flow statement data set forth below has been extracted without material adjustment from, and should be read in conjunction with, the Group’s consolidated financial information incorporated by reference in this Prospectus (See Part 14 (Information Incorporated by Reference)). In its financial statements for the years ended 31 December 2015 and 2016, the Group presented certain pro forma financial information in respect of its results of operations for the year ended 31 December 2015 and as at 31 December 2014 on the basis that the restructuring associated with the Company’s admission to listing in February 2015 had been in place throughout the year ending 31 December 2014 and as at 31 December 2014 and throughout the year ending 31 December 2015. Accordingly, where indicated with the caption “pro forma”, the consolidated financial information for the Group for the year ended 31 December 2015 has been extracted from the “pro forma” presentation included in the Group income statement, the Group balance sheet and Group cash flow statement included in its 2015 Annual Report and Accounts, which are incorporated by reference in this Prospectus. This “pro forma” information should be considered as non-IFRS financial information. This presentation is not, and is not intended to constitute, “pro forma” financial information within the meaning of Rule 2.3.1 of the Prospectus Rules or within the meaning of Article 11 of Regulation S-X under the US federal securities laws. The Company meets the definition of an investment entity as set out in IFRS 10 Consolidated Financial Statements. Investment entities are required to account for all investments, including subsidiaries, associates and joint ventures, at fair value through profit or loss, except for those subsidiaries that provide services that relate to the investment entity’s investment activities. Such subsidiaries are consolidated, rather than recorded at fair value through profit or loss. Project Companies in which the Group invests are described as “non-recourse”, which means that providers of debt to such Project Companies do not have recourse to John Laing beyond its equity commitments in the underlying projects. Subsidiaries through which the Company holds its investments in Project Companies, which are held at FVTPL, and subsidiaries that are Service Companies, which are consolidated, are described as “recourse”. Transactions and balances receivable or payable between recourse subsidiary entities held at fair value and those that are consolidated are eliminated in the Group financial statements. Transactions and balances between non-recourse project companies held at fair value and recourse entities that are consolidated are not eliminated in the Group financial statements.
122 Group income statement
Year ended 31 December 2017 2016 2015 (audited) (statutory) (pro forma) (statutory) (£ millions) Continuing operations Net gain on investments at fair value through profit or loss . . . . . 166.3 218.8 133.1 129.7 Other income ...... 30.4 42.0 34.5 31.5 Operating income ...... 196.7 260.8 167.6 161.2 Cost of sales ...... — — (0.1) (0.1) Gross profit ...... 196.7 260.8 167.5 161.1 Administrative expenses ...... (58.9) (58.4) (55.3) (52.3) Profit from operations ...... 137.8 202.4 112.2 108.8 Finance costs ...... (11.8) (10.3) (11.3) (11.3) Profit before tax ...... 126.0 192.1 100.9 97.5 Tax credit/(charge) ...... 1.5 (1.8) (2.1) (2.1) Profit from continuing operations ...... 127.5 190.3 98.8 95.4 Discontinued operations Profit from discontinued operations (after tax) ...... — — 5.7 5.7 Profit for the year attributable to the Shareholders of the Company ...... 127.5 190.3 104.5 101.1
123 Group balance sheet
As at 31 December 2017 2016 2015 (audited) Non-current assets Intangible assets ...... — — 0.2 Plant and equipment ...... 0.1 0.3 1.0 Investments at fair value through profit or loss ...... 1,346.4 1,257.5 965.3 Deferred tax assets ...... 0.5 1.0 1.4 1,347.0 1,258.8 967.9 Current assets Trade and other receivables ...... 7.6 7.4 8.3 Cash and cash equivalents ...... 2.5 1.6 1.1 10.1 9.0 9.4 Total assets ...... 1,357.1 1,267.8 977.3 Current liabilities Current tax liabilities ...... (1.4) (4.1) (2.7) Borrowings ...... (173.2) (161.4) (14.9) Trade and other payables ...... (17.3) (14.7) (19.6) (191.9) (180.2) (37.2) Liabilities directly associated with assets classified as held for sale ...... — — (4.2) Net current liabilities ...... (181.8) (171.2) (32.0) Non-current liabilities Retirement benefit obligations ...... (40.3) (69.3) (46.2) Provisions ...... (1.0) (1.5) (0.1) (41.3) (70.8) (46.3) Total liabilities ...... (233.2) (251.0) (87.7) Net assets ...... 1,123.9 1,016.8 889.6 Equity Share capital ...... 36.7 36.7 36.7 Share premium ...... 218.0 218.0 218.0 Other reserves ...... 5.9 2.7 0.7 Retained earnings ...... 863.3 759.4 634.2 Equity attributable to the Shareholders of the Company ...... 1,123.9 1,016.8 889.6
124 Group cash flow statement
Year ended 31 December 2017 2016 2015 (audited) (statutory) (pro forma) (statutory) (£ millions) Net cash outflow from operating activities ...... (47.3) (37.1) (70.5) (70.5) Investing activities Net cash transferred from/(to) investments held at fair value through profit or loss ...... 77.4 (73.4) (54.0) (54.0) Cash acquired on acquisition of subsidiaries ...... — — — 2.2 Purchase of plant and equipment ...... (0.1) (0.1) (0.6) (0.6) Net cash (used in)/from investing activities ...... 77.3 (73.5) (54.6) (52.4) Financing activities Dividends paid ...... (30.1) (26.2) (5.9) (5.9) Finance costs paid ...... (10.0) (8.9) (13.7) (13.7) Proceeds from borrowings ...... 11.0 165.0 50.0 50.0 Repayment of borrowings ...... — (19.0) (31.0) (31.0) Net proceeds on issue of share capital ...... — — 124.7 124.7 Net cash (used in)/from financing activities ...... (29.1) 110.9 124.1 124.1 Net increase/(decrease) in cash and cash equivalents ...... 0.9 0.3 (1.0) 1.2 Cash and cash equivalents at beginning of the period ...... 1.6 1.1 2.2 — Effect of foreign exchange rate changes ...... — 0.2 (0.1) (0.1) Cash and cash equivalents at end of period ...... 2.5 1.6 1.1 1.1
125 PART 12 Operating and Financial Review This Part 12 (Operating and Financial Review) should be read in conjunction with Part 3 (Presentation of Financial and Other Information), Part 8 (Industry Overview), Part 9 (Business Description) and with the information incorporated by reference into this Prospectus as described in Part 14 (Information Incorporated by Reference). Prospective investors should read the entire document and not just rely on the summary set out below. The financial information considered in this Part 12 (Operating and Financial Review) is extracted from the financial information incorporated by reference as described in Part 14 (Information Incorporated by Reference). The following discussion of the Company’s results of operations and financial conditions contains forward looking statements. The Company’s actual results could differ materially from those that it discusses in these forward looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Prospectus, particularly under Part 2 (Risk Factors) and Part 3 (Presentation of Financial and Other Information—Forward Looking Statements). In addition, certain industry issues also affect the Company’s results of operations and are described in Part 8 (Industry Overview). In its financial statements for the years ended 31 December 2015 and 2016, the Group presented certain pro forma financial information in respect of its results of operations for the year ended 31 December 2015 and as at 31 December 2014 on the basis that the restructuring associated with the Company’s admission to listing in February 2015 had been in place throughout the year ending 31 December 2014 and as at 31 December 2014 and throughout the year ending 31 December 2015. Accordingly, where indicated with the caption “pro forma”, the consolidated financial information for the Group for the year ended 31 December 2015 has been extracted from the “pro forma” presentation included in the Group income statement, the Group balance sheet and the Group cash flow statement included in its 2015 Annual Report and Accounts, which are incorporated by reference in this Prospectus. This “pro forma” information should be considered as non-IFRS financial information. This presentation is not, and is not intended to constitute, “pro forma” financial information within the meaning of Rule 2.3.1 of the Prospectus Rules or within the meaning of Article 11 of Regulation S-X under the US federal securities laws. In the presentation below, the Group principally assesses the Group’s results of operations as reflected by the “pro forma” presentation included in the Group’s 2015 Annual Report and Accounts in order to improve the comparability of the periods indicated. The Company meets the definition of an investment entity as set out in IFRS 10 Consolidated Financial Statements. Investment entities are required to account for all investments, including subsidiaries, associates and joint ventures, at fair value through profit or loss, except for those subsidiaries that provide services that relate to the investment entity’s investment activities. Such subsidiaries are consolidated, rather than recorded at fair value through profit and loss. Project Companies in which the Group invests are described as “non-recourse”, which means that providers of debt to such Project Companies do not have recourse to John Laing beyond its equity commitments in the underlying projects. Subsidiaries through which the Company holds its investments in Project Companies, which are held at FVTPL, and subsidiaries that are Service Companies, which are consolidated, are described as “recourse”. Transactions and balances receivable or payable between recourse entities held at fair value and those which are consolidated are eliminated in the Group Financial statements.
1. Overview John Laing is an originator, active investor and manager of international infrastructure projects. As at (1) 31 December 2017, the book value of its investment portfolio (“Portfolio Value”) was £1,193.8 million (Gross Value: £1,529.2 million) and the Group managed £1,648.5 million of External AUM. John Laing’s business is focused on major transport, social and environmental infrastructure projects awarded under governmental public-private partnership (“PPP”) programmes, and renewable energy projects, across a range of international markets including Asia Pacific, North America (the United States and Canada) and Europe, including the United Kingdom. The Group originates and invests in greenfield infrastructure, and then actively manages its investments in projects through their construction phase. Once operational, the Group either continues to hold and actively manage its interests over the lifetime of the projects (usually up to
(1) The Portfolio Value is included within the “investments at fair value through profit or loss” line item in the Group balance sheet (£1,346.4 million in total as at 31 December 2017, including the value of other assets and liabilities in recourse subsidiaries held at FVTPL of £152.6 million).
126 30 years) or sells its interests in the projects to secondary market investors (in which case, the Group may retain an asset management role). As at 31 December 2017, the Group had a large, diversified investment portfolio comprising interests in 41 infrastructure projects, comprising £580.3 million of investments in projects in the construction phase and £603.2 million in the operational phase, together with a 2.5 per cent. shareholding in JLEN valued at £10.3 million. The Group has committed investments to more than 130 projects, thereby establishing itself as a leading name in its core international markets and chosen sectors. John Laing’s business, which integrates origination, investment and asset management capabilities, is organised across three key areas of activity: • Primary investments: John Laing’s primary investment activities involve sourcing and originating, bidding for and winning greenfield infrastructure projects, typically as part of a consortium in the case of PPP projects. The Group classifies its interests in projects which are in the construction phase as its “primary investment portfolio”. • Secondary investments: John Laing’s secondary investment activities involve ownership of a substantial portfolio of interests in operational PPP and renewable energy projects. The Group classifies its investments in operational projects as its “secondary investment portfolio”. Almost all of the Group’s secondary investments were previously part of John Laing’s primary investment portfolio. • Asset management: The Group actively manages its own primary and secondary investment portfolios and provides investment advice and asset management services to two external listed funds (JLIF and JLEN) through its wholly owned and FCA-regulated subsidiary, JLCM. As at 31 December 2017, JLCM’s External AUM were £1,648.5 million. One of the key characteristics of the Group’s investments is the relative predictability of their cash flows given the structure of PPP contracts (typically, a Project Company’s revenue is from a Governmental Entity based on the availability for use, or level of use, of the project’s infrastructure asset) and the revenue regime of renewable energy projects (backed by government support mechanisms). As at 31 December 2017, approximately 59 per cent. of the portfolio valuation of £1,193.8 million was attributable to investments in projects with availability-based cash flows. John Laing aims to deliver predictable returns and to actively manage and reduce risk across its primary and secondary portfolios.
2. Key performance indicators 2.1 Net asset value (“NAV”) The Group’s NAV represents the net assets of the Group as reported in the Group’s Annual Report and Accounts incorporated by reference into this Prospectus.
2.2 Investment portfolio valuation The Group’s investment portfolio is made up of primary and secondary investments. As described above, the Group’s primary investment portfolio comprises investments in PPP and renewable energy assets which have yet to reach the end of construction. The Group’s secondary investment portfolio comprises investments in operational PPP and renewable energy assets, most of which were originated as primary investments by John Laing. During the year ended 31 December 2017, seven new investments were added to the Group’s primary investment portfolio, 14 investments transferred to the Group’s secondary investment portfolio as the underlying projects moved into the operational phase and eight investments were sold in full from the Group’s secondary portfolio.
127 The split between the Group’s primary and secondary investments and the reconciliation between the Portfolio Value and Gross Value is shown in the table below:
As at 31 December 2017 Cash collateral / Portfolio LCs Gross Value outstanding(2) Value (unaudited) (£ millions) Primary investments ...... 580.3 335.4 915.7 Secondary investments ...... 613.5 — 613.5 Total portfolio(1) ...... 1,193.8 335.4 1,529.2
Notes: (1) The cash flows on which the discounted cash flow valuation was based were those projected, as at 31 December 2017, to be distributable to the Group over the remaining life of the investments, derived from detailed project financial models. These incorporate assumptions reflecting the Group’s expectations of future performance, including value enhancements. (2) For PPP investments, at the point of financial close, John Laing typically posts collateral for its future equity commitments in the form of a bank-issued letter of credit (“LC”) or in the form of cash collateral. LCs outstanding are off-balance sheet obligations, with the value associated with future investment commitments attaching to those LCs likewise not being recognised in the Portfolio Value of the Group’s portfolio but rather recognised in the Gross Value of the Group’s portfolio. The Portfolio Value as shown above represents the Group’s investments in projects and listed shares of JLEN and does not include future investment commitments to projects secured by LCs or cash collateral. Where a commitment to a future investment is backed by a letter of credit (“LC”), the obligation is an off-balance sheet obligation, but where such commitment is funded through cash collateral, this cash is recognised as a Group asset (within the line item “investments at fair value through profit or loss” in the Group balance sheet in the Historical Financial Information). The Gross Value of the portfolio includes the value of both these LCs and cash collateral; while this measure is not in accordance with IFRS (unlike Portfolio Value which is an IFRS measure), the Directors believe that it is helpful in understanding the underlying value of the Group’s portfolio. The table below shows the bridge from the Portfolio Value to the Gross Value of the portfolio as at 31 December 2017, 2016 and 2015.
As at 31 December 2017 2016 2015 (£ millions) Portfolio Value ...... 1,194 1,176 841 Cash collateral ...... 133 24 124 LCs outstanding ...... 202 163 154 Gross Value of the portfolio ...... 1,529 1,362 1,119
A full valuation of the investment portfolio is prepared every six months at 30 June and 31 December, with a review at 31 March and 30 September. On each full valuation, the Directors have obtained an independent opinion from a third party with considerable expertise in valuing the type of investments held by the Group, that the investment portfolio valuation represented a fair market value in the prevailing market conditions. Valuations are principally based on a discounted cash flow (“DCF”) methodology, with the objective being to establish a fair value for each investment in the portfolio assuming that forecast project cash flows are received until maturity of the underlying asset. DCF valuation methodology is widely recognised by the broader infrastructure market. John Laing’s valuation methodology is also informed by the Group’s ongoing divestment programme which provides regular benchmark data. Other sources of data include information provided by independent valuation advisers and as disclosed by listed secondary funds. The Group maintains detailed cash flow models for each asset in the portfolio, allowing continuous monitoring of current valuations. These models form the basis for the Group’s regular revaluation of the portfolio as part of its financial reporting procedures. Typically, cash flow models are built by third party professional firms initially during the bidding phase of the project (the “financial close model”). Then, early during the operational phase of the project, the financial close model may be amended or rebuilt either to reflect material contract changes or to make it more functional for reporting purposes (the “operational model”). This often involves a simplification of the financial model as detailed construction phase calculations are no longer required and can be replaced with actual historic data.
128 For PPP assets, both the financial close model and any operational model will be the subject of an independent review before being accepted by the Project Company and senior debt providers for project purposes. In updating cash flow forecasts for investments, the Group aims to incorporate up to date economic assumptions (for example, in relation to inflation rates and interest rates) as well as project specific assumptions (such as the forecast construction completion date or up to date forecasts for insurance premia). Under the Group’s methodology, a base case discount rate for an operational project is derived from secondary market information and other available data points. The base case discount rate is then adjusted to reflect additional project specific risks. In addition, risk premia are added to reflect the additional risk during the construction phase. The risk premium under the Group’s valuation methodology added for construction risk is typically reduced over time on a linear basis as a project progresses through its construction programme such that, by the time it reaches the operational phase, the construction risk premium has been removed. An immediate valuation uplift will typically be recorded at financial close resulting from the application of a valuation discount rate that is lower than the HTM IRR. Support for such an immediate premium has been evidenced by payments made by investors on occasions when John Laing has sold down interests in new investments shortly after financial close, although sales at this stage of a project’s life are far less frequent than when projects become operational. For the 31 December 2017 valuation, the overall weighted average discount rate was 8.8 per cent., comprising a weighted average discount rate of 9.3 per cent. for the primary investment portfolio and a weighted average discount rate of 7.9 per cent. for the secondary investment portfolio. The range of valuation discount rates reflects both project specific risks and also, for primary investments, the progress of construction. For PPP projects in the construction stage, the discount rates applied by the Group, as at 31 December 2017, ranged from 7.6 per cent. to 11.8 per cent.; in the operations stage, the discount rates applied by the Group ranged from 7.0 per cent. to 9.0 per cent. For renewable energy projects in the construction stage, the discount rates applied by the Group ranged from 8.0 per cent. to 10.2 per cent.; in the operations stage, the discount rates applied by the Group ranged from 6.8 per cent. to 10.0 per cent. By their nature, valuations are uncertain and rely on estimates and assumptions which are subject to risk. See paragraph 1.3 “The valuation of an investment in a project may not reflect its ultimate realisable value” in Part 2 (Risk Factors).
2.3 New investment committments Management is targeting growth in new investment commitments in the near to medium term, underpinned by the international market opportunity for infrastructure development and the Group’s access to a strong pipeline of investment opportunities. Growth in investment commitments will be funded primarily through a combination of cash flow from operations, banking facilities, disposals of the Group’s interests in operational projects to secondary market investors and proceeds of the Rights Issue. For the year ended 31 December 2017, the Group secured new investment commitments of £383 million in respect of seven projects. For the year ended 31 December 2016, the Group secured new investment commitments of £182 million in respect of nine new projects and an additional commitment to two existing investments. For the year ended 31 December 2015, the Group secured new investment commitments of £180 million in respect of eight new projects and additional commitments to two existing investments. Between 31 December 2014 and 31 December 2017, the Group committed over £745 million (across both PPP and renewable energy projects) to 24 new investments and four existing investments. The Group’s PPP pipeline as at 31 December 2017 of £1.6 billion comprised specifically identified projects that were expected to be procured or be available in the near term and includes, inter alia, potential investment commitments where John Laing or a Consortium was either shortlisted or had already been appointed preferred bidder (approximately £216 million). Once the Group or a Consortium has secured a preferred bidder position for a PPP project, it is almost certain that the Group or such Consortium will take such project to financial close. The Group’s renewable energy pipeline at 31 December 2017 of approximately £565 million included approximately £141 million of potential investments commitments where John Laing had secured an exclusive position. The Group’s investment pipeline is impacted by, inter alia: the number of PPP tenders announced by Governmental Entities; the Group’s own strategic decision to bid for certain contracts; the Group’s or a Consortium’s win (or loss) or withdrawal from bidding of contracts; an expansion in the geographies or
129 markets in which the Group considers investing; availability of renewable energy projects; improvements in the visibility of potential bids; and other factors as described further in paragraph 3 “Significant factors affecting the Group’s results of operations” below. As a result, the Group’s investment pipeline as at a specific date may change at any time as opportunities are added or removed for various reasons. Such factors contributed to the increase in the Group’s PPP investment pipeline from approximately £1,067 million as at 31 December 2014 to £1,585 million as at 31 December 2017. Management uses the investment pipeline as an important metric for budgeting the Group’s amount of future investment commitments and corresponding future capital requirements, though this metric is an uncertain indicator of actual bidding activity or future contracts. Accordingly, the investment pipeline may not be indicative of new investments the Group may secure or of the future value of the Group’s investment portfolio. See paragraph 1.6 “The Group’s investment pipeline is not a guarantee of actual bidding activity or future investments” in Part 2 (Risk Factors).
2.4 Divestments As part of its self-funding model, the Group evaluates selling its interests in Project Companies typically once they are in the operational phase (the point at which the project is largely “de-risked”) as disposal proceeds are used to fund new primary investment activity and make returns to shareholders. When investments are sold to JLIF or JLEN, the value of such investments contributes to growth in the value of the respective fund’s portfolio, which in turn increases the Group’s External AUM and thereby increases the Group’s fee income. Between 31 December 2014 and 31 December 2017, the Group made 21 divestments of interests in Project Companies from its investment portfolio, predominantly of investments from within its secondary investment portfolio, for total proceeds of £516 million as well as the sale of part of its shareholding in JLEN in 2016 for £6.4 million. For more information on the Group’s divestments during the period under review, see paragraph 3.5 “Divestments” in this Part 9.
2.5 External AUM The Group managed £1,648.5 million of External AUM as at 31 December 2017 under arm’s length contracts with two separately listed and John Laing branded infrastructure funds (JLIF and JLEN). Fees earned under the Investment Advisory Agreements are calculated as a percentage of the respective fund’s portfolio value at a particular point in time. Additional fee income is also earned from JLIF when JLIF makes acquisitions from third parties rather than from the Group at a percentage of the acquisition value. The table below sets out the Group’s External AUM and External AUM fees related to JLIF and JLEN for the years ended 31 December 2017, 2016 and 2015.
As at and for the year ended 31 December 2017 2016 2015 (£ millions) External AUM (unaudited)(1) ...... 1,649 1,472 1,136 External AUM fees ...... 16.7 15.8 12.0
Note: (1) The External AUM reported by the Company reflects the latest published portfolio values of JLIF and JLEN at the time the Company first reported the External AUM at each reporting end; therefore the External AUM may not reflect the portfolio value of JLIF and JLEN at 31 December in each period. As External AUM increase (or decrease), fee income increases (or decreases) accordingly. For more information on the fee arrangements between the Group and JLIF/JLEN, see paragraph 7.1 “Investment management services” in Part 9 (Business Description). Both JLIF and JLEN are listed on the London Stock Exchange.
2.6 Cash yield from investments The Group receives cash yield from its investments which primarily comprises payments from a Project Company, either in the form of dividends (on capital provided in the form of equity) or debt interest and repayments (in respect of capital provided in the form of a subordinated shareholder loan). Such cash yield is paid by Project Companies to Group subsidiaries which are held at fair value and as a result are not reported in
130 the Group cash flow statement. Instead cash yield appears as a movement between Project Companies and other assets and liabilities in the investments at FVTPL note to the Group Financial Statements (note 12 to the 2017 Group financial statements). For the year ended 31 December 2017, cash yield from investments was £40.2 million, as compared to £34.8 million and £38.9 million for the years ended 31 December 2016 and 2015, respectively.
3. Significant factors affecting the Group’s results of operations 3.1 Fair value movements in the Group’s investment portfolio The primary driver of the Group’s operating income (and accordingly its overall results of operations) is the movement in the fair value of the Group’s investment portfolio. As described in “Investment portfolio valuation” in paragraph 2.2 above, the value of the Group’s investment portfolio changes from period to period in part as a result of aggregate net changes in the Group’s assessment of the fair value of each investment in the Group’s investment portfolio as well as changes in the composition of the Group’s investment portfolio arising from new investment commitments and disposals during the relevant period.
3.1.1 Forecasting the evolution of the investment portfolio valuation In view of the importance of the Group’s portfolio valuation and fair value movements therefrom for the Group income, balance sheet and cash flow statements and for the way in which the Group manages its funding, John Laing undertakes regular and detailed forecasting of the potential evolution of the Group’s Portfolio Value, including appropriate sensitivity analysis to reflect the inherent uncertainties in such forecasting. Furthermore, the forecasting approach the Group employs considers the evolution of the portfolio in terms of: • the forecast performance of the current investment portfolio (the “Current Portfolio”) and assumptions in relation to disposals therefrom; and • the quantum and potential performance of new primary investments and assumptions in relation to future disposals therefrom. The factors that will typically affect the movement in the Portfolio Value from period to period in terms of the primary investment portfolio, secondary investment portfolio and overall are set out in the table below:
Primary Secondary Overall investment investment investment Typical factors affecting overall portfolio valuation movement from period to period portfolio portfolio portfolio Cash movements: Cash injections ...... ✓ n/a ✓ Cash yield from investments ...... n/a ✓ ✓ Changes in portfolio composition: New investment commitments ...... ✓ n/a ✓ Divestments ...... n/a ✓ ✓ Transfers between primary and secondary ...... ✓ ✓ n/a Other fair value movements: Changes to cash flow forecasts (amount and timing) ...... ✓ ✓ ✓ Changes to construction risk premia ...... ✓ n/a ✓ Changes to project specific risk premia ...... ✓ ✓ ✓ Changes to operational benchmark discount rate ...... ✓ ✓ ✓ Discounting unwind ...... ✓ ✓ ✓ Foreign exchange ...... ✓ ✓ ✓ In the table above the term “discounting unwind” refers to the impact of the future forecast cash flows to be valued being one period closer to the valuation date.
3.1.2 Portfolio Value development of Current Portfolio As set out in the table in paragraph 3.1.1 above, forecasting the movement in the value of the Current Portfolio requires assumptions or information on a project by project basis. (i) Cash injections/investments The fair value of the Group’s primary investments within the Current Portfolio will, all other things being equal, increase by the amount of any cash investments made in the relevant period.
131 (ii) Distributions Distributions from the Group’s secondary investment portfolio are forecast based upon the individual project cash flow models maintained for each investment. The receipt of distributions, which are typically in the form of dividends and/or subordinated debt interest/repayments, during a period will reduce the remaining forecast cash flows from the investment portfolio and will cause a decrease in its value. However, the discount rate unwind effect described above will typically act in part to offset such decrease. (iii) Divestments The Group’s secondary investment portfolio provides the pool from which disposals can be made to contribute towards funding new investments in primary investments. In determining which investments the Group might plan to sell during any period, consideration will be given to the status of the underlying project, its value enhancement prospects and the demand within the secondary market as well as the funding needs of the Group. The table below shows the historic relationship between disposal proceeds from realisations and new investment commitments.
Year ended 31 December 2017 2016 2015 (unaudited) (£ millions) Realisations(1) ...... 289 147 86 New investment commitments ...... 383 182 180
Note: (1) Represent proceeds from disposal of investments, gross of disposal costs. (iv) Transfers from primary investment portfolio to secondary investment portfolio Investments transfer from the primary investment portfolio to the secondary investment portfolio when they reach the end of construction and commence operations. Each project within the Current Portfolio has a forecast construction end date, which informs the assumptions that the Group makes about internal transfers. The value at which each investment will transfer will reflect the cash subscription of equity (which will have occurred on or prior to construction completion) together with the valuation consistent with operational secondary market valuation discount rate benchmarks. (v) Fair value movements In forecasting future fair value movements the Group focuses primarily on (i) estimating the impact of the reduction in the valuation discount rate applicable to its primary investments as each investment progresses through to its operational phase and (ii) the effect of discount rate unwind. Typically, the Group does not make forecasts of the fair value impact of changes in operational benchmark discount rates (although it does consider the sensitivity of the portfolio valuation to movements in valuation discount rates), project specific premia or foreign exchange. The Group includes in its forecast targeted value enhancements from its Current Portfolio.
3.1.3 Portfolio Value development of new investments Actual cash flow models are used for valuation purposes once a project reaches financial close. For new investments, the Portfolio Value evolution is forecast by John Laing based on standard templates (supported by historical data as summarised in paragraph 3 “John Laing’s Business Model” of Part 9 (Business Description) depending on the type of investment. The Group considers that for the purposes of its portfolio forecasting, the use of standard templates provides a reasonable approximation and no material additional benefit would arise from using draft cash flow models being developed for new investment opportunities within its investment pipeline as these are subject to frequent change and insufficient certainty over which of the underlying projects will reach financial close. As described in paragraph 3 of Part 9 (Business Description), future divestment returns are subject to a number of factors beyond the Group’s control, including the strength of competition in primary markets and the level of demand in secondary markets for the Group’s investments.
3.1.4 Evolution of the investment portfolio valuation during the period under review During the period under review, the Portfolio Value increased from £772.0 million as at 31 December 2014 to £1,193.8 million as at 31 December 2017. This increase resulted from the interaction of factors described above. The table below shows the evolution of the Group’s Portfolio Value during the period under review.
132 The total investment portfolio value is included within the “investments at fair value through profit or loss” line item in the Group’s balance sheet.
As at 31 December 2017 2016 2015 (audited) (unaudited) (statutory) (pro forma) (£ millions) Opening portfolio value ...... 1,175.9 841.4 772.0 Investment in equity and loans ...... 209.9 301.5 142.5 Distributions / cash yield ...... (40.2) (34.8) (38.9) Realisations ...... (312.5) (146.6) (86.3) Investments transferred to JLPF ...... — — (80.0) Fair value movements ...... 160.7 214.4 132.1 Closing Portfolio Value ...... 1,193.8 1,175.9 841.4
3.2 The terms of the Group’s borrowings The borrowings and indebtedness of the Group comprise amounts outstanding under its corporate banking facilities. At 31 December 2017, the Group had principal committed senior unsecured corporate banking facilities of £475 million, comprising two revolving credit facility tranches (the “Facilities”), which are primarily used to back investment commitments. The maturity date of the Facilities is 9 March 2020. For more information about the terms of the Facilities, see Part 16 (Additional Information—Banking facilities). The Group also has committed liquidity facilities of £50 million expiring in February 2019. For the years ended 31 December 2017, 2016 and 2015, the Historical Financial Information shows finance costs of £11.8 million, £10.3 million and £11.3 million. For more information on the Group’s capitalisation and indebtedness, see Part 13 (Capitalisation and Indebtedness).
3.3 Retirement benefits At 31 December 2017, the Group had total retirement benefit obligations of £40.3 million calculated under IAS 19. This included an accounting deficit relating to JLPF of £35.2 million, an accounting surplus relating to JLPP of £2.9 million and liabilities under a post-retirement medical benefits scheme of £8.0 million. The accounting deficit of £35.2 million relating to JLPF is a decrease of £29.0 million on the accounting deficit of £64.2 million as at 31 December 2016 primarily as a result of the Group’s cash contribution to JLPF of £24.5 million in March 2017. The next triennial actuarial valuation of JLPF is due as at 31 March 2019. For more information on the terms of the Group’s arrangement with the JLPF Trustee, see paragraph 10.2 “JLPF Arrangement” in Part 16 (Additional Information). An actuarial valuation of JLPF was carried out as at 31 March 2016 by a qualified independent actuary, Willis Towers Watson. At that date, JLPF was 85 per cent. funded on the technical provision funding basis. A seven-year deficit repayment plan was agreed with the JLPF Trustee, whereby the actuarial deficit of £171 million as at 31 March 2016 is to be repaid over seven years as follows:
By 31 March £ million 2017 ...... 24.5 2018 ...... 26.5 2019 ...... 29.1 2020 ...... 24.9 2021 ...... 25.7 2022 ...... 26.4 2023 ...... 24.6 The amount of the deficit in the JLPF scheme can vary significantly due to gains or losses on scheme investments, and movements in the assumptions used to value scheme liabilities (in particular life expectancy, discount rate and inflation rate). Consequently, the Group is exposed to the risk of increases in cash contributions payable and volatility in the deficit reported in the Group’s balance sheet.
133 3.4 Timing and value of bid cost recoveries and other Project Company derived income Bid costs incurred are included in administrative expenses in the Group income statement until such time as the Group is virtually certain that it will recover the costs from the relevant Project Company. From the point of virtual certainty, bid costs are held in the Group balance sheet as a receivable prior to being recovered, typically on financial close. The Group recovers bid costs relating to the project in question by charging a fee to the relevant Project Company. Recoveries of bid costs are included within other income in the Group income statement. As bid costs on projects are recognised as incurred, the costs and associated revenues are not necessarily recorded in the same period. In addition to the bid costs recoveries, the Group typically seeks to earn an investment fee from Project Companies to compensate John Laing for the costs of providing LCs and/or in respect of cash collateral, both of which are posted as security for John Laing’s future equity subscription obligations. These fees are typically earned by companies making and providing the collateral for the investment commitment with such companies being investment entity subsidiaries that are fair valued in the Group accounts. Consequently, these fees are included within the line item “net gain on investments at fair value through profit or loss” in the Group income statement.
3.5 Divestments As discussed in paragraph 2.4 “Divestments” above, proceeds from the disposal of the Group’s interests in Project Companies help fund its new primary investment activity. Between 31 December 2014 and 31 December 2017, the Group made 21 divestments of entire or part interests in its investment portfolio, predominantly of investments from within its secondary investment portfolio. The table below shows the Group’s realised proceeds from the disposal of investments, gross of costs, as well as the proportion of such disposals which were acquired by JLIF or JLEN, for the period under review.
Year ended 31 December 2017 2016 2015 (unaudited) (£ millions, unless otherwise indicated) PPP divestments by John Laing ...... 246 90 15 Acquired by JLIF ...... 103 90 12 Acquired by JLIF (as a %) ...... 42% 100% 80% Renewable energy divestments by John Laing ...... 43 50 72 Acquired by JLEN ...... 43 50 72 Acquired by JLEN (as a %) ...... 100% 100% 100% For disposals completed since 31 December 2017, see paragraph 4 “Current Trading and Prospects” below.
3.6 Asset management income In addition to fee income earned from JLIF and JLEN in relation to the Group’s external asset management activities as described in paragraph 2.5 above, the Group earns fees from Project Companies in relation to the project management services it provides under MSAs. For more information on the Group’s MSAs, see paragraph 7.2 “Project management services” in Part 9 (Business Description). For the year ended 31 December 2017, the Group received £6.1 million in income related to project management services, compared to £14.9 million and £17.0 million for the years ended 31 December 2016 and 2015 (pro forma presentation for the year ended 31 December 2015).
4. Current Trading and Prospects On 8 March 2018, the Group announced its results for the year ended 31 December 2017. The financial highlights are set out below: • 10.5 per cent. increase in NAV, from £1,017 million at 31 December 2016 to £1,124 million; • 13.5 per cent. increase in NAV including dividends paid in 2017; • NAV per share at 31 December 2017 of 306p (31 December 2016—277p); • New investment commitments of £383 million (2016—£182 million); • Realisations of £289 million from the sale of investments (2016—£147 million);
134 • Profit before tax of £126 million (2016—£192 million); • 12 per cent. increase in external AUM to £1,649 million; and • Cash yield from investment portfolio of £40 million (2016—£35 million).
5. Description of key line items in the Group Income Statement in the Historical Financial Information As described in Part 3 (Presentation of Financial and Other Information), the Group accounts for all investments, including subsidiaries, associates and joint ventures, at fair value through profit or loss, except for those subsidiaries that provide services that relate to the investment entity’s investment activities.
5.1 Dividend income Dividend income from investments at fair value through profit or loss is recognised when the Shareholders’ rights to receive payment have been established (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably). Dividend income is recognised gross of withholding tax, if any, and only when approved and paid.
5.2 Net gains on investments at fair value through profit or loss Net gains on investments at fair value through profit or loss represent the movement in fair value of the Group’s investments after taking account of dividend income received by the Group. The fair value movement comprises the following: • Movement in the fair value of investments in Project Companies and listed funds (taken together, these form the investment portfolio): Any gain (or loss) on investments is a result of movements in the valuation for each investment from one period to another after taking account of cash flows in the period. Key drivers of fair value movements are described in paragraph 2.2 above. • Investment fees earned from Project Companies: Investment fees from projects reflect fees recovered from PPP Project Companies in return for the Group entering into LCs or posting cash collateral from financial close until the injection of cash subscriptions which is generally towards or at the end of construction. The Project Company pays the fee (which is a contractual payment) during the period in which the LC or cash collateral is outstanding. • Other gains/losses, including corporation tax credits of recourse subsidiaries held at fair value through profit or loss, primarily in the form of Group and Consortium relief receivable from recourse subsidiaries, which are consolidated in the Group accounts, as well as from Project Companies.
5.3 Other income The Group earns income from the following sources: (i) Fees from asset management services Fees from asset management services to projects in which the Group invests and to external parties are recognised as the services are provided in accordance with IAS 18 Revenue. (ii) Recovery of bid costs on financial close Bid costs incurred in respect of bidding for new primary investments are charged to the Group Income Statement until such times as the Group is virtually certain that it will recover the costs. Virtual certainty is generally achieved when an agreement is in place demonstrating that costs are fully recoverable even in the event of cancellation of a project. From the point of virtual certainty, bid costs are held in the Group Balance Sheet as a debtor until recovered, typically on achieving financial close. On financial close, the Group recovers bid costs by charging a fee to the relevant Project Company in the investment portfolio. Other income excludes VAT and the value of intra-group transactions between recourse subsidiaries held at FVTPL and those that are consolidated.
5.5 Administrative expenses Administrative expenses comprise third party costs, primarily in relation to bidding, staff costs and overhead costs together with service costs in relation to post-retirement obligations.
135 Third party bid costs vary according to the quantum and stage of on-going bids. In addition, a project achieving financial close in a particular financial year may have incurred third party bid costs in earlier years. Third party bid costs are generally incurred over a period of time, potentially several years in case of larger projects, hence the level of bid costs incurred in any given year is not necessarily reflective of the level of investment committed in that year. It represents the variable costs incurred on specific bids, typically associated with external advisers, and typically concentrated towards the later stages of a bid. Third party bid costs are charged to the Group income statement until such time as the Group is virtually certain that it will recover the costs. Staff costs mainly reflect salaries, pension costs and allowances, social security costs and bonus and long term incentive plan awards. Overhead costs comprise accommodation costs, IT costs, depreciation and other general overheads.
5.6 Finance costs Finance costs relating to the Facilities other than upfront fees, are recognised in the year in which they are incurred. Upfront fees incurred on refinancing of the Facilities are amortised over the remaining facility term. Finance costs also include the net interest cost on retirement benefit obligations.
5.7 Tax The tax charge or credit represents the sum of tax currently payable and deferred tax. (i) Current Tax Current tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Group Income Statement because it excludes both items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted, or substantively enacted, by the balance sheet date. (ii) Deferred Tax Deferred tax liabilities are recognised in full for taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will arise to allow all or part of the assets to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realized. Deferred tax is charged or credited to the Group Income Statement except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets and current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. The tax charge or credit comprises the tax charge or credit of the Company and those recourse subsidiaries that are consolidated and includes group relief receivable or payable to recourse subsidiaries held at FVTPL. Tax losses within the Group are predominantly in recourse subsidiaries held at FVTPL.
5.9 Profit from discontinued operations Profit from discontinued operations relates to legacy property and construction businesses that are classified as discontinued and which have been sold. The results from discontinued operations include movements in provisions for potential liabilities at the time of the sale of the legacy businesses, including discount unwind of these provisions. In the Historical Financial Information, profit from discontinued operations was only reported in the year ended 31 December 2015.
136 6. Results of operations 6.1 Comparison of results of operations for the years ended 31 December 2017 and 31 December 2016
Year ended 31 December 2017 2016 (audited) (£ millions) Continuing operations Net gain on investments at fair value through profit or loss ...... 166.3 218.8 Other income ...... 30.4 42.0 Operating income ...... 196.7 260.8 Administrative expenses ...... (58.9) (58.4) Profit from operations ...... 137.8 202.4 Finance costs ...... (11.8) (10.3) Profit before tax ...... 126.0 192.1 Tax credit/(charge) ...... 1.5 (1.8) Profit for the period attributable to the Shareholders of the Company ...... 127.5 190.3
6.1.1 Net gain on investments at fair value through profit or loss The Group’s net gain on investments at FVTPL for the year ended 31 December 2017 was £166.3 million, as compared to £218.8 million for the year ended 31 December 2016, representing a decrease of £52.5 million, or 24.0 per cent. This decrease was primarily attributable to foreign exchange rate movements.
6.1.2 Other income The Group’s other income for the year ended 31 December 2017 was £30.4 million, as compared to £42.0 million for the year ended 31 December 2016, representing a £11.6 million, or 27.6 per cent., decrease. This decrease was primarily attributable to the sale in late 2016 of the project management services activities in the UK.
6.1.3 Operating income As a result of the foregoing, the Group’s operating income decreased by £64.1 million, or 24.6 per cent., to £196.7 million for the year ended 31 December 2017 from £260.8 million for the year ended 31 December 2016.
6.1.4 Administrative expenses The Group’s administrative expenses for the year ended 31 December 2017 were £58.9 million, as compared to £58.4 million for the year ended 31 December 2016, representing a £0.5 million, or 0.9 per cent, increase.
6.1.5 Profit from operations As a result of the foregoing, the Group’s profit from operations decreased by £64.6 million to £137.8 million for the year ended 31 December 2017 from £202.4 million for the year ended 31 December 2016.
6.1.6 Finance costs The Group’s finance costs for the year ended 31 December 2017 were £11.8 million, as compared to £10.3 million for the year ended 31 December 2016, representing a £1.5 million, or 14.6 per cent increase. This increase was primarily attributable to higher average usage of the corporate banking facilities.
6.1.7 Profit before tax As a result of the foregoing, the Group’s profit before tax decreased by £66.1 million to £126.0 million for the year ended 31 December 2017 from £192.1 million for the year ended 31 December 2016.
6.1.8 Tax The Group’s tax credit for the year ended 31 December 2017 was £1.5 million compared to a tax charge of £1.8 million for the year ended 31 December 2016. This variance was primarily attributable to a prior year
137 adjustment of group relief payable by consolidated recourse subsidiaries to recourse subsidiaries held at FVTPL.
6.1.9 Profit for the period As a result of the foregoing, the Group’s profit for the period decreased by £62.8 million to £127.5 million for the year ended 31 December 2017 from £190.3 million for the year ended 31 December 2016.
6.2 Comparison of results of operations for the years ended 31 December 2016 and 31 December 2015
Year ended 31 December 2016 2015 (audited) (statutory) (pro forma) (£ millions) Continuing operations Net gain on investments at fair value through profit or loss ...... 218.8 133.1 Other income ...... 42.0 34.5 Operating income ...... 260.8 167.6 Cost of sales ...... — (0.1) Gross profit ...... 260.8 167.5 Administrative expenses ...... (58.4) (55.3) Profit from operations ...... 202.4 112.2 Finance costs ...... (10.3) (11.3) Profit before tax ...... 192.1 100.9 Tax charge ...... (1.8) (2.1) Profit from continuing operations ...... 190.3 98.8 Discontinued operations Profit from discontinued operations (after tax) ...... — 5.7 Profit for the period attributable to the Shareholders of the Company ...... 190.3 104.5
6.2.1 Net gain on investments at fair value through profit or loss The Group’s net gain on investments at FVTPL for the year ended 31 December 2016 was £218.8 million, as compared to £133.1 million for the year ended 31 December 2015, representing a £85.7 million, or 64.4 per cent, increase. This increase was principally attributable to favourable foreign exchange movements in 2016 compared to the previous year.
6.2.2 Other income The Group’s other income for the year ended 31 December 2016 was £42.0 million, as compared to £34.5 million for the year ended 31 December 2015, representing an increase of £7.5 million, or 21.7 per cent. This increase was attributable primarily to higher recoveries of bidding costs in 2016 than in the previous year, an increase in fee income from external investment management services due to the higher level of External AUM and proceeds from the sale in 2016 of the project management services activities in the UK.
6.2.3 Operating income As a result of the foregoing, the Group’s operating income increased by £93.2 million, or 55.6 per cent., to £260.8 million for the year ended 31 December 2016 from £167.6 million for the year ended 31 December 2015.
6.2.4 Gross profit As a result of the foregoing, the Group’s gross profit increased by £93.3 million, or 55.7 per cent., to £260.8 million for the year ended 31 December 2016 from £167.5 million for the year ended 31 December 2015.
6.2.5 Administrative expenses The Group’s administrative expenses for the year ended 31 December 2016 were £58.4 million, as compared to £55.3 million for the year ended 31 December 2015, representing an increase of £3.1 million, or 5.6 per cent.
138 This increase was primarily attributable to higher bidding costs incurred in 2016 compared to 2015 and higher costs under IFRS 2 of share-based incentive schemes, offset in part by one-off employee costs incurred in relation to the Company’s initial public offering in the year ended 31 December 2015.
6.2.6 Profit from operations As a result of the foregoing, the Group’s profit from operations increased by £90.2 million to £202.4 million for the year ended 31 December 2016 from £112.2 million for the year ended 31 December 2015.
6.2.7 Finance costs The Group’s finance costs for the year ended 31 December 2016 were £10.3 million, as compared to £11.3 million for the year ended 31 December 2015, representing a £1.0 million decrease. This decrease was primarily attributable to a decrease in the net interest cost of retirement obligations, offset in part by higher finance costs on the Facilities due to higher average usage of these facilities.
6.2.8 Profit before tax As a result of the foregoing, the Group’s profit before tax increased by £91.2 million to £192.1 million for the year ended 31 December 2016 from £100.9 million for the year ended 31 December 2015.
6.2.9 Tax The Group’s tax charge for the year ended 31 December 2016 was £1.8 million compared to a tax charge of £2.1 million for the year ended 31 December 2015.
6.2.10 Profit from discontinued operations (after tax) There were no discontinued operations for the year ended 31 December 2016, and accordingly the Group did not report a profit or loss from discontinued operations for that year, as compared to a £5.7 million profit for the year ended 31 December 2015. The profit in 2015 was primarily attributable to the resolution of legacy claims against the Group.
6.2.11 Profit for the period As a result of the foregoing, the Group’s profit for the period increased by £85.8 million to £190.3 million for the year ended 31 December 2016 from a profit of £104.5 million for the year ended 31 December 2015.
6.3 Operating segments The principal categories of the Group’s activity, and thus the reportable segments under IFRS 8, are: (i) primary investment, (ii) secondary investment and (iii) asset management. The results included within each of the reportable segments comprise: • Primary investment—costs and cost recoveries associated with sourcing and originating, bidding for and winning greenfield PPP and renewable energy infrastructure projects; investment returns from and growth in the value of the primary investment portfolio, net of associated costs. • Secondary investment—investment returns from and growth in the value of the secondary investment portfolio, net of associated costs. • Asset management—fee income and associated costs from investment management services in respect of both the primary and secondary investment portfolios and in respect of JLIF’s and JLEN’s portfolios plus; fee income and associated costs from project management services.
6.3.1 Profit before tax from continuing operations by segment The Board’s primary measure of profitability for each segment is profit before tax. The table below is a breakdown of the Group’s profit before tax from continuing operations by segment for the years ended 31 December 2017, 2016 and 2015, which are incorporated by reference in this Prospectus as described in
139 Part 14 (Information Incorporated by Reference)), and further below is a reconciliation to the Group’s profit/ (loss) before tax in the Group income statement.
Year ended 31 December 2017 2016 2015 (audited) (statutory) (£ millions) Primary investment ...... 137.3 113.1 50.7 Secondary investment ...... (31.9) 57.1 43.0 Asset management ...... 18.8 19.9 15.5 Reportable segments’ profit before tax ...... 124.2 190.1 109.2 Post retirement charges ...... (2.6) (2.9) (4.2) Other net gain/(loss)(1) ...... 4.4 4.9 (4.1) Profit before tax from continuing operations ...... 126.0 192.1 100.9
Note: (1) Other net gain/(loss) comprises non-segmental results, including results from corporate activities and discontinued operations. Primary investment The Group’s profit before tax for the primary investment segment for the year ended 31 December 2017 was £137.3 million, as compared to £113.1 million for the year ended 31 December 2016, representing an increase of £24.2 million or 21.4 per cent. This increase was primarily attributable to a higher fair value movement on investments, which in turn was principally a result of higher value uplift on financial closes and value enhancements offset by foreign exchange movements. The Group’s profit before tax for the primary investment segment for the year ended 31 December 2016 was £113.1 million, as compared to £50.7 million for the year ended 31 December 2015, representing an increase of £62.4 million. This increase was primarily attributable to a higher fair value movement on investments, which in turn was principally as a result of favourable foreign exchange movements.
Secondary investment The Group’s loss before tax for the secondary investment segment for the year ended 31 December 2017 was £31.9 million, as compared to a profit before tax of £57.1 million for the year ended 31 December 2016. The adverse variance of £89.0 million was primarily attributable to foreign exchange movements as well as lower power and gas price forecasts and a net reduction in value of the Group’s Manchester Waste investments. The Group’s profit before tax for the secondary investment segment for the year ended 31 December 2016 was £57.1 million, as compared to £43.0 million for the year ended 31 December 2015, representing an increase of £14.1 million. This increase was primarily attributable to foreign exchange gains on the investment portfolio as well as higher value enhancements offset by a reduction in value of the Group’s investments in the New Royal Adelaide Hospital and Manchester Waste VL Co projects.
Asset management The Group’s profit before tax for the asset management segment for the year ended 31 December 2017 was £18.8 million, as compared to £19.9 million for the year ended 31 December 2016, representing a decrease of £1.1 million, or 5.5 per cent. This decrease was primarily attributable to the sale in late 2016 of the project management services activities in the UK offset by higher fund management income due to increased External AUM. The Group’s profit before tax for the asset management segment for the year ended 31 December 2016 was £19.9 million, as compared to £15.5 million for the year ended 31 December 2015, representing an increase of £4.4 million, or 28.4 per cent. This increase was primarily attributable to higher fee income from investment management services as a result of increased External AUM.
140 6.3.2 Assets by segment The Group provides segmental reporting of its investment portfolio including investments in Project Companies and investments in listed funds. These investments are held at fair value along with other assets and liabilities and reported as investments at fair value through profit or loss on the Group balance sheet.
31 December 31 December 31 December 2017 2016 2015 (audited) £ million £ million £ million Segment assets Primary investment ...... 580.3 696.3 405.9 Secondary investment ...... 613.5 479.6 435.5 Total investment portfolio ...... 1,193.8 1,175.9 841.4 Other investments ...... 0.3 0.3 0.5 Other assets and liabilities ...... 152.3 81.3 123.4 Total investments at fair value through profit or loss ...... 1,346.4 1,257.5 965.3 Other assets ...... 10.7 10.3 12.0 Total assets ...... 1,357.1 1,267.8 977.3 Retirement benefit obligations ...... (40.3) (69.3) (46.2) Other liabilities ...... (192.9) (181.7) (41.5) Total liabilities ...... (233.2) (251.0) (87.7) Group net assets ...... 1,123.9 1,016.8 889.6
The Group’s investment portfolio is made up of primary and secondary investments. The Group classifies its interests in PPP and renewable energy projects which are in the construction phase as its “primary investment portfolio”. The Group classifies its investments in operational projects as its “secondary investment portfolio”. Almost all of John Laing’s secondary investments were previously part of its primary investment portfolio. Other items included in investments at fair value through profit or loss comprise other investments and other assets and liabilities. Other investments comprise investments in small joint venture companies that are not included in the investment portfolio, which are measured at the net asset value of each company. Other assets and liabilities comprise assets, other than investments, and liabilities within the recourse group subsidiaries that are held at FVTPL, with significant amounts being cash collateral balances. The Group’s other assets comprise assets of the Company and the consolidated recourse subsidiaries which comprise cash balances, trade and other receivables and long term assets including intangible and tangible assets. These assets are not analysed by segment. The Group’s retirement benefit obligations comprise the net deficit under IAS 19 of the Group’s pension schemes and post-retirement medical benefit schemes. The Group’s other liabilities comprise the other liabilities of the Company and the consolidated recourse subsidiaries and include trade and other payables and provisions.
7. Liquidity and Capital Resources In this section the capital resources, cash balances and cash flows of subsidiaries held at fair value through profit or loss are described and included along with consolidated subsidiaries of the Group.
7.1 Sources and uses of liquidity The Group’s liquidity requirements arise primarily from bid expenses, administrative expenses, interest expenses and amounts required to fund its investment commitments. The Group’s principal sources of liquidity during the period covered by the Historical Financial Information have been borrowings under its corporate banking facilities, distributions from Project Companies and proceeds from the disposal of its interests in Project Companies. The Group’s capital resources to meet its ongoing liquidity needs include undrawn amounts under its £475 million Facilities, and the Group’s cash balances, together with anticipated future proceeds from the disposal of interests in Project Companies and any distributions from Project Companies. For PPP investments, at the point of financial close, John Laing typically posts collateral for its future equity commitments in the form of a LC issued under the Facilities or in the form of cash collateral. Cash is typically injected into a Project Company once construction of the project is complete. Renewable energy investments
141 are typically cash funded at financial close. Where the Group decides to use cash collateral to secure an investment commitment (in lieu of issuing a LC), the associated cash balance is included within total investments on the Group balance sheet. The decision to use cash collateral in lieu of issuing LCs is made by the Group on a project-by-project basis depending on the level of cash in the business at a given point in time and project specific requirements.
7.2 Cash flow A consequence of investment entity accounting in the Historical Financial Information is that cash balances and cash flows of recourse subsidiaries held at fair value through profit or loss are not included in the Group balance sheet and cash flow statement respectively. The Group cash flow statement on the Group balance sheet relates to the Company and the Group’s consolidated subsidiaries which principally include the subsidiaries that perform investment related services. These cash flows are discussed in paragraph 7.2.1 below. The Group’s investment activity is performed by recourse subsidiaries that are fair valued in the Historical Financial Information. Movements in cash balances are presented in the table below, which sets out the opening and closing balance of the line item “investments at fair value through profit or loss” for the years ended 31 December 2017, 2016 and 2015. For each period, there is a net cash transferred from or to investments held at fair value through profit or loss.
Year ended 31 December 2017 Portfolio Other assets Project Listed valuation and companies investments sub-total liabilities Total (audited) (£ millions) Opening balance ...... 1,165.9 10.0 1,175.9 81.6 1,257.5 Distributions ...... (39.6) (0.6) (40.2) 40.2 — Investments in equity and loans ...... 209.9 — 209.9 (209.9) — Realisations ...... (289.0) — (289.0) 289.0 — Proceeds received on acquisition of Manchester Waste VL Co by GMWDA ...... (23.5) — (23.5) 23.5 — Fair value movement ...... 159.8 0.9 160.7 5.6 166.3 Net cash transferred from investments at fair value through profit or loss ...... — — — (77.4) (77.4) Closing balance ...... 1,183.5 10.3 1,193.8 152.6 1,346.4
During the year ended 31 December 2017, the Group disposed of shares and subordinated debt in eight PPP and renewable energy project companies for proceeds of £289.0 million. In addition, the Group’s shareholding in Manchester Waste VL Co was acquired by the Greater Manchester Waste Development Authority for £23.5 million.
Year ended 31 December 2016 Portfolio Other assets Project Listed valuation and companies investments sub-total liabilities Total (audited) (£ millions) Opening balance ...... 825.3 16.1 841.4 123.9 965.3 Distributions ...... (33.9) (0.9) (34.8) (34.8) — Investments in equity and loans ...... 301.5 — 301.5 301.5 — Realisations from investment portfolio ...... (140.2) (6.4) (146.6) (146.6) — Fair value movement ...... 213.2 1.2 214.4 4.4 218.8 Net cash transferred to investments at fair value through profit or loss ...... — — — 73.4 73.4 Closing balance ...... 1,165.9 10.0 1,175.9 81.6 1,257.5
142 During the year ended 31 December 2016, the Group disposed of its entire interests in five PPP and renewable energy Project Companies and part of its interest in one PPP project. The Group also sold part of its shareholding in JLEN. Total proceeds from all realisations were £146.6 million.
Year ended 31 December 2015 Portfolio Other assets Project Listed valuation and companies investments sub-total liabilities Total (unaudited) (pro forma) (£ millions) Opening balance ...... 706.4 65.6 772.0 86.2 858.2 Distributions ...... (38.0) (0.9) (38.9) 38.9 — Investments in equity and loans ...... 142.5 — 142.5 (142.5) — Realisations ...... (86.3) — (86.3) 86.3 — Investments transferred to JLPF ...... (29.6) (50.4) (80.0) — (80.0) Fair value movement ...... 130.3 1.8 132.1 1.0 133.1 Net cash transferred to investments at fair value through profit or loss ...... — — — 54.0 54.0 Closing balance ...... 825.3 16.1 841.4 123.9 965.3
During the year ended 31 December 2015, the Group disposed of its entire interests in seven PPP and renewable energy Project Companies. Total proceeds from all realisations were £86.3 million. The cash flows in paragraph 7.2.1 below are those reported in the Group cash flow statements in the Historical Financial Information and comprise the cash flows of the Company and the consolidated subsidiaries (i.e. excluding recourse subsidiaries held at fair value through profit or loss).
7.2.1 Cash flow statements Net cash outflow from operating activities comprises the cash outflows of the Group’s primary bidding activities, offset by recoveries at financial close, and the net cash inflows of the Group’s investment management and project management services less the Group’s overheads. Net cash from/(used in) investing activities comprises the net cash transferred to/(from) the Company and consolidated recourse subsidiaries from/(to) recourse subsidiaries held at fair value through profit or loss in relation to the Group’s investment portfolio cash flows. Net cash (used in)/from financing activities comprises the cash flow movement in borrowings and related costs of the Group and the payment of dividends. During the period under review, the Group’s cash flows as presented in accordance with IFRS in the Historical Financial Information were broadly consistent with the activities of the business described in paragraph 7.2 above.
Cash flow for the years ended 31 December 2017, 2016 and 2015
Year ended 31 December 2017 2016 2015 (audited) (statutory) (pro forma) (£ millions) Net cash outflow from operating activities ...... (47.3) (37.1) (70.5) Net cash from/(used in) investing activities ...... 77.3 (73.5) (54.6) Net cash (used in)/from financing activities ...... (29.1) 110.9 124.1 Net increase/(decrease) in cash and cash equivalents ...... 0.9 0.3 (1.0) Cash and cash equivalents at beginning of the period ...... 1.6 1.1 2.2 Effect of foreign exchange rate changes ...... — 0.2 (0.1) Cash and cash equivalents at end of the period ...... 2.5 1.6 1.1
7.3 Borrowings The Group’s Facilities have been principally used to fund new investment commitments either through cash drawings or through issuing LCs. In addition, the Group may use such borrowings to make cash drawings
143 where required to fund short-term working capital requirements, or for performance bonds to support short-term bidding activity. LCs outstanding are not recognised as a liability on the Group balance sheet, with the value associated with future investment commitments attaching to those LCs not being recognised in Portfolio Value but rather recognised in the Gross Value as described in paragraph 2.2 “Investment portfolio valuation” above. As at 31 December 2017, £139.2 million of the Group’s Facilities was undrawn compared to undrawn amounts of £115.9 million and £175.7 million as at 31 December 2016 and 2015, respectively. The following table presents an analysis of the Group’s financial resources for the period under review.
As at 31 December 2017 2016 2015 (unaudited) (£ millions) Total committed facilities ...... 525.0 450.0 350.0 Less: Letters of credit issued ...... (202.3) (162.6) (154.2) Other guarantees and commitments ...... (7.5) (6.5) (1.1) Short term cash borrowings(2) ...... (176.0) (165.0) (19.0) Utilisation of facilities ...... (385.8) (334.1) (174.3) Undrawn corporate facilities ...... 139.2 115.9 175.7 Cash and bank deposits(1) ...... 14.6 53.1 5.5 Less unavailable cash ...... (0.7) (0.9) (1.1) Net available financial resources ...... 153.1 168.1 180.1
Notes: (1) Cash and bank deposits excluding cash collateral balances. Cash and bank deposits reconciled to the Group balance sheet:
As at 31 December 2017 2016 2015 Amounts in fair valued entities included within investments at fair value through profit or loss ...... 12.1 51.5 4.4 Amounts in consolidated entities shown as cash and cash equivalents ...... 2.5 1.6 1.1 Total cash and bank deposits stated above ...... 14.6 53.1 5.5
(2) Short term cash borrowings reconciled to the Group balance sheet:
As at 31 December 2017 2016 2015 Borrowings ...... (173.2) (161.4) (14.9) Unamortised financing costs ...... (2.8) (3.6) (4.1) Short term cash borrowings stated above ...... (176.0) (165.0) (19.0)
7.4 Contractual obligations The table below presents a summary of the Group’s outstanding commitments for future minimum lease payments under non-cancellable operating leases as at 31 December 2017:
Less More than One to than one five five year years years Total (£ millions) Land and buildings ...... 1.0 3.0 2.2 6.2 Other ...... 0.1 0.1 — 0.2 Total ...... 1.1 3.1 2.2 6.4
144 7.5 Off balance sheet arrangements 7.5.1 Letters of credit As at 31 December 2017, the Group had future equity and loan commitments of £335.4 million of which £202.3 million was backed by LCs with the balance backed by cash collateral. See paragraph 2.2 of this Part 9 for an explanation of the impact of LCs on the Gross Value of the Group’s investment portfolio.
7.5.2 Performance bonds and other guarantees The Group had provided performance and bid bonds and contingent commitments of £7.5 million under the Facilities as at 31 December 2017.
8. Dividend Policy For a description of the Group’s dividend policy, see paragraph 11 “Dividend policy” of Part 9 (Business Description).
9. Quantitative and Qualitative Disclosures about Market Risks The Group’s activities expose it to a variety of financial risks: foreign exchange rate risk, interest rate risk, inflation risk, credit risk, price risk, liquidity risk and capital risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. See Part 2 (Risk Factors) and note 17 to the Group financial statements of the Group’s 2017 Final Results Announcement, which are incorporated by reference in this Prospectus as described in Part 14 (Information Incorporated by Reference), for additional detail.
10. Critical Accounting Policies and Estimates For a description of the Group’s critical accounting judgements and key sources of estimation uncertainty, see note 3 to the Group financial statements in the Group’s 2017 Final Results Announcement and note 2 to the Group financial statements in the 2016 Annual Report and Accounts and the 2015 Annual Report and Accounts which are incorporated by reference in this Prospectus as described in Part 14 (Information Incorporated by Reference).
145 PART 13 Capitalisation and Indebtedness Capitalisation and indebtedness The table below sets out the Company’s capitalisation and indebtedness as at 31 December 2017. The information has been extracted without material adjustment from the 2017 Final Results Announcement, which is incorporated by reference in this Prospectus as set out in Part 14 (Information Incorporated by Reference).
As at 31 December 2017 (£ millions) Total current debt Unguaranteed/unsecured(1) ...... 176.0 Shareholder’s equity Share capital ...... 36.7 Share premium ...... 218.0 Accumulated profit ...... 869.2 Total capitalisation and indebtedness ...... 1,299.9
The following table sets out the Company’s net indebtedness as at 31 December 2017. The information has been extracted without material adjustment from the 2017 Final Results Announcement, which is incorporated by reference in this Prospectus as set out in Part 14 (Information Incorporated by Reference).
As at 31 December 2017 (£ millions) Cash(2) ...... 14.6 Liquidity ...... 14.6 Other current financial debt(1) ...... (176.0) Current Financial Indebtedness ...... (176.0) Net Current Financial Indebtedness ...... (161.4) Non-Current Financial Indebtedness ...... — Net Financial Indebtedness ...... (161.4)
Notes: (1) At 31 December 2017, utilisation under the Group’s corporate banking facilities comprised short term cash borrowings of £176.0 million, included above and on the Group balance sheet, and, in addition, letters of credit of £202.3 million and other guarantees of £7.5 million. Letters of credit and other guarantees, as detailed in paragraph 7.5 of Part 12 (Operating and Financial Review), are not recognised as liabilities on the Group balance sheet. (2) As at 31 December 2017, the Group had cash collateral balances of £133.1 million to fund future investment commitments which has been excluded from the net indebtedness table presented above. Of the £14.6 million of cash shown above, £2.5 million is in recourse subsidiaries that are consolidated and £12.1 million is in recourse subsidiaries that are held at FVTPL and therefore is included in investments at fair value through profit or loss on the Group balance sheet.
146 PART 14 Information Incorporated by Reference The following documents, which have been approved, filed with or notified to the FCA, and which are available for inspection in accordance with paragraph 19 of Part 16 (Additional Information) of this Prospectus and are available on the Company’s website at www.laing.com, contain information about the Group which is relevant to this Prospectus: • 2017 Final Results Announcement; • 2016 Annual Report and Accounts; and • 2015 Annual Report and Accounts. The table below sets out the sections of these documents which are incorporated by reference in, and form part of, this Prospectus, and only the parts of the documents identified in the table below are incorporated by reference in, and form part of, this Prospectus. The parts of these documents which are not incorporated by reference are either not relevant for investors or are covered elsewhere in this Prospectus. To the extent that any part of any information referred to below itself contains information which is incorporated by reference, such information shall not form part of this Prospectus.
Page number(s) in reference Reference document Information incorporated by reference in this Prospectus document As at and for the year ended 31 December 2017 2017 Final Results Announcement . . Independent Auditor’s report to the shareholders of John Laing Group plc on the audited financial results of John Laing Group plc Group Income Statement Group Statement of Comprehensive Income Group Statement of Changes in Equity Group Balance Sheet Group Cash Flow Statement Notes to the Group Financial Statements As at and for the year ended 31 December 2016 2016 Annual Report and Accounts . Independent Auditor’s report to the members of John Laing Group plc 70–75 Group Income Statement 76 Group Statement of Comprehensive Income 77 Group Statement of Changes in Equity 78 Group Balance Sheet 79 Group Cash Flow Statement 80 Notes to the Group Financial Statements 81–110 As at and for the year ended 31 December 2015 2015 Annual Report and Accounts . Independent Auditor’s report to the members of John Laing Group plc 64–67 Group Income Statement 68 Group Statement of Comprehensive Income 69 Group Statement of Changes in Equity 70 Group Balance Sheet 71 Group Cash Flow Statement 72 Notes to the Group Financial Statements 73–111
147 PART 15 Unaudited Pro Forma Financial Information Section A—Unaudited pro forma financial information The following unaudited pro forma statement of net assets has been prepared to illustrate the effect of the Rights Issue on the net assets of the Group as if it had completed on 31 December 2017. The following unaudited pro forma financial information is based on the consolidated financial information of the Group and compiled on the basis set out in the notes below. The unaudited pro forma financial information has been prepared in a manner consistent with the accounting policies adopted by the Group for the year ended 31 December 2017. The information, which has been produced for illustrative purposes only by its nature addresses a hypothetical situation and, therefore, does not represent the Group’s actual financial position or results. The unaudited pro forma financial information does not constitute financial statements within the meaning of section 434 of the Companies Act. Investors should read the whole of this Prospectus and not rely solely on the unaudited financial information in this Part 15. Deloitte LLP’s report on the unaudited pro forma financial information is set out in Section B of this Part 15.
Unaudited consolidated pro forma statement of net assets as at 31 December 2017
Pro forma Net statement of assets of the net assets of Group as at Net the Group as at 31 December proceeds of 31 December 2017 the Rights Issue 2017 £’000 £’000 (note 4) £’000 Non-current assets Plant and equipment ...... 0.1 — 0.1 Investments at fair value through profit or loss ...... 1,346.4 — 1,346.4 Deferred tax assets ...... 0.5 — 0.5 1,347.0 — 1,347.0 Current assets Trade and other receivables ...... 7.6 — 7.6 Cash and cash equivalents ...... 2.5 210.2 212.7 10.1 210.2 220.3 Total assets ...... 1,357.1 210.2 1,567.3 Current liabilities Current tax liabilities ...... (1.4) — (1.4) Borrowings ...... (173.2) — (173.2) Trade and other payables ...... (17.3) — (17.3) (191.9) — (191.9) Net current (liabilities)/assets ...... (181.8) 210.2 28.4 Non-current liabilities Retirement benefit obligations ...... (40.3) — (40.3) Provisions ...... (1.0) — (1.0) (41.3) — (41.3) Total liabilities ...... (233.2) — (233.2) Net current (liabilities)/assets ...... 1,123.9 210.2 1,334.1
Notes: (1) The financial information as at 31 December 2017 has been extracted, without material adjustment, from the 2017 Final Results Announcement incorporated by reference as described in Part 14 “Information Incorporated by Reference”. (2) This pro forma statement of net assets does not constitute financial statements within the meaning of section 434 of the Companies Act 2006. (3) No adjustment has been made to reflect the trading results of the Group since 31 December 2017 or any other change in its financial position in that period. (4) As set out in paragraph 1.1 of Part 7 “Terms and Conditions of the Rights Offer”, the total net proceeds receivable by the Company from the Rights Issue are estimated to be approximately £210.2 million, after the aggregate expenses of, or incidental to, the Rights Issue to be borne by the Company of approximately £6.3 million.
148 Section B—Accountants’ report on the unaudited pro forma financial information
Deloitte LLP New Street Square London EC4A 3BZ The Board of Directors on behalf of John Laing Group plc 201 Bishopsgate London EC2M 3AE Barclays Bank PLC 5 The North Colonnade London E14 4BB HSBC Bank plc 8 Canada Square London E14 5HQ 8 March 2018 Dear Sirs John Laing Group plc (the “Company”) We report on the unaudited combined pro forma financial information set out in Part 15 of the prospectus of the Company dated 8 March 2018 (the “Prospectus”), which has been prepared on the basis described, for illustrative purposes only, to provide information about how the transaction might have affected the combined financial information presented on the basis of the accounting policies adopted by the Company in preparing the financial statements for the year ending 31 December 2017. This report is required by the Commission Regulation (EC) No 809/2004 (the “Prospectus Directive Regulation”) and is given for the purpose of complying with that requirement and for no other purpose.
Responsibilities It is the responsibility of the directors of the Company (the “Directors”) to prepare the combined pro forma financial information in accordance with Annex II items 1 to 6 of the Prospectus Directive Regulation. It is our responsibility to form an opinion, as to the proper compilation of the combined pro forma financial information and to report that opinion to you in accordance with Annex II item 7 of the Prospectus Directive Regulation. Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Annex I item 23.1 of the Prospectus Directive Regulation, consenting to its inclusion in the Prospectus. In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the combined pro forma financial information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.
Basis of Opinion We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily
149 of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the combined pro forma financial information with the Directors. We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the combined pro forma financial information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company. Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in jurisdictions outside the United Kingdom, including the United States of America, and accordingly should not be relied upon as if it had been carried out in accordance with those standards or practices.
Opinion In our opinion: (a) the combined pro forma financial information has been properly compiled on the basis stated; and (b) such basis is consistent with the accounting policies of the Company.
Declaration For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with Annex I item 1.2 of the Prospectus Directive Regulation. Yours faithfully
Deloitte LLP Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom. Deloitte LLP is the United Kingdom affiliate of Deloitte NWE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NWE LLP do not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms.
150 PART 16 Additional Information 1. Incorporation and share capital 1.1 The Company was incorporated and registered in England and Wales on 23 October 2006 as a private company limited by shares under the Companies Act 1985 with the name Henderson Infrastructure Holdco (UK) Limited and with the registered number 5975300. 1.2 On 28 January 2015, the Company was reregistered as a public limited company and changed its name to John Laing Group plc. 1.3 The Company’s registered office and principal place of business is at 1 Kingsway, London WC2B 6AN, United Kingdom and its telephone number is +44 020 7901 3200. 1.4 The principal laws and legislation under which the Company operates and the ordinary shares have been created are the Act and regulations made thereunder. 1.5 As at 7 March 2018 (being the Latest Practicable Date prior to the publication of this Prospectus), the Company had 366,960,134 Shares in issue. 1.6 The share capital history of the Company is as follows: 1.6.1 on incorporation the authorised share capital of the Company was £1,000 divided into 1,000 ordinary shares of £1 each; 1.6.2 on 21 December 2006, by a written resolution, the Company subdivided its issued share capital of £1 into 100,000,000 ordinary shares of £0.00000001 each and authorised the following redesignation of issued ordinary shares: • 74,000,000 ordinary shares were redesignated as X ordinary shares; and • 26,000,000 ordinary shares were redesignated as Y ordinary shares; 1.6.3 on 18 December 2007, by a written resolution, the Company redesignated its issued share capital of 74,000,000 X ordinary shares of £0.00000001 each and 26,000,000 Y Shares of £0.00000001 each as 100,000,000 ordinary shares of £0.00000001 each; 1.7 as part of its reorganisation in preparation for its initial public offering in February 2015, the Company entered into an intra group sale and purchase agreement on 27 January 2015, pursuant to which Henderson Infrastructure Holdco (Jersey) Limited transferred its shareholding of 2,761,933 ordinary shares in Henderson Infrastructure Holdco Limited to the Company in consideration for the issue by the Company of 100,000,000 ordinary shares of £0.00000001 each in the Company; 1.7.1 on 27 January 2015, by written resolution, the Company consolidated its 200,000,000 ordinary shares of £0.00000001 each into 20 ordinary shares of 10 pence each; 1.7.2 on 27 January 2015, the Company entered into an assignment agreement pursuant to which Henderson Infrastructure Holdco (Jersey) Limited assigned to the Company the amount of £630,000,000 due from Henderson Infrastructure Holdco Limited under shareholder loans in consideration for the issue of 299,999,980 ordinary shares of 10 pence each in the Company to Henderson Infrastructure Holdco (Jersey) Limited; 1.7.3 on 27 January 2015, by written resolution, the Company undertook a reduction of its share premium by £500,000,000 from the existing share premium account of £600,000,000 to £100,000,000. 1.7.4 On 17 February 2015, the Company issued 66,923,076 Shares of 10p each pursuant to its initial public offering.
151 1.7.5 The following table shows the changes in the share capital of the Group which occurred from 17 February 2015 to the Latest Practicable Date:
Number of ordinary shares At 17 February 2015 ...... 366,923,076 At 1 January 2016 ...... 366,923,076 At 1 January 2017 ...... 366,923,076 Issued pursuant to the Company’s Deferred Share Bonus Plan on 13 March 2017 . 37,058 At 1 January 2018 ...... 366,960,134 At 7 March 2018 (being the Latest Practicable Date) ...... 366,960,134 1.7.6 Immediately prior to the publication of this Prospectus, the issued share capital of the Company was £36,696,013.40, comprising 366,960,134 Shares of 10 pence each, (all of which were fully paid or credited as fully paid). 1.7.7 Subject to Rights Issue Admission, 122,320,044 Rights Issue Shares will be issued at a price of 177p per Rights Issue Share. This will result in the issued share capital of the Company increasing by approximately 33 per cent. Qualifying Shareholders who take up their pro rata entitlement in full will suffer no dilution to their interests in the Company. Qualifying Shareholders who do not take up any of the rights to subscribe for the Rights Issue Shares will be diluted by 25 per cent. following the Rights Issue. 1.7.8 Immediately following completion of the Rights Issue, the issued share capital of the Company is expected to be £48,928,018 comprising 489,280,178 Shares of 10 pence each (all of which will be fully paid or credited as fully paid). 1.8 On 11 May 2017, by resolutions passed at the Company’s Annual General Meeting: 1.8.1 the Directors were authorised pursuant to section 570 of the Act, to allot equity securities (as defined in the Act) for cash under the authority given by that resolution and/or to sell ordinary shares held by the Company as treasury shares for cash as if section 561(1) of the Act did not apply to any such allotment or sale, such authority to be limited: (a) to the allotment of equity securities in connection with an offer of equity securities (but in the case of the authority granted under resolution 13(a)(ii), by way of a rights issue only): (i). to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and (ii). to people who are holders of other equity securities, if this is required by the rights of those securities or, if the Board considers it necessary, as permitted by the rights of those securities And so that the Board may impose any limitations or restrictions and make any arrangements which it considers necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter; and (b) To the allotment of equity securities or sale of treasury shares (otherwise than under paragraph (i) above) up to a nominal amount of £1,834,615, being approximately 5 per cent. of the issued ordinary share capital of the Company as at 6 March 2017. Such authority to expire at the end of the next Annual General Meeting of the Company (or, if earlier, at the close of business on 11 August 2018) but, in each case, prior to its expiry the Company may make offers, and enter into agreements, which would, or might, require equity securities to be issued (and sell treasury shares) under any such offer or agreement as if the authority had not expired. 1.8.2 the Directors were authorised, pursuant to section 570 and section 573 of the Act, and in addition to the authority granted under paragraph 1.8.1 above, to allot equity securities (as defined in the Act) for cash under the authority given by that resolution and/or to sell ordinary shares held by the Company as treasury shares for cash as if section 561 of the Act did not apply to any such allotment or sale, such authority to be: (a) limited to the allotment of equity securities or sale of treasury shares up to a nominal amount of £1,834,615, being approximately 5 per cent. of the issued ordinary share capital of the Company as at 6 March 2017; and
152 (b) used only for the purposes of financing (or refinancing, if the authority is to be used within six months after the original transaction) a transaction which the Board of the Company determines to be an acquisition or other capital investment of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group Group prior to 11 May 2017, Such authority to expire at the end of the next Annual General Meeting of the Company (or, if earlier, at the close of business on 11 August 2018) but, in each case, prior to its expiry the Company may make offers, and enter into agreements, which would, or might, require equity securities to be issued (and sell treasury shares) under any such offer or agreement as if the authority had not expired. 1.9 Save as disclosed above and in paragraph 5 below: 1.9.1 no share or loan capital of the Company has, within three years of the date of this Prospectus, been issued or agreed to be issued, or is now proposed to be issued (other than pursuant to the Rights Issue), fully or partly paid, either for cash or for a consideration other than cash, to any person; 1.9.2 no commissions, discounts, brokerages or other special terms have been granted by the Company in connection with the issue or sale of any share or loan capital of any such company; and 1.9.3 no share or loan capital of the Company is under option or agreed conditionally or unconditionally to be put under option. 1.10 The Company will be subject to the continuing obligations of the FCA with regard to the issue of shares for cash. The provisions of section 561(1) of the Act (which confer on shareholders rights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid up in cash other than by way of allotment to employees under an employees’ share scheme as defined in section 1166 of the Act) apply to the issue of shares in the capital of the Company except to the extent such provisions are disapplied as referred to in paragraph 1.7.2 above.
2. Articles of Association Within the Articles of Association of the Company (the “Articles”), references to any gender shall include the other genders. The Articles include provisions to the following effect:
2.1 Share rights Subject to the provisions of the Act, and without prejudice to any rights attached to any existing shares or class of shares: (i) any share may be issued with such rights or restrictions as the Company may by ordinary resolution determine or, subject to and in default of such determination, as the Board shall determine; and (ii) shares may be issued which are to be redeemed or are liable to be redeemed at the option of the Company or the holder and the Board may determine the terms, conditions and manner of redemption of such shares provided that it does so prior to the allotment of those shares.
2.2 Voting rights Subject to any rights or restrictions attached to any shares, on a vote on a resolution on a show of hands every member who is present in person shall have one vote and on a vote on a resolution on a poll every member present in person or by proxy shall have one vote for every share of which he is the holder. No member shall be entitled to vote at a general meeting or at a separate meeting of the holders of any class of shares in the capital of the Company, either in person or by proxy, in respect of a share unless all moneys presently payable by him in respect of that share have been paid. If at any time the Board is satisfied that any member, or any other person appearing to be interested in shares held by such member, has been duly served with a notice under section 793 of the Act and is in default for the prescribed period in supplying to the Company the information thereby required, or, in purported compliance with such a notice, has made a statement which is false or inadequate in a material particular, then the Board may, in its absolute discretion at any time thereafter by notice to such member direct that, in respect of the shares in relation to which the default occurred, the member shall not be entitled to attend or vote either personally or by proxy at a general meeting or at a separate meeting of the holders of that class of shares or on a poll.
153 2.3 Dividends and other distributions Subject to the provisions of the Act, the Company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the Board. Except as otherwise provided by the rights and restrictions attached to shares, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid, but no amount paid on a share in advance of the date on which a call is payable shall be treated for these purposes as paid on the share. Subject to the provisions of the Act, the Board may pay interim dividends if it appears to the Board that they are justified by the profits of the Company available for distribution. If the share capital is divided into different classes, the Board may pay interim dividends on shares which confer deferred or non preferred rights with regard to dividends as well as on shares which confer preferential rights with regard to dividends, but no interim dividend shall be paid on shares carrying deferred or non preferred rights if, at the time of payment, any preferential dividend is in arrears, and pay at intervals settled by it any dividend payable at a fixed rate if it appears to the Board that the profits available for distribution justify payment. If the Board acts in good faith it shall not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on any shares having deferred or non preferred rights. No dividend or other moneys payable in respect of a share shall bear interest against the Company unless otherwise provided by the rights attached to the share. Except as otherwise provided by the rights and restrictions attached to any class of shares, all dividends will be declared and paid according to the amounts paid up on the shares on which the dividend is paid. The Board may, if authorised by an ordinary resolution of the Company, offer any holder of shares the right to elect to receive shares, credited as fully paid, by way of scrip dividend instead of cash in respect of the whole (or some part, to be determined by the Board) of all or any dividend. Any dividend which has remained unclaimed for 12 years from the date when it became due for payment shall, if the Board so resolves, be forfeited and cease to remain owing by the Company. Except as provided by the rights and restrictions attached to any class of shares, the holders of the Company’s shares will under general law be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings. A liquidator may, with the sanction of a special resolution and any other sanction required by the Insolvency Act 1986, divide among the members in specie the whole or any part of the assets of the Company and may, for that purpose, value any assets and determine how the division shall be carried out as between the members or different classes of members.
2.4 Variation of rights Subject to the provisions of the Act, rights attached to any class of shares (unless otherwise provided by the terms of allotment of the shares of that class) may be varied or abrogated with the written consent of the holders of three quarters in nominal value of the issued shares of the class (excluding any shares of that class held as treasury shares), or the sanction of a special resolution passed at a separate general meeting of the holders of the shares of the class.
2.5 Lien and forfeiture The Company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys payable to the Company (whether presently or not) in respect of that share. The Company may sell, in such manner as the Board determines, any share on which the Company has a lien if a sum in respect of which the lien exists is presently payable and is not paid within 14 clear days after notice has been sent to the holder of the share, or to the person entitled to it by transmission, demanding payment and stating that if the notice is not complied with the share may be sold. Subject to the terms of the allotment, the Board may from time to time make calls on the members in respect of any moneys unpaid on their shares. Each member shall (subject to receiving at least 14 clear days’ notice) pay to the Company the amount called on his shares. If a call or any instalment of a call remains unpaid in whole or in part after it has become due and payable, the board may give the person from whom it is due not less than 14 clear days’ notice requiring payment of the amount unpaid together with any interest which may have accrued and any costs, charges and expenses incurred by the Company by reason of such non payment. The
154 notice shall name the place where payment is to be made and shall state that if the notice is not complied with the shares in respect of which the call was made will be liable to be forfeited.
2.6 Limitations on shareholdings by certain relevant holders The Articles contain provisions restricting ownership of Shares in the Company by certain persons in certain circumstances where the Company may become an investment company as defined by the US Investment Company Act of 1940, as amended, or where the assets of the Company may be considered “plan assets” within the meaning of ERISA and the rules and regulations made thereunder. The Board may by notice in writing require any member or any other person appearing to be interested or appearing to have been interested in Shares in the Company to disclose to the Company in writing such information as the Board shall require relating to the ownership of or interests in the Shares in question as lies within the knowledge of such member or other person (supported, if the Board so requires, by a statutory declaration and/or by independent evidence) including (without prejudice to the generality of the foregoing) any information which the Company is entitled to seek pursuant to section 793 of the Act and any information which the Board shall deem necessary or desirable in order to determine whether any Shares are “Relevant Shares” (meaning Shares in the Company held, directly or indirectly, by US persons that are not “qualified purchasers” within the meaning of the US Investment Company Act of 1940, as amended, or persons that are Benefit Plan Investors (including directly or through or as nominee) or which are deemed to be so held). Whether or not a notice described above has been given, the Board may by notice in writing require any member or any other person appearing to be interested or appearing to have been interested in Shares in the Company to demonstrate to the satisfaction of the Board that the Shares in question are not Relevant Shares. Any person on whom such notice has been served and any other person who is interested in such Shares may within 14 days of such notice (or such longer period as the Board may consider reasonable) make representations to the Board as to why such Shares should not be treated as Relevant Shares but if, after considering any such representations and such other information as seems to them relevant, the Board believes such Shares to be Relevant Shares, the Board may determine that such Shares shall be deemed to be Relevant Shares and they shall thereupon be treated as such. The Board may give notice to the holder of any Relevant Shares and, if it so chooses, to any other person appearing to it to be interested in such Relevant Shares calling for such person to make a disposal or disposals of Relevant Shares such that the Relevant Shares cease to be Relevant Shares (a “Required Disposal”) within 14 days of receipt of such notice or such longer period as the Board considers reasonable. The Board may extend the period in which any such notice is required to be complied with and may withdraw any such notice (whether before or after expiry of the period referred to) if it appears to it that the Shares to which the notice relates are not or are no longer Relevant Shares or in any other circumstances the Board sees fit. If the Board is not satisfied that a required disposal has been made by the expiry of the 14 day period (as may be extended), no transfer of any of the Relevant Shares to which the notice relates may be made or registered other than a transfer made pursuant to this provision or unless such notice is withdrawn. If a notice given under this provision has not been complied with in all respects to the satisfaction of the Board or withdrawn, the Board shall, so far as it is able, make a Required Disposal (or procure that a Required Disposal is made) and shall give written notice of such disposal to those persons on whom the notice was served. The holder of the Shares duly disposed of and all other persons interested in such Shares shall be deemed irrevocably and unconditionally to have authorised the Board to make such Required Disposal. The manner, timing and terms of any such Required Disposal made or sought to be made by the Board (including but not limited to the price or prices at which the same is made and the extent to which assurance is obtained that no transferee is or would become a relevant holder) shall be such as the Board determines (based on advice from bankers, brokers or other persons the Board considers appropriate to be consulted by it for the purpose) to be reasonably obtainable having regard to all the circumstances, including but not limited to the number of Shares to be disposed of and any requirement that the disposal be made without delay; and the Board shall not be liable to any person (whether or not a relevant holder) for any of the consequences of reliance on such advice. The proceeds of the Required Disposal shall be received by the Company or by any person nominated by the Company whose receipt shall be a good discharge for the purchase money and shall be paid (without any interest being payable in respect of it and after deduction of any expenses incurred by the Board in the sale) to the former holder (or, in the case of joint holders, the first of them named in the register) upon surrender by him or on his behalf to the Company for cancellation of any certificate in respect of the transferred Shares
155 2.7 Transfer of shares A member may transfer all or any of his certificated shares by an instrument of transfer in any usual form or in any other form which the Board may approve. An instrument of transfer shall be signed by or on behalf of the transferor and, unless the share is fully paid, by or on behalf of the transferee. An instrument of transfer need not be under seal. The Board may, in its absolute discretion, refuse to register the transfer of a certificated share which is not fully paid, provided that the refusal does not prevent dealings in shares in the Company from taking place on an open and proper basis. The Board may also refuse to register the transfer of a certificated share unless the instrument of transfer: 2.7.1 is lodged, duly stamped (if stampable), at the office or at another place appointed by the Board accompanied by the certificate for the share to which it relates and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer; 2.7.2 is in respect of one class of share only; and 2.7.3 is in favour of not more than four transferees. If the Board refuses to register a transfer of a share in certificated form, it shall send the transferee notice of its refusal within two months after the date on which the instrument of transfer was lodged with the Company. No fee shall be charged for the registration of any instrument of transfer or other document relating to or affecting the title to a share. Subject to the provisions of the Regulations, the Board may permit the holding of shares in any class of shares in uncertificated form and the transfer of title to shares in that class by means of a relevant system and may determine that any class of shares shall cease to be a participating security.
2.8 Alteration of share capital Subject to the Act and the provisions of the Articles, the Company may by ordinary resolution increase, consolidate or sub divide its share capital or convert stock into paid up shares.
2.9 Purchase of own shares Subject to the Act and without prejudice to any relevant special rights attached to any class of shares, the Company may purchase any of its own shares of any class in any way and at any price (whether at par or above or below par).
2.10 General meetings The Board shall convene and the Company shall hold general meetings as annual general meetings in accordance with the requirements of the Act. The Board may call general meetings whenever and at such times and places as it shall determine.
2.11 Directors 2.11.1 Appointment of Directors Unless otherwise determined by ordinary resolution, the number of Directors shall be not less than two but shall not be subject to any maximum in number. Directors may be appointed by ordinary resolution of Shareholders or by the Board.
2.11.2 No share qualification A Director shall not be required to hold any shares in the capital of the Company by way of qualification.
2.11.3 Annual retirement of Directors At every annual general meeting held after the first annual general meeting after the date of adoption of the Articles, all Directors at the date of notice of annual general meeting shall retire from office.
156 2.11.4 Remuneration of Directors The emoluments of any Director holding executive office for his services as such shall be determined by the Board, and may be of any description. The ordinary remuneration of the Directors who do not hold executive office for their services (excluding amounts payable under any other provision of the Articles) shall not exceed in aggregate £750,000 per annum or such higher amount as the Company may from time to time by ordinary resolution determine. Subject thereto, each such Director shall be paid a fee for their services (which shall be deemed to accrue from day to day) at such rate as may from time to time be determined by the Board. In addition to any remuneration to which the Directors are entitled under the Articles, they may be paid all travelling, hotel and other expenses properly incurred by them in connection with their attendance at meetings of the Board or committees of the Board, general meetings or separate meetings of the holders of any class of shares or of debentures of the Company or otherwise in connection with the discharge of their duties.
2.11.5 Permitted interests of Directors Subject to the provisions of the Act, and provided that he has disclosed to the Board the nature and extent of his interest (unless the circumstances referred to in section 177(5) or section 177(6) of the Act apply, in which case no such disclosure is required), a Director notwithstanding his office: 2.11.5.1 may be a party to, or otherwise interested in, any transaction or arrangement with the Company or in which the Company is otherwise (directly or indirectly) interested; 2.11.5.2 may act by himself or for his firm in a professional capacity for the Company (otherwise than as auditor), and he or his firm shall be entitled to remuneration for professional services as if he were not a Director; and 2.11.5.3 may be a director or other officer of, or employed by, or a party to a transaction or arrangement with, or otherwise interested in, any body corporate in which the Company is (directly or indirectly) interested as shareholder or otherwise or with which he has such a relationship at the request or direction of the Company.
2.11.6 Restrictions on voting A Director shall not vote at a meeting of the Board or a committee of the Board on any resolution of the Board concerning a matter in which he has an interest which can reasonably be regarded as likely to give rise to a conflict with the interests of the Company, unless his interest arises only because the resolution concerns one or more of the following matters: 2.11.6.1 the giving of a guarantee, security or indemnity in respect of money lent or obligations incurred by him or any other person at the request of, or for the benefit of, the Company or any of its subsidiary undertakings; 2.11.6.2 the giving of a guarantee, security or indemnity in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which the Director has assumed responsibility (in whole or part and whether alone or jointly with others) under a guarantee or indemnity or by the giving of security; 2.11.6.3 a contract, arrangement, transaction or proposal concerning an offer of shares, debentures or other securities of the Company or any of its subsidiary undertakings for subscription or purchase, in which offer he is or may be entitled to participate as a holder of securities or in the underwriting or sub underwriting of which he is to participate; 2.11.6.4 a contract, arrangement, transaction or proposal concerning any other body corporate in which he or any person connected with him is interested, directly or indirectly, and whether as an officer, shareholder, creditor or otherwise, if he and any persons connected with him do not to his knowledge hold an interest (as that term is used in sections 820 to 825 of the Act) representing 1 per cent. or more of either any class of the equity share capital (excluding any shares of that class held as treasury shares) of such body corporate (or any other body corporate through which his interest is derived) or of the voting rights available to members of the relevant body corporate (any such interest being deemed for the purpose of this Article to be likely to give rise to a conflict with the interests of the Company in all circumstances):
157 2.11.6.5 a contract, arrangement, transaction or proposal for the benefit of employees of the Company or of any of its subsidiary undertakings which does not award him any privilege or benefit not generally accorded to the employees to whom the arrangement relates; and 2.11.6.6 a contract, arrangement, transaction or proposal concerning any insurance which the Company is empowered to purchase or maintain for, or for the benefit of, any Directors or for persons who include Directors.
2.11.7 Indemnity of officers Subject to the provisions of the Act, but without prejudice to any indemnity to which the person concerned may otherwise be entitled, every Director or other officer of the Company (other than any person (whether an officer or not) engaged by the Company as auditor) shall be indemnified out of the assets of the Company against any liability incurred by him for negligence, default, breach of duty or breach of trust in relation to the affairs of the Company, provided that this paragraph shall be deemed not to provide for, or entitle any such person to, indemnification to the extent that it would cause this paragraph, or any element of it, to be treated as void under the Act.
3. Directors’ and Senior Managers’ interests and major Shareholders 3.1 The following table sets out the interests of the Directors and the Senior Managers as at the Latest Practicable Date and immediately following completion of the Rights Issue:
% of % of existing Number of issued share Number of issued share Shares following capital following Shares as at capital as at the Rights the Rights Director/Senior Manager 7 March 2018 7 March 2018 Issue(1) Issue(2) Phil Nolan ...... 110,256 0.0300 147,008 0.0300 Will Samuel(3) ...... — — — — Olivier Brousse ...... 168,929 0.0460 225,238 0.0460 Patrick O’Donnell Bourke ...... 141,385 0.0385 188,513 0.0385 David Rough ...... 35,256 0.0096 47,008 0.0096 Jeremy Beeton ...... 16,256 0.0044 21,674 0.0044 Toby Hiscock ...... 20,500 0.0056 27,333 0.0056 Anne Wade ...... 20,256 0.0055 27,008 0.0055 Carolyn Cattermole ...... 47,220 0.0129 62,960 0.0129 Chris Waples ...... 106,432 0.0290 141,909 0.0290 Anthony Phillips ...... 35,000 0.0095 46,666 0.0095 Justin Bailey ...... — — — — Ross McArthur ...... 5,212 0.0014 6,949 0.0014 Mark Westbrook ...... — — — — Romina Dawson-Hall ...... — — — —
Notes: (1) Assuming full take up by such persons of their entitlements (subject to any rounding adjustment) under the Rights Issue and that all of the Rights Issue Shares are issued. The Directors may decide to acquire additional rights to Rights Issue Shares in the Rights Issue.
(2) Assuming that no further Shares are issued as a result of any options or awards under the John Laing Share Schemes (described in paragraph 5 of this Part 16).
(3) Will Samuel, the Chairman Designate, has indicated his intention to acquire Ordinary Shares with a value of £100,000 following completion of the Rights Issue.
158 3.2 Major Shareholders In so far as is known to the Directors, the following are the interests (within the meaning of Part VI of the Companies Act 2006, as amended) which represent, or will represent, directly or indirectly, three per cent. or more of the issued share capital of the Company as at 1 March 2018:
% of existing issued Number of Shares share capital as at Name as at 1 March 2018 1 March 2018 Standard Life Aberdeen ...... 39,095,255 10.65% Schroder Investment Management ...... 35,182,637 9.59% Fidelity Investment International ...... 32,742,522 8.92% BlackRock Inc ...... 26,872,095 7.32% Morgan Stanley Investment Management ...... 18,357,885 5.00% Janus Henderson Investors ...... 17,637,916 4.81% Baillie Gifford & Co ...... 16,326,597 4.45% GLG Partners ...... 11,318,069 3.08% Norges Bank Investment Management ...... 11,132,384 3.03% The Vanguard Group, Inc ...... 11,117,877 3.03% Save as disclosed above, in so far as is known to the Directors, there is no other person who is, directly or indirectly, interested in three per cent. or more of the issued share capital of the Company, or of any other person who can, will or could, directly or indirectly, jointly or severally, exercise control over the Company as at 7 March 2018. The Directors have no knowledge of any arrangements the operation of which may at a subsequent date result in a change of control of the Company. None of the Company’s major shareholders have or will have different voting rights attached to the shares they hold in the Company. 3.3 No Director has or has had any interest in any transactions which are or were unusual in their nature or conditions or are or were significant to the business of the Group or any of its subsidiary undertakings and which were effected by the Group or any of its subsidiaries during the current or immediately preceding financial year or during an earlier financial year and which remain in any respect outstanding or unperformed. 3.4 There are no outstanding loans or guarantees granted or provided by any member of the Group to or for the benefit of any of the Directors.
4. Directors’ terms of employment 4.1 The Directors and their functions are set out in Part 10 (Directors, Senior Management and Corporate Governance).
4.2 Executive Directors 4.2.1 Olivier Brousse receives an annual basic salary of £465,000 per annum and Patrick O’Donnell Bourke receives an annual basic salary of £346,300 per annum. 4.2.2 Each Executive Director is also eligible to participate in the John Laing Group plc Long-Term Incentive Plan 2015 (also described at paragraph 5.2 below), cash bonus scheme and John Laing Group plc Deferred Share Bonus Plan 2015 (described at paragraph 5.29 below). 4.2.3 Each Executive Director’s service agreement is terminable by either party on 12 months’ notice. The Company is entitled to terminate the Executive Directors’ employment by payment of a cash sum in lieu of notice equal to salary and the cost to the Company of providing contractual benefits (other than bonus) during what would otherwise have been the notice period. The payment in lieu of notice can, at the Company’s discretion, be paid as a lump sum or in equal monthly instalments over the notice period. There is a mechanism in the agreement to reduce the instalments where the Executive Director commences alternative employment during the notice period.
159 4.2.4 Each Executive Director is eligible for a non-pensionable annual bonus with a maximum bonus opportunity of 100 per cent. of his annual basic salary. 4.2.5 Any bonus is discretionary and subject to the achievement of performance conditions, which are set by the remuneration committee and are linked to the Company’s financial performance and personal performance. To the extent any bonus exceeds the target amount (the target amount being 60 per cent. of annual basic salary for 2018), the full amount of any excess will be deferred in Shares under the terms of the Deferred Share Bonus Plan. Awards under the John Laing Group plc Deferred Share Bonus Plan 2015 vest in equal tranches on the first, second and third anniversaries of the date of award, subject ordinarily to continued employment. 4.2.6 Each Executive Director also receives private health insurance, life insurance and income protection insurance. In relation to pensions, the Executive Directors receive, in lieu of pension, a salary supplement equal to 15 per cent. of their annual basic salary. Patrick O’Donnell Bourke also receives a car allowance. Each Executive Director is entitled to reimbursement of reasonable expenses incurred by him or her in the performance of his or her duties. 4.2.7 Each Executive Director is subject to a confidentiality undertaking without limitation in time and to non-competition, non-solicitation of clients and customers, non-solicitation of employees and non-interference with suppliers’ restrictive covenants for a period of 6 months (less any period spent on garden leave) after the termination of his employment arrangements. 4.2.8 The Company has customary directors’ and officers’ indemnity insurance in place in respect of each of the Executive Directors. The Company has entered into a qualifying third party indemnity (the terms of which are in accordance with the Companies Act 2006) with each of the Executive Directors.
4.3 Chairman and Non-Executive Directors 4.3.1 Phil Nolan is entitled to receive an annual fee of £180,000 as Chairman. His appointment as Chairman is terminable by either party giving to the other six months’ written notice or at any time in accordance with the articles of association of the Company (without prejudice to his right to receive six months’ payment in lieu of notice unless Phil Nolan’s removal in accordance with the articles of association is as a result of a serious default on his part). Phil Nolan will step down from the Board following the Company’s annual general meeting on 10 May 2018. 4.3.2 Will Samuel is entitled to an annual fee of £45,000 for his role of Chairman Designate, which will increase to £200,000 when he becomes Chairman immediately following the Company’s annual general meeting on 10 May 2018. His appointment may be terminated at any time upon written notice until such time as he becomes Chairman, after which it may be terminated by either party giving to the other six months’ written notice. His appointment may also be terminated at any time in accordance with the articles of association of the Company (without prejudice to his right to receive six months’ payment in lieu of notice (following his appointment as Chairman) unless Will Samuel’s removal is as a result of a serious default on his part. 4.3.3 The appointments of David Rough, Jeremy Beeton, Toby Hiscock and Anne Wade took effect for an initial term of three years on 17 February 2015 and were extended for a further three year term with effect from 16 February 2018. They are subject to annual re-election by the Company in general meeting. Their appointments may be terminated at any time upon written notice or in accordance with the articles of association of the Company or upon their resignation. 4.3.4 Each of David Rough, Jeremy Beeton, Toby Hiscock and Anne Wade is entitled to an annual fee of £45,000. Toby Hiscock is entitled to an additional annual fee of £15,000 for his role as chairman of the audit & risk committee. David Rough is entitled to an additional annual fee of £10,000 for his role as Senior Independent Director and Anne Wade is entitled to an additional annual fee of £10,000 for her role as chairman of the remuneration committee. 4.3.5 The Chairman, Chairman Designate and the Non-Executive Directors are entitled to reimbursement of reasonable expenses. 4.3.6 The Non-Executive Directors are not entitled to receive any compensation on termination of their appointment. Neither the Chairman, Chairman Designate nor the Non-Executive Directors are entitled to participate in the Company’s share, bonus or pension schemes. 4.3.7 The Company has customary directors’ and officers’ indemnity insurance in place in respect of the Chairman and the Non-Executive Directors. The Company has entered into a qualifying third party
160 indemnity (the terms of which are in accordance with the Companies Act 2006) with the Chairman, Chairman Designate and each of the Non-Executive Directors. 4.4 Save as set out above, there are no existing or proposed service agreements or letters of appointment between the Directors and any member of the Group.
4.5 Directors’ and Senior Management’s Remuneration Under the terms of their service contracts, letters of appointment and applicable incentive plans, in the year ended 31 December 2017, the aggregate remuneration and benefits of the directors of the Company and the Senior Management of the Group who served during the year ended 31 December 2017, consisting of fourteen individuals, was £3.8 million. Under the terms of their service contracts, letters of appointment and applicable incentive plans, during the year ended 31 December 2017, the directors of the Company were remunerated as set out below:
Annual Other Date of Joining Name Position Salary (£) Benefits (£) the Group Phil Nolan ...... Non-Executive Chairman 180,000 — January 2010 Will Samuel ...... Non-Executive Chairman Designate 2,942 — December 2017 Olivier Brousse ...... Chief Executive Officer 465,000 328,599 March 2014 Patrick O’Donnell Bourke . Group Finance Director 346,300 265,027 May 2011 David Rough ...... Senior Independent Director 55,000 — December 2014 Jeremy Beeton ...... Independent Non-Executive Director 45,000 — December 2014 Toby Hiscock ...... Independent Non-Executive Director 60,000 — June 2009 Anne Wade ...... Independent Non-Executive Director 55,000 — December 2014 4.6 There is no arrangement under which any Director has waived or agreed to waive future emoluments nor has there been any waiver of emoluments during the financial year immediately preceding the date of this Prospectus.
4.7 Directors’ and Senior Management’s current and past directorships and partnerships Set out below are the directorships (unless otherwise stated) and partnerships held by the Directors and members of Senior Management (other than, where applicable, directorships held in the Company and/or in any subsidiaries of the Company or Project Company in which the Group has invested), in the five years prior to the date of this Prospectus:
Name Current directorships / partnerships Past directorships / partnerships Phil Nolan ...... Associated British Ports Holding Enquest plc Limited Ulster Bank Limited Providence Resources Plc Affinity Water Acquisitions (Investments) Limited Affinity Water Limited Will Samuel ...... Tilney Group Limited Howdens Joinery Group plc Ecclesiastical Insurance Group plc Ecclesiastical Insurance Office plc Inchcape plc International Alert Beaufort House Trust Limited TSB Bank plc Olivier Brousse ...... Grosvenor Park 2004 Film — Partnership No. 1 LLP The Invicta Film Partnership No. 14 Brive Rugby Club 1001 Fontaines (Charity) Patrick O’Donnell Bourke . Affinity Water Limited —
161 Name Current directorships / partnerships Past directorships / partnerships David Rough ...... Brown Shipley & Co. Limited Land Securities Capital Markets plc Changing Faces Land Securities Group plc Hansteen Holdings plc LS Property Finance Company Limited Xstrata Limited Jeremy Beeton ...... SSE Plc A. Proctor Group Limited Tanah Merah Limited A. Proctor Insulation Limited MerseyLink Limited (chairman but Arqiva Broadcast Finance plc not a director) Arqiva Broadcast Holdings Limited WYG plc Arqiva Broadcast Intermediate OPG Power Ventures Plc Limited PricewaterhouseCoopers LLP Arqiva Broadcast Parent Limited (member of advisory board Arqiva Financing No 1 Limited Strathclyde University (sits on Arqiva Financing No 2 Limited governing court) Arqiva Financing No 3 plc Arqiva Financing plc Arqiva Group Holdings Limited Arqiva Group Intermediate Limited Arqiva Group Parent Limited Arqiva Holdings Limited Arqiva International Holdings Limited Arqiva Limited Arqiva PP Financing plc Arqiva Senior Finance Limited Arqiva Services Limited Arqiva Smart Financing Limited Arqiva Smart Holdings Limited Arqiva Smart Metering Limited Arqiva Smart Parent Limited Arqiva Telecoms Investment Limited Arqiva UK Broadcast Holdings Limited GSR Energy Royal Imtech BV Toby Hiscock ...... Henderson Diversified Portfolio Henderson Asia Pacific Absolute Limited Return Fund I Inc. The AlphaGen Relative Value Henderson Asia Pacific Absolute Agriculture Fund Limited Return Master Fund Inc. The AlphaGen Relative Value Master Henderson Asia Pacific Absolute Fund Limited Return Fund Limited The AlphaGen Multi-Strategy Fund Henderson Asia Pacific Limited Multi-Strategy Fund Limited The AlphaGen Multi-Strategy Master Henderson Asia Pacific Fund Limited Multi-Strategy Master Fund Limited The AlphaGen Lutra Fund Henderson Asia Pacific Select The AlphaGen Long Short Absolute Return Fund Limited Agriculture Fund Limited Henderson Asia Pacific Select The AlphaGen Long Short Absolute Return Master Fund Limited Agriculture Master Fund Limited Henderson Credit Long Short Fund The AlphaGen Rigel Fund Limited Limited The AlphaGen Rigel Master Fund Henderson Credit Long Short Master Limited Fund Limited Henderson Credit Opportunities Fund Limited Henderson European ABS Opportunity Fund Limited
162 Name Current directorships / partnerships Past directorships / partnerships Henderson European Absolute Return Fund Limited Henderson European Select Absolute Return Fund Limited Henderson Global Macro Fund Limited Henderson Global Macro Master Fund Limited Henderson North American Equity Multi-Strategy Fund Limited Henderson North American Equity Multi-Strategy Master Fund Limited Henderson Pan-European Equity Multi-Strategy Fund Limited Henderson Total Return Fund Limited Henderson UK Equity Long Short Fund Limited The AlphaGen Japan Absolute Return Fund Limited The AlphaGen Japan Select Absolute Return Fund Limited The AlphaGen Japan Select Absolute Return Master Fund Limited The AlphaGen Liquidity Events Master Fund Limited The AlphaGen Liquidity Events Fund Limited Anne Wade ...... Big Society Capital Limited ICR Global Foundation (UK) Limited Heron Foundation Guidestar International Summit Materials Holcim Ltd Leaders’ Quest (partner)
Carolyn Cattermole ...... — — Chris Waples ...... — Modus Services (Holdings) Limited Modus Services Limited Anthony Phillips ...... 12 Schubert Road Management — Company Limited Justin Bailey ...... — — Ross McArthur ...... — — Mark Westbrook ...... — — Romina Dawson-Hall . . . . — —
4.8 Within the period of five years preceding the date of this Prospectus, none of the Directors: (i) has had any convictions in relation to fraudulent offences; (ii) has been a member of the administrative, management or supervisory bodies or director or senior manager (who is relevant in establishing that a company has the appropriate expertise and experience for management of that company) of any company at the time of any bankruptcy, receivership or liquidation of such company; or (iii) has received any official public incrimination and/or sanction by any statutory or regulatory authorities (including designated professional bodies) or has ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of a company or from acting in the management or conduct of affairs of a company.
163 5. John Laing Share Schemes The Company operates the LTIP and the DSBP, both of which were adopted by the Board on 26 January 2015. The LTIP and the DSBP are for the purpose of incentivising and motivating John Laing’s employees.
Summary of John Laing Share Schemes 5.1 The principal features of the John Laing Share Schemes are summarised below.
THE LONG-TERM INCENTIVE PLAN Overview of the LTIP 5.2 The LTIP was adopted by the Board on 26 January 2015 and provides for two types of share incentive to be granted (each an “LTIP Award”): (i) a conditional share award, which entitles a participant to receive Shares for no payment; and (ii) a share option to acquire Shares at a nil (or nominal) exercise price. The remuneration committee may also decide to grant cash-based phantom awards of equivalent value to share-based awards or to satisfy share-based awards in cash. 5.3 LTIP Awards are not pensionable and may be granted over newly issued Shares, Shares held in treasury or Shares purchased in the market. 5.4 The LTIP will terminate on the 10th anniversary of its adoption but the rights of existing participants at that point will not be affected.
Eligibility 5.5 All of the Company’s employees, including its Executive Directors and employees of the Company’s subsidiaries, are eligible to participate in the LTIP at the discretion of the remuneration committee.
Grant of LTIP Awards 5.6 Subject to any applicable dealing restrictions, the remuneration committee may grant LTIP Awards under the LTIP during the period of 42 days commencing on either (i) the announcement of the Company’s results for any period or (ii) at such other time as the remuneration committee considers that exceptional circumstances exist that justify a grant. 5.7 No payment will be required for the grant of an LTIP Award. LTIP Awards are personal to the participant and may not be transferred, except on death.
Individual limits 5.8 The remuneration committee will determine the appropriate level of grant for participants. However, the maximum number of Shares under LTIP Awards granted to a participant in any financial year will have an aggregate market value, as measured at the date of grant, not exceeding 200 per cent. of the participant’s base salary. 5.9 Market value will be based on the closing middle market quotation for a Share as derived from the Official List for the dealing day immediately preceding the date of grant.
Plan limits 5.10 To the extent that Shares are to be issued to satisfy options or awards under the LTIP: (i) no options or awards may be granted under the LTIP or any other employee share plan if they would cause the aggregate number of Shares issued or issuable pursuant to options or other rights to subscribe for Shares which have been granted in the period up to the preceding 10 years under the LTIP and any other employee share plan operated by the Company to exceed 10 per cent. of the Company’s issued share capital at the proposed date of grant; and (ii) no options or awards may be granted under the LTIP, the DSBP or any other discretionary executive share plan (together the “John Laing Share Schemes”) if they would cause the aggregate number of Shares issued or issuable pursuant to options or other rights to subscribe for Shares which have been granted in the period up to the preceding 10 years under any Executive
164 Share Plan operated by the Company to exceed 5 per cent. of the Company’s issued share capital at the proposed date of grant. 5.11 Shares held in treasury will be treated as newly issued for the purpose of this limit until such time as guidelines published by institutional investor representative bodies recommend otherwise. Shares purchased in the market to satisfy awards will not count towards this limit.
Dividend equivalents 5.12 The remuneration committee may elect to make a payment (in cash and/or shares) to participants at the time of delivery of vested Shares in respect of the number of Shares which vest under an LTIP Award to reflect the value of dividends that would have been paid on such Shares during the vesting period. This amount may take into account the reinvestment of dividends.
Performance conditions 5.13 LTIP Awards will be subject to performance conditions imposed by the remuneration committee at the date of grant. Performance conditions will generally be measured over a period of at least three years. The extent to which the performance conditions are satisfied will determine how many (if any) of the Shares under an LTIP Award a participant is entitled to acquire. Performance conditions will not be capable of being retested, so that any proportion of LTIP Award which does not vest on the vesting date will lapse. 5.14 As a general principle, performance conditions will be demanding and stretching. Vesting levels will be determined on a sliding scale by reference to achievement of the performance conditions. The remuneration committee has the discretion to set different performance conditions for subsequent awards provided that, in the remuneration committee’s reasonable opinion, the new targets are not materially less challenging in the circumstances. 5.15 The remuneration committee may vary the performance conditions applying to existing LTIP Awards if an event occurs which causes the remuneration committee to consider that it would be appropriate to amend the performance conditions provided the variation is fair and reasonable and the new conditions are, in the reasonable opinion of the remuneration committee, materially no more or less difficult to satisfy than the original conditions but for the event in question.
Holding Period 5.16 Subject to a relaxation to enable the sale of such number of Shares as may be required to meet any tax liability arising on vesting or exercise, Executive Directors will be required to retain any Shares that vest or become exercisable under an LTIP Award for a minimum period of two years after the vesting date.
Vesting of LTIP Awards 5.17 LTIP Awards will usually vest on the later of (i) the third anniversary of the date of grant or on such later date as the applicable performance period expires and (ii) the date on which the remuneration committee assesses the extent to which any applicable performance conditions have been satisfied, provided (ordinarily) that the participant remains employed within the Group at that time. Vested share awards will be released to participants within 30 days of the vesting date. Vested share options will be exercisable within the period of 10 years after the date of grant after the vesting date and released to participants automatically within 30 days of the date on which the option is exercised. For Executive Directors, all such Shares (net of tax) will be subject to the holding period described in paragraph 5.16 above.
Cessation of employment 5.18 LTIP Awards will normally only vest if the participant remains in employment with the Company or one of its subsidiaries or holds office within the Group at the vesting date. If a participant leaves employment and no longer holds any office within the Group during the vesting period LTIP Awards will normally lapse. 5.19 However, if the reason for leaving is injury, disability, redundancy, retirement with the agreement of the participant’s employer, the sale of the participant’s employer or the business in which he or she is employed out of the Group or any other reason at the remuneration committee’s discretion, LTIP
165 Awards will not lapse but will vest on the normal vesting date, to the extent that the remuneration committee determines that the performance conditions have been satisfied over the full performance period but subject to a time pro rating reduction (based on the total number of complete months from the date of grant to the cessation of employment relative to the length of the vesting period). Alternatively, the remuneration committee may, in its absolute discretion, determine that LTIP Awards should vest on a date following the date of cessation of employment but prior to the normal vesting date, subject to the satisfaction of the performance conditions at such date and to a time pro rating reduction. If a participant dies, the LTIP Award will ordinarily vest on the date of death unless the remuneration committee decides it should vest on the normal vesting date, in either case subject to the satisfaction of performance conditions at the relevant time and to a time pro rating reduction. 5.20 In any of the circumstances described in paragraph 5.19, the remuneration committee may determine that the pro rating reduction should not apply at all or should apply to a lesser extent if it considers that exceptional circumstances justify such treatment.
Malus and Clawback 5.21 The Company has the right, before an LTIP Award vests, to reduce the number of Shares over which the award was granted in certain circumstances, comprising a material misstatement of audited accounts, and/or where there has been an error or reliance on misleading information when assessing the size of the LTIP Award that was granted. 5.22 The Company also has the right to require the transfer back to the Company of any benefit received by a participant on the vesting of an LTIP Award at any time during the three year period after the vesting date for that LTIP Award if there has been a material misstatement of audited accounts resulting in the over-vesting of the award, there has been an error in assessing any applicable performance condition or in calculating the number of shares vesting, resulting in an over-vesting of the award and/or it is discovered that the participant could reasonably have been dismissed during the vesting period as a result of his or her misconduct. The amount to be clawed back may be satisfied by the reduction in any future bonus to be awarded to the participant or a reduction in the vesting of outstanding LTIP Awards or any other long-term incentive awards or by the payment of a cash amount by the participant.
Variation of capital 5.23 In the event of any variation in the Company’s share capital (including a rights issue or any sub-division or consolidation of the Company’s share capital), or a demerger, special dividend or other similar event which affects the market price of a Share to a material extent, the remuneration committee may adjust the number of Shares under an LTIP Award.
Corporate events 5.24 In the event of a change of control or voluntary winding-up, unvested LTIP Awards will vest to the extent that the performance conditions have been satisfied at the time of the relevant event but subject to a time pro rating reduction (based on the number of complete months from the date of grant to the date of the relevant event relative to the length of the vesting period for the relevant LTIP Award). The remuneration committee may determine that the pro rating reduction should not apply at all or should apply to a lesser extent where it considers that exceptional circumstances apply. LTIP Awards granted in the form of options will be deemed to have been automatically exercised on the relevant vesting date. 5.25 The remuneration committee may also require LTIP Awards to be exchanged for equivalent awards over shares in a new holding company if the change of control of the Company is part of an internal corporate reorganisation (unless the remuneration committee decides otherwise, in which case LTIP Awards will vest on the same basis as described in paragraph 5.41). 5.26 In the event that a demerger, special dividend or other similar event is proposed which, in the opinion of the remuneration committee, would affect the price of a Share to a material extent, the remuneration committee may decide that LTIP Awards will vest on the same basis as described in paragraph 5.24.
Amendments 5.27 The remuneration committee may amend the LTIP in any respect. However, provisions governing eligibility requirements, the limits on the number of Shares available for LTIP Awards, the maximum entitlement of participants, the basis for determining a participant’s entitlement and the adjustment of
166 LTIP Awards following a variation of the Company’s share capital may not be altered to the advantage of participants without the prior approval of shareholders in general meeting (with the exception of minor amendments made to benefit the administration of the LTIP to take account of a change in legislation or to obtain or maintain favourable (or avoid unfavourable) tax, exchange control or regulatory treatment for eligible employees, participants or for any company in the Group). 5.28 No alteration to the material disadvantage of participants may be made without the prior consent of a majority of those participants who reply to a request for their consent.
THE DEFERRED SHARE BONUS PLAN Overview of the DSBP 5.29 The DSBP was adopted by the Board on 26 January 2015 and operates in conjunction with the Company’s executive bonus scheme. 5.30 The DSBP provides for two types of award to be granted (each a “DSBP Award”): (i) a conditional share award, which entitles a participant to receive Shares for no payment; and (ii) a share option to acquire Shares at a nil (or nominal) exercise price. The remuneration committee may also decide to grant cash-based phantom awards of equivalent value to share-based awards or to satisfy share-based awards in cash. 5.31 DSBP Awards are not pensionable and may be granted over newly issued Shares, Shares held in treasury or Shares purchased in the market. 5.32 The DSBP will terminate on the 10th anniversary of its adoption but the rights of existing participants at that point will not be affected.
Eligibility 5.33 Any employee (including Executive Directors) of the Group who is entitled to receive a cash bonus will be eligible for participation in the DSBP at the discretion of the remuneration committee. To date, participation has been limited to the Executive Directors and other members of senior management of the Group.
Grant of DSBP Awards 5.34 The remuneration committee may determine that a proportion of a participant’s annual bonus will be deferred and granted in the form of a DSBP Award. The remuneration committee’s current intention is that bonuses above a target level equal to 60 per cent. of a participant’s annual basic salary will be deferred into DSBP Awards. The value of Shares over which a DSBP Award will be granted will be based on the closing middle market quotation for a Share as derived from the Official List for the dealing day immediately preceding the date of grant or, at the remuneration committee’s discretion, the average price of a Share over a period of up to 5 dealing days prior to the date of grant. 5.35 Subject to any applicable dealing restrictions, the remuneration committee may grant DSBP Awards within 42 days after the determination of a participant’s bonus and, wherever possible, during the period of 42 days commencing on the announcement of the Company’s results for any period or otherwise at such other time as the remuneration committee considers that exceptional circumstances exist that justify a grant. 5.36 No payment will be required for the grant of a DSBP Award. DSBP Awards are personal to the participant and may not be transferred, except on death.
Plan limits 5.37 To the extent that Shares are to be issued to satisfy options or awards under the DSBP: (i) no options or awards may be granted under the DSBP or any other employee share plan if they would cause the aggregate number of Shares issued or issuable pursuant to options or other rights to subscribe for Shares which have been granted up to the preceding 10 years under the DSBP and any other employee share plan operated by the Company to exceed 10 per cent. of the Company’s issued share capital at the proposed date of grant; and
167 (ii) no options or awards may be granted under the LTIP, the DSBP or any other discretionary executive share plan (together the “John Laing Share Schemes”) if they would cause the aggregate number of Shares issued or issuable pursuant to options or other rights to subscribe for Shares which have been granted in the period up to the preceding 10 years under any Executive Share Plan operated by the Company to exceed 5 per cent of the Company’s issued share capital at the proposed date of grant. 5.38 Shares held in treasury will be treated as newly issued for the purpose of this limit until such time as guidelines published by institutional investor representative bodies recommend otherwise. Shares purchased in the market to satisfy awards will not count towards this limit.
Dividend equivalents 5.39 The remuneration committee may elect to make a payment (in cash and/or shares) to participants in respect of the number of Shares which vest under a DSBP Award to reflect the value of dividends that would have been paid on such Shares during the vesting period. This amount may take into account the reinvestment of dividends.
Performance conditions 5.40 DSBP Awards will not be subject to performance conditions.
Vesting and exercise 5.41 DSBP Awards will normally vest in three equal tranches on the first, second and third anniversaries of the date of grant of the DSBP Award, subject ordinarily to the participant remaining in employment with the Group at the relevant vesting date. Where a DBSP Award has been granted in the form of an option, that option will normally remain exercisable for a period determined by the remuneration committee at grant which shall not exceed 10 years from the date of grant.
Holding period 5.42 No post-vesting holding period will apply to Shares that vest or become exercisable under a DSBP Award.
Cessation of employment 5.43 Except in certain circumstances, set out below, a DSBP Award will lapse immediately upon a participant ceasing to be employed by or holding office within the Group. 5.44 However, if a participant so ceases because of his or her death, injury, disability, redundancy, retirement with the agreement of his employer, the sale of the participant’s employer or the business in which he or she is employed outside the Group, or in other circumstances at the discretion of the Board, his or her DSBP Award will vest on the date of cessation. A DSBP Award will not be pro-rated.
Malus and Clawback 5.45 The Company has the right, before a DSBP Award vests, to reduce the number of Shares over which the award was granted where it is discovered that the award was granted over too many Shares as a result of a material misstatement in the Company’s accounts relating to the bonus year, when there has been an error or reliance on misleading information when assessing the size of the bonus to which the DSBP Award is linked and/or the size of the DSBP Award that was granted; and/or it is discovered that the participant could reasonably have been dismissed during the bonus year as a result of his or her misconduct. 5.46 The Company may also apply clawback where the application of malus to a DSBP Award in accordance with the principles described in paragraphs 5.45 above does not enable the full amount to be recouped on the basis that the value under the relevant DSBP Award is less than the intended value to be recouped. In these circumstances the remuneration committee may decide to apply clawback within 3 years of the date of grant of a DSBP Award, to be satisfied by the reduction in any future bonus to be awarded to the participant or a reduction in the vesting of outstanding DSBP Awards or any other long-term incentive awards or by the payment of a cash amount by the participant.
168 Variation of capital 5.47 In the event of any variation in the Company’s share capital (including a rights issue or any sub-division or consolidation of the Company’s share capital), or a demerger, special dividend or other similar event which affects the market price of Shares to a material extent, the remuneration committee may adjust the number of Shares under a DSBP Award.
Corporate events 5.48 In the event of a change of control or voluntary winding-up of the Company, the DSBP Awards will vest early and in full. 5.49 The remuneration committee may also require DSBP Awards to be exchanged for equivalent awards over shares in a new holding company if the change of control of the Company is part of an internal corporate reorganisation (unless the remuneration committee decides otherwise, in which case DSBP Awards will vest on the same basis as described in paragraph 5.41). 5.50 In the event of a demerger, distribution or any other similar event which in the opinion of the remuneration committee would affect the price of a Share to a material extent, the remuneration committee may determine that DSBP Awards shall vest early and in full.
Amendments 5.51 The remuneration committee may amend the DSBP at any time. 5.52 However, provisions governing eligibility requirements, the limits on participation, the limit on the number of Shares available for DSBP Awards, the basis for determining a participant’s entitlement to and the terms of the shares or cash to be acquired and the adjustment of DSBP Awards may not be altered to the advantage of participants without the prior approval of shareholders in general meeting (with the exception of minor amendments made to benefit the administration of the DSBP to take account of a change in legislation or to obtain or maintain favourable (or avoid unfavourable) tax, exchange control or regulatory treatment for eligible employees, participants or for any company in the Group). 5.53 No alteration to the material disadvantage of participants may be made without the prior consent of a majority of those participants who reply to a request for their consent.
6. Pensions 6.1 Defined contribution schemes The Group (through Legal & General) operates a stakeholder pension scheme for UK employees under which the relevant employer makes matching contributions based on the employee’s level of contributions up to a maximum of 8 per cent. of monthly basic salary (or 12 per cent. for senior staff). Equivalent defined contribution arrangements are in place for staff located outside the United Kingdom.
6.2 Defined benefit schemes The Group operates two defined benefit pension schemes: the John Laing Pension Fund (“JLPF”) and the John Laing Pension Plan (“JLPP”). John Laing Limited (formerly John Laing plc) is the principal employer in relation to both schemes. John Laing Services Limited and Laing Investments Management Services Limited are also participating employers in relation to JLPF.
John Laing Pension Fund JLPF is the larger of the two defined benefit pension schemes. Its assets are held by a trustee board, the John Laing Pension Trust Limited (the “JLPF Trustee”), separately from the Group. As at 31 December 2017, it had 12,212 members of whom 8,086 were deferred pensioners and 4,126 were pensioners. There are no active members following JLPF’s closure to future accrual on 31 March 2011. The scheme has been closed to new members since 1 January 2002. At its last triennial valuation as at 31 March 2016, JLPF was assessed to have a deficit of £171 million on the scheme specific funding basis representing a funding level of 85 per cent. (an increase from a 75 per cent. funding level at the previous valuation as at 31 March 2013). Calculated on a buy-out basis (the cost of
169 securing all benefits with an insurer), the deficit as at 31 March 2016 would be £743 million representing a funding level of 58 per cent. The market value of JLPF’s assets was assessed to be £1,003.0 million as at 31 March 2016 (an increase from £825.8 million as at 31 March 2013). The assets of JLPF include a bulk annuity policy which provides an insured asset for meeting part of the liabilities of current pensions in payment. The value of this bulk annuity contract was assessed as at 31 March 2016 to be £245.2 million (approximately equal, as at that date, to the value of the liabilities insured) based on a scheme specific funding basis. On 4 December 2014, the Company and John Laing Limited entered into an agreement with the JLPF Trustee, the terms of which are summarised in paragraph 10.2 below. Under this agreement, the Company and John Laing Limited agreed to make a contribution of £100 million to JLPF. The obligation to make the contribution was settled by the transfer of 47,840,000 shares in John Laing Environmental Assets Group Limited (“JLEN”), representing a 29.9 per cent. interest in JLEN; a 47 per cent. interest in relation to the PPP project known as “the City Greenwich Lewisham (DLR) project”; and an amount of approximately £20,925,000 in cash (predominantly arising from the exercise of an option by Croydon Council in relation to 100 per cent. of John Laing Limited’s interest in the Croydon BWH project for £20,250,000) to be adjusted to take into account any change in the market value of the JLEN shares as at the date of the JLPF Framework Agreement. Following a triennial actuarial review as at 31 March 2016, the JLPF Trustee and John Laing Limited agreed a seven-year plan to repay the actuarial deficit of £171.0 million, under which John Laing Limited would pay a deficit contribution of £26.5 million in March 2018, £29.1 million in March 2019 and £24.9 million in March 2020 and annual deficit contributions thereafter through to 2023. The next triennial actuarial valuation of JLPF will be as at 31 March 2019.
John Laing Pension Plan JLPP’s assets are held by a trustee board, John Laing Pension Plan Trustees Limited, separately from the Group. JLPP had 439 members as at 31 December 2017, of whom 109 were deferred pensioners and 330 were pensioners. JLPP closed to new members on 31 December 1996, with the last active member leaving the Group in 2003. At its last triennial valuation as at 31 March 2017, JLPP’s future liabilities were valued at £12.0 million while its assets were valued at £13.1 million representing a funding surplus of £1.1 million on a scheme specific funding basis and a funding level of 109.2%. Consequently, the Company is not currently making contributions and all expenses are met from JLPP’s assets as and when they arise.
7. Underwriting arrangements 7.1 Underwriting Agreement On 8 March 2018, the Company and the Joint Bookrunners entered into the Underwriting Agreement in connection with the Rights Issue. Subject to the terms and conditions of the Underwriting Agreement, the Joint Bookrunners (as agents for and on behalf of the Company) have agreed severally (and not jointly or jointly and severally) to use reasonable endeavours to procure subscribers for any Rights Issue Shares which have not been taken up under the Rights Issue as soon as reasonably practicable and in any event by not later than 5.00 p.m. on the second dealing day after the last date for acceptance under the Rights Issue, for an amount which is not less than the total of the Rights Issue Price multiplied by the number of such Rights Issue Shares for which subscribers are so procured plus the expenses of procurement (including any applicable brokerage and commissions and VAT). If and to the extent that the Joint Bookrunners are unable to procure subscribers on the basis outlined above, the Joint Bookrunners have agreed to subscribe for, on a several basis (in their due proportions), any remaining Rights Issue Shares. In consideration of their services provided under the Underwriting Agreement, and provided that the Underwriting Agreement becomes wholly unconditional and is not terminated in accordance with its terms before Rights Issue Admission, the Company shall pay the Joint Bookrunners an aggregate commission of 2.00 per cent. of the Rights Issue Price multiplied by the aggregate number of Rights Issue Shares (plus any applicable VAT). Out of such commission payable to the Joint Bookrunners, the Joint Bookrunners have agreed to pay or procure the payment of sub-underwriting commissions payable to such persons (if any) as the Joint Bookrunners may procure to subscribe for Rights Issue Shares. The Company may also pay to the Joint Bookrunners an aggregate commission of 0.25 per cent. of the Rights Issue Price multiplied by the aggregate number of Rights Issue Shares (plus any applicable VAT) to be allocated and paid by the Company as between
170 the Joint Bookrunners in the Company’s sole discretion. Irrespective of whether Rights Issue Admission occurs, the Company shall bear all expenses of or incidental to the Rights Issue, Rights Issue Admission and the arrangements contemplated by the Underwriting Agreement. The obligations of the Joint Bookrunners under the Underwriting Agreement are conditional on certain conditions customary in agreements of this type including, inter alia: (a) the Company complying with its obligations under the Underwriting Agreement to the extent they fall to be performed before Rights Issue Admission; (b) no supplementary prospectus being published by or on behalf of the Company prior to Rights Issue Admission; (c) in the good faith opinion of the Joint Bookrunners there having been no material adverse change in, nor any development reasonably likely to result in a material adverse change in or affecting, the condition, earnings, business affairs or prospects of the Company or the Group taken as a whole, whether or not arising in the ordinary course of business, at any time before Rights Issue Admission; (d) Rights Issue Admission becoming effective by not later than 8.00 a.m. on 9 March 2018 (or such later time and/or date (being not later than 8.00 a.m. on 5 April 2018) as the Joint Bookrunners may determine); and (e) Euroclear having approved admission and enablement of the Nil Paid Rights and Fully Paid Rights as participating securities within CREST on or prior to Rights Issue Admission and such Shares continuing to be participating securities within CREST. If any of the conditions in the Underwriting Agreement is not satisfied (or waived by the Joint Bookrunners), or becomes incapable of being satisfied, by the required time and date (or by such later time and/or date (being not later than 3.00 p.m. on 5 April 2018 as the Joint Bookrunners may agree) then, save for certain exceptions, the obligations of the parties under the Underwriting Agreement shall cease and terminate without prejudice to any liability for any prior breach of the Underwriting Agreement. In addition, the Underwriting Agreement may be terminated by the Joint Bookrunners prior to Rights Issue Admission upon the occurrence of certain specified events, including, among other things, for force majeure, in which case the Rights Issue will not proceed. Under the Underwriting Agreement, the Company has given certain customary (for a transaction of this nature) indemnities, representations, warranties and undertakings to the Joint Bookrunners concerning, among other things, the accuracy of information in this Prospectus, and in relation to other matters relating to the Group and its business. Under the terms of the Underwriting Agreement, the Company has agreed, during a period of 180 calendar days commencing on the date of the commencement of dealings in Rights Issue Shares, fully paid, not to: (A) undertake any consolidation or subdivision of its share capital or any capitalisation issue; or (B) directly or indirectly, issue, allot, offer, pledge, sell, lien, charge, transfer, contract to sell, lend, sell any option or contract to purchase, purchase any option or contract to sell, grant any right in respect of or security over or any option, right or warrant to purchase, deposit into any depositary receipt facility or otherwise transfer or dispose of any Shares or any securities convertible into or exercisable or exchangeable for Shares or file any registration statement under the Securities Act with respect to any of the foregoing (or publicly announce the same); or (C) enter into any swap or other agreement, arrangement or transaction that transfers or confers in whole or in part, directly or indirectly, any of the economic consequences of the ownership of its Shares; or (D) carry out any capital increases (including but not limited to any issues of Shares) or issue any convertible bonds, exchangeable bonds or other securities which are convertible, exchangeable, exercisable into, or otherwise give the right to subscribe for or acquire its Shares, whether directly or indirectly, (whether any such swap, agreement, arrangement or transaction described in (C) or (D) above is to be settled by delivery of Shares, cash or otherwise), except in each case with the prior written consent of the Joint Bookrunners (such consent not to be unreasonably withheld or delayed), provided that the restrictions above shall not apply in relation to (i) the issuance of the Rights Issue Shares to be issued in the context of the Rights Issue, and (ii) the grant or award in the ordinary course of options or Shares under, and allotments and issuances of Shares pursuant to the Company’s executive or employee share schemes or incentive plans existing on the date of the Underwriting Agreement.
171 8. Subsidiaries, investments and principal establishments The Company is the holding company of the Group. In addition to the Group’s investments in projects as set forth in Part 9 (Business Description—Portfolio Overview and Valuation), the principal subsidiaries and subsidiary undertakings of the Company are as follows:
8.1 Subsidiaries and subsidiary undertakings
Class and percentage of ownership Country of incorporation and interest and Name registered office voting power Field of activity John Laing Holdco Limited . England and Wales; 100% Holding company for 1 Kingsway, London, investments WC2B 6AN John Laing Limited ...... England and Wales; 100% Holding company for 1 Kingsway, London, investments WC2B 6AN John Laing Investments Limited ...... England and Wales; 100% Holding company for 1 Kingsway, London, investments WC2B 6AN John Laing Projects & Developments (Holdings) Limited ...... England and Wales; 100% Holding company for certain 1 Kingsway, London, rail-related assets and WC2B 6AN property developments Laing Property Limited . . . . England and Wales; 100% Holding company for property 1 Kingsway, London, developments WC2B 6AN John Laing Capital Management Limited . . . . England and Wales; 100% Investment management 1 Kingsway, London, company WC2B 6AN John Laing Services Limited England and Wales; 100% Management of retained 1 Kingsway, London, construction liabilities WC2B 6AN John Laing Social Infrastructure Limited . . . England and Wales; 100% Holding company for 1 Kingsway, London, accommodation investments WC2B 6AN John Laing (USA) Limited . England and Wales; 100% Management, staff and 1 Kingsway, London, administrative WC2B 6AN services—operating in the US Laing Investments Management Services Limited ...... England and Wales; 100% Management, staff and 1 Kingsway, London, administrative services WC2B 6AN Laing Investments Management Services (Australia) Limited . . . . . England and Wales; 100% Management, staff and 1 Kingsway, London, administrative WC2B 6AN services—operating in Australia Laing Investments Management Services (Canada) Limited ...... England and Wales; 100% Management, staff and 1 Kingsway, London, administrative WC2B 6AN services—operating in Canada
172 Class and percentage of ownership Country of incorporation and interest and Name registered office voting power Field of activity Laing Investments Management Services (Netherlands) Limited . . . England and Wales; 100% Management, staff and 1 Kingsway, London, administrative WC2B 6AN services—operating in the Netherlands Laing Investments Management Services (Germany) Limited . . . . . England and Wales; 100% Management, staff and 1 Kingsway, London, administrative WC2B 6AN services—operating in Germany John Laing Infrastructure Limited ...... England and Wales; 100% Holding company for roads 1 Kingsway, London, investments WC2B 6AN John Laing Investments Overseas Holdings Limited England and Wales; 100% Holding company for 1 Kingsway, London, overseas investments WC2B 6AN Laing Investments Management Services (New Zealand) Limited . . England and Wales; 100% Management, staff and 1 Kingsway, London, administrative WC2B 6AN services—operating in New Zealand John Laing Infrastructure (German Holdings) Limited England and Wales; 100% Holding company for German 1 Kingsway, London, SPV road operating WC2B 6AN companies John Laing Investments NZ Holdings Limited ...... England and Wales; 100% Holding company for 1 Kingsway, London, investments WC2B 6AN John Laing & Son BV . . . . Netherlands; Schiphol 100% Investment manager and Boulevard 253, Schiphol security provider 1118BH, Netherlands John Laing Investments Netherlands Holdings BV . Netherlands; Schiphol 100% Holding company for Boulevard 253, 118 BH investments Schiphol, Netherlands
8.2 Principal establishments The following are the principal establishments of the Group:
Type of Name and location facility Tenure LIMS UK, 1 Kingsway London ...... Office Expiring 3 November 2026. LIMS Netherlands, WTC Schiphol Airport Amsterdam ...... Office Expiring 30 September 2021 (with 1 year’s prior written notice), otherwise extends 5 years. Break option in October 2019 (with 12 months prior written notice) LIMS Australia, 303 Collins Street Melbourne ...... Office Expiring 28 February 2018, in process of extending to 28 February 2019
173 Type of Name and location facility Tenure LIMS Australia, 15 Castlereagh Street Sydney ...... Office Expiring 31 January 2020 LIMS New Zealand, West Plaza Business Centre Auckland ...... Office Renews annually, expiring 31 October each year LIMS Canada, 120 Adelaide Street Toronto ...... Office Expiring 31 May 2019 John Laing USA, 780 Third Avenue New York ...... Office Expiring 30 April 2020 John Laing USA, Downtown City National Plaza, 515 South Flower Street, Los Angeles ...... Office Agreement expires 31/08/18, if notice served by 31/07/18, otherwise renews for another 3 months. A longer-term LA office is anticipated to be secured by then John Laing USA, Pembrook Commons Florida ...... Office Expiring 31 October 2018 if written notice served three months prior, otherwise renews annually
9. Statutory auditors Deloitte LLP, whose registered office is at 2 New Street Square, London EC4A 3BZ, are the auditors of the Group. Deloitte LLP is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales.
10. Material contracts The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Company or another member of the Group: (a) within the two years immediately preceding the date of this Prospectus which are, or may be, material to the Company or any member of the Group, and (b) at any time and contain provisions under which the Company or any member of the Group has an obligation or entitlement which is, or may be, material to the Company or any member of the Group as at the date of this Prospectus:
10.1 Underwriting Agreement The Underwriting Agreement described in paragraph 7.1 of this Part 16 (Additional Information).
10.2 JLPF Arrangement JLPF Framework Agreement On 4 December 2014, John Laing Limited (formerly John Laing plc) and John Laing Group plc entered into an agreement (the “JLPF Framework Agreement”) with the JLPF Trustee. Under the JLPF Framework Agreement, in return for John Laing plc and John Laing Group plc agreeing to procure the contribution of certain assets to JLPF, the JLPF Trustee executed a schedule of contributions and recovery plan and agreed certain provisions relating to the ongoing management of JLPF. Under the JLPF Framework Agreement: • John Laing plc and John Laing Group plc procured the contribution of an aggregate value of £100 million which was satisfied by the transfer of certain assets to JLPF on 17 February 2015. These assets comprised (i) 47,840,000 shares in JLEN (equivalent to 29.9 per cent. of the issued share capital); (ii) 705,000 ordinary shares in the holding company of the City Greenwich Lewisham (DLR) project (equivalent to a 47 per cent. interest); and (iii) an amount of approximately £20,925,000 in cash (predominantly arising from the exercise of an option by Croydon Council in relation to 100 per cent. of John Laing plc’s interest in the Croydon BWH project for £20,250,000) adjusted to take into account any change in the market value of the JLEN Shares as at the date of the JLPF Framework Agreement and at 17 February 2015. • The JLPF Trustee entered into a new schedule of contributions and recovery plan on 4 December 2014 which provided that certain obligations of John Laing plc to make potential additional contributions to
174 JLPF would cease to apply following the contributions of assets described above. For more information on the deficit recovery amounts, see paragraph 3.3 in Part 12 (Operating and Financial Review). • On 17 February 2015 John Laing Group plc entered into a guarantee of all present and future obligations of John Laing plc, John Laing Services Limited and Laing Investments Management Services Limited to make payments to JLPF. The guarantee will remain in place until 23 December 2024 and will be additional to an existing guarantee by John Laing plc which expires on 23 December 2019.
Pension Agreement A Pension Agreement was executed on 17 February 2015, which provides that: John Laing Group plc will consult with the JLPF Trustee for at least 60 days before: • making any changes to its dividend policy (as described in this Prospectus in paragraph 11 of Part 9 (Business Description) or any payments outside the policy; • taking action in relation to the Facilities Agreement which could adversely affect the financial covenant supporting JLPF; incurring certain new or additional financial indebtedness (other than in relation to non-recourse project finance companies), disposing of any asset of the John Laing group where the discount on portfolio value exceeds both 15 per cent. of portfolio value and £2.5 million, or granting certain security interests; John Laing Group plc will consult with the JLPF Trustee for at least 40 days before entering into heads of terms in relation to any refinancing of the Facilities Agreement; and John Laing Group plc will not dispose of group assets without the consent of the JLPF Trustee if the disposal would breach the terms of the Facilities Agreement and will provide certain financial information to the JLPF Trustee.
10.3 Investment Adviser Agreements Pursuant to an investment adviser agreement dated 27 October 2010 (as amended and restated on 10 September 2014 and as further amended on 18 December 2014, on 8 April 2015, on 12 November 2015 and, most recently, 8 August 2017) between JLIF and JLCM as investment adviser (the “JLIF Investment Adviser Agreement”), JLCM as investment adviser (the “Investment Adviser”) provides investment management services to JLIF. JLCM’s provision of investment management services to JLEN is pursuant to a separate investment adviser agreement dated 19 February 2014 (and amended on 21 March 2014 and 25 June 2014) between JLCM as Investment Adviser and JLEN (the “JLEN Investment Adviser Agreement”). The services provided under the JLIF Investment Adviser Agreement and the JLEN Investment Adviser Agreement (together, the “Investment Adviser Agreements”) include, inter alia, advising the relevant fund in respect of the implementation of and changes to such fund’s investment strategy and policy, and in respect of the strategic management of such fund’s investment portfolio. Additionally, the Investment Adviser provides certain valuation, accounting and reporting services, working in conjunction with the administrator of the relevant fund. The Investment Adviser Agreements also incorporate procedures to manage any conflicts of interest that may arise as a result of the performance by the Investment Adviser of its services under the relevant Investment Adviser Agreement. The JLIF Investment Adviser Agreement may be terminated by either party giving to the other party one year’s written notice of termination at any time. JLIF may also terminate the JLIF Investment Adviser Agreement by giving six months written notice at any time to the Investment Adviser and paying a termination fee to the Investment Advisor in lieu of the remaining six months’ notice period. The JLEN Investment Adviser Agreement may be terminated by either party giving to the other party one year’s written notice of termination at any time after 31 March 2018 (being the fourth anniversary of the listing of JLEN on the London Stock Exchange). Notwithstanding their respective terms, the Investment Advisory Agreements may also be terminated with immediate effect by JLCM, on the one hand, and JLIF or JLEN (as applicable), on the other hand, giving written notice to the other party in any of the following circumstances: (a) the other party fails to make a payment under the agreement when due, and fails to remedy such breach within 30 calendar days of being notified of such breach; and
175 (b) the other party commits a material breach of the agreement, and such breach (if capable of remedy) is not remedied within 30 days of being notified in writing by the non-breaching party, or (if the breach is not capable of remedy) the breaching party fails to offer compensation which is reasonably acceptable to the non-breaching party, taking into account any loss that has been or will be suffered as a result of the breach. The Investment Adviser may terminate either of the Investment Adviser Agreements with immediate effect by giving written notice to JLIF or JLEN, as applicable, if the relevant fund’s ordinary shares cease to be listed on the Official List or in the event of the relevant fund’s insolvency (or an analogous event). JLIF or JLEN, as applicable, may terminate its Investment Advisory Agreement with immediate effect by giving written notice to the Investment Adviser in any of the following circumstances: (a) in the event of the insolvency (or analogous event) of the Investment Adviser; (b) the Investment Adviser is no longer permitted by applicable law to perform its services under the agreement; and (c) the Investment Adviser is prevented by force majeure from performing its services under the agreement for at least 60 consecutive days. JLIF or JLEN, as applicable, may also terminate its Investment Adviser Agreement by giving six months’ written notice at any time to the Investment Adviser if, in the reasonable opinion of the relevant fund, a material amount of people (in number and seniority) who are employed by the Group to enable the Investment Adviser to provide the services contemplated by the agreement cease to be employed by the Group, and such employees have not been replaced (before the end of the six months’ notice period referred to above) by suitably qualified other staff who will enable the Investment Adviser to provide the services in a manner comparable to that in which the services were provided prior to the occurrence of such event. With respect to the JLIF Investment Adviser Agreement, JLIF may also terminate the agreement by: (a) giving written notice to the Investment Adviser if the Investment Adviser ceases to be the operator of JLIF Limited Partnership in certain limited circumstances with immediate effect; or (b) by giving six months’ written notice at any time to the Investment Advisor in the event that certain named individuals exercising key functions in connection with the provision by the Investment Adviser of services under the JLIF Investor Adviser Agreement cease to be employed by the Group and are not replaced within six months. Each of the Investment Adviser Agreements provides that JLIF or JLEN, as applicable, will indemnify the Investment Adviser and their officers, directors, employees and agents, in respect of losses of any nature arising in connection with the relevant agreement other than those resulting from the fraud, negligence or wilful default of the person claiming the indemnity. Each of the Investment Adviser Agreements also provides that the Investment Adviser shall not be liable to JLIF or JLEN, as applicable, in respect of any losses suffered by the relevant fund and arising out of any act or omission by it or any of its employees or agents except where the act or omission is a result of the negligence, wilful default or fraud of itself or any of its employees or agents.
10.4 First Offer Agreements John Laing and JLIF have entered into two first offer agreements, one relating to certain specified investments in rail projects of the Group and the other relating to certain investments in non-rail projects of the Group. John Laing has separately entered into a first offer agreement with JLEN. Together they are the “First Offer Agreements”.
JLIF Non-rail assets Pursuant to a restated and amended first offer agreement between John Laing and JLIF entered into on 21 January 2014 (the “JLIF Non-Rail First Offer Agreement”), John Laing undertakes that it will notify JLIF of any equity interests it is proposing to sell in: (a) an accommodation project (including social housing) in the United Kingdom, Europe or Canada; or (b) a roads project (including highways maintenance and street lighting) in the United Kingdom, Europe or Canada, and which fall within JLIF’s investment criteria.
176 Either party may terminate the JLIF Non-Rail First Offer Agreement by giving one year’s written notice to the other party at any time after 27 October 2014 or by written notice should any of the following occur: (a) the other party commits a material breach of the JLIF Non-Rail First Offer Agreement; (b) in the event of the insolvency (or analogous event) of the other party; and (c) the JLIF Investment Adviser Agreement is terminated, at which point (subject to a 30 day cure period) the JLIF Non-Rail First Offer Agreement will terminate 45 days after the date of the notice.
Rail assets Pursuant to a first offer agreement between John Laing and JLIF entered into on 21 January 2014 ((“the JLIF Rail First Offer Agreement”) together with the JLIF Non-Rail First Offer Agreement, the “JLIF First Offer Agreements”), John Laing undertakes that it will notify JLIF of any interest it is proposing to sell in certain specified investments in rail projects of the Group. The JLIF Rail First Offer Agreement continues until the date following the sale of the last remaining specified rail investment of the Group or until terminated, if earlier. Either party may terminate the JLIF Rail First Offer Agreement by serving a written notice should any of the following occur: (a) the other party commits a material breach of the JLIF Rail First Offer Agreement; and (b) in the event of the insolvency (or analogous event) of the other party, at which point (subject to a 30 day cure period) the JLIF Rail First Offer Agreement will terminate 45 days after the date of the notice.
JLEN The first offer agreement between John Laing and JLEN was entered into on 19 February 2014 and amended on 7 January 2015 (the “JLEN First Offer Agreement”). Pursuant to the terms of the JLEN First Offer Agreement, John Laing undertakes that it will notify JLEN of any interest in an environmental infrastructure project in the United Kingdom, Ireland, Sweden or any other country in the European Union or the European Free Trade Association, of which John Laing wishes to dispose and that falls within JLEN’s investment criteria. The JLEN First Offer Agreement may be terminated by either party giving to the other party one year’s written notice of termination at any time after four years from the date of the JLEN First Offer Agreement. Notwithstanding its initial four year term, the JLEN First Offer Agreement may also be terminated by either party giving written notice to the other party should any of the following occur: (a) the other party commits a material breach of the JLEN First Offer Agreement; (b) in the event of the insolvency (or analogous event) of the other party; (c) the JLEN Investment Adviser Agreement is terminated; and (d) JLCM ceases to be a wholly-owned subsidiary of John Laing, at which point (subject to a 30 day cure period) the JLEN First Offer Agreement will terminate on the date falling 45 days after the date of the notice.
Terms common to the First Offer Agreements JLIF or JLEN, as applicable, must notify John Laing within 20 business days after receipt of a notice described above of the interests set out in that notice that it wishes to acquire, and the price it proposes to pay for each such interest (the “CPI Price”), together with the identity of the proposed purchaser for each such interest. John Laing, in turn, will be required to notify JLIF or JLEN, as applicable, within 10 business days of receipt of the notice from the relevant fund whether it wishes to proceed with a sale of the relevant interests at the CPI Price. If John Laing notifies the relevant fund that it intends to proceed with the sale to such fund, John Laing, on the one hand, and JLIF or JLEN (as applicable), on the other hand, will be required to negotiate, acting reasonably and in good faith with a view to agreeing the terms of a sale and purchase agreement for the relevant interests, substantially in the form of a pre-agreed acquisition agreement, with such amendments thereto as the relevant parties may agree.
177 If John Laing notifies JLIF or JLEN, as applicable, that it does not intend to proceed with the sale to the relevant fund or if John Laing and such fund do not agree the terms of the sale and purchase agreement within 30 business days of the notice from John Laing intending to proceed with the sale, John Laing may, within two years (the “Dealing Period”), offer to sell any or all of the relevant interests to any person on terms that are not materially more advantageous to the purchaser than the terms offered by JLIF or JLEN, as applicable. John Laing will be entitled to sell to any person, on such terms as such seller shall in its absolute discretion see fit, any interests offered for sale, where the relevant fund has notified John Laing that it does not wish to acquire such interests or such fund does not respond within the 20 business day period referred to above. If John Laing proposes to sell an interest to another person (not being another member of the Group) during the Dealing Period on terms that are materially more advantageous to the purchaser than the terms previously offered by the relevant fund, it shall first re-offer the relevant interests to such fund on such more advantageous terms. John Laing may also notify JLIF or JLEN, as applicable, that it intends to sell a bundle of interests together. In such case, the provisions described above will apply to the bundled interests in all respects as if they related to a single interest. The relevant fund may offer to buy all, but not some only, of the bundled interests. John Laing agrees to act in good faith when deciding which interests to include in a bundle together. The First Offer Agreements also contain provisions for the relevant parties to meet periodically, in the case of the JLIF First Offer Agreements, or at least twice in each year in the case of the JLEN First Offer Agreement, to consult on sales of interests over the following one year period.
10.5 Banking facilities On 19 January 2015, the Company and certain of its subsidiaries entered into a revolving credit facilities agreement with Barclays Bank PLC and HSBC Bank plc as bookrunners, Barclays Bank PLC, HSBC Bank plc and Australia and New Zealand Banking Group Limited as mandated lead arrangers and original lenders and Barclays Bank PLC as agent providing for £350 million committed senior unsecured revolving credit facilities to be made available in two tranches, Facility A and Facility B (the “Facilities”) (the “Facilities Agreement”). On 21 June 2016 and 6 October 2017, the Group increased the Facilities to £400 million and £475 million, respectively. The maturity date of the Facilities is 9 March 2020. Under the Facilities Agreement, the Group has the ability to utilise the Facilities for general corporate purposes in various currencies including GBP, EUR, USD, AUD, NZD and CAD. The applicable margin on Facility A and Facility B is the same. Facility B may only be used in connection with the business of the group in Australia, New Zealand and Asia. The Company can also agree with individual lenders that they provide some or all of their commitment by way of bilateral ancillary facilities (for letters of credit and bank guarantees). As at 31 December 2017, the Group had an aggregate of £139.2 million of undrawn commitments under the Facilities Agreement. Utilisation of undrawn commitments is subject to customary utilisation conditions including that no default under the finance documents is continuing or would result from the utilisation and that certain representations that are to be repeated are true in all material respects. The Facilities Agreement contains warranties, representations, covenants and events of default (in each case, subject to agreed exceptions, materiality tests, carve outs and grace periods) that are customary for a credit agreement of this nature. These include restrictions on disposals, mergers and acquisitions and incurring additional financial indebtedness, a negative pledge, restrictions and covenants in relation to pension schemes, financial covenants (described below) and requirements for mandatory prepayment in certain circumstances (described below). The Facilities Agreement provides for the financial covenants to be tested semi-annually, on 30 June and 31 December. To comply with the ongoing financial covenants under the Facilities Agreement the Group must ensure that: • the Adjusted Asset Cover Ratio (the “AACR”) is not less than 2.25:1 in respect of any testing period. The AACR means the Investment Asset Value (less the value of any investment assets in construction which exceeds 50 per cent. of the Investment Asset Value) divided by the consolidated total net debt of the Group for that period. “Investment Asset Value” means the aggregate value of the investment assets held by the Group by reference to the most recently available valuation of such assets as adjusted for assets acquired or sold since the date of such valuation and updated pursuant to the agreed valuation methodology; and • the Cash Cover Ratio is not less than 5:1 in respect of any testing period. “Cash Cover Ratio” means the consolidated Cash Yield of the Group for that period divided by the finance charges of the Group for that
178 period (including payments of interest and amounts payable under certain swaps but excluding repayments of principal). “Cash Yield” means the net revenues of the Group for that period (including disposal proceeds representing repayment of capital). This ratio is tested on an 18-month rolling basis. The interest rate under the Facilities Agreement is the appropriate base rate (depending on the currency utilised) plus a margin of between 2.5 to 3.25 per cent. per annum, depending on the level of AACR. The Facilities Agreement requires the Group to prepay the Facilities on demand in certain circumstances, including if any person or group of persons acting in concert gains control of the Company. The Facilities shall also become immediately due and payable if there is a disposal of all or substantially all of the assets of the Group. The Facilities Agreement is guaranteed by the Company and by certain of its subsidiaries. On 24 November 2016, the Group entered into two committed term loan facilities of £25 million each with Barclays Bank PLC and HSBC Bank plc with a maturity of 31 March 2018. These facilities back surety facilities of £50 million both expiring in March 2018. In February 2018, these £50 million facilities were extended until February 2019. There are no drawings under either of these loan facilities. Each facility uses the lender protections and financial covenants from the main facility with, in addition, the banks agreeing to vote in the same way on these facilities as they vote on the £475 million revolving credit facility.
11. UK Taxation The following statements are intended only as a general guide to certain UK tax considerations and do not purport to be a complete analysis of all potential UK tax consequences of acquiring, holding or disposing of Shares, Nil Paid Rights or Fully Paid Rights. They are based on current UK legislation and what is understood to be the current practice of HMRC as at the date of this Prospectus, both of which may change, possibly with retroactive effect. These statements apply only to Shareholders who are resident (and, in the case of individuals, domiciled) for tax purposes in (and only in) the United Kingdom (except insofar as express reference is made to the treatment of non-UK residents), who hold their Shares as an investment (other than under an individual savings account or pension arrangement) and who are the absolute beneficial owner of both the Shares and any dividends paid on them. The tax position of certain categories of Shareholders who are subject to special rules (such as persons acquiring their Rights Issue Shares in connection with employment, dealers in securities, insurance companies and collective investment schemes) is not considered. The statements summarise the current position and are intended as a general guide only. Prospective acquirers of Rights Issue Shares, Nil Paid Rights or Fully Paid Rights who are in any doubt as to their tax position or who may be subject to tax in a jurisdiction other than the United Kingdom are strongly recommended to consult their own professional advisers.
11.1 Taxation of Dividends The Company is not required to withhold tax when paying a dividend. The amount of any liability to tax on dividends paid by the Company will depend upon the individual circumstances of a Shareholder.
11.1.1 UK resident individual shareholders Under current UK tax rules specific rates of tax apply to dividend income. These include a nil rate of tax (the “nil rate band”) for the first £5,000 (to be reduced to £2,000 from April 2018) of dividend income in any tax year and different rates of tax for dividend income that exceeds the nil rate band. For these purposes “dividend income” includes UK and non UK source dividends and certain other distributions in respect of shares. An individual Shareholder who is resident for tax purposes in the UK and who receives a dividend from the Company will not be liable to UK tax on the dividend to the extent that (taking account of any other dividend income received by the Shareholder in the same tax year) that dividend falls within the nil rate band. To the extent that (taking account of any other dividend income received by the Shareholder in the same tax year) the dividend exceeds the nil rate band, it will be subject to income tax at 7.5 per cent. to the extent that it falls below the threshold for higher rate income tax. To the extent that (taking account of other dividend income received in the same tax year) it falls above the applicable threshold for higher rate income tax then the dividend will be taxed at 32.5 per cent. to the extent that it is within the higher rate band, or 38.1 per cent. to the extent that it is within the additional rate band. For the purposes of determining which of the taxable bands dividend income falls into, dividend income is treated as the highest part of a Shareholder’s income. In
179 addition, dividends within the nil rate band which would (if there was no nil rate band) have fallen within the basic or higher rate bands will use up those bands respectively for the purposes of determining whether the threshold for higher rate or additional rate income tax is exceeded.
11.1.2 UK resident corporate shareholders It is likely that most dividends paid on the Shares to corporate Shareholders would fall within one or more of the classes of dividend qualifying for exemption from corporation tax. However, it should be noted that the exemptions are not comprehensive and are subject to anti-avoidance rules.
11.1.3 UK resident exempt shareholders UK resident Shareholders who are not liable to UK tax on dividends, including pension funds and charities, are not entitled to any tax credit in respect of dividends paid by the Company.
11.1.4 Non-UK resident shareholders No tax credit will attach to any dividend paid by the Company to Shareholders who are resident outside the United Kingdom for tax purposes. A Shareholder resident outside the United Kingdom may also be subject to taxation on dividend income under local law. A Shareholder who is resident outside the United Kingdom for tax purposes should consult his or her own tax adviser concerning his or her tax position on dividends received from the Company.
11.2 Taxation of Chargeable Gains 11.2.1 UK tax resident shareholders (a) Rights Issue Shares acquired pursuant to the Rights Issue For the purposes of UK taxation of chargeable gains (“CGT”), the issue of Rights Issue Shares to existing Shareholders who take up their rights should be regarded as a reorganisation of the share capital of the Company. Accordingly, to the extent that an existing Shareholder takes up all or part of his entitlement under the Rights Issue, he should not be treated as making a disposal of all or part of his holding of Existing Shares and no liability to CGT should arise. Instead, the Rights Issue Shares acquired and the Existing Shares in respect of which they are issued will, for CGT purposes, be treated as the same asset and as having been acquired at the same time as the Existing Shares. The amount paid for the Rights Issue Shares will be added to the base cost of the Existing Shares when computing any gain or loss on any subsequent disposal. (b) Disposals If a Shareholder sells or otherwise disposes of all or some of the Rights Issue Shares allotted to him or her, or of his or her rights to subscribe for Rights Issue Shares, or if he or she allows or is deemed to have allowed his or her rights to lapse and receives a cash payment in respect of them, he or she may, depending on his or her circumstances and subject to any available exemption or relief, incur a liability to CGT. If a Shareholder disposes of all or part of his Nil Paid Rights, or allows or is deemed to allow them to lapse and receives a cash payment then if the proceeds are “small” as compared to the value of the Existing Shares in respect of which the rights arose, the Shareholder should not generally be treated as making a disposal for CGT purposes. Instead, the proceeds will be deducted from the base cost of his holding of Existing Shares for the purpose of computing any chargeable gain or allowable loss on a subsequent disposal. HMRC currently regards a receipt as “small” if its amount or value does not exceed five per cent. of the value of the Existing Shares or is £3,000 or less, whether or not it would also fall within the five per cent. test. This treatment will not apply where such proceeds are greater than the base cost of the holding of Existing Shares for CGT purposes.
11.2.2 Non-UK tax resident Shareholders Shareholders who are not resident in the United Kingdom will not generally be subject to UK taxation of capital gains on the disposal or deemed disposal of Shares unless they are carrying on a trade, profession or vocation in the United Kingdom through a branch or agency (or, in the case of a corporate Shareholder, a permanent establishment) in connection with which the Shares are used, held or acquired. Non-UK tax resident Shareholders may be subject to non-UK taxation on any gain under local law.
180 An individual Shareholder who has ceased to be resident for tax purposes in the United Kingdom or is treated as resident outside the United Kingdom for purposes of the double tax treaty (“Treaty non-resident”) for a period of five years or less (or, for departures before 6 April 2013, ceases to be resident or ordinarily resident or becomes Treaty non-resident for a period of less than five tax years) and who disposes of all or part of his Shares during that period may be liable to capital gains tax on his return to the United Kingdom, subject to any available exemptions or reliefs.
11.3 Stamp duty and Stamp Duty Reserve Tax (“SDRT”) 11.3.1 The Rights Issue The stamp duty and SDRT treatment of the subscription or purchase of Shares under the Rights Issue will be as follows: (a) No stamp duty or SDRT will generally be payable on the issue of Provisional Allotment Letters or the crediting of Nil Paid Rights to accounts in CREST. Where Rights Issue Shares represented by such documents or rights are registered in the name of the Shareholder entitled to such shares, or Rights Issue Shares are credited in uncertificated form to CREST accounts, no liability to stamp duty or SDRT will generally arise. (b) A purchaser of rights to Rights Issue Shares represented by Provisional Allotment Letters (whether nil or fully paid) or of Nil Paid Rights or Fully Paid Rights held in CREST on or before the latest time for registration of renunciation will not generally be liable to pay stamp duty, but the purchaser will normally be liable to pay SDRT at the rate of 0.5 per cent. of the value or amount of the consideration given. (c) Where such a purchase is effected through a stockbroker or other financial intermediary, that person will normally account for the SDRT and should indicate that this has been done in any contract note issued to the purchaser. In other cases, the purchaser of the rights to the Rights Issue Shares represented by the Provisional Allotment Letter or Nil Paid Rights or Fully Paid Rights held in CREST is liable to pay the SDRT and must account for it to HM Revenue & Customs. In the case of transfers within CREST, any SDRT due should be collected through CREST in accordance with the CREST rules. (d) No stamp duty or SDRT will be payable on the registration of Provisional Allotment Letters or Nil Paid Rights or Fully Paid Rights, whether by the original holders or their renouncees.
11.3.2 Subsequent Transfers Stamp duty at the rate of 0.5 per cent. (rounded up to the next multiple of £5) of the amount or value of the consideration given is generally payable on an instrument transferring Shares. An exemption from stamp duty is available on an instrument transferring Shares where the amount or value of the consideration is £1,000 or less, and it is certified on the instrument that the transaction effected by the instrument does not form part of a larger transaction or series of transactions in respect of which the aggregate amount or value of the consideration exceeds £1,000. A charge to SDRT will also arise on an unconditional agreement to transfer Shares (at the rate of 0.5 per cent. of the amount or value of the consideration payable). However, if within six years of the date of the agreement becoming unconditional an instrument of transfer is executed pursuant to the agreement, and stamp duty is paid on that instrument, any SDRT already paid will be refunded (generally, but not necessarily, with interest) provided that a claim for repayment is made, and any outstanding liability to SDRT will be cancelled. The liability to pay stamp duty or SDRT is generally satisfied by the purchaser or transferee.
11.3.3 Shares transferred through paperless means including CREST Paperless transfers of Shares, such as those occurring within CREST, are generally liable to SDRT, rather than stamp duty, at the rate of 0.5 per cent. of the amount or value of the consideration. CREST is obliged to collect SDRT on relevant transactions settled within the system. The charge is generally borne by the purchaser. Under the CREST system, no stamp duty or SDRT will arise on a transfer of Shares into the system unless such a transfer is made for a consideration in money or money’s worth, in which case a liability to SDRT (usually at a rate of 0.5 per cent.) will arise.
11.3.4 Shares held through Clearance Systems or Depositary Receipt Arrangements Special rules apply where Shares are issued or transferred to, or to a nominee or agent for, either a person whose business is or includes issuing depository receipts within Section 67 or Section 93 of the Finance
181 Act 1986 or a person providing a clearance service within Section 70 or Section 96 of the Finance Act 1986, under which SDRT or stamp duty may be charged at 1.5 per cent. Following litigation HMRC have confirmed that they will no longer seek to apply the 1.5 per cent. SDRT charge on the issue of shares into a clearance service or depositary receipt arrangement on the basis that the charge is not compatible with EU law. This view has not yet been reflected in a change in the UK rules, but it was confirmed in the Autumn 2017 Budget that the Government intend to continue this approach following Brexit. HMRC’s view is that the 1.5 per cent. SDRT or stamp duty charge will continue to apply to transfers of shares into a clearance service or depository receipt arrangement unless they are an integral part of an issue of share capital. Further litigation indicates that this view is not correct (at least in respect of certain transfers of legal title to clearance services), but HMRC have not yet confirmed whether they will cease applying the charge. Accordingly specific professional advice should be sought before incurring a 1.5 per cent. stamp duty or SDRT charge in any circumstances. The statements in this paragraph 11.3 apply to any holders of Shares irrespective of their residence, summarise the current position and are intended as a general guide only. Special rules apply to agreements made by, amongst others, intermediaries.
12. US Federal Income Taxation The following discussion is a general summary based on present law of certain US federal income tax consequences of the receipt, exercise and disposition of Nil Paid Rights pursuant to the Rights Issue as well as the acquisition, ownership and disposition of the Rights Issue Shares. The discussion is not a complete description of all tax considerations that may be relevant. It applies only to US Holders (as defined below) that receive the Nil Paid Rights with respect to Existing Shares, hold the Nil Paid Rights and Rights Issue Shares as capital assets and use the US dollar as their functional currency. The discussion is a general summary; it is not a substitute for tax advice. It does not address the tax treatment of prospective investors subject to special rules, such as banks or other financial institutions, insurance companies, tax exempt entities, dealers, traders in securities that elect to mark-to-market, regulated investment companies, real estate investment trusts, investors liable for alternative minimum tax, US expatriates, persons that directly, indirectly or constructively own 10 per cent. or more of the Company’s equity interests, investors that hold Existing Shares, Nil Paid Rights or Rights Issue Shares in connection with a permanent establishment or fixed base outside the United States, or investors that hold Existing Shares, Nil Paid Rights or Rights Issue Shares as part of a hedge, straddle, conversion, constructive sale or other integrated financial transaction. This summary also does not address US federal taxes other than the income tax (such as estate or gift taxes), US state and local, or non-US tax laws or matters. As used here, a “US Holder” means a beneficial owner of the Nil Paid Rights or Rights Issue Shares that is for US federal income tax purposes (i) a citizen or individual resident of the United States, (ii) a corporation created or organised under the laws of the United States, any state thereof, or the District of Columbia, (iii) a trust subject to the control of one or more US persons and the primary supervision of a US court and (iv) an estate the income of which is subject to US federal income tax without regard to its source. The US federal income tax treatment of a partner in a partnership (or other entity or arrangement treated as a partnership for US federal income tax purposes) that holds Nil Paid Rights or Rights Issue Shares will generally depend on the status of the partner and the activities of the partnership. Partnerships and partners in partnerships should consult their tax advisers concerning the US federal income tax consequences to their partners of receiving, exercising and disposing of Nil Paid Rights and the acquisition, ownership and disposition of Rights Issue Shares. US Holders should note that the discussion above entitled “UK Taxation” in this Part 16 is also relevant. See in particular the discussion in paragraph 10.3 “Stamp duty and Stamp Duty Reserve Tax (“SDRT”)” above.
Nil Paid Rights Receipt A US Holder should be entitled to treat the receipt of Nil Paid Rights as a non-taxable distribution with respect to its Existing Shares, and the following discussion assumes the distribution is not taxable. Were the distribution to be treated as a taxable distribution, the holder could recognise dividend income equal to the fair market value of the rights (likely determined by the price at which they initially trade). If the fair market value of Nil Paid Rights when distributed is less than 15 per cent. of the fair market value of the Existing Shares, the Nil Paid Rights will have no tax basis unless the US Holder affirmatively elects to allocate its adjusted tax basis in its Existing Shares to the Nil Paid Rights in proportion to the relative fair
182 market values of the Existing Shares and the Nil Paid Rights on the date Nil Paid Rights are distributed. A US Holder must make this election in a statement attached to its tax return for the taxable year in which it receives the Nil Paid Rights. If the fair market value of Nil Paid Rights when distributed is 15 per cent. or more than the fair market value of the Existing Shares, a US Holder must allocate its adjusted tax basis in its Existing Shares between the Existing Shares and the Nil Paid Rights in proportion to their relative fair market values on the date Nil Paid Rights are distributed.
Exercise A US Holder will not recognise taxable income when it receives Rights Issue Shares by exercising Nil Paid Rights. The holder’s tax basis in the Rights Issue Shares will equal its tax basis, if any, in the Nil Paid Rights exercised plus the US dollar value of the pounds sterling exercise price of the Nil Paid Rights on the acquisition date (or, if the Rights Issue Shares are treated as traded on an “established securities market,” in the case of cash basis and electing accrual basis taxpayers, the settlement date). A US Holder that holds Fully Paid Rights as a result of the exercise of Nil Paid Rights will be treated as the owner of the Rights Issue Shares allocated to the Fully Paid Rights.
Disposition A US Holder will recognise capital gain or loss on the sale or other disposition of Nil Paid Rights in an amount equal to the difference between its tax basis, if any, in the Nil Paid Rights and the US dollar value of the amount realised from the sale or other disposition. Any gain or loss generally will be treated as arising from US sources. A US Holder’s holding period in the Nil Paid Rights will include its holding period in the Existing Shares with respect to which the Nil Paid Rights were distributed. A US Holder that receives pounds sterling on the sale or other disposition of the Nil Paid Rights will realise an amount equal to the US dollar value of the pounds sterling on the date of sale or other disposition (or, if the Nil Paid Rights are treated as securities traded on an “established securities market,” in the case of cash basis and electing accrual basis US Holders, the settlement date). A US Holder will recognise exchange gain or loss if the US dollar value of the pounds sterling received at the spot rate on the settlement date differs from the amount realized. A US Holder will have a tax basis in the pounds sterling received equal to its value at the spot rate on the settlement date. Any exchange gain or loss realised on the settlement date or on a subsequent conversion of the pounds sterling into US dollars will be US source ordinary income or loss.
Expiration If a US Holder allows Nil Paid Rights to expire without exercising or selling them, and receives no payment from the Joint Bookrunners on account of the sale of Rights Issue Shares at a premium over the Rights Issue Price, the Nil Paid Rights should be deemed to have no tax basis. The holder therefore should recognise no loss upon the expiration of the Nil Paid Rights. Any tax basis that was allocated from Existing Shares to the Nil Paid Rights will remain with the Existing Shares. A US Holder that receives a payment from the Joint Bookrunner on account of the sale of Rights Issue Shares at a premium over the Rights Issue Price will be treated either as having sold the Nil Paid Rights (as described above) or as having exercised the Nil Paid Rights and sold the Rights Issue Shares. A US Holder that is treated as having sold the Rights Issue Shares will recognise a short-term capital gain or loss as described below (see—“Dispositions”). A US Holder that receives amounts in respect of lapsed Nil Paid Rights should consult its own tax advisers about the US federal income tax treatment of those amounts.
Rights Issue Shares Dividends Subject to the discussion below under “—Passive Foreign Investment Company Rules,” the gross amount of any distribution of cash or property with respect to the Rights Issue Shares (other than certain distributions, if any, of the Rights Issue Shares distributed pro rata to all shareholders) will be included in a US Holder’s gross income as ordinary income to the extent of the Company’s current and accumulated earnings and profits as determined under US federal income tax laws. The Company does not expect to maintain calculations of earnings and profits for US federal income tax purposes. Therefore, a US Holder should expect that such distribution will generally be treated as a dividend from foreign sources when received. The dividends will not be eligible for the dividends-received deduction generally available to US corporations.
183 Dividends received by eligible non-corporate US Holders, however, should be taxed at the preferential rates applicable to qualified dividend income if the Company qualifies for the benefits of the income tax treaty between the United States and the United Kingdom (the “US-UK Treaty”), which the Company believes it does, and such dividend is paid on Rights Issue Shares that have been held by such US holder for at least 61 days during the 121-day period beginning 60 days before the ex-dividend date and the Company is not a passive foreign investment company (“PFIC”) in the year of distribution or the preceding year. Dividends paid in pounds sterling will be included in income in a US dollar amount based on the exchange rate in effect on the date of receipt, whether or not the pounds sterling are converted into US dollars at that time. A US Holder’s tax basis in the pounds sterling will equal the US dollar amount included in income. Any gain or loss on a subsequent conversion or other disposition of the pounds sterling for a different US dollar amount generally will be US source ordinary income or loss. If dividends paid in pounds sterling are converted into US dollars on the day they are received, a US Holder generally will not be required to recognise exchange gain or loss in respect of the dividend income. Dividends received by certain non-corporate US Holders will generally be includible in “net investment income” for purposes of the Medicare contribution tax.
Dispositions Subject to the discussion below under “Passive Foreign Investment Company Rules”, a US Holder generally will recognise capital gain or loss on the sale or other disposition of Rights Issue Shares equal to the difference between the US dollar value of the amount realised and the US Holder’s tax basis in the Rights Issue Shares. The US Holder’s amount realised will include the gross amount of the proceeds from the sale or other disposition. Any gain or loss generally will be treated as arising from US sources. Any loss will also be long-term to the extent the US Holder previously received qualified dividends in excess of 10 per cent. of the US Holder’s adjusted tax basis in the Rights Issue Shares. The gain or loss will be long-term capital gain or loss if the US Holder’s holding period exceeds one year. Long-term capital gains of non-corporate US Holders are subject to preferential tax rates. Deductions for capital loss are subject to significant limitations. The initial tax basis of the US Holder’s Rights Issue Shares will be the US dollar value of the aggregate Rights Issue Price paid determined at the spot rate of exchange on the date of purchase. If the Rights Issue Shares are treated as traded on an “established securities market,” cash basis and electing accrual basis US Holders will determine the US dollar value of aggregate Rights Issue Price paid for such Rights Issue Shares at the spot rate of exchange on the settlement date. A US Holder that receives pounds sterling on the sale or other disposition of Rights Issue Shares will realise an amount equal to the US dollar value of the pounds sterling at the spot rate of exchange on the date of sale or other disposition (or, if the Rights Issue Shares are traded on an “established securities market,” in the case of a cash basis or electing accrual basis US Holder, the settlement date). A US Holder will recognise exchange gain or loss if the US dollar value of the pounds sterling received at the spot rate of exchange on the settlement date differs from the amount realised. A US Holder will have a tax basis in the pounds sterling received equal to its US dollar value at the spot rate on the settlement date. Any exchange gain or loss realised on the settlement date or on a subsequent conversion of the pounds sterling into US dollars will be US source ordinary income or loss. Capital gains from the sale or other disposition of the Rights Issue Shares received by certain non-corporate US Holders will generally be includible in “net investment income” for purposes of the Medicare contribution tax.
Passive Foreign Investment Company Rules A non-US corporation will be a PFIC for any taxable year in which, taking into account its proportionate share of the income and assets of 25 per cent. or more owned subsidiaries, (1) 75 per cent. or more of its gross income consists of passive income, or (2) 50 per cent. or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For these purposes, cash is considered a passive asset and passive income generally includes, among other things, dividends, rents, royalties and gains from the disposition of investment assets (subject to various exceptions), but goodwill (which can be valued based on the Company’s market capitalisation) may not be considered a passive asset. Based on all information available to it, the Company has no reason to believe it would be classified as a PFIC for the prior taxable year, the current taxable year or to expect it would be classified as a PFIC for any future taxable year; however, no definitive determination regarding the Company’s PFIC status has been made at this time. Whether the Company is a PFIC is a factual determination made annually, so that even if not currently classified as a PFIC, the Company’s status could change depending upon, among other things, changes in the
184 composition and relative value of its gross receipts and assets and its market capitalisation, and the manner in which the Company otherwise conducts its business. Accordingly, no assurance can be given that the Company will not be a PFIC in the current or any future taxable year. If the Company is a PFIC for any taxable year during which a US Holder holds the Rights Issue Shares, gain recognised by a US Holder on a sale or other taxable disposition (including certain pledges) of those Rights Issue Shares will generally be allocated rateably over the US Holder’s holding period for the Rights Issue Shares. The amounts allocated to the taxable year of the sale or other taxable disposition and to any year before the Company became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations for that year, as appropriate, and an interest charge would be imposed. Further, to the extent that any distribution received by a US Holder on its Rights Issue Shares treated as an investment in a PFIC exceeds 125 percent of the average of the annual distributions on those Rights Issue Shares received during the preceding three years or the US Holder’s holding period, whichever is shorter, that distribution would be subject to taxation in the same manner as gain, as described immediately above. The Company may own, directly or indirectly, equity interests in other entities which are PFICs (“Lower-tier PFICs”). Under proposed Treasury regulations, if the Company were a PFIC, a US Holder would be subject to tax under the rules described above on (i) excess distributions by a Lower-tier PFIC and (ii) a disposition of shares of a Lower-tier PFIC, in each case as if the US Holder held such shares directly, even though the US Holder has not actually received the proceeds of those distributions or dispositions. Accordingly, if these proposed regulations are finalised in their current form, US Holders of the Rights Issue Shares generally would be subject to tax under the PFIC rules described above if the Company or the entity owning the shares of such Lower-tier PFIC were to receive distributions from, or dispose of the shares of, such Lower-tier PFIC. Because these proposed regulations are not currently in effect, the treatment of distributions with respect to and dispositions of shares of a Lower-tier PFIC is uncertain and, therefore, US Holders should consult their own tax advisors as to how to treat distributions by, and dispositions of shares of, a Lower-tier PFIC. A US Holder may be able to avoid some of the adverse impacts of the PFIC rules described above by electing to mark the Existing Shares and Rights Issue Shares to market annually. The election is available only if the Shares are considered “marketable stock,” which generally includes stock that is regularly traded in more than de minimis quantities on a qualifying exchange. If a US Holder makes the mark-to-market election, any gain from marking the Shares to market or from disposing of them would be ordinary income. Any loss from marking the Shares to market would be recognised only to the extent of unreversed gains previously included in income. Loss from marking the Shares to market would be ordinary, but loss on disposing of them would be capital loss except to the extent of mark-to-market gains previously included in income. The Company expects the London Stock Exchange, where the Shares trade, to be a qualifying exchange. However, no assurance can be given that the Shares will be considered regularly traded, and therefore considered “marketable stock,” for purposes of the PFIC mark-to-market election. A valid mark-to-market election cannot be revoked without the consent of the IRS unless the Shares cease to be marketable stock. US Holders will not be able to make mark-to-market elections with respect to Lower-tier PFICs. Each US Holder is encouraged to consult its own tax adviser as to the Company’s status as a PFIC and whether a mark to market election is available or desirable in their particular circumstances. A US Holder would not be able to avoid the tax consequences described above by electing to treat the Company as a qualified electing fund (“QEF”) because the Company does not intend to provide US Holders with the information that would be necessary to make a QEF election with respect to the Shares. US Holders should consult their own tax advisers concerning the Company’s possible PFIC status and the consequences to them if the Company were a PFIC for any taxable year.
Information Reporting and Backup Withholding Dividends on Rights Issue Shares and proceeds from the sale or other disposition of Rights Issue Shares may be reported to the IRS unless the holder establishes a basis for exemption. Backup withholding tax may apply to amounts subject to reporting. Any amount withheld may be credited against the holder’s US federal income tax liability subject to certain rules and limitations. US Holders should consult with their own tax advisers regarding the application of the US information reporting and backup withholding rules. Certain non-corporate US Holders are required to report information with respect to investments in Rights Issue Shares not held through an account with a domestic financial institution. US Holders that fail to report required information could become subject to substantial penalties. Potential investors are encouraged to consult with
185 their own tax advisers about these and any other reporting obligations arising from their investment in Rights Issue Shares. THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PARTICULAR INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISER ABOUT THE TAX CONSEQUENCES TO IT OF RECEIPT, EXERCISE OR DISPOSITION OF THE NIL PAID RIGHTS AND ACQUISITION, OWNERSHIP AND DISPOSITION OF THE RIGHTS ISSUE SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.
13. Enforcement and civil liabilities under US federal securities laws The Company is a public limited company incorporated under English law. Many of the Directors are citizens of the United Kingdom (or other non-US jurisdictions), and a portion of the Company’s assets are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon the Directors or to enforce against them in the US courts judgments obtained in US courts predicated upon the civil liability provisions of the US federal securities laws. There is doubt as to the enforceability in England, in original actions or in actions for enforcement of judgments of the US courts, of civil liabilities predicated upon US federal securities laws.
14. Litigation and disputes There are no governmental, legal or arbitration proceedings (including such proceedings which are pending or threatened of which the Company is aware) during the 12 months preceding the date of this Prospectus, which may have, or have had, a significant effect on the Company’s and/or the Group’s financial position or profitability.
15. Related party transactions Save as described in the 2017 Final Results Announcement, 2016 Annual Report and Accounts and 2015 Annual Report and Accounts incorporated by reference into this Prospectus, there are no related party transactions between the Company or members of the Group and related parties.
16. Working capital In the opinion of the Company, the Group has sufficient working capital for its present requirements, that is, for at least the next 12 months following the date of this Prospectus.
17. No significant change There has been no significant change in the financial or trading position of the Group since 31 December 2017, the date to which the last audited consolidated accounts of the Group were prepared.
18. Consents Deloitte LLP is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales and has given and has not withdrawn its written consent to the inclusion of its report set out in Part 15 (Unaudited Pro Forma Financial Information) of this Prospectus and the references thereto in the form and context in which they appear and has authorised the contents of its report for the purposes of item 5.5.3R(2)(f) of the Prospectus Rules. A written consent under the Prospectus Rules is different from a consent filed with the SEC under Section 7 of the Securities Act. As the Shares have not been paid and will not be registered under the Securities Act, Deloitte LLP has not filed consent under section 7 of the Securities Act.
19. General 19.1 The aggregate expenses of, or incidental to, the Rights Issue to be borne by the Company, including the Joint Bookrunners’ commission, the FCA’s fees, professional fees and expenses and the costs of printing and distribution of documents, are estimated to amount to approximately £6.3 million (including VAT). 19.2 The financial information contained in this Prospectus does not amount to statutory accounts within the meaning of section 434(3) of the Act. Full audited accounts have been delivered to the Registrar of Companies for the Group for the years ended 31 December 2016 and 2015.
186 20. Documents available for inspection Copies of the following documents will be available for inspection during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) for a period of 12 months following the date of this Prospectus at the offices of Freshfields Bruckhaus Deringer LLP at 65 Fleet Street, London EC4Y 1HS: (a) the Articles of Association of the Company; (b) the Annual Historical Financial Information of the Group in respect of the two financial years ended 2016 and 2015, together with the Accountants’ Report from Deloitte LLP, which are incorporated by reference in Part 14 (Information Incorporated by Reference) of this Prospectus; (c) the consent letter referred to in “Consents” in paragraph 18 above; and (d) this Prospectus. Dated: 8 March 2018
187 PART 17 Definitions and Glossary The following definitions apply throughout this Prospectus unless the context requires otherwise:
“2015 Annual Report and Accounts” ...... John Laing’s annual report and accounts for the year ended 31 December 2015 “2016 Annual Report and Accounts” ...... John Laing’s annual report and accounts for the year ended 31 December 2016 “2017 Final Results Announcement” ...... the announcement published on 8 March 2018 on the Company’s website of John Laing’s financial statements for the year ended 31 December 2017 “Act” ...... the Companies Act 2006, as amended “ATAD” ...... Anti-Tax Avoidance Directive “ARR” ...... annualised rate of return, as defined in paragraph 3.2 of Part 3 (Presentation of Financial and Other Information) “Articles” ...... the Articles of Association of the Company “Audited Financial Statements” ...... the 2015 Annual Report and Accounts, the 2016 Annual Report and Accounts and the 2017 Final Results Announcement “Barclays” ...... Barclays Bank plc “BEPS” ...... Benefit Erosion and Profit Shifting “Benefit Plan Investor” . . . any person with any interest in (i) any employee benefit plan (as defined in section 3(42) of ERISA) that is subject to part 4 of Title I of ERISA; (ii) any plan to which section 4975(e)(1) of the US Internal Revenue Code of 1986, as amended, applies; or (iii) any entity whose underlying assets are plan assets by reason of a plan’s investment in the entity “Board” ...... the board of directors of the Company “Book Value” ...... the value at which John Laing records its investment in a project in its accounts, net of future investment commitments to such project secured by LCs or cash collateral “Business Day” ...... a day (other than a Saturday or Sunday) on which banks are open for general business in London “cash yield from investments” ...... comprises payments from a Project Company, either in the form of dividends (on capital provided in the form of equity) or debt interest and repayments (in respect of capital provided in the form of a subordinated shareholder loan) “CCSS” ...... CREST Courier and Sorting Service “City Code” ...... the City Code on Take-overs and Mergers “Company” ...... John Laing Group plc “Consortium” ...... a consortium in which the Group is a member “Corporation Act” ...... the Corporation Act 2001 (Cth) of Australia “CREST” ...... the relevant system (as defined in the CREST Regulations) for the paperless settlement of trades in listed securities in the United Kingdom, of which Euroclear Limited is the operator (as defined in the CREST Regulations)
188 “CREST Manual” ...... the rules governing the operation of CREST, consisting of the CREST Reference Manual, CREST International Manual, CREST Central Counterparty Service Manual, CREST Rules, Registrars Service Standards, Settlement Discipline Rules, CCSS Operations Manual, Daily Timetable, CREST Application Procedure, CREST Glossary of Terms and CREST Terms and Conditions (all as defined in the CREST Glossary of Terms promulgated by Euroclear on 15 July 1996 and as amended since) “CREST member” ...... a person who has been admitted by Euroclear as a system-member (as defined in the CREST Regulations) “CREST Proxy Instruction” instruction to appoint a proxy or proxies through the CREST electronic proxy appointment service, as described in the Notice of General Meeting in the paragraph entitled “Notes on CREST Voting” “CREST Regulations” . . . . the Uncertificated Securities Regulations 2001 (SI 2001/3755) “CREST sponsor” ...... a CREST participant admitted to CREST as a CREST sponsor “CREST sponsored member” a CREST member admitted to CREST as a sponsored member “DCF” ...... discounted cash flow “DfT” ...... the UK Department for Transport “Directors” ...... the Executive Directors and the Non-Executive Directors “DSBP” ...... Deferred Share Bonus Plan “DTP” ...... Denver Transit Partners “Equity” ...... means, in relation to the Group’s investments in Project Companies, equity and/or subordinated debt “EEA” ...... the European Economic Area “EPC” ...... engineering, procurement and construction contract “ERISA” ...... the US Employee Retirement Income Security Act of 1974, as amended from time to time, and the applicable regulations thereunder “EU” ...... the European Union “EU Emission Trading System” ...... the European Emission Trading System, established by Directive 2003/87/EC of the European Parliament, as amended “Euroclear” ...... Euroclear & Ireland Limited “Excluded Territories” . . . . Australia, Canada and Japan “Executive Directors” . . . . the executive Directors of the Company “Existing Shares” ...... The ordinary shares of 10p each in the capital of the Company in issue immediately prior to the Rights Issue “Ex Rights Date” ...... The date on which the Company’s Shares begin trading without giving the holders of those Shares the right to participate in the Rights Issue (being 8.00 a.m. on 9 March 2018) “External AUM” ...... John Laing’s assets under management on behalf of third parties “Facilities” ...... the Group’s £475 million senior unsecured corporate banking facilities, comprising two revolving credit facility tranches “Facilities Agreement” . . . . the facilities agreement dated 19 January 2015 as described in paragraph 10.7 of Part 16 (Additional Information) “FCA” ...... the UK Financial Conduct Authority
189 “Financial close” ...... a key milestone at which full contractual commitment (i.e. all contracts and service delivery plans and binding contracts, including committed financing) is made to a project so that project implementation (i.e. construction and operation) can start “First Offer Agreements” . . John Laing’s first offer agreements with JLIF and JLEN “FSMA” ...... the Financial Services and Markets Act 2000, as amended “Fully Paid Rights” . . . . . rights to subscribe for the Rights Issue Shares, fully paid “FVTPL” ...... fair value through profit or loss “Governance Code” . . . . . the UK Corporate Governance Code issued by the Financial Reporting Council, as amended from time to time “Governmental Entities” . . . governmental or other public sector authorities “Gross Value” ...... the fair book value of the Group’s investment in a project, plus the amount of future investment that has been committed to such project secured by LCs or cash collateral “Group” or “John Laing” . . save where otherwise indicated, “Group” or “John Laing” means the Company and its subsidiaries “Historical Financial Information” ...... financial information, unless otherwise stated, extracted without material adjustment from the 2017 Final Results Announcement and from the 2016 and 2015 Annual Reports and Accounts “Hitachi” ...... Hitachi Rail Europe “HMRC” ...... HM Revenue and Customs “HSBC” ...... HSBC Bank plc “HTM IRR” ...... hold-to-maturity internal rate of return, as defined in paragraph 3.1 of Part 3 (Presentation of Financial and Other Information) “IEP” ...... the DfT’s Intercity Express Programme “IFRS” ...... International Financial Reporting Standards, as adopted by the European Union “Investment Adviser Agreements” ...... the JLEN Investment Adviser Agreement and the JLIF Investment Adviser Agreement “IRS” ...... the US Internal Revenue Service “ITC” ...... The US federal Business Energy Investment Tax Credit “JLCM” ...... John Laing Capital Management Limited “JLEN” ...... John Laing Environmental Assets Group Limited “JLEN First Offer Agreement” ...... A first offer agreement between John Laing and JLEN entered into on 19 February 2014 and amended on 7 January 2015 “JLEN Investment Adviser Agreement” ...... an investment adviser agreement dated 19 February 2014 (as amended on 21 March 2014 and 25 June 2014, pursuant to which JLCM provides investment management services to JLEN “JLIF” ...... John Laing Infrastructure Fund Limited “JLIF Non-Rail First Offer Agreement” ...... a restated and amended first offer agreement between John Laing and JLIF entered into on 21 January 2014
190 “JLIF Investment Adviser Agreement” ...... an investment adviser agreement dated 27 October 2010 (as amended and restated on 10 September 2014 and further amended on 18 December 2014, on 8 April 2015, 12 November 2015 and, most recently, on 8 August 2017), pursuant to which JLCM provides investment management services to JLIF “JLPF” ...... John Laing Pension Fund “JLPF Trustee” ...... John Laing Pension Trust Limited, the trustee of JLPF “JLPP” ...... John Laing Pension Plan “John Laing Share Schemes” The John Laing Group plc Long Term Incentive Plan 2015 and the John Laing Group plc Deferred Share Bonus Plan “Joint Bookrunners” . . . . . Barclays Bank PLC and HSBC Bank plc “Latest Practicable Date” . . 7 March 2018 “LC” ...... a bank-issued letter of credit “Listing Rules” ...... the listing rules of the FCA made under section 74(4) of the FSMA “London Stock Exchange” . London Stock Exchange plc “McKinsey” ...... McKinsey & Company “Member States” ...... member states of the European Union “MiFID II” ...... EU Directive 2014/65/EU on markets in financial instruments, as amended “MiFID II Product Governance Requirements” ...... Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II, as well as local implementing measures “MM” ...... money multiple, as defined in paragraph 3.3 of Part 3 (Presentation of Financial and Other Information) “Money Laundering Regulations” ...... The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 “MSA” ...... Management Services Agreement “NAV” ...... net asset value “Nil Paid Rights” ...... Rights Issue Shares in nil paid form provisionally allotted to Qualifying Shareholders pursuant to the Rights Issue “Non-Executive Directors” . the non-executive Directors of the Company “OECD” ...... Organisation for Economic Co-operation and Development “Official List” ...... the Official List of the FCA “PCAOB” ...... the Public Company Accounting Oversight Board (United States) “Portfolio Value” ...... the book value of the Group’s investment portfolio “post-tax cash flow” . . . . . post-tax cash flows including all equity and debt payments received by the Group from Project Companies “PPP” or “P3” ...... a public-private partnership “Probity Deeds” ...... probity and process deeds “Project Company” ...... a project company in which the Group has an interest “Prospectus” ...... the final prospectus approved by the FCA as a prospectus prepared in accordance with the Prospectus Rules made under section 73A of the FSMA
191 “Prospectus Directive” . . . . the expression “Prospectus Directive” means Directive 2003/71/EC as amended including by Directive 2010/73/EU and includes any relevant implementing measure in each Relevant Member State. “Provisional Allotment Letter” ...... the provisional allotment letter to be issued to Qualifying non CREST Shareholders (other than certain Overseas Shareholders) “PV” ...... photo-voltaic “qualified institutional buyers” or “QIBs” . . . . . has the meaning given by Rule 144A “Qualified Investors” . . . . . persons who are “qualified investors” within the meaning of Article 2(1)(e) of the Prospectus Directive “qualified purchasers” or “QPs” ...... has the meaning given by the US Investment Company Act “Qualifying CREST Shareholders” . . Qualifying Shareholders holding Shares in uncertificated form “Qualifying Non-CREST Shareholders” ...... Qualifying Shareholders holding Shares in certificated form “Qualifying Shareholders” . Shareholders on the register of members of the Company on the Record Date with the exclusion of persons with a registered address or located or resident in an Excluded Territory or the United States “Record Date” ...... Close of business on 6 March 2018 “Receiving Agent” ...... Equiniti Limited “Registrars” ...... Equiniti Limited “Regulation S” ...... Regulation S under the US Securities Act “Relevant Implementation Date” ...... the date on which the Prospectus Directive was implemented in the Relevant Member State “Relevant Member State” . . the EEA States that have implemented the Prospectus Directive “Renewable Energy Directive” ...... EU Directive 2009/28/EC on the Promotion of the Use of Energy from Renewable Sources “restricted securities” . . . . . has the meaning given to it in section 144(a)(3) of the US Securities Act “Rights” ...... together, the Nil Paid Rights and the Fully Paid Rights “Rights Issue” ...... the offer by way of rights to Qualifying Shareholders to acquire Rights Issue Shares, on the terms and conditions set out in this Prospectus and, in the case of Qualifying non CREST Shareholders only, the Provisional Allotment Letter “Rights Issue Admission” . . the admission of the Rights Issue Shares (nil paid) to the premium listing segment of the Official List and to trading on the London Stock Exchange’s main market for listed securities “Rights Issue Price” . . . . . 177p per Rights Issue Share “Rights Issue Shares” . . . . the new ordinary shares of 10p each to be issued by the Group pursuant to the Rights Issue “RoSPA” ...... the Royal Society for the Prevention of Accidents “Rule 144A” ...... Rule 144A under the US Securities Act “SDRT” ...... stamp duty reserve tax “SEC” ...... US Securities and Exchange Commission
192 “Senior Management” . . . . those persons named in paragraph 2 of Part 4 (Directors, Senior Management and Corporate Governance) “Service Companies” . . . . . recourse group subsidiaries that provide services related to investment activities and that are consolidated in the Group financial statements “Shareholders” ...... the holders of Shares in the capital of the Company “Shares” ...... the ordinary shares of the Company, having the rights set out in the Articles “solar PV” ...... solar photovoltaic “SSE” ...... substantial shareholdings exemption “SPV” ...... a special purpose vehicle “Tax Code” ...... the US Internal Revenue Code of 1986, as amended “TCJA” ...... Tax Cuts and Jobs Act, enacted 22 December 2017 “UK” ...... the United Kingdom of Great Britain and Northern Ireland “UNFCCC” ...... the United Nations Framework Convention on Climate Change “Underwriting Agreement” . the underwriting agreement entered into between the Company and the Banks described in paragraph 7.1 of Part 16 (Additional Information—Underwriting arrangements) “US GAAP” ...... accounting principles generally accepted in the United States “US GAAS” ...... auditing standards generally accepted in the United States “US Securities Act” . . . . . United States Securities Act of 1933, as amended “VAT” ...... value-added tax “Volker Rule” ...... as defined in the Dodd Frank Act (Section 619: Prohibitions on Proprietary Trading and Certain Relationships with Hedge Funds and Private Equity Funds) “Win Rate” ...... the value of John Laing’s potential PPP investment commitments in respect of which John Laing or a Consortium is successfully appointed as preferred bidder in that period (i.e. a win), as a percentage of the total value of John Laing’s potential PPP investment commitments in the same period in respect of which the Group or a Consortium has been shortlisted for projects and preferred bidder status has been subsequently reached for such shortlisted projects, either by the Group or a Consortium or a third party (i.e. all won or lost bids, rather than the investment pipeline as a whole)
193 APPENDIX A FORM OF US INVESTMENT LETTER To: John Laing Group plc 1 Kingsway London WC2B 6AN United Kingdom (the “Company”) Barclays Bank PLC 5 The North Colonnade London E14 4BB United Kingdom HSBC Bank plc 8 Canada Square London E14 5HQ United Kingdom (the “Joint Bookrunners”) Ladies and Gentlemen: This letter (a “US Investment Letter”) relates to the (a) offering of Shares (the “Rights Issue Shares”) of John Laing Group plc (the “Company”) acquired from the Joint Bookrunners (or their affiliates); or (b) subsequent transfer of such Rights Issue Shares. In any case, this letter is to be delivered on behalf of the person acquiring beneficial ownership of the Rights Issue Shares by the investor named below or the accounts listed on the attachment hereto (each, an “Investor”). Unless otherwise stated, or the content otherwise requires, capitalized terms in this letter shall have the same meaning as is given to them in the prospectus relating to the offering of the Rights Issue Shares described therein published by the Company on 8 March 2018 (the “Prospectus”). The Investor agrees, acknowledges, represents and warrants, on its own behalf or on behalf of each account for which it is acting that: 1. the Investor has received a copy of the Prospectus and understands and agrees that the Prospectus speaks only as of its date and that the information contained therein may not be correct or complete as of any time subsequent to that date; 2. (i) if located in the United States, the Investor is (x) a “Qualified Institutional Buyer” (“QIB”) as defined in Rule 144A (“Rule 144A”) under the US Securities Act of 1933, as amended (the “Securities Act”), and (y) a “Qualified Purchaser” (“QP”) as defined in Section 2(a)(51) and related rules of the US Investment Company Act of 1940, as amended (the “Investment Company Act”) or (ii) if it is a US person, it is a QP as defined in Section 2(a)(51) and related rules of the Investment Company Act; 3. the Investor is not a broker-dealer which owns and invests on a discretionary basis less than US$25 million in securities of unaffiliated issuers; 4. the Investor is not subscribing to, or purchasing, the Rights Issue Shares with a view to, or for offer or sale in connection with, any distribution thereof (within the meaning of the Securities Act) that would be in violation of the securities laws of the United States or any state thereof; 5. the party signing this US Investment Letter was not formed for the purpose of investing in the Company and is acquiring the Rights Issue Shares for its own account or for the account of one or more Investors on whose behalf the party signing this US Investment Letter is authorized to make the acknowledgments, representations and warranties, and enter into the agreements, contained in this US Investment Letter; 6. the Investor is not a participant-director employee plan, such as a plan described in subsection (a)(1)(i)(D), (E) or (F) of Rule 144A; 7. no portion of the assets used by the Investor to purchase, and no portion of the assets used by the Investor to hold, the Shares or any beneficial interest therein constitutes or will constitute the assets of: (i) an “employee benefit plan” that is subject to Title I of the US Employee Retirement Income Security Act of 1974, as amended (“ERISA”); (ii) a plan, individual retirement account or other
194 arrangement that is subject to section 4975 of the US Internal Revenue Code of 1986, as amended (the “Tax Code”); (iii) entities whose underlying assets are considered to include “plan assets” of any plan, account or arrangement described in preceding clause (i) or (ii); or (iv) any governmental plan, church plan, non-US Plan or other investor whose purchase or holding of Shares would be subject to any state, local, non-US or other laws or regulations similar to Title I of ERISA or section 4975 of the Tax Code or that would have the effect of the regulations issued by the US Department of Labor set forth at 29 CFR section 2510.3-101, as modified by section 3(42) of ERISA (each entity described in preceding clause (i), (ii), (iii) or (iv), a “Plan Investor”); 8. (i) no transfers of the Shares or any interest therein to a person using assets of a Plan Investor to purchase or hold such Shares or any interest therein will be permitted and (ii) if the ownership of Shares by an investor will or may result in the Company’s assets being deemed to constitute “plan assets” under the Plan Asset Regulations, the Directors may serve a notice upon the holder of such Shares requiring the holder to transfer the Shares to an eligible transferee within 30 days, and if within 30 days, the transfer notice has not been complied with, the Company may seek, subject to applicable laws and regulations, to sell the relevant Shares on behalf of the holder by instructing a member of the LSE to sell them to an eligible transferee; 9. the Rights Issue Shares are being offered in a transaction not involving any public offering within the United States within the meaning of the Securities Act and that the Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States; 10. the Rights Issue Shares (whether in physical, certificated form or in uncertificated form held in CREST) are “restricted securities” within the meaning of Rule 144(a)(3) under the U.S. Securities Act, the Shares are being offered and sold in a transaction not involving any public offering in the U.S. within the meaning of the Securities Act and no representation is made as to the availability of the exemption provided by Rule 144 for resales of Shares; 11. the Company has not been and will not be registered, as an investment company under the Investment Company Act pursuant to sections 7(d) and 3(c)(7) thereof and that the Company has elected to impose the transfer and selling restrictions with respect to persons in the United States and US Persons described herein so that the Company will qualify for the exemption provided under section 3(c)(7) of the Investment Company Act and will have no obligation to register as an investment company even if it were otherwise determined to be an investment company; 12. if in the future the Investor decides to offer, resell, transfer, assign, pledge or otherwise dispose of any Rights Issue Shares, such Rights Issue Shares will be offered, resold, transferred, assigned, pledged or otherwise disposed of by the Investor solely in a transaction (a “Disposition”) executed in, on or through the facilities of the LSE, and neither the Investor nor any person acting on its behalf will pre-arrange such Disposition with a buyer in the United States or known to be a US person; 13. notwithstanding anything to the contrary in this letter, the Rights Issue Shares may not be deposited into any unrestricted depositary receipt facility in respect of the Company’s securities, established or maintained by a depositary bank; 14. the Investor is knowledgeable, sophisticated and experienced in business and financial matters and it fully understands the limitations on ownership and transfer and the restrictions on sales of such Shares; 15. the Investor is able to bear the economic risk of its investment in the Shares and is currently able to afford the complete loss of such investment and the Investor is aware that there are substantial risks incidental to the purchase of the Shares, including those summarized under “Risk Factors” in the Prospectus; 16. the Investor understands and acknowledges that, to the extent permitted by applicable law and regulation, (i) the Company and its agents will not be required to accept for registration of transfer any Rights Issue Shares acquired by the Investor made other than in compliance with the restrictions set forth in this US Investment Letter, (ii) the Company may seek to require any US person or any person within the United States who was not a QP at the time it acquired any Shares or any beneficial interest therein (which for the avoidance of doubt does not include any investor signing this letter who has truthfully made the representations, warranties and agreements herein) to transfer the Shares or any such beneficial interest immediately in a manner consistent with the restrictions set forth in this US Investment Letter, and (iii) if the obligation to transfer is not met, the Company is irrevocably authorized, without any obligation, to transfer the Shares, as applicable, in a manner consistent with the
195 restrictions set forth in this US Investment Letter and, if such Shares are sold, the Company shall be obliged to distribute the net proceeds to the entitled party; 17. the Investor became aware of the offering of the Shares by the Company and the Rights Issue Shares were offered to the Investor solely by means of the Prospectus (which was available to it solely via the Company’s website) and the Investor did not become aware of, nor were the Shares offered to the Investor by any other means, including, in each case, by any form of general solicitation or general advertising, and in making the decision to purchase or subscribe to the Rights Issue Shares, the Investor relied solely on the information set forth in the Prospectus; 18. (i) none of the Joint Bookrunners or their affiliates have made or will make any representation or warranty as to the accuracy or completeness of the information in the Prospectus or any other information provided by the Company; (ii) the Investor has not relied and will not rely on any investigation by any Joint Bookrunner, its affiliates or any person acting on its behalf that may have been conducted with respect to the Company, or the Rights Issue Shares; and (iii) none of the Joint Bookrunners makes any representation as to the availability of an exemption from the Securities Act for the transfer of the Rights Issue Shares; 19. upon a proposed transfer of the Rights Issue Shares, the Investor will notify any purchaser of such Rights Issue Shares or the executing broker, as applicable, of any transfer restrictions that are applicable to the Rights Issue Shares being sold; 20. neither the Investor, nor any of the Investor’s affiliates, nor any person acting on the Investor’s or their behalf, will make any “directed selling efforts” as defined in Regulation S under the Securities Act in the United States with respect to the Shares; 21. it understands that the Shares (to the extent they are in certificated form), unless otherwise determined by the Company in accordance with applicable law, will bear a legend substantially to the following effect: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND THE COMPANY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE “INVESTMENT COMPANY ACT”). THE SHARES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT (“REGULATION S”) OUTSIDE THE UNITED STATES TO A PERSON NOT KNOWN BY YOU TO BE A US PERSON (AS DEFINED IN REGULATION S), BY PRE-ARRANGEMENT OR OTHERWISE, OR (2) TO THE COMPANY OR A SUBSIDIARY THEREOF. EACH HOLDER, BY ITS ACCEPTANCE OF SHARES, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING RESTRICTIONS. THE COMPANY AND ITS AGENTS WILL NOT BE REQUIRED TO ACCEPT FOR REGISTRATION OF TRANSFER ANY SHARES MADE OTHER THAN IN COMPLIANCE WITH THESE RESTRICTIONS. THE COMPANY MAY REQUIRE ANY US PERSON OR ANY PERSON WITHIN THE UNITED STATES WHO WAS NOT A QUALIFIED PURCHASER (AS DEFINED IN SECTION 2(A)(51) OF THE INVESTMENT COMPANY ACT) AT THE TIME IT ACQUIRED ANY SHARES OR ANY BENEFICIAL INTEREST THEREIN TO TRANSFER THE SHARES OR ANY SUCH BENEFICIAL INTEREST IMMEDIATELY IN A MANNER CONSISTENT WITH THESE RESTRICTIONS, AND IF THE OBLIGATION TO TRANSFER IS NOT MET, THE COMPANY IS IRREVOCABLY AUTHORIZED, WITHOUT ANY OBLIGATION, TO TRANSFER THE SHARES, AS APPLICABLE, IN A MANNER CONSISTENT WITH THESE RESTRICTIONS AND, IF SUCH SHARES ARE SOLD, THE COMPANY SHALL BE OBLIGED TO DISTRIBUTE THE NET PROCEEDS TO THE ENTITLED PARTY; 22. each of the Joint Bookrunners, the Company and their respective affiliates are irrevocably authorized to produce this US Investment Letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby; and 23. no agency of the United States or any state thereof has made any finding or determination as to the fairness of the terms of, or any recommendation or endorsement in respect of, the Shares.
196 The Investor hereby consents to the actions of each of the Joint Bookrunners, and hereby waives any and all claims, actions, liabilities, damages or demands it may have against each Joint Bookrunner in connection with any alleged conflict of interest arising from the engagement of each of the Underwriters with respect to the sale by the applicable Joint Bookrunner of the Rights Issue Shares to the Investor. The Investor acknowledges that each of the Joint Bookrunners, the Company and their respective affiliates and others will rely on the acknowledgments, representations and warranties contained in this US Investment Letter as a basis for exemption of the sale of the Rights Issue Shares under the Securities Act, the Investment Company Act, under the securities laws of all applicable states, for compliance with ERISA and for other purposes. The party signing this US Investment Letter agrees to notify promptly to the Company if any of the acknowledgments, representations or warranties set forth herein are no longer accurate. This US Investment Letter shall be governed by and construed in accordance with the laws of the State of New York. Where there are joint applicants, each must sign this US Investment Letter. Applications from a corporation must be signed by an authorized officer or be completed otherwise in accordance with such corporation’s constitution (evidence of such authority may be required). Very truly yours, NAME OF PURCHASER:
By: Name: Title: Address: Date:
197 Merrill Corporation Ltd, London 18-6173-1