Annual Financial Report

RNS Number : 3416R

John Laing Environmental Assets Grp

14 June 2018

 

14 June 2018

John Laing Environmental Assets Group Limited

Announcement of results for the year ended 31 March 2018

The Directors of John Laing Environmental Assets Group Limited (the "Company" or "JLEN") are pleased to announce the Company's results for the year ended 31 March 2018.

Financial Highlights

·      Portfolio valuation as at 31 March 2018 of £429.5 m (31 March 2017: £327.6m)

·      NAV per ordinary share of 99.6 pence as at 31 March 2018 (31 March 2017: 100.1 pence). Lower assumptions for long-term electricity prices and reduction in value of the Dumfries & Galloway waste project, partially offset by value enhancements and a change in the discount rate for UK wind assets

·      Total dividends declared of 6.31 pence per ordinary share for the year to 31 March 2018 (2017: 6.14 pence per ordinary share), in line with the target set out in the 2017 Annual Report. Dividend cover of 1.2 times for the financial year

·      Target dividend for the year to 31 March 2019 of 6.51 pence per ordinary share

·      Share price total return for the period since IPO of 25.1%

Portfolio Highlights

·      Six acquisitions completed during the year for a total consideration of £109.3m, including two investments into the anaerobic digestion sector increasing portfolio diversification

·      Overall portfolio performance in line with expectations

·      Wind portfolio generation on budget with good availability

·      Encouraging performance from anaerobic digestion assets purchased during the year 8% over budget

·      Under-performance in Solar PV of -9%, contributed to by low irradiation during the year and ongoing issues with the Branden solar project

·      Waste tonnages in line with expectations. Wastewater volumes below budget but offset by strong cost controls

Financing Activity

·      Raised £55.5m of equity capital via placings during the year. Share Issuance Programme in place for 200 million shares

·      Improved revolving credit facility of £130m expiring June 2021, following exercise of option to extend

·      Strong pipeline of assets for further growth both under the First Offer Agreement with John Laing and from third parties

Richard Morse, Chairman of JLEN, said:

"JLEN has been successful in further diversifying its portfolio through multiple acquisitions, including establishing itself in the anaerobic digestion sector which augments portfolio returns. Performance was solid in the majority of the portfolio, with encouraging signs from the AD assets. We have paid dividends in line with our target and increased the target dividend for 2018/19 to 6.51p. We continue to see attractive opportunities across environmental infrastructure sectors and have put ourselves in a strong position to take advantage of this with the improved revolving credit facility and Share Issuance Programme."

Annual report

A copy of the annual report has been submitted to the National Storage Mechanism and will shortly be available at www.morningstar.co.uk/uk/NSM. The annual report will also be available on the Company's website at www.jlen.com where further information on JLEN can be found.

Details of the conference call for analysts and investors

The Company intends to announce its audited results for the year ended 31 March 2018 on 14 June 2018. A conference call for analysts will take place at 9.00am. To register for the call please contact Redleaf Communications on [phone], or by email on [e-mail].

Presentation materials will be posted on the Company's website, www.jlen.com, from 9.00am.

For further information, please contact:

John Laing Capital Management Limited Chris Tanner Chris Holmes	[phone]
Winterflood Investment Trusts  Neil Langford Chris Mills	[phone]
Readleaf Communications Charlie Geller	[phone]

HIGHLIGHTS

·     Dividend of 6.31p per share declared for the year to 31 March 2018 (2017: 6.14p per share). Dividend cover of 1.2x

·     NAV per share 99.6p from 100.1p at 31 March 2017, due to lower assumptions for long-term electricity prices and the reduction in value of the Dumfries & Galloway waste project, partially offset by value enhancements and a change in the discount rate for UK wind assets

·     Profit before tax for the year of £21.1m (2017: £25.6m), £24.0m (2017: £17.0m) excluding the movement on investment at fair value

·     Share price total return for the period since IPO of 25.1%

·     Raised £55.5m of equity capital via placings during the year

·     Largest portfolio segment onshore wind on budget. Encouraging performance from growing anaerobic digestion segment which partially offsets previously reported under-performance in solar PV

·     Six acquisitions completed during the year for a total consideration of £109.3m, giving a total of 24 assets

·     Improved terms of replacement three-year revolving credit facility of £130m expiring June 2020 with option to extend for one year

·     Strong pipeline of assets for further growth, both under First Offer Agreement with John Laing and from third parties

CHAIRMAN'S STATEMENT

JLEN has had a record year for acquisitions, increasing diversification by establishing itself in the anaerobic digestion sector. Performance was solid in the majority of the portfolio, with encouraging signs from the AD assets.

On behalf of the Board, I am pleased to present the Annual Report of the Company for the year ended 31 March 2018.

Results

The Company has continued to make good progress in the development of its portfolio of environmental infrastructure assets during the year, including further diversification into the anaerobic digestion ("AD") sector. Six acquisitions were agreed during the year totalling £109.3 million, adding 81.8 MWs to the portfolio. One transaction was with John Laing Group under the First Offer Agreement, which remains an important source of future opportunities, while the other five were with third parties, demonstrating the Company's increasingly broad reach into the wider environmental infrastructure market.

As a result, at the year end, JLEN has a diversified portfolio of 24 operational solar, onshore wind, waste & wastewater and anaerobic digestion projects based in the UK and France, representing a total of 259.2MW, which are substantially backed by long-term contracts or stable regulatory-backed subsidy arrangements.

The Net Asset Value ("NAV") per share at 31 March 2018 was 99.6 pence, compared with 100.1 pence at 31 March 2017. Negative drivers over the period were decreases in forecasts for long-term merchant electricity prices and issues with the Company's smallest investment, Dumfries & Galloway waste. These were largely offset by limited discount rate changes for UK onshore wind and a number of portfolio enhancements and savings.

The Directors observe that markets are increasingly competitive in all of the Company's main sectors and remain of the view that the discount rates used for valuations are conservative.

Profit after tax for the year was £21.1 million (2017: £25.6 million) resulting in earnings per share of 5.7 pence (2017: 9.31 pence). Removing unrealised movements on investments at fair value, the adjusted PBT is £24.0 million (2017: £17.0 million), equivalent to 6.5 pence per share (2017: 6.3 pence).

Cash received from the portfolio assets by way of distributions, which includes interest, loan repayments and dividends, was £33.4 million during the year. After operating and finance costs, cash flow from operations of the Company of £26.9 million covered the cash dividends paid during the year of 6.27 pence per share by 1.2x and the declared interim dividends applicable to the year of 6.31 pence per share 1.1x, covered in more detail below.

Dividends

The Company has delivered consistent financial performance during the year, with dividend cover of 1.2x. This is the same as the previous year, and has been achieved while growing the dividend in line with inflation and without the Company issuing scrip in place of cash dividends.

During the year, the Company paid a final dividend for the period ended 31 March 2017 of 1.535 pence per share (£5.2 million). Interim dividends of 1.5775 pence per share were paid in September 2017 (£6.0 million), of 1.5775 pence per share in December 2017 (£6.0 million) and of 1.5775 pence per share in February 2018 (£6.0 million).

The Board is pleased to confirm the quarterly dividend in respect of the quarter to 31 March 2018 of 1.5775 pence per share, which was approved on 30 May 2018 and will be paid on 22 June 2018, bringing the total to the target of 6.31 pence per share for the full year.

It is the Directors' intention to pay shareholders a sustainable dividend, paid quarterly, that increases progressively in line with inflation, subject to market conditions, performance, financial position and outlook. The Company is targeting a full-year dividend for the year ending 31 March 2019 of 6.51 pence per share.⁽¹⁾ This reflects fully the increase in inflation over the year and demonstrates the Directors' confidence in the strength of the portfolio.

(1)   This is a target only and not a profit forecast. There is no assurance that this target will be met.

Portfolio performance

During the year, overall generation from the renewable energy portfolio was 0.3% below budget including assets purchased during the year. The wind assets, the largest element of the portfolio, produced solid performance with no major outages or issues and was on budget. The AD assets purchased during the year demonstrated encouraging performance, with gas production 8% over the acquisition case forecasts. In both asset classes the Directors feel that there is scope for further outperformance based on asset management plans that have been developed and that will shortly be implemented.

This partially offsets weakness in the solar portfolio, which experienced poor solar irradiation levels, ongoing resolution of historic issues at the Branden project and two unrelated high voltage ("HV") defects at the Crug Mawr project, part of the CSGH portfolio. Actual generation from the solar portfolio was 9.4% below budget, but allowing for the lower irradiation and the Crug Mawr HV failure, underlying performance was 5.4% below budget. This shows that there is still significant work to do to resolve issues, and the Directors note that performance in the second half of the year was better than the first half, which was significantly affected by Branden connector issues and the associated replacement programme conducted under warranty.

The results from our renewable energy assets are dependent in part on the level of energy prices, which have trended noticeably lower since the time of IPO in March 2014. Compared to the assumptions used in the portfolio valuation at 31 March 2017, on a time weighted average basis, the decrease in the electricity price assumptions is approximately 7.6% over a 25-year period. While the overall movement in forecast prices has been negative, JLEN has taken advantage of an improvement in short-term electricity and gas forward prices during the year (+7%) by fixing prices under existing PPA arrangements for a significant proportion of the renewable energy portfolio, typically for periods of 6 to 12 months. The waste & wastewater processing assets are not materially affected by the level of electricity prices.

The PFI-backed waste & wastewater assets now represent only 13% of the portfolio. The Directors have decided to reduce the value of the Dumfries & Galloway waste project to nil at the year end. This follows the public announcement by Renewi plc on 9 March 2018 of its intention to exit the operating contract that its subsidiary Renewi UK Services Ltd has with the PFI project company during the 2018-19 financial year. The Directors consider that the limited time period to resolve the issues facing the project increases the likelihood that the project company will be unable to provide the contracted services to the public sector client when the operator exits the project. Although efforts continue to find a way forward, the asset has been written down due to these uncertainties.

For the remaining waste & wastewater assets, financial performance has been slightly ahead of expectations. Waste tonnages and performance at the East London Waste ("ELWA") project have been stable and complemented by higher than forecast inflation meant that ELWA was able to pay distributions slightly ahead of budget. The Tay wastewater project mitigated a dry year through the implementation of strong cost controls.

The Directors are aware of the wider industry discussion regarding the prospects of a future Labour government seeking to cancel PFI projects and the consequent impact on asset owners. Operational relations with the public sector clients for the two remaining PFI assets in the portfolio are good and the projects continue to meet contractual service requirements. We continue to believe that the UK Government will honour its contracts entered into under UK law, and we assess that if the public clients were to seek to terminate the projects in accordance with the contracts, compensation arrangements would adequately cover the value of the projects to the Company.

Investment performance

Over the 12-month period to 31 March 2018, shareholders have seen a share price total return of -1.8% whilst over the same period the NAV total return per share was -0.5%. The difference is largely due to the compression in the premium of share price to NAV from 9.0% at 31 March 2017 to 1.5% at 31 March 2018.

Acquisitions

During the period under review, the Company announced the following acquisitions:

·     Moel Moelogan 1 and 2 wind farms - 14.3MW

·     CSGH solar portfolio - 33.5MW (4 sites)

·     Vulcan Renewables anaerobic digestion - 5MW_th

·     Monksham solar follow-on - now 100% owned

·     Llynfi Afan Wind Farm - 24MW

·     Icknield Farm anaerobic digestion - 5MW_th

These acquisitions bring the total capacity of the renewable energy assets in the JLEN portfolio to 259.2MW. The Directors are particularly pleased to see the introduction of anaerobic digestion assets into the portfolio. These assets have established operating track records and a high proportion of RPI-linked revenues, combined with attractive risk-adjusted returns.

Debt facilities

In June 2017, the Fund signed a new replacement three-year loan agreement with HSBC, NIBC, ING and Santander which provides for a committed revolving credit facility ("RCF") of £130 million (of which £48.4 million has been drawn at 31 March 2018), and for an uncommitted "accordion" facility of up to £60 million. In June 2018, the facility was extended for a further year until June 2021.

This replaces the previous facility and gives JLEN an increased source of flexible funding outside of equity raisings at a lower cost. The facility is periodically paid down from the proceeds of equity issuance which then allows JLEN to make new investments with the certainty of funding and on a timely basis, reducing the performance drag associated with holding excess cash.

Share capital

In July 2017, JLEN successfully raised £40 million via a book building process following the announcement of the annual results, with an issue price of 103 pence per share, an estimated 3% premium to NAV. The proceeds of the share issue were used to repay the outstanding balance on the RCF, which was then used to finance the acquisitions of Moel Moelogan and CSGH solar in April and May respectively.

In February 2018, the Company put in place a new issuance programme for up to 200 million new ordinary shares. The issuance programme remains valid until February 2019 and facilitates the Company issuing new shares through placings, offers for subscription, intermediaries' offers or combinations thereof. In March 2018, the Company issued 15.6 million shares through an initial placing under the issuance programme, raising £15.5 million at 99.5 pence per share against a backdrop of troubled financial markets.

Valuation

The Net Asset Value at 31 March 2018 is £392.4 million, comprising £429.5 million portfolio valuation, £11.8 million of cash held by the Group, less £48.4 million drawn on the Company's (immediate subsidiary's) revolving credit facility, together with negative working capital balances of £0.5 million.

The Investment Adviser has prepared a fair market valuation of the portfolio as at 31 March 2018. This valuation is based on a discounted cash flow analysis of the future expected equity and loan note cash flows accruing to the Group from each portfolio investment. This valuation uses key assumptions which are recommended by the Investment Adviser using its experience and judgement, having taken into account available comparable market transactions and financial market data in order to arrive at a fair market value.

To provide assurance to the Board with respect to the valuation, an independent verification exercise of the methodology and assumptions applied by JLCM is performed by a leading accountancy firm and an opinion is provided to the Directors. The Directors have satisfied themselves as to the methodology used and the assumptions adopted and have approved the valuation of £429.5 million for the portfolio of 24 investments as at 31 March 2018. This equates to a Net Asset Value of 99.6 pence per share.

Risks and uncertainties

While it is the Investment Adviser that manages the risks facing the Company on a day-to-day basis, it is the Board of the Company which retains ultimate responsibility. The Company's Risk and Audit Committees, which report to the Board, regularly review the effectiveness of the Company's (and that of the Investment Adviser, Administrator and other third party service providers as it deems fit) internal control policies and procedures for the identification, assessment and reporting of risks.

The Board considers that the principal risks and uncertainties for JLEN have not materially altered from those set out in the Prospectus. The full Prospectus is available on JLEN's website, and a summary of the principal risks and uncertainties is included below in the strategic report. The Directors do not consider that Brexit represents a significant risk for the Fund, as more than 99% of the portfolio by value is located in Great Britain and should not be affected directly by matters that are currently the subject of negotiation between the UK Government and the EU, such as customs arrangements and trade deals.

JLEN's ability to issue new shares, even during recent periods of general market uncertainty and volatility, demonstrates that its central proposition of investing in a diversified portfolio of environmental infrastructure assets with the benefit of long-term, predictable, wholly or partially inflation-linked cash flows remains attractive.

Annual general meeting

The annual general meeting will be held on 15 August 2018 at 10.00am at the Company's registered office in Guernsey.

Governance and Board effectiveness

The Board has completed its first independent external effectiveness evaluation and the results were presented to the Directors in May 2018. It was concluded that the Company maintained high standards of corporate governance practice and, in the context of the Company, the main principles of the AIC Code of Corporate Governance continued to be applied effectively. Further details are provided in the corporate governance report.

Investment Adviser management changes

As mentioned in the Half-Year report, Chris Holmes joined JLCM in January 2018 to take up the role as co-head of the JLCM team advising the Fund. Chris was formerly of the Green Investment Group (part of Macquarie Group), where he was Managing Director of Waste and Bioenergy. JLCM has made other additions to the team, most notably on the asset management side in respect of solar and AD. The Board is delighted with these appointments and is confident that with the investment advice provided by Chris Tanner, Chris Holmes and the wider team at JLCM, JLEN remains well placed for the next phase of growth.

Outlook

The Board considers that the outlook for the Company is one of opportunity. The pipeline of potential investments remains strong, both from John Laing Group, in accordance with the First Offer Agreement, and from third parties. The pipeline is also well diversified in terms of asset mix.

JLEN's diversified environmental infrastructure mandate has meant that it has been able to focus on a wider segment of the environmental infrastructure market over the course of the period, as evidenced by recent investments in the anaerobic digestion sector, which offer established operational assets with attractive yield characteristics. The Board considers that this trend is likely to continue, with further opportunities to pursue in AD as well as other bioenergy sectors such as biomass. While we will continue to look at wind and solar opportunities, recent experience of bidding for assets suggests that more attractive risk-adjusted returns are present in the wider environmental infrastructure sectors beyond wind and solar.

The Board also considers that UK assets will continue to be the main focus for capital deployment over the short to medium term. Although JLEN has the mandate to invest in established environmental infrastructure assets in OECD countries which provide stable regulatory or contractual frameworks and the Investment Adviser considers overseas markets that may meet these criteria, the Board considers it unlikely that any of these markets provides superior value for the Fund presently, compared to its current pipeline of UK opportunities. The Board, reviews this assessment regularly and retains the flexibility to change focus if the assessment of relative value changes.

A feature of the market for renewables funds since the majority had their initial public offerings in 2013-14 has been the volatility in asset valuations brought about by reducing forecasts of future long-term electricity prices. One of the attractions of sectors such as anaerobic digestion is that operational assets typically have a higher subsidy element and a consequent lower relative exposure to merchant revenues. Going forward, the Board intends to prioritise acquisitions with lower merchant exposure in order to maintain JLEN's low sensitivity to power prices, which supports the objective of paying a sustainable dividend that grows in line with inflation.

The challenge to realising the opportunities comes from ensuring that the Company has sufficient capital to be an attractive transaction partner in these sectors. The Company's most recent equity placing came at a time of stress for equity markets. More recently, markets have recovered and the Board continues to believe that the existing portfolio is conservatively valued and will generate improved value as we continue with identified asset management initiatives. These include upgrades to turbines provided by a number of turbine suppliers in the portfolio, increasing capacity in the AD plants, and continuing to drive improvements and savings in projects' contractual arrangements with third parties. The Board considers the Company to represent an attractive and differentiated offering to investors seeking a diversified pool of cash flows from environmental infrastructure assets.

I am grateful to all of my Board, to our Investment Adviser and all our other advisers for their efforts over the course of the period under review, and we look forward to the next year with confidence.

Richard Morse

Chairman

13 June 2018

STRATEGIC REPORT

INVESTMENT OBJECTIVES

To provide investors with a sustainable dividend per share, paid quarterly, that increases in line with inflation, and to preserve the capital value of its portfolio over the long term.

The Company aims to provide its investors with a sustainable dividend per share, paid quarterly, that increases progressively in line with inflation. It aims to preserve, and where possible enhance, the capital value of its portfolio on a real basis through the reinvestment of cash flows not required for the payment of dividends

The dividend for the year ended 31 March 2018 is 6.31 pence per share. Over the longer term, the Company targets an IRR of 7.5% to 8.5% (net of fees and expenses) on the IPO issue price of 100 pence per share, through investment in a diversified portfolio of environmental infrastructure projects^.(1)

The Company seeks to maintain strong relationships with all its stakeholders and those of its investments, including investors, funders, key contractors, strategic partners, national and local government and local communities.

STRATEGY AND INVESTMENT POLICY

To provide investors with access to a diversified portfolio of operational environmental infrastructure projects.

The Company seeks to achieve its objectives by investing in a diversified portfolio of environmental infrastructure projects:

·     that have the benefit of long‑term, predictable, wholly or partially inflation‑linked cash flows;

·     that are supported by long‑term contracts or stable and well‑proven regulatory and legal frameworks; and

·     that feature well‑established technologies, demonstrable operational performance and a track record of producing long‑term predictable revenues.

JLEN defines environmental infrastructure as infrastructure projects that utilise natural or waste resources or support more environmentally friendly approaches to economic activity. This could involve the generation of renewable energy (including solar, wind, hydropower and biomass technologies), the supply and treatment of water, the treatment and processing of waste, and projects that promote energy efficiency.

The Company will invest in environmental infrastructure projects either directly or through holding structures that give the Company an investment exposure to environmental infrastructure projects.

Whilst there are no restrictions on the amount of the Company's assets that may be invested in any individual type of environmental infrastructure, the Company will, over the long term, seek to invest in a diversified spread of investments both geographically (although the UK will always represent a minimum of 50% of the portfolio by value) and across different types of environmental infrastructure in order to achieve a broad spread of risk in the Company's portfolio.

The projects comprising the current portfolio are underpinned by well‑established technologies. It is intended that the equipment and systems used by the assets in the portfolio will not rely substantially on new technology but will use those that have a significant track record of use in other projects. On acquisition, the relevant equipment will also have demonstrated operational performance at its place of installation. However, as environmental infrastructure is a relatively new asset class and the technologies that underpin it may be subject to technological advancements in the future, the actual investment allocation will depend on the development of the environmental infrastructure market, the underlying technologies and the judgement of the Directors (on the advice of the Investment Adviser) as to what is in the best interests of the Company at the time of investment.

Investment restrictions

With the objective of achieving a spread of risk, the following investment restrictions will apply to the acquisition of investment interests in the portfolio:

·     the substantial majority of projects in the portfolio by value and number will be operational. The Fund will not acquire investment interests in any project if, as a result of such investment, 15% or more of the NAV is attributable to projects that are in construction and are not yet fully operational;

·     at least 50% of the portfolio (by value) will be based in the UK and the Fund will only invest in projects that are located in OECD countries;

·     it is intended that investment interests in any single project acquired will not have an acquisition price greater than 25% of the NAV immediately post‑acquisition. In no circumstances will a new acquisition exceed a maximum limit of 30% of the NAV immediately post‑acquisition;

·     the Company will make use of short‑term debt financing to facilitate the acquisition of investments. Borrowing may be secured against the assets comprising the portfolio. It is intended that such debt will be repaid periodically by the raising of new equity finance by the Company. The level of such debt is limited to 30% of the Company's Net Asset Value immediately after the acquisition of any further investment. Such debt will not include (and will be subordinate to) any project-level gearing, which shall be in addition to any borrowing at Fund level; and

·     the Fund may acquire investment interests in respect of projects that have non‑recourse project finance in place at the project entity level. The Company is limited to aggregate non‑recourse financing attributable to renewable energy generation and PPP projects not exceeding 65% and 85% respectively of the aggregate gross project value of such projects.

Hedging

Where investments are made in currencies other than pounds sterling, the Fund will consider whether to hedge currency risk in accordance with the Fund's currency and hedging policy as determined from time to time by the Directors. Interest rate hedging may be carried out to provide protection against increasing costs of servicing debt drawn down by the Fund to finance investments. This may involve the use of interest rate derivatives and similar derivative instruments. Hedging against inflation may also be carried out where appropriate and this may involve the use of RPI swaps and similar derivative instruments. The currency, interest rate and any inflationary hedging policies will be reviewed by the Directors on a regular basis to ensure that the risks associated with movements in foreign exchange rates, interest rates and inflation are being appropriately managed.

Cash balances

Pending reinvestment or distribution of cash receipts, cash received by the Fund will be invested in cash, cash equivalents, near‑cash instruments, money market instruments and money market funds and cash funds. The Fund may also hold derivative or other financial instruments designed for efficient portfolio management or to hedge interest, inflation or currency rate risks. The Company and any other member of the Group may also lend cash which it holds as part of its cash management policy.

Origination of further investments

Each of the investments comprising the portfolio comply with the Company's investment policy and further investments will only be acquired if they comply with the Company's investment policy.

The Company has the contractual right of first offer (in accordance with the First Offer Agreement) for environmental infrastructure projects in the UK, Ireland, Sweden and any other country in the European Union or the European Free Trade Association, which John Laing wishes to dispose of and that are consistent with the Company's investment policy. Subject to due diligence and agreement on price, the Fund will seek to acquire those projects that fit the investment objectives and investment policy of the Company. The Fund will also seek out and review acquisition opportunities not connected with John Laing and will, where appropriate, carry out the necessary due diligence. If, in the opinion of the Directors, the risk characteristics, valuation and price of the investment interests in the project or projects for sale are acceptable and consistent with the Company's investment objective and investment policy, then (subject to the Fund having sufficient sources of capital) an offer will be made (without seeking the prior approval of shareholders) and, if successful, the investment interests in the relevant project or projects will be acquired by the Fund.

Amendments to and compliance with the investment policy

Material changes to the investment policy of the Company may only be made in accordance with the approval of the shareholders by way of ordinary resolution and (for so long as the ordinary shares are listed on the official list maintained by the UK Listing Authority) in accordance with the Listing Rules. Minor changes to the investment policy must be approved by the Directors.

The investment restrictions detailed above apply at the time of the acquisition of investment interests and the values of existing investment interests shall be as at the date of the most recently published NAV of the Company unless the Directors believe that such valuation materially misrepresents the value of the Fund's investment interests at the time of the relevant acquisition. The Fund will not be required to dispose of investment interests and to rebalance its portfolio as a result of a change in the respective valuations of investment interests.

Key performance measures

The key performance measures used by the Company to assess its performance over time against the objectives and strategy set out previously are as follows:

·     market capitalisation

·     dividend per share (declared)

·     share price

·     total shareholder return for the period (share price basis)

·     Net Asset Value

·     Net Asset Value per share

·     Net Asset Value per share growth (adjusting for dividends)

·     portfolio value

·     number of investments and

·     largest single investment as a percentage of portfolio value

The key performance measures for the year ended 31 March 2018 are set out in the strategic report.

BUSINESS MODEL

Guernsey‑registered investment company with a premium listing on the London Stock Exchange.

Introduction

The Company is a Guernsey‑registered investment company with a premium listing on the London Stock Exchange. The Company makes its investments via a group structure involving John Laing Environmental Assets Group (UK) Limited ("UK HoldCo"), an English limited company and wholly owned subsidiary of the Company, and additional intermediate holding companies for certain projects (the Company and UK HoldCo, together with their wholly owned intermediate holding companies, the "Group"). Through the group structure, at 31 March 2018 the Company owns a portfolio of 24 environmental infrastructure investments in the UK and France. The Company has a 31 March financial year end, announces half‑year results in November and full-year results in June. The Company pays dividends quarterly, targeting payments in June, September, December and March each year.

The Company is a self‑managed Alternative Investment Fund under the European Union's Alternative Investment Fund Managers Directive. The Company has a Board of five independent non‑executive Directors (details of whom can be found below) whose role is to manage the governance of the Company in the interests of shareholders and other stakeholders. In particular, the Board scrutinises the performance of the Investment Adviser, approves and monitors adherence to the investment policy, determines the risk appetite of the Group, and sets Group policies. The Board meets a minimum of four times per year for regular Board meetings and there are a number of ad hoc meetings dependent upon business needs. In addition, the Board has three committees covering Audit, Risk and Nomination. Investment decisions are delegated to an Investment Committee comprising all members of the Board. The Board fulfils the responsibilities typically undertaken by a remuneration committee.

The Board as a whole also fulfils the functions of an investment advisory engagement committee. The Board will review and make recommendations on any proposed amendment to the Investment Advisory Agreement, keep under review the performance of the Investment Adviser and will manage the risks of the delegation of certain activities to the Investment Adviser. The Board also performs a review of the performance of the other key service providers to the Fund and meets to conduct these reviews at least once a year.

The Board takes advice from the Investment Adviser, John Laing Capital Management Limited ("JLCM"), on matters concerning the market, the portfolio and new investment opportunities. Day‑to‑day management of the Group's portfolio is delegated to the Investment Adviser. The Company has an Investment Advisory Agreement in place with JLCM which can be terminated with 12 months' notice.

The key roles of the Investment Adviser are as follows:

·     monitoring financial performance against Group targets and forecasts;

·     advising the Board on investment strategy and portfolio composition to achieve the desired target returns within the agreed risk appetite;

·     sourcing, evaluating and implementing the pipeline of new investments for the portfolio;

·     monitoring the operational management of, and managing the investment cash flows from, the Group's investments;

·     minimising cash drag (having uninvested cash on the balance sheet) and improving cash efficiency generally;

·     managing the process and analysis for semi‑annual valuations of the Group's portfolio submitted to the Board for approval;

·     ensuring good financial management of the Group, having regard to accounting, tax and debt covenants;

·     hedging non‑sterling investments; and

·     managing the Company's investor reporting and investor relations activities.

Further details on the Investment Adviser are set out  below and in note 15 to the financial statements with respect to fees.

Praxis Fund Services Limited is Company Secretary and Administrator to the Fund. Other key service providers to the JLEN Group include Winterflood Securities as corporate broker, Redleaf Communications as financial public relations advisers, Mourant Ozannes as legal advisers as to Guernsey law, Hogan Lovells as legal advisers as to English law, Link Registrars as registrars, Deloitte LLP as auditor, and NIBC, Santander, ING and HSBC as lenders to the Group via the £130 million revolving credit facility.

The Board reviews the performance of all key service providers on an annual basis.

Acquisitions

As noted above, it is expected that further investments may include investments that will be acquired from John Laing under the terms of the First Offer Agreement as well as investments purchased from non‑related parties.

The Company has established procedures to deal with any potential conflicts of interest that may arise from individuals at John Laing both advising the Directors on the "buy‑side" (for the Fund) and acting on the "sell‑side" (for John Laing and its subsidiaries) in relation to any acquisition of projects from John Laing. These procedures include:

·     the creation of a separate "buy‑side" committee (representing the interests of the Fund as purchaser) and a separate "sell‑side" committee (representing the interests of the relevant John Laing company as seller), with each member of the "buy‑side" committee having the benefit of a release from his or her duties as a John Laing employee to the extent that these duties conflict with their duties to act in the interests of the Fund as a member of the "buy‑side" committee;

·     a requirement for the "buy‑side" committee to conduct due diligence on the investment interests proposed to be purchased which is separate from and independent of any due diligence conducted for John Laing, and for a report on the fair market value of the investment interests to be obtained from an independent expert; and

·     the establishment of information barriers between members of the "buy‑side" and "sell‑side" committees to ensure confidentiality and integrity of commercially sensitive information, and for individuals with economic interests in the investment interests to abstain from participating in committee discussions and votes on the relevant projects.

The Fund will seek to acquire further investments going forward from both John Laing and the wider market. In selecting the projects to acquire, the Investment Adviser and the Directors will be obliged to ensure that these projects meet the Company's investment policy.

The Investment Adviser will be subject to the overall supervision of the Board and all decisions on the acquisition of new investments and the disposal of existing investments will be subject to the approval of the Directors, all of whom are independent of John Laing. To the extent that any Director is appointed to the Board in the future who is not independent from John Laing, any such Director will not participate in any decision to acquire investments from or sell investments to John Laing.

In view of the procedures and protections set out above and the fact that it is a key part of the Company's investment policy to acquire assets from John Laing, the Company will not seek the approval of shareholders for acquisitions of assets from John Laing in the ordinary course of the Company's investment policy.

The Registered Collective Investment Scheme ("RCIS") Rules require that any arrangements between a relevant person (as defined in the RCIS Rules) and the Company are at least as favourable to the Company as would be any comparable arrangement effected on normal commercial terms negotiated at arm's length between the relevant person and an independent party.

Potential disposal of investments

Whilst the Directors may elect to retain investment interests in the portfolio projects that the Fund acquires and any other further investments made by the Fund over the long term, the Investment Adviser will regularly monitor the valuations of such projects and any secondary market opportunities to dispose of investment interests and report to the Directors accordingly. The Directors only intend to dispose of investments where they consider that appropriate value can be realised for the Fund or where they otherwise believe that it is appropriate to do so. Proceeds from the disposal of investment interests may be reinvested or distributed at the discretion of the Directors.

Discount management

By special resolution of the shareholders of the Company, passed at the August 2017 AGM, the Company has been granted shareholder authority (subject to the Listing Rules and all other applicable legislation and regulations) to purchase in the market up to 14.99% per annum of the ordinary shares in issue immediately following the passing of the resolution. This authority will expire at the conclusion of the next annual general meeting of the Company in August 2018. The Directors intend to seek renewal of this authority from shareholders at each annual general meeting.

It is the Company's investment objective to return value to shareholders in the form of dividends and capital distributions. The Company intends to distribute net income in the form of dividends. Furthermore, in normal market circumstances, the Directors intend to favour pro rata capital distributions ahead of ordinary share repurchases in the market. However, if the ordinary shares have traded at a significant discount to Net Asset Value for a prolonged period, the Board will seek to prioritise the use of net income after the payment of dividends on market repurchases over other uses of capital.

As part of the Company's discount management policies, the Board intends to propose a continuation vote if the ordinary shares trade at a significant discount to Net Asset Value per share for a prolonged period of time. If, in any financial year, the ordinary shares have traded, on average, at a discount in excess of 10% to the Net Asset Value per share, the Board will propose a special resolution at the Company's next annual general meeting that the Company ceases to continue in its present form. If such a vote is passed, the Board will be required to formulate proposals to be put to shareholders within four months to wind up or otherwise reconstruct the Company, bearing in mind the illiquid nature of the Company's underlying assets.

The discount prevailing on each business day will be determined by reference to the closing market price of ordinary shares on that day and the most recently published Net Asset Value per share.

CASE STUDY

Vulcan Renewables Ltd

First investment into AD sector bringing exposure to a non-intermittent form of green energy.

The Vulcan Renewables project comprises an anaerobic digestion plant located in Hatfield Woodhouse near Doncaster. The plant was commissioned in October 2013 and predominantly produces and upgrades biogas to be injected into the gas grid. The plant has a current capacity of c. 5MW_th and it also has a 0.5MW_e CHP engine which produces electricity and heat to meet the load of the facility, with residual electricity exported to the grid. The project is accredited both under the inflation-linked RHI government subsidy (in respect of biomethane exported to the gas grid) and the inflation-linked FiT (in respect of all electricity produced by the CHP engine). Green Gas Certificates are earned for biomethane which is injected into the grid. Vulcan is currently designed to process 40,000t/year of agricultural feedstock, comprised of mainly maize and supplemented with rye and grass during respective harvesting seasons, along with the occasional utilisation of beet. The plant also produces an organic digestate that is used by local farmers, displacing c. 2000t of inorganic chemical fertilisers.

Project specifics
Acquisition date	August 2017
Acquisition price	£15.3 million
Plant description	c. 5MWth gas-to-grid agricultural fed AD plant with a 0.5MWe CHP engine to provide for the site
Operational date	October 2013
Revenue incentives	c. 80% Government-backed RPI pegged tariffs - RHI, FiT
Feedstock	- Approximately 40,000t p.a. - Mixture of maize, rye and beet
Site operator	Future Biogas ("FBL") - FBL originally developed the plant - FBL operate a number of plants in the locality

Vulcan upgrade project

The Vulcan site currently has a Network Entry Agreement ("NEA") allowing injection of up to 1,200m³/hour of biomethane. Since commissioning, the plant has run at gas output of c. 450-500m³/hour and therefore has sufficient headroom through the NEA to export more RHI eligible gas. In order to produce the additional gas, an upgrade project is being developed with Future Biogas to increase the facility's output by converting one of the three tanks to form a third fermenter and to construct new digestate storage facilities. The works being considered will allow for a biomethane production of approximately 1,000m³/hour thereby leaving scope for further upgrades to fully utilise the NEA allowance. The Vulcan plant is able to receive additional RHI tariff for additional generating capacity that a site extension can add to the existing facility, thereby making this upgrade project an economically attractive option.

Project information *
Estimated construction duration	c. 15 months
Estimated capital cost	£7 million-£9 million
Processed feedstock increase (t)	Up to 100%
Biomethane increase (MWh)	Up to 120%

* As at the date of this report, JLEN has not entered into the documentation required to implement the Vulcan upgrade project.  JLEN is currently negotiating this documentation and is expected to enter into it shortly, but there is no guarantee that this will occur or that the Vulcan upgrade project will proceed as described above

What is anaerobic digestion?

Anaerobic digestion uses natural bacteria to break down biomass in a sealed tank in the absence of oxygen to produce a methane-rich biogas. Generally, biomass fuel can include wet wastes such as animal manures and slurries, crop residues and food waste and/or purpose-grown crops such as maize. The biogas can be used for process heat, or for heat and electricity generation using a combined heat and power unit. Alternatively, the biogas can be upgraded to biomethane for use in transport applications or injection into the gas grid. The leftover indigestible material is called digestate; this is rich in nutrients and can be used as a fertiliser. Digestate can be used whole and spread on land. Alternatively, it can be separated into liquor and fibres. Separated fibre can be used fresh as a soil conditioner or, after further aerobic composting to stabilise it, the material is suitable for making into a compost product.

OPERATIONAL AND FINANCIAL REVIEW

Financial performance of the portfolio has been satisfactory, with the largest portfolio segment onshore wind on budget and encouraging performance from new segment AD partially offsetting previous under-performance in solar PV.

Key performance measures

The key performance measures for the year ended 31 March 2018 are summarised below:

	Year ended	Year ended
	31 Mar 2018	31 Mar 2017
Market capitalisation	£394.4m	£370.2m
Dividend per share (declared)	6.31p	6.14p
Share price	101.1p	109.0p
Total shareholder return for the period (share price basis)	-1.8%	16.8%
Net Asset Value	£392.4m	£340.0m
Net Asset Value per share	99.6p	100.1p
Net Asset Value per share growth (adjusting for dividends)	-0.5%	3.5%
Portfolio value	£429.5m	£327.6m
Number of investments	24	19
Largest single investment as % of portfolio value	10.2%	13.7%

Portfolio performance

Operating performance of the whole environmental infrastructure portfolio during the year ended 31 March 2018 was generally satisfactory, producing 514GWh of green energy which, overall, is in line with expectations. Within the portfolio, technology sectors fared differently, with the performance of the anaerobic digestion assets purchased during the year being a highlight, and solar failing to meet budget while showing an improvement from the previous year.

The wind projects experienced wind conditions in line with the long-term average forecast during the year ended March 2018 and performed solidly, leading to generation in line with budget. Overall, generation from the wind assets of 399GWh during the year was on budget and ahead of the previous year's production of 217GWh, due to better wind conditions and new acquisitions. The newest additions to the wind portfolio, Llynfi Afan and Moel Moelogan, performed in line with expectations. Llynfi Afan, in its first year of operation since construction, experienced some grid outages and consequently production was slightly below target. Such outages largely related to new grid infrastructure and are not expected to reoccur. However, Moel Moelogan wind farm, which has been running for over five years, performed well and exceeded production targets.

The wind portfolio generally experienced good reliability and availability levels. All wind projects achieved contractual availability levels, apart from one where liquidated damages of around £40,000 resulting from trading to reach the required level will supplement generation revenues.

Various upgrades have been implemented during the year to maximise production by reducing losses due to grid outages and by improving turbine production at medium and low wind speeds. The turbine improvements typically include optimised software controls and adjustment to the turbine's aerodynamic profile. Further similar upgrades are being evaluated and implemented where appropriate to increase production incrementally. Other asset management plans are in the process of review, including contract rationalisation across the wind portfolio, sale of REGOs, and O&M initiatives including possible provision by parties other than the original turbine supplier.

Generation from the solar assets during the period at 64GWh was 9.4% below budget. This under-performance was impacted by low solar irradiation and two asset-specific issues. The main asset-specific issue was on the Branden project, which experienced a number of technical issues with inverters and string connectors during the year under review. This led to intermittent periods of unavailability and persistently lower than expected generation as investigations were undertaken to identify and resolve the problem. The Investment Adviser has been discussing the issues with the relevant contractual parties and a programme to replace affected connectors at Branden was completed in the third quarter of 2017. The cost of the replacement programme was mitigated by contractual protections provided by component warranties and lost generation by business interruption insurance where applicable. Other issues relating to the performance of the Branden sites are being resolved with the relevant contractual parties.

The second asset-specific issue affected the Crug Mawr project, part of the CSGH portfolio, which suffered a HV branch joint failure, leading to an outage of 16 days while repairs occurred. Similar cables in the CSGH portfolio have been inspected for signs of failure and preventative measures taken as required. A further resolution to an incorrect relay protection installation has also been implemented at Crug Mawr, resolving a problem with frequent grid outages suffered through 2017.

Irradiation for the solar portfolio was 3.7% lower than the long-term average forecast⁽¹⁾. Adjusting for this lower irradiation and the under-performance at Crug Mawr (which is considered to be exceptional and non-recurring), underlying under-performance was 5.4% for the period, of which Branden was the largest contributor. The Investment Adviser is in the process of carrying out new detailed surveys of all sites within the portfolio in conjunction with technical advisers to identify likely areas of under-performance and this is expected to contribute to reducing the gap to budget further in the period ahead.

For the ELWA waste project and the Tay wastewater project, financial performance has been slightly ahead of expectations. Operational performance and compliance with contractual targets has also been good, with no material breaches occurring. Waste tonnages and performance at the East London Waste project have been stable and the impact of higher than forecast inflation meant that ELWA was able to pay distributions slightly ahead of budget. The Tay wastewater project experienced a very dry 2017, with flows 11% below the long-term average, which had a limited effect on gross revenues due to the banded payment mechanism that sees greater per-unit revenues earned at lower volumes. Strong cost controls also mitigated reduced revenues and consequently distributions were in line with expectations.

The D&G project has also performed satisfactorily on a day-to-day operational basis. However, the operating contractor's intention to leave the project and consequent uncertainty regarding the project's long-term viability has impacted upon financial performance, with the project unable to pay distributions during the period. This has reduced the dividend cover by 0.02x. The D&G project is valued at nil at 31 March 2018.

Generation from the growing AD segment posted good performance, with gas volumes being 8% above budget and plants displaying good overall availability. Both sites provide some scope for operational enhancement and various minor and major upgrade proposals are under consideration.

Apart from the issues noted above, all other projects have achieved high levels of technical and operational availability during the year, with no significant operational disruption experienced. Overall, the generation of the renewable energy assets in the portfolio since IPO is summarised as follows:

Portfolio generation	2014‑15	2015‑16	2016-17	2017-18	Total
Wind portfolio actual generation (GWhe)	82	184	217	399	882
Variation from budget(1)	-7%	+11%	-15%	0%	-2%
Solar portfolio actual generation (GWhe)	10	30	40	64	144
Variation from budget(1)	-1%	‑2%	-12%	-9%	-7%
AD portfolio actual generation (GWhth)	-	-	-	51	51
Variation from budget	-	-	-	+8%	+8%

(2)   Budgets adjusted to reflect operational energy yield assessments carried out under contracted true-up mechanisms post IPO.

Following an overall increase of both short‑term market prices and long‑term forecasts for electricity prices during the financial year ended 31 March 2017, with a simple average increase over 25 years of 6.9% from corresponding levels at the start of that financial year, JLEN has experienced a decrease in forecast electricity prices during the year to 31 March 2018. Compared to the assumptions used in the portfolio valuation at 31 March 2017, on a time weighted average basis, the decrease in the electricity price assumptions is approximately 7.6% over a 25-year period, being a simple average decrease over 25 years of approximately 7.9%, including an increase in market forward prices (gross of any discounts under PPAs) over the next two years of nearly 7%.

The average all-in price received by the differing technology classes in the UK for their energy volumes generated in the year ended 31 March 2018 was £78 per MWh_e for onshore wind, £192 per MWh_e for solar and £93 per MWh_th for AD.

Overall, 35% (31 March 2017: 32%) of the portfolio distributions are exposed to market electricity prices. JLEN has taken advantage of the improvement in short‑term electricity price forecasts during the year by fixing prices under existing PPA arrangements for a significant proportion of the renewable energy portfolio for periods of up to 24 months. At 31 March 2018, 72% of the renewable energy portfolio's electricity exposure was subject to a price fix for the summer 2018 season and 53% for the winter 2018. Where electricity-generating projects in the portfolio do not have a fixed price under their PPAs, JLEN has reflected an average of £49/MWh (gross of any PPA discounts) for winter seasons and £43/MWh for summer seasons for the next 24 months (31 March 2017: £45/MWh and £40/MWh respectively).

The impact on revenues and portfolio valuation is discussed in more detail in the analysis of financial results and investment portfolio and valuation sections below.

The effects of monthly variability and seasonality in production expected in a portfolio of intermittent renewables projects are reduced by the overall technology diversification in JLEN's portfolio. Although agricultural AD plants have some indirect exposure to weather patterns through the yield of harvests (feedstock), it is very unlikely to impact on their gas volumes. The environmental processing assets, apart from Tay, have revenues independent of weather and all have revenues that vary little with changes in volume of waste and wastewater processed.

Acquisitions

Since 31 March 2017, the Company has acquired five new projects and made an additional investment into an existing project for a total consideration of £109.3 million. The acquisitions were funded by the proceeds of the July 2017 and February 2018 shares issues, and drawdowns under the Company's £130 million revolving credit facility. The assets were as follows:

Moel Moelogan

As mentioned in the 2017 Annual Report as post-balance sheet events, JLEN acquired the Moel Moelogan 1 and 2 wind farms in North Wales in April 2017 and May 2017. These have a combined capacity of 14.3MW and were acquired for a total consideration of £25.7 million.

CSGH solar portfolio

In June 2017, JLEN acquired a portfolio of four ground-mounted solar parks with a total generating capacity of 33.5MW. Higher Tregarne, located in Cornwall, has been operational since March 2014, has a generation capacity of 5MW and is accredited for 1.6 ROCs. The other three solar parks, Crug Mawr, Golden Hill and Shoals Hook, located in South Wales, have been operational since March 2015, and have a total generation capacity of 28.5MW and are accredited for 1.4 ROCs. The CSGH solar portfolio was acquired for a total consideration of £12.2 million.

Vulcan Renewables

In August 2017, JLEN made its first investment in the anaerobic digestion sector through Vulcan Renewables. The plant is rated at approximately 5MW_th and predominantly produces grid-injectable biomethane from its biogas. The plant also has a 0.5MW_e CHP engine which supplies the site's needs. The project is accredited both under the Renewable Heat Incentive ("RHI") and the Feed-in Tariff ("FiT"). The farm-based anaerobic digestion plant is managed by experienced operator Future Biogas Ltd and is located in Hatfield Woodhouse near Doncaster. It was commissioned in October 2013 and was one of the first commercial biogas-to-grid projects in the UK. Vulcan was acquired for a total consideration, including working capital, of £15.3 million.

Monksham solar

In October 2017, and as originally anticipated, JLEN increased its interest in the Monksham solar portfolio by completing the purchase of the 'A' shares for c. £2.1 million from founding EIS shareholders. This takes JLEN's control, economic or otherwise, from 87% to 100%.

Llynfi Afan

On 12 December 2017, JLEN completed the acquisition of Llynfi Afan Wind Farm from John Laing Group plc for a cash consideration, including working capital, of £43.0 million. Llynfi Afan Wind Farm is located in the Afan Valley, Abergwynfi, West Glamorgan in Wales and comprises 12 Gamesa 2MW G80 turbines with a total generating capacity of 24MW and is accredited for 0.9 ROCs. The site has been operational since March 2017.

Icknield Farm

On 2 February 2018, JLEN made a further investment in the anaerobic digestion sector through Icknield Farm. The investment consists of the provision of a debt facility to repay existing loans and acquisition of a minority equity stake from private individuals, who were the project's developers, for an aggregate amount of c. £11 million. The Icknield Farm AD plant, located in Ipsden, South Oxfordshire, was commissioned in December 2014. The plant has a capacity of approximately 5MW_th and predominantly produces biomethane exported to the national gas grid. In addition, the plant also has a 0.4MW_e CHP engine and is accredited under the Renewable Heat Incentive ("RHI") and Feed-in Tariff ("FiT").

Financing

In June 2017, the Fund signed a new three-year facilities agreement with HSBC, NIBC, ING and Santander which provides for a committed revolving credit facility of £130 million and for an uncommitted accordion facility of up to £60 million. Furthermore, the facility incorporates an uncommitted option to extend for a further year. The facility margin is 200 to 225 bps (depending on the loan-to-value ratio for the Fund) over LIBOR.

This replaced the existing facility and provides JLEN an increased source of flexible funding outside of equity raisings at a lower cost. It will be used to make future acquisitions of environmental infrastructure projects to add to JLEN's current portfolio of wind, solar, anaerobic digestion, waste & wastewater processing assets, on a timely basis, reducing the performance drag associated with holding excess cash. As at the period end, drawings under the RCF were £48.4 million. Under its investment policy, JLEN may borrow up to 30% of its NAV.

In addition to the revolving credit facility, several of the projects have underlying project-level debt which is not reflected in these financial statements. There is an additional gearing limit in respect of such debt of 85% of the aggregate gross project value (being the fair market value of such portfolio companies increased by the amount of any financing held within the projects) for PFI/PPP projects and 65% for renewable energy generation projects.

The project-level gearing at 31 March 2018 across the portfolio was 39.1% (31 March 2017: 42.9%) being 32.9% (31 March 2017: 32.7%) for the renewable energy assets and 56.4% (31 March 2017: 59.8%) for the PFI processing assets. The increase in the gearing for the renewable energy assets during the year reflects the acquisitions of Llynfi Afan and CSGH solar in the year, which have project-level debt. Taking into account the amount drawn down under the revolving credit facility, the overall fund gearing at 31 March 2018 was 45.4% (31 March 2017: 44.9%).

As at 31 March 2018, the Group, which comprises the Company and the intermediate holding companies, had cash balances of £11.8 million (31 March 2017: £26.1 million).

Analysis of financial results

The financial statements of the Company for the year ended 31 March 2018 are set out below.

The Company prepared the financial statements for the year ended 31 March 2018 in accordance with International Financial Reporting Standards ("IFRS") as published by the EU. In order to continue providing useful and relevant information to its investors, the financial statements also refer to the "Group", which comprises the Company, its wholly owned subsidiary (John Laing Environmental Assets Group (UK) Limited ("UK HoldCo") and the indirectly held wholly owned subsidiaries HWT Limited (which holds the investment interest in the Tay project) and JLEAG Solar 1 Limited (which holds the investment interest in the Panther solar portfolio).

Basis of accounting

The Company applies IFRS 10 and Investment Entities: Amendments to IFRS 10, IFRS 12 and IAS 28, which states that investment entities should measure all their subsidiaries that are themselves investment entities at fair value. The Company accounts for its interest in its wholly owned direct subsidiary John Laing Environmental Assets Group (UK) Limited as an investment at fair value through profit or loss.

The primary impact of this application in comparison to consolidating subsidiaries, is that the cash balances, the working capital balances and borrowings in the intermediate holding companies are presented as part of the Company's fair value of investments.

The Company's intermediate holding companies provide services that relate to the Company's investment activities on behalf of the parent which are incidental to the management of the portfolio. These companies are recognised in the financial statements at their fair value, which is equivalent to their net assets.

The Group holds investments in the 24 portfolio assets which make distributions comprising returns on investments (interest on loans and dividends on equity) together with repayments of investments (loan repayments and equity redemptions).

Results for the year ended 31 March 2018

	Year ended	Year ended
	31 Mar	31 Mar
All amounts presented in £million (except as noted)	2018	2017
Net assets(1)	392.4	340.0
Portfolio value(2)	429.5	327.6
Intermediate holding companies' net (liabilities)/assets(2)	(41.0)	9.3
Operating income	26.1	29.8
Net assets per share	99.6p	100.1p
Distributions, repayments and fees from portfolio	33.4	25.4
Profit before tax	21.1	25.6

(1)   Also referred to as Net Asset Value or "NAV".

(2)   Classified as investments at fair value through profit or loss on the statement of financial position.

Net assets

Net assets increased from £340.0 million at 31 March 2017 to £392.4 million at 31 March 2018, primarily driven by the capital raises during the year.

The net assets of £392.4 million comprise £429.5 million portfolio value of environmental infrastructure investments and the Company's cash balances of £5.5 million partially offset by £41.0 million of intermediate holding companies' net liabilities and other net liabilities of £1.6 million.

The intermediate holding companies' net liabilities of £41.0 million comprises a £48.4 million credit facility loan, partially offset by cash balances of £6.3 million and other net assets of £1.1 million.

Analysis of the Group's net assets at 31 March 2018

	At 31 Mar	At 31 Mar
All amounts presented in £million (except as noted)	2018	2017
Portfolio value	429.5	327.6
Intermediate holding companies' cash	6.3	21.9
Intermediate holding companies' revolving credit facility	(48.4)	(12.5)
Intermediate holding companies' other assets/(liabilities)	1.1	(0.1)
Fair value of the Company's investment in UK HoldCo	388.5	336.9
Company's cash	5.5	4.2
Company's other liabilities	(1.6)	(1.1)
Net Asset Value at 31 March	392.4	340.0
Number of shares	394,077,029	339,642,078
Net Asset Value per share	99.6p	100.1p

At 31 March 2018, the Group (the Company plus intermediate holding companies) had a total cash balance of £11.8 million (31 March 2017: £26.1 million), including £5.5 million in the Company's balance sheet (31 March 2017: £4.2 million) and £6.3 million in the intermediate holding companies (31 March 2017: £21.9 million), which is included in the Company's balance sheet within "investments at fair value though profit or loss".

At 31 March 2018, UK HoldCo had drawn £48.4 million of its revolving credit facility (31 March 2017: £12.5 million) which is included in the Company's balance sheet within "investments at fair value through profit or loss".

The movement in the portfolio value from 31 March 2017 to 31 March 2018 is summarised as follows:

	Year ended	Year ended
	31 Mar	31 Mar
All amounts presented in £million (except as noted)	2018	2017
Portfolio value at start of the year	327.6	264.5
Acquisitions (net of post-acquisition price adjustments)	107.2	55.3
Distributions received from investments	(33.4)	(25.4)
Growth in value of portfolio	28.1	33.2
Portfolio value at 31 March	429.5	327.6

Further details on the portfolio valuation and an analysis of movements during the year are provided in the investment portfolio and valuation section.

Income

The Company's profit before tax for the year ended 31 March 2018 is £21.1 million, generating earnings of 5.7 pence per share. Excluding the net loss on investments at fair value, the profit for the year ended 31 March 2018 is £24.0 million, generating an adjusted earnings of 6.50 pence per share.

	Year ended	Year ended
	31 Mar	31 Mar
All amounts presented in £million (except as noted)	2018	2017
Interest received on UK HoldCo loan notes	18.6	14.2
Dividend received from UK HoldCo	10.4	7.0
Net (losses)/gains on investments at fair value	(2.9)	8.6
Operating income	26.1	29.8
Operating expenses	(5.0)	(4.2)
Profit before tax	21.1	25.6
Earnings per share	5.7p	9.3p

In the year to 31 March 2018, the operating income was £26.1 million, including the receipt of £18.6 million of interest on the UK HoldCo loan notes, £10.4 million of dividends also received from UK HoldCo and a net loss on investments at fair value of £2.9 million.

The operating expenses included in the income statement for the year were £5.0 million, in line with expectations. These comprise £4.1 million Investment Adviser fees and £0.9 million operating expenses. Investment Adviser fees are charged at 1% of Adjusted Portfolio Value as set out in more detail in note 15 to the financial statements.

Ongoing charges

The "ongoing charges" ratio is an indicator of the costs incurred in the day‑to‑day management of the Fund. JLEN uses the AIC recommended methodology for calculating this ratio, which is an annual figure.

The ongoing charges percentage for the year to 31 March 2018 was 1.31% (year ended 31 March 2017: 1.46%). The ongoing charges have been calculated, in accordance with AIC guidance, as annualised ongoing charges (i.e. excluding acquisition costs and other non‑recurring items) divided by the average published undiluted Net Asset Value in the period. The ongoing charges percentage has been calculated on the consolidated basis and therefore takes into consideration the expenses of UK HoldCo as well as the Company. Adjusting for the impact of the drawdown amount under the revolving credit facility, the ongoing charges ratio would be 1.18% (31 March 2017: 1.19%). JLCM believes this to be competitive for the market in which JLEN operates and the stage of development and size of the Fund, demonstrating that management of the Fund is efficient with minimal expenses incurred in its ordinary operation.

Cash flow

The Company had a total cash balance at 31 March 2018 of £5.5 million (2017: £4.2 million). The breakdown of the movements in cash during the year is shown below.

Cash flows of the Company for the year (£million):

	Year ended	Year ended
	31 Mar	31 Mar
	2018	2017
Cash balance at 1 April	4.2	3.3
Net proceeds from share issues	54.7	113.7
Investment in UK HoldCo (equity and loan notes)	(54.5)	(113.9)
Interest on loan notes received from UK HoldCo	18.6	14.2
Dividends received from UK HoldCo	10.4	7.0
Directors' fees and expenses	(0.3)	(0.2)
Investment Adviser fees	(3.9)	(3.2)
Administrative expenses	(0.6)	(0.5)
Dividends paid in cash to shareholders	(23.1)	(16.2)
Company cash balance at 31 March	5.5	4.2

The Group had a total cash balance at 31 March 2018 of £11.8 million (2017: £26.1 million) and borrowings under the revolving credit facility of £48.4 million (2017: £12.5 million). The breakdown of the movements in cash during the year is shown below.

Cash flows of the Group for the year (£million):

	Year ended	Year ended
	31 Mar	31 Mar
	2018	2017
Cash distributions from environmental infrastructure investments	33.4	25.4
Administrative expenses	(0.7)	(0.7)
Directors' fees and expenses	(0.3)	(0.2)
Investment Adviser fees	(3.9)	(3.2)
Financing costs (net of interest income)	(1.6)	(2.3)
Cash flow from operations	26.9	19.0
Net proceeds from share issues	54.7	113.7
Acquisition of investment assets	(108.5)	(55.3)
Reduction in acquisition price	3.7	2.0
Acquisition costs (including stamp duty)	(2.5)	(1.0)
Debt arrangement fee cost	(1.4)	-
Proceeds/(repayment) from borrowings under the revolving credit facility	35.9	(42.3)
Dividends paid in cash to shareholders	(23.1)	(16.2)
Cash movement in the year	(14.3)	19.9
Opening cash balance	26.1	6.2
Group cash balance at 31 March	11.8	26.1

During the year, the Group received cash distributions of £33.4 million from its environmental infrastructure investments, in line with the distributions expected by the Group after adjusting for acquisitions during the year.

Cash received from investments in the year adequately covers the operating and administrative expenses and financing costs as well as the dividends declared to shareholders in respect of the year ended 31 March 2018. Cash flow from operations of the Group of £26.9 million covers dividends paid in the year to 31 March 2018 of £23.1 million by 1.2x. The dividend cover based on dividends declared in respect of the year to 31 March 2018 was 1.1x.

The Group anticipates that future revenues from its environmental infrastructure investments will continue to be in line with expectations and therefore will continue to fully cover future costs as well as planned dividends payable to its shareholders.⁽¹⁾

Dividends

During the year, the Company paid a final dividend for the period ended 31 March 2017 of 1.535 pence per share in June 2017 (£5.2 million) in respect of the quarter to 31 March 2017.

Interim dividends of 1.5775 pence per share were paid in September 2017 (£6.0 million) in respect of the quarter to 30 June 2017, of 1.5775 pence per share in December 2017 (£6.0 million) in respect of the quarter to 30 September 2017, and of 1.5775 pence per share in February 2018 (£6.0 million) in respect of the quarter to 31 December 2017. On 31 May 2018 the Company declared an interim dividend of 1.5775 pence per share in respect of the quarter ended 31 March 2018 (£6.2 million), which is payable on 22 June 2018.

The target dividend for the year to 31 March 2019 is 6.51 pence per share, being the amount declared in respect of the year to 31 March 2018 of 6.31 pence per share, adjusted for inflation.⁽¹⁾

These are targets only and not profit forecasts. There can be no assurance that these targets will be met.

INVESTMENT PORTFOLIO AND VALUATION

Portfolio value increased to £429.5 million at 31 March 2018 from £327.6 million at 31 March 2017.

Investment portfolio

At 31 March 2018, the Group's investment portfolio comprised of interests in 24 project vehicles, all located in the UK:

					Commercial
				Capacity	operations
Asset	Location	Type	Ownership	(MWs)	date
Amber	UK (Eng)	Solar	100%	9.8	Jul 2012
Branden	UK (Eng)	Solar	100%	14.7	Jun 2013
CSGH	UK (Eng)	Solar	100%	33.5	Mar 2014 & 15
Monksham	UK (Eng)	Solar	100%	10.7	Mar 2014
Pylle Southern	UK (Eng)	Solar	100%	5.0	Dec 2015
Panther	UK (Eng)	Solar	100%	6.5	2011-2014
Bilsthorpe	UK (Eng)	Wind	100%	10.2	Mar 2013
Burton Wold Extension	UK (Eng)	Wind	100%	14.4	Sept 2014
Carscreugh	UK (Scot)	Wind	100%	15.3	Jun 2014
Castle Pill	UK (Wal)	Wind	100%	3.2	Oct 2009
Dungavel	UK (Scot)	Wind	100%	26.0	Oct 2015
Ferndale	UK (Wal)	Wind	100%	6.4	Sep 2011
Hall Farm	UK (Eng)	Wind	100%	24.6	Apr 2013
Le Placis Vert	France	Wind	100%	4.0	Jan 2016
Llynfi Afan	UK (Wal)	Wind	100%	24	Mar 2017
Moel Moelogan	UK (Wal)	Wind	100%	14.3	2003 & 08
New Albion	UK (Eng)	Wind	100%	14.4	Jan 2016
Plouguernével	France	Wind	100%	4.0	May 2016
Wear Point	UK (Wal)	Wind	100%	8.2	Jun 2014
Dumfries & Galloway	UK (Scot)	Waste management	80%	n/a	2007
ELWA	UK (Eng)	Waste management	80%	n/a	2006
Tay	UK (Scot)	Wastewater	33%	n/a	Nov 2001
Icknield	UK (Eng)	Anaerobic digestion	40%	5.0(1)	Dec 2014
Vulcan	UK (Eng)	Anaerobic digestion	100%	5.0(2)	Oct 2013

(1)   MW_th (thermal) and an additional 0.4MW_e CHP engine for on-site power provision.

(2)   MW_th (thermal) and an additional 0.5MW_e CHP engine for on-site power provision.

Portfolio valuation

The Investment Adviser is responsible for carrying out the fair market valuation of the Company's investments, which is presented to the Directors for their approval and adoption. The valuation is carried out on a quarterly basis as at 30 June, 30 September, 31 December and 31 March each year.

The Directors' valuation of the portfolio at 31 March 2018 was £429.5 million, compared to £327.6 million at 31 March 2017. The increase of £101.9 million is the net impact of new acquisitions, cash received from investments, changes in macroeconomic, electricity price and discount rate assumptions and underlying growth in the portfolio.

The movement in value of investments during the year ended 31 March 2018 is shown in the table below:

	2018	2017
	£m	£m
Valuation of portfolio at opening balance	327.6	264.5
Acquisitions in the year (including post-acquisition adjustments and deferred consideration)	107.2	55.3
Cash distributions from portfolio	(33.4)	(25.4)
Rebased opening valuation of portfolio	401.4	294.4
Changes in forecast electricity prices	(17.4)	10.4
Changes in economic assumptions	2.9	3.8
Changes in discount rates	7.2	3.7
Changes in exchange rates	0.1	0.2
Balance of portfolio return	35.3	15.1
Valuation of portfolio at 31 March	429.5	327.6
Fair value of intermediate holding companies	(41.0)	9.3
Investments at fair value through profit or loss	388.5	336.9

Allowing for investments of £107.2 million (including post-acquisition adjustments and deferred consideration) and cash receipts from investments of £33.4 million, the rebased valuation is £401.4 million. The portfolio valuation at 31 March 2018 is £429.5 million (2017: £327.6 million), representing an increase over the rebased valuation of 7.0% over the year (2017: 11.3%).

Valuation assumptions

The investments in JLEN's portfolio are valued by discounting the future cash flows forecast by the underlying assets financial models.

Each movement between the rebased valuation and the 31 March 2018 valuation is considered below:

Forecast electricity and gas prices

The project cash flows used in the portfolio valuation at 31 March 2018 reflect contractual fixed price arrangements under PPAs where they exist and short‑term market forward prices where they do not, for the next two years. Thereafter, the project cash flows assume future electricity and gas prices in line with central forecasts from a single established market consultant, adjusted by the Directors for project-specific arrangements if required.

JLEN has reflected a decline in mid- to long-term electricity expectations during the period partially offset by near‑term increases. Compared to the assumptions used in the valuation at 31 March 2018, on a time-weighted average basis, the decrease in the electricity price assumptions is approximately 7.6% over a 25-year period (being a simple average decrease over 25 years of approximately 7.9% including an increase in market forward prices (gross of any discounts under PPAs) over the next two years of nearly 7%).

Where generating projects in the portfolio do not have a fixed price under their PPAs, JLEN has reflected the prices in the table below (gross of PPA discounts):

Avg. £/MWh	Summer	Winter
Electricity	43 (40)	49 (45)
Gas	14 (-)	17 (-)

At 31 March 2018, 72% of the renewable energy portfolio's electricity price exposure was subject to a fixed price for the summer 2018 season and 53% for the winter season.

The overall decrease in forecasts for future electricity prices compared to forecasts at 31 March 2017 has decreased the valuation of the portfolio by £17.4 million.

The Investment Adviser is aware that some market participants use price forecast assumptions that are blended from the forecasts of two or more market consultants and has carried out analysis to assess the impact on the portfolio valuation of adopting a similar policy. The Investment Adviser believes that such a "blended curve" would be 2% higher on a time-weighted basis than the curve used by the Company under its current policy, and this would translate into increased value of c. £5.5 million or c. 1.4 pence per share. The Directors have decided not to alter the policy as the general trend for electricity price forecasts since IPO has been downwards and analysis suggests that the majority of the valuation uplift comes in later years when such forecasts are subject to greatest uncertainty.

Economic assumptions

Macroeconomic assumptions in respect of inflation, corporation tax and deposit interest rates have remained relatively constant during the period and the overall movement in valuation is not significant. RPI inflation rates assumed in the valuation at 31 March 2018 are 3.5% in 2018 (31 March 2017: 3.3%), 3.1% in 2019 (31 March 2017: 2.75%) with 2.75% for all subsequent years for UK assets, and 1.5% for 2018 and all subsequent years (31 March 2017: 1.5%) for the French assets. The long‑term UK corporation tax rate assumed is 19%, stepping down to 17% from April 2020 onwards, reflecting the rates enacted by legislation and in line with market practice. The equivalent rate for the French assets is 28% (31 March 2017: 33.3%) stepping down to 26.5% in 2020 and 25.0% in 2021 (31 March 2017: both 33.3%). Deposit rates assumed in the valuation reflect a range of deposit rates in the UK from 1.5% in 2018 with a gradual increase to a long‑term rate of 2.5% (March 2017: 2.75%) with effect from 2020 onwards. For the French assets, the rate assumed is 0.5%. The euro/sterling exchange rate used to value the euro‑denominated investments in France was €1.14/£1 at 31 March 2018.

Discount rates

The discount rates used in the valuation exercise represent the Investment Adviser's and Board's assessment of the rate of return in the market for assets with similar characteristics and risk profile. The discount rates are reviewed on a regular basis and updated to reflect changes in the market and in the project risk characteristics.

During the period, there has continued to be strong demand for income‑producing infrastructure assets, including environmental infrastructure projects as their market matures. The Investment Adviser, based on its experience of bidding in the secondary market for onshore wind, and as flagged in the 2017 Annual Report, has proposed a reduction in the discount rate used for valuing UK onshore wind farms which has been adopted by the Board. Discount rates for the other sectors within the portfolio remain unchanged from those used at 31 March 2017, although the Investment Adviser notes discount rate benchmarks for geared UK solar projects are reducing. While the majority of the solar assets in the portfolio are ungeared, the read-across from geared to ungeared discount rates (assuming a market‑norm level of gearing) suggests that these too are reducing and the Investment Adviser will continue to monitor for future valuations.

As mentioned in the portfolio performance section, addressing the issues of all the parties at the D&G project is proving complex and is likely to involve significant effort and resources in finding solutions, which JLEN as majority shareholder in the project company is prepared to do. Although the project company benefits from contractual protections that govern changes to the contract, the eventual outcome is subject to significant uncertainty, further impacted by the public announcement that the operator intends to exit. To reflect that uncertainty, the Company has taken the decision to write down the value of the project to zero. The project had represented c. 1% of the portfolio value at the 30 September 2017 valuation.

Taking the above into account and reflecting the change in mix of the portfolio during the year, the overall Weighted Average Discount Rate ("WADR") of the portfolio was 8.1% at 31 March 2018 (31 March 2017: 8.2%).

Balance of portfolio return

This represents the balance of valuation movements in the year excluding the factors noted above. The balance of the portfolio return mostly reflects the impact on the rebased portfolio value, all other measures remaining constant, of the effect of the discount rate unwinding and also some additional valuation adjustments from updates to individual project revenue assumptions. The total represents an uplift of £35.3 million net of the reduction in value of the D&G asset.

Valuation sensitivities

The Net Asset Value of the Company is the sum of the discounted value of the future cash flows of the underlying asset financial models, the cash balances of the Company and UK HoldCo, and the other assets and liabilities of the Group less Group debt.

The portfolio valuation is the largest component of the Net Asset Value and the key sensitivities are considered to be the discount rate applied in the valuation of future cash flows and the principal assumptions used in respect of future revenues and costs.

A broad range of assumptions are used in our valuation models. These assumptions are based on long‑term forecasts and are not affected by short‑term fluctuations in inputs, whether economic or technical. The Investment Adviser exercises its judgement in assessing both the expected future cash flows from each investment based on the project's life and the financial models produced by each project company and the appropriate discount rate to apply.

The key assumptions are as follows:

Discount rate

The WADR of the portfolio at 31 March 2018 was 8.1% (31 March 2017: 8.2%). A variance of plus or minus 0.5% is considered to be a reasonable range of alternative assumptions for discount rates.

Volumes

Base case forecasts for intermittent renewable energy projects assume a "P50" level of electricity output based on reports by technical consultants. The P50 output is the estimated annual amount of electricity generation (in MWh) that has a 50% probability of being exceeded - both in any single year and over the long term - and a 50% probability of being underachieved. Hence the P50 is the expected level of generation over the long term.

The P90 (90% probability of exceedance over a 10‑year period) and P10 (10% probability of exceedance over a 10‑year period) sensitivities reflect the future variability of wind and solar irradiation and the uncertainty associated with the long‑term data source being representative of the long‑term mean.

Agricultural anaerobic digestion facilities do not suffer from similar deviations as their feedstock input volumes (and consequently biogas production) are controlled by the site operator.

For the waste and wastewater processing projects, forecasts are based on projections of future flows and are informed by both the client authorities' own business plans and forecasts and independent studies where appropriate.

Revenues in the PPP projects are generally not very sensitive to changes in volumes due to the nature of their payment mechanisms.

Electricity prices

Electricity price assumptions are based on the following: for the first two years, cash flows for each project use forward electricity prices based on market rates unless a contractual fixed price exists, in which case the model reflects the fixed price followed by the forward price for the remainder of the two‑year period. For the remainder of the project life, long‑term central case forecasts from an established market consultant and other relevant information is used, and adjusted by the Investment Adviser for project specific arrangements. The sensitivity assumes a 10% increase or decrease in electricity prices relative to the base case for each year of the asset life after the first two‑year period.

Inflation

Each project in the portfolio receives a revenue stream which is either fully or partially inflation‑linked. The inflation assumptions are described in the macroeconomic section below. The sensitivity assumes a 0.5% increase or decrease in inflation relative to the base case for each year of the asset life.

Euro/sterling exchange rates

As the proportion of the portfolio assets with cash flows denominated in euros represented approximately less than 1% of the portfolio value at 31 March 2018, the Directors consider the sensitivity to changes in euro/sterling exchange rates to be insignificant.

Project economic life

Each project in the portfolio has an assumed economic life during which it earns revenues and after which it no longer operates. In the case of wind and solar projects, the economic life assumption is 25 years from the date of commissioning unless there are specific factors that suggest a longer or shorter economic life. In the case of PPP or AD projects, the economic life is determined according to the term of the concession contract or accredited tariff duration that defines the project.

The Directors are aware that a number of market participants are assuming longer economic lives for wind and solar projects, typically where the planning permission permits the project to remain operational for longer than 25 years and where the project has the right to extend its lease with the landowner. Where these are in place, economic lives of up to 35 years for solar parks and 30 years for wind farms have been assumed.

These conditions apply to one wind project in the JLEN portfolio, which is assumed to have an economic life of 30 years. All other wind and solar projects are assumed to have an economic life of 25 years or less. The Investment Adviser is exploring opportunities to secure extensions to planning and lease arrangements, and believes that these are achievable on a proportion of the projects within the wind and solar portfolios. A sensitivity has been run, assuming that 25% of eligible projects achieve extensions, and on this basis NAV would increase by c. £4.8 million or c. 1.2 pence per share.

MARKET OUTLOOK

Based on the current outlook for the portfolio and the markets in which it operates, the Board believes that the current portfolio is well positioned to continue to deliver the target returns of the Company.

Despite the current political and economic uncertainty in the UK and Europe with the continued uncertainty over Brexit negotiations, we believe that the Company's strategy of investing in a diversified portfolio of assets in the wider environmental infrastructure sector and of providing consistent long-term income with NAV resilience remains achievable.

Whilst it will take some time for the exact details of arrangements post-exit from the EU to emerge, government policy commitments for clean energy continue in the UK and climate change remains one of the important areas of focus, not only for the UK, but globally. The UK has ambitious domestic targets, with the Climate Change Act of 2008 establishing a target to reduce its emissions by at least 80% from 1990 levels by 2050. The Act established a system of five-yearly carbon budgets, the fifth of which was formally approved by Parliament in 2016 and aims to limit annual emissions to an average of 57% below 1990 levels by 2032.

As an EU member, the UK is required to generate 15% of its energy from renewables by 2020 under the European Union's Renewable Energy Directive. Although by leaving the EU the UK may no longer be obliged to meet these targets or any successor targets (unless agreed as part of any secession agreement), the renewables projects required to meet the 2020 target have already been largely built or are expected to be commissioned. In respect of longer‑term commitments, the Climate Change Act's ambitious carbon reduction targets will require a substantial and continued contribution from renewables.

Short-term electricity prices have remained robust and we have taken advantage of this by locking-in fixed prices across a number of our projects. However, the longer‑term outlook for electricity prices has softened, informed in part by the low prices bid into auctions for new plants seeking subsidies throughout Europe. In the UK, the most recent Contract for Difference ("CFD") auction for offshore wind delivered the lowest bid strike price of £57.50/MWh, significantly lower than the lowest price in the previous auction in 2015 of £114/MWh. This winter was also the first delivery year for the Capacity Market ("CM"), aimed at ensuring security of electricity supply by providing a payment for reliable sources of capacity, alongside electricity revenues, to ensure the delivery of electricity when needed.

Despite this backdrop, we see no indication that the pricing of assets is softening in core UK markets, and competition remains fierce. The Investment Adviser continues to see good levels of potential transactions in the market and participates on occasion, but remains committed to observing the Company's investment requirements and not overpaying for assets. Similarly, while the investment mandate covers OECD countries, finding opportunities in stable, well-understood markets that meet the investment requirements while offering an acceptable risk profile is a challenge. The Investment Adviser does not believe that overseas markets will be of significant focus in the short term, although it will continue to monitor opportunities and elements of these markets may become more significant in the future.

Although smaller in number, the Investment Adviser has been pleased with the level of environmental infrastructure opportunities outside of wind and solar that it has seen. During the period, JLEN made its first two anaerobic digestion investments, acquiring Vulcan and Icknield. These projects present a different risk/return profile to wind and solar projects, with relatively high proportions of index-linked subsidy revenue. Indeed, where support regimes have been withdrawn or limited for the maturing green industries of wind and solar, there is refreshed optimism in the anaerobic digestion space surrounding the reopening of the RHI scheme. This may trigger current developer/operators to come to the secondary market in order to recycle capital into the next generation of plants. Many of these original plants, akin to our existing investments, were commissioned in 2014-15 and are now able to display a significant performance track record. The Investment Adviser believes that the Company is an attractive counterparty and will continue to analyse opportunities in this space and the broader environmental sector that fit in with the uniquely broad remit of this fund. The arrival of Chris Holmes, formerly Head of Waste and Bioenergy at the Green Investment Bank, as co‑head of the investment advisory team will assist with this activity.

JLEN has the benefit of a First Offer Agreement with John Laing over a pipeline of environmental infrastructure projects which supports its growth plans in the next few years. The Company expects that, pursuant to the First Offer Agreement, environmental infrastructure projects that are in accordance with its investment policy with a combined investment value of approximately £260 million (as estimated by John Laing) will become available for acquisition by the Fund within the period to 31 December 2020. This includes wider environmental infrastructure projects, including biomass and energy-from-waste.

The Investment Adviser will also continue to seek opportunities to improve the performance of the portfolio assets ahead of target through the delivery of additional operational scale efficiencies and through prudent portfolio and financial management. The Investment Adviser has expanded its dedicated asset management team in the year, and is currently pursuing a number of avenues which should boost the value of the portfolio, including upgrades to equipment, rationalisation of service providers and ancillary revenues from generation assets. We consider that these opportunities should increase in number and value as the portfolio grows and innovation continues in environmental infrastructure sectors where the Company invests.

RISKS AND RISK MANAGEMENT

JLEN has a comprehensive risk management framework overseen by the Risk Committee comprising independent non‑executive Directors.

Risk is the potential for events to occur that may result in damage, liability or loss. Such occurrences could adversely impact the Company's business model, reputation or financial standing. Alternatively, under a well‑formed risk management framework, potential risks can be identified in advance and can either be mitigated or possibly even converted into opportunities.

The Prospectus details all the potential risks that the Directors consider are material that could occur in an environmental infrastructure project and in particular those in relation to renewable energy generation and PPP/PFI projects.

Given that the Company delegates certain activities to the Investment Adviser and Administrator, reliance is also placed on the controls of the Group's service providers.

In the normal course of business, each project will have developed a rigorous risk management framework including a comprehensive risk register that is reviewed and updated regularly and approved by its Board. The purpose of JLEN's risk management policies and procedures is not to eliminate risk completely, as this is possible but not commercially advisable. Rather, it is to reduce the likelihood of occurrence and to ensure that JLEN is adequately prepared to deal with risks so as to minimise their impact should they materialise.

Risk identification and monitoring

JLEN has a separate Risk Committee, comprising three non‑executive Directors, which is responsible for overseeing and advising the Board on the current and potential risk exposures of the Fund, with particular focus on the Group's principal risks, being those with the greatest potential to influence shareholders' economic decisions, and the controls in place to mitigate those risks.

The identification, assessment and management of risk are integral aspects of the Investment Adviser's and Administrator's work in both managing the existing portfolio on a day‑to‑day basis and pursuing new investment opportunities (though the Board has ultimate responsibility for the risk management activities of the Group). The Investment Adviser and Administrator have established internal controls to manage these risks and they review and consider the Group's key risks with the Risk Committee on a quarterly basis, including new risks arising and/or changes in the likelihood of any particular risk occurring. These systems of internal control were in place for the year under review and up to the date of the Annual Report.

The Board's investment advisory engagement committee reviews the performance of the Investment Adviser and Administrator, as well as other key service providers, annually.

JLEN has a comprehensive risk management framework and risk register that assesses a) the probability of each identified risk materialising and b) the impact it may have on JLEN. This is captured by a rating system assigning a red, orange, amber or green categorisation to prioritise and focus JLEN's risk management policies and procedures:

·     red - very likely to occur or has occurred in the recent past, with a significant potential impact on the Group's stakeholders, reputation and/or financial standing if the risk occurred;

·     orange - a non-negligible chance of occurring, with a material impact if it did occur;

·     amber - more likely to occur than green, with a medium impact if the risk did occur; or

·     green - unlikely to occur and with a minor impact should the risk materialise.

Mitigation actions have been developed with respect to each risk so as first to reduce the likelihood of such risk occurring and secondly to minimise the severity of its impact in the case that it does occur.

The risk register is a "live" document that is reviewed and updated regularly by the Risk Committee as new risks emerge and existing risks change. The principal risks faced by the Group are formally reviewed by the Risk Committee at each quarterly meeting and a report from the Committee is presented to the Board for consideration and approval. Each of the underlying projects is overseen by an experienced general or contracts manager who reports to their individual project board. The general and contract managers maintain strong relationships between clients, sub‑contractors and other stakeholders. This ensures effective management of potential risks.

JLEN's risk register covers five main areas of risk:

·     strategic, economic and political;

·     operational, business, processes and resourcing;

·     financial and taxation;

·     compliance and legal; and

·     asset specific.

Each of these areas, together with the principal risks within that category, are summarised in the table below, followed by a detailed discussion of the mitigating factors.

STRATEGIC, ECONOMIC AND POLITICAL
Risk	Potential impact	Mitigation
Inflation and interest rates	The underlying assets in the portfolio and therefore the returns expected from them have some exposure to inflation. The Company has some interest rate exposure, through its own cash deposits and bank funding (UK Holdco revolving credit facility) and deposits and funding within the projects themselves.	Returns from the assets in the portfolio are highly correlated with inflation due to revenues from PFI assets, green benefits for renewable energy assets and most operational costs being directly linked to an inflation index. This results in a "natural hedge", removing the need for the use of derivatives to mitigate inflation risk. Through the use of interest rate swaps and fixed rate loans, finance costs are fixed at the time of the contract being signed, substantially reducing interest rate risk. The revolving credit facility has a floating interest charge over LIBOR but this is mitigated as the facility provides short-term finance prior to being repaid with capital raise proceeds.
Acquisitions and pipeline	JLEN's intention is to grow the portfolio through the acquisition of further environmental infrastructure projects. However, there is a risk that a pipeline of acquisitions does not materialise.	JLEN benefits from a First Offer Agreement with John Laing, giving it the right of first offer over a pipeline of environmental infrastructure projects, valued by John Laing at approximately £260 million for the period to 31 December 2020. In addition, JLEN continually receives and seeks opportunities from the wider secondary market and developers, both in the UK and overseas.
Funding of acquisitions and future equity fundraising	There is a risk that JLEN is unable to achieve its stated ambition of growing the portfolio by acquiring new assets due to a lack of funding, both from corporate debt and equity capital from investors.	JLEN has a three‑year (plus one-year optional extension) £130 million revolving credit facility providing short‑term finance to pursue acquisitions. This is used to finance acquisitions prior to raising capital, mitigating the risk of inadequate funding affecting growth. Investors have been supportive of the infrastructure class in general and the environmental infrastructure/renewable energy class in particular, with recent capital raises by environmental infrastructure funds confirming the appetite investors have for infrastructure as an asset class. A number of economic factors, including interest rate increases could reduce the investors' appetite in future equity fundraising.
Refinancing of existing medium‑term project finance	There is a risk that JLEN is unable to refinance any or all of its project-level facilities which fall subject to a full repayment demand rather than following the pre-agreed amortisation schedule used to size the original debt level.	The Investment Adviser closely monitors the liquidity in the capital markets and, should credit not be forthcoming, could consider i) raising further equity capital to repay the SPV level debt or ii) consider an asset sale to a third party with a differing capital funding structure.
Competition	JLEN, in pursuing investment opportunities and in seeking to raise further capital, competes against a number of other listed and private infrastructure funds. There is a risk that such competition could limit growth of the Company.	JLEN differentiates itself from its peer group in a number of ways, including its investment policy of investing in a diversified range of environmental infrastructure technologies and revenue streams, its aim to only raise capital against committed investments and through its First Offer Agreement with John Laing.
Future of UK capital spending	Under its investment policy, JLEN is required to hold at least 50% of its portfolio by value in UK assets. JLEN therefore has a significant interest in the future of UK infrastructure spending. Government financial support for new renewable energy and environmental processing assets has reduced significantly in recent years and there is a risk that spending is either reduced or stopped altogether or that the model used to procure environmental infrastructure and/or renewable energy projects offers a risk profile that would not allow JLEN to invest under its investment policy.	Should either of these risks materialise, the immediate impact on JLEN and the secondary PPP/renewable energy market would be small as there is sufficient deal flow in the UK market to sustain this space in the short to medium term, as primary participants seek to recycle equity to reinvest in new infrastructure projects. In addition, JLEN has the ability to mitigate the impact of a slowdown in UK deal flow through overseas acquisitions in order to diversify the portfolio and reduce its reliance on the UK for investment opportunities.
UK referendum on EU membership	In June 2016, the UK voted in favour of leaving the EU and on 29 March 2017 formally notified the European Council of its intention to leave the EU under Article 50 of the Lisbon Treaty. As a result of this outcome there is likely to be a prolonged period of market uncertainty as the exact details are negotiated between the UK Government and the rest of the EU, which could result in adverse conditions for JLEN and an increase in the risks noted in this section, particularly volatility in macroeconomic indicators such as inflation and interest rates and changes in regulations. In response to the decision by the UK to leave the EU, in March 2017 the Scottish parliament voted in favour of seeking a second Scottish independence referendum, although the UK Government has indicated such a vote should not occur before the UK has formally left the EU and following the 2017 general election the SNP lost 21 of its 56MPs, suggesting sentiment may have tempered.	At this stage it is not clear what the precise impact on the UK environmental infrastructure industry will be of an exit from the EU. The UK Government remains committed to UK infrastructure development and there continues to be evidence that investors see listed infrastructure as a "safe haven" in times of market turbulence. The mitigation measures for the principal macroeconomic risks are those described above in relation to inflation and interest rates. Given the current level of investment in non-UK assets JLEN has a non-significant exposure to changes in exchange rates. And whilst the UK Government may not in future be bound by EU-set renewable obligations, the UK is still bound by national and international renewable obligations including the 2008 Climate Change Act. As such, JLEN believes that a low carbon and renewable energy generation agenda will remain a key part of UK policy. Regarding a Scottish referendum, JLEN will continue to monitor the situation as it develops and will identify potential risks when the likely course of events becomes clearer and it is possible to assess their nature and extent.
OPERATIONAL, BUSINESS, PROCESSES AND RESOURCING
Risk	Potential impact	Mitigation
Volume of resource	By the very nature of environmental infrastructure projects, their financial performance is dependent on the volume of resource available, be it solar irradiation, wind, feedstock yields, waste or water. These are factors outside the control of JLEN or the projects themselves, with the risk of a significant effect on performance if the outcome is significantly different from the assumptions made in forecasting revenue and costs and hence returns to JLEN.	For renewable energy projects there is a degree of protection from this variability in weather resource from portfolio diversification, as solar is more productive in the summer and wind more productive in the winter, with the absolute level of resource being uncorrelated. In addition, the waste and wastewater projects benefit from "banded" volumetric payment arrangements that mean the projects are relatively insensitive to falling volumes. The projects also benefit from contractual exclusivity over the available waste or water stream and, in the case of the waste projects, minimum guaranteed volumes, further mitigating this risk. On all projects, technical consultants are employed to advise on the assumptions which should be made regarding volume and its impact on performance for each individual asset. When acquiring wind farms with limited operational life, the aim is to seek to include where possible "energy yield true-up" mechanisms in acquisition agreements which apply when a reasonable operational period has been completed. Under this true‑up the energy yield will be reforecast based on all available data and the purchase price adjusted subject to de minimis thresholds and caps. For anaerobic digestion sites, it is common to agree feedstock contracts that adjust for the dry matter content in the biomaterial and relate pricing to that energy content and volume which is delivered. Should a shortfall be likely, for instance due to a poor harvest, substitute feedstocks are widely available.
Electricity and gas prices	The revenues of the renewable energy solar, anaerobic digestion and wind assets are dependent to some extent on the market price of electricity, which is out of the control of JLEN. There is a risk that the actual prices received vary significantly from the model assumptions, leading to a shortfall in anticipated revenues to JLEN.	The risk of exposure to variations in electricity and gas prices from assumptions made is mitigated by JLEN in the following ways: i) short‑term PPAs are used to fix prices for between one and three years depending on market conditions and many have floor prices; ii) forward prices based on market rates are used for the first two years where no fix is in place; iii) quarterly reports from an independent established market consultant are used to inform the electricity prices over the longer term used in the financial models. Due to the diversification in the portfolio, JLEN has relatively low exposure to electricity and gas prices for the sector.
Reliance on Investment Adviser	The Company is heavily reliant on the Investment Adviser to identify, acquire and manage JLEN's investments. A performance deterioration by the Investment Adviser could have an impact on the Company's performance and there is a risk that the Company may not be able to find an appropriate replacement Investment Adviser should the engagement with the Investment Adviser be terminated.	The Investment Adviser has a strong track record of accomplishment of investing and managing infrastructure projects. JLCM, being a wholly owned subsidiary of John Laing Group plc, has access to the depth of resource provided by its parent company, as well as robust policies, procedures, compliance systems and risk controls. John Laing Group plc has significant personnel to draw from to provide the services under the Investment Advisory Agreement. Ultimately, in the event of ongoing under-performance by the Investment Adviser, JLEN has the ability to serve notice and to replace JLCM as Investment Adviser.
Cyber risk	There exists a threat of cyber-attack in which a hacker or computer virus may attempt to access the IT systems of the Group, the Investment Adviser, the Administrator or one of the project companies and attempt to destroy or use the data for malicious purposes. While JLEN considers that it is unlikely to be the deliberate target of a cyber-attack, there is the possibility that it could be targeted as part of a random or general act.	JLEN has no dedicated IT systems and it relies on those of its service providers, principally the Investment Adviser and Administrator, who have procedures in place to mitigate cyber-attacks and have robust business continuity plans in place. JLEN carries out ongoing compliance checks and reviews on these procedures to ensure the risk is mitigated.
FINANCIAL AND TAXATION
Risk	Potential impact	Mitigation
Portfolio valuation	The discount rates used in the valuation exercise represent the Investment Adviser's and the Board's assessment of the rate of return in the market for assets with similar characteristics and risk profile. Increased underlying gilt rates may lead to increased discount rates being applied by the market and a consequential decrease in the portfolio value. Asset values may not run in parallel to evolving forecasts for future electricity and gas prices and investors should expect some variation in asset valuation from period to period, as and when a material movement from prior expectations is identified.	The discount rates are reviewed on a regular basis and updated, where appropriate, to reflect changes in the market and in the project risk characteristics. In general, independent forecasters expect UK wholesale electricity and gas prices to continue to rise in real terms over the long term, based on tighter UK capacity margins in the short term and global energy supply and demand in the long term. To provide additional assurance to both the Board and JLEN's shareholders with respect to the valuation, an independent verification exercise of the methodology and assumptions applied by JLCM is performed by a leading accountancy firm and an opinion provided to the Directors.
Changes to tax legislation and rates	JLEN values its portfolio based on current enacted corporation tax rates and tax rules in the jurisdictions in which it operates. Changes to these rates or rules in the future could impact the valuation of the portfolio and the level of distributions received from the portfolio.	JLEN works closely with expert tax advisers and adopts tax positions which are based on industry practice and in line with the wider Group strategy. However, other than participating in industry consultation processes, there is little within the power of the Company that is able to mitigate changes in corporation tax rates and tax legislation. JLEN continues to monitor and participate in any relevant consultation processes with UK HMRC and to assess the impact of any additional changes which may result from the introduction of differing legislation.
COMPLIANCE AND LEGAL
Risk	Potential impact	Mitigation
Regulatory - general	JLEN is required to comply with certain London Stock Exchange, UK Listing Authority and Guernsey regulatory requirements and regulations, including those under the Alternative Investment Fund Managers Directive ("AIFMD") and the Foreign Account Tax Compliance Act ("FATCA"). There is a risk that failure to comply with any of the relevant rules could result in a negative reputational or financial impact on the Company.	Through a comprehensive compliance monitoring programme, JLEN ensures that it remains well informed as to the legislation, regulation and guidance relevant to both the Company itself as well as the project entities in which it invests. The Board monitors compliance information provided by the Administrator, Company Secretary, Investment Adviser and legal counsel and monitors ongoing compliance developments in the Channel Islands and with the London Stock Exchange and Financial Conduct Authority.
Regulatory - support for renewables	Changes in government policy to new renewable energy have resulted in changes to, and in some case, early closure of, the Renewables Obligation, the Renewable Heat Incentive and Feed‑in Tariff regimes. If these were applied retrospectively to current operating projects including those in the Group's portfolio, this could adversely impact the market price for renewable energy or the value of the green benefits earned from generating renewable energy.	The government has evolved the regulatory framework for new projects being developed but has consistently stood behind the framework that supports operating projects as it understands the need to ensure investors can trust regulation. This principle of "grandfathering" was confirmed in the Energy Act 2013.
ASSET SPECIFIC
Risk	Potential impact	Mitigation
Operational risks	JLEN invests in projects where the majority of operational risk is retained by the public sector counterparty (relevant to PFI projects) or passed down to sub‑contractors. However, in all cases, some risk is retained by the project, as set out above and identified in the Prospectus. There is a risk that poor performance by sub-contractors or, in the event of having to replace a sub-contractor, that a replacement may only be found at a higher cost, could adversely affect project cash flows. In the event of a single project suffering from a material issue, distributions to the Fund could possibly be impacted absolutely or for a period of time whilst the issue is resolved.	The portfolio is constantly monitored by the Investment Adviser to address risks as they are identified. The use of a diverse range of service providers supplying management, operational and maintenance services ensures any failure of a single service provider has a minimal impact on the portfolio as a whole. This risk is mitigated in part by the diversification represented by JLEN's portfolio of assets. The portfolio has material damage and business interruption insurance policies in place to cover against potential losses.

CORPORATE SOCIAL RESPONSIBILITY

The business of the Company is to invest in environmental infrastructure projects. JLEN recognises the business imperative and moral obligation to carry out its activities in a socially responsible, safe and environmentally sustainable manner, with due consideration to human rights.

JLEN recognises the environmental, social and economic needs of the communities in which it works and looks for suitable opportunities to engage and support communities.

The commitment to corporate social responsibility ("CSR") is delivered through programmes directly supported by JLEN and through the activities of JLCM, Praxis and JLEN's other partners who manage the projects and/or provide operations and maintenance services to the portfolio assets. JLEN actively encourages its partners to engage with the local communities in which our projects are located. It is the engagement of these teams that operate our assets on a daily basis and support the communities in which they operate that makes the greatest difference. Examples of how the assets and partners have contributed to achieving JLEN's CSR ambitions are provided below.

Renewable energy projects

Each of the projects in the renewable energy portfolio seeks to engage with and support the local communities in which they are located and operate throughout their term of operation, which in most cases is over 20 years. During the construction of the wind farms and solar parks, projects seek, wherever possible, to employ local construction companies and suppliers. Once operational, local suppliers and landowners continue to be involved in the day-to-day operations of the sites and across the portfolio many projects have committed to providing funding to support local economic, social and environmental benefits in the community. For the year ended 31 March 2018, JLEN provided a total of £325k to local community funds, either through long-term agreements or via ad hoc requests to support local causes. Some examples of the funding that has been approved for this year include the maintenance of community sporting facilities, the development of an outside area of a local school, support of a Rainbows group and the upgrade of an external convenience.

Environmental processing projects

JLEN's waste & wastewater projects support the provision of essential public services in the areas in which they are located and provide employment opportunities for local communities. In addition, they contribute to the continuing education of local communities in respect of waste minimisation via re-use, recycling and waste reduction. At the ELWA project in East London, the operator, Shanks Waste Management, invests each year in education programmes for local schools and works with Keep Britain Tidy, a registered charity, who in turn provide one education officer who focuses on school education programmes and workshops for under-13s at the Jenkins Lane site education facility. The aim of these programmes is to increase recycling performance in schools, enhance knowledge of types of materials and those which can be recycled, and to work towards Eco-Schools awards (Bronze, Silver and Green Flag). Similarly, the Hatton works at the Tay project hosts visits from local schools and universities throughout the year and the project contributes via sponsorship to the Tay Estuary Forum, a local coastal partnership, and attends committee meetings. Recently, the project has sponsored the installation of a flagpole and litter sacks to assist in the local beautification scheme.

John Laing

The John Laing Group's community investment strategy is delivered through its employees and a number of partners.

Since 2006, John Laing has been an active Patron of The Prince's Trust, which has allowed them to support disadvantaged and vulnerable young people across the UK, to help them move into work, education or training. The Group encourages its staff to become involved in activities and initiatives that benefit local communities and environments.

The John Laing Charitable Trust ("JLCT") supports the work of welfare visitors who look after the needs of former employees and their surviving partners. Its trustees set aside considerable funds each year to provide financial help and assistance. All John Laing employees or members of their immediate family directly involved in a charity are able to apply to JLCT for a grant to support a good cause and additionally JLCT is able, within certain limits, to match charitable donations raised by employees.

Praxis Fund Services

The PraxisIFM Group supports the local communities in which it operates, focusing on equipping people with the skills they need to lead successful and rewarding lives by supporting initiatives, which provide learning, training and development opportunities and/or encourage people to lead healthy lifestyles. In Guernsey, this includes sponsoring Les Bourgs Hospice, the Eisteddfod and the Guernsey Literary Festival, together with the CI Sports Awards and the Delancey Flyers Cycling League.

Health and safety

The physical location, operation and maintenance of environmental infrastructure projects may, if inappropriately assessed and managed, pose health and safety risks to those involved. The operation and maintenance of facilities may result in bodily injury or industrial accidents. If an accident were to occur in relation to one or more of the Group's investments and if the Group were deemed to be at fault, the Group could be liable for damages or compensation to the extent such loss is not covered under insurance policies. In addition, adverse publicity or reputational damage could ensue.

The JLEN, UK HoldCo and individual project entity boards have health and safety policies and review health and safety at each of their respective scheduled board meetings. The Group engages the Investment Adviser to carry out a rolling programme of independent audits of the health and safety policies and compliance of its projects and all major suppliers.

Environment

JLEN takes its environmental responsibilities very seriously and seeks to ensure effective environmental management, not only of its own direct activities, but also the indirect aspects and impacts resulting from the occupation and use of its environmental infrastructure projects. The overall environmental contribution of the investment portfolio is substantial, with the portfolio as at 31 March 2018 capable of producing enough clean energy annually to power the equivalent of 463,000 homes in the UK and France and enough green gas to heat the equivalent of 2,500 homes in the UK. In addition to the direct energy generation of our portfolio companies, our waste processing facilities provide fuel to third party waste to energy processing facilities which will power a further 50,000 homes whilst diverting 450,000 tonnes of waste from landfill and recycling over 100,000 tonnes of reusable material.

Over the course of the coming year it is JLEN's intention to enhance the information provided on the green impact of individual transactions and across the portfolio in order to fully demonstrate the environmental benefits the fund brings as an owner of these assets.

Our AD plants produce an organic fertiliser as a bi‑product which is used locally by farmers in displacing approximately 2000t per plant of commercial-grade inorganic fertilisers which are commonly imported. The local habitat is also carefully monitored and managed around our sites - for example, at our Vulcan plant in Doncaster, the site has become an important habitat for the kestrel and declining whitethroat warbler which now breed on site. Over the years, the edge planting has encouraged new wildlife, butterflies and bees.

Each of JLEN's renewable energy sites has an environmental or habitat management plan agreed with the relevant local authorities under planning approvals, which ensures the projects are sympathetic to the local environment in which they are located and protect local wildlife and habitats.

This strategic report is approved by the Board of Directors.

Richard Morse

Chairman

13 June 2018

GOVERNANCE

CHAIRMAN'S INTRODUCTION

Introduction

The Listing Rules and the Disclosure Guidance and Transparency Rules ("Disclosure Rules") of the UK Listing Authority ("UKLA") require listed companies to disclose how they have applied the principles and complied with the provisions of the Corporate Governance Code to which the issuer is subject. The provisions of the UK Corporate Governance Code ("UK Code"), as issued by the Financial Reporting Council ("FRC") in September 2012, and updated in September 2014 and April 2016, are applicable to the year under review and can be viewed at www.frc.org.uk.

The related Code of Corporate Governance (the "AIC Code"), issued by the Association of Investment Companies ("AIC") in February 2013, provides specific corporate governance guidelines to investment companies. The AIC issued their revised code for Guernsey domiciled member companies in July 2016. The FRC has confirmed that AIC member companies who report against the AIC Code and who follow the AIC's Corporate Governance Guide for Investment Companies ("AIC Guide") will be meeting their obligations in relation to the UK Code and the associated disclosure requirements of the Disclosure Rules. The AIC Code can be viewed at www.theaic.co.uk.

The Guernsey Financial Services Commission ("GFSC") has issued a Finance Sector Code of Corporate Governance. The Code comprises Principles of Guidance, and provides a formal expression of good corporate practice against which shareholders, boards and the GFSC can better assess the governance exercised over companies in Guernsey's finance sector. Companies which report against the UK Code or the AIC Code are also deemed to meet the Guernsey Code.

Statement of compliance with the AIC Code and Guide

The Board recognises the importance of a strong corporate governance culture that meets the Listing Rules of the UKLA. The Board has put in place a framework for corporate governance which it believes is appropriate for the Company. All Directors contribute to Board discussions and debates. The Board believes in providing as much transparency for shareholders as is reasonably possible. It should be noted that most of the Company's day‑to‑day responsibilities are delegated to third parties and the Company has no employees.

The Company is a member of the AIC and is classified within the infrastructure (renewable energy) sector. The Company currently complies (except as set out at the end of this paragraph) with the principles of good governance contained in the AIC Code (which complements the Corporate Governance Code and provides a framework of best practice for listed investment companies) and has decided to follow the AIC's Corporate Governance Guide for Investment Companies (the "AIC Guide"), and in accordance with the AIC Code, the Company will be meeting its obligations in relation to the Corporate Governance Code and associated disclosure requirements of the Listing Rules. The Corporate Governance Code includes provisions relating to the role of the Chief Executive, executive Directors' remuneration and the need for an internal audit function. For the reasons set out in the AIC Guide, and as explained in the Corporate Governance Code, the Board considers these provisions are not relevant to the position of the Company, as it has no executive directors, employees or internal operations.

LEADERSHIP

Board of Directors

Members of JLEN's Board of Directors, all of whom are non-executive and independent of the Investment Adviser, are listed below.

Richard Morse

Chairman

Richard has more than 31 years' experience in energy and infrastructure, including environmental energy. He is a partner at Opus Corporate Finance, where he leads the environmental energy practice. His current boardroom experience includes Bazalgette Tunnel Limited (Deputy Chairman and Chairman of the Audit Committee), Woodard Corporation (Chairman), and Heathrow Southern Rail Limited (non‑executive Director).

Past experience

Richard trained as an investment banker, becoming Deputy Head of Corporate Finance and head of the utilities and energy team at Dresdner Kleinwort Wasserstein, before taking up senior roles in the energy and utilities practices at Goldman Sachs and Greenhill International, and a Senior Adviser role at Matrix Corporate Capital.

Committee memberships

Nomination Committee

Christopher Legge

Director

Chris worked for Ernst & Young in Guernsey from 1983 to 2003 and was Head of Audit and Accountancy from 1990 to 1998 where he was responsible for the audits of a number of banking, insurance, investment fund, property fund and other financial services clients. He was appointed managing partner in 1998.

Past experience

Since retiring from Ernst & Young in 2003, Chris has held numerous non‑executive directorships in the UK listed financial services sector, including TwentyFour Select Monthly Income Fund Limited, Sherborne Investors (Guernsey) B Limited, Sherborne Investors (Guernsey) C Limited , Third Point Offshore Investors Limited and NB Distressed Debt Investment Fund Limited, all of which are UK listed and where he also chairs the Audit Committee. He is a Fellow of the Institute of Chartered Accountants in England and Wales.

Committee memberships

Audit Committee, Risk Committee

Denise Mileham

Director

Denise has over 30 years' experience in financial services, having worked in fund administration, custody and compliance roles. She previously sat on the board of Resolution Limited, the FTSE 100 company, now part of Aviva. She was previously an executive director of Kleinwort Benson (Channel Islands) Fund Services, acting as Head of Fund Administration and Deputy Head of Fund Services (which included custody). She also worked at Close Fund Services, as Director of New Business, running a team responsible for marketing, sales and implementation.

Past experience

In her early career, Denise worked in the funds department of Barclaytrust before moving to Credit Suisse where she undertook a number of roles, including Compliance Officer in the fund administration department. She is a Chartered Fellow of the Securities and Investment Institute and a member of the Institute of Directors, the Guernsey NED Forum and Guernsey Investment Fund Association and previously sat on their Technical Committee.

Committee memberships

Nomination Committee, Risk Committee

Peter Neville

Director

Peter has more than 40 years' experience in the financial services and financial services regulatory sectors in the UK and overseas. He has worked in merchant banking and corporate finance in the UK and the Far East, undertaking IPOs, corporate restructurings, mergers and acquisitions and project finance. He was involved in establishing the Investment Management Regulatory Organisation in the UK and the regulatory regime for funds and investment management firms in Malta. Peter currently holds a number of non‑executive directorships including at both Channel Islands Competition and Regulatory Authorities.

Past experience

Peter was Director General of the Guernsey Financial Services Commission from 2001 until 2009. Since retiring he has held a number of non-executive directorships, including as Chairman of Kleinwort Benson (Channel Islands) Limited and as a director of Mytrah Energy Limited. He holds an MA in Jurisprudence from Oxford University and is a Fellow of the Institute of Chartered Accountants in England and Wales.

Committee memberships

Audit Committee, Nomination Committee, Risk Committee

Richard Ramsay

Senior Independent Director

Richard is a chartered accountant with considerable experience of the energy sector and the closed-end fund industry. He is currently Chairman of Seneca Global Income & Growth Trust plc, an investment trust. He is also Chairman of Northcourt Limited, Wolsey Group Limited and a director of Castle Trust Capital plc and URICA Limited, all unlisted companies in the financial services sector.

Past experience

Richard's energy sector experience includes: leading the Barclays de Zoete Wedd team that privatised the Scottish electricity industry; a period at Ofgem as Managing Director Finance and Regulation; and working as director of the Shareholder Executive, principally involved with government businesses in the nuclear sector. At Ivory & Sime, Barclays de Zoete Wedd and latterly at Intelli Corporate Finance, he has worked as a corporate adviser in the closed-end funds sector, completing over £2.5 billion of transactions. He has been a director of two investment trusts and one venture capital trust.

Committee memberships

Audit Committee

The Investment Adviser

JLEN is advised by John Laing Capital Management Limited ("JLCM"). JLCM is a wholly owned subsidiary of John Laing plc.

Chris Tanner

Investment Adviser

Chris is a Director of JLCM and co-lead Investment Adviser with over 18 years' experience in infrastructure, including PPPs, economic infrastructure and renewables.

Prior to joining John Laing, he was a Principal in Henderson's private equity infrastructure team. In the 18 months prior to joining JLCM he was on secondment to John Laing as Corporate Finance Director. Preceding Henderson, Chris worked at PricewaterhouseCoopers for 11 years.

Chris is a member of the Institute of Chartered Accountants in England and Wales and has an MA in Politics, Philosophy and Economics from Oxford University.

Chris Holmes

Investment Adviser

Chris is a Director of JLCM and co-lead Investment Adviser with over 20 years' experience in infrastructure, including PPPs, economic infrastructure and renewables.

Chris joined the Investment Adviser in January 2018. Prior to this, Chris was a Managing Director and Head of Waste & Bioenergy team at the Green Investment Group (formerly the UK Green Investment Bank plc) for four years. During his time at Green Investment Group, Chris was responsible for over £0.5 billion of investment across 18 assets in the waste and biomass sectors.

Before taking up his position at the Green Investment Bank plc, Chris was Head of Capital Markets in the Infrastructure and Renewables team at NIBC, also with responsibility for UK debt origination and advisory within these sectors. Chris was with NIBC for over 12 years, working on a number of waste and bioenergy transactions.

Chris has a BA in Business Economics from the University of Durham.

Corporate governance statement

AIFM Directive

The Company is categorised as an internally managed non‑EEA AIF for the purposes of the AIFM Directive and, as such, neither it nor the Investment Adviser is required to seek authorisation under the AIFM Directive. The Board retains responsibility for the majority of the Company's risk management and portfolio management functions, and performs a number of its management functions through the various committees described below.

The Board delegates certain activities to the Investment Adviser, but actively and continuously supervises the Investment Adviser in the performance of its functions and reserves the right to take decisions in relation to the investment policies and strategies of the Company or to change the Investment Adviser (subject to the terms of the Investment Advisory Agreement). The Board retains the right to override any advice given by the Investment Adviser if acting on that advice would cause the Company not to be acting in the best interests of investors, and more generally to provide overriding instructions to the Investment Adviser on any matter within the scope of the Investment Adviser's mandate. The Board also has the right to request additional information or updates from the Investment Adviser in respect of all delegated matters, including in relation to the identity of any sub‑delegates and their sphere of operation.

AIFM Directive disclosures

As explained in Part 9 of the Prospectus, the Company is required, pursuant to Article 42(1)(a) of the AIFM Directive, to make certain specified disclosures to prospective investors prior to their investment in the Company, in accordance with Article 23 of the AIFM Directive (the "Article 23 Disclosures"). As at the date of this report, there is one material update to the Article 23 Disclosures contained in Section 11 of Part 9 of the Prospectus, as follows:

·      as detailed further in this report, the repayment date of the Fund's revolving credit facility has been extended for an additional year (to June 2021), with effect from 1 June 2018.

The Company has published an investor disclosure document on its website (www.jlen.com) for the purposes of making the Article 23 Disclosures available to prospective investors prior to their investment in the Company.

The Board

The Board consists of five Directors, all of whom are non‑executive and independent of the Company's Investment Adviser. The Directors' details are contained above and set out the range of investment, financial and business skills and experience represented. Richard Morse has been appointed Chairman and Richard Ramsay Senior Independent Director. The Board meets at least four times a year and, should the nature of the activity of the Company require it, additional meetings may be scheduled, some at short notice. Between meetings there is regular contact with the Investment Adviser and the Administrator and the Board requires information to be supplied in a timely manner by the Investment Adviser, the Company Secretary and other advisers in a form and of a quality appropriate to enable it to discharge its duties.

The tenure of Directors is expected to not exceed nine years unless exceptional circumstances warrant, such as to allow for phased Board appointments and retirements. The Company intends that each Director will stand for re‑election at the annual general meeting of the Company at intervals of no more than three years. The Board has adopted a policy for any long‑standing Directors who have held office for nine years or longer to stand for re‑election annually.

The Board is mindful and supportive of the principle of widening the diversity of its composition. It is also committed to appointing the most appropriate available candidate based on merit, taking into account the skills and attributes of both existing members and potential new recruits and thereby the balance of skills, experience and approach of the Board as a whole which will lead to optimal Board effectiveness.

The terms and conditions of appointment of the Directors are available for inspection at the Company's registered office.

Duties and responsibilities

The Board is responsible to shareholders for the overall management of the Company. The Board has adopted a set of reserved powers which set out the particular areas where the Board wishes to retain control. Such reserved powers include decisions relating to the determination of investment policy and approval of investments, strategy, capital raising, statutory obligations and public disclosure, financial reporting and entering into any material contracts by the Company.

The Directors have access to the advice and services of Praxis Fund Services Limited, the Company Secretary and Administrator, who is responsible to the Board for ensuring that Board procedures are followed and that it complies with Guernsey law and applicable rules and regulations of the Guernsey Financial Services Commission and the London Stock Exchange.

An Investment Advisory Agreement between the Company and the Investment Adviser sets out the matters over which the Investment Adviser has delegated authority, including monitoring and managing the existing investment portfolio, and also the limits on cost and expenditure above which Board approval must be sought. All other matters are reserved for the approval by the Board of Directors.

Where necessary, in carrying out their duties, the Directors may seek independent professional advice at the expense of the Company. The Company maintains appropriate Directors' and Officers' liability insurance in respect of legal action against its Directors on an ongoing basis.

The Board has responsibility for ensuring that the Company keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and which enable it to ensure that the financial statements comply with The Companies (Guernsey) Law, 2008, as amended. It is the Board's responsibility to present a fair, balanced and understandable assessment, which extends to interim and other price‑sensitive public reports.

Committees of the Board

The Board has not deemed it necessary to appoint a separate remuneration committee as, being comprised of five Directors, it considers that such matters may be considered by the Board as a whole. At the launch of the Fund, the remuneration of the Board was fixed after consultation with independent external advisers. During subsequent years, the Board has reviewed the remuneration levels for the Company and received industry comparison information from the Investment Adviser in respect of Directors' remuneration. As noted in the Directors' remuneration report below, remuneration levels were subject to a full independent review during 2017 and recommendations for fee levels to apply from the financial year commencing April 2018 will be proposed to shareholders as part of the revised remuneration policy at the 2018 annual general meeting.

The Company has established an Audit Committee, chaired by Christopher Legge, which operates within clearly defined terms of reference and comprises three non‑executive Directors: Christopher Legge, Peter Neville and Richard Ramsay, whose qualifications and experience are noted on above. The Audit Committee meets at least three times a year, at times appropriate to the financial reporting calendar.

The duties of the Audit Committee in discharging its responsibilities include reviewing the Annual Report and financial statements; the Half-year Report and financial statements; the system of internal controls; and the terms of appointment of the external auditor, together with their remuneration. It is also the forum through which the external auditor reports to the Board. The Audit Committee also reviews the objectivity of the external auditor along with the terms under which the external auditor is engaged to perform non‑audit services. The provisions in place to maintain the independence and objectivity of the auditor include the requirement to replace the lead audit partner every five years, and restrictions on the delivery of non‑audit services to the Company, with such services, and the terms under which these are to be provided, considered by the Audit Committee on a case-by-case basis. Notwithstanding such services, the Audit Committee considers Deloitte LLP to be independent of the Company and that the provision of such non‑audit services is not a threat to the objectivity and independence of the conduct of the audit.

The Company has also established a Risk Committee, which is chaired by Peter Neville and comprises three non‑executive Directors: Peter Neville, Christopher Legge and Denise Mileham. The duties of the Risk Committee include the identification, measurement, management and monitoring appropriately and regularly of all risks relevant to the Company's investment strategy and to which the Company is or may be exposed. It is the responsibility of the Risk Committee to advise the Board on the overall risk appetite, tolerance and strategy of the Company, and to oversee the Company's current risk exposures and the controls in place to mitigate those risks. The Risk Committee meets at least four times per year.

The Company has also established a Nomination Committee, chaired by Denise Mileham and which comprises three non‑executive Directors: Denise Mileham, Richard Morse and Peter Neville. The Nomination Committee's main function is to regularly review the structure, size and composition of the Board and to consider succession planning for Directors. The Nomination Committee meets at least twice per year.

Separate reports from the Audit, Risk and Nomination Committees on their activities for the period are set out below. The terms of reference for each of the Committees are available on the Company's website or upon request from the Company Secretary.

The Board as a whole performs the functions typically undertaken by an Investment Committee. The Board ensures compliance with the terms of the investment policy of the Company and will consider and decide on any changes to the investment policy (subject to obtaining the relevant shareholder approvals), including geographical and sectorial spread of investments, risk profile, investment restrictions and the approach to project selection. The Board also makes discretionary management decisions in respect of the investment portfolio (with reference as necessary to advice provided by the Investment Adviser), but may appoint sub‑committees to meet on an ad hoc basis to consider potential acquisitions and disposals of particular investments.

The Board as a whole also fulfils the functions of an investment advisory engagement committee.

The Board will review and make recommendations on any proposed amendment to the Investment Advisory Agreement and keeps under review the performance of the Investment Adviser. The investment advisory engagement committee also performs a review of the performance of other key service providers to the Fund and meets at least once a year.

The attendance record of Directors for the year to 31 March 2018 is set out below.

	Board	Audit	Risk	Nomination
	meeting	Committee	Committee	Committee
Number of meetings held	4	4	4	2
Richard Morse	4	n/a	n/a	2
Christopher Legge	4	4	4	2
Denise Mileham	4	n/a	4	2
Peter Neville	3	4	3	2
Richard Ramsay	4	4	n/a	n/a

A total of 18 other unscheduled Board meetings were held during the year for specific purposes which were attended by some, but not all, of the Directors.

EFFECTIVENESS

Corporate governance statement

The Board ensures it has the appropriate balance of skills, experience, independence and knowledge to operate effectively.

Performance and evaluation

The JLEN Board has adopted a process to review its performance on a regular basis and such reviews are carried out internally on an annual basis, with external facilitation expected to take place every three years. The annual evaluation of the Board and the individual committees has taken the form of questionnaires and discussion to assess Board effectiveness and individual Director performance in various areas. The review of the Chairman's performance is led by the Senior Independent Director.

The Board committed in the 2016 Annual Report to undertake an external evaluation in 2017. Accordingly, in November 2016 candidates were shortlisted, interviewed and it was subsequently agreed by the Board to engage Optimus Group Limited ("Optimus"), a Guernsey-based independent consultancy, to carry out the first external evaluation. The evaluation process involved meetings with each of the Directors individually, with representatives of JLCM and Praxis Fund Services Limited, the completion of questionnaires, attendance at a scheduled Board meeting, reviewing key Board documentation and reviewing the structure of the Company's formally constituted committees. The Board considered Optimus' findings as a whole in May 2017 and the results confirmed that the Board has a high standard of corporate governance and the relevant principles of the UK Code and the AIC Code continued to be applied effectively. An internal self-evaluation was undertaken for the current financial year, and the next external evaluation will take place in 2020.

Any new Directors will receive an induction from the Investment Adviser and the Administrator as part of their induction process. All Directors regularly update their skills and knowledge and will receive other relevant training as necessary, including site visits.

Internal control

The Board is responsible for the Company's system of internal control and for reviewing its effectiveness, and the Board has therefore established an ongoing process designed to meet the particular needs of the Company in managing the risks to which it is exposed.

The process is based on a risk‑based approach to internal control through a matrix which identifies the key functions carried out by the Investment Adviser, Administrator and other key service providers, the various activities undertaken within those functions, the risks associated with each activity and the controls employed to minimise and mitigate those risks. The Audit Committee works in close co‑operation with the Risk Committee, with the prime responsibility of the Audit Committee being the review of internal controls and processes, and of the Risk Committee being the principal risks and uncertainties facing the Company. A separate report on the activities of the Risk Committee is set out below.

RELATIONS WITH SHAREHOLDERS

The Company welcomes engagement with shareholders and the investment community.

Dialogue with shareholders

The Company welcomes the views of shareholders and places great importance on communication with its shareholders. The Investment Adviser produces a regular factsheet which is available on the Company's website. The Chairman and senior members of the Investment Adviser make themselves available, as practicable, to meet with principal shareholders and key sector analysts.

Feedback from these meetings is provided to the Board on a regular basis. The Board is also kept fully informed of all relevant market commentary on the Company by the Company's financial PR agency, as well as receiving relevant updates from the Investment Adviser and the Company's broker.

Investor publications

All shareholders can address their individual concerns to the Company in writing at its registered address.

The annual general meeting of the Company provides a forum for shareholders to meet and discuss issues with the Directors and the Investment Adviser.

ACCOUNTABILITY

Directors' remuneration report

The Board has established separate Risk, Audit and Nomination Committees to effectively oversee the activities of the Group.

Introduction

The Board has not deemed it necessary to appoint a remuneration committee as, being comprised of five Directors, it considers that such matters may be considered by the whole Board, provided that no Director is involved in deciding their own remuneration.

The Board determines and agrees the policy for the remuneration of the Directors of the Company, including the approval of any ad hoc payments in respect of exceptional work required (e.g. for the work involved with the issue of prospectuses and equity fundraises).

As all Directors of the Company are non‑executive, they receive an annual fee appropriate for their responsibilities and time commitment, but no other incentive programmes or performance-related emoluments.

At IPO, the remuneration of the Board was fixed after consultation with independent external advisers and has since been increased broadly with inflation. During the year, the Board engaged the services of Trust Associates to undertake an external review of the Company's current remuneration policy, and to provide recommendations in relation to any changes which may apply to the financial year commencing 1 April 2018. The review included benchmarking the fees paid by the Company against the investment funds sector generally, and with companies operating in the infrastructure and renewable energy infrastructure sectors.

Certain recommendations arising from the Trust Associates review were accepted by the Directors. In addition, the Directors gave due consideration to certain specific factors of the Company which placed additional responsibilities on the Directors, including the active nature of the Board and the governance obligations of operating as a self-managed AIF, and elements of the previous remuneration policy which were deemed to be inconsistent with market practice or commensurate with the levels of work undertaken by the designated Chairs of the Company's formally constituted committees. The proposed changes to the Company's remuneration policy in relation to the financial year ending 31 March 2019 will be proposed to shareholders at the 2018 annual general meeting, and are set out below.

Remuneration policy

Each Director receives a fixed fee per annum based on their role and responsibility within the Company and the time commitment required. It is not considered appropriate that Directors' remuneration should be performance related and none of the Directors are eligible for pension benefits, share options, long-term incentive schemes or other benefits in respect of their services as non‑executive Directors of the Company. Shares held by the Directors are disclosed in the report of the Directors. The total remuneration of non‑executive Directors has not exceeded the £300,000 per annum limit set out in the Articles of Incorporation of the Company.

The Company's Articles of Incorporation empower the Board to award additional remuneration where any Director has been engaged in exceptional work on a time spent basis to compensate for the additional time spent over their expected time commitment.

All of the Directors have been provided with letters of appointment which stipulate that their initial term shall be for three years, subject to re‑election. The Articles of Incorporation provide that Directors retire and offer themselves for re‑election at the first annual general meeting after their appointment and at least every three years thereafter. A Director's appointment may at any time be terminated by, and at the discretion of, either party upon three months' written notice. A Director's appointment will automatically end without any right to compensation whatsoever if they are not re‑elected by the shareholders. A Director's appointment may also be terminated with immediate effect and without compensation in certain other circumstances.

The terms and conditions of appointment of non‑executive Directors are available for inspection at the Company's registered office.

Details of individual remuneration

As set out above, during the year the Board, with assistance from the Investment Adviser and the Administrator, reviewed the findings of the external remuneration review undertaken by Trust Associates, and recommended certain adjustments to the levels of individual remuneration paid to the Directors.

For comparative purposes, the table below sets out the Directors' remuneration approved and actually paid for the year to 31 March 2018, as well as that proposed for the year ending 31 March 2019.

				Additional
				fees
		Base		for fund	Total
		proposed for	Base paid	raising in	fees for
Director	Role	2018/2019	2017/2018	2017/2018	2017/2018
Richard Morse	Chairman	65,000	62,700	10,000	72,700
Richard Ramsay	Senior Independent Director	47,300	47,300	10,000	57,300
Christopher Legge	Audit Committee Chairman	45,000	37,000	10,000	47,000
Denise Mileham	Nomination Committee Chairman	41,000	37,000	10,000	47,000
Peter Neville	Risk Committee Chairman	41,000	37,000	10,000	47,000
Total		239,300	221,000	50,000	271,000

Where the Company requires Directors to work on specific corporate actions such as further equity raisings, an additional fee will be appropriately determined. Additional fees payable to the Directors for the year ended 31 March 2018 relate to the fundraisings carried out during the year. Equity raises were carried out in July 2017 under the placing programme and the Company issued 38.9 million new shares. A further 15.6 million new ordinary shares were issued following the announcement in February 2018 to undertake a share issuance programme for up to 200 million new ordinary shares.

Directors are entitled to claim reasonable expenses which they incur attending meetings or otherwise in performance of their duties relating to the Company. The total amount of Directors' expenses paid for the year ended 31 March 2018 was £2,059 (31 March 2017: £1,578).

Approval of report

The Board will seek approval at the annual general meeting in August 2018 for both the remuneration policy and the annual Directors' fees for routine business for the year ended 31 March 2018 and fees for additional specific exceptional work, as set out above.

ACCOUNTABILITY

Audit Committee report

Summary of the roles and responsibilities of the Audit Committee

The Audit Committee is appointed by the Board from the non‑executive Directors of the Company. The Audit Committee, chaired by Christopher Legge, operates within clearly defined terms of reference and includes all matters indicated by Disclosure Guidance and Transparency Rule 7.1 and the UK Corporate Governance Code. The terms of reference are considered annually by the Audit Committee and are then referred to the Board for approval. A copy of the terms of reference is available on the Company's website or upon request from the Company Secretary.

The main roles and responsibilities of the Audit Committee are:

·     monitoring the integrity of the financial statements of the Company and any formal announcements relating to the Company's financial performance and reporting to the Board on significant financial reporting issues and judgements contained therein;

·     reviewing the content of the Half‑year and Annual Reports and financial statements and advising the Board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy;

·     agreeing with the external auditor the audit plan and reviewing the auditor's report related to the Half‑year Report and the Annual Report and financial statements;

·     reviewing the long-term viability and going concern statements, including the underlying documentation prepared by the Investment Adviser;

·     reviewing, in conjunction with the Risk Committee, the adequacy and effectiveness of the Company's internal financial controls and internal control and risk management systems;

·     reviewing the adequacy and security of the Company's arrangements for regulatory compliance, whistleblowing and fraud;

·     making recommendations to the Board, to be put to shareholders for approval at the annual general meeting, in relation to the appointment, re‑appointment and removal of the Company's external auditor; and

·     assessing annually the external auditor's independence and objectivity taking into account relevant professional and regulatory requirements and the relationship with the auditor as a whole, including the provision of any non‑audit services and the effectiveness of the audit process.

The Audit Committee reports formally to the Board on its proceedings on all matters within its duties and responsibilities and how it has discharged its responsibilities.

Composition of the Committee

The members of the Audit Committee are:

·     Christopher Legge (Chairman);

·     Peter Neville; and

·     Richard Ramsay.

Meetings

The Audit Committee meets at least three times a year and at such other times as the Audit Committee Chairman shall require.

Any member of the Audit Committee may request that a meeting be convened by the Secretary of the Audit Committee. The external auditor may request that a meeting be convened if it is deemed necessary.

Other Directors and third parties may be invited by the Audit Committee to attend meetings as and when appropriate.

Annual general meeting

The Audit Committee Chairman attends the annual general meeting to answer shareholder questions on the Committee's activities.

Significant issues

The Audit Committee considered the following significant issues in relation to the financial statements:

Valuation of investments

The Company is required to calculate the fair value of its investments. Whilst there is a relatively active market for investments of this nature, there is not a suitable listed or other public market in these investments against which their value can benchmarked. As a result, a valuation is performed based on a discounted cash flow methodology in line with IAS 39 Financial Instruments: Recognition and Measurement and IFRS 13 Fair Value Measurement.

The calculation of the fair value of the investments carries elements of risks, mainly in relation to the assumptions and factors such as:

·     the determination of the appropriate macroeconomic assumptions underlying the forecast investment cash flows;

·     the determination of the appropriate assumptions regarding future power prices, energy generation and volumes underlying the forecast investment cash flows;

·     the determination of appropriate sensitivities to apply to meet the required disclosures;

·     the impact of project-specific matters on the forecast cash flows for each investment;

·     the determination of the appropriate discount rate for each investment that is reflective of current market conditions;

·     the tax deductibility of interest expense now that BEPS legislation has been implemented;

·     the underlying project financial models may not reflect the underlying performance of the investment;

·     terms and costs of the future refinancing of senior debt on certain projects;

·     the cash flows from the underlying financial models may not take into account current known issues; and

·     the updates performed on the underlying financial models result in errors in forecasting.

·     The Audit Committee is satisfied that the Administrator and Investment Adviser's assumptions have been reviewed and challenged for:

·     the macroeconomic assumptions, including the comparison of these assumptions to observable market data, actual results, and prior year comparatives;

·     the electricity price, gas price, energy generation and volume assumptions, including the comparison of these assumptions to observable market data, actual results and prior year comparatives; and

·     the build‑up of the discount rates for consistency and reasonableness, benchmarking against market data and peers and project-specific items.

The Audit Committee is also satisfied that the portfolio valuation and associated disclosures have been audited for mechanical accuracy, ensuring that the investments are brought on balance sheet at fair value and that the independent valuation carried out by an independent firm has been reviewed and challenged by the auditor.

Internal audit

The Audit Committee considers at least once a year whether or not there is a need for an internal audit function. Currently, the Audit Committee does not consider there to be a need for an internal audit function specific to the Company, given that there are no employees in the Company and the systems and procedures employed by the Administrator and Investment Adviser, including their own internal controls and procedures in place in relation to the Company, provide sufficient assurance that a sound system of internal control, which safeguards the Company's assets, is maintained. In addition, internal audits of the projects are performed periodically by the Investment Adviser, who reports findings to the Audit Committee.

External audit

Deloitte LLP has been the Company's auditor since incorporation on 12 December 2013 and this is the fourth set of financial statements on which it has expressed an audit opinion.

The Audit Committee has assessed the quality and the effectiveness of the audit process. To draw its conclusions, the Audit Committee reviewed:

·     the scope of the audit, the audit fee and the external auditor's fulfilment of the agreed audit plan;

·     the degree of diligence demonstrated by them in the course of their interaction with the Board, the Audit Committee and the Administrator and Investment Adviser;

·     the external auditor's assessment of the Group's main risks; and

·     the report highlighting the matters that arose during the course of the audit and the recommendations made by the external auditor.

The Audit Committee has noted the revisions to the UK Code and the AIC Code, and in particular the recommendation, in each, to put the external audit out to tender every five to 10 years. The Audit Committee has also noted the requirements of The Competition and Markets Authority with respect to external auditor services and retendering. This is the fourth year of Deloitte's appointment as the Company's auditor. The audit partner for the Company is John Clacy and he has been in place for four years.

The Audit Committee is satisfied with the effectiveness and independence of the audit process and, as such, recommended to the Board that Deloitte LLP be re‑appointed as external auditor for the year ending 31 March 2019. The Audit Committee also recommended the audit appointment is retendered every 10 years, with the audit partner changing every five years.

Non‑audit services

The Audit Committee considered the extent of non‑audit services provided by the external auditor. The Company has adopted a formal policy in relation to the provision of non-audit services, pursuant to which the external auditor's objectivity and independence is safeguarded through limiting non‑audit services to their role as reporting accountants for capital raising services.

Activities of the Audit Committee

The Audit Committee met on four occasions during the year ended 31 March 2018. Matters considered at these meetings included, but were not limited to:

·     review of the re-appointment of the external auditor;

·     review of the effectiveness of the external auditor and the external audit process;

·     approval of the external audit fees;

·     consideration and agreement of the terms of reference of the Audit Committee for approval by the Board;

·     review of the proposed accounting policies and format of the financial statements;

·     review of the audit plan and timetable for the preparation of the Annual Report and financial statements;

·     review of the Company's valuation methodology;

·     review of the independent valuation report; and

·     review of the 2018 Annual Report and financial statements and the 2017 Half‑year Report.

As a result of its work during the year, the Audit Committee has concluded that it has acted in accordance with its terms of reference.

Approval

On behalf of the Audit Committee:

Christopher Legge

Chairman of the Audit Committee

13 June 2018

ACCOUNTABILITY

Risk Committee report

The Board of Directors has established a Risk Committee from the non‑executive Directors of the Company. The Risk Committee, chaired by Peter Neville, operates within clearly defined terms of reference and works closely with the Audit Committee in monitoring the internal controls and risk management of the Company. The terms of reference are considered at least annually by the Risk Committee and are then referred to the Board for approval. A copy of the terms of reference is available on the Company's website or upon request from the Company Secretary.

The main roles and responsibilities of the Risk Committee are:

·     when requested to do so, advise the Board on the overall risk appetite, tolerance and strategy of the Fund, taking account of the extent to which the risk profile of the Company corresponds to the size, structure and objectives of the Company, in addition to the current and prospective macroeconomic, financial and regulatory environment, including relevant stakeholder issues;

·     oversee and advise the Board on the current risk exposures of the Fund with particular focus on the Fund's principal risks, being those which could influence shareholders' economic decisions, and the controls in place to mitigate those risks;

·     keep under review the Fund's overall risk identification and assessment processes and, in conjunction with the Audit Committee, review the adequacy and effectiveness of the risk management systems;

·     in conjunction with the Audit Committee, ensure that a framework of strong corporate governance and best practice is in place, which enables the Company to comply with the main requirements of the Guernsey Code, UK Code or the AIC Code where considered appropriate;

·     when requested to do so, advise the Board on proposed strategic transactions including acquisitions or disposals, ensuring that a due diligence appraisal of the proposition is undertaken, focusing in particular on risk aspects and implications for the risk appetite and tolerance of the Fund, and taking independent external advice where appropriate and available; and

·     oversee the remit of the risk management function, its resources, access to information and independence.

The members of the Risk Committee are:

·     Peter Neville (Chairman);

·     Christopher Legge; and

·     Denise Mileham.

The Risk Committee reports formally to the Board on its proceedings on all matters within its duties and responsibilities and how it has discharged its responsibilities. The Committee must meet at least four times a year and at such other times as the Risk Committee Chairman shall require. Other Directors and third parties may be invited by the Risk Committee to attend meetings as and when appropriate. The Risk Committee met four times in the year.

In order to assist it in fulfilling its role on behalf of the Board, the Committee has established, in conjunction with the Investment Adviser, an ongoing process designed to meet the particular needs of the Company in managing the risks to which it is exposed. This is a risk‑based approach through the maintenance of a register which identifies the key risk areas faced by the Company and the controls employed to minimise and mitigate those risks. Scoring based on a traffic light system for likelihood and impact is used to assess the significance to the Fund of each individual risk. The register is updated quarterly and the Committee considers all material changes to the risk ratings and the action which has been, or is being, taken. By their nature, these procedures will provide a reasonable, but not absolute, assurance against material misstatement or loss.

Nomination Committee report

The Board of Directors has established a Nomination Committee from the non‑executive Directors of the Company. The Nomination Committee, chaired by Denise Mileham, operates within clearly defined terms of reference which are considered and are then referred to the Board for approval. A copy of the terms of reference is available on the Company's website or upon request from the Company Secretary.

The main roles and responsibilities of the Nomination Committee are:

·     regularly review the structure, size and composition of the Board and make recommendations to the Board with regard to any changes (including skills, knowledge and experience in accordance with Principle 6 of the AIC Code);

·     give full consideration to succession planning for Directors taking into account the challenges and opportunities facing the Company; and

·     be responsible for identifying and nominating for the approval of the Board, candidates to fill Board vacancies as and when they arise.

The members of the Nomination Committee are:

·     Denise Mileham (Chairman);

·     Richard Morse; and

·     Peter Neville.

The Nomination Committee reports formally to the Board on its proceedings on all matters within its duties and responsibilities and how it has discharged its responsibilities. The Committee meets at least twice a year and at such other times as the Nomination Committee Chairman shall require. Other Directors and third parties may be invited by the Nomination Committee to attend meetings as and when appropriate.

The Chairman of the Board, Richard Morse, was appointed by John Laing and, in conjunction with the Investment Adviser, undertook a comprehensive recruitment process for the remaining members of the Board, with the aim of establishing a Board with the skills, knowledge and experience necessary for the proposed listing of the Company and its subsequent management and operation. All members of the Board were recruited in the summer of 2013 and appointed to the Board on incorporation of the Company on 12 December 2013.

The Nomination Committee met two times during the year. Matters considered at these meetings included, but were not limited to:

·     certain recommendations arising from the 2017 external Board evaluation;

·     the findings of the external Board evaluation concerning the size, structure and composition of the Board and the appropriateness of the current mix of skills, knowledge and experience for its current activities;

·     Director succession planning;

·     Director training;

·     the time requirements of Directors;

·     governance of subsidiaries; and

·     consideration and agreement of the terms of reference of the Nomination Committee for approval by the Board.

Based on its review of the composition of the Board and the feedback received from the independent external Board evaluation, the Committee concluded that the current mix of skills, knowledge and experience is appropriate for its current activities. The Committee noted that the Board was satisfied with the internal evaluations process conducted for 2018 and a similar process would be repeated in 2019. It was expected that the next external evaluation would be arranged for 2020.

REPORT OF THE DIRECTORS

The Directors are pleased to submit their report and the audited financial statements of the Company for the year ended 31 March 2018.

Principal activities

John Laing Environmental Assets Group Limited is a company incorporated and registered in Guernsey under the Companies (Guernsey) Law, 2008. The Company was incorporated on 12 December 2013 with the Company register number 57682.

At 31 March 2017, the total number of ordinary shares of the Company in issue was 339,642,078. In July 2017 JLEN issued 38,834,951 shares in an oversubscribed placing. In February 2018, the Company launched a new placing programme of up to 200 million new shares and in March 2018 issued a further 15,600,000 shares pursuant to a first close under the placing programme. At 31 March 2018, the total number of ordinary shares of the Company in issue was 394,077,029.

The Company is a registered fund under the Registered Collective Investment Scheme Rules 2015 and is regulated by the Guernsey Financial Services Commission and, during the year, its principal activity was as an investor in environmental infrastructure projects that utilise natural or waste resources or support more environmentally friendly approaches to economic activity.

Business review

The Company is required to present a fair review of its business during the year ended 31 March 2018, its position at the year end and a description of the principal risks and uncertainties it faces.

Disclosure of information under Listing Rule 9.8.4

The Company is required to disclose information on any contract of significance subsisting during the period under review:

·     to which the Company, or one of its subsidiary undertakings, is a party and in which a Director of the Company is or was materially interested; and

·     between the Company, or one of its subsidiary undertakings, and a controlling shareholder.

Details can be found in note 15 to the financial statements.

The Directors note that no shareholder has waived or agreed to waive any dividends.

Results and dividends

The results for the year are set out in the financial statements below. On 31 May 2018, the Directors declared a dividend in respect of the period 1 January 2018 to 31 March 2018 of 1.5775 pence per share to shareholders on the register as at the close of business on 8 June 2018.

Going concern

The Company's business activities, together with the factors likely to affect its future development, performance and prospects, are set out in the strategic report. The financial position of the Company, its cash flows and its liquidity position are also described in the strategic report. In particular, the current economic conditions have created a number of risks and uncertainties for the Company and these are set out in the risks and risk management section above. The financial risk management objectives and policies of the Company and the exposure of the Company to credit risk, market risk and liquidity risk are discussed in note 16 to the financial statements.

The Company continues to meet its requirements and day‑to‑day liquidity needs through both its own cash resources and those of its investment entities, to which it has full recourse.

JLEN benefits from a £130 million multi‑currency revolving credit facility with an accordion facility of up to £60 million with HSBC, NIBC, ING and Santander, expiring in June 2021 after the option to extend for one further year was exercised in June 2018. The facility is used primarily to fund acquisitions, and is repaid through raising equity in the market. The facility is intended to provide short-term finance which is then repaid from equity raises and not structural financing.

At 31 March 2018, the Company had net current assets of £3.9 million (31 March 2017: £3.1 million), including a cash balance of £5.5 million (31 March 2017: £4.2 million). At UK HoldCo level, the £130 million revolving credit facility was drawn to a level of £48.4 million (31 March 2017: £12.5 million), with the balance available for future acquisitions and working capital. JLEN has sufficient cash balances to meet other current obligations as they fall due while all key financial covenants are forecast to continue to be complied with.

The Directors have reviewed Company forecasts and projections which cover a period of not less than 12 months from the date of the Annual Report, taking into account reasonably likely changes in investment and trading performance, which show that the Company has sufficient financial resources.

On the basis of this review, and after making due enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

Long-term viability statement

The Directors have assessed the viability of the Group over the three‑year period to March 2021, taking account of the Group's current position and the potential impact of the principal risks documented in the strategic review. Based on this robust assessment, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period to March 2021.

In making this statement, the Directors have considered and challenged the reports of the Investment Adviser in relation to the resilience of the Group, taking account of its current position, the principal risks facing it in severe but reasonable scenarios, the effectiveness of any mitigating actions and the Group's risk appetite. Sensitivity analysis has been undertaken to consider the potential impacts of such risks on the business model, future performance, solvency and liquidity over the period, both on an individual and combined basis. In particular, this has considered the achievement of budgeted energy yields, the level of future electricity and gas prices, continued government support for renewable energy subsidy payments and the impact of a proportion of the PFI portfolio not yielding. The sensitivity analysis was premised on a number of assumptions, including that the Group's current revolving credit facility remains in place and that there will be sufficient liquidity within equity and debt markets to raise new capital as and when required.

The Directors have determined that a three‑year look forward to March 2021 is an appropriate period over which to provide its viability statement. This is consistent with the outlook period used in economic and other medium‑term forecasts regularly prepared for the Board by the Investment Adviser and the discussion of any new strategies undertaken by the Board in its normal course of business. These reviews consider both the market opportunity and the associated risks, principally the ability to raise third-party funds and invest capital.

Internal controls review

Taking into account the information on principal risks and uncertainties provided in the strategic report and the ongoing work of the Audit and Risk Committees in monitoring the risk management and internal control systems on behalf of the Board, the Directors:

·     are satisfied that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity; and

·     have reviewed the effectiveness of the risk management and internal control systems and no significant failings or weaknesses were identified.

Share capital

The issued ordinary share capital of the Company was increased through placings in July 2017 and March 2018. Further details can be found in note 13 to the financial statements.

The Company has one class of ordinary shares which carries no rights to fixed income. On a show of hands, each member present in person or by proxy has the right to one vote at general meetings. On a poll, each member is entitled to one vote for every share held.

The issued nominal value of the ordinary shares represents 100% of the total issued nominal value of all share capital. There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Incorporation and prevailing legislation. The Directors are not aware of any agreements between holders of the Company's shares that may result in restrictions on the transfer of securities or on voting rights. No person has any special rights of control over the Company's share capital and all issued shares are fully paid.

The Company's Memorandum and Articles of Incorporation contain details relating to the rules that the Company has about the appointment and removal of Directors or amendment to the Company's Articles of Incorporation which are incorporated into this report by reference.

Authority to purchase own shares

A resolution to provide the Company with authority to purchase its own shares will be tabled at the annual general meeting on 15 August 2018. This shareholder authority was renewed at the 2017 annual general meeting.

Major interests in shares and voting rights

As at 31 March 2018, the Company had been notified, in accordance with Chapter 5 of the Disclosure Guidance and Transparency Rules, of the following interests in 5% or more of the voting rights as a shareholder in the Company.

	Percentage
	of voting rights	Number of
	and issued	ordinary
Shareholder	share capital	shares
John Laing Pension Trust Limited	10.6%	41,590,000
Newton Investment Management Limited	9.6%	37,820,606
Legal & General Investment Management	6.0%	23,447,374
Baillie Gifford & Co Limited	5.8%	22,700,000

Board of Directors

The Board members that served during the year and up until the date of this report, all of whom are non‑executive Directors and independent of the Investment Adviser, are listed below. Their biographical details are shown on above.

Name	Function
Richard Morse	Chairman
Christopher Legge	Director
Denise Mileham	Director
Peter Neville	Director
Richard Ramsay	Senior Independent Director

Re‑election of Directors

At the first annual general meeting of the Company on 14 August 2014, all of the Directors offered themselves for re‑election and were duly re‑elected. In subsequent years one-third of the Board will stand for re‑election, and at the annual general meeting to be held on 15 August 2018, Richard Morse and Denise Mileham will each stand for re‑election. Having considered the results of the performance evaluation, the Directors remain satisfied that Mr Morse and Mrs Mileham's performance continues to be effective and they continue to demonstrate commitment to their roles. Each of the Directors has a letter of appointment rather than a service contract.

Directors' interests

Directors who held office during the year and had interests in the shares of the Company as at 31 March 2018 were:

	Ordinary	Ordinary
	shares of	shares of
	no par value	no par value
	each held at	each held at
	31 Mar 2018	31 Mar 2017
Richard Morse	83,042	83,042
Christopher Legge	29,896	29,896
Denise Mileham	28,160	28,160
Peter Neville	29,896	29,896
Richard Ramsay	53,813	53,813

There have been no changes in the Directors' interests from 31 March 2018 to the date of this report.

Annual general meeting

The Company's annual general meeting will be held at 10.00am on 15 August 2018 at Sarnia House, Le Truchot, St Peter Port, Guernsey, Channel Islands. Details of the business to be conducted are contained in the notice of annual general meeting.

Appointment of the Investment Adviser

John Laing Capital Management acts as the Investment Adviser to the Company. A summary of the contract between the Company, its subsidiaries and joint ventures and JLCM in respect of services provided is set out in note 15 to the financial statements. It is the Directors' opinion, based upon the performance in the year ended 31 March 2018, that the continuing appointment of JLCM on the agreed terms is in the best interests of the shareholders as a whole.

Auditor

The Audit Committee reviews the appointment of the external auditor, its effectiveness and its relationship with the Company and its subsidiaries and joint ventures, which includes monitoring use of the auditor for non‑audit services and the balance of audit and non‑audit fees paid. Following a review of the independence and effectiveness of the auditor, a resolution will be proposed at the 2018 annual general meeting to reappoint Deloitte LLP.

Each Director believes that there is no relevant information of which our auditor is unaware. Each has taken all the steps necessary, as a Director, to be aware of any relevant audit information and to establish that Deloitte LLP is made aware of any pertinent information. This confirmation is given and should be interpreted in accordance with the provisions of Section 249 of the Companies (Guernsey) Law, 2008.

By order of the Board

Richard Morse

Chairman

13 June 2018

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Directors' report and financial statements in accordance with applicable laws and regulations. The Companies (Guernsey) Law, 2008 requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and IASB, and the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, International Accounting Standard 1 requires that Directors:

·     properly select and apply accounting policies;

·     present information, including accounting policies,
in a manner that provides relevant, reliable, comparable and understandable information;

·     provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the European Union are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

·     make an assessment of the Company's ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and which enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Guernsey and the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

·     the financial statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

·     the strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings taken as a whole, together with a description of the principal risks and uncertainties that we face; and

·     the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

By order of the Board

Richard Morse

Chairman

13 June 2018

FINANCIAL STATEMENTS

INDEPENDENT AUDITOR'S REPORT

to the members of John Laing Environmental Assets Group Limited

Report on the audit of the financial statements

Opinion

In our opinion, the financial statements:

·     give a true and fair view of the state of the Company's affairs as at 31 March 2018 and of its profit for the year then ended;

·     have been properly prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board ("IASB"); and

·     have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

We have audited the financial statements of John Laing Environmental Assets Group Limited (the "Company") which comprise:

·     the income statement;

·     the statement of financial position;

·     the statement of changes in equity;

·     the cash flow statement; and

·     the related notes 1 to 19.

The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European Union.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report.

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited by the FRC's Ethical Standard were not provided to the Company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. While the Company is not a public interest entity subject to European Regulation 537/2014, the Directors have decided that the parent company should follow the same requirements as if that Regulation applied to the parent company.

Summary of our audit approach
Key audit matters	The key risk that we identified in the current year was the assessment of the fair value of the investments in the Fund.
Materiality	The materiality that we used in the current year was £7.8 million and was based on 2% of net assets.
Scoping	As the Company is treated as an investment entity under IFRS 10, its subsidiaries are measured at fair value rather than consolidated on a line-by-line basis and therefore the Company has been treated as one component. There has been no change in approach for the current year.
Significant changes in our approach	As discussed below, we changed the benchmark used to determine materiality in the year.

Conclusions relating to going concern, principal risks and viability statement
Going concern We have reviewed the Directors' statement in note 2(b) to the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them and their identification of any material uncertainties to the Company's ability to continue to do so over a period of at least 12 months from the date of approval of the financial statements. We are required to state whether we have anything material to add or draw attention to in relation to that statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our knowledge obtained in the audit.	We confirm that we have nothing material to report, add or draw attention to in respect of these matters.
Principal risks and viability statement Based solely on reading the Directors' statements and considering whether they were consistent with the knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of the Directors' assessment of the Company's ability to continue as a going concern, we are required to state whether we have anything material to add or draw attention to in relation to: ·     the disclosures that describe the principal risks and explain how they are being managed or mitigated; ·     the Directors' confirmation that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity; or ·     the Directors' explanation as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures, drawing attention to any necessary qualifications or assumptions. We are also required to report whether the Directors' statement relating to the prospects of the Company required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.	We confirm that we have nothing material to report, add or draw attention to in respect of these matters.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Valuation of investments at fair value
Key audit matter description	As described in the significant accounting policies in note 2 to the financial statements, the fair value of the Company's investments is determined using a discounted cash flow methodology, as there is no liquid market for these projects. These investments are valued at £388.5 million. Note 9 to the financial statements provides a breakdown of the movement in these investments in the financial year. The complexity of the valuation methodology, as well as a number of significant judgements, means that the fair value of the investments may not be appropriate. The key estimates included in the valuation are: ·     discount rates - the determination of the appropriate discount rate for each investment with regard to risk-free rates, operational risk, and recent market transactions where applicable; there is also potential for fraud through manipulation of this assumption; ·     macroeconomic assumptions - including forward electricity prices, corporation tax rates, and inflation rates; and ·     operational assumptions - including expected future energy yields, output levels and asset upgrade assumptions.
How the scope of our audit responded to the key audit matter	Our audit procedures were designed to allow us to obtain appropriate evidence to support the assumptions adopted in the discounted cash flow models. Our audit procedures included: ·     understanding and reviewing the design and implementation of internal controls around updates to the valuation model used at 31 March 2018; ·     challenging the discount rates applied by engaging our internal valuation specialists to calculate an independent appropriate range, and benchmarking the discount rates against comparable market participants and recent market transactions; ·     challenging the macroeconomic assumptions by reference to observable market data and forecasts; ·     reviewing changes to operational assumptions in the underlying models, in particular movements from acquisition values and value enhancements made, through reference to third party support where required; ·     challenging the conclusions of the Investment Adviser's external report; ·     reviewing the historical accuracy of the models' cash flow forecasts against actual results; ·     reviewing the share purchase agreements for assets acquired in the year in order to confirm that the value of assets acquired was appropriately included in the valuation of the portfolio; ·     testing the mechanical accuracy of the valuation models including performing model integrity tests; and ·     reviewing the appropriateness of the disclosures made in the financial statements including the sensitivities applied.
Key observations	In consideration of the fair value of the portfolio, we have determined that, as a whole, the assumptions adopted are appropriate, noting in particular that: ·     the discount rates applied are within the reasonable range determined by our valuation specialists and industry peers; ·     the macroeconomic assumptions fall within a reasonable range based on available observable market data; ·     the future energy yield assumptions appear appropriate based on historic performance and our discussions with operational management; and ·     asset-specific enhancements were correctly reflected in the underlying cash flows supported by third party reports.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Materiality	£7.8 million (31 March 2017: £6.7 million).
Basis for determining materiality	2% of Net Asset Value (31 March 2017: 2% of the investments at fair value through profit or loss).
Rationale for the benchmark applied	We consider Net Asset Value to be a key benchmark used by members of the Company in assessing financial performance. In the prior year, we used the investments at fair value through profit or loss balance as our benchmark, however we believe Net Asset Value to be a more conservative metric and more relevant for members of the Company.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £390,000 (31 March 2017: £335,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

An overview of the scope of our audit

Our audit was scoped by obtaining an understanding of the entity and its environment, including internal controls, and assessing the risks of material misstatement. Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team.

As the Company is treated as an investment entity under IFRS 10, its subsidiaries are measured at fair value rather than consolidated on a line-by-line basis and therefore the Company has been treated as one component. There has been no change in approach for the current year.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information include where we conclude that: ·     fair, balanced and understandable - the statement given by the Directors that they consider the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or ·     Audit Committee reporting - the section describing the work of the Audit Committee does not appropriately address matters communicated by us to the Audit Committee; or ·     Directors' statement of compliance with the UK Corporate Governance Code - the parts of the Directors' statement required under the Listing Rules relating to the Company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

We have nothing to report in respect of these matters.

Responsibilities of Directors

As explained more fully in the Directors' responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the Company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Report on other legal and regulatory requirements

Matters on which we are required to report by exception
Adequacy of explanations received and accounting records Under the Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion: ·     proper accounting records have not been kept; or ·     the financial statements are not in agreement with the accounting records: or ·     we have not received all the information and explanations we require for our audit.	We have nothing to report in respect of these matters.

Other matters

Auditor tenure

Following the recommendation of the Audit Committee, we were appointed by the Board on 12 December 2013 to audit the financial statements for the period ending 31 March 2015 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is four years, covering the years ending 31 March 2015 to 31 March 2018.

Consistency of the audit report with the additional report to the Audit Committee

Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).

John Clacy, FCA

for and on behalf of Deloitte LLP

Statutory Auditor

Guernsey, Channel Islands

16 June 2018

INCOME STATEMENT

for the year ended 31 March 2018

		2018	2017
	Notes	£'000s	£'000s
Operating income	9	26,078	29,791
Operating expenses	5	(5,018)	(4,191)
Operating profit		21,060	25,600
Profit before tax		21,060	25,600
Tax	6	-	-
Profit for the year		21,060	25,600
Earnings per share
Basic and diluted (pence)	8	5.70	9.31

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

All results are derived from continuing operations.

There is no other comprehensive income in either the current year or the preceding year, other than the profit for the year, and therefore no separate statement of comprehensive income has been presented.

STATEMENT OF FINANCIAL POSITION

as at 31 March 2018

		2018	2017
	Notes	£'000s	£'000s
Non-current assets
Investments at fair value through profit or loss	9	388,468	336,921
Total non-current assets		388,468	336,921
Current assets
Trade and other receivables	10	20	32
Cash and cash equivalents		5,509	4,150
Total current assets		5,529	4,182
Total assets		393,997	341,103
Current liabilities
Trade and other payables	11	(1,610)	(1,055)
Total current liabilities		(1,610)	(1,055)
Total liabilities		(1,610)	(1,055)
Net assets		392,387	340,048
Equity
Share capital account	13	389,262	334,858
Retained earnings	14	3,125	5,190
Equity attributable to owners of the Company		392,387	340,048
Net assets per share (pence per share)		99.6	100.1

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

The financial statements were approved by the Board of Directors and authorised for issue on 13 June 2018.

They were signed on its behalf by:

Richard Morse                     Christopher Legge

Chairman                                 Director

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2018

		Year ended 31 Mar 2018
		Share capital	Retained
		account	earnings	Total
	Notes	£'000s	£'000s	£'000s
Balance at 1 April 2017		334,858	5,190	340,048
Profit for the year		-	21,060	21,060
Profit and total comprehensive income for the year		-	21,060	21,060
Issue of share capital	13	55,522	-	55,522
Expenses of issue of equity shares	13	(1,118)	-	(1,118)
Dividends paid	7	-	(23,125)	(23,125)
Balance at 31 March 2018		389,262	3,125	392,387

		Year ended 31 Mar 2017
		Share capital	Retained
		account	earnings	Total
	Notes	£'000s	£'000s	£'000s
Balance at 1 April 2016		221,122	(4,231)	216,891
Profit for the year		-	25,600	25,600
Profit and total comprehensive income for the year		-	25,600	25,600
Issue of share capital	13	115,572	-	115,572
Expenses of issue of equity shares	13	(1,836)	-	(1,836)
Dividends paid	7	-	(16,179)	(16,179)
Balance at 31 March 2017		334,858	5,190	340,048

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

CASH FLOW STATEMENT

for the year ended 31 March 2018

		2018	2017
	Notes	£'000s	£'000s
Profit from operations		21,060	25,600
Adjustments for:
Investment interest		(18,631)	(14,170)
Dividends received		(10,400)	(7,000)
Net loss/(gain) on investments at fair value through profit or loss		2,953	(8,621)
Operating cash flows before movements in working capital		(5,018)	(4,191)
Decrease/(increase) in receivables		12	(1)
Increase in payables		555	203
Net cash outflow from operating activities		(4,451)	(3,989)
Investing activities
Investments in subsidiaries		(17,500)	(45,000)
Loan to subsidiaries	12	(37,000)	(68,900)
Investment interest		18,631	14,170
Dividends received		10,400	7,000
Net cash used in investing activities		(25,469)	(92,730)
Financing activities
Proceeds on issue of share capital	13	55,522	115,572
Expenses relating to issue of shares	13	(1,118)	(1,836)
Dividends paid	7	(23,125)	(16,179)
Net cash from financing activities		31,279	97,557
Net increase in cash and cash equivalents		1,359	838
Cash and cash equivalents at beginning of the year		4,150	3,312
Cash and cash equivalents at end of year		5,509	4,150

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

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2018

1. General information

John Laing Environmental Assets Group Limited (the "Company" or "JLEN") is a closed‑ended investment company domiciled and incorporated in Guernsey, Channel Islands, under Section 20 of the Companies (Guernsey) Law, 2008. The shares are publicly traded on the London Stock Exchange under a premium listing. The audited financial statements of the Company are for the year ended 31 March 2018 and have been prepared on the basis of the accounting policies set out below. The financial statements comprise only the results of the Company as its investment in John Laing Environmental Assets Group (UK) Limited ("UK HoldCo") is measured at fair value as detailed in the key accounting policies below. The Company and its subsidiaries invest in environmental infrastructure projects that utilise natural or waste resources or support more environmentally friendly approaches to economic activity.

2. Significant accounting policies

(a) Basis of preparation

The financial statements were approved and authorised for issue by the Board of Directors on 13 June 2018. The set of financial statements included in this financial report has been prepared in compliance with the Companies (Guernsey) Law, 2008 and in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and IFRS as issued by the International Accounting Standards Board ("IASB") using the historical cost basis, except that the financial instruments classified at fair value through profit or loss are stated at their fair value.

As a result of adopting the amendments to IFRS 10, IFRS 12 and IAS 28 first adopted in the Company's Annual Report to 31 March 2015, the Company is required to hold its subsidiaries that provide investment services at fair value, in accordance with IAS 39 Financial Instruments: Recognition and Measurement, and IFRS 13 Fair Value Measurement. The Company accounts for its investment in its wholly owned direct subsidiary UK HoldCo at fair value. The Company, together with its wholly owned direct subsidiary UK HoldCo, the intermediate holding subsidiary HWT Limited and JLEAG Solar 1 Limited, comprise the Group (the "Group") investing in environmental infrastructure assets.

The net assets of the intermediate holding companies (comprising UK HoldCo, HWT Limited and JLEAG Solar 1 Limited), which at 31 March 2018 principally comprise working capital balances, the revolving credit facility and investments in projects, are required to be included at fair value in the carrying value of investments.

Consequently, the Company does not consolidate its subsidiaries or apply IFRS 3 Business Combinations when it obtains control of another entity as it is considered to be an investment entity under IFRS. Instead, the Company measures its investment in its subsidiary at fair value through profit or loss.

The financial statements incorporate the financial statements of the Company only.

UK HoldCo is itself an investment entity. Consequently, the Company need not have an exit strategy for its investment in UK HoldCo.

Each investment indirectly held has a finite life. For the PPP assets, the shareholder debt will mature towards the end of the concession, and at the end of the concession the investment will be dissolved. In the case of renewable energy assets, the life of the project is based on the expected asset life and the land lease term, after which the investment will also be dissolved. The exit strategy is that investments will normally be held to the end of the concession, unless the Company sees an opportunity in the market to dispose of investments. John Laing Capital Management Limited, the Company's Investment Adviser and the Company's Board regularly consider whether any disposals should be made.

The Directors continue to consider that the Company demonstrates the characteristics and meets the requirements to be considered as an investment entity.

The following standards which have not been applied in these financial statements were in issue but not yet effective:

·     IFRS 16 Leases (effective 1 January 2019);

·     IFRS 17 Insurance Contracts (effective 1 January 2021);

·     IFRIC 23 Uncertainty over Income Tax Treatments (effective 1 January 2019);

·     Amendments to IFRS 9 Prepayment features with Negative Compensation (effective 1 January 2019);

·     Amendments to IFRS 10 and IAS 28 Long-term Interest in Associates and Joint Ventures (effective 1 January 2019);

·     Annual improvements to IFRS standards 2015-2017 cycle (effective 1 January 2019);

·     Amendments to IAS 19 Plan Amendments, Curtailment or Settlement (effective 1 January 2019); and

·     Amendments to References to the Conceptual Framework in IFRS standards (effective 1 January 2019).

The following standards became effective during the year and did not have a material impact on the Company's reported results:

·     IFRS 9 Financial Instruments (effective 1 January 2018); and

·     IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018).

The Directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Company in future periods as outlined below:

IFRS 9 Financial Instruments

Due to the Company's limited use of complex financial instruments, IFRS 9 is not expected to have a material impact on the Company's reported results.

IFRS 15 Revenue from Contracts with Customers

The majority of the Company's revenue is derived from fair value movements on investments and interest income, neither of which are within the scope of IFRS 15. As a result, it is not anticipated that the new standard will have a material impact on the Company's reported results.

IFRS 16 Leases

The Company itself does not have any leases so it is not anticipated that the new standard will have a material impact on the Company's reported results. The change in accounting treatment for the leases in the unconsolidated subsidiaries is not expected to have a significant cash impact over time and therefore does not impact the overall valuation of the Company's investments in the subsidiaries.

(b) Going concern

The Directors, in their consideration of going concern, have reviewed comprehensive cash flow forecasts prepared by the Company's Investment Adviser, John Laing Capital Management Limited, which are based on prudent market data and believe, based on those forecasts and an assessment of the Company's subsidiary's banking facilities, that it is appropriate to prepare the financial statements of the Company on the going concern basis. In arriving at their conclusion that the Company has adequate financial resources, the Directors were mindful that the Group had unrestricted cash of £11.8 million (including £5.5 million in the Company) as at 31 March 2018 and a revolving credit facility (available for investment in new or existing projects and working capital) of £130 million and an uncommitted accordion facility of up to £60 million which expires in June 2021.

As at 31 March 2018, the Company's wholly owned subsidiary UK HoldCo had borrowed £48.4 million under the facility.

All key financial covenants are forecast to continue to be complied with throughout the next year.

The Directors are satisfied that the Company has sufficient resources to continue to operate for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.

(c) Revenue recognition - operating income

Operating income in the income statement represents gains or losses that arise from the movement in the fair value of the Company's investment in UK HoldCo, dividend income and interest received from UK HoldCo. Dividends from UK HoldCo are recognised when the Company's right to receive payment has been established. Interest income is accrued by reference to the loan principle outstanding, applicable interest rate, and in accordance with the loan note agreement. Refer to note 9 for details.

(d) Taxation

Under the current system of taxation in Guernsey, the Company itself is exempt from paying taxes on income, profits or capital gains. Dividend income and interest income received by the Company may be subject to withholding tax imposed in the country of origin of such income. The underlying intermediate holding companies and project companies in which the Company invests provide for and pay taxation at the appropriate rates in the countries in which they operate. This is taken into account when assessing the fair value of the Company's investments.

(e) Cash and cash equivalents

Cash and cash equivalents comprise cash balances, deposits held on call with banks and other short‑term highly liquid deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand are included as a component of cash and cash equivalents for the purpose of the cash flow statements. Deposits held with original maturities of greater than three months are included in other financial assets.

(f) Financial instruments

Financial assets and financial liabilities are recognised on the Company's statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the contractual rights to the cash flows from the instrument expire or the asset is transferred and the transfer qualifies for derecognition in accordance with IAS 39 Financial Instruments: Recognition and Measurement and IFRS 13 Fair Value Measurement.

a) Financial assets

The Company classifies its financial assets as either fair value through profit or loss or loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

i)    Investments at fair value through profit or loss

Investments at fair value through profit or loss are recognised upon initial recognition as financial assets at fair value through profit or loss in accordance with IFRS 10. In these financial statements, investments at fair value through profit or loss is the fair value of the Company's subsidiary, UK HoldCo, which comprises the fair value of UK HoldCo, JLEAG Solar 1 Limited, HWT Limited and the environmental infrastructure investments.

The intermediate holding companies' net assets (UK HoldCo, HWT Limited and JLEAG Solar 1 Limited) are mainly composed of cash, working capital balances and borrowings under the Company's wholly owned direct subsidiary's revolving credit facility, and are recognised at fair value which is equivalent to their net assets.

The Company's investment in UK HoldCo comprises both equity and loan notes. Both elements are exposed to the same primary risk, being performance risk. This performance risk is taken into consideration when determining the discount rate applied to the forecast cash flows. In determining fair value, the Board considered observable market transactions and has measured fair value using assumptions that market participants would use when pricing the asset, including assumptions regarding risk. The loan notes and equity are considered to have the same risk characteristics. As such, the debt and equity form a single class of financial instrument for the purposes of disclosure. The Company measures its investment as a single class of financial asset at fair value in accordance with IFRS 13 Fair Value Measurement.

ii)    Loans and receivables

Trade receivables, loans and other receivables that are non‑derivative financial assets and that have fixed or determinable payments that are not quoted in an active market are classified as "loans and other receivables". Loans and other receivables are measured at amortised cost using the effective interest method, less any impairment. They are included in current assets, except where maturities are greater than 12 months after the reporting date, in which case they are classified as non‑current assets. The Company's loans and receivables comprise "trade and other receivables" and "cash and cash equivalents" in the statement of financial position.

The loan notes issued by the Company's wholly owned subsidiary UK HoldCo are held at fair value, which is included in the balance of the investments at fair value through profit or loss in the statement of financial position.

b) Financial liabilities and equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

i)    Equity instruments

Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or associated with the establishment of the Company that would otherwise have been avoided are written off against the balance of the share capital account as permitted by Companies (Guernsey) Law, 2008.

ii)    Financial liabilities

Financial liabilities are classified as other financial liabilities, comprising:

·     loans and borrowings which are recognised initially at the fair value of the consideration received, less transaction costs. Subsequent to initial recognition, loans and borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis; and

·     other non‑derivative financial instruments, including trade and other payables, are measured at amortised cost using the effective interest method less any impairment losses.

c) Effective interest method

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the relevant asset's carrying amount.

d) Fair value estimation for investments at fair value

The Company's investments at fair value are not traded in active markets.

Fair value is calculated by discounting at an appropriate discount rate future cash flows expected to be received by the Company's intermediate holdings, from investments in both equity (dividends and equity redemptions), shareholder and inter-company loans (interest and repayments). The discount rates used in the valuation exercise represent the Investment Adviser's and the Board's assessment of the rate of return in the market for assets with similar characteristics and risk profile. The discount rates are reviewed on a regular basis and updated, where appropriate, to reflect changes in the market and in the project risk characteristics. The discount rates that have been applied to the financial assets at 31 March 2018 were in the range 6.5% to 9.2% (31 March 2017: 6.5% to 9.3%). Refer to note 9 for details of the areas of estimation in the calculation of the fair value.

For subsidiaries which provide management/investment‑related services, the fair value is estimated to be the net assets of the relevant companies, which principally comprise cash, loans and working capital balances.

(g) Segmental reporting

The Board is of the opinion that the Company is engaged in a single segment of business, being investment in environmental infrastructure to generate investment returns while preserving capital. The financial information used by the Board to allocate resources and manage the Company presents the business as a single segment comprising a homogeneous portfolio.

(h) Statement of compliance

Pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987 the Company is a registered closed‑ended investment scheme. As a registered scheme, the Company is subject to certain ongoing obligations to the Guernsey Financial Services Commission, and is governed by the Companies (Guernsey) Law, 2008 as amended.

3. Critical accounting judgements, estimates and assumptions

In the application of the Company's accounting policies, which are described in note 2, the Directors are required to make judgements, estimates and assumptions about the fair value of assets and liabilities that affect reported amounts. Actual results may differ from these estimates.

Key sources of estimation uncertainty

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Investments at fair value through profit or loss

The fair value of environmental infrastructure investments is calculated by discounting at an appropriate discount rate future cash flows expected to be received by the Company's intermediate holdings, from investments in both equity (dividends and equity redemptions), shareholder and inter-company loans (interest and repayments). Estimates such as the cash flows are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the fair value of assets not readily available from other sources. Actual results may differ from these estimates.

Discount rates used in the valuation represent the Investment Adviser's and the Board's assessment of the rate of return in the market for assets with similar characteristics and risk profile. The discount rate is deemed to be one of the most significant unobservable inputs and any change could have a material impact on the fair value of investments. Underlying assumptions and discount rates are disclosed in note 9.

Critical accounting judgements

Equity and debt investment in UK HoldCo

In applying their judgement the Directors have satisfied themselves that the equity and debt investments in UK HoldCo share the same investment characteristics and as such constitute a single asset class for IFRS 7 disclosure purposes. Please refer to the accounting policies in note 2 for further detail.

Investment entities

The Directors consider that the Company demonstrates the characteristics and meets the requirements to be considered as an investment entity. Please refer to the accounting policies in note 2 for further detail.

4. Seasonality

Neither operating income nor profit are impacted significantly by seasonality. While meteorological conditions resulting in the fluctuation in the levels of wind and sunlight can affect revenues of the Company's environmental infrastructure projects, due to the diversified mix of projects, these fluctuations do not materially affect the Company's operating income or profit.

5. Operating expenses

	Year ended	Year ended
	31 Mar 2018	31 Mar 2017
	£'000s	£'000s
Investment advisory fees	4,147	3,340
Directors' fees and expenses	273	242
Administration fee	89	98
Other expenses	509	511
	5,018	4,191

The Company had no employees during the year (31 March 2017: nil). There was no Directors' remuneration for the year other than Directors' fees as detailed in note 15 (31 March 2017: nil).

Included within other expenses is an amount of £91,500 to Deloitte LLP in the year for Deloitte LLP's review of the Company's half-year financial information and for the audit of the Company for the year ended 31 March 2018 (year ended 31 March 2017: £81,500).

The Company paid £49,000 (year ended 31 March 2017: £45,000) to Deloitte LLP in respect of non‑audit services related to the Company's Prospectus issued on 23 February 2018.

6. Tax

Income tax expense

The Company has obtained exempt status from income tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989.

The income from its investments is therefore not subject to any further tax in Guernsey, although the investments provide for and pay taxation at the appropriate rates in the countries in which they operate. The underlying tax within the subsidiaries and environmental infrastructure assets, which are held as investments at fair value through profit or loss, are included in the estimate of the fair value of these investments.

7. Dividends

	Year ended	Year ended
	31 Mar 2018	31 Mar 2017
	£'000s	£'000s
Amounts recognised as distributions to equity holders during the year (pence per share):
Final dividend for the year ended 31 March 2017 of 1.535 (31 March 2016: 1.5135)	5,215	3,396
Interim dividend for the quarter ended 30 June 2017 of 1.5775 (30 June 2016: 1.54)	5,970	4,087
Interim dividend for the quarter ended 30 September 2017 of 1.5775 (30 September 2016: 1.53)	5,970	4,327
Interim dividend for the quarter ended 31 December 2017 of 1.5775 (31 December 2016: 1.535)	5,970	4,369
	23,125	16,179

A dividend for the quarter ended 31 March 2018 of 1.5775 pence per share, amounting to £6.2 million, was approved by the Board on 31 May 2018 and is payable on 22 June 2018. The dividend has not been included as a liability at 31 March 2018.

8. Earnings per share

Earnings per share is calculated by dividing the profit attributable to equity shareholders of the Company by the weighted average of the number of ordinary shares in issue during the year:

	Year ended	Year ended
	31 Mar 2018	31 Mar 2017
	£'000s	£'000s
Earnings
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to owners of the Company	21,060	25,600
Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share	369,225,001	274,904,718

The denominator for the purposes of calculating both basic and diluted earnings per share is the same as the Company has not issued any share options or other instruments that would cause dilution.

	Pence	Pence
Basic and diluted earnings per share	5.70	9.31

9. Investments at fair value through profit or loss

As set out in note 1, the Company accounts for its interest in its 100% owned subsidiary UK HoldCo as an investment at fair value through profit or loss. UK HoldCo in turn owns investments in intermediate holding companies and environmental infrastructure projects.

The table below shows the movement in the Company's investment in UK HoldCo as recorded on the Company's statement of financial position:

	31 Mar 2018	31 Mar 2017
	£'000s	£'000s
Fair value of environmental infrastructure investments	429,494	327,647
Fair value of intermediate holding companies	(41,026)	9,274
Total fair value of investments	388,468	336,921

Reconciliation of movement in fair value of portfolio of assets

The table below shows the movement in the fair value of the Company's portfolio of environmental infrastructure assets. These assets are held through other intermediate holding companies. The table also presents a reconciliation of the fair value of the asset portfolio to the Company's statement of financial position as at 31 March 2018, by incorporating the fair value of these intermediate holding companies.

		Cash, working			Cash, working
		capital and			capital and
		debt in			debt in
		intermediate			intermediate
	Portfolio value	holdings	Total	Portfolio value	holdings	Total
	31 Mar 2018	31 Mar 2018	31 Mar 2018	31 Mar 2017	31 Mar 2017	31 Mar 2017
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Opening balance	327,647	9,274	336,921	264,486	(50,086)	214,400
Acquisitions
Portfolio of assets acquired	110,789	-	110,789	53,948	-	53,948
Post-acquisition price adjustments	(3,591)	-	(3,591)	1,358	-	1,358
	107,198	-	107,198	55,306	-	55,306
Growth in portfolio(1)	28,058	-	28,058	33,248	-	33,248
Yields from portfolio to intermediate holding companies	(33,409)	33,409	-	(25,393)	25,393	-
Yields from intermediate holding companies
Interest on loan notes(1)	-	(18,631)	(18,631)	-	(14,170)	(14,170)
Dividend payments from UK HoldCo to the Company(1)	-	(10,400)	(10,400)	-	(7,000)	(7,000)
	-	(29,031)	(29,031)	-	(21,170)	(21,170)
Other movements
Investment in working capital in UK HoldCo	-	(16,798)	(16,798)	-	16,274	16,274
Administrative expenses borne by intermediate holding companies(1)	-	(1,980)	(1,980)	-	(3,457)	(3,457)
(Drawdown)/repayment of UK HoldCo revolving credit facility borrowings	-	(35,900)	(35,900)	-	42,320	42,320
Fair value of the Company's investment in UK HoldCo	429,494	(41,026)	388,468	327,647	9,274	336,921

(1)   The net loss on investments at fair value through profit or loss for the year ended 31 March 2018 is £2,953,000 (31 March 2017: gain of £8,621,000). This, together with interest received on loan notes of £18,631,000 (31 March 2017: £14,170,000) and dividend income of £10,400,000 (31 March 2017: £7,000,000) comprises operating income in the income statement.

The balances in the table above represent the total net movement in the fair value of the Company's investment. The "cash, working capital and debt in intermediate holding companies" balances reflect investment in, distributions from or movements in working capital and are not value generating.

Fair value of portfolio of assets

The Investment Adviser has carried out fair market valuations of the investments as at 31 March 2018. The Directors have satisfied themselves as to the methodology used and the discount rates applied for the valuation. Investments are all investments in environmental infrastructure projects and are valued using a discounted cash flow methodology, being the most relevant and most commonly used method in the market to value similar assets to the Company's. The Company's holding of its investment in UK HoldCo represents its interest in both the equity and debt instruments. The equity and debt instruments are valued as a whole using a blended discount rate and the value attributed to the equity instruments represents the fair value of future dividends and equity redemptions in addition to any value enhancements arising from the timing of loan principal and interest receipts from the debt instruments, while the value attributed to the debt instruments represents the principal outstanding and interest due on the loan at the valuation date.

The valuation techniques and methodologies have been applied consistently with the valuations performed since the launch of the Fund in March 2014.

Discount rates applied to the portfolio of assets range from 6.5% to 9.2% (31 March 2017: 6.5% to 9.3%). The weighted average discount rate of the portfolio at 31 March 2018 is 8.1% (31 March 2017: 8.2%).

The following economic assumptions have been used in the discounted cash flow valuations:

	31 Mar 2018	31 Mar 2017
UK - inflation rates	3.50% for 2018 gradually decreasing to 2.75% from 2020	3.70% for 2017 gradually decreasing to 2.75% from 2019
France - inflation rates	1.5%	1.5%
UK - deposit interest rates	1.5% for 2018, gradually rising to 2.5% from 2020	1.5% for 2017, gradually rising to 2.75% from 2019
France - deposit rates	0.5%	0.5%
Euro/sterling exchange rate	1.14	1.17

The UK corporation tax rate assumed in the 31 March 2018 portfolio valuation is 19%, stepping down to 17% from April 2020 (31 March 2017: 20%), in line with market practice. The equivalent rate for the French assets is 28% stepping down to 26.5% from 2020.

Refer to note 16 for details of the sensitivity of the portfolio to movements in the discount rate and economic assumptions.

Fair value of intermediate holding companies

The assets in the intermediate holding companies substantially comprise working capital, cash balances and the outstanding revolving credit facility debt; therefore, the Directors consider the fair value to be equal to the book values.

Details of environmental infrastructure project investments were as follows:

	% holding at 31 March 2018		% holding at 31 March 2017
		Shareholder		Shareholder
Project name	Equity	loan	Equity	loan
Amber	100%	100%	100%	100%
Bilsthorpe	100%	100%	100%	100%
Branden	100%	100%	100%	100%
Burton Wold Extension	100%	100%	100%	100%
Carscreugh	100%	100%	100%	100%
Castle Pill	100%	100%	100%	100%
CSGH	100%	100%	-	-
Dumfries and Galloway	80%	80%	80%	80%
Dungavel	100%	100%	100%	100%
ELWA	80%	80%	80%	80%
Ferndale	100%	100%	100%	100%
Hall Farm	100%	100%	100%	100%
Icknield	40%	100%	-	-
Le Placis Vert	100%	100%	100%	100%
Llynfi Afan	100%	100%	-	-
Moel Moelogan	100%	100%	-	-
Monksham	100%	100%	100%(1)	100%
New Albion Wind Farm	100%	100%	100%	100%
Panther	100%	100%	100%	100%
Plouguernével	100%	100%	100%	100%
Pylle Southern	100%	100%	100%	100%
Tay	33%	33%	33%	33%
Vulcan	100%	100%	-	-
Wear Point	100%	100%	100%	100%

(1) 100% of "B" shares plus 100% of loans to the project. The "A" shareholders, investors under the Enterprise Investment Scheme, remained invested in the project at 31 March 2017. Including the loans, JLEN held an economic interest over 87% of the value of the project's cash flow (as calculated at acquisition). During the year, the "A" shares were acquired by JLEN, taking JLEN's ownership and control to 100% at 31 March 2018.

Details of investments made during the year

On 30 April 2017 the Group acquired Moel Moelogan 2 wind farm in North Wales and on 22 May 2017 completed a further acquisition of Moel Moelogan 1 wind farm for a cash consideration of £25.5 million.

On 6 June 2017, the Group acquired the CSGH solar portfolio for a total cash consideration of £11.8 million.

On 29 August 2017, the Group acquired the Vulcan Renewables Limited anaerobic digestion plant for a cash consideration of £15.1 million.

On 24 October 2017, and as originally anticipated, the Group increased its interest in the Monksham solar portfolio by completing the purchase of the "A" shares for £2.1 million from founding EIS shareholders. This takes JLEN's control, economic or otherwise, from 87% to 100%.

On 12 December 2017, the Group acquired Llynfi Afan Wind Farm for a cash consideration of £43.0 million.

On 1 February 2018, the Group completed a minority investment in the Icknield Farm anaerobic digestion plant from private individuals who were the project's developers for a cash consideration of £10.9 million.

10. Trade and other receivables

	31 Mar 2018	31 Mar 2017
	£'000s	£'000s
Prepayments	20	32
Balance at 31 March	20	32

11. Trade and other payables

	31 Mar 2018	31 Mar 2017
	£'000s	£'000s
Accruals	1,610	1,055
Balance at 31 March	1,610	1,055

12. Loans and borrowings

The Company had no outstanding loans or borrowings at 31 March 2018 (31 March 2017: £nil), as shown in the Company's statement of financial position.

The Company's immediate subsidiary, UK HoldCo, as Borrower, and the Company, as Guarantor, benefit from a three‑year revolving credit facility with HSBC, ING, NIBC and Santander. On 14 June 2017, the Fund signed a new three-year facilities agreement which provides for a committed revolving credit facility of £130 million and an uncommitted accordion facility of up to £60 million. Furthermore, the facility incorporates an uncommitted option to extend for a further year, which was exercised on 1 June 2018. The facility margin is 200 to 225 bps (depending on the loan-to-value ratio for the Fund) over LIBOR. The facility will be used to finance the acquisitions of environmental infrastructure projects and to cover working capital requirements.

As at 31 March 2018, UK HoldCo had an outstanding balance of £48.4 million under the facility (31 March 2017: £12.5 million). The loan bears interest of LIBOR + 200 to 225 bps and is intended to be repaid by proceeds from future capital raises.

As at 31 March 2018, the Company held loan notes of £228.9 million which were issued by UK HoldCo (31 March 2017: outstanding amount of £191.9 million).

There were no other outstanding loans and borrowings in either the Company, UK HoldCo, HWT or JLEAG Solar 1 at 31 March 2018.

13. Share capital account

	Number of	31 Mar 2018
	shares	£'000s
Opening balance 1 April 2017	339,642,078	334,858
Shares issued in the year	54,434,951	55,522
Expenses of issue of equity shares	-	(1,118)
Balance at 31 March 2018	394,077,029	389,262

On 7 July 2017, the Company raised gross proceeds of £40.0 million by way of a placing of 38.8 million new ordinary shares at a price of 103.0 pence per new ordinary share to institutional investors pursuant to the placing programme dated 15 June 2017.

On 7 March 2018, the Company raised gross proceeds of £15.5 million by way of a placing of 15.6 million new ordinary shares at a price of 99.5 pence per new ordinary share to institutional investors pursuant to the placing programme dated 23 February 2018.

Following these issues, at 31 March 2018, the Company's share capital is comprised of 394,077,029 fully paid up ordinary shares of no par value.

All new shares issued rank pari passu and include the right to receive all future dividends and distributions declared, made or paid.

14. Retained earnings

	31 Mar 2018	31 Mar 2017
	£'000s	£'000s
Opening balance	5,190	(4,231)
Profit for the year	21,060	25,600
Dividends paid	(23,125)	(16,179)
Balance at 31 March	3,125	5,190

15. Transactions with Investment Adviser and other related parties

Transactions between the Company and its subsidiaries, which are related parties of the Company, are fair valued and are disclosed within note 9. Details of transactions between the Company and other related parties are disclosed below. This note also details the terms of the Company's engagement with John Laing Capital Management Limited as Investment Adviser together with the details of investment acquisitions from John Laing, of which JLCM is a wholly owned subsidiary.

Transactions with the Investment Adviser

JLCM is the Company's Investment Adviser. JLCM's appointment as Investment Adviser is governed by an Investment Advisory Agreement which may be terminated after an initial four-year term, starting 31 March 2014, by either party giving one year's written notice.

JLCM is entitled to a base fee equal to:

(a)  1.0% per annum of the Adjusted Portfolio Value⁽¹⁾ of the Fund⁽²⁾ up to and including £500 million; and

(b)  0.8% per annum of the Adjusted Portfolio Value of the Fund in excess of £500 million.

The total Investment Adviser fee charged to the income statement for the year ended 31 March 2018 was £4,147,000 (31 March 2017: £3,340,000) of which £1,103,000 remained payable as at 31 March 2018 (31 March 2017: £850,000).

(1)   Adjusted Portfolio Value is defined in the Investment Advisory Agreement as:

a)  the fair value of the investment portfolio; plus

b)  any cash owned by or held to the order of the Fund; plus

c)  the aggregate amount of payments made to shareholders by way of dividend in the quarterly period ending on the relevant valuation day, less

(i)  any other liabilities of the Fund (excluding borrowings); and

(ii)  any uninvested cash.

(2)   Fund means the Company and John Laing Environmental Assets Group (UK) Limited together with their wholly owned subsidiaries or subsidiary undertakings (including companies or other entities wholly owned by them together, individually or in any combination, as appropriate) but excluding project entities.

Individual project companies make provision for the payment of fees to Directors appointed by its shareholders. During the year, one of the Investment Adviser's parent company's subsidiaries, Laing Investments Management Services Limited, received Directors' fees of £18,000 (31 March 2017: £17,500) from the portfolio for the provision of Directors' services provided to assets within the portfolio.

During the year, the Company's intermediate holding companies paid fees of £30,000 (31 March 2017: £27,000) related to tax compliance-related services provided by one of the Investment Adviser's parent company's subsidiaries, Laing Investments Management Services Limited.

Other transactions with related parties

During the year, the Company's wholly owned subsidiary UK HoldCo completed the acquisition of the Llynfi Afan Wind Farm project from a member of John Laing Group plc for a cash consideration of £43.0 million.

During the year, the Directors of the Company, who are considered to be key management, received fees of £271,000 (31 March 2017: £240,000) for their services. The Directors of the Company were also paid £2,059 of expenses (31 March 2017: £1,578).

The Directors held the following shares:

	Ordinary
	shares	Ordinary
	of no par	shares
	value	of no par value
	each held at	each held at
	31 Mar 2018	31 Mar 2017
Richard Morse	83,042	83,042
Christopher Legge	29,896	29,896
Denise Mileham	28,160	28,160
Peter Neville	29,896	29,896
Richard Ramsay	53,813	53,813

All of the above transactions were undertaken on an arm's length basis.

The Directors were paid dividends in the year of £14,090 (31 March 2017: £13,754).

16. Financial instruments

Financial instruments by category

The Company held the following financial instruments at fair value at 31 March 2018. There have been no transfers of financial instruments between levels of the fair value hierarchy. There are no non-recurring fair value measurements.

	31 Mar 2018
			Financial	Financial
			assets at fair	liabilities at
	Cash and	Loans and	value through	amortised
	bank balances	receivables	profit or loss	cost	Total
	£'000s	£'000s	£'000s	£'000s	£'000s
Levels	1	1	3	1
Non‑current assets
Investments at fair value through profit or loss (Level 3)	-	-	388,468	-	388,468
Current assets
Trade and other receivables	-	20	-	-	20
Cash and cash equivalents	5,509	-	-	-	5,509
Total financial assets	5,509	20	388,468	-	393,997
Current liabilities
Trade and other payables	-	-	-	(1,610)	(1,610)
Total financial liabilities	-	-	-	(1,610)	(1,610)
Net financial instruments	5,509	20	388,468	(1,610)	392,387

	31 Mar 2017
			Financial	Financial
			assets at fair	liabilities at
	Cash and	Loans and	value through	amortised
	bank balances	receivables	profit or loss	cost	Total
	£'000s	£'000s	£'000s	£'000s	£'000s
Levels	1	1	3	1
Non-current assets
Investments at fair value through profit or loss (Level 3)	-	-	336,921	-	336,921
Current assets
Trade and other receivables	-	32	-	-	32
Cash and cash equivalents	4,150	-	-	-	4,150
Total financial assets	4,150	32	336,921	-	341,103
Current liabilities
Trade and other payables	-	-	-	(1,055)	(1,055)
Total financial liabilities	-	-	-	(1,055)	(1,055)
Net financial instruments	4,150	32	336,921	(1,055)	340,048

The table opposite provides an analysis of financial instruments that are measured subsequent to their initial recognition at fair value as follows:

-    Level 1: fair value measurements derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

-    Level 2: fair value measurements derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

-    Level 3: fair value measurements derived from valuation techniques that include inputs to the asset or liability that are not based on observable market data (unobservable inputs).

There were no transfers between Level 1 and 2, Level 1 and 3 or Level 2 and 3 during the year.

In the tables opposite, financial instruments are held at carrying value as an approximation to fair value unless stated otherwise.

Reconciliation of Level 3 fair value measurement of financial assets and liabilities

An analysis of the movement between opening and closing balances of the investments at fair value through profit or loss is given in note 9.

The fair value of the investments at fair value through profit or loss includes the use of Level 3 inputs. Please refer to note 9 for details of the valuation methodology.

Sensitivity analysis of the portfolio

The discount rate is considered the most significant unobservable input through which an increase or decrease would have a material impact on the fair value of the investments at fair value through profit or loss.

The sensitivity of the portfolio to movements in the discount rate is as follows:

31 March 2018
Discount rate	Minus 0.5%	Base 8.1%	Plus 0.5%
Change in portfolio valuation	Increases £16.8m	£429.5m	Decreases £15.8m
Change in NAV per share	Increases 3.9p	99.6p	Decreases 3.7p

31 March 2017
Discount rate	Minus 0.5%	Base 8.2%	Plus 0.5%
Change in portfolio valuation	Increases £13.1m	£327.6m	Decreases £12.3m
Change in NAV per share	Increases 3.8p	100.1p	Decreases 3.6p

The sensitivity of the portfolio to movements in long-term inflation rates is as follows:

31 March 2018
Inflation rates	Minus 0.5%	Base 2.75%	Plus 0.5%
Change in portfolio valuation	Decreases £18.9m	£429.5m	Increases £20.2m
Change in NAV per share	Decreases 4.4p	99.6p	Increases 4.7p

31 March 2017
Inflation rates	Minus 0.5%	Base 2.75%	Plus 0.5%
Change in portfolio valuation	Decreases £14.3m	£327.6m	Increases £15.5m
Change in NAV per share	Decreases 4.2p	100.1p	Increases 4.6p

Wind and solar assets are subject to electricity price and electricity generation risks. The sensitivities of the investments to movements in the level of electricity output and electricity price are as follows:

The fair value of the investments is based on a "P50" level of electricity generation for the renewable energy assets, being the expected level of generation over the long term. The sensitivity of the portfolio to movements in energy yields based on an assumed "P90" level of electricity generation (i.e. a level of generation that is below the "P50", with a 90% probability of being exceeded) and an assumed "P10" level of electricity generation (i.e. a level of generation that is above the "P50", with a 10% probability of being achieved) is as follows:

31 March 2018
Energy yield	P90 (10 year)	Base P50	P10 (10 year)
Change in portfolio valuation	Decreases £43.4m	£429.5m	Increases £42.6m
Change in NAV per share	Decreases 10.1p	99.6p	Increases 9.9p

31 March 2017
Energy yield	P90 (10 year)	Base P50	P10 (10 year)
Change in portfolio valuation	Decreases £33.6m	£327.6m	Increases £33.6m
Change in NAV per share	Decreases 9.9p	100.1p	Increases 9.9p

The sensitivity of the portfolio to movements in electricity prices is as follows:

31 March 2018
Energy prices	Minus 10%	Base	Plus 10%
Change in portfolio valuation	Decreases £23.4m	£429.5m	Increases £23.0m
Change in NAV per share	Decreases 5.4p	99.6p	Increases 5.3p

31 March 2017
Energy prices	Minus 10%	Base	Plus 10%
Change in portfolio valuation	Decreases £16.9m	£327.6m	Increases £17.1m
Change in NAV per share	Decreases 5.0p	100.1p	Increases 5.0p

Waste & wastewater assets do not have significant volume and price risks.

Euro/sterling exchange rate sensitivity

As the proportion of the portfolio assets with cash flows denominated in euros represented less than 1% of the portfolio value at 31 March 2018, the Directors consider the sensitivity to changes in the euro/sterling exchange rate to be insignificant.

The Directors consider that the carrying value amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements are approximately equal to their fair values.

Capital risk management

Capital management

The Group, which comprises the Company and its non‑consolidated subsidiaries, manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balances. The capital structure of the Group principally consists of the share capital account and retained earnings as detailed in notes 13 and 14, debt as detailed in note 12 and cash and cash equivalents. The Group aims to deliver its objective by investing available cash and using leverage whilst maintaining sufficient liquidity to meet ongoing expenses and dividend payments.

Gearing ratio

The Company's Investment Adviser reviews the capital structure of the Company and the Group on a semi-annual basis. The Company and its subsidiaries intend to make prudent use of leverage for financing acquisitions of investments and working capital purposes. Under the Company's Articles, and in accordance with the Company's investment policy, the Company's outstanding borrowings, excluding the debts of underlying assets, will be limited to 30% of the Company's Net Asset Value.

As at 31 March 2018, the Company had no outstanding debt. However, as set out in note 12, the Company's subsidiary UK HoldCo has a £130 million revolving credit facility, which was drawn by £48.4 million at 31 March 2018.

Financial risk management

The Group's activities expose it to a variety of financial risks: capital risk, liquidity risk, market risk (including interest rate risk, inflation risk and electricity price risk) and credit 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.

For the Company and the intermediate holding companies, financial risks are managed by the Investment Adviser, which operates within the Board-approved policies. For the environmental infrastructure investments, due to the nature of the investments, certain financial risks (typically interest rate and inflation risks) are hedged at the inception of a project. All risks continue to be managed by the Investment Adviser. The various types of financial risk are managed as follows:

Financial risk management - Company only

The Company accounts for its investments in its subsidiaries at fair value. Accordingly, to the extent there are changes as a result of the risks set out below, these may impact the fair value of the Company's investments.

Capital risk

The Company has implemented an efficient financing structure that enables it to manage its capital effectively. The Company's capital structure comprises equity only (refer to the statement of changes in equity). As at 31 March 2018 the Company had no recourse debt, although as set out in note 12, the Company is a guarantor for the revolving credit facility of UK HoldCo.

Liquidity risk

The Directors monitor the Company's liquidity requirements to ensure there is sufficient cash to meet the Company's operating needs.

The Company's liquidity management policy involves projecting cash flows and forecasting the level of liquid assets necessary to meet these. Due to the nature of its investments, the timing of cash outflows is reasonably predictable and, therefore, is not a major risk to the Company.

The Company was in a net cash position and had no outstanding debt at the balance sheet date. At the balance sheet date the Group had debt of £48.4 million, being the amount drawn on the revolving credit facility.

Market risk - foreign currency exchange rate risk

As the proportion of the portfolio assets with cash flows denominated in euros represented less then 1% of the portfolio value at 31 March 2018, the Directors consider the sensitivity to changes in the euro/sterling exchange rate to be insignificant.

Where investments are made in currencies other than pounds sterling, the Company will consider whether to hedge currency risk in accordance with the Company's currency and hedging policy as determined from time to time by the Directors. A portion of the Company's underlying investments may be denominated in currencies other than pounds sterling. However, any dividends or distributions in respect of the ordinary shares will be made in pounds sterling and the market prices and Net Asset Value of the ordinary shares will be reported in pounds sterling.

Currency hedging may be carried out to seek to provide some protection for the level of pound sterling dividends and other distributions that the Company aims to pay on the ordinary shares, and in order to reduce the risk of currency fluctuations and the volatility of returns that may result from such currency exposure. Such currency hedging may include the use of foreign currency borrowings to finance foreign currency assets and forward foreign exchange contracts.

Financial risk management - Company and non‑consolidated subsidiaries

The following risks impact the Company's subsidiaries and in turn may impact the fair value of investments held by the Company.

Market risk - interest rate risk

Interest rate risk arises in the Company's subsidiaries on the revolving credit facility borrowings and floating rate deposits. Borrowings issued at variable rates expose those entities to variability of interest payment cash flows. Interest rate hedging may be carried out to seek to provide protection against increasing costs of servicing debt drawn down by the Company's subsidiary John Laing Environmental Assets Group (UK) Limited, as part of its revolving credit facility. This may involve the use of interest rate derivatives and similar derivative instruments.

Each infrastructure investment hedges their interest rate risk at the inception of a project. This will either be done by issuing fixed rate debt or variable rate debt which will be swapped into fixed rate by the use of interest rate swaps.

Market risk - inflation risk

Some of the Company's investments will have part of their revenue and some of their costs linked to a specific inflation index at inception of the project. In most cases this creates a natural hedge, meaning a derivative does not need to be entered into in order to mitigate inflation risk.

Market risk - power price risk

The wholesale market price of electricity and gas is volatile and is affected by a variety of factors, including market demand for electricity and gas, the generation mix of power plants, government support for various forms of power generation, as well as fluctuations in the market prices of commodities and foreign exchange. Whilst some of the Company's renewable energy projects benefit from fixed prices, others have revenue which is in part based on wholesale electricity and gas prices.

A decrease and/or prolonged deterioration in economic activity in the UK, for any reason, could result in a decrease in demand for electricity and gas in the market. Short‑term and seasonal fluctuations in electricity and gas demand will also impact the price at which the investments can sell electricity and gas. The supply of electricity and gas also impacts wholesale electricity and gas prices. Supply of electricity and gas can be affected by new entrants to the wholesale power market, the generation mix of power plants in the UK, government support for various generation technologies, as well as the market price for fuel commodities.

Volume risk - electricity generation risk

Meteorological conditions poorer than forecast can result in generation of lower electricity volumes and lower revenues than anticipated.

Credit risk

Credit risk is the risk that a counterparty of the Company or its subsidiaries will default on its contractual obligations it entered into with the Company or its subsidiaries. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers. The Company and its subsidiaries mitigate their risk on cash investments and derivative transactions by only transacting with major international financial institutions with high credit ratings assigned by international credit rating agencies.

The Company's infrastructure investments receive regular, long‑term, partly or wholly index‑linked revenue from government departments, local authorities or clients under the Renewables Obligation and Feed‑in Tariff regimes. The Directors believe that the Group is not significantly exposed to the risk that the customers of its investments do not fulfil their regular payment obligations because of the Company's policy to invest in jurisdictions with satisfactory credit ratings.

Given the above factors, the Board does not consider it appropriate to present a detailed analysis of credit risk.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group adopts a prudent approach to liquidity management by ensuring it maintains adequate reserves and banking facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

The Directors monitor the Company's liquidity requirements to ensure there is sufficient cash to meet the Company's operating needs.

The Company's liquidity management policy involves projecting cash flows and forecasting the level of liquid assets required to meet its obligations. Due to the nature of its investments, the timing of cash outflows is reasonably predictable and, therefore, is not a major risk to the Group.

Debt raised by asset investments from third parties is without recourse to the Group.

17. Guarantees and other commitments

As at 31 March 2018, the Company has provided a guarantee under the Company's wholly owned subsidiary UK HoldCo's £130 million revolving credit facility. Following a one-year extension in June 2018, the RCF is now due to expire in June 2021.

The Company had no other commitments or guarantees.

18. Subsidiaries

The following subsidiaries have not been consolidated in these financial statements as a result of applying the requirements of "Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 27)":

		Place of	Registered	Ownership	Voting
Name	Category	business	office	interest	rights
John Laing Environmental Assets Group (UK) Limited(1)	Intermediate holding	UK	A	100%	100%
HWT Limited	Intermediate holding	UK	B	100%	100%
JLEAG Solar 1 Limited	Intermediate holding	UK	A	100%	100%
Croft Solar PV Limited	Operating subsidiary	UK	C	100%	100%
Cross Solar PV Limited	Operating subsidiary	UK	C	100%	100%
Domestic Solar Limited	Operating subsidiary	UK	C	100%	100%
Ecossol Limited	Operating subsidiary	UK	C	100%	100%
Hill Solar PV Limited	Operating subsidiary	UK	C	100%	100%
Share Solar PV Limited	Operating subsidiary	UK	C	100%	100%
Tor Solar PV Limited	Operating subsidiary	UK	C	100%	100%
Residential PV Trading Limited	Operating subsidiary	UK	C	100%	100%
South-Western Farms Solar Limited	Operating subsidiary	UK	C	100%	100%
Angel Solar Limited	Operating subsidiary	UK	C	100%	100%
Easton PV Limited	Project holding company	UK	D	100%	100%
Pylle Solar Limited	Project holding company	UK	D	100%	100%
Second Energy Limited	Operating subsidiary	UK	D	100%	100%
ELWA Holdings Limited	Project holding company	UK	E	80%	80%
ELWA Limited(1)	Operating subsidiary	UK	E	80%	81%(2)
JLEAG Wind Holdings Limited	Project holding company	UK	A	100%	100%
JLEAG Wind Limited	Project holding company	UK	A	100%	100%
Amber Solar Parks (Holdings) Limited	Project holding company	UK	F	100%	100%
Amber Solar Park Limited	Operating subsidiary	UK	F	100%	100%
Fryingdown Solar Park Limited	Operating subsidiary (dormant)	UK	F	100%	100%
Five Oaks Solar Parks Limited	Operating subsidiary (dormant)	UK	F	100%	100%
Bilsthorpe Wind Farm Limited	Operating subsidiary	UK	F	100%	100%
Ferndale Wind Limited	Project holding company	UK	F	100%	100%
Castle Pill Wind Limited	Project holding company	UK	F	100%	100%
Wind Assets LLP	Operating subsidiary	UK	F	100%	100%
Shanks Dumfries and Galloway Holdings Limited	Project holding company	UK	G	80%	80%
Shanks Dumfries and Galloway Limited	Operating subsidiary	UK	G	80%	80%
Hall Farm Wind Farm Limited	Operating subsidiary	UK	F	100%	100%
Branden Solar Parks (Holdings) Limited	Project holding company	UK	F	100%	100%
Branden Solar Parks Limited	Operating subsidiary	UK	F	100%	100%
KS SPV 3 Limited	Operating subsidiary	UK	F	100%	100%
KS SPV 4 Limited	Operating subsidiary	UK	F	100%	100%
Carscreugh Renewable Energy Park Limited	Operating subsidiary	UK	F	100%	100%
Wear Point Wind Limited	Operating subsidiary	UK	F	100%	100%
Monksham Power Ltd	Project holding company	UK	D	100%	100%
Frome Solar Limited	Operating subsidiary	UK	D	100%	100%
BL Wind Limited	Operating subsidiary	UK	F	100%	100%
Burton Wold Extension Limited	Operating subsidiary	UK	F	100%	100%
New Albion Wind Farm (Holdings) Limited	Project holding company	UK	F	100%	100%
New Albion Wind Limited	Operating subsidiary	UK	F	100%	100%
Dreachmhor Wind Farm Limited	Operating subsidiary	UK	F	100%	100%
France Wind GP Germany GmbH	Project holding company	DE	K	100%	100%
France Wind Germany GmbH & Co. KG	Project holding company	DE	K	100%	100%
Parc Eolien Le Placis Vert SAS	Operating subsidiary	FR	I	100%	100%
Energie Eolienne de Plouguernével SAS	Operating subsidiary	FR	J	100%	100%
CSGH Solar Limited	Project holding company	UK	A	100%	100%
CSGH Solar(1) Limited	Project holding company	UK	A	100%	100%
Catchment Tay Holdings Limited	Project holding company	UK	H	33.3%	33.3%
Catchment Tay Limited	Operating subsidiary	UK	H	33.3%	33.3%
sPower Holdco 1 (UK) Limited	Project holding company	UK	D	100%	100%
sPower Finco 1 (UK) Limited	Project holding company	UK	D	100%	100%
Higher Tregarne Solar (UK) Limited	Operating subsidiary	UK	D	100%	100%
Crug Mawr Solar (UK) Limited	Operating subsidiary	UK	D	100%	100%
Golden Hill Solar (UK) Limited	Project holding company	UK	D	100%	100%
Golden Hill Solar Limited	Operating subsidiary	UK	D	100%	100%
Shoals Hook Solar (UK) Limited	Operating subsidiary	UK	D	100%	100%
CGT Investment Limited	Project holding company	UK	L	100%	100%
CWMNI GWYNT TEG CYF	Operating subsidiary	UK	L	100%	100%
Moelogan 2 (Holdings) Cyfyngedig	Project holding company	UK	L	100%	100%
Moelogan 2 C.C.C.	Operating subsidiary	UK	L	100%	100%
Vulcan Renewables Limited	Operating subsidiary	UK	M	100%	100%
Llynfi Afan Renewable Energy Park (Holdings) Limited	Project holding company	UK	A	100%	100%
Llynfi Afan Renewable Energy Park Limited	Operating subsidiary	UK	A	100%	100%
Green Gas Oxon Limited	Project holding company	UK	N	40%	40%
Icknield Gas Limited	Operating subsidiary	UK	N	40%	40%
Slapton Power Company Limited	Operating subsidiary	UK	N	40%	40%

(1) John Laing Environmental Assets Group Limited is the only entity directly held by the Company

(2) ELWA Holdings Limited holds 81% of the voting rights and 100% share of the economic benefits in ELWA Limited.

Registered offices

A)  1 Kingsway, London WC2B 6AN

B)   50 Lothian Road, Festival Square, Edinburgh, Midlothian EH3 9WJ

C)   Calder & Co, 16 Charles II Street, London SW1Y 4NW

D)   Long Barn, Manor Farm, Stratton-on-the-Fosse, Radstock BA3 4QF

E)   Dunedin House, Auckland Park, Mount Farm, Milton Keynes MK1 1BU

F)   8 White Oak Square, London Road, Swanley, Kent BR8 7AG

G)  16 Charlotte Square, Edinburgh EH2 4DF

H)   Infrastructure Managers Limited, 2nd floor, 11 Thistle Street, Edinburgh EH2 1DF

I)    Parc Eolien le Placis Vert, Rue du Pre Long 35770 Vern Sur Seiche, France

J)   3 Rue Benjamin Delessert, 56104 Lorient Cedex 04, France

K)   Steinweg 3-5, Frankfurt am Main, 60313, Germany

L)   Cae Sgubor Ffordd Pennant, Eglwysbach, Colwyn Bay, Conwy LL28 5UN

M)  10-12 Frederick Sanger Road, Guildford, Surrey GU2 7YD

N)   Friars Ford, Manor Road, Goring, Reading RG8 9EL

19. Events after balance sheet date

A dividend for the quarter ended 31 March 2018 of 1.5775 pence per share, amounting to £6.2 million, was approved by the Board on 30 May 2018 for payment on 22 June 2018.

In June 2018, the RCF was extended for a further year. The £130 million facility is now available until June 2021.

There are no other significant events since the year end which would require to be disclosed.

COMPANY SUMMARY

Below are the Company key facts, advisers and other information.

	John Laing Environmental Assets Group Limited is a Guernsey‑registered closed‑ended investment company (registered number 57682) with a premium listing on the London Stock Exchange
Registered address	Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 1GR
Ticker/SEDOL	JLEN/BJL5FH8
Company year end	31 March
Dividend payments	Quarterly in March, June, September and December
Investment Adviser	John Laing Capital Management Limited, incorporated in England and Wales on 19 May 2004 under the Companies Act 1985 (registered number 5132286) and authorised and regulated in the UK by the Financial Conduct Authority ("FCA")
Company Secretary and Administrator	Praxis Fund Services Limited, a company incorporated in Guernsey on 13 April 2005 (registered number 43046)
Market capitalisation	£398.4 million at 31 March 2018
Investment Adviser fees	1.0% per annum of the Adjusted Portfolio Value of the investments up to £0.5 billion, falling to 0.8% per annum for investments above £0.5 billion. No performance or acquisitions fees
ISA, PEP and SIPP status	The ordinary shares are eligible for inclusion in PEPs and ISAs (subject to applicable subscription limits) provided that they have been acquired in the market, and they are permissible assets for SIPPs
AIFMD status	The Company is classed as a self‑managed Alternative Investment Fund under the European Union's Alternative Investment Fund Managers Directive
Non-mainstream pooled investment status	The Board conducts the Company's affairs, and intends to continue to conduct the Company's affairs, such that the Company would qualify for approval as an investment trust if it were resident in the United Kingdom. It is the Board's intention that the Company will continue to conduct its affairs in such a manner and that independent financial advisers should therefore be able to recommend its ordinary shares to ordinary retail investors in accordance with the FCA's rules relating to non‑mainstream investment products
FATCA	The Company has registered for FATCA and has a GIIN number 2BN95W.99999.SL.831
Investment policy	The Company's investment policy is set out above and is detailed on page 65 of the Company's Prospectus dated 23 February 2018
Website	www.jlen.com

DIRECTORS AND ADVISERS

Directors

Richard Morse (Chairman)

Christopher Legge

Denise Mileham

Peter Neville

Richard Ramsay

Administrator to the Company, Company Secretary and registered office

Praxis Fund Services Limited

Sarnia House

Le Truchot

St Peter Port

Guernsey GY1 1GR

Channel Islands

Registrar

Link Registrars (Guernsey) Limited (formerly Capita Asset Services)

Mont Crevelt House

Bulwer Avenue

St Sampson

Guernsey GY2 4LH

Channel Islands

UK transfer agent

Link Asset Services (formerly Capita Asset Services)

The Registry

34 Beckenham Road

Beckenham

Kent B43 4TU

United Kingdom

Auditor

Deloitte LLP

Regency Court

Glategny Esplanade

St Peter Port

Guernsey GY1 3HW

Channel Islands

Investment adviser

John Laing Capital Management Limited

1 Kingsway

London WC2B 6AN

United Kingdom

Public relations

Redleaf Communications

First Floor

4 London Wall Buildings

Blomfield Street

London EC2M 5NT

United Kingdom

Corporate broker

Winterflood Securities Limited

The Atrium Building

Cannon Bridge House

25 Dowgate Hill

London EC4R 2GA

United Kingdom

Corporate bankers

HSBC

PO Box 31

St Peter Port

Guernsey GY1 3AT

Channel Islands

Public company directorships

Richard Morse

John Laing Environmental Assets Group Limited

Christopher Legge

John Laing Environmental Assets Group Limited

Ashmore Global Opportunities Limited, London - Main Market

NB Distressed Debt Investment Fund Limited - SFM

Sherborne Investors (Guernsey) B Limited, London - SFM

Sherborne Investors (Guernsey) C Limited, London - SFM

Third Point Offshore Investors Limited, London - Main Market

TwentyFour Select Monthly Income Fund Limited, London - Main Market

Denise Mileham

John Laing Environmental Assets Group Limited

Peter Neville

John Laing Environmental Assets Group Limited

Richard Ramsay

John Laing Environmental Assets Group Limited

Seneca Global Income & Growth plc,

London - Main Market

GLOSSARY OF KEY TERMS

AIFM Directive

the EU Alternative Investment Fund Managers Directive (No. 2011/61/EU)

Brexit

the UK referendum on 23 June 2016 in which a majority of voters voted to exit the EU

the Company or JLEN or the Fund

John Laing Environmental Assets Group Limited

EU

European Union

First Offer Agreement

the First Offer Agreement between the Company and John Laing

FiT

the Feed-in Tariff

gross project value

the fair market value of the investment interests held in a project as increased by the amount of any financing in the relevant project entity

Group

John Laing Environmental Assets Group Limited and its intermediate holding companies UK HoldCo, HWT Limited and JLEAG Solar 1 Limited

GWh

gigawatt hour

Intermediate holding companies

companies within the Group which are used as pass-through vehicles to invest in underlying environmental infrastructure assets, namely UK HoldCo, HWT Limited and JLEAG Solar 1 Limited

Investment Adviser or JLCM

John Laing Capital Management Limited

IPO

Initial Public Offering

IRR

internal rate of return

John Laing

John Laing Group plc and its subsidiary companies

MWh

megawatt hour

NAV

Net Asset Value

OECD

Organisation for Economic Co‑operation and Development

portfolio

the 24 assets in which JLEN had a shareholding as at 31 March 2018

portfolio valuation

the sum of all the individual investments' net present values

PPAs

Power Purchase Agreements

PPP/PFI

the Public Private Partnership procurement model

PV

photovoltaic

RHI

Renewable Heat Incentive

ROCs

Renewables Obligation Certificates

total shareholder return

total shareholder return combines the share price movement and dividends since IPO expressed as an annualised percentage

UK HoldCo

John Laing Environmental Assets Group (UK) Limited, wholly owned subsidiary of John Laing Environmental Assets Group Limited

WADR

the weighted average discount rate

- ENDS -

 

END

 

 

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