I am pleased to report that 2005 was another year of progress and growth for the Company. We reinforced our position as a market leader in the UK and continued with our strategy of selective expansion in growing overseas markets.
Across these markets, the Company acts as an originator and manager of project investments, a long-term partner of government entities and an investor in Project Companies which generate attractive and robust returns over the longer term.
Private financing and delivery of the serviced infrastructure assets required for improving public services, and partnerships between the public and private sectors to meet a wide variety of service needs, are now firmly established in a growing number of the world’s most advanced economies.
Accelerating change in the financial markets and the prominence of infrastructure as an asset class have been of great significance for our operating environment in 2005, increasing the value of the Group’s existing assets and operations on the one hand, and, on the other, ensuring significant innovation and a depth of competitive interest in the sectors in which we operate.
Accommodation, Roads and Rail remain the key areas in which the Company operates and in each area further opportunities became evident during 2005. Fresh opportunities have arisen in new sectors, and through additional joint ventures, partnerships and innovative structures, we have further developed our competitive capacity to meet these challenges.
John Laing continues to reinforce its financial and organisational capacity to take advantage of trends related to infrastructure development and investment; and your Board remains committed to a strategy of delivering sustainable project earnings together with continuing growth in the value of the infrastructure assets developed and managed by the Group.

RESULTS
The Group profit before tax on continuing operations for the year ended 31 December 2005 was £35.8 million, compared to £25.0 million in the prior year:*
This result reflects underlying growth in the profitability of the operational investments portfolio together with profits on disposal of selected assets and was achieved after allowing for a significant increase in business development expenditure and costs relating to an expanded programme of bidding.

* All comparative figures have been restated to comply with International Financial Reporting Standards.

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DIVIDENDS
In July 2005, the Company conducted a well supported rights issue to support future growth, raising £95.5 million after costs. As a result there were 233,154,341 Ordinary Shares in issue as of 31 December 2005 (2004 – 182,836,621). The 2005 interim dividend of 1.2 pence per share (2004 – 1.1 pence) was paid on the enlarged post-rights share capital.
The Board continues to adopt a policy of growing future dividends, provided that they are fully covered by earnings. The Board is proposing a final dividend of 2.45 pence per Ordinary Share. Taken with the interim dividend, this increases the proposed full year dividend to 3.65 pence per share (2004 – 3.3 pence), an increase of 10%.
Subject to shareholder approval, the final dividend for 2005 will be paid on 1 June 2006 to shareholders registered at the close of business on 24 March 2006.

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PORTFOLIO REVIEW
At the year end our portfolio included 48 project interests of which 27 are fully operational and a further 11 partially operational. The Group reached financial close on eight new project concessions during 2005 and a further six projects are currently at preferred bidder stage.
One disappointment was the decision in late January 2006 of Surrey County Council not to proceed as expected with their new office accommodation project on which we had been working as preferred bidder. We are examining options for recovery of costs incurred under current government policy, but as a matter of prudence have written off £4.6 million of capitalised bid costs within the 2005 results.
Our serviced accommodation projects in health, education, local and central government sectors have continued to perform well. These are predominantly governed by availability based payment mechanisms.
The risk management strategies embedded in our approach to sourcing construction and ongoing servicing have continued to prove robust.
In the Roads division, new projects in Finland and Poland reached financial close. Our first Norwegian investment became fully operational and the traffic volumes across our operational “shadow toll” UK roads met aggregate forecasts.
Chiltern Railways’ performance was adversely affected by the collapse of third party building works at Gerrards Cross which severely interrupted services for a seven week period in July and August 2005. Liability for costs and lost revenues flowing from these events has been accepted by the counterparty to the relevant access agreements.

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VALUATION
A valuation of the portfolio has been conducted in line with the independently validated methodology which the Company has consistently applied since 2000. The results indicate a portfolio valuation of £330.1 million, a 20% growth over the December 2004 valuation after intervening transactions are taken into account.

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ACQUISITIONS AND DISPOSALS
The Group undertook no major portfolio acquisitions during 2005, being principally focussed on the development of existing projects and organic growth in Equion, Laing Roads and Laing Rail.
However, acquisitions from co-investors during the year included the purchase of further stakes in Edinburgh and Glasgow Schools through a pre-emption opportunity and acquisition of the remaining 50% stake in the Walsall street-lighting project for a combined consideration of £10.9 million. On 9 March 2006 Equion Limited sold 14.23% of the Glasgow Schools project and 21.43% of the Edinburgh Schools project to the Secondary Market Infrastructure Fund. The total proceeds were £14.6 million, giving rise to profits on disposal of £3.4 million. Equion Limited retains a 20% holding in each of the two assets.
In December 2005 the Company announced the formation of Laing Capital Management and the conclusion of an initiating transaction with the Allianz Group, whereby a 50% interest in three operational police sector assets was disposed of to Allianz Specialist Investments with an initial profit on disposal of £13.0 million. Post disposal, Laing Capital Management continues to manage these assets on behalf of Allianz in a structure which offers continuity to our public sector clients and increased flexibility for the Group.
One other disposal of an operational interest took place during the year in a transaction whereby Serco Investments Limited purchased John Laing’s 50% interest in Defence Management (Holdings) Limited, the project company for the operational Joint Services Command and Staff College project. The Group recorded a profit on disposal of £7.9 million in a transaction which facilitated integration of the College’s operations with those of the surrounding defence estate also serviced by Serco.

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PENSION OBLIGATIONS
The Group retains responsibility for The John Laing Pension Fund, which is closed to new entrants and has less than 100 contributory active members, but more than 9,000 deferred members and pensioners.
During 2005 the assumptions used for calculating the deficit have been reviewed, with the discount rate utilised to calculate future liabilities reduced in line with historically low long-term bond rates, current life expectancy projections incorporated and membership details updated following the triennial actuarial valuation. As a result of these changes the net deficit for all post retirement obligations, net of the related deferred tax asset, stood at £144.1 million as at 31 December 2005 (2004 – £135.5 million).
It is the Group’s strategy to manage reduction of this deficit over time, an approach that matches the long- run nature of the robust cash flows generated by John Laing’s project investment activity. The Group has reached an agreement with the Trustees under which an additional contribution of £10 million is to be made in 2006 (2005 – £6 million) to address the deficit. The additional contribution will increase by 3% per annum, unless agreed otherwise by the Company and Trustees, until the deficit has been eliminated.

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FINANCING STRATEGY
Having successfully refinanced its corporate facilities in December 2004, the Group raised further resources through the rights issue which successfully concluded in July 2005.
The subsequent launch of Laing Capital Management reinforces the Group’s ability to realise cash from part disposal of interests in operational projects while retaining the asset management responsibility. 2005 exhibited further strong evidence of the significant continuing appetite for acquiring operational assets in the secondary market.
As a result of these actions, the Group has resources in hand and the means to support continuing organic growth and expansion. As at 31 December 2005, the Group had cash balances of £108.6 million (2004 – £42.7 million), excluding non-recourse debt and cash in our PFI Project Companies.

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DIRECTORS AND STAFF
2005 presented major challenges and significant opportunities for John Laing, the Board and its employees. There were no changes to Board membership during the year and I would like to thank my Director colleagues for their continued support and application in overseeing the Company’s strategic direction and corporate governance. I would also once again like to pay a warm tribute to the enthusiasm and commitment of the staff who are contributing to excellent performance across a wide range of activity.

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PROSPECTS
During 2006 John Laing expects to make substantial progress in bringing a number of major new projects to financial close and in further developing activity in new growth sectors for PFI/PPP investment. The Company remains satisfied that all the major hospital projects it has at preferred bidder stage will proceed to financial close and has received assurances from all the relevant Trusts that they remain committed to implementing these schemes. Both the financial strength and the operational skill base of the Company were augmented during the year with a view to taking advantage of new fields of opportunity in new markets, and our expanded programme of bidding reflects the breadth of the relevant opportunities now available.
More broadly, infrastructure markets are attracting considerable interest as governments seek to address economic development, social policy and environmental objectives with enhanced investment programmes, structured to ensure certainty of delivery and quality of operation. These trends underpin our ability to create shareholder value and this is further reinforced by better recognition of the attractions of infrastructure investment as an asset class.
The Board believes that John Laing is well placed to take advantage of emerging opportunities through innovation in relation to new activities and further optimising the performance of the existing portfolio of activities and project investments. In line with this outlook, the Company approaches the coming period confident of the prospects for sustaining the pattern of profitable growth which has been established over recent years.


W W Forrester
Chairman
13 March 2006

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