PORTFOLIO VALUATION

A valuation of the John Laing portfolio has been carried out on a consistent basis for each half-year period since June 2000. The exercise does not seek to estimate the changing market value of the assets in the portfolio in the light of the development of the secondary market. However, through application of a consistent methodology, the process serves to illustrate movements in value between periods and the impact of intervening transactions and its publication provides shareholders and analysts with information that can be compared to individual transactions in the broader market, where these have been made public.
A significant number of listed players in the European PFI/PPP market have started to publish valuations of their own investments. Whilst each company has adopted its own methodology, all are based on similar principles to the method that John Laing has been using for the last five years.

METHODOLOGY
Each run of the valuation process is based on using one of four methods to establish a value for each of the projects in the portfolio:

The cash movement relating to acquisitions in 2005 reflects the purchase of additional stakes in the Edinburgh and Glasgow Schools projects in November, and the acquisition of the remaining 50% stake in the Walsall street-lighting project also in November.
The cash movements relating to disposals in 2005 were the sale of a 50% interest in the Joint Services Command and Staff College project in September, and the cash receipt from the sale of three police projects in December.
Equity and loan note subscriptions relate to projects where commitments to invest equity and loan notes have crystallised, or to new investment in further tranches of schemes in existing LIFT concessions.
There were no cash receipts from refinancings in 2005. The proceeds and distributions include investment receipts from yielding projects whether dividend distributions, loan repayments or interest received.
At sector level, the

• the successful closing of Newcastle Hospital, North Swindon Schools and further tranches of investment in LIFT schemes;
• the purchase of further stakes in Edinburgh and Glasgow Schools through pre-emption opportunities; and
• the disposal of the 50% stakes in the police assets to Allianz AG.

Taking these various transactions into account, the rebased growth for the Accommodation sector was 27% (2004 – 15%).
The Roads sector showed rebased growth of 18% and accounts for 28% of the portfolio total (2004 – 25%). Contributing factors to this growth were the successful closing of the E18 road project in Finland and the A1 road project in Poland.
The Rail sector exhibited rebased growth of 14% and accounts for 22% of the portfolio total (2004 – 23%). The Chiltern investment accounts for 73% of the sector total and increased in value by 4%.
The Utilities sector valuation increased by 8% on a rebased basis, reflecting the investment made in the London Underground Connect project. Kinnegar (the small waste water treatment plant in Northern Ireland) continues to be valued on a more prudent basis because, although steps have been taken to improve performance levels that previously reduced client payments, it is currently too early to forecast the longer term outcome accurately.
DCF valuation underpins 98% of the total portfolio valuation of £330.1 million.

The long-term cash flows analysed as part of the DCF analysis are shown below (excludes acquisitions, disposals, bid costs and overheads):