Annual Financial Report

RNS Number : 2192T

Utilico Limited

23 September 2010

 



Date:                23 September 2010

Contact:           Charles Jillings                                              

                        Utilico Limited                                                

                        01372 271 486                                               

Utilico Limited

Audited Statement of Results

for the year to 30 June 2010

Financial Highlights

·      Diluted NAV per share up 21.5%*

·      Revenue earnings per share 10.49p, up nearly threefold

·      Cash distribution of 12.0p per ordinary share

·      Average annual compound return of 9.5% per annum since the inception of Utilico Investment Trust plc in 2003*

              * adding back cash distribution

CHAIRMAN'S STATEMENT

In the 6 months to 30 June 2010 the equity markets gave back much of the gains they made in the first half of the Company's financial year to 31 December 2009, due to rising concerns over the strength of the global economic recovery. Turmoil in Greece and concerns over European sovereign debt levels has led many European governments to announce severe austerity measures. These are expected to reduce Europe's short-term economic recovery. This, together with a weaker than expected recovery in the USA and a policy slowdown in China, principally in the property sector, has seen rising expectations of a slowdown or even a double dip recession in many countries. In view of this equity markets have weakened considerably.

The FTSE All-Share reached 2,761 on 31st December 2009, up 27.1% since the year end at 30 June 2009, and then fell to 2,543 on 30 June 2010, down 7.9% in the six months but ending the year up 17.1%. Most equity markets followed this profile and are substantially below their year highs. While the utility sectors have proved more resilient in the second half, as a whole the sector remains behind the wider market over the year to 30 June 2010.

Utilico has seen its net asset value ("NAV") rise by 28.7% in the first half of the year to 189.05p and then fall back by 12.0% to 166.39p in the second half. However, during the year Utilico effected a cash distribution by way of a bonus issue and buyback amounting to 12.0p per ordinary share. Adding this back, the adjusted NAV would be 178.39p which would represent a decline of 5.6% in the second half. On an adjusted NAV basis over the year, Utilico's NAV was up 21.5%, ahead of the FTSE All-share which was up 17.1% and well ahead of the DJ World utilities index (GBP adjusted) which recorded a gain of 8.5%.

Utilico's investment activity has remained relatively modest with investments of £46.2m and disposals of £42.3m. Portfolio gains were £36.9m resulting in a closing portfolio of £321.7m. The most significant investment was in Permanent Investments Limited ("PIL"). PIL is a Bermuda exempted company which has taken a controlling position in Bermuda Commercial Bank Limited ("BCB"). Utilico has a 25% interest in PIL and has invested £8.2m. BCB offers a platform from which to establish a vibrant banking entity without the distractions of a bad loan book. Further detail is included in the Investment Manager's report.

It must be noted that the two most recent significant investments by Utilico have been in assets outside the utilities and infrastructure sector. The Board has concluded that in line with the current investment mandate, around a quarter of Utilico's gross assets can be invested in other assets. At 30 June 2010 this percentage stood at 21.0%. The Investment Managers are acutely aware that over the last 10 years the universe of companies in the developed markets utility sector has reduced in number. In addition we have seen significant leverage being adopted, and valuations rise. In the current climate where growth is slow and governments are looking at ways of extracting "value", this investment class looks vulnerable and unattractive. We will need to address this issue going forward and a wider mandate may well be the best way forward. Any material change to our investment policy would require approval by shareholders.

The revenue return has improved significantly to 10.49p per share, up nearly threefold on last year. This has arisen from the timing of dividends from Infratil Limited, combined with significant interest received on the Resolute Mining Ltd convertible loan note. This is expected to continue into the new financial year. As previously announced, despite having positive revenue earnings in the year, plus revenue reserves brought forward, under Bermuda law, Utilico is unable to pay a dividend to shareholders as a result of having negative capital reserves. This continues to be the position today. As soon as investment returns create a positive balance of capital reserves, Utilico intends to recommence dividend payments.

During the year we completed a bonus issue of B Shares and immediately bought them back, thus effecting a cash distribution to shareholders. This opportunity arose as Utilico's NAV had risen to the point that the zero dividend preference ("ZDP") share cover was over 1.4x. This is no longer the case today. We will continue to seek a basis on which sustainable distributions can be made. It should be noted that if the Company were liquidated the undistributed revenue reserves would be first paid to the ordinary shareholders before the ZDP holders.

Disappointingly, the discount to Utilico's ordinary shares remains stubbornly high, ending the year at 30.0%.

The key issues for the global equity markets are the resolution of two interlinked issues. The successful management of the debt issues (and in particular the sovereign debt issues) and the return to growth needed to sustain corporate valuations. The real test is likely to come when a combination of factors revert to the long term norm, which they must at some point. These are low interest rates, market intervention by governments, and unsustainable sovereign debts. The equity markets' ability to weather this process is difficult to predict. It is safe to say we remain in unprecedented territory and there must still be downside risks.

J. Michael Collier
September 2010

INVESTMENT MANAGER'S REPORT

The last year to 30 June 2010 has been one of two parts. The first half saw a recovery from the lows in prior years while in the second half much of these gains were eroded. Utilico's performance followed this trend and the NAV ended the year at 166.39p per ordinary share. During the year Utilico effected a cash distribution by way of a bonus issue and buyback amounting to 12.0p per ordinary share. Adding this back the adjusted NAV would be 178.39p representing an increase of 21.5%, ahead of the FTSE All-share which was up 17.1% and well ahead of the DJ World utilities index (GBP adjusted) which recorded a gain of 8.5%.

Utilico's longer term track record is good. Since the inception of Utilico Investment Trust plc ("UIT") in August 2003, Utilico's NAV per share (adding back dividends and other distributions) has increased by 84.1%. This equates to an average annual compound return of 9.5% per annum. This compares well to the FTSE All-Share Index which has increased by just 23.3% over this period, being a compound growth of just 3.3% per annum. This out-performance is calculated after all fees and expenses, including performance related fees, have been taken into account. If one looks back further, to the inception of The Special Utilities Investment Trust PLC in 1993, this out-performance is even more pronounced.

Investment Approach

Our basic approach to investment remains unchanged. The Investment Manager will continue to look for asset backed companies and deep value opportunities, often distressed in nature.

However, there is a reducing pool of investable assets and there is a lower conviction by the Investment Manager on value opportunities within the utilities and infrastructure sector in the developed markets. Over recent years in the UK listed utilities arena, for instance, we have seen most of the ports sector disappear, the number of water companies reduce, BAA was acquired by Ferrovial and Railtrack was nationalised. This sharply reduces our pool of listed investment opportunities in the UK.

In addition, we have seen the rising use of leverage, plus higher valuations in general, diminish the attractions of a number of investments and thus reduce our investment opportunities further. Finally, we are concerned that there is an increasing move towards extracting value from national assets and in some cases a restructuring of state obligations. The financial pressures faced by governments today who are seeking to solve their sovereign debt issues are such that utilities and infrastructure assets are seen as 'fair game'. This point is clearly demonstrated by the Spanish Government resetting of solar tariffs going forward and seriously considering back dating these alterations. In view of this we have reviewed alternative investments.

Investment Activity

During the period Utilico realised £42.3m from the disposals and invested £46.2m into the portfolio. Major disposals included £7.9m from the sale of our entire stake in Zurich Airport and £6.6m from Newtel on the realisation of its subsidiary Newtel Data Services Limited. We also sold the Resolute ordinary shares we received in lieu of interest on our convertible loan notes. These shares were sold in the market at a profit of £0.7m. Vix Technology returned £3.6m in cash during the course of the year.

Investments made included £13.9m on the exercise of Infratil's warrants and £8.2m into Permanent Investments Limited ("PIL"). We supported Renewable Energy Holdings Limited ("REH") by lending them £2.5m in the form of a convertible loan note. Further details are below for PIL and REH. Outside the top ten we invested £5.4m into Augean Ltd ("Augean"). Augean is a listed UK waste company focused on hazardous waste disposal.

The geographic allocation has moved as a result of the above. New Zealand exposure increased on the back of the Infratil warrant exercise plus a stronger currency to 22% of the portfolio. The UK and Channel Islands decreased to 16% as a result of the Newtel return and other realisations. Asia and the Far East increased to 14% as a result of Utilico Emerging Markets Limited's ("UEM") increasing investments in this area. Bermuda rose on the investment in PIL to 9%. Australia fell to 8% as a result of the Vix asset return plus other returns and realisations.

Sectoral exposure remains broadly unchanged. Gold increased to 15% as a result of Resolute's revaluation. Telecoms reduced to 7% as a result of the Newtel return and Other increased to 6% as a result of the PIL investment.

At the year end Utilico had unlisted and untraded investments of £39.2m (12.2%), down from £49.8m (17.7%) of the portfolio at the start of the year. Deducting the exposure to PIL, whose sole asset is in a listed company, Bermuda Commercial Bank Limited, then the year end position for such investments is £30.0m (9.3%). The reduction of £19.7m in the year represents cash back of £10.0m and the conversion of the loan to Resolute into the listed convertible loan notes in Resolute mining, cash invested of £5.8m, and provisions of £4.2m.

Major Investments

Nearly 65.0% of Utilico's portfolio value is represented by just three investments, Infratil, UEM and Resolute. However, two of these investments offer diverse underlying exposure. Infratil offers targeted exposure to electricity and transportation sectors, primarily in New Zealand and Australia. UEM offers a more diverse exposure to emerging market utilities and transportation infrastructure investments.

The investment in Infratil, which is Utilico's largest, stood at £89.0m, representing 27.7% of the portfolio as at the year end. Utilico held 19.9% of Infratil's outstanding ordinary shares at that date. Utilico invested a further £13.9m during the year to exercise warrants in July 2009. Infratil's share price under performed wider markets during the year, with a fall in value of 7.5%. Infratil's assets have, for the most part, traded well during the year and the shares now stand at a substantial discount to their underlying value. This is clearly disappointing and we are looking to Infratil to substantially narrow this discount.

The second largest holding is UEM at £72.1m, representing 22.4% of Utilico's portfolio. Utilico held 25.7% of UEM's outstanding ordinary shares as at the year end. In addition, Utilico held 10,288,675 warrants and 2,187,204 S shares. Of these 2,500,000 were sold subsequent to the year end and the balance were exercised. Utilico's resulting holding is 59,259,303, representing 26.6% of UEM.

The holding in UEM allows Utilico to obtain its exposure to the emerging market utility and infrastructure sectors. UEM's NAV rose by 34.5% during the period, with the shares rising in value by 17.9%. UEM's portfolio is more diverse than Infratil, and as such, none of UEM's largest investments feature in Utilico's look through top 10 holdings. The largest investment is Malaysia Airport Holdings Berhad, which is Utilico's 11th largest holding on a look through basis, representing 2.5% of the portfolio.

Following the format established in prior years, we review the major sectors to which Utilico is exposed, and the major holdings therein. In order to provide a better understanding of Utilico's underlying investments, the ten largest holdings and the sector and geographical analysis are presented on a 'look though' basis as though investments held indirectly through Infratil and UEM were held directly by Utilico itself.

Renewable energy

It remains the case that the energy generation of the future will be less carbon intensive than that of the past. There is a growing emphasis not only on environmental factors, but also security of supply, and these both count in favour of renewables. However, these forms of energy have two principal drawbacks: a high capital cost and a relatively long lead time for development.

Historically these energy generation assets were often seen as dependable (almost bond like) and thus capable of raising capital via both equity and debt. This position has changed sharply as concerns over dependability and scalability have emerged. It is now better understood that wind fluctuation does result in significant variations year on year on individual asset performance. For instance, wind farms have been found to have variable output beyond that expected. In terms of capital, the smaller wind farm operators have seen their ability to access both the debt and capital markets evaporate.

Finally there is growing concern that these assets, which require government subsidies to operate profitably, will be subject to political intervention. This is the case in Spain where the Spanish government is not only changing the economic environment for new solar farms but also considering tearing up historic contracts as well. In our view this is a retrograde step for the industry.

Renewable energy has become Utilico's largest sector exposure, with the main holdings being TrustPower Ltd, Renewable Energy Generation Limited ("REG") and, outside the top 10, Renewable Energy Holdings Limited.

TrustPower has enjoyed a successful period, completing substantial investments in wind farms on budget, and is now well positioned with a combination of further growth in renewable generation, coupled with an established New Zealand based energy supply business providing an element of both stability and hedging.

REG had a very good year in which they realised their Canadian investment for cash. The cash substantially exceeded the market value of REG. REG was re-rated as a result and its shares rose by 26.8% during the year to 52.0p at year end. REG is now able to use its cash resources to build out its pipeline and to acquire small assets at attractive valuations. REG is slowly building a long term valuable asset. However, current markets are unwilling to ascribe any value to possible future value creation inherent within the pipeline, and we would now only expect the shares to recover further as value is extracted through delivery of projects.

Utilico has invested into a similarly named company during the year, REH, owning both ordinary shares plus a secured convertible loan note. REH offers a similar profile to REG, but has exposure to Germany, Poland and the UK, plus interests in wave energy technology. REH is capital constrained and as such its ability to maximise its position is poor. We will monitor this situation closely. During the year James Smith joined the board of REH. REH's valuation reflects these funding concerns and it has seen its share price decline from 31.5p to 11.3p, down 64.3%.

Electricity

The electricity sector continues to be a substantial sector for Utilico at 14%. Within the top 10, Utilico held Jersey Electricity Limited, Infratil Energy Australia and Ascendant Group Limited (previously Belco).

Jersey Electricity Limited ("JEL") continues to trade soundly, and the island of Jersey has performed well during the current downturn. The shares have held firm to the gains last year and offer a defensive investment. However, the re-rating over the last 24 months meant progress from here is likely to be less rewarding to Utilico as an investor. We will continue to encourage management to seek the release of value from JEL's ungeared, asset rich balance sheet.

Ascendant Group Limited ("AGL") is the new name for Belco Holdings. A long term investment for Utilico, AGL fell outside our top 10 holdings during the year. Like Jersey, Bermuda has proved relatively resilient to the global downturn, and continues to be an attractive destination for investment. Again, like JEL, AGL is largely ungeared and is able to fund the substantial majority of its investments out of cash flow, together with a continuing attractive yield. We are encouraging AGL to return capital to its shareholders.

Infratil Energy Australia ("IEA") is a business which Infratil has been developing since 2005 to exploit the deregulating Australian energy supply markets. The rate of client, revenue, and profit growth has been encouraging, and the energy expertise within the Infratil group of companies should hopefully ensure that this business continues to develop at a fast pace.

Infrastructure IT

The infrastructure IT sector accounted for 8% of gross assets at June 2010, and includes Vix Technology Pty Ltd ("Vix"), which is Utilico's fourth largest holding on a look through basis, accounting for 3.8% of total investments.

Several of Vix's projects are approaching a stage when they will move from negative to positive cash flows, and this should enable returns of capital to be made. £3.6m was received by Utilico in the year, and we expect substantial releases of capital in the current year. Vix ERG, Vix's subsidiary, continues to win major contracts, the latest is the Bangkok Central Clearing House contract.

Airports

Airports accounted for 9% of Utilico's gross assets at June 2010, down from 11% at June 2009. The airports sector has seen a substantial recovery in fortunes with both rising passenger and freight numbers. In most markets, activity is now back above pre-crisis levels.

Utilico's largest airport exposure is to Wellington Airport ("Wellington") in New Zealand, held indirectly via Infratil's 66% interest in this company. Pleasingly, Wellington has continued to perform well as a result of a programme of investment. Passenger numbers increased by 4.7% during its financial year to March 2010, and this has led to improved profitability. We expect this to continue, especially with the Rugby World Cup next year.

Gold

Gold was a new sector for Utilico last year, and while not fitting into the definition of a utility, it is felt that a counter cyclical diversification will be of merit to portfolio management during the current period of economic turbulence.

The gold sector, which comprises one investment in Resolute Mining Limited ("Resolute"), has risen from 10% to 15% on a revaluation of Resolute. The entry into this sector was made through an opportunistic distressed 12% convertible loan note in Resolute. Resolute is headquartered in Western Australia but with mining assets in both Africa and Australia. Utilico invested a total of £16.3m into this investment, which was pleasingly showing a substantial profit at the year end and is now Utilico's second largest investment on a look through basis. The Investment Managers believe that this investment remains undervalued and has potential for significant upside.

Other

Other at 6% includes Permanent Investments Limited ("PIL"). PIL is Utilico's 10th largest investment on a look through basis and represents 2.6% of the portfolio. PIL is an unlisted investment vehicle whose sole asset is a stake in Bermuda Commercial Bank Limited ("BCB"). Utilico holds 25.0% of PIL which in turn holds 76.9% of BCB. BCB is a Bermuda domiciled bank listed on the Bermuda Stock Exchange. BCB has shareholder funds of BD$75.0m and gross assets of approximately BD$400.0m. At the time of acquisition BCB's assets were invested in the short term money markets. BCB avoided the issues faced by most banks as a result.

Michael Collier, Warren McLeland and Eric Stobart have all joined the board of BCB.

Derivatives

For some time Utilico has operated a strategic hedge via the purchase and sale of equity index options, principally on the S&P 500 Index. These options had a positive net value of £4.5m at June 2010.

The level of put protection is kept under constant review, and will depend upon several factors including the relative position of markets, the price of options as compared to the market, and the Investment Manager's view of likely future volatility and market movements.

In common with previous years, Utilico has maintained currency hedges to partially protect the Sterling value of certain investments. At the year end, forward currency sale contracts were maintained for a nominal NZ$90.5m, US$11.0m, €5.0m and A$46.7m. This is above the level maintained in previous years, and reflects the Investment Manager's view that Sterling is likely to be, on balance, stronger rather than weaker against certain of Utilico's currencies of investment.

Debt

The level of Utilico's bank debt has increased during the year, from £17.0m at the start of the year to £29.3m at the end of the year. This increase enabled Utilico to meet the final part payment on the Infratil 2009 warrants. This was drawn as £23.4m in New Zealand Dollars and £5.9m in Sterling.

At the year end, Utilico had total banking facilities of £30.0m, which expire in November 2010.

Cash balances at the year end were up £2.0m to £6.5m.

Currency

Currency fluctuations have continued to feature in the year to 30 June 2010. Currency gains of £1.1m were recorded which related mainly to movements on the weakness of the New Zealand Dollar.

Although it should be noted that this figure does not include gains on foreign currency denominated investment positions. Sterling fell in value by 9.2%, and 9.9% against the US Dollar and Swiss Franc respectively, and gained 4.1% against the Euro. Sterling also weakened significantly against the New Zealand Dollar and Australian Dollar during the year, falling 14.3% and 12.9% respectively.

Revenue Income

Gross revenue from investments held rose to £13.8m, up 61.7% on the previous year. This was partly a result of the timing of dividend payments from Infratil and interest on the Resolute convertible loan notes.

Elsewhere we remain encouraged by dividend payments, particularly in the emerging markets, with UEM maintaining its dividend despite the difficult economic environment. Dividend increases were seen in some investments such as JEL, offset by reductions elsewhere including REG and Keytech. The revenue yield on gross assets increased from 2.6% to 4.2%.

Expenses

Management, administration, and other expenses remained at £2.4m. This reflects management fees which are linked to the level of gross assets and other costs, such as administration fees, which are fixed. As such the total expense ratio fell marginally from 0.8% to 0.7% in the year.

Finance costs charged through the revenue return fell from £2.6m to £1.4m as a result of the reduction in bank debt from £70.0m at the start of 2009 to £17.0m at the start of 2010.

The bulk of finance costs arise from the three tranches of ZDP shares in issue, these costs being charged against capital return. It should be noted that these costs are fixed and are not affected by movements in interest rates.

Buybacks

Utilico sold into the market its 2016 ZDP shares that it had bought back in the previous year for £4.9m, representing a profit of £1.2m.

No specific policy exists relating to the buy-back of shares, but Utilico will continue to buy back shares if it is felt appropriate. Consideration will be given to the demand for Utilico's shares by market participants, the level of discount between the share price and the NAV, the availability of shares to repurchase, and also other investment opportunities. The Board will renew the authority to buy back up to 14.99% of the ordinary shares in order to preserve its flexibility. However, we are unable to buy back shares in a situation where the ZDP cover falls below 1.4x.

PRINCIPAL RISKS AND RISK MITIGATION 

The Group's assets consist mainly of quoted equity securities and its principal risks are therefore market related. The large number of investments held, together with the geographic and sector diversity of the portfolio, enables the Company to spread its risk with regard to liquidity, market volatility, currency movements and revenue streams. 

Other key risks faced by the Group relate to investment strategy, management and resources, regulatory issues, operational matters and financial controls.

These risks, and the way in which they are managed, are described in more detail under the heading "Principal risks and risk mitigation" within the Report of the Directors contained within the Group's Report and Accounts for the year ended 30 June 2010. The Annual Report and Accounts is published on the Company's website, www.utilico.bm.

STATEMENT OF DIRECTOR'S RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and Accounts of the Group and Company in accordance with applicable Bermuda law and IFRSs.

The Directors are required to prepare Group and Company accounts for each financial period which present fairly the financial position of the Group and Company and the financial performance and cash flows of the Group and Company for that period. In preparing those Group and Company accounts the Directors are required to:

·      select suitable accounting policies in accordance with IAS 8: Accounting policies, Changes in Accounting Estimates and Errors and then apply them consistently;

·      make judgements and estimates that are reasonable and prudent;

·      state whether IFRSs have been followed; and

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the Group and Company accounts comply with Bermuda Law. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for prevention and detection of fraud and other irregularities.

To the best of the knowledge of the Directors, the financial statements give a true and fair view of the assets, liabilities,

financial position and loss of the Group and Company, and the Investment Manager's report includes a fair review of

development and performance of the business and a description of the principal risks and uncertainties that they face.

In so far as the Directors are aware:

·      there is no relevant audit information which the Company's auditors are unaware; and

·      the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

The accounts are published on the Company's website, www.utilico.bm, the maintenance and integrity of

which is the responsibility of the Company. The work carried out by the auditors does not involve consideration of the

maintenance and integrity of the website and accordingly, the auditors accept no responsibility for any changes that have occurred to the accounts since they were originally presented on the website. Visitors to the website need to be aware that the legislation governing the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction.

GROUP PERFORMANCE SUMMARY

	30 June 2010	30 June 2009	Change 2009/10
Ordinary shares
Capital value
Net asset value per ordinary share (undiluted)	166.39p	146.87p	13.3%
Net asset value per ordinary share (diluted)	166.39p	146.87p	13.3%
Share prices and indices
Ordinary share price	116.50p	117.00p	(0.4%)
Discount (based on diluted NAV per ordinary share)	30.0%	20.3%
FTSE All-Share Index	2,543	2,172	17.1%
Returns and dividends
Revenue return per ordinary share (undiluted)	10.49p	2.77p	278.7%
Capital return per ordinary share (undiluted)	21.13p	(82.62p)	n/a
Total return per ordinary share (undiluted)	31.62p	(79.85p)	n/a
Dividend per ordinary share	-	-	n/a
Cash distribution per ordinary share	12.0p	-	n/a
Zero dividend preference (ZDP) shares (1)
2012 ZDP Shares
Capital entitlement per ZDP share	151.55p	141.65p	7.0%
ZDP share price	159.75p	150.75p	6.0%
2014 ZDP Shares
Capital entitlement per ZDP share	123.72p	115.37p	7.2%
ZDP share price	129.50p	116.50p	11.2%
2016 ZDP Shares
Capital entitlement per ZDP share	123.72p	115.37p	7.2%
ZDP share price	108.75p	102.50p	6.1%
Warrants
2012 warrant price	2.00p	3.50p	(42.9%)
Equity holders funds (£m)
Gross Assets (2)	334.2	288.9	15.7%
Bank debt	29.3	17.0	72.4%
ZDP debt	161.2	145.1	11.1%
Equity holders' funds	143.7	126.8	13.3%
Revenue account (£m)
Income	13.8	8.5	62.4%
Costs (management and other expenses)	2.4	2.4	-
Finance costs	1.4	2.6	(46.2%)
Financial ratios of the Group
Revenue yield on average Gross Assets	4.2%	2.6%
Total expense ratio (3) on average Gross Assets	0.7%	0.8%
Bank loans and ZDP shares gearing on Gross Assets	57.0%	56.1%

(1) Issued by Utilico Finance Limited, a wholly owned subsidiary of Utilico Limited in June 2007. 2012 ZDP shares previously issued by Utilico

      Investment Trust plc.

(2) Gross assets less current liabilities excluding loans.

(3) Excluding performance fee and income not receivable.

GROUP STATEMENT of comprehensive income

	Year to 30 June 2010			Year to 30 June 2009
	Revenue	Capital	Total	Revenue	Capital	Total
	return	return	return	return	return	return
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Profits/(losses) on investments	-	36,852	36,852	-	(60,202)	(60,202)
(Losses)/gains on derivative instruments	-	(8,510)	(8,510)	-	2,689	2,689
Exchange gains/(losses)	23	1,068	1,091	20	(8,141)	(8,121)
Investment and other income	13,758	-	13,758	8,506	2,172	10,678
Total income	13,781	29,410	43,191	8,526	(63,482)	(54,956)
Income not receivable	-	-	-	(789)	-	(789)
Management and administration fees	(1,573)	-	(1,573)	(1,601)	-	(1,601)
Other expenses	(819)	(22)	(841)	(811)	(27)	(838)
Profit/(loss) before finance costs and taxation	11,389	29,388	40,777	5,325	(63,509)	(58,184)
Finance costs	(1,356)	(10,764)	(12,120)	(2,551)	(9,983)	(12,534)
Movement of ZDP share liability	-	(374)	(374)	-	1,533	1,533
Profit/(loss) before taxation	10,033	18,250	28,283	2,774	(71,959)	(69,185)
Taxation	(971)	-	(971)	(358)	-	(358)
Profit/(loss) for the year	9,062	18,250	27,312	2,416	(71,959)	(69,543)
Earnings per ordinary share (basic) - pence	10.49	21.13	31.62	2.77	(82.62)	(79.85)
Earnings per ordinary share (diluted) - pence	10.49	21.13	31.62	2.77	(82.62)	(79.85)

The total column of this statement represents the Group's Income Statement and the Group's Statement of Comprehensive Income, prepared in accordance with IFRS.

The supplementary revenue returns and capital returns are prepared under guidance published by the Association of Investment Companies in the UK.

The Group does not have any income or expense that is not included in the profit for the year, and therefore the 'profit for the year' is also the 'total comprehensive income for the year', as defined in International Accounting Standard 1 (revised).

All items in the above statement derive from continuing operations.

All income is attributable to the equity holders of the Company. There are no minority interests.

COMPANY STATEMENT of comprehensive income

	Year to 30 June 2010			Year to 30 June 2009
	Revenue	Capital	Total	Revenue	Capital	Total
	return	return	return	return	return	return
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Profits/(losses) on investments	-	35,362	35,362	-	(55,019)	(55,019)
Losses on derivative instruments	-	(6,706)	(6,706)	-	(995)	(995)
Exchange gains/(losses)	-	1,039	1,039	-	(8,610)	(8,610)
Investment and other income	13,756	-	13,756	8,484	2,172	10,656
Total income	13,756	29,695	43,451	8,484	(62,452)	(53,968)
Income not receivable	-	-	-	(789)	-	(789)
Management and administration fees	(1,573)	-	(1,573)	(1,601)	-	(1,601)
Other expenses	(772)	(22)	(794)	(738)	(27)	(765)
Profit/(loss) before finance costs and taxation	11,411	29,673	41,084	5,356	(62,479)	(57,123)
Finance costs	(1,356)	(10,838)	(12,194)	(2,551)	(10,116)	(12,667)
Profit/(loss) before taxation	10,055	18,835	28,890	2,805	(72,595)	(69,790)
Taxation	(972)	-	(972)	(359)	-	(359)
Profit/(loss) for the year	9,083	18,835	27,918	2,446	(72,595)	(70,149)
Earnings per ordinary share (basic) - pence	10.51	21.81	32.32	2.81	(83.36)	(80.55)
Earnings per ordinary share (diluted) - pence	10.51	21.81	32.32	2.81	(83.36)	(80.55)

The total column of this statement represents the Company's Income Statement and the Company's Statement of Comprehensive Income, prepared in accordance with IFRS.

The supplementary revenue returns and capital returns are prepared under guidance published by the Association of Investment Companies in the UK.

The Company does not have any income or expense that is not included in the profit for the year, and therefore the 'profit for the year' is also the 'total comprehensive income for the year', as defined in International Accounting Standard 1 (revised).

All items in the above statement derive from continuing operations.

All income is attributable to the equity holders of the Company.

GROUP STATEMENT OF CHANGES IN EQUITY

for the year to 30 June 2010
	Ordinary	Share			Non-	Retained earnings
	share	premium	Special	Warrant	distributable	Capital	Revenue
	capital	account	Reserve	reserve	reserve	reserves	reserve	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 June 2009	8,637	233,951	-	3,051	32,067	(156,168)	5,320	126,858
Profit for the year	-	-	-	-	-	18,250	9,062	27,312
Conversion of warrants	-	3	-	(1)	1	-	-	3
Bonus issue of ordinary shares	785	(785)	-	-	-	-	-	-
Ordinary shares repurchased by the Company	(785)	(9,580)	-	-	-	-	-	(10,365)
Transfer on share issue and buyback	-	-	10,365	-	-	-	(10,365)	-
Issue costs of ordinary share capital	-	(88)	-	-	-	-	-	(88)
Transfer on loss of control of subsidiary	-	-	-	-	-	(300)	300	-
Balance at 30 June 2010	8,637	223,501	10,365	3,050	32,068	(138,218)	4,317	143,720

for the year to 30 June 2009
	Ordinary	Share		Non-	Retained earnings
	share	premium	Warrant	distributable	Capital	Revenue
	capital	account	reserve	reserve	reserves	reserve	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 June 2008	9,200	242,188	3,051	32,067	(84,209)	2,904	205,201
(Loss)/profit for the year	-	-	-	-	(71,959)	2,416	(69,543)
Conversion of warrants	-	1	-	-	-	-	1
Ordinary shares repurchased by the Company	(563)	(8,238)	-	-	-	-	(8,801)
Balance at 30 June 2009	8,637	233,951	3,051	32,067	(156,168)	5,320	126,858

STATEMENT OF CHANGES IN EQUITY OF THE COMPANY

for the year to 30 June 2010
	Ordinary	Share			Non-	Retained earnings
	share	premium	Special	Warrant	distributable	Capital	Revenue
	capital	account	Reserve	reserve	reserve	reserves	reserve	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 June 2009	8,637	233,951	-	3,051	32,067	(156,878)	5,424	126,252
Profit for the year	-	-	-	-	-	18,835	9,083	27,918
Conversion of warrants	-	3	-	(1)	1	-	-	3
Bonus issue of ordinary shares	785	(785)	-	-	-	-	-	-
Cost of paying up bonus shares	(785)	(9,580)	-	-	-	-	-	(10,365)
Transfer on share issue and buyback	-	-	10,365	-	-	-	(10,365)	-
Issue costs of ordinary share capital	-	(88)	-	-	-	-	-	(88)
Balance at 30 June 2010	8,637	223,501	10,365	3,050	32,068	(138,043)	4,142	143,720

for the year to 30 June 2009
	Ordinary	Share		Non-	Retained earnings
	share	premium	Warrant	distributable	Capital	Revenue
	capital	account	reserve	reserve	reserves	reserve	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 June 2008	9,200	242,188	3,051	32,067	(84,283)	2,978	205,201
(Loss)/profit for the year	-	-	-	-	(72,595)	2,446	(70,149)
Conversion of warrants	-	1	-	-	-	-	1
Ordinary shares repurchased by the Company	(563)	(8,238)	-	-	-	-	(8,801)
Balance at 30 June 2009	8,637	233,951	3,051	32,067	(156,878)	5,424	126,252

BALANCE SHEETs

At 30 June		GROUP		COMPANY
	2010	2009	2010	2009
	£'000s	£'000s	£'000s	£'000s
Non-current assets
Investments	321,708	281,031	328,107	288,399
Current assets
Other receivables	1,615	3,248	1,566	3,248
Derivative financial instruments	6,368	2,444	1,235	-
Cash and cash equivalents	6,495	4,496	6,362	4,355
	14,478	10,188	9,163	7,603
Current liabilities
Bank loans	(29,320)	-	(29,320)	-
Other payables	(1,000)	(912)	(163,878)	(151,508)
Derivative financial instruments	(986)	(1,375)	(352)	(1,242)
	(31,306)	(2,287)	(193,550)	(152,750)
Net current assets/(liabilities)	(16,828)	7,901	(184,387)	(145,147)
Total assets less current liabilities	304,880	288,932	143,720	143,252
Non-current liabilities
Bank loans	-	(17,000)	-	(17,000)
Zero dividend preference shares	(161,160)	(145,074)	-	-
Net assets	143,720	126,858	143,720	126,252
Equity attributable to equity holders
Ordinary share capital	8,637	8,637	8,637	8,637
Share premium account	223,501	233,951	223,501	233,951
Special reserve	10,365	-	10,365	-
Warrant reserve	3,050	3,051	3,050	3,051
Non-distributable reserve	32,068	32,067	32,068	32,067
Capital reserves	(138,218)	(156,168)	(138,043)	(156,878)
Revenue reserve	4,317	5,320	4,142	5,424
Total attributable to equity holders	143,720	126,858	143,720	126,252
Net asset value per ordinary share
Basic - pence	166.39	146.87	166.39	146.17

CASH FLOW STATEMENTs

for the year to 30 June		GROUP		COMPANY
	2010	2009	2010	2009
	£'000s	£'000s	£'000s	£'000s
Cash flows from operating activities	(961)	68,158	(925)	69,970
Cash flows from investing activities	-	-	-	-
Cash flows before financing activities	(961)	68,158	(925)	69,970
Financing activities
Movement on loans	11,567	(64,754)	11,567	(64,754)
Proceeds from warrants exercised	3	1	3	1
Cost of share buy back	(10,452)	(8,801)	(10,452)	(8,801)
Cash flows from financing activities	1,118	(73,554)	1,118	(73,554)
Net increase/(decrease)  in cash  and cash equivalents	157	(5,396)	193	(3,584)
Cash and cash equivalents at the beginning of the year	4,496	5,423	4,355	3,996
Effect of movement in foreign exchange	1,842	4,469	1,814	3,943
Cash and cash equivalents at the end of the year	6,495	4,496	6,362	4,355

NOTES

The Company is an investment company incorporated in Bermuda and quoted on The London Stock Exchange.

The consolidated Accounts for the year ended 30 June 2010 comprise the results of the Company and its subsidiaries Utilico Finance Limited and Utilico NZ Limited and its special purpose entity Global Equity Risk Protection Limited.

This statement was approved by the Board on 23 September 2010. It is not the Company's statutory accounts. The statutory accounts for the financial year ended 30 June 2010 have been approved and audited, and received an audit report which was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report. The statutory accounts for the financial period ended 30 June 2009 received an audit report which was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report.

The Report & Accounts will be posted to shareholders in early October and are made available on the website www.utilico.bm. Copies may be obtained during normal business hours from Exchange House, Primrose Street, London, EC2A 2NY.

By order of the Board

F&C Management Limited, Secretary

23 September 2010

 

END

 

 

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