Interim Management Statement

RNS Number : 4523W

Utilico Limited

19 November 2010

Utilico Limited

Set out below is the interim management statement ("IMS") for the period from 1 July 2010 to 30 September 2010, containing information that covers this period, and up to the date of publication of this IMS.

Investment Objective

Utilico Limited aims to provide long term capital appreciation by investing predominantly in infrastructure, utility and related companies.

Performance

The equity markets continued to rise during the three months under review, the FTSE All-Share Index rose by 12.7%, the S&P Index (GBP adjusted) rose by 5.3% and the MSCI EMF (GBP adjusted) Index rose by 11.5%. Utilico's NAV outperformed the market, increasing in value by 27.1%.

Portfolio

Utilico's gross assets less current liabilities (excluding debt) began the quarter at £334.2m and ended the quarter at £376.6m an increase of 12.7%. Ordinary Shareholders' funds increased by £38.9m from £143.7m at 30 June 2010 to £182.6m at 30 September 2010.

The ten largest holdings have remained the same over the quarter although there have been some strong movements in share price. Resolute Mining ordinary shares gained 28.9%, UEM was up by 21.4% and Infratil gained 10.6% over the three months. Billing Services Group decreased by 20.5%.

Infratil continues to be Utilico's largest investment and rose as a percentage of gross assets due to the performance of the ordinary share price combined with the strength of the New Zealand Dollar against Sterling.

UEM's NAV rose by 3.9% over the three months and its share price was up 21.4% as the discount narrowed. During the period Utilico sold 2.5m UEM 2010 warrants and exercised the remaining 7.0m. Utilico's resultant holding is 26.6% of UEM.

Resolute Mining's share price rose by 28.9% over the quarter due to strong results and the rise in the gold price. Renewable Energy Generation (REG) saw its share price fall by 2.9% as the market would generally rather see tangible evidence of value creation from its cash position, rather than attributing value up-front to REG's future development pipeline. Jersey Electricity's share price remained flat at 64.0p, Keytech's share price fell by 5.3%, whilst Ascendant Group was up 3.6%. Billing Services' share price fell by 20.5% overconcerns that US telephone companies are becoming less supportive of third party service providers billing their clients for enhanced services, which may in turn lead to lower transaction volumes in the future.

Debt and Cash

During the period Utilico increased its debt position to £30.0m. Utilico's debt was drawn in New Zealand Dollars (£24.1m) and Sterling (£5.9m). Utilico's cash balance increased over the period, from £6.5m at 30 June 2010 to £8.7m at 30 September 2010.

Hedging

Options. Utilico has maintained its option positions over the three month period. As at 30 June 2010, Utilico held index put options which provided market protection of approximately £27.2m with a market value of £4.6m. By the end of September 2010, the level of protection had increased to £43.2m, whilst the market value of the position reduced to £1.9m

Currency Hedging. At the end of September 2010, Utilico held currency hedges in New Zealand Dollars and Australian Dollars.

The NZ$ contracts of NZ$55.5m and NZ$12.5m covered approximately £25.9m of Sterling assets and $9.2m of US Dollar assets. The remaining two hedges were Australian dollars against Sterling, providing coverage of £8.2m. In total £40.0m of assets are covered by these currency forwards.

ZDP Shares

Over the quarter, the traded price of Utilico's 2012 ZDP shares increased to 161.0p up 0.8% since the year end. The 2014 and 2016 maturity ZDP shares also rose by 5.0% and 13.6% to 136.0p and 123.5p respectively.

As at 30 September 2010 the three ZDP tranches offered yields to maturity of 4.8%, 5.2% and 7.6% for the 2012, 2014, and 2016 maturities respectively. The asset covers at final redemption value stood at 3.40x, 2.17x and 1.53x for the 2012, 2014, and 2016 maturities respectively.

Share price and NAV

Utilico's share price rose from 116.5p at 30 June 2010 to 135.5p at 30 September 2010. Utilico's discount to NAV increased from 30.0% at 30 June 2010 to 35.9% at 30 September 2010. A combination of all Utilico's traded instruments ended September with a 17.0% discount to underlying asset value.

Outlook

We remain cautiously optimistic. We firmly believe the economic performance of the emerging markets, in particular China, and the strengthening recovery in the USA will result in stronger corporate earnings. However, the substantial imbalances within the global economy, coupled with the levels of indebtedness of developed economies, cause us to remain vigilant. Sovereign debt levels, and attempts to reduce them, could unsettle the economic recovery underway.

Capital Structure		30 September 2010 £m	30 June 2010 £m
Gross assets less current liabilities		£376.6m	£334.2m

Bank debt		£30.0m	£29.3m
ZDP shares		£164.0m	£161.2m
Shareholders' funds (ordinary shares)		£182.6m	£143.7m
		£376.6m	£334.2m
Effective gearing on ordinary shares		2.1x	2.3x

Ordinary Shares		30 September 2010	30 June 2010
NAV (undiluted, cum income)		211.40p	166.39p
Share price		135.50p	116.50p
Discount to undiluted NAV		35.9%	30.0%
Annual average compound return (including dividends)		12.7%	9.5%
Shares in issue		86,373,863	86,373,863

Warrants at 30 September 2010			2012
Expiry date			April 2012
Price			1.55p
Warrants in issue			3,588,617
Exercise terms			1.090909 ordinary Share
			per warrant at subscription price
			of 288.75p

ZDP Shares at 30 September 2010	2012	2014	2016
Accrued capital entitlement	154.16p	125.92p	125.92p
Share price	161.00p	136.00p	123.50p
(Discount)/premium to NAV	4.4%	8.0%	(1.9%)
ZDP cover*	3.40x	2.17x	1.53x
Yield to redemption*	4.8%	5.2%	7.6%
ZDP redemption value	177.52p	167.60p	192.78p
Shares in issue	45,486,200	37,500,000	37,500,000
*based on final redemption values

Performance

30 September

2010

30 June

2010

% change

Utilico NAV (undiluted, cum income)

211.40p

166.39p

27.1%

FTSE All-Share Index

2867.58

2543.47

12.7%

Sectoral Split of Investments *	30 September 2010	30 June 2010
Renewable Energy	19%	21%
Electricity	19%	14%
Gold	12%	15%
Airports	8%	9%
Toll roads	7%	6%
Infrastructure IT	7%	8%
Telecoms	6%	7%
Other	6%	6%
Water and waste	6%	6%
Ports	6%	5%
Other Infrastructure	1%	1%
Gas	1%	1%
Satellites	1%	1%
Infrastructure Investment Funds	1%	-

Geographical Split of Investments *	30 September 2010	30 June 2010
New Zealand	21%	22%
Other - Gold	19%	15%
Asia & Far East	16%	14%
UK and Channel Islands	14%	16%
Latin America	8%	7%
Bermuda	7%	9%
Australia	7%	8%
Europe (excluding UK and Switzerland)	4%	5%
North America	3%	4%
Other	1%	-

* on a look through basis

Top 10 Holdings as % of Gross Assets		30 September 2010	30 June 2010
1(1)	Infratil Limited	25.1%	26.6%
2(2)	Utilico Emerging Markets Limited	25.0%	21.5%
3(3)	Resolute Mining Ltd	18.3%	13.9%
4(4)	Jersey Electricity Company Limited	4.5%	5.5%
5(6)	Renewable Energy Generation Limited	2.9%	3.3%
6(5)	Vix Technology	2.7%	3.7%
7(7)	KeyTech Limited	2.5%	3.2%
8(8)	Permanent Investments limited	2.1%	2.5%
9(10)	Ascendant Group	1.9%	2.2%
10(9)	Billing Services	1.6%	2.3%
	Total Top 10	86.6%	84.6%