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01

Ecofin Water & Power Opportunities plc Report and Accounts 2010

Highlights for the year As at or year ended 31 March, 2010

Ordinary Shares Net asset value Net asset value (diluted) Share price Discount to net asset value Shareholder total return (share price change plus dividends received) Zero Dividend Preference Shares Calculated value Share price Premium to calculated value Shareholder total return (share price change)* Income Shares Net asset value Share price Premium to net asset value Shareholder total return (share price change plus dividends received) Capital Shares Net asset value Share price Discount to net asset value Shareholder total return (share price change) Shareholders’ funds Ordinary Shareholders (£’000) Zero Dividend Preference Shareholders (£’000) Income Shareholders (£’000) Capital Shareholders (£’000) Total Shareholders’ funds (£’000) Total assets less current liabilities (excluding net borrowings) (£’000) Net borrowings (£’000)† Gearing level of the Company†

As at or year ended 31 March, 2009

184.05p 177.94p 143.00p -22.3% 20.8%

150.64p 150.64p 122.50p -18.7% -29.6%

103.18p 111.50p 8.1% 11.5%

– – – –

– – – –

100.00p 100.00p 0.0% 10.6%

– – – –

475.94p 439.00p -7.8% -31.1%

387,119 61,907 – – 449,026 554,311 173,408 44.8%

307,549 – 32,423 63,807 403,779 512,738 141,382 38.1%

% change

+22.2 +18.1 +16.7

+25.9

+11.2 +8.1 +18.3

* The Zero Dividend Preference Shares shareholder total return is based on their placing price of 100.00p per share on 31 July, 2009. † Gearing is calculated as net borrowings divided by Shareholders’ funds. Net borrowings as at 31 March, 2010 consist of Prime Brokerage borrowings, the nominal value of the Convertible Unsecured Loan Stock and the liability associated with the Zero Dividend Preference Shares, less cash. Net borrowings as at 31 March, 2009 consist of Prime Brokerage borrowings and the liability associated with the Income Shares, less cash. At 31 March, 2010, shareholders’ funds for the purpose of gearing consist of Ordinary Shareholders’ funds while at 31 March, 2009 they consist of Ordinary Shareholders’ funds and Capital Shareholders’ funds.

Performance record since launch

Net Asset Value per Share5 Net income Net Gross Income Capital Ordinary Gross available for Dividends Year ended assets3 assets Gearing4 Share Share Share income6 distribution7 paid8 1 31 March £’000 £’000 % p p p £’000 £’000 £’000

Launch2 2002 2003 2004 2005 2006 2007 2008 2009 2010

101,500 99,833 62,327 89,881 137,983 285,857 504,706 521,540 403,779 449,026

175,000 175,104 136,967 163,969 220,371 422,976 762,029 786,016 529,7169 573,7329

66.7 – 109.1 71.8 47.6 37.8 37.4 45.9 38.1 44.8

65.00 65.34 69.47 73.99 79.01 83.34 88.56 94.11 100.00 n/a

170.00 154.57 39.15 108.84 236.23 474.39 727.61 747.00 475.94 n/a

– – – – 104.91 137.97 183.89 191.40 150.64 184.05

– 238 8,814 9,110 9,514 13,334 21,680 22,108 24,718 18,627

– (15) 5,628 5,712 5,880 8,514 13,673 12,549 16,362 12,368

1 Years ended 31 March, 2004 and 2005 have been restated to reflect changes in accounting policies. 2 At launch on 26 February, 2002. 3 Including the net proceeds of capital increases in June 2005 and January 2007. 4 Gross debt less cash divided by shareholders’ equity calculated in accordance with the Company’s Articles of Association. 5 Calculated in accordance with the Company’s Articles of Association. Ordinary Shares since they were issued at 100p per share in June 2005. 6 Dividends, interest and other income received on the Company’s investments and cash. 7 Available for distribution to the Company’s Ordinary Shareholders and, until 31 March, 2009, its Income Shareholders who from June 2005 received preferred, fixed dividends. 8 Aggregate dividends paid to Income and Ordinary Shareholders during the year. 9 Includes net unrealised profit or loss on open forward currency contracts held at fair value.

– – 4,200 5,600 5,600 4,862 10,240 11,395 13,364 10,362


02

Ecofin Water & Power Opportunities plc Report and Accounts 2010

Chairman’s statement Dear Shareholder, Performance

In the financial year to 31 March, 2010, the net assets of your Company, adjusted for capital changes, increased by 22.2% – or by 18.1% on a diluted basis, taking into account the effect of the Subscription Shares and the Convertible Unsecured Loan Stock issued in May and July 2009, respectively. This performance compares favourably with the decline in net assets of 22.6% your Company suffered in the year to 31 March, 2009. Over the same period, the price of the Company’s Ordinary Shares increased by 16.7% as the discount to net asset value at which the Ordinary Shares traded in the secondary market widened from 18.7% at the beginning of the financial year to 22.3% at 31 March, 2010. The total return for Ordinary Shareholders over the financial year – which is the increase in the share price plus dividends received – was 20.8%. The Company’s Zero Dividend Preference Shares (ZDP Shares) were issued on 28 July, 2009 at a price of 100p per share and a gross redemption yield of approximately 7% per annum. They will be redeemed on 31 July, 2016 at a price of 160.70p per share. At 31 March, 2010 they were trading in the secondary market at a mid-price of 111.50p per share, which represented a gain of 11.5% over their issue price and a gross redemption yield of 5.9%. Over the course of the twelve months to 31 March, 2010, world equity markets rallied strongly, recovering from the lows reached in the first quarter of 2009. The recovery was, however, not at all uniform across markets or sectors. The MSCI World index of developed markets was up 40.6% while the MSCI Emerging Markets index rose by 66.9%, both in sterling terms. Within the world’s developed markets, performance varied widely by sector, with investors favouring those companies believed to be more highly geared to economic recovery at the expense of defensive sectors such as utilities. Of the ten subsectors of the MSCI World index, financial services was the best performing subsector, rising 62.2%% in sterling terms, while the utilities subsector was the worst performing of the ten, gaining 12.5% over the twelve month period. More information about the net asset performance of your Company compared to a number of equity market indices can be found in the Investment Manager’s report on page 5.

Over the course of the financial year, your Company’s Ordinary Shares traded at a discount to net asset value that ranged from a low of 8.8% on 19 June, 2009 to a high of 25.9% on 11 December, 2009. At year-end, the discount was 22.3%. From July 2005, when your Company’s Ordinary Shares were first issued, to mid-2008 they traded at an average discount of only 2.6%. Since mid-2008 they have traded at an average discount of 17.7%. Your Directors are obviously concerned about the level of discount, but clearly the problem is an industry-wide one that reflects the volatility of equity markets and risk aversion on the part of market participants since the market falls of 2008. The relative underperformance of the utilities sector has also been a factor. Your Directors are seeking to broaden the market for the Company’s Ordinary Shares and would expect the discount to narrow with a recovery in the utilities sector and improved performance by the Company.

Income and dividends

In the financial year, your Company earned £12,368,000 after tax on its Revenue Account which was available to pay dividends to Ordinary Shareholders, compared to £13,509,000 in the previous year. Under the Company’s accounting principles, dividends are only recognised in the Company’s accounts when they are actually paid, not when they are declared. Therefore, over the course of the financial year ended 31 March, 2010 Ordinary Shareholders were paid two dividends which are recognised in these financial statements; that is, the second interim dividend for the year ended 31 March, 2009 of 2.5p per share which was actually paid on 15 May, 2009, within the period covered by these financial statements, and the first interim dividend for the year ended 31 March, 2010 of 2.5p per share which was paid on 30 November, 2009. These dividends totalled £10,362,000 and, under current accounting principles, are not shown in the Company’s Consolidated statement of comprehensive income on page 29 but are shown in the cash flow statements on page 32 and the statements of changes in equity on page 33. They are also described in note 9 to the financial statements. On 24 March, 2010, the Company declared a second interim dividend for the year ended 31 March, 2010 of 3p per Ordinary Share, an increase in the interim dividend of 20%. As this dividend was paid on 31 May, 2010, after the financial year-end, it is not recognised in these financial statements. The Board took this action in recognition of the fact that the semi-annual dividend on the Company’s Ordinary Shares had not been increased since 2005 and it would expect to maintain this semi-annual dividend of 3.0p per Ordinary Share, markets permitting.


Ecofin Water & Power Opportunities plc Report and Accounts 2010

Capital reorganisation

When your Company was launched in February 2002, it placed 35 million Capital Shares and 70 million Income Shares with institutional investors. These shares came to the end of their lives on 31 March, 2009. Under the terms of the reorganisation of the Company’s share capital agreed by shareholders in July 2005 – which created the Company’s Ordinary Share class – the Company undertook to offer those Income and Capital Shareholders who had not previously converted their shares into Ordinary Shares two options in April 2009. They could either convert their shares into Ordinary Shares on a net asset value for net asset value basis, or they could accept cash tender offers made by the Company for their shares. As set out in the terms of the reorganisation agreed in 2005, the cash tender prices were 100p per Share in the case of Income Shares and 97.5% of the net asset value of a Capital Share as at 31 March, 2009, equating to 464.04p per Capital Share. Perhaps not surprisingly given the dramatic falls in equity markets which had taken place in 2008 and had continued through the first quarter of 2009, shareholders representing only 11.4% of the Company’s Income Shares and 8.5% of its Capital Shares chose to convert their shares into Ordinary Shares. As a consequence, the remaining Income and Capital Shares were purchased by the Company pursuant to the tender offers for an aggregate consideration of £86.3 million, including the expenses associated with the offers. These conversion and tender offers were completed on 30 April, 2009 and the Shares purchased by the Company were cancelled. This had the effect of reducing the net assets attributable to the Company’s Shareholders.

03

Fundraisings

As explained in my letters to Shareholders in April and July last year, the Directors of your Company were concerned that following the capital reorganisation completed on 30 April, 2009 Ordinary Shareholders would no longer be able to benefit from the gearing provided by the Income Shares or from the income earned on assets attributable to the Capital Shares, on which no dividends were paid. They also believed that a reduction in the size of the Company would limit the Company’s ability to make sizeable investments of the kind that had contributed to the Company’s performance in the past. As a consequence, the Company undertook a fund raising designed to address these issues which was successfully completed in July 2009 and which raised £137.7 million net of expenses. The Company issued £80 million nominal amount of Convertible Unsecured Loan Stock (CULS) through a placing with institutional investors and an offer to the public, including the Company’s Ordinary Shareholders, and £60 million of Zero Dividend Preference Shares (ZDP Shares) through a placing with institutional investors. The CULS provide the Company and its Ordinary Shareholders with gearing at a fixed cost as was the case with the Company’s Income Shares. They pay investors 6% per annum, payable semi-annually, and have a life of seven years, maturing on 31 July, 2016 unless they are converted into Ordinary Shares of the Company prior to that date; the conversion price is 172.64p per Ordinary Share, subject to adjustment in certain circumstances. In any liquidation of the Company, the CULS would rank behind the Company’s ZDP Shares and ahead of the Company’s Ordinary Shares. The ZDP Shares do not pay a current dividend so Ordinary Shareholders will benefit from the income earned on the assets attributable to the ZDP Shares. The ZDP Shares were issued at a price of 100p per share and will be redeemed on 31 July, 2016 at a price of 160.70p per share, which was the equivalent of a gross redemption yield of 7% per annum at the time of their issue. The Company’s obligation to redeem the ZDP Shares, however, represents a future claim on the assets of the Company which ranks ahead of the Ordinary Shares.


04

Ecofin Water & Power Opportunities plc Report and Accounts 2010

Chairman’s statement continued

Both issues were oversubscribed and have performed well in the aftermarket. As of the date of this report, the ZDP Shares – which were issued at a price of 100p – are trading in the secondary market at a mid-price of 114.75p and the CULS – which were also issued at a price of 100p – are trading at a mid-price of 111.25p. Finally, the raising of £137.7 million, after expenses, through these financings more than replaced the £86.3 million of net assets lost through the repurchase of the Company’s Income and Capital Shares. Earlier in the year, in May 2009, the Company issued Subscription Shares to all of its Ordinary Shareholders in the form of a bonus issue on the basis of one Subscription Share for every five Ordinary Shares owned. Each Subscription Share now entitles the holder to subscribe in cash for one Ordinary Share on 31 May and 30 November until 31 May, 2012 at prices of 172p per Ordinary share until 31 May, 2011 and 183p thereafter. To the extent that these Subscription Shares and the CULS are converted, the Company will in due course have the benefit of additional permanent capital. If all Subscription Shares were exercised and all CULS converted, the number of Ordinary Shares in issue would increase by approximately 42%. Under the rules of the FTSE Group, a joint-venture between the London Stock Exchange and the Financial Times newspaper, which develops and maintains the leading UK stock market indices, split capital investment trusts with income and capital shares outstanding – but not companies with ZDP Shares outstanding – are ineligible for inclusion in FTSE indices. As a result of the cancellation of the Company’s income and capital shares in April 2009, the Company is now a member of the FTSE All Share index.

Board changes

During the year, Patrick Blanchard resigned from the Board with effect from 1 January, 2010, and Christophe Boucher, the alternate director to Patrick Blanchard, resigned upon his retirement from Dexia Crédit Local on 30 September, 2009. On behalf of the Board, I would like to thank them for their services to the Company.

Outlook

Following years of relative outperformance, the global utilities sector has been one of the worst equity market performers of any sector over the course of the past year and a half. This is broadly attributable to the effects on the sector – and particularly on the power sector – of the global recession of 2008/2009, the most severe global recession since 1945, on the one hand, and the perceptions and preferences of investors in global equity markets on the other. These include investor concerns about the fundamentals of the utility sector and its prospects and the preference investors have shown since equity markets began to recover in 2009 for companies perceived to be more highly geared to economic recovery than utilities. As a result – as more fully explained in the Investment Manager’s report – utilities are under-owned by investors and are trading at historically low valuations. In the opinion of the Investment Manager, investor concerns about the sector are largely overdone and the cyclical effect of the recession on the industry’s earnings prospects is reflected in current share prices. Historically, the utilities sector has been one that recovers relatively late in the cycle following a recession and the Investment Manager expects this to be the case in the current economic environment. Over the longer term, economic recovery will, once again, draw investors’ attention to the huge capital requirements of the industry if ageing generation capacity is to be replaced and if governments are to meet their low carbon renewable energy targets. Meanwhile, valuations in the sector are supported by some of the highest dividend yields available in the equity market – and more generally on financial assets – with, in the opinion of the Investment Manager, limited downside risk from current valuation levels. Once again, utilities look attractive over a longer-term investment horizon when measured on a risk-adjusted and total return basis.

Ian Barby

30 July, 2010


05

Ecofin Water & Power Opportunities plc Report and Accounts 2010

Investment Manager’s report The economy and markets

In your Company’s financial year to 31 March, 2010, the global economy began to recover from the worst global recession since the Second World War, financial markets stabilised and equity markets recovered much of the ground they lost between September 2007 and March 2009, an eighteen month period that saw the MSCI World index of developed markets fall by 59.1% and the MSCI Emerging Markets index fall by 64.5%, both in US dollar terms. Most of the world’s major economies resumed growing in the second half of calendar 2009 following falls in GDP from mid-2008 to mid-2009 of 3.8% in the US, 4.9% in the Euro-zone, 6.1% in Japan and 5.3% in the UK. The pace of the recovery in the developed economies has, however, been slow compared to the rates of growth they experienced in the years prior to the recession. Emerging and developing economies have done considerably better, suffering less in the recession and recovering more quickly than the developed economies. In financial markets, policy interest rates in the developed countries remained very low by historical standards over the period as central bankers took care to support the relatively weak recovery against a background of low inflation. Concerns about the stability of the international financial system waned and banks resumed lending, although at far below pre-crisis levels. In the bond markets, the second half of 2009 and early 2010 saw high levels of new issue activity as borrowers sought to take advantage of the low rates on offer and investors sought the relative safety of investment grade bonds. World equity markets recovered strongly over the course of your Company’s financial year, which coincided with the recovery in equity markets that began in late March 2009 and peaked in early April 2010. In the year to 31 March, 2010, the MSCI World index gained 49.1% and the MSCI Emerging Markets index rose by 77.3%, both in US dollar terms. At 31 March, 2010, however, the MSCI World index and the MSCI Emerging Markets index were still about 29% and 25%, respectively, below the highs they reached in October 2007. The recovery in world equity markets that took place over the year ended 31 March, 2010 was, however, far from uniform across industrial sectors and market segments. Investors showed a marked preference for industrial sectors whose performance they believed would be highly geared to economic recovery and for recovery plays, such as companies in the financial services sector. They also favoured smaller companies over some of the world’s largest companies and over companies they viewed as defensive. The MSCI World index of developed markets, for example, is divided into ten subsectors whose performance in the year to 31 March, 2010 ranged from a 62.2% gain for the finance sector, the best performing sector, followed by 58.9% for the materials sector to a low of 12.5% for the global utilities sector in which your Company invests, all in sterling terms.

Over the course of the year, sterling strengthened by 5.8% against the US dollar, from $1.4334 to $1.5169, and by 3.8% against the Euro, from €1.0796 to €1.1211.

Performance of the Company

Despite the fact that the global utilities sector was the worst performing sector of the MSCI World index of developed equity markets in the year to 31 March, 2010, the Company performed reasonably well over the period. On a per share basis, the net asset value of an Ordinary Share rose by 22.2% over the year and by 18.1% on a diluted basis. The performance of the Company compared to a number of equity indices is shown in the table below. The Composite Utilities index is one calculated by Ecofin using the leading third-party utilities indices in the major markets, but weighted to reflect the approximate geographical composition of the Company’s investment portfolio over the period.

Performance vs selected indices

Ecofin Water & Power Opportunities plc Net assets Net asset value per Share Ordinary Shares Ordinary Shares (diluted) Indices MSCI World MSCI World Utilities FTSE All Share FTSE Utilities Euro Stoxx Euro Stoxx Utilities S&P 500 S&P 500 Utilities Composite Utilities

Year to Year to Since launch 31 March, 31 March, on 26 February, 2010 2009 2002 % % %

17.2*

-22.6*

182.0*

22.2 18.1

-21.3 -21.3

75.4† 69.6†

40.6 12.5 46.7 18.2 39.0 16.8 38.3 9.0 15.4

-22.4 -14.8 -32.2 -21.9 -35.8 -31.8 -16.5 -6.5 -19.7

16.9 42.1 17.3 64.6 36.1 92.7 -1.6 5.2 71.4

* Adjusted for changes in share capital. † Since Ordinary Shares were first issued on 29 June, 2005. All performance data are in sterling terms.


06

Ecofin Water & Power Opportunities plc Report and Accounts 2010

Investment Manager’s report continued

The growth in net assets of 17.2% in the year to 31 March, 2010 shown above differs from the growth in net assets (Total Shareholders’ funds) of 11.2% for the year shown in the “Highlights for the year” on page 1. The net assets in the table above have been adjusted for changes in the Company’s share capital since the launch of the Company in February 2002 and are meant to show the performance of the Company over time and from year to year on a comparable basis. The 11.2% growth in total shareholders’ funds (the net assets of the Company) shown on page 1 has not been adjusted for changes in the Company’s share capital and reflects the existence of the Company’s Income and Capital Shares on 31 March, 2009, and their subsequent cancellation, and the issuance of the Company’s Zero Dividend Preference Shares (ZDP Shares) during the year which were outstanding at year-end. The growth in the Company’s net assets since its launch, adjusted for changes in its share capital, compared to leading broad equity market and utility market indices is shown graphically below.

Net assets vs broad market indices (since inception) 400 350

EWPO Net assets ex Dividend FTSE All Share DJ Euro Stoxx (£) S&P 500 (£)

300 250 200 150 100 50 0 2/02

2/03

2/04

2/05

2/06

2/07

2/08

2/09

2/10

Net assets vs utility sector indices (since inception) 400 350

EWPO Net assets ex Dividend FTSE All Share utilities DJ Euro Stoxx utilities (£) S&P 500 utilities (£)

300 250 200

If the Company’s closing net assets as at 31 March, 2010 are adjusted for all of the changes in the Company’s capital since its launch – changes which, if not adjusted for, would distort any measurement of performance – then the Company’s net assets have grown by 182.0% since the Company’s launch, which is equivalent to an annual return of 13.7%. If the dividends paid to the Company’s Shareholders since its launch are included, the annual return would be 16.0%. The Company’s Ordinary Shares were first issued on 29 June, 2005 at a net asset value of 104.91p per share. The net asset value per Ordinary Share at 31 March, 2010 was 184.05p or 177.94p on a diluted basis. This growth in the net asset value of an Ordinary Share since June 2005 is the equivalent of 12.5% per annum, or 11.7% per annum if the diluted net asset value per share is used. If dividends paid to Ordinary Shareholders are included, the return per Ordinary Share is the equivalent of 15.3% per annum, and 14.6% per annum on a diluted basis.

Investment strategy

In the year to 31 March, 2010, we continued to pursue opportunities to invest in utility and utility-related companies in the major world markets without regard to any benchmark and to manage risk by taking advantage of the fragmented nature of the global utility sector to ensure that the Company had a portfolio diversified with respect to geography, sub-sector and company size. The Company’s portfolio remained relatively concentrated although the ten largest investments accounted for 41.5% of the portfolio at year-end compared to 45.7% a year earlier. We also continued to employ significant levels of gearing which was 44.8% at year-end compared to 38.1% at the end of the previous financial year. At year-end, however, the Company’s portfolio included £45.8 million of bonds and put options of £5.4 million on a delta adjusted basis which were less volatile than equities. Adjusting for this, the equity exposure of the Company was 132.4% of Ordinary Shareholders’ funds at 31 March, 2010 compared to 142.1% a year earlier. During the year, we reduced the Company’s exposure to companies in Europe, excluding the UK, and significantly increased its assets in the US and its exposure to developing and emerging markets. We also somewhat increased its exposure to the UK. Within the sub-sectors in which the Company invests, we increased its exposure to renewable energy-related companies and to companies in the gas industry at the expense of its investments in the conventional electricity industry. At all times during the year, the Company complied with its investment policies as set out in the Report of the Directors on pages 17 to 23.

150

An analysis of the Company’s portfolio by country or region, by sub-sector and by market capitalisation can be found on page 10.

100 50 0 2/02

2/03

2/04

2/05

2/06

2/07

2/08

2/09

2/10


Ecofin Water & Power Opportunities plc Report and Accounts 2010

Portfolio review

The Company’s ten largest investments at 31 March, 2010 and at the end of its previous financial year, are shown below.

At 31 March, 2010 %

ITC Holdings Hansen Transmissions Ecofin China Power Transmissora Aliança Poweo Northumbrian Water EIH Cyprus BG Group E.ON Williams Companies

At 31 March, 2009 %

7.6 Electric Power Dev 7.3 ITC Holdings 6.1 Hansen Transmissions 3.8 EDF Group 3.4 Poweo 3.3 E.ON 3.3 Acea 2.4 Iberdrola Renovables 2.2 Endesa 2.1 Solel Solar Systems 41.5

10.0 8.2 6.8 4.5 3.8 3.0 2.7 2.3 2.2 2.2 45.7

Only two companies in the list at 31 March, 2010 represent new investments by the Company, that is, Ecofin China Power & Infrastructure Fund and BG Group. Although Northumbrian Water Group and Transmissora Aliança de Energia Eléctrica (formerly known as Terna Participacoes) were not among the Company’s ten largest investments at 31 March, 2009, they were its eleventh and twelfth largest investments at that date. EIH Cyprus is a holding company whose principal assets at 31 March, 2010 were the cash proceeds and escrow accounts associated with the sale of the Company’s holding in Solel Solar Systems, an unquoted investment and the Company’s tenth largest holding at the beginning of the financial year. The Company has long had a holding in Williams Companies, although it increased it significantly during the year. The Company did, however, sell most of its holding in the Japanese company Electric Power Development over the course of the year at a small profit following a lengthy and only partially successful campaign to get the company to increase its dividend and to reform its corporate governance. The Company also sold its entire holding in the Italian company Acea out of concern about the company’s strategic direction and substantially reduced its investments in the Spanish companies Iberdrola Renovables and Endesa, on valuation grounds. The share price of ITC Holdings, the Company’s largest investment at year-end, rose by 26.1% over the year. The company is projecting nearly $4 billion of capital investment over the next decade and earnings per share growth of approximately 15% per annum over the next five years. As a specialist in high voltage transmission, the company expects to be a major beneficiary of the estimated $60 to $100 billion to be invested in transmission in the US over the next decade, much of it to be spent connecting renewable energy generators to the grid in ITC’s Midwest operating region.

07

Hansen Transmissions, the Company’s second largest investment, declined by 8.8% over the year as Hansen continued to suffer from lower order volumes for wind turbines from its major customers and an uncertain regulatory and legislative environment with respect to renewable energy in many countries. Hansen appointed a new chief executive in March 2010 and the company is deferring planned capital expenditure and focusing on achieving manufacturing efficiencies and cost control during the downturn. The Company owns 6.66% of Hansen and funds managed by Ecofin Limited own an additional 8.11% of Hansen. On 24 June, 2010, Martin Nègre, a director of the Company, was appointed a director of Hansen. In July and September 2009, the Company invested the equivalent of approximately £27.5 million in the Ecofin China Power & Infrastructure Fund, a long/short equity fund managed by the Company’s investment manager, Ecofin Limited. The fund invests in utility and infrastructure companies listed on stock exchanges in China, Hong Kong, Taiwan and Singapore. At 31 March, 2010, the fund had a portfolio consisting of 53 companies and had net assets of approximately US$ 97.2 million, approximately 52.5% of which, equivalent to £33.6 million, were attributable to the Company. The Company pays no investment management or performance fees to Ecofin Limited in connection with its investment in the fund. From the fund’s launch in July 2009 to 31 March, 2010, the net asset value of the fund’s shares rose by 10.5%. The share price of Transmissora Aliança de Energia Elécrica, formerly Terna Participacoes, rose by 71.2% over the year as the company was the subject of a takeover bid in November 2009 which was finally completed in May 2010 when the Company sold its remaining shares in the company. Poweo, the Company’s fifth largest holding, continued to disappoint during the year as it struggled in an uncertain regulatory environment in France where movements to liberalise electricity markets are making slower progress than expected. Its share price fell by 26.9% over the year. Northumbrian Water Group, the Company’s sixth largest investment, saw its share price rise by 29.7% in the year to 31 March, 2010 as the UK water companies benefited from a regulatory settlement with the UK water regulator OFWAT which was finalised during the second half of calendar 2009 and which the market viewed as reasonable. The terms of the settlement last for five years and Northumbrian is viewed as one of the principal beneficiaries of the regulatory review.


08

Ecofin Water & Power Opportunities plc Report and Accounts 2010

Investment Manager’s report continued

In November, 2009, Solel Solar Systems, an unquoted Israeli company and the Company’s tenth largest investment at the beginning of the year, was sold to the German company Siemens AG for approximately US$418 million, equivalent to US$ 53.70 per share. Funds managed by Ecofin Limited, the Company’s investment manager, owned approximately 63% of Solel and the cost of the funds’ investment in Solel was US$28.43 per share. At the beginning of the year, the Company’s investment in Solel had been valued by the Directors at US$24.17 per share. This was increased to US$39.29 per share by year-end to reflect part of the expected net proceeds of the sale. Although Solel was sold for cash, Siemens held back a portion of the purchase price in the form of escrow accounts which will be released over the coming months if certain conditions are met. In addition, the transaction is subject to taxation. The EIH Cyprus group was established to hold Solel in a tax efficient manner and will be unwound once the tax position with respect to the sale of Solel is clarified. As a result, the Company is likely to receive additional monies in connection with the sale of Solel in the future, but these amounts are not expected to be material in the context of the Company’s investment business. The share price of BG Group, a UK-based international gas company, rose by 8.1% over the year, although the Company initiated its holding in the company in July 2009. The share price of E.ON, the largest German utility, rose by 29.8% over the year, but the Company reduced the size of its holding in the company toward the end of the year. The share price of the Williams Companies, a US gas company, rose by 102.9% over the Company’s financial year, but the Company increased its holding in the company during the second half of calendar 2009. In January 2010, the company announced a major restructuring of its business, selling its pipeline business and other assets to a master limited partnership (MLP), which it controls, for cash and an 80% stake in the MLP. The restructuring should provide the company with better access to capital to fund its exploration and production activities and to pursue acquisition opportunities. Further information on the Company’s ten largest investments can be found on page 13. At 31 March, 2010, the Company had 106 investments. Eightynine of these investments were equity investments including 7 unquoted investments which accounted for 6.5% of the Company’s portfolio. In addition, the Company had investments in 17 fixed-income securities issued by utility and utility-related companies which accounted for 8.3% of the portfolio, including one unquoted fixed-income security accounting for 1.0% of the portfolio.

The global utility sector

Although the utility sector out-performed the broader equity market on a relative basis in the in the falling equity markets of 2008/2009, it failed to recover as strongly as other sectors when equity markets advanced sharply in the second half of 2009. It has, however, done somewhat better on a relative basis in the volatile equity markets of recent months. The explanation lies in the preference investors have had for sectors perceived to be more highly geared to economic recovery than sectors perceived to be defensive, such as utilities, and in investor concerns about some of the fundamentals of the industry. Investor concerns centre on the lingering effects on the industry of the global recession and financial crisis. In the recession, the power industry – which dominates the global utility sector – experienced unprecedented declines in electricity consumption, primarily industrial consumption, and steep falls in energy commodity and power prices. This has raised questions about the balance between generating capacity and demand, given the scale of the decline in consumption, when economies recover and whether the power industry might suffer from excess capacity for some time. Investors have also been concerned about the highly-geared nature of the industry, about its access to capital markets and ability to refinance its debt and about the profitability of the industry and the sustainability of its dividends. More recently, investors have grown worried about rising regulatory risk, particularly in Europe. While we share some of these concerns, we believe most are overdone. Electricity consumption is recovering, power prices are strengthening in many markets and the industry has moved quickly to cut its spending on new capacity. These cuts, combined with future plant closures mandated by age or new environmental restrictions, implies that a favourable balance between electricity supply and demand could be restored more quickly than many expect, with resulting pressure on reserve margins. Cuts in capital expenditure and recovering demand also persuade us that, with few exceptions, the current level of dividends being paid by the industry is sustainable. With respect to finance, utility companies have demonstrated not only that they can access capital markets but that in many cases they can refinance their debt on very favourable terms given the prevailing low interest rate environment, thereby lowering their long-term cost of capital. Finally, regulatory risk, particularly in Europe, is rising and this has certainly contributed to the cautious approach many investors take to the sector. While this uncertainty is likely to persist for a while, in the longer-term governments face an enormous challenge of how to incentivise investor-owned power companies – in the wake of the recession – to make the very large investments in cleaner thermal power plants and in renewable energy which will be required to lower CO2 emissions and to guarantee the security of future energy supply.


Ecofin Water & Power Opportunities plc Report and Accounts 2010

Outlook

In April 2010, concerns about the public finances of European countries – particularly Greece – that had been growing for months and which had contributed to high levels of market volatility during the first quarter of calendar 2010, precipitated a crisis in financial markets that led to sharp sell-offs and extreme volatility in currency, equity and commodities markets. The news flow exacerbated the sell-off as European governments struggled to deal with the crisis before finally agreeing support measures totalling €750 billion in May. Although markets have recovered somewhat since hitting lows for 2010-to-date in early July, concerns about sovereign debt, the banking system and the outlook for global economic growth in an era of public sector austerity could weigh on equity markets for some time. In this uncertain environment, utilities are trading on what we believe are very low valuations by historic standards; at levels not seen since the downturn of 2001/2002, when the industry was suffering from overexpansion and other related problems and when many utility balance sheets were stretched. We believe that depressed utility valuations and the high dividend yields available in the sector combined with the fact that the industry has started to recover from the effects of the recession, together with the fact that the sector’s fundamentals are improving makes this a good time to invest in the sector. As we have said before, in a low growth and low return environment such as the one many observers are forecasting, the utility sector should offer investors good returns over the longer term, when measured on a risk-adjusted and total return basis.

Ecofin Limited 30 July, 2010

09


10

Ecofin Water & Power Opportunities plc Report and Accounts 2010

Portfolio analysis as at 31 March, 2010

By country or region

1 United States 2 United Kingdom 3 Europe ex-UK 4 China 5 Brazil 6 Hong Kong 7 Cyprus 8 Canada 9 Russia 10 Australia 11 New Zealand 12 Japan 13 Other

9 10 11 12 13 6

7

8

5

1

4

3 2

By sector 4

1 Electricity 2 Utility-related 3 Gas distribution 4 Water 5 Multi-utility

5

3

£’000

188,165 117,032 112,768 35,978 28,965 20,051 18,126 10,174 8,189 5,301 3,996 3,861 577 553,183

£’000

293,532 153,981 62,442 31,067 12,161 553,183

2010

%

£’000

34.01 21.16 20.39 6.50 5.24 3.62 3.28 1.84 1.48 0.96 0.72 0.70 0.10 100.00

136,298 98,446 165,254 – 17,498 11,675 13,132 3,346 25 3,272 2,892 50,294 542 502,674

2010

%

£’000

53.06 27.83 11.29 5.62 2.20 100.00

378,499 38,453 28,627 19,310 37,785 502,674

2009

%

27.11 19.58 32.87 – 3.49 2.32 2.61 0.67 0.01 0.65 0.57 10.01 0.11 100.00

2009

%

75.30 7.63 5.70 3.85 7.52 100.00

1 2

By market capitalisation of portfolio companies

7

1

6

2 5

1 Less than £200 million 2 £200 to £1,500 million 3 £1,500 to £5,000 million 4 £5,000 to £10,000 million 5 More than £10,000 million 6 Unquoted equities* 7 Corporate bonds * At Directors’ estimation of fair value.

4 3

£’000

64,357 128,160 118,187 40,698 119,987 36,006 45,788 553,183

2010

%

£’000

11.63 23.17 21.36 7.36 21.69 6.51 8.28 100.00

30,311 121,840 146,901 27,769 95,623 36,523 43,707 502,674

2009

%

6.03 24.24 29.22 5.53 19.02 7.27 8.69 100.00


11

Ecofin Water & Power Opportunities plc Report and Accounts 2010

Portfolio holdings as at 31 March, 2010

(All Ordinary Shares, unless otherwise stated)

Company Country

Fair value % of total £’000 investments

ITC Holdings US Hansen Transmissions UK Ecofin China Power & Infrastructure Fund† China Transmissora Aliança de Energia Eléctrica Brazil Poweo France Northumbrian Water Group UK EIH Cyprus* Cyprus BG Group UK E.ON Germany Williams Companies US Top ten investments International Power UK American Electric Power US CEZ Czech Republic Entergy US Oest Elektrizitatswirts Austria The AES Corporation US Iberdrola Spain National Grid UK Dominion Resources US CMS Energy US Top twenty investments Algonquin Power & Utilities Canada Allegheny Energy US Enel Italy Centrica UK Suez Environnement France Energy Future Holdings* US FPL Group Convertible 8.375% 01/06/2012 US Agri Capital Germany 15% 31/03/2014* Germany Atlas Energy 10.75% 01/02/2018 US Exmar Belgium Top thirty investments El Paso Energy US EDF Group France Fortum Oyj Finland BKW FMB Energie Switzerland Pennon Group UK Sempra Energy US Gazprom Russia Trading Emissions UK Continental Resources 7.375% 01/10/2020 US Infratil New Zealand Top forty investments ProShares UltraShort 7-10 Year Treasury ETF US Electric Power Development Japan Murray Energy 10.25% 15/10/2015 US Rising Development Hong Kong Miasole Series E Preferred* US Eastern Australia Agriculture* Australia Séchilienne-Sidec France NovaTek OAO Russia Utilico Emerging Markets UK FPL Group US Top fifty investments

42,124 40,194 33,623 20,890 18,928 18,407 18,126 13,417 12,161 11,764 229,634 10,941 10,685 10,393 10,223 10,067 8,687 8,548 8,009 7,786 7,505 322,478 6,759 6,647 6,499 6,462 6,382 6,294 5,526 5,352 4,920 4,884 382,203 4,814 4,592 4,550 4,528 4,386 4,273 4,214 4,166 4,002 3,996 425,724 3,922 3,861 3,784 3,771 3,708 3,533 3,494 3,488 3,448 3,435 462,168

7.61 7.27 6.08 3.78 3.42 3.33 3.28 2.43 2.20 2.13 41.53 1.98 1.93 1.88 1.85 1.82 1.57 1.55 1.45 1.41 1.36 58.33 1.22 1.20 1.17 1.17 1.15 1.14 1.00 0.97 0.89 0.88 69.12 0.87 0.83 0.82 0.82 0.79 0.77 0.76 0.75 0.72 0.72 76.97 0.71 0.70 0.68 0.68 0.67 0.64 0.63 0.63 0.62 0.62 83.55


12

Ecofin Water & Power Opportunities plc Report and Accounts 2010

Portfolio holdings as at 31 March, 2010 continued

(All Ordinary Shares, unless otherwise stated)

Fair value % of total £’000 investments

Other investments: 56

91,015

16.45

Total number of investments: 106

553,183

100.00

Derivative contracts disclosed as current assets/(liabilities) Total investments and derivative contracts:

1,946 555,129

* Unlisted, at Directors’ estimation of fair value. † Open-ended fund investing in China and managed by Ecofin Limited (unquoted with monthly liquidity).


Ecofin Water & Power Opportunities plc Report and Accounts 2010

13

Ten largest holdings ITC Holdings Corp. (www.itc-holdings.com)

US electricity transmission 7.61% of the portfolio* (2009: 8.15%) Market capitalisation: $2,758 million (£1,816 million) ITC is an independent US electricity transmission company which owns regulated, high voltage transmission networks in the American Mid-west that transmit electricity from generators to local distribution companies. The company specialises in transmission infrastructure and invests with local utilities in order to upgrade their transmission systems to improve reliability, to reduce congestion and to transmit electricity generated by wind farms to major Mid-western load centres.

Hansen Transmissions International NV (www.hansentransmissions.com)

Gearbox design, manufacture and supply 7.27% of the portfolio (2009: 6.80%) Market capitalisation: £607 million Hansen is a Belgian company whose shares are denominated in sterling and listed on the London Stock Exchange. Hansen supplies gearboxes to four of the five world’s largest manufacturers of gear-driven wind turbines from manufacturing facilities in Belgium, India and China. Hansen also manufactures gearboxes used in the electric power and water treatment industries.

Ecofin China Power & Infrastructure Fund Limited†

Open-ended fund investing in China 6.08% of the portfolio (2009: 0.00%) Net asset value: $97 million (£64 million) Ecofin China Power & Infrastructure is a long/short equity fund which invests in utility and infrastructure companies listed on stock exchanges in China, Hong Kong, Taiwan and Singapore. The fund can sell stock and indices short but has a long bias as its net exposure to the market will vary from 20% to 100%. The fund is managed by Ecofin Limited but no investment management fees are payable to Ecofin with respect to the Company’s investment in the fund.

Transmissora Aliança de Energia Elétrica S.A. (www.taesa.com.br)

Brazilian electricity transmission network operator 3.78% of the portfolio (2009: 2.15%) Market capitalisation: R$3,369 million (£1,247 million) Transmissora Aliança, formerly Terna Participacoes, is one of the largest electricity transmission companies in Brazil. Companhia Energética de Minas Gerais (Cemig) SA, a state-controlled Brazilian company, purchased 85.27% of Terna in November 2009 from its majority shareholder, the Italian company Terna SpA, and purchased those shares held by the public on the same terms on 7 May, 2010.

Poweo SA (www.poweo.com)

French electricity and gas supply 3.42% of the portfolio (2009: 3.76%) Market capitalisation: €188 million (£168 million) Poweo is an independent French electricity and gas supplier which purchases electricity and gas on wholesale markets which it distributes to its industrial, commercial and retail customers. The company is also developing its own thermal and renewable generation capabilities. Poweo is 44.8% owned by the Austrian utility company Verbund.

Northumbrian Water Group plc (www.nwg.co.uk)

UK water and sewerage 3.33% of the portfolio (2009: 2.15%) Market capitalisation: £1,468 million Northumbrian Water provides water and sewerage services to more than 2.6 million customers in the North East of England and water to more than 1.7 million customers in Essex and Suffolk in the East of England. It also operates the Kielder Reservoir in Northumberland, the largest reservoir in North West Europe, under a contract with the UK’s Environment Agency.

EIH Cyprus Limited†

Holding company 3.28% of the portfolio (2009: 2.61%) EIH Cyprus Group is a joint-venture which is 15% owned by the Company and 85% by other funds managed by the Investment Manager, Ecofin Limited. EIH Cyprus was established to own certain investments in a tax efficient manner, notably Solel Solar Systems, an unquoted Israeli company which was sold to Siemens AG in December 2009. At 31 March, 2010, approximately 98.6% of the assets beneficially owned by EIH Cyprus represented the cash proceeds and escrow accounts associated with the sale of Solel.

BG Group plc (www.bg-group.com)

Gas production and supply and electricity generation 2.43% of the portfolio (2009: 00.0%) Market capitalisation: £38,563 million BG Group is a UK-based international gas company whose activities include exploring for natural gas and its production, transmission and distribution, the development of liquefied natural gas (LNG) resources and, to a lesser extent, the operation of gas-fired power plants whose output is sold to utility companies. BG Group is active in more than twenty countries and more than 75% of its revenues arise from outside the UK.

E.ON AG (www.eon.com)

German and international electricity and gas production, transmission and supply 2.20% of the portfolio (2009: 3.04%) Market capitalisation: €54,687 million (£48,659 million) E.ON is a vertically integrated electricity and gas company and is one of the largest companies in Germany by market capitalisation. E.ON generates electricity from thermal, nuclear and hydroelectric facilities and is the largest natural gas company in Germany. It operates electricity transmission networks and gas pipelines and supplies electricity and gas to final consumers, principally in central Europe.

Williams Companies, Inc. (www.williams.com)

US gas production and transportation 2.13% of the portfolio (2009: 0.73%) Market capitalisation: $13,497 million (£8,927 million) Williams is an integrated US natural gas company which produces, gathers and processes natural gas, principally in Texas, Oklahoma and the Rocky Mountain region of the United States. It also controls a master limited partnership which operates some 14,600 miles of interstate natural gas pipelines which transport natural gas from the Gulf Coast to the East Coast and Florida and from the Rocky Mountains to the Pacific Northwest. These pipelines deliver approximately 12% of the natural gas consumed in the United States.

* The Company owns 1,161,791 shares in ITC which represented 7.61% of the value of the portfolio as at 31 March, 2010. It also owns a derivative instrument, a contract for difference (CFD), over an additional 350,692 shares of ITC. If the shares represented by the CFD were included, the Company’s exposure to movements in the share price of ITC would be the largest such exposure in its portfolio, equivalent to a holding representing approximately 9.69% of the portfolio. † Additional information on these unquoted companies is contained in the Investment Manager’s Report and in note 6 to the financial statements.


14

Ecofin Water & Power Opportunities plc Report and Accounts 2010

History and capital structure of the Company History to 31 March, 2005

The Company was launched on 26 February, 2002 as a geared equity vehicle to take advantage of the investment opportunities that the Directors believed existed in the water, electric power and gas distribution industries (commonly referred to as “utilities”) and utility-related industries, principally in the United Kingdom, Continental Europe, the United States and other developed markets. At that time, the Company raised £101.5 million (after expenses) through a placing with institutional investors of 70 million Income Shares and 35 million Capital Shares at 100p each. The Company had a finite life and was due to be wound up on 31 March, 2009 when the Income Shares and Capital Shares would come to the end of their lives. The Income Shares were entitled to all of the net income of the Company distributed as dividends and a return of capital of 100p per share on 31 March, 2009. The Capital Shares were not entitled to participate in the Company’s income but were entitled to all of the growth in the Company’s net asset value to 31 March, 2009. The Income Shares were designed to provide holders with a high dividend yield while the Capital Shares were designed to provide investors with the potential for highly geared capital growth. The Company also borrowed the equivalent of £70 million – 50% in sterling, 25% in Euros and 25% in US dollars – under a banking facility with Bank of Scotland to provide shareholders with a geared return on their investment. Under its banking arrangements, the Company swapped its floating-rate debt into fixed-rate debt with a maturity of approximately seven years. The Company commenced investing in February 2002 with gross assets of £171.5 million.

2005 restructuring, fund raising and refinancing

On 24 June, 2005, the Company’s share capital was reorganised following a vote of shareholders. Under the Articles of Association adopted as part of the reorganisation, the Company’s life was made indefinite and a new class of Ordinary Shares was created which were entitled to participate in both the net income and capital growth of the Company. The dividends payable on the Company’s Income Shares were fixed to 31 March, 2009. As part of the reorganisation, holders of Income Shares and Capital Shares were given the opportunity to convert their shares into Ordinary Shares which had an unlimited life. As a result, 53.7% and 44.9%, respectively, of the Company’s Income Shares and Capital Shares were converted into a total of 71,301,392 Ordinary Shares which became the Company’s largest share class. At the time of the reorganisation, the Company also raised £48.0 million (after expenses) through a placing of 50 million Ordinary Shares with institutional investors and announced that it would refinance its borrowings to benefit from more flexible borrowing arrangements and to lower its cost of borrowing.

In August 2005, the Company entered into a Prime Brokerage Agreement with Citigroup and repaid its fixed-rate borrowings from Bank of Scotland. Under the Prime Brokerage Agreement, the Company was able to vary the amounts and currencies of its borrowings and to borrow at floating-rates.

2007 to 31 March, 2009

In January 2007, the Company raised an additional £106.3 million (after expenses) through a placing of 61,250,960 Ordinary Shares with institutional investors. In July 2007, in keeping with an undertaking made at the time of the Company’s reorganisation in 2005, the Company extended a cash tender offer to all holders of Capital Shares for up to 50% of their holdings, pursuant to which 1.7% of the Capital Shares then in issue were purchased by the Company at an aggregate price of £2.2 million. In July 2008, pursuant to a similar undertaking, the Company made a conversion offer to all holders of Capital Shares, pursuant to which 29.3% of the Capital Shares then in issue were converted into 21,608,161 Ordinary Shares. On 31 March, 2009, the issued share capital of the Company comprised 204,160,513 Ordinary Shares, 32,423,253 Income Shares, 13,406,595 Capital Shares and 495,555,977 Deferred Shares. The Deferred Shares were created as a result of the conversion of some of the Company’s Income Shares and Capital Shares into Ordinary Shares and had no voting rights or entitlements to the income or assets of the Company. The net assets attributable to the Company’s Ordinary Shares, calculated according to the Company’s Articles of Association, at 31 March, 2009 were £307,549,000. The net assets attributable to the Company’s Income Shares and Capital Shares were £32,423,000 and £63,807,000, respectively. The net assets attributable to the Deferred Shares were negligible.

2009 restructuring and financings

In April 2009, subsequent to the year-end and in keeping with an undertaking made at the time of the Company’s reorganisation in 2005, the Company offered all holders of its Income Shares and Capital Shares an opportunity to convert their shares – which had come to the end of their lives on 31 March, 2009 – into Ordinary Shares on a net asset value basis or to accept cash tender offers by the Company for their shares. The cash tender offer price for the Company’s Income Shares was 100p per share. The cash tender offer price for the Capital Shares was 97.5% of their net asset value per share as at 31 March, 2009, equating to 464.04p per Capital Share.


Ecofin Water & Power Opportunities plc Report and Accounts 2010

Approximately 88.6% of the Income Shares and 91.5% of the Capital Shares in issue were purchased and cancelled by the Company pursuant to the tender offers on 29 April, 2009 for an aggregate price of £86.3 million including expenses associated with the offers. The remaining Income and Capital Shares were converted into 6,158,846 Ordinary Shares. The Deferred Shares were purchased by the Company and cancelled on 8 May, 2009. On 15 May, 2009, a total of 42,063,749 Subscription Shares were issued to Ordinary Shareholders by way of a one for five bonus issue. The Subscription Shares carry no rights other than a right to subscribe for Ordinary Shares at a rate of one Ordinary Share for each Subscription Share, exercisable every six months commencing on 30 November, 2009 and ending on 31 May, 2012 at the following predetermined prices: Period of exercise

Subscription price

On or prior to 31 May 2010 After 31 May 2010 and up to 31 May 2011 After 31 May 2011 and up to 31 May 2012

168p 172p 183p

On 28 July, 2009, Ordinary Shareholders approved the issue of 60 million Zero Dividend Preference Shares (ZDP Shares), issued by EW&PO Finance plc, a wholly-owned subsidiary of the Company, at a price of 100p per share and £80 million nominal amount of Convertible Unsecured Subordinated Loan Stock (CULS) which began trading on the London Stock Exchange on 29 July. The ZDP Shares will mature on 31 July, 2016 and have a gross redemption yield of 7% per annum; that is, investors will receive 160.70p on 31 July, 2016 for every 100p invested when the ZDP shares were issued. The CULS will pay investors interest of 6% per annum, payable semi-annually, until 31 July, 2016 when they will be redeemed by the Company at 100% of their nominal value, unless they have previously been converted into Ordinary Shares of the Company. The conversion price of the CULS was set at 101% of the net asset value of an Ordinary Share on 22 July, 2009, or 172.6445p, which represented a premium of 23.3% over the price of an Ordinary Share on that day. The conversion price may be adjusted in certain circumstances over the life of the CULS, notably in the event of a dilutive issue of equity. At the date of this report there are 60 million ZDP Shares in issue, and £79,997,846 nominal amount of CULS.

Capital structure and borrowings

As a result of the conversion and tender offers completed on 29 April, 2009, the bonus issue of Subscription Shares on 15 May, 2009, the issue of ZDP Shares on 28 July, 2009 and the exercise of some Subscription Shares and the conversion of some CULS in December 2009, the issued share capital of the Company as at 31 March, 2010 comprised 60,000,000 ZDP Shares, 210,331,821 Ordinary Shares and 42,052,534 Subscription Shares. In addition to its issued share capital, the Company at 31 March, 2010 had a nominal amount of £79,997,846 of CULS outstanding and Prime brokerage borrowings of £35,535,000.

15

Due to a further exercise of Subscription Shares subsequent to the Company’s year-end, there were 210,348,227 Ordinary Shares and 42,036,128 Subscription Shares outstanding at the date of this report. Under the Prime Brokerage Agreement with Citigroup, the Company is able to borrow against the value of its investment portfolio in varying amounts and in a variety of currencies at floating rates of interest. As a result, the Company’s capital structure and gearing may vary over time. Under the terms of the Prime Brokerage Agreement, Citigroup must give the Company 364 days notice if it wishes to cease lending to the Company pursuant to Citigroup’s then current margin requirements although it may require the Company to repay its indebtedness within 30 days if Citigroup were to wind up its prime brokerage business. The Board has authorised the Investment Manager to utilise gearing of up to 60%. Gearing is the aggregate amount of any borrowings, the nominal amount of the CULS and the accrued entitlement of the ZDP Shares, less cash, divided by Ordinary Shareholders’ funds. At 31 March, 2010, the Company’s gearing was 44.8%. At 21 July, 2010, the most recent weekly net asset value calculation date for the Company prior to the date of this report, the Company’s gearing was 53.9%.

Risk

In the opinion of the Directors of the Company, an investment in the Ordinary Shares of the Company entails a greater than average degree of risk, in the context of the investment trust industry, principally because the Company employs substantial levels of gearing. The Directors believe, however, that this risk is ameliorated by the fact that the utility companies in which the Company invests provide essential services, have substantial real assets and typically pay dividends. The share prices of the listed utility companies in which the Company invests also tend to be, on average, less volatile than the broader equity markets. In the opinion of the Directors, an investment in the Subscription Shares of the Company also entails a greater than average degree of risk, principally because they are a highly geared security and may expire with no value. In the opinion of the Directors, an investment in either the ZDP Shares of EW&PO Finance plc or the CULS of the Company entails less risk of a loss of capital than an investment in the Ordinary Shares or Subscription Shares of the Company.


16

Ecofin Water & Power Opportunities plc Report and Accounts 2010

Directors Ian Barby^+, the Chairman of the Company, was a ViceChairman of Mercury Asset Management plc from 1990 to 1998 and subsequently a Managing Director of Merrill Lynch Investment Managers. He is non-executive chairman of INVESCO Perpetual UK Smaller Companies Investment Trust plc and a non-executive director of BlackRock World Mining Trust plc, Pantheon International Participations PLC, Schroder Income Growth Fund plc and SR Europe Investment Trust plc. Christopher Jones^+†, was head of investments at Merchant Investors Assurance Company Ltd, a wholly-owned subsidiary of Allianz (UK) Limited, which he joined in 1985, until retiring in 2003. His other directorships are Atlantis Japan Growth Fund Ltd, Cayenne Trust plc, Montanaro European Smaller Companies plc, Montanaro UK Smaller Companies Investment Trust plc and Schroder UK Mid and Small Cap Fund plc. Bernard Lambilliotte (Alternate Director to John Murray), is the Senior Managing Director, Chief Investment Officer, and one of the founders of Ecofin Limited (Ecofin), the Company’s Investment Manager. Prior to founding Ecofin in 1992, he was an investment manager for Pictet & Cie in Geneva and in London. From 1985 to 1990, he was an investment banker with Swiss Bank Corporation in London and Paris. He is also a non-executive director of Hamon & Cie (International) S.A., an international power engineering group based in Brussels. Federico Marescotti^, has, since 1999, been the Executive Chairman of Vela Capital, a private equity group. He is also Executive Chairman and Managing Director of Friulia, one of Italy’s leading financial holding companies. From 1986 to 1992, he was Managing Director of Saceccav Depurazioni Sacede s.p.a., an Italian company which builds and operates water and refuse facilities for local governments which was acquired by the German multi-utility company, RWE A.G., in 1991. At RWE, he was Managing Director of RWE Ambiente Italia s.p.a. He is a director of JP Morgan European Fledgeling Investment Trust plc and Dunedin Enterprises Investment Trust plc. He is also a director of other unquoted companies.

John Murray, is the Chairman and one of the founders of Ecofin Limited (Ecofin), the Company’s Investment Manager. Prior to founding Ecofin in 1992, he was head of the corporate finance department and a member of the management committee of Swiss Bank Corporation’s London-based investment banking business. Before joining Swiss Bank Corporation in 1987, he was an investment banker with Morgan Stanley Group, Inc. from 1975 to 1986. He is a non-executive director of Ecofin Global Utilities Hedge Fund Limited, Ecofin North American Utilities Hedge Fund Limited, Ecofin Special Situations Utilities Fund Limited, Ecofin China Power & Infrastructure Fund Limited and BlackRock New Energy Investment Trust plc. He is chairman of EFMI Global Utilities and Infrastructure Funds plc, a fund managed by an affiliate of Ecofin. Martin Nègre, was the Chairman of the Company until 31 March, 2005. He is Chairman of Ecofin Global Utilities Hedge Fund Limited, Ecofin North American Utilities Hedge Fund Limited, Ecofin Special Situations Utilities Fund Limited and Ecofin China Power & Infrastructure Fund Limited and a director of EFMI Global Utilities and Infrastructure Funds plc. He was, until June 2001, the chief executive officer of Ondeo Services UK (then known as Northumbrian Water Group plc), a subsidiary of Suez Lyonnaise des Eaux, and Suez Lyonnaise’s chief corporate representative in the UK. Prior to that, he was Suez Lyonnaise’s international director in Paris and then its Asia-Pacific president in Hong Kong and Singapore. Before that, he spent 21 years with Alsthom and then GEC Alsthom, the Anglo/French engineering company, where he was a senior executive and the chief executive officer of the power generation division. He is a non-executive director of Northumbrian Water Group plc, Promethean plc and Bolux SICAV Luxembourg. On 24 June, 2010, he was appointed a director of Hansen Transmissions International NV, the Company’s second largest investment. ^ Independent. † Senior Independent Director. + Audit Committee member. All Directors are Non-Executive. The dates of appointment of all Directors, other than the Alternate Director, are given on page 26. All Directors are Directors of the Company’s subsidiary, EW&PO Finance plc except for Mr Lambilliotte (who is an alternate for Mr Murray).


Ecofin Water & Power Opportunities plc Report and Accounts 2010

17

Report of the Directors The Directors submit their annual report together with the audited financial statements of the Company for the year ended 31 March, 2010.

Activities and status

The principal activity of the Company, as an investment trust company, is portfolio investment and the Company is registered as an investment company under Section 833 of the Companies Act 2006. The Company’s investments are managed by Ecofin Limited. The Directors have conducted the affairs of the Company with a view to obtaining approval for the Company to be treated as an investment trust for the purposes of Sections 1158/1159 Corporation Tax Act 2010 (previously Section 842 of the Income and Corporation Taxes Act 1988) so as to be exempt from United Kingdom taxation on capital gains. Such approval is only given retrospectively in respect of each accounting period of the Company and does not preclude HM Revenue & Customs (HMRC) opening a subsequent enquiry into the Company’s tax return. HMRC approval has been given up to and including the year ended 31 March, 2009. At 31 March, 2009 the Company’s Income and Capital Shares came to the end of their lives and, as a result, in April 2009 the Company’s share capital was reorganised as more fully explained on pages 14 and 15. On 19 May, 2009, EW&PO Finance plc, a wholly-owned subsidiary, was incorporated. On 1 October, 2009 the Company’s Memorandum of Association was deleted and the Articles of Association amended accordingly.

Duration of the Company

The Company has an unlimited life.

Investment objectives and policy

The investment objectives of the Company are to achieve a high, secure dividend yield on its investment portfolio and to realise long-term growth in the capital value of the portfolio for the benefit of shareholders while taking care to preserve shareholders’ capital. The Company’s assets are primarily invested in the equity and equity-related securities of utility and utility-related companies although the Company may also invest, to a limited extent, in the debt securities of such companies and may hold significant cash or cash equivalent positions from time to time. For purposes of investment, utility companies are those involved in the generation, transmission, distribution and supply of electric power; the abstraction, treatment and distribution of water; the treatment of waste water and waste; the distribution of natural gas; and the transmission of energy. Utility-related companies are those that supply equipment, technology, fuel or services to utility companies or which enjoy natural monopolies in the provision of essential infrastructure services.

While the Directors expect that the Company’s investments will principally be in companies listed on recognised stock exchanges in the United Kingdom, Continental Europe, the United States, Canada and other OECD countries, the Company may invest up to 20% of its gross assets, at the time of acquisition, in the securities of companies quoted on recognised stock exchanges in non-OECD countries. The Company may also invest in unquoted securities, although no new unquoted investment will be made if, as a result, the aggregate value of unquoted securities held by the Company would exceed 25% of the Company’s gross assets as at the date of the investment. The Company may also invest up to 15% of its gross assets in collective investment vehicles, including UK investment companies, other closed-end funds and funds managed by the Investment Manager. In the latter case, however, the Company will not pay investment management fees or performance fees to the Investment Manager with respect to such investments. The Company takes advantage of the highly fragmented nature of the global utilities sector – in which most companies are local, regional or national, but not global, companies – to invest in a portfolio diversified with respect to country, sub-sector of the global utilities sector, company size and regulatory regime. The total of investments in any one country is unlikely to exceed 40% of the Company’s gross assets, although the Company may, with the approval of the Directors, have an exposure to a single country of up to 50% of the Company’s gross assets. No single investment by the Company will exceed 15% of the Company’s gross assets at the time of the most recent acquisition of shares or other securities in such an investment. The Company employs substantial levels of gearing to enable the Company to earn a high level of dividend income and to offer the Company’s Ordinary Shareholders a geared return on their investment. The Directors believe that the use of gearing is justified given the nature of most of the companies in which the Company invests; that is, utility companies which provide essential services, operate in regulated markets, have relatively low levels of business risk and pay dividends. The level of gearing utilised and the nature and term of any borrowings is the responsibility of the Directors. In current market conditions, the Directors have authorised the Investment Manager to maintain gearing (borrowings, the nominal value of the Company’s Convertible Loan Stock (CULS) and the accrued entitlement of its Zero Dividend Preference Shares (ZDP Shares), less cash, divided by Ordinary Shareholders’ funds) of up to 60%. The Company’s accounts are maintained in sterling. Many of the Company’s investments are likely to be denominated and quoted in currencies other than sterling, but the Company does not pursue an active hedging policy against fluctuations in exchange rates, although it may do so in certain circumstances. The Company’s exposure to fluctuations in exchange rates will, to some extent, be mitigated by any borrowings in currencies other than sterling and any long-term currency hedges.


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Ecofin Water & Power Opportunities plc Report and Accounts 2010

Report of the Directors continued

The Company may make use of derivative instruments, such as options, financial futures and contracts for difference, in pursuit of its investment objectives and for the management of risk within limits set by the Directors. It is the policy of the Company that the total exposure to such derivative instruments will not exceed 20% of the Company’s gross assets less current liabilities. The Company may also engage in short-selling of individual securities or of financial indices within limits set by the Directors. It is the policy of the Company that its total exposure to short positions will not exceed 30% of the Company’s gross assets less current liabilities. Total exposure is the sum of the Company’s investments, the absolute value of its short positions (if any) and, in the case of derivatives, the value of the underlying securities adjusted for volatility.

Business review of the year

A business review of the year and commentary on the future outlook are presented in the Chairman’s statement on pages 2 to 4, the Investment Manager’s report on pages 5 to 9 and, the financial instruments and capital disclosures set out in note 23 to the financial statements on pages 46 to 50. These provide details of the Group’s key performance indicators (its net asset values per share), and principal uncertainties and risks facing the Group (market price, liquidity, exchange rates, interest rates, credit risk and (where applicable) derivative exposure). The principal non-financial risks the Company faces include breach of regulatory requirements (especially loss of Section 1158 Corporation Tax Act 2006 status (formerly Section 842 ICTA 1988)), loss of reputation or goodwill, failure of systems and/or controls, and loss of key personnel (especially at the Investment Manager). The Company manages these risks by requiring third party service providers to report on their activities and ability to continue to provide satisfactory services to the Company at least annually, to notify the Chairman of any proposed changes in key staff, and to provide detailed reports on any breach of regulation and the remedial action taken.

Results and dividend

The revenue which was available for dividend payments on Ordinary Shares for the year ended 31 March, 2010, after taxation, amounted to £12,368,000 (2009: Ordinary and Income Shares £16,362,000). In respect of the year to 31 March, 2010 an interim dividend of 2.50p per Ordinary Share (2009: 2.50p) was paid on 30 November, 2009 and a second interim dividend of 3.00p per Ordinary Share (2009: 2.50p) was paid on 31 May, 2010. Income Share interim dividends for the year to 31 March, 2009 (not applicable for the year to 31 March, 2010) of 2.00p were paid on each of 29 August, 2008, 28 November, 2008 and 27 February, 2009, and an interim dividend of 2.80p per Income share paid on 31 March, 2009. The Directors are not proposing the payment of any final dividend for the year to 31 March, 2010.

Directors

The Directors of the Company, all of whom were in office throughout the year, are listed on page 16 with brief biographies. Christophe Boucher, an alternate for Patrick Blanchard, resigned on 30 September, 2009 and Patrick Blanchard resigned as a Director on 1 January, 2010. At the forthcoming Annual General Meeting, Ian Barby retires by rotation in accordance with the Company’s Articles of Association, and John Murray and Martin Nègre retire in accordance with the Listing Rules. Being eligible, all retiring Directors offer themselves for re-election. Without each of the aforementioned Directors participating, the other members of the Board evaluated their performance as Directors of the Company and consider that the Company has benefited significantly from their services and contribution to the Board’s deliberations. The Board is pleased to recommend that shareholders vote in favour of the re-election of all retiring Directors. The powers of the Directors are set out in the Articles of Association which are publicly available at Companies House and comprise the usual general powers given to Directors to manage the affairs of a Company, to delegate power to committees of the Board or individual Directors, and to appoint alternates. There are no specific rules on how these powers are to be exercised.


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Ecofin Water & Power Opportunities plc Report and Accounts 2010

Directors’ interests

The beneficial interests of the Directors in the shares and securities of the Company, as declared and recorded in accordance with the Companies Act 2006, are set out below:

Ian Barby Christopher Jones** Federico Marescotti John Murray Martin Nègre

Ordinary Shares of 0.1p each 31 March, 1 April, 2010 2009

16,064 6,150 15,450 – 286,000

– 6,150 15,450 – 286,000

Subscription Shares of 1p each 31 March, 1 April, 2010 2009

– – – – –

350,000 51,230 3,090 – 57,200

6% Convertible Unsecured Zero Dividend Preference Loan Stock (ZDP) Shares of 100p each* 31 March, 1 April, 31 March, 1 April, 2010 2009 2010 2009

200,000 50,000 – – 250,000

– – – – –

– – – – –

– 80,000 – – –

* The ZDP Shares are issued by EW&PO Finance plc, a wholly-owned subsidiary of the Company. ** Includes 30,000 ZDP Shares held non-beneficially.

Ian Barby Christopher Jones Federico Marescotti John Murray Martin Nègre

Income Shares of 1p each 31 March, 1 April, 2010 2009

– – – – –

– 7,000 – – –

Capital Shares of 1p each 31 March, 1 April, 2010 2009

– – – – –

70,000 5,000 – – 115,000

Deferred Shares of 0.1p each 31 March, 1 April, 2010 2009

– – – – –

– 23,850 84,550 – 2,464,000

The Deferred Shares were created in connection with the reorganisation of the Company and the conversions of Income Shares and Capital Shares into Ordinary Shares in June 2005, July 2008 and April 2009. All the Deferred Shares were repurchased by the Company on 29 April, 2009 and subsequently cancelled. Ecofin Holdings Limited, a company in which John Murray and Bernard Lambilliotte (alternate for Mr Murray) have an interest, is interested in 1,316,199 Ordinary Shares and 263,239 Subscription Shares. The International Pension Plan of Ecofin Holdings Limited, of which John Murray and Bernard Lambilliotte are members, is interested in 4,631,500 Ordinary Shares, 1,126,300 Subscription Shares and £1,000,000 nominal amount of CULS. Ecofin Limited (in which John Murray and Bernard Lambilliotte have an interest through their interest in Ecofin Holdings Limited) is interested in 366,052 Ordinary Shares, 873,210 Subscription Shares, and £2,000,000 nominal amount of CULS. At the date of this report, The Cayenne Trust plc, of which Christopher Jones is a Director, was interested in 1,500,000 Ordinary Shares of the Company, 1,450,000 Subscription Shares, and £2,000,000 nominal amount of CULS. In addition, Bolux Utilities S.A., a Luxembourg Sicav of which Martin Nègre is a director, owned £1,200,000 nominal of CULS and 550,000 Subscription Shares. Martin Nègre has a consultancy agreement with the Company. The non-executive Directors hold letters of appointment which will be available for inspection at the Annual General Meeting. Save as disclosed above, no Director was a party to, or had an interest in, any contract or arrangement with the Company.


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Ecofin Water & Power Opportunities plc Report and Accounts 2010

Report of the Directors continued

Substantial shareholdings

At 31 March and 20 July, 2010 the disclosable interests in the voting rights of the Company as notified to the Company or ascertained by the Company in accordance with Chapter 5 of the UK Listing Authority’s Disclosure Rules and Transparency Rules are shown in the following table: 31 March, 2010 Ordinary Shares Holder of 0.1p each %TVR*

Invesco Asset Management Ltd Artemis Investment Management Ltd Dexia Credit Local Cadogan Management LLC M & G Investment Management Ltd Pictet Asset Management Ltd Legal & General Investment Management Ltd (UK) East Riding Pension Fund

60,360,316 14,351,187 12,765,004 11,635,720 9,200,000 11,255,753 8,192,800 7,123,955

28.70 6.82 6.07 5.53 4.37 5.35 3.90 3.39

20 July, 2010 Ordinary Shares of 0.1p each %TVR*

60,406,608 15,126,244 12,765,004 11,635,720 9,200,000 8,804,804 8,034,332 7,441,592

28.72 7.19 6.07 5.53 4.37 4.19 3.82 3.54

* TVR = total voting rights. The Company’s Subscription Shares do not carry voting rights.

Capital structure

The issued capital of the Company at 31 March, 2010 comprised 210,331,821 Ordinary Shares, 42,052,534 Subscription Shares, 60,000,000 ZDP Shares (issued by EW&PO Finance plc, a wholly-owned subsidiary of the Company) and £79,997,846 nominal amount of CULS. On 30 April, 2009, pursuant to tender offers to all Income Shareholders and Capital Shareholders for up to 100% of their holdings, the Company purchased and subsequently cancelled 28,738,131 Income Shares at a price of 100p per Income Share and 12,263,835 Capital Shares at a price of 464.04060487p per Capital Share. At the same time, pursuant to an offer to all Income Shareholders and Capital Shareholders to convert their shares into Ordinary Shares, 3,685,122 Income Shares and 1,142,760 Capital Shares were converted into a total of 6,158,846 Ordinary Shares and 42,119,974 Deferred Shares. The Deferred Shares in issue at 29 April, 2009, which were created through the conversion of Income Shares and Capital Shares into Ordinary Shares on 28 June, 2005, 30 July, 2008 and 29 April, 2009, were repurchased by the Company and cancelled on 7 May, 2009. On 15 May, 2009, the Company issued 42,063,749 Subscription Shares to Ordinary Shareholders by way of a bonus issue on the basis of one Subscription Share for every five Ordinary Shares held on 15 May, 2009. On 29 July, 2009, the Company issued £80,000,000 nominal amount of 6% Convertible Unsecured Loan Stock due 2016, of which £79,997,846 remains in issue at the date of this report, and EW&PO Finance plc, a wholly-owned subsidiary of the Company, issued 60 million Zero Dividend Preference Shares due 2016 at a price of 100p per share. On 30 November, 2009, the Company issued 12,462 Ordinary Shares following the election to subscribe by holders of 11,215 Subscription Shares, and to convert by holders of £2,154 nominal of CULS, for Ordinary Shares. On 3 June 2010, the Company issued 16,406 Ordinary Shares in the capital of the Company following the election to subscribe by holders of 16,406 Subscription Shares. Following the tender offers, the conversions, the repurchase of the Deferred Shares, the bonus issue of Subscription Shares and allotments of Ordinary Shares, the Company’s authorised share capital comprises 959,088,059 Ordinary Shares of 0.1p each, 58,235,990 Subscription Shares of 0.1p each and 537,675,951 Deferred Shares of 0.1p each. Of these 210,348,227 Ordinary Shares and 42,036,128 Subscription Shares are issued and fully paid as of the date of this report. None of the Deferred Shares are in issue.

Attributes of the Company’s shares

Ordinary Shares Each Ordinary Share is entitled to one vote in a general meeting of the Company. They are entitled to such dividends as the Directors may declare and to participate in the Company’s capital growth. On a winding up, after settling amounts due to EW&PO Finance plc, holders of CULS and all other liabilities, they are entitled to a proportion of any remaining assets.


Ecofin Water & Power Opportunities plc Report and Accounts 2010

Subscription Shares The Subscription Shares carry no rights whatsoever other than a right to subscribe for one Ordinary Share for each Subscription Share held.

Corporate Governance

ZDP Shares The ZDP Shares, issued by the Company’s subsidiary EW&PO Finance plc, are not entitled to participate in the revenue or capital profits of the Group. They carry no rights to notice of or voting at general meetings of either the Company or EW&PO Finance plc, but are entitled to vote at separate meetings of ZDP Shareholders. They will mature on 31 July, 2016 and have a fixed return.

Creditors’ payment policy

There are no restrictions on transfers of any of the above Shares other than a) transfers for more than one class of shares, b) transfers to more than four joint transferees, c) transfers of shares which are not fully paid up, subject to a lien, or in default of Section 793 of the Companies Act 2006, d) transfers which, if refused, would prevent dealings in listed shares on a proper and open basis, and e) dealings by Directors, Persons Discharging Managerial Responsibilities and connected persons which would or might constitute insider dealing or market abuse, or were otherwise precluded by the rules of the UK Listing Authority. Neither the Company nor the Directors are aware of any agreements or arrangements with or between shareholders which restrict the transfer of Shares, or which would take effect, alter or terminate in the event of a change of control of the Company.

EW&PO Finance plc

EW&PO Finance plc, a wholly-owned subsidiary of the Company, has an initial capital base of £50,000 divided as to 50,000 Ordinary Shares, all of which are beneficially owned by the Company. None of the Directors has any beneficial interest in the share capital of EW&PO Finance plc, nor does any Director have a service agreement with that company. The interests of the Directors in the share capital and securities of the parent company are shown on page 19.

Investment Management Agreement

The Investment Manager, Ecofin Limited, provides discretionary fund management services under an Investment Management Agreement entered into on 6 July, 2009, terminable by either party on 6 months’ notice, effective 29 July, 2009. Brief details of the terms of the Investment Management Agreement are given in note 6 to the financial statements and details of fees paid to the Investment Manager are given in note 3 to the financial statements. Having reviewed the performance of the Investment Manager for the year to 31 March, 2010, the Directors are satisfied that the continued appointment of the Investment Manager on the terms agreed is in the best interests of the Company and its shareholders.

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The Company’s statement on corporate governance, which forms part of this Directors’ Report, is set out on pages 24 and 25. It is the Company’s policy to obtain the best terms for all business, including purchases of investments, and to abide by those agreed terms. As the Company is an investment trust, it does not have any trade creditors.

Statement of Directors’ responsibilities for the annual report

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards (IFRS) adopted by the European Union. Under company law the Directors must not approve the Group financial statements unless they are satisfied that they present fairly the financial position, financial performance, and cash flows of the Group for that period. In preparing the Group financial statements, 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; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • state that the Group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements; • provide additional disclosures when compliance with the specific requirements of IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s financial position and financial performance; and • make judgements and estimates that are reasonable and prudent. The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy, at any time, the financial position of the Group and to enable them to ensure that the Group’s financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulations. The Directors are also responsible for ensuring that the Report of the Directors is prepared in accordance with company law in the United Kingdom and that the Annual Report includes information required by the Listing Rules of the Financial Services Authority. They are also responsible for safeguarding the assets of the Company and the Group and for taking such steps as are reasonably open to them for the prevention and detection of fraud and other irregularities.


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Ecofin Water & Power Opportunities plc Report and Accounts 2010

Report of the Directors continued

The Directors are responsible for the maintenance and integrity of the corporate and financial information about the Company included on the Investment Manager’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Under applicable laws and regulations, the Directors are responsible for preparing the report of the Directors, the Directors’ remuneration report and the Corporate governance statement (which are set out on pages 24 and 26).

Auditor information

Each Director confirms that, so far as he is aware, there is no relevant audit information of which the Company’s auditors are unaware and that he has taken all steps he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

Directors’ Confirmation Statement

The Directors listed on page 16, as the persons responsible within the Company, hereby confirm to the best of their knowledge: a) that the financial statements within this Annual Report of which this statement forms part have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the Group; and b) the Management Report, which comprises the Chairman’s statement, Investment Manager’s report, Business review and note 23 to the financial statements, includes a fair review of the development and performance of the business and position of the Company and the Group, together with the principal risks and uncertainties which they face.

Auditor

Ernst & Young LLP, registered auditor, has indicated its willingness to continue in office. In accordance with Section 489 of the Companies Act 2006, resolutions will be proposed at the forthcoming Annual General Meeting to re-appoint Ernst & Young LLP as independent auditor and to authorise the Directors to determine the auditor’s remuneration for the ensuing year.

Financial Statements

These financial statements have been prepared under International Financial Reporting Standards as adopted by the European Union (IFRS) for groups of companies. Previous financial statements were prepared under UK GAAP.

Annual General Meeting

The notice convening the Annual General Meeting (AGM) of the Company for 6 September, 2010 is set out at the end of this document.

Ordinary business

Resolutions 1 to 7 in the notice convening the AGM set out the ordinary business to be transacted at the meeting. These resolutions pertain to the receipt and adoption of the annual report and accounts, the approval of the Directors’ remuneration report, the re-elections of Ian Barby, John Murray and Martin Nègre as Directors, the re-appointment of Ernst & Young LLP as independent auditor and authority for the Directors to determine the auditor’s remuneration.

Special business

Directors’ authority to allot shares Paragraph (i)(a) of Resolution 8, to be proposed as an ordinary resolution, will authorise the Directors to allot unissued shares up to a nominal amount of £70,000 for general purposes. This would allow the issue of 70,000,000 Ordinary Shares, which would represent approximately one-third of the number of Ordinary Shares in issue as at 30 July, 2010. In addition, in accordance with the guidance from the Association of British Insurers (ABI) on the expectations of institutional investors in relation to the authority of directors to allot shares, paragraph (i)(b) of Resolution 8 will authorise the Directors to allot additional shares up to a nominal amount of £70,000. However, the Directors will only be able to allot those shares for the purposes of a rights issue in which the new shares are offered to Ordinary Shareholders or (if applicable) holders of other securities entitled to participate in such issue in proportion to their existing shareholdings. As a result, if Resolution 8 is passed, the Directors could allot shares representing up to two-thirds of the current issued Ordinary Share capital pursuant to a rights issue. However, if the Directors do conduct a rights issue and the number of shares issued exceeds one-third of the issued Ordinary Share capital and the monetary proceeds from the rights issue exceed one-third of the Company’s pre-issue market capitalisation, then, in accordance with the ABI’s guidance, all the Directors will offer themselves for re-election at the Annual General Meeting following the decision to make the rights issue. The authority, if granted, will run until the Annual General Meeting of the Company in 2011 or 30 September, 2011, whichever is the earlier.


Ecofin Water & Power Opportunities plc Report and Accounts 2010

Disapplication of pre-emption rights Resolution 9, to be proposed as a special resolution, will empower the Directors to allot equity securities for cash, otherwise than to existing shareholders on a pro rata basis or in accordance with their rights, (i) by way of a rights issue (subject to certain exclusions), (ii) by way of an open offer or other offer of securities (not being a rights issue) in favour of ordinary shareholders and (if applicable) holders of other relevant securities of the Company in proportion to their shareholdings (subject to certain exclusions) and (iii) other than pursuant to (i) and (ii) up to an aggregate nominal amount of £21,000, which would represent approximately 10% of the Company’s issued Ordinary Share capital as at 30 July, 2010. While the Directors have no present intention of using such power, it will provide a degree of flexibility to increase the assets of the Company by the issue of new shares for cash, should any favourable opportunities arise to the advantage of shareholders. Under no circumstances will the Directors use the power to issue shares at a price which is less than the net asset value attributable to the shares of the relevant class at the time of issue. Under the Companies Act 2006 the Company may hold shares which it buys back in treasury and then sell or transfer them at a later date rather than cancelling them. The Act requires such sales and transfers to be on a pre-emptive, pro rata basis to existing shareholders unless shareholders agree by special resolution to disapply such pre-emption rights. Accordingly, for the reason given above, in addition to giving the Directors power to allot unissued shares on a non-pre-emptive basis, Resolution 9 will, if passed, empower the Directors to sell or transfer any shares held in treasury on a non-pre-emptive basis subject to the overall limit described above. The power, if granted, will run until the Annual General Meeting of the Company in 2011 or 30 September, 2011, whichever is the earlier. As at 31 July, 2010, the Company held no equity securities in treasury. Authority to purchase own shares The Board recommends the renewal of the Company’s existing authority to make market purchases of its shares. Resolution 10, to be proposed as a special resolution, will, if passed, authorise the Company to make market purchases of up to 31,531,200 Ordinary Shares and/or Subscription Shares, which would represent approximately 14.99% of the number of Ordinary Shares in issue as at 30 July, 2010. No shares have been repurchased under the existing authority. Purchases of shares will be made within guidelines established from time to time by the Board, but the Board will only exercise the authority if, in its opinion, it would be in the interests of the Company to do so. Purchases will only be made through the market for cash at prices below the prevailing net asset value per share, thereby resulting in an increased net asset value per share, and within the price constraints set out in sub-paragraphs (b) and (c) of the resolution.

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Under the Listing Rules of the Financial Services Authority, the price which may be paid for shares purchased pursuant to the share buy-back authority must not be more than 5% above the average of the market values of the relevant class of shares for the five business days before any purchase is made. Any shares so purchased may be cancelled or, if the Directors so determine and subject to the provisions of the Companies Act 2006 and any applicable regulations of the FSA, be held as treasury shares. All voting rights on treasury shares would be suspended and no distribution in respect of treasury shares (either by way of dividend or on a winding-up) would be permitted. The authority, if granted, will run until 30 September, 2011 or, if earlier, the conclusion of the Annual General Meeting of the Company in 2011. Notice period for meetings Resolution 11, to be proposed as a Special Resolution, is a resolution to allow the Company to hold general meetings (other than Annual General Meetings) on 14 clear days’ notice. Before the coming into force of the Shareholders’ Rights Regulations on 3 August 2009, the Company was able to call general meetings other than an Annual General Meeting on 14 clear days’ notice without obtaining shareholder approval. Changes to the Companies Act 2006 made by the Shareholders’ Rights Regulations increased the notice period required for general meetings of the Company to 21 days unless shareholders approve a shorter notice period, which cannot, however, be less than 14 clear days. Annual General Meetings will continue to be held on at least 21 clear days’ notice. In order to preserve the Company’s ability to call general meetings (other than an Annual General Meeting) on 14 clear days’ notice, Resolution 11 seeks such approval. The shorter notice period would not be used as a matter of routine for such meetings, but only where the flexibility is merited by the business of the meeting and is thought to be to the advantage of shareholders as a whole. If granted, the approval will be effective until the Company’s next AGM, when it is intended that a similar resolution will be proposed. In order to be able to call a general meeting on less than 21 clear days’ notice, the Company must make a means of electronic voting available to all shareholders for that meeting. The Directors recommend that shareholders vote in favour of all resolutions being put to the Annual General Meeting, as they themselves intend to do in respect of their own beneficial shareholdings. On behalf of the Board

Phoenix Administration Services Limited Secretary 30 July, 2010


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Ecofin Water & Power Opportunities plc Report and Accounts 2010

Corporate governance statement The corporate governance statement forms part of the Report of the Directors. The Board is committed to high standards of corporate governance. The Board has put in place a framework for corporate governance which it believes is appropriate for an investment trust whose principal activity is portfolio investment and which will enable the Company to comply with the relevant provisions of the Combined Code, issued by the Financial Reporting Council (FRC) in June 2008, as well as the Code of Corporate Governance published by the Association of Investment Companies (the AIC Principles). The Board has carried out a review of the provisions of the Combined Code, the AIC Principles and paragraph 9.8.6 of the Listing Rules, and confirms that it complies with these, except as explained below where the Company has not complied or does not believe it appropriate to do so. As the Company has no executive Directors, the provisions of the Combined Code in relation to executive Directors’ remuneration and the role of the Chief Executive do not apply to the Company. Despite the provisions of code D.2.2, the Company will provide printed summaries of proxy voting at general meetings, which will also be posted on the Company’s website after the meeting, rather than reading out proxy voting results at the meeting after each Resolution has been voted on.

The Board and its committees

The Board comprises five non-executive Directors, three of whom are deemed by the Board to be independent. Christopher Jones is the Senior Independent Director. The terms of reference of committees of the Board are available from the registered office of the Company. The Directors ordinarily meet as a Board four times a year, at which time they review the Company’s investments and other matters of relevance to the Company. Between these meetings, the Board is in regular contact with the Investment Manager. There is a written list of matters reserved for decision by the Board, which includes decisions relating to the determination of investment policy, any change in investment strategy, gearing policy, the repurchase of shares, and the entering into of material contracts. In addition, changes relating to the Company’s capital structure, circulars to shareholders, listing particulars, relevant press releases and any significant changes in accounting policies must be approved by the Board. All Directors have access to the advice and services of the Company Secretary and, where necessary in the furtherance of their duties, the Directors may seek independent professional advice at the expense of the Company. Subsequent to the year-end, the Board conducted a formal appraisal of its performance as a whole, of its committees and of individual Directors. The appraisals were led by the Chairman through soliciting the views of individual Directors, the results of which were then openly discussed in a Board meeting. Without the Chairman present, the Board verbally reviewed his performance under the leadership of Christopher Jones, the Senior Independent Director.

The Board is satisfied that all Directors have sufficient knowledge and expertise for their roles and that the structure and operation of the Board and its committees remains effective. Directors are appointed for an initial term covering the period from the date of appointment to the next Annual General Meeting, at which they are required to submit themselves for election by shareholders. The Company’s Articles of Association provide that one-third of the Board should retire by rotation each year and, other than for the Directors representing or connected with the Investment Manager, who are required to stand for re-election each year under FSA Listing Rules, all Directors are required to submit themselves for re-election at least every three years unless they have served on the Board for nine years or more whereupon they are required to stand for election annually. The Board as a whole fulfils the function of a Nomination Committee and therefore the establishment of a separate committee is not considered necessary. The Board has an agreed procedure for the appointment of non-executive Directors. The Audit Committee comprises Christopher Jones as Chairman, Ian Barby and, following the resignation of Patrick Blanchard, Federico Marescotti. It is the responsibility of the Audit Committee to ensure that the Company maintains the highest standards of integrity and financial reporting. The Audit Committee meets representatives of the Investment Manager at least twice a year and receives reports on the quality and effectiveness of the accounting records and management information maintained on behalf of the Company. Since the Company’s accounting and custodial activities are carried out by third-party service providers, the Board does not consider it necessary to have a separate internal audit function or whistleblowing procedures. Mr Barby provides significant input at meetings of the Audit Committee and the Board is therefore satisfied for him to be a member of that Committee notwithstanding Principle 5 of the AIC Principles. The Audit Committee reviews the internal control and risk management systems; accounting policies; consistency and integrity of published financial information; auditor qualifications and objectivity; and the effectiveness of the audit process as applied to the Company. Having reviewed the services provided by the external auditor, including the terms of their engagement and any non-audit work provided to the Company, the Audit Committee is satisfied as to the independence of the external auditor and recommends their re-appointment at the forthcoming Annual General Meeting. Details of non-audit fees paid to the external auditor are set out in note 4 on page 37.


Ecofin Water & Power Opportunities plc Report and Accounts 2010

The Board as a whole fulfils the function of a Remuneration Committee. The Remuneration Committee, which is chaired by Ian Barby, is responsible for monitoring, reviewing and making recommendations to the Board on all elements of the remuneration of the Directors and the Company’s advisers. Given Mr Barby’s broad industry knowledge the Board considers his chairmanship of the Committee, notwithstanding the AIC Principles, to be desirable and in the interest of the Company. The Board as a whole also acts as the Management Engagement Committee under the chairmanship of Ian Barby. The following table sets out the number of meetings attended by Directors:

Management Board Audit Engagement Regular Committee Committee

Number of meetings Ian Barby Patrick Blanchard* Christopher Jones Federico Marescotti John Murray Martin Nègre

6 6 5 6 6 6 6

2 2 2 2 n/a n/a n/a

1 1 1 1 1 n/a n/a

* Resigned 1 January, 2010.

Internal control

The Board confirms that there is an ongoing process for identifying, evaluating and managing those risks that are significant for the Company and that this process reflects the guidance provided by the FRC (Internal Control, Revised Guidance for Directors on the Combined Code) in October 2005. This process was in place during the year ended 31 March, 2010, and during the period from that date to the date of this annual report and financial statements, and has been reviewed by the Board. The Board has ultimate responsibility for the system of internal controls adopted by the Company and for reviewing the effectiveness of these controls. The Board sets the Company’s investment strategy and regularly reviews the financial performance of the Company, and other matters relevant to the Company’s operations, with the Investment Manager and with other providers of services to the Company, as appropriate. A key element of the system of controls adopted by the Board is the employment of third parties to provide services to the Company and the establishment of clearly defined responsibilities and reporting procedures between the Board and these third parties, and among the third parties themselves. This means that any material transaction undertaken on the Company’s behalf is done so with the knowledge and approval of more than one service provider to the Company.

25

The Board has contractually delegated the management of the Company’s investment portfolio to the Investment Manager, Ecofin Limited. The Investment Manager does not, however, have custody of the Company’s assets, which are in the custody of an independent custodian, Citigroup, with whom the Company has entered into a Prime Brokerage Agreement. The day-to-day administration of the Company is undertaken by Phoenix Administration Services Limited (the Administrator), which also provides the Company with company secretarial services. The Board has entered into contracts with each of these service providers after full and careful consideration of the services provided and the performance of these service providers is reviewed regularly. The Investment Manager, Prime Broker and Administrator each maintain their own systems of internal and financial controls. The system of controls the Board has adopted is designed to manage, rather than to eliminate, the risk that the Company will be unable to meet its business objectives, and can provide reasonable, but not absolute, assurance against any material misstatement or loss. The Board has reviewed the operation and effectiveness of the Company’s system of internal controls during the period and assesses and manages the Company’s key risks on an ongoing basis. The Audit Committee has established a framework to provide it and the Board with reasonable assurances as to the effectiveness of the internal controls operated by third-party service providers.

Relations with shareholders

Communication with shareholders is given a high priority by the Board, and members of the Board and the Investment Manager have regular contact with the Company’s institutional shareholders. The Board supports the principle that the Annual General Meeting be used to communicate with investors, and all shareholders are encouraged to attend and vote. Directors are available at the Annual General Meeting to discuss issues affecting the Company with shareholders.

Going concern

The Directors have carefully reviewed the Company’s current financial resources, the majority of net assets being securities which are traded on recognised stock exchanges, and the projected expenses of the Group for the next 12 months. On the basis of that review the Directors are satisfied that the Company’s resources are adequate for continuing in business for the foreseeable future, and that it is appropriate to prepare the Group’s financial statements on a going concern basis.


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Ecofin Water & Power Opportunities plc Report and Accounts 2010

Directors’ remuneration report The Board has prepared this report in accordance with the requirements of Section 421 to the Companies Act 2006. An ordinary resolution for the approval of this report will be put to shareholders at the forthcoming Annual General Meeting. The law requires the Company’s auditor to audit certain of the disclosures provided. Where disclosures have been audited, they are indicated as such. The auditor’s opinion is included in its report on page 28. The Company complies with the Combined Code appended to the FSA Listing Rules in respect of directors’ remuneration and the content of the Directors’ remuneration report.

Policy on Directors’ emoluments

Details of individual Directors’ emoluments are set out on page 27 and Directors’ share interests on page 19. Levels of pay have been set which reflect the individual contribution of each Director. Directors’ fees are set at a level believed to be one at which the Company will be able to continue to motivate and to retain its Directors. The Company does not operate any pension schemes, share option schemes, long-term incentive schemes or death benefit schemes for its Directors and the Directors do not receive any performance remuneration from the Company. John Murray and Bernard Lambilliotte are also directors of the Investment Manager, Ecofin Limited, which, in accordance with the terms of the Investment Management Agreement, is entitled to a base annual fee and a performance fee, particulars of which are disclosed in notes 3 and 6 to the financial statements. Directors’ fees are determined within the limit (£200,000 in aggregate) set out in the Company’s Articles of Association. Fees are periodically reviewed by the Board in the capacity of the Remuneration Committee and were last reviewed on 23 March, 2010. As a result of the most recent review, with effect from 1 April, 2010 the fees payable have been increased to annual fees of £30,000 (Chairman of the Board), £25,000 (Audit Committee Chairman) and £22,000 (other Directors). This was the first increase in fees since 2004. Directors and Officers liability insurance is maintained by the Company on behalf of the Directors. No Director is entitled to any compensation on leaving office. It is intended that the above policy will continue for the year ending 31 March, 2011, and subsequent years.

Directors’ service contracts

Non-executive Directors do not have service contracts with the Company, although each has a formal letter of appointment recording the terms on which he serves. Non-executive Directors are required to stand for re-election to the Board at least every three years.

Due for re-election at Annual Director Date of appointment General Meeting

Ian Barby Patrick Blanchard* Christopher Jones Federico Marescotti John Murray Martin Nègre

5 January, 2004 13 February, 2002 5 December, 2001 5 December, 2001 5 December, 2001 5 December, 2001

2010 – 2011 2011 Annually Annually

* Resigned 1 January, 2010.

Your Company’s performance

A graph comparing the total return for the Company’s shareholders with a market index is required to be included in the remuneration report. The graph below compares the share price total return (assuming all dividends are reinvested) to Income, Capital and Ordinary Shareholders compared to the total shareholder return on a notional investment in the FTSE All Share index. The FTSE All Share index is broadly representative of the UK stock market and, as such, is an appropriate benchmark for investors receiving sterling-denominated returns such as those available to shareholders in the Company.

Total shareholder return for Ecofin Water & Power Opportunities plc and the FTSE All-Share index for the five years to 31 March, 2010 700

Capital Share NAV Income Share NAV Ordinary Share NAV FTSE All Share

600 500 400 300 200 100 0

04

05

06

07

08

09

10


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Ecofin Water & Power Opportunities plc Report and Accounts 2010

Directors’ emoluments and benefits for the year ended 31 March (audited) 2010 2009 Other Consultancy Total Consultancy Total Fees payments fees emoluments Fees fees emoluments Non-executive directors £ £ £ £ £ £ £

Ian Barby Patrick Blanchard* Christopher Jones Federico Marescotti John Murray Martin Nègre

25,000 13,125 20,000 17,500 17,500 17,500 110,625

12,500 10,000 10,000 10,000 10,000 10,000 62,500

– – – – – 80,000 80,000

37,500 23,125 30,000 27,500 27,500 107,500 253,125

25,000 17,500 20,000 17,500 17,500 17,500 115,000

– – – – – 80,000 80,000

25,000 17,500 20,000 17,500 17,500 97,500 195,000

* Resigned 1 January, 2010.

Alternate directors are not, under the Company’s Articles of Association, entitled to receive any fees for their services as a Director and no payments have been made to Christophe Boucher or Bernard Lambilliotte. In the year ended 31 March, 2010, the Company issued two prospectuses; one, in April 2009, setting out the terms of the conversion and tender offers for the Company’s Income Shares and Capital Shares, and the other, in July 2009, in connection with the issue of 60 million Zero Dividend Preference Shares by a subsidiary of the Company and £80 million nominal amount of Convertible Unsecured Loan Stock. As a result, the Board met six times during the year instead of four as is customary, had extensive discussions with the Company’s advisers and reviewed all of the documentation associated with the issue of the prospectuses. The amounts shown above under ‘Other payments’ were made for this additional work by the Board. Martin Nègre entered into a consultancy agreement with the Company dated 13 February, 2002, under which he advises the Company on developments in the water, electric power and gas distribution industries and liaises with the Board and the Investment Manager in relation to the same. Martin Nègre is entitled to a payment of £80,000 per annum and this is shown as ‘Consultancy fees’ in the table above. The consultancy agreement is for an indefinite period, but is terminable by either party on three months’ notice and immediately on the occurrence of certain specified events which are usual in the context of an arrangement of this nature. On behalf of the Board

Phoenix Administration Services Limited Secretary 30 July, 2010


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Ecofin Water & Power Opportunities plc Report and Accounts 2010

Independent auditors’ report to the members of Ecofin Water & Power Opportunities plc

We have audited the financial statements of Ecofin Water & Power Opportunities plc for the year ended 31 March, 2010 which comprise the Consolidated statement of comprehensive income, Consolidated and Company balance sheets, the Consolidated and Company cash flow statements, the Consolidated and Company statements of changes in equity and the related notes 1 to 26. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and as regards the parent company financial statements as applied in accordance with the provisions of the Companies Act 2006.

• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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.

• the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006; • the information given in the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements.

Opinion on other matters prescribed by the Companies Act 2006 In our opinion:

Matters on which we are required to report by exception We have nothing to report in respect of the following:

Respective responsibilities of directors and auditors

As explained more fully in the Statement of Directors’ responsibilities set out on page 21, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.

Opinion on financial statements In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 March 2010 and of the Group’s net return for the year then ended; • the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

Under the Companies Act 2006 we are required to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Under the Listing Rules we are required to review: • the directors’ statement, set out on page 25, in relation to going concern; and • the part of the Corporate governance statement relating to the Company’s compliance with the nine provisions of the June 2008 Combined Code specified for our review.

Caroline Gulliver Senior Statutory Auditor for and on behalf of Ernst & Young LLP Statutory Auditor London 30 July, 2010


Ecofin  
Ecofin  

Annual Report 2010

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