Ecofin Water & Power Opportunities : Half-year Report

ECOFIN WATER & POWER OPPORTUNITIES PLC

Half-year Financial Results for the six months ended 31 March, 2016

Announcement of Unaudited Results

This announcement contains regulated information.

Summary of the Half-year to 31 March, 2016

· The Financial Statements of the Company as at 31 March, 2016 have been prepared on a break-up or realisable value basis while the Financial Statements of the Company as at 30 September, 2015 were prepared on a going-concern, fair value basis, as explained in the Chairman's Statement

· The Net Asset Value ('NAV') per Ordinary Share increased by 0.5% and by 3.1% on a total return basis

· The price of an Ordinary Share declined by 0.7%. The total return per Ordinary Share (the change in the share price plus the dividends received and reinvested) was 2.5%

Performance for periods to 31 March, 2016

Ecofin Water & Power Opportunities plc (the 'Company') was launched on 26 February, 2002 as a split capital investment trust with Income and Capital Shares in issue. Its Ordinary Shares were first issued on 29 June, 2005. The performance of the Company and the indices shown below are presented on a total return basis, i.e., assuming a reinvestment of dividends. The indices are net return indices assuming the reinvestment of dividends net of withholding taxes using the tax rates applicable to non-resident institutional investors.

Chairman's Statement

Continuation vote

On 24 June, 2016, a General Meeting of the Company was held for Shareholders to vote on an ordinary resolution that the Company continue in business as a closed-end investment company. The resolution passed with 60.3% of those Shareholders who voted voting in favour of the resolution, 39.7% voting against the resolution and 0.02% abstaining. 78.1% of the Company's shares were voted at the General Meeting.

As a result, the Company will propose a scheme of reconstruction (the 'Scheme of Reconstruction') described in the Circular sent to Shareholders on 31 May, 2016. Should it be approved, the Company will be liquidated and Shareholders will be:

(i) issued with shares in Ecofin Global Utilities and Infrastructure Trust plc ('Ecofin Global'), a newly incorporated UK investment trust which will invest globally in the equity and equity-related securities of listed utility and infrastructure companies and, to a limited extent, in the fixed-income securities of such companies;

(ii) issued with shares in EF Realisation Company Limited ('EF Realisation'), a newly incorporated investment company domiciled in Guernsey, Channel Islands, which will hold a portfolio of illiquid assets currently held by the Company; and

(iii) offered a cash exit for up to 35% of the issued share capital of the Company.

Ecofin Global will have an unlimited life, but will hold a continuation vote at its Annual General Meeting in 2019 and every five years thereafter. Its shares will be listed on the premium segment of the London Stock Exchange. EF Realisation is expected to have a life of two years and will be a liquidating vehicle; that is, it will seek to achieve an orderly realisation of its portfolio and to distribute the net proceeds to its shareholders and it will make no new investments. Its shares will be listed on the specialist fund segment of the London Stock Exchange.

Assuming approval, your Company will be restructured under section 110 of the Insolvency Act 1986 (as amended) in order that the split of the Company into Ecofin Global and EF Realisation and the issue of shares in these new companies to Shareholders can be effected in a tax efficient manner.

Shareholders will be sent copies of the Prospectuses for Ecofin Global and EF Realisation and a Circular describing the reconstruction and the cash exit in July. The Scheme of Reconstruction is expected to be completed by mid- September.

Under the Scheme of Reconstruction, the Company would be liquidated prior to the end of its current financial year. As a consequence of this, the financial statements of the Company in this interim report have been prepared on a break-up or realisable value basis instead of a going concern, fair value basis as in previous annual and interim reports of the Company. In particular, the accounts reflect the redemption value of the Zero Dividend Preference ('ZDP') Shares as at their redemption date of 31 July, 2016 instead of their carrying value as at 31 March, 2016, the additional liabilities related to the CULS in the period between 31 March and their maturity on 31 July, 2016, and a provision for the costs associated with the liquidation of the existing Company, as explained in Note 1 to the Financial Statements. These adjustments have increased the expenses and finance costs and decreased the returns per Ordinary Share and the NAV attributable to Ordinary Shareholders. The NAV per Ordinary Share as at 31 March, 2016 as shown in the Financial Statements. in this interim report was 140.26p. Had the Financial Statements been prepared on a going-concern, fair value basis the NAV per Ordinary Share would have been 143.21p, approximately 2.1% higher than that shown on page 1 of the Half-year Report and in the Financial Statements.

Performance

In the half-year to 31 March, 2016, the net assets of your Company as per the Financial Statements in this interim report rose by 1.8% and the NAV per Ordinary Share rose by 0.5%. At the same time, the price of an Ordinary Share fell by 0.7% and the discount to NAV at which Ordinary Shares traded widened from 18.3% to 19.3% over the period. On a total return basis, assuming that the quarterly dividends received by an Ordinary Shareholder over the six month period were reinvested in the Company's Ordinary Shares, the NAV per Ordinary Share rose by 3.1% and the price of an Ordinary Share rose by 2.5%.

Had the financial statements been prepared on a going concern, fair value basis the net asset value per Ordinary Share at 31 March, 2016 would have been 143.21p. On this basis, the NAV per Ordinary Share would have risen by 5.3% on a total return basis over the six months to 31 March, 2016.

By comparison, the FTSE All-Share index rose by 3.5%, the MSCI World index of developed country equity markets rose by 11.0% and the MSCI World Utility index rose by 16.4% over the half-year, all on a total return basis and in sterling terms. Sterling was weak over the period, however, with the pound falling 5.1% against the U.S. dollar and 6.7% against the Euro, which had the effect of boosting the returns of the global MSCI indices, which are calculated in U.S. dollars, when they are expressed in Sterling. The MSCI World index and the MSCI World Utility index, for example, rose by a lesser 5.4% and 10.4%, respectively, on a total return basis when expressed in U.S. dollars. Approximately 40% of your Company's investments were denominated in US dollars over the period.

This performance took place against a background of volatile equity markets arising out of continuing concerns about the slow pace of world economic growth, the outlook for policy interest rates, particularly in the United States, and the continuing fall in the price of oil which investors appeared to view as an indicator of the overall state of the world economy. The West Texas Intermediate (WTI) oil price declined from US$45.09 per barrel on 30 September, 2015 to a low of US$26.21 on 11 February, 2016 before recovering to US$38.34 on 31 March, 2016, the end of the half-year period under review. The MSCI World index also hit its low for the six month period on 11 February - 7.1% down on its level at 30 September, 2015 and 10.6% down since 31 December, 2015 - after which it recovered closing up 5.4% in U.S. dollar terms over the six months.

Outlook

As Shareholders voted in favour of the Company continuing as an investment trust, the Company will propose the Scheme of Reconstruction, which, if approved, will involve the liquidation of the Company and its replacement by Ecofin Global and EF Realisation. As a consequence, the weekly NAVs per Ordinary Share will, with effect from the NAV calculation date of 30 June, 2016, reflect the accrual of the liquidation costs and the other adjustments described in Note 1 to the financial statements.

The Directors believe that a reorganisation of the Company through the implementation of the Scheme of Reconstruction is in the best interests of the Company and Shareholders as a whole. The Investment Manager believes that structural changes taking place in the global utilities sector, the need to replace ageing generation plant and equipment and the rapid rise of renewable energy - as well as the world's huge infrastructure needs - will provide Ecofin Global with the opportunity to earn good equity returns for its shareholders following the completion of the Scheme of Reconstruction. It also believes that EF Realisation will provide Shareholders with the best alternative for realising the Company's investments in Lonestar Resources Limited and its other illiquid investments in an orderly manner.

On 23 June, 2016, voters in the U.K. voted in a referendum to leave the European Union. The pound feel by 11.1% over the two business days following the vote and world equity markets feel sharply although the UK equity markets, as measured by the FTSE All-Share index, fell by less than Euro-zone markets. Market commentators are forecasting an extended period of uncertainty and, as a result, heightened volatility in world equity markets. Your Company's portfolio, the majority of which consists of non-Sterling assets, has held up well in the market sell-off as utilities have outperformed the broader equity markets.

Ian Barby

Chairman

30 June, 2016

Investment Manager's Report

Economy and markets

Over the six months to 31 March, 2016 covered by this Report, the outlook for world economic growth deteriorated and the risks of a further slowdown increased. The deterioration in the outlook was due to lower than expected growth rates in most of the major developed economies, but particularly in Japan and the Eurozone, and to concerns about weak growth in many emerging markets but notably in Brazil and Russia. The reasons for the slowdown in the developed economies were varied, but included weaker than expected investment and poor export performance in the U.S., low rates of investment and a lack of confidence partly attributable to political developments in the Eurozone, uncertainty associated with the referendum on EU membership in the U.K. and weak consumer spending in Japan. In emerging markets, Brazil's political crisis has produced a crisis of confidence and policy paralysis while Russia and other commodity exporters continue to suffer from low oil and commodity prices. In China, the transition away from investment led growth to a more balanced growth model has seen growth slow.

Commodity prices remained very low over the period by recent historical standards, but oil and gas prices deserve a special mention. In the six months to 31 March, 2016 - and since then - movements in the world oil price have had a strong influence on market sentiment; falls or increases in the oil price have been seen by investors as a sign of a deteriorating or improving outlook, respectively, for economic growth. Both the oil price and world equity markets - as measured by the MSCI World index - hit their lows for the six months to 31 March, 2016 on 11 February, 2016, since when equity markets appear to have followed the recovery in the oil price.

In the sectors in which the Company invests, however, low gas prices - in the U.S. the result of the successful exploitation of shale gas reserves - have put downward pressure on power prices which have depressed earnings of unregulated merchant power companies in the U.S. and vertically integrated power companies in Europe. Low oil and gas prices have also called into question future production levels and, therefore, the economics of some energy infrastructure investment.

In the financial markets, equity markets were volatile, particularly during the first six weeks of 2016, but gained ground over the six months. Very low levels of inflation led to an easing of monetary policy by the European Central Bank and the Bank of Japan and concerns about the outlook for economic growth saw yields on government bonds fall in virtually every developed country over the period. Yields on ten year U.S. Treasuries, for example, fell from 2.04% to 1.77% over the six months while yields on ten year German government Bunds fell from 0.50% to 0.15%. In the currency markets, Sterling was particularly weak depreciating 6.7% against the Euro and 5.1% against the US dollar.

Performance

As explained in the Chairman's Statement, the financial statements in this interim report have been prepared on a break-up or realisable value basis instead of on the going concern, fair value basis on which the Company's previous annual and interim reports have been prepared. This is due to the fact that although Shareholders voted in favour of the Company continuing as an investment trust in the General Meeting of the Company held on 24 June, 2016, the Scheme of Reconstruction which will now be put to Shareholders will, if approved, involve the liquidation of the Company.

This makes performance comparisons difficult because the Financial Statements in this interim report reflect the changes in accounting policies described in Note 1 to the Financial Statements and prepared on this basis the net asset value per Ordinary Share at 31 March, 2016 was 140.26p. Had the Financial Statements been prepared on a going-concern, fair value basis the NAV per Ordinary Share would have been 143.21p, approximately 2.1% higher than that shown on page 1 of the Half-year Report and in the Financial Statements. Comparisons are further complicated by the fact that the weekly NAVs published by the Company since 31 March, 2016 have been calculated on a going-concern, fair value basis. The commentary that follows assumes the Financial Statements as at 31 March, 2016 contained in this interim report had been prepared on a going-concern, fair value basis.

The Company's net assets attributable to both its Ordinary and Zero Dividend Preference Shareholders rose by 2.8% over the six months to 31 March, 2016 on a reported basis while the NAV per Ordinary Share rose by 2.6%. The price of an Ordinary Share, however, fell by 0.7% and the discount to NAV at which Ordinary Shares traded widened from 18.3% to 20.9%. On a total return basis, however, assuming that the dividends paid to Ordinary Shareholders over the period were reinvested in the Company's Ordinary Shares, the NAV per Ordinary Share rose by 5.3% and the price of an Ordinary Share rose by 2.5%.

While the growth in NAV per Ordinary Share compared favourably to the FTSE All-Share index, which rose 3.5% on a total return basis, it trailed most of the global US dollar-denominated indices calculated on a total return basis and in sterling terms due partially to the depreciation of Sterling over the period. The MSCI World index of developed equity markets, for example, rose by 11.0% in sterling terms but by 5.4% in US dollar terms. Similarly, the MSCI World Utility index rose by 16.4% in Sterling terms, but by 10.4% in US dollar terms while the MSCI Energy index rose by 10.4% in sterling terms, but by 4.9% in US dollar terms. Another factor which contributed to the performance of these indices was their large weightings in U.S. equities which performed strongly over the period. Approximately 57% of the MSCI World index's weighting, for example, is attributable to US companies while at 31 March, 2016 only 36% of the Company's portfolio was invested in the U.S.

The principal cause of the Company's underperformance relative to most indices over the period was the poor performance of those portfolio companies exposed to the volatility in energy commodity prices, whether directly or indirectly, principally in the United States but also in Europe. The share price of Lonestar Resources Limited (Lonestar), the Company's second largest investment at the beginning of the period, fell by 51.5% as a result of uncertainty about the outlook for oil prices and the long run prospects for the U.S. shale oil and gas industry; this was the largest portfolio loss incurred by the Company over the period. The second largest loss was attributable to a 51.5% fall in the share price of Williams Companies, a leading U.S. operator of gas pipelines and the Company's fourth largest investment at the beginning of the period. Although Williams' gas pipelines are regulated assets and it is not directly exposed to falls in gas prices, investors questioned the company's exposure to production levels in the U.S. gas industry and to troubled shale gas companies. Williams' share price was also adversely affected by uncertainty surrounding its proposed acquisition by Energy Transfer Equity L.P., another pipeline operator, which was announced in September 2015 but which experienced regulatory delays and has looked increasingly less attractive given the turmoil in the industry.

SolarCity, a fast-growing U.S. installer of roof-top solar panels, particularly to households, performed poorly on concerns about its business model, as did Quanta Services which provides engineering services to the U.S. power and oil and gas industries. Largely unregulated power producers, such as NRG Energy, Inc. in the U.S. and Engie S.A. in Europe (formerly GDF Suez) which are fully exposed to the commodity risks associated with low gas and power prices were also very weak. The Company also wrote down the value of its investment in Woodfuels, an unquoted provider of wood fuels to biomass power generators.

In contrast, the Company's holdings in regulated or quasi-regulated power companies and many of its investments in the renewable energy sector contributed positively toward performance. NextEra Energy, the owner of the regulated utility Florida Power & Light and the largest operator of renewable energy generation in the U.S., which was the Company's largest holding at the beginning of the period, was also the biggest single contributor to the Company's performance as its share price rose by 20.7%. First Solar, also a U.S. company, was the second largest contributor to performance as its share price rose 45.7%. Other holdings which performed well were NiSource, a holding company for a number of U.S. fully regulated power and gas distribution companies and, in Europe, the UK company Renewable Energy Generation, Flughafen Zuerich, the operator of the Zurich airport, and Snam Rete Gas, the Italian regulated gas distributor.

The Company's second best performer, however, was Direct Energie, a small French electricity and gas distributor which, at the beginning of the period, was the Company's third largest holding. It is one of the few independent distributors in the French market - which is dominated by Électricité de France, 84.9% owned by the French state - and its share price rose by 17.4% over the period. The Company owned 4.4% of Direct Energie at 31 March, 2016 and a representative of the Investment Manager is a non-executive director of the company. On 20 June, 2016, the Investment Manager announced the placing of its 4.4% holding in Direct Energie.

Portfolio developments

An analysis of the Company's investment portfolio by geography, sector or type of investment and the market capitalisation of the companies in which the Company is invested is shown on page 9 of the Half-year Report. The changes over the six month period reflect market and foreign currency movements as well as asset allocation decisions by the Investment Manager. Over the period, there was little change in the geographical allocations in the portfolio other than a small reduction to UK companies in favour of Continental European ones and a continuing reduction of the Company's exposure to China. At the sector level, the exposure to regulated and unregulated utilities continued to grow as did the exposure to infrastructure names while the exposure to the energy sector was reduced.

Major purchases over the period were of Groupe Eurotunnel, Veolia Environnement, SSE, E.ON and Suez Environnement in the U.K. and Europe and American Electric Power, Edison International and Exelon in the U.S. Major sales were of Gamesa, Endesa, Iberdrola, Enagas, National Grid and Pennon in the U.K. and Europe and of Quanta Services and NextEra Energy - on profit taking - in the U.S.

Lonestar

Throughout the period under review, the Company owned 55.5% of the share capital of Lonestar and representatives of the Investment Manager served on the board of the company. The share price of Lonestar fell by 51.5% over the six months on very thin volume, hitting an historic low on 18 February, 2016 before recovering somewhat by the end of the period. As a result, Lonestar fell from being the Company's second largest holding at the beginning of the period to its fourth largest holding at 31 March, 2016.

Despite operational improvements in the business, Lonestar has continued to be valued by the market at a large discount to its U.S. peers which are also active predominately in the Eagle Ford basin. Depending on the metric used, we estimate the valuation discount as at the date of this Report at between 28% and 54%. In our opinion, there are a number of reasons why Lonestar trades at such a valuation discount but the principal one is that it is an Australian, and not a U.S., company and the natural buyers of shares in companies such as Lonestar are U.S. investors.

In December 2015, Lonestar announced that it intended to re-domicile the company in the United States, to list its shares on the NASDAQ exchange and to de-list its shares from the Australian Stock Exchange. Shareholders overwhelmingly approved the change in March 2016 and the company began the process of re-domiciling the company, registering its shares with the U.S. Securities and Exchange Commission and obtaining a NASDAQ listing. This was completed on 28 June, 2016 and trading on NASDAQ will commence on 5 July, 2016.

Outlook

As the Continuation Vote was passed on 24 June, 2016, we will continue to make changes in the portfolio pursuant to a new investment strategy which we began to implement in April. This strategy is within the Company's current investment policy and restrictions but is also essentially the strategy which will be followed by Ecofin Global Utilities and Infrastructure Trust plc ('Ecofin Global') - the continuing vehicle if the Scheme of Reconstruction to be put to Shareholders is approved. We have also been raising cash to provide for the repayment of the Convertible Unsecured Subordinated Loan Stock and the Zero Dividend Preference Shares on 31 July, 2016.

The new strategy emphasises investments in regulated utility and infrastructure companies in OECD countries with progressive dividend policies. The investment thesis is that spending on infrastructure will accelerate in coming years and that much of this spending will be undertaken by regulated companies. A significant proportion of this spending is expected to take place in the utility sector as ageing power plants are replaced and new transmission and distribution networks are built. Investments in renewable energy generation will be an important, and growing, part of spending by power companies. The returns to the Company's Shareholders and - if the Scheme of Reconstruction is approved - to shareholders of Ecofin Global are expected to come from a growth in the regulated asset values of investee companies and dividend growth.

Ecofin Limited

Investment Manager

30 June, 2016

Consolidated Statement of Comprehensive Income

for the half-year ended 31 March, 2016

The total column of this statement represents the Group's profit or loss, prepared in accordance with International Financial Reporting Standards ('IFRS'). The supplementary revenue and capital return columns are prepared under guidance published by the Association of Investment Companies ('AIC'). All items derive from continuing operations; the Group does not have any other recognised gains or losses.

Consolidated and Company Balance Sheets

As at 31 March, 2016

Consolidated and Company Cash Flow Statements

for the half-year ended 31 March, 2016

Consolidated Statement of Changes in Equity

Notes to the Financial Statements

For the six months ended 31 March, 2016

1 Accounting policies

1.1 Basis of preparation for Half-year

The Financial Statements of the Group and Company have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU') and as applied in accordance with the provisions of the Companies Act 2006 (the 'Act'). These comprise standards and interpretations of the International Accounting Standards ('IAS') and Standing Interpretations Committee as approved by the International Accounting Standards Committee ('IASC') that remain in effect, to the extent that IFRS have been adopted by the EU.

The Financial Statements have also been prepared in accordance with the Statement of Recommended Practice ('SORP') for investment trusts issued by the Association of Investment Companies ('AIC') in November 2014, where the SORP is not inconsistent with IFRS.

The financial information contained in the Half-year Report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information for the periods ended 31 March, 2016 and 31 March, 2015 have not been audited. The financial information for the year ended 30 September, 2015 has been extracted from the latest published audited accounts. Those accounts have been filed with the Registrar of Companies and included the Independent Auditor's Report which was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006. However the Independent Auditor's Report did include an emphasis of matter relating to the uncertainty around the Company's status as a going concern in light of the Continuation Vote. Those statutory accounts were prepared in accordance with IFRS, as adopted by the European Union.

On 24 June, 2016, a General Meeting of the Company was held for Shareholders to vote on a resolution that the Company continue as a closed-end investment company. The Continuation Vote was passed and therefore the Company will seek to implement the reconstruction proposals described in the Circular sent to Shareholders on 31 May, 2016. Assuming the Scheme of Reconstruction is approved by Shareholders, the Company will be restructured under Section 110 of the Insolvency Act 1986 (as amended) and, therefore these Financial Statements have been prepared under the 'break-up' or realisable value basis. Non-current assets and liabilities have been reclassified as current assets and liabilities. The market value for investments is deemed to be a proxy for recoverable value. The liability of the CULS and ZDP Shares has been accounted for as the amount expected to settle the liabilities. All costs associated with the winding up of the business have been recognised.

The functional currency of the Group is Sterling as this is the currency of the primary economic environment in which the Group operates and of its capital raising currency, i.e. the denomination of the Ordinary Shares, CULS and ZDP Shares. Accordingly, the Financial Statements are presented in Sterling rounded to the nearest thousand pounds.

The consolidated Financial Statements incorporate the Financial Statements of the Company and its wholly-owned subsidiary, EW&PO Finance plc. As permitted by Section 408 of the Act, no Company statement of comprehensive income has been prepared. Subsidiaries are consolidated from the date of their acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. The Financial Statements of subsidiaries used in the preparation of the consolidated Financial Statements are based on consistent accounting policies. All intra-group balances and transactions, including unrealised profits arising therefrom, are eliminated.

IFRS 10 Consolidated Financial Statements

The Financial Statements in these accounts reflect the adoption of IFRS 10 (including the Investment Entities amendment) which requires investment companies to value subsidiaries (except for those providing investment related services) at fair value through profit and loss rather than consolidate them. The Directors, having assessed the criteria, believe that the Group meets the criteria to be an investment entity under IFRS 10 and that this accounting treatment better reflects the Company's activities as an investment trust. Therefore all investments in subsidiaries (with the exception of EW&PO Finance plc) are carried at fair value through the profit and loss in accordance with IAS 39.

EW&PO Finance plc, which is controlled by the Company, holds the ZDP Shares and has lent the proceeds to the Company. It is considered to provide investment related services to the Group and is therefore required to be consolidated under the IFRS 10 Investment Entities amendment. EW&PO Finance plc has been consolidated in these Financial Statements using consistent accounting policies to those applied by the Company.

1.2 Presentation of statement of comprehensive income

In order to better reflect the activities of the Company as an investment trust company, and in accordance with guidance issued by the AIC, supplementary information which analyses the Consolidated Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Consolidated Statement of Comprehensive Income. Net revenue is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 1159 of the Corporation Tax Act 2010. Special dividends are assessed as revenue or capital depending on the economic substance of the payments to shareholders.

1.3 Use of estimates

The preparation of financial statements requires the Group to make estimates and assumptions that affect items reported in the Balance Sheet and Statement of Comprehensive Income and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management's best knowledge of current facts, circumstances and, to some extent, future events and actions, the Group's actual results may ultimately differ from those estimates, possibly significantly. The investments in the equity and fixed interest stocks of unquoted companies that the Group holds are not traded and as such the prices are more uncertain than those of more widely traded securities. The unquoted investments are valued by reference to valuation techniques approved by the Directors and in accordance with the International Private Equity and Venture Capital Valuation ('IPEV') guidelines and IFRS 13.

1.4 Segmental reporting

The chief operating decision maker has been identified as the Board of the Company. The Board reviews the Group's internal management accounts in order to analyse performance. The Directors are of the opinion that the Company is engaged in one segment of business, being the investment business. Geographical segmental analysis pertaining to income has not been disclosed because the Directors are of the opinion that, as an investment company, the geographical sources of revenues received by the Group are incidental to its investment activity. The geographical allocation of the investments from which income is received and to which non-current assets relate is given on page 9 of the Half-year Report.

2 Income

3 Net asset value

Diluted NAV

For the half-year ended 31 March, 2016 and the financial year ended 30 September, 2015 there was no assumed conversion of CULS into Ordinary Shares, because the Ordinary Share NAV was less than the conversion price of the CULS, and therefore no dilution.

For the period ended 31 March, 2015 the diluted NAV per Ordinary Share was 183.89p calculated on the assumption that the £79,830,923 nominal amount of CULS was fully converted on a 57.92:100 basis into 46,240,067 additional Ordinary Shares. Where dilution occurs, the net returns are adjusted for items relating to the CULS; accrued CULS finance costs for the period and unamortised issues expenses are reversed, and total earnings for the period are tested for dilution. Once dilution has been determined, individual revenue and capital earnings are adjusted.

4 Return per class of share

The total return per Ordinary Share shown above can be further analysed between revenue and capital, as below:

A diluted return per Ordinary Share is calculated on the assumption that the CULS is converted at the beginning of the financial period into additional Ordinary Shares and that earnings reflect the savings in finance costs on the CULS after taxation. This results in an adjusted revenue return of £6,371,000 (31 March, 2015: £5,254,000 and 30 September, 2015: £14,481,000), an adjusted capital return of £7,662,000 (31 March, 2015: loss £48,393,000 and 30 September, 2015: loss £146,822,000) and adjusted weighted average shares in issue of 256,117,473 (31 March, 2015: 256,118,264 and 30 September, 2015: 256,110,522).

As per note 3 above, there was no assumed conversion and no dilution for the half-year ended 31 March, 2016 and for the year ended 30 September, 2015. The assumed conversion was dilutive for the half-year ended 31 March, 2015.

5 Dividends on Ordinary Shares

The current dividend policy is to pay four quarterly dividends of 1.8125p per share to Ordinary Shareholders totalling 7.25p per share per year, markets permitting.

IAS 10 'Events after the Balance Sheet Date' requires dividends to be recognised in the period in which they are paid. Amounts recognised as distributed to Ordinary Shareholders in the half-year to 31 March, 2016 are as follows:

6 Share capital

Ordinary Shares

At 31 March, 2016 there were 209,880,513 Ordinary Shares in issue (31 March, 2015: 209,878,197 and 30 September, 2015: 209,878,197) and 568,409 Ordinary Shares held in Treasury (31 March, 2015: 568,409 and 30 September, 2015: 568,409).

During the six months to 31 March, 2016 the Company issued 2,316 Ordinary Shares following receipt of elections to convert by holders of the Company's CULS.

7 Current and non-current liabilities

6% Convertible Unsecured Subordinated Loan Stock 2016

On 29 July, 2009, the Company issued £80,000,000 nominal amount of CULS. The loan stock could be converted at the election of holders into Ordinary Shares during the months of May and November each year until May 2016 at a rate of 1 Ordinary Share for every 172.6445p nominal of CULS. The CULS paid interest of 6% per annum on 31 May and 30 November each year 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. There will also be a final interest payment for the period from 31 May, 2016 to (but excluding) the date of final payment of the CULS on 31 July, 2016. The interest is charged 25% to revenue and 75% to capital within the Consolidated Statement of Comprehensive Income, in line with the Board's expected long-term split of returns from the investment portfolio of the Company.

As at 31 March, 2016 the nominal amount of CULS in issue was £79,826,923 (31 March, 2015: £79,830,923 and 30 September, 2015: £79,830,923).

Zero Dividend Preference Shares

On 29 July, 2009, the Company's subsidiary, EW&PO Finance plc, issued 60 million ZDP Shares at a price of 100p per share. The ZDP Shares will mature on 31 July, 2016 and had a gross redemption yield of 7% per annum at issue; that is, investors will receive 160.70p on 31 July, 2016 for every 100p invested. As at 31 March, 2016, there were 60 million ZDP Shares in issue (31 March, 2015 and 30 September, 2015: 60 million).

The Company issued to its subsidiary, EW&PO Finance plc, a non-interest bearing Subordinated Unsecured Loan Note 2016 ('Loan Note') equal to the net proceeds of the ZDP Share issue which were lent by the subsidiary to the Company under an agreement dated 29 September, 2009. This will be repaid or redeemed at par on 31 July, 2016 or earlier on demand by the subsidiary. The Company also entered into a subsidiary capital contribution agreement whereby the Company will undertake to contribute such funds to the subsidiary as will ensure that the subsidiary will have, after the repayment of the Loan Note by the Company, sufficient assets to satisfy the final capital entitlement of the ZDP Shares.

8 Effective rate of tax

The effective rate of tax reported in the revenue column of the Consolidated Statement of Comprehensive Income for the half-year ended 31 March, 2016 is 8% (half-year to 31 March, 2015: 13% and year to 30 September, 2015: 12.5%) based on a revenue return before tax of £5,795,000 (half-year to 31 March, 2015: £5,190,000 and year to 30 September, 2015: £14,873,000). This differs from the standard rate of tax of 20% (31 March, 2015: 20.5% and 30 September, 2015: 20.5%) as a result of dividend income not taxable for corporation tax purposes.

9 Principal risks

The principal risks facing the Company along with, where appropriate, the steps taken by the Company's Board to mitigate such risks are summarised on pages 19 to 21 and note 19 to the Financial Statements in the Annual Report and Accounts for the year ended 30 September, 2015 (available on the Investment Manager's web pages (www.ecofin.co.uk) and from the Company Secretary). These include investment performance and market risk, income risk, liquidity risk, the Company's investment in majority owned Lonestar, operational risks, and a loss of key investment personnel or clients by the Investment Manager which may impair its ability to manage the Company's assets. Additional risks relate to the Company's capital structure and use of gearing, investment in unquoted securities and securities of companies incorporated in non-OECD or emerging markets, and foreign exchange risk. A further risk relates to the interaction of supply and demand and general market or sector sentiment, as reflected in the discount to NAV at which the Ordinary Shares trade in the secondary market.

Interest rate risk

The Company is only exposed to significant interest rate risk through its prime brokerage borrowings with Citigroup Global Markets Limited and through the fair value of investments in fixed-interest rate securities. The CULS was issued by the Group at a fixed cost until its conversion and it is carried in the Company's Balance Sheet at amortised cost rather than at fair value. The ZDP Shares issued by the Group had a gross redemption yield of 7% at their issue price; the Shares were placed with investors at a price of 100.00p per share on 29 July, 2009 and will be redeemed by the Group on 31 July, 2016 for 160.70p per share.

Prime brokerage borrowings varied throughout the period as part of a Board endorsed policy and at 31 March, 2016 amounted to the equivalent of £28,888,000 (30 September, 2015: £43,660,000) in a variety of currencies. All of these borrowings were at floating rates of interest.

The Company's fixed-income portfolio at 31 March, 2016 was valued at £4,442,000 (30 September, 2015: £7,417,000).

Foreign currency risk

The value of the Group's assets and the total return earned by the Company's Shareholders can be significantly affected by foreign exchange movements as most of the Group's assets are denominated in currencies other than Sterling, the currency in which the Group's accounts are prepared. The risk is partially offset by the Group's foreign currency borrowings.

Market price risk

The Company's investment portfolio is subject to fluctuations, volatility and the vagaries of market prices. The Directors seek to mitigate this risk by ensuring proper controls exist through the Investment Management Agreement for maintaining a diversified portfolio of the securities of utility and utility-related companies and ensuring that there are balances within the portfolio by geography, sub-sector and types of instrument.

The ZDP Shares and the CULS provide gearing which is used to enhance returns, although this also increases the Ordinary Shareholders' exposure to market risk, resulting in greater volatility in the net assets attributable to Ordinary Shareholders.

Liquidity risk

The Group's assets mainly comprise readily realisable securities which can be easily sold to meet funding commitments if necessary. Unquoted investments in the portfolio are subject to liquidity risk, as are thinly traded securities such as Lonestar. A liquidity analysis is prepared on at least a quarterly basis as part of the Investment Manager's report to the Board and the liquidity profile of all securities, including unquoted and thinly traded securities, is reviewed. The Investment Manager reviews the liquidity profile of the investments continuously.

Credit risk

Credit risk is mitigated by diversifying the counterparties with which the Investment Manager conducts investment transactions. The credit-standing of all counterparties is reviewed periodically with limits set on amounts due from any one broker.

10 Fair values of financial assets and financial liabilities

Except for the Group's CULS and ZDP Shares which are measured at amortised cost, as shown below, financial assets and financial liabilities of the Group are carried in the Balance Sheet at 31 March, 2016 at their recoverable value and at 30 September, 2015 at their fair value (investments and derivatives) or the amount is a reasonable approximation of realisable and fair value (due from brokers, dividends receivable, accrued income, cash at bank, due to brokers and prime brokerage borrowings).

* This includes the equity component of the CULS of £5,409,000 (30 September, 2015: £5,409,000).

** Market values have been used to determine the fair values of the Company's CULS and its ZDP Shares shown in the table above.

For these Half-year Financial Statements, the Company's financial assets have been measured at realisable value which is deemed to be materially equivalent to the market value of the listed positons and the fair value of the unquoted positions at 31 March, 2016.

The Company measures fair values using a three-level fair value hierarchy that reflects the level of judgement involved in estimating fair value. The hierarchy categorises the inputs used in valuation techniques into three levels:

Level 1: Investments valued using quoted market prices, unadjusted, in active markets for identical assets are included in Level 1.

Level 2: Financial instruments that are valued using observable inputs, i.e. quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs, are classified as Level 2. Level 2 investments include the Company's forward currency contracts; these are valued using quotations provided by the Prime Broker which uses spot foreign exchange rates and interest rates in the respective currencies to provide the quotations.

Level 3: Investments classified as Level 3 have unobservable inputs and these include the Company's unquoted investments (equity, equity-related and debt instruments of unquoted companies). These types of securities are generally subject to higher valuation uncertainties and liquidity risks than securities listed or traded on a regulated market. Level 3 fair values are determined by the Directors using valuation methodologies in accordance with the IPEV Guidelines. Significant inputs include investment cost, the value of the most recent capital raising, the adjusted net asset value of funds and the Ecofin Pricing Committee's valuations. In accordance with IPEV Guidelines, new investments are carried at cost, the price of the most recent investment being a good indication of fair value. Thereafter, fair value is the amount deemed to be the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Carrying values are reviewed and assessed every month by Ecofin's Pricing Committee and approved in the Audit Committee meetings.

At 31 March, 2016, the Company's Level 3 investments accounted for 3.2% of its gross assets (gross assets are equal to total assets, including securities sold short, less forward currency contracts). Investments accounting for 2.7% of gross assets were in two funds managed by third-party managers which value their funds at fair value. The Directors value these investments at net asset value, adjusted if necessary. The Directors have elected to apply a discount of approximately 15% and 25%, respectively, to the valuations supplied by the third-party managers in recognition of the illiquidity of the investments. Direct investments in the equity, equity-related or fixed-income securities of unquoted companies accounted for 0.5% of the Company's gross assets at 31 March, 2016. The Directors valued these investments at the price of the most recent investment or a percentage of this price.

The Directors may consider adjustments to these valuations. The range of possible adjustments could be material, depending on the circumstances. In the past, the Directors have accepted the recommendation of the Investment Manager and have made adjustments to the valuation of unquoted investments which have ranged up to 100% of their valuation as proposed by a third-party. For the purposes of sensitivity analysis, a 25% adjustment could be considered reasonable. A 25% adjustment to the valuation of all Level 3 investments would result in a movement in the Company's net assets of less than 1%.

If the inputs used to measure fair value are categorised into different levels of the hierarchy, the investment is categorised entirely according to the lowest priority level that is significant to the fair value measurement of the relevant asset or liability.

The tables below set out fair value measurements of the Company's financial assets and liabilities as at 31 March, 2016 according to this fair value hierarchy. There have been no transfers during the period between Level 1 and 2.

As a quoted investment, Lonestar is included in Level 1 investments.

The Company's CULS and ZDP Shares are actively traded on a recognised stock exchange. The fair value of the CULS 31 March, 2016: £80,426,000 (30 September, 2015: £81,827,000) and ZDP Shares 31 March, 2016: £93,825,000 (30 September, 2015: £92,700,000) are therefore deemed Level 1.

A reconciliation of fair value measurements in Level 3 is set out below.

11 Post Balance Sheet event

On 31 May, 2016 the Company published a Circular to consider the continuation and reconstruction of the Company. On 24 June, 2016 Shareholders approved the continuation of the Company and, as such, these Financial Statements have been prepared under the break-up or realisable basis and further details are provided in note 1. Estimated expenses relating to the continuation vote and the reconstruction of the Company amounting to £1,958,000 have been accrued for in these Financial Statements. The finance costs for the period reflect the additional finance costs arising from preparing the Financial Statements on a realisable basis.

Interim Management Report

There have been no related party transactions undertaken by the Company in the first six months of the current financial year and there have been no changes to the related party disclosures described in the Annual Report and Accounts of the Company for the year ended 30 September, 2015.

The Directors consider that the Chairman's Statement and the Investment Manager's Report on pages 2 to 6 of the Half-year Report, the above disclosure on related party transactions and the Directors' Responsibility Statement below, together constitute the Interim Management Report of the Company for the half-year to 31 March, 2016 and satisfy the requirements of Disclosure and Transparency Rules 4.2.3 to 4.2.11 of the Financial Conduct Authority. Ernst & Young LLP, the Company's Auditor, has reviewed this Half-year Report for the six months to 31 March, 2016.

Directors' Responsibility Statement

The Directors listed on page 26 of the Half-year Report confirm that to the best of their knowledge:

(i) the condensed set of Financial Statements within the Half-year Report, which have been prepared in accordance with IAS 34, 'Interim Financial Reporting', as adopted by the EU, give a true and fair review of the assets, liabilities, financial position and profit and loss of the Group;

(ii) the Interim Management Report includes a fair review, as required by Disclosure and Transparency Rule 4.2.7 R, of important events that have occurred during the six months to 31 March, 2016 and their impact on the condensed set of Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

(iii) the Interim Management Report includes a fair review of the information concerning related party transactions as required by Disclosure and Transparency Rule 4.2.8 R.

This Half-year Report was approved by the Board on 30 June, 2016 and the above Directors' Responsibility Statement was signed on its behalf by:

Ian Barby

Chairman

30 June, 2016

Half-yearly Report 2016

The Company's Half-year Report for the six months ended 31 March, 2016 will be posted to Shareholders in July 2016. Copies of the Half-year Report and Financial Statements will be available from the Registered Office of the Company at 10 Harewood Avenue, London NW1 6AA and on the website,www.ecofin.co.uk, which is a website maintained by the Company's Investment Manager, Ecofin Limited. A copy of the Half-year Report for the six months ended 31 March, 2016 has been submitted to the National Storage Mechanism of the UK Listing Authority and will shortly be available for inspection at:www.Hemscott.com/nsm.do.

For further information, please contact:

Nariman Ghandhi

Company Secretary

For and on behalf of

BNP Paribas Secretarial Services Limited

Tel: 020 7410 5971

30 June, 2016