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LMI Int'l Utilities (LIU)

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Tuesday 17 September, 2002

LMI Int'l Utilities

Interim Results



The Directors announce the unaudited statement of consolidated results for the
six months ended 30 June 2002 as follows:


(incorporating the revenue account*) of the Company

                               1 January                     1 January          
                            to 30 June 2002               to 30 June 2001       
                     Revenue    Capital      Total  Revenue   Capital     Total 
                           £          £          £        £         £         £ 
Losses on                  -    (32,546)   (32,546)       -   (12,752)  (12,752)
Income                 6,335          -      6,335    7,573         -     7,573 
Investment              (593)      (593)    (1,186)    (695)     (695)   (1,390)
management fee                                                                  
Other expenses          (326)       (47)      (373)    (508)     (899)   (1,407)
Exchange gain on           -      3,237      3,237        -         -         - 
capital items                                                                   
Return on ordinary                                                              
before finance costs                                                            
taxation               5,416    (29,949)   (24,533)   6,370   (14,346)   (7,976)
Interest payable and                                                            
charges                 (389)      (389)      (778)    (632)     (632)   (1,264)
Return on ordinary                                                              
before taxation        5,027    (30,338)   (25,311)   5,738   (14,978)   (9,240)
Taxation on ordinary  (1,124)       309       (815)  (1,210)      658      (552)
Return on ordinary                                                              
after taxation         3,903    (30,029)   (26,126)   4,528   (14,320)   (9,792)
Appropriations in                                                               
respect of                                                                      
non-equity shares:                                                              
- Zero Coupon              -     (5,448)    (5,448)        -   (4,977)   (4,977)
                       3,903    (35,477)   (31,574)   4,528   (19,297)  (14,769)
Dividends in respect                                                            
of non-                                                                         
equity shares:                                                                  
- Income shares       (2,423)         -     (2,423)  (2,423)         -   (2,423)
                       1,480    (35,477)   (33,997)   2,105   (19,297)  (17,192)
Dividends in respect                                                            
of equity                                                                       
- Ordinary shares     (2,423)         -     (2,423)  (2,423)         -   (2,423)
Transfer from           (943)   (35,477)   (36,420)    (318)  (19,297)  (19,615)

* The revenue column of this statement is the revenue account of the merged
companies LeggMason Investors International Utilities Trust plc and Johnson Fry
Second Utilities Trust Limited and Antrec PLC.

                      pence      pence      pence   pence     pence     pence 
Return per Ordinary    3.38     (61.50)    (58.12)   3.92    (33.45)   (29.53)
Return per Income      3.38          -       3.38    3.92         -      3.92 
Return per Zero                                                               
Preference share          -       9.68       9.68       -      8.84      8.84 


                                                  As at                  As at 
                                           30 June 2002           30 June 2001 
                                                  £'000                  £'000 
Investments at market value                     229,113                308,419 
Net current (liabilities)/assets                   (672)                   679 
                                                228,441                309,098 
Creditors: amounts falling due in               (52,155)               (55,385)
more than one year                                                             
Add: current period retained loss                   943                    318 
Total net assets for the purposes of                                           
calculating net asset                                                          
values                                          177,229                254,031 


                                            6 months to            6 months to 
                                           30 June 2002           30 June 2001 
                                                  £'000                  £'000 
Net cash inflow from operating                    4,374                  5,443 
Net cash outflow from servicing                  (3,571)                (3,920)
of finance                                                                     
Net tax recovered                                   219                    456 
Net cash outflow from financial                  (3,128)                (3,110)
Equity dividends paid                            (2,711)                (2,654)
Management of liquid resources                        -                    (47)
Decrease in cash                                 (4,817)                (3,832)

                                                  As at                  As at 
                                           30 June 2002           30 June 2001 
                                                  pence                  pence 
NET ASSET VALUE PER ORDINARY                       8.08                 159.62 
NET ASSET VALUE PER INCOME SHARE                  85.43                  85.49 
NET ASSET VALUE PER ZERO COUPON                                                
PREFERENCE SHARE                                 219.18                  200.23

The above financial information does not constitute statutory financial
statements as defined in Section 240 of the Companies Act 1985. The statutory
financial statements for the year ended 31 December 2001, upon which the
auditors issued an unqualified opinion, have been delivered to the Registrar of


With the changed investment climate, this is proving to be an extremely
difficult and challenging year for the Trust. The scale and speed of the fall
in equity values world wide, but especially in the USA where more than 50% of
the Trust's funds are invested, was unforeseen. Bear market conditions were
exacerbated by extraordinary factors such as the Enron investigation, evidence
of accountancy malpractice among major USA corporations and the Californian
energy crisis. Although there is some evidence that the resulting massive fall
out is coming to an end and the American economy is showing signs of recovery,
equities still remain fairly fully valued in the context of their historical
values. Recovery, however, is still fragile and much depends on the consumer -
despite being burdened by high levels of debt, especially in the USA -
continuing to spend.

Your Trust has fared very poorly over the last six months with substantial
falls in US utilities eroding the equity of both Ordinary and Income
shareholders. The Trust's performance is measured against a number of reference
points - these are: the Dow Jones Utilities Index in the US which fell by
6.82%; the S&P Utilities Index, again in the US, which fell by 15.73%; the FTSE
Utilities Index in the UK which was unique in gaining 1.20%; the FTSE World
Utilities Index which fell by 6.68% and the FTSE World Telecoms Index which
fell by 33.69%. By way of contrast the total assets of the Trust fell by 13.02%
and net assets by 14.94%, being £228,441,020 and £176,285,932 respectively at
the period end. The under performance was due in the main to our US exposure.

The Trust's assets must exceed £141m at 31 December 2003 to enable it to repay
in full the Trust's 56.25 million Zero Coupon Preference shares. The annual
rate of return allocated to these shares of 9.46% was an appropriate rate in
1993, but contrasts starkly with present market rates and is a considerable
burden for the Trust and a challenge to management faced with lower equity
values and, in some cases, reduced dividend yields. This burden impacts
adversely on the equity available to the Income and Ordinary shareholders. The
rights of the shareholders are enshrined in the Articles of Association and are

With the value of the Trust's assets now greatly depleted we are ever attentive
to our obligations to the various classes of shareholders. While our extremely
high capital gearing was invaluable to the Trust during the period of a rising
stock market, the adverse is the case when stock market values fall. US
companies are addressing their balance sheets and accounting issues. Any return
to confidence has the potential to quickly reverse the fortunes of the Ordinary
and Income shareholders.

The Trust has excellent relationships with its bankers and has not at any time
breached its banking covenants.

Despite present difficulties, the Trust's income has remained, overall,
relatively robust. Your Board has declared and paid first and second interim
dividends of 2.1p each per Income share and the same per Ordinary share.

Board Change

On 26 July 2002, Rebecca Thomas resigned as a Director of the Trust. The Board
would like to thank Rebecca for her invaluable contribution during her tenure
of office at the Trust's manager, Legg Mason Investors Asset Managers plc, and
wish her every success for the future.


While global equity markets appear over valued on a historical view, the
utility sector is, in our opinion, under valued - especially in the US. World
wide utilities now play an essential role in countries' economies. Even when an
adverse environment for the US utility sector prevailed in the early 90s due to
nuclear liabilities and credit issues, not one of the so-called distressed
utilities went out of business. This is testament to the underlying strength of
a utilities business as an essential service.

Given time, I have little doubt that the fundamental attractiveness of
utilities will result in a recovery in the value of our portfolio. The Trust's
wind up date is however 31 December 2003. The relatively short timescale gives
us little room to manoeuvre and we therefore need to look to an early return to
investment confidence and a sustained improvement in the world equity markets,
especially utilities.

The Board are very much focused on the performance of the Trust and the
interest of all classes of shareholders as we run up to December 2003.

The Board much regrets the performance of the Trust over the reporting period.
We are grateful that shareholders have maintained their interest during these
difficult times and we thank them for their continuing support.

W W C Syson


17 September 2002

Copies of the interim report will be sent to shareholders in September and will
be available to members of the public from the Registered Office at 23
Cathedral Yard, Exeter EX1 1HB.