Dissemination announcement

Embargoed until 0700 29th March 2011

Ultra Electronics Holdings plc

("Ultra" or "the Group")

Dissemination announcement

Ultra announces the dissemination of its Annual Report & Accounts for the year ended 31 December 2010. A preliminary announcement of the Group's results was made on 28 February 2011.

The Group's 2010 Annual Report & Accounts and the Notice of Annual General Meeting 2011 are published today on Ultra's website www.ultra-electronics.com.

Copies of the Annual Report & Accounts and the Notice of Annual General Meeting 2011 have been submitted to the National Storage Mechanism, and will shortly be available for inspection at www.hemscott.com/nsm.do

For the purposes of the dissemination announcement and in compliance with the Disclosure and Transparency Rules, certain components of the annual report that were either not included in the preliminary announcement, or appeared in a summarised format, are provided, in full, on the following pages of this release.

Ultra Electronics Holdings plc

("Ultra" or "the Group")

RISKS AND UNCERTAINTIES

Ultra's confidence in its ability to continue to deliver growth is underpinned by a number of key factors. The Group has a track record of year-on-year success despite significant volatility in foreign exchange rates and whilst experiencing full market cycles in both the defence and civil sectors. These risks will continue to be mitigated through robust business strategies.

All of Ultra's managers are responsible for identifying the risks facing the Group's businesses and for putting procedures in place to recognise and mitigate such risks. Strategic risks are assessed formally each year by the Board during the strategic planning process and steps are taken subsequently to ensure that such risks are minimised at all times. Operational risks, including those associated with execution of development contracts, are monitored as part of the Group's monthly business performance review process. Business units are required to report on all key areas of risk, highlighting situations where normal controls have failed to be fully effective and explaining what remedial actions have been taken. Such situations are then monitored regularly until a satisfactory conclusion is reached. The Chief Executive reports all significant deviations twice a year to the Board.

Market factors

About 80% of Ultra's revenue is from the defence sector. Whilst the level of international tension remains high, defence budgets are coming under pressure from governments seeking to reign in public spending. As a consequence of the squeeze, it is likely that upgrades of existing military platforms will take precedence over new platforms, which typically drives demand for the kinds of advanced electronic solutions in which Ultra specialises.

In the UK defence budgets, which represent only about 12% of Group revenue (direct and indirect), will be reduced. The coalition government published its National Security Strategy (NSS) and announced the results of its Strategic Defence and Security Review (SDSR) in October. As a result of the SDSR, a number of military procurement projects have been cancelled or delayed although none of these have had a material effect on Ultra. On the contrary, the announcement in the NSS that cyber attack has been ranked as one of the top four highest risks to the UK should benefit Ultra in the future.

In the US, the President's budget requests for the near to medium term are for core defence spending to grow slowly. Whilst the Deficit Reduction Panel, implemented by the newly elected Republican controlled House of Representatives, is looking to make savings the parts of the defence budget addressable by Ultra remain sufficiently large to give the Group headroom for further growth. Perhaps of greater short term concern to Ultra is the delay in authorising expenditure against the FY2011 defence budget which is slowing the flow of new contracts. However, Congress is coming under increasing pressure, both from the Department of Defence and industry, to pass the budget and it is anticipated that the situation will be resolved in the coming months.

The scaling back of the current allied operations in Afghanistan and Iraq is not expected to harm the Group's trading position, since Ultra did not benefit materially from the start of the operations. It may even provide benefit as it may alleviate some of the current pressures on defence budgets.

Ultra's focus is on developing differentiated solutions within a large number niche markets in high growth sectors where it can maintain sustainable competitive advantage and can win business worldwide. This specialism and diversity give some protection from budget variations and provides resilience to its financial performance.

Ultra operates in a number of different distinct areas of capability, reducing the potential impact of a risk posed by a decline in any one market sector. Similarly, Ultra is represented on a significant range of major international programmes and platforms. However, no single programme represents more than 5% of Ultra's revenue in any year, meaning the cancellation or curtailment of any single programme is unlikely to have a significant adverse impact on the Group.

Furthermore, Ultra's strategic positioning means that it has a broad customer base, providing an element of risk mitigation. Ultra supplies all elements of the armed forces, i.e. the army, navy, air force and marines together with first responders such as police, medical staff and fire-fighters. The Group has also broadened its geographic footprint and now sells its products and services in over 40 countries worldwide. Ultra also has a transatlantic capability, with 12 of its 25 businesses being in North America. As such, the Group is operating as a domestic entity on both sides of the Atlantic, thereby providing sovereign operational independence of the respective armed forces.

Ultra has significant business in the civil sector and this provides useful diversification, often providing an adjacent market in which to exploit complementary skills and technologies. This spread gives further resilience to Ultra's performance.

Protecting market access

In order to optimise Ultra's customer relationships and maximise access to customer funding, the Group takes a pragmatic view of routes to market. In the US, this pragmatism has manifested itself in the creation of the Proxy Board structure to allow the relevant Ultra businesses to be able to access highly classified programs. The Proxy Board is staffed by American nationals who look after the national interests of the USA in this regard. Similarly, in the UAE it has been determined that the best approach to the growing specialist training and consultancy market is through an enlarged joint venture with Emirates Advanced Investments. Ultra owns 49% of this joint venture.

Execution of contracts

Ultra places great emphasis on managing the risks embedded in its customer contracts. The management teams of Ultra businesses must focus on reducing or retiring these risks as quickly as possible.

Ultra differentiates between engineering and technical risk:

·; Engineering risk is the development of a technical solution where the solution, or something very similar to it, has been developed before. There is therefore a very high degree of confidence that the pursuit of Ultra's defined engineering and programme management procedures will lead to a solution to the customer requirement, however cost may become a key differentiator for the customer.

·; Technical risk is where the route to the final solution is not completely clear. Some research is needed; a technical or other breakthrough may be required. Technical risk is best constrained to a contract or defined package of work in which failure to find an appropriate solution is an acceptable outcome. Examples of this would be study contracts part or fully funded by the potential customer and with an appropriate contribution from Ultra that ensures intellectual property in the outcome is retained. Ultra will not enter into a fixed, firm priced solution with a firm timetable if there is embedded technical risk - Ultra will only commit to delivering what it knows it can deliver. Ultra places great pride in meeting its commitments.

Staff retention

The Group's success in innovating to meet customer needs is based on the broad range of skills and capabilities of employees, meaning Ultra's performance is fundamentally driven by the individual and team contributions made by its people. The availability of appropriately skilled engineers and other specialist staff is finite. In this competitive market, Ultra pursues a number of initiatives to give it an advantage over competing employers to attract, retain and develop the best people. These are described more fully on pages 16 and 17 of this document.

Exchange rates

An explanation of how Ultra manages its foreign exchange risks is provided in the financial review section on pages 29 and 30 of the 2010 Annual Report and Accounts. For the purposes of this dissemination announcement, it has been included here.

Ultra's results are affected by both the translation and transaction effects of foreign currency movements By their nature, currency translation risks cannot be mitigated but the transaction position is actively managed.

The majority of sales made by Ultra's businesses are made in local currency, thus avoiding any transaction risk. However, this risk does arise when businesses make sales and purchase that are denominated in foreign currencies, most often in US dollars. To reduce the potential volatility, Ultra attempts to source, in US dollars, a high proportion of the product sold in US dollars. For the remaining net expense, the Group's policy is to hedge forward the foreign currency trading exposure in order to increase certainty. Traditionally, forward cover has been established for 18 to 24 months worth of net US dollar flows into the UK. A small amount of hedging (less than $20m per annum) was also put in place at historically favourable rates for 2013 to 2015. Exposure to other currencies is hedged as it arises on specific contracts.

The lag between when foreign exchange contracts are taken out and the dates they mature also leads to annual fluctuations. However, in 2010 the effective hedge rate for selling US dollars was little changed on 2009 so that the impact on operating profit was a small decrease of £1.2m. For 2011 and beyond the outlook is for a gradual strengthening in Ultra's effective hedged position, taking existing contracts into account and assuming current spot rates remain unchanged.

Tactical Communication Systems, based in Montreal, Canada, will be a US dollar-denominated business, thereby reducing the Group's transactional foreign exchange exposure to USD:CAD rate movements.

Industry restructuring

The industries in which the Group operates continue to experience restructuring, which sometimes results in Ultra's customers themselves becoming more vertically integrated. This may increase the incidence of the Group's customers having capabilities that overlap with Ultra's. The threat that this otherwise might pose is offset by Ultra's strategy of operating in specific market niches where it has some sustainable differentiation. Whilst there have been some large acquisition deals in the surveillance and cyber market sectors over the past year, Ultra retains a solid list of potential acquisitions and the Group is confident that it can make acquisitions that will help Ultra pursue its strategies for growth in 2011 and beyond. 'Organisation transforming' acquisitions are unlikely owing to the risk profile of such transactions.

Pricing pressure

Ultra's customers aspire to stable or reducing prices for the goods and services that they procure. This inevitably leads to cost pressures to which the Group must respond. As part of its efforts to cut costs, the UK MoD is seeking to renegotiate contracts that were let on a single source and/or cost-plus basis. Ultra has no materially significant contracts let in this way from the UK MoD and so no major impact is anticipated. Ultra has a long track record of product innovation, exploiting new, lower cost electronics technologies to reduce costs whilst delivering improved performance. Additionally, operational efficiencies are achieved by working more intelligently, particularly through embracing lean manufacturing and design processes. Ultra has made significant progress in sourcing production in low cost economies where this is appropriate given the nature of the products that the Group provides. The anticipated cost reductions have been achieved, thereby helping protect and improve the Group's headline operating margins.

Relationships

The diversified nature of Ultra's activities is reflected in the broad range of platforms and programmes in which the Group is involved. This diversification extends to customer, supplier and partner relationships. Within its total sales to the major prime contractors, Ultra typically supplies products, equipment, sub-systems and services to a range of different platforms and programmes, with each one effectively acting as a different customer. Given that no single platform or programme represents more than 5% of revenue in any one year, there is, therefore, no single relationship of such significance that its severance would have a material impact on Ultra's performance or prospects.

RELATED PARTY TRANSACTIONS

Remuneration of key management personnel

The remuneration of key management personnel, which includes the Directors of the Group, is set out below in aggregate for each of the categories specified in IAS 24: Related Party Disclosures. Further information about the remuneration of individual directors is provided in the audited part of the Directors' Remuneration Report on pages 55 and 56 of the Annual Report & Accounts:

Transactions with associate

At 31 December 2010, a loan of £3,266,000 (2009: nil) was due from Al Shaheen Adventure LLC (ASA), the Group's 49% equity accounted investment.

A small amount of trading also occurs with ASA, in the normal course of business and on an arms length basis. Balances are settled on normal trade terms and the amounts outstanding at year end were insignificant.

STATEMENT OF GOING CONCERN

Ultra's banking facilities amount to £210m in total, plus a £15m overdraft. They were established in two tranches. The first tranche comprises £120m of revolving credit, denominated in Sterling, US dollars, Canadian dollars, Australian dollars and Euros. This facility was signed in February 2010 and expires in September 2013. The facility is provided by a club of five banks.

The second tranche provides a further £90m of revolving credit. This was signed in January 2011 with six banks and is set to expire in January 2016. Both facilities have the same covenants.

As well as being used to fund acquisitions, the banking facilities are also used for other balance sheet and operational needs, including the funding of day-to-day working capital requirements. The US and Canadian dollar borrowings also represent natural hedges against assets denominated in these currencies. The Group's banking covenants have all been met during the past year with a comfortable margin. The approved Group budget for 2011 and strategic plan for later years give confidence that the Group will continue to meet these covenants. Details of how Ultra manages its liquidity risk can be found in note 23 of the Annual Report and Accounts - Financial Instruments and Financial Risk Management

Though global macro-economic conditions remain uncertain, the long-term nature of Ultra's business and its positioning in attractive sectors of its markets, taken together with the Group's forward order book provide a satisfactory level of confidence in respect of trading in the year to come. At the beginning of 2011 Ultra had firm orders in place for about 60% of analysts' consensus forecast sales in the year. As a consequence the Directors believe that the Group is well placed to mitigate any material adverse consequences of the current economic conditions.

The Directors have a reasonable expectation that Ultra has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt a going concern basis of accounting in preparing the annual financial statements.

RESPONSIBILITY STATEMENT OF THE DIRECTORS ON THE ANNUAL REPORT

The responsibility statement below has been prepared in connection with the company's full annual report for the year ending 31 December 2010. Certain parts thereof are not included within this announcement.

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

• the management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board,

D. Caster, Chief Executive

P. Dean, Finance Director

25 February 2011

- End -

Enquiries:

Ultra Electronics Holdings plc 020 8813 4321

Douglas Caster, Chief Executive www.ultra-electronics.com

Rakesh Sharma, Chief Operating Officer

Paul Dean, Group Finance Director

Media Enquiries

Susan Ellis, Senior Communications Adviser 07836 522722

James White, MHP Communications 020 3128 8756

Further information about Ultra:

Ultra Electronics is an internationally successful defence, security, transport and energy company with a long, consistent track record of development and growth. Ultra businesses constantly innovate to create solutions to customer requirements that are different from and better than those of the Group's competitors. The Group has about one hundred and fifty distinct market or technology niches within its twenty five businesses. The diversity of niches enables Ultra to contribute to a large number of defence, aerospace and civil platforms and programmes and provides resilience to the Group's financial performance.

Ultra has world-leading positions in many of its niches and, as an independent, non-threatening partner, is able to support all of the main prime contractors with specialist capabilities and solutions. As a result of such positioning, Ultra's systems, equipment or services are often mission-critical to the successful operation of the platform to which they contribute. In turn, this mission-criticality secures Ultra's positions for the long term which underpin the superior financial performance of the Group.

Ultra offers support to its customers through the design, delivery and support phases of a programme. Ultra businesses have a high degree of operational autonomy where the local management teams are empowered to devise and implement competitive strategies that reflect their expertise in their specific niches. The Group has a small head office and executive team that provide to the individual businesses the same agile, responsive support that they provide to customers as well as formulating Ultra's overarching, corporate strategy.

Across the Group's three divisions, the major market sectors in which Ultra operates are:

• battlespace IT, summarised as being the systems and equipment that allows coalition commanders to have an integrated, real-time picture of the disposition of friendly and enemy forces that is better than the one available to the enemy. This information superiority underpins rapid decision making which, together with effective command, control and communications, translates into military superiority. The use of battlespace IT is fundamental to the implementation of the military doctrines of 'network-centric warfare' or 'network-enabled capability' that are seen as transformational in the capability to win future battles. Expenditure on battlespace IT equipment therefore continues to represent an increasing share of the total defence budget in the main markets in which Ultra operates.

• sonar systems, expanding Ultra's traditional world-leading airborne anti-submarine warfare capability into broader activities in the underwater battlespace. These include integrated ship and submarine sonar systems, persistent seabed-deployed sensor arrays, torpedo defence and sea mine disposal systems. The fact that over forty countries have, between them, more than four hundred highly capable, stealthy submarines is continuing to focus expenditure in this sector.

• civil and military aircraft equipment, Ultra provides specialist sub-systems and equipment for military and civil aircraft. The main military aircraft programmes on which Ultra equipment is fitted continue to have political support, underpinned by consistent financial commitment. For civil aircraft, record order intake performance by all major aircraft manufacturers underpins increasing build rates for the medium term.

• specialist defence equipment, including power conversion and signature systems for naval ships and submarines. Ultra's specialist capability in high integrity controls for submarine nuclear reactors is included in this sector, for which there is continuing commitment to new platforms and the upgrade of existing boats. Ultra also supplies advanced sub-systems for modern armoured vehicles including those for electrical power management, indirect vision and weapon control. The need for increased mobility and force protection is driving a number of large military vehicle procurements in Ultra's main markets.

• specialist civil systems and equipment, including Ultra's advanced airport IT solutions. Airline passenger growth around the world is driving continuing expansion and upgrade of airport infrastructure. Ultra supplies trackside power equipment for rail transit systems, for which demand continues to be driven by the need to expand and upgrade rail networks. The UK market for nuclear power generation is expanding and Ultra's offering derived from its equivalent military capability is well positioned to benefit.