2019
REPORT AND ACCOUNTS
A DIVERSE PORTFOLIO BY GEOGRAPHY AND SECTOR
To maximise shareholder returns by identifying
and investing in compelling long-term investments
worldwide, where the underlying value is not
reflected in the market share price.
IN THE YEAR TO 30 JUNE 2019
REVENUE EARNINGS
PER ORDINARY SHARE
DIVIDENDS PER
ORDINARY SHARE
NET ASSET VALUE
(“NAV”) TOTAL
RETURN PER
ORDINARY SHARE*
SHARE PRICE
TOTAL RETURN PER
ORDINARY SHARE*
7.63p
7.50p
29.7%
18.8%
*See Alternative Performance Measures on page 98.
CONTENTS
2 Why UIL Limited?
PERFORMANCE
3
Current Year Performance
4 Geographical Investment Exposure
5 Group Performance Summary
6
8
Performance Since Inception
Chairman’s Statement
STRATEGIC REPORT AND INVESTMENTS
11
Investment Managers’ Report
17 Ten Largest Holdings
24 ZDP Shares
26 Strategic Report
33
Investment Managers and Team
GOVERNANCE
36 Directors
37 Directors’ Report
42 Corporate Governance Statement
47 Capital Structure
49 Directors’ Remuneration Report
52 Audit & Risk Committee Report
55 Statement of Directors’ Responsibilities
FINANCIAL STATEMENTS
56
Independent Auditor’s Report
61 Accounts
67 Notes to the Accounts
ADDITIONAL INFORMATION
95 Notice of Annual General Meeting
97 Company Information
98 Alternative Performance Measures
100 Historical Performance
NATURE OF THE COMPANY
The business of UIL Limited (“UIL” or
the “Company”) consists of investing
the pooled funds of its shareholders
in accordance with its investment
objective and policy, generating a
return for shareholders and spreading
the investment risk. The Company
has borrowings and gearing is also
provided by zero dividend preference
(“ZDP”) shares, issued by its wholly
owned subsidiary UIL Finance
Limited (“UIL Finance”). The joint
portfolio managers of the Company
are ICM Investment Management
Limited (“ICMIM”) and ICM Limited
(“ICM”), together referred to as the
“Investment Managers”.
FINANCIAL CALENDAR
Year End
30 June
Annual General Meeting (“AGM”)
7 November 2019
Half Year
31 December
Dividends Payable
September, December, March
and June
FORWARD–LOOKING STATEMENTS
This report and accounts may contain “forward-looking statements” with respect to the financial condition, results of operations and business of
the Company. Such statements involve risk and uncertainty because they relate to future events and circumstances that could cause actual results
to differ materially from those expressed or implied by forward-looking statements. The forward-looking statements are based on the Directors’
current view and on information known to them as at the date of this report. Nothing in this publication should be construed as a profit forecast.
Potential investors are reminded that the value of investments and the income from them may go down as well as up and investors may not receive
back the full amount invested.
1
Report and Accounts for the year to 30 June 2019
WHY UIL LIMITED?
CURRENT YEAR PERFORMANCE
NAV TOTAL RETURN
PER ORDINARY SHARE*
SHARE PRICE TOTAL
RETURN PER ORDINARY
SHARE*
NAV DISCOUNT AS AT
30 JUNE 2019*
GEARING*
29.7%
18.8%
46.2%
64.6%
REVENUE EARNINGS
PER ORDINARY SHARE
DIVIDENDS PER
ORDINARY SHARE
REVENUE YIELD*
DIVIDEND YIELD*
7.63p
7.50p
2.2%
3.8%
ORDINARY SHARES
BOUGHT BACK
AVERAGE PRICE OF
ORDINARY SHARES
BOUGHT BACK
ONGOING CHARGES
EXCLUDING
PERFORMANCE FEES*
ONGOING CHARGES
INCLUDING
PERFORMANCE FEES*
1.2m
180.40p
2.1%
5.1%
*See Alternative Performance Measures on pages 98 to 99.
TOTAL RETURN COMPARATIVE PERFORMANCE † (pence)
from June 2018 to June 2019
130
125
120
115
110
105
100
95
90
85
Jun 18
Jul 18
Aug 18
Sep 18
Oct 18
Nov 18
Dec 18
Jan 19
Feb 19
Mar 19
Apr 19
May 19
Jun 19
NAV total return per ordinary share
FTSE All-Share total return Index
† Rebased to 100 as at 30 June 2018
Source: ICM and Bloomberg
3
Stock selection remains our focus and ICM’s
proven bottom-up long-term approach should
benefit UIL in changing times.
UIL’S OBJECTIVE IS:
HISTORICALLY:
• To maximise shareholder returns by identifying
• Shareholders have received very attractive total
and investing in compelling long-term investments
worldwide, where the underlying long-term value is
not reflected in the market share price
UIL OFFERS ORDINARY SHAREHOLDERS:
• A high conviction portfolio
returns
• NAV total return performance over the last three
years has increased 65.6%, compared to an increase
of 29.5% in the FTSE All-Share total return
UIL’S INVESTMENT MANAGER
• Attractive quarterly dividends
• ICM Limited has been UIL’s investment manager
• Diversified mix of investments
• Opportunity to currently buy UIL shares on the
market at a significant discount to NAV
since inception (14 August 2003) and prides itself
in identifying compelling investment opportunities
and working pro-actively with investee companies
to improve the economic value of identified
investments
2
UIL LimitedReport and Accounts for the year to 30 June 2019
GEOGRAPHICAL INVESTMENT EXPOSURE
(% OF TOTAL INVESTMENTS ON A LOOK THROUGH BASIS)
GROUP PERFORMANCE SUMMARY
NORTH AMERICA
UK AND CHANNEL ISLANDS
EUROPE (EXCLUDING UK)
ASIA
June 2019
June 2018
6.1%
1.9%
June 2019
June 2018
11.8%
16.7%
June 2019
June 2018
10.9%
4.8%
June 2019
June 2018
7.4%
6.3%
LATIN AMERICA
June 2019
June 2018
6.5%
5.9%
AFRICA
June 2019
June 2018
5.1%
1.5%
BERMUDA
June 2019
June 2018
15.4%
13.0%
AUSTRALIA
June 2019
June 2018
NEW ZEALAND
GOLD MINING
20.6%
32.4%
June 2019
June 2018
1.2%
1.9%
June 2019
June 2018
15.0%
15.6%
NAV total return per ordinary share (1) (for the year) (%)
Share price total return per ordinary share (1) (for the year) (%)
Annual compound NAV total return (1) (since inception (2)) (%)
NAV per ordinary share (pence)
Ordinary share price (pence)
Discount (1) (%)
Returns and dividends (pence)
Revenue return per ordinary share
Capital return per ordinary share
Total return per ordinary share
Dividends per ordinary share
FTSE All-Share total return Index
Equity holders' funds (£m)
Gross assets (3)
Bank debt
ZDP shares
Equity holders' funds
Revenue account (£m)
Income
Costs (management and other expenses)
Finance costs
Financial ratios of the Group (%)
Ongoing charges figure excluding performance fees (1)
Ongoing charges figure including performance fees (1)
Gearing (1)
30 June
2019
30 June
2018
% change
2019/18
29.7
18.8
13.4
369.57
199.00
46.2
7.63
75.34
82.97
7.50
7,431
537.2
51.0
159.9
326.3
11.2
2.8
1.6
2.1
5.1
64.6
18.7
11.3
12.4
291.79
174.50
40.2
6.67
38.96
45.63
7.50
7,389
488.3
27.8
199.4
261.1
10.6
2.8
1.6
2.2
4.4
87.3
n/a
n/a
n/a
26.7
14.0
n/a
14.4
93.4
81.8
0.0
0.6
10.0
83.5
(19.8)
25.0
5.7
0.0
0.0
n/a
n/a
n/a
(1) See Alternative Performance Measures on pages 98 and 99
(2) All performance data relating to periods prior to 20 June 2007 are in respect of Utilico Investment Trust plc, UIL’s predecessor.
(3) Gross assets less current liabilities excluding loans and ZDP shares
UIL delivered a strong NAV total return per
ordinary share.
Source: ICM
4
5
UIL LimitedReport and Accounts for the year to 30 June 2019 PERFORMANCE SINCE INCEPTION
ANNUAL COMPOUND
NAV TOTAL RETURN *
NAV TOTAL RETURN
PER ORDINARY SHARE *
ANNUAL COMPOUND
SHARE PRICE TOTAL
RETURN *
SHARE PRICE TOTAL
RETURN PER ORDINARY
SHARE *
13.4%
637.1%
11.2%
443.0%
REVENUE EARNINGS
PER ORDINARY SHARE
DIVIDENDS PER
ORDINARY SHARE
DIVIDENDS PER
ORDINARY SHARE
COVER *
REVENUE RESERVES
PER ORDINARY SHARE
CARRIED FORWARD *
96.36p
74.95p
1.4x
10.30p
*See Alternative Performance Measures on pages 98 to 99.
DIVIDENDS PAID
OUT
VALUE OF ORDINARY
SHARES BOUGHT BACK
ZDP SHARES
ISSUED
ZDP SHARES
REDEEMED
£68.3m
£26.1m
£373.6m
£326.1m
DIVIDENDS PER ORDINARY SHARE (pence)
ALLOCATION OF GROSS ASSETS (£m)
from June 2004 to June 2019
from August 2003 to June 2019
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2004
2005
2006
2007
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
600
500
400
300
200
100
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Dividend per share – ordinary
Dividend per share – special
Ordinary shares
ZDP shares
Bank loans
No dividends were paid between 2007 and 2010
2010 refers to a cash distribution
Source: ICM
Source: ICM
HISTORIC TOTAL RETURN PERFORMANCE † (pence)
Since inception to 30 June 2019
CUMULATIVE TOTAL RETURN COMPARATIVE PERFORMANCE (pence)
from August 2003 to June 2019 (Rebased to 100 as at 14 August 2003*)
800
700
600
500
400
300
200
100
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
800
700
600
500
400
300
200
100
0
NAV total
return of
637.1%
NAV total return per ordinary share **
Ordinary share price total return **
FTSE All-Share total return Index
NAV total return per ordinary share**
FTSE All-Share total return Index
† Rebased to 100 as at 14 August 2003
** Adjusted for the exercise of warrants and convertibles
Source: ICM
*Inception of Utilico Investment Trust PLC
**Adjusted for the exercise of warrants and convertibles
Source: ICM
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
6
7
UIL LimitedReport and Accounts for the year to 30 June 2019
CHAIRMAN’S STATEMENT
We remain bottom up investors looking for
compelling value.
INDICES MOVEMENTS
from June 2018 to June 2019
CURRENCY MOVEMENTS vs STERLING
from June 2018 to June 2019
It is pleasing to report UIL
delivered another strong NAV
total return per ordinary share
performance of 29.7% for the
year to 30 June 2019. This once
again outperformed the FTSE
All-Share total return Index
over the same period, which
was only up by 0.6%. UIL has
achieved growth in NAV over
each of the last six years and
has paid dividends in each of
those years.
PETER BURROWS
Chairman
Since inception in August 2003, UIL has distributed
£68.3m in dividends, invested £26.1m in ordinary share
buybacks and made net gains of some £271.0m for
a total return of 637.1% (adjusted for the exercise of
warrants and convertibles). This represents an average
annual compound NAV total return since inception of
13.4%. The FTSE All-Share total return Index average
annual compound total return for the same period was
8.1%.
At the half-year, we referred to the commitment by the
Board and Investment Managers in the 2014 annual
report to reduce the absolute debt for UIL, which
stood at £235.9m as at 30 June 2013 and improve
gearing. Debt and gearing have reduced every year
since this statement was made and I am pleased
to note continued progress in the current full year.
Gearing reduced from 160.4% as at 30 June 2013 to
stand at a record low for UIL of 64.6% as at 30 June
2019 and absolute debt now stands at £210.9m.
Gearing is now well inside the target of 100.0% set
in 2014 and no further reduction in absolute debt is
expected. In addition, in 2014 the Board resolved to
pay a quarterly dividend. Pleasingly over the last six
years dividends paid have been at 7.50p each year
(1.875p a quarter) and as at 30 June 2019, based on a
share price of 199.00p, the dividend yield was 3.8%.
The sustainability of these dividends should provide
shareholders with added confidence in UIL.
Once again, the discount factor encouraged the
Investment Managers, supported by the Board, to
continue to buy back shares. This year UIL bought
back 1.2m ordinary shares (1.4%) at an average price of
180.40p, which represented a discount of 51.2% to the
closing NAV. These buybacks were accretive to both
UIL’s NAV per share and earnings per share (“EPS”).
The share price total return for the year was 18.8%.
The Board is frustrated to see the ordinary shares
trade at their widest ever year end discount of 46.2% –
despite the strong NAV gains, the continued reduction
in absolute debt, lower gearing and attractive
dividends payments. As with the gearing targets set
six years ago the Board has determined, in agreement
with the Investment Managers and the major
shareholder, to target a lower discount level of 20.0%
in the medium term. To do this UIL will step up its
marketing, as well as continuing to buy back ordinary
shares. UIL announced on 26 July 2019 that, partly as
a result of buy backs, UIL shares held in public hands
reduced to 25.0%, the minimum level required to stay
listed on the Premium Segment of the Main Market.
To enable further buybacks the Board expects shortly
to be sending proposals to shareholders to transfer
the listing of UIL’s ordinary shares from the Premium
Segment to the Specialist Fund Segment of the Main
Market of the London Stock Exchange. Further details
will be set out in that circular.
As noted in the half-yearly report there are two
opposing forces at work in global markets at the
moment: populist leadership and Central Bank activity.
Populist leaders have been elected to challenge
the existing “political establishment” while Central
Banks have been seeking to move policies back to
a more “normal” setting. As the world’s economies
currently slow down, the Central Banks are in retreat.
Most developed economies are seeing interest rates
130
125
120
115
110
105
100
95
90
85
110
105
100
95
90
Jun 18
Aug 18
Oct 18
Dec 18
Feb 19
Apr 19
Jun 19
Jun 18
Aug 18
Oct 18
Dec 18
Feb 19
Apr 19
Jun 19
FTSE All-Share
S&P 500
Australian Stock Exchange ("ASX")
US Dollar
Australian Dollar
New Zealand Dollar
Euro
New Zealand Stock Exchange ("NZX")
Rebased to 100 as at 30 June 2018
Source: Bloomberg
Rebased to 100 as at 30 June 2018
Source: Bloomberg
reducing while this should at some point result in
inflationary pressures, there is little sign of this today.
The populists are looking to deliver policy changes with
little regard for more traditional economic forces.
Given that the US Dollar is still the world’s reserve
currency, the contraction in US Dollars in circulation
leads to broad global economic contraction. This
has put pressure on other global economies, as has
the challenge posed by the emergence of disruptive
technology businesses, which dominate local and
global markets. Much of the equity market growth has
been driven by higher earnings, but higher debt levels
across the world’s economies have contributed as well.
These three factors add to market volatility.
In my statement in last year’s report and accounts, I
noted that there had been a sharp increase in volatility,
and we expect this to continue, driven by the issues
outlined above. While market volatility was anticipated,
the extent of the market weakness that we have
seen in the first half was not. In the six months to 31
December 2018 the China A Share market was down
12.4%, the FTSE All-Share down 11.0% and the US S&P
down 7.8%. Since then markets have rebounded in the
second half to close largely in positive territory.
In the UK, Brexit has continued to crowd out
discussions on most topics as exit concerns have
risen. Unsurprisingly, over the year to 30 June 2019,
Sterling weakened 3.6% against the US Dollar and
1.2% against the Euro. The Australian economy has
also weakened and the Australian Dollar declined 1.5%
against Sterling. In the face of weakening demand and
over-supply, the oil price has seen a dramatic decrease
from USD 79.44 to USD 66.55 per barrel, a decline of
16.2%. Gold rose by 12.5% over the year to 30 June
2019 ending the year at USD 1,409/oz. It is worth
noting that, in AUD terms, gold ended at near all-time
highs of AUD 2,005/oz, up 18.5% in the year to 30 June
2019. In response to lower interest rates globally and
rising political and geopolitical tension we expect gold
to go higher.
In October 2018, UIL Finance redeemed the
outstanding 2018 ZDP shares in full at a redemption
cost of £51.2m. In addition, UIL cancelled 20.0m 2024
ZDP shares it was holding on its balance sheet as
standby for the 2018 ZDP redemption.
In April 2018, UIL Finance issued 25.0m 2026 ZDP
shares, of which UIL held 13.4m, with a view to
extending the ZDP redemption profile and lowering
its cost of debt. As at 30 June 2019, the aggregate
ZDP liability was £159.9m. Since this liability is across
four issues it will reduce the significance of each
redemption.
UIL is well placed with gearing reduced to 64.6% as at
30 June 2019 from 87.3% as at 30 June 2018, the debt
8
9
UIL LimitedReport and Accounts for the year to 30 June 2019 CHAIRMAN’S STATEMENT
(continued)
INVESTMENT MANAGERS’ REPORT
With effect from 1 July 2018 the provision of
administration services to UIL was moved from F&C
Management Limited to JP Morgan Chase Bank N.A.
(in relation to fund accounting, fund valuation and
reporting administration services) and through ICMIM,
to Waverton Investment Management (in relation to
middle office and market dealing services). JPMorgan
Chase Bank N.A remains UIL’s custodian and
J.P. Morgan Europe Limited remain as depositary. I am
pleased to note these arrangements are operating as
expected.
Finally, in line with the announcement in June, Eric
Stobart and Warren McLeland will be stepping down
from the Board on 30 September 2019. On behalf of
the Board I would like to thank Eric, for his wise counsel
and valuable contribution since his appointment as
a non-executive director of the Company in 2007
and as chair of the Audit & Risk Committee; and Mr
McLeland, for his insightful guidance and expertise
since his appointment in 2013 and in supporting
Somers Limited (“Somers”) as chairman, UIL’s largest
investment. The Board expects to announce soon the
appointment of a new non-executive director who will
also chair the Audit & Risk Committee. Following that
appointment, the Board will comprise five directors.
OUTLOOK
The world’s economies are slowing as reported by the
International Monetary Fund. In addition, trade friction
is rising as America First, China 2025 and Brexit drive
changes in global relationships. All this leaves the
Board cautious about the outlook for the markets.
Against the above backdrop, stock selection is of
increasing importance. The Investment Managers’
relentless bottom up approach to investment should
benefit UIL’s portfolio.
Peter Burrows AO
Chairman
13 September 2019
COMMODITIES MOVEMENTS
from June 2018 to June 2019
120
110
100
90
80
70
60
Jun 18
Aug 18
Oct 18
Dec 18
Feb 19
Apr 19
Jun 19
Oil
Copper
Nickel
Gold
Rebased to 100 as at 30 June 2018
Source: Bloomberg
profile extended to 2026 and the Company’s average
funding costs as at 30 June 2019 reduced further to
5.5%.
It is pleasing to see our four issues of ZDP shares
trading at much tighter gross redemption yields than
last year and that the ZDP share market remains
relatively buoyant. As a result of UIL’s investment
performance the cover for the ZDP shares has
improved considerably and as at the year-end the 2026
ZDP cover was over 2.0 times.
The Board is considering proposals in relation to the
redemption of the 2020 ZDP shares on 31 October
2020 and will publish further details in due course.
Revenue return for the year to 30 June 2019 was
£6.8m, ahead of the prior year of £6.0m, an increase
of 13.6%. This resulted in revenue return EPS of 7.63p
versus the prior year’s 6.67p, an increase of 14.4% and
the dividend being covered by earnings for the first
time in six years.
The capital return for the year ended 30 June 2019 was
£67.2m.
The Board maintained total dividends for the year to
30 June 2019 at 7.50p per share which represents a
yield on the closing share price of 199.00p of 3.8%.
Looking forward, the Board expects to maintain
the current dividend profile. Undistributed revenue
reserves carried forward increased from £9.0m to
£9.1m equal to some 10.30p per share.
UIL’s NAV total return of 29.7%
for the twelve months to 30
June 2019 was a rewarding
result given the market volatility
in 2019. This builds on UIL’s
recent significant gains. Since
inception, UIL’s NAV total return
was 637.1% resulting in an
annual compound NAV total
return of 13.4%.
As noted in the Chairman’s
statement, in the year to 30
CHARLES JILLINGS
Investment Manager
June 2019, volatility returned to equity, currency, debt
and commodity markets. We are conscious that this
volatility is impacting all asset classes, with global
gross domestic product (“GDP”) growth softening
and debt continuing to rise across the world’s
economies. However, regardless of the broader market
environment, we remain bottom up investors looking
for compelling value. This focus on the individual
businesses should, over the longer term, deliver above
average returns. However, markets will dictate carrying
values in the shorter term.
While the issues outlined above have created a
headwind for the broader markets, UIL has seen its
investment position continue to improve significantly.
This has been driven by positive developments in its
investee companies, such as the mining automation
investment by Resolute Mining Limited (“Resolute”)
and through to Afterpay Touch Group Limited’s
(“Afterpay”) expansion into the US market with the
addition of 7,500 new customers per day. In addition,
three significant transactions have been or are in
the process of being concluded: Somers’ conditional
sale of Bermuda Commercial Bank Limited (“BCB”),
Bermuda First Investment Company Limited’s
(“BFIC”) conditional sale of Ascendant Group Limited
(“Ascendant”) and Zeta Resources Limited’s (“Zeta”)
sale of Bligh Resources Limited (“Bligh”). These sales
will provide additional liquidity to UIL at an opportune
time for new investments. UIL’s NAV is up, gearing,
10
11
UIL LimitedReport and Accounts for the year to 30 June 2019 INVESTMENT MANAGERS’ REPORT
(continued)
IN THE YEAR TO 30 JUNE 2019
AUSTRALIA REMAINS UIL’S LARGEST
COUNTRY EXPOSURE AT 20.6%
BERMUDA IS UIL’S SECOND LARGEST
COUNTRY EXPOSURE AT 15.4%
GOLD REMAINS UIL’S THIRD
LARGEST EXPOSURE AT 15.0%
11.8%
2.4%
0.6%
UK IS UIL’S FOURTH LARGEST
COUNTRY EXPOSURE AT 11.8%
THE REST OF EUROPE IS UIL’S FIFTH
LARGEST EXPOSURE AT 10.9%
ASIA IS UIL’S SIXTH LARGEST
EXPOSURE AT 7.4%
4.9%
6.1%
1.1%
Note: decreases/increases refer to the movement in the portolio percentage of the relevant country
SECTOR SPLIT OF INVESTMENTS
Infrastructure
Investments
26.5%
(2018: 21.7%)
Technology
Financial Services
22.7%
(2018: 25.9%)
21.8%
(2018: 22.7%)
Gold Mining
Resources
Other
15.0%
(2018: 15.6%)
9.4%
(2018: 9.4%)
4.6%
(2018: 4.7%)
IN THE YEAR TO 30 JUNE 2019
INVESTED
REALISED
TOTAL REVENUE INCOME
£78.5m
£118.4m
£11.2m
LEVEL 1 & 2
INVESTMENTS
LEVEL 3
INVESTMENTS
LEVEL 3
% OF TOTAL PORTFOLIO*
£359.4m
*Includes loans to listed companies
12
£184.4m
33.9%
Source: ICM
UIL’S GROSS ASSETS (LESS CURRENT LIABILITIES EXCLUDING
LOANS AND ZDP SHARES) INCREASED FROM £488.3M TO
£537.2m
IN THE YEAR TO 30 JUNE 2019
including ZDP shares, is down, EPS is up and dividends
are being maintained at current levels.
decision making by analysts and managers within their
defined sectors.
UIL’s strong NAV performance are underpinned by
these strong fundamentals.
Offsetting the benefits to shareholders of the
above is the discount drag that UIL suffers on its
platform investments. As at 30 June 2019 discounts
to published NAVs amounted to 10.8% for Utilico
Emerging Markets Trust plc (“UEM”) (some £10.8m)
and 9.0% for Somers (some £11.0m), and together this
amounts to a discount on these investments of some
£21.8m. Adding these discounts back would see UIL’s
shareholders’ funds increase by 6.7% to 394.22p and
the UIL discount widen to 49.5%.
INVESTMENT APPROACH
UIL continues to develop its core platform investments,
which offer the following benefits:
• Focused strategy. Each platform has a narrow
mandate and as such is driven by the objective of
finding and making attractive investments within its
mandate.
• Dedicated research analysts. The research
analysts for each platform are focused on both
understanding existing portfolio businesses and
identifying compelling new investments.
• Financial support. Ability to draw on UIL’s support
and financial backing.
• Deep knowledge. Utilising the Investment Managers’
knowledge across many jurisdictions to optimise
investment opportunities and undertake corporate
finance led transactions.
The platforms have been set up to provide a sharper
focus, leading to better investment opportunities and
A key driver in shaping the current portfolio is the
Investment Managers’ three medium-term core views.
First, that the world’s financial markets are over indebted;
second, that technological change offers strong
investment upside and third, that emerging markets
offer higher GDP growth opportunities than developed
markets. UIL’s Investment Managers’ emphasis is on
individual stock selection, remaining fully invested and
focusing on finding investments at valuations that do not
reflect their true long-term value, while at the same time
being a supportive shareholder of investee companies.
The Investment Managers are a relentless bottom up
investors, drawing on in-depth knowledge and capability.
PORTFOLIO
The technology investments in UIL have been strong
contributors to performance with the share price of
Afterpay rising 168.1% and Optal Limited (“Optal”) rising
60.9%. In addition, the Bermuda investment valuations
also rose significantly with BFIC up 77.5% and One
Communications Limited (“OneComm”) up 51.1%. UEM’s
performance has been strong with its share price rising
22.8%. Somers share price was weaker, down 5.8% as
was Zeta down 11.3%. Resolute was up 4.7%. These are
all reviewed in the ten largest holdings section starting
on page 19. Overall, the investment portfolio gained
£90.4m in value.
As at 30 June 2019, the top ten investments accounted
for 91.9% of the portfolio compared to 89.2% in the prior
year. Concentration risk, however, is significantly reduced
owing to each platform holding a number of underlying
investments. It should be noted that for both sector and
geographic analysis, we continue to present and discuss
the portfolio on a look-through basis.
13
UIL LimitedReport and Accounts for the year to 30 June 2019
These are also reviewed under the ten largest holdings
section starting on page 19.
(2019: 33.9% - 2018: 25.6%) mainly as a result of gains in
valuations by Optal, Ascendant and OneComm.
GEOGRAPHIC REVIEW
BREXIT
INVESTMENT MANAGERS’ REPORT
(continued)
PLATFORM INVESTMENTS
UIL currently has five individual platform investments
– Somers, UEM, Zeta, BFIC and Allectus Capital Limited
(“Allectus”). These investments are all in the top ten
portfolio and these five investments account for 58.8%
of the total portfolio as at 30 June 2019 (prior year
55.6%). During the year to 30 June 2019, UIL made
net withdrawals of £7.7m, (prior year £15.5m) from its
platform investments.
These are reviewed under the ten largest holdings
section starting on page 19.
The continuing sale of Infratil was completed in the year.
Infratil has been a very successful core holding and had
been held by UIL and its predecessor companies and
was one of the earliest investments made by SUIT. We
wish Infratil shareholders continued success.
PORTFOLIO ACTIVITY
During the year to 30 June 2019, UIL invested £78.5m,
including net loans of £12.5m to Zeta, £10.3m to Allectus
and £6.0m to Somers while UIL realised £118.4m,
including £67.5m from Afterpay, £11.2m from Infratil and
£3.7m from UEM.
In June 2019 BFIC paid a special dividend to its
shareholders, with an option to take shares in
OneComm in lieu of the dividend. UIL opted to receive
OneComm shares and as a result received a £20.4m
investment in OneComm with its investment in BFIC
reduced.
On 5 February 2019, Somers announced the conditional
sale of its investment in BCB and this is proceeding
through the regulatory process. In June 2019, Ascendant
announced it had reached agreement for Algonquin
Power & Utilities Corp to acquire Ascendant, subject to
regulatory and shareholders’ approvals. Shareholder
consent has now been received and regulatory consent
is expected soon. Also, in June 2019, Bligh, a significant
investment of Zeta, announced it had been sold to
Saracen Mineral Holdings Limited (“Saracen”). These
transactions undertaken by Somers, BFIC and Zeta are
expected to generate significant cash for UIL as investee
company loans are expected to be repaid by each of
them to UIL.
The geographical split of the portfolio, on a look-
through basis, shows Australia reducing to 20.6% of
total investments (30 June 2018: 32.4%) and Bermuda
increasing from 13.0% as at 30 June 2018 to 15.4% as at
30 June 2019. Europe (excluding the UK) increased over
the year from 4.8% of the total investments as at 30
June 2018 to 10.9% as at 30 June 2019.
SECTOR REVIEWS
Infrastructure Investments – 26.5% (prior year
21.7%)
UIL has amalgamated the utility sectors into one and
this consists of the following; Airports, Renewables,
Water & waste, Infrastructure, Toll roads, Ports, Oil &
Gas, Telecoms and Electricity.
Technology – 22.7% (prior year 25.9%)
UIL holds a number of investments in the technology
sector, both directly and through Allectus (its ninth
largest investment). Optal is UIL’s fifth largest holding in
the portfolio while Afterpay is the sixth largest holding
and VixTech is the tenth largest holding. Technology
exposure reduced as UIL exited from the Vix Verify
investment for AUD 15.2m and sold down 69.9% of its
holding in Afterpay. Against this, Afterpay and Optal
were amongst UIL’s top performers, with share prices
up 168.1% and 60.9% respectively.
Financial Services – 21.8% (prior year 22.7%)
UIL’s largest investment both in financial services and
in the portfolio is Somers, which accounts for 21.8%
of UIL’s total portfolio as at 30 June 2019 (prior year
22.6%).
Gold Mining – 15.0% (prior year 15.6%)
UIL’s largest investment in gold mining is in Resolute,
which is held both directly by UIL (12.3% of the total
portfolio) and indirectly through Zeta.
Resources (excl. gold mining) – 9.4% (prior year 9.4%)
UIL’s largest investment in resources is Zeta, which
accounts for 12.7% of the total portfolio as at 30 June
2019 (prior year 12.3%).
DIRECT INVESTMENTS
LEVEL 3 INVESTMENTS
UIL has five direct investments in its top ten holdings.
These include: Resolute, Optal, Afterpay, Vix Tech Pte.
Limited (“VixTech”) and OneComm.
UIL’s investments in level 3 companies increased by
8.3% of the total portfolio in the year under review
Brexit risks for UIL are considered by the management
team and Board of UIL. The strategy pursued over
recent years of hedging the UIL ZDP liability in full,
should provide resilience in these volatile times. UIL
has hedged £173.5m from AUD, USD and Euro into
Sterling. This has resulted in a balanced position for
UIL’s net assets. The FX contracts are spread over six
months to reduce any one-month cash call if Sterling
weakened significantly. Within UIL’s portfolio there
are UK businesses which could see an impact from
Brexit both in operations and assets. These businesses
have taken steps to mitigate the day to day operating
impact. We have judged the impact on UIL to be
immaterial. However, this is under constant review and
consideration. Details of UIL’s FX position are set out
below and in note 12 to the accounts.
DERIVATIVES
UIL was for the most part inactive in stock market
derivatives during the year as the Investment Managers
expected the markets to perform well in 2018/9
driven by strong corporate earnings, notwithstanding
increased volatility.
During the year to 30 June 2019 there continued to be
significant currency hedges in place in the portfolio.
As at 30 June 2019, these hedges were higher than
average as we aimed to increase the portfolio’s
exposure to Sterling following the Brexit induced
weakness. These hedges included AUD 144.7m, USD
84.8m, EUR 26.0m and NZD 7.4m and in the year
generated a loss on the capital account of £6.9m (30
June 2018: gain of £3.3m).
GEARING
We are pleased to highlight that UIL’s initial goal set
in 2014 of reducing gearing to 100.0% or below has
been delivered again this year. Gearing (including the
ZDP shares) has reduced significantly and consistently
from 160.4% in 2013 to 64.6% as at 30 June 2019. Given
this progress we have no plans to reduce debt as an
absolute amount below current levels of £173.0m in
ZDP shares and £50.0m bank facility.
More pleasing is the continuing reduction of financing
costs with the average costs reducing from 6.3% in
June 2013 to 5.5% as at 30 June 2019. This should
continue as next year’s 2020 ZDP shares, (currently
compounding at 7.25%), are expected to be refinanced
in current markets at lower rates.
ZDP SHARES
On a consolidated basis the ZDP shares reduced from
£199.4m to £159.9m. UIL’s wholly owned subsidiary,
UIL Finance, commenced the year with £233.9m of
ZDP shares in issue, of which UIL held 0.3m 2018
ZDP shares, 20.0m 2024 ZDP shares and 13.4m 2026
ZDP shares on its balance sheet. In October 2018,
the outstanding £51.2m of 2018 ZDP shares were
redeemed in full, with UIL realising £61.8m from
investments to facilitate the redemption. In addition,
UIL cancelled £20.0m of 2024 ZDP shares it was holding
on its balance sheet as standby for the 2018 ZDP
redemption. As at 30 June 2019, UIL Finance had in
issue four classes of ZDP shares amounting to £172.6m,
of which UIL held 11.9m of the 2026 ZDP shares at
market value.
A new section focused on the ZDP shares is included
on pages 24 and 25 of this document and further
details on the ZDP shares are included in note 15 to the
accounts.
DEBT
Bank loans of £27.8m as at 30 June 2018 were repaid in
September 2018, reflecting portfolio realisations ahead
of the 2018 ZDP redemption of £51.2m. The bank
facility of £50.0m was then fully drawn to fund the 2018
ZDP redemption. The facility is drawn in Australian,
Canadian and US Dollars.
Scotiabank’s £50.0m committed senior secured
multicurrency revolving facility matures in March 2020.
UIL intends to commence discussions to extend this
maturity to 2022, later this year.
REVENUE RETURNS
Revenue total income was up by 5.8% from £10.6m to
£11.2m reflecting increased dividends. Management
and administration fees and other expenses remained
flat at £2.8m (30 June 2018: £2.8m). Financing costs
were largely unchanged at £1.6m (30 June 2018: £1.6m).
Taxes reduced to almost nil.
Revenue profit was up 13.6% to £6.8m (30 June 2018:
£6.0m) and EPS increased 14.4% to 7.63p (6.67p as at
30 June 2018) driven by revenue return increases and a
lower number of shares in issue following the buybacks
during the financial year.
14
15
UIL LimitedReport and Accounts for the year to 30 June 2019 INVESTMENT MANAGERS’ REPORT
(continued)
TEN LARGEST HOLDINGS
CAPITAL RETURNS
EXPENSE RATIO
Capital total income was £86.8m (30 June 2018:
£52.4m). This represented gains on investments and
foreign exchange losses.
Management and administration fees and other
expenses were £8.5m as performance fees increased
in the year (30 June 2018: £5.3m).
Finance costs reduced by 8.2% to £11.1m (30 June
2018: £12.1m) reflecting the lower number of ZDP
shares in issue and lower borrowing costs.
The resultant profit for the year to 30 June 2019 on the
capital return was £67.2m (30 June 2018: £35.0m) and
EPS was 75.34p (30 June 2018: 38.96p).
Pleasingly the ongoing charges figure, excluding
performance fees, decreased from 2.2% as at 30 June
2018 to 2.1% as at 30 June 2019. Including performance
fees (accrued by UIL and by underlying investee funds)
the ongoing charges figure increased from 4.4% to
5.1% reflecting UIL’s stronger performance this year
and consequent higher performance fee.
All expenses are borne by the ordinary shareholders.
Charles Jillings
ICM Investment Management Limited
and ICM Limited
13 September 2019
ORIGINAL SUIT CAPITAL SHAREHOLDER RETURN –
15.4%
NAV TOTAL RETURN
A BRIEF HISTORY
In August 1993, UBS Warburg raised £50.0m for
a new fund called Special Utilities Investment
Trust PLC (“SUIT”) which was jointly managed by
Foreign & Colonial Management Limited (“F&C”)
and Duncan Saville. SUIT was launched as a split
capital fund with 50m capital shares of 40p each
(£20m) and 60m income shares of 60p each (£30m).
The capital shares bore all the expenses of the
issue and received all the capital upside, while the
income shares were entitled to all the net revenue
and their 60p subscribed capital at the end of
SUIT’s life in August 2003. SUIT’s objective was to
deliver a progressive dividend policy for the income
shareholders and achieve capital growth for the
capital shareholders from a portfolio of utilities,
initially consisting largely of securities in water supply
companies which were acquired from a company
associated with Duncan Saville.
Over time, F&C became the administrators and
Duncan Saville formed an investment management
company to manage the fund. In August 2003, the
income shares were redeemed at par and the capital
shareholders were given the option for a cash exit or
to roll their existing capital shares into a new fund,
Utilico Investment Trust PLC (“Utilico”). In light of the
18.8% compound return generated in the previous
ten years it was not surprising that some 70% of the
capital shareholders elected to roll over.
In the following 16 years Utilico’s mandate was
changed to invest in companies where the
underlying value is not reflected in the market
price, as the European utilities sector were facing a
number of challenges and regulatory headwinds.
A STRONG NAV TRACK RECORD
For a SUIT continuation capital shareholder who
rolled over into UIL in 2003, the annual compound
net asset value (“NAV”) total return (which assumes
dividends were reinvested) from 23 August 1993 to
30 June 2019 amounted to 15.4% per annum.
An alternative way of looking at the benefits of this
compounding return is to consider an investment
of £10,000 in a SUIT capital share in August 1993.
Based on the underlying NAV of a UIL ordinary share
(assuming dividends were reinvested) as at 30 June
2019, the value would be approximately £409,000.
PROFILE
Whilst SUIT started life geared at 150.0%, UIL is
today geared at 65.5% and the NAV total return rate,
although slowed, remains strong, SUIT’s was 18.8%
and UIL’s is 13.4%. Throughout this period the major
shareholder has remained consistent, as has much
of the senior management team.
THE VALUE OF THE TEN
LARGEST HOLDINGS
REPRESENTS
91.9%
(2018: 89.2%) OF THE
GROUP’S TOTAL
INVESTMENTS
THE VALUE OF
CONVERTIBLE
SECURITIES
REPRESENTS
6.7%
(2018: 7.1%) OF
THE GROUP’S
PORTFOLIO
THE VALUE OF FIXED
INCOME SECURITIES
REPRESENTS
THE TOTAL NUMBER
OF COMPANIES
INCLUDED IN THE
PORTFOLIO IS
11.9%
(2018: 6.7%) OF THE
GROUP’S PORTFOLIO
42
(2018: 43)
16
17
UIL LimitedReport and Accounts for the year to 30 June 2019
TEN LARGEST HOLDINGS
(continued)
TEN LARGEST HOLDINGS OF THE GROUP
TEN LARGEST HOLDINGS ON A LOOK-THROUGH BASIS
(INCLUDING PLATFORM INVESTMENTS)
Company
Resolute Mining Limited
Optal Limited
Resimac Group Limited
Afterpay Touch Group Limited
Ascendant Group Limited
Bermuda Commercial Bank Limited
One Communications Limited
BNL UK Limited (Waverton)
Panoramic Resources Limited
Alliance Mining Commodities Limited
Total of ten largest holdings on a look-through basis
Other investments
Total investments
Portfolio
UIL and Zeta
UIL
Somers
UIL
UIL and BFIC
Somers
UIL
Somers
Zeta
Zeta
Fair Value
£'000s
71,535
43,726
39,236
37,718
28,522
25,097
22,946
20,873
19,580
17,913
327,146
216,648
543,794
% of total
investments
13.1%
8.0%
7.2%
6.9%
5.2%
4.6%
4.2%
3.8%
3.6%
3.3%
60.2%
39.8%
100.0%
UIL’s Investment Managers’ emphasis is on
individual stock selection, remaining fully invested
and focusing on finding investments at valuations
that do not reflect their true long-term value.
1
2
SHARE PRICE
5.8%
Sector
Financial Services
Fair Value
£’000s
118,428
% of total
investments
21.8%
SHARE PRICE
22.8%
Sector
Investment Fund
Fair Value
£’000s
88,859
% of total
investments
16.3%
Somers is a financial services investment holding company, whose
shares are listed on the Bermuda Stock Exchange (“BSX”). Somers is
managed by ICM.
Somers shareholders’ equity was USD 343.1m as at 30 June 2019 (30
June 2018: USD 378.3m) and reported a NAV per share of USD 16.81
as at 30 June 2019, down from USD 19.09 as at 30 June 2018. Somers
declared dividends of 50.0c up from 49.0c in the prior year. During
the twelve months to 30 June 2019 Somers’ share price decreased,
representing a loss of 1.5%, after adding back dividends. Somers is
classified as an investment company under IFRS 10 and, accordingly,
values its underlying investments at fair value. Somers’ four largest
investments, which make up 86.5% of its portfolio, are a 62.6% holding
in Resimac Group Limited (a leading non-bank Australian financial
institution with over AUD 13.0bn assets under management (“AUM”)), a
100% shareholding in BCB (one of the four licensed banks in Bermuda),
a 62.8% shareholding in UK specialist bank, PCF Group plc and a 62.5%
holding in Waverton Investment Management Limited (a UK wealth
manager with £6.0bn AUM). Somers has agreed to sell BCB subject to
regulatory and Governmental approvals. In the year to 30 June 2019,
UIL’s shareholding in Somers increased by 3.2%.
UEM is a closed-end investment trust, whose ordinary shares are
listed on the premium segment of the Official List of the Financial
Conduct Authority and are traded on the Main Market of the
London Stock Exchange (“LSE”).
UEM is managed by ICM and ICMIM and invests predominantly in
emerging markets with a focus on infrastructure and utility assets.
UEM’s NAV total return increased by 22.6% in the twelve months to 30
June 2019, a particularly pleasing performance and significantly ahead
of the MSCI Emerging Markets Total Return Index (Sterling adjusted)
which grew by 5.3%. UEM’s outperformance versus the MSCI Emerging
Markets Index was primarily due to strong performance in its investee
companies, particularly in Brazil. Over the period, UEM’s share price
increased with the discount to NAV narrowing from 13.4% to 10.4%.
Dividends per share increased to 7.20p from 7.00p. In the twelve months
under review UIL decreased its shareholding in UEM by 4.7%.
18
UIL Limited
Report and Accounts for the year to 30 June 2019
19
TEN LARGEST HOLDINGS OF THE GROUP
(continued)
3
4
SHARE PRICE
11.3%
Sector
Resources
Fair Value
£’000s
% of total
investments
69,178
12.7%
SHARE PRICE
4.7%
Sector
Gold Mining
Fair Value
£’000s
% of total
investments
66,733
12.3%
Zeta is a resource focused investment company, which is listed on
the ASX. Zeta is managed by ICM.
In the year ended 30 June 2019, Zeta’s net assets per share fell by 38.6%.
Zeta’s share price closed the year at a minimal 0.1% (prior year: 30.1%)
discount to net tangible assets per share. The commodity prices of Zeta’s
major underlying investments were all down in USD except for gold, with
nickel down 14.9%, copper down 10.2%, while gold was up 12.5%. As a
commodity leveraged company, the value of Zeta’s net assets typically rise
more when commodity prices rise, while falling more when commodity
prices fall as the impact on mining companies is magnified. In September
2018, Zeta commenced an on-market buy-back programme and as at 30
June 2019, 807,948 shares had been bought back at an average price of
AUD 0.37 per share. Zeta has a concentrated portfolio, having built up
cornerstone shareholdings in bauxite, nickel, gold, and copper companies.
In June 2019, Australian gold company Saracen announced a takeover
offer for Bligh, offering new Saracen shares in exchange for shares in
Bligh at a 97% premium to the Bligh share price just prior to the offer. The
takeover was completed after the end of Zeta’s June financial year. In the
year to 30 June 2019, UIL’s shareholding in Zeta increased by 0.1%.
Resolute is an Australian domiciled gold mining company, listed on
the ASX and the LSE with three operating mines: the Syama mine
in southern Mali; the Ravenswood mine in northeast Australia;
and the recently acquired Mako mine in Senegal. In addition, the
company owns the Bibiani gold mining project in Ghana.
Resolute’s share price in the twelve months to 30 June 2019 increased
on the back of higher gold prices and the start of production at Syama
Underground. Production in the year to 30 June 2019 of c.305,000oz gold
was in line with the guidance. Gold produced at Syama increased by 25.4%
to 243,617oz. Syama Underground is a new automated underground
development still in the ramp-up stage, although commercial production
rates were achieved in the June 2019 quarter. With increased volumes, cash
costs at Syama fell by 24.2% to AUD 906 per ounce. At Ravenswood, gold
produced fell by 31.3% to 61,819oz, and the Mt Wright Underground at
Ravenswood is expected to be closed in late 2019. However, recent drilling
at Ravenswood combined with the higher gold price, substantially boosted
economic reserves, and Resolute is working on improving its plan for the
Ravenswood Expansion Project which is targeting a new 15-year mine life
with annual production of c. 200,000oz. As at 30 June 2019, Resolute had
cash and bullion on hand of AUD 34.3m, down from AUD 79.6m in the prior
year. Total borrowings were AUD 193.0m, up significantly from AUD 33.8m
in the prior year due to capital expenditures on the Syama Underground
development. Resolute recently dual listed its shares on the LSE and
changed its financial year to a calendar year. UIL’s shareholding in Resolute
remained the same in the period under review.
5
6
VALUATION
60.9%
Sector
Technology
Fair Value
£’000s
43,726
% of total
investments
8.0%
SHARE PRICE
168.1%
Sector
Technology
Fair Value
£’000s
37,718
% of total
investments
6.9%
Optal is an unlisted, UK domiciled developer of global payment
systems and its key application is providing services to eNett, a
virtual payment card solution for the travel industry.
This allows travel agents to make payments to service providers
(e.g. hotels, airlines, tour operators) over the universally accepted
MasterCard system in a secure, cost effective and efficient way using a
virtual account number (VAN) created solely for each single transaction.
Optal is the primary VAN issuer for eNett, which is majority owned
by Travelport (formerly US listed but taken private in May 2019), with
Optal owning the residual 23.5%. For the year to 31 December 2018,
Optal grew revenues by 50.5% to EUR 304.8m and net profit after tax
increased by 111.8% to EUR 27.7m. Despite being a fast growing finTech
business, Optal is profitable, cash generative and pays regular dividends
to shareholders. Optal is also providing other payment solutions outside
of the travel payment industry and expects this segment to continue to
grow at a rate significantly above the rate of its travel related business.
The recent strong operational performance has resulted in an upwards
revaluation of the business over the year by 60.9%. UIL’s shareholding in
Optal was unchanged in the year to 30 June 2019.
Afterpay is an Australian listed consumer orientated, finTech
company. Afterpay offers consumers the ability to pay for
purchases (online or in store) in instalments over an eight-week
period with no interest charge. The service is funded by retailers,
who benefit from larger average basket sizes and a higher
propensity for consumers to purchase.
Afterpay continues to expand rapidly both in its established Australian
and New Zealand markets, and internationally, with services launched in
the United States in May 2018 and in the UK (under the Clearpay brand)
in June 2019. Retailers at launch in the UK included Urban Outfitters
and Boohoo.com. As at 30 June 2019, the service was available through
32,300 retailers ( June 2018: 16,500) and Afterpay’s customer numbers
more than doubled to 4.6m active customers ( June 2018: 2.0m) including
1.8m in the USA. Underlying sales increased by 140% in the twelve
months to 30 June 2019. Afterpay’s share price performance was strong
during the year, with the stock advancing to the ASX-100 Index in June
2019. UIL sold 69.9% of its shareholding during the period.
20
UIL Limited
Report and Accounts for the year to 30 June 2019
21
TEN LARGEST HOLDINGS OF THE GROUP
(continued)
7
8
VALUATION
77.5%
Sector
Electricity
Fair Value
£’000s
23,742
% of total
investments
4.4%
BFIC is an investment holding company, which now has only one
significant investment, Ascendant, Bermuda’s monopoly electricity
company. BFIC is managed by ICM.
During the year BFIC distributed its holding in OneComm, a holding
company for telecommunication companies in Bermuda and the
Cayman Islands, to UIL via a special dividend. As at 30 June 2019, BFIC
had total assets of USD 50.7m and net assets of USD 31.9m. In early
2019, Ascendant commenced a strategic review and on 3 June 2019,
announced that it had agreed to be acquired by Algonquin Power and
Utilities Corp. for USD 36.00 per share, a significant premium to the
Ascendant share price prior to the announcement of the strategic
review. The offer was approved by shareholders on 9 August 2019 and is
now awaiting regulatory and Governmental approval. In the meantime,
Ascendant continues its investment in replacement generation and
transmission, and distribution network. Upon completion of the sale of
Ascendant it is likely that BFIC will be liquidated and assets distributed to
shareholders. UIL’s shareholding in BFIC remained the same during the
year under review.
OneComm is an integrated telecommunications holding company
with operations in Bermuda and the Cayman Islands. OneComm
provides mobile telephone, fibre-based broadband, Pay TV, voice
and I.T. services.
During the year to 30 June 2019, UIL increased its direct holding in the
company mainly due to the acquisition of shares previously held within
BFIC. OneComm operates in markets which are highly competitive and
has invested heavily in recent years to upgrade its networks with fibre
to offer broadband speeds of up to 300 Mbps and on-demand 4K Ultra
HD video content. OneComm has also continued to invest in improving
its 4G LTE Wireless network in Bermuda. Following this period of heavy
capital investment, OneComm now has improved customer experiences,
but also made efficiency gains. EBITDA in the six months to 30 June 2019
increased by 8.7% compared with the prior year. Capital expenditure has
normalised and OneComm has resumed dividend payments.
VALUATION
51.1%
Sector
Telecoms
Fair Value
£’000s
22,946
% of total
investments
4.2%
9
10
VALUATION
52.1%
Sector
Technology
Fair Value
£’000s
19,306
% of total
investments
3.6%
VALUATION
0.0% UNCHANGED
Sector
Technology
Fair Value
£’000s
9,208
% of total
investments
1.7%
Allectus is an unlisted investment company with a value focused
portfolio of technology businesses. Allectus is managed by ICM
and oversees and actively supports investments in Asia Pacific, the
United Kingdom and United States, for ICM.
Allectus invests on a high conviction, deep value basis into potentially
disruptive technologies. It predominantly focuses on early and growth
stage investments in finTech, AI, digital health and identity & security,
backed by proprietary and world-class intellectual property. In the year
ending 30 June 2019, Allectus made numerous investments into multiple
verticals including, Pandia Health (digital health provider for women),
Own Solutions (European cash-to-digital exchange platform), Waddle
Loans (B2B SaaS platform for invoice financing for financial institutions),
Cluey (online education and tutoring as a service), Snapper (transit and
payments technology provider), The Clinician (SaaS platform for health
AI analytics) and FanAI (esports analytics and marketing). Additionally,
Allectus has focused on adding value to its existing portfolio including
the provision of growth capital to Switch Automation (US based smart
buildings/AI platform), Perfect Channel (a UK based B2B marketplace
exchange-as-a-service platform) and Imagus (an Australian based facial
recognition technology company).
VixTech is an unlisted, integrated payment solutions company with
a global footprint that has developed solutions for over 200 cities
and regions, enabling millions of people worldwide to experience
the convenience of low-cost, smartcard travel through integrated
systems processing billions of transactions per annum.
VixTech’s products are the cornerstone of the world’s largest smartcard
payment and billing systems and include flagship solutions such as the
Hong Kong Octopus Card, Singapore EzLink, Beijing ACC and Melbourne
Metcard. VixTech continues to undergo a significant corporate
restructuring to improve its long-term efficiency, by developing a
product-focused business model. Given the restructuring that VixTech
has experienced over the last three years, revenues have remained
partly deferred whilst investment costs and restructuring costs remain
high. For the year ended 30 June 2019, revenues were USD 107.0m with
adjusted EBITDA being negative USD 3.0m. As management continue
to scrutinise the business for any excess costs and start to deliver on
new product roll outs, profitability is expected to improve. UIL and ICM
(VixTech’s two shareholders) remain optimistic that the technology
used in the products will improve the commuter travel experience.
Shareholders continue to support VixTech and during the year to 30
June 2019, UIL loaned USD 4.3m to VixTech. UIL’s shareholding in VixTech
remained unchanged in the year to 30 June 2019.
22
UIL Limited
Report and Accounts for the year to 30 June 2019
23
ZDP SHARES
ZDP shares(1) (pence)
2020 ZDP shares
Capital entitlement(2) per ZDP share
ZDP share price
2022 ZDP shares
Capital entitlement(2) per ZDP share
ZDP share price
2024 ZDP shares
Capital entitlement(2) per ZDP share
ZDP share price
2026 ZDP shares
Capital entitlement(2) per ZDP share
ZDP share price
2018 ZDP shares (redeemed)
Capital entitlement(2) per ZDP share
ZDP share price
(1) Issued by UIL Finance, a wholly owned subsidiary of UIL
(2) See pages 47 and 48
GEARING/NAV TOTAL RETURN
from 30 June 2013 to 30 June 2019
30 June
2019
30 June
2018
% change
2019/18
TOTAL BORROWINGS
141.01
149.50
120.03
132.00
107.97
114.00
105.89
107.50
n/a
n/a
131.52
142.50
113.01
124.50
103.10
107.50
100.87
102.25
156.78
159.50
7.2
4.9
6.2
6.0
4.7
6.0
5.0
5.1
n/a
n/a
800
700
600
500
400
300
200
100
0
(
p
e
n
c
e
)
2014 ZDP
2016 ZDP
2018 ZDP
2020 ZDP
2022 ZDP
2024 ZDP
2026 ZDP
Total
Bank debt
Total debt
Jun 2013
£’000s
72,705
72,734
47,957
Jun 2014
£’000s
76,138
77,928
58,427
Jun 2015
£’000s
Jun 2016
£’000s
Jun 2017
£’000s
Jun 2018
£’000s
Jun 2019
£’000s
83,493
62,816
26,132
61,327
67,548
28,134
40,352
72,622
48,704
52,452
50,858
51,940
55,873
29,408
11,275
55,387
59,499
31,582
13,474
193,396
212,493
172,441
197,361
173,778
199,354
159,942
42,732
25,649
34,362
24,987
47,846
28,495
50,971
236,128
238,142
206,803
222,348
221,624
227,849
210,913
Source: ICM
ZDP SHARES – TIMES COVERED BY UIL’S GROSS ASSETS*
2014 ZDP
2016 ZDP
2018 ZDP
2020 ZDP
2022 ZDP
2024 ZDP
2026 ZDP
Jun
2013
3.19
1.82
1.32
Jun
2014
3.96
2.08
1.47
Jun
2015
2.95
1.80
1.52
Jun
2016
Jun
2017
Jun
2018
Jun
2019
5.13
2.68
2.18
1.60
3.51
2.38
1.72
6.50
3.71
2.44
1.84
1.63
4.92
2.97
2.42
2.08
* Gross assets divided by the aggregate redemption liabilities of the ZDP shares and any bank debt or other borrowings ranking in priority to the ZDP
shares.
Source: ICM
TOTAL ZDP AND
BANK DEBT AS AT
30 JUNE 2019
GEARING AS AT
30 JUNE 2019
TOTAL DEBT
REDUCTION DURING
THE YEAR
AVERAGE COST OF
DEBT FUNDING
£210.9m
64.6%
7.2%
5.5%
)
%
(
180
160
140
120
100
80
60
40
20
0
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
Jun 18
Jun 19
*Rebased to 100 as at 14 August 2003
Source: ICM
Gearing
NAV total return*
It is pleasing to note UIL’s initial goal set six years
ago of reducing gearing to 100.0% or below has
been significantly over-delivered.
24
24
UIL Limited
Report and Accounts for the year to 30 June 2019
25
UIL Limited
STRATEGIC REPORT
PRINCIPAL ACTIVITY
UIL carries on business as an investment company and
its principal activity is portfolio investment.
INVESTMENT OBJECTIVE
UIL’s investment objective is to maximise shareholder
returns by identifying and investing in investments
worldwide where the underlying value is not reflected
in the market price.
STRATEGY AND BUSINESS MODEL
UIL invests in accordance with the objective set
out above. The Board is collectively responsible
to shareholders for the long-term success of the
Company.
Since the Company has no employees it outsources
its activities to third party service providers, including
the appointment of external investment managers to
deliver investment performance. The Board oversees
and monitors the activities of the service providers
with the Board setting investment policy and risk
guidelines, together with investment limits.
ICMIM, an English incorporated company authorised
and regulated by the Financial Conduct Authority
(“FCA”) as an alternative investment fund manager
(“AIFM”) pursuant to the AIFM Regulations, is the
Company’s AIFM and joint portfolio manager alongside
ICM. The investment team responsible for the
management of the portfolio is headed by Duncan
Saville and Charles Jillings.
ICMIM and ICM, operating under guidelines
determined by the Board, have direct responsibility
for the decisions relating to the day to day running of
the Company and are accountable to the Board for
the investment, financial and operating performance
of the Company. Other service providers include
JP Morgan Chase Bank N.A. – London Branch
which provides administration services, JPMorgan
Chase Bank N.A. – Jersey which provides custodial
services, J.P. Morgan Europe Limited which acts as
the Company’s Depositary under the AIFM Directive
and Computershare Investor Services which acts
as registrar. ICM has also been appointed Company
Secretary.
INVESTMENT POLICY AND RISK
UIL’s investment policy is to identify and invest
in opportunities where the underlying value is
not reflected in the market price. This perceived
undervaluation may arise from factors such as
technological change, market motivation, prospective
financial engineering opportunities, competition,
underperforming management or shareholder apathy.
UIL aims to maximise value for shareholders through a
relatively concentrated portfolio of investments.
Historically UIL has invested a significant proportion
of its gross assets in existing infrastructure, utility
and related sectors but, following the change in
mandate in 2007, this direct exposure has reduced
as UIL has, in addition, invested in other sectors. UIL
has been reclassified in the Association of Investment
Companies (“AIC”) database as a “Flexible Investment”.
Subject to compliance with the Listing Rules in force
from time to time, UIL may invest in other investment
companies or vehicles, including any managed by the
Investment Managers, where such investment would
be complementary to UIL’s investment objective and
policy.
UIL has the flexibility to invest in shares, bonds,
convertibles and other types of securities, including
non-investment grade bonds and to invest in unlisted
securities.
UIL may also use derivative instruments such as
American Depositary Receipts, promissory notes,
foreign currency hedges, interest rate hedges,
contracts for difference, financial futures, call and
put options and warrants and similar instruments
for investment purposes and efficient portfolio
management, including protecting UIL’s portfolio and
balance sheet from major corrections and reducing,
transferring or eliminating investment risks in its
investments. These investments will be long term in
nature.
UIL has the flexibility to invest in markets worldwide
although investments in the utilities and infrastructure
sectors are principally made in the developed markets
of Australasia, Western Europe and North America, as
UIL’s exposure to the emerging markets infrastructure
and utility sectors is primarily through its holding in
UEM. UIL has the flexibility to invest directly in these
sectors in emerging markets with the prior agreement
of UEM.
UIL believes it is appropriate to support investee
companies with their capital requirements whilst at
the same time maintaining an active and constructive
shareholder approach through encouraging a review
of the capital structure and business efficiencies. The
Investment Managers’ team maintains regular contact
with investee companies and UIL may often be among
the largest shareholders. There are no limits on the
proportion of an investee company that UIL may hold
and UIL may take legal or management control of a
company from time to time.
As required by the Listing Rules, there will be no
material change to the investment policy without prior
approval of the FCA and shareholders. The approval
of the ZDP shareholders is also required where
the investment policy of the Company is changed
materially.
INVESTMENT LIMITS
The Board has prescribed the following limits on
the investment policy, all of which are at the time of
investment unless otherwise stated.
There are no fixed limits on the allocation of
investments between sectors and markets, however
the following investment limits apply:
• investments in unlisted companies will, in aggregate,
not exceed 25% of gross assets at the time that any
new unlisted investment is made. This restriction
does not apply to loans to listed platform companies
and to the Company’s holding of shares linked to a
segregated account of Global Equity Risk Protection
Limited (“GERP”), an unquoted Bermuda segregated
accounts company. This account, which is structured
as the Bermuda equivalent of a protected cell,
exists for the sole purpose of carrying out derivative
transactions on behalf of UIL (see below);
• no single investment will exceed 30% of gross assets
at the time such investment is made, save that this
limit shall not prevent the exercise of warrants,
options or similar convertible instruments acquired
prior to the relevant investment reaching the 30%
limit; and
• derivative transactions are carried out by GERP on
behalf of UIL to enable it to make investments more
efficiently and for the purposes of efficient portfolio
management. GERP spreads its investment risks by
having the ability to establish an overall net short
position in index options, contracts for difference,
swaps and equity options. GERP may not hold more
than 50% of the value of UIL’s segregated portfolio
in index options and GERP may not hold more than
100% of the relevant debt or of the relevant market
value in foreign currency by way of foreign exchange
options or forwards.
None of the above restrictions will require the
realisation of any of UIL’s assets where any restriction
is breached as a result of an event outside of the
control of the Investment Managers which occurs
26
26
UIL Limited
Report and Accounts for the year to 30 June 2019
27
UIL Limited STRATEGIC REPORT
(continued)
after the investment is made, but no further relevant
assets may be acquired or loans made by UIL until the
relevant restriction can again be complied with.
BORROWING AND GEARING POLICY
The Board carefully considers the Company’s policy
in respect of the level of equity exposure. The Board
takes responsibility for UIL’s gearing strategy and sets
guidelines to control it, which it may change from time
to time. The Company may, from time to time, use
bank borrowings for short-term liquidity purposes.
In addition, it has longer term borrowings in the form
of the ZDP shares that its subsidiary UIL Finance has
issued. Details of the ZDP shares in issue and any
changes during the year are included in note 15 to the
accounts.
RESULTS AND DIVIDENDS
Details of the Company’s performance are set out in
the Investment Managers’ Report. The results for the
period ending 30 June 2019 are set out in the accounts
on pages 61 to 66. The dividends in respect of the
period, which total 7.50p, have been declared by way of
four interim dividends.
KEY PERFORMANCE INDICATORS
Delivery of shareholder value is achieved through the
increase in capital value of the Company’s shares and
by its income return. The Board reviews performance
by reference to a number of Key Performance
Indicators (“KPIs”) that include the following:
• NAV total return relative to the FTSE All-Share Index
Under UIL’s Bye-laws, the Group is permitted to borrow
(excluding the gearing provided through the Group’s
capital structure) an aggregate amount equal to 100%
of the Group’s gross assets. Borrowings will be drawn
down in any currency appropriate for the portfolio.
• Share price
• Discount to NAV
• Revenue earnings
• Ongoing charges figure
The Board has set a current limit on gearing (being
total borrowings excluding the ZDP shares measured
against gross assets) not exceeding 33.3% at the time
of drawdown. Borrowings may be drawn down in
Sterling, US Dollars or any currency for which there are
corresponding assets within the portfolio (at the time
of draw down, the value drawn must not exceed the
value of the relevant assets in the portfolio).
The Company has a £50m multicurrency revolving
facility with Scotiabank Europe plc which expires on
22 March 2020; as at 30 June 2019 the facility was fully
drawn. Further details are included in note 13 to the
accounts.
While some elements of performance against KPIs are
beyond management control, they provide measures
of the Group’s absolute and relative performance and
are therefore monitored by the Board on a regular
basis. These KPIs fall within the definition of Alternative
Performance Measures (“APMs”) under guidance
issued by the European Securities and Markets
Authority (ESMA) and additional information explaining
how these are calculated is set out on pages 98 and 99.
30 June
NAV total return (%)
2019
29.7
2018
18.7
FTSE All-Share total return Index (%)
0.6
9.0
DIVIDEND POLICY
Share price (pence)
199.00
174.50
The Board’s objective is to maintain or increase the
total annual dividend. Dividends are expected to be
paid quarterly each year in September, December,
March and June. In determining dividend payments,
the Board will take account of factors such as
income forecasts, retained revenue reserves and
the Company’s dividend payment record. The Board
also has the flexibility to pay dividends from capital
reserves.
Discount to NAV (%)
Percentage of issued shares bought
back during the year (based on opening
share capital) (%)
Revenue EPS (pence)
Ongoing charges figure – excluding
performance fees (%)
46.2
40.2
1.4
0.8
7.63
6.67
2.1
2.2
A graph showing the NAV total return performance
compared to the FTSE All-Share Index can be found on
page 3. The ten year record on page 100 shows historic
data for the Company’s metrics.
Discount to NAV: The Board monitors the premium/
discount at which the Company’s shares trade in
relation to the assets. During the year the Company’s
shares traded at a discount relative to NAV in a range
of 34.9% to 48.3% and an average discount of 42.6%.
The Board and the Investment Managers closely
monitor both movements in the Company’s share price
and significant dealings in the shares. On 26 July 2019,
UIL announced that the Board intends to focus on
reducing the discount of the ordinary shares, targeting
a discount to NAV of approximately 20% over the
medium term. In order to avoid substantial overhangs
or shortages of shares in the market the Board asks
shareholders to approve resolutions which allow for
the buyback of shares and their issuance which can
assist in the management of the discount. UIL bought
back, and cancelled, 1,210,000 ordinary shares during
the year, representing 1.4% of its opening issued share
capital.
Earnings and dividends per share: As referred to
in “Dividend Policy” above, the Board’s objective is to
maintain or increase the total annual dividend. The
Board and the Investment Managers attach great
importance to maintaining dividends per share since
dividends form a key component of the total return to
shareholders.
The Board declared four quarterly dividends, each
of 1.875p, in respect of the year ended 30 June 2019.
The fourth quarterly dividend was declared on 27
August 2019 and will be paid on 27 September 2019 to
shareholders on the register as at 6 September 2019.
The total dividend for the year was 7.50p, the same as
in the previous year.
Ongoing charges: These are calculated in accordance
with the industry measure of costs as a percentage
of NAV. The expenses of the Company are reviewed
at every Board meeting, with the aim of managing
costs incurred and their impact on performance. The
ongoing charges figure appears high when compared
to other investment companies as the expenses are
expressed as a percentage of average net assets (after
the deduction of the ZDP shares) and comprises all
operational, recurring costs that are payable by the
Company or incurred within underlying investee funds.
This ratio is sensitive to the size of the Company as well
as the level of costs.
PRINCIPAL RISKS AND RISK MITIGATION
During the year ended 30 June 2019, ICMIM was
the Company’s AIFM and had sole responsibility
for risk management subject to the overall policies,
supervision, review and control of the Board.
The Board considers carefully the Company’s principal
risks and seeks to mitigate these risks through
regular review by the Audit & Risk Committee of the
Company’s risk register which identifies the risks
facing the Company and the likelihood and potential
impact of each risk, together with the controls
established for mitigation. Where produced, the Audit
& Risk Committee also reviews summaries of the
Service Organisation Control (SOC1) reports from the
Company’s service providers.
The Board applies the principles and
recommendations of the UK Corporate Governance
Code and the AIC Code of Corporate Governance as
described on page 43. The Company’s internal controls
are described in more detail on page 44. As required
by the AIC Code of Corporate Governance, the Board
has undertaken a robust assessment of the principal
risks facing the Company including those that would
threaten its business model, future performance,
solvency or liquidity. Most of the Company’s principal
risks are market-related and similar to those of other
investment companies which invest globally in various
currencies around the world.
UIL’s business model and strategy are not time limited
and, as a global investor, are unlikely to be adversely
impacted as a direct result of Brexit. However, since
UIL’s reporting currency is Sterling, any rise or fall in
Sterling will lead, respectively, to a fall or rise in the
Company’s reported NAV.
The principal ongoing risks and uncertainties currently
faced by the Company, and the controls and actions
to mitigate those risks are described below. Further
details of risks and risk management policies as they
relate to the financial assets and liabilities of the
Company are detailed in note 32 to the accounts.
28
UIL Limited
Report and Accounts for the year to 30 June 2019
29
STRATEGIC REPORT
(continued)
INVESTMENT
RISK:
The risk that
the investment
strategy does not
achieve long-term
total returns for
the Company’s
shareholders
GEARING:
The risk that the
use of gearing may
adversely impact
on the Company’s
performance
The Board monitors the performance of the Company and has
established guidelines to ensure that the investment policy that
has been approved is pursued by the Investment Managers.
No material
change in overall
risk in the year.
The investment process employed by the Investment Managers
combines assessment of economic and market conditions in the
relevant countries with stock selection. Fundamental analysis
forms the basis of the Company’s stock selection process,
with an emphasis on sound balance sheets, good cash flows,
the ability to pay and sustain dividends, good asset bases and
market conditions. The political risks associated with investing
in these countries are also assessed. Overall, the investment
process aims to achieve absolute returns through an active fund
management approach.
The Company’s results are reported in Sterling, whilst the
majority of its assets are priced in foreign currencies. The impact
of adverse movements in exchange rates can significantly
affect the returns in Sterling of both capital and income. Such
factors are out of the control of the Board and the Investment
Managers and may give rise to distortions in the reported
returns to shareholders. It can be difficult and expensive to
hedge some currencies.
In addition, the ordinary shares of the Company may trade at
a discount to their NAV. The Board monitors the price of the
Company’s shares in relation to their NAV and the premium/
discount at which they trade. The Board may buy back shares
if there is a significant overhang of stock in the market; it is
focused on reducing the discount of the ordinary shares,
targeting a discount to NAV of approximately 20% over the
medium term.
The Board regularly reviews strategy in relation to a range of
issues including the balance between quoted and unquoted
stocks, the allocation of assets between geographic regions and
sectors and gearing. Periodically the Board holds a separate
meeting devoted to strategy, the most recent one being held in
November 2018.
A more detailed review of economic and market conditions is
included in the Investment Managers’ Report.
There is no guarantee that the Company’s strategy and business
model will be successful in achieving its investment objective.
The value of an investment in the Company and the income
derived from that investment may go down as well as up
and an investor may not get back the amount invested. Past
performance of the Company is not necessarily indicative of
future performance.
The ordinary shares rank behind bank debt and ZDP shares,
making them a geared instrument.
The gearing level is high due to the capital structure of the
balance sheet. Whilst the gearing should enhance total return
where the return on the Company’s underlying securities is rising
and exceeds the cost of borrowing, it will have the opposite
effect where the underlying return is falling. As at 30 June 2019,
gearing on net assets, including bank loans, any overdrafts
and ZDP shares, was 64.6% (30 June 2018: 87.3%). The Board
reviews the level of gearing at each Board meeting.
BANKING:
KEY STAFF:
A breach of the
Company’s loan
covenants might
lead to funding
being summarily
withdrawn
ICMIM monitors compliance with the banking covenants when
each drawdown is made and at the end of each month. The
Board reviews compliance with the banking covenants at each
Board meeting.
No material
change in overall
risk in the year.
Loss by the
Investment
Managers of key
staff could affect
investment returns
The quality of the management team is a crucial factor
in delivering good performance. There are training and
development programs in place for employees of the Investment
Managers and the recruitment and remuneration packages have
been developed in order to retain key staff.
No material
change in overall
risk in the year.
RELIANCE ON
THE INVESTMENT
MANAGERS AND
OTHER SERVICE
PROVIDERS:
Inadequate
controls by the
Investment
Managers or
Administrator or
other third-party
service providers
could lead to
misappropriation
of assets
Any material changes to the management team are considered
by the Board at its next meeting; the Board discusses succession
planning with the Investment Managers at regular intervals.
Failure by any service provider to carry out its obligations to
the Company in accordance with the terms of its appointment
could have a materially detrimental impact on the operation
of the Company and could affect the ability of the Company
to successfully pursue its investment policy. The Company’s
main service providers are listed on page 97. The Audit & Risk
Committee monitors the performance of the service providers.
Most of UIL’s investments are held in custody for the Company
by JPMorgan Chase Bank N.A., Jersey with a small number
of investments held in custody by Waverton Investment
Management Limited. J.P. Morgan Europe Limited, the
Company’s depositary services provider, also monitors the
movement of cash and assets across the Company’s accounts.
The Audit & Risk Committee reviews the JP Morgan SOC1
reports, which are reported on by Independent Service Auditors,
in relation to its administration, custodial and information
technology services.
The Board reviews the overall performance of the Investment
Managers and all the other service providers on a regular basis.
The risk of cybercrime is high, as it is with most organisations,
but the Board regularly seeks assurances from the Investment
Managers and other service providers on the preventative steps
that they are taking to reduce this risk.
Although there
has been no
change in overall
risk in the year,
the possibility
of cybercrime
continues to be
a concern. The
Company’s assets
are considered
to be relatively
secure, so the risk
is the inability
to transact
investment
decisions for a
period of time and
reputational risk.
No material
change in overall
risk in the year.
VIABILITY STATEMENT
The Board makes an assessment of the longer-term
prospects of the Company beyond the timeframe
envisaged under the going concern basis of accounting,
having regard to the Company’s current position and
the principal risks it faces. The Company is a long-term
investment vehicle and the Board believes that it is
appropriate to assess the Company’s viability over a
long-term horizon. For the purposes of assessing the
Company’s prospects in accordance with Code Provision
C.2.2 of the UK Corporate Governance Code (April 2016),
the Board considers that assessing the Company’s
prospects over a period of five years is appropriate
given the nature of the Company and appropriately
reflects the long-term strategy of the Company.
In its assessment of the viability of the Company, the
Board has considered each of the Company’s principal
risks and uncertainties detailed above, as well as the
impact of a sustained, but not catastrophic, fall in
equity and foreign exchange markets on the Company’s
ability to repay the £183.9m ultimate liability in respect
of the 2020 and 2022 ZDP share issues and its bank
debt. In arriving at its conclusions, the Board has also
considered the Company’s income and expenditure
30
UIL Limited
Report and Accounts for the year to 30 June 2019
31
STRATEGIC REPORT
(continued)
projections and the fact that a significant percentage of
the Company’s investments comprise readily realisable
securities which could be sold to meet funding
requirements, if necessary. Additionally, the Board
has considered the impact of failure of any of its key
service providers and believes that suitable alternative
providers could be engaged at relatively short notice if
necessary.
Based on the Company’s processes for monitoring
operating costs, share price discount, the Investment
Managers’ compliance with the investment objective
and policy, asset allocation, the portfolio risk profile,
gearing, counterparty exposure, liquidity risk and
financial controls, the Board has concluded that there is
a reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they
fall due over the next five years.
OUTLOOK
The Board’s main focus is on the achievement of the
Company’s objective of delivering a long-term total
return and the future of the Company is dependent
upon the success of its investment strategy. The
outlook for the Company is discussed in the Chairman’s
Statement and the main trends and factors likely to
affect the future development, performance and
position of the Company’s business can be found in the
Investment Managers’ Report.
GENDER DIVERSITY
The Board currently consists of five male directors and
one female director. The Company has no employees
and therefore there is nothing further to report in
respect of gender representation within the Company.
The Company’s policy on diversity is detailed in the
Corporate Governance Statement.
GREENHOUSE GAS EMISSIONS
All the Company’s activities are outsourced to third
parties. The Company therefore has no greenhouse gas
emissions to report from its operations.
BRIBERY ACT
The Company has a zero tolerance policy towards
bribery and is committed to carrying out business fairly,
honestly and openly. The Investment Managers also
adopt a zero tolerance approach and have policies and
procedures in place to prevent bribery.
CRIMINAL FINANCE ACT
The Company has a commitment to zero tolerance
towards the criminal facilitation of tax evasion.
MODERN SLAVERY ACT
Due to the nature of the Company’s business, being
a company that does not offer goods and services to
customers, the Board considers that it is not within the
scope of the Modern Slavery Act 2015 because it has
no turnover. The Company is therefore not required
to make a slavery and human trafficking statement. In
any event, the Board considers the Company’s supply
chains, dealing predominantly with professional advisers
and service providers in the financial services industry,
to be low risk in relation to this matter.
EMPLOYEE, SOCIAL, ENVIRONMENTAL, ETHICAL AND
HUMAN RIGHTS POLICY
The Company is managed by ICMIM and ICM, has no
employees and all its directors are non-executive. There
are, therefore, no disclosures to be made in respect of
employees. The Board notes the Investment Managers’
policy statement in respect of Social, Environmental and
Governance issues, as outlined on page 40.
This Strategic Report was approved by the Board of
Directors on 13 September 2019.
By order of the Board
ICM Limited
Company Secretary
13 September 2019
INVESTMENT MANAGERS AND TEAM
The Investment Managers are focused on finding
investments at valuations that do not reflect their true
long term value. Their investment approach is to have
a deep understanding of the business fundamentals
of each investment and its environment versus its
intrinsic value. The Investment Managers are long
term investors and see markets as a place to exchange
assets.
ICM manages over £1.8bn in funds directly and is
responsible indirectly for a further £13.6bn of assets
in subsidiary investments. ICM has over 60 staff based
in offices in Bermuda, Cape Town, Dublin, London,
Singapore, Sydney and Wellington.
UIL has a broad investment mandate. To better
execute the mandate UIL has set up a number of
platforms to focus the investment process and
decisions. The Investment Managers have mirrored
these platforms in establishing investment teams
dedicated to each.
The investment teams are led by Duncan Saville and Charles Jillings.
DUNCAN SAVILLE
Duncan Saville, a director of ICM, is a chartered accountant with experience in
corporate finance and asset management. He was formerly a non-executive director
of Special Utilities Investment Trust PLC and Utilico Investment Trust plc and is an
experienced non-executive director having been a director of a number of utility,
financial services, resources and technology companies. He is currently a non-
executive director of listed companies Resimac Group Limited and West Hamilton
Holdings Limited, and unlisted directorships include Allectus Capital Limited.
CHARLES JILLINGS
Charles Jillings, a director of ICM and chief executive of ICMIM, is responsible for
the day-to-day running of UIL and the investment portfolio. He qualified as a
chartered accountant and has extensive experience in corporate finance and asset
management. He is an experienced director having previously been a non-executive
director of Special Utilities Investment Trust PLC and other companies in the water,
waste and financial services sectors. His current portfolio of directorships include
Somers Limited, Waverton Investment Management Limited, and Allectus Capital
Limited.
32
UIL Limited
Report and Accounts for the year to 30 June 2019
33
INVESTMENT MANAGERS AND TEAM
(continued)
Core teams assisting them at a senior level, including consultants, are:
FINANCIAL SERVICES
UTILITIES & INFRASTRUCTURE
Jacqueline Broers, who has been involved in the running of UIL and UEM since September 2010.
Mrs Broers is focused on the transport sector worldwide with particular emphasis on emerging
markets. Prior to joining the investment team, Mrs Broers worked in the corporate finance team at
Lehman Brothers and Nomura. Mrs Broers is a qualified chartered accountant.
Jonathan Groocock, who has been involved in the running of UIL and UEM since February 2011.
Mr Groocock is focused on the utilities sector worldwide with particular emphasis on emerging
markets. Prior to joining the investment team Mr Groocock had nine years’ experience in sell side
equity research, covering telecoms stocks at ABN AMRO, Oriel Securities and Investec. Mr Groocock
qualified as a CFA charterholder in 2005. Mr Groocock is a director of Coldharbour Technology
Limited.
Mark Lebbell, who has been involved in the running of UIL and UEM since their inception and
before that was involved with Utilico Investment Trust plc and The Special Utilities Investment Trust
PLC since 2000. Mr Lebbell is focused on the communications sector worldwide with particular
emphasis on emerging markets. Mr Lebbell is an associate member of the Institute of Engineering
and Technology.
FIXED INCOME
RESOURCES
TECHNOLOGY
Gavin Blessing, joined ICM in 2012. He has over 20 years of experience, mostly in the corporate
fixed income markets, both investment grade and high yield. He worked as a credit research
analyst and portfolio manager at Goldman Sachs Asset Management in London for 10 years and
subsequently as head of credit origination at ISTC in Dublin, Ireland. Prior to joining ICM he was
head of bond credit research at Canaccord Genuity in Dublin. Mr Blessing is a qualified chartered
accountant and CFA charterholder.
Dugald Morrison, is responsible for ICM NZ Limited and in addition is focused on the resources
sector worldwide. He is an experienced investment analyst, having worked in stockbroking,
investment banking and investment management firms in New Zealand, the United Kingdom and
the United States since 1987. He is a non-executive director of Resimac New Zealand. Mr Morrison
is a member of the New Zealand Institute of Directors.
Jason Cheong, is responsible for ICM’s technology investing activities. He is the portfolio manager
for Allectus Capital Limited, having worked in private equity, investment banking and corporate law
in Australia and the UK. Prior to joining ICM, he was an investment manager at Brookfield Asset
Management. Mr Cheong is a qualified solicitor, admitted to practice in Australia.
Alasdair Younie is a director of ICM. Mr Younie is responsible for the day to day running of the
Somers Group and its Bermuda investments portfolio. Mr Younie has extensive experience in
financial markets and corporate finance. He worked for six years within the corporate finance
department of Arbuthnot Securities Limited in London. He is a director of Ascendant Group
Limited, Bermuda Commercial Bank Limited, Bermuda First Investment Company Limited, Somers
Limited and West Hamilton Holdings Limited. Mr Younie is a member of the Institute of Chartered
Accountants in England and Wales.
CORPORATE FINANCE
Sandra Pope is a director of ICMIM. She has over 25 years’ experience in corporate finance,
having previously worked in corporate finance at Deloitte Haskins & Sells, Hill Samuel Bank and
Close Brothers for 10 years and has worked for the ICM Group since 1999. Mrs Pope is a qualified
chartered accountant and is a director of several private companies.
OPERATIONS
ACCOUNTING
Brad Goddard has over 25 years’ experience in international markets and finance and their related
operations with the ICM Group. Brad has been involved with UIL since its inception and prior
to that, he was involved with The Special Utilities Investment Trust plc. Mr Goddard is currently
working closely with Somers’ investee companies to achieve greater operational synergies across
the Somers group.
Werner Van Kets has managed various operational and financial aspects of ICM Corporate
Services (Pty) Ltd since its inception, which provides accounting and other corporate support
services to the ICM group. His previous work experience includes Deloitte (South Africa) and Credit
Suisse in London. Mr Van Kets is a qualified chartered accountant.
COMPANY SECRETARY, ICM LIMITED
Alastair Moreton, a chartered accountant, joined the team in 2017 to provide company secretarial
services to the Company and UEM. He has over thirty years’ experience in corporate finance with
Samuel Montagu, HSBC, Arbuthnot Securities and Stockdale Securities, where he was responsible
for the company’s closed end fund corporate clients.
34
UIL Limited
Report and Accounts for the year to 30 June 2019
35
DIRECTORS
DIRECTORS’ REPORT
PETER BURROWS AO* (CHAIRMAN)
Peter Burrows AO (Chairman) was appointed a Director in September 2011 and Chairman in
November 2015. Mr Burrows is an experienced stockbroker and founded his own independent
specialist private client stock broking firm, Burrows Limited, in 1986. Mr Burrows was previously
the chairman and director of a number of listed and unlisted companies. Mr Burrows was made
an officer in the Order of Australia (AO) for his services to medical research, tertiary education
and finance.
ALISON HILL*
Alison Hill, FCMA, CGMA, was appointed a Director in November 2015 and is an executive
director and chief executive officer of The Argus Group in Bermuda, which provides insurance,
retirement and financial services. Ms Hill has over twenty five years’ experience in global
corporations in the financial services sector. Ms Hill is a trustee and a member of committees
of a number of non-corporate organisations in Bermuda. Ms Hill is a Fellow of the Chartered
Institute of Management Accountants and a Chartered Global Management Accountant.
WARREN MCLELAND
Warren McLeland, was appointed a Director in September 2013. He was formerly a stockbroker,
investment banker and Chief Executive Officer of Resimac Ltd. He acts as an adviser in funds
management and business strategy to companies operating in the Asia Pacific region. He is
chairman of Somers Limited, director of Resimac Group Limited and is an experienced non-
executive director.
CHRISTOPHER SAMUEL*
Christopher Samuel, who was appointed a Director in November 2015, was Chief Executive
of Ignis Asset Management until mid-2014, when it was taken over by Standard Life. He has
over twenty five years of Board level experience in the investment management sector. He is
currently Chairman of Blackrock Throgmorton Trust plc and JP Morgan Japanese Investment
Trust plc as well as a non-executive director of Alliance Trust PLC and Sarasin LLP. Mr Samuel is a
Chartered Accountant.
DAVID SHILLSON
David Shillson, LLM (Hons), who was appointed a Director in November 2015, is an experienced
corporate and commercial lawyer and a senior partner of Kensington Swan, a New Zealand law
firm. He has significant experience acting for a variety of clients, particularly in acquisitions and
investment structuring, advising on transactional and governance matters across the utilities
(ports, airports), technology, energy, transport (rail and roads) and finance sectors. Mr Shillson is
a member of the New Zealand Law Society and the New Zealand Institute of Directors.
ERIC STOBART*
Eric Stobart, FCA (Chairman of Audit & Risk and Management Engagement Committees) was
appointed a Director in May 2007. He has spent most of his career in merchant and commercial
banking, latterly as Director of Public Policy and Regulation for what is now Lloyds Banking
Group. He is a non-executive chairman of Capita Managing Agency Limited, a member of the
audit and risk committee of London Business School and a trustee of four pension schemes
with combined assets of c£3.6 billion. Mr Stobart is a chartered accountant with an MBA from
London Business School.
* Independent Director and member of the Audit & Risk Committee and Management Engagement Committee
The Directors present the Annual Report and Accounts
of the Company for the year ended 30 June 2019.
STATUS OF THE COMPANY
UIL is a Bermuda exempted closed-end investment
company with registration number 39480. The
Company’s ordinary shares and UIL Finance’s ZDP
shares are currently listed, respectively, on the
premium and standard segments of the Official List
of the Financial Conduct Authority and are traded on
the Main Market of the London Stock Exchange. As
referred to in the Chairman’s Statement, UIL expects
to publish proposals in September 2019 to transfer
the listing of its ordinary shares to the Specialist Fund
Segment. UIL is a member of the AIC in the UK.
The Company’s subsidiary undertaking, UIL Finance,
carries on business as an investment company.
THE ALTERNATIVE INVESTMENT FUND MANAGERS
DIRECTIVE (“AIFMD”)
The Company is a non-EU Alternative Investment Fund
(“AIF”) for the purposes of the AIFMD. The Company
has appointed ICMIM, an English incorporated
company which is regulated by the FCA, as its AIFM,
with sole responsibility for risk management and ICM
and ICMIM jointly to provide portfolio management
services.
The AIFMD requires certain information to be made
available to investors in AIFs before they invest and
requires that material changes to this information
be disclosed in the annual report of each AIF. An
Investor Disclosure Document (“IDD”), which sets out
information on the Company’s investment strategy
and policies, leverage, risk, liquidity, administration,
management, fees, conflicts of interest and other
shareholder information, is available on the Company’s
website at www.uil.limited.
UIL has also appointed J.P. Morgan Europe Limited
(“JPMEL”) as its depositary services provider. JPMEL’s
responsibilities include general oversight over the
issue and cancellation of the Company’s shares, the
calculation of the NAV, cash monitoring and asset
verification and record keeping. JPMEL receives a fee
of 2.2bps on UIL’s NAV for its services, subject to a
minimum fee of £25,000 per annum, payable monthly
in arrears.
FUND MANAGEMENT ARRANGEMENTS
The aggregate fees payable by the Company under
the Investment Management Agreement (“IMA”) are
0.5% per annum of gross assets after deducting
current liabilities (excluding borrowings incurred for
investment purposes), payable quarterly in arrears,
with such fees to be apportioned between ICMIM and
36
37
UIL LimitedReport and Accounts for the year to 30 June 2019 DIRECTORS’ REPORT
(continued)
ICM as agreed by them. The Investment Managers
may also become entitled to a performance-related
fee. The IMA may be terminated on one year’s notice
in writing and further details of the management
and performance fees are disclosed in note 3 to the
accounts.
Under the IMA, ICM has been appointed as Company
Secretary.
The Board continually reviews the policies and
performance of the Investment Managers. The Board’s
philosophy and the Investment Managers’ approach
are that the portfolio should consist of shares thought
attractive irrespective of their inclusion or weighting
in any index. Over the long term, the Board expects
the combination of the Company’s and Investment
Managers’ approach to generate a positive return for
shareholders. The Board continues to believe that the
appointment of ICMIM and ICM on the terms agreed is
in the interests of shareholders as a whole.
ADMINISTRATION
The provision of accounting and administration
services has been outsourced to JPMorgan Chase
Bank N.A. – London Branch (the “Administrator”).
The Administrator provides financial and general
administrative services to the Company for an annual
fee based on the Company’s month end NAV (5 bps
on the first £100m NAV, 3bps on the next £150m
NAV, 2bps on the next £250m NAV and 1.5bps on the
next £500m NAV). The Administrator and any of its
delegates are also entitled to reimbursement of certain
expenses incurred by it in connection with its duties. In
addition, ICMIM has appointed Waverton Investment
Management Limited (“Waverton”) to provide
certain support services (including middle office,
market dealing and information technology support
services). Waverton is entitled to receive an annual
fee of 3bps of the Company’s gross assets and the
Company reimburses ICMIM for its costs and expenses
incurred in relation to this agreement. Annually, the
Management Engagement Committee also considers
the ongoing administrative requirements of the
Company and assesses the services provided.
SAFE CUSTODY OF ASSETS
During the year ended 30 June 2019, most of UIL’s
investments were held in custody for the Company by
JPMorgan Chase Bank N.A., Jersey (the “Custodian”).
Operational matters with the Custodian are carried
out on the Company’s behalf by ICMIM and the
Administrator in accordance with the IMA and the
Administration Agreement. The Custodian is paid
a variable fee dependent on the number of trades
transacted and the location of the securities held. A
small number of investments are also held in custody
by Waverton.
DIVIDENDS
The dividends in respect of the year, which total 7.50p
per ordinary share, have been declared and are paid
as four interim dividends in order to maintain quarterly
payments. Dividends of 1.875p per share were paid
on 21 December 2018, 29 March 2019, 28 June 2019
and a dividend of 1.875p per share was declared on 27
August 2019 and will be paid on 27 September 2019.
ISA AND NMPI
UIL has conducted its affairs so that its ordinary
shares and the ZDP shares remain qualifying
investments under the Individual Savings Account
(“ISA”) regulations. Furthermore, the shares are
excluded from the FCA’s restrictions which apply to
non-mainstream pooled investments (“NMPI”). It is
the intention of the Board to continue to satisfy these
regulations.
GOING CONCERN
The financial statements have been prepared on a
going concern basis. The use of the going concern
basis of accounting is appropriate because there
are no material uncertainties related to events or
conditions that may cast significant doubt about the
ability of the Company to continue as a going concern.
After making enquiries, the Board has a reasonable
expectation that the Company has adequate
resources to continue in operational existence for the
foreseeable future. Accordingly, the Board continues
to adopt the going concern basis in preparing the
accounts.
DIRECTORS
UIL currently has a Board of six non-executive
Directors who oversee and monitor the activities of
the Investment Managers and other service providers
and ensure that the Company’s investment policy
is adhered to. The Board is supported by an Audit
& Risk Committee and a Management Engagement
Committee, which deal with specific aspects of
the Company’s affairs. The Corporate Governance
Statement, which is set out on pages 42 to 46, forms
part of this Directors’ Report.
The Directors have a range of business, financial and
asset management skills as well as experience relevant
to the direction and control of the Company. Brief
biographical details of the members of the Board are
shown on page 36. All the Directors are independent
other than Mr McLeland and Mr Shillson. Mr McLeland
is a director of other companies associated with the
Investment Managers and Mr Shillson is a partner of
Kensington Swan, a New Zealand law firm which has
acted for members of the UIL and ICM groups. As
referred to in the Chairman’s Statement, Mr McLeland
and Mr Stobart intend to step down from the Board
on 30 September 2019 and, following the appointment
of a new non-executive Director, the UIL Board will
comprise five Directors.
UIL’s Bye-laws require that a Director shall retire
and be subject to re-election at the first AGM after
appointment and at least every three years thereafter.
UIL maintains Directors’ and officers’ liability insurance
which provides appropriate cover for any legal action
brought against its Directors.
The nature of an investment company and the
relationship between the Board and the Investment
Managers are such that it is considered unnecessary
to identify a senior independent director. Any of the
Directors is available to shareholders if they have
concerns which have not been resolved through the
normal channels of contact with the Chairman or the
Investment Managers, or for which such channels are
inappropriate.
DIRECTORS’ INTERESTS
The Directors’ interests in the ordinary share capital
of the Company are disclosed in the Directors’
Remuneration Report.
No Director was a party to, or had any interests in,
any contract or arrangement with the Company at any
time during the year or at the year end. There are no
agreements between the Company and its Directors
concerning compensation for loss of office.
A Director must avoid a situation where he/she has,
or can have, a direct or indirect interest that conflicts,
or possibly may conflict, with the Company’s interests.
The Directors have declared any potential conflicts of
interest to the Company which are reviewed regularly
by the Board. The Directors have undertaken to advise
the Company Secretary and/or Chairman as soon
as they become aware of any potential conflicts of
interest.
SHARE CAPITAL
As at 30 June 2019 the issued ordinary share capital
of the Company and the total voting rights were
88,283,389 ordinary shares. As at the date of this
report the issued share capital and total voting
rights were 88,283,389 ordinary shares. There are
no restrictions on the transfer of securities in the
Company and there are no special rights attached to
any of the shares.
SHARE ISSUES AND REPURCHASES
UIL has the authority to purchase shares in the market
and to issue new shares for cash. During the period
ended 30 June 2019 the Company purchased 1,210,000
shares for cancellation. The current authority to
repurchase shares was granted to Directors on 21
November 2018 and expires at the conclusion of the
AGM in 2019. The Directors are proposing that their
authority to buy back up to 14.99% of the Company’s
shares and to issue up to 5% new shares be renewed
at the forthcoming AGM.
SUBSTANTIAL SHARE INTERESTS
As at the date of this report, the Company had
received notification from Mr Duncan Saville that he
had an interest in 62,259,821 ordinary shares (70.5% of
UIL’s issued share capital) which included the holdings
of General Provincial Life Pension Fund Limited
(54,851,533 ordinary shares (62.1%)) and Permanent
Mutual Limited (6,712,477 ordinary shares (7.6%)).
THE COMMON REPORTING STANDARD
Tax legislation under The OECD (Organisation for
Economic Co-operation and Development) Common
Reporting Standard for Automatic Exchange of
Financial Account Information (the “Common Reporting
Standard”) was introduced on 1 January 2016. The
legislation requires UIL, as an investment company,
to provide personal information on shareholders to
the Company’s local tax authority in Bermuda. The
Bermuda tax authority may in turn exchange the
information with the tax authorities of another country
38
UIL Limited
Report and Accounts for the year to 30 June 2019
39
DIRECTORS’ REPORT
(continued)
or countries in which the shareholder may be tax
resident, where those countries (or tax authorities
in those countries) have entered into agreements to
exchange financial account information.
All new shareholders, excluding those whose shares
are held as depositary interests, who are entered on
the share register will be sent a certification form for
the purposes of collecting this information.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
POLICY
In conjunction with looking at the financial, macro
and political drivers when making an investment, the
Company does take into consideration environmental,
social and governance (“ESG”) risks and opportunities
as UIL believes that its investee companies should
consider the ESG framework. ESG factors are
therefore taken into consideration as part of the
investment process, however the Company does not
decide whether to make an investment decision on
environmental and social grounds alone. Having made
the investment UIL does exercise its votes on ESG
concerns should they arise.
As part of ensuring a solid corporate governance
framework is enforced within an investment
opportunity, the Investment Managers will seek to
exercise all voting rights attached to shares held
by the Company. The Investment Managers review
all resolutions and will vote accordingly, and the
Board periodically receives a report on instances
where the Investment Managers have voted against
the recommendation of an investee company’s
management on any resolution.
The concept of responsible investing has always
been one of the founding pillars of UIL’s and its
predecessor’s investment process, therefore taking
into consideration ESG risks and opportunities is
not a new phenomenon. The Investment Managers
have however formulated an ESG investment policy
which is integrated into each investment opportunity.
The Investment Managers have regular contact with
investees and often write to boards setting out the
Investment Managers’ position.
AUDIT INFORMATION AND AUDITOR
The Directors who held office at the date of approval
of this Directors’ Report confirm that, so far as they are
aware, there is no relevant audit information of which
the Company’s auditor is unaware; and each Director
has taken all the steps that they ought to have taken as
a Director to make themselves aware of any relevant
audit information and to establish that the Company’s
auditor is aware of that information.
LISTING RULE 9.8.4R
There are no instances where the Company is required
to make disclosures in respect of Listing Rule 9.8.4R
(information to be included in annual report and
accounts).
ANNUAL GENERAL MEETING
The business of the AGM consists of 9 resolutions.
Resolutions 1 to 8 will be proposed as ordinary
resolutions and resolution 9 will be proposed as a
special resolution. Shareholders’ attention is drawn to
the following resolutions:
Ordinary Resolution 1 – Annual Report and Financial
Statements
This resolution seeks shareholder approval to receive
the Directors’ Report, the Independent Auditor’s
Report and the Financial Statements for the year
ended 30 June 2019.
Ordinary Resolution 2 – Approval of the Directors’
Remuneration Report
This resolution is an advisory vote on the Directors’
Remuneration Report.
Ordinary Resolution 3 – Approval of the Company’s
dividend policy
This resolution seeks shareholder approval of the
Company’s dividend policy to pay four interim
dividends per year. Under the Company’s Bye-laws, the
Board is authorised to approve the payment of interim
dividends without the need for the prior approval of
the Company’s shareholders.
Having regard to corporate governance best practice
relating to the payment of interim dividends without
the approval of a final dividend by a company’s
shareholders, the Board has decided to seek express
approval from shareholders of its dividend policy to
pay four interim dividends per year. If this resolution
is not passed, it is the intention of the Board to
refrain from authorising any further interim dividends
until such time as the Company’s dividend policy is
approved by its shareholders.
Ordinary Resolutions 4 and 5 – Re-election of
Directors
Resolutions 4 and 5 relate to the re-election of,
respectively, Mr Burrows and Mr Shillson. Mr Burrows
retires by rotation and Mr Shillson, who is not
considered independent, retires annually. The Board
has considered the re-election of Mr Burrows and
Mr Shillson and has reviewed the composition of the
Board as a whole and borne in mind the need for a
proper balance of skills and experience. Following an
appraisal of the performance of all the Directors, the
Board believes that these Directors should be put
forward for re-election. Based on their individual skills,
knowledge and experience the Board believes they
make a valuable contribution and their re-election
would be in the best interests of the Company.
Ordinary Resolutions 6 and 7 – Appointment of the
external Auditor and the Auditor’s Remuneration
These resolutions relate to the appointment and
remuneration of the Company’s auditor. The Company,
through its Audit & Risk Committee, has considered
the independence and objectivity of the external
auditor and is satisfied that the proposed Auditor is
independent.
Ordinary Resolution 8 – Authority to buy back
shares
The Directors’ authority to buy back shares was
renewed at last year’s AGM and will expire at the end of
the AGM in 2019. The Directors are proposing to renew
the authority at the forthcoming AGM, and are seeking
authority to purchase in the market up to 13,230,000
ordinary shares (equivalent to approximately 14.99%
of the issued ordinary shares as at the date of this
report). This authority, unless it is varied, revoked or
renewed, will expire at the conclusion of the Company’s
AGM in 2020.
Any purchases will be made at prices below the
prevailing NAV per ordinary share. The maximum
price that can be paid is the higher of: (a) 105% of
the average of the mid-market quotations of the
ordinary shares for the five business days immediately
before the date of purchase; and (b) the higher of the
price of the last independent trade and the highest
current independent bid on the trading venue where
the purchase is carried out. Any ordinary shares
purchased by the Company may be held in treasury or
cancelled.
Any purchases are regarded as investment decisions.
It is proposed that any purchase of shares would
be funded from the Company’s own cash resources
or, if appropriate, from short-term borrowings. The
Board intends to seek a renewal of such authority at
subsequent AGMs.
Special Resolution 9 – Authority to disapply pre-
emption rights
The Company’s Bye-laws provide that, unless
otherwise determined by a special resolution, the
Company is not able to allot ordinary shares for cash
without offering them to existing shareholders first
in proportion to their shareholdings. Resolution 9 will
grant the Company authority to dis-apply these pre-
emption rights in respect of up to £440,000 of relevant
securities (equivalent to 4,400,000 ordinary shares
of 10p each, representing approximately 5% of its
ordinary shares in issue as at the date of this report).
This will allow the Company flexibility to issue further
ordinary shares for cash without conducting a rights
issue or other pre-emptive offer in circumstances
where the Directors believe it may be advantageous to
shareholders to do so. Any such issues would only be
made at prices greater than NAV and would therefore
increase the assets underlying each share. The issue
proceeds would be available for investment in line with
the Company’s investment policy.
Resolution 9 is a Special Resolution and will require the
approval of a 75% majority of votes cast in respect of it.
RECOMMENDATION
The Board considers the resolutions to be proposed
at the AGM to be in the best interests of the Company
and its shareholders as a whole. Accordingly, the
Directors recommend that shareholders should vote
in favour of all the resolutions to be proposed at the
AGM.
By order of the Board
ICM Limited
Secretary
13 September 2019
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UIL Limited
Report and Accounts for the year to 30 June 2019
41
CORPORATE GOVERNANCE STATEMENT
THE COMPANY‘S CORPORATE GOVERNANCE FRAMEWORK
Corporate Governance is the process by which the board of directors of a company protects shareholders’
interests and by which it seeks to enhance shareholder value. Shareholders hold the directors responsible for the
stewardship of a company’s affairs, delegating authority and responsibility to the directors to manage the company
on their behalf and holding them accountable for its performance. Responsibility for good governance lies with
the Board. The Board considers the practice of good governance to be an integral part of the way it manages
the Company and is committed to maintaining high standards of financial reporting, transparency and business
integrity.
The governance framework of the Company reflects the fact that as an investment company it has no full-time
employees and outsources its activities to third party service providers.
THE BOARD
Six non-executive directors (NEDs)
CHAIRMAN:
Peter Burrows
KEY OBJECTIVES:
• to provide leadership within
a framework of prudent
and effective controls which
enable risk to be assessed and
managed; and
• to constructively challenge
and scrutinise performance
of all outsourced activities.
• to set strategy, values and
standards;
AUDIT & RISK
COMMITTEE
MANAGEMENT
ENGAGEMENT
COMMITTEE
All the independent
Directors
All the independent
Directors
CHAIRMAN:
Eric Stobart
CHAIRMAN:
Eric Stobart
NOMINATION
COMMITTEE
FUNCTION
The Board as a
whole performs
this function
REMUNERATION
COMMITTEE
FUNCTION
The Board as a
whole performs
this function
KEY OBJECTIVE:
KEY OBJECTIVES:
KEY OBJECTIVES:
KEY OBJECTIVE:
• to oversee the
• to review the
• to regularly review
• to set the
financial reporting
and control
environment.
performance of
the Investment
Managers and the
Administrator; and
the Board’s structure
and composition;
and
remuneration policy
for the Directors of
the Company.
• to consider any new
• to review the
appointments.
performance of
other service
providers.
THE AIC CODE OF CORPORATE GOVERNANCE
As a Bermuda incorporated company with a premium
listing on the Official List, the Board’s principal
governance reporting obligation is in relation to
the UK Corporate Governance Code, as amended
from time to time, (the “UK Code”) issued by the
Financial Reporting Council (“FRC”). However, it is
recognised that investment companies have special
circumstances which have an impact on their
governance arrangements. An investment company
typically has no employees and the roles of portfolio
manager, administration, accounting and company
secretarial tend to be outsourced to a third party. The
Association of Investment Companies has therefore
drawn up its own set of guidelines known as the AIC
Code of Corporate Governance (the “AIC Code”), which
recognises the nature of investment companies by
focusing on matters such as board independence
and the review of management and other third party
contracts. The FRC has endorsed the AIC Code and
confirmed that companies which report against the
AIC Code will be meeting their obligations in relation to
the UK Code and paragraph LR9.8.6 of the FCA’s Listing
Rules. The Board believes that reporting against the
principles and recommendations of the AIC Code will
provide better information to shareholders.
COMPLIANCE WITH THE AIC CODE
During the year ended 30 June 2019, the Company
complied with the recommendations of the AIC Code
and the relevant provisions of the UK Code, except as
those relating to:
• the role of the chief executive
• executive directors’ remuneration
• the need for an internal audit function
• nomination of a senior independent director
For the reasons set out in the AIC Guide, and as
explained in the UK Code, the Board considers these
provisions are not relevant to the position of UIL, being
an external managed investment company. The Board
is composed of non-executive directors and therefore
the Board does not believe it is necessary to nominate a
senior independent director.
The Board notes that a new version of the UK Code was
published in July 2018, and that a new version of the
AIC Code was published in January 2019, each applying
to accounting periods beginning on or after 1 January
2019. The Company will report against the new AIC Code
for the financial year ending 30 June 2020.
Information on how the Company has applied the
principles of the AIC Code and the UK Code is set out
below.
THE BOARD
The Board is responsible to shareholders for the overall
stewardship of the Company. A formal schedule of
matters reserved for the decision of the Board has been
adopted. Investment policy and strategy are determined
by the Board and it is also responsible for the gearing
policy, dividend policy, public documents, such as the
Annual Report and Financial Statements, the buy-back
policy and corporate governance matters. In order to
enable the Directors to discharge their responsibilities
effectively the Board has full and timely access to
relevant information.
The Board meets at least three times a year, with
additional Board and Committee meetings being held
on an ad hoc basis to consider investment performance
and particular issues as they arise. Key representatives
of the Investment Managers attend each meeting and
between these meetings there is regular contact with
the Investment Managers. Board meetings are often
held in countries where the Company holds investments
and the Board will meet with investee companies and
local experts.
The Board has direct access to the advice and services
of the Company Secretary, who is an employee of
ICM. The Company Secretary, with advice from the
Company’s lawyers and financial advisers, is responsible
for ensuring that the Board and Committee procedures
are followed and that applicable rules and regulations
are complied with. The Company Secretary is also
responsible to the Board for ensuring timely delivery
of information and reports and that the statutory
obligations of the Company are met. The Company
Secretary is responsible for advising the Board, through
the Chairman, on all governance matters.
There is an agreed procedure for Directors, in the
furtherance of their duties, to take legal advice at the
Company’s expense, having first consulted with the
Chairman.
There were four Board meetings, three Audit &
Risk Committee meetings and one Management
42
43
UIL LimitedReport and Accounts for the year to 30 June 2019 CORPORATE GOVERNANCE STATEMENT
(continued)
Engagement Committee meeting held during the period
and the attendance by the Directors was as follows:
Board
Audit & Risk
Committee
Management
Engagement
Committee
Number of meetings
held during the year
Peter Burrows
Alison Hill
Warren McLeland
Christopher Samuel
David Shillson
Eric Stobart
4
4
4
4
4
4
4
3
3
3
n/a
3
n/a
3
1
1
1
n/a
1
n/a
1
Apart from the meetings detailed above, there were a
number of meetings held by committees of the Board
to discuss investment performance, approve the
declaration of quarterly dividends and other ad hoc
items.
AUDIT & RISK COMMITTEE
During the year ended 30 June 2019, the Audit & Risk
Committee, which is chaired by Mr Stobart, consisted
of all the independent Directors of the Company.
Further details of the Audit & Risk Committee are
provided in its report on page 52.
MANAGEMENT ENGAGEMENT COMMITTEE
The Board has appointed a Management Engagement
Committee, chaired by Mr Stobart, which operates
within written terms of reference clearly setting out its
authority and duties. The Management Engagement
Committee is comprised of the independent Directors
of the Company and meets at least once a year.
The Investment Managers’ performance is considered
by the Board at every meeting, with a formal evaluation
by the Management Engagement Committee annually.
The Board received detailed reports and views from
the Investment Managers on investment policy, asset
allocation, gearing and risk at each Board meeting
in the year ended 30 June 2019, with ad hoc market/
company updates if there were significant movements
in the intervening period.
The Management Engagement Committee also
considers the effectiveness of the administration
services provided by the Investment Managers and
Administrator, including the timely identification and
resolution of areas of accounting judgement and
implementation of new regulatory requirements
and the performance of other third party service
providers. In this regard the Committee assessed the
services provided by the Investment Managers, the
Administrator and the other service providers to be
good.
REMUNERATION COMMITTEE
The Board as a whole undertakes the work which
would otherwise be undertaken by a Remuneration
Committee. Its work is summarised in the Directors’
Remuneration Report on page 49.
INTERNAL CONTROLS
The Directors acknowledge that they are responsible
for ensuring that the Company maintains a sound
system of internal financial and non-financial controls
(“internal controls”) to safeguard shareholders’
investments and the Company’s assets.
The Company’s system of internal control is designed
to manage rather than eliminate risk of failure to
achieve the Company’s investment objective and/
or adhere to the Company’s investment policy and/
or investment limits. The system can therefore only
provide reasonable and not absolute assurance
against material misstatement or loss.
The Investment Managers, Administrator and
Custodian maintain their own systems of internal
controls and the Board and the Audit & Risk
Committee receive regular reports from these service
providers.
The Board meets regularly, at least three times a year.
It reviews financial reports and performance against
relevant stock market criteria and the Company’s peer
group, amongst other things. The effectiveness of
the Company’s system of internal controls, including
financial, operational and compliance and risk
management systems is reviewed at least bi-annually
against risk parameters approved by the Board. The
Board confirms that the necessary actions are taken to
remedy any significant failings or weaknesses identified
from its review. No significant failings or weaknesses
occurred during the year ended 30 June 2019 or
subsequently up to the date of this annual financial
report. The Board has reviewed and accepted the
Investment Managers’ anti-bribery and corruption and
“whistleblowing” policies.
BOARD DIVERSITY, APPOINTMENT, RE-ELECTION
AND TENURE
The Board as a whole undertakes the responsibilities
which would otherwise be assumed by a nomination
committee. It considers the size and structure of the
Board, including the balance of expertise and skills
brought by individual Directors. It has regard to board
diversity and recognises the value of progressive
refreshing of and succession planning for, company
boards and such matters are discussed by the
Board as a whole at least annually. The Board also
seeks to have Directors in different jurisdictions who
understand the key influences on businesses in their
area, whether they are economic, political, regulatory
or other issues. The Board’s policy on diversity,
including gender, is to take this into account during
the recruitment process. Any new appointment is
considered on the basis of the skills and experience
that the individual would bring to the Board, regardless
of gender or other forms of diversity, and therefore no
targets have been set against which to report. As at the
date of this report, the Board consists of five men and
one woman.
The Board is of the view that length of service does
not necessarily compromise the independence or
contribution of directors of an investment company,
where continuity and experience can add significantly
to the strength of the Board. This is supported by the
views on independence expressed in the AIC Code.
No limit on the overall length of service of any of the
Company’s Directors, including the Chairman, has been
imposed. The Board has put in place a policy whereby
Directors who have served for nine years or more will
be subject to annual re-election.
The Board reviews succession planning at least
annually. Appointments of new Directors will be made
on a formalised basis with the Chairman agreeing, in
conjunction with his colleagues, a job specification
and other relevant selection criteria and the methods
of recruitment (where appropriate using an external
recruitment agency), selection and appointment. The
potential Director would meet with Board members
prior to formal appointment. An induction process
will be undertaken, with new appointees to the
Board being given a full briefing on the workings and
processes of the Company and the management of the
Company by the Chairman, the Investment Managers,
the Company Secretary and other appropriate
persons. The Bye-laws require that a Director shall
retire and be subject to re-election at the first AGM
after appointment and at least every three years
thereafter.
BOARD, COMMITTEE AND DIRECTORS’
PERFORMANCE APPRAISAL
The Directors recognise the importance of the AIC
Code’s recommendations in respect of evaluating
the performance of the Board as a whole, the Audit
& Risk Committee and the Management Engagement
Committee and individual Directors. The performance
of the Board, Audit & Risk Committee and Management
Engagement Committee and Directors has been
assessed during the year in terms of:
• attendance at meetings;
• the independence of individual Directors;
• the ability of Directors to make an effective
contribution to the Board and Committees through
the range and diversity of skills and experience each
Director brings to their role; and
• the Board’s ability to challenge the Investment
Managers’ recommendations, suggest areas of
debate and set the future strategy of the Company.
The Board opted to conduct performance evaluation
through questionnaires and discussion between
the Directors, the Chairman and the chairmen
of the Committees. This process is conducted by
the Chairman, having regard to the performance
evaluation questionnaire, reviewing individually with
each of the Directors their performance, contribution
and commitment to the Company and the possible
further development of skills. In addition, the Chair of
the Audit & Risk Committee reviews the performance
of the Chairman with the other Directors, taking into
account the views of the Investment Managers. The
relevant points arising from these meetings are then
reported to, and discussed by, the Board as a whole.
This process has been carried out in respect of the
year under review and will be conducted on an annual
basis. The result of this year’s performance evaluation
process was that the Board, the Committees of the
Board and the Directors individually were all assessed
to have performed satisfactorily. No follow-up actions
were required.
44
45
UIL LimitedReport and Accounts for the year to 30 June 2019 CORPORATE GOVERNANCE STATEMENT
(continued)
CAPITAL STRUCTURE
It is not felt appropriate currently to employ the
services of, or to incur the additional expense of, an
external third party to conduct the evaluation process
as an appropriate process is in place; this will, however,
be kept under review.
RELATIONS WITH SHAREHOLDERS
UIL welcomes the views of shareholders and
places great importance on communication with
shareholders.
The prime medium by which the Company
communicates with shareholders is through the
half-yearly and annual financial reports, which aim
to provide shareholders with a full understanding
of the Company’s activities and its results. This
information is supplemented by the calculation and
publication, via a Regulatory Information Service, of
the NAV of the Company’s shares and by monthly
fact sheets produced by the Investment Managers.
Shareholders can visit the Company’s website: www.
uil.limited in order to access copies of half-yearly and
annual financial reports, factsheets and regulatory
announcements.
The Investment Managers hold meetings with the
Company’s largest shareholders and report back to
the Board on these meetings. The Chairman and other
Directors are available to discuss any concerns with
shareholders, if required.
By order of the Board
ICM Limited
Company Secretary
13 September 2019
UIL has a leveraged balance sheet structure, with
the ordinary shares leveraged by the ZDP shares,
bank debt and other loans.
ORDINARY SHARES
The number of ordinary shares in issue, and the voting
rights, as at 30 June 2019 was 88,283,389 shares. The
ordinary shares are entitled to all the revenue profits
of the Company available for distribution and resolved
to be distributed by the Directors by way of a dividend.
The Directors consider the payment of dividends on a
quarterly basis.
On a winding up, holders of ordinary shares will be
entitled, after payment of all debts and the satisfaction
of all liabilities of the Company, to the winding up
revenue profits of the Company and thereafter, after
paying to UIL Finance for its ZDP shareholders their
accrued capital entitlement, to all the remaining assets
of the Company.
ZDP SHARES
The ZDP shares are issued by UIL Finance, a wholly-
owned subsidiary of UIL. The ZDP shares carry no
entitlement to income and the whole of any return will
take the form of capital.
2020 ZDP shares
39,000,000 2020 ZDP shares were in issue as at 30
June 2019. The 2020 ZDP shares rank for payment
in priority to the ordinary shares (save for any
undistributed revenue profit on winding up) and the
2022, 2024 and 2026 ZDP shares but rank behind the
bank debt for capital repayment of 154.90p per 2020
ZDP share on 31 October 2020. The capital repayment
is equivalent to a redemption yield of 7.25% per annum
based on the initial capital entitlement of 100p.
2022 ZDP shares
50,000,000 2022 ZDP shares were in issue as at 30
June 2019. The 2022 ZDP shares rank for payment
in priority to the ordinary shares (save for any
undistributed revenue profit on winding up) and the
2024 and 2026 ZDP shares but rank behind the bank
debt and the 2020 ZDP shares for capital repayment
of 146.99p per 2022 ZDP share on 31 October 2022.
The capital repayment is equivalent to a redemption
yield of 6.25% per annum based on the initial capital
entitlement of 100p.
2024 ZDP shares
30,000,000 2024 ZDP shares were in issue as at 30
June 2019. The 2024 ZDP shares rank for payment
in priority to the ordinary shares (save for any
undistributed revenue profit on winding up) and the
2026 ZDP shares but rank behind the bank debt, the
2020 and the 2022 ZDP shares for capital repayment
of 138.35p per 2024 ZDP share on 31 October 2024.
The capital repayment is equivalent to a redemption
yield of 4.75% per annum based on the initial capital
entitlement of 100p.
2026 ZDP shares
25,000,000 (11,920,535 held by UIL) 2026 ZDP shares
were in issue as at 30 June 2019. The 2026 ZDP shares
rank for payment in priority to the ordinary shares
(save for any undistributed revenue profit on winding
up) but rank behind the bank debt, the 2020, 2022 and
the 2024 ZDP shares for capital repayment of 151.50p
per 2026 ZDP share on 31 October 2026. The capital
repayment is equivalent to a redemption yield of 5.00%
per annum based on the initial capital entitlement of
100p.
BANK DEBT
As at 30 June 2019, UIL had a £50.0m multi-currency
loan facility provided by Scotiabank, secured against
the Company’s assets by way of a debenture, which
was fully drawn.
SENSITIVITY OF RETURNS AND RISK PROFILES
Ordinary shares rank behind the ZDP shares (save
for any undistributed revenue profit on a winding
up) and bank debt such that they represent a geared
instrument. For every £100 of gross assets of the
Company as at 30 June 2019, the ordinary shares could
be said to be interested in £60.74 of those assets after
deducting the prior claims as above. This makes the
ordinary shares more sensitive to movements in gross
assets. Based on these amounts, a 1.0% movement
46
47
UIL LimitedReport and Accounts for the year to 30 June 2019 CAPITAL STRUCTURE
(continued)
DIRECTORS’ REMUNERATION REPORT
for the year ended 30 June 2019
in gross assets would change the NAV attributable to
ordinary shares by 1.6%.
The interest cost of UIL’s bank debt, combined with the
annual accruals in respect of ZDP shares, represents
a blended cost to the ordinary shares of 5.5% as at 30
June 2019.
Based on their final entitlement of 154.90p per
share, the final entitlement of the 2020 ZDP shares
was covered 4.92 times by gross assets as at 30 June
2019. Should the gross assets fall by 79.7% over the
remaining life of the 2020 ZDP shares, then the 2020
ZDP shares would not receive their final entitlement
in full. Should gross assets fall by 90.7%, equivalent
to an annual fall of 83.0%, the 2020 ZDP shares would
receive no payment at the end of their life.
Based on their final entitlement of 146.99p per
share, the final entitlement of the 2022 ZDP shares
was covered 2.97 times by gross assets as at 30 June
2019. Should the gross assets fall by 66.3% over the
remaining life of the 2022 ZDP shares, then the 2022
ZDP shares would not receive their final entitlement
in full. Should gross assets fall by 79.7%, equivalent to
an annual fall of 38.0%, the 2022 ZDP shares would
receive no payment at the end of their life.
Based on their final entitlement of 138.35p per share,
the final entitlement of the 2024 ZDP shares was
covered 2.42 times by gross assets as at 30 June
2019. Should the gross assets fall by 58.7% over the
remaining life of the 2024 ZDP shares, then the 2024
ZDP shares would not receive their final entitlement
in full. Should gross assets fall by 66.3%, equivalent
to an annual fall of 18.4%, the 2024 ZDP shares would
receive no payment at the end of their life.
Based on their final entitlement of 151.50p per share,
the final entitlement of the 2026 ZDP shares was
covered 2.08 times by gross assets as at 30 June
2019. Should the gross assets fall by 51.8% over the
remaining life of the 2026 ZDP shares, then the 2026
ZDP shares would not receive their final entitlement in
full. Should gross assets fall by 58.7%, equivalent to an
annual fall of 11.4%, the 2026 ZDP shares would receive
no payment at the end of their life.
SPLIT OF GROSS ASSETS
as at 30 June 2019
CONSOLIDATED FUNDING COST STRUCTURE
as at 30 June 2019
by value
by percentage
7.25%
6.25%
5.00%
4.75%
3.14%
Bank
loans
2020
ZDP
shares
2022
ZDP
shares
2024
ZDP
shares
2026
ZDP
shares
5.46%
Blended
cost
of prior
charges
to
ordinary
shares
£326.3m
Ordinary shares
60.74%
£13.5m
£31.6m
2026 ZDP shares
2024 ZDP shares
2.51%
5.88%
£59.5m
2022 ZDP shares
11.08%
£55.4m
2020 ZDP shares
10.31%
£50.9m
Bank loans
9.48%
and attendance at Board and general meetings and
Committee meetings. Directors are not eligible for
bonuses, pension benefits, share options, long-term
incentive schemes or other benefits.
Directors are provided with a letter of appointment
when they join the Board. There is no provision for
compensation upon early termination of appointment.
The letters of appointment are available on request at
the Company’s registered office during business hours.
DIRECTORS’ REMUNERATION
The Board reviews the fees payable to the Chairman
and Directors annually. The fees payable to the
Chairman and Directors were reviewed and increased
with effect from 1 July 2018 such that the Directors
received fees of £33,250 per annum, the chairman of
the Audit & Risk Committee received £43,000 and the
Chairman of the Board received £45,000 in the year
ended 30 June 2019.
The review in respect of 2019/2020 has resulted in the
fees being increased with effect from 1 July 2019 as
detailed in the table below.
Year ending 30 June
Chairman
Directors
Chairman of Audit & Risk
Committee
*Actual
2020
£’000s
2019*
£’000s
2018*
£’000s
46.0
34.0
45.0
33.3
44.0
32.5
44.0
43.0
42.0
The Board presents the report on Directors’
remuneration for the year ended 30 June 2019. The
report comprises a remuneration policy, which is
subject to a triennial binding shareholder vote, or
sooner if an alteration to the policy is proposed, and a
report on remuneration, which is subject to an annual
advisory vote. Where certain parts of the disclosures
provided have been audited, they are indicated as
such. The auditor’s opinion is included in their report
on page 56.
The Board’s policy on remuneration is set out below.
A key element is that fees payable to Directors should
reflect the time spent by them on the Company’s
affairs and should be sufficient to attract and retain
individuals with suitable knowledge and experience
to promote the long term success of the Company
whilst also reflecting the time commitment and
responsibilities of the role. There were no changes to
the policy during the year.
The Board is composed solely of non-executive
Directors, none of whom has a service contract
with the Company and therefore no remuneration
committee has been appointed. The Board as a whole
undertakes the responsibilities which would otherwise
be assumed by a remuneration committee.
DIRECTORS’ REMUNERATION POLICY
The Board considers the level of the Directors fees
at least annually. The Board determines the level of
Directors’ fees within the limit currently set by the
Company’s Bye-laws, which limit the aggregate fees
payable to the Directors to a total of £250,000 per
annum.
The Board’s policy is to set Directors’ remuneration at
a level commensurate with the skills and experience
necessary for the effective stewardship of the
Company and the expected contribution of the Board
as a whole in continuing to achieve the investment
objective. Time committed to the Company’s business
and the specific responsibilities of the Chairman,
Directors and the chairman of the Audit & Risk
Committee are taken into account. The policy aims
to be fair and reasonable in relation to comparable
investment companies.
The fees are fixed and are payable in cash, quarterly
in arrears. Directors are entitled to be reimbursed for
any reasonable expenses properly incurred by them
in connection with the performance of their duties
48
UIL Limited
Report and Accounts for the year to 30 June 2019
49
49
Report and Accounts for the year to 30 June 2019 DIRECTORS’ REMUNERATION REPORT
(continued)
CONSIDERATION OF SHAREHOLDERS’ VIEWS
RELATIVE IMPORTANCE OF SPEND ON PAY
COMPANY PERFORMANCE
The graph below compares, for the ten years ended 30 June 2019, the ordinary share price total return (see page 98)
to the FTSE All-Share total return Index (GBP adjusted).
SHARE PRICE TOTAL RETURN
From June 2009 to June 2019 (rebased to 100 at 30 June 2009)
300
260
220
180
140
100
60
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
UIL ordinary share price total return
FTSE All-Share total return Index
Source: ICM
On behalf of the Board
Peter Burrows
Chairman
13 September 2019
The Directors’ Remuneration Policy was approved by
shareholders at the Company’s AGM in November
2017. Over 99% of the votes cast were in favour
of resolution and less than 1% were against. The
Directors’ Remuneration Policy will next be put to
shareholders for approval at the AGM to be held in
2020, unless changes are proposed to be made in the
meantime.
An ordinary resolution to approve the Directors’
Remuneration Report will be put to shareholders at
each AGM and shareholders will have the opportunity
to express their views and raise any queries in respect
of remuneration policy either before or at this meeting.
To date, no shareholders have commented in respect
of remuneration policy. The Directors’ Remuneration
Report was approved by shareholders at the
Company’s AGM in November 2018 when over 99% of
the votes cast were in favour of the resolution and less
than 1% were against.
DIRECTORS’ ANNUAL REPORT ON REMUNERATION
(AUDITED)
A single figure for the total remuneration of each
Director is set out in the table below for the year
ended 30 June 2019.
The following table compares the remuneration paid
to the Directors with aggregate distributions paid
to shareholders in the year to 30 June 2019 and the
prior year. This disclosure is a statutory requirement,
however the Directors consider that comparison of
Directors’ remuneration with annual dividends does
not provide a meaningful measure relative to the
Company’s overall performance as an investment
company with an objective of providing shareholders
with long-term total return.
Year ended
30 June
Aggregate Directors’
emoluments
Aggregate shareholder
distributions(1)
2019
£’000s
2018
£’000s
CHANGE
£’000s
221
216
5
6,689
6,738
(49)
(1)
The dividend per share was the same in both years at 7.50p per
ordinary share; the total dividend paid has reduced in 2019 due to
the reduction in the number of shares in issue following buybacks
of shares by the Company.
DIRECTORS’ BENEFICIAL SHARE INTERESTS
The Directors’ (and any connected persons) holdings of
ordinary shares are detailed below:
Director(1)
Peter Burrows
Alison Hill
Warren McLeland
Christopher Samuel
David Shillson
Eric Stobart(2)
Total
2019
£
2018
£
45,000
44,000
33,250
32,500
33,250
32,500
33,250
32,500
33,250
32,500
43,000
42,000
221,000
216,000
(1) The Directors’ entitlement to fees is calculated in arrears
(2) Mr Stobart’s fee includes an entitlement of £9,750 (2017/18, £9,500)
for being chairman of the Audit & Risk Committee
The information in the table above has been audited.
The amounts paid by the Company to the Directors
were for services as non executive directors. As at 30
June 2019, £55,250 was outstanding to Directors in
respect of their annual fees.
As at 30 June
Peter Burrows(1)
Alison Hill
Warren McLeland
Christopher Samuel
David Shillson
Eric Stobart(2)
2019
2018
739,617
539,617
47,358
28,970
71,237
52,849
100,000
40,000
88,848
65,460
50,000
50,000
(1)
As at 30 June 2018, Mr Burrows held a further 100,000 shares in a
non-beneficial capacity
(2)
Including 10,744 shares held by Mrs Stobart
Since the year end, Ms Hill, Mr McLeland, Mr Samuel
and Mr Shillson have each acquired, respectively,
a further 4,024, 4,024, 100,000 and 4,024 ordinary
shares in the Company. No Director held any interest,
beneficial or otherwise, in the issued shares of the
Company other than as stated above.
50
UIL Limited
Report and Accounts for the year to 30 June 2019
51
AUDIT & RISK COMMITTEE REPORT
As chairman of the Audit &
Risk Committee, I am pleased
to present the Committee’s
report to shareholders for the
year ended 30 June 2019.
• considering the narrative elements of the annual
financial report, including whether the annual
financial report taken as a whole is fair, balanced
and understandable and provides the necessary
information for shareholders;
ROLE AND RESPONSIBILITIES
UIL has established a
separately chaired Audit &
Risk Committee whose duties
include considering and
recommending to the Board
for approval the contents of
ERIC STOBART
Chairman of the Audit
and Risk Committee
the half yearly and annual financial statements and
providing an opinion as to whether the annual report
and accounts, taken as a whole, are fair, balanced
and understandable and provide the information
necessary for shareholders to assess the Company’s
performance, business model and strategy.
The Audit & Risk Committee meets at least three times
a year. Two of the planned meetings are held prior to
the Board meetings to approve the half yearly and
annual results and the Audit & Risk Committee receives
information from the principal service providers
on their internal controls. Representatives of the
Investment Managers attend all meetings.
COMPOSITION
The Audit & Risk Committee is composed of the
independent Directors of the Company and is chaired
by Eric Stobart. It is considered that there is a range of
recent and relevant financial experience amongst the
members of the Audit & Risk Committee.
RESPONSIBILITIES AND REVIEW OF THE EXTERNAL
AUDIT
During the year the principal activities of the Audit &
Risk Committee included:
• regular review of the portfolio, particularly of the
unlisted investments;
• considering and recommending to the Board for
approval the contents of the half yearly and annual
financial statements and reviewing the external
auditor’s report;
• considering the basis of accounting; as set out in
note 31 to the accounts the financial statements
have been prepared on a going concern basis;
• evaluation of reports received from the auditor with
respect to the annual financial statements and its
review of the half yearly report;
• management of the relationship with the external
auditor, including its appointment and the evaluation
of the scope, effectiveness, independence and
objectivity of its audit and non-audit services;
• evaluation of the effectiveness of the internal
control and risk management systems, including
reports received on the operational controls of the
Company’s service providers and reports from the
Company’s depositary;
• monitoring developments in accounting and
reporting requirements that impact on the
Company’s compliance with relevant statutory and
listing requirements; and
• review of SOC1 reports or their equivalent from the
Administrator and the Custodian.
AUDITOR AND AUDIT TENURE
KPMG LLP (“KPMG”) has been the auditor of the
Company since 2012, following a competitive tender
process. The audit partner is Jonathan Martin.
The Audit & Risk Committee has considered the
independence of the auditor and the objectivity of the
audit process and is satisfied that KPMG has fulfilled its
obligations to shareholders as independent auditor to
the Company.
It is the Company’s policy not to seek substantial
non-audit services from its auditor, unless they relate
to a review of the half-yearly report or reporting on
financial information in circulars or prospectuses,
as the Board considers the auditor is best placed to
provide these services. If the provision of significant
non-audit services were to be considered, the Audit
& Risk Committee would procure such services from
an accountancy firm other than the auditor. Non-audit
fees paid to KPMG by the Company during the year
amounted to £5,000 for the year ended 30 June 2019
(2018: £31,000) and related to the review of the half
yearly accounts (2018 also included work in connection
with the ZDP shares prospectus); more details are
included in note 4A to the accounts.
Managers prior to approval of the annual financial
report.
The partner and manager of the audit team at
KPMG presented their audit plan to the Audit & Risk
Committee in advance of the financial year end. Items
of audit focus were discussed, agreed and given
particular attention during the audit process. KPMG
reported to the Audit & Risk Committee on these
items, their independence and other matters. This
report was considered by the Audit & Risk Committee
and discussed with KPMG and the Investment
Members of the Audit & Risk Committee meet in
camera with the external auditor at least annually.
ACCOUNTING MATTERS AND SIGNIFICANT AREAS
For the year ended 30 June 2019 the accounting
matters that were subject to specific consideration
by the Audit & Risk Committee and consultation with
KPMG where necessary were as follows:
SIGNIFICANT AREA
HOW ADDRESSED
Value of the unlisted
investments
Investments that are unlisted or not actively traded are valued using a variety of
techniques to determine a fair value, as set out in note 1(d) to the accounts, and all such
valuations are carefully reviewed by the Audit & Risk Committee with the Investment
Managers.
Carrying value of the
listed investments
The Audit & Risk Committee receives detailed information on all the unlisted investments
and it discusses and challenges the valuations with the Investment Managers. It
considers market comparables and discusses any proposed revaluations with the
Investment Managers. The Audit & Risk Committee checks with KPMG that it has
reviewed and tested the proposed valuations for reasonability.
Actively traded listed investments are valued using stock exchange prices provided by
third party pricing vendors. The Audit & Risk Committee regularly reviews the portfolio.
The Audit & Risk Committee reviews the annual internal control report produced by the
Administrator, which is reported on by independent external accountants and which
details the systems, processes and controls around the daily pricing of the securities.
KPMG independently tests the pricing of the listed investments.
The above was satisfactorily addressed through
consideration of reports provided by, and discussed
with, the Investment Managers and KPMG. As a result,
and following a thorough review process, the Audit &
Risk Committee advised the Board that it is satisfied
that, taken as a whole, the annual financial report
for the year ended 30 June 2019 is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Company’s
performance, business model and strategy. In reaching
this conclusion, the Audit & Risk Committee has
assumed that the reader of the report would have
a reasonable level of knowledge of the investment
company industry.
EXTERNAL AUDIT, REVIEW OF ITS EFFECTIVENESS
AND AUDITOR REAPPOINTMENT
The Audit & Risk Committee advises the Board on the
appointment of the external auditor, its remuneration
for audit and non-audit work and its cost effectiveness,
independence and objectivity.
As part of the review of the effectiveness of the audit
process, a formal evaluation process incorporating
views from the members of the Audit & Risk
Committee and relevant personnel at the Investment
Managers is followed and feedback is provided to
KPMG. Areas covered by this review include:
• the calibre of the audit firm, including reputation and
industry presence;
52
UIL Limited
Report and Accounts for the year to 30 June 2019
53
AUDIT & RISK COMMITTEE REPORT
(continued)
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
in respect of the Annual Report and the Financial Statements
• the extent of quality controls including review
WHISTLEBLOWING POLICY
The Committee has also reviewed and accepted the
‘whistleblowing’ policy that has been put in place by
the Investment Managers under which their staff,
in confidence, can raise concerns about possible
improprieties in matters of financial reporting or other
matters, in so far as they affect the Company. The
Committee ensures arrangements are in place for the
proportionate and independent investigation of such
matters and for appropriate follow up action.
INTERNAL AUDIT
Due to the nature of the Company, being an externally
managed investment company with no executive
employees, the Company does not have its own
internal audit function. The Committee and the Board
have concluded that there is no current need for such
a function, based on the satisfactory operation of
controls within the Company’s service providers.
Eric Stobart
Chairman of the Audit & Risk Committee
13 September 2019
processes, second director oversight and annual
reports from its regulator;
• the performance of the audit team, including
skills of individuals, specialist knowledge, partner
involvement, team member continuity and quality
and timeliness of audit planning and execution;
• audit communication including planning, relevant
accounting and regulatory developments, approach
to significant accounting risks, communication of
audit results and recommendations on corporate
reporting;
• ethical standards including independence and
integrity of the audit team, lines of communication
to the Audit & Risk Committee and partner rotation;
and
• reasonableness of the audit fees.
For the year ended 30 June 2019, the Audit & Risk
Committee is satisfied that the audit process was
effective.
Resolutions proposing the reappointment of KPMG as
the Company’s auditor and authorising the Directors
to determine its remuneration will be put to the
shareholders at the forthcoming AGM.
INTERNAL CONTROLS AND RISK MANAGEMENT
UIL’s risk assessment focus and the way in which
significant risks are managed is a key area of focus
for the Audit & Risk Committee. Work here was
driven by the Audit & Risk Committee’s assessment
of the risks arising in the Company’s operations and
identification of the controls exercised by the Board
and its delegates, the Investment Managers, the
Administrator and other service providers. These
are recorded in risk matrices prepared by ICMIM
as the Company’s AIFM with responsibility for risk
management, which continue to serve as an effective
tool to highlight and monitor the principal risks, details
of which are provided in the Strategic Report. It also
received and considered, together with representatives
of the Investment Managers, reports in relation to
the operational controls of the Investment Managers,
Administrator, Custodians and share registrar. These
reviews identified no issues of significance.
The Directors are responsible for preparing the Report
and Accounts and the Group and parent Company
financial statements in accordance with applicable law
and regulations.
The Directors are required to prepare Group and
parent Company financial statements for each financial
year. They are also required to prepare the Group
financial statements in accordance with International
Financial Reporting Standards as adopted by the
European Union (“IFRSs as adopted by the EU”) and
applicable law and have elected to prepare the parent
Company financial statements on the same basis.
The Directors must not approve the financial
statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group
and parent Company and of their profit or loss for that
period. In preparing each of the Group and parent
Company financial statements, the Directors are
required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are reasonable,
relevant and reliable;
• state whether they have been prepared in
accordance with IFRSs as adopted by the EU;
• assess the Group and parent Company’s ability
to continue as a going concern, disclosing, as
applicable, matters related to going concern; and
• use the going concern basis of accounting unless
they either intend to liquidate the Group or the
parent Company or to cease operations, or have no
realistic alternative but to do so.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the parent Company’s transactions and
disclose with reasonable accuracy at any time the
financial position of the parent Company and enable
them to ensure that its financial statements comply
with the Companies Act 1981 of Bermuda. They are
responsible for such internal control as they determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors
are also responsible for preparing a, Directors’ Report,
and a Corporate Governance Statement that complies
with that law and those regulations. The Directors
have decided to prepare voluntarily a Directors’
Remuneration Report as if the Company was required
to comply with the requirements of schedule 8 of
the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 (SI 2008 No.
410) made under the UK Companies Act 2006.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website. Legislation in the
UK governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN
RESPECT OF THE ANNUAL FINANCIAL REPORT
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance
with the applicable set of accounting standards, 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 annual report includes a fair review of the
development and performance of the business
and the position of the issuer and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
We consider the annual report and accounts, taken
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the Group’s position and performance,
business model and strategy.
Approved by the Board on 13 September 2019 and
signed on its behalf by:
Peter Burrows
Chairman
54
UIL Limited
Report and Accounts for the year to 30 June 2019
55
55
Report and Accounts for the year to 30 June 2019 Independent
auditor’s report
to the members of UIL Limited
1. Our op inion is unmodified
Overview
Materiality:
Group financial
statem ents as a
whole
£5.45m (2018: £5.0m )
1% (2018: 1%) of total assets
Key audit matters vs 2018
Recurring risks
Valuation of unlisted
investm ents
Valuation of listed
investm ents
◄►
▼
We have audited the financial statem ents of UIL
Lim ited (“the Com pany”) for the year ended 30
June 2019 which com prise the Group and
Com pany Incom e Statem ents, Group and Com pany
Statem ent of Changes in Equity, Statem ents of
Financial Position, Statem ents of Cash Flow and
the related notes, including the accounting policies
in note 1.
In our opinion the financial statem ents:
— give a true and fair view of the state of the
Group’s and of the parent Com pany’s affairs as
at 30 June 2019 and of the Group’s and parent
Com pany’s profit for the year then ended;
— have been properly prepared in accordance with
International Financial Reporting Standards as
adopted by the European Union;
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities are
described below. We have fulfilled our ethical
responsibilities under, and are independent of the
Group in accordance with, UK ethical requirem ents
including the FRC Ethical Standard as applied to
listed entities. We believe that the audit evidence
we have obtained is a sufficient and appropriate
basis for our opinion.
2. Key audit matters: our assessment of risks of material misstatement
Key audit m atters are those m atters that, in our professional judgm ent, were of m ost significance in the audit of the financial
statem ents and include the m ost significant assessed risks of m aterial m isstatem ent (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagem ent team . These m atters were addressed in the context of our audit of the financial
statem ents as a whole, and in form ing our opinion thereon, and we do not provide a separate opinion on these m atters. In
arriving at our audit opinion above, the key audit m atters, in decreasing order of audit significance, were as follows.
Valuation of unlisted investments
Sub jective valuation:
— Our procedures included:
The risk
Our resp onse
(£184.4 m illion; 2018: £126.1m illion)
Refer to page 53 (Audit & Risk
Com m ittee Report), page 68
(accounting policy) and pages 74 to 76
(financial disclosures).
is
price
34% of the Group’s total assets (by value) is
held in investm ents where no quoted
Unlisted
m arket
available.
fair value,
investm ents are m easured at
which is established in accordance with the
International Private Equity and Venture
Capital Valuation Guidelines
using
m easurem ents of value such as prices of
earnings
recent
m ultiples
a
significant risk over the valuation of these
investm ents.
assets. There is
transactions,
and net
orderly
by
The effect of this m atter is that, as part of
our risk assessm ent, we determ ined that
unlisted investm ent valuations have a high
degree of estim ation uncertainty, with a
outcom es
potential
greater than our m ateriality for the financial
statem ents as a whole.
reasonable
range of
— Historical comp arisons: Assessm ent of
investm ent realisations in the period, com paring
actual sales proceeds to previous quarterly
valuations to understand the reasons for
significant variances and determ ine whether
they are indicative of bias or error in the
Com pany’s approach to valuations;
— Methodology choice: In the context of
observed industry best practice and the
provisions of the International Private Equity and
Venture Capital Valuation Guidelines, we
challenged the appropriateness of the valuation
bases selected;
— Comp aring valuations: Where a recent
transaction has been used to value a holding, we
obtained an understanding of the circum stances
surrounding the transaction and whether it was
considered to be on an arm s-length basis and
suitable as an input into a valuation.
— Our valuations exp erience: Challenging the
investm ent m anager on key judgem ents
affecting investee com pany valuations, such as
discount factors and the choice of benchm ark
for earnings m ultiples. We com pared key
underlying financial data inputs to external
sources, investee com pany audited accounts
and m anagem ent inform ation as applicable. We
challenged the assum ptions around
sustainability of earnings based on the plans of
the investee com panies and whether these are
achievable and we obtained an understanding of
existing and prospective investee com pany cash
flows to understand whether borrowings can be
serviced or whether refinancing m ay be
required. Our work included consideration of
events which occurred subsequent to the period
end up until the date of this audit report.
— Assessing transp arency: Consideration of the
appropriateness, in accordance with relevant
accounting standards, of the disclosures in
respect of unlisted investm ents and the effect
of changing one or m ore inputs to reasonably
possible alternative valuation assum ptions.
56
57
2. Key audit matters: our assessment of risks of material misstatement (cont.)
4. We have nothing to rep ort on going concern
Valuation of listed investments
Low risk, high value:
Our procedures included:
The risk
Our resp onse
(£359.4 m illion; 2018:
£367.3m illion)
Refer to page 53 (Audit & Risk
Com m ittee Report), page 68
(accounting policy) and pages 74 to
76 (financial disclosures).
The Group’s portfolio of listed
investm ents m akes up 66% of the
Group’s total assets (by value) and is
considered to be the key driver of
results. We do not consider these
investm ents to be at a high risk of
significant m isstatem ent, or to be
subject to a significant level of
judgem ent because they com prise
liquid, quoted investm ents. However,
due to their m ateriality in the context of
the financial statem ents as a whole,
they are considered to be the area which
had the greatest effect on our overall
audit strategy and allocation of
resources in planning and com pleting
our audit.
— Pricing: Agreeing the pricing of 100% of the
listed investm ents in the portfolio to third
party pricing sources;
— Fair value hierarchy assessment:
Reviewing the fair value hierarchy
classification m ethodology of the investm ent
m anager and assessing the accuracy of the
classification of assets as level 1 or level 2 in
accordance with IFRS 13; and
— Custodian confirmations: Agreeing 100%
of investm ent holdings in the portfolio to
independently received third party
confirm ations.
3. Our ap p lication of materiality and an overview of the
scop e of our audit
Total Assets
£548.2m (2018: £496.2m )
Group Materiality
£5.45m (2018: £5.0m )
Materiality for the Group’s financial statem ents as a whole
was set at £5.45 m illion (2018: £5.0 m illion), determ ined
with reference to a benchm ark of total assets, of which it
represents 1% (2018: 1%).
In addition, we applied m ateriality of £0.34 m illion (2018:
£0.3 m illion) to m anagem ent and adm inistration fees for
which we believe m isstatem ents of lesser am ounts than
m ateriality for the financial statem ents as a whole could
reasonably be expected to influence the Group’s
m em bers’ assessm ent of the financial perform ance of the
Group.
Materiality for the parent com pany financial statem ents as a
whole was set at £5.4 m illion (2018: £5.0 m illion).
We agreed to report to the Audit Com m ittee any corrected
or uncorrected identified m isstatem ents exceeding £0.27
m illion (2018: £0.25 m illion), in addition to other identified
m isstatem ents that warranted reporting on qualitative
grounds.
The Group team perform ed the audit of the Group as if it
was a single aggregated set of financial inform ation. The
audit was perform ed using the m ateriality levels set out
above at our offices in London, United Kingdom .
£5 .45 m
Whole financial
statements materiality
(2018: £5.0m)
£4.05 m
Performance materiality
(2018: £3 .5m)
Total Assets
Group materiality
£0.2 73m
Misstatements reported to the
audit committee (2018: £0.3m)
Directors’ rem uneration report
In addition to our audit of the financial statem ents, the
directors have engaged us to audit the inform ation in the
Directors’ Rem uneration Report that is described as having
been audited, which the directors have decided to prepare
as if the Com pany were required to com ply with the
requirem ents of Schedule 8 to The Large and Medium -sized
Com panies and Groups (Accounts and Reports) Regulations
2008 (SI 2008 No. 410) m ade under the UK Com panies Act
2006.
In our opinion the part of the Directors’ Rem uneration
Report to be audited has been properly prepared in
accordance with the Com panies Act 2006, as if those
requirem ents applied to the Com pany.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial
statem ents audit, we have nothing m aterial to add or draw
attention to in relation to:
— the directors’ confirm ation within the Viability Statem ent
on page 31 that they have carried out a robust
assessm ent of the principal risks facing the Group,
including those that would threaten its business m odel,
future perform ance, solvency and liquidity;
— the Principal Risks disclosures describing these risks
and explaining how they are being m anaged and
m itigated; and
— the directors’ explanation within the Viability Statem ent
on page 31 of how they have assessed the prospects of
the Group, over what period they have done so and why
they considered that period to be appropriate, and their
statem ent as to whether they have a reasonable
expectation that the Group will be able to continue in
operation and m eet its liabilities as they fall due over the
period of their assessm ent, including any related
disclosures drawing attention to any necessary
qualifications or assum ptions.
Our work is lim ited to assessing these m atters in the
context of only the knowledge acquired during our financial
statem ents audit. As we cannot predict all future events or
conditions and as subsequent events m ay result in
outcom es that are inconsistent with judgm ents that were
reasonable at the tim e they were m ade, the absence of
anything to report on these statem ents is not a guarantee
as to the Group’s and Com pany’s longer-term viability.
The Directors have prepared the financial statem ents on
the going concern basis as they do not intend to liquidate
the Com pany or the Group or to cease their operations, and
as they have concluded that the Com pany’s and the
Group’s financial position m eans that this is realistic. They
have also concluded that there are no m aterial uncertainties
that could have cast significant doubt over their ability to
continue as a going concern for at least a year from the
date of approval of the financial statem ents (“the going
concern period”).
Our responsibility is to conclude on the appropriateness of
the Directors’ conclusions and, had there been a m aterial
uncertainty related to going concern, to m ake reference to
that in this audit report. However, as we cannot predict all
future events or conditions and as subsequent events
m ay result in outcom es that are inconsistent with
judgem ents that were reasonable at the tim e they were
m ade, the absence of reference to a m aterial uncertainty
in this auditor's report is not a guarantee that the Group
and the Com pany will continue in operation.
In our evaluation of the Directors’ conclusions, we
considered the inherent risks to the Group’s and
Com pany’s business m odel, including the im pact of
Brexit, and analysed how those risks m ight affect the
Group’s and Com pany’s financial resources or ability to
continue operations over the going concern period. We
evaluated those risks and concluded that they were not
significant enough to require us to perform additional
audit procedures.
Based on this work, we are required to report to you if we
have anything m aterial to add or draw attention to in
relation to the directors’ statem ent in Note 1 to the
financial statem ents, on the use of the going concern
basis of accounting with no m aterial uncertainties that
m ay cast significant doubt over the Group and Com pany’s
use of that basis for a period of at least twelve m onths
from the date of approval of the financial statem ents. We
have nothing to report in this respect, and we did not
identify going concern as a key audit m atter.
5. We have nothing to rep ort on the other information in
the Annual Rep ort
The directors are responsible for the other inform ation
presented in the Annual Report together with the financial
statem ents. Our opinion on the financial statem ents does
not cover the other inform ation and, accordingly, we do not
express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.
Our responsibility is to read the other inform ation and, in
doing so, consider whether, based on our financial
statem ents audit work, the inform ation therein is m aterially
m isstated or inconsistent with the financial statem ents or
our audit knowledge. Based solely on that work we have
not identified m aterial m isstatem ents in the other
inform ation.
58
59
7. The p urp ose of our audit work and to whom we owe
our resp onsib ilities
This report is m ade solely to the Com pany’s m em bers, as a
body, in accordance with section 90(20) of the Com panies
Act 1981 of Berm uda and the term s of our engagem ent by
the Com pany. Our audit work has been undertaken so that
we m ight state to the Com pany’s m em bers those m atters
we are required to state to them in an auditor’s report, and
the further m atters we are required to state to them in
accordance with the term s agreed with the Com pany, and
for no other purpose. To the fullest extent perm itted by law,
we do not accept or assum e responsibility to anyone other
than the Com pany and the Com pany’s m em bers, as a body,
for our audit work, for this report, or for the opinions we
have form ed.
Jonathan Martin
for and on b ehalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
13 Septem ber 2019
Corporate governance disclosures
We are required to report to you if:
— we have identified m aterial inconsistencies between the
knowledge we acquired during our financial statem ents
audit and the directors’ statem ent that they consider
that the annual report and financial statem ents taken as
a whole is fair, balanced and understandable and
provides the inform ation necessary for shareholders to
assess the Group’s position and perform ance, business
m odel and strategy; or
— the section of the annual report describing the work of
the Audit Com m ittee does not appropriately address
m atters com m unicated by us to the Audit Com m ittee.
— the Corporate Governance Statem ent does not properly
disclose a departure from the eleven provisions of the
UK Corporate Governance Code specified by the Listing
Rules for our review.
We have nothing to report in these respects.
6. Resp ective resp onsib ilities
Directors’ responsibilities
As explained m ore fully in their statem ent set out on page
55, the directors are responsible for: the preparation of the
financial statem ents including being satisfied that they give
a true and fair view; such internal control as they determ ine
is necessary to enable the preparation of financial
statem ents that are free from m aterial m isstatem ent,
whether due to fraud or error; assessing the Group and
parent Com pany’s ability to continue as a going concern,
disclosing, as applicable, m atters related to going concern;
and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent
Com pany or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statem ents as a whole are free from
m aterial m isstatem ent, whether due to fraud or other
irregularities (see below), or error, and to issue our opinion
in an auditor’s report. Reasonable assurance is a high level
of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect
a m aterial m isstatem ent when it exists. Misstatem ents can
arise from fraud, other irregularities or error and are
considered m aterial if, individually or in aggregate, they
could reasonably be expected to influence the econom ic
decisions of users taken on the basis of the financial
statem ents.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
GROUP INCOME STATEMENT
for the year to 30 June
Notes
9 Gains on investments
12 (Losses)/gains on derivative financial
instruments
Foreign exchange gains/(losses)
2 Investment and other income
Total income
3 Management and administration fees
4 Other expenses
Revenue
return
£’000s
–
–
–
11,184
11,184
(1,587)
(1,178)
Capital
return
£’000s
90,402
(6,871)
3,306
–
86,837
2019
Total
return
£’000s
90,402
(6,871)
3,306
11,184
98,021
(8,538)
(10,125)
(8)
(1,186)
86,710
Revenue
return
£’000s
–
–
(97)
10,671
10,574
(1,491)
(1,316)
7,767
Capital
return
£’000s
48,366
3,298
777
–
52,441
(5,337)
(1)
47,103
2018
Total
return
£’000s
48,366
3,298
680
10,671
63,015
(6,828)
(1,317)
54,870
Profit before finance costs and taxation
8,419
78,291
Gains on transactions of ZDP shares held
intra group
–
–
–
–
4
4
5 Finance costs
(1,600)
(11,093)
(12,693)
(1,592)
(12,083)
(13,675)
Profit before taxation
6,819
67,198
74,017
6 Taxation
Profit for the year
7 Earnings per ordinary share – pence
(9)
6,810
7.63
–
67,198
75.34
(9)
74,008
82.97
6,175
(179)
5,996
6.67
35,024
41,199
–
35,024
38.96
(179)
41,020
45.63
The Group does not have any income or expense that is not included in the profit for the year and therefore the profit for the year is also the total
comprehensive income for the year, as defined in International Accounting Standard 1 (revised).
All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of the Company. There are no minority interests.
The notes on pages 67 to 94 form part of these financial statements.
60
60
UIL Limited
Report and Accounts for the year to 30 June 2019
61
COMPANY INCOME STATEMENT
GROUP STATEMENT OF CHANGES IN EQUITY
for the year to 30 June
Notes
9 Gains on investments
12 (Losses)/gains on derivative financial
instruments
Foreign exchange gains/(losses)
2 Investment and other income
Total income
3 Management and administration fees
4 Other expenses
Revenue
return
£’000s
–
–
–
11,184
11,184
(1,587)
(1,178)
Capital
return
£’000s
90,800
(6,871)
3,306
–
87,235
2019
Total
return
£’000s
90,800
(6,871)
3,306
11,184
98,419
(8,538)
(10,125)
(8)
(1,186)
87,108
Revenue
return
£’000s
–
–
(97)
10,671
10,574
(1,491)
(1,316)
7,767
Capital
return
£’000s
49,712
3,298
777
–
53,787
(5,337)
(1)
48,449
2018
Total
return
£’000s
49,712
3,298
680
10,671
64,361
(6,828)
(1,317)
56,216
for the year to 30 June 2019
Notes
Ordinary
share
capital
£’000s
Share
premium
account
£’000s
Special
reserve
£’000s
Non-
distributable
reserve
£’000s
Capital
reserves
£’000s
Revenue
reserve
£’000s
Total
£’000s
Balance at 30 June 2018
8,949
18,167
233,866
32,069
(40,886)
8,969
261,134
Profit for the year
8 Ordinary dividends paid
18 Shares purchased by the
Company
Balance at 30 June 2019
–
–
(121)
8,828
–
–
(2,064)
–
–
–
–
–
–
67,198
6,810
74,008
–
–
(6,689)
(6,689)
–
(2,185)
16,103
233,866
32,069
26,312
9,090
326,268
Profit before finance costs and taxation
8,419
78,689
5 Finance costs
(1,600)
(12,082)
(13,682)
(1,592)
(12,821)
(14,413)
for the year to 30 June 2018
Profit before taxation
6,819
66,607
73,426
6 Taxation
Profit for the year
7 Earnings per ordinary share – pence
(9)
6,810
7.63
–
66,607
74.68
(9)
73,417
82.31
6,175
(179)
5,996
6.67
35,628
41,803
–
35,628
39.63
(179)
41,624
46.30
The Company does not have any income or expense that is not included in the profit for the year and therefore the profit for the year is also the total
comprehensive income for the year, as defined in International Accounting Standard 1 (revised).
All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of the Company.
The notes on pages 67 to 94 form part of these financial statements.
Notes
Ordinary
share
capital
£’000s
Share
premium
account
£’000s
Special
reserve
£’000s
Non-
distributable
reserve
£’000s
Capital
reserves
£’000s
Revenue
reserve
£’000s
Total
£’000s
Balance at 30 June 2017
9,020
19,313
233,866
32,069
(75,667)
9,468
228,069
Profit for the year
Transfer for change in
treatment of subsidiary
8 Ordinary dividends paid
–
–
–
–
–
–
18 Shares purchased by the
Company
(71)
(1,146)
–
–
–
–
–
–
–
–
35,024
5,996
41,020
(243)
243
–
–
–
(6,738)
(6,738)
–
(1,217)
Balance at 30 June 2018
8,949
18,167
233,866
32,069
(40,886)
8,969
261,134
The notes on pages 67 to 94 form part of these financial statements.
62
UIL Limited
Report and Accounts for the year to 30 June 2019
63
COMPANY STATEMENT OF CHANGES IN EQUITY
STATEMENTS OF FINANCIAL POSITION
for the year to 30 June 2019
Notes
Ordinary
share
capital
£’000s
Share
premium
account
£’000s
Special
reserve
£’000s
Non-
distributable
reserve
£’000s
Capital
reserves
£’000s
Revenue
reserve
£’000s
Balance at 30 June 2018
8,949
18,167
233,866
32,069
(40,282)
Profit for the year
8 Ordinary dividends paid
18 Shares purchased by the
Company
Balance at 30 June 2019
–
–
(121)
8,828
–
–
(2,064)
–
–
–
–
–
–
66,607
–
–
16,103
233,866
32,069
26,325
9,090
326,281
for the year to 30 June 2018
Notes
Ordinary
share
capital
£’000s
Share
premium
account
£’000s
Special
reserve
£’000s
Non-
distributable
reserve
£’000s
Capital
reserves
£’000s
Balance at 30 June 2017
9,020
19,313
233,866
32,069
(75,910)
Profit for the year
8 Ordinary dividends paid
18 Shares purchased by the
Company
Balance at 30 June 2018
–
–
–
–
(71)
8,949
(1,146)
18,167
The notes on pages 67 to 94 form part of these financial statements.
–
–
–
–
–
–
35,628
–
–
233,866
32,069
(40,282)
8,969
261,738
Total
£’000s
261,738
73,417
(6,689)
8,969
6,810
(6,689)
–
(2,185)
Revenue
reserve
£’000s
9,711
5,996
(6,738)
Total
£’000s
228,069
41,624
(6,738)
–
(1,217)
Notes at 30 June
Non-current assets
9 Investments
Current assets
11 Other receivables
12 Derivative financial instruments
Cash and cash equivalents
Current liabilities
13 Bank loans
14 Other payables
12 Derivative financial instruments
15 Zero dividend preference shares
Net current liabilities
2019
£’000s
Group
2018
£’000s
Company
2019
£’000s
2018
£’000s
543,794
493,375
556,430
528,544
748
436
3,177
4,361
1,699
503
647
2,849
748
436
3,177
4,361
1,699
503
647
2,849
(50,971)
(9,491)
(1,483)
–
(50,971)
–
(6,852)
(1,089)
(9,491)
(240,771)
(1,483)
(1,089)
–
(50,858)
–
–
(61,945)
(58,799)
(61,945)
(241,860)
(57,584)
(55,950)
(57,584)
(239,011)
Total assets less current liabilities
486,210
437,425
498,846
289,533
Non-current liabilities
16 Bank loans
17 Other payables
–
–
(27,795)
–
(27,795)
–
(172,565)
–
–
15 Zero dividend preference shares
(159,942)
(148,496)
–
Net assets
Equity attributable to equity holders
18 Ordinary share capital
19 Share premium account
20 Special reserve
21 Non-distributable reserve
22 Capital reserves
23 Revenue reserve
326,268
261,134
326,281
261,738
8,828
16,103
8,949
18,167
8,828
16,103
8,949
18,167
233,866
233,866
233,866
233,866
32,069
26,312
9,090
32,069
(40,886)
8,969
32,069
26,325
9,090
32,069
(40,282)
8,969
Total attributable to equity holders
326,268
261,134
326,281
261,738
24 Net asset value per ordinary share – pence
369.57
291.79
369.58
292.47
The notes on pages 67 to 94 form part of these financial statements.
Approved by the Board on 13 September 2019 and signed on its behalf by
P Burrows
Chairman
E St C Stobart
Director
64
UIL Limited
Report and Accounts for the year to 30 June 2019
65
STATEMENTS OF CASH FLOWS
NOTES TO THE ACCOUNTS
Notes for the year to 30 June
25 Cash flows from operating activities
Investing activities:
Purchases of investments
Sales of investments
Purchases of derivatives
Sales of derivatives
Cash flows from investing activities
Cash flows before financing activities
Financing activities:
Equity dividends paid
Movements on loans
Cash flows from issue of ZDP shares
2019
£’000s
(831)
Group
2018
£’000s
2,116
Company
2018
£’000s
2,122
2019
£’000s
(831)
(58,875)
(64,046)
(59,776)
(64,313)
102,243
70,115
103,833
71,092
(6,410)
–
36,958
36,127
(6,689)
22,862
1,590
–
(6,410)
–
2,170
8,239
10,355
(6,738)
(18,962)
13,921
–
37,647
36,816
2,170
8,949
11,071
(6,689)
22,862
(6,738)
(18,962)
–
12,943
Cash flows from redemption of ZDP shares
(52,095)
(417)
(51,194)
–
Cash paid for ordinary shares purchased for cancellation
(2,185)
(1,381)
(2,185)
(1,381)
Cash flows from financing activities
(36,517)
(13,577)
(37,206)
(14,138)
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of movement in foreign exchange
Cash and cash equivalents at the end of the year
Comprised of:
Cash
Bank overdraft
Total
The notes on pages 67 to 94 form part of these financial statements.
(390)
(53)
3,620
3,177
3,177
–
3,177
(3,222)
3,573
(404)
(53)
647
(700)
(53)
(390)
(53)
3,620
3,177
3,177
–
3,177
(3,067)
3,423
(409)
(53)
647
(700)
(53)
1. ACCOUNTING POLICIES
The Company, UIL Limited, is an investment company
incorporated in Bermuda and traded on the London Stock
Exchange. The Company commenced trading on 20 June
2007.
The Group Accounts comprise the results of the Company
and UIL Finance Limited (“UIL Finance”).
The Group is engaged in a single segment of business,
focusing on maximising shareholder returns by identifying
and investing in investments where the underlying value is
not reflected in the market price.
(a) Basis of accounting
The Accounts have been prepared on a going concern basis
in accordance with IFRS, which comprise standards and
interpretations approved by the IASB, and International
Accounting Standards and Standing Interpretations
Committee interpretations approved by the IASC that remain
in effect and to the extent that they have been adopted by
the European Union.
In the current financial year the Group and Company has
applied IFRS 9 Financial Instruments (as revised in July 2014)
and the related consequential amendments to other IFRSs.
IFRS 9 introduces new requirements for the classification
and measurement of financial assets and financial liabilities,
impairment for financial assets and general hedge
accounting. All Statement of Financial Position items are
measured at fair value except for the bank loans and ZDP
shares of the Group and bank loans and intra-group loan of
the Company, there are no impaired assets and the Group
does not enter into general hedge accounting. Financial
liabilities valued at amortised cost under IAS 39 are bank
loans payable, intra-group loans and ZDP shares and will
continue to be measured at amortised cost under IFRS 9. The
inter-company loan agreement has been reviewed and the
loan is repayable on the redeemable dates of the ZDP shares.
There is no material impact in relation to the adoption of this
standard.
In the current financial period the Group has adopted IFRS
15. The core principle of IFRS 15 is that an entity should
recognise revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in
exchange for those goods or services. Given the nature of the
income streams of the Group, there is no material impact to
the current measurement and disclosure of revenue.
Other than the above, there have been no significant changes
to the accounting policies during the year to 30 June 2019.
The Board has determined by having regard to the currency
of the Company’s share capital and the predominant
currency in which its shareholders operate, that Sterling is
the functional and reporting currency.
Where presentational recommendations set out in the
revised Statement of Recommended Practice “Financial
Statements of Investment Trust Companies and Venture
Capital Trusts” (“SORP”), issued in the UK by the Association
of Investment Companies (“AIC”) in November 2014
and updated in February 2018, do not conflict with the
requirements of IFRS, the Directors have prepared the
Accounts on a basis consistent with the recommendations
of the SORP, in the belief that this will aid comparison with
similar investment companies incorporated and listed in the
United Kingdom.
In accordance with the SORP, the Income Statement has been
analysed between a revenue return (dealing with items of a
revenue nature) and a capital return (relating to items of a
capital nature). Revenue returns include, but are not limited
to, dividend income, operating expenses, finance costs
and taxation (insofar as they are not allocated to capital, as
described in notes 1(j) and 1(k)). Net revenue returns are
allocated via the revenue return to the revenue reserve.
Capital returns include, but are not limited to, profits and
losses on the disposal and the valuation of non-current
investments, derivative instruments and on cash and
borrowings. Net capital returns are allocated via the capital
return to capital reserves.
Dividends on ordinary shares may be paid out of the revenue
reserve and the capital reserves.
A number of new standards and amendments to standards
and interpretations are effective for annual periods beginning
after 1 January 2019 and have not been applied in preparing
these consolidated accounts. None of these are expected to
have a significant effect on the consolidated accounts of the
Group.
The key assumptions concerning the future and other key
sources of estimation uncertainty that have a significant risk
of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year relate to
the valuation of unlisted investments, details of which are set
out in accounting policy 1(d).
(b) Basis of consolidation
The consolidated Accounts include the Accounts of the
Company and its operating subsidiary, UIL Finance. All intra
group transactions, balances, income and expenses are
eliminated on consolidation. Other subsidiaries and associate
undertakings held as part of the investment portfolio (see
1(d) below) are not accounted for in the Group Accounts, but
are carried at fair value through profit or loss.
66
UIL Limited
Report and Accounts for the year to 30 June 2019
67
NOTES TO THE ACCOUNTS
(continued)
(c) Financial instruments
Financial instruments include non-current assets, derivative
assets and liabilities and long-term debt instruments. For
those financial instruments carried at fair value, accounting
standards recognise a hierarchy of fair value measurements
for financial instruments which gives the highest priority
to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority
to unobservable inputs (Level 3). The classification of
instruments depends on the lowest significant applicable
input, as follows:
Level 1 – Unadjusted, fully accessible and current quoted
prices in active markets for identical assets
or liabilities. Included within this category are
investments listed on any recognised stock
exchange or quoted on any secondary market.
Level 2 – Quoted prices for similar assets or liabilities, or
other directly or indirectly observable inputs which
exist for the duration of the period of investment.
Examples of such instruments would be convertible
loans in listed investee companies, securities
for which the quoted price has been recently
suspended, forward exchange contracts and certain
other derivative instruments.
Level 3 – External inputs are unobservable. Value is the
Directors’ best estimate of fair value, based on
advice from relevant knowledgeable experts,
use of recognised valuation techniques and on
assumptions as to what inputs other market
participants would apply in pricing the same
or similar instruments. Included in Level 3 are
investments in private companies or securities,
whether invested in directly, via loans or through
pooled private equity vehicles.
(d) Valuation of investments and derivative financial
instruments held at fair value through profit or loss
Investment purchases and sales are accounted for on the
trade date, inclusive of transaction costs. Investments,
including both equity and loans, used for efficient portfolio
management are classified as being at fair value through
profit or loss. As the Company’s business is investing in
financial assets with a view to profiting from their total
return in the form of dividends, interest or increases in fair
value, its investments (including those ordinarily classified
as subsidiaries under IFRS 10 but exempted by that financial
reporting standard from the requirement to be consolidated)
are designated as being at fair value through profit or loss
on initial recognition. Derivatives including forward foreign
exchange contracts and options are accounted for as a
financial asset/liability at fair value through profit or loss.
The Company manages and evaluates the performance of
these investments and derivatives on a fair value basis in
accordance with its investment strategy and information
about the Company is provided internally on this basis to the
Company’s Directors and key management personnel. Gains
and losses on investments and on derivatives are analysed
within the Income Statement as capital returns. Quoted
investments are shown at fair value using market bid prices.
The fair value of unquoted investments is determined by the
Board in accordance with the International Private Equity
and Venture Capital Valuation guidelines. In exercising its
judgement over the value of these investments, the Board
uses valuation techniques which take into account, where
appropriate, latest dealing prices, valuations from reliable
sources, net asset values, earnings multiples, recent orderly
transactions in similar securities, time to expected repayment
and other relevant factors.
(e) Cash and cash equivalents
Cash and cash equivalents comprise cash balances. Bank
overdrafts are included as a component of cash and cash
equivalents for the purpose of the cash flow statement only.
(f) Bank borrowings
Interest-bearing bank loans and overdrafts are initially
measured at fair value and subsequently measured at
amortised cost using the effective interest method. No
debt instruments held during the year required hierarchical
classification. Finance charges, including interest, are accrued
using the effective interest method and are added to the
carrying amount of the instrument to the extent that they are
not settled in the year. See 1(k) below for allocation of finance
costs between revenue and capital return within the Income
Statement.
(g) Zero dividend preference shares and intra group loans
The ZDP shares, due to be redeemed in 2020, 2022, 2024 and
2026 at a redemption value, including accrued capitalised
returns (see note 15) of 154.90 pence per share, 146.99
pence per share, 138.35 pence per share and 151.50 pence
per share respectively, have been classified as liabilities,
as they represent an obligation on behalf of the Group to
deliver to their holders a fixed and determinable amount at
the redemption date. They are accordingly accounted for
at amortised cost, using the effective interest method. ZDP
shares held by the Company are deemed cancelled for Group
purposes. The Company has agreed to place UIL Finance
in sufficient funds to enable UIL Finance to pay the capital
entitlements of each class of ZDP share on their respective
redemption date. The intra group loans are accordingly
accounted for at amortised cost, using the effective interest
method.
(h) Foreign currency
(m) Capital reserves
The following items are accounted for through the Income
Statement as capital returns and transferred to capital
reserves:
Capital reserve – arising on investments sold
• gains and losses on the disposal of investments and
derivative instruments
• exchange differences of a capital nature
• expenses allocated in accordance with notes 1(j) and 1(k)
Capital reserve – arising on investments held
• increases and decreases in the valuation of investments
and derivative instruments held at the year end.
(n) Use of judgements, estimates and assumptions
The presentation of the financial statements in conformity
with IFRS requires management to make judgements,
estimates and assumptions that affect the application
of accounting policies and reported amounts of assets,
liabilities, income and expenses. Estimates and judgements
are continually evaluated and are based on perceived risks,
historical experience, expectations of plausible future events
and other factors. Actual results may differ from these
estimates.
The areas requiring the most significant judgement and
estimation in the preparation of the financial statements are:
accounting for the value of unquoted investments; and the
classification of the subsidiaries as investment entities.
The policy for valuation of unquoted securities is set out in
note 1(d) to the accounts and further information on Board
procedures is contained in the Audit & Risk Committee
Report and note 32(d) to the accounts. The fair value of
unquoted (level three) investments, as disclosed in note 9 to
the accounts, represented 33.9% of total investments as at
30 June 2019.
Details of the subsidiaries are set out in note 10 to the
accounts. The Board has reviewed the classification and
characteristics of the subsidiaries and except for UIL Finance
determined that where the subsidiaries carry on business as
investment companies they do not fall under s32 of IFRS 10
as providing services that relate to UIL’s investment activities.
UIL has therefore not consolidated these subsidiaries and
measures them at fair value through profit and loss in
accordance with IFRS 9.1.
Foreign currency assets and liabilities are expressed in
Sterling at rates of exchange ruling at the statement of
financial position date. Foreign currency transactions are
translated at the rates of exchange ruling at the dates of
those transactions. Exchange profits and losses on currency
balances are credited or charged to the Income Statement
and analysed as capital or revenue as appropriate. Forward
foreign exchange contracts are valued in accordance with
quoted market rates.
(i) Investment and other income
Dividends receivable are brought into the Income Statement
and analysed as revenue return (except where, in the opinion
of the Directors, their nature indicates they should be
recognised as capital) on the ex-dividend date or, where no
ex-dividend date is quoted, when the Group’s right to receive
payment is established. Where the Group or the Company
has elected to receive its dividends in the form of additional
shares rather than in cash, the amount of the cash dividend
foregone is recognised as revenue return. Any excess in the
value of the shares received over the amount of the cash
dividend foregone is recognised as capital return. Interest on
debt securities is accrued on a time basis using the effective
interest method. Bank and short-term deposit interest is
recognised on an accruals basis. These are brought into the
Income Statement and analysed as revenue returns.
(j) Expenses
All expenses are accounted for on an accruals basis.
Expenses are charged through the Income Statement and
analysed under revenue return except for those expenses
incidental to the acquisition or disposal of investments and
performance related fees (calculated under the terms of
the management agreement), which are analysed under the
capital return, as the Directors believe such fees arise from
capital performance.
(k) Finance costs
Finance costs are accounted for using the effective interest
method, recognised through the Income Statement and
analysed under the revenue return except those finance
costs of the ZDP shares and intra group loans which are
analysed under the capital return.
(l) Dividends payable
Dividends paid by the Company are accounted for in the year
in which the Company is liable to pay them and are reflected
in the Statement of Changes in Equity. Under Bermuda law,
the Company is unable to pay dividends unless it has revenue
and other reserves (excluding share capital and share
premium) which together have a positive value exceeding the
cost of the dividend.
68
UIL Limited
Report and Accounts for the year to 30 June 2019
69
NOTES TO THE ACCOUNTS
(continued)
2.
INVESTMENT AND OTHER INCOME
Group and Company
Investment income:
Dividends
Interest
Other income:
Interest on cash and short-term deposits
Total income
Revenue
£’000s
Capital
£’000s
8,622
2,487
11,109
75
11,184
–
–
–
–
–
–
Revenue
£’000s
Capital
£’000s
2019
Total
£’000s
8,622
2,487
8,315
2,334
11,109
10,649
75
22
11,184
10,671
–
–
–
–
–
3. MANAGEMENT AND ADMINISTRATION FEES
Group and Company
Payable to:
ICM/ICMIM – management fee, secretarial fees
– performance fee
Administration fees
Revenue
£’000s
Capital
£’000s
1,198
–
389
–
8,538
–
2019
Total
£’000s
1,198
8,538
389
Revenue
£’000s
Capital
£’000s
1,174
–
317
–
5,337
–
1,587
8,538
10,125
1,491
5,337
2018
Total
£’000s
8,315
2,334
10,649
22
10,671
2018
Total
£’000s
1,174
5,337
317
6,828
The Company has appointed ICM Investment Management
Limited (“ICMIM”) as its Alternative Investment Fund
Manager and joint portfolio manager with ICM Limited
(“ICM”), for which they are entitled to a management fee
and a performance fee. The aggregate fees payable by
the Company are apportioned between the joint portfolio
managers as agreed by them.
The relationship between ICMIM and ICM is compliant
with the requirements of the EU Alternative Investment
Fund Manager Directive and also such other requirements
applicable to ICMIM by virtue of its regulation by the Financial
Conduct Authority.
The annual management fee is 0.5% per annum based on
total assets less current liabilities (excluding borrowings and
excluding the value of all holdings in companies managed or
advised by the Investment Managers or any of its subsidiaries
from which it receives a management fee), calculated and
payable quarterly in arrears. The agreement with ICM and
ICMIM may be terminated upon one year’s notice given by the
Company or by ICM and ICMIM, acting together.
In addition, the Investment Managers are entitled to a
capped performance fee payable in respect of each financial
period, equal to 15% of the amount by which the Company’s
total net asset value (“NAV”) attributable to holders of
ordinary shares outperforms the higher of (i) 5.0%, and
(ii) the post-tax yield on the FTSE Actuaries Government
Securities UK Gilts 5 to 10 years’ index, plus inflation (on the
RPIX basis) (the “Reference Rate”). The opening equity funds
for calculation of the performance fee are the higher of (i) the
equity funds on the last day of a calculation period in respect
of which a performance fee was last paid, adjusted for
capital events and dividends paid since that date (the “high
watermark”); and (ii) the equity funds on the last day of the
previous calculation period increased by the Reference Rate
during the calculation period and adjusted for capital events
and dividends paid since the previous calculation date. In
a period where the Investment Managers or any of their
associates receive a performance fee from any ICM managed
investment in which UIL is an investor, the performance fee
payable by UIL will be reduced by a proportion corresponding
to UIL’s percentage holding in that investment applied to
the underlying investment performance fee, subject to
the provision that the UIL performance fee cannot be a
negative figure. In calculating any performance fee payable,
a cap of 2.5% of closing NAV (adjusted for capital events
and dividends paid) will be applied following any of the
above adjustments and any excess over this cap shall be
written off. Based on the NAV calculated at the year end, the
performance fee due to ICM and ICMIM in respect of the year
ended 30 June 2019 was estimated to be £8,538,000 (2018:
£5,310,000). ICM and ICMIM received this fee in cash in July
and August 2019. The full performance fee per these audited
accounts is £8,538,000 (2018: £5,337,000). The subsequent
adjustment for year ended 30 June 2018 of £27,000 was paid
to ICM and ICMIM in December 2018.
ICM also provides company secretarial services to the
Company with the Company paying 45% of the incurred costs
associated with this post.
With effect from 1 July 2018, JP Morgan Chase Bank N.A. –
London Branch was appointed Administrator and ICMIM
appointed Waverton Investment Management Limited
(“Waverton”) to provide certain support services (including
middle office, market dealing and information technology
support services). The Company or the Administrator may
terminate the agreement with the Administrator upon six
months’ notice in writing after an initial term of one year.
70
UIL Limited
Report and Accounts for the year to 30 June 2019
71
NOTES TO THE ACCOUNTS
(continued)
4. OTHER EXPENSES
Group and Company
Auditor’s remuneration (see note 4A)
Broker and consultancy fees
Custody fees
Directors’ fees for services to the Company
(see Directors’ Remuneration Report on pages
49 to 51)
Travel expenses
Professional and legal fees
Sundry expenses
Revenue
£’000s
Capital
£’000s
88
88
277
221
171
55
278
1,178
–
–
–
–
–
–
8
8
4A. AUDITOR’S REMUNERATION
Fees paid to the Group’s auditor are summarised below:
Group Auditor – KPMG LLP
Group and Company Annual Audit Fees
Audit of the Group and Company’s annual financial statements
Other non-audit services – review of interim financial statements
Total auditor’s remuneration allocated to the income statement
Revenue
£’000s
Capital
£’000s
2019
Total
£’000s
88
88
277
221
171
55
286
76
133
231
216
185
163
312
1,186
1,316
–
–
–
–
–
–
1
1
2018
Total
£’000s
76
133
231
216
185
163
313
1,317
6.
TAXATION
Group and Company
Overseas taxation
Revenue
£’000s
9
Capital
£’000s
–
2019
Total
£’000s
Revenue
£’000s
9
179
Capital
£’000s
–
2018
Total
£’000s
179
Except as stated above, profits of the Company and subsidiaries for the year are not subject to any taxation within their countries
of residence (2018: same).
7. EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share from continuing operations is based on the following data:
Revenue
Capital
Total
2019
£’000s
6,810
67,198
74,008
Group
2018
£’000s
5,996
35,024
41,020
Company
2018
£’000s
5,996
35,628
41,624
2019
£’000s
6,810
66,607
73,417
Number
Number
Number
Number
Other non-audit services – reporting accountants for the issue of ZDP shares and included within the
ZDP share issue costs
Total auditor's remuneration for the year
5. FINANCE COSTS
Group
Loans and bank overdrafts
ZDP shares
Company
Loans and bank overdrafts
Intra-group loan account
Revenue
£’000s
1,600
–
1,600
Revenue
£’000s
1,600
–
1,600
Capital
£’000s
–
11,093
11,093
Capital
£’000s
–
12,082
12,082
2019
Total
£’000s
1,600
11,093
12,693
2019
Total
£’000s
1,600
12,082
13,682
Revenue
£’000s
1,592
–
1,592
Revenue
£’000s
1,592
–
1,592
2019
£’000s
2018
£’000s
Weighted average number of shares in issue during the year for earnings
per share calculations
89,198,019
89,892,773
89,198,019
89,892,773
83
5
88
–
88
Capital
£’000s
–
12,083
12,083
Capital
£’000s
–
12,821
12,821
70
6
76
25
101
2018
Total
£’000s
1,592
12,083
13,675
2018
Total
£’000s
1,592
12,821
14,413
8. DIVIDENDS
Group and Company
2017 Fourth quarterly of 1.875p
2018 First quarterly of 1.875p
2018 Second quarterly of 1.875p
2018 Third quarterly of 1.875p
2018 Fourth quarterly of 1.875p
2019 First quarterly of 1.875p
2019 Second quarterly of 1.875p
2019 Third quarterly of 1.875p
Record
date
Payment
date
2019
£’000s
08-Sep-17
22-Sep-17
08-Dec-17
14-Dec-17
09-Mar-18
23-Mar-18
08-Jun-18
22-Jun-18
07-Sep-18
21-Sep-18
07-Dec-18
21-Dec-18
08-Mar-19
29-Mar-19
07-Jun-19
28-Jun-19
–
–
–
–
1,678
1,678
1,678
1,655
6,689
2018
£’000s
1,691
1,691
1,678
1,678
–
–
–
–
6,738
The Directors declared a fourth quarterly dividend in respect of the year ended 30 June 2019 of 1.875p per share which will be
paid on 27 September 2019 to all ordinary shareholders on the register at close of business on 6 September 2019. The total
cost of the dividend, which has not been accrued in the results for the year to 30 June 2019, is £1,655,000 based on 89,283,389
ordinary shares in issue.
72
UIL Limited
Report and Accounts for the year to 30 June 2019
73
NOTES TO THE ACCOUNTS
(continued)
9.
INVESTMENTS
Group
Investments brought forward
Cost
Gains/(losses)
Valuation
Movements in the year:
Level 1
£’000s
Level 2
£’000s
Level 3
£’000s
2019
Total
£’000s
Level 1
£’000s
Level 2
£’000s
Level 3
£’000s
2018
Total
£’000s
133,874
143,581
148,352
425,807
132,779
128,183
123,894
384,856
78,351
11,504
(22,287)
67,568
72,474
6,679
(14,893)
64,260
212,225
155,085
126,065
493,375
205,253
134,862
109,001
449,116
Transfer between levels*
(5,064)
2,524
2,540
Adjustment for fair value of GERP
–
–
–
–
–
2,725
(2,725)
–
145
–
–
–
145
Purchases at cost
7,774
3,892
66,799
78,465
16,524
1,800
50,354
68,678
Sales
proceeds
Company
Investments brought forward
Cost
Gains/(losses)
Movements in the year:
Level 1
£’000s
Level 2
£’000s
Level 3
£’000s
2019
Total
£’000s
Level 1
£’000s
Level 2
£’000s
Level 3
£’000s
2018
Total
£’000s
167,711
143,581
148,352
459,644
132,779
141,835
123,894
398,508
79,683
11,504
(22,287)
68,900
72,474
(6,828)
(14,893)
50,753
247,394
155,085
126,065
528,544
205,253
135,007
109,001
449,261
Transfer between levels*
(18,619)
16,079
2,540
–
2,725
(2,725)
–
–
Purchases at cost
8,673
3,892
66,799
79,364
51,323
1,800
50,354
103,477
Sales
proceeds
(105,845)
(1,725)
(34,708)
(142,278)
(50,204)
(69)
(23,633)
(73,906)
(83,605)
(135)
(34,708)
(118,448)
(49,228)
(69)
(23,633)
(72,930)
realised net gains/(losses) on sales
69,260
88
14,584
83,932
31,895
2,461
(2,791)
31,565
realised net gains/(losses) on sales
68,335
(2)
14,584
82,917
31,881
2,461
(2,791)
31,551
Gains/(losses) on investments held at
year end
Valuation at 30 June
Analysed at 30 June
Cost
Gains/(losses)
Valuation
5,556
(7,164)
9,093
7,485
5,070
18,611
(6,866)
16,815
205,221
154,200
184,373
543,794
212,225
155,085
126,065
493,375
116,607
154,152
197,982
468,741
133,874
143,581
148,352
425,807
88,614
48
(13,609)
75,053
78,351
11,504
(22,287)
67,568
205,221
154,200
184,373
543,794
212,225
155,085
126,065
493,375
*Transfers due to the changes in liquidity and delisting of investee companies (2018: transfers due to investee company shares resuming regular
trading in the period)
Gains/(losses) on investments held at
year end
Valuation at 30 June
Analysed at 30 June
Cost
Gains/(losses)
Valuation
4,358
(6,583)
9,093
6,868
6,402
18,611
(6,866)
18,147
205,221
166,836
184,373
556,430
247,394
155,085
126,065
528,544
116,607
166,073
197,982
480,662
167,711
143,581
148,352
459,644
88,614
763
(13,609)
75,768
79,683
11,504
(22,287)
68,900
205,221
166,836
184,373
556,430
247,394
155,085
126,065
528,544
*Transfers due to the changes to liquidity and delisting of investee companies (2018: transfers due to investee company shares resuming regular
trading in the period)
Level 1 includes investments listed on any recognised stock exchange or quoted on any secondary market
Level 1 includes investments listed on any recognised stock exchange or quoted on any secondary market
Level 2 includes investment in GERP, holdings linked directly to companies whose prices are quoted and quoted investments that are thinly traded
Level 2 includes holdings linked directly to companies whose prices are quoted and quoted investments that are thinly traded
Level 3 includes investments in private companies and other unquoted securities
Level 3 includes investments in private companies and other unquoted securities
Gains on investments held at fair value
Gains on investments sold
Gains on investments held
Total gains on investments
Group
2018
£’000s
Company
2019
£’000s
2018
£’000s
2019
£’000s
82,917
31,551
83,932
31,565
7,485
16,815
6,868
18,147
90,402
48,366
90,800
49,712
74
UIL Limited
Report and Accounts for the year to 30 June 2019
75
NOTES TO THE ACCOUNTS
(continued)
Associated undertakings
10. SUBSIDIARY UNDERTAKINGS
Under IFRS10 Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities, the following associate
undertakings at 30 June 2019 are held as part of the investment portfolio and consequently are accounted for as investments at
fair value through profit and loss:
3DMeditech Pty Ltd ("3DMedi")
Allectus Capital Limited (“Allectus”)
DTI Group Ltd ("DTI")
Elevate Platform Limited ("Elevate")
Orbital Corp Limited ("Orbital")
SmileStyler Solutions Pty Ltd ("SmileStyler")
Somers Limited (“Somers”)
Vix Tech Pte Limited (“VixTech”)
Transactions with associated undertakings
Country of
registration and
incorporation
Number of
ordinary
shares held
Percentage of
ordinary shares
held
Australia
Bermuda
Australia
UK
Australia
Australia
Bermuda
Singapore
59,048
477,720
54,502,619
812,766
23,627,904
992,730
9,042,117
55,742,658
27.0%
39.8%
25.3%
31.1%
30.5%
23.0%
44.3%
39.8%
3DMedi
Allectus
DTI
Elevate
Orbital
SmileStyler
Somers
VixTech
Loans of AUD 0.5 were advanced to 3DMedi and the balance at year end was AUD 0.5m.
Distribution of SmileStyler shares issued to UIL.
Loans of USD 13.4m were advanced to Allectus and at the year end the balance of the loan
was USD 23.2m.
There were no transactions between UIL and DTI during the year.
Loans of £0.7m were advanced to Elevate.
0.4m ordinary shares bought on the market at a cost of £0.1m.
Holding received through a distribution from 3DMedi.
Received 279,310 ordinary shares of value £3.4m as part of dividend reinvestment
program.
Loans of USD 7.1m and £0.3m were advanced to Somers and Somers repaid USD 0.8m and
£0.6m. Interest of USD 0.2m and £0.1m was paid to UIL. The balance at the year end was
USD 3.4m and £7.1m.
The two loans were converted into one USD loan and the balance at year end was USD
23.6m.
Significant interests
In addition to the above, the Group and Company have a holding of 3% or more of any class of share capital of the following
investments, which are material in the context of the Accounts:
Company
Country of registration
and incorporation
Class of
instrument held
One Communications Limited (“OneComm”)
Bermuda
Ordinary Shares
Optal Limited
Resolute Mining Limited
United Kingdom
Ordinary Shares
Australia
Ordinary Shares
Utilico Emerging Markets Trust plc
United Kingdom
Ordinary Shares
2019
% of class of
instrument
held
2018
% of class of
instrument
held
12.6%
5.3%
12.0%
16.0%
3.1%
5.3%
12.2%
16.4%
The following was a subsidiary undertakings of the Company at 30 June 2019 and 30 June 2018.
Country of operation,
registration and
incorporation
Number and class of shares held
Holding and
voting
rights %
UIL Finance Limited
Bermuda
10 ordinary shares of 10p nil paid share
100
The subsidiary was incorporated, and commenced trading, on 17 January 2007 to carry on business as an investment company.
Under IFRS 10 Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities, the following are
subsidiaries of the Company, held as part of the investment portfolio, and are accounted for as investments at fair value through
profit and loss.
Country of
registration and
incorporation
Number of
shares held
2019
Holding and
voting rights
%
2018
Holding and
voting rights
%
Number of
shares held
Bermuda
1,891,195
94.2
1,891,195
94.2
Bermuda First Investment Company
Limited ("BFIC")
Coldharbour Technology Limited
("Coldharbour")
United Kingdom
23,660,694
Energy Holdings Ltd
Bermuda
100
Global Equity Risk Protection Limited
("GERP")
Newtel Holdings Limited ("Newtel")
UIL Holdings Pte Ltd
Bermuda
Jersey
Singapore
3,920
115,920
100
Zeta Resources Limited ("Zeta")
Bermuda
172,286,916
Transactions with subsidiaries held as investments
95.6
100.0
100.0
100.0
100.0
60.0
12,260,694
100
3,920
-
100
172,191,580
91.9
100.0
100.0
-
100.0
59.7
BFIC
Dividends of USD 20.6m or equivalent OneComm shares issued to UIL, which UIL elected to
receive 3.7m OneComm shares at fair value of USD 20.5m and cash of USD 0.1m.
Loan of USD 1.5m was repaid, the balance of USD 0.3m was converted to a loan note. Loan
note balance of USD 5.1m including capitalised interest of USD 0.3m was used to purchase
1.0m OneComm shares at fair value from BFIC. Loans at the year end was £nil.
Coldharbour
8.4m shares purchased with 8.4m warrants attached at a cost of £4.2m. 3.0m warrants on
a one for one basis to ordinary shares were exercised at a cost of £1.5m.
Energy Holdings Ltd
There were no transactions during the year.
GERP
Newtel
Capital contributions of £0.2m were paid in the year.
A loan of £0.3m was advanced and £0.2m was repaid. The balance of the loan at year end
was £5.3m.
UIL Holdings Pte Ltd
There were no transactions during the year.
Zeta
Loans of AUD 19.7m were advanced to Zeta and interest of AUD 1.7m and CAD 1.4m was
capitalised. As at the year end the balance of the loans and interest outstanding was AUD
40.1m and CAD 23.1m.
76
UIL Limited
Report and Accounts for the year to 30 June 2019
77
NOTES TO THE ACCOUNTS
(continued)
11. OTHER RECEIVABLES
Group and Company
Accrued income
Prepayments and other debtors
2019
£’000s
724
24
748
2018
£’000s
1,665
34
1,699
12. DERIVATIVE FINANCIAL INSTRUMENTS
Group and Company
Current
assets
£’000s
Current
liabilities
£’000s
2019
Net current
assets/
(liabilities)
£’000s
Current
assets
£’000s
Current
liabilities
£’000s
2018
Net current
assets/
(liabilities)
£’000s
Forward foreign exchange contracts
436
(1,483)
(1,047)
503
(1,089)
(586)
The above derivatives are classified as level 2 as defined in note 1(c).
Changes in derivatives
Changes in total net current derivative financial instruments are as follows:
Group and Company
Valuation brought forward
Net settlements
(Losses)/gains
Valuation carried forward
13. BANK LOANS – CURRENT LIABILITY
Group and Company
AUD 69m repayable March 2020
CAD 20.0m repayable March 2020
USD 1.1m repayable March 2020
Balance carried forward
2019
£’000s
(586)
6,410
(6,871)
(1,047)
2019
£’000s
38,046
12,026
899
50,971
2018
£’000s
(1,714)
(2,170)
3,298
(586)
2018
£’000s
–
–
–
–
The Company has a committed loan facility of £50,000,000 from Scotiabank Europe plc (“Scotiabank”) expiring on 22 March 2020.
Commissions are charged on any undrawn amounts at commercial rates. The terms of the loan facility, including those related to
accelerated repayment and costs of repayment, are typical of those normally found in facilities of this nature. Scotiabank has a
floating charge over the assets of the Company in respect of amounts owing under the loan facility.
14. OTHER PAYABLES – CURRENT LIABILITY
Bank overdraft
Investment creditors
Intra-group loans
Accrued finance costs
Accrued expenses
2019
£’000s
–
–
–
159
9,332
9,491
Group
2018
£’000s
700
5
–
71
6,076
6,852
Company
2018
£’000s
700
5
233,919
71
6,076
240,771
2019
£’000s
–
–
–
159
9,332
9,491
The Directors consider that the carrying values of other payables are equivalent to their fair value.
15. ZERO DIVIDEND PREFERENCE SHARES
ZDP shares – current liabilities
2018 ZDP shares
ZDP Shares – non-current liabilities
2020 ZDP shares
2022 ZDP shares
2024 ZDP shares
2026 ZDP shares
Total ZDP shares liabilities
2019
£’000s
2018
£’000s
–
50,858
55,387
59,499
31,582
13,474
51,940
55,873
29,408
11,275
159,942
148,496
159,942
199,354
Authorised ZDP shares at 30 June 2019 and at 30 June 2018 are as follows:
Number
£’000s
2018 ZDP shares
2020 ZDP shares
2022 ZDP shares
2024 ZDP shares
2026 ZDP shares
53,072,561
50,000,000
78,117,685
76,717,291
25,000,000
3,148
3,026
4,154
2,917
2,500
78
UIL Limited
Report and Accounts for the year to 30 June 2019
79
NOTES TO THE ACCOUNTS
(continued)
2019
Number
£’000s Number
£’000s Number
£’000s Number
£’000s Number
2018
2020
2022
2024
2026
£’000s
Total
£’000s
Balance at
30 June 2018
Issue of ZDP
shares
Redemption
of 2018 ZDP
shares
ZDP shares
purchased by
the Company
Finance costs
(see note 5)
Balance at
30 June 2019
32,455,269
50,858 39,000,000 51,940 50,000,000 55,873 30,000,000 29,408 11,579,465 11,275 199,354
–
–
–
–
–
–
–
– 1,500,000
1,590
1,590
(31,892,465)
(51,194)
–
–
–
–
–
–
–
– (51,194)
(562,804)
(901)
–
–
–
–
–
–
–
–
(901)
–
1,237
–
3,447
–
3,626
–
2,174
–
609 11,093
–
– 39,000,000 55,387 50,000,000 59,499 30,000,000 31,582 13,079,465 13,474 159,942
2018
Number
2018
£’000s
Number
2020
£’000s
Number
2022
£’000s
Number
2024
£’000s
Number
2026
£’000s
Total
£’000s
49,842,413
72,622 39,000,000 48,704 50,000,000 52,452
–
–
–
– 173,778
–
–
–
–
–
–
–
–
–
–
– 30,000,000 30,000 11,579,465 11,579
41,579
–
–
(1,626)
–
(410)
(2,036)
(17,126,384)
(25,644)
–
–
–
–
–
–
–
– (25,644)
(260,760)
(406)
–
–
–
–
–
–
–
–
(406)
Balance at
30 June 2017
Issue of ZDP
shares
Issue costs of
ZDP shares
Redemption
of 2018 ZDP
shares
ZDP shares
purchased by
the Company
Finance costs
(see note 5)
Balance at
30 June 2018
32,455,269
50,858 39,000,000 51,940 50,000,000 55,873 30,000,000 29,408 11,579,465 11,275 199,354
UIL held 260,760 2018 ZDP shares intra group as at 30 June
2018. In the period UIL purchased a further 562,804 2018
ZDP shares in the open market and held intra group. On 22
October 2018 UIL Finance cancelled all the 2018 ZDP shares
held by UIL in consideration for UIL Finance releasing UIL
from its obligation under the subscription agreement to fund
the redemption of such 2018 ZDP Shares. On 31 October
2018 the remaining 31,892,465 2018 ZDP shares that were in
issue were redeemed at 160.52p per 2018 ZDP share.
UIL held 20,000,000 2024 ZDP shares intra group as at 30
June 2018. On 22 October 2018 UIL Finance cancelled all the
2024 ZDP shares held by UIL in consideration for UIL Finance
releasing UIL from its obligation under the subscription
agreement to fund the redemption of such 2024 ZDP Shares.
UIL held 13,420,535 2026 ZDP shares as at 30 June 2018 intra
group. In the year UIL sold 1,500,000 2026 ZDP shares in the
open market, receiving £1.6m. UIL held 11,920,535 2026 ZDP
shares intra group as at 30 June 2019.
2020 ZDP shares
Based on the initial entitlement of a 2020 ZDP share of 100p
on 31 July 2014, a 2020 ZDP share will have a final capital
entitlement at the end of its life on 31 October 2020 of
154.90p equating to a 7.25% per annum gross redemption
yield. The capital entitlement (excluding issue costs) per 2020
ZDP share as at 30 June 2019 was 141.01p (2018: 131.52p).
2022 ZDP shares
Based on the initial entitlement of a 2022 ZDP share of 100p
on 23 June 2016, a 2022 ZDP share will have a final capital
entitlement at the end of its life on 31 October 2022 of
146.99p equating to a 6.25% per annum gross redemption
yield. The capital entitlement (excluding issue costs) per 2022
ZDP share as at 30 June 2019 was 120.03p (2018: 113.01p).
2024 ZDP shares
Based on the initial entitlement of a 2024 ZDP share of 100p
on 2 November 2018, a 2024 ZDP share will have a final
capital entitlement at the end of its life on 31 October 2024
of 138.35p equating to a 4.75% per annum gross redemption
yield. The capital entitlement (excluding issue costs) per 2024
ZDP share as at 30 June 2019 was 107.97p (2018: 103.10p).
2026 ZDP shares
Based on the initial entitlement of a 2026 ZDP share of 100p
on 26 April 2018, a 2026 ZDP share will have a final capital
entitlement at the end of its life on 31 October 2026 of
151.50p equating to a 5.00% per annum gross redemption
yield. The capital entitlement (excluding issue costs) per 2026
ZDP share as at 30 June 2019 was 105.89p (2018: 100.87p).
The ZDP shares are traded on the London Stock Exchange
and are stated at amortised cost using the effective interest
method. The ZDP shares carry no entitlement to income
however they have a pre-determined final capital entitlement
which ranks behind all other liabilities and creditors of UIL
Finance and UIL but in priority to the ordinary shares of
the Company save in respect of certain winding up revenue
profits.
The growth of each ZDP accrues daily and is reflected in the
capital return and NAV per ZDP share on an effective interest
rate basis. The ZDP shares do not carry any voting rights at
general meetings of the Company. However the Company
will not be able to carry out certain corporate actions unless
it obtains at separate meetings approval of each class of
ZDP shareholders. Separate approval of each class of ZDP
shareholders must be obtained in respect of any proposals
which would affect their respective rights, including any
resolution to wind up the Company. In addition the approval
of ZDP shareholders by the passing of a special resolution at
separate class meetings of the ZDP shareholders is required
in relation to any proposal to modify, alter or abrogate the
rights attaching to any class of the ZDP shares and in relation
to any proposal by the Company or its parent company which
would reduce the Group’s cover of the existing ZDP shares
below 1.35 times.
On a liquidation of UIL and/or UIL Finance, to the extent that
the relevant classes of ZDP shares have not already been
redeemed, the shares shall rank in the following order of
priority in relation to the repayment of their accrued capital
entitlement as at the date of liquidation:
(i)
the 2020 ZDP shares shall rank in priority to the 2022 ZDP
shares, the 2024 ZDP shares and the 2026 ZDP shares;
(ii) the 2022 ZDP shares shall rank in priority to the 2024 ZDP
shares and the 2026 ZDP shares; and
(iii) the 2024 ZDP shares shall rank in priority to the 2026 ZDP
shares.
The entitlement of ZDP shareholders of a particular class
shall be determined in proportion to their holdings of ZDP
shares of that class.
Group and Company
AUD 29.1m repayable March 2020
CAD 20.0m repayable March 2020
Balance carried forward
For details of the loan facilities, see note 13.
17. OTHER PAYABLES - NON-CURRENT LIABILITY
Company
Intra-group loans
2019
£’000s
–
–
–
2018
£’000s
16,279
11,516
27,795
2019
£’000s
172,565
2018
£’000s
–
UIL has agreed to place UIL Finance in sufficient funds to enable UIL Finance to pay the accrued capital entitlement of each class
of ZDP share on their respective redemption dates. The amount owed in the accounts is based on the entitlements of the ZDP
shareholders at the relevant date. The loan is repayable on the date when the underlying ZDP shares are redeemed.
–
4,286
–
3,236
–
3,421
–
1,034
–
106
12,083
16. BANK LOANS – NON-CURRENT LIABILITY
80
UIL Limited
Report and Accounts for the year to 30 June 2019
81
NOTES TO THE ACCOUNTS
(continued)
18. ORDINARY SHARE CAPITAL
Equity share capital:
Ordinary shares of 10p each with voting rights
Authorised
2019
Balance at 30 June 2018
Purchased for cancellation
Balance at 30 June 2019
2018
Balance at 30 June 2017
Purchased for cancellation
Balance at 30 June 2018
Number
£’000s
250,000,000
25,000
Total shares
in issue
Number
Total shares
in issue
£’000s
89,493,389
(1,210,000)
88,283,389
Total shares
in issue
Number
90,197,208
(703,819)
89,493,389
8,949
(121)
8,828
Total shares
in issue
£’000s
9,020
(71)
8,949
During the year the Company bought back for cancellation 1,210,000 ordinary shares at a total cost of £2,185,000. No further
ordinary shares have been purchased for cancellation since the year end.
In addition to receiving the income distributed by way of dividend, the ordinary shareholders will be entitled to any balances
on the revenue reserve at the winding up date, together with the assets of the Company remaining after payment of the ZDP
shareholders’ entitlement. The ordinary shareholders participate in all general meetings of the Company on the basis of one vote
for each share held.
19. SHARE PREMIUM ACCOUNT
Group and Company
Balance brought forward
Purchase of ordinary shares
Balance carried forward
This is a non-distributable reserve arising on the issue of share capital.
20. SPECIAL RESERVE
Group and Company
Balance brought forward and carried forward
2019
£’000s
18,167
(2,064)
16,103
2018
£’000s
19,313
(1,146)
18,167
2019
£’000s
2018
£’000s
233,866
233,866
The special reserve can be used to purchase the Company’s own shares in accordance with Bermuda law. The reserve will not
constitute winding up revenue profits in the event of the Company’s liquidation, but it constitutes a reserve under Bermuda law
for assessing the sufficiency of reserves for the purpose of making dividend payments to ordinary shareholders.
21. NON-DISTRIBUTABLE RESERVE
Group and Company
Balance brought forward and carried forward
2019
£’000s
32,069
2018
£’000s
32,069
The non-distributable reserve constitutes a reserve for the purpose of assessing the sufficiency of reserves for the purpose of
making dividend payments to ordinary shareholders.
22. CAPITAL RESERVES
Group
Gains on investments sold
Gains on investments held
(Losses)/gains on derivative
financial instruments sold
(Losses)/gains on derivative
financial instruments held
Foreign exchange gains
Performance fee (see note 3)
Other capital charges
Gains on transactions of
ZDP shares held intra group
ZDP shares finance charges
Balance brought forward
Transfer for change in
treatment of subsidiary
2019
2018
Capital reserve
(arising on
investments
sold)
£’000s
Capital reserve
(arising on
investments
held)
£’000s
Capital
reserves total
£’000s
Capital reserve
(arising on
investments
sold)
£’000s
Capital reserve
(arising on
investments
held)
£’000s
Capital
reserves total
£’000s
82,917
–
–
7,485
82,917
7,485
31,551
–
–
16,815
31,551
16,815
(6,410)
–
(6,410)
2,170
–
2,170
–
(461)
3,306
(8,538)
(8)
–
(11,093)
60,174
(121,375)
–
–
–
–
7,024
80,489
(461)
3,306
(8,538)
(8)
–
(11,093)
67,198
(40,886)
–
777
(5,337)
(1)
4
(12,083)
17,081
(138,213)
1,128
–
–
–
–
–
17,943
62,546
1,128
777
(5,337)
(1)
4
(12,083)
35,024
(75,667)
–
–
–
(243)
–
(243)
Balance at 30 June
(61,201)
87,513
26,312
(121,375)
80,489
(40,886)
82
UIL Limited
Report and Accounts for the year to 30 June 2019
83
NOTES TO THE ACCOUNTS
(continued)
2019
2018
Capital reserve
(arising on
investments
sold)
£’000s
Capital reserve
(arising on
investments
held)
£’000s
Capital
reserves total
£’000s
Capital reserve
(arising on
investments
sold)
£’000s
Capital reserve
(arising on
investments
held)
£’000s
Capital
reserves total
£’000s
83,932
–
–
6,868
83,932
6,868
31,565
–
–
18,147
31,565
18,147
(6,410)
–
(6,410)
2,170
–
2,170
–
(461)
3,306
(8,538)
(8)
(12,082)
60,200
(108,596)
(48,396)
–
–
–
–
6,407
68,314
74,721
(461)
3,306
(8,538)
(8)
(12,082)
66,607
(40,282)
26,325
–
777
(5,337)
(1)
(12,821)
16,353
(124,949)
(108,596)
1,128
–
–
–
–
19,275
49,039
68,314
1,128
777
(5,337)
(1)
(12,821)
35,628
(75,910)
(40,282)
Company
Gains on investments sold
Gains on investments held
(Losses)/gains on derivative
financial instruments sold
(Losses)/gains on derivative
financial instruments held
Foreign exchange gains
Performance fee (see note 3)
Other capital charges
Intra-group loan account
finance charges
Balance brought forward
Balance at 30 June
Group and Company
Included within the capital reserve movement for the year is £19,507,000 (2018: £nil) of dividend receipts recognised as capital
in nature, £15,000 (2018: £2,000) of transaction costs on purchases of investments and £54,000 (2018: £49,000) of transaction
costs on sales of investments.
23. REVENUE RESERVE
Amount transferred to revenue reserve
Dividends paid in the year
Balance brought forward
Transfer for change in treatment of subsidiary
Balance at 30 June
24. NET ASSET VALUE PER ORDINARY SHARE
2019
£’000s
6,810
(6,689)
8,969
–
9,090
Group
2018
£’000s
5,996
(6,738)
9,468
243
8,969
2019
£’000s
6,810
(6,689)
8,969
–
9,090
Company
2018
£’000s
5,996
(6,738)
9,711
–
8,969
NAV per ordinary share is based on net assets at the year end of £326,268,000 for the Group and £326,281,000 for the Company
(2018: £261,134,000 for the Group and £261,738,000 for the Company) and on 88,283,389 ordinary shares in issue at the year
end (2018: 89,493,389).
25. RECONCILIATION OF TOTAL RETURN BEFORE TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Profit before taxation
Adjust for non-cash flow items:
Gains on investments
Losses/(gains) on derivative financial instruments
Foreign exchange gains
Non-cash flows on income
Decrease/(increase) in accrued income
Decrease in other debtors
Increase in creditors
Gains on transactions of ZDP shares held intra group
ZDP shares finance costs
Intra-group loan account finance costs
Tax on overseas income
Cash flows from operating activities
2019
£’000s
74,017
Group
2018
£’000s
41,199
2019
£’000s
73,426
Company
2018
£’000s
41,803
(90,402)
(48,366)
(90,800)
(49,712)
6,871
(3,306)
(3,390)
941
10
3,344
–
(3,298)
(680)
(2,976)
(1,013)
9
5,341
(4)
11,093
12,083
6,871
(3,306)
(3,390)
941
10
3,344
–
–
(3,298)
(680)
(2,976)
(1,013)
9
5,347
–
–
–
(9)
(831)
–
12,082
12,821
(179)
2,116
(9)
(831)
(179)
2,122
26. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
Group
2019
Bank loans
ZDP shares
2018
Bank loans
ZDP shares
Balance at
30 June
2018
£’000s
27,795
199,354
227,149
Balance at 30
June 2017
£’000s
Cash
flows
£’000s
Foreign
exchange
movement
£’000s
47,846
(18,962)
(1,089)
173,778
221,624
13,504
(5,458)
–
(1,089)
Non-cash flow
changes
Cash
flows
£’000s
22,862
(50,505)
(27,643)
Foreign
exchange
movement
£’000s
314
–
314
Non-cash flow changes
Gains on
transactions
of ZDP
shares held
intra group
£’000s
–
(4)
(4)
Finance
costs
£’000s
–
12,083
12,083
Finance
costs
£’000s
–
11,093
11,093
Balance at
30 June
2019
£’000s
50,971
159,942
210,913
Decrease of
accrued
costs
£’000s
–
(7)
(7)
Balance at
30 June
2018
£’000s
27,795
199,354
227,149
84
UIL Limited
Report and Accounts for the year to 30 June 2019
85
NOTES TO THE ACCOUNTS
(continued)
Company
2019
Bank loans
Intra-group loans
2018
Bank loans
Intra-group loans
Balance at
30 June
2018
£’000s
27,795
233,918
261,713
Non-cash
flows on
redemption
of ZDP
shares
£’000s
–
(22,241)
(22,241)
Cash
flows
£’000s
22,862
(51,194)
(28,332)
Non-cash flow
changes
Finance
costs
£’000s
–
12,082
12,082
Balance at
30 June
2019
£’000s
50,971
172,565
223,536
Foreign
exchange
movement
£’000s
314
–
314
Non-cash flow
changes
Balance at
30 June
2017
£’000s
Non-cash flows
on issues of
ZDP shares
£’000s
Cash
flows
£’000s
Foreign
exchange
movement
£’000s
47,846
(18,962)
–
(1,089)
173,778
221,624
12,943
(6,019)
34,383
34,383
–
(1,089)
Finance
costs
£’000s
–
12,821
12,821
Decrease of
accrued
costs
£’000s
–
(7)
(7)
Balance at
30 June
2018
£’000s
27,795
233,918
261,713
27. ULTIMATE PARENT UNDERTAKING
In the opinion of the Directors, from 26 June 2018 the Group’s
ultimate parent undertaking is Somers Isles Private Trust
Company Limited (“SIPTCL”), a company incorporated in
Bermuda and owned by Mr Duncan Saville. Prior to 26 June
2018, the Group’s ultimate parent undertaking was General
Provincial Life Pension Fund Limited (“GPLPF”) which is
incorporated in Bermuda.
28. RELATED PARTY TRANSACTIONS
The following are considered related parties of UIL:
UIL’s majority shareholder GPLPF holds 62.1% of UIL’s shares
and is ultimately controlled by SIPTCL.
Subsidiaries of UIL:
BFIC, Coldharbour, Energy Holdings Limited, GERP, Newtel,
UIL Finance, UIL Holdings Pte Ltd and Zeta (on consolidation,
transactions between the Company and UIL Finance have
been eliminated).
Controlled Entities:
Somers, Allectus and VixTech.
Subsidiaries of the above subsidiaries and controlled
entities:
Bermuda Commercial Bank Limited (“BCB”), PCF Bank, Perfect
Channel Limited, Waverton, West Hamilton Holdings Limited,
Homeloans Limited, Resimac Group Limited and Zeta Energy
Pte. Ltd.
Key management entities and persons:
ICM and ICMIM and the board of directors of ICM who are
Alasdair Younie, Charles Jillings, Duncan Saville and of ICMIM,
Charles Jillings and Sandra Pope.
Persons exercising control of UIL:
The Board of UIL.
Companies controlled by key management persons:
Azure Limited, Ingot Capital Management Limited, Mitre
Finance Limited, Mitre Investments Limited, Permanent
Investment Limited (“PIL”) and Permanent Mutual Limited
(“PML”),
The following transactions were carried out during the year
to 30 June 2019 between the Company and its related parties
above:
UIL Finance
Loans from UIL Finance to UIL of £233.9m as at 30 June 2018
decreased by £61.3m, to £172.6m as at 30 June 2019. The
loans are repayable on any ZDP share repayment date.
In the year to 30 June 2019, the number of ZDP shares
subscribed for and sold in the market by UIL is detailed in
note 15 to the accounts.
BFIC, Coldharbour, Energy Holdings, GERP, Newtel, UIL
PIL and PML
Holdings Pte Ltd and Zeta.
Transactions are disclosed in note 10.
3DMedi, Allectus, DTI, Elevate, Orbital, Smilestyler, Somers
and VixTech.
Transactions are disclosed in note 9.
PIL and PML are both controlled by SIPTCL and hold 46.0%
and 3.1% respectively of Somers ordinary shares. PML
received dividends of £503,436 from UIL. There were no
other transactions between the Company and PIL or between
the Company and PML in the year.
SIPTCL
BCB, PCF Bank, Perfect Channel Limited, Waverton, West
Hamilton Holdings Limited, Homeloans Limited, Resimac
See note 27. There were no transactions between SIPTCL and
the Company in the year.
Group Limited and Zeta Energy Pte. Ltd.
There were no transactions between these entities and UIL
in the year.
ICM and ICMIM
ICM and ICMIM are joint portfolio managers of UIL. There
were no other transactions with ICM or ICMIM or ICM
Investment Research Limited and ICM Corporate Services
(Pty) Ltd, both wholly owned subsidiaries of ICM, other than
investment management, secretarial costs and performance
fees as set out in note 3, and reimbursed expenses included
within note 4 of £108,000 (2018: £114,000). At the year-
end £310,000 (2018: £279,000) remained outstanding to
ICM and ICMIM in respect of management and company
secretarial fees and £8,538,000 (2018:£5,337,000) in respect
of performance fees.
Other
Azure Limited received dividends of £7,215 from UIL,
GPLPF received dividends of £4,200,115 from UIL and Mitre
Investments Limited received dividends of £3,141 from
UIL. There were no other transactions between the above
associates and the Company other than investments in the
ordinary course of UIL’s business.
29. CONTINGENT LIABILITIES
UIL is a co-guarantor for the repayment of a USD10m loan
that Bank of Butterfield has provided to VixTech. The loan is
repayable by VixTech in August 2022. It is not expected that
UIL will incur any liability.
ICMIM received dividends from UIL of £7,828.
30. OPERATING SEGMENTS
Alasdair Younie, Charles Jillings, Duncan Saville and
Sandra Pope
Mr Younie is a director of BCB, BFIC, GERP, One
Communications Limited, PIL, PML, Somers and West
Hamilton Holdings Limited. Mr Jillings is a director of Allectus
Capital Limited, GERP, PIL, PML, Somers and Waverton. Mr
Jillings received dividends from UIL of £26,250. Mr Saville
is a director of Allectus Capital Limited, BFIC, GPLPF, GERP,
PIL, PML, Resimac Group Limited, VixTech, West Hamilton
Holdings Limited, Newtel Holdings Limited and Zeta Energy.
There were no other transactions in the year with Alasdair
Younie, Charles Jillings, Duncan Saville and Sandra Pope and
UIL.
The Board
As detailed in the Directors’ Remuneration Report on page
50, the Board received aggregate remuneration of £221,000
(2018: £216,000) included within “Other expenses” in note 4
for services as Directors. As at 30 June 2019, £25,000 (2018:
£54,000) remained outstanding to the Directors. In addition
to their fees, the Directors received dividends totalling
£76,131 (2018: £62,627) during the year under review in
respect of their shareholdings in the Company.
There were no further transactions with the Board during the
year.
Operating segments are considered to be secondary
reporting segment. The Directors are of the opinion that the
Company’s activities comprise a single operating segment,
which is investing in equity, debt and derivative securities to
maximise shareholder returns.
31. GOING CONCERN
The financial statements have been prepared on a going
concern basis. The majority of the Company’s assets
consist of equity shares in listed companies and in most
circumstances are realisable within a short timescale. The
use of the going concern basis of accounting is appropriate
because there are no material uncertainties related to events
or conditions that may cast significant doubt about the ability
of the Company to continue as a going concern. After making
enquiries, the Directors have a reasonable expectation
that the Company has adequate resources to continue in
operational existence for the foreseeable future. Accordingly,
the Directors continue to adopt the going concern basis in
preparing the accounts.
As at the year end, the Company had a £50m multicurrency
loan facility with Scotiabank expiring on 22 March 2020.
Drawdowns under the facility are detailed in note 13. The
86
UIL Limited
Report and Accounts for the year to 30 June 2019
87
The Group’s assets and liabilities at 30 June (shown at fair value, except derivatives at gross exposure value), by currency
excluding Sterling based on the country of primary exposure, are shown below:
2019
Other receivables
Cash and cash equivalents
Derivative financial instruments – liabilities
Short-term borrowings
Net monetary liabilities
Investments
Net financial assets
2018
Other receivables
Cash and cash equivalents
AUD
£’000s
349
–
(79,782)
(38,046)
(117,479)
176,463
58,984
AUD
£’000s
1,016
272
Derivative financial instruments – liabilities
(103,370)
Long-term borrowings
Net monetary (liabilities)/assets
Investments
Net financial assets
(16,280)
(118,362)
159,630
41,268
BMD
£’000s
EUR
£’000s
USD
£’000s
–
–
37
50
Other
£’000s
240
20
Total
£’000s
626
70
(23,304)
(66,520)
(3,897)
(173,503)
–
(899)
(12,026)
(50,971)
(23,304)
(67,332)
(15,663)
(223,778)
27,727
27,727
43,726
20,422
166,136
14,892
428,944
98,804
(771)
205,166
–
–
–
–
–
BMD
£’000s
EUR
£’000s
NZD
£’000s
USD
£’000s
–
4
–
127
19
244
(5,344)
(7,526)
(66,051)
Other
£’000s
460
–
–
Total
£’000s
1,544
647
(182,291)
–
–
–
(11,516)
(27,796)
(5,340)
23,774
18,434
(7,399)
(65,788)
(11,056)
(207,896)
9,135
9,543
144,919
411,048
1,736
(56,245)
133,863
203,152
49
–
–
–
49
64,047
64,096
Investment Managers and the Board regularly monitor these
risks. The Group does not normally hold significant cash
balances. Borrowings are limited to amounts and currencies
commensurate with the portfolio’s exposure to those
currencies, thereby limiting the Group’s exposure to future
changes in exchange rates.
Gearing may be short- or long-term, in Sterling and foreign
currencies, and enables the Group to take a long-term view
of the countries and markets in which it is invested without
having to be concerned about short-term volatility. Income
earned in foreign currencies is converted to Sterling on
receipt. The Board regularly monitors the effects on net
revenue of interest earned on deposits and paid on gearing.
Currency exposure
The principal currencies to which the Group was exposed
were the Australian Dollar, Bermuda Dollar, Euro and US
Dollar (2018: additionally New Zealand Dollar). The exchange
rates applying against Sterling at 30 June and the average
rates for the year were as follows:
2019 Average
2018
AUD – Australian Dollar
1.8136
1.8100
1.7869
BMD – Bermuda Dollar
1.2727
1.2941
1.3203
EUR – Euro
1.1176
1.1345
1.1308
NZD – New Zealand Dollar
n/a
1.9306
1.9500
USD – US Dollar
1.2727
1.2941
1.3203
NOTES TO THE ACCOUNTS
(continued)
Company will either extend or replace the facility or repay the
outstanding debt when due from portfolio realisations.
32. FINANCIAL RISK MANAGEMENT
The Group’s investment objective is to maximise shareholder
returns by identifying and investing in investments worldwide
where the underlying value is not reflected in the market
price.
The Group seeks to meet its investment objective by
investing principally in a diversified portfolio of both listed
and unlisted companies. Derivative instruments may be
used for purposes of hedging the underlying portfolio of
investments. The Group has the power to take out both
short and long term borrowings. In pursuing the objective,
the Group is exposed to financial risks which could result in a
reduction of either or both of the value of the net assets and
the profits available for distribution by way of dividend. These
financial risks are principally related to the market (currency
movements, interest rate changes and security price
movements), liquidity and credit and counterparty risk. The
Board of Directors, together with the Investment Managers, is
responsible for the Group’s risk management. The Directors’
policies and processes for managing the financial risks are set
out in (a), (b) and (c) below.
The Company’s risks include the risks within UIL Finance
and therefore only the Group risks are analysed below as
the differences are not considered to be significant. The
accounting policies which govern the reported Statement
of Financial Position carrying values of the underlying
financial assets and liabilities, as well as the related income
and expenditure, are set out in note 1 to the Accounts. The
policies are in compliance with IFRS and best practice, and
include the valuation of financial assets and liabilities at fair
value except as noted in (d) below and in note 15 in respect
of ZDP shares. The Group does not make use of hedge
accounting rules.
(a) Market risks
The fair value of equity and other financial securities held in
the Group’s portfolio and derivative financial instruments
fluctuates with changes in market prices. Prices are
themselves affected by movements in currencies and
interest rates and by other financial issues, including the
market perception of future risks. The Board sets policies
for managing these risks within the Group’s objective and
meets regularly to review full, timely and relevant information
on investment performance and financial results. The
Investment Managers assess exposure to market risks when
making each investment decision and monitor on-going
market risk within the portfolio. The Group’s other assets
and liabilities may be denominated in currencies other than
Sterling and may also be exposed to interest rate risks. The
88
UIL Limited
Report and Accounts for the year to 30 June 2019
89
NOTES TO THE ACCOUNTS
(continued)
Based on the financial assets and liabilities held, and exchange rates applying, at Statement of Financial Position date, a
weakening or strengthening of Sterling against each of these currencies by 10% would have had the following approximate effect
on annualised income after tax and on NAV per share:
Weakening of Sterling
Income Statement
Revenue profit for the year
Capital profit for the year
Total profit for the year
NAV per share
Basic – pence
Strengthening of Sterling
Income Statement
AUD
£’000s
BMD
£’000s
EUR
£’000s
USD
£’000s
AUD
£’000s
BMD
£’000s
EUR
£’000s
NZD
£’000s
USD
£’000s
2019
2018
212
6,515
6,727
2,354
3,081
5,435
–
4
2,269
10,974
2,269
10,978
311
4,472
4,783
380
7,116
7,496
59
2,048
2,107
113
193
306
–
(6,252)
(6,252)
7.62
6.16
2.57
12.43
5.34
8.38
2.36
0.34
(6.99)
AUD
£’000s
BMD
£’000s
EUR
£’000s
USD
£’000s
AUD
£’000s
BMD
£’000s
EUR
£’000s
NZD
£’000s
USD
£’000s
2019
2018
Revenue profit for the year
(212)
(2,354)
–
(4)
(311)
(380)
(59)
Capital profit for the year
(6,515)
(3,081)
(2,269)
(10,974)
(4,472)
(7,116)
(2,048)
Total profit for the year
(6,727)
(5,435)
(2,269)
(10,978)
(4,783)
(7,496)
(2,107)
(113)
(193)
(306)
–
6,252
6,252
NAV per share
Basic – pence
(7.62)
(6.16)
(2.57)
(12.43)
(5.34)
(8.38)
(2.36)
(0.34)
6.99
These analyses are broadly representative of the Group’s activities during the current year as a whole, although the level of the
Group’s exposure to currencies fluctuates in accordance with the investment and risk management processes.
Interest rate exposure
The exposure of the financial assets and liabilities to interest rate risks at 30 June is shown below:
2019
Within
one year
£’000s
More than
one year
£’000s
3,177
–
(50,971)
(47,794)
–
–
–
–
Total
£’000s
3,177
–
(50,971)
(47,794)
Within
one year
£’000s
2018
More than
one year
£’000s
647
(700)
–
(53)
–
–
(27,795)
(27,795)
Total
£’000s
647
(700)
(27,795)
(27,848)
Exposure to floating rates
Cash
Bank overdraft
Borrowings
Exposure to fixed rates
Zero dividend preference shares
(159,942)
–
(159,942)
(199,354)
(50,858)
(148,496)
Net exposures
At period end
Maximum in year
Minimum in year
(207,736)
(47,794)
(159,942)
(227,202)
(50,911)
(176,291)
(227,202)
(50,911)
(176,291)
(233,949)
(46,524)
(187,425)
(197,523)
(40,259)
(157,264)
(204,155)
(27,434)
(176,721)
Exposure to
floating
interest
rates
£’000s
Total
£’000s
Fixed
interest
rates
£’000s
Exposure to
floating
interest
rates
£’000s
Total
£’000s
Fixed
interest
rates
£’000s
(227,202)
(27,848)
(199,354)
(233,949)
(35,479)
(198,470)
(197,523)
(40,259)
(157,264)
(204,155)
(27,434)
(176,721)
Net exposures
Maximum in year
Minimum in year
Exposures vary throughout the year as a consequence of changes in the make-up of the net assets of the Group arising out of the
investment and risk management processes. Interest received on cash balances or paid on overdrafts is at ruling market rates.
Finance costs on the ZDP shares are fixed (see note 15). Interest paid on borrowings is at ruling market rates (2018: same). The
Group’s total returns and net assets are sensitive to changes in interest rates on cash and borrowings. Based on the financial
assets and liabilities held, and the interest rates pertaining, at each Statement of Financial Position date, a decrease or increase
in interest rates by 2% would have had the following approximate effects on the Group Income Statement revenue and capital
returns after tax and on the NAV per share.
Revenue profit for the year
Capital profit for the year
Total profit for the year
NAV per share
Basic – pence
Other market risk exposures
Increase
in rate
£’000s
(956)
–
(956)
2019
Decrease
in rate
£’000s
956
–
956
Increase
in rate
£’000s
(557)
–
(557)
2018
Decrease
in rate
£’000s
557
–
557
(0.62)
0.62
The portfolio of investments, valued at £543,794,000 at 30 June 2019 (2018: £493,375,000) is exposed to market price changes.
The Group enters into currency and index options in managing its exposure to other market risks.
The Investment Managers assess these exposures at the time of making each investment decision. The Board reviews overall
exposures at each meeting against indices and other relevant information. An analysis of the portfolio by country and major
industrial sector are set out on pages 4 and 12 respectively. The Investment Managers have operated a strategic market position
via the purchase and sale of equity index put and call options, principally on the S&P500 Index. The level of the position is kept
under constant review, and will depend upon several factors including the relative performance of markets, the price of options
as compared to the market, and the Investment Managers’ view of likely future volatility and market movements.
Based on the portfolio of investments at the statement of financial position date, and assuming other factors, including derivative
financial instrument exposure, remain constant, a decrease or increase in the fair values of the portfolio by 20% would have had
the following approximate effects on the Income Statement Capital Return after tax and on the NAV per share:
Income Statement capital profit for the year (£’000s)
108,759
108,759
98,675
(98,675)
NAV per share
Basic – pence
123.19
123.19
110.26
(110.26)
2019
2018
Increase
in value
Decrease
in value
Increase
in value
Decrease
in value
90
UIL Limited
Report and Accounts for the year to 30 June 2019
91
NOTES TO THE ACCOUNTS
(continued)
(b) Liquidity risk exposure
(d) Fair values of financial assets and liabilities
The Group and the Company are required to raise funds to meet commitments associated with financial instruments including
ZDP shares. These funds may be raised either through the realisation of assets or through increased borrowing. The risk of
the Group or the Company not having sufficient liquidity at any time is not considered by the Board to be significant, given: the
number of quoted investments held in the Group’s portfolio, 20 at 30 June 2019 (14 at 30 June 2018); the liquid nature of the
portfolio of investments; the geographical and industrial diversity of the portfolio (see pages 4 and 12 respectively); and the
existence of an on-going loan facility agreement. Cash balances are held with reputable banks.
The Investment Managers review liquidity at the time of making each investment decision. The Board reviews liquidity exposure
at each meeting. The Group has bank loan facilities of £50.0m as set out in note 13 to the accounts and ZDP share liabilities of
£159.9m as set out in note 15. The contractual maturities of the financial liabilities, based on the earliest date on which payment
can be required, were as follows:
Three
months
or less
£’000s
–
9,491
172,455
–
–
Bank overdraft
Other creditors
Derivative financial
instruments
Bank loans
ZDP shares
More than
three months
but less than
one year
£’000s
More than
one year
£’000s
–
–
–
51,173
–
–
–
–
2019
Total
£’000s
–
9,491
Three
months
or less
£’000s
700
6,152
172,455
182,292
More than
three months
but less than
one year
£’000s
More than
one year
£’000s
2018
Total
£’000s
700
6,152
182,292
–
–
–
–
–
–
–
–
–
–
195,226
195,226
51,173
–
–
181,946
51,173
195,226
428,345
189,144
27,890
27,890
245,051
245,051
272,941
462,085
(c) Credit risk and counterparty exposure
The Group is exposed to potential failure by counterparties to deliver securities for which the Group has paid, or to pay for
securities which the Group has delivered. The Board approves all counterparties used in such transactions, which must be
settled on a basis of delivery against payment (except where local market conditions do not permit). A list of pre-approved
counterparties is maintained and regularly reviewed by Waverton and the Board. Broker counterparties are selected based on a
combination of criteria, including credit rating, statement of financial position strength and membership of a relevant regulatory
body. Cash and deposits are held with reputable banks. The Group has an on-going contract with its custodians for the provision
of custody services. The contracts are reviewed regularly. Details of securities held in custody on behalf of the Group are received
and reconciled monthly. To the extent that the Investment Managers carry out duties (or cause similar duties to be carried out by
third parties) on the Group’s behalf, the Group is exposed to counterparty risk. The Board assesses this risk continuously through
regular meetings with management.
In summary, compared to the amounts included in the statement of financial position, the maximum exposure to credit risk was
as follows:
The assets and liabilities of the Group are, in the opinion of the Directors, reflected in the statement of financial position at fair
value except for ZDP shares which are carried at amortised cost using effective interest rate basis (see note 15). Borrowings
under loan facilities do not have a value materially different from their capital repayment amount. Borrowings in foreign
currencies are converted into Sterling at exchanges rates ruling at each valuation date.
The fair values of ZDP shares derived from their quoted market price at 30 June, were:
Current assets
2018 ZDP shares
2020 ZDP shares
2022 ZDP shares
2024 ZDP shares
2026 ZDP shares
2019
£’000s
–
58,305
66,000
34,200
14,060
2018
£’000s
51,766
55,575
62,250
32,250
11,840
Unquoted investments are valued based on professional assumptions and advice that is not wholly supported by prices from
current market transactions or by observable market data. The Directors make use of recognised valuation techniques and may
take account of recent arms’ length transactions in the same or similar investments.
The Directors regularly review the principles applied by the Investment Managers to those valuations to ensure they comply with
the Group’s accounting policies and with fair value principles.
Level 3 financial instruments
Valuation methodology
The Directors have satisfied themselves as to the methodology used, the discount rates, key assumptions applied and the
valuation. The level 3 assets comprise of a number of unlisted investments at various stages of development and each has been
assessed based on its industry, location and business cycle. The valuation methodologies include cost of recent investment or
last funding round, listed peer comparison or peer group multiple, dividend yield or net assets as appropriate. Where applicable,
the Directors have considered observable data and events to underpin the valuations. A discount has been applied, where
appropriate, to reflect both the unlisted nature of the investments and business risks.
The level 3 financial instruments are split between unlisted companies and loans to listed companies.
Sensitivity of level 3 financial investments measured at fair value to changes in key assumptions.
The following table shows in the opinion of the Directors the rise or fall of the collective value of level three financial investments
for possible alternative assumptions being made when valuing the investments under the valuation policy set out in note 1(d) to
the accounts.
2019
Effect of
possible
alternative
assumptions
£’000s
13,919
4,518
18,437
Carrying
amount
£’000s
139,192
45,181
184,373
2018
Effect of
possible
alternative
assumptions
£’000s
7,080
5,527
12,607
Carrying
amount
£’000s
70,796
55,269
126,065
Current assets
Cash at bank
Financial assets through profit and loss
2019
Maximum
exposure
in the year
£’000s
2018
Maximum
exposure
in the year
£’000s
30 June
£’000s
8,399
647
21,901
30 June
£’000s
3,177
Unlisted companies
Loans to unlisted companies
Total
derivatives (forward foreign exchange contracts)
173,503
199,244
181,706
192,308
None of the Group’s financial assets are past due or impaired. The Group’s principal custodian is JPMorgan Chase Bank N.A..
Waverton acts as custodian for unquoted investments. UIL has an indirect interest in Waverton.
92
UIL Limited
Report and Accounts for the year to 30 June 2019
93
NOTES TO THE ACCOUNTS
(continued)
NOTICE OF ANNUAL GENERAL MEETING
(e) Capital risk management
The objective of the Group is stated as being to maximise shareholder returns by identifying and investing in investments where
the underlying value is not reflected in the market price. In pursuing this long term objective, the Board has a responsibility for
ensuring the Group’s ability to continue as a going concern. It must therefore maintain its capital structure through varying
market conditions. This involves the ability to: issue and buy back share capital within limits set by the shareholders in general
meeting; borrow monies in the short and long term; and pay dividends to shareholders out of current year earnings as well as out
of brought forward reserves. Changes to ordinary share capital are set out in note 18 to the accounts.
Dividends are set out in note 8 to the accounts. Bank loans are set out in notes 13 and 16 to the accounts. ZDP shares are set out
in note 15 to the accounts.
33. ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (“AIMFD”)
In accordance with the AIFMD, information in relation to the Group’s leverage and the remuneration of the Company’s AIFM,
ICMIM, is required to be made available to investors. Detailed regulatory disclosures including those on the AIFM’s remuneration
policy are available on the Company’s website or from ICMIM on request.
The Group’s maximum and actual leverage as at 30 June 2019 are shown below:
Leverage exposure
Maximum permitted limit
Actual
Gross
method
Commitment
method
425%
215%
425%
215%
The leverage limits are set by the AIFM and approved by the Board. The AIFM is also required to comply with the gearing
parameters set by the Board in relation to borrowings.
(c) the maximum price (exclusive of expenses payable
by the Company) which may be paid for an Ordinary
Share shall be the higher of:
(i)
105% of the average of the middle market
quotations of the Ordinary Shares for the five
business days prior to the date on which such
shares are contracted to be purchased; and
(ii) the higher of the price of the last independent
trade and the highest current independent bid on
the trading venue where the purchase is carried
out;
(d) such purchases shall be made in accordance with the
Companies Act 1981 of Bermuda;
(e) unless renewed, the authority hereby conferred
shall expire at the conclusion of the Annual General
Meeting to be held in 2020 save that the Company
may, prior to such expiry, enter into a contract to
purchase Ordinary Shares which will or may be
completed or executed wholly or partly after the
expiration of such authority.
As a Special Resolution: That, for the purpose of
Bye-law 4A of the Company’s Bye-laws, the Company
may issue Relevant Securities (as defined in the Bye-
laws) representing up to 4,400,000 Ordinary Shares,
equivalent to approximately 5% of the total number of
Ordinary Shares in issue as at the date of this notice
otherwise than on a pre-emptive basis, provided that
such disapplication shall expire (unless and to the extent
previously revoked, varied or renewed by the Company in
general meeting by Special Resolution (as defined in the
Bye-laws)) at the earlier of the conclusion of the Annual
General Meeting to be held in 2020 or 18 months from
the date of this resolution but so that this power shall
enable the Company to make such offers or agreements
before such expiry which would or might otherwise
require Relevant Securities to be issued after such
expiry and the Directors may issue Relevant Securities in
pursuance of such offer or agreement as if such expiry
had not occurred.
9.
By order of the Board
ICM Limited, Secretary
13 September 2019
THIS DOCUMENT IS IMPORTANT AND REQUIRES
YOUR IMMEDIATE ATTENTION. If you are in any
doubt as to what action to take, you should consult
your stockbroker, solicitor, accountant or other
appropriate independent professional adviser
authorised under the Financial Services and
Markets Act 2000. If you have sold or otherwise
transferred all your shares in UIL Limited, please
forward this document and the accompanying
Form of Proxy to the person through whom the
sale or transfer was effected, for transmission to
the purchaser or transferee.
Notice is hereby given that the 2019 Annual General Meeting
of UIL Limited will be held at Clarendon House, 2 Church
Street, Hamilton HM 11, Bermuda on Thursday, 7 November
2019 at 5.00pm (local time) for the purpose of considering
and, if thought fit, passing the following resolutions (which
will be proposed in the case of resolutions 1 to 8, as ordinary
resolutions and, in the case of resolution 9, as a special
resolution):
1.
2.
3.
To receive the Directors’ Report, the Independent
Auditor’s Report and the Financial Statements for the
year ended 30 June 2019.
To approve the Directors’ Remuneration Report for the
year ended 30 June 2019.
To approve the Company’s dividend policy to pay four
interim dividends per year.
4. To re-elect Mr P Burrows as a Director.
5. To re-elect Mr D Shillson as a Director
6.
7.
8.
To re-appoint KPMG LLP as auditor of the Company
to hold office until the conclusion of the next Annual
General Meeting of the Company.
To authorise the Directors to determine the auditor’s
remuneration.
That, in substitution for the Company’s existing authority
to make market purchases of ordinary shares of 10p in
the Company (“Ordinary Shares”), the Company be and
it is generally and unconditionally authorised to make
market purchases of Ordinary Shares, provided that:
(a) the maximum number of Ordinary Shares hereby
authorised to be purchased is 13,230,000 (being the
equivalent of approximately 14.99% of the issued
Ordinary Shares as at the date of this notice);
(b) the minimum price which may be paid for an Ordinary
Share shall be 10p;
94
UIL Limited
Report and Accounts for the year to 30 June 2019
95
95
Report and Accounts for the year to 30 June 2019
NOTICE OF ANNUAL GENERAL MEETING
(continued)
COMPANY INFORMATION
NOTES
7. CREST members who wish to vote through the CREST electronic
1. Only the holders of ordinary shares registered on the register of
members of the Company at close of business on 5 November
2019 shall be entitled to attend and vote or to be represented at
the meeting in respect of the ordinary shares registered in their
name at that time. Changes to entries on the register after close of
business on 5 November 2019 shall be disregarded in determining
the rights of any person to attend and vote at the meeting.
2. A member entitled to attend and vote at the meeting may appoint
one or more proxies to attend and vote instead of him/her. A
proxy need not be a member of the Company.
3.
If the Chairman, as a result of any proxy appointments, is
given discretion as to how the votes are cast and the voting
rights in respect of those discretionary proxies, when added to
the interests in the Company’s securities already held by the
Chairman, result in the Chairman holding such number of voting
rights that he has a notifiable obligation under the Disclosure
Guidance and Transparency Rules, the Chairman will make the
necessary notifications to the Company and the Financial Conduct
Authority. As a result, any person holding 5% or more of the voting
rights in the Company who grants the Chairman a discretionary
proxy in respect of some or all of those voting rights and so would
otherwise have a notification obligation under the Disclosure
Guidance and Transparency Rules need not make a separate
notification to the Company and the Financial Conduct Authority.
4. Any such person holding 5% or more of the voting rights in the
Company who appoints a person other than the Chairman as his
proxy will need to ensure that both he and such person complies
with their respective disclosure obligations under the Disclosure
Guidance and Transparency Rules.
5. A form of proxy is provided with this notice of meeting. The return
of a form of proxy will not preclude a member from attending
the meeting and voting in person if he/she wishes to do so. To
be valid, a form of proxy for use at the meeting and the power of
attorney or other authority (if any) under which it is signed, or a
notarially certified or office copy of such power or authority, must
be deposited with the Company’s registrars, Computershare
Investor Services (Bermuda) Limited, c/o The Pavilions, Bridgwater
Road, Bristol BS99 6ZY not later than 5:00 pm (GMT) on 5
November 2019.
Alternatively, shareholders can vote or appoint a proxy
electronically by visiting www.investorcentre.co.uk/eproxy. You will
be asked to enter the Control Number, the Shareholder Reference
Number and PIN which are printed on the form of proxy. The
latest time for the submission of proxy votes electronically is than
5:00 pm (GMT) on 5 November 2019. To appoint more than one
proxy, an additional proxy form(s) may be obtained by contacting
the Registrar’s helpline on 0370 707 1196 or you may photocopy
the form of proxy. Please indicate in the box next to the proxy
holder’s name the number of shares in relation to which they are
authorised to act as your proxy. Please also indicate by marking
the box provided if the proxy instruction is one of multiple
instructions being given. All forms of proxy must be signed and
should be returned together in the same envelope.
6.
Investors holding ordinary shares in the Company through
depository interests should ensure that Forms of Instruction are
returned to Computershare Investor Services PLC, The Pavilions,
Bridgwater Road, Bristol, BS99 6ZY not later than 5:00 pm (GMT)
on 4 November 2019 or give an instruction via the CREST system
as detailed below.
proxy appointment service may do so by using the procedures
described in the CREST Manual. CREST personal members or
other CREST sponsored members, and those CREST members
who have appointed a voting service provider(s), should refer to
their CREST sponsor or voting service provider(s), who will be able
to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the
CREST service to be valid, the appropriate CREST message (a
“CREST Proxy Instruction”) must be properly authenticated in
accordance with Euroclear UK & Ireland Limited’s specifications,
and must contain the information required for such instruction,
as described in the CREST Manual (available via www.euroclear.
com/CREST). The message, regardless of whether it constitutes
the appointment of a proxy or is an amendment to the instruction
given to a previously appointed proxy must, in order to be valid,
be transmitted so as to be received by the issuer’s agent (ID
3RA50) by not later than 5:00 pm (GMT) on 4 November 2019.
For this purpose, the time of receipt will be taken to be the time
(as determined by the timestamp applied to the message by
the CREST Applications Host) from which the issuer’s agent is
able to retrieve the message by enquiry to CREST in the manner
prescribed by CREST. After this time any change of instructions to
proxies appointed through CREST should be communicated to the
appointee through other means.
CREST members and, where applicable, their CREST sponsors,
or voting service providers should note that Euroclear UK &
Ireland Limited does not make available special procedures in
CREST for any particular messages. Normal system timings and
limitations will, therefore, apply in relation to the input of CREST
Proxy Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST personal
member, or sponsored member, or has appointed a voting service
provider, to procure that his CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system
by any particular time. In this connection, CREST members
and, where applicable, their CREST sponsors or voting system
providers are referred, in particular, to those sections of the
CREST Manual concerning practical limitations of the CREST
system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
8. The register of Directors’ holdings is available for inspection at the
registered office of the Company during normal business hours
on any weekday and will be available at the place of the meeting
from 15 minutes prior to the commencement of the meeting until
the conclusion thereof.
9. No service contracts exist between the Company and any
of the Directors, who hold office in accordance with letters
of appointment and the Company’s Bye-laws. The letters of
appointment are available for inspection on request at the
Company’s registered office and at the Annual General Meeting.
10. As at the date of publication of this Notice of Annual General
Meeting, the Company’s issued share capital consisted of
88,283,389 ordinary shares of 10p each. Each ordinary share
carries the right to one vote and therefore the total voting rights
in the Company as at the date of this report are 88,283,389.
DIRECTORS
Peter Burrows, AO (Chairman)
Alison Hill
Warren McLeland
Christopher Samuel
David Shillson
Eric St C Stobart
REGISTERED OFFICE
Clarendon House, 2 Church Street, Hamilton HM 11,
Bermuda
Company Registration Number: 39480
LEI: 213800CTZ7TEIE7YM468
AIFM AND JOINT PORTFOLIO MANAGER
ICM Investment Management Limited
Ridge Court, The Ridge, Epsom, Surrey, KT18 7EP
United Kingdom
Telephone number 01372 271486
Authorised and regulated in the UK by the Financial Conduct Authority
JOINT PORTFOLIO MANAGER AND SECRETARY
ICM Limited
34 Bermudiana Road, Hamilton HM 11, Bermuda
LEGAL ADVISOR TO THE COMPANY
(as to English law)
Norton Rose Fulbright LLP
3 More London Riverside, London SE1 2AQ
United Kingdom
LEGAL ADVISOR TO THE COMPANY
(as to Bermuda law)
Conyers Dill & Pearman Limited
Clarendon House, 2 Church Street, Hamilton HM 11,
Bermuda
AUDITOR
KPMG LLP
15 Canada Square, London E14 5GL, United Kingdom
Member of the Institute of Chartered Accountants in England and
Wales
DEPOSITARY SERVICES PROVIDER
J.P. Morgan Europe Limited
25 Bank Street, Canary Wharf, London E14 5JP
United Kingdom
Authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation Authority
ASSISTANT SECRETARY
Conyers Corporate Services (Bermuda) Limited
Clarendon House, 2 Church Street, Hamilton HM 11,
Bermuda
CUSTODIAN
JPMorgan Chase Bank N.A.
JPMorgan House, Grenville Street, St Helier
Jersey JE4 8QH
REGISTRAR
Computershare Investor Services (Bermuda) Limited
5 Reid Street, Hamilton HM 11, Bermuda
Telephone 0370 707 4040
REGISTRAR TO THE DEPOSITARY INTERESTS
AND CREST AGENT
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol BS99 6ZY
United Kingdom
ADMINISTRATOR
JP Morgan Chase Bank N.A. – London Branch
25 Bank Street, Canary Wharf, London E14 5JP
United Kingdom
Authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation Authority
BROKER
Shore Capital and Corporate Limited
Cassini House, 57-58 St James’s Street, London
SW1A 1LD
United Kingdom
Authorised and regulated in the UK by the Financial Conduct Authority
COMPANY BANKER
Scotiabank Europe PLC
201 Bishopsgate, 6th Floor, London EC2M 3NS
United Kingdom
96
UIL Limited
Report and Accounts for the year to 30 June 2019
97
97
Report and Accounts for the year to 30 June 2019
ALTERNATIVE PERFORMANCE MEASURES
The European Securities and Markets Authority defines
an Alternative Performance Measure (“APM”) as being
a financial measure of historical or future financial
performance, financial position or cash flows, other
than a financial measure defined or specified in the
applicable accounting framework. The Group uses the
following APMs:
Discount/Premium – if the share price is lower than
the NAV per ordinary share, the shares are trading at
a discount. Shares trading at a price above NAV per
ordinary share are said to be at a premium. As at 30
June 2019 the ordinary share price was 199.00p and
the NAV per ordinary share was 369.57p, the discount
was therefore 46.2%.
Gearing – represents the ratio of the borrowings of
the Group to its net assets.
Bank overdraft
Bank loans
ZDP shares
Total debt
page
65
65
2019
£’000s
–
2018
£’000s
700
50,971
27,795
159,942
199,354
210,913
227,849 (a)
Equity holders' funds
65
326,268
261,134 (b)
Gearing
64.6%
87.3% (a)/(b)
NAV per ordinary share – the value of the Group’s
net assets divided by the number of ordinary shares in
issue (see note 24 to the Accounts).
NAV/share price total return – the return to
shareholders calculated on a per ordinary share basis
by adding dividends paid in the period to the increase
or decrease in the NAV or share price in the period.
The dividends are assumed to have been re-invested
in the form of net assets or shares, respectively, on the
date on which the dividends were paid.
2019
30 June 2018
21 September 2018
21 December 2018
29 March 2019
28 June 2019
30 June 2019
Total return
2018
30 June 2017
22 September 2017
14 December 2017
23 March 2018
22 June 2018
30 June 2018
Total return
Dividend rate
(pence)
NAV
(pence)
Share price
(pence)
n/a
291.79
1.875
1.875
1.875
1.875
305.61
280.64
335.31
369.57
n/a
369.57
29.7%
174.50
183.50
175.00
177.50
199.00
199.00
18.8%
Dividend rate
(pence)
NAV
(pence)
Share price
(pence)
n/a
1.875
1.875
1.875
1.875
n/a
252.86
267.46
256.62
271.44
280.20
291.79
18.7%
164.00
163.25
158.00
167.50
172.50
174.50
11.3%
NAV/share price total return since inception – the
return to shareholders calculated on a per ordinary
share basis by adding dividends paid in the period and
adjusting for the exercise of warrants and Convertible
Unsecured Loan Stock (“CULS”) in the period to the
increase or decrease in the NAV/share price in the
period. The dividends are assumed to have been
re-invested in the form of net assets or shares on the
date on which the dividends were paid. The adjustment
for the exercise of warrants and CULS is made on the
date the warrants and CULS were exercised.
2019
Share
price
(pence)
NAV
(pence)
2018
Share
price
(pence)
NAV
(pence)
99.47
85.67
99.47
85.67
1.9839
2.3374
1.9380
2.2436
Total return
NAV 14 August 2003
(pence)
Total dividend,
warrants and CULS
adjustment factor
NAV 30 June (pence)
369.57
199.00
291.79
174.50
Adjusted NAV at
30 June (pence)
Total return since
inception
733.18
465.13
565.48
391.51
637.1% 443.0% 468.5% 357.0%
Annual compound NAV/share price total return
since inception – the annual return to shareholders
using the same basis as NAV/share price total return
since inception.
NAV (pence)
2019
Share price
(pence)
Annual compound NAV total
return since inception
13.40%
11.20%
Ongoing charges – all operating costs expected to
be regularly incurred and that are payable by the
Group or suffered within underlying investee funds,
expressed as a proportion of the average weekly net
asset values of the Group (valued in accordance with
accounting policies) over the reporting year. The costs
of buying and selling investments and derivatives are
excluded, as are interest costs, taxation, non-recurring
costs and the costs of buying back or issuing ordinary
shares.
Ongoing charges calculation
(excluding performance fees)
2019
£’000s
2018
£’000s
page
Management and administration
fees
61
1,587
1,491
Other expenses
Expenses suffered within
underlying funds
Total expenses for ongoing
charges calculation
Average weekly net asset values
of the Group
Ongoing Charges
61
1,178
1,316
3,188
2,580
5,953
5,387 (a)
Revenue yield – represents the ratio of total income in
the year over average gross assets in the year.
Income
page
2019
£’000s
2018
£’000s
61
11,184
10,671
Average Gross assets
497,867
465,892
Revenue yield
2.2%
2.3%
Dividend yield – represents the ratio of dividends per
ordinary over closing ordinary share price.
Dividends per ordinary
shares
Ordinary share price
Dividend yield
page
2019
£’000s
2018
£’000s
73
7.50
199.00
3.8%
7.50
174.5
4.3%
Revenue reserves per ordinary share carried
forward – the value of the Group’s revenue reserves
divided by the number of ordinary shares in issue.
Revenue reserves (£'000s)
Number of ordinary shares
in issue at 30 June
Revenue reserves per
ordinary share carried
forward (pence)
page
65
2019
2018
9,090
8,969
82 88,283,389 89,493,389
10.30
10.02
285,326 243,894 (b)
5
2.1%
2.2% (a)/(b)
Dividend per ordinary share cover – represents
revenue reserves per ordinary share carried forward
over the dividends per ordinary share.
Ongoing changes calculation
(including performance fees)
2019
£’000s
2018
£’000s
page
Management and administration
fees
61 10,125
6,828
Other expenses
Expenses suffered within
underlying funds
Total expenses for ongoing
charges calculation
Average weekly net asset values
of the Group
Ongoing Charges
61
1,178
1,316
3,188
2,580
14,491
10,724 (c)
285,326 243,894 (d)
5
5.1%
4.4% (c)/(d)
Revenue reserves per
ordinary share carried
forward (pence)
Dividends per ordinary
shares
Dividend per ordinary
share cover
page
2019
2018
10.30
10.02
73
7.50
7.5
1.4x
1.3x
98
98
UIL Limited
Report and Accounts for the year to 30 June 2019
99
UIL Limited
HISTORICAL PERFORMANCE
at 30 June
2019
2018
2017
2016
2015
2014 2013(1)
2012
2011
2010
NAV per ordinary share (pence)
369.57 291.79 252.86 241.12 169.00 165.84 148.33 209.67 201.63 166.39
Ordinary share price (pence)
199.00 174.50 164.00 130.75 117.00 128.00 130.00 144.00 147.25 116.50
Discount (%)
46.2
40.2
35.1
45.8
30.8
22.8
12.4
31.3
27.0
30.0
Returns and dividends (pence)
Revenue return per ordinary share
7.63
6.67
6.38
6.23
Capital return per ordinary share
75.34
38.96
12.46
68.45
7.84
2.47
7.03
12.06
11.99
7.65
10.49
19.85 (63.65)
2.73
26.05
21.15
Total return per ordinary share
82.97
45.63
18.84
74.68
10.31
26.88 (51.59)
14.72
33.70
31.64
Dividend per ordinary share
7.50
7.50
7.50
7.50
7.50
7.50 10.00(2)
7.00
8.25
-
Capital distribution per ordinary share
-
-
-
-
-
-
-
-
-
12.00
FTSE All-Share total return Index
7,431
7,389
6,777
5,737
5,614
5,471
4,837
4,101
4,234
3,370
ZDP shares(3) (pence)
2020 ZDP shares
Capital entitlement(4) per ZDP share
141.01 131.52 122.64 114.35 106.61
ZDP share price
2022 ZDP shares
149.50 142.50 140.38 130.00 122.38
Capital entitlement(4) per ZDP share
120.03 113.01 106.37 100.12
ZDP share price
2024 ZDP shares
132.00 124.50 119.50 104.50
Capital entitlement(4) per ZDP share
107.97 103.10
ZDP share price
2026 ZDP shares
114.00 107.50
Capital entitlement(4) per ZDP share
105.89 100.87
ZDP share price
107.50 102.25
Equity holders' funds (£m)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Gross assets(5)
Bank debt
ZDP shares
Other debt
Equity holders' funds
Revenue account (£m)
Income
Costs (management and other expenses)
Finance costs
Financial ratios of the Group (%)
Ongoing charges figure (excluding
performance fees)
Gearing
537.2
488.3
449.7
440.7
373.4
399.1
383.0
434.5
408.7
334.2
51.0
27.8
47.8
24.7
34.4
22.2
42.5
0.0
30.9
29.3
159.9
199.4
173.8
197.4
172.4
212.5
193.4
224.4
172.8
161.2
-
-
-
-
-
-
-
1.2
3.5
-
326.3
261.1
228.1
218.6
166.6
164.4
147.1
208.9
201.5
143.7
11.2
10.6
10.7
10.5
11.2
10.4
16.2
15.9
11.9
13.8
2.8
1.6
2.8
1.6
2.9
1.8
1.9
1.7
1.8
1.1
2.1
0.9
3.2
0.8
3.0
0.8
2.9
2.0
2.4
1.4
2.1
64.6
2.2
87.3
2.1
3.3
2.0
2.2
1.8
1.7
2.0
0.7
97.2
101.6
124.1
144.4
160.4
108.0
102.8
132.6
(1) Restated on adoption of IFRS10 Consolidated Financial Statements
(2) Includes the special dividend of 2.50p per share
(3) Issued by UIL Finance, a wholly owned subsidiary of UIL
(4) See pages 47 and 48
(5) Gross assets less current liabilities excluding loans
100
A DIVERSE PORTFOLIO BY GEOGRAPHY AND SECTOR
UK CONTACT
PO Box 208
Epsom Surrey
KT18 7YF
Telephone: +44 (0)1372 271486
www.uil.limited
UIL Limited