2020
REPORT AND ACCOUNTS
A DIVERSE PORTFOLIO BY GEOGRAPHY AND SECTOR
WHY UIL LIMITED?
Resolute Mining Limited – Syama, fully automated underground mining control centre
UIL Limited’s objective is 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 2020
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*
9.77p
(2019: 7.63p)
7.875p
(2019: 7.500p)
(18.7)%
(2019: 29.7%)
(7.1)%
(2019: 18.8%)
* See Alternative Performance Measures on pages 109 and 110
Stock selection remains our focus and ICM Limited’s
proven bottom-up long-term approach should
benefit UIL Limited in changing times.
UIL OFFERS ORDINARY SHAREHOLDERS:
UIL’S INVESTMENT MANAGER
• A high conviction portfolio
• ICM Limited has been UIL’s investment manager
• Attractive quarterly dividends
• 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
• Aligned interest with over 70.0% held by investors
HISTORICALLY SHAREHOLDERS HAVE RECEIVED:
associated with ICM
• Very attractive total returns. NAV total return
performance over the last three years has increased
25.0%, compared to a decrease of 4.6% in the FTSE
All-Share total return Index
• Historic dividend yield of 4.4%
• ICM offers significant sector expertise
PORTFOLIO STRENGTHS
• Technology
• Finance
• Utilities and
Infrastructure
• Unlisted investments
1
Report and Accounts for the year to 30 June 2020
CONTENTS
PERFORMANCE
3
Current Year Performance
4 Group Performance Summary
5
9
Chairman’s Statement
Top Ten Companies as at 30 June 2020
10 Geographical Investment Exposure
11 Performance Since Inception (14 August 2003)
STRATEGIC REPORT AND INVESTMENTS
13
Investment Managers’ Report
19 Our Investment Approach
20 Macro Trends Affecting Our Portfolio
22 Ten Largest Holdings
28 ZDP Shares
30 Strategic Report
40
Investment Managers and Team
GOVERNANCE
43 Directors
44 Directors’ Report
50 Corporate Governance Statement
55 Capital Structure
57 Directors’ Remuneration Report
60 Audit & Risk Committee Report
63 Statement of Directors’ Responsibilities
AUDIT
64
Independent Auditor’s Report
FINANCIAL STATEMENTS
70 Accounts
76 Notes to the Accounts
ADDITIONAL INFORMATION
106 Notice of Annual General Meeting
108 Company Information
109 Alternative Performance Measures
111 Historical Performance
2
VixTech – Manchester Metrolink platform
FINANCIAL CALENDAR
Year End
30 June
Annual General Meeting (“AGM”)
8 December 2020
Half Year
31 December
Dividends Payable
September, December, March
and June
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. UIL
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 UIL are ICM Investment
Management Limited (“ICMIM”) and
ICM Limited (“ICM”), together referred
to as the “Investment Managers”.
CURRENT YEAR PERFORMANCE
NAV TOTAL RETURN
PER ORDINARY SHARE*
SHARE PRICE TOTAL
RETURN PER ORDINARY
SHARE*
NAV DISCOUNT AS AT
30 JUNE 2020*
GEARING*
(18.7)%
(2019: 29.7%)
(7.1)%
(2019: 18.8%)
39.4%
(2019: 46.2%)
93.4%
(2019: 63.7%)
REVENUE EARNINGS
PER ORDINARY SHARE
DIVIDENDS PER
ORDINARY SHARE
REVENUE YIELD*
DIVIDEND YIELD*
9.77p
(2019: 7.63p)
7.875p
(2019: 7.500p)
2.5%
(2019: 2.2%)
4.4%
(2019: 3.8%)
ORDINARY SHARES
BOUGHT BACK
AVERAGE PRICE OF
SHARES BOUGHT BACK
ONGOING CHARGES
EXCLUDING
PERFORMANCE FEES*
ONGOING CHARGES
INCLUDING
PERFORMANCE FEES*
2.3m
(2019: 1.2m)
251.25p
(2019: 180.40p)
2.1%
(2019: 2.1%)
2.1%
(2019: 5.1%)
*See Alternative Performance Measures on pages 109 and 110
TOTAL RETURN COMPARATIVE PERFORMANCE † (pence)
from 30 June 2019 to 30 June 2020
110
105
100
95
90
85
80
75
70
65
Jun 19
Jul 19
Aug 19
Sep 19
Oct 19
Nov 19
Dec 19
Jan 20
Feb 20
Mar 20
Apr 20
May 20
Jun 20
NAV total return per ordinary share
FTSE All-Share total return Index
† Rebased to 100 as at 30 June 2019
Source: ICM and Bloomberg
3
UIL LimitedReport and Accounts for the year to 30 June 2020
GROUP PERFORMANCE SUMMARY
CHAIRMAN’S STATEMENT
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 (1) (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 (4)
Bank and other 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
2020
30 June
2019
% change
2020/19
(18.7)
(7.1)
11.2
292.79
177.50
39.4
9.77
(81.30)
(71.53)
7.875 (3)
6,465
483.3
51.2
180.5
251.6
12.7
2.6
1.6
2.1
2.1
93.4
29.7
18.8
13.4
369.57
199.00
46.2
7.63
75.34
82.97
7.500
7,431
537.2
51.0
159.9
326.3
11.2
2.8
1.6
2.1
5.1
63.7
n/a
n/a
n/a
(20.8)
(10.8)
n/a
28.0
(207.9)
(186.2)
5.0
(13.0)
(10.0)
0.4
12.9
(22.9)
13.4
(7.1)
0.0
n/a
n/a
n/a
(1) See Alternative Performance Measures on pages 109 and 110
(2) All performance data relating to periods prior to 20 June 2007 are in respect of Utilico Investment Trust plc, UIL’s predecessor
(3) The fourth quarterly dividend of 2.00p has not been included as a liability in the accounts
(4) Gross assets less current liabilities excluding loans and ZDP shares
The coronavirus (“Covid-19”)
pandemic has seen both a
demand and supply shock and
impacted most stakeholders.
The last quarter of the UIL
financial year 2020 has been
challenging for investors.
UIL’s investment valuations
were impacted by the market
downturn declining in the year
to 30 June 2020 by 10.1% to
£489.0m, ahead of the FTSE All-
Share total return Index which was down by 13.0% over
the year. UIL’s leveraged balance sheet meant that UIL’s
NAV total return declined 18.7%.
PETER BURROWS
Chairman
Since inception in August 2003, UIL has distributed
£74.4m in dividends, invested £32.0m in ordinary
share buybacks and made net returns of £253.5m for
a total return of 498.9% (adjusted for the exercise of
warrants and convertibles). This represents an annual
compound NAV total return since inception of 11.2%.
The annual compound total return for the FTSE All-
Share Index over the same period was 6.7%.
On top of Covid-19, we continue to experience two
broad opposing forces at work in global markets at the
moment; social and political tensions, and central bank
intervention. Central banks are focused on reflationary
policies, providing liquidity, lowering interest rates
and now decreasing average inflation targets. The
prolonging of negative interest rates in the developed
markets is a concern. We see negative interest rates
as eroding value for savers and pension funds while
increasing the long-term risk to global security.
The world has become more divided and polarised in
its views. This has manifested itself in protests from
Hong Kong, Minsk, Moscow, Beirut, London, Portland,
Paris through to Santiago, although each has had
different drivers, for example, independence for Hong
Kong, the wealth gap in Santiago, climate change in
London and Black Lives Matter in Portland. The focus
is on a rebalance of social and political priorities and
resources. Questions are being asked and headwinds
rising. Some of this anger has developed into riots
and caused significant disruption and is generating
sharp policy changes. Most countries are seeing a
rise in nationalism. The US election is itself a strong
expression of these social and political divides.
There is also an accelerating expectation that
businesses address questions around their approach
to Environmental, Social and Governance (“ESG”)
outcomes.
In the UK, Brexit, which crowded out discussions on
most topics in the first half of the financial year remains
uncertain in its detailed outcome. Over the year to
30 June 2020, Sterling weakened 2.9% against the US
Dollar, reflecting this uncertainty.
Covid-19 has become a global pandemic that severely
challenges us, and the impact globally cannot be
emphasised enough. It has inflicted huge damage to
the underlying economy and has disrupted health
services, education, business and social activities.
Governments have struggled to keep up with a rapidly
changing situation. Covid-19 has impacted every
continent and every community. More than this, it
has exposed the stresses and weaknesses in our
economies, politics and social fabric. The vulnerable
have borne and continue to bear the greatest burden
directly and indirectly from Covid-19.
Nearly everyone experienced first-hand a shift
overnight from working in offices to working at
home. This disrupted and challenged everybody’s
professional, social and personal lives. Our Investment
Managers rightly focused on three issues. First, people;
their employees, our investee boards, their staff, and
the stakeholders. Ensuring the right processes and
decisions were adopted and made. Second, ensuring
that UIL and its investee companies focused on short
term cashflow needs and that they had adequate
funding. Third, ensuring that UIL and its investees
could thrive where opportunities arise. While Covid-19
has challenged every weakness in businesses it has
We remain bottom-up investors looking for
compelling value.
4
5
UIL LimitedReport and Accounts for the year to 30 June 2020 CHAIRMAN’S STATEMENT (continued)
INDICES MOVEMENTS
from 30 June 2019 to 30 June 2020
CURRENCY MOVEMENTS vs STERLING
from 30 June 2019 to 30 June 2020
COMMODITIES MOVEMENTS
from 30 June 2019 to 30 June 2020
135
125
115
105
95
85
75
65
115
110
105
100
95
90
145
130
115
100
85
70
55
40
25
Jun 19
Aug 19
Oct 19
Dec 19
Feb 20
Apr 20
Jun 20
Jun 19
Aug 19
Oct 19
Dec 19
Feb 20
Apr 20
Jun 20
Jun 19
Aug 19
Oct 19
Dec 19
Feb 20
Apr 20
Jun 20
FTSE All-Share Index
Australian Securities Exchange ("ASX")
S&P 500 Index
US Dollar
Euro
Australian Dollar
Oil
Copper
Nickel
Gold
Rebased to 100 as at 30 June 2019
Source: Bloomberg
Rebased to 100 as at 30 June 2019
Source: Bloomberg
Rebased to 100 as at 30 June 2019
Source: Bloomberg
also accelerated change. The shift to working from
home has no doubt augmented the adoption of
digital platforms. We believe that UIL has risen to the
challenges and emerged stronger. No doubt there are
further challenges to come and UIL will address those
in a similar manner.
The pandemic has exposed all the above social and
political fault lines and we have seen unprecedented
responses from governments and central banks to
support their economies. Interest rates have been
lowered to near nil or even negative. Borrowings have
soared beyond what was considered already an over
leveraged position. We have seen social tensions rise
as communities hit hardest by Covid-19 are often
among the poorest, and where these issues have
combined with unresolved racial tensions dating back
decades to result in significant demonstrations in the
USA and Europe.
A sense of urgency to address Covid-19 has been a
big positive and the health service has responded at
lightning speed. PPE, drug testing and virus testing
have accelerated at a remarkable pace and large
parts of the health service have gone online for initial
consultations.
6
The growth of digital consumption has accelerated
under Covid-19 as more people are working from
home and more businesses are operating online. As
a result, technology businesses have jumped in value
significantly, a trend we noticed before and one that we
continue to see accelerating.
The above social issues, from nationalism to
the pandemic, remain to be resolved. However,
communities have pulled together, and the human
spirit has risen above this upheaval. Let us hope our
leaders can deliver on these challenges.
The market turmoil that ensued following the global
response to the pandemic has magnified the already
rising market volatility. While the S&P Index was up
5.4% over the twelve months to 30 June 2020, its
trading range was some 40.0%, having been up 15.1%
at its peak in February 2020 and down 23.9% at its
trough in March 2020. This volatility is reflected in
most other indices. The FTSE All-Share total return
Index was up 7.1% in January 2020, down 30.7% at its
trough in March 2020 and has ended the year down
13.0%. Australia’s ASX followed the US markets profile
with a trading range of 20.0% and ending the year
5.3% up. Currencies showed unprecedented volatility
with Sterling rising by 5.0% versus the US Dollar in
December 2019 and falling by 9.5% in March 2020,
ending the year down 2.9%. Commodities have moved
significantly with nickel being up 43.9% in September
2019 and ending the year up 1.1%. Oil was caught up
in the pandemic demand shock and a power struggle
between oil suppliers. Oil traded famously on the
Houston exchange at negative values as oversupply
and limited demand resulted in surplus oil. Oil ended
the year down 38.2%.
The Investment Managers have set out in their report a
more detailed overview on actions taken in 2020. But I
would note UIL closely monitored cash while supporting
investee companies where necessary. In particular, they
committed to UIL’s proportion of the Resolute Mining
Limited (“Resolute”) placing of AUD 95.0m and assisted
Zeta Resources Limited (“Zeta”) in stabilising Panoramic
Resources Limited (“Panoramic”) by supporting
Panoramic’s funding requirements and consequent
restructuring. Panoramic was Zeta’s largest investment.
These have proved good decisions and both companies
are stronger for UIL’s support.
The impact of Covid-19 on UIL’s balance sheet has been
a sharp rise in indebtedness to 106.3% at the bottom
of the market downturn in March. This has since
reduced to 93.4% as at 30 June 2020. We set a gearing
target of 100.0% back in 2014 and it is good to see UIL
inside that target.
During the market turmoil, the UIL ordinary
share discount widened out to over 45.0%. This is
disappointing given the progress made towards a
20.0% discount target. Last year, in committing to
a 20.0% discount, we noted UIL would step up its
marketing, as well as continuing to buy back ordinary
shares. During the market turmoil UIL stepped back
from buying back and husbanded cash to better
respond to the funding needs in its portfolio and the
redemption of the 2020 ZDP shares. Once appropriate
to do so, UIL intends to return to buying back shares
and seeking to lower the discount to NAV.
UIL announced on 26 July 2019 that, partly as a result
of ongoing 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 put forward
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 (“LSE”). These proposals were
overwhelmingly approved by shareholders. On
5 November 2019, UIL’s ordinary shares were admitted,
by way of introduction, to a secondary listing on the
Bermuda Stock Exchange (“BSX”).
A key focus has been the corporate transactions by
UIL and its wider group. Zeta was able to use the
proceeds from the successful exit of Bligh Resources
Limited (“Bligh”), to repay some of the loans to UIL. But
the market turmoil impacted three other transactions
underway: the offer for Ascendant Group Limited
(“Ascendant”) and the agreements to sell Optal Limited
(“Optal”) as well as Bermuda Commercial Bank Limited
(“BCB”), which is held by Somers Limited (“Somers”).
ICM remains focused on delivering all three corporate
transactions. It is pleasing to see the Ascendant
transaction set to complete in early November 2020.
UIL Finance issued 25.0m 2026 ZDP shares in March
2018, with a view to extending the ZDP redemption
profile and lowering its cost of debt. As at 30 June
2020, the aggregate ZDP liability was £180.5m. Since
this liability is across four ZDP issues it reduces the
significance of each redemption payment. UIL held
11.9m 2026 ZDP shares as at 30 June 2019 and placed
9.5m of these in the year, leaving UIL holding 2.4m
2026 ZDP shares as at 30 June 2020. The Company’s
7
UIL LimitedReport and Accounts for the year to 30 June 2020 CHAIRMAN’S STATEMENT (continued)
TOP TEN COMPANIES AS AT 30 JUNE 2020
average funding costs as at 30 June 2020 reduced
further to 5.2% from 5.5% as at 30 June 2019.
It is disappointing to see our four issues of ZDP shares
trading at much higher gross redemption yields than
last year and that the ZDP share market remains
relatively depressed. The cover for the ZDP shares
remains good, with the cover at the year-end for the
2026 ZDP shares over 1.81 times. Given all the market
uncertainty there has not been the stability to offer
2028 ZDP shares to 2020 ZDP shareholders as a roll
over option. Perhaps once stability returns this can
be looked at in 2021. The 2020 ZDP shares are due to
be repaid in full at the end of October 2020. Following
this, the gearing of UIL will be reduced. The funding
of the ZDP shares has come from a full exit from
Ascendant, funded through Bermuda First Investment
Company Limited (“BFIC”), a partial exit from One
Communications Limited (“One Communications”)
and a number of other portfolio realisations. Both
Ascendant and One Communications have been long-
term strategic investments for UIL, and we wish them
and their stakeholders good fortune for the future.
Pleasingly, revenue return for the year to 30 June 2020
was £8.5m, well ahead of the prior year of £6.8m, an
increase of 24.4%. This resulted in revenue return
earnings per share (“EPS”) of 9.77p compared to the
prior year’s 7.63p, an increase of 28.0%. This is a very
good outcome given all the challenges during the year
to 30 June 2020.
In February 2020 the Board increased the quarterly
dividend to 2.00p resulting in total dividends for the
year to 30 June 2020 of 7.875p per share, an uplift of
5.0% which represents a yield on the closing share
price as at 30 June 2020 of 177.50p of 4.4%. Looking
forward, the Board expects to maintain the current
dividend profile, and based on 2.00p per quarter
this gives 8.00p for next year and a running yield of
5.0% based on the recent share price of 160.00p.
Undistributed revenue reserves carried forward
increased from £9.1m to £10.9m, equal to some 12.63p
per share. The capital return for the year ended 30
June 2020 was negative £70.5m, mainly from the loss
on investments.
COVID-19
The Covid-19 impact on UIL’s portfolio is set out in the
Investment Managers’ Report on page 16. In response
to the pandemic, the Board has suspended all travel
and physical meetings, but has moved to holding
regular video conference meetings to receive updates
on the portfolio and performance from the Investment
Managers. All interactions with UIL’s service providers
have been by video conference, where needed,
including the audit process.
At the forthcoming AGM the Board is proposing
to make a number of minor amendments to the
Company’s Bye-Laws, including changes to provide
additional flexibility to hold meetings by telephone,
electronic or other communication facilities. Further
details are set out in the Directors’ Report on page 47.
OUTLOOK
By any “normal metric” the global economies face
unprecedented challenges today. The war on Covid-19
has taken its toll and continues to take its toll. Not
many countries have re-opened their borders to travel
and most have ongoing local shutdown responses to
Covid-19 flareups, thereby limiting full recovery. Most
nations have seen borrowings balloon over 100% of
gross domestic product (“GDP”), interest rates trend
to zero or negative and unemployment jump by 5% to
10%. Given this outlook the Board remains cautious.
It is pleasing to see most portfolio companies doing
well in the circumstances. The Investment Managers’
proactive approach has helped many of them.
Peter Burrows AO
Chairman
27 October 2020
26.8%
14.5%
13.3%
13.0%
5.2%
Somers Limited
Zeta Resources
Limited
Utilico Emerging
Markets Trust plc
Resolute Mining
Limited
Ascendant Group
Limited
Financial Services
Resources
Investment Fund
Gold Mining
Electricity
A financial services
investment platform,
which primarily
invests in the
banking, wealth
management and
asset financing
sectors.
A resources-
focused investment
holding company,
which invests in a
range of resource
entities and base
metals exploration
and production
companies.
A UK closed-end
investment trust
dedicated to
investments in
infrastructure, utility
and related sectors
including technology
infrastructure in the
emerging markets.
A gold mining and
exploration company
with operating mines
in Africa. In addition,
the company owns a
gold mining project
in Ghana.
The monopoly
provider of energy
and energy-
related services in
Bermuda. Ascendant
is the parent
company of Bermuda
Electric Light
Company Limited.
5.2%
5.0%
4.7%
4.2%
1.9%
Allectus Capital
Limited
Optal Limited
Vix Tech Pte
Limited
One
Communications
Limited
Orbital Corporation
Limited
Technology
Technology
Technology
Telecommunications
Technology
A technology
investment company
with a value focused
portfolio of listed and
unlisted technology
companies.
A global payment
systems company
which focuses
primarily on the
travel industry.
A telecommunication
holding company
with operations in
Bermuda and the
Cayman Islands.
A manufacturer of
integral propulsion
systems for tactical
unmanned aerial
vehicles for military
application.
Designs, supplies and
operates automated
fare collection
systems, intelligent
transportation
systems and
passenger
information display
systems for the
public transit
industry.
Note: % of total investments
8
9
UIL LimitedReport and Accounts for the year to 30 June 2020
GEOGRAPHICAL INVESTMENT EXPOSURE
(% of total investments on a look through basis)
PERFORMANCE SINCE INCEPTION (14 AUGUST 2003)
NORTH AMERICA
UK AND CHANNEL ISLANDS
EUROPE (EXCLUDING UK)
ASIA
June 2020
June 2019
4.0%
6.1%
June 2020
June 2019
10.4%
11.8%
June 2020
June 2019
8.1%
10.9%
June 2020
June 2019
8.7%
7.4%
ANNUAL COMPOUND
NAV TOTAL RETURN *
NAV TOTAL RETURN
PER ORDINARY SHARE *
ANNUAL COMPOUND
SHARE PRICE TOTAL
RETURN *
SHARE PRICE TOTAL
RETURN PER ORDINARY
SHARE *
11.2%
498.9%
10.1%
404.3%
REVENUE EARNINGS
PER ORDINARY SHARE
DIVIDENDS PER
ORDINARY SHARE
DIVIDENDS PER
ORDINARY SHARE
COVER *
REVENUE RESERVES
PER ORDINARY SHARE
CARRIED FORWARD *
106.13p
82.83p
1.6x
12.63p
*See Alternative Performance Measures on pages 109 to 110
DIVIDENDS PAID
OUT
VALUE OF ORDINARY
SHARES BOUGHT BACK
ZDP SHARES
ISSUED
ZDP SHARES
REDEEMED
£74.4m
£32.0m
£383.9m
£326.1m
HISTORIC TOTAL RETURN PERFORMANCE † (pence)
since inception to 30 June 2020
LATIN AMERICA
June 2020
June 2019
4.6%
6.5%
AFRICA
June 2020
June 2019
6.9%
5.1%
BERMUDA
June 2020
June 2019
AUSTRALIA & NEW ZEALAND
June 2020
June 2019
25.6%
21.8%
GOLD MINING
June 2020
June 2019
16.4%
15.4%
15.3%
15.0%
850
750
650
550
450
350
250
150
50
Source: ICM
10
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
NAV total return per ordinary share **
Ordinary share price total return **
FTSE All-Share total return Index
† Rebased to 100 as at 14 August 2003
** Adjusted for the exercise of warrants and convertibles
Source: ICM
11
UIL LimitedReport and Accounts for the year to 30 June 2020
PERFORMANCE SINCE INCEPTION (continued)
INVESTMENT MANAGERS’ REPORT
DIVIDENDS PER ORDINARY SHARE (pence)
from 30 June 2004 to 30 June 2020
ALLOCATION OF GROSS ASSETS (£m)
from 14 August 2003 to 30 June 2020
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
2020
600
500
400
300
200
100
0
A ug 03
Ju n 04
Ju n 05
Ju n 06
Ju n 07
Ju n 08
Ju n 09
Ju n 10
Ju n 11
Ju n 12
Ju n 13
Ju n 14
Ju n 15
Ju n 16
Ju n 17
Ju n 18
Ju n 19
Ju n 20
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
CUMULATIVE TOTAL RETURN COMPARATIVE PERFORMANCE (pence)
from 14 August 2003 to 30 June 2020 (Rebased to 100 as at 14 August 2003*)
800
700
600
500
400
300
200
100
0
NAV total
return of
498.9%
Aug 03
Jun 04
Jun 05
Jun 06
Jun 07
Jun 08
Jun 09
Jun 10
Jun 11
Jun 12
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
Jun 18
Jun 19
Jun 20
NAV total return per ordinary share**
FTSE All-Share total return Index
*Inception of Utilico Investment Trust PLC
**Adjusted for the exercise of warrants and convertibles
Source: ICM
The Covid-19 pandemic
impact on UIL’s NAV has been
significant. UIL’s NAV total return
was negative 18.7% during the
twelve months to 30 June 2020.
This eroded all gains from the
2019 financial year and UIL’s
NAV per share ended the year
at 292.79p. However, it was
pleasing to see UIL’s earnings
and dividends rise over both
2019 and 2020, and over these
CHARLES JILLINGS
Investment Manager
two years, NAV total return increased by 5.3%.
It is worth noting several of UIL’s investments trade at a
discount. If Somers, Utilico Emerging Markets Trust plc
(“UEM”) and Zeta were valued at NAV, the UIL NAV would
increase by 7.0% to 313.27p and many of UIL’s metrics
would rise as a result.
Covid-19 has caused unprecedented challenges
for investors. Add the pandemic to a growing list of
significant concerns around central bank intervention,
populism, US/China frictions, Brexit, Black Lives Matter,
climate change and investors have been besieged by
a dynamic and difficult environment. Sorting out the
facts from the noise has proved difficult. When the
world’s largest corporates struggle to project their
next quarter’s revenues, it is hard to be certain about
the global economy. ICM has continued to be focused
on its investments and the delivery of their individual
opportunities, making sure they have both the right
approach to risk while seeking opportunities that will
thrive in this Covid-19 environment.
For many investee companies in UIL’s direct and indirect
portfolio these challenges have led to accelerated
engagement with the executives by ICM. This has
enabled ICM to further understand the position of the
investee companies, and dynamically respond to their
challenges and new opportunities. At times it meant
going on a new journey together to achieve the best
outcomes for the investee company. This could be
encouraging a new strategy, furloughing of staff, or
perhaps raising equity funding. Past stress tests were
often inadequate as businesses were not prepared
for either the scale or speed of change. It is pleasing
to report that most investee companies have come
through stronger.
For ICM it meant working hard to understand the
changing environment and support investee teams
seeking solutions to a myriad of issues. For UIL it meant
taking hard decisions to back businesses needing
funding and selling other investments. In particular,
UIL continued to reduce its holding in Afterpay Limited
(“Afterpay”) into a rising share price and to fund Resolute
and Zeta. Resolute had undertaken a corporate
transaction to buy the Mako mine late in 2019. This
resulted in Resolute taking over a lending facility to
Mako with repayment penalties. This should have been
refinanced from the combined cashflows of the Syama
and Mako mines. Disappointingly the roaster at Syama
failed and needed urgent repair, reducing production
considerably. Resolute was forced to refinance the
Mako lender and did this through an urgent placing. UIL
stood its corner and invested over AUD 17.0m directly
and indirectly. Resolute is now on a sounder financial
footing.
In addition, Panoramic, Zeta’s largest investment, was
in the middle of a mine expansion which was halted
due to Covid-19. This resulted in Panoramic’s bankers
seeking a repayment of their secured facility. UIL lent
AUD 22.0m to Zeta so it could support the restructuring
of Panoramic and take control of Horizon Gold Limited
(“Horizon”), a gold mining opportunity originally
controlled by Panoramic. Today Panoramic has a strong
balance sheet, a new industry investor with strong
operating capabilities and Zeta now holds 69.0% of
Horizon which is expected to be an exciting long-term
opportunity.
In order to respond to the above funding needs,
UIL managed cashflows tightly. Backing its investee
companies, meeting UIL day to day expenses and paying
dividends were paramount. It is pleasing to see that this
was achieved.
ICM is strongly of the view that the shift of workers
and businesses online under the pandemic
lockdowns globally has accelerated the digitalisation
of governments, businesses and individuals. This shift
ranges from doctors’ surgeries going online, restaurants
setting up internet delivery options and farmers
offering produce online. This should offer many exciting
investment opportunities. Businesses without internet
reach or capability will face a challenging outlook,
while many businesses have been agile and online
and therefore have both an opportunity and a positive
outlook.
12
13
UIL LimitedReport and Accounts for the year to 30 June 2020 INVESTMENT MANAGERS’ REPORT (continued)
UIL continues to look for disruptive technology businesses
that are capital light in nature but offer scalable growth.
We emphasise to our investee companies that disruption
is coming to everybody and they need to be taking
advantage of it by adapting their business models.
INVESTMENT APPROACH
UIL continues to develop its core platform investments,
which offer the following benefits:
• Focused strategy. Each platform has a dedicated
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
decision making by analysts and managers within their
defined sectors.
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 better 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 relentless bottom-up investors, drawing on
in-depth knowledge and capability.
PORTFOLIO
The technology investments in UIL have been strong
contributors over recent years. Afterpay was up by 143.2%
during the year to 30 June 2020 and UIL realised much
14
Utilico Emerging Markets – Madagascar International Container Terminal in
Toamasina
of the position contributing £47.2m to investments
sold. Optal’s valuation was marked down reflecting
uncertainties over the corporate sale transaction, while
Vix Tech Pte Limited’s (“VixTech”) valuation was marked
up 50.0% reflecting its continued progress and return to
EBITDA profitability.
Somers’ share price was essentially flat during the year
to 30 June 2020, but a highlight was the considerable
strength at Resimac Group Limited which saw profits
after tax, rise strongly. Share prices in most of the other
Somers’ investments weakened in the face of Covid-19
uncertainties, while the impact of a strong US Dollar saw
FX losses at the Somers level.
Zeta’s share price declined 52.1% during the period
reflecting weakness in the wider resources sector.
Resolute’s share price fell by 15.7% reflecting concerns
over operating performance despite rising gold prices.
UEM declined 26.4% reflecting Covid-19’s impact on
the emerging markets together with very significant
declines in the Brazilian Real (down 37.7%). UEM has
some 26.0% of its portfolio invested in Brazil. UEM was
also impacted by relative underperformance of utilities
versus the market. Ascendant was unchanged reflecting
the takeover offer from Algonquin Power & Utilities
Corp. (“Algonquin”). Allectus Capital Limited (“Allectus”)
was largely unchanged reflecting its predominantly early
stage investments. One Communications’ valuation
was reduced by 12.6% reflecting market uncertainties
over the Covid-19 impact on their customer receivables.
Orbital Corporation Limited (“Orbital”) entered the top
ten as a result of strong business performance and a
IN THE YEAR TO 30 JUNE 2020
AUSTRALIA & NEW ZEALAND
REMAINS UIL’S LARGEST EXPOSURE
AT 25.6%
BERMUDA IS UIL’S SECOND LARGEST
COUNTRY EXPOSURE AT 16.4%
GOLD REMAINS UIL’S THIRD
LARGEST EXPOSURE AT 15.3%
3.8%
1.0%
0.3%
UK IS UIL’S FOURTH LARGEST
COUNTRY EXPOSURE AT 10.4%
ASIA IS UIL’S FIFTH LARGEST
EXPOSURE AT 8.7%
THE REST OF EUROPE IS UIL’S SIXTH
LARGEST EXPOSURE AT 8.1%
1.4%
1.3%
2.8%
Note: decreases/increases refer to the movement in the portolio percentage of the relevant country
SECTOR SPLIT OF INVESTMENTS
Financial Services
26.9%
(2019: 21.8%)
Infrastructure
Investments
23.0%
(2019: 26.5%)
Technology
18.0%
(2019: 22.7%)
Gold Mining
Resources
Other
15.3%
(2019: 15.0%)
11.9%
(2019: 9.4%)
4.9%
(2019: 4.6%)
IN THE YEAR TO 30 JUNE 2020
INVESTED
REALISED
TOTAL REVENUE INCOME
£108.4m
£103.2m
£12.7m
LEVEL 1 & 2
INVESTMENTS*
LEVEL 3
INVESTMENTS*
LEVEL 3
% OF TOTAL PORTFOLIO
£311.3m
£177.7m
36.3%
* See note 9 to the accounts
Source: ICM
15
UIL LimitedReport and Accounts for the year to 30 June 2020
INVESTMENT MANAGERS’ REPORT (continued)
share price rise of 140.0%. These are all reviewed in the
ten largest holdings section starting on page 23. Overall,
the investment portfolio lost £60.0m in value.
As at 30 June 2020, the top ten investments accounted
for 93.8% of the portfolio compared to 91.9% 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.
PLATFORM INVESTMENTS
UIL currently has four platform investments – Somers,
UEM, Zeta and Allectus in the top ten holdings. These
investments account for 59.8% of the total portfolio
as at 30 June 2020 (prior year 54.4%). During the year
to 30 June 2020, UIL made net investments of £28.8m,
(prior year net withdrawals of £7.7m) to the platform
investments.
These are reviewed under the ten largest holdings
section starting on page 23.
PORTFOLIO ACTIVITY
During the year to 30 June 2020, UIL invested £108.4m
and realised £103.2m, including net loans of £16.7m to
Zeta, £7.5m to Somers, £4.8m to Allectus and £2.7m to
VixTech, as well as investing a net of £5.0m in Resolute
ordinary shares. UIL’s realisations included sales of
£47.2m from Afterpay.
In September 2019 BFIC distributed shares in Ascendant
to its shareholders by way of a special dividend. UIL as a
result received a £20.8m investment in Ascendant with
its investment in BFIC reduced accordingly.
DIRECT INVESTMENTS
UIL has six direct investments in its top ten holdings,
namely: Resolute, Ascendant, Optal, VixTech, One
Communications and Orbital.
These are also reviewed under the ten largest holdings
section starting on page 23.
GEOGRAPHIC REVIEW
The geographical split of the portfolio, on a look-through
basis, shows Australia increasing to 25.6% of UIL’s total
investments (30 June 2019: 21.8%) while most others
reflect more modest movements.
SECTOR REVIEWS
Financial Services – 26.9% (30 June 2019: 21.8%)
Somers is UIL’s largest investment, both in the financial
services sector and in UIL’s portfolio and accounted for
26.8% of UIL’s total portfolio as at 30 June 2020 (30 June
2019: 21.8%).
Infrastructure Investments – 23.0% (30 June 2019:
26.5%)
Last year UIL amalgamated the infrastructure
and utility sectors into one and this consists of
Telecommunications, Infrastructure, Electricity, Road &
Rail & Ports, Oil & Gas, Renewables, Water & waste and
Airports.
Technology – 18.0% (30 June 2019: 22.7%)
UIL holds a number of investments in the technology
sector, both directly and through Allectus (its sixth
largest investment). Optal is UIL’s seventh largest
holding in the portfolio, VixTech is the eighth largest
holding, and Orbital tenth. However, UIL’s technology
exposure reduced during the year following shares sold
in Afterpay.
Gold Mining – 15.3% (30 June 2019: 15.0%)
UIL’s largest investment in gold mining is in Resolute,
which is held both directly by UIL (13.0% of the total
portfolio) and indirectly through Zeta.
Resources (excl. gold mining) – 11.9% (30 June 2019:
9.4%)
UIL’s largest investment in resources is Zeta, which
accounted for 14.5% of the total portfolio as at 30 June
2020 (30 June 2019: 12.7%).
LEVEL 3 INVESTMENTS
UIL’s investments in level 3 companies increased by
2.4% in the year to 30 June 2020 from 33.9% as at 30
June 2019 to 36.3%, mainly as a result of loans to Zeta.
COVID-19
As noted in the Chairman’s Statement, the Board has
suspended all travel and physical meetings, and moved
to holding Board meetings by video conference.
ICM has benefited from having offices in the key time
zones of Asia, Europe and the Americas and from its
existing cloud-based infrastructure platform. ICM
has developed a process and approach to ensure
information is gathered and acted upon in an efficient
and timely manner. The shift to working from home
was almost seamless. Today ICM has a work from
home policy in place across its offices and a “ban” on
corporate travel. While it is hoped this will change in
the future, ICM is prepared for ongoing restrictions if
needed.
BREXIT
Brexit risks for UIL are considered by both ICM and the
Board of UIL. There are two identified risks, Sterling
exchange rates and UK business disruption. UIL has a
potential significant mismatch in its liabilities and assets
in terms of UIL ZDP liabilities denominated in Sterling
and its underlying investments in other currencies.
To mitigate this, UIL has hedged £134.0m of the ZDP
liability against various currencies in which UIL is
invested, predominantly Australian Dollar, US Dollar and
Euro into Sterling. This has resulted in a more balanced
position for UIL’s net assets. The FX contracts are spread
over six months to reduce any long margin 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 as not material at this stage. 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, although it generated a
gain in the capital account of £3.2m (30 June 2019: S&P
options were traded within Global Equity Risk Protection
Limited). The impact of Covid-19 was both quick and
dramatic and the S&P index jumped higher in response,
increasing the cost of buying S&P Put Options. No
position is held at the year end.
During the year to 30 June 2020 there continued to be
significant currency hedges in place in the portfolio.
These hedges included AUD 67.1m, EUR 60.4m,
CAD 52.5m and USD 29.0m as at 30 June 2020, and in
the year resulted in a small gain of £0.1m (30 June 2019:
loss of £6.9m).
GEARING
As a result of the sharp deterioration in markets in
March 2020 UIL’s gearing increased to 106.3%. Over
recent months it has reduced to 93.4% as at 30 June
2020. UIL’s target remains for gearing to be under
100.0%. UIL will redeem the 2020 ZDP shares in full
which will result in a reduction in the ZDP shares in
issue by some £60.4m to £126.5m. Together with bank
debt of £50.0m the absolute level of debt would reduce
substantially to £176.5m, from the debt as at 30 June
2020 of £231.7m.
The continuing reduction of financing costs, with the
blended rate of debt reducing from 6.3% in June 2013
to 5.5% as at 30 June 2019 and 5.2% at 30 June 2020, is
pleasing, although not surprising in the lower interest
rate environment. This should continue as the 2020
ZDP shares, (currently compounding at 7.25%), are
redeemed in full. In the twelve months to 30 June 2020
the finance costs were £11.9m, down 6.1% on the prior
year’s £12.7m. This should continue this year owing to
lower average interest costs and lower debt levels.
ZDP SHARES
On a consolidated basis the ZDP shares increased from
£159.9m to £180.5m, mainly as a result of compounding
interest and as a result of placing out 2026 ZDP shares
held by UIL for issue. UIL held 11.9m 2026 ZDP shares
at market value as at 30 June 2019 and placed 9.5m of
these in the twelve months. The balance of 2.4m 2026
ZDP shares is held by UIL as at 30 June 2020.
DEBT
Bank debt of £50.6m as at 30 June 2020 was drawn
in Australian Dollars, Euros and Sterling. During the
market sell off in March UIL requested a relaxation of
certain loan covenants, which Scotiabank Europe PLC
(“Scotiabank”) granted for the period to 3 August 2020.
These reduced covenants have now fallen away given
asset recoveries and as at 30 June 2020 UIL was within
the original covenant levels. We thank Scotiabank for
their support.
Scotiabank’s £50.0m committed senior secured
multicurrency revolving facility was renewed in the year
and matures on 30 September 2022.
REVENUE RETURNS
Revenue total income was up by 13.4% to £12.7m
reflecting increased dividends and loan interest.
Management and administration fees and other
expenses were down by 5.6% at £2.6m (30 June 2019:
16
17
UIL LimitedReport and Accounts for the year to 30 June 2020 INVESTMENT MANAGERS’ REPORT (continued)
OUR INVESTMENT APPROACH
2020, with the initial ruling on certain descriptive terms
favouring Wex Inc’s position. The case will now proceed
to a full trial to determine whether Wex Inc must legally
complete the agreed acquisition of Optal.
On 19 October 2020, UIL announced that all the
remaining conditions for the sale of Ascendant to
Algonquin had been satisfied and that the transaction
will complete in mid-November 2020. UIL also
announced that it had sold its direct holding of
Ascendant shares to BFIC at the sale price of USD 33.3m.
In October 2020, UIL sold the majority of its holding in
One Communications to One Communications’ majority
holder. The balance of One Communications’ holding
was sold to BFIC in October and BFIC paid USD 39.0m
to UIL. This, together with the proceeds from the One
Communications sale, other portfolio realisations and
repayment of debt by Somers and Zeta will enable UIL
to meet the 2020 ZDP shares redemption on time and
in full.
Charles Jillings
ICM Investment Management Limited and ICM Limited
27 October 2020
£2.8m). Financing costs were largely unchanged at
£1.6m (30 June 2019: £1.6m). Taxes were again nil.
Revenue profit was up 24.4% to £8.5m (30 June 2019:
£6.8m) and EPS increased 28.0% to 9.77p (30 June
2019: 7.63p) driven by revenue return increases and a
lower number of ordinary shares in issue following the
buybacks during the year.
CAPITAL RETURNS
Capital total income was negative £60.2m (30 June 2019:
positive £86.8m), eroding 69.3% of last year’s gains.
This represented losses on investments and foreign
exchange losses.
There were no performance fees in the year to 30 June
2020 (30 June 2019: £8.5m).
Finance costs reduced by 7.0% to £10.3m (30 June 2019:
£11.1m) reflecting the lower number of ZDP shares in
issue and lower borrowing costs.
The resultant loss for the year to 30 June 2020 on the
capital return was £70.5m (30 June 2019: profit £67.2m)
and EPS loss was 81.30p (30 June 2019: profit 75.34p).
EXPENSE RATIO
The ongoing charges figure, excluding performance fees,
was unchanged at 2.1% as at 30 June 2020. As there was
no performance fee (accrued by UIL and by underlying
investee funds) the ongoing charges figure including
performance fee decreased from 5.1% to 2.1%.
All expenses are borne by the ordinary shareholders.
POST BALANCE SHEET EVENTS
On 6 August 2020, Somers announced it had terminated
its agreement to sell BCB, originally announced in
February 2019, following the receipt of multiple
unsolicited offers which the Somers’ board determined
were superior to the first offer. It also stated that
discussions continue with those parties as it works
towards delivering a transaction which will benefit all of
Somers and BCB’s stakeholders.
On 27 January 2020, UIL announced that it had agreed
to sell its holding in Optal to Wex Inc. On 7 May 2020,
Wex Inc indicated that it believed that it was not legally
required to complete the transaction, citing the material
adverse effect of the pandemic on Optal’s business.
The sellers have challenged this in the UK Commercial
Court. Preliminary hearings took place in September
ICM is a long-term investor and generally operates
focused portfolios with separate investment remits.
ICM has several dedicated research teams who have
deep knowledge and understanding in their specific
sectors, which improves the ability to source and make
solid investments. ICM has approximately USD 2.2bn of
assets directly under management and is responsible
indirectly for a further USD 19.6bn of assets in
subsidiary investments.
ICM looks to exploit market and pricing opportunities
and concentrates on absolute performance. The
investments are not market index driven and ICM is
unlikely to participate in either an IPO or an auction
unless there is compelling value.
UIL seeks to leverage ICM’s investment abilities
to both identify and make investments across a
range of industries. New investments usually offer
a mix of attractive value at the time of investment.
There is no desire to establish a “portfolio of must
have investments”, rather the investment portfolio
comprises a series of bottom-up decisions.
We incorporate ESG factors into our investment
process in four key ways.
• Engagement – We engage with the investee
companies and visit businesses on location to
further develop a comprehensive and long-term
perspective.
• Investigate – Insights gained during these meetings
are combined with in depth internal research. This
enables us to gauge how ESG issues may impact an
investment.
• Integrate – Given our long-term focus, we integrate
the investee company’s ESG profile into our
investment decisions.
• Participate – We continually connect with investee
companies’ management teams through ongoing
meetings as well as influencing best outcomes on
key issues.
S
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SUPERIOR, CONSISTENT PERFORMANCE
Long Term
Deep Value
Cash
Generative
Bottom-Up
Approach
Active Investors
Investee
Relationships
Detailed
Company
Knowledge
Extensive
Industry
Experience
Sector Focused
DEEP SECTOR KNOWLEDGE
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18
19
UIL LimitedReport and Accounts for the year to 30 June 2020
MACRO TRENDS AFFECTING OUR PORTFOLIO
GEOPOLITICS AND GLOBALISATION
FINANCIALS
• Increased political tensions and populism is leading to a rising level of nationalism and
protectionism, unwinding several decades of global supply chain integration.
• Trade war between USA and China is resulting in higher tariffs and barriers to trade,
negatively impacting global GDP and increasing non-productive friction in economies.
• Trade flows and external deficits or surpluses are being rebalanced in many countries,
with commensurate effects on foreign exchange and local economies.
• The changing dynamics of trading bloc relationships is resulting in significant shifts in
transport and logistics value chains, and associated infrastructure.
GOVERNANCE AND TRANSPARENCY
DIGITALISATION
• Effective governance remains fundamental to long-term investment performance.
Corporates with strong governance are consistently demonstrating their ability to
navigate economic uncertainty.
• Economies with robust political and institutional structures continue to offer a more
attractive investment landscape. Growing populism is challenging weaker institutions.
• The rise of social media and information exchange has elevated the importance of
transparency. Opaque business practices face growing scrutiny.
ENVIRONMENTAL POLICY
RESOURCES
• Climate change is now an accepted reality. Governments and intergovernmental
organisations have initiatives in place targeting reductions in the impact of man-made
emissions on climate change.
• Major emissions contributors such as the power and transport sectors are seeing a
radical shift away from the most polluting technologies. Renewables, battery storage,
electric vehicles and waste treatment are key areas of development, and are increasingly
commercial without subsidies.
• Rise of electric vehicles and renewables expected to increase long term demand for
several commodities, including nickel, copper, lithium, and graphite.
• Unprecedented increase in global government debt, low/negative interest rates,
and record government spending driving gold investment as protection from flat
money inflation.
• Excess global oil production capacity, combined with reduction in short term oil demand
due to Covid-19, limits new development and puts downward pressure on oil prices.
• Heightened risk to global economy, and thus demand for industrial commodities, due to
increased government, corporate and consumer debt levels and global pandemic.
• Changing demographics and improved financial sophistication of individuals are altering
the demand for traditional financial services products, whilst providing a fertile ground
for innovation, e.g. Buy-now, Pay-Later and online shopping.
• Emphasis on individual responsibility for savings and investments, particularly due to
the inability of government and companies to support pension provision schemes.
• Digitalisation means greater use of big data and artificial intelligence (AI),
e.g. introduction of Open Banking will improve financial product efficiency.
• 5G mobile and fibre broadband rollout presents opportunities for businesses and
benefits to people driven by enhanced applications in sectors including e-commerce
and logistics, e-government, online education, telemedicine, remote working, personal
communications and multimedia content.
• Innovative solutions in financial technology (fintech) disintermediating traditional
financial sector business models to offer more efficient and secure solutions for
payments, credit, investment, tax collection and insurance.
• The increased use of connected sensors, cloud storage and data processing with
machine learning techniques will drive new applications to optimise and further
automate manufacturing, healthcare, security and transport infrastructure.
EMERGING MARKETS – URBANISATION AND GROWING MIDDLE CLASS
• Trend in emerging markets shows migration to cities, seeking a higher standard of living
and higher income opportunities. This requires significant investment in supporting
infrastructure, such as roads, metros, railway, electricity networks and sanitation.
• Rising income and social characteristics of emerging middle class populations result in
higher overall consumption and greater propensity to purchase durable goods.
• Emerging middle class increasingly demand a higher degree of public services and a
greater focus on quality of life, including education, environmental conditions, tourism,
and accountability from governmental institutions.
COVID-19 DISRUPTION
• Disruptions to both production and demand causing increased volatility.
• Several leading indicators suggested heightened risk of recession prior to Covid-19.
• Significant risk to a number of countries of additional or extended shutdowns from
increasing cases or a “second wave”.
20
21
UIL LimitedReport and Accounts for the year to 30 June 2020 TEN LARGEST HOLDINGS
Orbital – Flight Testing at Insitu Pacific
THE VALUE OF THE TEN
LARGEST HOLDINGS
REPRESENTS
THE VALUE OF
CONVERTIBLE
SECURITIES
REPRESENTS
THE VALUE OF FIXED
INCOME SECURITIES
REPRESENTS
93.8%
(2019: 91.9%) OF THE
GROUP’S TOTAL
INVESTMENTS
0.0%
(2019: 6.7%) OF THE
GROUP’S PORTFOLIO
15.0%
(2019: 11.9%) OF THE
GROUP’S PORTFOLIO
THE TOTAL NUMBER
OF COMPANIES
INCLUDED IN THE
PORTFOLIO IS
40
(2019: 42 COMPANIES)
SHARE PRICE
2.0%
Sector
Financial Services
Fair Value
£’000s
131,032*
% of total
investments
26.8%
1
2
SHARE PRICE
52.1%
Sector
Resources
Fair Value
£’000s
70,701*
% of total
investments
14.5%
* includes equity and debt
Somers is a financial services investment holding company, listed
on the BSX and managed by ICM.
Somers shareholders’ equity was USD 371.0m as at 30 June 2020
(30 June 2019: USD 343.1m) and reported a NAV per share of USD 17.61
up from USD 16.81 as at 30 June 2019. Somers declared dividends of 51.0c
up from 50.0c in the prior year. During the twelve months to 30 June 2020
Somers’ share price decreased slightly, but after adding back dividends
recorded a gain of 1.4%. 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 87.5% of its
portfolio, are a 62.5% holding in Resimac Group Limited (a leading non-
bank Australian financial institution, listed on the ASX, with AUD 14.9bn
assets under management (“AUM”)), a 100% shareholding in BCB (one
of the four licensed banks in Bermuda), a 62.9% shareholding in PCF
Group plc, a UK specialist bank listed on the LSE, and a 62.5% holding in
Waverton Investment Management Limited (a UK wealth manager with
over £9.0bn assets under influence). In August 2020, Somers announced it
had terminated its agreement to sell BCB, originally announced in February
2020, following the receipt of multiple unsolicited offers which the Somers’
board determined were superior to the first offer and that discussions
continued with those parties.
In the year to 30 June 2020, UIL’s shareholding in Somers increased by 3.4%.
Zeta is a resource-focused investment company, which is listed on
the ASX and managed by ICM.
In the year ended 30 June 2020, Zeta’s net assets fell by 52.4%. Zeta’s
share price closed the year at a premium of 6.4% (prior year: 0.1%
discount) to net tangible assets per share. The commodity prices of
Zeta’s major underlying investments were mixed, with aluminium down
9.6%, gold up 26.4%, nickel up 1.0%, and copper up 0.3%. Operational
difficulties at two of Zeta’s largest investments, Panoramic and Resolute,
resulted in falls in the share prices of those two investments despite the
relevant commodity prices (nickel and gold respectively) being up over the
year. As a leveraged commodity company, the value of Zeta’s net assets
typically rises more when commodity prices rise, while falling more when
commodity prices fall as the impact on mining companies is magnified.
In September 2019, Zeta renewed the buyback programme started in
September 2018. As at 30 June 2020, 877,948 shares had been bought
back during the year at an average price of AUD 0.36 per share. Zeta
has a concentrated portfolio, having built up cornerstone shareholdings
in bauxite, gold, nickel, and copper companies. During the year, Zeta
increased its direct ownership of Horizon from 20.1% to 69.0%.
In the year to 30 June 2020, UIL’s shareholding in Zeta was unchanged.
22
23
UIL LimitedReport and Accounts for the year to 30 June 2020 TEN LARGEST HOLDINGS (continued)
3
4
SHARE PRICE
26.4%
Sector
Investment Fund
Fair Value
£’000s
65,181
% of total
investments
13.3%
SHARE PRICE
15.7%
Sector
Gold Mining
Fair Value
£’000s
63,679
% of total
investments
13.0%
UEM is a closed-end investment trust, managed by ICM and ICMIM,
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 LSE.
UEM invests predominantly in emerging markets with a focus on
infrastructure and utility assets. Emerging markets have been impacted by
the Covid-19 outbreak, which led to a broad-based sell-off in risk assets in
early 2020. In the twelve months to 30 June 2020, UEM’s NAV total return
fell by 19.6%. A significant contributor to UEM’s underperformance was
the rapid depreciation in the Brazilian Real, which fell 37.7% versus Sterling,
25.9% of UEM’s assets are based in Brazil.
Notwithstanding the economic impact of Covid-19, many of UEM’s
investee companies have continued to deliver resilient operational and
financial metrics, including making dividend payments. UEM’s portfolio is
predominantly invested in relatively liquid, cash-generative companies and
the UEM board has committed to maintaining quarterly dividend payments
for the remainder of 2020.
During the period, UEM’s share price fell by 26.4%, with the discount
to NAV widening from 10.4% to 15.6%. Dividends per share increased
to 7.575p from 7.200p. In the period under review UIL decreased its
shareholding in UEM by 0.3%.
Resolute is an Australian domiciled gold mining company with two
operating mines: the Syama mine in southern Mali and the Mako
mine in Senegal. In addition, the company owns the Bibiani gold
mining project in Ghana. Resolute is listed on the ASX and the LSE.
Resolute’s share price in the twelve months to 30 June 2020 decreased
15.7% despite significantly higher gold prices. Production in the financial
year to 31 December 2019 of c. 385,000oz gold was slightly below earlier
guidance of 400,000oz. Gold produced at Syama was in line with the
previous financial year at 243,058oz. During the year, Resolute acquired the
Mako gold mine in Senegal. In the five months of ownership to
31 December 2019, Mako produced 42,997oz with cash costs of USD 546
per ounce. At Ravenswood, gold produced was 54,486oz with cash costs of
USD 1,209 per ounce. Ravenswood was sold on 31 March 2020, with total
proceeds of up to AUD 300m partly dependent on future gold prices and
production. Guidance for Resolute operations for the year ended
31 December 2020 has been set at 430,000 ounces at an all-in sustaining
cost of USD 980 per ounce. During the year, Resolute completed an equity
raising of AUD 195m, and successfully refinanced its Mako acquisition debt
funding. As at 30 June 2020, Resolute had cash and bullion on hand of
USD 87.5m, and total borrowings of USD 307m.
UIL’s shareholding in Resolute increased 10.5% in the period under review.
5
6
EARNINGS
8.0%
Sector
Electricity
Fair Value
£’000s
25,587
% of total
investments
5.2%
SHAREHOLDING
10.2%
Sector
Technology
Fair Value
£’000s
25,512
% of total
investments
5.2%
Ascendant is listed on the BSX and owns 100% of Bermuda Electricity
Light Company Limited (“BELCO”), Bermuda’s sole electricity provider,
and a number of other non-regulated energy related companies.
During the year, shareholders of Ascendant, including UIL, overwhelmingly
approved the sale of Ascendant to Algonquin for USD 36.00 a share.
Following the announcement in October 2020 that all the remaining
conditions for the transaction had been satisfied it is expected that the
transaction will complete in mid-November 2020.
For the year ended 31 December 2019, Ascendant reported core earnings
from operations, before corporate expenses, of BMD 15.3m (2018: BMD
14.5m). Despite falling electricity sales from a weak economic environment,
earnings at BELCO increased year on year by 8.0%. Earnings at AG Holdings
Limited (the holding company for Ascendant’s non-regulated businesses)
increased by 36.0%. The increased earnings were partially offset by one-off
restructuring costs and costs associated with the sale of the company to
Algonquin. Post the year end BELCO completed and commissioned 56MW
of replacement generation at its North Power Station which is the centre
piece of its USD 250m capital plan.
UIL’s shareholding in Ascendant increased during the year under review,
following the special dividend distribution by BFIC to UIL.
Allectus is an unlisted investment company with a value focused
portfolio of technology businesses and managed by ICM.
Allectus invests on a high conviction, deep value basis in potentially
disruptive technologies. Allectus focuses predominantly on early
stage growth investments in fintech, AI, digital health, and other high
conviction business models. In the year ended 30 June 2020, Allectus
made a number of investments into multiple verticals including, Hoolah
(Singapore based buy now, pay later provider), FloodMapp (SaaS
predictive flood modelling solution), Adarga (AI based analytics platform
for defence), Switch Automation (smart buildings/AI platform), FanAI
(esports analytics and marketing), Automio (a SaaS legaltech platform)
and AP Ventures (an investment vehicle created within the Afterpay
group to monetise Afterpay related opportunities). Allectus successfully
realised one investment, Pin Payments, which was sold to payments
unicorn Checkout.com in early 2020.
In December 2019, a restructuring of the ownership of Allectus took
place, converting the debt into equity.
UIL’s shareholding in Allectus increased by 10.2% to 50.0% in the year to
30 June 2020.
24
UIL Limited
Report and Accounts for the year to 30 June 2020
25
TEN LARGEST HOLDINGS (continued)
7
8
Optal is an unlisted, UK domiciled developer of global payment
systems and its key application is providing services to eNett, a
virtual card payment solution for the travel industry.
In January 2020, Wex Inc, a US listed company agreed to buy both Optal
and eNett for a combined sum of USD 1.7bn comprised of cash and
shares. The deal was expected to close in the middle of 2020.
Following Covid-19, Wex Inc announced in May 2020 that it did not
believe that it had to complete the deal on the original terms. The sellers
disagree with this view and challenged Wex Inc in the UK courts. It is
expected the dispute will be decided by the UK Commercial Court and
this process is currently ongoing.
UIL’s carrying valuation of Optal as at 30 June 2020 was reduced by
45.1% compared to last year’s valuation and is at a discount to the
expected proceeds from the deal if it completes on the original terms.
UIL’s shareholding in Optal was unchanged in the year to 30 June 2020.
VALUATION
45.1%
Sector
Technology
Fair Value
£’000s
24,387
% of total
investments
5.0%
% HOLDING
NO CHANGE
Sector
Technology
Fair Value
£’000s
22,803
% of total
investments
4.7%
VixTech is an unlisted, integrated payment solutions company
in transport ticketing, with a global footprint. It 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 and processing billions of
transactions per annum.
With over 30 years of industry experience, VixTech continues to be a
leader in transport ticketing, implementing and managing automated
fare collection, payments, access and passenger information systems
for customers around the globe. VixTech’s products are a cornerstone
of the world’s largest smartcard payment and billing systems and
include previous flagship projects such as the Hong Kong Octopus Card,
Singapore EZ-Link, Beijing ACC, and Melbourne Metcard.
VixTech has undertaken substantial restructuring over the last three years,
with the business now beginning to see the benefits from new product
roll outs. In June 2020, VixTech’s balance sheet was recapitalised, resulting
in VixTech now having a stronger tendering position when bidding for
new projects, which should enhance its ability to win projects in the
future. For the year ended 30 June 2020, revenues were USD 109.2m with
EBITDA of USD 4.4m and UIL had no outstanding loans with VixTech. UIL’s
percentage holding in VixTech remained unchanged in the year to
30 June 2020.
9
10
VALUATION
12.6%
Sector
Telecommunications
Fair Value
£’000s
20,667
% of total
investments
4.2%
One Communications is an integrated telecommunications holding
company with operations in Bermuda and the Cayman Islands.
One Communications is listed on the BSX and provides mobile
telephone, fibre-based broadband, Pay TV, voice and IT services.
One Communications invested heavily in upgrading its network in recent
years, with capital investment returning to more normal levels in 2019.
One Communications’ improved cashflows have been used to reduce
debt, increase dividends and to buy back shares.
UIL values One Communications with reference to a peer
telecommunications group. UIL’s carrying valuation as at 30 June
2020 reduced by 12.6% compared to last year, primarily due to lower
profit assumptions in the near term. Tourism is a large component of
Bermuda’s economy and the dominant industry in the Cayman Islands.
The drop in tourist numbers will clearly have a negative impact on the
economies of these islands for some time.
UIL’s shareholding in One Communications was unchanged in the year to
30 June 2020.
Orbital is listed on the ASX and is a manufacturer of integral
propulsion systems for unmanned aerial vehicles which are used for
military surveillance purposes.
Orbital’s key customers are Insitu (a division of Boeing), Textron Systems
and Northrup Grumman. Based in Perth, Australia, Orbital also has
opened an assembly and service plant in Oregon, USA.
Orbital’s share price responded positively during the year, gaining
140.0% on news of new orders, new products, and new customers.
Orbital’s revenues more than doubled for the year to 30 June 2020
compared to its prior financial year. UIL has held shares in Orbital for
several years.
UIL’s shareholding in Orbital was unchanged in the year to 30 June 2020.
SHARE PRICE
140.0%
Sector
Technology
Fair Value
£’000s
9,479
% of total
investments
1.9%
26
UIL Limited
Report and Accounts for the year to 30 June 2020
27
30 June
2020
30 June
2019
% change
2020/19
TOTAL BORROWINGS
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
(1) Issued by UIL Finance, a wholly owned subsidiary of UIL
(2) See pages 55 and 56
GEARING/NAV TOTAL RETURN
from 30 June 2013 to 30 June 2020
151.23
152.00
127.59
126.50
113.13
105.50
111.21
92.25
141.01
149.50
120.03
132.00
107.97
114.00
105.89
107.50
7.2
1.7
6.3
(4.2)
4.8
(7.5)
5.0
(14.2)
800
700
600
500
400
300
200
100
0
(
p
e
n
c
e
)
)
%
(
180
160
140
120
100
80
60
40
20
0
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
Jun 18
Jun 19
Jun 20
Gearing
NAV total return*
*Rebased to 100 as at 14 August 2003
Source: ICM
2014 ZDP
2016 ZDP
2018 ZDP
2020 ZDP
2022 ZDP
2024 ZDP
2026 ZDP
Total
Jun 2013
£’000s
Jun 2014
£’000s
Jun 2015
£’000s
Jun 2016
£’000s
Jun 2017
£’000s
Jun 2018
£’000s
Jun 2019
£’000s
Jun 2020
£’000s
72,705
72,734
47,957
76,138
77,928
58,427
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
59,087
63,407
33,250
24,791
193,396
212,493
172,441
197,361
173,778
199,354
159,942
180,535
Bank and other debt
42,732
25,649
34,362
24,987
47,846
28,495
50,971
54,660
Total debt
236,128
238,142
206,803
222,348
221,624
227,849
210,913
235,195
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
Jun
2016
Jun
2017
Jun
2018
Jun
2019
Jun
2020
2.95
1.80
1.52
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
4.23
2.58
2.11
1.81
* 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 AND OTHER DEBT
AS AT 30 JUNE 2020
GEARING AS AT
30 JUNE 2020
TOTAL DEBT
INCREASED DURING
THE YEAR
BLENDED RATE
OF DEBT
£235.2m
93.4%
11.5%
5.2%
28
28
UIL Limited
Report and Accounts for the year to 30 June 2020
29
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 (“JPMEL”) 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
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”.
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 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 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.
There will be no material change to the investment
policy (including the investment limits and the
borrowing limits) without the prior approval of
shareholders. Any such change would also require the
approval of the ZDP shareholders.
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
• 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.
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
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 LIMITS
Under UIL’s Bye-laws, the Group is permitted to borrow
(excluding the gearing provided through the Group’s
30
30
UIL Limited
Report and Accounts for the year to 30 June 2020
31
UIL Limited STRATEGIC REPORT (continued)
capital structure) an aggregate amount equal to 100%
of its gross assets. Borrowings will be drawn down in
any currency appropriate for the portfolio.
• Revenue earnings
• Ongoing charges figure
However, the Board has set a current limit on gearing
(being total borrowings excluding ZDP shares
measured against gross assets) not exceeding 33.3%
at the time of draw down. 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 £50.0m committed senior secured
multicurrency revolving facility with Scotiabank which
expires on 30 September 2022; as at 30 June 2020 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 under guidance issued by
the European Securities and Markets Authority and
additional information explaining how these are
calculated is set out on pages 109 and 110.
30 June
NAV total return (%)
2020
(18.7)
2019
29.7
FTSE All-Share total return Index (%)
(13.0)
0.6
Share price (pence)
177.50
199.00
DIVIDEND POLICY
Discount to NAV (%)
The Board’s objective is to maintain or increase the
total annual dividend. Dividends are expected to be
paid quarterly each year in December, March, June
and September. In determining dividend payments,
the Board will take account of factors such as income
forecasts, retained revenue reserves, the Company’s
dividend payment record and Bermuda law. The Board
also has the flexibility to pay dividends from capital
reserves.
RESULTS AND DIVIDENDS
Details of the Company’s performance are set out in
the Investment Managers’ Report. The results for the
year ended 30 June 2020 are set out in the attached
accounts. The dividends in respect of the year, which
total 7.875p, 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
• Share price
• Share price 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 (%)
39.4
46.2
2.7
1.4
9.77
7.63
2.1
2.1
A graph showing the NAV total return performance
compared to the FTSE All-Share total return Index can
be found on page 3. The ten year record on page 111
shows historic data for the Company.
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 25.6% to 56.1% and an average discount of 35.8%.
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. A total of
2,344,075 ordinary shares were bought back and
cancelled during the year, representing 2.7% of the
Company’s opening issued share capital.
changes to inputs may result in material changes to the
carrying value of the investments.
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 a first quarterly dividend of 1.875p
per share and second, third and fourth quarterly
dividends of 2.0p per share in respect of the year
ended 30 June 2020. The fourth quarterly dividend
was declared on 24 August 2020 and paid on 25
September 2020 to shareholders on the register as at
4 September 2020. The total dividend for the year was
7.875p per share (2019: 7.50p per share).
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.
OVERVIEW OF THE INVESTMENT VALUATION
PROCESS
In preparing UIL’s half-yearly and annual financial
accounts, the most important accounting judgements
and estimates relate to the carrying value of our
unlisted investments which are stated at fair value. As
at 30 June 2020, 36.3% of UIL’s investment portfolio
consisted of level 3 investments that were valued using
inputs that were not based on observable market data.
Given the importance of this area to the integrity of
the financial reporting, the Board and the Investment
Managers carefully review the valuation policies and
processes and the individual valuation methodologies
at each reporting date. However, the valuation of
unlisted securities is inherently subjective, as it is made
on the basis of assumptions which may not prove to be
accurate. As detailed in note 30 to the accounts, small
VALUATION PROCESS
UIL’s valuation policy is the responsibility of the Board,
with additional oversight and annual review from the
Audit & Risk Committee. The policy is reviewed at least
annually.
The valuation of the unlisted investments is the
responsibility of the Board, with valuation support
and analysis provided by the Investment Managers’
valuation team. The investment portfolio is valued
at fair value and this is achieved by valuing each
investment using an appropriate valuation technique
and applying a consistent valuation approach for all
investments.
The concept of fair value is key to the valuation process
and is defined as “the price that would be received to
sell an asset in an orderly transaction between market
participants at the measurement date” (International
Private Equity and Venture Capital (“IPEV”) guidelines,
December 2018).
Maximum use is made of market-based information
and the valuation methodologies used are those
generally used by market participants. Valuations
are compliant with IFRS fair value guidelines and
guidelines issued by the IPEV valuation board, which
set out recommended practice for fair valuing of
unlisted investments within the IFRS framework. The
valuation of unlisted investments requires the exercise
of judgment and every effort is made to ensure that
this judgment is applied objectively and is not used to
overstate or understate the valuation result.
The Board reviews the unlisted valuations at each
meeting and in conjunction with UIL’s external financial
reporting process. The Board receives a detailed
report from the Investment Managers’ valuation
team recommending a proposed valuation for each
of UIL’s investments. The report includes details of
all material valuations, explanations for movements
and confirmation of the valuation process adopted.
Representatives of the Investment Managers are in
attendance at these meetings to answer any questions
the Board may have on the valuation process and the
choice of valuation techniques and inputs. The Board
reviews and challenges the assumptions behind the
unlisted asset valuations.
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UIL Limited
Report and Accounts for the year to 30 June 2020
33
STRATEGIC REPORT (continued)
VALUATION METHODOLOGIES
The valuation of unlisted investments is normally
determined by using one of the following valuation
methodologies and, depending on the investment and
relevance of the approach, any or all of these valuation
methods could be used.
Earnings Multiples
This is UIL’s most commonly used valuation
methodology and is used where the investment
is profitable and where a set of comparable listed
companies with similar characteristics to its holding can
be determined. As several investments are not traded
on an active market, the valuations are then adjusted by
a liquidity discount with the discount varying depending
on the nature of the underlying investment entity
and its sector and whether restrictions exist on UIL’s
ability to sell the asset in an orderly fashion. In certain
instances, UIL may use a revenue multiple approach if
this is deemed more appropriate.
It is UIL’s policy to use reported earnings adjusted for
non-recurring items, which are typically sourced from
the investee companies’ management accounts or
audited financial reports. In certain cases, current or
projected maintainable earnings provide a more reliable
indicator of the company’s performance and in these
instances an estimate of maintainable earnings is used
in the valuation calculation.
Multiples are derived from comparable listed
companies in the same business sector. Adjustments
are made for relative performance versus the
comparables and other company specific factors
including size, product offering and growth rates.
Discounted Cash Flow
This methodology may be used for valuing investments
with long term stable cash flows and uses maintainable
earnings discounted at appropriate rates to reflect the
value of the business. Generally, the latest historical
accounts are used unless reliable forecast results for
the current year are available. Earnings are adjusted
where appropriate for exceptional or non-recurring
items.
Net Assets
This valuation technique derives the value of an
investment by reference to the value of its net assets.
This is used for investments whose value derives mainly
from the underlying fair value of their assets rather
than their earnings, such as unlisted fund investments,
property holding companies and other investment
businesses. In addition, this valuation approach may
also be used for investments that are not making an
adequate return on assets and for which a greater value
can be realised by liquidating the business and selling
its assets.
For unlisted investment companies and limited
partnerships, the fair value estimate is based on a
summation of the estimated fair value of the underlying
investments attributable to the investor. This fund NAV
approach may be used where there is evidence that the
valuation is derived using fair value principles and the
most recent available fund NAV may be adjusted to take
account of changes or events to UIL’s reporting date.
Recent Investments
For an initial or recent transaction, UIL may value its
investment using the recent transaction price for a
limited period following the transaction, where the
transaction price continues to be representative of fair
value.
Imminent Investment Realisation
Where realisation of an investment or a flotation of an
investment is imminent and the pricing of the relevant
transaction has been substantially agreed, a discount
to the expected realisation proceeds or flotation value
valuation technique is used. Judgement is applied as
to the likely eventual exit proceeds and certainty of
completion. This technique is only utilised where a sale
or flotation process is materially complete, and the
remaining risks are estimated to be small.
Note 30 to the accounts sets out more details on UIL’s
unlisted investments and the valuation methodologies
adopted.
VALUATION IMPACT OF COVID-19
The approach to valuations as at 30 June 2020 was
substantially consistent with UIL’s normal process
and valuation policy and the investment portfolio
was valued on a fair value basis, in line with IPEV
guidance. However, the Covid-19 pandemic has created
a significant degree of uncertainty and the valuation
methodology for unlisted investments has been
enhanced to address this issue. A broader range of
inputs and approaches to determine fair value was
considered and, where appropriate, adjustments have
been made to valuations based on the anticipated
severity of the Covid-19 impact on the individual
business. It needs to be emphasised that this is a very
unusual event, which is still evolving, and therefore
there remains an elevated degree of uncertainty in the
valuations generated as at 30 June 2020. UIL’s valuation
approach is consistent with the IPEV special valuation
guidance, issued in March 2020, addressing the
valuation approach during the Covid-19 pandemic.
PRINCIPAL RISKS AND RISK MITIGATION
During the year ended 30 June 2020, 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
and emerging risks and uncertainties. It 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. Emerging
risks are considered at each Audit & Risk Committee
meeting. As required by the AIC Code of Corporate
Governance, the Board has undertaken a robust
assessment of the principal risks facing the Company.
Following the emergence of Covid-19, the Audit & Risk
Committee reviewed the emerging risks arising and
associated mitigating actions to address increased
market risks, operational risks and gearing risks.
The principal risks and uncertainties currently faced by
the Company and the controls and actions to mitigate
those risks, are described below.
KEY RISK FACTORS
INVESTMENT
RISK:
The risk that the investment strategy
does not achieve long-term positive
total returns for the Company’s
shareholders.
MARKET RISK:
Adverse market movements in the
prices of equity and fixed interest
securities, interest rates and foreign
currency exchange rates and adverse
liquidity could lead to a fall in NAV.
(Risk level increased in response to
Covid-19)
The Board monitors the performance of the Company and has
established guidelines to ensure that the approved investment
policy is pursued by the Investment Managers. 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.
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 and the Board monitors the implementation and results
of the investment process with the Investment Managers.
The Company’s portfolio is exposed to equity market risk, interest
rate risk, foreign currency risk and liquidity risk. Adverse market
conditions may result from factors such as economic conditions,
political change, natural disasters and health epidemics. At each
Board meeting the Board reviews the composition of the portfolio,
asset allocation, stock selection, unquoted investments and levels
of gearing and has set investment restrictions and guidelines
which are monitored and reported on by the Investment
Managers.
The Company’s results are reported in Sterling, although the
majority of its assets are priced in foreign currencies and therefore
any rise or fall in Sterling will lead, respectively, to a fall or rise in
the Company’s reported NAV. 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.
34
UIL Limited
Report and Accounts for the year to 30 June 2020
35
STRATEGIC REPORT (continued)
KEY STAFF RISK:
Loss by the Investment Managers
of key staff could affect investment
returns.
DISCOUNT RISK:
The Company’s shares may trade at a
discount to their NAV and a widening
discount may undermine investor
confidence in the Company.
OPERATIONAL
RISK:
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.
(Risk level increased in response to
Covid-19)
GEARING RISK:
Whilst the use of 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.
(Risk level increased in response to
Covid-19)
REGULATORY
RISK:
Failure to comply with applicable
legal and regulatory requirements
could lead to suspension of the
Company’s Stock Exchange listings,
financial penalties, a qualified audit
report or the Company being subject
to tax on capital gains.
The quality of the investment management team is a crucial
factor in delivering good performance. There are training
and development programs in place for employees and the
remuneration packages have been developed in order to retain
key staff. 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.
The Board monitors the price of the Company’s shares in relation
to their NAV and the 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 Company’s main service providers are listed on page 108. The
Audit & Risk Committee monitors the performance and controls
(including business continuity procedures) of the service providers
at regular intervals.
Most of UIL’s investments are held in custody for the Company
by JPMorgan Chase Bank N.A., Jersey with title documents for
a small number of investments also being held securely by
Waverton Investment Management Limited (“Waverton”). JPMEL,
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.
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. As at 30 June 2020, gearing on net assets, including bank
loans, any overdrafts and ZDP shares, was 93.4% (30 June 2019:
63.7%). The Board reviews the level of gearing at each Board
meeting.
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.
The Investment Managers and the Company’s professional
advisers monitor developments in relevant laws and regulations
and provide regular reports to the Board in respect of the
Company’s compliance.
CORONAVIRUS
The Board has identified the emergence and spread of
Covid-19 as a risk facing the Company and its investee
companies. The Board has reviewed the business
continuity plans of each of the Company’s principal
service providers in relation to the steps being taken
to combat the spread of the virus and will continue to
monitor developments as they occur. The Chairman’s
Statement and the Investment Managers’ Report
provide further discussion in relation to Covid-19 and its
effects on markets and the Company’s portfolio.
BREXIT
The Board has considered whether Brexit poses a
discrete risk to the Company. As the Company reports in
Sterling and a substantial proportion of the Company’s
portfolio companies are priced in foreign currencies,
sharp movements in exchange rates can affect the NAV
(see “market risk” above). The strategy pursued over
recent years of hedging the ZDP liability in full, should
provide resilience and foreign exchange contracts are
spread over a number of 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 and therefore the impact of
Brexit on UIL is not considered to be material. However,
the Board will continue to keep Brexit under regular
review and consideration.
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 provision
31 of the UK Corporate Governance Code, the Board
considers that assessing the Company’s prospects
over a period of five years is appropriate given the
nature of the Company and its investment objective
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 significant fall in world equity and foreign
exchange markets on the value of the Company’s
investment portfolio and the Company’s ability to repay
the £226.0m ultimate liability in respect of the 2020,
2022 and 2024 ZDP share issues and its bank debt.
The Board is satisfied that it operates an effective risk
management process and has concluded a robust
assessment of the principal risks facing the Company,
including the impact of Covid-19. The Board has also
considered the Company’s income and expenditure
projections and the fact that the Company’s operating
expenses comprise a very small percentage of net
assets while a significant proportion of the Company’s
investments comprise listed securities which could likely
be sold to meet funding requirements, if necessary. The
Board has specifically considered the UK’s departure
from the European Union and can see no scenario that
it believes would affect the going concern status or
viability of the Company. The Board has also considered
the uncertainty surrounding the potential duration
of the Covid-19 pandemic, its impact on the global
economy and the prospects for the Company’s portfolio
holdings and has concluded that it is unlikely to affect
the viability of the Company.
As part of this assessment the Board considered a
number of stress tests, including short term reverse
stress testing, and scenarios which considered the
impact of severe stock market and currency volatility
on shareholders’ funds over a five-year period. Initially,
the Company’s projections were adjusted to reflect a
material reduction in the value of its investments in
line with that experienced during the emergence of the
Covid-19 pandemic from January 2020 to April 2020. This
was then flexed to include two further scenarios; first a
material weakening in Sterling, the Company’s reporting
currency, and then a scenario which provided for a
further fall in the market values of its investments. The
assumptions also included a reduced level of portfolio
realisations when compared with previous years. The
results demonstrated the impact on the Company’s
NAV, its expenses, and its ability to meet its liabilities
over that period. As a result of this analysis, the Board
has concluded that there is a reasonable expectation
that the Company will be able to continue in operation
36
UIL Limited
Report and Accounts for the year to 30 June 2020
37
37
Report and Accounts for the year to 30 June 2020 STRATEGIC REPORT (continued)
and meet its liabilities as they fall due over the next five
years.
PROMOTING THE SUCCESS OF THE COMPANY
Although the Company is domiciled in Bermuda, the
Board has considered the guidance set out in the AIC
Code of Corporate Governance in relation to Section
172 of the Companies Act 2006 in the UK. This requires
the Directors to have a duty to promote the success of
the Company for the benefit of its members as a whole
and includes having regard (amongst other matters) to
fostering relationships with the Company’s stakeholders
and maintaining a reputation for high standards of
business conduct. The Directors confirm that they have
considered Section 172 when making decisions during
the year under review.
As an externally managed investment company, UIL
has no employees, customers, operations or premises.
Therefore, the Company’s key stakeholders (other
than its shareholders) are considered to be its service
providers. The need to promote business relationships
with the service providers and maintain a reputation
for high standards of business conduct is central to the
Directors’ decision-making. The Directors believe that
fostering constructive and collaborative relationships
with the Company’s service providers will assist in
their promotion of the success of the Company for
the benefit of all shareholders and their performance
is monitored by the Board and its committees. The
principal service provider is the Investment Managers,
who are responsible for managing the Company’s assets
in order to achieve its stated investment objective, and
the Board maintains a good working relationship with
them. Whilst strong long term investment performance
is essential, the Board recognises that to provide an
investment vehicle that is sustainable over the long
term, both it and the Investment Managers must
have regard to ethical and environmental issues that
impact society. Accordingly, ESG considerations are an
important part of the Investment Managers’ investment
process as explained more fully below.
The Board seeks to engage with its Investment
Managers and other service providers in a collaborative
and collegiate manner, whilst also ensuring that
appropriate and regular challenge is brought and
evaluation conducted. The aim of this approach is to
enhance service levels and strengthen relationships
with a view to ensuring the interests of the Company’s
shareholders are best served by keeping cost levels
proportionate and competitive, and by maintaining the
highest standards of business conduct.
The Directors aim to act fairly as between the
Company’s shareholders and the approach to
shareholder relations is summarised in the Corporate
Governance Statement on pages 50 to 54. The
Chairman is available to meet with shareholders as
appropriate and the Investment Managers meet
regularly with shareholders and their respective
representatives, reporting back on views to the Board.
Shareholders may also communicate with the Company
at any time by writing to the Board at the Company’s
registered office or contacting the Company’s broker.
These communication opportunities help inform
the Board when considering how best to promote
the success of the Company for the benefit of all
shareholders over the long term.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
POLICY
The Board believes that it is in the shareholders’
interests to consider ESG factors when selecting and
retaining investments and has asked the Investment
Managers to take these into account when investing.
In conjunction with assessing the financial, macro
and political drivers when making and monitoring an
investment, the Investment Managers therefore embed
ESG opportunities and risks into their investment
process. ESG factors are built into their bottom-up in-
depth analysis, however the Investment Managers do
not decide whether to make an investment decision on
ESG grounds alone.
ESG factors help to enhance the investment team’s
understanding of a company, as these factors affect
a company’s business model and its long-term ability
to generate sustainable returns. The integration of
ESG factors therefore has broadened the Investment
Managers’ understanding of an investment and enables
the investment team to fully question a company’s
investment potential from a number of perspectives.
The Investment Managers have integrated ESG practices
into their fundamental analysis and monitor these on
an ongoing basis throughout the investment period
to ensure that there are no material changes. Where
necessary, the Investment Managers will question and
challenge a portfolio company’s management team
directly to ensure that the investee companies are
fully onboarding ESG considerations. In particular, the
Investment Managers recognise that governance factors
are fundamental to an investment.
honestly and openly. The Investment Managers also
adopt a zero tolerance approach and have policies and
procedures in place to prevent bribery.
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.
CRIMINAL FINANCE ACT
The Company has a commitment to zero tolerance
towards the criminal facilitation of tax evasion.
SOCIAL, HUMAN RIGHTS AND COMMUNITY
MATTERS
As an externally-managed investment company, the
Company does not have any employees or maintain any
premises. It therefore has no material, direct impact
on the environment or any particular community and
the Company itself has no environmental, human
rights, social or community policies. The Board notes
the Investment Managers’ policy statement in respect
of Environmental, Social and Governance issues, as
outlined on page 38.
MODERN SLAVERY ACT
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.
This Strategic Report was approved by the Board of
Directors on 27 October 2020.
By order of the Board
ICM Limited
Company Secretary
27 October 2020
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. 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.
GENDER DIVERSITY
The Board consists of four 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 on page 53.
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,
38
UIL Limited
Report and Accounts for the year to 30 June 2020
39
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.
ICM MANAGES OVER
£1.8bn
IN FUNDS DIRECTLY AND IS RESPONSIBLE INDIRECTLY FOR A FURTHER £15.9BN OF ASSETS IN SUBSIDIARY
INVESTMENTS. ICM HAS OVER 65 STAFF BASED IN OFFICES IN BERMUDA, CAPE TOWN, DUBLIN, LONDON,
SINGAPORE, SYDNEY, VANCOUVER 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 in multiple companies
in the utility, investment, mining and technology sectors. He is currently a non-
executive director of listed companies Resimac Group Limited and West Hamilton
Holdings 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. He is currently a director of Somers Limited and
Waverton Investment Management Limited.
Core teams assisting them at a senior level, including consultants, are:
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 of 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.
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 twenty 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 Australasia 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, heads up 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 United Kingdom. Prior to joining ICM, he was an investment manager at Brookfield
Asset Management. Mr Cheong is a qualified solicitor, admitted to practice in Australia.
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UIL Limited
Report and Accounts for the year to 30 June 2020
41
INVESTMENT MANAGERS AND TEAM (continued)
DIRECTORS
FINANCIAL SERVICES
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 thirty years’ experience in corporate finance,
having previously worked in corporate finance at Deloitte Haskins & Sells, Hill Samuel Bank and
Close Brothers for ten 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 thirty years’ experience in international markets and finance and their
related operations with the ICM Group. He 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.
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.
STUART BRIDGES*
Stuart Bridges (Chairman of Audit & Risk and Management Engagement Committees) was
appointed a Director in October 2019. He is a non-executive director and chairman of the audit
committee of Caledonia Investments plc. A chartered accountant, his previous roles included
chief financial officer of Control Risks Group, chief financial officer of Nex Group plc (formerly
ICAP plc) and chief financial officer of Hiscox plc. Prior to Hiscox, he held various positions in
a number of financial services companies in the United Kingdom and United States including
Henderson Global Investors.
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.
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
some twenty five years of board level experience in the investment management sector. He is
currently chairman of Blackrock Throgmorton Trust plc, JP Morgan Japanese Investment Trust plc
and Quilter Financial Planning Limited 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 Dentons Kensington Swan, the New
Zealand member of Dentons, the global 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, transport, energy, technology and finance sectors. Mr
Shillson is a member of the New Zealand Law Society and the New Zealand Institute of Directors.
* Independent Director and member of the Audit & Risk Committee and Management Engagement Committee
42
UIL Limited
Report and Accounts for the year to 30 June 2020
43
43
Report and Accounts for the year to 30 June 2020 DIRECTORS’ REPORT
The Directors present the Annual Report and Accounts
of the Company for the year ended 30 June 2020.
STATUS OF THE COMPANY
UIL is a Bermuda exempted closed-end investment
company with registration number 39480. The
Company’s ordinary shares are admitted to trading
on the Specialist Fund Segment of the Main Market
of the London Stock Exchange and have a secondary
listing on the Bermuda Stock Exchange. UIL Finance’s
ZDP shares are listed on the Standard Segment of the
Official List of the Financial Conduct Authority and
are traded on the Main Market of the London Stock
Exchange. 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, 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 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 to
ICMIM and ICM 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 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 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 2020, most of UIL’s
investments were held in custody for the Company by
JPMorgan Chase Bank N.A., Jersey (the “Custodian”)
with title documents for a small number of investments
also being held securely by Waverton. 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.
FINANCIAL INSTRUMENTS
The Company’s financial instruments comprise its
investment portfolio, cash balances, bank borrowings
and debtors and creditors which arise directly from
its operations such as sales and purchases awaiting
settlement, and accrued income. The financial risk
management objectives and policies arising from its
financial instruments and the exposure of the Company
to risk are disclosed in note 30 to the accounts.
DIVIDENDS
A dividend of 1.875p per share was paid on 20
December 2019, two dividends of 2.0p per share
were paid on 27 March 2020 and 26 June 2020 and a
dividend of 2.0p per share was declared on 24 August
2020 and paid on 25 September 2020 to shareholders
on the register as at 4 September 2020. In aggregate,
the four interim dividends in respect of the year
amount to 7.875p per ordinary share.
ISA AND NMPI
The ordinary shares and the ZDP shares remain
qualifying investments under the Individual Savings
Account (“ISA”) regulations and it is the intention of
the Board to continue to satisfy these regulations.
Furthermore, the Company currently conducts its
affairs so that its shares can be recommended by
IFAs to ordinary retail investors in accordance with
the FCA’s rules in relation to non-mainstream pooled
investments and intends to continue to do so for the
foreseeable future.
GOING CONCERN
The Board has reviewed the going concern basis of
accounting for the Company. A significant proportion of
the Company’s investments comprise listed securities.
31.0% of the total portfolio as at 30 June 2020 is in
Level 1 investments which, in most circumstances,
could likely be sold to meet funding requirements,
if necessary. The Board has considered the impact
of Covid-19 and performed a detailed assessment
44
44
UIL Limited
Report and Accounts for the year to 30 June 2020
45
UIL Limited DIRECTORS’ REPORT (continued)
of the Company’s operational risk and resources
including its ability to meet its liabilities as they fall
due, by conducting stress tests and scenarios which
considered the impact of severe stock market and
currency volatility. This is set out in note 29 to the
accounts. In light of this work and there being 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, the Board
has a reasonable expectation that the Company
has adequate resources to continue in operational
existence for a period of at least the next twelve
months from the date of approval of these financial
statements. Accordingly, the Board considers it
appropriate to continue to adopt the going concern
basis in preparing the accounts.
DIRECTORS
UIL has a Board of five 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 50 to 54, 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 43. All the Directors are independent
other than Mr Shillson, who is a partner of Dentons
Kensington Swan, a New Zealand law firm which has
acted for members of the UIL and ICM groups.
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.
However, in accordance with the AIC Code of Corporate
Governance, all the directors are subject to annual
re-election.
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’ INDEMNITY AND INSURANCE
As permitted by the Company’s Bye-laws, the Directors
have the benefit of an indemnity under which the
Company has agreed to indemnify each Director, to the
extent permitted by law, in respect of certain liabilities
incurred as a result of carrying out his/her role as a
Director of the Company. The indemnity was in place
during the year and as at the date of this report.
UIL also maintains Directors’ and Officers’ liability
insurance which provides appropriate cover for any
legal action brought against the Directors.
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 2020 the issued ordinary share capital
of the Company and the total voting rights were
85,939,314 ordinary shares. As at the date of this
report the issued share capital and total voting
rights were 85,939,314 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
year ended 30 June 2020 the Company purchased
2,344,075 shares for cancellation. The current
authority to repurchase shares was granted to
Directors on 7 November 2019 and expires at the
conclusion of the next AGM. 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 62,335,821 ordinary shares (72.5%
of UIL’s issued share capital) which included the
holding of General Provincial Life Pension Fund Limited
(54,851,533 ordinary shares (63.8%)).
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
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. The
Company’s registrars have been engaged to collate
such information and file reports on behalf of the
Company.
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.
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
The ordinary shares of UIL are admitted to the
Specialist Fund Segment and therefore the Listing
Rules do not technically apply to it. However it
has agreed to comply voluntarily with certain key
provisions of the Listing Rules, including Listing
Rule 9.8, and confirms that 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 following information to be discussed at the
forthcoming AGM is important and requires your
immediate attention. If you are in any doubt about the
action you should take, you should seek advice from
your stockbroker, bank manager, solicitor, accountant
or other financial adviser authorised under the
Financial Services and Markets Act 2000 (as amended).
If you have sold or transferred all of your shares in the
Company, you should pass this document, together
with any other accompanying documents including the
form of proxy, at once to the purchaser or transferee,
or to the stockbroker, bank or other agent through
whom the sale or transfer was effected, for onward
transmission to the purchaser or transferee.
The business of the AGM consists of 14 resolutions.
Resolutions 1 to 13 (inclusive) will be proposed
as ordinary resolutions and resolution 14 will be
proposed as a special resolution.
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 2020.
Ordinary Resolution 2 – Approval of the Directors’
Remuneration Policy
This resolution is to approve the Directors’
Remuneration Policy which, if passed, will be effective
with immediate effect and will apply until it is next
put to shareholders for approval, which must be at
intervals of not more than three years.
46
UIL Limited
Report and Accounts for the year to 30 June 2020
47
DIRECTORS’ REPORT (continued)
Ordinary Resolution 3 – Approval of the Directors’
Remuneration Report
This resolution is an advisory vote on the Directors’
Remuneration Report.
and chief executive officer of the financial services
company, The Argus Group. She therefore brings
extensive financial services experience and knowledge
of Bermuda to her role on the Board.
Ordinary Resolution 4 – 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 5 to 9 (inclusive) – Election and
re-election of Directors
The biographies of the Directors are set out on page
43 and are incorporated into this report by reference.
Resolution 5 relates to the election of Mr Stuart
Bridges who was appointed on 2 October 2019. Mr
Bridges is a chartered accountant with many years of
experience both as a chief financial officer and as chair
of audit and risk committees in the financial services
sector. He therefore brings this strong background
and skills to his role as the Company’s Audit & Risk
Committee Chairman.
Resolution 6 relates to the re-election of Mr Peter
Burrows who was appointed Chairman on 16
November 2015, having joined the Board on 16
September 2011. Mr Burrows’ leadership of the Board
as Chairman draws on his long and varied experience
on the boards of many listed and unlisted companies.
His focus is on long-term strategic issues, which are
key topics of Board discussion.
Resolution 7 relates to the re-election of Ms Alison
Hill who was appointed on 16 November 2015. Ms
Hill is based in Bermuda and is an executive director
Resolution 8 relates to the re-election of Mr Chris
Samuel who was appointed on 16 November 2015.
Mr Samuel’s extensive experience in the investment
management industry and as chairman of other
investment companies means that he brings in-depth
knowledge and expertise in investment matters to his
role on the Board.
Resolution 9 relates to the re-election of Mr David
Shillson who was appointed on 16 November 2015. Mr
Shillson brings significant legal experience to his role
on the Board which draws on a track record of advising
on acquisitions and investment structuring in many of
the sectors in which the Company invests.
Ordinary Resolutions 10 and 11 – 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. Further information in relation to the
assessment of the existing Auditor’s independence can
be found in the report of the Audit & Risk Committee.
Resolutions relating to the following items of special
business will be proposed at the forthcoming AGM:
Ordinary Resolution 12 – Authority to buy back
shares
This resolution seeks to renew the authority granted
to Directors enabling the Company to purchase its
own shares. The Directors will consider repurchasing
shares in the market if they believe it to be in
shareholders’ interests and as a means of correcting
any imbalance between supply and demand for the
Company’s shares. Any shares purchased pursuant to
this resolution shall be cancelled immediately upon
completion of the purchase or held, sold, transferred
or otherwise dealt with as treasury shares.
The Directors are seeking authority to purchase in the
market up to 12,880,000 ordinary shares (equivalent to
approximately 14.99% of the issued ordinary shares as
will expire at the conclusion of the next AGM of the
Company to be held in 2021 unless renewed prior to
that date at an earlier general meeting.
Resolution 14 is a Special Resolution and will require
the approval of a 75% majority of votes cast in respect
of it.
AGM ARRANGEMENTS
In light of the ongoing Covid-19 situation and
measures in place to prevent the spread of the virus,
shareholders are asked not to attend the AGM in
person. Voting on all resolutions will be conducted
on a poll and shareholders are therefore strongly
encouraged to register their votes in advance of the
AGM by submitting proxy forms to the Company’s
registrar, appointing the chairman of the meeting as
their proxy to ensure their votes are counted.
RECOMMENDATION
The Board considers that each of the resolutions to
be proposed at the Annual General Meeting is likely to
promote the success of the Company for the benefit of
its members as a whole and are in the best interests
of the Company and its shareholders as a whole. The
Directors unanimously recommend that shareholders
vote in favour of these resolutions as they intend to do
in respect of their own beneficial holdings.
By order of the Board
ICM Limited
Secretary
27 October 2020
at the date of the Notice of AGM). This authority, unless
renewed at an earlier general meeting, will expire at
the conclusion of the next AGM of the Company to be
held in 2021.
Ordinary Resolution 13 – Amendments to the
Company’s Bye-laws
The Board is proposing to make a number of minor
amendments to the Company’s Bye-laws. The
restrictions imposed by governments in response
to the Covid-19 pandemic has presented challenges
for the Board to hold physical meetings. To provide
additional flexibility, the Board proposes to amend the
provision in relation to Board and committee meetings
held by telephone, electronic or other communication
facilities so that if all the Directors participating in a
meeting are not in the same place, they may decide
that the meeting is to be treated as taking place
wherever any of them is located. Other proposed
changes relate primarily to correcting typographical
errors.
The proposed new Bye-laws (marked to show the
proposed changes) will be available for inspection on
the Company’s website at www.uil.limited from the
date of this report until the conclusion of the Annual
General Meeting or a copy may be requested by
writing to the Company Secretary at the Company’s
registered office. The proposed new Bye-laws (marked
to show the proposed changes) will also be available
for inspection at the place of the forthcoming Annual
General Meeting for at least 15 minutes before and
during that Annual General Meeting.
Special Resolution 14 – 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. This resolution will
grant the Company authority to dis-apply these pre-
emption rights in respect of up to £429,000 of relevant
securities (equivalent to 4,290,000 ordinary shares
of 10p each, representing approximately 5% of its
ordinary shares in issue as at the date of the Notice of
AGM). Any such sale of shares would only be made at
prices greater than NAV and would therefore increase
the assets underlying each share. This resolution
48
UIL Limited
Report and Accounts for the year to 30 June 2020
49
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
Five 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:
Stuart Bridges
CHAIRMAN:
Stuart Bridges
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
The Board’s principal governance reporting obligation
is in relation to the UK Corporate Governance Code
(the “UK Code”) issued by the Financial Reporting
Council (“FRC”) in July 2018. 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 AIC has
therefore drawn up its own set of guidelines known
as the AIC Code of Corporate Governance (the “AIC
Code”) issued in February 2019, 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.
The UK Code is available from the FRC’s website at
www.frc.org.uk. The AIC Code is available from the
Association of Investment Companies’ website at www.
theaic.co.uk.
COMPLIANCE WITH THE AIC CODE
During the year ended 30 June 2020, 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; and
• membership of the Audit & Risk Committee by the
Chairman of the Board.
For the reasons set out in the AIC Code and as
explained in the UK Code, the Board considers these
provisions are not relevant to the position of UIL, being
an externally managed investment company. The Board
is composed entirely of non-executive directors and
therefore the Board does not believe it is necessary to
nominate a senior independent director. In addition,
as explained in the Audit & Risk Committee Report, the
Chairman of the Board is also a member of the Audit &
Risk Committee, as permitted by the AIC Code.
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. Although the Board has
currently suspended all travel and physical meetings,
Board meetings may often be 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
50
51
UIL LimitedReport and Accounts for the year to 30 June 2020 CORPORATE GOVERNANCE STATEMENT (continued)
Company’s expense, having first consulted with the
Chairman.
During the year, none of the Directors took on any
significant new commitments or appointments. All of
the Directors consider that they have sufficient time to
discharge their duties.
There were three Board meetings, three Audit &
Risk Committee meetings and one Management
Engagement Committee meeting held during the year
and the attendance by the Directors was as follows:
Board
Audit & Risk
Committee
Management
Engagement
Committee
Number of scheduled
meetings held during
the year
Peter Burrows
Stuart Bridges
(appointed 2 October
2019)
Alison Hill
Warren McLeland
(retired 30
September 2019)
Christopher Samuel
David Shillson
Eric Stobart (retired
30 September 2019)
3
3
2/2
3
1/1
3
3
1/1
3
3
2/2
3
n/a
3
n/a
1/1
1
1
0/0
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
The Audit & Risk Committee comprises all the
independent Directors of the Company and is currently
chaired by Mr Bridges, who took over from Mr Stobart
following his retirement during the year. Further details
of the Audit & Risk Committee are provided in its
report starting on page 60.
MANAGEMENT ENGAGEMENT COMMITTEE
The Management Engagement Committee, which is
currently chaired by Mr Bridges following
Mr Stobart’s retirement during the year, comprises all
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 2020, 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 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. Further details are provided in the
Directors’ Remuneration Report starting on page 57.
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 2020 or
subsequently up to the date of this 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 four 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. All Directors are 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. All appointments are subject to subsequent
confirmation by shareholders in general meeting.
During the year ended 30 June 2020, the Board
undertook a process, using an external recruitment
agency, to recruit a new Director and the preferred
candidate, Mr Stuart Bridges, was appointed to the
Board on 2 October 2019.
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, the Committees
and individual Directors. This encompasses both
quantitative and qualitative measures of performance
including:
• 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 reviewing individually with each of
52
53
UIL LimitedReport and Accounts for the year to 30 June 2020 CORPORATE GOVERNANCE STATEMENT (continued)
CAPITAL STRUCTURE
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.
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 and shareholders may
communicate with the Company at any time by writing
to the Board at the Company’s registered office or
contacting the Company’s broker.
By order of the Board
ICM Limited
Company Secretary
27 October 2020
Since inception, UIL has created a NAV total return
for shareholders of 498.9%
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 2020 was 85,939,314 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 2020. 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 100.00p.
2022 ZDP SHARES
50,000,000 2022 ZDP shares were in issue as at 30
June 2020. 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 100.00p.
2024 ZDP SHARES
30,000,000 2024 ZDP shares were in issue as at 30
June 2020. 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 100.00p.
2026 ZDP SHARES
25,000,000 2026 ZDP shares were in issue as at 30
June 2020, of which 2,403,294 were held by UIL. 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 100.00p.
BANK DEBT
As at 30 June 2020, 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 2020, the ordinary shares could
be said to be interested in £53.12 of those assets after
deducting the prior claims as above. This makes the
54
55
UIL LimitedReport and Accounts for the year to 30 June 2020 CAPITAL STRUCTURE (continued)
DIRECTORS’ REMUNERATION REPORT
ordinary shares more sensitive to movements in gross
assets. Based on these amounts, a 1.0% movement
in gross assets would change the NAV attributable to
ordinary shares by 1.9%.
ZDP shares would not receive their final entitlement
in full. Should gross assets fall by 76.4%, equivalent
to an annual fall of 46.1%, the 2022 ZDP shares would
receive no payment at the end of their life.
The interest cost of UIL’s bank debt, combined with the
annual accruals in respect of ZDP shares, represents a
blended rate of 5.2% as at 30 June 2020.
Based on their final entitlement of 154.90p per share,
the final entitlement of the 2020 ZDP shares was
covered 4.23 times by gross assets as at 30 June
2020. Should the gross assets fall by 76.4% 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 88.8% 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 2.58 times by gross assets as at 30 June
2020. Should the gross assets fall by 61.2% over the
remaining life of the 2022 ZDP shares, then the 2022
Based on their final entitlement of 138.35p per
share, the final entitlement of the 2024 ZDP shares
was covered 2.11 times by gross assets as at 30 June
2020. Should the gross assets fall by 52.7% 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 61.2%, equivalent
to an annual fall of 19.6%, 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 1.81 times by gross assets as at 30 June
2020. Should the gross assets fall by 44.9% 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 52.7%, equivalent to an
annual fall of 11.1%, the 2026 ZDP shares would receive
no payment at the end of their life.
SPLIT OF GROSS ASSETS
as at 30 June 2020
CONSOLIDATED FUNDING COST STRUCTURE
as at 30 June 2020
7.25%
by value
by percentage
6.25%
£251.6m
Ordinary shares
52.1%
5.00%
5.17%
4.75%
£24.8m
£33.3m
2026 ZDP shares
2024 ZDP shares
5.1%
6.9%
£63.4m
2022 ZDP shares
13.1%
£59.1m
2020 ZDP shares
12.2%
£50.6m
Bank loans
10.5%
2020
ZDP
shares
2022
ZDP
shares
2024
ZDP
shares
2026
ZDP
shares
Blended
rate of
debt
1.76%
Bank
loans
The Board presents the report on Directors’
remuneration for the year ended 30 June 2020. 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. Ordinary resolutions for the approval
of the remuneration policy and this report will be put
to shareholders at the Company’s forthcoming AGM.
Where certain parts of the disclosures provided have
been audited, they are indicated as such. The auditor’s
opinion is included in their report starting on page 64.
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.
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
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 2019 such that the fees payable
to Directors were £34,000 per annum, the fees payable
to the chairman of the Audit & Risk Committee were
£44,000 and the fees payable to the Chairman of the
Board were £46,000 in the year ended 30 June 2020.
The review in respect of the year ending 30 June 2021
has resulted in no increases being applied to the
annual fees as detailed in the table below.
DIRECTORS’ REMUNERATION POLICY
Year ending 30 June
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.
Chairman
Directors
Chairman of Audit & Risk
Committee
*Actual
2021
£’000s
2020*
£’000s
2019*
£’000s
46.0
34.0
46.0
34.0
45.0
33.3
44.0
44.0
43.0
VOTING AT ANNUAL GENERAL MEETING
A resolution to approve the Remuneration Report was
put to shareholders at the AGM of the Company held
on 7 November 2019. Of the votes cast, 99.97% were
in favour and 0.03% were against; this resolution will
be put to shareholders again this year. The Company
seeks shareholder approval for its remuneration policy
on a triennial basis and a binding resolution was last
put to shareholders at the AGM held on 22 November
2017. Of the votes cast, 99.95% were in favour and
0.05% were against. A resolution to approve the
56
UIL Limited
Report and Accounts for the year to 30 June 2020
57
57
Report and Accounts for the year to 30 June 2020 DIRECTORS’ REMUNERATION REPORT
(continued)
remuneration policy will be put to shareholders at the
forthcoming AGM.
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 2020.
a statutory requirement, the Directors consider that
comparison of Directors’ remuneration with annual
dividends and share buybacks 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.
COMPANY PERFORMANCE
The graph below compares, for the ten years ended 30 June 2020, the ordinary share price total return (see page
109) to the FTSE All-Share total return Index (Sterling adjusted).
SHARE PRICE TOTAL RETURN
from June 2010 to June 2020 (rebased to 100 at 30 June 2009)
Director(1)
Peter Burrows(2)
Stuart Bridges (appointed 2 October
2019)
Alison Hill
Warren McLeland (retired 30
September 2019)
Christopher Samuel
David Shillson
Eric Stobart (retired 30 September
2019)
2020
£
2019
£
23,000
45,000
Year ended
30 June
Aggregate Directors’
emoluments
33,000
–
Aggregate dividends
Aggregate share buybacks
2020
£’000s
2019
£’000s
CHANGE
£’000s
178
6,711
5,892
221
6,689
2,185
(43)
22
3,707
34,000
33,250
8,500
33,250
34,000
33,250
34,000
33,250
11,000
43,000
DIRECTORS’ BENEFICIAL SHARE INTERESTS
(AUDITED)
The Directors’ (and any connected persons) holdings of
ordinary shares are detailed below:
380
330
280
230
180
130
80
Total
177,500
221,000
(1) The Directors’ entitlement to fees is calculated in arrears
(2) Peter Burrows waived £23,000 of his £46,000 entitlement for the
year
The annual percentage change in Directors’
remuneration for the past year is (48.9)% for Mr
Burrows, 2.3% for Ms Hill, Mr McLeland, Mr Samuel,
Mr Shillson and Mr Stobart and not applicable for Mr
Bridges since he was appointed during the year.
RELATIVE IMPORTANCE OF SPEND ON PAY
The following table compares the remuneration
paid to the Directors with aggregate distributions
paid to shareholders relating to the year to 30 June
2020 and the prior year. Although this disclosure is
As at 30 June
Peter Burrows
Stuart Bridges(1)
Alison Hill(1)
Warren McLeland(2)
Christopher Samuel
David Shillson(1)
Eric Stobart(2)
2020
2019
799,617
739,617
11,896
n/a
63,815
47,358
n/a
71,237
205,045
100,000
105,305
88,848
n/a
50,000
(1) Since the year end, Mr Bridges, Ms Hill, Mr Samuel and Mr Shillson
have each acquired, respectively, a further 6,080, 4,698, 2,505 and
4,698 ordinary shares
(2) Retired as a Director on 30 September 2019. Mr McLeland and Mr
Stobart held, respectively, 78,513 and 50,000 ordinary shares as at
that date
On behalf of the Board
Peter Burrows
Chairman
27 October 2020
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
UIL ordinary share price total return
FTSE All-Share total return Index
Source: ICM
58
UIL Limited
Report and Accounts for the year to 30 June 2020
59
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 2020.
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
STUART BRIDGES
Chairman of the Audit
& 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
Committee also reviews the external Auditors’
report on the annual financial statements and is
responsible for reviewing and forming an opinion
on the effectiveness of the external audit process
and audit quality. Other duties include reviewing the
appropriateness of the Company’s accounting policies
and ensuring the adequacy of the internal control
systems and standards.
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. Representatives of the Investment
Managers attend all meetings.
COMPOSITION
During the year ended 30 June 2020, the Audit & Risk
Committee consisted of all the independent Directors
of the Company. It is considered that there is a range of
recent and relevant financial experience amongst the
members of the Audit & Risk Committee together with
experience of the investment trust sector. In light of
the Chairman of the Board’s relevant financial services
experience, his continued independence and his
valued contributions in Committee meetings, the Audit
& Risk Committee considers it appropriate that he is a
member.
RESPONSIBILITIES AND REVIEW OF THE EXTERNAL
AUDIT
During the year the principal activities of the Audit &
Risk Committee included:
• 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;
• management of the relationship with the external
auditor, including its appointment and the
evaluation of scope, execution, cost effectiveness,
independence and objectivity;
• reviewing and approving the external auditors’
plan for the financial year, with a focus on the
identification of areas of audit risk, and consideration
of the appropriateness of the level of audit
materiality adopted;
• reviewing and recommending to the Board for
approval the audit and non-audit fees payable to the
external auditor and the terms of its engagement;
• evaluation of reports received from the external
auditor with respect to the annual financial
statements and its review of the half-yearly report;
• reviewing the efficacy of the external audit process
and making a recommendation to the Board with
respect to the reappointment of the external
auditors;
• 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;
• reviewing the appropriateness of the Company’s
accounting policies; and
• monitoring developments in accounting and
reporting requirements that impact on the
Company’s compliance with relevant statutory and
listing requirements.
AUDITOR AND AUDIT TENURE
KPMG LLP (“KPMG”) has been the auditor of the
Company since 2012, following a competitive tender
process. The Audit & Risk Committee decides when it
is appropriate to put the role of auditor out to tender.
The audit partner has rotated regularly. Mr John
Waterson was appointed the lead audit partner this
year and his predecessor, Mr Jonathan Martin, acted as
audit partner since 2017. 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 and each non-audit
service is reviewed by the Committee to consider if
it is appropriate to be provided by the auditor based
on the nature and circumstances of the non-audit
work. Non-audit fees paid to KPMG by the Company
amounted to £7,500 for the year ended 30 June
2020 (2019: £5,000) and related to the review of the
half yearly accounts; and KPMG were engaged to
perform a transaction service review for an estimated
fee of £10,000. In addition, KPMG have provided
a non-audit service to Allectus (a subsidiary of the
Company) during the year in relation to financial and
tax due diligence services for a fee of approximately
£206,000. The Committee has considered the threats
to independence from the provision of this service and
concluded that since appropriate safeguards exists
there is no impact to auditor independence.
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
Managers prior to approval of the annual financial
report.
Members of the Audit & Risk Committee meet in
camera with the external auditor at least annually.
SIGNIFICANT AREA
HOW ADDRESSED
Going concern
The accounts have been prepared on a going concern basis. As part of its assessment of
going concern, the Audit & Risk Committee reviewed the Investment Managers’ forecasts
of liquidity for a period of at least twelve months from the date of approval of the
accounts and considered a series of stress tests and scenarios reflecting severe stock
market and currency volatility as set out in note 29 to the accounts.
Value of level 3
investments and
valuation of
investment in Somers
Investments that are classified as level 3 are valued using a variety of techniques to
determine a fair value, as set out in note 1(d) to the accounts and Somers is valued as set
out in note 30(d) to the accounts. All such valuations are carefully reviewed by the Audit
& Risk Committee with the Investment Managers.
The Audit & Risk Committee receives detailed information on all level 3 investments and
Somers, and it discusses and challenges the valuations with the Investment Managers.
It considers market comparables and discusses any proposed revaluations with the
Investment Managers.
ACCOUNTING MATTERS AND SIGNIFICANT AREAS
For the year ended 30 June 2020 the accounting
matters that were subject to specific consideration
by the Audit & Risk Committee and consultation with
KPMG where necessary were as follows:
The Audit & Risk Committee reviewed the external
audit plan at an early stage and concluded that the
appropriate areas of audit risk relevant to the Company
had been identified and that suitable audit procedures
had been put in place to obtain reasonable assurance
that the financial statements as a whole would be free
of material misstatements.
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 2020 is fair, balanced
60
UIL Limited
Report and Accounts for the year to 30 June 2020
61
AUDIT & RISK COMMITTEE REPORT (continued)
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
in respect of the Report and Accounts
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 investments.
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;
• the extent of quality controls including review
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 2020, the Audit & Risk
Committee is satisfied that the audit process was
effective.
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 and Custodian. These reviews identified
no issues of significance.
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.
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.
Stuart Bridges
Chairman of the Audit & Risk Committee
Resolutions proposing the reappointment of KPMG as
the Company’s auditor and authorising the Directors
27 October 2020
The Directors are responsible for preparing the Report
and the Group and parent Company Accounts in
accordance with applicable law and regulations.
The Directors are required to prepare Group and
parent Company financial statements for each financial
year. They have elected 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.
The Directors have decided to prepare voluntarily a
Directors’ Remuneration Report in accordance with
Schedule 8 to The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008
made under the UK Companies Act 2006, as if those
requirements applied to the Company. The Directors
have also decided to prepare voluntarily a Corporate
Governance Statement under the UK Corporate
Governance Code as if the Company were required to
comply with the Listing Rules of the Financial Conduct
Authority applicable to UK premium listed companies.
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 and Bermuda 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 Strategic report and Directors’ 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 and signed on its behalf by:
Peter Burrows
Chairman
27 October 2020
62
UIL Limited
Report and Accounts for the year to 30 June 2020
63
63
Report and Accounts for the year to 30 June 2020 Independent
auditor’s report
to the members of UIL Limited
Overview
Materiality:
group financial
statements as a
whole
Coverage
£4.9m (2019: £5.4m)
1% (2019: 1%) of total assets
100% (2019:100%) of group total
assets
Key audit matters
vs 2019
Recurring risks
Event driven
Valuation of level 3
investments and
valuation of
investment in
Somers Limited
New: Going concern
▲
▲
1. Our opinion is unmodified
We have audited the financial statements of UIL
Limited (“the Company”) for the year ended 30
June 2020 which comprise Group and Company
Income Statements, Group and Company
Statements of Changes in Equity, Group and
Company Statements of Financial Position, Group
and Company Statements of Cash Flow, and the
related notes, including the accounting policies in
note 1.
In our opinion the financial statements:
– give a true and fair view of the state of the
Group’s and of the parent Company’s affairs as
at 30 June 2020 and of the Group’s and parent
Company’s loss 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 we are independent of
the Group in accordance with, UK ethical
requirements 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.
64
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (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 engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon and we do not provide a separate opinion on these matters. In
arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows :
The risk
Our response
Valuation of level 3
investments and valuation of
investment in Somers
Limited
(£177.6 million; 2019: £184.4
million)
Investments in Somers
(£113.5million; 2019:
£108.7million)
Refer to page 61 (Audit
Committee Report), page 77
(accounting policy) and pages
82, 101 to 103 (financial
disclosures).
Subjective valuation:
Valuation of level 3 investments
As at 30 June 2020, 36% (2019: 34%)
of the Group’s total assets (by value) is
held in level 3 investments where no
quoted market price is available.
Unlisted investments are measured at
fair value, which is established in
accordance with the International Private
Equity and Venture Capital Valuation
Guidelines, by using measurements of
value such as prices of recent orderly
transactions, earnings multiples, and net
assets.
Valuation of investments in Somers
Limited
As at 30 June 2020, a further 23.0%
(2019: 19.9%) of the Group’s total
assets (by value) is held in investments
in Somers Limited (“Somers”) equity
which is valued by the Group using an
inactive price/ stale price. We have
included valuation of investments in
Somers in this key audit matter as the
shares are not actively traded, increasing
the risk that the listed price does not
represent fair value.
The effect of both of these matters is
that, as part of our risk assessment, we
determined that the valuation of level 3
investments and the investment in
Somers Limited, have a potential range
of reasonable outcomes greater than our
materiality for the financial statements
as a whole. The financial statements
note 30 discloses the range/sensitivity
estimated by the Group.
Our procedures were performed on level 3
investments of the Group in addition to the Group’s
investments in Somers Limited and (where
appropriate) the underlying level 3 investments of
Somers Limited.
Our procedures included:
Historical comparisons: Assessment of investment
realisations in the period where relevant, comparing; (i)
actual sales proceeds to prior year end valuations; (ii)
repayments of debt investments to repayment timeline
expectations previously communicated by
management; (iii) current year fair values to
management narrative of expectations communicated
in previous periods, to understand the reasons for
significant variances and determine whether they are
indicative of bias or error in the Group’s approach to
valuations. A retrospective review of prior period
audited accounts, in comparison to prior period
management accounts included as key inputs to
valuations is also undertaken to assess the accuracy of
management information provided. Our historical
comparison procedures on the underlying level 3
investments within Somers Limited were limited to
comparing the methodology underpinning the valuation
of the Somers underlying investments to that used in
the most recent Somers audited financial statements
and understanding the reason for variances,
determining whether they are indicative of bias or error
in the approach to valuation.
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 basis selected for the
Group’s investments in Level 3 securities, investment
in Somers Limited and the underlying investments of
Somers Limited.
Our valuation experience: Challenging the
investment manager on key judgements affecting
investee company valuations, such as discount factors,
the choice of benchmark for earnings multiples and the
discount between Somers’ NAV and its listed price. .
We compared key underlying financial data inputs to
external sources, investee company audited accounts
and management information as applicable. We
challenged the assumptions around sustainability of
earnings based on the plans of the investee companies
and whether these are achievable and we obtained an
understanding of existing and prospective investee
company cashflows to understand whether borrowings
can be serviced or whether refinancing may be
required. Our work included consideration of events
which occurred subsequent to the year end up until
the date of this audit report.
65
3. Our application of materiality and an overview
of the scope of our audit
Total assets
£492.9m (2019: £548.2m)
Group Materiality
£4.9m (2019: £5.4m)
£4.9m
Whole financial
statements materiality
(2019: £5.4m)
Investment income materiality
(2019: management and
administration fees materiality):
£0.42m (2019: £0.34m).
£0.24m
Misstatements reported to the
audit committee (2019: £0.27m)
Total assets
Group materiality
Materiality for the Group’s financial statements as a
whole was set at £4.9 million (2019: £5.4 million),
determined with reference to a benchmark of total
assets, of which it represents 1% (2019: 1%).
In addition, we applied materiality of £0.42 million
(2019: £0.34 million) to Investment and other
income (2019: management and administration
fees) for which we believe misstatements of lesser
amounts than materiality for the financial
statements as a whole could reasonably be
expected to influence the Company’s members’
assessment of the financial performance of the
Group.
Materiality for the parent company financial
statements as a whole was set at £4.9 million
(2019: £5.4 million).
We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
exceeding £0.24 million (2019: £0.27 million), in
addition to other identified misstatements that
warranted reporting on qualitative grounds.
The Group team performed the audit of the Group
as if it was a single aggregated set of financial
information. The audit was undertaken to the
materiality level specified above and was
performed by a single audit team.
The risk
Our response (continued)
Our valuation experience: Where a recent transaction
has been used to value a holding, we obtained an
understanding of the circumstances surrounding the
transaction and whether it was considered to be on an
arms-length basis and suitable as an input into a
valuation.
Our corporate finance expertise: We used the
expertise of KPMG Corporate Finance to assess the
reasonableness of the valuation methodology, including
the impact of COVID-19, for a selection of level 3
investments, including within the Somers Limited
portfolio.
Assessing transparency: Consideration of the
appropriateness, in accordance with relevant accounting
standards, of the disclosures in respect of level 3
investments and the investment in Somers Limited and
the effect of changing one or more inputs to reasonably
possible alternative valuation assumptions.
Going concern
Disclosure quality
Our procedures included:
Test of details: Evaluated whether the assumptions
associated with future potential changes in the valuation
of liquid assets are realistic and achievable and consistent
with the matters identified in the audit.
Sensitivity analysis: We considered sensitivities over
the level of available liquid financial resources indicated
by the Group’s financial forecasts, taking account of
reasonably possible (but not unrealistic) adverse effects
that could arise from these risks individually and
collectively. We also considered reverse stress scenarios
to consider the level of reduction in the valuation of liquid
investments at which point the Group would be unable to
meet its liabilities as they fall due; and
Assessing transparency: Assessing the going concern
disclosure to ensure it adequately covers the assessment
that management has performed to support the going
concern of the Group and parent Company.
Refer to pages 45 and 46
(Directors Report), page
61 (Audit Committee
Report), page 76
(accounting policy) and
page 95 (financial
disclosures).
The financial statements explain how
the Board has formed a judgement that
it is appropriate to adopt the going
concern basis of preparation for the
Group and parent Company.
That judgement is based on an
evaluation of the inherent risks to the
Group’s and Company’s business
model and how those risks might
affect the Group and Company’s
financial resources or ability to continue
operations over a period of at least a
year from the date of approval of the
financial statements.
The risks most likely to adversely affect
the Group and Company’s available
financial resources over this period
were:
– The quantum and expected timing
of payment of liabilities as they fall
due, including bank loans and the
2020 tranche of Zero dividend
preference shares (ZDPs) and
access to liquid assets; and
– Potential future market driven
reductions in liquid assets and
adverse foreign exchange
movements.
The risk for our audit was whether or
not those risks were such that they
amounted to a material uncertainty that
may have cast significant doubt about
the ability to continue as a going
concern. Had they been such, then that
fact would have been required to have
been disclosed.
We continue to perform procedures over valuation of listed investments. However, following the reduction in the valuation of listed
investments, we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately
identified in our report this year.
66
67
4. We have nothing to report on going concern
5. We have nothing to report on the other information in
Corporate governance disclosures
7. The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members, as a
body, in accordance with section 90 (2) of the Companies
Act 1981 of Bermuda and the terms of our engagement by
the Company. Our audit work has been undertaken so that
we might state to the Company’s members those matters
we are required to state to them in an auditor’s report , and
the further matters we are required to state to them in
accordance with the terms agreed with the Company, and
for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other
than the Company and the Company’s members, as a body,
for our audit work, for this report, or for the opinions we
have formed.
John Waterson
for and on behalf of KPMG LLP
Chartered Accountants
20 Castle Terrace Edinburgh
EH1 2EG
27 October 2020
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the
Company or the Group or to cease their operations, and as
they have concluded that the Company’s and the Group’s
financial position means that this is realistic. They have also
concluded that there are no material 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 statements (“the going
concern period”).
Our responsibility is to conclude on the appropriateness of
the Directors’ conclusions and, had there been a material
uncertainty related to going concern, to make reference to
that in this audit report. However, as we cannot predict all
future events or conditions and as subsequent events may
result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the
absence of reference to a material uncertainty in this
auditor's report is not a guarantee that the Group or the
Company will continue in operation.
We identified going concern as a key audit matter (see
section 2 of this report). Based on the work described in our
response to that key audit matter, we are required to report
to you if we have anything material to add or draw attention
to in relation to the directors’ statement in Note 1 to the
financial statements on the use of the going concern basis
of accounting with no material uncertainties that may cast
significant doubt over the Group and Company’s use of that
basis for a period of at least twelve months from the date
of approval of the financial statements.
We have nothing to report in this respect.
the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information 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 information and, in
doing so, consider whether, based on our financial
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or
our audit knowledge. Based solely on that work we have
not identified material misstatements in the other
information.
Directors’ remuneration report
In addition to our audit of the financial statements, the
directors have engaged us to audit the information in the
Directors’ Remuneration Report that is described as having
been audited, which the directors have decided to prepare
as if the Company were required to comply with the
requirements of Schedule 8 to The Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations
2008 (SI 2008 No. 410) made under the UK Companies Act
2006.
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006, as if those
requirements applied to the Company.
Disclosures of emerging and principal risks and longer-term
viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
attention to in relation to:
–
–
–
the directors’ confirmation within the Viability statement
on page 37 that they have carried out a robust
assessment of the emerging and principal risks facing
the Group, including those that would threaten its
business model, future performance, solvency and
liquidity;
the Principal Risks and Risk Mitigation disclosures
describing these risks and explaining how they are being
managed and mitigated; and
the directors’ explanation in the Viability Statement 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
statement as to whether they have a reasonable
expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the
period of their assessment, including any related
disclosures drawing attention to any necessary
qualifications or assumptions.
Our work is limited to assessing these matters in the
context of only the knowledge acquired during our financial
statements audit. As we cannot predict all future events or
conditions and as subsequent events may result in
outcomes that are inconsistent with judgments that were
reasonable at the time they were made, the absence of
anything to report on these statements is not a guarantee
as to the Group’s and Company’s longer-term viability.
We are required to report to you if:
– we have identified material inconsistencies between the
knowledge we acquired during our financial statements
audit and the directors’ statement that they consider
that the annual report and financial statements 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; or
–
the section of the annual report describing the work of
the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee.
In addition to our audit of the financial statements, the
directors have engaged us to review their Corporate
Governance Statement as if the company were required to
comply with the Listing Rules of the Financial Conduct
Authority in relation to those matters. Under the terms of
our engagement we are required to report to you if the
Corporate Governance Statement does not properly
disclose a departure from the provisions of the UK
Corporate Governance Code specified for our review.
We have nothing to report in these respects.
6. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page
63, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give
a true and fair view; 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; assessing the Group and
parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and using 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.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud 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 material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
68
69
GROUP INCOME STATEMENT
COMPANY INCOME STATEMENT
for the year to 30 June
Notes
9 (Losses)/gains on investments
12 Gains/(losses) on derivative financial
instruments
Foreign exchange (losses)/gains
2 Investment and other income
Total income/(loss)
3 Management and administration fees
4 Other expenses
Profit/(loss) before finance costs and
taxation
Revenue
return
£’000s
Capital
return
£’000s
2020
Total
return
£’000s
–
–
–
12,684
12,684
(1,426)
(1,184)
(60,006)
(60,006)
3,286
(3,469)
–
3,286
(3,469)
12,684
(60,189)
(47,505)
–
(10)
(1,426)
(1,194)
Revenue
return
£’000s
–
–
–
11,184
11,184
(1,587)
(1,178)
Capital
return
£’000s
90,402
(6,871)
3,306
–
86,837
(8,538)
2019
Total
return
£’000s
90,402
(6,871)
3,306
11,184
98,021
(10,125)
for the year to 30 June
Notes
9 (Losses)/gains on investments
12 Gains/(losses) on derivative financial
instruments
Foreign exchange (losses)/gains
2 Investment and other income
Total income/(loss)
3 Management and administration fees
(8)
(1,186)
4 Other expenses
Revenue
return
£’000s
Capital
return
£’000s
2020
Total
return
£’000s
–
–
–
12,684
12,684
(1,426)
(1,184)
(60,078)
(60,078)
3,286
(3,469)
–
3,286
(3,469)
12,684
(60,261)
(47,577)
–
(10)
(1,426)
(1,194)
Revenue
return
£’000s
–
–
–
11,184
11,184
(1,587)
(1,178)
Capital
return
£’000s
90,800
(6,871)
3,306
–
87,235
(8,538)
2019
Total
return
£’000s
90,800
(6,871)
3,306
11,184
98,419
(10,125)
(8)
(1,186)
10,074
(60,199)
(50,125)
8,419
78,291
86,710
Profit/(loss) before finance costs and
taxation
10,074
(60,271)
(50,197)
8,419
78,689
87,108
5 Finance costs
(1,602)
(10,312)
(11,914)
(1,600)
(11,093)
(12,693)
5 Finance costs
(1,602)
(10,643)
(12,245)
(1,600)
(12,082)
(13,682)
Profit/(loss) before taxation
8,472
(70,511)
(62,039)
6,819
67,198
74,017
Profit/(loss) before taxation
8,472
(70,914)
(62,442)
6,819
66,607
73,426
6 Taxation
(1)
–
(1)
Profit/(loss) for the year
8,471
(70,511)
(62,040)
7 Earnings per ordinary share – pence
9.77
(81.30)
(71.53)
(9)
6,810
7.63
–
67,198
75.34
(9)
74,008
82.97
6 Taxation
(1)
–
(1)
Profit/(loss) for the year
8,471
(70,914)
(62,443)
7 Earnings per ordinary share – pence
9.77
(81.76)
(71.99)
(9)
6,810
7.63
–
66,607
74.68
(9)
73,417
82.31
The Group does not have any income or expense that is not included in the profit/(loss) for the year and therefore the profit/(loss) 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 76 to 104 form part of these financial statements.
The Company does not have any income or expense that is not included in the profit/(loss) for the year and therefore the profit/(loss) 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 76 to 104 form part of these financial statements.
70
UIL Limited
Report and Accounts for the year to 30 June 2020
71
GROUP STATEMENT OF CHANGES IN EQUITY
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year to 30 June 2020
Notes
Ordinary
share
capital
£’000s
Share
premium
account
£’000s
Special
reserve
£’000s
Non-
distributable
reserve
£’000s
Capital
reserves
£’000s
Revenue
reserve
£’000s
Total
£’000s
for the year to 30 June 2020
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 as at 30 June 2019
8,828
16,103
233,866
32,069
26,312
9,090
326,268
Balance as at 30 June 2019
8,828
16,103
233,866
32,069
26,325
9,090
326,281
(Loss)/profit for the year
8 Ordinary dividends paid
17 Shares purchased by the
Company
Balance as at 30 June 2020
–
–
(234)
8,594
–
–
(5,658)
–
–
–
–
–
–
(70,511)
8,471
(62,040)
–
(6,711)
(6,711)
–
–
(5,892)
10,445
233,866
32,069
(44,199)
10,850
251,625
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 as 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
17 Shares purchased by the
Company
Balance as 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
The notes on pages 76 to 104 form part of these financial statements.
(Loss)/profit for the year
8 Ordinary dividends paid
17 Shares purchased by the
Company
Balance as at 30 June 2020
–
–
(234)
8,594
–
–
(5,658)
–
–
–
–
–
–
(70,914)
8,471
(62,443)
–
–
(6,711)
(6,711)
–
(5,892)
10,445
233,866
32,069
(44,589)
10,850
251,235
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 as at 30 June 2018
8,949
18,167
233,866
32,069
(40,282)
8,969
261,738
Profit for the year
8 Ordinary dividends paid
17 Shares purchased by the
Company
Balance as at 30 June 2019
–
–
–
–
(121)
8,828
(2,064)
16,103
–
–
–
–
–
–
66,607
6,810
73,417
–
–
(6,689)
(6,689)
–
(2,185)
233,866
32,069
26,325
9,090
326,281
The notes on pages 76 to 104 form part of these financial statements.
72
UIL Limited
Report and Accounts for the year to 30 June 2020
73
STATEMENTS OF FINANCIAL POSITION
STATEMENTS OF CASH FLOWS
Notes as at 30 June
Non-current assets
9 Investments
Current assets
11 Other receivables
12 Derivative financial instruments
Cash and cash equivalents
Current liabilities
13 Loans
14 Other payables
12 Derivative financial instruments
15 Zero dividend preference shares
2020
£’000s
Group
2019
£’000s
Company
2020
£’000s
2019
£’000s
488,997
543,794
491,280
556,430
3,579
111
258
3,948
748
436
3,177
4,361
3,579
111
258
3,948
748
436
3,177
4,361
(51,146)
(50,971)
(51,146)
(50,971)
(4,248)
(5,391)
(59,087)
(9,491)
(1,483)
(63,335)
(5,391)
(9,491)
(1,483)
–
–
–
for the year to 30 June
(Loss)/profit before taxation
Adjust for non-cash flow items:
Losses/(gains) on investments
(Gains)/losses on derivative financial instruments
Foreign exchange losses/(gains)
Non-cash flows on income
(Increase)/decrease in accrued income
(Increase)/decrease in other debtors
(Decrease)/increase in creditors
ZDP shares finance costs
Intra-group loan account finance costs
Tax on overseas income
2020
£’000s
Group
2019
£’000s
2020
£’000s
(62,039)
74,017
(62,442)
Company
2019
£’000s
73,426
60,006
(3,286)
3,469
(6,323)
(709)
(2,122)
(8,757)
10,312
–
(1)
(90,402)
6,871
(3,306)
(3,390)
941
10
3,344
11,093
–
(9)
60,078
(3,286)
3,469
(6,323)
(709)
(2,122)
(8,757)
–
(90,800)
6,871
(3,306)
(3,390)
941
10
3,344
–
10,643
12,082
(1)
(9)
(831)
Net current liabilities
(115,924)
(57,584)
(115,924)
(57,584)
Investing activities:
(119,872)
(61,945)
(119,872)
(61,945)
Cash flows from operating activities
(9,450)
(831)
(9,450)
Total assets less current liabilities
373,073
486,210
375,356
498,846
Non-current liabilities
16 Other payables
–
–
(124,121)
(172,565)
15 Zero dividend preference shares
(121,448)
(159,942)
–
–
Net assets
Equity attributable to equity holders
17 Ordinary share capital
18 Share premium account
19 Special reserve
20 Non-distributable reserve
21 Capital reserves
22 Revenue reserve
251,625
326,268
251,235
326,281
8,594
10,445
8,828
16,103
8,594
10,445
8,828
16,103
233,866
233,866
233,866
233,866
32,069
(44,199)
10,850
32,069
26,312
9,090
32,069
(44,589)
10,850
32,069
26,325
9,090
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
Cash flows from redemption of ZDP shares
Cash paid for ordinary shares purchased for cancellation
Total attributable to equity holders
251,625
326,268
251,235
326,281
Cash flows from financing activities
23 Net asset value per ordinary share – pence
292.79
369.57
292.34
369.58
The notes on pages 76 to 104 form part of these financial statements.
Approved by the Board on 27 October 2020 and signed on its behalf by
Peter Burrows
Chairman
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 76 to 104 form part of these financial statements.
(81,698)
(58,875)
(81,698)
(59,776)
82,812
102,243
93,093
103,833
–
(6,410)
–
(6,410)
7,519
8,633
(817)
(6,711)
(2,137)
10,281
–
36,958
36,127
(6,689)
22,862
1,590
–
(52,095)
7,519
18,914
9,464
(6,711)
(2,137)
–
–
–
37,647
36,816
(6,689)
22,862
–
(51,194)
(5,892)
(4,459)
(5,276)
3,177
(1,157)
(3,256)
(2,185)
(5,892)
(2,185)
(36,517)
(14,740)
(37,206)
(390)
(53)
3,620
3,177
(5,276)
3,177
(1,157)
(3,256)
(390)
(53)
3,620
3,177
258
3,177
258
3,177
(3,514)
(3,256)
–
3,177
(3,514)
(3,256)
–
3,177
74
UIL Limited
Report and Accounts for the year to 30 June 2020
75
NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES
The Company, UIL Limited, is an investment company
incorporated in Bermuda and traded on the Specialist Fund
Segment of the Main Market of 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 (see note 29) 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.
There have been no significant changes to the accounting
policies during the year to 30 June 2020.
The Board has determined by having regard to the currency
of the Company’s share capital, the predominant currency
in which its shareholders operate and the currency in which
dividends are paid by the Company, 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 October 2019, 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 special
reserve, revenue reserve and the capital reserves.
A number of new standards and amendments to standards
and interpretations, which have not been applied in
preparing these accounts, were in issue but not effective.
None of these are expected to have a material effect on the
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
note 1(d) below) are not accounted for in the Group Accounts,
but are carried at fair value through profit or loss.
(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, securities for which an offer price has
been announced in the market, 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 (see key valuations techniques on
pages 101 to 103).
(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 note 1(k) below for allocation of
finance costs between revenue and capital return within the
Income Statement.
(g) ZDP shares
The ZDP shares, due to be redeemed on 31 October 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 as per IFRS
9 “Financial Instruments”. 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
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
76
76
UIL Limited
UIL Limited
Report and Accounts for the year to 30 June 2020
Report and Accounts for the year to 30 June 2020
77
77
NOTES TO THE ACCOUNTS
(continued)
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 and is able to pay its liabilities as they fall
due.
(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 estimates and judgements
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) and further information on Board procedures is
contained in the Audit & Risk Committee Report and note
30(d). The fair value of unquoted (level three) investments, as
disclosed in note 9, represented 36.3% of total investments
as at 30 June 2020.
Details of the subsidiaries are set out in note 10. 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.
2.
INVESTMENT AND OTHER INCOME
Group and Company
Investment income:
Dividends*
Interest*
Other income:
Underwriting commission
Interest on cash and short-term deposits
Total income
*Includes scrip income of £6,827,000 (2019: £3,390,000)
Revenue
£’000s
Capital
£’000s
8,209
4,463
12,672
8
4
12,684
–
–
–
–
–
–
Revenue
£’000s
Capital
£’000s
2020
Total
£’000s
8,209
4,463
8,622
2,487
12,672
11,109
8
4
–
75
12,684
11,184
2019
Total
£’000s
8,622
2,487
11,109
–
75
11,184
–
–
–
–
–
–
3. MANAGEMENT AND ADMINISTRATION FEES
Group and Company
Payable to:
ICM/ICMIM – management fee, secretarial fees
– performance fee
Administration fees
Revenue
£’000s
Capital
£’000s
2020
Total
£’000s
Revenue
£’000s
Capital
£’000s
1,152
–
274
1,426
–
–
–
–
1,152
1,198
–
274
–
389
–
8,538
–
1,426
1,587
8,538
10,125
2019
Total
£’000s
1,198
8,538
389
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
Managers 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
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. A performance fee
was last paid in respect of the year to 30 June 2019. As at that
date the equity shareholders’ funds were £326.3m. As at 30
June 2020, the attributable shareholders’ funds were below
the high watermark and therefore no performance fee has
been accrued.
ICM also provides company secretarial services to the
Company with the Company paying 45% of the incurred costs
associated with this post.
JP Morgan Chase Bank N.A. – London Branch has been
appointed Administrator and ICMIM has appointed Waverton
Investment Management Limited 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.
78
UIL Limited
Report and Accounts for the year to 30 June 2020
79
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
57 to 59)
Travel expenses
Professional and legal fees
Migration costs to Specialist Fund Segment
Sundry expenses
Revenue
£’000s
Capital
£’000s
88
49
65
178
77
179
232
316
1,184
–
–
–
–
–
–
–
10
10
2020
Total
£’000s
88
49
65
178
77
179
232
326
1,194
Revenue
£’000s
Capital
£’000s
88
88
277
221
171
55
–
278
1,178
–
–
–
–
–
–
–
8
8
2019
Total
£’000s
88
88
277
221
171
55
–
286
1,186
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 for the year
2020
£’000s
2019
£’000s
80
8
88
83
5
88
KPMG engaged in other non-audit services to perform a transaction service review. The estimated fee was £10,000.
5. FINANCE COSTS
Group
Loans and bank overdrafts
ZDP shares
Company
Loans and bank overdrafts
Intra-group loan account
Revenue
£’000s
1,602
–
1,602
Revenue
£’000s
1,602
–
1,602
Capital
£’000s
–
10,312
10,312
Capital
£’000s
–
10,643
10,643
2020
Total
£’000s
1,602
10,312
11,914
2020
Total
£’000s
1,602
10,643
12,245
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
6.
TAXATION
Group and Company
Overseas taxation
Revenue
£’000s
1
Capital
£’000s
–
2020
Total
£’000s
1
Revenue
£’000s
9
Capital
£’000s
–
2019
Total
£’000s
9
Except as stated above, profits of the Company and subsidiaries for the year are not subject to any taxation within their countries
of residence (2019: 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
2020
£’000s
8,471
(70,511)
(62,040)
Group
2019
£’000s
6,810
67,198
74,008
2020
£’000s
8,471
(70,914)
(62,443)
Company
2019
£’000s
6,810
66,607
73,417
Number
Number
Number
Number
Weighted average number of shares in issue during the year for earnings
per share calculations
86,733,371
89,198,019
86,733,371
89,198,019
8. DIVIDENDS
Group and Company
2018 Fourth quarterly of 1.875p
2019 First quarterly of 1.875p
2019 Second quarterly of 1.875p
2019 Third quarterly of 1.875p
2019 Fourth quarterly of 1.875p
2020 First quarterly of 1.875p
2020 Second quarterly of 2.000p
2020 Third quarterly of 2.000p
Record
date
Payment
date
2020
£’000s
07-Sep-18
21-Sep-18
07-Dec-18
21-Dec-18
08-Mar-19
29-Mar-19
07-Jun-19
28-Jun-19
06-Sep-19
27-Sep-19
06-Dec-19
20-Dec-19
06-Mar-20
27-Mar-20
05-Jun-20
26-Jun-20
–
–
–
–
1,655
1,618
1,719
1,719
6,711
2019
£’000s
1,678
1,678
1,678
1,655
–
–
–
–
6,689
The Directors declared a fourth quarterly dividend in respect of the year ended 30 June 2020 of 2.00p per share which was paid
on 25 September 2020 to all ordinary shareholders on the register at close of business on 4 September 2020. The total cost of
the dividend, which has not been accrued in the results for the year to 30 June 2020, is £1,719,000 based on 85,939,314 ordinary
shares in issue.
80
UIL Limited
Report and Accounts for the year to 30 June 2020
81
NOTES TO THE ACCOUNTS
(continued)
9.
INVESTMENTS
Group
Investments brought forward
Cost
Gains/(losses)
Valuation
Movements in the year:
Sales
proceeds
Level 1
£’000s
Level 2
£’000s
Level 3
£’000s
2020
Total
£’000s
Level 1
£’000s
Level 2
£’000s
Level 3
£’000s
2019
Total
£’000s
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
Company
Investments brought forward
Cost
Gains/(losses)
Level 1
£’000s
Level 2
£’000s
Level 3
£’000s
2020
Total
£’000s
Level 1
£’000s
Level 2
£’000s
Level 3
£’000s
2019
Total
£’000s
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
205,221
154,200
184,373
543,794
212,225
155,085
126,065
493,375
Movements in the year:
Transfer between levels*
1,044
(2,643)
1,599
–
(5,064)
Purchases at cost
15,956
24,547
67,938
108,441
7,774
2,524
3,892
2,540
–
66,799
78,465
Transfer between levels*
1,044
(2,643)
1,599
–
(18,619)
16,079
2,540
–
Purchases at cost
15,956
24,547
67,938
108,441
8,673
3,892
66,799
79,364
Sales
proceeds
(54,013)
(10,714)
(48,786)
(113,513)
(105,845)
(1,725)
(34,708)
(142,278)
(54,013)
(433)
(48,786)
(103,232)
(83,605)
(135)
(34,708)
(118,448)
(losses)/gains on investments
(16,803)
(15,808)
(27,467)
(60,078)
73,618
(6,495)
23,677
90,800
(losses)/gains on investments
(16,803)
(15,736)
(27,467)
(60,006)
73,891
(7,166)
23,677
90,402
Valuation at 30 June
Analysed at 30 June
Cost
Gains/(losses)
Valuation
151,405
159,935
177,657
488,997
205,221
154,200
184,373
543,794
127,930
156,666
216,524
501,120
116,607
154,152
197,982
468,741
23,475
3,269
(38,867)
(12,123)
88,614
48
(13,609)
75,053
151,405
159,935
177,657
488,997
205,221
154,200
184,373
543,794
*Transfers due to the changes in liquidity and delisting of investee companies (2019: transfers due to the changes in liquidity and delisting of investee
companies)
The Group received £103,232,000 (2019: £118,448,000) from investments sold in the year. The book cost of these investments when they were
purchased was £76,062,000 (2019: £35,531,000). These investments have been revalued over time and until they were sold any unrealised gains/
losses were included in the fair value of the investments
Disposals in level 3 investments includes £22.4m related to repayment of capital and £20.4m of capital distribution.
Level 1 includes investments listed on any recognised stock exchange or quoted on any secondary market
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
Valuation at 30 June
Analysed at 30 June
Cost
Gains/(losses)
Valuation
151,405
162,218
177,657
491,280
205,221
166,836
184,373
556,430
127,930
159,069
216,524
503,523
116,607
166,073
197,982
480,662
23,475
3,149
(38,867)
(12,243)
88,614
763
(13,609)
75,768
151,405
162,218
177,657
491,280
205,221
166,836
184,373
556,430
*Transfers due to the changes to liquidity and delisting of investee companies (2019: transfers due to the changes to liquidity and delisting of investee
companies)
The Company received £113,513,000 (2019: £142,278,000) from investments sold in the year. The book cost of these investments when they were
purchased was £85,580,000 (2019: £58,346,000). These investments have been revalued over time and until they were sold any unrealised gains/
losses were included in the fair value of the investments
Level 1 includes investments listed on any recognised stock exchange or quoted on any secondary market
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
(Losses)/gains on investments held at fair value
Gains on investments sold
(Losses)/gains on investments held
Total (losses)/gains on investments
Group
2019
£’000s
Company
2020
£’000s
2019
£’000s
2020
£’000s
27,170
82,917
27,933
83,932
(87,176)
7,485
(88,011)
6,868
(60,006)
90,402
(60,078)
90,800
82
UIL Limited
Report and Accounts for the year to 30 June 2020
83
NOTES TO THE ACCOUNTS
(continued)
Associated undertakings
Significant interests
Under IFRS10 Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities, the following associate
undertakings 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")
DTI Group Ltd ("DTI")
Elevate Platform Limited ("Elevate")
Orbital Corporation Limited
Serkel Solutions Pty Ltd ("Serkel")
SmileStyler Solutions Pty Ltd ("SmileStyler")
Somers Limited
Vix Tech Pte. Limited
Transactions with associated undertakings
Country of
registration and
incorporation
Number of
ordinary shares
held
2020
2019
% of ordinary
shares held
% of ordinary
shares held
Australia
Australia
UK
Australia
Australia
Australia
Bermuda
Singapore
59,048
103,193,989
812,766
23,627,904
10,510
1,151,434
9,351,652
82,674,632
27.0
30.8
31.0
30.5
33.3
24.0
44.4
39.8
27.0
25.3
31.1
30.5
–
23.0
44.3
39.8
3DMedi
DTI
Elevate
Orbital
Serkel
SmileStyler
Somers
VixTech
UIL capitalised interest of AUD 0.1m and exchanged its resulting loan balance of AUD 0.6m
with 3DMedi for 158,704 SmileStyler shares and 10,510 Serkel shares held by 3DMedi in
June 2020 as full settlement for the loan.
UIL increased its holding in DTI by subscribing for 30.3m shares through a rights issue
and a further 16.0m shares as a result of UIL underwriting the rights issue. A further 2.4m
shares were purchased on the market.
Pursuant to a loan agreement dated 1 January 2019 under which UIL has agreed to loan
monies to Elevate, UIL advanced to Elevate £1.0m. As at 30 June 2020, the balance of the
loan and interest outstanding was £1.6m. The loan bears interest at an annual rate of 6.0%
and is repayable on 31 December 2023.
Pursuant to a loan agreement dated 1 March 2019 under which UIL has agreed to loan
monies to Orbital, UIL advanced to Orbital USD 1.5m and capitalised interest of USD 95k.
The loan was fully repaid on 22 June 2020. The USD 3.0m loan facility remained in place
until 1 September 2020 and bears interest at an annual rate of USD three months Libor
plus 6.0%.
UIL received 10,510 Serkel shares from 3DMedi in June 2020 as part settlement for a loan
that 3DMedi had with UIL.
UIL received 158,704 SmileStyler shares from 3DMedi in June 2020 as part settlement for a
loan that 3DMedi had with UIL.
Somers paid a dividend of USD 4.6m to UIL and UIL received 309,535 ordinary shares as
part of a dividend reinvestment program. Pursuant to loan agreements dated 1 September
2016 (USD loan), 22 June 2018 (GBP loan), 5 September 2019 (AUD loan) and 4 December
2019 (CAD loan), under which UIL has agreed to loan monies to Somers, UIL advanced to
Somers loans of USD 1.0m, £1.3m, AUD 7.5m and CAD 4.2m, Somers repaid CAD 1.9m and
UIL received interest of USD 65k, £126k, AUD 113k and CAD 88k. As at 30 June 2020, the
balance of the loans and interest outstanding was USD 4.4m, £8.4m, AUD 7.5m and CAD
2.3m. With the exception of the CAD loan, which bears interest at an annual rate of 10.0%,
the loans bear interest at an annual rate of 6.0% and are repayable on not less than twelve
months’ notice.
Pursuant to a loan agreement dated 1 December 2016 under which UIL has agreed to loan
monies to VixTech, UIL advanced to VixTech USD 3.4m. In June 2020, UIL had its full loan of
USD 26.9m with VixTech converted into equity, receiving 26,931,974 VixTech shares in the
transaction.
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
Ascendant Group Limited
One Communications Limited
Optal Limited
Resolute Mining Limited
Country of registration
and incorporation
Bermuda
Bermuda
Class of
instrument held
Ordinary Shares
Ordinary Shares
United Kingdom
Ordinary Shares
Australia
Ordinary Shares
Utilico Emerging Markets Trust plc
United Kingdom
Ordinary Shares
2020
% of class of
instrument
held
2019
% of class of
instrument
held
8.8
13.1
5.3
9.1
16.3
1.7
12.6
5.3
12.0
16.0
10. SUBSIDIARY UNDERTAKINGS
The following was a subsidiary undertakings of the Company at 30 June 2020 and 30 June 2019.
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.
2020
2019
Country of
registration
and
incorporation
Number of
ordinary
shares held
Holding and
voting rights
%
Number of
ordinary
shares held
Holding and
voting rights
%
Allectus Capital Limited*
Bermuda
100
50.0
477,720
Bermuda First Investment Company
Limited
Bermuda
1,891,195
Coldharbour Technology Limited
United Kingdom
29,660,694
Energy Holdings Ltd
Global Equity Risk Protection Limited
("GERP")
Bermuda
Bermuda
100
–
Newtel Holdings Limited ("Newtel")
Jersey
115,920
UIL Holdings Pte Ltd
Zeta Resources Limited
* 2019: associated undertaking
Singapore
100
Bermuda
172,286,916
94.2
96.5
100.0
–
100.0
100.0
60.0
1,891,195
23,660,694
100
3,920
115,920
100
172,286,916
39.8
94.2
95.6
100.0
100.0
100.0
100.0
60.0
84
UIL Limited
Report and Accounts for the year to 30 June 2020
85
NOTES TO THE ACCOUNTS
(continued)
Transactions with subsidiaries held as investments
Allectus
BFIC
Coldharbour
On 1 July 2019, as part of a share capital reorganisation, UIL’s debt of USD 23.2m was
converted into equity of Allectus and UIL also purchased an additional 52 ordinary shares
for USD 5k which increased UIL’s holding from 39.8% to 50.0% of the ordinary shares. In
addition to the above, pursuant to a loan agreement dated 1 September 2016 under which
UIL has agreed to loan monies to Allectus, UIL advanced to Allectus a loan of USD 6.2m. On
23 June 2020 the full loan was converted to equity in the form of contributed surplus. The
loan is interest free and is converted into equity on an annual basis at 30 June each year.
BFIC paid a dividend of USD 25.5m to UIL (UIL received in specie 746,524 Ascendant shares
at USD 34.20 per share in settlement of the dividend). Pursuant to a loan agreement dated
3 July 2017 under which UIL has agreed to loan monies to BFIC, UIL advanced to BFIC USD
0.8m and received interest of USD 15k. As at 30 June 2020, the balance of the loan was
USD 0.8m. The loan bears interest at an annual rate of 6.0% and is repayable on not less
than twelve months’ notice.
UIL exercised 6,000,000 Coldharbour warrants at a cost of £3.0m. UIL received a loan of
£0.5m from Coldharbour on 27 May 2020. The loan remains outstanding as at 30 June
2020 (see note 13).
Energy Holdings Ltd
There were no transactions during the year.
GERP
Newtel
The GERP-Utilico Segregated Account owned by UIL was terminated and the 3,920 Class A
shares were cancelled on 6th May 2020.
Newtel repaid £0.1m of its working capital loan to UIL and paid interest of £16k. As at 30
June 2020 the loan balance was £5.2m and is repayable on demand.
UIL Holdings Pte Ltd
There were no transactions during the year.
Zeta
Pursuant to loan agreements dated 1 September 2016 (AUD loan) and 1 May 2018 (CAD
loan), under which UIL has agreed to loan monies to Zeta, UIL advanced to Zeta loans
of AUD 62.6m and CAD 5.9m and received from Zeta a repayment of AUD 40.3m, and
capitalised interest of AUD 2.3m and CAD 1.5m. As at 30 June 2020, the balance of the
loans and interest outstanding was AUD 64.7m and CAD 30.5m. The AUD loan bears
interest at an annual rate of 7.5% and the CAD loan bears interest at an annual rate of
7.25%. The loans are repayable on not less than twelve months’ notice.
11. OTHER RECEIVABLES – CURRENT ASSETS
Group and Company
Margin account
Accrued income
Prepayments and other debtors
12. DERIVATIVE FINANCIAL INSTRUMENTS
Group and Company
2020
£’000s
2,104
1,433
42
3,579
2019
£’000s
–
724
24
748
Current
assets
£’000s
Current
liabilities
£’000s
2020
Net current
assets/
(liabilities)
£’000s
Current
assets
£’000s
Current
liabilities
£’000s
2019
Net current
assets/
(liabilities)
£’000s
Forward foreign exchange contracts
111
(5,391)
(5,280)
436
(1,483)
(1,047)
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
Gains/(losses)
Valuation carried forward
13. LOANS – CURRENT LIABILITY
Group and Company
Bank Loans
AUD 69m part repaid June 2020
CAD 20.0m repaid March 2020
USD 1.1m repaid July 2020
AUD 12.9m rolled over August 2020
AUD 12.9m rolled over October 2020
AUD 11.0m repayable December 2020
EUR 5.6m rolled over August 2020
EUR 5.6m rolled over October 2020
EUR 5.6m repayable December 2020
GBP 5.0m rolled over August 2020
GBP 5.0m rolled over October 2020
GBP 5.1m repayable December 2020
Loan from Coldharbour repayable July 2020
2020
£’000s
(1,047)
(7,519)
3,286
(5,280)
2019
£’000s
(586)
6,410
(6,871)
(1,047)
2020
£’000s
2019
£’000s
–
–
–
7,177
7,177
6,151
5,068
5,068
5,068
5,000
5,000
4,937
500
38,046
12,026
899
–
–
–
–
–
–
–
–
–
–
51,146
50,971
The Company has a committed loan facility of £50,000,000 from Scotiabank expiring on 30 September 2022. 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 and the loan covenants, 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.
On 27th May 2020 the Company received a short term loan from Coldharbour which has been repaid since the year end. The loan
had an interest rate of 4%.
14. OTHER PAYABLES – CURRENT LIABILITY
Bank overdraft
Intra-group loans
Accrued finance costs
Accrued expenses
2020
£’000s
3,514
–
63
671
4,248
Group
2019
£’000s
–
–
159
9,332
9,491
Company
2019
£’000s
–
–
159
9,332
9,491
2020
£’000s
3,514
59,087
63
671
63,335
86
UIL Limited
Report and Accounts for the year to 30 June 2020
87
The Directors consider that the carrying values of other payables are equivalent to their fair value.
NOTES TO THE ACCOUNTS
(continued)
15. ZDP SHARES
ZDP shares – current liabilities
2020 ZDP shares
ZDP Shares – non-current liabilities
2020 ZDP shares
2022 ZDP shares
2024 ZDP shares
2026 ZDP shares
Total ZDP shares liabilities
2020
£’000s
59,087
–
63,407
33,250
24,791
2019
£’000s
–
55,387
59,499
31,582
13,474
121,448
159,942
180,535
159,942
Authorised ZDP shares of the Company at 30 June 2020 and 30 June 2019 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
2020
Number
2020
£’000s
Number
2022
£’000s
Number
2024
£’000s
Number
2026
£’000s
Total
£’000s
Balance as at
30 June 2019
Issue of ZDP
shares
Finance costs
(see note 5)
Balance as at
30 June 2020
39,000,000
55,387 50,000,000
59,499 30,000,000
31,582 13,079,465
13,474
159,942
–
–
–
3,700
–
–
–
3,908
–
–
– 9,517,241
10,281
10,281
1,668
–
1,036
10,312
39,000,000
59,087 50,000,000
63,407 30,000,000
33,250 22,596,706
24,791
180,535
2019
Number
Balance as at
30 June 2018 32,455,269
2018
£’000s
Number
2020
£’000s
2022
Number
£’000s Number
2024
£’000s
Number
2026
£’000s
Total
£’000s
50,858 39,000,000 51,940 50,000,000
55,873 30,000,000 29,408 11,579,465
11,275
199,354
Issue of ZDP
shares
Redemption
of 2018 ZDP
shares
ZDP shares
purchased by
the Company
Finance costs
(see note 5)
Balance as at
30 June 2019
–
–
–
–
–
–
–
– 1,500,000
1,590
1,590
(31,892,465)
(51,194)
–
–
–
–
–
–
(562,804)
(901)
–
–
–
–
–
–
–
1,237
–
3,447
–
3,626
–
2,174
–
–
–
–
(51,194)
–
(901)
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
UIL held 11,920,535 2026 ZDP shares as at 30 June 2019 intra group. In the year UIL sold 9,517,241 2026 ZDP shares in the open
market, receiving £10.3m. UIL held 2,403,294 2026 ZDP shares intra group as at 30 June 2020.
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 2020 was 151.23p (2019: 141.01p).
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 2020 was 127.59p (2019: 120.03p).
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 2020 was 113.13p (2019: 107.97p).
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 2020 was 111.21p (2019: 105.89p).
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
16. OTHER PAYABLES - NON-CURRENT LIABILITY
Company
Intra-group loans
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.
2020
£’000s
124,121
2019
£’000s
172,565
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 as at 30 June 2020 is £180,535,000
(current liability: £59,087,000 and non-current liability: £121,448,000) (2019: non-current liability: £172,565,000) 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.
88
UIL Limited
Report and Accounts for the year to 30 June 2020
89
NOTES TO THE ACCOUNTS
(continued)
17. ORDINARY SHARE CAPITAL
Equity share capital:
Ordinary shares of 10p each with voting rights
Authorised
2020
Balance at 30 June 2019
Purchased for cancellation
Balance at 30 June 2020
2019
Balance at 30 June 2018
Purchased for cancellation
Balance at 30 June 2019
Number
£’000s
250,000,000
25,000
Total shares
in issue
Number
Total shares
in issue
£’000s
88,283,389
(2,344,075)
85,939,314
Total shares
in issue
Number
89,493,389
(1,210,000)
88,283,389
8,828
(234)
8,594
Total shares
in issue
£’000s
8,949
(121)
8,828
During the year the Company bought back for cancellation 2,344,075 (2019: 1,210,000) ordinary shares at a total cost of
£5,892,000 (2019: £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.
18. 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.
19. SPECIAL RESERVE
Group and Company
Balance brought forward and carried forward
2020
£’000s
16,103
(5,658)
10,445
2019
£’000s
18,167
(2,064)
16,103
2020
£’000s
2019
£’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
20. NON-DISTRIBUTABLE RESERVE
Group and Company
Balance brought forward and carried forward
2020
£’000s
32,069
2019
£’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.
21. CAPITAL RESERVES
Group
2020
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
2019
Capital
reserves
total
£’000s
Gains on investments sold
27,170
–
27,170
82,917
–
82,917
(Losses)/gains on investments
held
Gains/(losses) on derivative
financial instruments sold
Losses on derivative financial
instruments held
–
(87,176)
(87,176)
–
7,485
7,485
7,519
–
7,519
(6,410)
–
(6,410)
–
(4,233)
Foreign exchange (losses)/gains
(3,469)
Performance fee (see note 3)
Other capital charges
ZDP shares finance charges
Balance brought forward
Balance as at 30 June
–
(10)
(10,312)
20,898
(61,201)
(40,303)
–
–
–
–
(91,409)
87,513
(3,896)
(4,233)
(3,469)
–
(10)
(10,312)
(70,511)
26,312
(44,199)
–
(461)
3,306
(8,538)
(8)
(11,093)
60,174
(121,375)
(61,201)
–
–
–
7,024
80,489
87,513
(461)
3,306
(8,538)
(8)
(11,093)
67,198
(40,886)
26,312
90
UIL Limited
Report and Accounts for the year to 30 June 2020
91
NOTES TO THE ACCOUNTS
(continued)
2020
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
2019
Capital
reserves
total
£’000s
Company
Gains on investments sold
27,933
–
27,933
83,932
–
83,932
(Losses)/gains on investments
held
Gains/(losses) on derivative
financial instruments sold
Losses on derivative financial
instruments held
Foreign exchange (losses)/gains
(3,469)
Performance fee (see note 3)
Other capital charges
Intra-group loan account
finance charges
Balance brought forward
Balance as at 30 June
Group and Company
–
(10)
(10,643)
21,330
(48,396)
(27,066)
–
(88,011)
(88,011)
–
6,868
6,868
7,519
–
7,519
(6,410)
–
(6,410)
–
(4,233)
–
–
–
–
(92,244)
74,721
(4,233)
(3,469)
–
(10)
(10,643)
(70,914)
26,325
(17,523)
(44,589)
–
(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
Included within the capital reserve movement for the year is £515,000 (2019: £19,507,000) of dividend receipts recognised as
capital in nature, £27,000 (2019: £15,000) of transaction costs on purchases of investments and £46,000 (2019: £54,000) of
transaction costs on sales of investments.
22. REVENUE RESERVE
Amount transferred to revenue reserve
Dividends paid in the year
Balance brought forward
Balance as at 30 June
2020
£’000s
8,471
(6,711)
9,090
10,850
Group
2019
£’000s
6,810
(6,689)
8,969
9,090
2020
£’000s
8,471
(6,711)
9,090
10,850
Company
2019
£’000s
6,810
(6,689)
8,969
9,090
23. NET ASSET VALUE PER ORDINARY SHARE
NAV per ordinary share is based on net assets at the year end of £251,625,000 for the Group and £251,235,000 for the Company
(2019: £326,268,000 for the Group and £326,281,000 for the Company) and on 85,939,314 ordinary shares in issue at the year
end (2019: 88,283,389).
24. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
Group
2020
Bank loans
Coldharbour loan
ZDP shares
Dividends paid
Repurchase of shares for cancellation
2019
Bank loans
ZDP shares
Dividends paid
Repurchase of shares for cancellation
Company
2020
Bank loans
Coldharbour loan
Intra-group loans
Dividends paid
Repurchase of shares for cancellation
2019
Bank loans
Intra-group loans
Dividends paid
Repurchase of shares
for cancellation
Balance as
at 30 June
2018
£’000s
27,795
233,918
–
–
261,713
Balance as
at 30 June
2019
£’000s
Transactions
in the year
£’000s
50,971
–
159,942
–
–
–
–
–
6,711
5,892
210,913
12,603
Balance as
at 30 June
2018
£’000s
27,795
199,354
–
–
227,149
Transactions
in the year
£’000s
–
–
6,689
2,185
8,874
Balance as
at 30 June
2019
£’000s
Transactions
in the year
£’000s
50,971
–
172,565
–
–
–
–
–
6,711
5,892
Non-cash flow
changes
Foreign
exchange
movement
£’000s
2,312
–
–
–
–
Finance
costs
£’000s
Balance as
at 30 June
2020
£’000s
–
–
50,646
500
10,312
180,535
–
–
–
–
2,312
10,312
231,681
Non-cash flow
changes
Foreign
exchange
movement
£’000s
314
–
–
–
Finance
costs
£’000s
Balance as
at 30 June
2019
£’000s
–
50,971
11,093
159,942
–
–
–
–
314
11,093
210,913
Non-cash flow
changes
Foreign
exchange
movement
£’000s
2,312
–
–
–
–
Finance
costs
£’000s
Balance as
at 30 June
2020
£’000s
–
–
50,646
500
10,643
183,208
–
–
–
–
Cash
flows
£’000s
(2,637)
500
10,281
(6,711)
(5,892)
(4,459)
Cash
flows
£’000s
22,862
(50,505)
(6,689)
(2,185)
(36,517)
Cash
flows
£’000s
(2,637)
500
–
(6,711)
(5,892)
223,536
12,603
(14,740)
2,312
10,643
234,354
Non-cash flow
changes
Transactions
in the year
£’000s
Non-cash flows
on issues of
ZDP shares
£’000s
Cash
flows
£’000s
Foreign
exchange
movement
£’000s
Finance
costs
£’000s
Balance as
at 30 June
2019
£’000s
22,862
–
314
–
50,971
6,689
(6,689)
2,185
8,874
(2,185)
(51,194)
(22,241)
–
–
–
–
–
12,082
172,565
–
–
–
–
(37,206)
(22,241)
314
12,082
223,536
92
UIL Limited
Report and Accounts for the year to 30 June 2020
93
NOTES TO THE ACCOUNTS
(continued)
25. ULTIMATE PARENT UNDERTAKING
In the opinion of the Directors, 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.
26. RELATED PARTY TRANSACTIONS
The following are considered related parties of UIL:
Ultimate parent undertaking:
UIL’s majority shareholder General Provincial Life Pension
Fund Limited (“GPLPF”) holds 63.83% of UIL’s shares. Union
Mutual Pension Fund Limited (“UMPF”) holds 4.92% of UIL’s
shares and General Provincial Company Limited (“GPC”) holds
3.67% of UIL’s shares. The ultimate parent undertaking of
GPLPF, UMPF and GPC is Somers Isles Private Trust Company
Limited (“SIPTCL”) as trustee of various trusts of which Mr
Duncan Saville is a beneficiary.
Subsidiaries of UIL:
Allectus, BFIC, Coldharbour, Energy Holdings Ltd, Newtel, UIL
Holdings Pte Ltd and Zeta. (On consolidation, transactions
between the Company and UIL Finance Limited have been
eliminated).
Associated undertakings:
3DMedi, DTI, Elevate, Orbital, Serkel, SmileStyler, Somers and
VixTech.
Subsidiaries of the above subsidiaries and associated
undertakings:
Allectus: CHIPS AG, Global Equity Risk Protection Limited
(“GERP-ACL”), Metricus Pty Ltd, Own Solutions AC Ltd, Perfect
Channel Limited, Snapper Services Ltd, Trustlink (Pty) Ltd,
Unity Holdings Ltd, Vix Resources Pty Ltd, and VixNet Africa
(Pty) Ltd.
Zeta: Horizon Gold Limited, Kumarina Resources Limited, Zeta
Energy Pte. Ltd, and Zeta Investments Limited.
Somers: BCB, PCF Group plc, Resimac Group Limited,
Waverton Investment Management Group Limited, and West
Hamilton Holdings Limited.
Key management entities and persons:
ICM and ICMIM and the board of directors of ICM, Alasdair
Younie, Charles Jillings, Duncan Saville and of ICMIM, Charles
Jillings and Sandra Pope. ICM Investment Research Limited
and ICM Corporate Services (Pty) Ltd are wholly owned
subsidiaries of ICM.
Persons exercising control of UIL:
The Board of UIL.
Eric Stobart and Warren McLeland resigned as Directors on
30 September 2019 and Stuart Bridges was appointed as a
Director on 2 October 2019.
Companies controlled by key management persons:
Azure 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 2020 between the Company and its related
parties above:
UIL Finance
Loans from UIL Finance to UIL of £172.6m as at 30 June 2019
increased by £10.6m, to £183.2m as at 30 June 2020. The loans
are repayable on the ZDP share repayment date to which the
relevant loan relates.
Allectus, BFIC, Coldharbour, Energy Holdings, GERP, Newtel,
UIL Holdings Pte Ltd and Zeta
Transactions are disclosed in note 10.
3DMedi, Allectus, DTI, Elevate, Orbital, Serkel, SmileStyler,
Somers and VixTech
Transactions are disclosed in note 9.
Subsidiaries of the above subsidiaries and associated
undertakings
There were no transactions in the year to 30 June 2020
with any of the subsidiaries of the above subsidiaries and
associated undertakings.
Key management entities and persons
ICM and ICMIM are joint portfolio managers of UIL. Other
than investment management fees, secretarial costs and
performance fees as set out in note 3, and reimbursed
expenses included within note 4 of £55,000 (2019: £108,000),
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. At the year-end
£243,000 (2019: £310,000) remained outstanding to ICM and
ICMIM in respect of management and company secretarial fees
and £ nil (2019: £8,538,000) in respect of performance fees.
Mr Younie is a director of Bermuda Commercial Bank Limited,
BFIC, GERP, PIL, PML, Somers and West Hamilton Holdings
Limited. Mr Jillings is a director of Allectus, GERP, PIL, PML,
Somers and Waverton. Mr Jillings received dividends from UIL
of £27,125. Mr Saville is a director of Allectus, BFIC, GPLPF,
GERP, Newtel Holdings Limited, PIL, PML, Resimac Group
Limited, VixTech, West Hamilton Holdings Limited and Zeta
Energy Pte Ltd. There were no other transactions in the year
between UIL and Alasdair Younie, Charles Jillings, Duncan
Saville and Sandra Pope.
The Board
29. GOING CONCERN
As detailed in the Directors’ Remuneration Report on page
58, the Board received aggregate remuneration of £177,500
(2019: £221,000) included within “Other expenses” in note 4
for services as Directors. As at 30 June 2020, £36,500 (2019:
£25,000) remained outstanding to the Directors. In addition
to their fees, the Directors received dividends totalling
£91,137 (2019: £76,131) during the year. There were no other
transactions during the year between the Board and UIL.
Companies controlled by key management persons:
PIL and PML
PML received dividends of £387,467 from UIL. There were no
other transactions between the Company and PIL or between
the Company and PML in the year.
SIPTCL
See note 25. There were no transactions between SIPTCL and
the Company in the year.
Other
Azure Limited received dividends of £45,885 from UIL, GPLPF
received dividends of £4,250,994 from UIL, UMPF received
£156,340 from UIL, GPC received £63,000 from UIL and Mitre
Investments Limited received dividends of £202,863 from
UIL. There were no other transactions between companies
controlled by key management and UIL in the year.
UIL entered into a CFD contract to purchase the economic
rights attaching to shares of S&C Engine Group with PML.
UIL paid USD 2.2m, being the full and fair value of those
shares. UIL bears the risk of the movement in fair value of
the shares and is entitled to receive any dividends paid by
S&C Engine Group. The CFD contract has a maturity date of
twelve months after the first trade date being 4 December
2019 unless agreed by both parties to terminate the contract
earlier. There were no other transactions in the year with the
companies controlled by key management persons and UIL.
Notwithstanding that the Group has reported net current
liabilities of £115,924,000 as at 30 June 2020 (2019:
£57,584,000), the financial statements have been prepared
on a going concern basis which the Directors consider to be
appropriate for the following reasons.
The Board’s going concern assessment has focussed
on the forecast liquidity of the Group for twelve months
from the date of approval of the financial statements. This
analysis assumes that the Company will meet some of its
short term obligations through the sale of listed securities,
which represented 31% of the Company’s total portfolio as
at 30 June 2020. As part of this assessment the Board has
considered a severe but plausible downside that reflects
the impact of Covid-19 and an assessment of the Company’s
ability to meet its liabilities as they fall due (including the
loan liabilities in note 13 and the 2020 ZDP liability in note
15), assuming a significant reduction in asset values and
accompanying currency volatility.
The severe but plausible downside assumes a breach of
bank loan covenants leading to the repayment of bank loan
liabilities and a significant reduction in asset values in line
with that experienced during the emergence of the Covid-19
pandemic from January 2020 to April 2020. The Board also
considered reverse stress testing to identify the reduction
in the valuation of liquid investments that would cause the
Group to be unable to meet its net current liabilities, being
primarily the bank loan of £50,646,000 and the 2020 tranche
of the ZDP shares of £60,411,000. The Board is confident that
the reduction in asset values implied by the reverse stress
test is not plausible even in the current volatile environment.
Consequently, the Directors are confident that the Company
will have sufficient funds to continue to meet its liabilities
as they fall due for at least twelve months from the date of
approval of the financial statements. Accordingly, the Board
considers it appropriate to continue to adopt the going
concern basis in preparing the accounts.
27. CONTINGENT LIABILITIES
30. FINANCIAL RISK MANAGEMENT
UIL is a co-guarantor for the repayment of a USD 6.7m 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.
The Group’s investment objective is 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.
28. OPERATING SEGMENTS
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.
The Group seeks to meet its investment objective by
investing principally in a direct and indirect 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
94
UIL Limited
Report and Accounts for the year to 30 June 2020
95
NOTES TO THE ACCOUNTS
(continued)
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. 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
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. The exchange rates applying against Sterling as at 30
June and the average rates for the year were as follows:
2020
Average
2019
AUD – Australian Dollar
1.7946
1.8802
1.8136
BMD – Bermuda Dollar
1.2356
1.2607
1.2727
EUR – Euro
1.1001
1.1403
1.1176
USD – US Dollar
1.2356
1.2607
1.2727
The Group’s assets and liabilities as 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:
2020
Other receivables
Cash and cash equivalents
AUD
£’000s
10,529
–
Derivative financial instruments – liabilities
(37,353)
Short-term borrowings
Net monetary liabilities
Investments
Net financial assets
2019
Other receivables
Cash and cash equivalents
Derivative financial instruments – liabilities
Short-term borrowings
Net monetary liabilities
Investments
Net financial assets
(23,084)
(49,908)
97,251
47,343
AUD
£’000s
349
–
(79,782)
(38,046)
(117,479)
176,463
58,984
–
–
–
–
–
46,254
46,254
BMD
£’000s
–
–
–
–
–
BMD
£’000s
EUR
£’000s
USD
£’000s
27,770
249
Other
£’000s
375
9
Total
£’000s
38,674
258
–
–
(54,949)
(51,181)
(31,167)
(174,650)
(15,203)
–
–
(38,287)
(70,152)
(23,162)
(30,783)
(174,005)
24,387
171,839
(45,765)
148,677
21,806
(8,977)
361,537
187,532
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
Based on the financial assets and liabilities held, and exchange rates applying, as at the 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
AUD
£’000s
BMD
£’000s
EUR
£’000s
2020
USD
£’000s
AUD
£’000s
BMD
£’000s
EUR
£’000s
Revenue profit for the year
Capital profit/(loss) for the year
Total profit/(loss) for the year
102
5,260
5,362
825
5,139
5,964
–
8
(5,085)
(5,085)
16,520
16,528
212
6,515
6,727
2,354
3,081
5,435
–
2,269
2,269
2019
USD
£’000s
4
10,974
10,978
NAV per share
Basic – pence
Strengthening of Sterling
Income Statement
6.24
6.94
(5.92)
19.23
7.62
6.16
2.57
12.43
AUD
£’000s
BMD
£’000s
EUR
£’000s
2020
USD
£’000s
AUD
£’000s
BMD
£’000s
EUR
£’000s
2019
USD
£’000s
Revenue loss for the year
(102)
(825)
–
(8)
Capital (loss)/profit for the year
(5,260)
(5,139)
5,085
(16,520)
Total (loss)/profit for the year
(5,362)
(5,964)
5,085
(16,528)
(212)
(6,515)
(6,727)
(2,354)
(3,081)
(5,435)
–
(4)
(2,269)
(10,974)
(2,269)
(10,978)
NAV per share
Basic – pence
(6.24)
(6.94)
5.92
(19.23)
(7.62)
(6.16)
(2.57)
(12.43)
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.
96
UIL Limited
Report and Accounts for the year to 30 June 2020
97
NOTES TO THE ACCOUNTS
(continued)
Interest rate exposure
Other market risk exposures
The exposure of the financial assets and liabilities to interest rate risks as at 30 June is shown below:
Exposure to floating rates
Cash and margin account
Bank overdraft
Borrowings
Exposure to fixed rates
ZDP shares
Net exposures
At period end
Maximum in year
Minimum in year
Net exposures
Maximum in year
Minimum in year
2020
Total
£’000s
Within
one year
£’000s
More than
one year
£’000s
2,362
(3,514)
(51,146)
(52,298)
2,362
(3,514)
(51,146)
(52,298)
–
–
–
–
Within
one year
£’000s
3,177
–
(50,971)
(47,794)
2019
More than
one year
£’000s
–
–
–
–
Total
£’000s
3,177
–
(50,971)
(47,794)
(180,535)
(59,087)
(121,448)
(159,942)
–
(159,942)
(232,833)
(60,739)
(172,094)
(207,736)
(47,794)
(159,942)
(236,730)
(60,970)
(175,760)
(227,202)
(50,911)
(176,291)
(204,203)
(37,439)
(166,764)
(197,523)
(40,259)
(157,264)
Exposure to
floating
interest
rates
£’000s
Total
£’000s
Fixed
interest
rates
£’000s
Exposure to
floating
interest
rates
£’000s
Total
£’000s
Fixed
interest
rates
£’000s
(236,770)
(57,123)
(179,647)
(227,202)
(27,848)
(199,354)
(207,736)
(47,794)
(159,942)
(197,523)
(40,259)
(157,264)
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 (2019: 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
Increase
in rate
£’000s
(1,046)
–
(1,046)
2020
Decrease
in rate
£’000s
1,046
–
1,046
Increase
in rate
£’000s
(956)
–
(956)
2019
Decrease
in rate
£’000s
956
–
956
(0.12)
0.12
(0.11)
0.11
The portfolio of investments, valued at £488,997,000 as at 30 June 2020 (2019: £543,794,000) 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 10 and 15 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)
97,799
(97,799)
108,759
(108,759)
2020
2019
Increase
in value
Decrease
in value
Increase
in value
Decrease
in value
NAV per share
Basic – pence
(b) Liquidity risk exposure
113.80
(113.80)
123.19
(123.19)
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, 18 as at 30 June 2020 (20 as at 30 June 2019); the liquid nature of
the portfolio of investments; the geographical and sector diversity of the portfolio (see pages 10 and 15 respectively); and the
existence of an on-going loan facility agreement. Cash balances are held with reputable banks with high quality external credit
ratings.
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 and ZDP share liabilities of £180.5m 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
3,514
734
203,425
17,765
–
225,438
Bank overdraft
Other creditors
Derivative financial
instruments
Loans
ZDP shares
More than
three months
but less than
one year
£’000s
More than
one year
£’000s
2020
Total
£’000s
3,514
Three
months
or less
£’000s
–
734
9,491
203,425
173,503
–
–
–
–
51,209
149,234
209,645
–
–
More than
three months
but less than
one year
£’000s
More than
one year
£’000s
–
–
–
51,173
–
–
–
–
2019
Total
£’000s
–
9,491
173,503
51,173
–
195,226
195,226
149,234
468,527
182,994
51,173
195,226
429,393
–
–
–
33,444
60,411
93,855
98
UIL Limited
Report and Accounts for the year to 30 June 2020
99
NOTES TO THE ACCOUNTS
(continued)
(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. Prior to making investments in debt instruments, the Investment Managers have in
place a process of review that includes an evaluation of a potential investee company’s ability to service and repay its debt. The
Investment Managers review the financial position of investee companies on a regular basis. 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:
Current assets
Cash at bank
Margin account
Financial assets through profit and loss
Investments in debt instruments
Derivatives (forward foreign exchange contracts)
Derivatives (S&P options)
2020
Maximum
exposure
in the year
£’000s
5,267
2,104
105,038
198,145
24,270
30 June
£’000s
258
2,104
75,265
198,145
–
2019
Maximum
exposure
in the year
£’000s
8,399
–
109,283
199,244
–
30 June
£’000s
3,177
–
101,392
173,503
–
None of the Group’s financial assets are past due or impaired. The Group’s principal custodian is JPMorgan Chase Bank N.A.– Jersey
Branch. Waverton acts as custodian for unquoted investments. UIL has an indirect interest in Waverton.
(d) Fair values of financial assets and liabilities
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 as at 30 June, were:
2020 ZDP shares
2022 ZDP shares
2024 ZDP shares
2026 ZDP shares
2020
£’000s
59,280
63,250
31,650
21,523
2019
£’000s
58,305
66,000
34,200
14,060
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 objective of using valuation techniques is to arrive at a
fair value measurement that reflects the price that would be
received to sell the asset or paid to transfer the liability in
an orderly transaction between market participants at the
measurement date.
The Company uses proprietary valuation models, which are
compliant with IPEV guidelines and IFRS 13 and which are
usually developed from recognised valuation techniques.
Some or all of the significant inputs into these models may
not be observable in the market and are derived from market
prices or rates or are estimated based on assumptions.
Valuation models that employ significant unobservable inputs
require a higher degree of management judgement and
estimation in the determination of fair value. Management
judgement and estimation are usually required for the
selection of the appropriate valuation model to be used,
determination of expected future cash flows of the financial
instrument being valued, determination of the probability of
counterparty default and prepayments, peer group multiple
and selection of appropriate discount rates.
Fair value estimates obtained from such models are adjusted
for any other factors, such as controlling interest, historical
and projected financial data, entity specific strengths and
weaknesses, or model uncertainties, to the extent that the
Company believes that a third party market participant would
take them into account in pricing a transaction.
The Directors have satisfied themselves as to the
methodology used, the discount rates and key assumptions
applied, and the valuations. 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.
Sensitivity of level 3 financial investments measured at fair
value to changes in key assumptions.
Level 3 inputs are sensitive to assumptions made when
ascertaining fair value. The following section details the
sensitivity of valuations to variations in key inputs. The level
of change selected is considered to be reasonable, based
on observation of market conditions and historic trends.
In assessing the level of reasonably possible outcomes
consideration was also given to the impact of Covid-19 on
the valuations, the performance of the investee companies
before the outbreak of Covid-19, the projected short-term
impact on their ability to generate earnings and cash flow
and also a longer-term view of their ability to recover and
perform against their investment cases. The impact on the
valuations has been varied and largely linked to their relevant
sectors and this has been reflected in the level of sensitivities
applied.
The Directors consider that for Optal, one of the Company’s
larger investments, on account of its exposure to the travel
and global payments sectors, the impact of Covid-19 is more
challenging to predict. It is therefore likely that uncertainty
is greater and, accordingly a wider range of sensitivities has
been applied.
Zeta Bermuda incorporated
UIL has provided various loans to Zeta and, as at 30 June
2020 carried these loans at £54.4m. The loans have a
residual cost of £51.7m.
Valuation inputs: Gross asset to gross debt cover of 1.8 times.
Valuation methodology: UIL has entered into a number of
loan facilities with Zeta. These unsecured facilities carry fixed
interest rates between 7.3% and 7.5% and are repayable
upon UIL giving Zeta not less than twelve months’ notice. At
year end balances of AUD 64.7m and CAD 30.5m were drawn
down on these facilities. UIL utilises a discounted cash flows
valuation technique to estimate the fair value of these loans.
In the prior year, a discounted cash flow valuation technique
was not utilised by UIL as the Directors considered that the
fair value of the loans was equal to the par value.
Sensitivities: Should Zeta’s assets increase/decline by 20%
there would be no impact on UIL’s loans to Zeta.
Allectus Bermuda incorporated
Valuation inputs: Market value for portfolio of investments.
Valuation methodology: UIL has used the portfolio’s NAV
and carried its investment at USD 31.5m (£25.5m). Residual
cost of £22.3m. Allectus’ portfolio is concentrated in the
technology sector and its NAV was valued using valuation
techniques consistent with IFRS and was subject to audit.
The Directors considered together both Allectus’ sector
and the economic impact of Covid-19 up to 30 June 2020 in
Allectus’ portfolio valuations and assessed that the valuation
uncertainty associated with Covid-19 was at the lower end of
the risk spectrum.
Sensitivities: Should the value of Allectus move by 10% the
gain or loss would be USD 3.2m (£2.6m).
Optal UK incorporated
Valuation inputs: 14.1 times estimated 2022 EBITDA. Unlisted
and time discounts applied giving a post discount multiple of
8.9 times.
Valuation methodology: Based on a peer group valuation of
14.1 times estimated 2022 EBITDA resulting in a valuation of
100
UIL Limited
Report and Accounts for the year to 30 June 2020
101
NOTES TO THE ACCOUNTS
(continued)
EUR 554.6m. A 22.0% discount was applied to this multiple
based on an assessment of differences between Optal and
its comparable peers, and incorporates liquidity, relative
company size, product range, and growth potential. UIL
holds a 5.3% equity interest in Optal and, as at 30 June 2020,
carried this investment at EUR 26.8m (£24.4m). Residual cost
of £13.8m. The EBITDA estimates, EBITDA multiples, option
exercise assumptions and discounts applied are directly
linked to the future earnings potential of the travel and global
payments industries and will therefore include assumptions
on areas such as the duration of social distancing measures
and individual government actions, and their potential
impacts on the travel industry. Whilst the quoted multiples
should reflect the Covid-19 impact, the impact of Covid-19
on future earnings is more challenging to predict and it is
likely that uncertainty is greater and, thus, additional EBITDA
sensitivities have been applied.
In January 2020, UIL announced that it had agreed to sell
its holding in Optal to Wex Inc and in May 2020, Wex Inc
indicated that it believed that it was not legally required to
complete the transaction, citing the material adverse effect of
Covid-19 on Optal’s business. The sellers have challenged this
in the UK Commercial Court. Preliminary hearings took place
in September 2020 and the case will now proceed to a full
trial to determine whether Wex Inc must legally complete the
agreed acquisition of Optal. UIL’s valuation of Optal as at 30
June 2020 is carried at a discount to the expected proceeds
from the deal if it completes on the original terms.
Sensitivities: Optal is ungeared. Should the 2022 EBITDA
move by: EUR 5.0m the gain or loss would be EUR 2.2m
(£2.0m); EUR 10.0m the gain or loss would be EUR 4.3m
(£3.9m); or EUR 20.0m the gain or loss would be EUR 8.6m
(£7.8m). Should the peer group multiple ascribed to Optal’s
EBITDA move by 1.0, the change in valuation would be EUR
1.6m (£1.5m) while a 2.0 movement in the multiple would
result in a EUR 3.3m (£3.0m) change in valuation.
VixTech Singapore incorporated
Valuation inputs: 16.3 times estimated 2021 EBITDA. Discount
of 25.0% applied.
Valuation methodology: VixTech has been valued based
on peer comparisons and in particular EV/EBITDA. Listed
peer valuations averaged 16.3 times for 2021. Based on an
estimated 2021 EBITDA for the year to 30 June 2021, and
after applying a 25.0% unlisted discount, the valuation is USD
70.8m. The 25.0% discount was based on an assessment
of differences between VixTech and its comparable peers
and incorporates liquidity, debt profile, product range, and
business model development stage. The Directors, having
considered the VixTech’s industry (the provision of payment
solutions to the transport ticketing sector), the developing
nature of the business, and that the quoted multiples and
earnings should reflect the economic impact of Covid-19
up to 30 June 2020, assessed that the valuation uncertainty
associated with Covid-19 was of a medium risk level. UIL holds
a 39.8% equity interest in VixTech and, as at 30 June 2020,
carried this investment at USD 28.2m (£22.8m). Residual cost
of £28.1m.
Sensitivities: Should the 2021 EBITDA of VixTech move by:
USD 1.0m, the gain or loss in valuation for UIL would be USD
4.9m (£3.9m); or USD 2.0m, the gain or loss in valuation
for UIL would be USD 9.7m (£7.9m). Should the peer group
multiple ascribed to VixTech’s EBITDA move by: 1.0, the gain
or loss in valuation for UIL would be USD 1.7m (£1.4m); or
3.0, the gain or loss in valuation for UIL would be USD 5.2m
(£4.2m).
One Communications Bermuda incorporated
Valuation inputs: 7.7 times estimated 2020 maintainable
EBITDA. 23% unlisted discount applied.
Valuation methodology: The One Communications
shares were deemed not to trade in an active market
and One Communications has been valued based on
peer comparisons and in particular EV/EBITDA. Listed
peer valuations average 7.7 times for 2020 resulting in
a valuation of USD 195.6m. The 23.0% discount applied
was based on an assessment of differences between One
Communications and its comparable peers and incorporates
liquidity, geography, and growth potential. It also includes
approximately 5.0% relating to increased Covid-19 valuation
uncertainty. As disclosed in note 31, subsequent to the year
end, UIL reached an agreement on the sale of a substantial
portion of its holding in One Communications and as such
the Directors consider the valuation uncertainty associated
with Covid-19 to be low. UIL holds a 13.1% equity interest in
One Communications and, as at 30 June 2020, carried this
investment at USD 25.5m (£20.7m). Residual cost of £21.4m.
Sensitivities: Should the EBITDA of One Communications
move by USD 3.0m the gain or loss in valuation would be
USD 2.3m (£1.9m). Should the peer group multiple ascribed
to One Communications’s EBITDA move by 1.0 the change in
valuation for UIL would be USD 3.4m (£2.8m).
Somers Bermuda incorporated
UIL has provided various loans to Somers and, as at 30 June
2020, carried these loans at £17.5m. The loans have a residual
cost of £17.1m.
Valuation inputs: Gross asset to gross debt cover of 6.1 times.
Valuation methodology: UIL has entered into a number
of loan facilities with Somers. These unsecured facilities
carry fixed interest rates between 6.0% and 10.0% and are
repayable upon UIL giving Somers not less than twelve
months’ notice. At year end, balances of £8.4m, AUD 7.5m,
USD 4.4m and CAD 2.3m were drawn down on these
facilities. UIL utilises a discounted cash flows valuation
technique to estimate the fair value of these loans. In the
prior year, a discounted cash flow valuation technique was
not utilised by UIL as the Directors considered that the fair
value of the loans was equal to the par value.
Sensitivities: Somers had gross asset to gross debt cover of
6.1 times as at 30 June 2020. UIL therefore considers that no
reasonably possible change in Somers’ assets would result in
a change in the value of UIL’s loans to Somers.
BFIC Bermuda incorporated
Valuation inputs: Market value for portfolio of investments.
Valuation methodology: UIL has used the portfolio’s NAV and
carried its investments at USD 3.6m (£2.9m). Residual cost of
£0.6m. A substantial majority of BFIC’s portfolio consists of
Ascendant shares and as disclosed in note 31, subsequent
to the year end it was announced that all the remaining
conditions for the sale of Ascendant to Algonquin had been
satisfied and it is expected that the transaction will complete
in mid-November 2020. As such valuation uncertainty
associated with Covid-19 is low.
Sensitivities: Should the value of BFIC fall by 10% the gain or
loss would be USD 0.4m (£0.3m)
Other unlisted companies
Valuation methodology: UIL has a further 16 unlisted
holdings valued below £2.5m each. These holdings were
valued using a variety of methods, including; EV/EBITDA
multiple, EV/Revenue multiple, discounted cash flows,
fair value of the underlying net assets, and cost of recent
investments adjusted for events subsequent to acquisition
that impact fair value. The total value of these 16 holdings
was £9.5m as at 30 June 2020.
Sensitivities: If the value of all these lower valued investments
moved by 10.0%, this would have an impact on the
investment portfolio value of £1.0m or 0.2%. A 20.0% change
would have an impact on the investment portfolio value of
£1.9m or 0.4%.
Level 2 financial instruments
Somers Bermuda incorporated
Somers is UIL’s largest investment with a value of £131.0m as
at 30 June 2020 accounting for 26.8% of UIL’s total portfolio.
This investment consists of £113.5m of equity and £17.5m of
loans provided to Somers. UIL’s equity investment in Somers
is valued based on Somers’ listed share price of USD 15.00
per share. The market for Somers’ shares was considered
inactive as at 30 June 2020 and the investment is classified as
level 2.
Somers is a financial services investment holding company,
listed on the Bermuda Stock Exchange. It is classified as an
investment company under IFRS 10 and, accordingly, values
its underlying investments at fair value.
As an investment company, Somers’ value is based primarily
on the performance and valuation of its portfolio of
investments which are concentrated in the banking, wealth
management and asset financing sectors. Its portfolio
valuation and share price is therefore linked to the expected
future performance of these sectors including assumptions
around the expected impact of Covid-19. Somers’ four
largest investments, which make up 87.5% of its portfolio,
are a 62.5% holding in Resimac Group Limited, a nonbank
Australian financial institution, a 100.0% shareholding in BCB,
a Bermuda bank, a 62.9% shareholding in PCF Group plc, a UK
specialist bank, and a 62.5% holding in Waverton Investment
Management Group Limited, a UK wealth manager.
Somers reported an unaudited NAV per share of USD 17.61
as at 30 June 2020. This NAV included Somers’ valuation of
its holding in Resimac of AUD 1.24 per share. Had Somers
utilised Resimac Group Limited’s listed share price of AUD
1.00 per share, its 30 June 2020 NAV would have been USD
15.59.
Due to the low level of transactional volume in Somers shares
and the impact a change in the share price could have on
UIL’s carrying value, sensitivity figures have been calculated
for a range of share price movements that UIL considers
reasonably possible based on observations of market
conditions and historic trends in the stock.
Sensitivities: Somers is valued based on its listed share price
of USD 15.00. This represents a 3.8% discount to Somers’
NAV (utilising Resimac Group Limited’s listed share price) of
USD 15.59. Should the Somers’ share price decrease by: USD
1.00 per share the loss would be USD 9.4m (£7.6m); USD 2.00
the loss would be USD 18.7m (£15.1m); or USD 3.00 the loss
would be USD 28.1m (£22.7m). Should the Somers’ share
price increase by USD 1.00 per share the gain would be USD
9.4m (£7.6m).
(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 17.
Dividends are set out in note 8. Bank loans are set out in note
13. ZDP shares are set out in note 15.
102
UIL Limited
Report and Accounts for the year to 30 June 2020
103
NOTES TO THE ACCOUNTS
(continued)
OTHER FINANCIAL INFORMATION (UNAUDITED)
31. SUBSEQUENT EVENTS
During the year, shareholders of Ascendant, including UIL,
overwhelmingly approved the sale of Ascendant to Algonquin
for USD 36.00 a share. On 19 October 2020, UIL announced
that all the remaining conditions for the sale of Ascendant
to Algonquin had been satisfied and that the transaction will
complete in mid-November 2020. UIL also announced that it
had sold its direct holding of Ascendant shares to BFIC at the
sale price of USD 33.3m.
On 27 January 2020, UIL announced that it had agreed to
sell its holding in Optal to Wex Inc. On 7 May 2020, Wex Inc
indicated that it believed that it was not legally required
to complete the transaction, citing the material adverse
effect of the pandemic on Optal’s business. The sellers have
challenged this in the UK Commercial Court. Preliminary
hearings took place in September 2020, with the initial ruling
on certain descriptive terms favouring Wex Inc’s position. The
case will now proceed to a full trial to determine whether Wex
Inc must legally complete the agreed acquisition of Optal.
In October 2020, UIL sold the majority of its holding in One
Communications to One Communications’ majority holder.
The balance of One Communications’ holding was sold to
BFIC in October and BFIC paid USD 39.0m to UIL.
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 are shown below:
Leverage exposure
Maximum permitted limit
Actual
Gross
method
425%
251%
2020
Commitment
method
425%
251%
Gross
method
425%
215%
2019
Commitment
method
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.
104
UIL Limited
Report and Accounts for the year to 30 June 2020
105
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting of
UIL Limited will be held at Clarendon House, 2 Church Street,
Hamilton HM 11, Bermuda on Tuesday, 8 December 2020
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 13, as ordinary
resolutions and, in the case of resolution 14, as a special
resolution).
ORDINARY BUSINESS
1.
To receive and adopt the report of the Directors of the
Company and the financial statements for the year ended
30 June 2020, together with the report of the auditor
thereon.
2. To approve the Directors’ Remuneration Policy.
3.
4.
To approve the Directors’ Remuneration Report for the
year ended 30 June 2020.
To approve the Company’s dividend policy to pay four
interim dividends per year.
5. To elect Mr S Bridges as a Director.
6. To re-elect Mr P Burrows as a Director.
7. To re-elect Ms A Hill as a Director.
(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; and
(e) unless renewed, the authority hereby conferred
shall expire at the conclusion of the Annual General
Meeting to be held in 2021 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.
13. That the Company’s Bye-laws produced to the meeting
and initialled by the Chairman of the meeting for the
purpose of identification be adopted as the Bye-laws
of the Company with effect from the conclusion of the
meeting in substitution for, and to the exclusion of, the
existing Bye-laws of the Company.
8. To re-elect Mr C Samuel as a Director.
Special resolution
9. To re-elect Mr D Shillson as a Director.
14. That, for the purpose of Bye-law 4A of the Company’s
10. 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.
11. To authorise the Directors to determine the auditor’s
remuneration.
SPECIAL BUSINESS
Ordinary resolutions
12. 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 12,880,000 (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;
(c) the maximum price (exclusive of expenses payable
by the Company) which may be paid for an Ordinary
Share shall be the higher of:
Bye-laws, the Company may issue Relevant Securities (as
defined in the Bye-laws) representing up to 4,290,000
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 2021 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.
By order of the Board
ICM Limited, Secretary
27 October 2020
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 4 December
2020 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 4 December 2020 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
4 December 2020.
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
5:00 pm (GMT) on 4 December 2020. 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 3 December 2020 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 3 December 2020.
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
85,939,314 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 85,939,314.
106
106
UIL Limited
Report and Accounts for the year to 30 June 2020
107
UIL Limited
COMPANY INFORMATION
ALTERNATIVE PERFORMANCE MEASURES
DIRECTORS
Peter Burrows, AO (Chairman)
Stuart Bridges
Alison Hill
Christopher Samuel
David Shillson
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
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 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
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
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 flow, 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 2020 the ordinary share price was 177.50p and
the NAV per ordinary share was 292.79p, the discount
was therefore 39.4%.
Gearing – represents the ratio of the borrowings less
cash and cash equivalents of the Company to its net
assets.
Bank overdraft
Cash and cash
equivalents
Bank loans
Coldharbour loan
ZDP shares
Total debt
Net assets attributable
to equity holders
Gearing
page
87
74
87
87
88
74
4
2020
£’000s
3,514
(258)
50,646
500
180,535
234,937
2019
£’000s
–
(3,177)
50,971
–
159,942
207,736
251,625
326,268
93.4%
63.7%
NAV per ordinary share – the value of the Group’s
net assets divided by the number of ordinary shares in
issue (see note 23 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.
Year to 30 June
2020
Dividend rate
(pence)
NAV
(pence)
Share price
(pence)
30-Jun-19
27-Sep-19
20-Dec-19
27-Mar-20
26-Jun-20
30-Jun-20
Total return
n/a
369.57
1.875
1.875
2.000
2.000
379.77
343.46
257.03
278.36
n/a
292.79
-18.7%
199.00
254.00
247.00
140.00
175.00
177.50
-7.1%
Year to 30 June
2019
Dividend rate
(pence)
NAV
(pence)
Share price
(pence)
30-Jun-18
21-Sep-18
21-Dec-18
29-Mar-19
28-Jun-19
30-Jun-19
Total return
n/a
1.875
1.875
1.875
1.875
n/a
291.79
305.61
280.64
335.31
369.57
369.57
29.7%
174.50
183.50
171.50
177.50
199.00
199.00
18.8%
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
reinvested 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.
2020
Share
price
(pence)
NAV
(pence)
2019
Share
price
(pence)
NAV
(pence)
99.47
85.67
99.47
85.67
2.0347
2.4338
1.9839
2.3374
292.79
177.50
369.57
199.00
595.74
432.00
733.18
465.13
498.9% 404.3% 637.1% 443.0%
Total return
NAV 14 August 2003
(pence)
Total dividend,
warrants and CULS
adjustment factor
NAV/Share price at
year end (pence)
Adjusted NAV/Share
price at 30 June
(pence)
Total return since
inception
108
109
UIL LimitedReport and Accounts for the year to 30 June 2020
ALTERNATIVE PERFORMANCE MEASURES
(continued)
HISTORICAL PERFORMANCE
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.
Revenue yield – represents the ratio of total income in
the year over average gross assets in the year.
2020
Share
price
(pence)
NAV
(pence)
NAV
(pence)
2019
Share
price
(pence)
Income
Average Gross assets
Revenue yield
page
70
2020
£’000s
2019
£’000s
12,684
11,184
514,311
497,867
2.5%
2.2%
Annual compound
NAV total return
since inception
11.2%
10.1%
13.4%
11.2%
Dividend yield – represents the ratio of dividends per
ordinary share over closing ordinary share price.
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 NAV
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)
2020
£’000s
2019
£’000s
page
Management and administration
fees
Other expenses
Expenses suffered within
underlying funds
Total expenses for ongoing
charges calculation
70
1,426
1,587
939
1,178
3,555
3,188
5,920
5,953
Average weekly NAV of the Group
287,788 285,326
Ongoing Charges
4
2.1%
2.1%
Ongoing changes calculation
(including performance fees)
2020
£’000s
2019
£’000s
page
Management and administration
fees
Other expenses
Expenses suffered within
underlying funds
Total expenses for ongoing
charges calculation
70
1,426
10,125
939
1,178
3,555
3,188
5,920
14,491
Average weekly NAV of the Group
287,788 285,326
Ongoing Charges
4
2.1%
5.1%
Dividends per ordinary
shares
Ordinary share price
Dividend yield
page
2020
£’000s
2019
£’000s
4
4
7.875
7.500
177.50
199.00
4.4%
3.8%
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
74
2020
10,850
2019
9,090
90 85,939,314 88,283,389
12.63
10.30
Dividend per ordinary share cover – represents
revenue reserves per ordinary share carried forward
over the dividends per ordinary share
Revenue reserves per
ordinary share carried
forward (pence)
Dividends per ordinary
shares
Dividend per ordinary
share cover
page
2020
2019
12.63
10.30
4
7.875
7.500
1.6x
1.4x
at 30 June
2020
2019
2018
2017
2016
2015
2014
2013(1)
2012
2011
NAV per ordinary share (pence)
292.79
369.57 291.79 252.86 241.12 169.00 165.84 148.33 209.67 201.63
Ordinary share price (pence)
177.50
199.00 174.50 164.00 130.75 117.00 128.00 130.00 144.00 147.25
Discount (%)
39.4
46.2
40.2
35.1
45.8
30.8
22.8
12.4
31.3
27.0
Returns and dividends (pence)
Revenue return per ordinary share
9.77
7.63
6.67
6.38
6.23
Capital return per ordinary share
(81.30)
75.34
38.96
12.46
68.45
7.84
2.47
7.03
12.06
11.99
7.65
19.85 (63.65)
2.73
26.05
Total return per ordinary share
(71.53)
82.97
45.63
18.84
74.68
10.31
26.88 (51.59)
14.72
33.70
Dividend per ordinary share
7.875(2)
7.500
7.500
7.500
7.500
7.500
7.500 10.000(3)
7.000
8.250
FTSE All-Share total return Index
6,465
7,431
7,389
6,777
5,737
5,614
5,471
4,837
4,101
4,234
ZDP shares (4) (pence)
2020 ZDP shares
Capital entitlement (5) per ZDP share
151.23
141.01 131.52 122.64 114.35 106.61
ZDP share price
2022 ZDP shares
152.00
149.50 142.50 140.38 130.00 122.38
Capital entitlement (5) per ZDP share
127.59
120.03 113.01 106.37 100.12
ZDP share price
2024 ZDP shares
126.50
132.00 124.50 119.50 104.50
Capital entitlement (5) per ZDP share
113.13
107.97 103.10
ZDP share price
2026 ZDP shares
105.50
114.00 107.50
Capital entitlement (5) per ZDP share
111.21
105.89 100.87
ZDP share price
92.25
107.50 102.25
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
Equity holders' funds (£m)
Gross assets (6)
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 (7)
(excluding performance fee)
Gearing (7)
483.3
537.2
488.3
449.7
440.7
373.4
399.1
383.0
434.5
408.7
50.6
51.0
27.8
47.8
24.7
34.4
22.2
42.5
0.0
30.9
180.5
159.9
199.4
173.8
197.4
172.4
212.5
193.4
224.4
172.8
0.5
–
–
–
–
–
–
–
1.2
3.5
251.6
326.3
261.1
228.1
218.6
166.6
164.4
147.1
208.9
201.5
12.7
11.2
10.6
10.7
10.5
11.2
10.4
16.2
15.9
11.9
2.6
1.6
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
2.1
93.4
2.1
64.6
2.2
87.3
2.1
3.3
2.0
2.2
1.8
1.7
2.0
97.2
101.6
124.1
144.4
160.4
108.0
102.8
1. Restated on adoption of IFRS10 Consolidated Financial Statements
2. The fourth quarterly dividend of 2.00p has not been included as a liability in the accounts
3. Includes the special dividend of 2.50p per share
4. Issued by UIL Finance, a wholly owned subsidiary of UIL
5 .See pages 55 and 56
6. Gross assets less current liabilities excluding loans
7. See Alternative Performance Measures on pages 109 and 110
110
UIL Limited
Report and Accounts for the year to 30 June 2020
111
111
Report and Accounts for the year to 30 June 2020
A DIVERSE PORTFOLIO BY GEOGRAPHY AND SECTOR
UK CONTACT
PO Box 208
Epsom Surrey
KT18 7YF
Telephone: +44 (0)1372 271486
www.uil.limited