REG - UIL Finance Ltd UIL Limited Utilico Limited 2014 UIL Finance - UTLG - Final Results
22/09/2022 07:01
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RNS Number : 2220A UIL Finance Limited 21 September 2022
UIL Finance Limited
REPORT AND ACCOUNTS
FOR THE YEAR ENDED 30 JUNE 2022
UIL Finance Limited
REPORT AND ACCOUNTS
for the year ended 30 June 2022
Contents Page
Company Directory 2
Strategic Report 3
Directors' Report 4
Statement of Directors' Responsibilities 6
Independent Auditor's Report 7
Income Statement 11
Statement of Changes in Equity 11
Statement of Cash Flows 11
Statement of Financial Position 12
Notes to the Accounts 13
UIL Finance
Limited
COMPANY DIRECTORY
Registered Office Clarendon House
2 Church Street
Hamilton HM11
Bermuda
Directors Peter Burrows, AO (Chairman)
Stuart Bridges
Alison Hill
Christopher Samuel
David Shillson
Company Number 39479
Legal Entity Identifier 213800JPJWZ5P3QJX538
Auditor KPMG LLP
15 Canada Square
Canary Wharf
London E14 5GL
United Kingdom
Date of Formation 17 January 2007
Nature of Business Closed end investment company
Ordinary Shareholder and Parent Company UIL Limited
UIL Finance Limited
STRATEGIC REPORT
The Strategic Report is designed to provide shareholders with an insight into
the operations of the Company during the period. In particular, it gives
information on:
• the Company's objective and investment policy;
• the regulatory and competitive environment within which the Company
operates;
• the Board's strategy for achieving its stated objectives;
• principal risks and risk management; and
• key performance indicators.
Objective
The Company's investment objective is to finance and fund the final capital
entitlements of the zero dividend preference ("ZDP") shares.
Investment policy
The Company seeks to fund the final capital entitlements of the ZDP shares by
lending current asset funds to its parent company, UIL Limited.
Regulatory and competitive environment
The Company is obliged to comply with Bermuda law, the Listing Rules of the
Financial Conduct Authority and United Kingdom adopted International Financial
Reporting Standards ("UK adopted IFRSs"). The Company is exempt from taxation,
except insofar as it is withheld from income received. Under Bermuda law, the
Company may not distribute income by way of a dividend unless, after
distribution of the dividend, the realisable value of the Company's assets
would be greater than the aggregate of its liabilities. ICM Investment
Management Limited ("ICMIM") is the Alternative Investment Fund Manager of UIL
Limited and joint investment manager with ICM Limited ("ICM"). ICM is the
company secretary.
Strategy for achieving objectives
The Company's performance in pursuing its objective is based on the ability of
its parent company to repay the intra-group loan to the Company. UIL Limited
has provided an undertaking to provide sufficient funds to the Company to meet
each redemption as it falls due.
Principal risks
The principal underlying risk of the Company continues to relate to its
ability to repay the ZDP shares when they fall due. This is dependent on the
asset performance of the parent company. As at 30 June 2022, the parent
company had net assets of £218,507,000 (2021: £363,751,000) after providing
for amounts due to ZDP shareholders. Details of the ZDP shares are set out in
note 7 to the accounts.
A further risk faced by the Company is that of a regulatory nature. A
regulatory or legal breach could lead to financial penalties or a qualified
audit report. The Company uses all reasonable efforts to ensure that the
Company adheres to the relevant statutory and regulatory requirements.
Key Performance Indicators
The Board assesses the Company's success in pursuing its objectives in the
ability to provide for the amounts due to the ZDP shareholders which is based
on the ability of its parent company to repay the intra-group loan to the
Company. The KPIs for the parent company can be found in UIL Limited's Annual
Report.
This Strategic Report was approved by the Board of Directors on 21 September
2022.
ICM Limited
Company Secretary
21 September 2022
UIL Finance Limited
DIRECTORS' REPORT
The Directors present their report and accounts of the Company for the year
ended 30 June 2022.
Principal activity and status
UIL Finance Limited (the "Company" or "UIL Finance") is a Bermuda exempted,
closed ended investment company with company registration number 39479. The
Company's issued ZDP shares are listed on the standard segment of the main
market of the London Stock Exchange.
Corporate Governance
Bermuda does not have its own corporate governance code and, since the Company
has a Standard Listing on the Official List of the Financial Conduct
Authority, the Company is not required to comply or provide an explanation for
any non-compliance with the UK Corporate Governance Code issued by the
Financial Reporting Council.
The Board meets at least twice a year to consider strategic affairs and to
approve the half yearly report and the annual report and accounts.
In the Directors' opinion, the interests of the Company and its shareholders
are adequately covered by the governance procedures applicable to its parent
company, UIL Limited. For example, UIL Limited's Audit & Risk Committee
considers the financial reporting procedures and oversees the internal control
and risk management systems for the Group as a whole and the Directors see no
benefit in convening a separate Audit Committee or any other committee for the
Company. An overview of the Group's internal control and risk management
systems are set out in UIL Limited's report and accounts.
Results and Dividends
The results for the year are set out in the attached accounts which are
prepared on a going concern basis and as set out in note 13, the Directors
believe that it is appropriate to adopt the going concern basis in preparing
the accounts as the Company can continue to operate due to the contractual
obligation of the parent company to ensure that UIL Finance is able to redeem
the ZDP shares on each repayment date and the Directors are comfortable that
the parent company has the financial resources to do so.
The Company has not declared a dividend in respect of the year ended 30 June
2022 (2021: nil).
Directors
The following Directors held office throughout the year, unless otherwise
stated:
Peter Burrows (Chairman)
Stuart Bridges
Alison Hill
Christopher Samuel
David Shillson
Directors' Disclosures
As at 30 June 2022, no Director had any interest in the Company's shares
(2021: none). No Director acquired or disposed of any interest in the shares
in the Company during the year or since the year end.
Election and re-election of Directors
The Company'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, the directors have voluntarily agreed to be subject to
annual re-election. Consequently, at the forthcoming AGM Mr Burrows, Mr
Bridges, Ms Hill, Mr Samuel and Mr Shillson will stand for re-election.
The Board has considered the re-election of all the Directors individually and
has reviewed the composition of the Board as a whole and borne in mind the
need for a proper balance of skills and experience. Following an appraisal of
the performance of each of the Directors, the Board believes that these
Directors make a valuable contribution based on their individual skills,
knowledge and experience. They have commitment to their roles and the Board
believes that their election and re-election would be in the best interests of
the Company.
Each Director has signed a letter of appointment setting out the terms of
their engagement as a Director, but does not have a service agreement with the
Company.
Board Meetings
The Board meets at least twice a year to consider strategic affairs and to
approve the half yearly report and the annual report and accounts. In view of
the nature of the Company's business the Board does not consider it necessary
to appoint a separate audit committee or nominations committee.
Directors' Remuneration
No Director received or is entitled to receive any remuneration from the
Company.
Zero dividend preference shares
Full details of the changes to the Company's authorised and issued zero
dividend preference shares during the year can be found in note 7 to the
accounts.
Ordinary Share Capital
Full details of the changes to the Company's authorised and issued ordinary
share capital during the year can be found in note 8 to the accounts.
Ordinary shares of UIL Limited
Ordinary shares of UIL Limited rank behind the ZDP shares on a winding up of
the Company and UIL Limited, together referred to as the Group (save for any
undistributed revenue reserves of UIL Limited on a winding up).
Auditor
KPMG LLP ("KPMG") was the Company's auditor for the year ended 30 June 2022
and was responsible for the audit of these accounts.
Audit fees relating to the year amounted to £7,500 (2021: £7,500) and were
settled by the parent company, UIL Limited.
No fees were paid or payable to KPMG for non-audit work for the year under
review (2021: £nil).
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.
By order of the Board
ICM Limited,
Secretary
21 September 2022
UIL Finance Limited
STATEMENT OF DIRECTORS' RESPONSIBILITIES
in respect of the Report and Accounts
The Directors are responsible for preparing the Annual Report and Accounts in
accordance with applicable law and regulations.
The Directors are required to prepare Company financial statements for each
financial year. They have elected to prepare the financial statements in
accordance with UK-adopted international accounting standards and applicable
law.
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
Company and of the profit or loss for that period. In preparing the 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 UK adopted
International Accounting Standards;
· assess the 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 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 Company's transactions and disclose with
reasonable accuracy at any time the financial position of the 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 Company and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, and Corporate Governance
Statement that complies with that law and those regulations.
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 Strategic Report and Director' Report include a fair review of the
development and performance of the business and the position of the Company,
together with a description of the principal risks and uncertainties that it
faces.
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 Company's position and performance, business model
and strategy.
Approved by the Board on 21 September 2022 and signed on its behalf by:
Peter Burrows
Chairman
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF
UIL Finance Limited
1 Our opinion is unmodified
We have audited the financial statements of UIL Finance Limited ("the
Company") for the year ended 30 June 2022 which comprise the Income Statement,
Statement of Financial Position, Statement of Changes in Equity, Statement of
Cashflows, 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 Company's affairs
as at 30 June 2022 and of its result for the year then ended; and
· have been properly prepared in accordance with UK-adopted
international accounting standards.
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 believe that the audit evidence we have obtained is a sufficient
and appropriate basis for our opinion. Our audit opinion is consistent with
our report to the Board.
We were first appointed as auditor by the shareholders for the year ended 30
June 2013. The period of total uninterrupted engagement is for the ten
financial years ended 30 June 2022. We have fulfilled our ethical
responsibilities under, and we remain independent of the Company in accordance
with, UK ethical requirements including the FRC Ethical Standard as applied to
other listed entities.
2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, 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. We summarise below the key
audit matter, in arriving at our audit opinion above, together with our key
audit procedures to address those matters and, as required for public interest
entities, our results from those procedures. This matter was addressed, and
our results are based on procedures undertaken, in the context of, and solely
for the purpose of, our audit of the financial statements as a whole, and in
forming our opinion thereon, and consequently are incidental to that opinion,
and we do not provide a separate opinion on this matter.
The risk Our response
Recoverability of loan to Parent Company Low risk, high value
(144.2 million, 2021: £136.2 million) The carrying amount of the Loan to parent company balance represents 100% We performed the tests below rather than seeking to rely on any of the
(2021:100%) of the Company's total assets. The recoverability is not at a high Company's controls because the nature of the balance is such that we would
risk of significant misstatement or subject to significant judgement. However, expect to obtain audit evidence primarily through the detailed procedures
due to its materiality in the context of the financial statements, this is described.
Refer to page 14 (accounting policy) and page 15 (financial disclosures) considered to be the area that had the greatest effect on our overall audit.
Our procedures included:
Tests of detail: Assessing 100% of the debtor to identify, with reference to
the Parent Company's financial statements, whether the Parent Company has a
positive net asset value and therefore coverage of the debt owed, as well as
assessing whether the Parent Company has historically been profit-making; and
Assessing the Parent Company audit: Assessing the work performed by the Parent
Company audit team, and considering the results of that work, on those net
assets, including assessing the liquidity of the assets and therefore the
ability of the Parent Company to fund the repayment of the receivable.
Our results:
We found the Company's assessment of the recoverability of the loan to the
Parent Company to be acceptable
We continue to perform procedures over the accuracy of Zero Dividend
Preference ("ZDP") shares and the associated finance costs. However, following
consideration that the ZDP shares are valued at amortised cost with no
judgement required in the measurement including the associated finance costs,
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.
3 Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at £1.4 million
(2021: £1.3 million), determined with reference to a benchmark of total
assets, of which it represents 1% (2021: 1%).
In line with our audit methodology, our procedures on individual account
balances and disclosures were performed to a lower threshold, performance
materiality, so as to reduce to an acceptable level the risk that individually
immaterial misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance materiality was
set at 75% (2021: 75%) of materiality for the financial statements as a whole,
which equates to £1.0 million (2021: £1.0 million). We applied this
percentage in our determination of performance materiality because we did not
identify any factors indicating an elevated level of risk.
We agreed to report to the Board any corrected or uncorrected identified
misstatements exceeding £0.07 million (2021: £0.06 million), in addition
to other identified misstatements that warranted reporting on qualitative
grounds.
Our audit of the company was undertaken to the materiality level specified
above and was performed by a single audit team.
The scope of the audit work performed was fully substantive as we did not rely
upon the Company's internal control over financial reporting.
4 Going concern
The Directors have prepared the financial statements on the going concern
basis as they do not intend to liquidate the Company or to cease its
operations, and as they have concluded that the Company'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 its 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").
We used our knowledge of the Company, its industry, and the general economic
environment to identify the inherent risks to its business model and analysed
how those risks might affect the Company's financial resources or ability to
continue operations over the going concern period. The risks that we
considered most likely to adversely affect the Company's available financial
resources and its ability operate over this period were:
· Recoverability of the debt due from the Parent Company (UIL
Limited), to meet the ZDP shares liabilities.
We considered whether this risk could plausibly affect the liquidity in the
going concern period by assessing the degree of downside assumption that,
individually and collectively, could result in a liquidity issue, taking into
account the Parent Company's current and projected cash and liquid investment
position (and the results of a reverse stress test).
We considered whether the going concern disclosure in note 1(a) and note 13 to
the financial statements gives a full and accurate description of the
Directors' assessment of going concern, including the identified risks and
related sensitivities.
Our conclusions based on this work:
· we consider that the directors' use of the going concern basis of
accounting in the preparation of the financial statements is appropriate;
· we have not identified, and concur with the directors' assessment
that there is not, a material uncertainty related to events or conditions
that, individually or collectively, may cast significant doubt on the
Company's ability to continue as a going concern for the going concern period;
and
· we found the going concern disclosure in note 1(a) and note 13 to
be acceptable.
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 above conclusions are not
a guarantee that the Company will continue in operation.
5 Fraud and breaches of laws and regulations - ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud ("fraud risks") we
assessed events or conditions that could indicate an incentive or pressure to
commit fraud or provide an opportunity to commit fraud. Our risk assessment
procedures included:
· Enquiring of Directors as to the Company's high-level policies
and procedures to prevent and detect fraud, as well as whether they have
knowledge of any actual, suspected or alleged fraud.
· Assessing the segregation of duties in place between the
Directors, and the Company's Investment Manager; and
· Reading Board minutes.
We communicated identified fraud risks throughout the audit team and remained
alert to any indications of fraud throughout the audit.
As required by auditing standards and taking into our overall knowledge of the
control environment, we perform procedures to address the risk of management
override of controls, in particular the risk that management may be in a
position to make inappropriate accounting entries.
We evaluated the design and implementation of the controls over journal
entries and other adjustments and made inquiries of the Investment Manager
about inappropriate or unusual activity relating to the processing of journal
entries and other adjustments. We substantively tested all material
post-closing entries and, based on the results of our risk assessment
procedures and understanding of the process, including the segregation of
duties between the Directors and the Administrator, no further high-risk
journal entries or other adjustments were identified.
On this audit we do not believe there is a fraud risk related to revenue
recognition because the revenue is non-judgmental and straightforward, with
limited opportunity for manipulation.
We did not identify significant unusual transactions or any additional fraud
risks.
Identifying and responding to risks of material misstatement related to
compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected
to have a material effect on the financial statements from our general
commercial and sector experience, and through discussion with the Directors
and the Investment Manager, (as required by auditing standards), and discussed
with the Directors and the Investment Manager the policies and procedures
regarding compliance with laws and regulations. As the Company is regulated,
our assessment of risks involved gaining an understanding of the control
environment including the entity's procedures for complying with regulatory
requirements.
The potential effect of these laws and regulations on the financial statements
varies considerably.
Firstly, the Company is subject to laws and regulations that directly affect
the financial statements including financial reporting legislation (including
related companies legislation), listing regulations, and we assessed the
extent of compliance with these laws and regulations as part of our procedures
on the related financial statement items.
Secondly, the Company is subject to many other laws and regulations where the
consequences of non-compliance could have a material effect on amounts or
disclosures in the financial statements, for instance through the imposition
of fines or litigation. We identified the following areas as those most likely
to have such an effect: money laundering, data protection, bribery and
corruption legislation, and certain aspects of company legislation recognising
the financial and regulated nature of the Company's activities and its legal
form. Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of the Directors and
Investment Manager and inspection of regulatory and legal correspondence, if
any. Therefore, if a breach of operational regulations is not disclosed to us
or evident from relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or
regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk
that we may not have detected some material misstatements in the financial
statements, even though we have properly planned and performed our audit in
accordance with auditing standards. For example, the further removed
non-compliance with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection
of fraud, as these may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. Our audit procedures
are designed to detect material misstatement. We are not responsible for
preventing non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
6 We have nothing to report on the other information in 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.
7 Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 6, 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 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 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
(http://www.frc.org.uk/auditorsresponsibilities) .
9 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. 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 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 (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
20 Castle Terrace
Edinburgh
EH1 2EG
21 September 2022
UIL Finance Limited
INCOME STATEMENT
Year to Year to
30 June 30 June
2022 2021
Note £'000s £'000s
Income 2 7,988 8,762
Total income 7,988 8,762
Other expenses - -
Profit before finance costs and taxation 7,988 8,762
Finance costs 3 (7,988) (8,762)
Result before taxation - -
Taxation - -
Result for the year - -
Earnings per share - pence - -
The Company does not have any income or expense that is not included in the
result for the year and therefore the result 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 are derived from continuing operations.
The notes on pages 13 to 21 form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
There are no movements in equity.
STATEMENT OF CASH FLOWS
There were no cash flows in the period and therefore a cash flow statement has
not been prepared.
UIL Finance Limited
STATEMENT OF FINANCIAL POSITION
As at 30 June 2022 2021
Note £'000s £'000s
Non-current assets
Other receivables 6 93,079 136,257
Current assets
Other receivables 6 51,166 -
Current liabilities
Zero dividend preference shares 7 (51,166) -
Total assets less current liabilities 93,079 136,257
Non-current liabilities
Zero dividend preference shares 7 (93,079) (136,257)
Net assets - -
Equity attributable to equity holders
Ordinary share capital 8 - -
Approved by the Board on 21 September 2022 and signed on its behalf by
Peter Burrows
Chairman
The notes on pages 13 to 21 form part of these financial statements.
UIL Finance Limited
NOTES TO THE ACCOUNTS
for the year to 30 June 2022
1. Accounting policies
The Company is an investment company incorporated in Bermuda on 17 January
2007.
(a) Basis of accounting
The financial statements of the Company have been prepared on a going concern
basis (see note 13) in accordance with UK-adopted international accounting
standards, which comprise standards and interpretations approved by the
International Accounting Standards Board and International Accounting
Standards Committee that remain in effect.
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 Company.
(b) Zero dividend preference shares
The ZDP shares, due to be redeemed on 31 October 2022, 2024, 2026 and 2028, at
a redemption value, including accrued capitalised returns of 146.99 pence per
share, 138.35 pence per share, 151.50 pence per share and 152.29 pence per
share respectively, have been classified as liabilities, as they represent an
obligation on behalf of the Company 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 the requirements
of IFRS 9 "Financial Instruments", even though under Bermuda company law ZDP
shares are required to be recognised as share capital in the Company.
(c) Cash flow statement
There were no cash flows in the period or in the prior year and therefore a
cash flow statement has not been prepared. All transaction movements were
through the intra-group loan account.
(d) Foreign currency
The functional and reporting currency is pounds sterling because the Company's
ZDP share capital was raised, and will be repaid, in pounds sterling, and has
been lent to, and will be repaid, by the parent company, in that currency.
(e) Income
(i) Interest income
Interest on debt is accrued on a time basis using the effective interest
method, calculated by accreting the initial recognition of the inter-company
loan at present value (loan and contribution by the parent) to the final
amount receivable at maturity.
(ii) Other income
The parent's contribution towards the issue costs of the ZDP shares and
redemption proceeds is accrued on a time basis, calculated by amortising the
issue costs over the life of the loan.
(f) Expenses
The Company incurs no expenses other than finance costs. The Directors are not
entitled to receive any remuneration and all other expenses relating to the
Company are paid in full by the parent company.
(g) Finance costs
Finance costs are accounted for on an effective interest method.
UIL Finance Limited
NOTES TO THE ACCOUNTS (CONTINUED)
1. Accounting policies (continued)
(h) Inter company loans
UIL Limited has undertaken (i) to repay any interest free loan, and (ii) to
reimburse the Company (by way of payment in advance, if required) any and all
costs, expenses, fees or interest the Company incurs or is otherwise liable to
pay to the holder of the ZDP shares so as to enable the Company to pay the
final capital entitlement of each class of ZDP share on their respective
redemption date. The amount owed in the accounts is based on the entitlements
of the ZDP shareholders at the relevant date. The inter company loans are
accordingly accounted for at amortised cost, using the effective interest
method and were assessed for credit risk under the new IFRS 9 methodology and
evaluated as having no significant credit risk. Therefore, no amounts were
recognised as an impairment provision.
(i) Use of judgements, estimates and assumptions
The presentation of the financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets,
liabilities, income and expenses. Estimates and judgements are continually
evaluated and are based on perceived risks, historical experience,
expectations of plausible future events and other factors. Actual results may
differ from these estimates. The area requiring the most significant judgement
and estimation in the preparation of the financial statements is the
accounting through the Income Statement of the parent contribution to UIL
Finance to enable UIL Finance to repay the ZDP shareholders on each repayment
date. The parent's contribution towards the issue cost of the ZDP shares and
redemption proceeds has been treated through the Income Statement and
recognised over the life of the loan as UIL Finance provides financing
services to UIL Limited and in return is due to receive reimbursement of any
costs and expense as and when they fall due. The policy for interest income,
including the allocation and recognition of the parent contributions, is set
out in note 1(e) to the accounts.
2. Income
2022 2021
£'000s £'000s
Interest receivable 7,595 8,462
Other income 393 300
7,988 8,762
3. Finance costs
2022 2021
£'000s £'000s
ZDP shares 7,988 8,762
4. Earnings per share
The calculation of earnings per share is based on a result after tax for the
period of £nil (2021: £nil) and a weighted average number of 10 ordinary
shares in issue during the year (2021: 10 ordinary shares in issue during the
year).
5. Dividends
There were no dividends paid or declared in respect of the year (2021: nil).
UIL Finance Limited
NOTES TO THE ACCOUNTS (CONTINUED)
6. Other receivables
2022 2021
£'000s £'000s
Loan to parent company - UIL Limited
- Receivable within one year 51,166 -
- Receivable after more than one year 93,079 136,257
144,245 136,257
The loan is repayable on the date the underlying ZDP shares are redeemed.
7. Zero dividend preference shares
30 June 30 June
2022 2021
£'000s £'000s
ZDP shares - current liabilities
2022 ZDP shares 51,166 -
ZDP shares - non-current liabilities
2022 ZDP shares - 48,052
2024 ZDP shares 36,833 34,996
2026 ZDP shares 30,397 28,893
2028 ZDP shares 25,849 24,316
93,079 136,257
Total ZDP shares liabilities 144,245 136,257
Authorised ZDP shares of the Company as at 30 June 2022 and 30 June 2021 are
as follows:
Number £'000s
2022 ZDP shares of 5.3180p each 63,686,754 3,387
2024 ZDP shares of 3.8025p each 76,717,291 2,917
2026 ZDP shares of 10p each 25,000,000 2,500
2028 ZDP shares of 3.8676p each 44,842,717 1,734
UIL Finance Limited
NOTES TO THE ACCOUNTS (CONTINUED)
7. Zero dividend preference shares (continued)
ZDP shares issued by the Company are as follows:
Year to 30 June 2022
Balance as at 30 June 2021 Finance costs Balance as at
30 June 2022
2022 Number 35,569,069 - 35,569,069
£'000s 48,052 3,114 51,166
2024 Number 30,000,000 - 30,000,000
£'000s 34,996 1,837 36,833
2026 Number 25,000,000 - 25,000,000
£'000s 28,893 1,504 30,397
2028 Number 25,000,000 - 25,000,000
£'000s 24,316 1,533 25,849
Total £'000s 136,257 7,988 144,245
Year to 30 June 2021
Issue costs of ZDP shares
Balance as at 30 June 2020
Issue of ZDP shares Redemption of ZDP shares Conversion of ZDP shares Finance costs Balance as at
30 June 2021
2020 Number 39,000,000 - - (39,000,000) - - -
£'000s 59,087 - - (60,411) - 1,324 -
2022 Number 50,000,000 - - - (14,430,931) - 35,569,069
£'000s 63,407 - - - (19,338) 3,983 48,052
2024 Number 30,000,000 - - - - - 30,000,000
£'000s 33,250 - - - - 1,746 34,996
2026 Number 25,000,000 - - - - - 25,000,000
£'000s 27,464 - - - - 1,429 28,893
2028 Number - 25,000,000 - - - - 25,000,000
£'000s - 25,000 (964) - - 280 24,316
Total £'000s 183,208 25,000 (964) (60,411) (19,338) 8,762 136,257
On 31 October 2020 the 39,000,000 2020 ZDP shares that were in issue were
redeemed at 154.90p per 2020 ZDP share.
On 18 March 2021, UIL Finance announced plans for a rollover offer of 2022 ZDP
shares into 2028 ZDP shares (the "Rollover Offer") and a placing of up to
25,000,000 2028 ZDP shares (less the number of 2028 ZDP shares arising on the
conversion of 2022 ZDP shares pursuant to the Rollover Offer). Holders of
14,430,931 2022 ZDP shares elected to roll over into the new 2028 ZDP shares
and 19,842,502 new 2028 ZDP shares were issued on the basis of each 2022 ZDP
share converting into 1.375 2028 ZDP shares. UIL Finance placed 4,573,763 new
2028 ZDP shares at 100 pence per share with certain institutional and other
investors, raising gross proceeds of £4.6m and issued 583,735 2028 ZDP shares
to UIL Limited. The 25,000,000 new 2028 ZDP shares were admitted to the
standard segment of the Official List and to trading on the London Stock
Exchange on 23 April 2021.
UIL Limited held 3,109,620 2026 ZDP shares as at 30 June 2021. In the year UIL
Limited placed 800,000 2026 ZDP shares in the open market, receiving £0.9m.
UIL Limited held 2,309,620 2026 ZDP shares as at 30 June 2022.UIL Limited
held 583,735 2028 ZDP shares as at 30 June 2021 and 30 June 2022.
UIL Finance Limited
NOTES TO THE ACCOUNTS (CONTINUED)
7. Zero dividend preference shares (continued)
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 2022 was 143.98p (2021: 135.56p).
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 2022 was 124.14p (2021: 118.51p).
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 2022 was 122.62p (2021: 116.78p).
2028 ZDP shares
Based on the initial entitlement of a 2028 ZDP share of 100p on 23 April 2021,
a 2028 ZDP share will have a final capital entitlement at the end of its life
on 31 October 2028 of 152.29p equating to a 5.75% per annum gross redemption
yield. The capital entitlement (excluding issue costs) per 2028 ZDP share as
at 30 June 2022 was 106.87p (2021: 101.06p).
The ZDP shares are admitted to the standard segment of the Official List and
to trading 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 the Company and UIL Limited but
in priority to the ordinary shares of the Company and UIL Limited save in
respect of certain winding up revenue profits of UIL Limited.
The growth of each ZDP share accrues daily and is reflected in the return and
net asset value per ZDP share on an effective interest method. 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 the separate approval of the ZDP shareholders (treated as a single
class) at a separate meeting. 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 Limited and/or the Company, 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 2022 ZDP shares shall rank in priority to the 2024 ZDP shares, the
2026 ZDP shares and the 2028 ZDP shares;
(ii) the 2024 ZDP shares shall rank in priority to the 2026 ZDP shares and the
2028 ZDP shares; and
(iii) the 2026 ZDP shares shall rank in priority to the 2028 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.
UIL Finance Limited
NOTES TO THE ACCOUNTS (CONTINUED)
8. Ordinary share capital
Number £
Authorised
Ordinary shares of 10p each 10 1
Issued and nil paid
Balance as at 30 June 2022 and 30 June 2021 10 -
In addition to receiving any income distributed by way of dividend, the
ordinary shareholders will be entitled to all surplus assets after payment of
all debts, including ZDP shares.
Net asset value per ordinary share is £nil (30 June 2021: £nil) based on 10
shares in issue.
9. Parent company
UIL Limited, incorporated in Bermuda, is the parent company of the Company,
holding 100% of the nil paid ordinary shares.
In the opinion of the Directors, the Company's ultimate parent undertaking is
Somers Isles Private Trust Company Limited ("SIPTCL"), a company incorporated
in Bermuda and owned by Mr Duncan Saville.
10. Related party transactions
UIL Limited, SIPTCL, General Provincial Life Pension Fund Limited which holds
65.4% of UIL Limited shares and ultimately controlled by SIPTCL and the Board
of the Company are considered related parties. Amounts owing from related
parties are disclosed in the financial statements in note 6, ZDP shares issued
to UIL Limited are disclosed in note 7 and interest receivable from related
parties is disclosed in note 2.
11. Operating Segments
The Directors are of the opinion that the Company's activities comprise a
single business segment of financing the Company's ZDP shares debt by lending
current asset funds to its parent company and therefore no segmental reporting
is provided.
12. Financial Risk Management
The Board of Directors is responsible for the Company's risk management. The
Directors' policies and processes for managing the financial risks are set out
in the interest rate exposure and credit risk management sections below.
The accounting policies which govern the reported Statement of Financial
Position carrying values of the underlying financial assets and liabilities,
as well as the related income and expenditure, are set out in note 1 to the
accounts. The policies are in compliance with UK adopted IFRSs and best
practice and include the valuation of financial assets at fair value and
liabilities at amortised cost.
UIL Finance Limited
NOTES TO THE ACCOUNTS (CONTINUED)
12 Financial Risk Management (continued)
Interest Rate exposure
The exposure of the financial assets and liabilities to interest risks is
shown below:
Within More than
Total one year one year
30 June 2022 £'000s £'000s £'000s
Exposure to fixed rates
Zero dividend preference shares (144,245) (51,166) (93,079)
Intra-group loan 144,245 51,166 93,079
Net exposures
At year end - - -
Maximum in year - - -
Minimum in year - - -
Within More than
Total one year one year
30 June 2021 £'000s £'000s £'000s
Exposure to fixed rates
Zero dividend preference shares (136,257) - (136,257)
Intra-group loan 136,257 - 136,257
Net exposures
At year end - - -
Maximum in year - - -
Minimum in year - - -
Credit Risk exposure
The Company is exposed to potential failure by its parent company to settle
the ZDP share liability on behalf of the Company on the respective repayment
dates. The Board assesses this risk at each Board meeting.
2022 ZDP shares
Based on their final entitlement of 146.99p per share, the final entitlement
of the 2022 ZDP shares was covered 3.89 times by UIL Limited's gross assets as
at 30 June 2022. Should gross assets fall by 74.3% over the remaining life of
the 2022 ZDP shares, then the 2022 ZDP shares would not receive their final
entitlements in full. Should gross assets fall by 86.9%, the 2022 ZDP shares
would receive no payment at the end of their life.
2024 ZDP shares
Based on their final entitlement of 138.35p per share, the final entitlement
of the 2024 ZDP shares was covered 2.80 times by UIL Limited's gross assets as
at 30 June 2022. Should gross assets fall by 64.3% over the remaining life of
the 2024 ZDP shares, then the 2024 ZDP shares would not receive their final
entitlements in full. Should gross assets fall by 74.3%, equivalent to an
annual fall of 44.1%, the 2024 ZDP shares would receive no payment at the end
of their life.
UIL Finance Limited
NOTES TO THE ACCOUNTS (CONTINUED)
12. Financial Risk Management (continued)
Credit Risk exposure
2026 ZDP shares
Based on their final entitlement of 151.50p per share, the final entitlement
of the 2026 ZDP shares was covered 2.23 times by UIL Limited's gross assets as
at 30 June 2022. Should gross assets fall by 55.2% over the remaining life of
the 2026 ZDP shares, then the 2026 ZDP shares would not receive their final
entitlements in full. Should gross assets fall by 64.3%, equivalent to an
annual fall of 21.1%, the 2026 ZDP shares would receive no payment at the end
of their life.
2028 ZDP shares
Based on their final entitlement of 152.29p per share, the final entitlement
of the 2028 ZDP shares was covered 1.85 times by UIL Limited's gross assets as
at 30 June 2022. Should gross assets fall by 46.0% over the remaining life of
the 2028 ZDP shares, then the 2028 ZDP shares would not receive their final
entitlements in full. Should gross assets fall by 55.2%, equivalent to an
annual fall of 11.9%, the 2028 ZDP shares would receive no payment at the end
of their life.
None of the Company's financial liabilities is past due or impaired.
Fair Values of financial assets and liabilities
The assets and liabilities of the Company are, in the opinion of the
Directors, reflected in the Statement of Financial Position at fair value
except for the ZDP shares and the inter-company loan which are carried at
amortised cost using effective interest method in accordance with IFRS 9, or
at a reasonable approximation thereof.
The fair values of the ZDP shares based on their quoted market value as at 30
June were:
2022 2021
£'000s £'000s
2022 ZDP shares 51,219 49,619
2024 ZDP shares 36,750 36,150
2026 ZDP shares 28,875 29,000
2028 ZDP shares 24,750 25,000
Capital risk management
The objective of the Company is to finance and fund the redemption value of
the ZDP shares. The Board has a responsibility for ensuring the Company's
ability to continue as a going concern and to meet the redemption of the ZDP
shares. This is dependent on the asset performance of the parent company. At
30 June 2022, the parent company had net assets of £218,507,000 (2021:
£363,751,000) after providing for amounts due to ZDP shareholders.
UIL Finance Limited
NOTES TO THE ACCOUNTS (CONTINUED)
13. Going Concern
The Directors believe that it is appropriate to adopt the going concern basis
in preparing the accounts as the Company can continue to operate due to the
contractual obligation of the parent company to ensure that UIL Finance is
able to redeem the ZDP shares on each repayment date and the Directors are
comfortable that the parent company has the financial resources to do so.
The Board considered the parent company's going concern assessment which
focussed on the forecast liquidity of the Group for 12 months from the date of
approval of the financial statements. This analysis assumes that the parent
company will meet some of its short term obligations through the sale of
listed securities, which represented 41.6% of the parent company's total
portfolio as at 30 June 2022. As part of this assessment the board of the
parent Company has considered a severe but plausible downside that reflects
the impact of the key risks set out in the Strategic Report and an assessment
of the parent company's ability to meet its liabilities as they fall due
(including the loan and 2022 ZDP share liabilities), 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 in the first quarter of 2020. The parent company 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 £51,080,000 and the
repayment to the 2022 ZDP shareholders of £52,283,000. The parent company
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 12 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.
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