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Annual Financial Report

RNS Announcement

RNS Number : 3576M

UIL Finance Limited

13 September 2019

UIL Finance Limited

REPORT AND ACCOUNTS

FOR THE YEAR ENDED 30 JUNE 2019

UIL Finance Limited

REPORT AND ACCOUNTS

for the year ended 30 June 2019

Contents	Page


Company Directory	2


Strategic Review	3


Directors' Report	4


Statement of Directors' Responsibilities	7


Independent Auditor's Report	8


Income Statement	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)
	Alison Hill
	Warren McLeland
	Christopher Samuel
	David Shillson
	Eric Stobart


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 REVIEW

The Strategic Review 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 International Financial Reporting Standards as adopted by the European Union ("IFRSs as adopted by the EU"). 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 was appointed as company secretary with effect from 1 July 2017.

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. At 30 June 2019, the parent company had net assets of £326,268,000 (2018: £261,134,000) 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.

This Strategic Review was approved by the Board of Directors on 13 September 2019.

ICM Limited

Company Secretary

13 September 2019

UIL Finance Limited

DIRECTORS' REPORT

The Directors present their report and accounts of the Company for the year ended 30 June 2019.

Principal activity and status

UIL Finance Limited (the "Company") 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, as a Bermuda incorporated company, the Company is not required to comply with the UK Corporate Governance Code issued by the Financial Reporting Council (the "Code"). However, it is the Company's policy to comply with best practice on good corporate governance and maintain the same level of governance as UK listed investment companies. The Board has therefore considered the principles set out in the AIC Code of Corporate Governance (the "AIC Code") and the relevant provisions of the Code.

Except as disclosed below, the Company complied throughout the year with the recommendations of the AIC Code and the relevant provisions of the Code. The provisions of the Code regarding the role of chief executive and on Directors' remuneration are not relevant to the Company and are not reported on further.

In view of the requirement of the Bye-Laws that all Directors retire by rotation, the Board considers that it is not appropriate for the Directors to be appointed for specified terms as recommended by the AIC Code. However, in accordance with provision B.7.1 of the Code and principle 3 of the AIC Code, all Directors are subject to election by shareholders at the first annual general meeting following their appointment, and to re-election thereafter at intervals of no more than three years. Any Director serving beyond nine years is required to seek annual re-election. The Board of Directors does not consider it is necessary to appoint a Senior Independent Director.

Results and Dividends

The results for the year are set out in the attached accounts which are prepared on a going concern basis (see note 13).

The Company has not declared a dividend in respect of the year ended 30 June 2019 (2018: nil).

Directors

The following Directors held office throughout the year, unless otherwise stated:

Peter Burrows (Chairman)

Alison Hill

Warren McLeland

Christopher Samuel

David Shillson

Eric Stobart

Mr McLeland and Mr Stobart have advised the Board that they intend to step down from the Board on 30 September 2019.

Directors' Disclosures

At 30 June 2019, no Director had any interest in the Company's shares (2018: none). No Director acquired or disposed of any interest in the shares in the Company during the year or since the year end.

Re-election of Directors

Mr Burrows will retire by rotation at the forthcoming AGM and Mr Shillson retires annually and will do at the forthcoming AGM. Both Directors, being eligible, offer themselves 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 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.

Statement of Changes in Equity

There were no movements in equity attributable to equity holders and a statement of changes in equity has therefore not been prepared.

Cash Flow

There were no cash flows in the period and therefore a cash flow statement has not been prepared.

Viability statement

In accordance with the provisions of the UK Corporate Governance Code, published by the Financial Reporting Council in April 2016 (the "Code"), the Directors have assessed the prospects of the Company over the next five financial years. The Directors have determined that a five year period is a reasonable time horizon to consider the continuing viability of the Company, given the current regulatory environment, as they do not expect there to be any significant change to the current principal risks and to the mitigating controls in place over this period.

In its assessment of the viability of the Company, the Directors have considered the Company's principal risk and uncertainty, that UIL Limited, its parent company might not be able to repay its loan from the Company.

After review, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five financial years.

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 2019 and was responsible for the audit of these accounts.

Audit fees relating to the year amounted to £7,500 (2018: £6,000) 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 (2018: £25,000 was paid to KPMG as reporting accountants for the issue of the ZDP shares and were settled by the parent company, UIL Limited).

By order of the Board

ICM Limited,

Secretary

13 September 2019

UIL Finance Limited

STATEMENT OF DIRECTORS' RESPONSIBILITIES

in respect of the Annual Report and the Financial Statements

The Directors are responsible for preparing the Report and Accounts and the Group and parent Company financial statements in accordance with applicable law and regulations.

The Directors are required to prepare Company financial statements for each financial year. They have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRSs as adopted by the EU") 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 IFRS as adopted by the EU;

· 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 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 annual report includes 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 13 September 2019 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 2019 which comprise the Income statement and Balance sheet, 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 Company's affairs as at 30 June 2019 and of its results for the year then ended;

· have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU).

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 audit committee.

We were first appointed as auditor by the shareholders 29 October 2012. The period of total uninterrupted engagement is for the seven financial years ended 30 June 2019. 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 listed public interest entities. No non-audit services prohibited by that standard were provided.

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. We summarise below the key audit matters (unchanged from 2018), in decreasing order of audit significance, 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. These matters were 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 these matters.

The risk

Our response

Accuracy of Zero Dividend Preference Shares (£172.6 million; 2018: £182.7 million) and associated finance costs (£12.1 million; 2018: £12.8 million)

Refer to page 15-17 in the financial statements.

UIL Finance Limited has been incorporated solely to facilitate the issue of Zero Dividend Preference (ZDP) shares as a means of raising capital for its parent company UIL Limited. In order to do so the ZDP shares are issued in tranches to mature at 2 year intervals at which point they will be required to be repaid. These are accounted for at amortised cost and incorrect application of accounting principles would lead to a misstatement in the liability and in the finance costs.

Our procedures included:

- Terms of ZDP Shares: to ensure that the ZDP's have been properly accounted for, KPMG have obtained the share issuance documentation to confirm the issue statistics as follows; initial placing price, initial and final capital entitlement to the holder, gross redemption yield and maximum size of the initial placing;

- Finance Charge: KPMG have performed a recalculation of the finance charge based on the brought forward liability and the legal terms to form an expectation of the finance charge for the year. This has then been compared to the calculated finance charge of UIL Finance Limited to ensure that the calculation performed by UIL Finance Limited is accurate

- Calculation of the liability: based on the finance charge calculated as outlined above, KPMG performed the amortised cost calculation to establish an expectation of the liability on the balance sheet at year end. The expected amount was then compared to the UIL Finance Limited calculation to ensure UIL Finance Limited have accurately calculated and presented the liability at year-end.

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 £1.7m (2018: £2.3m), determined with reference to a benchmark of total assets, of which it represents 1% (2018: 1%).

We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.1m (2018: £0.1m), 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 all principally performed at our offices in London, United Kingdom.

4 We have nothing to report on 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").

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 Company will continue in operation.

In our evaluation of the Directors' conclusions, we considered the inherent risks to the Company's business model, including the impact of Brexit, and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period. We evaluated those risks and concluded that they were not significant enough to require us to perform additional audit procedures

Based on this work, we are required to report to you if:

· we have anything 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 Company's use of that basis for a period of at least twelve months from the date of approval of the financial statements; or

· the related statement under the Listing Rules set out on page 3 is materially inconsistent with our audit knowledge.

We have nothing to report in these respects, and we did not identify going concern as a key audit matter.

5 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.

Strategic report and directors' report

Based solely on our work on the other information:

· we have not identified material misstatements in the strategic report and the directors' report;

· in our opinion the information given in those reports for the financial year is consistent with the financial statements.

Disclosures of 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 5 that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity;

· the Principal Risks 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 Company, 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 Company 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.

Under the Listing Rules we are required to review the viability statement. We have nothing to report in this respect.

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 Company's longer-term viability.

6 Respective responsibilities

Directors' responsibilities

As explained more fully in their statement set out on page 7, 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 other irregularities (see below), or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud, other irregularities 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.

8 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.

Jonathan Martin

for and on behalf of KPMG LLP,

Chartered Accountants

15 Canada Square

London

E14 5GL

13 September 2019

UIL Finance Limited

INCOME STATEMENT
		Year to	Year to
		30 June	30 June
		2019	2018
	Note	£'000s	£'000s

Interest income	2	12,082	12,821
Total income		12,082	12,821
Other expenses		-	-
Profit before finance costs and taxation		12,082	12,821
Finance costs	3	(12,082)	(12,821)
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 20 form part of these financial statements.

UIL Finance Limited

STATEMENT OF FINANCIAL POSITION
As at 30 June		2019	2018
	Note	£'000s	£'000s
Non-current assets
Other receivables	6	172,565	-
Current assets
Other receivables	6	-	233,919
Current liabilities
Zero dividend preference shares	7	-	(51,266)
Total assets less current liabilities		172,565	182,653
Non-current liabilities
Zero dividend preference shares	7	(172,565)	(182,653)
Net assets		-	-

Equity attributable to equity holders
Ordinary share capital	8	-	-





Approved by the Board on 13 September 2019 and signed on its behalf by


Peter Burrows	Eric Stobart
Chairman	Director

The notes on pages 13 to 20 form part of these financial statements.

UIL Finance Limited

NOTES TO THE ACCOUNTS

for the year to 30 June 2019

1. Accounting policies

The Company is an investment company incorporated in Bermuda on 17 January 2007. The accounting policies below are unchanged from the previous year.

(a) Basis of accounting

The financial statements of the Company have been prepared on a going concern basis in accordance with International Financial Reporting Standards as adopted by the European Union, which comprise standards and interpretations approved by the International Accounting Standards Board and International Accounting Standards Committee that remain in effect.

A Statement of Changes in Equity has not been presented as there is no movement in the current or prior period.

In the current financial year the Company has applied International Financial Reporting Standard("IFRS") 9 Financial Instruments (as revised in July 2014) and the related consequential amendments to other IFRSs as adopted by the EU. IFRS 9 introduces new requirements for the classification and measurement of financial assets and financial liabilities, impairment for financial assets and general hedge accounting. The Company measured the receivables of the loan to parent company and financial liabilities of Zero Dividend Preference ("ZDP") shares at amortised cost under IAS 39 and they will continue to be measured at amortised cost under IFRS 9, there are no impaired assets and does not enter into general hedge accounting. The inter company loan agreement has been reviewed and clarified to be in line with IFRS 9 requirements. There is no material impact in relation to the adoption of this standard.

In the current financial year the Company has adopted IFRS 15. The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Given the nature of the income streams of the Company, there is no material impact to the current measurement and disclosure of revenue.

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2019 and have not been applied in preparing these accounts. None of these, is expected to have a significant effect on the accounts of the Company.

(b) Zero dividend preference shares

The ZDP shares, due to be redeemed on 31 October 2020, 2022, 2024 and 2026, at a redemption value 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 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. Under Bermuda company law ZDP shares are recognised as share capital in the Company.

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) Interest income

Interest on debt is accrued on a time basis using the effective interest method.

UIL Finance Limited

NOTES TO THE ACCOUNTS (CONTINUED)

1. Accounting policies (continued)

(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.

(h) Inter company loans

UIL Limited has agreed to place the Company in sufficient funds to enable the Company to pay the capital entitlement of each class of ZDP share on their respective redemption dates. The amount owed in the accounts is based on the entitlements of the ZDP shareholders at the relevant date. The 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.

2. Interest income

	2019	2018
	£'000s	£'000s
Loan to parent company - interest receivable	12,082	12,821

3. Finance costs

	2019	2018
	£'000s	£'000s
ZDP shares	12,082	12,821

4. Earnings per share

The calculation of earnings per share is based on a result after tax for the period of £nil (2018: £nil) and a weighted average number of 10 ordinary shares in issue during the year (2018: 10 ordinary shares in issue during the year).

5. Dividends

There were no dividends paid or declared in respect of the year (2018: nil).

UIL Finance Limited

NOTES TO THE ACCOUNTS (CONTINUED)

6. Other receivables

	2019	2018
	£'000s	£'000s
Loan to parent company - UIL Limited
- Receivable within one year	-	233,919
- Receivable after more than one year	172,565	-
	172,565	233,919

The loan is repayable on the date the underlying ZDP shares are redeemed (2018: repayable on any ZDP repayment date).

7. Zero dividend preference shares

	30 June	30 June
	2019	2018
	£'000s	£'000s
ZDP shares - current liabilities
2018 ZDP shares	-	51,266
ZDP shares - non-current liabilities
2020 ZDP shares	55,387	51,940
2022 ZDP shares	59,499	55,873
2024 ZDP shares	31,582	50,027
2026 ZDP shares	26,097	24,813
	172,565	182,653
Total ZDP shares liabilities	172,565	233,919

Authorised ZDP shares of the Company as at 30 June 2019 and 30 June 2018 are as follows:

	Number	£'000s
2018 ZDP shares of 5.9319p each	53,072,561	3,148
2020 ZDP shares of 6.0514p each	50,000,000	3,026
2022 ZDP shares of 5.3180p each	78,117,685	4,154
2024 ZDP shares of 3.8025p each	76,717,291	2,917
2026 ZDP shares of 10p each	25,000,000	2,500

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 2019

		Balance as at 30 June 2018	Redemption of ZDP shares	Cancellation of ZDP shares	Finance costs	Balance as at 30 June 2019
2018	Number	32,716,029	(31,892,465)	(823,564)	-	-
2018	£'000s	51,266	(51,194)	(1,322)	1,250	-
2020	Number	39,000,000	-	-	-	39,000,000
2020	£'000s	51,940	-	-	3,447	55,387
2022	Number	50,000,000	-	-	-	50,000,000
2022	£'000s	55,873	-	-	3,626	59,499
2024	Number	50,000,000	-	(20,000,000)	-	30,000,000
2024	£'000s	50,027	-	(20,920)	2,475	31,582
2026	Number	25,000,000	-	-	-	25,000,000
2026	£'000s	24,813	-	-	1,284	26,097
Total	£'000s	233,919	(51,194)	(22,242)	12,082	172,565

Year to 30 June 2018

		Balance as at 30 June 2017	Issue of ZDP shares	Issue costs of ZDP shares	Conversion of 2018 ZDP shares	Finance costs	Balance as at 30 June 2018
2018	Number	49,842,413	-	-	(17,126,384)	-	32,716,029
2018	£'000s	72,622	-	-	(25,644)	4,288	51,266
2020	Number	39,000,000	-	-	-	-	39,000,000
2020	£'000s	48,704	-	-	-	3,236	51,940
2022	Number	50,000,000	-	-	-	-	50,000,000
2022	£'000s	52,452	-	-	-	3,421	55,873
2024	Number	-	50,000,000	-	-	-	50,000,000
2024	£'000s	-	50,000	(1,626)	-	1,653	50,027
2026	Number	-	25,000,000	-	-	-	25,000,000
2026	£'000s	-	25,000	(410)	-	223	24,813
Total	£'000s	173,778	75,000	(2,036)	(25,644)	12,821	233,919

UIL Limited held 260,760 2018 ZDP shares as at 30 June 2018. In the period UIL Limited purchased a further 562,804 2018 ZDP shares in the open market. On 22 October 2018 the Company cancelled all the 2018 ZDP shares held by UIL Limited in consideration for the Company releasing UIL Limited from its obligation under the subscription agreement to fund the redemption of such 2018 ZDP Shares. On 31 October 2018 the remaining 31,892,465 2018 ZDP shares that were in issue were redeemed at 160.52p per 2018 ZDP share.

UIL Limited held 20,000,000 2024 ZDP shares as at 30 June 2018. On 22 October 2018 the Company cancelled all the 2024 ZDP shares held by UIL Limited in consideration for the Company releasing UIL Limited from its obligation under the subscription agreement to fund the redemption of such 2024 ZDP Shares.

UIL Limited held 13,420,535 2026 ZDP shares as at 30 June 2018. In the year UIL Limited sold 1,500,000 2026 ZDP shares in the open market, receiving £1.6m. UIL Limited held 11,920,535 2026 ZDP shares as at 30 June 2019.

UIL Finance Limited

NOTES TO THE ACCOUNTS (CONTINUED)

7. Zero dividend preference shares (continued)

2020 ZDP shares

Based on the initial entitlement of a 2020 ZDP share of 100p on 31 July 2014, a 2020 ZDP share will have a final capital entitlement at the end of its life on 31 October 2020 of 154.90p equating to a 7.25% per annum gross redemption yield. The capital entitlement (excluding issue costs) per 2020 ZDP share as at 30 June 2019 was 141.01p (2018: 131.52p).

2022 ZDP shares

Based on the initial entitlement of a 2022 ZDP share of 100p on 23 June 2016, a 2022 ZDP share will have a final capital entitlement at the end of its life on 31 October 2022 of 146.99p equating to a 6.25% per annum gross redemption yield. The capital entitlement (excluding issue costs) per 2022 ZDP share as at 30 June 2019 was 120.03p (2018: 113.01p).

2024 ZDP shares

Based on the initial entitlement of a 2024 ZDP share of 100p on 2 November 2018, a 2024 ZDP share will have a final capital entitlement at the end of its life on 31 October 2024 of 138.35p equating to a 4.75% per annum gross redemption yield. The capital entitlement (excluding issue costs) per 2024 ZDP share as at 30 June 2019 was 107.97p (2018: 103.10p).

2026 ZDP shares

Based on the initial entitlement of a 2026 ZDP share of 100p on 26 April 2018, a 2026 ZDP share will have a final capital entitlement at the end of its life on 31 October 2026 of 151.50p equating to a 5.00% per annum gross redemption yield. The capital entitlement (excluding issue costs) per 2026 ZDP share as at 30 June 2019 was 105.89p (2018: 100.87p).

The ZDP shares are 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 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.

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 2019 and 30 June 2018	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 2018: £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 62.1% 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 IFRSs as adopted by the EU 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 2019	£'000s	£'000s	£'000s
Exposure to fixed rates
Zero dividend preference shares	(172,565)	-	(172,565)
Intra-group loan	172,565	-	(172,565)
Net exposures
At year end	-	-	-
Maximum in year	-	-	-
Minimum in year	-	-	-

		Within	More than
	Total	one year	one year
30 June 2018	£'000s	£'000s	£'000s
Exposure to fixed rates
Zero dividend preference shares	(233,919)	(51,266)	(182,653)
Intra-group loan	233,919	233,919	-
Net exposures
At year end	-	182,653	(182,653)
Maximum in year	-	182,653	(182,653)
Minimum in year	-	152,452	(152,452)

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.

2020 ZDP shares

Based on their final entitlement of 154.90p per share, the final entitlement of the 2020 ZDP shares was covered 4.92 times by UIL Limited's gross assets as at 30 June 2019. Should gross assets fall by 79.7% over the remaining life of the 2020 ZDP shares, then the 2020 ZDP shares would not receive their final entitlements in full. Should gross assets fall by 90.7%, equivalent to an annual fall of 83.0%, the 2020 ZDP shares would receive no payment at the end of their life.

2022 ZDP shares

Based on their final entitlement of 146.99p per share, the final entitlement of the 2022 ZDP shares was covered 2.97 times by UIL Limited's gross assets as at 30 June 2019. Should gross assets fall by 66.3% over the remaining life of the 2022 ZDP shares, then the 2022 ZDP shares would not receive their final entitlements in full. Should gross assets fall by 79.7%, equivalent to an annual fall of 38.0%, the 2022 ZDP shares would receive no payment at the end of their life.

UIL Finance Limited

NOTES TO THE ACCOUNTS (CONTINUED)

12. Financial Risk Management (continued)

Credit Risk exposure

2024 ZDP shares

Based on their final entitlement of 138.35p per share, the final entitlement of the 2024 ZDP shares was covered 2.42 times by UIL Limited's gross assets as at 30 June 2019. Should gross assets fall by 58.7% over the remaining life of the 2024 ZDP shares, then the 2024 ZDP shares would not receive their final entitlements in full. Should gross assets fall by 66.3%, equivalent to an annual fall of 18.4%, the 2024 ZDP shares would receive no payment at the end of their life.

2026 ZDP shares

Based on their final entitlement of 151.50p per share, the final entitlement of the 2026 ZDP shares was covered 2.08 times by UIL Limited's gross assets as at 30 June 2019. Should gross assets fall by 51.8% over the remaining life of the 2026 ZDP shares, then the 2026 ZDP shares would not receive their final entitlements in full. Should gross assets fall by 58.7%, equivalent to an annual fall of 11.4%, the 2026 ZDP shares would receive no payment at the end of their life.

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:

	2019	2018
	£'000s	£'000s
2018 ZDP shares	-	52,182
2020 ZDP shares	58,305	55,575
2022 ZDP shares	66,000	62,250
2024 ZDP shares	34,200	53,750
2026 ZDP shares	26,875	25,563

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 2019, the parent company had net assets of £326,268,000 (2018: £261,134,000) after providing for amounts due to ZDP shareholders.

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 support of the parent company, UIL Limited.

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END

FR EAPNDFFXNEFF

RNS metadata

Title: Annual Financial Report
Time: 08:00:04
Date: 16 Sept 2019
Category: Results
ID: 3576M