Annual Financial Report

RNS Number : 2476K

UIL Limited

20 September 2016

 

Date:                      19 September 2016

Contact:                 Charles Jillings

                                UIL Limited

                                01372 271 486

UIL Limited

Audited Statement of Results

for the year to 30 June 2016

Financial Highlights

·   Net asset value ("NAV") total return of 47.1%

·   Dividend per ordinary share maintained at 7.50p

·   50.0m 2022 ZDP shares issued

Group Performance Summary

	30 June 2016	30 June 2015	Change % 2016/15
NAV total return(1) (for the year) (%)	47.1	6.4	n/a
Annual compound total return (since inception) (%)	9.9	7.8	n/a
Net asset value per ordinary share (pence)	241.12	169.00	42.7
Ordinary share price (pence)	130.75	117.00	11.8
Discount (%)	45.8	30.8	n/a
FTSE All-Share Total Return Index	5,737	5,614	2.2
Returns and dividends (pence)
Revenue return per ordinary share	6.23	7.84	(20.5)
Capital return per ordinary share	68.45	2.47	2,671.3
Total return per ordinary share	74.68	10.31	624.3
Dividend per ordinary share	7.50	7.50	0.0
Zero dividend preference ("ZDP") shares(2) (pence)
2016 ZDP shares
Capital entitlement per ZDP share	188.31	175.55	7.3
ZDP share price	191.00	184.63	3.5
2018 ZDP shares
Capital entitlement per ZDP share	136.32	127.09	7.3
ZDP share price	147.25	141.75	3.9
2020 ZDP shares
Capital entitlement per ZDP share	114.35	106.61	7.3
ZDP share price	130.00	122.38	6.2
2022 ZDP shares
Capital entitlement per ZDP share	100.12	n/a	n/a
ZDP share price	104.50	n/a	n/a
Equity holders' funds (£m)
Gross assets(3)	440.7	373.4	18.0
Bank debt	24.7	34.4	(28.2)
ZDP shares	197.4	172.4	14.5
Equity holders' funds	218.6	166.6	31.2
Revenue account (£m)
Income	10.5	11.2	(6.2)
Costs (management and other expenses)	1.9	1.8	5.6
Finance costs	1.7	1.1	54.5
Financial ratios of the Group (%)
Revenue yield on average gross assets	2.9	2.9	n/a
Ongoing charges figure excluding performance fees(4)	3.3	2.0	n/a
Ongoing charges figure including performance fees(4)	3.3	2.4	n/a
Bank loans, overdraft and ZDP shares gearing on net assets	101.6	124.1	n/a

(1) Total return is calculated as change in NAV per ordinary share plus dividends re-invested

(2) Issued by UIL Finance Limited ("UIL Finance"), a wholly owned subsidiary of UIL Limited ("UIL")

(3) Gross assets less current liabilities excluding loans and ZDP shares

(4) Expressed as a percentage of average net assets. Ongoing charges comprise all operational, recurring costs that are payable by the Group or

suffered within underlying investee funds, in the absence of any purchases or sales of investments.

Chairman's Statement

I am very pleased to report in my first year as Chairman that UIL achieved a NAV total return per ordinary share of 47.1% over the year to 30 June 2016, outperforming the FTSE All Share Total Return Index by an impressive 44.9%.

Over the 13 years since Utilico Investment Trust PLC was launched in August 2003, which rolled into UIL in June 2007, we have distributed £47.5m in dividends, invested £22.0m in share buybacks and added net gains to our NAV of some £144.0m for a total return of 205.3%. This represents an average annual compound total return since inception of 9.9%, ahead of the FTSE All Share Total Return Index average annual compound total return of 7.9%.

In the first six months to 31 December 2015, we noted rising market divergence and increasing volatility and we expected this to continue. In the six months to 30 June 2016 we have seen extraordinary volatility. Oil went as low as US$27.88 per barrel and gold rose to US$1,325.55/oz. The UK voted for Brexit and Sterling moved by over 10% in a single day. These movements have caused significant stresses in the financial system, with a significant proportion of the world's government debt now yielding negative returns. The end outcome remains a deep concern.

A key feature of the year was Brexit and Sterling's resultant weakness. Over the year Sterling fell against the US Dollar, Euro, Australian Dollar and New Zealand Dollar by 15.0%, 14.8%, 12.3% and 19.3% respectively. This clearly benefited UIL's predominantly long non-Sterling investment portfolio.

The gain in UIL's portfolio is due to the Investment Managers' stock selection, strong conviction in the investments and in remaining fully invested. UIL's investments are driven by three core views held by the Investment Managers. First, the world's financial markets are over indebted; second, technological change offers strong investment upside; third, emerging markets offer higher gross domestic product ("GDP") growth opportunities. The Investment Managers are focused on finding investments at valuations that do not reflect their true long-term value. But the shape of the portfolio has been driven by these three core views. Resolute Mining Limited ("Resolute") has offered real defence against the global quantitative easing ("QE") financial response to global indebtedness. Touchcorp Limited ("Touchcorp") and other technology investments have provided excellent exposure to disruptive technologies and have delivered strong performances. Utilico Emerging Markets Limited ("UEM") has demonstrated it can invest in the emerging markets growth through essential infrastructure and utility service companies.

Our move to establish UIL as a broader based investor in 2007, with a consequent change in the mandate, has enabled the establishment of several investment platforms which have generally benefited from a sharper focus and more in-depth knowledge of segments of the market. It has also enabled UIL to benefit from ICM's broader stock selection abilities.

UIL continues to invest in and develop its platforms: UEM (emerging markets); Infratil Limited ("Infratil") (utility infrastructure in Australasia); Somers Limited ("Somers") (financial services); Zeta Resources Limited ("Zeta") (commodities); and Bermuda First Investment Company Limited ("BFIC") (Bermuda centric assets). In addition, UIL has established a strong track record of investing in the FinTech and PayTech sectors and is looking to establish a "platform" to capitalise on this position. Pleasingly the majority of our existing platforms have made significant progress over the last 12 months.

A negative of the platforms continues to be the discount on a discount. UEM's share price on 30 June 2016 was 192.00p, a discount of 9.9% to the diluted NAV for UEM of 213.10p. A look-through valuation of UEM, Somers, Zeta and BFIC would increase UIL's NAV by 13.4% to 273.50p per share. If the brokers' look-through valuation for Infratil of some NZ$4.00 per share was reflected in UIL's NAV, this would increase the look-through valuation by a further 2.5% to 279.50p.

The discount encouraged the Investment Managers, supported by the Board, to buy back 8.0% of its ordinary shares, 7.9m shares, during the year at 116.00p, at a then discount of over 30.0% to the NAV. These buybacks were significantly accretive to UIL's NAV per share and earnings per share ("EPS"). Further buybacks need to be balanced against the need to maintain adequate cover for the ZDP shareholders and liquidity for the redemption of the ZDP shares when due for repayment.

During April 2016, UIL announced its proposals for financing the £90m redemption of the 2016 ZDP shares, due on 31 October 2016. As part of this, UIL is seeking to reduce the absolute level of leverage and refinance the balance of the required funding with longer-dated ZDP issues.

UIL is on track to realise £27m from its portfolio and use the proceeds to redeem £27m of the 2016 ZDP shares on maturity, thus reducing the absolute level of leverage.

To refinance the balance of some £63m 2016 ZDP shares, UIL's wholly owned subsidiary, UIL Finance, created a new class of 50m 2022 ZDP shares which were offered to the existing 2016 ZDP holders by way of rollover and to the market by way of a placing, both at 100.00p. Of the 50m shares, 28.1m 2022 ZDP shares were issued on the rollover of 2016 ZDP shares, 12.9m shares were placed in the market for cash and UIL subscribed for the balance of 9.0m. 

In summary £28.1m of the 2016 ZDP share liability has been rolled; a further £27.0m will be repaid from realisations; and £34.9m will be repaid from the issue of longer dated ZDP shares. The 2022 ZDP yield to redemption is 6.25%, 1.00% below the 2016 ZDP shares being retired. Going forward the blended finance cost is approximately 6.5%.

Since the year end UIL Finance has placed out some 10.8m 2020 ZDP shares at 128.00p per share, raising £13.8m and UIL took 3.2m 2020 ZDP shares onto its balance sheet.

It is pleasing to see the ability of UIL Finance to place ZDP shares and for the ZDP shares to trade above the capital entitlement today.

At the time of announcing the ZDP proposals, UIL also announced its intention to buy 2.5m Somers' ordinary shares, taking its holding to some 70.1% of Somers. This is to be funded by UIL issuing its ordinary shares in exchange for the Somers ordinary shares, both to be valued at their latest published NAV. This was subject to shareholder approval, which was received in June, and several regulatory approvals, one of which is still outstanding but is expected shortly.

The ZDP share liability and bank debt rose during the first six months to £230.8m from £206.8m as at 30 June 2015, mainly as a result of share buybacks funded by bank debt. In the second half of the year to 30 June 2016 it has reduced to £222.1m and will reduce further on redemption of the 2016 ZDP shares. Our target in terms of the refinancing is debt to equity of one to one or better and we are on track to deliver this. Bank debt has reduced since 31 December 2015 from £52.1m to £24.7m, reflecting portfolio realisations and ZDP share placing proceeds.

Scotiabank agreed to extend the £50m loan facility for two years to 22 March 2018. In addition, Scotiabank worked with UIL to structure a £25m bridging facility which may be drawn down for six months from the end of October 2016 in the event that UIL is unable, due to market conditions, to place out the ZDP shares it holds or make the further necessary realisations to redeem the 2016 ZDP shares on their maturity on 31 October 2016. The Board is appreciative of Scotiabank's strong and committed support for UIL.

Revenue return was £5.7m, down on the prior year of £7.8m, a reduction of 27.0%. The decline arose mainly from a combination of total income lower by £0.7m and finance costs being higher by £0.7m due to the funding of the share buybacks. In addition, the increased finance costs reflect the borrowings in Sterling being switched to both the Australian Dollar and New Zealand Dollar, which carry higher interest charges but offer natural hedges against portfolio assets in those currencies. The revenue return EPS of 6.23p was down from the prior year's 7.84p, a decrease of 20.5%. The better outcome at an EPS level is due to the significant buybacks in the year as there are a smaller number of shares in issue.

The Board maintained total dividends at 7.50p per share which represents a yield on the closing share price of 130.75p of 5.7%. Looking forward the Board expects to maintain the current dividend profile. Undistributed revenue reserves carried forward rose, due to the buybacks, to some 11.56p per share.

Management fees remained unchanged throughout the year to 30 June 2016, at the discounted rate of 0.25%. However, at the beginning of July 2016 the UIL NAV rose above the adjusted high watermark and, as a result, the voluntary management fee discount no longer applies and the fee has reverted to the historic 0.5% per annum, with effect from 1 July 2016.

The current low interest rate and inflationary environment and UIL's continuing move towards platform investments means the existing performance fee structure looks inappropriate. Under the existing performance fee arrangement, the hurdle would be 1.98% as a result of the lower interest rate and inflation outlook and the exclusion of platform investments managed by ICM would exclude over 50.0% of the portfolio. ICM considers the hurdle to be too low, the mechanism for excluding the platforms too cumbersome and the uncapped nature of the performance fee inappropriate. ICM voluntarily made a proposal to address these aspects of the performance fee to the Board, which the Board has reviewed and agreed. The key features of the changes are the introduction of a minimum hurdle of 5.0% on the performance fee benchmark, a cap on performance fees in any financial year of 2.5% of adjusted equity funds (net assets plus dividends paid in the period) and for the fee to be calculated on shareholders' funds of UIL, reduced by a proportion of any performance fees due to ICM on other platform mandates held by UIL. The proportionate reduction will be calculated based on UIL's year-end shareholding in the relevant platform. ICM has agreed that these changes will not result in a higher performance fee payable by UIL cumulatively than under the existing arrangements.

The capital return was £62.3m, a significant increase over the prior year return of £2.4m. This reflects portfolio gains of £103.5m offset by losses on derivative financial instruments, mainly FX transactions to hedge the UK Sterling ZDP liability, of £22.0m. UIL ran a currency neutral debt liability position going into Brexit and Sterling's fall of some 10.0% gave rise to much of this realised FX loss, even though it generated a significant resultant gain on the non Sterling portfolio exposure represented by shareholders' funds.

Ongoing charges are 3.3% (both excluding and including performance fees payable by the other companies managed by ICM) (2015: 2.0% excluding performance fees and 2.4% including performance fees). These include operational, recurring costs payable by the Group and a proportion of costs incurred in other investment companies held within the portfolio. The 3.3% charge includes the reversion of the management fee to 0.5% per annum (from the reduced fee of 0.25%) and includes this year £0.7m of fees payable by Somers.

July's stellar performance by UIL is worth highlighting, with gross assets being up by £73.0m and the record over 13 years from inception in August 2003 to 31 July 2016 increases the NAV total return per ordinary share since inception to 255.0%.

OUTLOOK

The world's economic outlook continues to be weak. The response from central bankers continues to be accommodative. However, the stress imposed on the world's markets by such accommodative policies is imposing significant strains on parts of the market. In particular exchange rates have been and are likely to continue to be volatile. In this environment the world's investors are driven to seeking out "yield" and risk is being overlooked. Any divergence from this "synchronised" global response is likely to cause deep dislocation and high volatility. Given this background we remain concerned about the outlook, especially for social and political divergence, as happened as a result of the Brexit vote. Our portfolio should benefit from a continuation of the current global response from central banks, which is driving up asset values and gold price; emerging markets and Fintech investments should also benefit. Should a rift emerge to the "synchronised" approach gold should benefit disproportionately. Our portfolio is driven by stock selection and continues to enable UIL and its platforms to identify niche investment opportunities.

Peter Burrows AO
Chairman
19 September 2016

Investment Managers' Report

UIL's NAV total return of 47.1% for the twelve months to 30 June 2016 was a pleasing result in challenging markets.

As noted in the Chairman's Statement, market volatility has continued to rise throughout the previous twelve months and markets remain difficult for investors. The effects of this volatility can be seen both in commodities and currencies. For the year to 30 June 2016, the price of gold was up by 12.8%, whilst oil and nickel were both down by over 21.0%. Sterling has been weak, especially post Brexit and was down against the US Dollar, Euro, Australian Dollar and New Zealand Dollar by 15.0%, 14.8% 12.3% and 19.3% respectively for the twelve months to 30 June 2016.

Sterling's weakness benefited UIL's investment portfolio, which has limited Sterling exposure, resulting in a strong year end rally in UIL's NAV. Partially offsetting this were UIL's £148m foreign exchange ("FX") hedges in Sterling and bank borrowings in Euro and Australian Dollar, which resulted in liabilities increasing. The FX hedges were held to offset UIL's ZDP share Sterling liabilities.

The stand out performers, especially in the last six months, have been gold mining companies. Resolute's share price rose by 326.7% and was the top ASX 300 performer in the year to 30 June 2016. The other stand out sector in these markets continues to be technology and FinTech companies. UIL has benefited from its exposure to both the gold and technology sectors.

UIL's NAV also benefited from the 7.9m ordinary share buyback in July last year at a discount of 30.5%. The 30 June 2016 NAV per share was improved by 10.0p.

UIL has continued its move towards core platform investments, which offer the following benefits:

•  Focused strategy. Each platform has a narrow mandate and as such is driven by the need to find and make investments within its mandate.

•  Dedicated research analysts. The research analysts for each platform are focused on both understanding their portfolio businesses and identifying compelling investments.

•  The platforms can draw on UIL's support and financial backing.

•  The platforms can utilise the Investment Managers' wide knowledge across many jurisdictions to optimise investment opportunities and undertake corporate finance led transactions.

In short, the platforms have been set up to provide sharper focus leading to better investment opportunities and decisions within their sectors.

We first articulated the platform approach in early 2012 and today these represent 54.9% of the portfolio, amounting to £247.9m.

During the year to 30 June 2016, UIL made net withdrawals of £22.4m from its platform investments. Key realisations included £31.3m from Infratil, £6.1m from UEM and £1.1m from BFIC. Key investments were £6.6m into Somers, £6.1m into Zeta and £3.3m into Vix Investments Limited ("Vix Investments"). These investments are each reviewed in detail below.

It must be noted that UIL suffers a discount drag on the platform investments. The initial investments made were based on NAV. Following this, the shares in the platform companies have traded at a discount. As UIL marks these investments to market there is an immediate negative effect from investments made and this has muted UIL's NAV performance.

As at 30 June 2016 there were discounts to published NAVs of 9.9% for UEM (some £8.8m); 19.3% for Somers (some £15.8m); and 41.6% for Zeta (some £30.3m). In addition, Infratil's shares were trading at NZ$3.19 as at 30 June 2016, significantly below the brokers' valuation of NZ$4.00, a discount of 20.3% (some £6.0m). Together this amounts to a discount on these investments of some £60.9m. Adding this back would see UIL's shareholders' funds increase by 27.9% to £279.5m.

A key driver in shaping the portfolio is the Investment Managers' three core views. First, the world's financial markets are over indebted; second, technological change offers strong investment upside; third, emerging markets offer higher GDP growth opportunities. The Investment Managers are about stock selection, remaining fully invested and are focused on finding investments at valuations that do not reflect their true long-term value, while being a supportive shareholder of investee companies. The shape of the portfolio has been driven by these three core views. Resolute has offered real defence against the global QE financial response to global indebtedness; Touchcorp and other technology owned investments have provided excellent exposure to disruptive technologies and have delivered strong performances and UEM has demonstrated it can invest in the growth of emerging markets through essential infrastructure and utility service companies.

PORTFOLIO

The portfolio continues to move away from infrastructure and utilities with 27.4% invested in these sectors. The prior year was 39.4%. The big increases are in gold and technology, which both rose as a result of valuation uplifts.

As at 30 June 2016 the top ten investments accounted for 88.4% of the portfolio versus prior year 87.5%. It should be noted that for both sector and geographic analysis, we continue to present the portfolio on a look-through basis.

PLATFORM INVESTMENTS

UIL currently has six platform investments - UEM, Somers, Zeta, Infratil, BFIC and Vix Investments. Together these investments represent six out of the top 10 investments and account for 54.9% of the portfolio as at 30 June 2016.

UEM is UIL's second largest investment accounting for 17.7% of the portfolio at the year end. In the year to 30 June 2016, UEM delivered another solid result, achieving a total return of 7.9% significantly, ahead of the MSCI Emerging Markets Total Return Index (Sterling adjusted) which grew by 3.9%. The Investment Managers' stock selection has once again been recognised with UEM's performance being highly commended and it has gained industry recognition, with the fund winning the Money Observer Trust Awards 2016 for being the Best Emerging Markets Trust, for consistent superior three-year performance. UEM was also awarded the Money Observer Rated Fund Award 2016 for the second year running.

UEM's performance over three and five years to 31 March 2016 has again been significantly ahead of the Index, with it achieving positive total returns of 7.6% and 32.5% respectively versus the MSCI Emerging Markets Total Return Index (Sterling adjusted) which had negative returns of 7.0% and 8.1% respectively over these time periods. The market environment continues to be challenging with most key emerging market indices negative over the twelve months to 30 June 2016, with China a notable underperformer with Hong Kong's Hang Seng Index down by 20.8% and the Shanghai SE Composite Index down by 31.5%. Emerging market currencies also continue to be difficult, although much of UEM's strong performance in June 2016 was due to the sharp decline in the value of Sterling following the largely unexpected result of the UK's EU membership referendum at the end of June. Over the year to 30 June 2016, Sterling fell by 15.2% and 9.4% against the Hong Kong Dollar and Chinese Renminbi.

In the year to 30 June 2016 UIL reduced its holding in UEM by 7.9% with the sale of 3.5m shares, realising £6.1m.

Somers' reported NAV per share decreased to US$17.03 as at 31 March 2016 from US$17.56 as at 31 March 2015, a decrease of 3.0%. Adding back dividends over the 12 months to 31 March 2016 the Somers total loss was 0.6%. Somers, a financial services investment company, is listed on the Bermuda Stock Exchange ("BSX") and its share price has remained virtually unchanged in the 12 months to 30 June 2016, decreasing slightly from US$14.00 to US$13.75 and the discount to the NAV has reduced to 17.7% from 25.4% last year. Somers is classified as an investment company under IFRS 10 and, accordingly, values its investments at fair value.

Somers' two biggest investments remain Bermuda Commercial Bank Limited ("BCB") and Waverton Investment Management Limited ("Waverton"). BCB reported total revenue of US$13.5m for the six months ended 31 March 2016 (31 March 2015: US$13.9m). Following the acquisition of a majority interest in Private & Commercial Finance Group plc ("PCFG") in September 2015, consolidated core earnings have improved with net interest income of US$14.1m for the six months (2015: US$6.1m). This improvement was offset by a reduction in BCB's investment portfolio, leaving an overall net loss of US$3.9m for the six month period (2015: net income US$2.1m). As at 31 March 2016, the value of BCB's holding in PCFG, on a mark to market basis, has increased by US$5.0m since acquisition and this unrealised gain is not included in the foregoing results.

PCFG's portfolio performance and profitability in the 12 months to 31 March 2016 has outperformed management's objectives. New business originations were £63m, up from £56m last year, while the car and commercial finance portfolio of finance receivables grew by 12% to £112m. The quality of PCFG's loan book improved again over the period, while loan loss provisioning continued to reduce.

Waverton's assets under management ("AuM") were £4.5bn as at 31 March 2016 (30 September 2015: £4.3bn). For the six months ended 31 March 2016, Waverton earned revenue of £15.8m (March 2015: £16.0m), EBITDA of £3.8m (March 2015: £5.2m) and profit before tax of £3.7m (March 2015: £4.8m). The year on year financial results were impacted by a lower average AuM driven by weaker capital markets and increased property costs due to Waverton moving into new premises in September 2015.

Ascot Lloyd Holdings Limited ("Ascot Lloyd"), one of Somers' strongest performing investments, had assets under administration at 30 June 2016 of approximately £2.5bn. Importantly for an independent financial advisory business, Ascot Lloyd's recurring income has grown to approximately £14m on an annualised basis. For the six months ended 30 June 2016, Ascot Lloyd reported unaudited revenue of £9.6m, profit before tax of £0.4m and underlying EBITDA of £2.4m.

Zeta's net tangible assets ("NTA") per share fell by 27.8% in the year to 30 June 2016. Over this same period, Zeta's share price fell by 55.0%, from A$0.40 to A$0.18. The share price discount to NTA at the end of June 2016 was 41.6%. Zeta's investments in oil and nickel were affected by falls in those commodity prices, which were down over the year by 21.9% and 21.2% respectively. In contrast, the price of gold on a US Dollar basis was up by 12.8%. As Zeta employs debt capital, changes in the share prices of its underlying investments have a magnified effect on Zeta's NTA.

Aside from Resolute (discussed below), Zeta's three largest investments are an oil and gas producer, New Zealand Oil and Gas Limited ("NZOG"), Australian-based oil junior Pan Pacific Petroleum NL ("PPP"), and Australian nickel company Panoramic Resources Limited ("Panoramic"). In the wake of lower oil prices, NZOG has curtailed exploration and moved to reduce costs; in the year to 30 June 2016, NZOG's share price fell by 15.5%. Similarly, PPP has also cut back on exploration and reduced costs; PPP's shares fell by 19.4%. At the end of 2015, Panoramic decided to put its operations on care and maintenance rather than continue to produce nickel uneconomically; its share price closed the financial year down by 72.8%.

Infratil had, what its managment deemed to be, a "satisfactory" year, continuing to deliver on a commitment to realise value through asset sales. In the year to March 2016, Infratil completed sales of Z Energy and iSite Limited, disposing of its remaining 20% stake in the former for NZ$480.0m and its 100% holding in the latter for NZ$49.0m. The investment returns on these sales were particularly impressive, with the NZ$392.3m net gain realised on Z Energy equating to a 48.4% annualised IRR over 5.5 years and the NZ$27.0m net gain recorded for iSite Limited equating to a 30.0% annualised IRR over 6.5 years. As a consequence, Infratil's net surplus reached a record NZ$438.3m, up from NZ$383.5m in the prior year.

Infratil's underlying EBIDAF registered a 2.5% year-on-year increase in the financial year to 31 March 2016. Strong growth at NZ Bus and RetireAustralia offset a flat result at Trustpower, which remains challenged by low wholesale pricing and generation-overcapacity. While NZ Bus has benefited considerably from productivity-focused investment, RetireAustralia has seen strong momentum in both sales and pricing, which has lifted profitability. Meanwhile, Wellington Airport delivered another consistent performance, with growth of 4.9% in earnings before interest, tax, depreciation, amortisation and fair value adjustments ("EBITDAF") benefiting from a strong uplift in passenger numbers (domestic +4.6%; international +16.0%). Going forward, growth should reflect new investment in route development - with the airport now part way through a NZ$300m investment upgrade programme - and scheduled increases in aeronautical charges.

The divestment of assets over the past several years has left Infratil with significant capacity for capital deployment, with over NZ$1bn in cash and undrawn bank facilities available. Investments across a number of sectors, including renewable energy, retirement & elderly care, waste and telecoms infrastructure, are currently being considered. Moreover, the demerger of Trustpower gives Infratil the opportunity to deploy significant capital for the expansion of wind farm developments.

In the year to 30 June 2016, Infratil's share price increased by 1.3%. UIL reduced its holding in Infratil by 60.6% with the sale of 21.5m shares at an average price of NZ$3.22, realising £31.3m.

BFIC's share price was unchanged over the year to 30 June 2016. BFIC's investee companies are beginning to reflect the improvement in Bermuda's economy over the last 12 months as infrastructure projects in advance of the 2017 America's Cup start to benefit the island. Bermuda's GDP grew in 2015 for the first time in a number of years and, with increased tourism and business investment, the outlook is benign.

BFIC's two major investments remain KeyTech Limited ("KeyTech") and Ascendant Group Limited ("Ascendant"). During the year KeyTech completed a significant transaction with the acquisition of the 58% of Cellone (one of Bermuda's two mobile networks) it didn't already own and the investment in KeyTech by ATN International Inc ("ATN") of BM$42m, which has resulted in ATN becoming a 51% shareholder in KeyTech. As a result of this investment, KeyTech was able to pay a special dividend of BM$0.75 per share, to reduce its net debt and to bring forward some of its capital expenditure plans in both Bermuda and the Cayman Islands. Ascendant reported much improved results in 2015 with operating profit doubling. This was the result of stronger sales driven by the improving Bermuda economy and reduced operating costs. Ascendant has been working with the Bermuda Government and recently submitted an integrated resource plan which focuses on the energy future of Bermuda, including the potential conversion of generation facilities to liquefied natural gas.

As at 30 June 2016, BFIC had total assets of BM$25.2m and reported a net profit for the twelve months of BM$1.9m. BFIC shares were untraded on the BSX in the year, but remained quoted at a bid price of BM$10.00. As a result, the holding in BFIC has been moved from level one to level two. As support for the bid price UIL has looked through to fair value of both Ascendant and Keytech, its two significant investments.

Vix Investments is an unlisted investment company holding a number of unlisted investments in technology companies, primarily related to FinTech. The largest holding in Vix Investment is Optal, which provides payment solutions to travel agents, principally as an issuer of single use Mastercard numbers. This allows agents to secure and pay for bookings through the Mastercard system, using a virtual card number linked to an individual transaction.

In the year to 31 December 2015, Optal's revenue was up to €81.3m and excluding disposals the profit before tax was up to €10.5m.

Two former holdings of Vix Investments, Touchcorp and DTI Group, listed last year and UIL now holds its share of these investments directly.

DIRECT INVESTMENTS

UIL has four direct investments in the top ten: Resolute, Vix Technology Limited ("VixTech"), Touchcorp and Augean plc ("Augean").

Resolute is UIL's largest investment, accounting for 20.0% of the portfolio as at 30 June 2016 and is an Australian gold mining company. Resolute was the top performer on the ASX 300 in the twelve months to 30 June 2016. Its share price in the year to 30 June 2016 rose by 326.7% to A$1.28. This was a reflection of increased gold prices, a decline in the Australian Dollar/US Dollar exchange rate, and cost reductions by the company. A change in management has seen a shift in culture towards a lower risk, cost conscious business. This is evident in the move to underground from open pit mining at Syama and the early pre-payment of all of its longer duration debts, leaving the company with a much stronger balance sheet and a net cash position.

Production in the year to 30 June 2016 of 315,169oz of gold was down on the previous year's production of 328,684oz. Resolute's principal producing assets include the Syama gold mine in Mali and Ravenswood in Australia. Gold ounces produced at Syama decreased by 6.8% to 209,617oz while the company focused on processing ore stockpiles ahead of development of underground mining, while cash costs rose by 3.8% to A$830/oz. At Ravenswood gold ounces produced rose by 1.7% to 105,552oz, largely in line with the previous year. Cash costs per ounce at Ravenswood increased by 9.9% to A$1,033/oz, in part due to the processing of larger volumes of lower grade ore.

In the year to 30 June 2016 Resolute reported revenues up by 21% year-on-year, gross profits up by 135% and net profit after tax at A$213m versus a loss of A$569m in the prior year. At end-June, Resolute had cash and bullion on hand of A$102m compared to total borrowings of just A$27m. The A$15m convertible note offering which was completed in December 2014, partially sub-underwritten by UIL was converted and redeemed in June 2016. Net cash inflows for the year totalled A$139m and Resolute used a significant portion of that to repay debt.

During the year Resolute completed a definitive feasibility study for underground mining in Syama, with work expected to commence on development in September 2016. Successful development of underground mining in Syama is expected to extend the life of the mine by at least 10 years. Resolute has also completed a feasibility study to commence mining at the Bibiani gold project in Ghana. The results were positive, and Resolute proposes to undertake additional drilling in order to extend the study's projected five-year mine life. Meanwhile at Ravenswood, Resolute is drilling with the aim of pursuing underground mining at Buck Reef West.

Resolute has provided guidance for gold production of 300,000oz at an all-in-sustaining-cost of A$1,280/oz (US$934/oz) for the year to 30 June 2017.

VixTech is an unlisted company in which UIL has a 39.8% holding. VixTech is a global leader in smart booking, ticketing, payments, real-time information and data management solutions for large-scale transport networks, with a customer base of more than 200 customers worldwide. VixTech leverages more than 25 years of industry experience designing, operating and maintaining proven next-generation ticketing, payment and loyalty platforms to help governments and businesses manage around five billion transactions a year and create new ways to connect with their customers. Harnessing the latest technologies, VixTech now also works with major sporting clubs, mining communities and event venues to boost engagement, save resources and enable powerful data-driven loyalty and reward schemes through simple solutions that achieve measurable growth and increase customer satisfaction. VixTech has a long history of successful transit ticketing and payment solutions in regions including Singapore, Hong Kong, USA, UK, Sweden and France. VixTech developed the world's largest payment central clearing house in Beijing before the 2008 Olympics, capable of processing more than 10 million passenger journeys per day.

Over the year to 30 June 2016, VixTech continued to deliver on its short term objectives to improve the quality of the order book, which resulted in a 29.6% increase in revenues. However, following management changes, VixTech is at the start of a transitional period to ensure that going forward it can operate more efficiently as a global, unified player. As a result, VixTech has incurred an increase in operating costs, resulting in EBITDA for the period falling by 68.0%.

Management's drive to expand geographically and increase its product offering continued throughout the year as it managed to secure a second contract with the Malaysian government authority, SPAD, to introduce a second transit ticketing system, enabling Malaysians in the near future to travel on bus, rail and monorail networks with one single smartcard. In addition, VixTech secured a contract with STIB, the Brussels' transport authority, to implement a new transit ticketing back office system, integrating multiple bus, tram and rail operators and operating systems into a single core platform. VixTech's pipeline remains robust as a number of opportunities are arising from major clients which should in the near future provide a solid sustainable uplift in revenue. The transitional period of making VixTech a more unified global player should result in the medium term in additional margin expansion which, if delivered and sustained, will result in a significant positive revaluation of the company.

Touchcorp is an Australian headquartered FinTech company, operating in Scandinavia, Europe, South-East Asia and the Australia Pacific regions. Touchcorp provides value-added products and services, including payment services, to retailers and to the providers of prepaid mobile phones, prepaid cards and to health and government organisations, through channels including the internet, mobile devices and retail agents (e.g. convenience stores, newsagents and petrol stations), as well as directly to consumers on behalf of product and service owners.

Touchcorp continued to exhibit strong growth with reported revenue for the year to 31 December 2015 up by 70.8% and pre-tax profits up by 27.0%. During the year, Touchcorp developed a solution for Afterpay Holdings Limited ("Afterpay"), a company that allows e-commerce website operators to offer their customers the facility to pay for their purchases in instalments. Touchcorp owns 30% of Afterpay.

Afterpay successfully listed on the Australian Stock Exchange in April 2016, with its shares advancing strongly ahead of the A$1.00 IPO price. Afterpay is currently benefiting from strong growth, with the number of customers, end users, transaction values and revenues more than doubling in the quarter to 30 June 2016 compared with the quarter to 31 March 2016.

Augean is a UK-based company providing specialist waste management services across a variety of industries. Augean's share price declined by 13.2% in the twelve months to 30 June 2016, despite Augean's good financial progress. In its financial year to December 2015, revenues increased by 10.9% and EBITDA increased by 20.2%, underpinned by strong growth in the core energy & construction business. However, reported net income registered a decline of 66.8%, impacted by a one-off asset impairment. Adjusted profit before tax was up by 12.1% and dividends increased by 30.0% on the previous year.

Landfill volumes handled by the energy & construction unit recorded an impressive 30.8% year-on-year increase, buoyed by increased activity in the construction sector. However, a decline in higher-margin air pollution control activities acted as a drag on the segment's EBITDA growth, which, at 15.0%, nonetheless exceeded expectations. In contrast, Radioactive Waste Services recorded a sharp 26.3% drop in volumes and 13.0% EBITDA growth as it is dependent on waste material from nuclear decommissioning. The Nuclear Decommissioning Authority reduced the release rate through 2015 but management anticipate a strong recovery from late-2016 to 2017.

Augean North Sea Services proved resilient in the year to December 2015, recording 34.0% EBITDA growth, albeit on relatively weak 2014 base-year figures. It is, however, worth mentioning that results in the second half of the year were significantly weaker than those in the first half, but new contracts relating to production platforms, onshore waste management and decommissioning, as opposed to exploration drilling waste management, are in line with management objectives to diversify the business away from oil-price dependent services. While the outlook for this segment is challenging, management are confident they can maintain profitability.

Following a recent review of the portfolio based on tighter parameters a number of investments have been moved from level one to level two as they are infrequently traded.

UNLISTED INVESTMENTS

Unlisted investments were valued at £65.5m, 14.5% of the portfolio, as at 30 June 2016, up from £56.6m (15.5% of the portfolio), as at 30 June 2015. In addition, UIL has made loans to listed platform companies totalling £30.6m, some 6.8% of the portfolio, up from £25.8m, 7.0% at the previous year end. As these companies are listed, these loans are not regarded as an investment in an unlisted company.

Together the unlisted investments and the loans to the platforms are reported as level 3 investments amounting to £96.1m, prior year £82.4m.

FinTech and paytech

Given our FinTech and PayTech performance and track record we are reviewing how better to achieve value from these investments to maximise our investment opportunity and the establishment of a platform may be the logical conclusion.

SECTOR REVIEWS

Gold Mining - 23.7%, prior year 7.3%

UIL's largest investment in gold mining is in Resolute, which is held directly through UIL (20.0% of the portfolio) and indirectly including through Zeta. Resolute is reviewed above.

The gains in gold mining are all down to the value uplift of Resolute and the Australian Dollar versus Sterling.

Technology - 21.0%, prior year 15.7%

UIL holds a number of investments in the technology sector, both directly and through Vix Investments. UIL's largest technology investment is Touchcorp, the seventh largest holding in the portfolio as at 30 June 2016, which successfully listed in Australia in March 2015 and is reviewed above.

VixTech provides ticketing payment solutions and is UIL's fifth largest investment. VixTech is reviewed above.

Vix Investments is UIL's ninth largest holding and has a number of investments in unlisted companies, principally in the FinTech space. Vix Investments is reviewed above.

Outside of the top ten, UIL holds shares in a small number of listed and unlisted technology companies which offer a range of software, hardware and specialist engineering solutions.

The technology sector grew mainly as a result of value increases.

Financial Services - 15.4%, prior year 15.1%

UIL's largest investment in financial services is in Somers, which accounts for 14.7% of UIL's portfolio as at 30 June 2016; Somers is reviewed above.

Financial services saw some increase mainly through value gains but percentage wise was marginally the same.

Oil & Gas - 9.6%, prior year 13.0%

UIL's largest investment in oil & gas is via Zeta, which accounts for 9.4% of UIL's portfolio as at 30 June 2016; Zeta is reviewed above.

Oil & gas declined due to strong downward pressure from weak commodities resulting in most investments declining in value.

DERIVATIVES

Equity: UIL continued to hold a modest market derivatives portfolio, mainly through S&P500 index options which resulted in a small loss of £0.1m for the year to 30 June 2016.

Foreign exchange: Currency positions within UIL's portfolio made significant losses of £21.9m due to Sterling's weakness. UIL has hedged a mixture of New Zealand Dollar, Australian Dollar, Euro and US Dollar. At the period end UIL's forward currency sale contracts in place were for nominal NZ$71.1m, A$142.7m, €22.5m and US$36.3m.

UIL has run a Sterling liability neutral policy and therefore hedged its predominantly Sterling liabilities with an appropriate mix of portfolio asset currency exposures.

GEARING

Gearing (including the ZDP shares) reduced from 160.4% three years ago to 124.1% last year and to 101.6% as at 30 June 2016. Although debt has increased by £15.3m in the year to 30 June 2016 from £206.8m to £222.1m, there has been a significant increase in shareholders' equity to £218.6m from £166.6m.

UIL has a goal of reducing gearing to 100.0% or below and this looks deliverable in the coming year.

ZDP SHARES

UIL's wholly owned subsidiary, UIL Finance, started the year with £172.4m of ZDP shares in issue, including £83.5m of 2016 ZDP shares due for redemption on 31 October 2016.

As indicated in the interim report, UIL Finance created 2022 ZDP shares in the second half of the financial year. Existing 2016 ZDP shareholders elected to roll approximately 15.0m shares into the 2022 ZDP shares, resulting in the issue of 28.1m 2022 ZDP shares and a further 12.9m 2022 ZDP shares were placed for cash in the market. On a consolidated basis, there were £40.4m 2022 ZDP shares and £61.3m 2016 ZDP shares outstanding as at 30 June 2016. The ZDP shares outstanding in total rose to £197.4m, up by £25.0m of which £12.7m represents the ZDP finance costs and £12.2m represents new 2022 ZDP shares placed in the market. The £12.2m cash raised has been used to reduce the bank debt.

As part of the rollover and placing, UIL acquired 9.0m 2022 ZDP shares for investment purposes; on consolidation, the ZDP shares held by UIL are eliminated.

Since the year end UIL Finance has placed out an additional 10.8m 2020 ZDP shares, raising some £13.8m and UIL has taken an additional 3.2m of these shares onto its balance sheet, all at 128.00p per 2020 ZDP share.

The ZDP cover has risen through the year and the yield to maturity reduced. This is a pleasing result. Further details on the ZDP shares is included in note 16 to the accounts on page 87.

DEBT

Bank debt increased from £34.4m at the start of the financial year to £52.1m at 31 December 2015 and then reduced to £24.7m as at 30 June 2016, with the reduction arising from the proceeds of the ZDP share placing of £12.2m, as noted above and portfolio realisations. The intention is to reduce the debt to nil ahead of the 2016 ZDP share redemption, with it rising to £50.0m on funding of the redemption.

Scotiabank extended the £50.0m facility to 22 March 2018 and also granted UIL a short-term £25.0m bridging facility, should it be needed, to help fund the redemption of the 2016 ZDP shares.

REVENUE RETURNS

Revenue returns were £5.7m, down on the previous year's £7.8m, a reduction of some 27.0%, mainly as a result of a combination of total lower income of £0.7m and finance costs being higher by £0.7m. The total income reduced due to realisations to fund the share buybacks. The finance cost increase reflects the borrowings in Sterling being switched to both the Australian Dollar and New Zealand Dollar which carry higher interest charges but offer natural hedges against portfolio assets in those currencies. The revenue return EPS of 6.23p was down from the prior year's 7.84p, a reduction of 20.5%. The outcome at an EPS level is due to the reduction in number of ordinary shares in issue following the significant buybacks undertaken in the year.

The Board maintained total dividends at 7.50p per ordinary share and this represents a yield on the year end closing share price of 5.7%. Looking forward the Board expects to maintain the current dividend profile. Undistributed revenue reserves carried forward are some 11.56p per share.

The ICM management fees were unchanged throughout the year to 30 June 2016 at the voluntarily discounted rate of 0.25%. In July 2016 the UIL NAV exceeded the adjusted high watermark and as a result the management fee discount no longer applies and the fee has reverted to historic 0.5% per annum.

CAPITAL RETURNS

Capital returns were £62.3m, a significant increase over the previous year's return of £2.4m. This reflects portfolio gains of £103.5m offset by losses on derivative financial instruments, mainly FX transactions to hedge the short UK Sterling ZDP share positions of £22.0m. UIL managed a currency neutral liability position going into Brexit and Sterling's fall of some 10% gave rise to much of this loss.

Ongoing charges (both excluding and including performance fees payable by the other companies managed by ICM) were 3.3%. These include operational, recurring costs payable by the Group and a proportion of costs incurred in other investment companies held within the portfolio.

ICM Investment Management Limited and ICM Limited
Investment Managers
19 September 2016

Principal Risks and Risk Mitigation

ICMIM was appointed as the Company's AIFM with effect from 13 April 2015 and has sole responsibility for risk management subject to the overall policies, supervision, review and control of the Board.

The Board carefully considers the Company's principal risks and seeks to mitigate these risks through continual and regular review, policy setting, compliance with and enforcement of contractual obligations and active communication with the Investment Managers and the Company's Administrator.

The Board applies the principles and recommendations of the UK Code on Corporate Governance and the AIC's Code on Corporate Governance as described on page 52 of the 2016 Report and Accounts. The Company's internal controls are described in more detail on pages 46 and 47 of the 2016 Report and Accounts. Through these procedures, and in accordance with Internal Control: Revised Guidance for Directors on the Combined Code (the "FRC guidance"), the Board has established an on-going process for identifying, evaluating and managing the significant risks faced by the Company and has regularly reviewed the effectiveness of the internal control systems for the year. This process has been in place throughout the year under review and to the date hereof and will continue to be regularly reviewed by the Board going forward.

Most of the Company's principal risks are market-related and similar to those of other investment companies which invest globally in various currencies around the world. The principal ongoing risks and uncertainties currently faced by the Company, and the controls and actions to mitigate those risks are described below. Further details of risks and risk management policies as they relate to the financial assets and liabilities of the Company are detailed in note 30 to the 2016 Report and Accounts.

Investment risk - the risk that the investment strategy does not achieve long-term total returns for the Company's shareholders

The Board monitors the performance of the Company and has established guidelines to ensure that the investment policy that has been approved is pursued by the Investment Managers.

The investment process employed by the Investment Managers combines assessment of economic and market conditions in the relevant countries with stock selection. Fundamental analysis forms the basis of the Company's stock selection process, with an emphasis on sound balance sheets, good cash flows, the ability to pay and sustain dividends, good asset bases and market conditions. The political risks associated with investing in these countries are also assessed. Overall, the investment process aims to achieve absolute returns through an active fund management approach.

The Company's results are reported in Sterling, whilst the majority of its assets are priced in foreign currencies. The impact of adverse movements in exchange rates can significantly affect the returns in Sterling of both capital and income. Such factors are out of the control of the Board and the Investment Managers and may give rise to distortions in the reported returns to shareholders. It can be difficult and expensive to hedge some currencies.

In addition, the ordinary shares of the Company may trade at a discount to their NAV. The Board monitors the price of the Company's shares in relation to their NAV and the premium/discount at which they trade. The Board may buy back shares if there is a significant overhang of stock in the market, having regard to the percentage of shares in public hands.

The Board regularly reviews strategy in relation to a range of issues including the balance between quoted and unquoted stocks, the allocation of assets between geographic regions and sectors and gearing. Periodically the Board holds a separate meeting devoted to strategy, the most recent one being held in November 2015.

A fuller review of economic and market conditions is included in the Investment Managers' Report section of the Strategic Report of the 2016 Report and Accounts.

There is no guarantee that the Company's strategy and business model will be successful in achieving its investment objective. The value of an investment in the Company and the income derived from that investment may go down as well as up and an investor may not get back the amount invested. Past performance of the Company is not necessarily indicative of future performance.

No material change in overall risk in the year

Gearing: the risk that the use of gearing may adversely impact on the Company's performance

The ordinary shares rank behind the bank debt and ZDP shares, making them a geared instrument.

The gearing level is high due to the capital structure of the balance sheet. Whilst the gearing should enhance total return where the return on the Company's underlying securities is rising and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is falling. As at 30 June 2016, gearing on net assets, including bank loans, any overdrafts and ZDP shares, was 101.6%. The Board reviews the level of gearing at each Board meeting.

No material change in overall risk in the year.

Banking: a breach of the Company's loan covenants might lead to funding being summarily withdrawn

ICMIM monitors compliance with the banking covenants when each drawdown is made and at the end of each month. The Board reviews compliance with the banking covenants at each Board meeting.

No material change in overall risk in the year.

Key staff: loss by the Investment Managers of key staff could affect investment returns

The quality of the management team is a crucial factor in delivering good performance. There are training and development programs in place for employees of the Investment Managers and the recruitment and remuneration packages have been developed in order to retain key staff.

Any material changes to the management team are considered by the Board at its next meeting; the Board discusses succession planning with the Investment Managers at regular intervals.

No material change in overall risk in the year.

Reliance on the Investment Managers and other service providers: inadequate controls by the Investment Managers or Administrator or other third party service providers could lead to misappropriation of assets

Failure by any service provider to carry out its obligations to the Company in accordance with the terms of its appointment could have a materially detrimental impact on the operation of the Company and could affect the ability of the Company to successfully pursue its investment policy. The Company's main service providers are listed on page 106 of the 2016 Report and Accounts. The Audit Committee monitors the performance of the service providers.

All listed investments are held in custody for the Company by JPMorgan Chase Bank NA, Jersey ("JPMorgan"); the unlisted investments are held in custody by BCB (together "the Custodians").

Following the appointment of J.P. Morgan Europe Limited ("JPMEL") as the Company's Depositary services provider, JPMEL also monitors the movement of cash and assets across the Company's accounts.

The Audit Committee reviews the Administrator's annual internal control report which details the controls around the reconciliation of the Administrator's records to those of the Custodians. The Administrator reviews the control reports published by JP Morgan and draws any issues to the attention of the Board.

The Board reviews operational issues at each Board meeting and the Audit Committee receives reports on the operation of internal controls and the risk of cybercrime, as explained in more detail within "Internal Controls" on pages 46 and 47 in the 2016 Report and Accounts.

The risk of cybercrime is high, as it is with most organisations, but the Board regularly seeks assurances from the Investment Managers and other service providers on the preventative steps that they are taking to reduce this risk.

Although there has been no change in overall risk in the year, the possibility of cybercrime continues to be a concern. The Company's assets are considered to be relatively secure, so the risk is the inability to transact investment decisions for a period of time and reputational risk.

Directors' Statement of Responsibilities

The Directors are responsible for preparing the annual report and accounts, which is required to include a Strategic Report, a Corporate Governance Statement, a Directors' Remuneration Report and a Report of the Directors.

The Directors must not approve the Group and Company financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company as at 30 June 2016 and of the results for the year then ended. The Directors are also responsible for ensuring that the annual report and accounts is fair, balanced and understandable and that the accounting records 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 Group and enable them to ensure that the financial statements and the Directors' annual report on remuneration comply with IFRS. They have a 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.

In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• make judgements and estimates that are reasonable and prudent;

• provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

• state that the Company has complied with IFRS, subject to any material departures disclosed and explained in the financial statements.

The Directors of the Company, whose names are shown on page 38 of the 2016 Report and Accounts, each confirm to the best of their knowledge that:

• the financial statements, which have been prepared in accordance with applicable Bermuda law and IFRS, as adopted by the European Union, on a going concern basis, give a true and fair view of the assets, liabilities, financial position and net return of the Company and Group;

• the annual financial report includes a fair review of the development and performance of the Company and the important events that have occurred during the financial year and their impact on the financial statements, including a description of the principal risks and uncertainties that it faces; and

• the financial statements and the Report of the Directors' include details of any related party transactions.

Approved by the Board on 19 September 2016 and signed on its behalf by:

Peter Burrows

Chairman

Group Income Statement

	Year to 30 June 2016			Year to 30 June 2015
	Revenue	Capital	Total	Revenue	Capital	Total
	return	return	return	return	return	Return
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Gains on investments	-	103,464	103,464	-	6,308	6,308
(Losses)/gains on derivative financial instruments	-	(22,013)	(22,013)	-	6,347	6,347
Foreign exchange gains/(losses)	181	(6,388)	(6,207)	(74)	2,989	2,915
Investment and other income	10,318	-	10,318	11,271	-	11,271
Total income	10,499	75,063	85,562	11,197	15,644	26,841
Income not receivable	(887)	-	(887)	-	-	-
Management and administration fees	(849)	-	(849)	(846)	-	(846)
Other expenses	(1,083)	(2)	(1,085)	(1,003)	(5)	(1,008)
Profit before finance costs and taxation	7,680	75,061	82,741	9,348	15,639	24,987
Finance costs	(1,739)	(12,734)	(14,473)	(1,082)	(13,195)	(14,277)
Profit before taxation	5,941	62,327	68,268	8,266	2,444	10,710
Taxation	(268)	-	(268)	(500)	-	(500)
Profit for the year	5,673	62,327	68,000	7,766	2,444	10,210
Earnings per ordinary share (basic)  - pence	6.23	68.45	74.68	7.84	2.47	10.31

The Group does not have any income or expense that is not included in the profit for the year, and therefore the "profit for the year" is also the "total comprehensive income for the year", as defined in International Accounting Standard 1 (revised).

All items in the above statement derive from continuing operations.

All income is attributable to the equity holders of the Company. There are no minority interests.

Company Income Statement

	Year to 30 June 2016			Year to 30 June 2015
	Revenue	Capital	Total	Revenue	Capital	Total
	return	return	return	return	return	return
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Gains on investments	-	103,674	103,674	-	6,233	6,233
(Losses)/gains on derivative financial instruments	-	(21,944)	(21,944)	-	6,423	6,423
Foreign exchange gains/(losses)	181	(6,420)	(6,239)	(74)	2,993	2,919
Investment and other income	10,318	-	10,318	11,271	-	11,271
Total income	10,499	75,310	85,809	11,197	15,649	26,846
Income not receivable	(887)	-	(887)
Management and administration fees	(834)	-	(834)	(831)	-	(831)
Other expenses	(1,075)	(2)	(1,077)	(996)	(5)	(1,001)
Profit before finance costs and taxation	7,703	75,308	83,011	9,370	15,644	25,014
Finance costs	(1,739)	(12,745)	(14,484)	(1,082)	(13,237)	(14,319)
Profit before taxation	5,964	62,563	68,527	8,288	2,407	10,695
Taxation	(268)	-	(268)	(500)	-	(500)
Profit for the year	5,696	62,563	68,259	7,788	2,407	10,195
Earnings per ordinary share (basic)  - pence	6.25	68.71	74.96	7.87	2.43	10.30

The Company does not have any income or expense that is not included in the profit for the year, and therefore the "profit for the year" is also the "total comprehensive income for the year", as defined in International Accounting Standard 1 (revised).

All items in the above statement derive from continuing operations.

All income is attributable to the equity holders of the Company.

Group Statement of Changes in Equity

for the year to 30 June 2016
	Ordinary	Share		Non-
	share	premium	Special	distributable	Capital	Revenue
	capital	account	reserve	reserve	reserves	reserve	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 June 2015	9,856	28,414	233,866	32,069	(149,255)	11,608	166,558
Profit for the year	-	-	-	-	62,327	5,673	68,000
Ordinary dividends paid	-	-	-	-	-	(6,799)	(6,799)
Shares purchased by the Company	(791)	(8,383)	-	-	-	-	(9,174)
Balance at 30 June 2016	9,065	20,031	233,866	32,069	(86,928)	10,482	218,585

for the year to 30 June 2015
	Ordinary	Share		Non-
	share	premium	Special	distributable	Capital	Revenue
	capital	account	reserve	reserve	reserves	reserve	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 June 2014	9,916	29,020	233,866	32,069	(151,699)	11,268	164,440
Profit for the year	-	-	-	-	2,444	7,766	10,210
Ordinary dividends paid	-	-	-	-	-	(7,426)	(7,426)
Shares purchased by the Company	(60)	(606)	-	-	-	-	(666)
Balance at 30 June 2015	9,856	28,414	233,866	32,069	(149,255)	11,608	166,558

Company Statement of Changes in Equity

for the year to 30 June 2016
	Ordinary	Share		Non-
	share	premium	Special	distributable	Capital	Revenue
	capital	account	reserve	reserve	reserves	reserve	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 June 2015	9,856	28,414	233,866	32,069	(149,451)	11,804	166,558
Profit for the year	-	-	-	-	62,563	5,696	68,259
Ordinary dividends paid	-	-	-	-	-	(6,799)	(6,799)
Shares purchased by the Company	(791)	(8,383)	-	-	-	-	(9,174)
Balance at 30 June 2016	9,065	20,031	233,866	32,069	(86,888)	10,701	218,844

for the year to 30 June 2015
	Ordinary	Share		Non-
	share	premium	Special	distributable	Capital	Revenue
	capital	account	reserve	reserve	reserves	reserve	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 June 2014	9,916	29,020	233,866	32,069	(151,858)	11,442	164,455
Profit for the year	-	-	-	-	2,407	7,788	10,195
Ordinary dividends paid	-	-	-	-	-	(7,426)	(7,426)
Shares purchased by the Company	(60)	(606)	-	-	-	-	(666)
Balance at 30 June 2015	9,856	28,414	233,866	32,069	(149,451)	11,804	166,558

Balance Sheets

at 30 June	GROUP		COMPANY
	2016	2015	2016	2015
	£'000s	£'000s	£'000s	£'000s
Non-current assets
Investments	452,197	366,928	462,624	367,609
Current assets
Other receivables	2,945	2,583	2,945	2,583
Derivative financial instruments	1,067	3,359	-	2,658
Cash and cash equivalents	174	1,236	11	1,053
	4,186	7,178	2,956	6,294
Current liabilities
Loans	-	(34,351)	-	(34,351)
Other payables	(1,101)	(560)	(207,467)	(172,994)
Derivative financial instruments	(14,637)	(196)	(14,570)	-
Zero dividend preference shares	(61,327)	-	-	-
	(77,065)	(35,107)	(222,037)	(207,345)
Net current liabilities	(72,879)	(27,929)	(219,081)	(201,051)
Total assets less current liabilities	379,318	338,999	243,543	166,558
Non-current liabilities
Loans	(24,699)	-	(24,699)	-
Zero dividend preference shares	(136,034)	(172,441)	-	-
Net assets	218,585	166,558	218,844	166,558
Equity attributable to equity holders
Ordinary share capital	9,065	9,856	9,065	9,856
Share premium account	20,031	28,414	20,031	28,414
Special reserve	233,866	233,866	233,866	233,866
Non-distributable reserve	32,069	32,069	32,069	32,069
Capital reserves	(86,928)	(149,255)	(86,888)	(149,451)
Revenue reserve	10,482	11,608	10,701	11,804
Total attributable to equity holders	218,585	166,558	218,844	166,558
Net asset value per ordinary share
Basic - pence	241.12	169.00	241.41	169.00

Statements of Cash Flows

	GROUP		COMPANY
for the year to 30 June	2016	2015	2016	2015
	£'000s	£'000s	£'000s	£'000s
Cash flows from operating activities	4,217	3,587	4,238	3,613
Investing activities
Purchases of investments	(46,049)	(42,255)	(46,582)	(43,746)
Sales of investments	65,169	86,466	65,169	86,466
Purchases of derivatives	(8,302)	(887)	(4,716)	-
Sales of derivatives	3,022	3,246	-	2,817
Cash flows on margin accounts	-	1	-	-
Cash flows from investing activities	13,840	46,571	13,871	45,537
Cash flows before financing activities	18,057	50,158	18,109	49,150
Financing activities
Equity dividends paid	(6,799)	(7,426)	(6,799)	(7,426)
Movement on loans	(11,483)	12,634	(11,483)	12,634
Cash flow from issue of ZDP shares	12,435	8,993	12,435	8,993
Cash flow from redemption of ZDP shares	-	(62,172)	-	(61,346)
Cost of shares purchased for cancellation	(9,174)	(666)	(9,174)	(666)
Cash flows from financing activities	(15,021)	(48,637)	(15,021)	(47,811)
Net increase in cash and cash equivalents	3,036	1,521	3,088	1,339
Cash and cash equivalents at the beginning of the year	1,225	(2,689)	1,042	(2,694)
Effect of movement in foreign exchange	(4,375)	2,393	(4,407)	2,397
Cash and cash equivalents at the end of the year	(114)	1,225	(277)	1,042

Comprised of:
Cash	174	1,236	11	1,053
Bank overdraft	(288)	(11)	(288)	(11)
Total	(114)	1,225	(277)	1,042

Notes

The Directors declared a fourth quarterly dividend in respect of the year ended 30 June 2016 of 1.875p per share which will be paid on 28 September 2016 to all ordinary shareholders on the register at close of business on 9 September 2016. The total cost of the dividend, which has not been accrued in the results for the year to 30 June 2016, is £1,695,000 based on 90,414,511 ordinary shares in issue.

This Statement of Results was approved by the Board on 19 September 2016. It is not the Group's or Company's statutory accounts. The statutory accounts for the financial year ended 30 June 2016 have been approved and audited, and received an audit report which was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report. The statutory accounts for the financial year ended 30 June 2015 received an audit report which was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report.

The Report & Accounts for the year ended 30 June 2016 will be posted to shareholders in early October 2016. A copy is available to view and download from the Company's website at www.uil.limited  Copies may also be obtained during normal business hours from Exchange House, Primrose Street, London, EC2A 2NY.

By order of the Board

ICM Investment Management Limited, Secretary

19 September 2016

 

END

 

 

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