UTLG Uil Fin 24

Date:                      8 October 2024

Contact:                 Charles Jillings

                                ICM Investment Management Limited

                                01372 271 486

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

UIL LIMITED

ANNUAL FINANCIAL REPORT

for the year to 30 June 2024

UIL Limited ("UIL" or the "Company") today announced its audited financial results for the year to 30 June 2024.

FINANCIAL HIGHLIGHTS

·    Revenue earnings per ordinary share of 10.15p (2023: 6.68p)

·    Dividends per ordinary share of 8.00p (2023: 8.00p)

·    Net asset value ("NAV") total return per ordinary share* of -15.3% (2023: -20.6%)

·    Share price total return per ordinary share* of -24.8% (2023: -18.5%)

·    NAV discount as at 30 June 2024* of 36.9% (2023: 27.5%)

·    Gearing* 73.6% (2023: 83.5%)

*See Alternate Performance Measures on pages 104 to 106 of the Report and Accounts

Extract from the Chairman Statement:

"FUTURE OF THE COMPANY

While we have a number of potentially exciting investments within the portfolio, such as the merged Waverton Investment Management Group ("Waverton") and London & Capital Group ("London & Capital"), and Diraq Pty Ltd ("Diraq"), our quantum computing investment, we recognise that recent poor investment performance has resulted in UIL not having the scale to build up a sufficiently diversified portfolio. In addition, the liquidity of the ordinary shares on the market, given the significant major shareholder ownership, is problematic while our general investment mandate does not provide the focused offering which the investor base in the UK now prefers.

Given this, the logical conclusion is to work towards taking the Company private and cancelling its stock exchange listings following the redemption of the 2028 ZDP shares.

The Investment Managers and majority shareholder both recognise this and have combined to put forward proposals, which the Board supports, to manage UIL over the next four years with a view to realising sufficient investments to enable the redemption of the ZDP shares and provide an opportunity for the UIL minority shareholders to exit.

To facilitate this, it is the intention to simplify the platform structures. This is likely to result in merging the Somers and Zeta investment vehicles into UIL, thereby consolidating the investments of Somers and Zeta with those of UIL. Such proposals will increase UIL's asset base, although the external minority interests in UIL will decrease as a percentage of the shares in issue, owing to the UIL majority shareholder's current shareholding in Somers and Zeta. It is proposed that these consolidations will be implemented at NAV to NAV.

It is UIL's current intention, in the absence of unforeseen circumstances, to maintain the annual dividend at 8.00p, payable quarterly.

Furthermore, it is UIL's aim to provide each year, through a cost effective mechanism, the opportunity for minority shareholders to exit a significant proportion of their shares at a discount to NAV of approximately 20%. Starting in the second half of 2025, this will provide liquidity for minority shareholders before the 2028 privatisation and, in addition, UIL plans to continue to buy back ordinary shares and ZDP shares in the market. It is hoped that these steps will lead to improved liquidity in UIL's shares, provide improved choice for ordinary shareholders to exit, whilst maintaining an income yield to 2028, for those shareholders who prefer regular income. It also provides improved asset cover for the outstanding ZDP shareholders.

As a first step, UIL and General Provincial Life Pension Fund Limited who together hold 95.0% of the outstanding share capital in Zeta, have formally notified Zeta on 12 July 2024 that they are considering acquiring the shares in Zeta that they do not currently own, by compulsory acquisition in accordance with s103 of the Companies Act 1981 of Bermuda. It is contemplated that such offer would be at or near Zeta's NAV at the time the offer is made."

The Report & Accounts for the year ended 30 June 2024 will be posted to shareholders in mid October 2024. A copy will shortly be available to view and download from the Company's website at www.uil.limited and the National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism. Please click on the following link to view the document: http://www.rns-pdf.londonstockexchange.com/rns/4147H_1-2024-10-8.pdf

GROUP PERFORMANCE SUMMARY

(1) See Alternate Performance Measures on pages 104 to 106 of the Report and Accounts

(2) All performance data relating to periods prior to 20 June 2007 are in respect of Utilico Investment Trust plc, UIL's predecessor.

(3) The third and fourth quarterly dividend of 2.00p has not been included as a liability in the accounts

CHAIRMAN'S STATEMENT

It has been another challenging year for UIL with its focus on smaller, value stocks. Investment performance has been disappointing with UIL's NAV total return down 15.3% for the year to 30 June 2024. UIL's annual compound NAV total return since inception in 2003 is 6.5% per annum.

Over the twelve months to 30 June 2024 inflation has reduced significantly in most countries and markets have moved higher as investors have gained confidence in the economic outlook and the reduction in interest rates for most markets. However, the Australian market fell 4.8% over the year which, given UIL's 47.6% weighting to Australia and New Zealand, has been a headwind.

A small positive is the reduction in UIL's net debt to £101.2m from £139.9m as at 30 June 2023, which has seen UIL's gearing decline. As at 30 June 2024 UIL's gearing stood at 73.6% (30 June 2023: 83.5%).

Since inception in August 2003, UIL has distributed £99.7m in dividends, invested £36.9m in ordinary share buybacks and made net gains of £184.0m for a total return of 276.3% (adjusted for the exercise of warrants and convertibles).

The Board is disappointed to see the ordinary shares discount to NAV widen to 36.9% at the end of the year (30 June 2023: 27.5%). This is partially explained by the focus of applying cash resources to the repayment of the outstanding bank loans and planning for the 2024 ZDP shares redemption. Consequently, no buybacks were undertaken in the year ended 30 June 2024. 

Since the year ended 30 June 2024, the Company has bought back a modest amount of ZDP shares and ordinary shares.

UIL's 2024, 2026 and 2028 ZDP shares are trading at significantly higher gross redemption yields compared to those as at 30 June 2023, being 12.4%, 10.9% and 10.7% respectively. As at 30 June 2024, UIL's average blended rate of funding costs had decreased from 5.7% to 5.2%, mainly as a result of the lower bank borrowings.

Total revenue income for the year to 30 June 2024 was £12.2m, an increase of 19.6% from £10.2m in the prior year, a good outcome given the reduced level of investments. Revenue finance costs decreased significantly in the year to 30 June 2024 to £2.2m, down 24.1% from the prior year at £2.9m. This resulted in revenue return earnings per share ("EPS") of 10.15p, representing a increase of 51.9% from 30 June 2023 of 6.68p.

The Board declared unchanged third and fourth quarterly dividends of 2.00p per ordinary share which maintains the total for the year at 8.00p, and a yield on the closing ordinary share price of 7.7%. It is UIL's current intention to maintain the annual dividend at 8.00p, payable quarterly, in the absence of unforeseen circumstances.

The revenue reserves carried forward increased to £15.2m as at 30 June 2024 from £11.7m as at 30 June 2023, representing revenue reserves per share of 18.15p (30 June 2023: 14.00p).

The capital return loss for the year ended 30 June 2024 was £33.5m.

GROUP DEBT REDUCTION

There have been significant realisations in UIL's platform companies Somers Limited ("Somers") and Zeta Resources Limited ("Zeta") helping UIL to repay its Bank of Nova Scotia debt facility in full. In addition, Somers paid dividends to its shareholders, of which UIL received £9.5m, while Zeta offered to buy back shares on the market from all its shareholders and UIL received £4.7m from its tendered shares. 

Within UIL's portfolio there were realisations of £52.4m, of which sales of Utilico Emerging Markets Trust plc ("UEM") (£19.8m), Permanent Investment Limited (holder of 16.7% of Littlepay Mobility Limited ("Littlepay")) (£4.7m), Somers (£4.3m) and West Hamilton Holdings Limited's ("West Hamilton") capital distribution of £8.4m were the largest.

ZDP REDEMPTION

The redemption of the 2024 ZDP shares will take place on 31 October 2024.

GLOBAL EVENTS

Several themes continue to dominate global events: heightened geopolitical tensions, elections, China's emerging dominance, the outlook for inflation and interest rates, climate change, technology and Artificial Intelligence ("AI"). Most of these are well understood, but thinking evolves and opportunities emerge.

The emergence of a strong China focused on moving up the value chain is being achieved by encouraging innovation and technology, and seeking resilience for their economy and equality for their citizens. The Chinese government has actively supported businesses which achieve its aims resulting in China dominating a number of world class research and industrial manufacturing processes from solar to electric vehicles ("EV"). China has shifted from being the world's supplier of high volume lower technology products (shoes to tennis rackets) to lower volume higher technology products (solar, wind and EV's) investing to meet not only its own but the world's demands.

The challenge for most economies is the inability to respond at scale. That has led to rising protectionism such as Canada's imposition of 100% tariffs on EVs and Chile's imposition of steel tariffs. China wants to build its middle class wealth while many of the world's countries want to protect their middle class.

We fully expect the ongoing friction between the USA and China to continue to deepen and it is now difficult to see how this reverses direction. Given the USA and China are the two largest economies globally this must pose significant risks at some point in the future, especially for technology businesses on each side of the Pacific Ocean.

The wars in Ukraine and Gaza have both gone on longer than expected and today there continues to be no clear way forward. Over time a solution will emerge, but the risk of a wrong decision leading to escalation remains high.

Inflation has moved markedly lower for most economies over the year in the face of high interest rates and central banks are now starting to cut rates. This will no doubt be beneficial to markets as risk assets are priced higher.

Despite the high interest rate environment labour markets have remained remarkably strong. We believe that a number of factors are driving this such as nearshoring, green investments and the emerging digital economy which enable companies such as Airbnb and others to utilise underused economic assets to generate returns. 

An ever increasing factor for investors is climate change. It has clearly had devastating impacts on a number of communities from wildfires in Canada to floods in Germany. We are seeing whole ecosystems being impacted by prolonged droughts and record temperatures. As investors we need to prepare for these outcomes to continue across our portfolios.

There is a very perceptible shift to embrace AI by most businesses and as with most technological developments, those without legacy businesses benefit the most, but eventually all businesses will need to adapt or risk failure. This has been our experience in the fintech sector. UIL has a number of investments with significant exposure to AI, blockchain and quantum computing.

BOARD

As noted in the half yearly financial report, Peter Burrows stepped down as Chairman of the Board on 31 March 2024 and I was appointed Chairman. Peter Burrows has been an excellent Chairman since his appointment in 2015 and his chairmanship during this challenging time was exemplary. We thank him warmly for his contribution.

Peter Durhager joined the Board at the end of March and has agreed to chair the Audit & Risk Committee. Peter brings significant operational experience to UIL which will be invaluable to the Board.

FUTURE OF THE COMPANY

While we have a number of potentially exciting investments within the portfolio, such as the merged Waverton Investment Management Group ("Waverton") and London & Capital Group ("London & Capital"), and Diraq Pty Ltd ("Diraq"), our quantum computing investment, we recognise that recent poor investment performance has resulted in UIL not having the scale to build up a sufficiently diversified portfolio. In addition, the liquidity of the ordinary shares on the market, given the significant major shareholder ownership, is problematic while our general investment mandate does not provide the focused offering which the investor base in the UK now prefers.

Given this, the logical conclusion is to work towards taking the Company private and cancelling its stock exchange listings following the redemption of the 2028 ZDP shares.

The Investment Managers and majority shareholder both recognise this and have combined to put forward proposals, which the Board supports, to manage UIL over the next four years with a view to realising sufficient investments to enable the redemption of the ZDP shares and provide an opportunity for the UIL minority shareholders to exit.

To facilitate this, it is the intention to simplify the platform structures. This is likely to result in merging the Somers and Zeta investment vehicles into UIL, thereby consolidating the investments of Somers and Zeta with those of UIL. Such proposals will increase UIL's asset base, although the external minority interests in UIL will decrease as a percentage of the shares in issue, owing to the UIL majority shareholder's current shareholding in Somers and Zeta. It is proposed that these consolidations will be implemented at NAV to NAV.

As referred to above, it is UIL's current intention, in the absence of unforeseen circumstances, to maintain the annual dividend at 8.00p, payable quarterly.

Furthermore, it is UIL's aim to provide each year, through a cost effective mechanism, the opportunity for minority shareholders to exit a significant proportion of their shares at a discount to NAV of approximately 20%. Starting in the second half of 2025, this will provide liquidity for minority shareholders before the 2028 privatisation and, in addition, UIL plans to continue to buy back ordinary shares and ZDP shares in the market. It is hoped that these steps will lead to improved liquidity in UIL's shares, provide improved choice for ordinary shareholders to exit, whilst maintaining an income yield to 2028, for those shareholders who prefer regular income. It also provides improved asset cover for the outstanding ZDP shareholders.

As a first step, UIL and General Provincial Life Pension Fund Limited who together hold 95.0% of the outstanding share capital in Zeta, have formally notified Zeta on 12 July 2024 that they are considering acquiring the shares in Zeta that they do not currently own, by compulsory acquisition in accordance with s103 of the Companies Act 1981 of Bermuda. It is contemplated that such offer would be at or near Zeta's NAV at the time the offer is made.

OUTLOOK

The outlook for worldwide economies increasingly rests with global leadership, both political and central bankers. The polarising of views to the left and right of the political spectrum is driving fractures through nations as leaders seek to navigate through escalating challenges. The rising pressure to meet social expectations and the impact of climate change, natural disasters and conflict will be difficult to navigate. Clearly the US election is a pivotal moment as are the decisions by the US central bank. We remain focused on reducing risk and helping investee companies through these challenges to emerge stronger

Stuart Bridges
Chairman

8 October 2024

INVESTMENT MANAGERS' REPORT

The need to repay UIL's bank debt of £37.5m during the year to 30 June 2024 created continued pressure on substantial portfolio realisations in difficult markets. Consequently, this has been a difficult year for the Company to navigate.

UIL's loss for the year to 30 June 2024 was £25.0m resulting in NAV per share of 164.04p, a decline of 17.9%. This has dragged UIL's annual compound NAV total return since inception in 2003 down to 6.5% per annum, a disappointing outcome. Total net debt reduced by £38.8m to £101.2m and gearing reduced by 9.9% to 73.6%, which was positive.

PORTFOLIO

There was significant activity over the year including realisations within the top ten holdings, which enabled them to fund capital distributions, dividends and buybacks. The investment portfolio reduced from £308.3m to £238.8m, with the reduction comprising £28.2m from losses on investments and £41.3m being net proceeds of portfolio sales.  

It should be noted that UEM and Zeta's share price discounts to NAV widened and now represent a £13.3m reduction to the underlying valuations.

Somers' valuation was largely unchanged in the year to 30 June 2024, being up by 0.4%. However, Somers distributed material dividends to its shareholders and adding these back, Somers' total return was 8.9% for the year. Within Somers' portfolio a significant transaction completed on 28 June 2024, when Waverton merged its business with London & Capital creating a £19.3bn wealth and asset management business. This is a transformative transaction for Waverton and we remain excited about its prospects. The combined business has the scale, capability and momentum to significantly outperform the market. As part of the merger, Somers reduced its investment in Waverton by two thirds and now owns an 18.0% interest in the enlarged wealth and asset management group. The cash released from the transaction allowed Somers to repay its debt and distribute dividends to its shareholders and UIL received £9.2m. In addition, UIL sold 302,000 of its Somers shares at fair value to a fellow shareholder, Union Mutual Pension Fund Limited ("UMPF"). During the year, Waverton gained in value for a total return of 9.9%.

Within the Somers portfolio, Resimac Group Limited ("Resimac") largely stood still with its share price declining by 2.3% which was more than offset by dividend distributions of 8.5%. It should be noted that UIL holds a direct investment in Resimac, which continues to be in UIL's top ten investments, in addition to Somers' investment in Resimac.

Zeta's NAV per share decreased by 22.8% over the year and its share price declined by 18.0%. This is mainly due to the collapse in nickel prices, the consequent valuation decline of Panoramic Resources Limited which entered administration, and the share price decline of 61.9% at Alliance Nickel Limited. Together these two investments contributed losses of AUD 48.9m in the year to Zeta.

Hudbay Minerals gained £2.5m in the year and Zeta took the opportunity to profitably exit its holding realising £23.3m. Zeta used the funds to buy back shares from shareholders and UIL successfully tendered 8.2% of its holding realising £4.7m for UIL.

UEM's NAV total return over the twelve months was up 7.6%. However, UEM's share price discount widened over the year from 14.0% to 18.6% reducing the total returns to UIL to 2.5%. UIL reduced its shareholding in UEM selling nearly half of its holding, realising £19.8m given the need for UIL to repay its bank loan.

The valuation of Allectus Quantum Holdings Limited ("Allectus Quantum") was flat over the year. Its sole investment is Diraq, a next generation quantum computing company. Diraq continues to meet its milestones including raising external funding in these challenging markets. Globally there is significant interest in quantum computing from the technology industry, investors and governments. Diraq is seen as an industry leader and its valuation remains modest relative to its market position, competitors and the amount of patents and intellectual property owned.

Allectus Capital Limited's ("Allectus Capital") valuation reduced by 40.9% due to write downs which mirrored sharp declines in peer group multiple valuations.

West Hamilton, a listed Bermuda property developer, completed the sale of its major asset in Bermuda. It used the proceeds to reduce its debt and to fund a significant distribution to its shareholders of which UIL's share was £8.4m.

The Market Limited continues to underwhelm and its share price decline of 48.3% during the year to 30 June 2024 was reflective. However, it has a strong Australian digital footprint and good brand positioning in Gumtree, Carsguide and Autotrader, with over AUD 2.0bn in annual transactions on its platforms, but unlocking of this ecommerce platform value will be challenging. 

UIL sold Permanent Investments Limited, which held 16.7% in Littlepay, to Somers. It should be noted that UIL on a look through basis holds 19.8% of Littlepay as at 30 June 2024.

Carebook Technologies Inc ("Carebook") and WT Financial Group Limited ("WT Financial") entered into the top ten holdings due to the sale of Littlepay and reduced valuation of Arria NLG Limited.

As we have highlighted before, within the Somers' portfolio is an investment in AK Jensen Group Limited ("AKJ") which comprises a platform for both traditional hedge funds and hedge funds trading digital assets. In addition, AKJ has issued tokens, a crypto currency, which have been sold to investors and hedge fund managers in the crypto platform. Valuing the token is difficult as few metrics allow comparability and the industry has not settled on a methodology we can readily adopt. While investors and hedge fund managers on the AKJ platform are buying AKJ tokens at EUR 0.37 the volume held by Somers would likely see a discount driven by lower liquidity opportunities and reduced fee discount benefits held by these hedge fund managers. Somers holds 75.0m AKJ tokens directly and holds further AKJ Tokens indirectly through its investments in AKJ group companies who in turn hold AKJ Tokens in treasury. Somers values these tokens at EUR 0.185 per token. Each EUR 0.05 represents £5.7m swing in valuation for Somers and £2.3m for UIL. Further details on AKJ can be found on their website and note 29 to the accounts.

FOREIGN EXCHANGE

As at 30 June 2024 UIL held no forward FX derivative positions. Last year we noted that UIL was expected to be less vulnerable to volatility in the FX markets for the coming year. This has turned out to be correct. In the year ended 30 June 2024, forward contract FX and currency losses amounted to £0.1m (30 June 2023: £3.6m).

COMMODITIES

Commodities were stronger during the year to 30 June 2024, with one exception, nickel was down 16.2%. Oil, copper and gold were all up by 15.4%, 17.4% and 21.2% respectively.

PORTFOLIO ACTIVITY

During the year to 30 June 2024, UIL invested £11.1m and realised £52.4m. The realisations include UEM, £19.8m, West Hamilton capital distribution of £8.4m and Zeta's buy back of £4.7m.

PLATFORM INVESTMENTS

UIL currently has three platform investments, Somers, Zeta and Allectus Capital in its top ten holdings. These investments account for 66.8% of the total portfolio as at 30 June 2024 (30 June 2023: 58.6%). During the year to 30 June 2024, net withdrawals from these platforms, including dividends, amounted to £16.7m (30 June 2023: £36.0m). We have excluded UEM as a platform given the reduction in shareholding following the sale of 49.1% of UIL's holding in UEM.

DIRECT INVESTMENTS

UIL has seven direct investments in its top ten holdings, UEM, Resimac, Allectus Quantum, West Hamilton, The Market Limited, Carebook and WT Financial.

GEOGRAPHIC AND SECTOR REVIEW

The geographical and sector split as set out on page 12 of the Report and Accounts reflects movements as a result of the above, the halving of the investment in UEM and 20.2% loss of value at Zeta, and the realisation of two thirds of Waverton sees Australia and New Zealand rise. Financial Services was up, and Infrastructure nearly halved due to the partial divestment of UEM.

LEVEL 3 INVESTMENTS

UIL's investment in level 3 companies amounted to 61.3% (30 June 2023: 56.0%) of the total portfolio. The total value reduced from £172.7m as at 30 June 2023 to £146.3m as at 30 June 2024, mainly as a result of West Hamilton's capital distribution, Somers' dividend and a further mark down in the Allectus Capital portfolio. The level 3 investments are revalued twice a year, but where there is a material event that impacts a level 3 investment, it is revalued at the time, thereby keeping the valuations current.

GEARING

Notwithstanding the significant pull back in portfolio valuations during the year, this was more than offset by the reduction in bank debt. As a result, gearing decreased to 73.6% as at 30 June 2024 from 83.5% as at 30 June 2023 and this remains well inside UIL's target gearing of under 100.0%. At an absolute level UIL's net debt decreased over the year from £139.9m to £101.2m as at 30 June 2024. UIL's debt has almost halved over the last two years. 

The blended costs of borrowing as at 30 June 2024 decreased from 5.7% in the previous year to 5.2% as a result of the lower loan debt.

ZDP SHARES

On a consolidated basis the ZDP shares increased by 5.5% from £94.6m to £99.8m, reflecting the compounding capital return. The 2024 ZDP shares are due for redemption on 31 October 2024 and UIL is taking steps to fund the redemption. The liability of £40.8m as at 30 June 2024 has been moved to current liabilities in the Group balance sheet.

UIL continues to hold 2.3m 2026 ZDP shares and 0.6m 2028 ZDP shares as at 30 June 2024.

BANK AND OTHER DEBT

Bank and other loans decreased to £2.9m as at 30 June 2024 (30 June 2023: £42.7m). The Bank of Nova Scotia's £37.5m committed senior secured multi-currency revolving facility was repaid in the year to 30 June 2024 and today UIL has no bank facility.

As at 30 June 2024, UMPF had loaned £2.9m to UIL. This loan was repaid in August 2024.

REVENUE RETURNS

Revenue income for the year to 30 June 2024 increased to £12.2m from £10.2m, an increase of 19.6%.

Management and administration fees and other expenses were down 11.8% at £1.5m (30 June 2023: £1.7m). Finance costs were significantly lower, down by 24.1% at £2.2m for the year to 30 June 2024 from £2.9m in the prior year, mainly as a result of the repayment of loans.

Revenue profit increased by 51.8% to £8.5m (30 June 2023: £5.6m) and EPS increased by 51.9% to 10.15p (30 June 2023: 6.68p).

CAPITAL RETURNS

Capital total income reported a loss of £28.3m (30 June 2023: loss of £44.0m) which was driven mainly by the £28.2m loss on investments, representing losses of 9.1% on the opening portfolio.

Finance costs reduced by 14.8% to £5.2m (30 June 2023: £6.1m) largely reflecting the lower number of ZDP shares in issue following the redemption of the 2022 ZDP shares in October 2022.

The resultant capital return loss for the year to 30 June 2024 was £33.5m (30 June 2023: loss of £50.0m) and EPS loss was 39.99p per ordinary share (30 June 2023: loss of 59.70p).

EXPENSE RATIO

The ongoing charges figure, including and excluding performance fees, was unchanged at 2.8% for the year ended 30 June 2024 (30 June 2023: 2.8%). No performance fee was earned at the UIL level or the platform companies.

All expenses are borne by the ordinary shareholders.

Charles Jillings
ICM Investment Management Limited
and ICM Limited

8 October 2024

PRINCIPAL RISKS AND RISK MITIGATION

During the year ended 30 June 2024, ICMIM was the Company's AIFM and had sole responsibility for risk management subject to the overall policies, supervision, review and control of the Board.

As required by the Association of Investment Companies ("AIC") Code of Corporate Governance, the Board has undertaken a robust assessment of the principal risks facing the Company. It seeks to mitigate these risks through regular review by the Audit & Risk Committee of the Company's risk register which identifies the risks facing the Company and the likelihood and potential impact of each risk, together with the controls established for mitigation.

During the year the Audit & Risk Committee also discussed and monitored a number of emerging risks that could potentially impact the Company, the principal ones being geopolitical risk and climate change risk. The Audit & Risk Committee has determined that they are not currently sufficiently material to be categorised as separate key risks and are considered within investment risk and market risk below.

The principal risks and uncertainties currently faced by the Company and the controls and actions to mitigate those risks, are described below. There have been no significant changes to the principal risks during the year.

INVESTMENT RISK: The risk that the investment strategy does not achieve long-term positive total returns for the Company's shareholders. Insufficient consideration of ESG factors could lead to poor performance and/or a reduction in demand for the Company's shares.

The Board monitors the performance of the Company and has established guidelines to ensure that the approved investment policy is pursued by the Investment Managers. The Board regularly reviews strategy in relation to a range of issues including the balance between quoted and unquoted stocks, the allocation of assets between geographic regions and sectors and gearing.

The investment process employed by the Investment Managers combines assessment of economic and market conditions in the relevant countries with stock selection. Fundamental analysis forms the basis of the Company's stock selection process, with an emphasis on an investment's balance sheet, cash flows and dividends, as well as market conditions. In addition, ESG factors are also considered when selecting and retaining investments and political risks associated with investing in specific countries are also assessed. Overall, the investment process aims to achieve absolute returns through an active fund management approach and the Board monitors the implementation and results of the investment process with the Investment Managers.

MARKET RISK: Adverse market movements in the prices of equity and fixed interest securities, interest rates and foreign currency exchange rates and adverse liquidity could lead to a fall in NAV.

The Company's portfolio is exposed to equity market risk, interest rate risk, foreign currency risk and liquidity risk. Adverse market conditions may result from factors such as economic conditions, political change, geopolitical confrontations, climate change, natural disasters and health epidemics. At each Board meeting the Board reviews the composition of the portfolio, asset allocation, stock selection, unquoted investments and levels of gearing and has set investment restrictions and guidelines which are monitored and reported on by the Investment Managers.

The Company's results are reported in Sterling, although the majority of its assets are priced in foreign currencies and therefore any rise or fall in Sterling will lead, respectively, to a fall or rise in the Company's reported NAV. Such factors are out of the control of the Board and the Investment Managers and may give rise to distortions in the reported returns to shareholders. It can be difficult and expensive to hedge some currencies.

KEY STAFF RISK: Loss by the Investment Managers of key staff could affect investment returns.

The quality of the investment management team is a crucial factor in delivering good performance. There are training and development programs in place for employees and the remuneration packages have been developed in order to retain key staff. Any material changes to the management team are considered by the Board at its next meeting; the Board discusses succession planning with the Investment Managers at regular intervals.

DISCOUNT RISK: The Company's shares may trade at a discount to their NAV and a widening discount may undermine investor confidence in the Company.

The Board monitors the price of the Company's shares in relation to their NAV and is focused on reducing the discount at which they trade. The Board may agree to buy back shares if there is a significant overhang of stock in the market; it targets a discount to NAV of approximately 20% over the medium term.

OPERATIONAL RISK: Failure by any service provider to carry out its obligations to the Company in accordance with the terms of its appointment could have a materially detrimental impact on the operation of the Company and could affect the ability of the Company to successfully pursue its investment policy.

The Company's main service providers are listed on page 103 of the Report and Accounts. The Audit & Risk Committee monitors the performance and controls (including business continuity procedures) of the key service providers at regular intervals.

Most of UIL's investments are held in custody for the Company by JPMorgan Chase Bank N.A., Jersey. JPMEL, the Company's depositary services provider, also monitors the movement of cash and assets across the Company's accounts. The Audit & Risk Committee reviews the JP Morgan SOC1 reports, which are reported on by Independent Service Auditors, in relation to its administration, custodial and information technology services.

The Board reviews the overall performance of the Investment Managers and all the other service providers on a regular basis. The risk of cyber-crime is high, as it is with most organisations, but the Board regularly seeks assurances from the Investment Managers and other key service providers on the preventative steps that they are taking to reduce this risk.

GEARING RISK: Whilst the use of borrowings 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.

The ordinary shares rank behind borrowings and ZDP shares, making them a geared instrument.

The gearing level is high due to the capital structure of the balance sheet. As at 30 June 2024, gearing on net assets, including borrowings and ZDP shares, was 73.6% (30 June 2023: 83.5%). The Board reviews the level of gearing at each Board meeting.

REGULATORY RISK: Failure to comply with applicable legal and regulatory requirements could lead to suspension of the Company's Stock Exchange listings, financial penalties, a qualified audit report or the Company being subject to tax on capital gains.

The Investment Managers and the Company's professional advisers monitor developments in relevant laws and regulations and provide regular reports to the Board in respect of the Company's compliance.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

in respect of the Annual Report and Financial Statements

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

The Directors are required to prepare Group and parent Company financial statements for each financial year. They have elected to prepare the Group financial statements in accordance with IFRS Accounting Standards and applicable law and have elected to prepare the parent Company financial statements on the same basis.

The Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable, relevant and reliable; 

·      state whether they have been prepared in accordance with applicable accounting standards; 

·      assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

·      use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 1981 of Bermuda. They are responsible for such internal controls as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

The Directors have decided to prepare voluntarily a Directors' Remuneration Report in accordance with Schedule 8 to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 made under the UK Companies Act 2006, as if those requirements applied to the Company. The Directors have also decided to prepare voluntarily a Corporate Governance Statement under the UK Corporate Governance Code as if the Company were required to comply with the Listing Rules of the Financial Conduct Authority applicable to UK companies admitted to listing in the closed-ended investment funds category of the Official List.

In accordance with Disclosure Guidance and Transparency Rule 4.1.15R, the financial statements will form part of the annual financial report prepared using the single electronic reporting format under the TD ESEF Regulation. The auditor's report on these financial statements provides no assurance over the ESEF format.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK and Bermuda governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL FINANCIAL REPORT 

We confirm that to the best of our knowledge: 

·      the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·      the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company, and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

Approved by the Board and signed on its behalf by:

Stuart Bridges

Chairman

8 October 2024

GROUP INCOME STATEMENT

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

All items in the above statement derive from continuing operations.

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

COMPANY INCOME STATEMENT

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

All items in the above statement derive from continuing operations.

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

GROUP STATEMENT OF CHANGES IN EQUITY

COMPANY STATEMENT OF CHANGES IN EQUITY

STATEMENTS OF FINANCIAL POSITION

STATEMENTS OF CASH FLOWS

NOTES

1. DIVIDENDS

The Directors declared a third quarterly dividend in respect of the year ended 30 June 2024 of 2.00p per share, paid on 31 July 2024 to all ordinary shareholders on the register at close of business on 5 July 2024. The total cost of the dividend, which has not been accrued in the results for the year to 30 June 2024, is £1,677,000 based on 83,842,918 ordinary shares in issue. The Directors declared a fourth quarterly dividend in respect of the year ended 30 June 2024 of 2.00p per share payable on 8 November 2024 to all ordinary shareholders on the register at close of business on 27 September 2024. The total cost of the dividend, which has not been accrued in the results for the year to 30 June 2024, is £1,675,000 based on 83,755,585 ordinary shares in issue.

2. RELATED PARTY TRANSACTIONS

The following are considered related parties of UIL:

Ultimate parent undertaking:

UIL's majority shareholder General Provincial Life Pension Fund Limited ("GPLPF") holds 65.4% of UIL's shares. Union Mutual Pension Fund Limited ("UMPF") holds 10.2% of UIL's shares. The ultimate parent undertaking of GPLPF and UMPF is Somers Isles Private Trust Company Limited as referred to in note 25 in the Report and Accounts.

Subsidiaries of UIL:

Coldharbour Technology Limited ("Coldharbour"), Energy Holdings Ltd, Newtel Holdings Limited ("Newtel"), Northbrook Resources Limited, West Hamilton Holdings Limited ("West Hamilton") and Zeta Resources Limited ("Zeta"). On consolidation, transactions between the Company and UIL Finance have been eliminated.

Joint ventures of UIL

Allectus Capital Limited ("Allectus Capital") and Allectus Quantum Holdings Limited ("Allectus Quantum").

Associated undertakings:

Carebook Technologies Inc ("Carebook"), DTI Group Ltd ("DTI"), Novareum Blockchain Asset Fund Ltd ("Novareum"), Orbital Corporation Limited ("Orbital"), Resimac Group Limited ("Resimac"), Serkel Solutions Pty Ltd ("Serkel"), Smilestyler Solutions Pty Ltd ("Smilestyler"), Somers Limited ("Somers"), SportEngaged Ltd and The Market Limited.

Subsidiaries of the above subsidiaries and associated undertakings:

Allectus Capital: Own Solutions AC Limited, Own Solutions Financial Services Limited, Aplauz CH GmbH, Aplauz NL B.V., Stiching

Aplauz Foundation

Allectus Quantum: Allectus Quantum Ltd and Diraq Pty Ltd.

Newtel: Newtel Limited.

Resimac: Access Home Loans Pty Ltd, Access Network Management Pty Ltd, Auspak Financial Services Pty Ltd, FAI First Mortgage

Pty Ltd, Independent Mortgage Corporation Pty Ltd, Resimac Est Pty Ltd and Resimac Limited.

Somers: Dfinitive Capital Limited, PCF Group plc, Snapper Services (UK) Limited, Somers Pte Ltd, Somers Treasury Pty Ltd and

Somers UK (Holdings) Limited and Waverton Investment Management Limited.

Zeta: Horizon Gold Limited, Kumarina Resources Pty Ltd, Zeta Energy Pte Ltd, Zeta Investments Limited and Zeta Minerals Ltd.

Key management entities and persons:

ICM and ICMIM and the board of directors of ICM, Alasdair Younie, Charles Jillings, Duncan Saville and of ICMIM, Charles Jillings and Sandra Pope. ICM Corporate Services (Pty) Ltd is a wholly owned subsidiary of ICM.

Persons exercising control of UIL:

The Board of UIL.

Company controlled by key management persons:

Mitre Investments Limited and Permanent Mutual Limited ("PML").

The following transactions were carried out during the year to 30 June 2024 between the Company and its related parties above:

UIL Finance

Loans from UIL Finance to UIL of £98.2m as at 30 June 2023 increased by £5.4m, to £103.6m as at 30 June 2024. The loans are

repayable on any ZDP share repayment date.

Subsidiaries of UIL

Coldharbour: There were no transactions during the year.

Energy Holdings Ltd: UIL paid fees of £0.1m incurred by Energy Holdings Ltd.

Newtel: Pursuant to a loan agreement dated 28 January 2020, under which UIL agreed to loan monies to Newtel, UIL advanced to Newtel £0.2m. The loan was converted to equity and in April 2024 the equity shares were sold to the CEO of Newtel for nil proceeds. As at 30 June 2024, the balance of the loan was £nil (2023: £nil).

Northbrook Resources Ltd: Pursuant to a loan agreement dated 1 January 2019 under which UIL agreed to loan monies to Northbrook, the outstanding loan balance of £1.6m brought forward was re-assigned to SKAC Ltd at nil proceeds, as part of an ongoing process to liquidate Northbrook. Interest was charged on the loan at 6.0% per annum. UIL paid fees of £33k incurred by Northbrook as part of the liquidation process.

West Hamilton: West Hamilton made a capital distribution of £8.3m and a dividend distribution of £0.7m to UIL during the year.

Zeta: Pursuant to a loan agreement dated 28 July 2023, under which Zeta Energy Pte Ltd (a 100% subsidiary of Zeta) agreed to loan monies to UIL, Zeta Energy Pte Ltd advanced to UIL AUD 13.5m in the year. UIL repaid the AUD 13.5m in the year and as at 30 June 2024 the balance was £nil. The loan bears interest at an annual rate of 8.3% and UIL paid interest of AUD 136k to Zeta Energy Pte Ltd during the year.

During the year, Zeta bought back 28,132,739 Zeta shares from UIL as part of the Zeta's buy back plan. UIL received AUD 9.0m

Joint Ventures of UIL

Allectus Capital: Pursuant to a loan agreement dated 1 September 2016 under which UIL agreed to loan monies to Allectus

Capital, UIL advanced to Allectus Capital a loan of USD 1.1m. The balance of the loan as at 30 June 2024 was USD 3.2m (30 June 2023: USD 2.1m). The loan is interest free and repayable on twelve months notice given by UIL.

Allectus Quantum: UIL paid fees of £28k incurred by Allectus Quantum.

Associated undertakings

Carebook: Pursuant to a loan agreement dated 22 December 2021, the balance of the loan and interest outstanding as at 30 June 2024 was CAD 1.0m (2023: CAD 1.0m). UIL received interest of CAD 0.1m in the year. Pursuant to a loan agreement dated 15 December 2022, the balance of the loan and interest outstanding as at 30 June 2024 was CAD 1.5m (2023: CAD 1.3m). Pursuant to a convertible loan agreement dated 5 December 2023, under which UIL has agreed to loan monies to Carebook, UIL advanced to Carebook a loan of CAD 2.0m. As at 30 June 2024, the balance of the loan and interest outstanding is CAD 2.2m. All three loans bear interest at an annual rate of the Canadian variable rate +10.0% and are repayable by 22 December 2026.

DTI: There were no transactions during the year

Littlepay: See Somers transactions.

Novareum: UIL redeemed 11,419 units at the NAV price on 30 April 2024, receiving £2.0m.

Orbital: In September 2023, UIL committed to take part in Orbital's AUD 4m share placement at AUD 0.14 per share, agreeing to subscribe for 25% of the shares offered at a cost of AUD 1.0m. This was subject to shareholder approval and the purchase completed in November after approval was received. UIL received 7,142,857 shares.

Resimac: There were no transactions during the year.

Serkel: There were no transactions during the year.

SmileStyler: There were no transactions during the year.

Somers: Pursuant to loan agreements dated 1 September 2016 (USD loan), 5 September 2019 (AUD loan) and 22 June 2018 (GBP loan), under which UIL agreed to loan monies to Somers, in the year UIL advanced to Somers loans of USD 5.0m, AUD 1.2m and £1.9m, UIL received interest of USD 17k, AUD 4k and £25k and received from Somers repayments of USD 5.0m, AUD 1.2m and £1.9m. As at 30 June 2024, the balance of the loans outstanding were USD nil, AUD nil and £ nil. The loans bear interest at an annual rate of 6.0% and are repayable on not less than 12 months' notice.

In October 2023, UIL purchased 149 shares in Permanent Investment Limited ("PIL") for USD 1 from Prime Life Common Fund Limited, holding 100% of the shares. The holding of Littlepay was gifted into PIL. Subsequently Somers purchased UIL's holding in PIL at fair value for £4.7m.

SportEngaged Ltd: There were no transactions during the year.

The Market Limited: There were no transactions during the year.

Subsidiaries of the above subsidiaries and associated undertakings

Except for the loan UIL received from Zeta Energy Pte Ltd (see Zeta above), there were no transactions during the year to 30 June 2024 with any of the subsidiaries of the above subsidiaries and associated undertakings.

Key management entities and persons

ICM and ICMIM are joint portfolio managers of UIL. Other than investment management fees, secretarial costs and performance fees as set out in note 4 to the Report and Accounts, and reimbursed expenses of £7,000, there were no other transactions with ICM or ICMIM or ICM Corporate Services (Pty) Ltd. At the period-end £88,000 remained outstanding to ICM and ICMIM in respect of management and company secretarial fees and £nil in respect of performance fees.

Mr Younie is a director of PML, Somers and West Hamilton. Mr Jillings is a director of Allectus Capital, PML, Somers and Waverton.

Mr Jillings received dividends from UIL of £33,000.

Mr Saville is a director of Allectus Capital, GPLPF, PML, Resimac, West Hamilton and Zeta Energy Pte Ltd. There were no other transactions in the year with Alasdair Younie, Charles Jillings, Duncan Saville and Sandra Pope and UIL.

The Board

Fees paid to Directors were: Chairman £52,500 per annum; Chairman of Audit & Risk Committee £50,150 per annum and Directors £38,850 per annum. The Board received aggregate remuneration of £180,000 for services as Directors. As at 30 June 2024, £nil remained outstanding to the Directors. In addition to their fees, the Directors received dividends totalling £67,000 during the year. In aggregate the Directors held 552,808 ordinary shares of the Company as at 30 June 2024. There were no other transactions in the year with the Board and UIL.

Ultimate parent undertaking and companies controlled by key management persons:

GPLPF received dividends of £3,291,000 from UIL, UMPF received dividends of £506,000 from UIL, Mitre Investments Limited received dividends of £150,000 from UIL and PML received dividends of £2,000 from UIL.

As at 30 June 2023, UMPF had loaned USD 6.6m to UIL. In August 2023, UIL sold 302,000 Somers shares at fair value for USD 4.3m and paid USD 2.3m in cash to UMPF to repay the loan. In March 2024 UMPF provided a £5.0m loan facility to UIL and at 30 June 2024 UIL had drawn £2.9m, see note 14 to the Report and Accounts for details. The loan bears interest at an annual rate of 8.3% and UIL paid interest of USD 63k to UMPF during the period.

There were no other transactions between companies controlled by key management and UIL during the year to 30 June 2024.

3. RESULTS

This statement was approved by the Board on 8 October 2024. The financial information set out above does not constitute the Group's or Company's statutory accounts for the years ended 30 June 2024 or 2023 but is derived from those accounts. The auditor has reported on those accounts; their reports were (i) unqualified and (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report.

Annual General Meeting Arrangements

The Annual General Meeting ("AGM") of the Company will be held at its registered office, Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda on Thursday, 14 November 2024 at 5.00pm (local time) and notice is set out at the end of the Report & Accounts.

Legal Entity Identifier: 213800CTZ7TEIE7YM468