UTLG Uil Fin 24

Date:                      21 February 2024

Contact:                 Charles Jillings                                                                 

                                ICM Investment Management Limited                        

                                01372 271 486                                                               

UIL LIMITED

UNAUDITED HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS TO 31 DECEMBER 2023

UIL Limited ("UIL" or the "Company") today announced its unaudited financial results for the six months to 31 December 2023.

FINANCIAL HIGHLIGHTS

·    Revenue return per ordinary share 0.02p (7.70p)

·    Dividends per ordinary share 4.00p (4.00p)

·    Net asset value ("NAV") total return per ordinary share* of 4.2% (-6.5%)

·    Share price total return per ordinary share* of -9.5% (-12.6%)

·    NAV discount* as at 31 December 2023 of 37.8% (33.3%)

·    Gearing* 71.3% (73.4%)

Figures in brackets are 31 December 2022

* See Alternate Performance Measures in the Half-yearly financial report for 31 December 2023       

The half-yearly report for the six months to 31 December 2023 will be posted to shareholders in early March 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/9880D_1-2024-2-21.pdf

UNAUDITED GROUP PERFORMANCE SUMMARY

(1)  See Alternative Performance Measures in the Half-yearly financial report for 31 December 2023

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

(3)  Percentage change based on comparative six month period to 31 December 2022

(4)  The second quarterly dividend of 2.00p has not been included as a liability in the accounts

(5)  For comparative purposes the figures have been annualised

CHAIRMAN'S STATEMENT

The half year to 31 December 2023 has continued to be challenging on both the economic and, especially so, the geopolitical front. At UIL this has been compounded given the need to reduce UIL's bank debt significantly at this time. UIL's investment performance has improved with its NAV total return up by 4.2% for the half year which is broadly in line with the wider markets. The FTSE All Share total return Index was up 5.1% for the six months to 31 December 2023. UIL's annual compound NAV total return since inception in 2003 was unchanged over the half year at 7.8%.

Shareholders' funds rose 2.1% in the six months to 31 December 2023. This is pleasing given the continued realisation of assets in weak markets and paydown of UIL's bank debt. Over the half year, borrowings from the Bank of Nova Scotia, London Branch ("Bank of Nova Scotia") reduced by £22.5m from £37.5m to £15.0m. As a result, total debt including the ZDP shares reduced from £139.9m to £121.9m over the half year period and gearing reduced from 83.5% to 71.3%. Since June 2022 UIL has repaid over £35.0m in bank debt and £52.3m in ZDP shares. UIL is set to repay a further £15.0m in bank debt by the end of March 2024. This is a substantial achievement in these volatile markets.

There has been one change in the top ten of UIL's portfolio during the half year to 31 December 2023. UIL sold its direct holding in Littlepay Mobility Limited ("Littlepay") to Somers Limited ("Somers"). Somers ultimately owns the majority holding in Littlepay and UIL will benefit from UIL's 40.4% holding in Somers. Replacing Littlepay is Carebook Technologies Inc ("Carebook"), which is listed on the TSX Venture Exchange, and is a leading Canadian provider of innovative digital health solutions.

The Board is disappointed to see the ordinary shares' discount to NAV end the year at 37.8%. Given the focus on the continued reduction in the bank facility, no buybacks were undertaken in the half year ended 31 December 2023.

As at 31 December 2023, UIL's average blended rate of funding costs, including bank debt, remained unchanged at 5.7%. UIL's longer dated 2024, 2026 and 2028 ZDP shares are trading at high gross redemption yields being 10.8%, 12.5% and 11.6% respectively.

The 2024 ZDP shares amounting to £39.8m as at 31 December 2023, are redeemable in October this year. As such they have been moved to current liabilities and the Investment Managers have started to take steps to fund the redemption payment.

Total revenue income for the half year to 31 December 2023 was £2.3m, a decrease of 72.9% from £8.5m in the prior half year. UIL has reduced a number of holdings and did not receive a distribution from Somers during the half year, significantly decreasing its income. On the back of higher interest rates, finance costs increased for the half year to 31 December 2023 to £1.5m, up 36.4% from the prior half year at £1.1m. The above resulted in revenue return profits decreasing to £19,000 (31 December 2022: £6.5m) for the half year and revenue return earnings per share ("EPS") of 0.02p, well below 31 December 2022 figure of 7.00p.

The capital return gains for the year ended 31 December 2023 of £6.8m is a small positive.

DIVIDENDS

The Board has declared an unchanged second quarterly dividend of 2.00p per ordinary share in respect of the year ending 30 June 2024. In light of UIL's current focus on the repayment of its bank facility in March and the timing of expected cash receipts from certain portfolio transactions, the date of payment of this dividend will be later than usual, with the payment due to be made in June 2024.

BANK FACILITY

UIL has agreed with the Bank of Nova Scotia to repay its committed senior secured multi-currency facility at its maturity on 19 March 2024. Over the six months UIL repaid £22.5m and as at 31 December 2023 the facility stood at £15.0m. £5.0m has recently been repaid and the remaining £10.0m will be repaid on 19 March 2024.

GLOBAL EVENTS

Market volatility has been driven by significant uncertainties in both the economy and social and geopolitical considerations.

The key economic driver of markets has been the outlook for inflation in the developed world and the central banks' focus on reducing it through higher central bank interest rates. While inflation is now on a lower trend, the remarkable outcome in many economies is that unemployment has remained well below trends and many economies have beaten expectations on GDP. However, in the last quarter the market firmly shifted its views on central bank interest rate reductions from if it will happen to when, especially in the USA. Many central banks take their lead from the US Federal Reserve. The upshot has been strong gains for most markets. Going forward we think most central banks have the opportunity to reduce rates.

The war in Ukraine has gone on longer than expected and today there continues to be no clear way forward. The outlook is grim as both sides are unable to gain ground.

The brutal conflict that has erupted in the Middle East is more concerning. These are deep seated politically ideological differences between many parties in the Middle East established over many years. The concern must be that this escalates into a much wider conflict.

The ongoing friction between the USA and China continues to deepen, and given these 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.

Overlayed on all this is the USA election. The direction the USA takes matters and its position and influence in the above mentioned conflicts is itself very uncertain.

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

There is a very perceptible shift to embrace Artificial Intelligence ("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

Having been appointed Chairman of the Board in 2015 I believe it is an appropriate time for me to step down and therefore I will retire from the Board on 31 March 2024. I would like to thank my fellow Board members for all their support over the years. I am delighted that the Board has decided that Stuart Bridges, the current Chairman of the Audit & Risk Committee, will replace me as Chairman. In addition, I am pleased to report that Peter Durhager has agreed to join the Board on 31 March 2024. Peter has over twenty five years of experience in financial, telecommunications and energy sectors. He is currently Chairman of Somers, one of UIL's platform investments and, in advance of his appointment to the UIL Board, he will be retiring from the Somers board following its annual general meeting next month.

OUTLOOK

The economic outlook remains positively balanced with inflation and employment expected to weaken and faced with this we expect central banks will lower interest rates. This Goldilocks scenario is finely balanced between those expecting a recession and those expecting a soft landing. The bigger concern is the direction of travel for most countries politically. There is an ever growing trend of protectionist views which can quickly grow into real economic headwinds. Add to this the geopolitical tensions and the downside risks are elevated. We remain cautiously optimistic about the outlook for UIL's portfolio.

Peter Burrows AO

Chairman

21 February 2024

INVESTMENT MANAGERS' REPORT

The half year to 31 December 2023 has continued to be difficult to navigate for investors, particularly in light of the significant increase in political risks in the Middle East. The need to reduce debt and realise assets to do so has certainly challenged UIL. It is therefore pleasing the net assets rose as markets recovered in the closing quarter of 2023.

UIL's profit for the half year to 31 December 2023 of £6.8m and total return of 4.2% has seen UIL's annual compound NAV total return since inception in 2003 unchanged at 7.8% over the half year.

PORTFOLIO

Over the half year there was more stability within the top ten holdings. Four holdings increased in value, four reduced in value, one remained unchanged and one reduced as a result of distributions to shareholders. Overall, the increases outweighed the decreases by some £11.6m. However, top ten portfolio net realisations of £20.7m led to a reduction in the top ten portfolio of £9.0m and a reduction of liabilities as well.

UEM's and Zeta's share price discounts to NAV have contributed a £13.5m reduction to the underlying valuations.

Somers' valuation increased by 15.5% in the half year to 31 December 2023. This was largely driven by Resimac whose share price recovered 18.2%. Resimac's resilience in the face of reduced mortgage volumes and compressed net interest margins is pleasing. It is also good to see Resimac continuing to buy back shares at these current levels. It should be noted that UIL holds a direct investment in Resimac as well, being UIL's fourth largest investment.

Waverton Investment Management Ltd ("Waverton"), Somers' largest investment continued its solid investment performance which has assisted in driving new assets against a macroeconomic environment which has not been strong for risk assets. In its year to 31 December 2023 Waverton saw AUM increase to over £10.0bn, with strong revenue growth.

Zeta's NAV per share decreased by 18.5% over the half year, primarily as a result of Zeta's exposure to nickel, which was down 19.5% over the six months to 31 December 2023, and the resultant voluntary administration of Panoramic Resources, one of Zeta's significant assets. Zeta's share price decreased by 9.8% and as a result the discount narrowed to 13.7%. Over the half year Zeta exited from Hudbay Minerals into a rising market. Zeta used the proceeds to buy back shares on the market. UIL reduced its shareholding in Zeta by 8.2% through selling into the buy back.

UEM has again been a relative standout performer over the half year to 31 December 2023 with a NAV total return of 4.7% compared to the MSCI Emerging Markets total return Index (GBP adjusted) ("MSCI") of 4.3% over the same period. UEM continues to see strong results reported by its investee companies with most continuing to grow revenues. While margins are under pressure EBITDA in many cases has expanded and delivered EPS growth. This is a credit to the investee management teams who continue to deliver excellent operational performance in volatile times. UEM is also significantly ahead of the MSCI since its inception in 2005.

As with most emerging markets funds, UEM's discount has widened and it stood at 14.7% as at 31 December 2023. UIL has taken the opportunity of share price outperformance to reduce its shareholding and realising 18.4% of its holding in UEM, receiving £7.4m during the half year.

Allectus Capital Limited ("Allectus Capital") saw its valuation weaken in line with the wider markets. Pre revenue, pre profitability investment valuations have been marked down substantially. The Allectus Capital valuation declined 9.5% over the half year. UIL contributed an additional £0.5m of capital to Allectus Capital during the half year.

Allectus Quantum Holdings Limited's ("Allectus Quantum") valuation was unchanged over the six months to 31 December 2023 and since the half year end it has made significant progress towards closing its current fund raising round. Its sole investment is Diraq Pty Ltd ("Diraq"), a next generation quantum computing company, which continues to make progress.

The Market Limited's share price was down 20.7% over the half year to 31 December 2023. While changes to the board of directors have been welcomed by the market, the soon to be released financial results are anticipated with interest and will provide information to gauge progress.

West Hamilton, a listed Bermuda property developer, sold two of its three major assets in Bermuda and made a capital and revenue distribution to all its shareholders. UIL received £9.0m, or USD 6.75 per share in the half year. The carrying value therefore reduced 55.9%, reflecting this distribution.

Arria NLG Limited's ("Arria") value was marked down in the half year by 20.2% reflecting weaker valuations over the six months. Whilst AI and the opportunity for machine learning are a positive for Arria, we are cautious on its outlook. Carebook's share price rose 7.1% over the six months to 31 December 2023. UIL contributed £1.2m in support of Carebook's growth strategy.

COMMODITIES

Commodities were more stable over the half year and most ended up during the period with gold rising 7.5%, copper up 4.0% and oil up 2.9%. The exception was nickel which fell 19.5% over the six months to 31 December 2023. The oversupply of nickel does look to be a true headwind, especially the supply of cheap nickel from Indonesia.

PORTFOLIO ACTIVITY

During the half year to 31 December 2023, UIL invested £9.4m and realised £34.2m.

PLATFORM INVESTMENTS

UIL currently has four platform investments, Somers, Zeta, UEM and Allectus Capital in its top ten holdings. These investments account for 74.8% of the total portfolio as at 31 December 2023 (30 June 2023: 71.8%). During the half year to 31 December 2023, net withdrawals from these platforms amounted to £13.5m (30 June 2023: £61.5m). Within the top ten holdings, UEM's investment was reduced by 18.4%, realising £7.4m and 8.2% of Zeta's shareholding was tendered into Zeta's buyback for £4.7m by UIL.

DIRECT INVESTMENTS

UIL has six direct investments in its top ten holdings, Resimac, Allectus Quantum, The Market Limited, West Hamilton, Arria and Carebook. All are listed except for Allectus Quantum and Arria. During the half year to 31 December 2023, net realisations from these direct investments amounted to £7.1m (30 June 2023: net investments of £51.8m). West Hamilton returned £8.3m to UIL following the realisation of its main property in Bermuda. £1.2m was invested into Carebook.

GEOGRAPHIC REVIEW

The geographical split of the portfolio, on a look through basis, shows Australia and New Zealand remaining UIL's top exposure at 41.6% of UIL's total investments (30 June 2023: 40.1%) and the UK is still UIL's second largest exposure at 20.6% (30 June 2023: 19.2%).

SECTOR REVIEW

Financial Services - 49.2% (30 June 2023: 40.6%)

Somers is UIL's largest investment and accounts for 41.6% of UIL's total investments as at 31 December 2023 (30 June 2023: 34.9%). Most gains came from Resimac, whose share price was up 18.2% and is held both within Somers and directly in UIL's portfolio.

Technology - 20.7% (30 June 2023: 23.6%)

UIL holds a number of early-stage investments in the technology sector, both indirectly through Allectus Capital (UIL's fifth largest investment), and directly. Most carrying values were down due to weaker market valuations for early stage investments.

Resources (excl. gold mining) - 11.5% (30 June 2023: 14.4%)

UIL's largest investment in resources is Zeta, which accounted for 15.9% of the total portfolio as at 31 December 2023 (30 June 2023: 17.9%). Zeta's share price weakened over the half year declining by 9.8% and the Zeta buyback reduced UIL's investment further.

Infrastructure Investments - 10.5% (30 June 2022: 11.6%)

This consists of Telecommunications, Infrastructure, Electricity, Ports, Road & Rail, Oil & Gas, Renewables, Water & Waste and Airports. UIL's infrastructure exposure is largely through UEM. While UEM's NAV rose, this was more than offset by UIL selling 18.4% of its holding in UEM thus reducing the sector percentage to 10.5%.

LEVEL 3 INVESTMENTS

As a result of selling down listed positions to generate cash to reduce bank debt, UIL's holdings of level 3 companies increased to 59.0% of the total portfolio from 56.0% as at 30 June 2023. The level 3 investments are formally revalued twice a year and where there is a material event that impacts an investment, it is revalued at that time, thereby keeping the level 3 valuations current.

GEARING

As a result of the decrease in bank debt and modest improvement in portfolio valuations, gearing has decreased significantly to 71.3% as at 31 December 2023 from 83.5% as at 30 June 2023 and this remains well inside UIL's target gearing of under 100.0%.

The blended costs of borrowing remained unchanged over the half year at 5.7%.

ZDP SHARES

On a consolidated basis the ZDP shares increased from £94.6m as at 30 June 2023 to £97.2m as at 31 December 2023, up 2.7% as a result of the capital growth of their redemption value. UIL continues to hold 2.3m 2026 ZDP shares and 0.6m 2028 ZDP shares as at 31 December 2023. With three ZDP issues, UIL has spread the redemption liability over five years.

DEBT

Bank and other loans decreased to £15.0m as at 31 December 2023 from £42.7m as at 30 June 2023. The Bank of Nova Scotia's remaining debt under the senior secured multi-currency revolving facility is due to be repaid by 19 March 2024.

Net bank overdraft increased to £9.8m compared to £2.6m as at 30 June 2023.

REVENUE RETURNS

Revenue income for the half year decreased by 72.9% to £2.3m from £8.5m in the six months to 31 December 2022. Much of the focus of UIL and the wider group is on cash generation and debt reduction. 

Management and administration fees and other expenses were down at £0.7m from £0.9m in the comparable six month period. Finance costs were up by £0.4m as at 31 December 2023 from £1.1m as at 31 December 2022, reflecting lower usage of bank debt, but at higher interest rates.

Revenue profit decreased during the six months to 31 December 2023 and EPS decreased by 99.7% to 0.02p from 7.70p as at 31 December 2022.

CAPITAL RETURNS

Capital total income was £9.4m (31 December 2022: loss of £17.0m).

Finance costs decreased by 27.8% to £2.6m (31 December 2022: £3.6m) largely reflecting the lower number of ZDP shares in issue following the 2022 ZDP shares redemption in October 2022.

The resultant profit for the half year to 31 December 2023 on the capital return was £6.8m (31 December 2022: loss of £20.6m) and EPS was 8.15p (31 December 2022: loss of 24.58p).

EXPENSE RATIO

The ongoing charges figure, including fees paid in UIL's platform companies and excluding performance fees, was 3.0% as at 31 December 2023 (31 December 2022: 2.9%). No performance fee was earned at the UIL level or within the platform companies.

All expenses are borne by the ordinary shareholders.

Charles Jillings

ICM Investment Management Limited and ICM Limited

21 February 2024

HALF-YEARLY FINANCIAL REPORT AND RESPONSIBILITY STATEMENT

The Chairman's Statement and the Investment Managers' Report give details of the important events which have occurred during the period and their impact on the financial statements.

PRINCIPAL RISKS AND UNCERTAINTIES

Most of UIL's principal risks and uncertainties are market related and are similar to those of other investment companies investing mainly in listed equities in developed countries.

The principal risks and uncertainties were described in more detail under the heading "Principal Risks and Risk Mitigation" within the Strategic Report section of the annual report and accounts for the year ended 30 June 2023 and have not changed materially since the date of that document.

The principal risks faced by UIL include not achieving long-term total returns for its shareholders, adverse market conditions leading to a fall in NAV, loss of key management, its shares trading at a discount to NAV, losses due to inadequate controls of third-party service providers, gearing risk and regulatory risk. In addition, the Board continues to monitor a number of emerging risks that could potentially impact the Company, the principal ones being geopolitical risk and climate change risk.

The annual report and accounts is available on the Company's website, www.uil.limited

RELATED PARTY TRANSACTIONS

Details of related party transactions in the six months to 31 December 2023 are set out in note 11 to the accounts.

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with Chapter 4 of the Disclosure Guidance and Transparency Rules, the Directors confirm that to the best of their knowledge:

• The condensed set of financial statements contained within the report for the six months to 31 December 2023 has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" and gives a true and fair view of the assets, liabilities, financial position and return of the Group;

• The half-yearly financial report, together with the Chairman's Statement and Investment Managers' Report, includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements as required by DTR 4.2.7R;

• The Directors' statement of principal risks and uncertainties above is a fair review of the principal risks and uncertainties for the remainder of the year as required by DTR 4.2.7R; and

• The half-yearly report includes a fair review of the related party transactions that have taken place in the first six months of the financial year as required by DTR 4.2.8R.

On behalf of the Board

Peter Burrows

Chairman

21 February 2024

CONDENSED GROUP INCOME STATEMENT (UNAUDITED)

The Group does not have any income or expense that is not included in the profit/(loss) for the period, and therefore the profit/(loss) for the period is also the total comprehensive income/(loss) for the period, 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.

CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

CONDENSED GROUP STATEMENT OF FINANCIAL POSITION (UNAUDITED)

CONDENSED GROUP STATEMENT OF CASH FLOWS (UNAUDITED)

NOTES TO THE ACCOUNTS (UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES

The Company is an investment company incorporated in Bermuda, with its ordinary shares traded on the Specialist Fund Segment of the Main Market of the London Stock Exchange and listed on the Bermuda Stock Exchange.

The Group accounts comprise the results of the Company and UIL Finance Limited.

This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK.

The annual financial statements of the Group for the year ended 30 June 2024 will be prepared in accordance with UK-adopted international accounting standards which comprise standards and interpretations approved by the IASB, and International Accounting Standards and Standing Interpretations Committee interpretations approved by the IASC that remain in effect. As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 30 June 2023.

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by the Directors in applying the Group's accounting policies and key sources of uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 30 June 2023.

The unaudited condensed Group accounts do not include all of the information required for full annual accounts and should be read in conjunction with the consolidated accounts of the Group for the year ended 30 June 2023, which were prepared under full IFRS requirements.

2. MANAGEMENT AND ADMINISTRATION FEES

The Company has appointed ICM Investment Management Limited ("ICMIM") as its Alternative Investment Fund Manager and joint portfolio manager with ICM Limited ("ICM"), for which they are entitled to a management fee and a performance fee. The aggregate fees payable by the Company are apportioned between the joint portfolio managers as agreed by them.

The relationship between ICMIM and ICM is compliant with the requirements of the UK version of the EU Alternative Investment Fund Managers Directive as it forms part of UK domestic law by virtue of the European Union (withdrawal) Act 2018, as amended and also such other requirements applicable to ICMIM by virtue of its regulation by the Financial Conduct Authority.

The annual management fee is 0.5% per annum based on total assets less current liabilities (excluding borrowings and excluding the value of all holdings in companies managed or advised by the Investment Managers or any of their subsidiaries from which they receives a management fee), calculated and payable quarterly in arrears. The agreement with ICM and ICMIM may be terminated upon one year's notice given by the Company or by ICM and ICMIM, acting together.

In addition, the Investment Managers are entitled to a capped performance fee payable in respect of each financial period, equal to 15% of the amount by which the Company's NAV attributable to holders of ordinary shares outperforms the higher of (i) 5.0%, and (ii) the post-tax yield on the FTSE Actuaries Government Securities UK Gilts 5 to 10 years' index, plus inflation (on the RPIX basis) (the "Reference Rate"). The opening equity funds for calculation of the performance fee are the higher of (i) the equity funds on the last day of a calculation period in respect of which a performance fee was last paid, adjusted for capital events and dividends paid since that date (the "high watermark"); and (ii) the equity funds on the last day of the previous calculation period increased by the Reference Rate during the calculation period and adjusted for capital events and dividends paid since the previous calculation date. In a period where the Investment Managers or any of their associates receive a performance fee from any ICM managed investment in which UIL is an investor, the performance fee payable by UIL will be reduced by a proportion corresponding to UIL's percentage holding in that investment applied to the underlying investment performance fee, subject to the provision that the UIL performance fee cannot be a negative figure. In calculating any performance fee payable, a cap of 2.5% of closing NAV (adjusted for capital events and dividends paid) will be applied following any of the above adjustments and any excess over this cap shall be written off. A performance fee was last paid in respect of the year to 30 June 2019. As at that date the equity shareholders' funds were £326.3m. As at 30 June 2021, the attributable shareholders' funds were above the high watermark. However, after adjusting for the allocated share of performance fees (paid and accrued) from ICM managed investments in which UIL is an investor, no performance fee was accrued.

In the period to 31 December 2023, UIL's NAV return is below the required hurdle calculated at 9.9% return to entitle the Investment Managers to a performance fee and therefore no performance fee has been accrued. The final amount payable is dependent upon the performance of the Company, adjusted for the allocated share of any performance fees from ICM managed investments in which UIL is an investor, in the year to 30 June 2024.

ICM also provides company secretarial services to the Company, with the Company paying 45% of the incurred costs associated with this post.

JP Morgan Chase Bank N.A. - London Branch has been appointed Administrator and ICMIM has appointed Waverton Investment Management Limited to provide certain support services (including middle office, market dealing and information technology support services). The Company or the Administrator may terminate the agreement with the Administrator upon six months' notice in writing.

3. TAXATION

Profits of the Company and subsidiaries for the period are not subject to any taxation within their countries of residence.

4. EARNINGS PER ORDINARY SHARE

The calculation of earnings per ordinary share from continuing operations is based on the following data:

5. DIVIDENDS

The Directors have declared a second quarterly dividend in respect of the year ending 30 June 2024 of 2.00p per ordinary share payable on 4 June 2024 to shareholders on the register at close of business on 10 May 2024. The total cost of this dividend, which has not been accrued in the results for the six months to 31 December 2023, is £1,677,000 based on 83,842,918 ordinary shares in issue as at the date of this half-yearly report.

6. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

The tables below set out the fair value measurements hierarchy at the relevant period end.

These fair value measurements are categorised into a hierarchy consisting of the following three levels:

Level 1 - valued using unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2 - valued by reference to valuation techniques using other observable inputs not included within level 1.

Level 3 - valued by reference to valuation techniques using unobservable inputs.

During the period, holdings of value £3,369,000 were transferred from level 2 to level 1 due to the investee company shares resuming regular trading. The book cost and fair values were transferred using the 30 June 2023 balances.

During the period, holdings of value £65,586,000 were transferred from level 1 to level 2 due to the investee company shares having irregular trading in the period and a holding of value £3,511,000 was transferred from level 2 to level 1 due to the investee company shares resuming regular trading. The book cost and fair values were transferred using the 30 June 2022 balances.

During the year, three holdings with a value of £70.0m were transferred from level 1 to level 2 due to the investee companies shares trading irregularly in the year and one holding with a value of £3.5m was transferred from level 2 to level 1 due to the investee company shares resuming regular trading. The book cost and fair value were transferred using the 30 June 2022 balances

A reconciliation of fair value measurements in level 3 is set out in the following table:

7. LOANS

As at 30 June 2023, the Company had a £37.5m multicurrency loan facility with Bank of Nova Scotia expiring on 19 September 2023. The Company extended the facility until 19 March 2024, the facility reduced to £25.0m on 19 September 2023, £20.0m on 31 October 2023 and £15.0m on 31 December 2023. The facility reduced to £10.0m on 19 February 2024 and will be fully repaid by 19 March 2024. Commissions are charged on any undrawn amounts at commercial rates. The terms of the loan facility, including those related to accelerated repayment and costs of repayment and the loan covenants, are typical of those normally found in facilities of this nature. Scotiabank has a floating charge over the assets of the Company in respect of amounts owing under the loan facility. As at 31 December 2023 £15.0m (31 December 2022: £50.0m and 30 June 2023: £37.5m) was drawn down.

As at 30 June 2023, Union Mutual Pension Fund Limited had loaned USD 6.6m (31 December 2022: nil) to UIL. The loan was repaid in full in August 2023 and incurred interest at 8% per annum.

During the period, Zeta Energy Limited loaned AUD 13.5m to UIL. This loan was fully repaid in October 2023 and incurred interest at 8.3% per annum.

8. ORDINARY SHARE CAPITAL

No ordinary shares have been purchased for cancellation since the period end.

9. NET ASSET VALUE PER SHARE

Net asset value per ordinary share is based on net assets as at the period end of £171,075,000 (31 December 2022: £201,236,000 and 30 June 2023: £167,581,000) and on 83,842,918 ordinary shares in issue as at the period end (31 December 2022 and 30 June 2023: 83,842,918).

10. OPERATING SEGMENTS

The Directors are of the opinion that the Group's activities comprise a single operating segment, namely that of investing in equity, debt and derivative securities to maximise shareholder returns.

11. RELATED PARTY TRANSACTIONS

The following transactions were carried out during the half year to 31 December 2023 between the Company and its related parties:

Subsidiaries of UIL:

Carebook Technologies Inc ("Carebook") -. 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 31 December 2023, the balance of the loan and interest outstanding was CAD 2.0m.  Pursuant to a loan agreement dated 28 September 2022, the balance of the loan and interest outstanding as at 31 December 2023 was CAD 1.0m (30 June 2023: CAD 1.0m). UIL received interest of CAD 0.1m in the period. Pursuant to a loan agreement dated 15 December 2022, the balance of the loan and interest outstanding as at 31 December 2023 was CAD 1.4m (30 June 2023: CAD 1.3m). All the loans bear interest at an annual rate of the Canadian variable rate +10.0% and are repayable by 22 December 2026.

Newtel Holdings Limited ("Newtel") - Pursuant to a loan agreement dated 1 July 2023, under which UIL agreed to loan monies to Newtel, UIL advanced to Newtel £0.1m. The loan does not bear interest. As at 31 December 2023, the balance of the loan was £0.1m.

Northbrook Resources Limited ("Northbrook") - 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 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% per annum. UIL paid fees of £33k incurred by Northbrook as part of the liquidation process.

West Hamilton Holdings Limited ("West Hamilton") - West Hamilton made a capital distribution of £8.3m and a dividend distribution of £0.7m to UIL during the period.

Zeta Resources Limited ("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 period. UIL repaid the AUD 13.5m in the period and as at 31 December 2023 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 period.

During the period, 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

Allectus Capital Limited ("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 0.6m. The balance of the loan as at 31 December 2023 was USD 2.7m (30 June 2023: USD 2.1m). The loan does not bear interest.

Allectus Quantum Holdings Limited ("Allectus Quantum") - UIL paid fees of £26k incurred by Allectus Quantum.

Associated undertakings:

Somers Limited ("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, UIL advanced to Somers loans of USD 5.0m, AUD 1.2m and £1.9m, UIL received interest of USD 14k, AUD 4k and £8k and received from Somers repayments of USD 4.8m, AUD 1.2m and £0.6m. As at 31 December 2023, the balance of the loans outstanding were USD 0.2m and £1.3m. 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 $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.

Key management entities and persons:

ICM and ICMIM are joint portfolio managers of UIL. Other than investment management fees and company secretarial costs as set out in note 2, and reimbursed expenses of £7,000, there were no other transactions with ICM or ICMIM or ICM Corporate Services (Pty) Ltd. As at 31 December 2023, £102,000 remained outstanding to ICM and ICMIM in respect of management and company secretarial fees and £nil in respect of performance fees.

Mr Jillings received dividends from UIL of £22,000. There were no other transactions during the six months with Alasdair Younie, Charles Jillings, Duncan Saville and Sandra Pope and UIL.

The Board:

The fees paid to Directors for the six months to 31 December 2023: Chairman £26,250; Chairman of Audit & Risk Committee £25,075; Directors £19,425. The Board received aggregate remuneration of £90,175 for services as Directors. As at 31 December 2023, £nil remained outstanding to the Directors. In addition to their fees, the Directors received dividends totalling £56,000. There were no other transactions during the six months with the Board and UIL.

Companies controlled by key management persons:

Union Mutual Pension Fund Limited ("UMPF") - 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. The loan bears interest at an annual rate of 8.0% and UIL paid interest of USD 63k to UMPF during the period.

General Provincial Life Pension Fund Limited received dividends of £2.2m from UIL, Union Mutual Pension Fund Limited received dividends of £0.3m from UIL and Mitre Investments Limited received dividends of £0.1m from UIL. There were no other transactions between companies controlled by key management and UIL during the six months to 31 December 2023.

12. FINANCIAL RISK MANAGEMENT - LEVEL 3 FINANCIAL INSTRUMENTS

Valuation methodology

The objective of using valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. The Company uses proprietary valuation models, which are compliant with IPEV guidelines and IFRS 13 and which are usually developed from recognised valuation techniques.

The Directors have satisfied themselves as to the methodology used, the discount rates and key assumptions applied, and the valuations. The methodologies used to determine fair value are described in the 2023 annual report. The level 3 assets comprise of a number of unlisted investments at various stages of development and each has been assessed based on its industry, location and business cycle. The valuation methodologies include net assets, discounted cash flows, cost of recent investment or last funding round, listed peer comparison or peer group multiple or dividend yield, as appropriate. Where applicable, the Directors have considered observable data and events to underpin the valuations. A discount has been applied, where appropriate, to reflect both the unlisted nature of the investments and business risks.

UIL currently has investments in a number of level 3 closed-end investment companies including Allectus Capital, Allectus Quantum and Somers. These companies are valued on a net assets basis, estimated based on the managers' NAVs. Managers' NAVs use recognised valuation techniques consistent with IFRS and are normally subject to audit. The fund valuations included in these financial statements were based principally on the 31 December 2023 managers' NAVs and these NAVs have been reviewed to ensure that the economic impact of higher interest rates, inflation, and the Ukraine and Middle East conflicts have been considered.

Sensitivity of level 3 financial investments measured at fair value to changes in key assumptions.

Level 3 inputs are sensitive to assumptions made when ascertaining fair value. While the Directors believe that the estimates of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value. The sensitivities shown in the table below give an indication of the effect of applying reasonable and possible alternative assumptions.

In assessing the level of reasonably possible outcomes consideration was also given to the impact on valuations of the elevated level of volatility in equity markets during the year, principally reflecting concerns about high rates of inflation, tightening energy supplies, higher interest rates and the Ukraine and Middle East conflicts. The valuations of fund interests are based on the managers' NAVs and the managers have advised that they have taken into account these economic and market concerns. The impact on the valuations has been varied and largely linked to their relevant sectors and this has been reflected in the level of sensitivities applied.

The following table shows the sensitivity of the fair value of level 3 financial investments to changes in key assumptions:

* Valuation of investment in Arria

UIL holds 6.6m ordinary shares in Arria which it valued at £5.4m as at 31 December 2023. Arria has been valued based on recent equity fundraising events. Arria's revenues are growing strongly, however it remains materially loss making and cash flow negative and it may have insufficient cash reserves if future capital raise activities do not proceed as planned. Accordingly, Arria's fair value has been given a sensitivity of 40% to reflect a higher level of uncertainty over the future position of the company.

13. GOING CONCERN

Notwithstanding that the Group has reported net current liabilities of £64,652,000 as at 31 December 2023 (31 December 2022: £56,135,000 and 30 June 2023: £46,177,000), the financial statements have been prepared on a going concern basis which the Directors consider to be appropriate for the following reasons.

The Board's going concern assessment has focused on the forecast liquidity of the Group for 12 months from the date of approval of the financial statements. This analysis assumes that the Company will meet some of its short term obligations through the sale of level 1 securities, which represented 20.0% of the Company's total portfolio as at 31 December 2023. As part of this assessment the Board has considered a severe but plausible downside that reflects the impact of the key risks set out in the Strategic Report of the Annual Report and an assessment of the Company's ability to meet its liabilities as they fall due (including the loan liabilities), assuming a significant reduction in asset values and accompanying currency volatility.

The severe but plausible downside assumes a breach of bank loan covenants leading to the repayment of bank loan liabilities and a significant reduction in asset values in line with that experienced during the emergence of the Covid-19 pandemic in the first quarter of 2020. The Board also considered reverse stress testing to identify the reduction in the valuation of liquid investments that would cause the Group to be unable to meet its net current liabilities, being primarily the bank loan of £15,000,000, the bank overdraft of £9,767,000 and the repayment to the 2024 ZDP shareholders of £41,505,000. The Board is confident that the reduction in asset values implied by the reverse stress test is not plausible even in the current volatile environment.

Consequently, the Directors are confident that the Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements. Accordingly, the Board considers it appropriate to continue to adopt the going concern basis in preparing the accounts.

14. RESULTS

The condensed set of financial statements, forming the half year accounts, has been neither audited nor reviewed by the Company's auditors. The latest published accounts are for the year ended 30 June 2023; the report of the auditors thereon was unqualified. The condensed financial statements shown above for the year ended 30 June 2023 are an extract from those accounts.

Legal Entity Identifier: 213800CTZ7TEIE7YM468