RNS Number : 6751M
Utilico Finance Limited
19 September 2012
 



                                                         

Utilico Finance Limited

                                               

Report and accounts for the year to 30 June 2012

 

 



 

Utilico Finance Limited                                                         

                                                                                                                            

Report and accounts                                                                                    

for the year to 30 June 2012                                                                        

                                                                                                                            

Contents                                                                                                              

Page

                                                                                                                            

 

                                                                                                                            

 

Company Directory

2

                                                                                                                            

 

                                                                                                                            

 

Directors' Report

3

                                                                                                                            

 

                                                                                                                            

 

Directors' Statement of Responsibilities

7

                                                                                                                            

 

                                                                                                                            

 

Statement of Comprehensive Income

8

                                                                                                                            

 

                                                                                                                            

 

Balance Sheet

9

                                                                                                                            

 

                                                                                                                            

 

Notes to the Accounts

10

 

 

 

 

 

 

Independent Auditor's Report                                                                                  

18

                                                                                                                            

 



 

Utilico Finance Limited


 

 

Company Directory






 

 

Registered Office

Canon's Court

 

22 Victoria Street

 

Hamilton HM 12

 

Bermuda

 

 

 

 

Directors

Dr Roger Urwin (Chairman)

 

Peter Burrows AO

       (appointed 1 November 2011)

 

J. Michael Collier

 

Susan Hansen

 

Eric St C Stobart

 

 

Company Number

39479

 

 

 

 

Auditor

Grant Thornton UK LLP

 

30 Finsbury Square

 

London, UK

 

EC2P 2YU

(for the year ended 30 June 2012)

 

 

KPMG Audit Plc

15 Canada Square

Canary Wharf

London E14 5GL

(for the year ending 30 June 2013 subject to shareholder approval)

 

 

Date of Formation

17 January 2007

 

 

 

 

Nature of Business

Closed ended investment company

 

 

 

 

Ordinary Shareholder and Parent Company

Utilico Investments Limited

 

 

 



Utilico Finance Limited

 

Directors' Report

 

Principal activity and status

Utilico Finance Limited (the "Company") is a Bermuda exempted, closed ended investment company with company registration number 39479. The Company's issued zero dividend preference ("ZDP") shares are listed on the standard segment of the main market of the London Stock Exchange.

 

Results and Dividends

The results for the year are set out in the attached accounts.

 

The Company is unable to declare a dividend in respect of the year ended 30 June 2012 as there is no profit to distribute.

 

Business Review

The Business Review is designed to provide shareholders with an insight into the operations of the Company during the year. In particular, it gives information on:

 

• the Company's objective and investment policy;

• the regulatory and competitive environment within which the Company operates;

• the Board's strategy for achieving its stated objectives;

• principal risks and risk management; and

• key performance indicators.

 

Objective

The Company's investment objective is to finance and fund the final capital entitlements of the ZDP shares.

 

Investment policy

The Company seeks to fund the final capital entitlements of the ZDP shares by lending current asset funds to its parent company, Utilico Investments Limited. 

 

Regulatory and Competitive Environment

The Company is obliged to comply with Bermuda law, the rules of the UK Listing Authority and International Financial Reporting Standards as adopted by the European Union. The Company is exempt from taxation, except insofar as it is withheld from income received. Under Bermuda law, the Company may not distribute income by way of a dividend unless, after distribution of the dividend, the realisable value of the Company's assets would be greater than the aggregate of its liabilities.

 

Strategy for Achieving Objectives

The Company's performance in pursuing its objective is based on the ability of its parent company (see note 9 to the accounts) to repay the intra-group loan to the Company.

 

Principal Risks

The principal underlying risk of the Company continues to relate to its ability to repay the ZDP shares in October 2012, October 2014, October 2016 and October 2018. This is dependent on the asset performance of the parent company. At 30 June 2012, the parent company had net assets of £208,894,000 (2011: £201,477,000) after providing for amounts due to ZDP shareholders. Details of the ZDP shares are set out in note 7 to the accounts.

 

A further risk faced by the Company is that of a regulatory nature. A breach of Bermuda law could lead to financial penalties or a qualified audit report.  The Company's legal advisers in Bermuda, Appleby (Bermuda) Limited, uses all reasonable efforts to ensure that the Company adheres to Bermuda law.

 

Key Performance Indicators

The Board assesses the Company's success in pursuing its objectives in the ability to provide for the amounts due to the ZDP shareholders.

 

 

Auditor

Grant Thornton UK LLP ("GT") was the Company's auditor for the year ended 30 June 2012 and was responsible for the audit of these accounts.

 

Audit fees relating to the year amounted to £7,000 (2011: £7,000) and were settled by the parent company, Utilico Investments Limited.

 

No fees were paid or payable to GT for non-audit work for the year under review (2011: £nil).

 

In keeping with FRC guidance, the Board decided to re-tender for the provision of audit services for the financial year ending 30 June 2013. GT, the existing auditor, was invited to re-tender.

 

Following the tender, the Board decided to recommend KPMG Audit Plc for appointment as auditor to the Company for the year ending 30 June 2013, including the interim review as at 31 December 2012.

 

A resolution concerning the appointment of KPMG Audit Plc as auditor to the Company will be proposed at the Annual General Meeting. A resolution authorising the Directors to determine the final fees payable to GT and the fees payable to KPMG Audit Plc will be proposed at the Annual General Meeting.

 

Corporate Governance

Bermuda does not have its own corporate governance code and, as a Bermuda incorporated company, the Company is not required to comply with the UK Corporate Governance Code issued by the Financial Reporting Council in June 2010 (the "Code").  However, it is the Company's policy to comply with best practice on good corporate governance and maintain the same level of governance as UK listed investment companies.  The Board has therefore considered the principles set out in the AIC Code of Corporate Governance revised in October 2010 (the "AIC Code") and the relevant provisions of the Code.

 

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

 

In view of the requirement of the Bye-Laws that all Directors retire by rotation, the Board considers that it is not appropriate for the Directors to be appointed for specified terms as recommended by provision B.2.3 of the Code. However, in accordance with provision B.7.1 of the Code and principle 3 of the AIC Code, all Directors are subject to election by shareholders at the first annual general meeting following their appointment, and to re-election thereafter at intervals of no more than three years. Any Director serving beyond nine years is required to seek annual re-election. The Board of Directors does not consider it appropriate to appoint a Senior Independent Director as recommended by principle 1 of the AIC Code and provision A.4.1 of the Code.

 

Directors' Disclosures

At 30 June 2012, Dr Roger Urwin held 52,029 2012 ZDP shares (2011: 52,029).  No other Director acquired or disposed of any interest in the shares in the Company during the year or since the year end.

 

The following Directors held office throughout the year:

Dr Roger Urwin (Chairman)

J. Michael Collier

Susan Hansen

Eric Stobart

 

Warren McLeland retired as a director on 16 September 2011 and Peter Burrows was appointed as a director on 1 November 2011.

 

Mr J M Collier stood down as Chairman of the Company on 23 September 2011 but remains on the Board as a non-independent Director. On the same date, Dr R J Urwin was

elected as Chairman of the Board of Directors.

 

Mr E St C Stobart will retire by rotation at the forthcoming Annual General Meeting and, being eligible, offers himself for re-election (Resolution 3). Mr J M Collier and Ms S Hansen retire annually and will do so at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election (Resolutions 4 and 5).

 

The Board has considered the re-election of Mr Stobart, Mr Collier and Ms Hansen and following an appraisal of their performance, the Board believes that these Directors make a valuable contribution based on their individual skills, knowledge and experience that they have committed to the role and their re-election would be in the interests of the Company.

 

Each Director has signed a letter of appointment setting out the terms of their engagement as Directors, but does not have a service agreement with the Company.

 

Board Meetings

The Board meets at least twice a year to consider strategic affairs and to approve the interim report and annual report and accounts. In view of the nature of the Company's business the Board does not consider it necessary to appoint a separate Audit Committee or Nominations Committee.

 

Donations

No donations were made by the Company during the year.

 

Directors' Remuneration

No Director received or is entitled to receive any remuneration from the Company.

 

Statement of Changes in Equity

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

 

Cash Flow

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

 

Going Concern

The Directors believe that it is appropriate to adopt the going concern basis in preparing the accounts as the Company can continue to operate due to the support of the parent company.

 

Company Secretary

The company secretarial function has been transferred from F&C Management Limited to ICM Limited with effect from 7 June 2012.

 

Share Capital

Full details of the changes to the Company's authorised and issued share capital during the year can be found in note 8 to the accounts.

 

Ordinary shares of Utilico Investments Limited

Ordinary shares of Utilico Investments Limited rank behind the ZDP shares on a winding up of the Company and Utilico Investments Limited, together referred to as the Group (save for any undistributed revenue reserves of Utilico Investments Limited on a winding up).

 

Redemption of 2012 ZDP shares and issue of new 2014, 2016 and 2018 ZDP shares

Pursuant to the prospectus relating to the "Rollover Offer of 2012 ZDP Shares into 2018 ZDP Shares and placing of 2014 ZDP Shares, 2016 ZDP Shares and 2018 ZDP Shares" published by the Company on 2 December 2011 and in accordance with the terms and conditions of the Rollover Offer, 6,143,391 2012 ZDP shares were cancelled and rolled-over into 10,356,448 new 2018 ZDP shares on 20 January 2012. The Company also issued 11,893,552 new 2018 ZDP shares at 100p per share raising £11.9m. The new 2018 ZDP shares were admitted to the Official List and to trading on the London Stock Exchange on 26 January 2012.

 

Pursuant to a supplementary prospectus relating to a "Placing of 2014 ZDP Shares, 2016 ZDP Shares and 2018 ZDP Shares" published by the Company on 2 March 2012, 10 million new 2014 ZDP Shares at 146.5p per share and 10 million new 2016 ZDP Shares at 146.5p were issued on 9 March 2012. The new ZDP shares were admitted to the Official List and to trading on the London Stock Exchange on 15 March 2012.

 

The Company has the ability to complete further placings until the final closing date of 1 December 2012.

 

By order of the Board

ICM Limited, Secretary

19 September 2012

 

Utilico Finance Limited

 

DIRECTORS' STATEMENT OF RESPONSIBILITIES

 

The Directors are responsible for the preparation of the financial statements which give a true and fair view of the state of affairs of the Company at 30 June 2012 and of the results for the

year then ended. In preparing the financial statements, suitable accounting policies have been used and applied consistently, and reasonable and prudent judgements and estimates

have been made. The financial statements are prepared in accordance with applicable Bermuda law, International Financial Reporting Standards as adopted by the European Union and on a going concern basis. The Directors are also responsible for ensuring that adequate accounting records are maintained and have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

 

To the best of the knowledge of the Directors:

a) the financial statements within this Report in relation to which this statement forms part have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Company; and

b) the Business Review and note 12 to the financial statements include a fair review of the development and performance of the Company and the principal risks and uncertainties it faces.

 

Insofar as the Directors are aware:

 

• there is no relevant audit information of which the Company's auditor is unaware; and

• the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

 

 

Approved by the Board on 19 September 2012 and signed on its behalf by:

 

 

Dr R J Urwin

Chairman



 

Utilico Finance Limited

 

 

Statement of Comprehensive Income

 


Year to

Year to

 

 

 

30 June

30 June

 

 

 

2012

2011

 

 

Note

£'000s

£'000s

 

 


 

 

Interest income

 

2

13,388

11,602

Total income

 


13,388

11,602

Other expenses

 


-

-

Profit before finance costs and taxation


13,388

11,602

Finance costs

 

3

(13,388)

(11,602)

Profit before tax

 


-

-

Taxation

 


-

-

Profit for the year

 


-

-

 

 


 

 

 

 


 

 

Earnings per share - pence

 


-

-

 

 


 

 

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

 

All items in the above statement are derived from continuing operations.

 


 

 

 

 



 

 

Utilico Finance Limited

 

 

 


 

 

 

Balance Sheet




At 30 June


2012

2011


Note

£'000s

£'000s



 

 

Current assets


 

 

Other receivables

6

226,390

172,762

Total assets less current liabilities


226,390

172,762

Current liabilities


 

 

Zero dividend preference shares

7

(68,269)

-

Net current assets


158,121

172,762

Non-current liabilities


 

 

Zero dividend preference shares

7

(158,121)

(172,762)

Net assets


             -  

             -  

 


 

 

Equity attributable to equity holders


 

 

Ordinary share capital

8

             -  

             -  

 


 

 

 


 

 

 


 

 

 


 

 

 


 

 

Approved by the Board on 19 September 2012 and signed on its behalf by:

 

 

 

 

 

 

 

 

 

 

 

 

Dr Roger Urwin

Eric Stobart

 

 

 

 

 



 

Utilico Finance Limited

 

Notes to the Accounts

for the year to 30 June 2012

 

1.       Accounting policies

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

         

(a)      Basis of accounting

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

 

The financial statements have been prepared on a historical cost basis.

 

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

 

At the date of authorisation of these Accounts, the following standards and interpretations have not been applied in these Accounts since they were in issue but not yet effective:

 

International Accounting Standards (IAS/IFRS)

Effective date for accounting

periods starting on or after

IFRS 9 Financial Instruments

1 January 2015

IFRS 13 Fair Value Measurement

1 January 2013

 

The Directors have chosen not to early adopt these standards and interpretations as they do not anticipate that they would have a material impact on the Company's Accounts in the period of initial application.

 

(b)      Zero dividend preference shares

The ZDP shares, due to be redeemed on 31 October 2012, 2014, 2016 and 2018 at a redemption value of 177.52 pence per share, 167.60 pence per share, 192.78 pence per share and 160.52 pence per share respectively, have been classified as liabilities, as they represent an obligation on behalf of the Company to deliver to their holders a fixed and determinable amount at the redemption date. They are accordingly accounted for at amortised cost, using the effective interest method. Under Bermuda company law ZDP shares are recognised as share capital in the Company.

         

(c)      Cash flow statement

There were no cash flows in the period or in the prior year and therefore a cash flow statement has not been prepared. All transaction movements were through the intra-group loan account.

         

(d)      Foreign currency

The functional and reporting currency is pounds sterling because the Company's ZDP share capital was raised, and will be repaid, in pounds sterling, and has been lent to, and will be repaid by the parent company, in that currency.

         

(e)      Other income

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

 

(f)       Finance costs

Finance costs are accounted for on an effective interest method.

 

 



 

Utilico Finance Limited                                                                                                                    

                                                                                                                                                                            

Notes to the Accounts (continued)

 

(g)      Intra company loan

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

 

2      Interest income                                                                                                                                                    

                                                                                        



2012

2011



£'000s

£'000s

Loan to parent company - interest receivable


13,388

11,602

 

 

 

 

3      Finance costs

      



2012

2011



£'000s

£'000s

ZDP shares


13,388

11,602

 

 

 

                                                                                                                                                                          

4.     Earnings per share                                                                                                                                              

 

The calculation of earnings per share is based on a profit after tax for the period of £nil (2011: £nil) and a weighted average number of 10 ordinary shares in issue during the year (2011: 10 ordinary shares in issue during the year).                                                                                                                                                                                                                                                       

                                                                                                                                                                                  

                                                                                                                                                                                  

5.     Dividends                                                                                                                                                             

 

There were no dividends paid or declared in respect of the period.

 

 

6.     Other receivables                                                                                                                                                

     



2012

2011



£'000s

£'000s

Loan to parent company - Utilico Investments Limited   


226,390

172,762

 

 

 

 

 

 



Utilico Finance Limited                                                                                                                               

                                                                                                                                                                            

Notes to the Accounts (continued)

 

7.         Zero dividend preference shares                                                                                                                         

                                                                                                                                                                                   

ZDP shares issued by the Company are as follows:

 

 


2012

2011



£'000s

£'000s

ZDP shares - current liabilities


 

 

2012 ZDP shares   


68,269

-

ZDP shares - non-current liabilities


 

 

2012 ZDP shares   


-

73,756

2014 ZDP shares   


67,938

49,532

2016 ZDP shares   


67,888

49,474

2018 ZDP shares   


22,295

-

 


158,121

172,762

Total ZDP shares liabilities


226,390

172,762

 

                                                                                                                                                                              


2012

2014

2016

2018

Total

 2012

Number

£'000s

Number

£'000s

Number

£'000s

Number

£'000s

£'000s

Authorised










ZDP shares of 10p

each

 

 

60,592,190

 

 

6,059

 

 

50,000,000

         

 

5,000

 

 

50,000,000

        

 

5,000

 

 


 

 

n/a

ZDP shares of 5.9319p each

 

 

 






 

 

49,842,413

 

 

2,956

 

 

n/a











Balance at   30 June 2011

 

45,486,200

 

73,756

 

37,500,000

 

49,532

 

37,500,000

 

49,474

 

-

 

-

 

172,762

Issue of ZDP shares

-

-

10,000,000

14,650

10,000,000

14,650

11,893,552

11,893

41,193

Issue costs of ZDP shares

-

-

-

(151)

-

(151)

-

(651)

(953)

Cancellation of 2012 ZDP shares and rollover to 2018 ZDP shares

(6,143,391)

(10,356)

-

-

-

-

10,356,448

10,356

-

Finance costs

-

4,869

-

3,907

-

3,915

 

-

697

13,388

Balance at

30 June 2012

 

39,342,809

 

68,269

 

47,500,000

 

67,938

 

47,500,000

 

67,888

22,250,000

22,295

 

226,390

 



 

Utilico Finance Limited                                                                                                                    

                                                                                                                                                                            

Notes to the Accounts (continued)

 

7.     Zero dividend preference shares (continued)

 

 

2012

2014

2016

Total

2011 

Number

£'000s

Number

£'000s

Number

£'000s

£'000s

Authorised

 

 

 

 

 

 

 

ZDP shares of

10p each

 

60,592,190

      

6,059

 

50,000,000

         

5,000

 

50,000,000

        

5,000

 

n/a

 

 

 

 

 

 

 

 

Balance at

30 June 2010

 

45,486,200

 

68,936

 

37,500,00

 

46,112

 

37,500,000

 

46,112

 

161,160

Finance charges

-

4,820

-

3,420

-

3,362

11,602

Balance at

30 June 2011

 

45,486,200

 

73,756

 

37,500,00

 

49,532

 

37,500,000

 

49,474

 

172,762

 

Pursuant to the prospectus relating to the "Rollover Offer of 2012 ZDP Shares into 2018 ZDP Shares and placing of 2014 ZDP Shares, 2016 ZDP Shares and 2018 ZDP Shares" published by the Company on 2 December 2011 and in accordance with the terms and conditions of the Rollover Offer, 6,143,391 2012 ZDP shares were cancelled and rolled-over into 10,356,448 new 2018 ZDP shares on 20 January 2012. The Company also issued 11,893,552 new 2018 ZDP shares at 100p per share raising £11.9m. The new 2018 ZDP shares were admitted to the Official List and to trading on the London Stock Exchange on 26 January 2012.

 

Pursuant to a supplementary prospectus relating to a "Placing of 2014 ZDP Shares, 2016 ZDP Shares and 2018 ZDP Shares" published by the Company on 2 March 2012, 10 million new 2014 ZDP Shares at 146.5p per share and 10 million new 2016 ZDP Shares at 146.5p were issued on 9 March 2012. The new ZDP shares were admitted to the Official List and to trading on the London Stock Exchange on 15 March 2012.

 

The Company has the ability to complete further placings until the final closing date of 1 December 2012.

 

2012 ZDP shares                                                                                                                                                                       

 

ZDP shares with a redemption date of 31 October 2012 were issued by Utilico Investment Trust plc ("UIT") on 7 May 2004. As part of the scheme of reconstruction implementing the proposals for the voluntary winding-up and reconstruction of UIT, each UIT ZDP shareholder received one ZDP share in the Company for every UIT ZDP share held on 8 June 2007. Based on the initial entitlement of a UIT ZDP share of 100p on 7 May 2004, a 2012 ZDP share will have a final capital entitlement at the end of its life on 31 October 2012 of 177.52p, equating to a 7 per cent. per annum gross redemption yield. The capital entitlement (excluding issue costs) per 2012 ZDP share at 30 June 2012 was 173.52p (30 June 2011: 162.15p).    

           

                                                                                                                                                                                                

2014 ZDP shares                                                                                                                                                                       

 

Based on the initial entitlement of a 2014 ZDP share of 100p on 15 June 2007, a 2014 ZDP share will have a final capital entitlement at the end of its life on 31 October 2014 of 167.60p equating to a 7.25 per cent. per annum gross redemption yield. The capital entitlement (excluding issue costs) per 2014 ZDP share at 30 June 2012 was 142.33p (30 June 2011: 132.69p).

Utilico Finance Limited                
                                                                                                   

                                                                                                                                                                            

Notes to the Accounts (continued)

 

7.     Zero dividend preference shares (continued)

 

           

                                                                                                                                                                                                

2016 ZDP shares                                                                                                                                                                       

 

Based on the initial entitlement of a 2016 ZDP share of 100p on 15 June 2007, a 2016 ZDP share will have a final capital entitlement at the end of its life on 31 October 2016 of 192.78p equating to a 7.25 per cent. per annum gross redemption yield. The capital entitlement (excluding issue costs) per 2016 ZDP share at 30 June 2012 was 142.33p (30 June 2011: 132.69p).

                                                                                          

2018 ZDP shares

 

Based on the initial entitlement of a 2018 ZDP share of 100p on 26 January 2012, a 2018 ZDP share will have a final capital entitlement at the end of its life on 31 October 2018 of 160.52p equating to a 7.25% per annum gross redemption yield. The capital entitlement (excluding issue costs) per 2018 ZDP share at 30 June 2012 was 103.03p.

 

 

The ZDP shares are listed on the London Stock Exchange and are stated at amortised cost using the effective interest method. The ZDP shares carry no entitlement to income however they have a pre-determined final capital entitlement which ranks behind all other liabilities and creditors of the Company and Utilico Investments Limited but in priority to the ordinary shares of the Company and Utilico Investments Limited save in respect of certain winding up revenue profits.

 

The growth of each ZDP share accrues daily and is reflected in the return and net asset value per ZDP share on an effective interest method.

                                                                                                                                                                                   

The ZDP shares do not carry any voting rights at general meetings of the Company. However the Company will not be able to carry out certain corporate actions unless it obtains the separate approval of the ZDP shareholders (treated as a single class) at a separate meeting. Separate approval of each class of ZDP shareholders must be obtained in respect of any proposals which would affect their respective rights, including any resolution to wind up the Company. In addition the approval of ZDP shareholders by the passing of a special resolution at separate class meetings of the ZDP shareholders is required in relation to any proposal to modify, alter or abrogate the rights attaching to any class of the ZDP shares and in relation to any proposal by the Company or its parent company which would reduce the Group's cover of the existing ZDP shares below 1.5 times.

                                                                                                                                                                                   

On a liquidation of Utilico Investments Limited and/or the Company, to the extent that the relevant classes of ZDP shares have not already been redeemed, the shares shall rank in the following order of priority in relation to the repayment of their accrued capital entitlement as at the date of liquidation:

 

(i) the 2012 ZDP shares shall rank in priority to the 2014 ZDP shares, the 2016 ZDP shares and the ZDP 2018 shares;

(ii) the 2014 ZDP shares shall rank in priority to the 2016 ZDP Shares and the 2018 ZDP shares; and

(iii) the 2016 ZDP shares shall rank in priority to the 2018 ZDP shares.                                                                       

 

The entitlement of ZDP Shareholders of a particular class shall be determined in proportion to their holdings of ZDP shares of that class.

                                                                                                                                                                                  



Utilico Finance Limited                                                                                                                    

                                                                                                                                                                            

Notes to the Accounts (continued)

 

8.     Ordinary share capital                                                                                                                                         

       

 

Number

£

Authorised

 

 

Ordinary shares of 10p each

     160,592,200

   16,059,220

Issued and nil paid

 

 

Balance at 30 June 2012 and 30 June 2011

10

-  

                                                                                                                                                                           

In addition to receiving any income distributed by way of dividend, the ordinary shareholders will be entitled to all surplus assets after payment of all debts, including ZDP shares.

 

Net asset value per ordinary share is nil (30 June 2011: nil) based on 10 shares in issue.

                                                                                                                                                                                   

9.     Parent company                                                                                                                                                  

 

Utilico Investments Limited, incorporated in Bermuda, is the parent company of the Company, holding 100% of the nil paid ordinary shares.

 

In the opinion of the Directors, the ultimate holding undertaking is General Provincial Life Pension Fund (L) Limited that is incorporated in Malaysia, holding 52.5% of the ordinary shares in Utilico Investments Limited.

 

10.   Related party transactions                                                                                                                            

 

Utilico Investments Limited, General Provincial Life Pension Fund (L) Limited and the Board of the Company are considered related parties. Amounts owing from related parties are disclosed in the financial statements in note 6 and interest receivable from related parties is disclosed in note 2.                                                                                                   

 

11.   Operating Segments

 

The Directors are of the opinion that the Company's activities comprise a single business segment of financing the Company's ZDP shares debt by lending current asset funds to its parent company and therefore no segmental reporting is provided.

 

12.     Financial Risk Management

 

The Board of Directors is responsible for the Company's risk management. The Directors' policies and processes for managing the financial risks are set out in the interest rate exposure and credit risk management below.

 

The accounting policies which govern the reported Balance Sheet carrying values of the underlying financial assets and liabilities, as well as the related income and expenditure, are set out in note 1 to the accounts. The policies are in compliance with International Financial Reporting Standards as adopted by the European Union and best practice, and include the valuation of financial assets at fair value and liabilities at amortised cost.

 



Utilico Finance Limited                                                                                                                    

                                                                                                                                                                            

Notes to the Accounts (continued)

 

12.     Financial Risk Management (continued)

 

Interest Rate exposure

The exposure of the financial assets and liabilities to interest risks is shown below:

 

 

 

Within

More than

 

Total

one year

one year

30 June 2012

£'000s

£'000s

£'000s

Exposure to fixed rates

 

 

 

Zero dividend preference shares

(226,390)

(68,269)

(158,121)

Intra-group loan

226,390

226,390

 -

Net exposures

 

 

 

At period end

 -

158,121

(158,121)

Maximum in period

 -

172,762

(172,762)

Minimum in period

 -

158,121

(158,121)

 

 

 

 

Within

More than

 

Total

one year

one year

30 June 2011

£'000s

£'000s

£'000s

Exposure to fixed rates

 

 

 

Zero dividend preference shares

(172,762)

 -

(172,762)

Intra-group loan

172,762

172,762

 -

Net exposures

 

 

 

At year end

 -

172,762

(172,762)

Maximum in year

 -

172,762

(172,762)

Minimum in year

 -

161,160

(161,160)

 

Credit Risk exposure

The Company is exposed to potential failure by its parent company to settle the ZDP share liability on behalf of the Company on the respective repayment dates. The Board assesses this risk at each Board meeting.

 

ZDP shares

2012 ZDP shares

Based on their final entitlement of 177.52p per share, the final entitlement of the 2012 ZDP shares were covered 6.20x times by Utilico Investments Limited's gross assets on 30 June 2012. Should gross assets fall by 83.9% over the remaining life of the 2012 ZDP shares, then the 2012 ZDP shares would not receive their final entitlements in full. Should gross assets fall by 100.0%, equivalent to an annual fall of 100.0%, the 2012 ZDP shares would receive no payment at the end of their life.

 

 



 

Utilico Finance Limited                                                                                                                    

                                                                                                                                                                            

Notes to the Accounts (continued)

 

12.        Financial Risk Management (continued)

 

2014 ZDP shares

Based on their final entitlement of 167.60p per share, the final entitlement of the 2014 ZDP shares were covered 2.90x times by Utilico Investments Limited's gross assets on 30 June 2012. Should gross assets fall by 65.5% over the remaining life of the 2014 ZDP shares, then the 2014 ZDP shares would not receive their final entitlements in full. Should gross assets fall by 83.9%, equivalent to an annual fall of 54.2% the 2014 ZDP shares would receive no payment at the end of their life.

 

2016 ZDP shares

Based on their final entitlement of 192.78p per share, the final entitlement of the 2016 ZDP shares were covered 1.80x times by Utilico Investments Limited's gross assets on 30 June 2012. Should gross assets fall by 44.4% over the remaining life of the 2016 ZDP shares, then the 2016 ZDP shares would not receive their final entitlements in full. Should gross assets fall by 56.9%, equivalent to an annual fall of 14.6% the 2016 ZDP shares would receive no payment at the end of their life.

 

2018 ZDP shares

Based on their final entitlement of 160.52p per share, the final entitlement of the 2018 ZDP shares were covered 1.57x by Utilico Investments Limited's gross assets on 30 June 2012.Should the gross assets falls by 36.1% over the remaining life of the 2048 ZDP shares, then the 2018 ZDP shares would not receive their final entitlements in full. Should gross assets fall by 44.4%, equivalent to an annual fall of 8.8% the 2018 ZDP shares would receive no payment at the end of their life.

 

None of the Company's financial liabilities is past due or impaired.

 

Fair Values of financial assets and liabilities

The assets and liabilities of the Company are, in the opinion of the Directors, reflected in the Balance Sheet at fair value except for ZDP shares which are carried at amortised cost using effective interest method in accordance with IAS39 or at a reasonable approximation thereof.

 

The fair values of the ZDP shares are:

 


2012

2011


£'000s

£'000s

2012 ZDP shares

                   67,030

76,644

2014 ZDP shares

73,150

53,531

2016 ZDP shares

70,538

50,063

2018 ZDP shares

23,140

-

 

 

Capital risk management

The objective of the Company is to finance the redemption value of the ZDP shares. The Board has a responsibility for ensuring the Company's ability to continue as a going concern and to meet the redemption of the ZDP shares.

 

 

 

 

 

 

 

 

Independent auditor's report to the shareholders of

Utilico Finance Limited

 

We have audited the financial statements of Utilico Finance Limited for the year ended 30 June 2012 which comprise the balance sheet, the statement of comprehensive income and the related notes.  The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

This report is made solely to the Company's shareholders, as a body, in accordance with Section 90(2) of the Companies Act 1981 of Bermuda.  Our audit work has been undertaken so that we might state to the Company's shareholders those matters we are required to state to them in an auditor's report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's shareholders as a body, for our audit work, for this report, or for the opinions we have formed.

 

Respective responsibilities of directors and auditor

As explained more fully in the Statement of Directors' Responsibilities set out on page 7, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.  Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).  Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

 

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the accounts sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.  This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.  In addition, we read all the financial and non-financial information in the director's report to identify material inconsistencies with the audited financial statements.  If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

 

Opinion on financial statements

In our opinion the financial statements:

·  give a true and fair view of the state of the Company's affairs as at 30 June 2012 and of its results for the year then ended;

·  have been properly prepared in accordance with IFRSs as adopted by the European Union; and

·  have been prepared in accordance with the requirements of the Companies Act 1981 of Bermuda.

 

 

 

 

Grant Thornton UK LLP

Statutory Auditor

Chartered Accountants

London

19 September 2012

 


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