2021
REPORT AND ACCOUNTS
EMERGING CITIES | EMERGING WEALTH | EMERGING OPPORTUNITIES
WHY UTILICO EMERGING MARKETS TRUST PLC?
Ocean Wilsons Holdings Limited (Brazil)
Utilico Emerging Markets Trust plc’s (“UEM”
or the “Company”) investment objective is to
provide long-term total return through a flexible
investment policy that permits UEM to make
investments predominantly in infrastructure, utility
and related sectors, mainly in emerging markets.
TRUSTED
A closed end fund
focused on long-term
total return
DIVERSIFIED
A diverse portfolio of
operational cash
generative investments
PROVEN
Strong management team
with a long-term record
of outperformance
UEM is an emerging markets specialist fund
focused on long-term total return predominantly in
infrastructure and utility investments.
OPPORTUNITY
HIGH OPERATING LEVERAGE
UEM offers a diverse portfolio of high conviction, bottom-
up investments spread across jurisdictions and sectors.
The Company seeks to invest in companies most of which
pay dividends, thereby contributing to UEM’s performance.
EMERGING MARKETS
Emerging markets (“EM”) offer higher Gross Domestic
Product (“GDP”) growth, and coupled with the
urbanisation and expansion of the middle class,
deliver attractive investment opportunities for UEM.
The EM middle class sector is expected to double in
ten years, which will drive the need for investment in
infrastructure and utilities.
UEM’s portfolio is predominantly operational.
Infrastructure and utility assets are enablers of growth
in EM and usually offer high operating leverage.
UTILITIES AND INFRASTRUCTURE ASSETS
At a time of heightened uncertainty, these are often
long-term assets with established regulatory frameworks
which should continue to deliver predictable and
sustainable income streams, thereby helping to underpin
UEM’s quarterly dividend payments.
Report and Accounts for the year to 31 March 2021
1
FINANCIAL HIGHLIGHTS
India Grid Trust (India)
FINANCIAL CALENDAR
Year End
31 March
Annual General Meeting
21 September 2021
Half Year
30 September
Dividends Payable
March, June, September
and December
The business of the Company
consists of investing the pooled
funds of its shareholders in
accordance with its investment
objective and policy, with the
aim of spreading investment
risk and generating a return for
shareholders. The joint portfolio
managers of the Company are
ICM Investment Management
Limited (“ICMIM”) and ICM Limited
(“ICM”), together referred to as the
“Investment Managers”.
International Container Terminal Services, Inc (The Philippines)
NET ASSET VALUE
(“NAV”) TOTAL RETURN
PER SHARE*
NAV OF 228.54p
PER SHARE*
REVENUE EARNINGS
PER SHARE OF
DIVIDENDS
PER SHARE
30.2%
25.7%
(2020:
24.9%)
(2020:
27.2%)
8.13p
(2020: 7.88p)
2.6%
(2020:
5.2%)
Front cover image – Rumo S.A. (Brazil)
* See Alternative Performance Measures on pages 96 and 97
CONTENTS
PERFORMANCE
4 Chairman’s Statement
9
Current Year Performance
10 Performance Summary
11 Geographical Investment Exposure
12 Top Ten Companies
13 Performance Since Inception (20 July 2005)
14 Ten Year Performance
STRATEGIC REPORT AND INVESTMENTS
15
Investment Managers’ Report
19 Macro Trends Affecting Our Portfolio
21 Our Investment Approach
22 Thirty Largest Holdings
24 Ten Largest Holdings Review
29 Data Services and Digital Infrastructure
32 Strategic Report
41
Investment Managers and Team
GOVERNANCE
43 Directors
44 Directors’ Report
50 Corporate Governance Statement
55 Directors’ Remuneration Report
58 Audit & Risk Committee Report
61 Directors’ Statement of Responsibilities
FINANCIAL STATEMENTS
62
Independent Auditor’s Report
68 Accounts
72 Notes to the Accounts
ADDITIONAL INFORMATION
91 Notice of Annual General Meeting
95 Company Information
96 Alternative Performance Measures
98 Historical Performance
On 3 April 2018, as a result of the proposals to redomicile Utilico Emerging Markets Limited (“UEM Bermuda”) to the United
Kingdom, the shareholders of UEM Bermuda exchanged all their shares in UEM Bermuda for shares in UEM on a one for one basis
and UEM Bermuda became a wholly owned subsidiary of UEM. All performance data relating to periods prior to 3 April 2018 are in
respect of UEM Bermuda.
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Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
3
CHAIRMAN’S STATEMENT
The year to 31 March 2021 has
continued to be truly challenging.
Everybody has been impacted,
with governments having to
deal with unknown outcomes,
business owners and investors
seeking confidence and growth,
and employees looking for job
security, certainty and balance
to their lives. We now have a
better understanding on how
to mitigate Covid-19 surges and
that vaccines work. On the back of this rising confidence,
equity share markets have recovered strongly.
JOHN RENNOCKS
Chairman
Pleasingly, UEM turned in a strong performance and
importantly delivered a NAV total return of 30.2% for the
year to 31 March 2021, albeit from a low NAV of 178.14p
on 1 April 2020. UEM measures its performance on a
total absolute return objective and long-term annual
compound NAV total return since inception is now 9.4%,
although the Investment Managers are seeking long-term
performance to be above 10.0% and this includes a rising
dividend.
UEM has lagged behind the MSCI EM Index as investors
globally have focused on technology companies,
driving digital growth investments higher. The MSCI EM
Information Technology sector Index has outperformed
the rest of the markets, rising by 83.2% during the
year to 31 March 2021. By its nature, UEM’s portfolio is
predominantly invested in utilities and infrastructure
assets which have been out of favour with investors
throughout most of the year. The MSCI EM Utilities sector
Index was only up by 17.2% during the twelve months to
31 March 2021 compared with UEM’s outperformance of
30.2% which is a significant positive.
Covid-19 continues to be a global pandemic that has
impacted every continent and every community, and
this cannot be over emphasised. It has exposed the
stresses and weaknesses in our economies, politics and
social fabric; from disrupted health services, education,
business and social activities. Governments have
struggled to keep up with a rapidly changing situation
and deciding on the optimal medical, economic and
social solutions to tackle the pandemic. The vulnerable
have borne and continue to bear the greatest burden
directly and indirectly from Covid-19.
The pandemic has seen both an immediate demand and
supply shock which has impacted most stakeholders in
all economies. As we move through the policy responses,
we are seeing ongoing “aftershocks”, especially in supply
chains. We expect this to continue. Economic and stock
market volatility is expected to remain high.
The policy response has been to seek to break
community transmission of Covid-19, ranging
from lockdowns, to testing, through to vaccination
programmes. Economically there have been two parts to
the Covid-19 response: central banks have dramatically
increased the supply of capital while reducing the cost
of capital; and governments have introduced significant
support schemes for businesses especially around
MSCI EM SECTOR INDEX TOTAL RETURNS (GBP ADJUSTED)
from 31 March 2020 to 31 March 2021
83.2%
76.5%
45.1%
43.2%
34.7%
33.7%
30.2%
29.9%
23.5%
20.5%
17.2%
8.0%
Information
technology
Materials Consumer
Healthcare Industrials Communication
discretionary
services
UEM NAV
total return
per share
Energy
Financials Consumer
Utilities
Real estate
staples
Source: Bloomberg
INDICES MOVEMENTS
from March 2020 to March 2021
180
170
160
150
140
130
120
110
100
90
Mar
2020
Jun
2020
Sep
2020
Dec
2020
Mar
2021
Brazil Ibovespa Index
NIFTY 50 Index
Shanghai SE Composite Index
Hang Seng Index
PSEi – Philippine SE Index
Rebased to 100 as at 31 March 2020
Source: Bloomberg
continued employment and social welfare support. These
are truly unprecedented steps which have come at a very
high economic cost.
At the same time there is also an accelerating
expectation that businesses address questions around
their approach to Environmental, Social and Governance
(“ESG”) outcomes. The concept of responsible investing
has always been a core component to UEM's investment
process. UEM’s Investment Managers have a good record
on governance, given their active approach to investee
companies and they have taken steps to continue to
strengthen their ESG approach to investing. ICM has
recently become a signatory to the United Nations –
supported Principles for Responsible Investment ("PRI"),
a code of best practice for incorporating ESG issues.
UEM is therefore able to meet the expectations and
requirements of that framework. ESG continues to be
a focus for UEM, and we believe this offers significant
opportunities for the Company over the long-term.
Today the world is largely over leveraged and under
employed. The next significant policy steps we expect
are under the broad policy banners of “build your way
out of the pandemic” and the “green agenda”. These will
add to demand and we believe will see strong inflationary
pressures continue to rise, especially where supply is
disrupted. While the policy initiatives may well reduce
unemployment, they will add significantly to the already
unpreceded debt levels.
Over the year, the individual markets have seen
strong divergences in market indices and currencies
as country-by-country responses have varied, and
the impact of Covid-19 has differed in its timing and
its severity. A common theme within markets has
been the acceleration of disruptive or enabling digital
businesses, which have thrived with the shift to working
from home. We expect this trend to continue and even
accelerate further. There are significant technology
disruption opportunities from finance to health and from
businesses through to government.
Numerous and substantial social issues are still evident,
including nationalism, climate change and wealth
inequality. However, communities have pulled together,
and the human spirit has risen above this upheaval. We
hope the global leaders are up to these challenges.
The EM markets have broadly been stronger with
the India Nifty 50 up 70.9%, Brazil Bovespa up 59.7%,
Shanghai Composite up 25.1%, the Philippine PSEi up
21.1% and Hang Seng up 20.2%. The dampener has
been currency headwinds with the Brazilian Real down
17.4% against Sterling, while the Hong Kong Dollar was
down 10.4% and the Philippine Peso was down 5.4%.
Much of the currency weakness has been accelerated
by the impact of Covid-19, and the respective country
impacts and responses. Nearly all central banks reduced
interest rates in order to soften the economic impact
and increase resilience in their individual economies.
Brazil reduced the benchmark interest rate (Selic) from
3.75% as at 31 March 2020 to 2.75% as at 31 March 2021,
while the Indian interest rate reduced by 2.0% in the
year to 31 March 2021. Over the year to 31 March 2021,
EM currency weakness reduced UEM’s GBP NAV by an
estimated 8.3%.
Commodities have moved significantly higher. Oil was
caught up in the pandemic demand shock and the power
struggle between oil suppliers. Oil famously traded on
the Houston Exchange at negative values as oversupply
combined with the shortage of storage resulted in
surplus oil for immediate delivery. However, oil ended the
year to 31 March 2021 up 179.4%. Expectations of a new
super cycle in copper, driven by both the green agenda
and a construction boom are driving copper prices to
new highs. We expect this growth to continue although
price volatility may continue.
The emerging risk from cyber attacks on businesses and
governments is a deep concern to all. So far we have not
4
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
5
CHAIRMAN’S STATEMENT (continued)
seen evidence of it within UEM's investee companies but
the apparent escalation is a concern for all.
It is also worth noting that, as economies reopen,
demand for goods and services is likely to accelerate
above normal trend lines. Coupled with the cost savings
implemented by many businesses in the face of huge
economic uncertainties from the pandemic fallout,
reported margins are actually widening. We expect this to
continue for much of this year.
China remains key to the EM, given its size and growth.
In the short-term we expect China’s GDP to remain well
above its recent long-term trend line, but its GDP may
fall back sharply later this year as policy responses are
curtailed. Brazil is benefiting from strong commodity
demand and the ongoing privatisation process should
continue to attract capital into the country. India is
currently being ravaged by Covid-19. Until the impact is
significantly lower, its economy will remain stalled.
REVENUE EARNINGS AND DIVIDEND
It is pleasing to report UEM’s revenue earnings per
share increased by 3.2%, given the challenges faced by
investee businesses and their need to preserve cashflow,
especially in the first six months to 30 September 2020.
At the half-year, revenue income was at 81.3% of the prior
year. This closed up to 94.9% in the full year as dividend
income recovered strongly in the second half of the year.
CURRENCY MOVEMENTS vs STERLING
from March 2020 to March 2021
115
105
95
85
75
Mar
2020
Jun
2020
Sep
2020
Dec
2020
Mar
2021
Brazilian Real
Hong Kong Dollar
Romanian Leu
Philippine Peso
Indian Rupee
Rebased to 100 as at 31 March 2020
Source: Bloomberg
As at 31 March 2021 13.6% of UEM’s portfolio was
invested in the Data Services and Digital Infrastructure
sector which is projected to be higher growth but
typically pays lower dividends and as such the rest of the
portfolio worked harder to deliver this earnings uplift.
UEM has now declared four quarterly dividends totalling
7.775p per share, a 2.6% improvement over the previous
year. Dividends remain fully covered by income. The
retained earnings revenue reserves increased by £1.0m
to £6.9m (prior to the payment of the last quarter
dividend). The fourth quarterly dividend of 2.00p per
share represents an uplift of 3.9% on the prior quarterly
dividend. The Board remains confident this quarterly rate
will be maintained for the next financial year.
The Board would like to re-emphasise that UEM’s
portfolio is predominantly invested in relatively liquid,
cash-generative companies which have long-duration
assets that the Company’s Investment Managers believe
are structurally undervalued and offer excellent total
returns.
SHARE BUYBACKS
UEM’s share price discount widened over the year from
11.2% as at 31 March 2020 to 13.6% as at 31 March 2021.
This continues to be above levels that the Board would
wish to see over the medium term. The Company has
continued buying back shares for cancellation and has
stepped up its buybacks with 6.6m shares bought back in
the year to 31 March 2021, at an average price of 182.81p,
and total cost of £12.1m.
While the Board is keen to see the discount narrow,
any share buyback remains an investment decision.
Traditionally the Company has bought back shares if
the discount widens in normal market conditions to
over 10.0%. Since inception, UEM has bought back
56.0m ordinary shares totalling £97.8m. The buybacks
now represent significantly more than the initial IPO
capitalisation of UEM Bermuda when it came to market in
July 2005.
MANAGEMENT AND PERFORMANCE FEES
Following a proposal from the Investment Managers to
discontinue the performance fee and move to a flat fee,
the Board asked UEM’s brokers to determine if this was
supported by our larger shareholders. There was strong
consensus for the removal of the performance fee,
especially from our wealth manager investors. The Board,
in consultation with the Company’s brokers, determined
a fee of 1.0% of NAV (and reducing at higher levels of NAV)
was fair to the Investment Managers and shareholders.
This revised fee arrangement was implemented from 1
April 2021. As a result of the above, ongoing charges will
be 1.4%, compared to 1.1% for the year to 31 March 2021.
More details are set on page 97.
A performance fee in respect of the year to 31 March
2021 of £5.1m was earned and this was paid in cash
and shares. To satisfy the share element the Investment
Managers bought shares in the market which resulted in
the fee being reduced by £0.3m to £4.8m as the shares
were bought on market at a discount after the year-end.
BOARD
Garth Milne has indicated his intention to retire
from the Board following the conclusion of UEM's
forthcoming annual general meeting (“AGM”). Garth was
a founding Director of UEM in 2005 and the Board and
Investment Managers wish to thank him for his immense
contribution over the years. His experience and level-
headed approach will be missed. The Board has started
the process of appointing a new independent director.
The Board will continue to consider board refreshment in
the coming year.
COVID-19 IMPACT ON UEM
The Covid-19 impact on UEM’s portfolio is detailed in
the Investment Managers’ Report on page 15. However,
it is worth noting that no UEM investee company has
needed or is expected to require significant restructuring
or refinancing. The strategic nature and business
model strength of UEM’s portfolio has been excellent.
Although market valuations of some companies initially
deteriorated sharply, most of the businesses have
proved resilient. Coupled with strong government and
central bank support the Board does not today see a
significant risk from Covid-19 outside of market volatility
in valuations.
Today the outlook is improving. Vaccinations are proving
to be effective and the vaccination approval processes
were quick. Most of the developed market economies are
well on their way to “vaccine herd immunity”. We expect
there to be an acceleration in vaccination programmes
over the coming six months in EM markets.
UEM, as a company, has adjusted to the global lockdowns
and cancelled all travel by the Board. UEM moved to
China Everbright Greentech Limited (China)
DIVIDEND PER SHARE OF 7.775P, UP BY
2.6%
FOR THE YEAR TO 31 MARCH 2021
using video conferencing to meet the requirements by
governments on social distancing and travel restrictions,
whilst ensuring the Board receives regular updates on
the Company’s portfolio and operating performance
from the Investment Managers. Nearly all interactions
with UEM’s service providers have been by video
conference, including the audit process.
UEM CONTINUATION VOTE
UEM’s forthcoming AGM in September contains a
resolution proposing the continuation of the Company,
as required by UEM’s Articles of Association. The Board
remains firmly of the view that it is in the shareholders’
interest for UEM to continue as currently constituted.
The Investment Managers, together with UEM’s
brokers, have met many of UEM’s major shareholders
over the last month and ascertained their views on a
number of topics. These have been reflected in UEM’s
forward thinking and processes and UEM thanks these
shareholders for their input.
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Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
7
CHAIRMAN’S STATEMENT (continued)
CURRENT YEAR PERFORMANCE
OUTLOOK
While the West is successfully vaccinating its way out of
Covid lockdowns it remains a fact that newer variants are
proving more difficult to contain as they emerge. With
the majority of the world’s population unvaccinated it
is almost certain new variants will continue to appear.
Hopefully, all new variants are contained by the current
vaccine array. With the world reopening we are seeing
accelerated demand as supply chains are refilled and
delayed demand is acted upon. As we are seeing in
much of UEM’s portfolio, this demand should result in
much stronger global GDP over the coming months.
The accelerated demand and the level of supply chain
disruption is leading to price inflation across most
countries as costs rise to deliver goods and services.
We remain cautious about unemployment which remains
high, and the unsustainable debts taken on to bridge
Covid lockdowns. That said, governments remain acutely
aware of the need to invest to both redress the Covid
impact on their economies but also to step change
the environmental challenge we all face. These two, we
believe, will deliver a robust world economy and UEM’s
asset base should be well placed to benefit.
John Rennocks
Chairman
18 June 2021
NAV TOTAL RETURN
PER SHARE*
SHARE PRICE
TOTAL RETURN
PER SHARE*
NAV OF 228.54P
PER SHARE*
SHARE PRICE
OF 197.50P
30.2%
27.3%
25.7%
22.3%
(2020:
24.9%)
(2020:
23.2%)
(2020:
27.2%)
(2020:
25.9%)
DIVIDENDS
PER SHARE
INVESTED
REALISED
DIVIDENDS PAID
2.6%
£174.7m
£142.1m
£17.2m
(2020:
5.2%)
(2020: £270.1m)
(2020: £270.8m)
(2020: £17.0m)
6.6M SHARES
BOUGHT BACK
TOTAL INCOME
ONGOING CHARGES*
(EXCLUDING
PERFORMANCE FEE)
ONGOING CHARGES*
(INCLUDING
PERFORMANCE FEE)
£12.1m
(2020: £4.8m)
£22.8m
(2020: £24.0m)
1.1%**
(2020: 1.1%)
2.1%**
(2020: 1.1%)
* See Alternative Performance Measures on pages 96 and 97
** 1.4% with effect from 1 April 2021 following changes to the management fee as set out on page 97
TOTAL RETURN COMPARATIVE PERFORMANCE (1)
from March 2020 to March 2021
150
140
130
120
110
100
China Gas Holdings Limited (China)
8
Utilico Emerging Markets Trust plc
Mar 20
Apr 20
May 20
Jun 20
Jul 20
Aug 20
Sep 20
Oct 20
Nov 20
Dec 20
Jan 21
Feb 21
Mar 21
NAV total return per share
MSCI Emerging Markets Total Return Index (GBP adjusted)
(1) Rebased to 100 as at 31 March 2020
Source: ICM and Bloomberg
Report and Accounts for the year to 31 March 2021
9
PERFORMANCE SUMMARY
GEOGRAPHICAL INVESTMENT EXPOSURE
NAV total return per share (1) (annual) (%)
Share price total return per share (1) (annual) (%)
Annual compound NAV total return (1) (since inception - 20 July 2005) (%)
NAV per share (1) (pence)
Share price (pence)
Discount (1) (%)
Earnings per share (basic)
- Capital (pence)
- Revenue (pence)
Total (pence)
Dividends per share
- 1st quarter (pence)
- 2nd quarter (pence)
- 3rd quarter (pence)
- 4th quarter (pence)
Total (pence)
Gross assets (2) (£m)
Equity holders’ funds (£m)
Shares bought back (£m)
Net (overdraft)/cash (£m)
Bank loans (£m)
Net debt (£m)
Gearing (1) (%)
Management and administration fees and other expenses
- excluding performance fee (£m)
- including performance fee (£m)
Ongoing charges figure (1)
- excluding performance fee (%)
- including performance fee (%)
31 March
2021
31 March
2020
% change
2021/20
30.2
27.3
9.4
228.54
197.50
(13.6)
45.73
8.13
53.86
1.925
1.925
1.925
2.000 (3)
7.775
556.1
505.7
12.1
(3.2)
(50.4)
(53.6)
(10.6)
5.0
10.1
1.1 (4)
2.1 (4)
(24.9)
(23.2)
8.1
181.84
161.50
(11.2)
(68.29)
7.88
(60.41)
1.800
1.925
1.925
1.925
7.575
461.4
414.3
4.8
39.5
(47.1)
(7.6)
(1.8)
6.4
6.4
1.1
1.1
n/a
n/a
n/a
25.7
22.3
n/a
167.0
3.2
189.2
6.9
0.0
0.0
3.9
2.6
20.5
22.1
152.1
(108.1)
7.0
605.3
n/a
(21.9)
57.8
n/a
n/a
(1) See Alternative Performance Measures on pages 96 and 97
(2) Gross assets less liabilities excluding loans
(3) The fourth quarterly dividend has not been included as a liability in the accounts
(4) 1.4% with effect from 1 April 2021 following changes to the management fee as set out on page 97
BRAZIL
March 2021
March 2020
18.0%
29.1%
INDIA
March 2021
March 2020
CHINA (INCLUDING HONG KONG)
OTHER ASIA
13.5%
13.1%
March 2021
March 2020
17.8%
18.0%
March 2021
March 2020
9.4%
5.3%
COLOMBIA
March 2021
March 2020
MEXICO
March 2021
March 2020
CHILE
March 2021
March 2020
Source: ICM
4.8%
4.1%
2.6%
0.7%
3.3%
3.1%
MIDDLE EAST / AFRICA
March 2021
March 2020
OTHER EUROPE
March 2021
March 2020
ROMANIA
March 2021
March 2020
5.6%
7.6%
6.0%
3.2%
3.2%
5.8%
SOUTH KOREA
March 2021
March 2020
THE PHILIPPINES
March 2021
March 2020
MALAYSIA
March 2021
March 2020
6.5%
1.7%
6.1%
6.4%
3.2%
1.9%
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Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
11
TOP TEN COMPANIES
PERFORMANCE SINCE INCEPTION (20 JULY 2005)
6.0%
3.4%
3.2%
3.2%
3.0%
International
Container Terminal
Services Inc.
India Grid Trust
Ocean Wilsons
Holdings Limited
Gujarat State
Petronet Limited
Alupar
Investimento S.A.
Ports
Electricity
Ports
Gas
Electricity
A global port
management
company
headquartered in the
Philippines.
An infrastructure
investment trust
with electricity
transmission assets
listed in India.
An investment
company which
operates as a
maritime service
provider, through its
Brazilian subsidiaries.
A natural gas
infrastructure and
gas transmission
company.
A Brazilian holding
company for energy
assets in the
electricity sector.
NAV ANNUAL
COMPOUND TOTAL
RETURN*
NAV TOTAL RETURN
PER SHARE*
SHARE PRICE TOTAL
RETURN PER SHARE*
9.4%
310.6%
262.6%
56.0M SHARES
BOUGHT BACK
DIVIDENDS PER SHARE
INCREASED FROM
1.50P TO
DIVIDENDS PAID
CUMULATIVE
£97.8m
7.775p
£185.9m
* See Alternative Performance Measures on pages 96 and 97
HISTORIC NAV AND SHARE PRICE PERFORMANCE (pence) (1)
from July 2005 to March 2021
2.7%
My E.G. Services
Berhad
2.7%
Rumo S.A.
2.5%
2.3%
2.3%
China Everbright
Greentech Limited
Corporacion
Financiera
Colombiana S.A.
Engie Energia Chile
S.A.
Data Services and
Digital Infrastructure
Road and Rail
Water and Waste
Infrastructure
Investment Funds
Electricity
A provider of
e-government
services in Malaysia.
A rail-based logistics
operator in Brazil.
An environmental
protection service
provider in China.
A Colombian
infrastructure
company operating
predominately in
the gas and toll road
sectors.
An electricity
generation company
operating in the
northern grid of
Chile.
Note: % of total investments
500
450
400
350
300
250
200
150
100
50
Jul
05
Mar
06
Mar
07
Mar
08
Mar
09
Mar
10
Mar
11
Mar
12
Mar
13
Mar
14
Mar
15
Mar
16
Mar
17
Mar
18
Mar
19
Mar
20
Mar
21
NAV total return per share (2)
Share price total return (2)
MSCI Emerging Markets
Total Return Index (GBP adjusted)
(1) Rebased to 100 as at 20 July 2005
(2) Adjusted for the exercise of warrants and subscription shares
Source: ICM and Bloomberg
12
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
13
TEN YEAR PERFORMANCE
INVESTMENT MANAGERS’ REPORT
DIVIDENDS PER SHARE (pence)
from March 2011 to March 2021
ONGOING CHARGES* (%)
from March 2011 to March 2021
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
1.2
1.0
0.8
0.6
0.4
0.2
0.0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Source: ICM
*Excluding performance fee
Source: ICM
INVESTMENT PURCHASES AND REALISATIONS (£m)
from March 2011 to March 2021
PORTFOLIO PROGRESSION (£m) AND NUMBER
OF HOLDINGS
from March 2011 to March 2021
300
250
200
150
100
50
0
92
87
92
88
80
79
84
86
82
80
81
700
600
500
400
300
200
100
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Purchases
Realisations
Source: ICM
Largest investment
Value of 21–40
Value of 2–10
Value of 41 and over
Value of 11–20
Source: ICM
UEM invests mainly in companies and sectors
displaying the characteristics of essential
services or monopolies.
It has been pleasing to see
UEM deliver a NAV total return
in the full year of 30.2%. UEM’s
asset class has been largely
overlooked by the markets which
have rightly focused on the shift
to working from home and the
accelerated digital explosion.
This has led to markets
rewarding the technology
sector shares. The MSCI EM
Information Technology sector
Index rose by 83.2% during the year to 31 March 2021.
CHARLES JILLINGS
Investment Manager
The Covid-19 pandemic has impacted everyone and
continues to dominate every aspect of life. There are few
places, if any, that are unaffected by restrictions dictated
by Covid-19. We now know how to address surges
and new variants, and we know the pharmaceutical
companies can produce extremely effective vaccines.
However, significant challenges remain. If this pandemic is
left unhindered it will escalate quickly and mutations are
a major concern. India, Latin America and Africa remain
mostly unvaccinated and serve as a petri dish from which
variants can emerge. Significant concerns remain around
a new variant being outside the vaccine capability.
Covid-19 has caused unprecedented challenges for
investors. Add this pandemic to a growing list of
significant and current concerns, which include central
bank intervention, extreme debt levels, historic low
and even negative interest rates, populism, US/China
frictions, Brexit, Black Lives Matter, climate change and
it is obvious that investors have been besieged by a
dynamic and challenging environment. When the world’s
largest corporates struggle to project their next quarter’s
revenues, it is difficult to be confident about the direction
and resilience of the global economy. ICM has continued
to be focused on the economic value of their preferred
investments and the delivery of their long-term financial
performance. It has made sure that these investments
have the right approach to risk, while still seeking
opportunities that will thrive in this current and then post
Covid-19 environment.
ICM is strongly of the view that due to Covid-19, the shift
to working from home and eCommerce has accelerated
the digitalisation of governments, businesses and
individuals. This shift ranges from doctors’ surgeries
going online, restaurants setting up internet delivery
options and farmers offering produce direct to
consumers online, and this dramatic shift will offer new
investment opportunities. Businesses without internet
reach or capability will face a challenging outlook. Many
businesses have been agile and shifted to eCommerce,
which has created opportunities and generated a positive
outlook for investors. We emphasise to our investee
companies that disruption is coming to everybody and
they need to be taking advantage of it by adapting their
business models and embracing these challenges.
There are two strong trends worth emphasising. First, as
individual markets recover, pent-up demands have driven
above trend activity in the last two quarters. Second,
most investee companies responded to the pandemic by
holding or reducing costs. As recovery has commenced,
this cautious approach has seen margins expand,
delivering some impressive results.
We have remained confident in the portfolio’s ability to
deliver growth and earnings. As a result, we have shifted
to fully drawing down our bank loan and our buybacks
have increased in quantum, given the attractive share
price discount. Today, our view is that the portfolio
remains of compelling value.
Our Investment Managers look with optimism
at the compelling opportunities that will
undoubtedly occur to add more resilient
investments to the portfolio.
14
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
15
INVESTMENT MANAGERS’ REPORT (continued)
REVENUE EARNINGS PER SHARE WAS 8.13P,
INCREASING BY
3.2%
IN THE YEAR TO 31 MARCH 2021
Torrent Power Limited moved from fifteenth to twenty-
eighth. The following fell outside the top thirty holdings
mainly on realisations: Cosan Logisitca S.A. from ninth
position as at 31 March 2020; Energisa S.A. from tenth
position; APT Satellite Holdings Limited from eighteenth
position; and Societe Nationale des Telecommunications
du Senegal (“Sonatel”) saw its share price fall with its
position moving from sixteenth to twenty-second.
Three insights are worth noting: 4.0% of the portfolio
falls outside the strict definition of utilities and
infrastructure investments, the largest being Starpharma,
a global biotech company with compelling value
added nanotechnology for the pharmaceutical sector,
which has increased to 1.7% of the portfolio, through
outperformance; the second is VinaCapital, a closed-end
fund providing access to the Vietnamese market which
is twenty-fifth in the portfolio. Investing in Vietnam has
always been challenging but we recognise the strong
drivers for growth in this country. VinaCapital allows
us to tap into this, with the added attraction being the
opportunity to buy into this investment company at a
significant discount. Interestingly, their top ten holdings
include FPT which is twenty-ninth in the portfolio; and
thirdly, CGN F3, a developer and owner operator of
windfarms and solar plants in mainland China. UEM has
some 3.7% invested in unlisted investments, the largest
unlisted holding is CGN F3.
Purchases in the portfolio decreased to £174.7m in the
year ended 31 March 2021 (31 March 2020: £270.1m)
and realisations decreased to £142.1m (31 March 2020:
£270.8m). This reflects investment activity more in line
with long-term averages. UEM ended the year fully
invested with its bank loans fully drawn.
During the year there have been some small sector
shifts. The exception has been Data Services and Digital
Infrastructure, which has increased from 4.4% last
year-end to 13.6% as at 31 March 2021. The drivers
for this are both new investments and excellent
performance. More detail is set out on page 29.
TELELINK BUSINESS SERVICES GROUP (BULGARIA) (“TBS”)
TBS is a leading systems integrator in the Balkans that
provides a full range of high value-added information
and communications technology for large corporates
and governments. TBS enables companies to adopt new
technologies and explore the full potential of the digital
world.
PORTFOLIO
UEM’s gross assets (less liabilities excluding loans)
increased sharply to £556.1m as at 31 March 2021 from
£461.4m as at 31 March 2020.
UEM has now expanded the list of disclosed investments
to thirty holdings in its annual report and the monthly
factsheet. This increases the visibility for shareholders
to some two thirds of the portfolio. There have been
eight new entries into the top twenty holdings of
the portfolio over the year: My E.G. Services Berhad
(“MYEG”); Corporacion Financiera Colombiana S.A.
(“Corficolombiana”); China Gas Holdings Limited (“China
Gas”); KunLun Energy Company Limited (“KunLun”);
Korean Internet Neutral Exchange Inc. (“KINX”); Simpar
S.A. (“Simpar”); Bolsa de Valores de Colombia (“BVC”);
and Naver Corporation Limited (“Naver”). The top thirty
has seen the following investments added: Starpharma
Holdings Limited (“Starpharma”); Telelink Business
Services Group (TBS”); VinaCapital Vietnam Opportunity
Fund Ltd (“VinaCapital”); CGN Capital Partners Infra Fund
3 (“CGN F3”); Ecorodovias Infraestrutura e Logistica
S.A. (“Ecorodovias”); FPT Corporation (“FPT”); and KT
Corporation (“KT”).
During the year to 31 March 2021, Transgaz S.A. moved
out of the top twenty holdings, and through realisations:
Companhia de Saneamento do Parana (“Sanepar”) and
Omega Geracao S.A. (“Omega”) exited the portfolio; and
IN THE YEAR TO 31 MARCH 2021
BRAZIL REMAINS UEM’S LARGEST
COUNTRY EXPOSURE
CHINA REMAINS UEM’S SECOND
LARGEST COUNTRY EXPOSURE
INDIA REMAINS UEM’S THIRD
LARGEST COUNTRY EXPOSURE
11.1%
0.2%
0.4%
Note: increases/decreases refer to the movement in the percentage of the portfolio represented by the relevant country
LATAM’S EXPOSURE
ASIA’S EXPOSURE
REST OF THE WORLD
28.7%
(2020: 37.0%)
56.5%
(2020: 46.4%)
14.8%
(2020: 16.6%)
SECTOR SPLIT OF INVESTMENTS
Electricity
Ports and Logistics
Data Services and
Digital Infrastructure
19.2%
(23.2%)
16.3%
(14.5%)
13.6%
(4.4%)
Gas
Satellites and Telecoms
Other
11.5%
8.9%
8.3%
(8.7%)
(7.9%)
(6.3%)
Road and Rail
Renewables
6.1%
(11.9%)
5.1%
(7.8%)
Infrastructure
Investment Funds
5.0%
(7.5%)
Airports
Water and Waste
3.9%
(1.8%)
2.1%
(6.0%)
Figures in brackets as at 31 March 2020
Source: ICM
16
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
17
INVESTMENT MANAGERS’ REPORT (continued)
MACRO TRENDS AFFECTING OUR PORTFOLIO
On a geographic basis Brazil saw the biggest reduction
with the exit from Omega and Energisa contributing to
this. Furthermore, the Brazilian Real decline of 17.4%
has driven Sterling portfolio values down. As such Brazil
reduced from 29.1% to 18.0%. South Korea has increased
through investment and performance, and has risen from
1.7% to 6.5%.
UEM ended the year with level 3 investments of £20.9m
(2020: £13.9m), representing 3.7% of total investments.
UEM’s level 3 investments increased mainly as a result of
£8.4m of additional investments in the year to 31 March
2021.
BANK DEBT
UEM’s net debt, being bank loans and overdrafts, net
of cash, increased from £7.6m as at 31 March 2020 to
£53.6m as at 31 March 2021, as UEM actively increased its
investment positions and therefore exposure to the stock
market. UEM’s loan facility was renewed in March 2021.
The £50.0m committed multicurrency revolving facility
now matures in March 2024 and has been novated to The
Bank of Nova Scotia, London Branch.
REVENUE RETURN
Revenue income decreased to £22.8m as at 31 March
2021, from £24.0m as at 31 March 2020, a decrease of
5.1%. This reflects both the impact of currencies and the
shift of 13.6% of the portfolio into Data Services and Digital
Infrastructure which are lower yielding investments. It is
worth noting that as at the half-year, revenue income was
some 81.3% of the prior year and at the full year this had
recovered to 94.9%.
Management fees and other expenses decreased by
21.3% to £2.7m in the year to 31 March 2021. This reflected
that for most of the year, the NAV was lower. Finance costs
remained modest at £0.3m given the low interest rate
environment. Taxation reduced by 27.6% to £1.6m during
the year ended 31 March 2021 (2020: £2.2m).
Arising from the above, profit for the year increased by
1.2% to £18.2m from £18.0m for the prior year. Earnings
per share was higher, a rise of 3.2% to 8.13p compared
to the prior year of 7.88p due to the increase in profit
and reduced average number of shares in issue following
buybacks in both years. Dividends per share of 7.775p
were fully covered by earnings.
Retained revenue reserves rose to £6.9m as at 31 March
2021, some 3.11p per share.
ECORODOVIAS INFRAESTRUTURA E LOGISTICA S.A.
(BRAZIL) (“ECORODOVIAS”)
Ecorodovias is a Brazilian toll road operator and is one of
the largest transportation companies in Latin America.
Its portfolio includes 10 highway concessions with a
total of 3,041km under concession and one port asset,
operating in 8 different states of Brazil, located in the
main trade corridors in the South and Southeast regions
of the country.
CAPITAL RETURN
The portfolio gained £114.3m on the capital account
during the year to 31 March 2021. There were net losses
on derivatives of £4.5m and gains on foreign exchange
of £2.2m. The resultant total income gain on the capital
account was £112.1m against prior year losses of £150.1m.
Management and administration fees were higher
at £7.4m (31 March 2020: £3.0m), as a result of a
performance fee for the year to 31 March 2021. Finance
costs decreased to £0.6m from £0.8m as a result of lower
interest costs. There was a charge for taxation of £1.6m (31
March 2020: £2.1m) which arose mainly from Indian capital
gains tax. The net effect of the above was a gain on capital
return of £102.4m (31 March 2020: a loss of £156.0m).
Charles Jillings
ICM Investment Management Limited
and ICM Limited
18 June 2021
URBANISATION
• Jobs in rural areas in EM are being displaced – for example, modern farming
equipment reduces agricultural employment – resulting in a lack of job opportunities
especially for the younger population.
• Rural populations are therefore migrating to cities, seeking a higher standard of living
and higher income opportunities in manufacturing and service industries.
• Rapid growth in urban populations requires significant investment in supporting
infrastructure, such as roads, metros, railway, electricity networks and sanitation.
RISE OF THE MIDDLE CLASS
• Increase in average incomes and the fall in levels of absolute poverty is resulting in a
rise in the proportion of EM populations classified as “middle class”.
• Rising income and social characteristics of emerging middle-class populations results
in higher overall consumption and greater propensity to purchase durable goods
such as fridges, washing machines and cars.
• Emerging middle class increasingly demand a higher degree of public services and
a greater focus on quality of life, including education, environmental conditions,
tourism, and accountability from governmental institutions.
ENVIRONMENTAL POLICY
• Climate change is now an accepted reality, with significant direct and indirect effects
on humankind and the global economy.
• Governments and intergovernmental organisations have initiatives in place targeting
reductions in the impact of man-made emissions on climate change.
• Major emissions contributors such as the power and transport sector are seeing a
radical shift away from the most polluting technologies.
• Renewables, battery storage, electric vehicles and waste treatment are key areas of
development and are increasingly commercial without subsidies.
COVID-19 DISRUPTION
• Disruptions to both production and demand causing increased volatility.
• Several leading indicators suggested heightened risk of recession prior to Covid-19.
• Significant risk to a number of countries of additional or extended shutdowns from
increasing cases or “subsequent waves”
18
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
19
MACRO TRENDS AFFECTING OUR PORTFOLIO (continued)
OUR INVESTMENT APPROACH
GEOPOLITICS AND GLOBALISATION
• Increased political tensions and populism is leading to a rising level of nationalism and
protectionism, unwinding several decades of global supply chain integration.
• Protectionism is resulting in higher tariffs and barriers to trade, negatively impacting
global GDP and increasing non-productive friction in economies.
• Trade flows and external deficits or surpluses are being rebalanced in many countries,
with commensurate effects on foreign exchange and local economies.
• The changing dynamics of trading bloc relationships is resulting in significant shifts in
transport and logistics value chains, and associated infrastructure.
GOVERNANCE AND TRANSPARENCY
DIGITALISATION
• EM typically have poorer institutional frameworks than developed democracies, with
transparency and rule of law being key areas of focus.
• Economies with robust political and institutional structures are inherently more
attractive for investment and constant monitoring for any changes to these is
necessary.
• Regulation of concessions – critical in the infrastructure sectors – is dependent on a
strong rule of law and adherence to contractual obligations.
• 4G mobile and fibre broadband rollout in EM present opportunities for businesses
and benefits to people driven by applications including e-commerce, e-government,
online education, telemedicine, communications, and media.
• Mobile money and payment systems are extending financial services with innovative
solutions to previously unbanked mass populations, especially in Africa.
• EM has the opportunity to provide digitally delivered services globally, leveraging their
young, well-educated workforces and lower operating costs.
• In the long-term, 5G, cloud storage and data processing will drive new applications to
optimise manufacturing, healthcare, logistics, security, and transport infrastructure in
“smart cities”.
ICM is a long-term investor and generally operates
focused portfolios with narrow investment remits. ICM
has several dedicated research teams who have deep
knowledge and understanding in their specific sectors,
which improves the ability to source and make compelling
investments. ICM has approximately USD 2.7bn of
assets directly under management and is responsible
indirectly for a further USD 22.1bn of assets in subsidiary
investments.
ICM looks to exploit market and pricing opportunities and
concentrates on absolute performance. The investments
are not market index driven and the investment portfolio
comprises a series of bottom-up decisions. ICM typically
does not participate in either an IPO or an auction unless
there is compelling value.
UEM seeks to leverage ICM’s investment abilities to
both identify and make investments across a range of
industries within the EM sector. New investments usually
offer an attractive valuation with strong risk/return
expectations at the time of investment.
When reviewing investment opportunities, as part of
the investment process ICM will look to understand the
material ESG factors. ICM incorporates ESG factors into
the investment process in three key ways.
• Understanding: in-depth analysis of the key issues
that face potential and current holdings, as well as
a deep understanding of the industry in which they
operate.
• Integration: incorporate the output of the
‘Understanding’ component detailed above into the
full company analysis to ensure a clear and complete
picture of the investment opportunity is obtained.
• Engagement: engage with investee companies on
the key issues on a regular basis, both virtually and on
location, where possible, to discuss and identify any
gaps in their ESG policy to further develop and improve
their ESG disclosure and implementation.
S
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A
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&
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P
P
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I
V
E
F
R
A
M
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W
O
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K
SUPERIOR, CONSISTENT PERFORMANCE
Long Term
Deep Value
Cash
Generative
Bottom Up
Approach
Active Investors
Investee
Relationships
Detailed
Company
Knowledge
Extensive
Industry
Experience
Sector Focused
DEEP SECTOR KNOWLEDGE
I
N
D
E
P
E
N
D
E
N
C
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&
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20
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
21
THIRTY LARGEST HOLDINGS
% OF TOTAL
INVESTMENTS
% OF TOTAL
INVESTMENTS
(India)
(Malaysia)
Limited (Brazil)
Rumo S.A. (Brazil)
International Container
Terminal Services, Inc.
(The Philippines)
Alupar Investimento S.A.
(Brazil)
China Everbright Greentech
Limited (China)
1
2 India Grid Trust (India)
3 Ocean Wilsons Holdings
4 Gujarat State Petronet Limited
5
6 My E.G. Services Berhad
7
8
9
10 Engie Energia Chile S.A. (Chile)
11 China Gas Holdings Limited
12 Power Grid Corporation of
13 KunLun Energy Company
14 Korean Internet Neutral
15 Citic Telecom International
16 Simpar S.A. (Brazil)
17 Bolsa de Valores de Colombia
Corporacion Financiera
Colombiana S.A. (Colombia)
Holdings Limited (Hong Kong)
Exchange Inc. (South Korea)
India Limited (India)
Limited (China)
(Colombia)
(China)
S.A. (Brazil)
(South Korea)
18 Naver Corporation Limited
19 Centrais Eletricas Brasileiras
20 Conpet SA (Romania)
21 Starpharma Holdings Limited
(Australia)
Societe Nationale des
Telecommunications du
Senegal (Senegal)
22
23 Santos Brasil Participacoes S.A.
24 Telelink Business Services
Group (Bulgaria)
(Brazil)
Fund 3 (China)
VinaCapital Vietnam
Opportunity Fund Ltd
(Vietnam)
25
26 CGN Capital Partners Infra
27 Ecorodovias Infraestrutura e
28 Torrent Power Limited (India)
29 FPT Corporation (Vietnam)
30 KT Corporation (South Korea)
Logistica S.A. (Brazil)
1.8%
1.8%
1.8%
1.7%
1.7%
1.7%
1.6%
1.6%
1.5%
1.5%
1.4%
1.4%
1.4%
% of
total
investments
65.9%
6.0%
3.4%
3.2%
3.2%
3.0%
2.7%
2.7%
2.5%
2.3%
2.3%
2.1%
2.0%
2.0%
2.0%
1.9%
1.9%
1.8%
Conpet SA (Romania)
THE VALUE OF THE TEN
LARGEST HOLDINGS
REPRESENTS
THE VALUE OF THE
TWENTY LARGEST
HOLDINGS REPRESENTS
THE VALUE OF THE
THIRTY LARGEST
HOLDINGS REPRESENTS
THE TOTAL NUMBER
OF COMPANIES
INCLUDED IN THE
PORTFOLIO IS
31.3%
(2020: 35.0%) OF
TOTAL INVESTMENTS
50.4%
(2020: 57.5%) OF
TOTAL INVESTMENTS
65.9%
(2020: 73.4%) OF
TOTAL INVESTMENTS
88
(2020: 81)
The value of convertible securities represents 0.3% (2020: 0.2%) of the portfolio. The value of fixed income securities represents 0.6% (2020: 0.0%) of the portfolio.
22
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
23
TEN LARGEST HOLDINGS REVIEW
1
Country
Sector
The Philippines
Ports
Fair Value £’000s
34,209
% of total
investments
6.0%
INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. (“ICT”) is a global
port management company in the business of acquiring, developing, managing
and operating container ports and terminals worldwide. ICT operates 32
terminals, in 19 countries over 6 continents handling over 10.0m containers.
Despite the challenging year to 31 December 2020 due to the impact of
Covid-19 affecting countries’ import and export volumes globally, ICT reported
flat volume growth of 0.2% with gross revenues up by 1.6%. Given the rigorous
cost reduction exercise executed across all operations during this difficult time,
EBITDA increased by 5.6% with EBITDA margin improving to 58.2%. Adjusted
net income also improved by 8.9%, with dividend per share ("DPS") down
28.4% as ICT management remained cautious given the current operating
environment. However ICT will review the situation as 2021 progresses.
ICT’s share price increased by 62.0% in the year to 31 March 2021, with UEM
increasing its position in ICT by 1.3%.
2
Country
India
Sector
Infrastructure
Investment Funds
Fair Value £’000s
19,364
% of total
investments
3.4%
INDIA GRID TRUST (“INDIGRID”) is an infrastructure investment trust listed on
the Bombay Stock Exchange which owns power transmission assets in India.
It has 30 lines totalling 6,740km and 9 substations, with the assets having an
average of 32 years' remaining contract life.
Over the past twelve months Indigrid has continued to grow rapidly,
announcing the acquisition of five assets with a combined value of INR 40bn.
This includes its first solar asset, with the trust diversifying into contracted
renewables assets complementary to its core transmission activities. In the
latter part of the year Indigrid announced an INR 12.8bn rights issue to fund
acquisitions. In the nine months to 31 December 2020, revenue and EBITDA
grew by 28.3% and 24.7% respectively. The trust is required to pay out at least
90% of cash flows in dividends and increased its quarterly DPS by 3.3% to
INR 3.10 in January 2021.
UEM’s position in Indigrid was unchanged in the period under review. During
the year Indigrid’s share price increased by 58.1% and the dividends paid
equated to a 14.0% yield on the price as at 31 March 2020.
3
Country
Sector
Brazil
Ports
Fair Value £’000s
18,026
% of total
investments
3.2%
4
Country
Sector
India
Gas
Fair Value £’000s
17,937
% of total
investments
3.2%
OCEAN WILSONS HOLDINGS LIMITED (“OCEAN WILSONS”) operates as a
maritime services company in Brazil via its subsidiary Wilson Sons and holds
a portfolio of investments via Ocean Wilsons Investment Limited (“OWIL”). It is
listed on the London and Bermuda Stock Exchanges.
2020 was a difficult year for Ocean Wilsons as Wilson Sons continues to operate
in a challenging economic and operational environment impacted by Covid-19
and the devaluation of the Brazilian Real. OWIL performed well as financial
markets recovered from the Covid-19 crash witnessed in March 2020. Wilson
Son’s container terminal operations over the year to 31 December 2020 saw
import volumes down resulting in handled volumes falling 0.9%, whilst the
towage business saw the number of harbour manoeuvres performed decline
by 0.4%. OWIL benefited from the market rebound, with the portfolio’s assets
under management increasing by 8.8% producing a net return for the year of
10.9%. Consolidated revenues were down 13.2%, with EBITDA down 11.4%. As at
31 March 2021, Ocean Wilsons’ discount to NAV narrowed to 34.9%.
Ocean Wilsons’ share price over the year to 31 March 2021 was up by 29.2%,
with UEM’s position increasing by 7.6%.
GUJARAT STATE PETRONET LIMITED (“GSPL”) is the main gas transmission
company in Gujarat State in India, controlled by Gujarat State Petronet, a
government entity. GSPL has 2,600km of gas pipelines connected to domestic
gas fields and LNG terminals. GSPL also has a 54% stake in Gujarat Gas, a listed
city gas distribution company.
Whilst India has introduced stricter environmental controls in industrialised
regions such as Gujarat, GSPL’s operations were impacted by the lockdowns
in response to the Covid-19 pandemic. Gas transmission volumes in the
twelve months to 31 March 2021 declined by 3.2%, and with tariffs lowered
in response to weaker LNG prices, revenues fell by 6.0%. However, GSPL
managed margins exceptionally well, enabling EBITDA to grow 12.3% in this
challenging environment. EPS was down 7.1% due to tax changes benefitting
the prior period results, whilst DPS was unchanged on the prior year.
In the twelve months to 31 March 2021 GSPL’s share price increased by 59.0%.
UEM increased its shareholding in GSPL by 8.6% during the period.
24
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
25
TEN LARGEST HOLDINGS REVIEW (continued)
5
Country
Sector
Brazil
Electricity
Fair Value £’000s
17,235
% of total
investments
3.0%
6
Country
Malaysia
Sector
Data Services
and Digital
Infrastructure
Fair Value £’000s
15,161
% of total
investments
2.7%
ALUPAR INVESTIMENTO S.A. (“ALUPAR”) is a holding company for energy
assets focused in the electricity transmission and generation sectors in Brazil,
Peru and Colombia. It has 29 transmission assets totalling 7,214km of electricity
lines in Brazil, of which 6,120km are operational, and 687MW of renewable
energy generation projects.
The past year has seen Alupar complete several of its new transmission lines,
notwithstanding the challenges that Covid-19 has brought to construction
projects. Alupar continued to show excellent capital discipline and execution
capability, with one major project being completed 16 months early and
at 16% under budget. Existing lines benefitted from inflation adjustments
of 1.7-5.6% during the year, whilst energy generation from its renewables
portfolio increased by 8.9%. In its financial year ended 31 December 2020
Alupar’s figures continued to be heavily influenced by construction under
IFRS accounting, with reported revenues increasing by 33.7% and EBITDA up
by 35.0%. Regulatory accounting, more reflective of underlying growth, saw
revenues and EBITDA growing by 6.9% and 16.5% respectively. DPS increased
by 53.3% as the peak capex cycle is now complete.
Alupar’s share price increased by 14.1% in the year to 31 March 2021 and UEM
decreased its shareholding in Alupar by 2.9% during the period.
MY E.G. SERVICES BERHAD (“MYEG”) is a provider of e-government services
in Malaysia, primarily serving applications in the areas of employment permits
and vehicle related licencing, tax and penalty processing. Increasingly, MYEG
is expanding its remit into new areas such as healthcare administration and
e-commerce. Additionally, it is increasing its presence outside of Malaysia,
especially in the Philippines and Indonesia.
MYEG has seen increased demand for many of its online services in the
past year. It has also introduced new services on behalf of the Malaysian
Government, expanding its vehicle road tax service to include motorcycles
and introducing new sensor equipped vehicles to electronically evaluate parts
of the practical driving test. MYEG is offering a hotel accommodation service
for Covid quarantine purposes, as well as administering testing and tracing
services.
In the twelve months to 31 December 2020, MYEG’s revenue increased by
10.9%, although the growth rate accelerated towards the end of the year.
EBITDA rose by 9.0% and reported net profit was also up by 9.0% compared to
the prior twelve-month period.
MYEG’s share price increased by 105.2% in the year to 31 March 2021 and
UEM increased its shareholding in MYEG by 32.1% during the period.
7
Country
Sector
Brazil
Road and Rail
Fair Value £’000s
15,097
% of total
investments
2.7%
8
Country
Sector
China
Renewables
Fair Value £’000s
14,082
% of total
investments
2.5%
RUMO S.A. (“RUMO”) offers logistics services for rail transportation, port
elevation and warehousing in Brazil. Rumo currently operates five concessions
of c.13,500km of lines with over 1,200 locomotives and 33,000 wagons, as well
as distribution centres and storage facilities.
2020 was a challenging year for Rumo, despite overall volumes transported
being up by 3.9% due to good growth in volumes of 7.0% within the Northern
operations. Lower take or pay agreements, higher competition resulting from
the paving of the toll road BR-163 and lower fuel prices led to a decrease
in yields, causing net revenues to decrease by 1.7% and adjusted EBITDA
decreasing by 8.4% with margin reducing to 50.7%. Management is more
optimistic about medium term outlook until 2025, providing volume and
EBITDA guidance of 11% and 16% CAGR for 2020 – 2025 respectively.
Rumo’s share price over the period was up by 3.3% and UEM increased its
shareholding in Rumo by 22.1%.
CHINA EVERBRIGHT GREENTECH LIMITED (“CE GREENTECH”) is an
environmental protection services provider based in China, focusing
on integrated biomass, hazardous waste treatment and environmental
remediation. CE Greentech is 70% owned by state owned enterprise China
Everbright Environment Group.
The past year has seen a challenging operating environment for CE Greentech,
with the impact of the Covid-19 lockdowns reducing industrial activity and
changes to the national subsidy policy capping utilisation hours affecting
prospective returns from its biomass plants. Only 18 of CE Greentech’s 50
biomass projects were included in the subsidy catalogues at the end of
December 2020, and collection of these receivables remains slow. In its
financial year to 31 December 2020, hazardous waste volumes processed
increased by 12.0% and electricity sales from biomass grew by 40.2%. With
construction activity levelling off, group revenues were up by 6.0% and
underlying EBITDA grew by 14.3%. EPS was up by 6.4% though DPS was
reduced by 6.3%. Post period-end CE Greentech successfully launched an
asset-backed note using the subsidy receivables as asset backing, alleviating
cash flow pressures.
CE Greentech’s share price decreased by 3.4% in the year to 31 March 2021
and UEM’s position in CE Greentech was unchanged over the same period.
26
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
27
TEN LARGEST HOLDINGS REVIEW (continued)
DATA SERVICES AND DIGITAL INFRASTRUCTURE
9
Country
Colombia
Sector
Infrastructure
Investment Funds
Fair Value £’000s
13,255
% of total
investments
2.3%
10
Country
Sector
Chile
Electricity
Fair Value £’000s
13,165
% of total
investments
2.3%
CORPORACION FINANCIERA COLOMBIANA S.A. (“CORFICOLOMBIANA”)
is a Colombian infrastructure company, and its operations are predominately
in midstream and downstream natural gas pipelines, toll roads and airports.
Corficolombiana is responsible for the transport of over half of the Colombian
natural gas supply through its 3,089km pipeline network.
In gas distribution, Corficolombiana has over 4.4m connections and a 38.0%
market share. It operates eight toll roads in Colombia, with over 668km under
concession and 138km under construction. In 2020, Corficolombiana was
included for the first time as a member of the Dow Jones Sustainability Mila
Index. In September 2020, Corficolombiana became a signatory of the PRI.
In its financial year to 31 December 2020, Corficolombiana’s EBITDA and net
income were up by 14.4% and 6.9% respectively, driven by the higher revenue
from gas transportation and regasification, and a recovery in the level of work
progress of the three 4G concessions under construction after Covid-19
restrictions.
Corficolombiana’s share price increased by 30.6% during the year to 31 March
2021 and UEM increased its shareholding in Corficolombiana by 23.0%.
ENGIE ENERGIA CHILE S.A. (“ECL”) is the main electricity generation company
in northern Chile and the fourth largest in the country by installed capacity. ECL
has 2.2GW installed capacity and 2,330km of transmission lines, and is now
60% owned by Engie which increased its stake in 4Q20.
With the Chilean government unveiling decarbonisation targets for the country,
2020 saw continued transformation of ECL as it accelerated its pivot away from
coal towards renewables. ECL has renegotiated its power purchase agreements
with mining clients to green sources of energy, whilst extending their lifespans.
It announced the early closure of its older coal facilities, and very recently the
re-purposing of its newer coal plants to biomass and gas. By 2025 ECL will
have no coal-fired plants, a significant shift from over 60% of the asset base as
at December 2020. In its financial year to 31 December 2020 electricity sales
volumes grew by 2.6%, but the weak price environment meant revenues fell by
7.1% and EBITDA declined by 14.5%. DPS was cut by 40.6% as ECL embarks on
a USD 1.0bn investment program in renewables.
ECL’s share price fell by 8.4% in the year to 31 March 2021, during which UEM
increased its shareholding in ECL by 3.1%.
The Data Services and Digital Infrastructure sector has
grown significantly in recent years as the global digital
sector has moved into the cloud, the proliferation of
applications and users has increased. The Covid-19
pandemic has accelerated this even more. This sector
offers above average growth over the medium term. UEM
has been an investor in this sector for some time and has
recently added a number of new investments. In order
to give a better understanding to these investments,
UEM has expanded the disclosure on this sector in the
portfolio. The businesses include owners and operators
of data centres, cloud services, telecom towers, fibre
networks, electronic payment platforms, e-government
and e-commerce platforms and systems integrators.
Additionally, many holdings in the satellites and
telecommunications sector have also embedded data
infrastructure assets within their businesses.
DATA SERVICES AND DIGITAL INFRASTRUCTURE INVESTMENT ACTIVITY (£’000s)
from 31 March 2020 to 31 March 2021
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Fair Value as at
31 March 2020
Total Investments
Total Realisations
Gains
Portfolio position
6
14
18
24
29
33
45
58
69
70
72
85
86
My E.G. Services Berhad
Korean Internet Neutral Exchange Inc.
Naver Corporation Limited
Telelink Business Services Group
FPT Corporation
WebCash Co. Limited
Kaspi.kz JSC
Conversant Pte Limited (unlisted)
Indus Towers Limited
Asseco South Eastern Europe S.A.
Samarkand Group plc
Alibaba Health Information Technology Limited
AP Ventures Limited (unlisted)
Location
Malaysia
South Korea
South Korea
Bulgaria
Vietnam
South Korea
Kazakhstan
Singapore
India
Poland
China
China
Australia
Fair Value as at
31 March 2021
Source: ICM
As at 31 March 2021
£'000s
15,160
11,294
10,247
8,929
7,865
7,437
4,728
3,372
2,187
2,019
1,696
880
828
28
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
29
INTERNATIONAL CONTAINER TERMINAL SERVICES, INC
International Container Terminal Services, Inc is a global port management
company which operates 32 terminals in 19 countries handling over 10.0m
containers. UEM first invested in 2006.
IN THE YEAR TO 31 DECEMBER 2020,
REVENUES INCREASED
1.6%
AND EBITDA 5.6%
INDIA GRID TRUST
India Grid Trust is an infrastructure investment trust
which owns power transmission assets in India. It has
30 lines totalling 6,740km and 9 substations. UEM first
invested in 2019.
IN THE NINE MONTHS TO 31 DECEMBER 2020,
REVENUES INCREASED
28.3%
AND EBITDA 24.7%
GUJARAT STATE PETRONET LIMITED
Gujarat State Petronet Limited is a gas infrastructure
and transmission company. It has 2,600km of gas
pipelines and has a 54% stake in Gujarat Gas. UEM first
invested in 2017.
IN THE YEAR TO 31 MARCH 2021,
EBITDA INCREASED
12.3%
30
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
31
STRATEGIC REPORT
PRINCIPAL ACTIVITY
UEM carries on business as an investment trust and its
principal activity is portfolio investment.
INVESTMENT OBJECTIVE
UEM’s objective is to provide long-term total return
through a flexible investment policy that permits it to
make investments predominantly in infrastructure,
utility and related sectors, mainly in emerging markets.
STRATEGY AND BUSINESS MODEL
UEM invests in accordance with the objective set
out above. The Board is collectively responsible
to shareholders for the long-term success of the
Company. Since the Company has no employees
it outsources its activities to third party service
providers, including the appointment of external
investment managers to deliver investment
performance. The Board oversees and monitors the
activities of the service providers with the Board
setting investment policy and risk guidelines, together
with investment limits.
ICMIM, an English incorporated company authorised
and regulated by the Financial Conduct Authority
(“FCA”) as an alternative investment fund manager
(“AIFM”) pursuant to the AIFM Regulations, is the
Company’s AIFM and joint portfolio manager alongside
ICM. The investment team responsible for the
management of the portfolio is headed by Charles
Jillings.
ICMIM and ICM, operating under guidelines
determined by the Board, have direct responsibility
for the decisions relating to the day to day running of
the Company and are accountable to the Board for
the investment, financial and operating performance
of the Company. Other service providers include
JPMorgan Chase Bank N.A. – London Branch which
provides administration and custodial services, JP
Morgan Europe Limited (“JPMEL”) which acts as the
Company’s Depositary under the AIFM Directive
and Computershare Investor Services which acts as
registrar. ICMIM has also been appointed Company
Secretary.
INVESTMENT POLICY
UEM’s investment policy is flexible and its investments
include (but are not limited to) water, sewerage,
waste, electricity, gas, telecommunications, ports,
airports, service companies, rail, roads, any business
with essential service or monopolistic characteristics
and any new infrastructure or utilities which may
arise mainly in emerging markets. The Company may
also invest in businesses which supply services to,
or otherwise support, the infrastructure, utility and
related sectors.
The Company focuses on the under-developed and
developing markets of Asia, Latin America, Emerging
Europe and Africa but has the flexibility to invest in
markets worldwide. The Company generally seeks
to invest in emerging market countries where the
Directors believe that there are attributes such
as political stability, economic development, an
acceptable legal framework and an encouraging
attitude to foreign investment.
The Company has the flexibility to invest in shares,
bonds, convertibles and other types of securities,
including non-investment grade bonds and to invest in
unlisted securities.
The Company may also use derivative instruments
such as American Depository Receipts, promissory
notes, foreign currency hedges, interest rate hedges,
contracts for difference, financial futures, call and
put options, warrants and similar instruments
for investment purposes and efficient portfolio
management, including protecting the Company’s
portfolio and Statement of Financial Position from
major corrections and reducing, transferring or
eliminating investment risks in its investments. These
investments will be long term in nature.
INVESTMENT RESTRICTIONS
The Board has prescribed the following limits on
the investment policy, all of which are at the time of
investment unless otherwise stated:
•
Investments in unquoted and untraded
investments in aggregate must not exceed 10.0%
of gross assets at the time of investment;
• No single investment may exceed 20.0% of gross
assets at the time of investment;
•
•
Investments other than in infrastructure, utility
and related companies must not exceed 20.0% of
gross assets at the time of investment;
Investments in a single country must not exceed
50.0% of gross assets at the time of investment
(and for these purposes investments will be
considered to have been made in the countries
where the relevant investee company reports
that it carries out its business operations, as
determined on a look-through basis);
• Not more than 10.0% in aggregate of the value
of the total assets of the Company at the time
the investment is made will be invested in other
closed-ended investment funds which are listed
on the Official List (except to the extent that those
investment funds have stated investment policies
to invest no more than 15.0% of their total assets
in other investment companies which are listed on
the Official List); and
•
Regardless of the investment policy of other
closed-ended investment funds listed on the
Official List and which are invested in by the
Company, the Company shall not invest in such
funds more than 15.0% in aggregate of the value
of the total assets of the Company at the time the
investment is made.
The above limits only apply at the time the investment
is made and the Company will not be required to
realise any assets or rebalance the portfolio where
any limit is exceeded as a result of any increases or
decreases in the valuation of the particular assets
which occurs after the investment is made, but no
further relevant assets may be acquired or loans made
by the Company until the relevant limit can again be
complied with.
BORROWING AND GEARING POLICY
UEM may use bank borrowings for short-term
liquidity purposes. In addition, the Board may gear
the Company by borrowing on a longer-term basis for
investment purposes.
32
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
33
STRATEGIC REPORT (continued)
The Board has set a current limit on gearing (being
total borrowings measured against gross assets) not
exceeding 25% at the time of drawdown. Borrowings
may be drawn down in Sterling, US Dollars or any
currency for which there are corresponding assets
within the portfolio (at the time of drawdown the value
drawn must not exceed the value of the relevant assets
in the portfolio).
On 15 March 2021, the Company announced that it had
extended its £50.0m multicurrency revolving facility
until 15 March 2024 and that the facility has been
novated from Scotiabank Europe PLC to The Bank of
Nova Scotia, London Branch. Further details on the
Company’s loan facility are set out in note 13 to the
accounts.
INVESTMENT APPROACH
UEM seeks to identify and invest in undervalued
investments predominantly in the infrastructure and
utility sectors, mainly in EM. The Investment Managers
aim to identify securities where underlying value and
growth prospects are not reflected in the market
price. This is often as a result of strong growth drivers,
but can include changes in regulation, technology,
market motivation, potential for financial engineering,
competition or shareholder indifference.
The Company seeks to minimise risk by investing
mainly in companies and sectors displaying the
characteristics of essential services or monopolies
such as utilities, transportation infrastructure,
communications or companies with a unique product
or market position. Most investee companies are asset
backed, have good cash flows and offer good dividend
yields. UEM generally seeks to invest in companies with
strong management who have the potential to grow
their business and who have an appreciation of, and
ability to manage, risk.
UEM believes it is generally appropriate to support
investee companies with their capital requirements
while at the same time maintaining an active
and constructive shareholder approach through
encouraging a review of capital structures and
business efficiencies. The Investment Managers
maintain regular contact with the investee companies
and UEM is often among the largest international
shareholders.
The Company aims to maximise value for shareholders
by holding a relatively concentrated portfolio of
securities and investing through instruments
appropriate to the particular situation. UEM is
prepared to hold investments in unlisted securities
when the attractiveness of the investment justifies
the risks and lower liquidity associated with unlisted
investments. ICMIM, as the Company’s AIFM,
controls stock-specific, sector and geographic risk by
continuously monitoring the exposures in the portfolio.
In depth continual analysis of the fundamentals
of investee companies allows ICMIM to assess the
financial risks associated with any particular stock. The
portfolio is typically made up of 60 to 90 stocks.
RESULTS AND DIVIDENDS
Details of the Company’s performance are set out in
the Investment Managers’ Report. The results for the
year ended 31 March 2021 are set out in the attached
accounts. The dividends in respect of the year, which
total 7.775p per share, have been declared by way of
four interim dividends.
DIVIDEND POLICY
The Board’s objective is to maintain or increase the
total annual dividend. Dividends are expected to be
paid quarterly each year in September, December,
March and June. In determining dividend payments
the Board will take account of factors such as
income forecasts, retained revenue reserves and
the Company’s dividend payment record. However,
in order to maintain its approval as an investment
trust, the Company will distribute at least 85.0% of
its distributable income earned in each financial year
by way of dividends. The Board also has the flexibility
to pay dividends from capital reserves and special
reserve.
KEY PERFORMANCE INDICATORS
Delivery of shareholder value is achieved through the
increase in capital value of the Company’s shares and
by its income return. The Board reviews performance
by reference to a number of Key Performance
Indicators (“KPIs”) that include the following:
• NAV total return relative to the MSCI
•
Share price
• Discount to NAV
•
Revenue earnings
• Ongoing charges figure
While some elements of performance against KPIs are
beyond management control, they provide measures
of the Company’s absolute and relative performance
and are therefore monitored by the Board on a regular
basis. These KPIs fall within the definition of Alternative
Performance Measures under guidance issued by
the European Securities and Markets Authority and
additional information explaining how these are
calculated is set out on pages 96 and 97.
Year ended 31 March
NAV total return (%)
MSCI Emerging Markets Total Return Index
(GBP adjusted) (%)
Share price (pence)
Discount to NAV (%)
Percentage of issued shares bought back
during the year (based on opening share
capital) (%)
2021
2020
30.2
(24.9)
42.3
(13.7)
197.50
161.50
(13.6)
(11.2)
2.9
0.8
Revenue earnings per share (pence)
8.13
7.88
Ongoing charges figure (%)
1.1
1.1
A graph showing the NAV total return performance
compared to the MSCI, can be found on page 9. The
ten year record on page 98 shows historic data for the
Company and its predecessor, UEM Bermuda.
Discount to NAV: The Board monitors the premium/
discount at which the Company’s shares trade in
relation to its NAV. During the year the Company’s
shares traded at a discount relative to NAV in a range
of 9.2% to 19.8% and an average discount of 14.1%.
The Board and Investment Managers closely monitor
both movements in the Company’s share price and
significant dealings in the shares.
The Board believes that the best way of addressing
the discount over the long term is to continue to
generate good performance and to create natural
demand for the Company’s shares in the secondary
market through increasing awareness of the Company,
its philosophy and management style. The Board
has maintained expenditure on marketing the
Company. The Board continues to seek authority from
shareholders to buyback and issue shares which can
assist in the management of the discount and/or any
premium at which the shares trade to their NAV. A total
of 6,589,096 shares were bought back and cancelled
during the year, representing 2.9% of the Company’s
opening issued share capital.
Earnings and dividends per share: As referred to
in “Dividend Policy” above, the Board’s objective is to
maintain or increase the total annual dividend. The
Board and the Investment Managers attach great
importance to maintaining dividends per share since
dividends form a key component of the total return to
shareholders.
The Board declared first, second and third quarterly
dividends, each of 1.925p per share and a fourth
quarterly dividend of 2.00p per share in respect of
the year ended 31 March 2021. The fourth quarterly
dividend will be paid on 23 June 2021 to shareholders
on the register on 4 June 2021. The total dividend for
the year was 7.775p per share (2020: 7.575p per share).
Ongoing charges: These are calculated in accordance
with the industry measure of costs as a percentage
of NAV. The expenses of the Company are reviewed
at every Board meeting, with the aim of managing
costs incurred and their impact on performance. The
ongoing charges figure for the year ended 31 March
2021 (excluding performance fee) was 1.1% (2020: 1.1%)
and, with effect from 1 April 2021, it increased to 1.4%
following changes to the management fee as referred
to on page 97. This ratio is sensitive to the size of the
Company, as well as the level of costs.
PRINCIPAL RISKS AND RISK MITIGATION
During the year ended 31 March 2021, 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.
The Board considers carefully the Company’s principal
and emerging risks and uncertainties. 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.
Emerging risks are considered at each Audit & Risk
Committee meeting. As required by the Association
of Investment Companies (“AIC”) Code of Corporate
34
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
35
STRATEGIC REPORT (continued)
Governance, the Board has undertaken a robust
assessment of the principal risks facing the Company.
The Covid-19 pandemic, which emerged towards the
end of the Company’s previous financial year, gave
rise to significant challenges for businesses worldwide
and the Board took these into account as part of its
assessment of risks to the Company.
KEY RISK FACTORS
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.
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. These guidelines
include sector and market exposure limits.
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.
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 investment process employed by the Investment Managers
combines assessment of economic and market conditions in the
relevant countries with stock selection. Fundamental analysis
forms the basis of the Company’s stock selection process, with
an emphasis on sound balance sheets, good cash flows, the
ability to pay and sustain dividends, good asset bases and market
conditions. ESG factors are also considered when selecting and
retaining investments and political risks associated with investing
in EM are assessed. The Investment Managers try to reduce risk
by ensuring that the Company’s portfolio is always appropriately
diversified. 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.
The Company’s portfolio is exposed to equity market risk and
foreign currency risk. Adverse market conditions may result from
factors such as economic conditions, political change, climate,
natural disasters and health epidemics. At each Board meeting
the Board reviews the diversification 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
is difficult and expensive to hedge EM currencies.
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.
MARKET RISK:
The Company’s assets consist mainly
of listed securities and its principal
risks are therefore market related and
adverse market conditions could lead
to a fall in NAV.
KEY STAFF RISK:
Loss by the Investment Managers
of key staff could affect investment
returns.
The Board monitors the price of the Company’s shares in relation
to their NAV and the premium/discount at which they trade.
The Board generally buys back shares for cancellation in normal
market conditions if they are trading at a discount in excess
of 10% and the Investment Managers agree that it is a good
investment decision.
The Company’s main service providers are listed on page 95.
The Audit & Risk Committee monitors the performance and
controls (including business continuity procedures) of the service
providers at regular intervals.
All listed and most unlisted investments are held in custody for
the Company by JPMorgan Chase Bank N.A. – London Branch
with a small number of unlisted investments held in custody by
Waverton Investment Management Limited (“Waverton”). 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 cybercrime is high, as it is with most organisations,
but the Board regularly seeks assurances from the Investment
Managers and other service providers on the preventative steps
that they are taking to reduce this risk.
GEARING RISK:
REGULATORY
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.
Gearing levels may change from time to time in accordance
with the Board and Investment Managers’ assessment of risk
and reward. As at 31 March 2021, UEM had net gearing on net
assets of 10.6%. ICMIM monitors compliance with the banking
covenants when each drawdown is made and at the end of
each month. The Board reviews compliance with the banking
covenants at each Board meeting.
Failure to comply with applicable
legal and regulatory requirements
such as the tax rules for investment
companies, the FCA’s Listing Rules and
the Companies Act 2006 could lead to
suspension of the Company’s Stock
Exchange listing, 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.
VIABILITY STATEMENT
The Board makes an assessment of the longer-term
prospects of the Company beyond the timeframe
envisaged under the going concern basis of
accounting, having regard to the Company’s current
position and the principal risks it faces. The Company
is a long-term investment vehicle and the Board
believes that it is appropriate to assess the Company’s
viability over a long-term horizon. For the purposes of
assessing the Company’s prospects in accordance with
provision 31 of the UK Corporate Governance Code,
the Board considers that assessing the Company’s
prospects over a period of five years is appropriate
given the nature of the Company and appropriately
reflects the long-term strategy of the Company.
In its assessment of the viability of the Company,
the Board has considered each of the Company’s
principal risks and uncertainties detailed above, as
well as the impact of a significant fall in the EM equity
markets on the value of the Company’s investment
36
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
37
STRATEGIC REPORT (continued)
portfolio. All of the key operations required by the
Company are outsourced to third party providers
and it is considered that alternative providers could
be engaged at relatively short notice if necessary.
The Directors have also considered the Company’s
income and expenditure projections and the fact
that the Company’s operating expenses comprise a
very small percentage of net assets while the majority
of the Company’s investments comprise readily
realisable securities which can be sold to meet funding
requirements if necessary. The Board continues to
consider the uncertainty surrounding the potential
duration of the Covid-19 pandemic, its impact on the
global economy and the prospects for the Company’s
portfolio holdings and has concluded that it is unlikely
to affect the going concern status or viability of the
Company.
As part of this assessment the Board considered a
number of stress tests, including short term reverse
stress testing, and scenarios which considered the
impact of severe stock market and currency volatility
on shareholders’ funds over a five-year period. Initially,
the Company’s projections were adjusted to reflect a
material reduction in the value of its investments in
line with that experienced during the emergence of
the Covid-19 pandemic in the first quarter of 2020.
This was then flexed to include two further scenarios;
first a material weakening in Sterling, the Company’s
reporting currency, and then a scenario which
provided for a further fall in the market values of its
investments. The results demonstrated the impact
on the Company’s NAV, its expenses, and its ability
to meet its liabilities over that period. As a result of
this analysis, the Board has concluded that there is a
reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they
fall due over the next five years.
The Investment Managers and UEM’s brokers engage
with shareholders on an ongoing basis and the Board,
having taken into account recent discussions with
many of UEM’s major shareholders, the results of
previous continuation votes and the ongoing demand
for UEM’s shares, considers it to be likely that the
resolution proposing the continuation of the Company
at this year’s AGM will be passed.
SECTION 172 STATEMENT
Under Section 172 of the Companies Act 2006, the
Directors have a duty to promote the success of
the Company for the benefit of its members as a
whole. This includes having regard (amongst other
matters) to fostering relationships with the Company’s
stakeholders and maintaining a reputation for high
standards of business conduct.
As an externally managed investment trust, the
Company has no employees, customers, operations or
premises. Therefore, the Company’s key stakeholders
(other than its shareholders) are considered to be
its service providers. The need to promote business
relationships with the service providers and maintain
a reputation for high standards of business conduct
is central to the Directors’ decision-making. The
Directors believe that fostering constructive and
collaborative relationships with the Company’s service
providers will assist in their promotion of the success
of the Company for the benefit of all shareholders
and their performance is monitored by the Board
and its committees. The principal service provider is
the Investment Managers, who are responsible for
managing the Company’s assets in order to achieve its
stated investment objective, and the Board maintains
a good working relationship with them. Whilst strong
long term investment performance is essential, the
Board recognises that to provide an investment
vehicle that is sustainable over the long term, both it
and the Investment Managers must have regard to
ethical and environmental issues that impact society.
Accordingly, ESG considerations are an important part
of the Investment Managers’ investment process as
explained more fully below.
The Board seeks to engage with its Investment
Managers and other service providers in a
collaborative and collegiate manner, whilst also
ensuring that appropriate and regular challenge is
brought and evaluation conducted. The aim of this
approach is to enhance service levels and strengthen
relationships with a view to ensuring the interests
of the Company’s shareholders are best served by
keeping cost levels proportionate and competitive,
and by maintaining the highest standards of business
conduct.
The Directors aim to act fairly as between the
Company’s shareholders and the approach to
shareholder relations is summarised in the Corporate
Governance Statement on pages 50 to 54. As part of
this, the AGM provides a key forum for the Board and
Investment Managers to present to shareholders on
the performance of UEM and its future prospects.
It also allows shareholders the opportunity to meet
with the Board and Investment Managers and to
raise questions and concerns. The Chairman is
available to meet with shareholders as appropriate
and the Investment Managers meet regularly with
shareholders and their respective representatives,
reporting back on views to the Board. Shareholders
may also communicate with the Company at any time
by writing to the Board at the Company’s registered
office or contacting the Company’s broker. These
communication opportunities help inform the Board
when considering how best to promote the success of
the Company for the benefit of all shareholders over
the long term.
In addition to ensuring that the Company’s stated
investment objective was being pursued, the Directors
confirm that they have considered Section 172 factors
when making decisions, including in relation to:
• the renewal of the Company’s £50m committed
multicurrency revolving facility which now matures in
March 2024;
• the changes to the fees payable by the Company to
ICMIM and ICM, with effect from 1 April 2021, which
included the discontinuation of the performance fee
and amendment of the management fee to a tiered
structure; and
• the increase in the fourth quarterly dividend to
2.00p per share, an increase of 3.9% on the quarterly
dividend of 1.925p per share paid in relation to each
of the first three quarters of the year.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
POLICY
The Board believes that it is in the shareholders’
interests to consider ESG factors when selecting
and retaining investments and has asked the
Investment Managers to take these into account
when investing. The Investment Mangers employ a
disciplined investment process that seeks to both
uncover opportunities and evaluate potential risks,
while striving for the best possible return outcomes.
When reviewing any investment opportunity, the
Investment Managers look to understand the relevant
ESG issues in conjunction with the financial, macro,
and political drivers as part of its investment process.
Relevant and material ESG opportunities and risks
can meaningfully affect investment performance,
therefore the consideration of ESG issues forms part of
the integrated research analysis, decision-making and
ongoing monitoring.
The concept of responsible investing has always been a
core component of the investment process, therefore
taking into consideration ESG risks and opportunities
is not a new phenomenon for the Investment
Managers. The Investment Managers look to determine
conclusions based on objective, ascertainable facts
and do not consider sentiments or interest groups.
Each investment is considered on its own merits, and
intention and actions are important considerations.
ESG factors help to enhance the Investment Managers’
understanding of a company, as these factors affect
the company’s business model and its long-term ability
to generate sustainable returns, and consequently
they are able to fully question a company’s investment
potential from a number of perspectives. ESG
considerations provide a way to identify and review the
long-term drivers of an investment that are not found
within the financial accounts.
Investments are regularly reviewed and the Investment
Managers meet to discuss key issues, ranging from
high level macro developments to detailed company
specific points, to ensure a high awareness of how the
current portfolio and potential new investments are
performing.
Where possible the Investment Managers aim to
visit investment opportunities to access an in-
person opportunity to ask management teams what
they perceive to be the key operational, social, and
environmental issues, as well as a chance to see assets
operating first-hand. ESG disclosures are not always
easy to understand given they may not be openly
reported or consistently disclosed. The Investment
Managers believe that engaging with companies
directly is the best first step. Where necessary, the
Investment Managers will question and challenge a
portfolio company’s management team directly to
ensure a full understanding of any challenges and
opportunities.
38
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
39
STRATEGIC REPORT (continued)
INVESTMENT MANAGERS AND TEAM
Given the Investment Managers are long term
investors, engagement with management teams is and
will remain paramount to the investment approach.
On behalf of UEM as shareholder, the Investment
Managers work actively with investee companies
to incorporate stronger ESG principles and vote in
a considered manner to drive positive change. In
particular, the Investment Managers recognise that
governance factors are fundamental to an investment.
ICM has recently become a signatory to the United
Nations-supported Principles for Responsible
Investment, which is an international network of
investors working together to implement its six
aspirational principles; and is a member of the Asian
Corporate Governance Association which is focused on
the implementation of effective corporate governance
in Asia. The Investment Managers believe that good
stewardship is essential and the principles these
various bodies espouse aligns with its philosophy to
protect and increase the value of its investments.
MODERN SLAVERY ACT
Due to the nature of the Company’s business, being
a company that does not offer goods and services to
customers, the Board considers that it is not within the
scope of the Modern Slavery Act 2015 because it has
no turnover. The Company is therefore not required
to make a slavery and human trafficking statement.
In any event, the Board considers the Company’s
supply chains, dealing predominantly with professional
advisers and service providers in the financial services
industry, to be low risk in relation to this matter.
GENDER DIVERSITY
The Board consists of four male directors and one
female director. The Company has no employees
and therefore there is nothing further to report in
respect of gender representation within the Company.
The Company’s policy on diversity is detailed in the
Corporate Governance Statement on page 53.
GREENHOUSE GAS EMISSIONS AND STREAMLINED
ENERGY AND CARBON REPORTING ("SECR")
All the Company’s activities are outsourced to third
parties. The Company therefore has no greenhouse
gas emissions to report from its operations. In
addition, the Company considers itself to be a low
energy user under the SECR regulations and therefore
is not required to disclose energy and carbon
information.
BRIBERY ACT
The Company has a zero tolerance policy towards
bribery and is committed to carrying out business
fairly, honestly and openly. The Investment Managers
also adopt a zero tolerance approach and have policies
and procedures in place to prevent bribery.
CRIMINAL FINANCES ACT
The Company has a commitment to zero tolerance
towards the criminal facilitation of tax evasion.
SOCIAL, HUMAN RIGHTS AND COMMUNITY
MATTERS
As an externally managed investment trust,
the Company does not have any employees
or maintain any premises. It therefore has no
material, direct impact on the environment or
any particular community and the Company itself
has no environmental, human rights, social or
community policies. The Board however notes the
Investment Managers’ policy statement in respect
of Environmental, Social and Governance issues, as
outlined on page 39.
OUTLOOK
The Board’s main focus is on the achievement of the
Company’s objective of delivering a long-term total
return and the future of the Company is dependent
upon the success of its investment strategy.
The outlook for the Company is discussed in the
Chairman’s Statement and the main trends and factors
likely to affect the future development, performance
and position of the Company’s business can be found
in the Investment Managers’ Report.
This Strategic Report was approved by the Board of
Directors on 18 June 2021.
By order of the Board
ICM Investment Management Limited
Company Secretary
18 June 2021
ICMIM, a company authorised and regulated by
the FCA, was the Company’s AIFM during the year
ended 31 March 2021 with sole responsibility for
risk management, subject to the overall policies,
supervision, review and control of the Board and is
joint portfolio manager of the Company, alongside ICM.
The Investment Managers are focused on finding
investments at valuations that do not reflect their true
long-term value. Their investment approach is to have
a deep understanding of the business fundamentals
of each investment and its environment versus its
intrinsic value. The Investment Managers are long
term investors and see markets as a place to exchange
assets.
ICM MANAGES OVER
USD 2.7bn
IN FUNDS DIRECTLY AND IS RESPONSIBLE INDIRECTLY FOR A FURTHER USD 22.1BN OF ASSETS IN SUBSIDIARY
INVESTMENTS. ICM HAS OVER 70 STAFF BASED IN OFFICES IN BERMUDA, CAPE TOWN, DUBLIN, LONDON, SEOUL,
SINGAPORE, SYDNEY, VANCOUVER AND WELLINGTON.
The investment teams are led by Charles Jillings and Duncan Saville.
CHARLES JILLINGS
Charles Jillings, a director of ICM and chief executive of ICMIM, is responsible for
the day-to-day running of UEM and the investment portfolio. He qualified as a
chartered accountant and has extensive experience in corporate finance and asset
management. He is an experienced director having previously been a non-executive
director in the financial services, water and waste sectors. He is currently a director
of Somers Limited, Waverton Investment Management Limited and Allectus Capital
Limited.
DUNCAN SAVILLE
Duncan Saville, a director of ICM, is a chartered accountant with experience in
corporate finance and asset management. He was formerly a non-executive director
of Utilico Investment Trust plc and is an experienced non-executive director having
previously been a director in multiple companies in the financial services, utility,
mining and technology sectors. He is currently a non-executive director of Resimac
Group Limited and West Hamilton Holdings Limited.
40
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
41
INVESTMENT MANAGERS AND TEAM (continued)
DIRECTORS
SENIOR CORE TEAM ASSISTING ON UEM INCLUDE:
Jacqueline Broers, who has been involved in the running of UEM since September 2010.
Mrs Broers is focused on the transport sector worldwide with particular emphasis on emerging
markets. Prior to joining the investment team, Mrs Broers worked in the corporate finance team at
Lehman Brothers and Nomura. Mrs Broers is a qualified chartered accountant.
Jonathan Groocock, who has been involved in the running of UEM since February 2011.
Mr Groocock is focused on the utilities sector worldwide with particular emphasis on emerging
markets. Prior to joining the investment team Mr Groocock had nine years of experience in sell side
equity research, covering telecoms stocks at ABN AMRO, Oriel Securities and Investec. Mr Groocock
qualified as a CFA charterholder in 2005.
Mark Lebbell, who has been involved in the running of UEM since its inception and before that
was involved with Utilico Investment Trust plc and The Special Utilities Investment Trust PLC since
2000. Mr Lebbell is focused on the communications sector worldwide with particular emphasis on
emerging markets. Mr Lebbell is an associate member of the Institute of Engineering and Technology.
COMPANY SECRETARY – ICM INVESTMENT MANAGEMENT LIMITED
Alastair Moreton, a chartered accountant, joined the team in 2017 to provide company secretarial
services to UEM and UIL Limited. Mr Moreton has over thirty years’ experience in corporate finance
with Samuel Montagu, HSBC, Arbuthnot Securities and, prior to joining ICM, Stockdale Securities,
where he was responsible for the company’s closed end fund corporate clients.
The Investment Managers’ approach is to
have a deep understanding of the business
fundamentals of each investment and its
environment versus its intrinsic value.
JOHN RENNOCKS (CHAIRMAN)*
John Rennocks (Chairman) has broad experience in conventional and renewable electricity
generation and in biotechnology, support services and manufacturing. He previously served
as deputy chairman and senior independent director of Inmarsat plc and as finance director
of a number of public limited companies (including Smith and Nephew plc, PowerGen plc,
British Steel plc and Corus Group plc) and as a non-executive chairman or director of several
companies, including Foreign & Colonial Investment Trust plc and JP Morgan Overseas
Investment Trust plc. He is currently chairman of Bluefield Solar Income Fund Limited. He is a
Fellow of the Institute of Chartered Accountants of England and Wales.
GARTH MILNE (DEPUTY CHAIRMAN)*
Garth Milne (Deputy Chairman) has been involved in the investment company sector for over
forty years both as an adviser and as a non-executive director. He is chairman of
UEM’s Remuneration Committee and, as referred to in the Chairman's statement, he has
indicated his intention to retire from the Board following the conclusion of UEM's AGM in
September 2021.
SUSAN HANSEN
Susan Hansen is a chartered accountant and MBA graduate and has worked in financial services
since 1980. She has previous experience in chartered accountancy and investment banking and
is a director of Resimac Group Limited, a non-bank lending company listed on the Australian
Securities Exchange, the principal of a financial training organisation in New Zealand and a
director of Cognitive Education Limited, a registered charity in New Zealand. She is a member
of the Institute of Chartered Accountants of Australia and New Zealand and a graduate of the
Australian Institute of Company Directors.
ANTHONY MUH*
Anthony Muh is an investment professional with over thirty years’ experience in the investment
management industry. He is a partner and executive director of H.R.L. Morrison & Co, a global
private market infrastructure investment management company. He is also chairman of JIDA
Capital Partners Limited, a China focused sustainable infrastructure investment manager. He
is past chairman and a Fellow of the Hong Kong Securities Institute and a member of the Asia
Advisory Board at Euromoney Institutional Investor Plc. Anthony is the current chairman and
council member of the Asia Corporate Governance Association.
ERIC STOBART*
Eric Stobart (Audit & Risk Committee Chairman) has spent most of his career in merchant and
commercial banking, latterly as a senior executive at Lloyds Banking Group. He was for twelve
years chair of the investment committee of the £25.0bn Lloyds Bank Pension Scheme as well
as having been chair of the audit and risk committee of a substantial investment management
group. Currently he chairs or is a member of the trustee board of four pension schemes with
combined assets of some £3.6bn. Mr Stobart is a chartered accountant with an MBA from
London Business School.
All Directors were appointed to the Board of the Company on 7 February 2018, other than Mr Stobart, who was
appointed on 1 October 2019.
None of the Directors have shared directorships with other Directors.
*Independent director and member of the Audit & Risk Committee, Remuneration Committee and Management Engagement Committee
42
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
43
DIRECTORS’ REPORT
The Directors present the Annual Report and Accounts
of the Company for the year ended 31 March 2021.
information, is available on the Company’s website at
www.uemtrust.co.uk.
STATUS OF THE COMPANY
UEM was incorporated on 7 December 2017. On 3 April
2018, as a result of the proposals to redomicile UEM
Bermuda to the United Kingdom, the shareholders
of UEM Bermuda exchanged all their shares in UEM
Bermuda for shares in the Company on a one for one
basis and UEM Bermuda became a wholly owned
subsidiary of the Company. All the assets of UEM
Bermuda were transferred to the Company and UEM
Bermuda was dissolved on 7 March 2019. UEM’s shares
are listed on the premium segment of the Official List of
the Financial Conduct Authority and traded on the main
market of the London Stock Exchange.
UEM carries on business as an investment trust. It
has been approved by HM Revenue & Customs as an
investment trust in accordance with sections 1158 and
1159 of the Corporation Tax Act 2010, subject to the
Company continuing to meet the eligibility conditions.
The Directors are of the opinion that the Company has
conducted its affairs in a manner which will satisfy the
conditions for continued approval.
UEM is domiciled in the UK as an investment company
within the meaning of section 833 of the Companies Act
2006. It is not a close company and has no employees.
UEM is a member of the AIC in the UK.
THE ALTERNATIVE INVESTMENT FUND MANAGERS
DIRECTIVE (“AIFMD”)
The Company is an Alternative Investment Fund
(“AIF”) falling within the scope of, and subject to,
the requirements of the AIFMD. The Company has
appointed ICMIM, an English incorporated company
which is regulated by the FCA, as its AIFM, with sole
responsibility for risk management and ICM and ICMIM
jointly to provide portfolio management services.
The AIFMD requires certain information to be made
available to investors in AIFs before they invest and
requires that material changes to this information be
disclosed in the annual report of each AIF. An Investor
Disclosure Document, which sets out information
on the Company’s investment strategy and policies,
leverage, risk, liquidity, administration, management,
fees, conflicts of interest and other shareholder
UEM also appointed JPMEL as its depositary service
provider. JPMEL’s responsibilities include general
oversight over the issue and cancellation of the
Company’s shares, the calculation of the NAV, cash
monitoring and asset verification and record keeping.
JPMEL receives an ad-valorem fee of 2.5bps of the
Company’s NAV for its services, subject to a minimum
fee of £25,000 per annum, payable monthly in arrears.
FUND MANAGEMENT ARRANGEMENTS
For the year ended 31 March 2021, the aggregate fees
payable by the Company to ICMIM and ICM under the
Investment Management Agreement (“IMA”) were 0.65%
per annum of NAV together with a performance related
fee. On 25 March 2021, UEM announced that, with
effect from 1 April 2021, the performance fee would
be discontinued and the management fee amended
to a tiered structure (1.0% of NAV up to £500m; 0.9%
of NAV above £500m up to £750m; 0.85% of NAV
above £750m up to £1,000m; and 0.75% of NAV above
£1,000m). The management fee is payable quarterly in
arrears, with such fee apportioned between ICMIM and
ICM as agreed by them. The IMA may be terminated on
not less than six months’ notice in writing and further
details of the management and performance fees are
disclosed in Note 4 to the accounts.
Under the IMA, ICMIM has been appointed as Company
Secretary.
The Board continually reviews the policies and
performance of the Investment Managers. The
Board’s philosophy and the Investment Managers’
approach are that the portfolio should consist of shares
thought attractive irrespective of their inclusion or
weighting in any index. The portfolio’s composition and
performance are likely, therefore, to be very different,
for example, from those of the MSCI. Over the short
term, there may be periods of sharp underperformance
or outperformance compared with the index. Over
the long term, the Board expects the combination of
the Company’s and Investment Managers’ approach
to result in a significant degree of outperformance
compared with the index. The Board continues to
believe that the appointment of ICMIM and ICM on the
terms agreed is in the interests of shareholders as a
whole.
ADMINISTRATION
The provision of accounting and administration services
has been outsourced to JPMorgan Chase Bank N.A. –
London Branch (the “Administrator”). The Administrator
provides financial and general administrative services to
the Company for an annual fee based on the Company’s
month end NAV (5 bps on the first £100m NAV, 3bps on
the next £150m NAV, 2bps on the next £250m NAV and
1.5bps on the next £500m NAV). The Administrator and
any of its delegates are also entitled to reimbursement
of certain expenses incurred by it in connection with
its duties. In addition, ICMIM has appointed Waverton
to provide certain support services (including middle
office, market dealing and information technology
support services). Waverton is entitled to receive an
annual fee of 3bps of the Company’s NAV and the
Company reimburses ICMIM for its costs and expenses
incurred in relation to this agreement.
Annually, the Management Engagement Committee
considers the ongoing administrative requirements of
the Company and assesses the services provided.
SAFE CUSTODY OF ASSETS
During the year ended 31 March 2021, all listed and
most unlisted investments were held in custody for
the Company by JPMorgan Chase Bank N.A. – London
Branch (the “Custodian”). Operational matters with the
Custodian are carried out on the Company’s behalf by
ICMIM and the Administrator in accordance with the
IMA and the Administration Agreement. The Custodian
is paid a variable fee dependent on the number of
trades transacted and the location of the securities
held. A small number of unlisted investments are also
held in custody by Waverton.
FINANCIAL INSTRUMENTS
The Company’s financial instruments comprise its
investment portfolio, cash balances, bank borrowings
and debtors and creditors which arise directly from
its operations such as sales and purchases awaiting
settlement, and accrued income. The financial risk
management objectives and policies arising from its
financial instruments and the exposure of the Company
to risk are disclosed in note 26 to the accounts.
DIVIDENDS
Dividends of 1.925p per share were paid on 18
September 2020, 18 December 2020 and 24 March
2021. A dividend of 2.00p per share was declared on
21 May 2021 and will be paid on 23 June 2021.
ISA AND NMPI
UEM remains a qualifying investment under the
Individual Savings Account (ISA) regulations and it
is the intention of the Board to continue to satisfy
these regulations. Furthermore, the Company
currently conducts its affairs so that its shares can
be recommended by IFAs to ordinary retail investors
in accordance with the FCA’s rules in relation to non-
mainstream pooled investments and intends to
continue to do so for the foreseeable future.
GOING CONCERN
The Board has reviewed the going concern basis
of accounting for the Company. The Company’s
assets consist substantially of equity shares in listed
companies and in most circumstances are realisable
within a short timescale. The Board has considered the
impact of Covid-19, the outcome of the continuation
vote that will be held at the AGM in September 2021
and performed a detailed assessment of the Company’s
operational risk and resources including its ability to
meet its liabilities as they fall due, by conducting stress
tests and scenarios which considered the impact of
severe stock market and currency volatility. This is set
out in note 25 to the accounts. In light of this work
and there being no material uncertainties related to
events or conditions that may cast significant doubt
about the ability of the Company to continue as a going
concern, the Board has a reasonable expectation that
the Company has adequate resources to continue in
operational existence for a period of at least the next
twelve months from the date of approval of these
financial statements. Accordingly, the Board considers
it appropriate to continue to adopt the going concern
basis in preparing the accounts.
DIRECTORS
UEM has a Board of five non-executive directors who
oversee and monitor the activities of the Investment
Managers and other service providers and ensure
that the Company’s investment policy is adhered to.
The Board is supported by an Audit & Risk Committee,
a Management Engagement Committee and a
Remuneration Committee, which deal with specific
aspects of the Company’s affairs. The Corporate
44
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
45
DIRECTORS’ REPORT (continued)
Governance Statement, which is set out on pages 50 to
54, forms part of this Directors’ Report.
The Directors have a range of business, financial and
asset management skills, as well as experience relevant
to the direction and control of the Company. Brief
biographical details of the members of the Board are
shown on page 43. All the Directors are independent
other than Ms Hansen who is also a director of
Resimac Group Limited, a company associated with the
Investment Managers.
All appointments to the Board and re-elections of
Directors are carried out in accordance with the
Companies Act 2006 and the Company’s Articles of
Association. The Company’s Articles of Association
provide that all the Directors retire each year. The
Board may also appoint Directors but any Director so
appointed must stand for election by the shareholders
at the next Annual General Meeting.
The nature of an investment company and the
relationship between the Board and the Investment
Managers are such that it is considered unnecessary to
identify a senior independent director. Mr Garth Milne,
the Deputy Chairman and the other Directors are
available to shareholders if they have concerns which
have not been resolved through the normal channels of
contact with the Chairman or the Investment Managers,
or for which such channels are inappropriate.
DIRECTORS’ INDEMNITY AND INSURANCE
As at the date of this report, a deed of indemnity has
been entered into by the Company and each of the
Directors under which the Company has agreed to
indemnify each Director, to the extent permitted by
law, in respect of certain liabilities incurred as a result of
carrying out his/her role as a Director of the Company.
Each Director is indemnified against the costs of
defending any criminal or civil proceedings or any claim
by the Company or a regulator as they are incurred
provided that where the defence is unsuccessful the
Director must repay those defence costs to the Company.
The indemnities are qualifying third party indemnity
provisions for the purposes of the Companies Act 2006.
UEM also maintains Directors’ and Officers’ liability
insurance which provides appropriate cover for any legal
action brought against the Directors.
DIRECTORS’ INTERESTS
The Directors’ interests in the share capital of the
Company are disclosed in the Directors’ Remuneration
Report on page 57.
No Director was a party to, or had any interests in,
any contract or arrangement with the Company at any
time during the year or at the year end. There are no
agreements between the Company and the Directors
concerning compensation for loss of office.
A Director must avoid a situation where he/she has,
or can have, a direct or indirect interest that conflicts,
or possibly may conflict, with the Company’s interests.
The Directors have declared any potential conflicts of
interest to the Company, which are reviewed regularly
by the Board. The Directors have undertaken to advise
the Company Secretary and/or Chairman as soon as
they become aware of any potential conflicts of interest.
SHARE CAPITAL
As at 31 March 2021 the issued share capital of the
Company and the total voting rights were 221,273,374
shares. As at the date of this report, the share capital of
the Company and total voting rights were 220,602,116
shares. There are no restrictions on the transfer of
securities in the Company and there are no special
rights attached to any of the shares.
SHARE ISSUES AND REPURCHASES
UEM has the authority to purchase shares in the
market to be held in treasury or for cancellation and to
issue new shares for cash. During the year ended 31
March 2021 the Company purchased 6,589,096 shares
for cancellation. The current authority to repurchase
shares was granted to Directors on 22 September 2020
and expires at the conclusion of the next AGM. The
Directors are proposing that their authority to buy back
up to 14.99% of the Company’s shares for cancellation
or to be held in treasury and to issue new shares or sell
shares from treasury be renewed at the forthcoming
AGM.
TENDER FACILITY
At the Directors’ discretion, the Company can operate
a tender facility subject to certain limitations. The
tender facility is not expected to be made available
in circumstances where the annual compound
growth rate of the Company’s gross assets exceeds
10% or where the Company’s net assets total return
performance exceeds 10% in the relevant period. The
maximum number of shares which may be tendered
pursuant to the tender facility in any financial year
would be limited to 12.5% of the shares in issue at the
commencement of the relevant financial year, with any
excess tender requests being scaled back pro-rata.
The tender facility has not been operated to date by
the Company or previously by its predecessor, UEM
Bermuda.
CONTINUATION OF THE COMPANY
UEM has been established with an unlimited life
although the Company’s Articles of Association provide
for a continuation vote to be put to shareholders at
the AGM to be held in 2021 and at every fifth annual
general meeting thereafter.
At the forthcoming AGM, resolution 10 seeks
shareholder approval, by way of an ordinary resolution,
that the Company should continue as presently
constituted. If this resolution is passed, shareholders
will have further opportunities to vote on the
continuation of the Company in 2026 and every fifth
annual general meeting thereafter. If the resolution is
not passed, the Directors will be required to formulate
proposals to be put to shareholders relating to the
future of the Company having regard, inter alia, to
prevailing market conditions and applicable regulations
and legislation.
SUBSTANTIAL SHARE INTERESTS
As at the date of this report, the Company had received
notification of the following holdings of voting rights:
UIL Limited
Number of
shares held
35,843,500
City of London Investment
Management Company Limited
22,230,393
Lazard Asset Management LLC
18,737,825
Rathbone Investment
Management Limited
Investec Wealth & Investment
Limited
10,728,364
10,293,426
% held
16.2
10.1
8.5
4.9
4.7
THE COMMON REPORTING STANDARD
Tax legislation under The OECD (Organisation for
Economic Co-operation and Development) Common
Reporting Standard for Automatic Exchange of
Financial Account Information (the “Common Reporting
Standard”) was introduced on 1 January 2016. The
legislation requires an investment trust company to
provide personal information to HMRC about investors
who purchase shares. The Company is required to
provide information annually on the tax residences of
a number of non-UK based certificated shareholders.
HMRC may in turn exchange the information with the
tax authorities of another country or countries in which
the shareholder may be tax resident, where those
countries (or tax authorities in those countries) have
entered into agreements to exchange financial account
information.
All new shareholders entered onto the share register,
excluding those whose shares are held in CREST, will be
sent a certification form for the purposes of collecting
this information.
AUDIT INFORMATION AND AUDITOR
As required by section 418 of the Companies Act 2006,
the Directors who held office at the date of approval of
this Directors’ Report confirm that, so far as they are
aware, there is no relevant audit information of which
the Company’s auditor is unaware; and each Director
has taken all the steps that they ought to have taken as
a Director to make themselves aware of any relevant
audit information and to establish that the Company’s
auditor is aware of that information.
LISTING RULE 9.8.4R
There are no instances where the Company is required
to make disclosures in respect of Listing Rule 9.8.4R
(information to be included in annual report and
accounts).
ARTICLES OF ASSOCIATION
Any amendments to the Company’s Articles of
Association must be made by special resolution.
ANNUAL GENERAL MEETING
The following information to be discussed at the
forthcoming AGM is important and requires your
immediate attention. If you are in any doubt about the
action you should take, you should seek advice from
46
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Report and Accounts for the year to 31 March 2021
47
DIRECTORS’ REPORT (continued)
your stockbroker, bank manager, solicitor, accountant or
other financial adviser authorised under the Financial
Services and Markets Act 2000 (as amended).
If you have sold or transferred all of your shares in the
Company, you should pass this document, together
with any other accompanying documents including the
form of proxy, at once to the purchaser or transferee,
or to the stockbroker, bank or other agent through
whom the sale or transfer was effected, for onward
transmission to the purchaser or transferee.
The business of the AGM consists of 13 resolutions.
Resolutions 1 to 11 (inclusive) will be proposed as
ordinary resolutions and resolutions 12 and 13 will be
proposed as special resolutions.
Ordinary Resolution 1 – Annual Report and
Financial Statements
The biographies of the Directors are set out on page 43
and are incorporated into this report by reference.
This resolution seeks shareholder approval to receive
the report of the Directors and financial statements for
the year ended 31 March 2021 and the Auditor’s report
thereon.
Ordinary Resolution 2 – Approval of the Directors’
Remuneration Report
This resolution is an advisory vote on the Directors’
Remuneration Report.
Ordinary Resolution 3 – Approval of the Company’s
dividend policy
This resolution seeks shareholder approval of the
Company’s dividend policy to pay four interim
dividends per year. Under the Company’s Articles of
Association, the Board is authorised to approve the
payment of interim dividends without the need for
the prior approval of the Company’s shareholders.
Having regard to corporate governance best practice
relating to the payment of interim dividends without
the approval of a final dividend by a company’s
shareholders, the Board has decided to seek express
approval from shareholders of its dividend policy to pay
four interim dividends per year. If this resolution is not
passed, it is the intention of the Board to refrain from
authorising any further interim dividends until such
time as the Company’s dividend policy is approved by
its shareholders.
Resolution 4 relates to the re-election of Mr John
Rennocks who was appointed on 7 February 2018.
Mr Rennocks’ leadership of the Board as Chairman
draws on his long and varied experience on the boards
of many public limited companies and investment
companies. His focus is on long-term strategic issues,
which are key topics of Board discussion.
Resolution 5 relates to the re-election of Ms Susan
Hansen who was appointed on 7 February 2018.
Ms Hansen’s previous experience in chartered
accountancy and investment banking makes her well
placed to monitor the Company’s performance and to
constructively challenge the Investment Managers.
Resolution 6 relates to the re-election of Mr Anthony
Muh who was appointed on 7 February 2018.
Mr Muh’s experience of over 30 years in the investment
management industry means that he brings in-depth
knowledge, expertise and experience in investment
matters (and particularly experience relating to the Asia
region) to his role on the Board.
Resolution 7 relates to the re-election of Mr Eric
Stobart who was appointed on 1 October 2019.
Mr Stobart has extensive accounting knowledge and
many years of experience of audit and risk committees
in the financial services sector. He therefore brings
this strong background and skills to his role as the
Company’s Audit & Risk Committee Chairman.
Ordinary Resolutions 4 to 7 (inclusive) – Re-election
of the Directors.
Ordinary Resolutions 8 and 9 – Appointment of the
external Auditor and the Auditor’s Remuneration
These resolutions relate to the appointment and
remuneration of the Company’s auditor. The Company,
through its Audit & Risk Committee, has considered
the independence and objectivity of the external
auditor and is satisfied that the proposed Auditor is
independent. Further information in relation to the
assessment of the existing Auditor’s independence can
be found in the report of the Audit & Risk Committee.
Resolutions relating to the following items of special
business will be proposed at the forthcoming AGM:
Ordinary Resolution 10 – Continuation of the
Company
The Company’s Articles of Association provide for a
continuation vote to be put to shareholders at the AGM
to be held in 2021 and at every fifth annual general
meeting thereafter and this resolution seeks approval
that the Company continues as presently constituted.
If this resolution is passed, shareholders will have
further opportunities to vote on the continuation of
the Company in 2026 and every fifth annual general
meeting thereafter. If the resolution is not passed,
the Directors will be required to formulate proposals
to be put to shareholders relating to the future of the
Company having regard, inter alia, to prevailing market
conditions and applicable regulations and legislation.
Ordinary Resolution 11 – Authority to allot shares
The Directors may only allot shares for cash if
authorised to do so by shareholders in a general
meeting. This resolution seeks authority for the
Directors to allot shares for cash up to an aggregate
nominal amount of £110,300 per annum, which is
equivalent to 11,030,000 ordinary shares of 1p each
and represents 5% of the Company’s issued ordinary
share capital (excluding treasury shares) as at the date
of the Notice of the AGM. This resolution will expire at
the conclusion of the next AGM of the Company to be
held in 2022 unless renewed prior to that date at an
earlier general meeting.
Special Resolution 12 – Authority to disapply pre-
emption rights
By law, Directors require specific authority from
shareholders before allotting new shares or selling
shares out of treasury for cash without first offering
them to existing shareholders in proportion to their
holdings. This resolution empowers the Directors
to allot new shares for cash or to sell shares held by
the Company in treasury, otherwise than to existing
shareholders on a pro rata basis, up to an aggregate
nominal amount of £110,300 which is equivalent to
11,030,000 ordinary shares of 1p each and represents
5% of the Company’s issued ordinary share capital
(excluding treasury shares) as at the date of the Notice
of the AGM. Any such sale of shares would only be
made at prices greater than NAV and would therefore
increase the assets underlying each share. This
resolution will expire at the conclusion of the next AGM
of the Company to be held in 2022 unless renewed
prior to that date at an earlier general meeting.
Special Resolution 13 – Authority to buy back shares
This resolution seeks to renew the authority granted
to Directors enabling the Company to purchase its own
shares. The Directors will only consider repurchasing
shares in the market if they believe it to be in
shareholders’ interests and as a means of correcting
any imbalance between supply and demand for the
Company’s shares.
The Directors are seeking authority to purchase up
to 33,068,000 ordinary shares (being 14.99% of the
issued ordinary share capital excluding treasury
shares as at the date of the Notice of the AGM). This
authority, unless renewed at an earlier general meeting,
will expire at the conclusion of the next AGM of the
Company to be held in 2022.
Any shares purchased pursuant to this resolution
shall be cancelled immediately upon completion of
the purchase or held, sold, transferred or otherwise
dealt with as treasury shares in accordance with the
provisions of the Companies Act 2006.
RECOMMENDATION
The Board considers that each of the resolutions to
be proposed at the Annual General Meeting is likely to
promote the success of the Company for the benefit
of its members as a whole and is in the best interests
of the Company and its shareholders as a whole. The
Directors unanimously recommend that shareholders
vote in favour of all the resolutions as they intend to do
in respect of their own beneficial holdings.
By order of the Board
ICM Investment Management Limited, Secretary
18 June 2021
48
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Report and Accounts for the year to 31 March 2021
49
CORPORATE GOVERNANCE STATEMENT
THE COMPANY‘S CORPORATE GOVERNANCE
FRAMEWORK
Corporate Governance is the process by which the
board of directors of a company protects shareholders’
interests and by which it seeks to enhance shareholder
value. Shareholders hold the directors responsible
for the stewardship of a company’s affairs, delegating
authority and responsibility to the directors to
manage the company on their behalf and holding
them accountable for its performance. Responsibility
for good governance lies with the Board. The Board
considers the practice of good governance to be an
integral part of the way it manages the Company and
is committed to maintaining high standards of financial
reporting, transparency and business integrity.
The governance framework of the Company reflects
the fact that, as an investment company, it has no full-
time employees and outsources its activities to third
party service providers.
THE BOARD
Five non-executive directors (NEDs)
CHAIRMAN:
John Rennocks
KEY OBJECTIVES:
• to provide leadership within
a framework of prudent
and effective controls which
enable risk to be assessed and
managed; and
• to constructively challenge
and scrutinise performance
of all outsourced activities.
• to set strategy, values
and standards;
AUDIT & RISK
COMMITTEE
MANAGEMENT
ENGAGEMENT
COMMITTEE
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
All independent NEDs
All independent NEDs
CHAIRMAN:
Eric Stobart
CHAIRMAN:
John Rennocks
The Board as a whole
performs this function
All independent NEDs
CHAIRMAN:
Garth Milne
KEY OBJECTIVE:
KEY OBJECTIVES:
KEY OBJECTIVES:
KEY OBJECTIVE:
• to oversee the
• to review the
• to regularly review
• to set the
financial reporting and
control environment.
performance of
the Investment
Managers and the
Administrator; and
• to review the
performance of other
service providers.
the Board’s structure
and composition; and
• to consider any new
appointments.
remuneration policy
for the Directors of
the Company.
THE AIC CODE OF CORPORATE GOVERNANCE
As a UK-listed investment trust the Board’s principal
governance reporting obligation is in relation to the UK
Corporate Governance Code (the “UK Code”) issued
by the Financial Reporting Council (“FRC”) in July 2018.
However, it is recognised that investment companies
have special circumstances which have an impact
on their governance arrangements. An investment
company typically has no employees and the roles of
portfolio management, administration, accounting
and company secretarial tend to be outsourced to a
third party. The AIC has therefore drawn up its own
set of guidelines known as the AIC Code of Corporate
Governance (the “AIC Code”) issued in February 2019,
which recognises the nature of investment companies
by focusing on matters such as board independence
and the review of management and other third party
contracts. The FRC has endorsed the AIC Code and
confirmed that companies which report against the
AIC Code will be meeting their obligations in relation to
the UK Code and paragraph LR9.8.6 of the FCA’s Listing
Rules. The Board believes that reporting against the
principles and recommendations of the AIC Code will
provide better information to shareholders.
The UK Code is available from the FRC’s website at
www.frc.org.uk. The AIC Code is available from the
Association of Investment Companies’ website at
www.theaic.co.uk.
COMPLIANCE WITH THE AIC CODE
During the year ended 31 March 2021, the Company
complied with the recommendations of the AIC Code
and the relevant provisions of the UK Code, except
those relating to:
• the role of the chief executive
• executive directors’ remuneration
• the need for an internal audit function
• nomination of a senior independent director
• membership of the Audit & Risk Committee by the
Chairman of the Board
For the reasons set out in the AIC Code and as
explained in the UK Code, the Board considers these
provisions are not relevant to the position of the
Company, being an externally managed investment
company. The Board is composed entirely of non-
executive directors and therefore the Board does
not believe it is necessary to nominate a senior
independent director. In addition, as explained in the
Audit & Risk Committee Report, the Chairman of the
Board is also a member of the Audit & Risk Committee,
as permitted by the AIC Code.
Information on how the Company has applied the
principles of the AIC Code and the UK Code is set out
below.
THE BOARD
The Board is responsible to shareholders for the
overall stewardship of the Company. A formal schedule
of matters reserved for the decision of the Board has
been adopted. Investment policy and strategy are
determined by the Board and it is also responsible for
the gearing policy, dividend policy, public documents,
such as the Annual Report and Financial Statements,
the buy-back policy and corporate governance
matters. In order to enable the Directors to discharge
their responsibilities effectively the Board has full and
timely access to relevant information.
The Board meets at least quarterly, with additional
Board and Committee meetings being held on an ad
hoc basis to consider particular issues as they arise.
Key representatives of the Investment Managers
attend each meeting and between these meetings
there is regular contact with the Investment Managers.
Board meetings are sometimes held in countries
where the Company holds investments and the Board
will meet with investee companies and local experts.
The Board has direct access to the advice and
services of the company secretary, who is an
employee of ICMIM. The company secretary, with
advice from the Company’s lawyers and financial
advisers, is responsible for ensuring that the Board
and Committee procedures are followed and that
applicable rules and regulations are complied with.
The company secretary is also responsible to the
Board for ensuring timely delivery of information
and reports and that the statutory obligations of
the Company are met. The company secretary is
responsible for advising the Board, through the
Chairman, on all governance matters.
50
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
51
CORPORATE GOVERNANCE STATEMENT (continued)
There is an agreed procedure for Directors, in the furtherance of their duties, to take legal advice at the Company’s
expense, having first consulted with the Chairman.
During the year, none of the Directors took on any significant new commitments or appointments. All of the
Directors consider that they have sufficient time to discharge their duties.
There were four Board meetings, three Audit & Risk Committee meetings, one Management Engagement
Committee meeting and one Remuneration Committee meeting held during the year ended 31 March 2021 and the
attendance by the Directors was as follows:
Number of meetings held during the year
John Rennocks
Susan Hansen
Garth Milne
Anthony Muh
Eric Stobart
Board
Audit & Risk
Committee
Management
Engagement
Committee
Remuneration
Committee
4
4
4
4
4
4
3
3
n/a
3
3
3
1
1
n/a
1
1
1
1
1
n/a
1
1
1
Apart from the meetings detailed above, there were a
number of meetings held by committees of the Board
to approve the declaration of quarterly dividends and
other ad hoc items.
AUDIT & RISK COMMITTEE
The Audit & Risk Committee comprises all the
independent Directors of the Company and is chaired
by Mr Stobart. Further details of the Audit & Risk
Committee are provided in its report starting on
page 58.
MANAGEMENT ENGAGEMENT COMMITTEE
The Management Engagement Committee, which
is chaired by Mr Rennocks, comprises all the
independent Directors of the Company and meets at
least once a year.
The Investment Managers’ performance is considered
by the Board at every meeting, with a formal evaluation
by the Management Engagement Committee annually.
The Board received detailed reports and views from
the Investment Managers on investment policy, asset
allocation, gearing and risk at each Board meeting in
the year ended 31 March 2021, with ad hoc market/
company updates if there were significant movements
in the intervening period.
services provided by the Investment Managers and
Administrator and the performance of other third
party service providers. In this regard the Committee
assessed the services provided by the Investment
Managers, the Administrator and the other service
providers to be good.
REMUNERATION COMMITTEE
The Remuneration Committee, which is chaired by
Mr Milne, comprises all the independent Directors
of the Company. Further details are provided in the
Directors’ Remuneration Report on page 55.
INTERNAL CONTROLS
The Directors acknowledge that they are responsible
for ensuring that the Company maintains a sound
system of internal financial and non-financial controls
(“internal controls”) to safeguard shareholders’
investments and the Company’s assets.
The Company’s system of internal control is designed
to manage rather than eliminate risk of failure to
achieve the Company’s investment objective and/
or adhere to the Company’s investment policy and/
or investment limits. The system can therefore only
provide reasonable and not absolute assurance
against material misstatement or loss.
The Management Engagement Committee also
considers the effectiveness of the administration
The Investment Managers, Administrator and
Custodian maintain their own systems of internal
area, whether they are economic, political, regulatory
or other issues. The Board’s policy on diversity,
including gender, is to take this into account during
the recruitment process. Any new appointment is
considered on the basis of the skills and experience
that the individual would bring to the Board, regardless
of gender or other forms of diversity, and therefore
no targets have been set against which to report. The
Board currently consists of four men and one woman.
As referred to in the Chairman’s statement, Mr Milne
has indicated his intention to retire from the Board at
this year’s AGM. The Board has begun the process to
search for a suitable replacement.
The Board is of the view that length of service does
not necessarily compromise the independence or
contribution of directors of an investment company,
where continuity and experience can add significantly
to the strength of the Board. This is supported by the
views on independence expressed in the AIC Code.
No limit on the overall length of service of any of the
Company’s Directors has been imposed. All Directors
are subject to annual re-election.
The Board reviews succession planning at least
annually. Appointments of new Directors will be made
on a formalised basis with the Chairman agreeing, in
conjunction with his colleagues, a job specification
and other relevant selection criteria and the methods
of recruitment (where appropriate using an external
recruitment agency), selection and appointment. The
potential Director would meet with Board members
prior to formal appointment. An induction process
will be undertaken, with new appointees to the
Board being given a full briefing on the workings and
processes of the Company and the management of the
Company by the Chairman, the Investment Managers,
the company secretary and other appropriate
persons. All appointments are subject to subsequent
confirmation by shareholders in general meeting.
BOARD, COMMITTEE AND DIRECTORS’
PERFORMANCE APPRAISAL
The Directors recognise the importance of the AIC
Code’s recommendations in respect of evaluating
the performance of the Board, the Committees
and individual Directors. This encompasses both
quantitative and qualitative measures of performance
including:
controls and the Board and the Audit & Risk
Committee receive regular reports from these service
providers.
The Board meets regularly, at least four times a year.
It reviews financial reports and performance against
relevant stock market criteria and the Company’s peer
group, amongst other things. The effectiveness of
the Company’s system of internal controls, including
financial, operational and compliance and risk
management systems is reviewed at least bi-annually
against risk parameters approved by the Board. The
Board confirms that the necessary actions are taken to
remedy any significant failings or weaknesses identified
from its review. No significant failings or weaknesses
occurred during the year ended 31 March 2021 or
subsequently up to the date of this report.
BOARD DIVERSITY, APPOINTMENT, RE-ELECTION
AND TENURE
The Board as a whole undertakes the responsibilities
which would otherwise be assumed by a nomination
committee. It considers the size and structure of the
Board, including the balance of expertise and skills
brought by individual Directors. It has regard to board
diversity, progressive refreshing and succession
planning and such matters are discussed by the
Board as a whole at least annually. The Board also
seeks to have Directors in different jurisdictions who
understand the key influences on businesses in their
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Report and Accounts for the year to 31 March 2021
53
CORPORATE GOVERNANCE STATEMENT (continued)
DIRECTORS’ REMUNERATION REPORT
• attendance at meetings;
• the independence of individual Directors;
• the ability of Directors to make an effective
contribution to the Board and Committees through
the range and diversity of skills and experience each
Director brings to their role; and
• the Board’s ability to challenge the Investment
Managers’ recommendations, suggest areas of
debate and set the future strategy of the Company.
The Board opted to conduct performance evaluation
through questionnaires and discussion between
the Directors, the Chairman and the chairmen
of the Committees. This process is conducted by
the Chairman reviewing individually with each of
the Directors their performance, contribution and
commitment to the Company and the possible
further development of skills. In addition, the Deputy
Chairman reviews the performance of the Chairman
with the other Directors, taking into account the views
of the Investment Managers. The relevant points
arising from these meetings are then reported to,
and discussed by, the Board as a whole. This process
has been carried out in respect of the period under
review and will be conducted on an annual basis. The
result of this period’s performance evaluation process
was that the Board, the Committees of the Board and
the Directors individually were all assessed to have
performed satisfactorily. No follow-up actions were
required.
The prime medium by which the Company
communicates with shareholders is through the
half-yearly and annual financial reports, which aim to
provide shareholders with a full understanding of the
Company’s activities and its results. This information
is supplemented by the calculation and publication,
via a Regulatory Information Service, of the NAV of
the Company’s shares and by monthly fact sheets
produced by the Investment Managers. Shareholders
can visit the Company’s website: www.uemtrust.
co.uk in order to access copies of half-yearly and
annual financial reports, factsheets and regulatory
announcements.
There is a regular dialogue between the Investment
Managers and institutional shareholders, including
private client wealth managers, to discuss aspects of
investment performance, governance and strategy
and to listen to shareholder views in order to help
develop an understanding of their issues and
concerns. General presentations to institutional
shareholders and analysts follow the publication of the
annual results. All meetings between the Investment
Managers and institutional and other shareholders
are reported to the Board. The Chairman and other
Directors are available to discuss any concerns with
shareholders if required and shareholders may
communicate with the Company at any time by writing
to the Board at the Company’s registered office or
contacting the Company’s broker.
It is not felt appropriate currently to employ the
services of, or to incur the additional expense of, an
external third party to conduct the evaluation process
as an appropriate process is in place; this will, however,
be kept under review.
By order of the Board
ICM Investment Management Limited
Company Secretary
18 June 2021
RELATIONS WITH SHAREHOLDERS
UEM welcomes the views of shareholders and
places great importance on communication with
shareholders. All shareholders have the opportunity
to attend and vote at the Company’s AGM. The Notice
of AGM sets out the business of the meeting and
each resolution is explained in the Directors’ Report.
In addition, the Investment Managers will review
the Company’s portfolio and performance at the
AGM, where the Directors and representatives of
the Investment Managers will be available to answer
shareholders’ questions.
STATEMENT OF THE
CHAIRMAN
As Chairman of the
Remuneration Committee,
I am pleased to present the
Directors’ Remuneration
Report to shareholders.
The report comprises a
remuneration policy, which is
subject to a triennial binding
shareholder vote, or sooner
if an alteration to the policy
is proposed, and a report on
remuneration, which is subject to an annual advisory
vote. An ordinary resolution for the approval of this
report will therefore be put to shareholders at the
Company’s forthcoming AGM.
GARTH MILNE
Chairman of the
Remuneration Committee
The law requires the Company’s auditor to audit
certain parts of the disclosures provided. Where
disclosures have been audited, they are indicated as
such. The auditor’s opinion is included in their report
starting on page 62.
The Remuneration Committee is responsible for
reviewing and making recommendations to the Board
in respect of the fees of Directors. In line with the
AIC Code, it reviews the ongoing appropriateness
of the Company’s remuneration policy and the
individual remuneration of Directors by reference to
the activities of the Company and in comparison with
other companies of a similar structure and size. Any
views expressed by shareholders on the fees being
paid to Directors will also be taken into consideration.
Following recommendations from the Remuneration
Committee, the Board reviews the fees payable to
the Chairman and Directors annually. There were no
changes to the remuneration policy during the year.
All the Directors invest the full amount of their fees
(net of tax) in the shares of the Company. Following
no increase to the fees for the year ended 31 March
2021 over the previous year, the review in respect of
the year ending 31 March 2022 has resulted in the
increases being applied to the annual fees as detailed
in the table opposite.
Year ending 31 March
Chairman
Directors
Chairman of the Audit & Risk Committee
*Actual
2022
£’000s
2021*
£’000s
47.6
35.2
44.5
46.0
34.0
43.0
DIRECTORS’ REMUNERATION POLICY
The Board, on the recommendation of its Remuneration
Committee, considers the level of the Directors fees
at least annually. The Board determines the level of
Directors’ fees within the limit currently set by the
Company’s Articles, which limit the aggregate fees
payable to the Board of Directors to a total of £250,000
per annum.
The Board’s policy is to set Directors’ remuneration at
a level commensurate with the skills and experience
necessary for the effective stewardship of the Company
and the expected contribution of the Board as a whole
in continuing to achieve the investment objective. Time
committed to the Company’s business and the specific
responsibilities of the Chairman, Directors and the
chairman of the Audit & Risk Committee are taken into
account. The policy aims to be fair and reasonable in
relation to comparable investment companies.
The fees are fixed and the monetary amount (net of
tax) is used by the Directors to purchase shares in the
Company quarterly in arrears. Directors are entitled to
be reimbursed for any reasonable expenses properly
incurred by them in connection with the performance
of their duties and attendance at Board and general
meetings and Committee meetings. Directors are not
eligible for bonuses, pension benefits, share options,
long-term incentive schemes or other benefits.
Directors are provided with a letter of appointment
when they join the Board. There is no provision for
compensation upon early termination of appointment.
The letters of appointment are available on request at
the Company’s registered office during business hours.
VOTING AT ANNUAL GENERAL MEETING
A resolution to approve the Remuneration Report was
put to shareholders at the AGM of the Company held
on 22 September 2020. Of the votes cast, 99.9% were
in favour and 0.1% were against; this resolution will
be put to shareholders again this year. In accordance
54
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
55
DIRECTORS’ REMUNERATION REPORT (continued)
with the Companies Act 2006, the Company is required to seek shareholder approval for its remuneration policy on
a triennial basis and a binding resolution was last put to shareholders at the AGM held on 17 September 2019. Of the
votes cast, 99.8% were in favour and 0.2% were against. A resolution to approve the remuneration policy will be put to
shareholders at the AGM to be held in 2022.
DIRECTORS’ ANNUAL REPORT ON REMUNERATION (AUDITED)
A single figure for the total remuneration of each Director who served during the year ended 31 March 2021 is set out
in the table below.
2020/21
Shares
purchased (1)
2020/21
Entitlement
£ (2)
2020/21
Taxable
benefits
£ (3)
2020/21
Total
£
2019/20
Shares
purchased (1)
2019/20
Entitlement
£ (2)
46,000
34,000
34,000
–
34,000
43,000
–
–
850
–
850
–
46,000
34,000
34,850
–
34,850
43,000
11,941
12,643
15,803
7,941
15,803
6,821
46,000
34,000
34,000
19,947
34,000
21,500
Director
John Rennocks
(Chairman)
Garth Milne
Susan Hansen
Garry Madeiros (4)
Anthony Muh
Eric Stobart (5)
Totals
13,526
14,288
17,860
–
17,860
12,305
75,839
2019/20
Taxable
benefits
£ (3)
–
–
875
875
875
2019/20
Total
£
46,000
34,000
34,875
20,822
34,875
21,500
191,000
1,700
192,700
70,952
189,447
2,625
192,072
(1) All the shares were purchased in the market, using the net fee entitlement after applicable tax deductions of each director, as set out in note 1(j)
to the accounts
(2) The Directors’ entitlement to fees is calculated in arrears
(3) Taxable benefits comprise amounts reimbursed for expenses incurred in carrying out business for the Company
(4) Retired 17 September 2019
(5) Appointed 1 October 2019
(6) There were no payments to third parties included in the fees referred to in the table above. There are no further fees to disclose as the Company
has no employees, chief executive or executive directors.
DIRECTORS’ BENEFICIAL SHARE INTERESTS (AUDITED)
COMPANY PERFORMANCE
Including the performance of UEM Bermuda, the
graph below compares, for the ten years ended 31
March 2021, the share price total return (assuming all
dividends are reinvested and adjusted for the exercise
of warrants and subscription shares) to shareholders
with the MSCI.
The Directors’ shareholdings (all beneficial) are set out
below:
As at 31 March
John Rennocks (1)
Garth Milne
Susan Hansen
Anthony Muh
Eric Stobart (2)
18 June
2021
31 March
2021
31 March
2020
183,390
817,942
127,569
219,870
33,500
183,390
814,559
123,340
215,641
30,250
145,752
798,900
103,742
188,801
15,000
(1) Including 2,645 shares held by Mrs Rennocks
(2) Including 4,750 shares held by Mrs Stobart
TOTAL RETURN COMPARATIVE PERFORMANCE
from 31 March 2011 to 31 March 2021
250
200
150
100
50
0
RELATIVE IMPORTANCE OF SPEND ON PAY
The following table compares the remuneration
paid to the Directors with aggregate distributions to
shareholders relating to the year ended 31 March
2021 and the prior year. Although this disclosure is
a statutory requirement, the Directors consider that
comparison of Directors’ remuneration with annual
dividends and share buybacks does not provide a
meaningful measure relative to the Company’s overall
performance as an investment company with an
objective of providing shareholders with long-term
total return.
2021
£’000s
2020
£’000s
Change
£’000s
Year ended 31 March
Aggregate Directors’
emoluments
Aggregate dividends
17,270
17,230
191
189
3
40
ANNUAL PERCENTAGE CHANGE IN DIRECTORS’
REMUNERATION
The following table sets out the annual percentage
change in Directors’ remuneration for the past year.
Year ended 31 March 2021
John Rennocks
Garth Milne
Susan Hansen
Anthony Muh
Eric Stobart
Fees
%
Taxable
expenses
%
0.0
0.0
0.0
0.0
0.0
n/a
n/a
(2.9)
(2.9)
n/a
Mar 11
Mar 12
Mar 13
Mar 14
Mar 15
Mar 16
Mar 17
Mar 18
Mar 19
Mar 20
Mar 21
Share price total return adjusted for the exercise of subscription shares
MSCI Emerging Markets Total Return Index (GBP adjusted)
Rebased to 100 as at 31 March 2011
Source: ICM and Bloomberg
On behalf of the Board
Garth Milne
Chairman of the Remuneration Committee
18 June 2021
Aggregate share buybacks
12,112
4,758
7,354
56
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
57
AUDIT & RISK COMMITTEE REPORT
As Chairman of the Audit & Risk
Committee, I am pleased to
present the Committee’s report
to shareholders for the year
ended 31 March 2021.
ROLE AND RESPONSIBILITIES
ERIC STOBART, FCA
Chairman of the Audit & Risk
Committee
UEM has established a
separately chaired Audit &
Risk Committee whose duties
include considering and
recommending to the Board
for approval the contents of
the half yearly and annual financial statements and
providing an opinion as to whether the annual report
and accounts, taken as a whole, are fair, balanced
and understandable and provide the information
necessary for shareholders to assess the Company’s
performance, business model and strategy. The
Committee also reviews the external Auditors’
report on the annual financial statements and is
responsible for reviewing and forming an opinion
on the effectiveness of the external audit process
and audit quality. Other duties include reviewing the
appropriateness of the Company’s accounting policies
and ensuring the adequacy of the internal control
systems and standards.
The Audit & Risk Committee meets at least three times
a year. Two of the planned meetings are held prior to
the Board meetings to approve the half yearly and
annual results. Representatives of the Investment
Managers attend all meetings.
COMPOSITION
During the year ended 31 March 2021, the Audit & Risk
Committee consisted of all the independent Directors
of the Company. It is considered that there is a range of
recent and relevant financial experience amongst the
members of the Audit & Risk Committee together with
experience of the investment trust sector.
In light of the Chairman of the Board’s relevant
financial experience, his continued independence and
his valued contributions in Committee meetings, the
Audit & Risk Committee considers it appropriate that
he is a member.
RESPONSIBILITIES AND REVIEW OF THE EXTERNAL
AUDIT
During the year the principal activities of the Audit &
Risk Committee included:
• considering and recommending to the Board for
approval the contents of the half yearly and annual
financial statements and reviewing the external
auditor’s report;
• management of the relationship with the external
auditor, including its appointment and the
evaluation of scope, execution, cost effectiveness,
independence and objectivity;
• reviewing and approving the external auditors’
plan for the financial year, with a focus on the
identification of areas of audit risk, and consideration
of the appropriateness of the level of audit
materiality adopted;
• reviewing and recommending to the Board for
approval the audit and non-audit fees payable to the
external auditor and the terms of its engagement;
• evaluation of reports received from the external
auditor with respect to the annual financial
statements and its review of the half-yearly report;
• reviewing the efficacy of the external audit process
and making a recommendation to the Board with
respect to the reappointment of the external
auditors;
• evaluation of the effectiveness of the internal
control and risk management systems including
reports received on the operational controls of the
Company’s service providers and reports from the
Company’s depositary;
• reviewing the appropriateness of the Company’s
accounting policies; and
• monitoring developments in accounting and
reporting requirements that impact on the
Company’s compliance with relevant statutory and
listing requirements.
AUDITOR AND AUDIT TENURE
KPMG LLP has been the auditor of the Company since
2018 and prior to that, auditor of UEM Bermuda since
2012. Listed companies are required to tender the
external audit at least every ten years and change
auditor at least every twenty years. The Company
will be required to tender the external audit no later
than for the year ending 31 March 2028. The audit
partner has rotated regularly. Mr John Waterson was
appointed the lead audit partner last year. The Audit
& Risk Committee has considered the independence
of the auditor and the objectivity of the audit process
and is satisfied that KPMG has fulfilled its obligations to
shareholders as independent auditor to the Company.
It is the Company’s policy not to seek substantial non-
audit services from its auditor, unless they relate to a
review of the half-yearly report as the Board considers
the auditor is best placed to provide this work. If the
provision of significant non-audit services were to
be considered, the Committee would procure such
services from an accountancy firm other than the
auditor. Non-audit fees paid to KPMG amounted to £nil
for the year ended 31 March 2021 (2020: £5,000 and
related to the review of the half-yearly accounts).
The partner and manager of the audit team at
KPMG presented their audit plan to the Audit & Risk
Committee in advance of the financial year end. Items
of audit focus were discussed, agreed and given
particular attention during the audit process. KPMG
reported to the Audit & Risk Committee on these
items, their independence and other matters. This
report was considered by the Audit & Risk Committee
and discussed with KPMG and the Investment
Managers prior to approval of the annual financial
report.
Members of the Audit & Risk Committee meet in
camera with the external auditor at least annually.
ACCOUNTING MATTERS AND SIGNIFICANT AREAS
For the year ended 31 March 2021 the accounting
matters that were subject to specific consideration by
the Audit & Risk Committee were as follows:
SIGNIFICANT AREA
HOW ADDRESSED
Value of the level 1
investments
Actively traded level 1 investments are valued using stock exchange prices provided by third party
pricing vendors. The Audit & Risk Committee regularly reviews the portfolio. The Audit & Risk
Committee reviews the annual internal control reports produced by the Investment Managers and
Administrator which detail the systems, processes and controls around the daily pricing of the
securities.
Value of the level 3
investments
Investments that are classified as level 3 are valued using a variety of techniques to determine a fair
value, as set out in note 1(c) to the accounts, and all such valuations are carefully reviewed by the
Audit & Risk Committee with the Investment Managers.
The Audit & Risk Committee receives detailed information on all level 3 investments and it discusses
and challenges the valuations with the Investment Managers. It considers market comparables and
discusses any proposed revaluations with the Investment Managers.
The Audit & Risk Committee reviewed the external audit plan at an early stage and concluded that the appropriate
areas of audit risk relevant to the Company had been identified and that suitable audit procedures had been
put in place to obtain reasonable assurance that the financial statements as a whole would be free of material
misstatements.
As a result, and following a thorough review process, the Audit & Risk Committee advised the Board it is
satisfied that, taken as a whole, the annual financial report for the year to 31 March 2021 is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Company’s performance,
business model and strategy. In reaching this conclusion, the Audit & Risk Committee has assumed that the reader
of the report would have a reasonable level of knowledge of the investment company industry.
58
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
59
AUDIT & RISK COMMITTEE REPORT (continued)
DIRECTORS’ STATEMENT OF RESPONSIBILITIES
in respect of the Annual Report and the Financial Statements
driven by the Audit & Risk Committee’s assessment
of the risks arising in the Company’s operations and
identification of the controls exercised by the Board
and its delegates, the Investment Managers, the
Administrator and other service providers. These
are recorded in risk matrices produced by ICMIM,
as the Company’s AIFM with responsibility for risk
management, which continue to serve as an effective
tool to highlight and monitor the principal risks, details
of which are provided in the Strategic Report on pages
32 to 40. It also received and considered, together with
representatives of the Investment Managers, reports in
relation to the operational controls of the Investment
Managers, Administrator and Custodian. These reviews
identified no issues of significance.
WHISTLEBLOWING POLICY
The Committee has also reviewed and accepted the
‘whistleblowing’ policy that has been put in place by
the Investment Managers under which their staff,
in confidence, can raise concerns about possible
improprieties in matters of financial reporting or other
matters, in so far as they affect the Company.
INTERNAL AUDIT
Due to the nature of the Company, being an externally
managed investment company with no executive
employees, the Company does not have its own
internal audit function. The Committee and the Board
have concluded that there is no current need for such
a function, based on the satisfactory operation of
controls within the Company’s service providers.
Eric Stobart
Chairman of the Audit & Risk Committee
18 June 2021
EXTERNAL AUDIT, REVIEW OF ITS EFFECTIVENESS
AND AUDITOR REAPPOINTMENT
The Audit & Risk Committee advises the Board on the
appointment of the external auditor, its remuneration
for audit and non-audit work and its cost effectiveness,
independence and objectivity.
As part of the review of the effectiveness of the audit
process, a formal evaluation process incorporating
views from the members of the Audit & Risk
Committee and relevant personnel at the Investment
Managers is followed and feedback is provided to
KPMG. Areas covered by this review include:
• the calibre of the audit firm, including reputation and
industry presence;
• the extent of quality controls including review
processes, second director oversight and annual
reports from its regulator;
• the performance of the audit team, including
skills of individuals, specialist knowledge, partner
involvement, team member continuity and quality
and timeliness of audit planning and execution;
• audit communication including planning, relevant
accounting and regulatory developments, approach
to significant accounting risks, communication of
audit results and recommendations on corporate
reporting;
• ethical standards including independence and
integrity of the audit team, lines of communication
to the Audit & Risk Committee and partner rotation;
and
• reasonableness of the audit fees.
For the year ended 31 March 2021, the Audit & Risk
Committee is satisfied that the audit process was
effective.
Resolutions proposing the reappointment of KPMG as
the Company’s auditor and authorising the Directors
to determine its remuneration will be put to the
shareholders at the forthcoming AGM.
INTERNAL CONTROLS AND RISK MANAGEMENT
UEM’s risk assessment focus and the way in which
significant risks are managed is a key area of focus
for the Audit & Risk Committee. Work here was
The Directors are responsible for preparing the Annual
Report and financial statements in accordance with
applicable United Kingdom law and regulations.
Directors’ Report, Directors’ Remuneration Report and
Corporate Governance Statement that complies with
that law and those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website, which is
maintained by the Company’s Investment Managers.
Legislation in the UK governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN
RESPECT OF THE ANNUAL FINANCIAL REPORT
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance
with the applicable set of accounting standards, give
a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company; and
• the Strategic Report and Directors’ Report include
a fair review of the development and performance
of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that it faces.
We consider the annual report and accounts, taken
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy.
Approved by the Board on 18 June 2021 and signed on
its behalf by:
John Rennocks
Chairman
Company law requires the Directors to prepare
financial statements for each financial year. Under
that law, they are required to prepare the financial
statements in accordance with International
Financial Reporting Standards in conformity with the
requirement of the Companies Act 2006.
Under company law the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Company and of its profit or loss for that period. In
preparing these financial statements, the Directors are
required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are reasonable,
relevant and reliable;
• state whether they have been prepared in
accordance with IFRS in conformity with the
requirement of the Companies Act 2006;
• assess the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to
going concern; and
• use the going concern basis of accounting unless
they either intend to liquidate the Company or to
cease operations, or have no realistic alternative but
to do so.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and enable them to ensure that the
financial statements comply with the Companies Act
2006. They are responsible for such internal control as
they determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets
of the Company and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors
are also responsible for preparing a Strategic Report,
60
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
61
Independent
auditor’s report
to the members of Utilico Emerging Markets Trust plc
Overview
Materiality:
financial
statem ents as a
whole
£5.6m (2020:£4.2m )
1% (2020: 0.9%) of total assets
Key audit matters vs 2020
Recurring risks
Valuation of Level 3
investm ents
Carrying am ount of
non – derivative level 1
investm ents
◄►
◄►
1. Our opinion is unmodified
We have audited the financial statem ents of Utilico
Em erging Markets Trust plc (“the Com pany”) for
the year ended 31 March 2021 which com prise the
Statem ent of Com prehensive Incom e, Statem ent
of Changes in Equity, Statem ent of Financial
Position, Statem ent of Cash Flows and the related
notes, including the accounting policies in note 1.
In our opinion the financial statements:
— give a true and fair view of the state of
Com pany’s affairs as at 31 March 2021 and of
its return for the year then ended;
— have been properly prepared in accordance with
International accounting Standards in conform ity
with the requirem ents of the Com panies Act
2006; and
— have been prepared in accordance with the
requirem ents of the Com panies Act 2006.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit
evidence we have obtained is a sufficient and
appropriate basis for our opinion. Our audit opinion
is consistent with our report to the Audit and Risk
Com m ittee.
We were first appointed as auditor by the Directors
on 7 February 2018. The period of total
uninterrupted engagem ent is for the three financial
years ended 31 March 2021. We have fulfilled our
ethical responsibilities under, and we rem ain
independent of the Com pany in accordance with,
UK ethical requirem ents including the FRC Ethical
Standard as applied to listed public interest entities.
No non-audit services prohibited by that standard
were provided.
2. Key audit matters: our assessment of risks of material misstatement
Key audit m atters are those m atters that, in our professional judgem ent, were of m ost significance in the audit of the financial
statem ents and include the m ost significant assessed risks of m aterial m isstatem ent (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagem ent team . We sum m arise below the key audit m atters (unchanged from 2020), in
decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address
those m atters and, as required for public interest entities, our results from those procedures. These m atters were addressed,
and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial
statem ents as a whole, and in form ing our opinion thereon, and consequently are incidental to that opinion, and we do not
provide a separate opinion on these m atters.
The risk
Our resp onse
Valuation of Level 3
investments
(£20.9 m illion; 2020: £13.9
m illion)
Refer to page 59 (Audit
and Risk Com m ittee
Report), page 72
(accounting policy) and
page 78 (financial
disclosures).
Sub jective Valuation
3.7% (2020: 3.0%) of the
com pany’s total assets (by value) is
held in investm ents where no
quoted m arket price is available.
Level 3 investm ents are m easured
at fair value, which is established in
accordance with the International
Private Equity and Venture Capital
Valuation Guidelines by using
m easurem ents of value such as
prices of recent orderly transactions,
revenue m ultiples and valuing fund
interests.
There is a significant risk over the
judgem ents and estim ates inherent
in the valuation and therefore this is
one of the key areas that our audit
has focused on.
The effect of these m atters is that,
as part of our risk assessm ent, we
determ ined that the valuation of
Level 3 investm ents has a high
degree of estim ation uncertainty,
with a potential range of reasonable
outcom es greater than our
m ateriality for the financial
statem ents as a whole.
We perform ed the detailed tests below rather than seeking
to rely on controls, because the nature of the balance is such
that we would expect
to obtain audit evidence prim arily
through the detailed procedures described:
Our procedures included:
— Historical comp arisons: We assessed investm ent
realisations in the period (including within relevant
underlying investee com pany portfolio), com paring actual
sales proceeds to prior year end valuations to understand
the reasons for significant variances and determ ine
whether they are indicative of bias or error in the
com pany’s approach to valuations;
— Methodology choice: In the context of observed
industry best practice and the provisions of the
International Private Equity and Venture Capital Valuation
Guidelines, we challenged the appropriateness of the
valuation basis selected;
— Our valuations exp erience: We challenged the
investm ent m anager on key judgem ents affecting
investee com pany valuations, such as discount factors
and the choice of benchm ark for revenue m ultiples. We
com pared key underlying financial data inputs to external
sources, investee com pany audited accounts and
m anagem ent inform ation as applicable. We challenged
the assum ptions around sustainability of revenue based
on the plans of the investee com panies and whether
these are achievable and we obtained an understanding
of existing and prospective investee com pany cash flows
to understand whether borrowings can be serviced or
whether refinancing m ay be required. Our work included
consideration of events which occurred subsequent to
the year end up until the date of this audit report;
— Comp aring valuations: Where a recent transaction has
been used to value a holding, we obtained an
understanding of the circum stances surrounding the
transaction and vouched the price to supporting
docum entation. We also assessed whether subsequent
changes or events such as m arket or entity specific
factors would im ply a change in value. For the valuation of
fund interests, we obtained and agreed the latest
reported net asset values from the fund m anagers; and
— Assessing transp arency: Consideration of the
appropriateness, in accordance with relevant accounting
standards, of the disclosures in respect of Level 3
investm ents and the effect of changing one or m ore
inputs to reasonably possible alternative valuation
assum ptions.
Our results: We found the Com pany’s valuation of Level 3
investm ents to be acceptable (2020: acceptable).
62
63
2. Key audit matters: including our assessment of risks of material misstatement (continued)
4. Going concern (continued)
5. Fraud and breaches of laws and regulations – ability
to detect
Carrying amount of
non-derivative Level 1
investments
(£534.7m ; 2020:
£394.6m )
Refer to page 59 (Audit
and Risk Com m ittee
Report), page 72
(accounting policy) and
page 78 (financial
disclosures).
The risk
Our resp onse
Low risk, high value
The Com pany’s portfolio of non-
derivative Level 1 investm ents
m akes up 94.0% (2020: 84.8%) of
the Com pany’s total assets by value
and is considered to be one of the
key drivers of results. We do not
consider these investm ents to be at
a high risk of significant
m isstatem ent, or to be subject to a
significant level of judgem ent
because they com prise liquid,
quoted investm ents. However, due
to their m ateriality in the context of
the financial statem ents as a whole,
they are considered to be one of the
areas which had the greatest effect
on our overall audit strategy and
allocation of resources in planning
and com pleting our audit.
We perform ed the detailed tests below rather than seeking
to rely on controls, because the nature of the balance us such
that detailed testing is determ ined to be the m ost effective
m anner of obtaining audit evidence.
Our procedure included
— Tests of detail: Agreed the valuation of 100% of non-
derivative Level 1 investm ents in the portfolio to
externally quoted prices; and
— Enquiry of custodians: All investm ents in non-derivative
level 1 investm ents were agreed to independently
received third party confirm ations from investm ent
custodians or we perform ed alternate procedures on
unconfirm ed balances.
Our results:
We found the carrying am ount of non-derivative Level 1
investm ents to be acceptable (2020: acceptable).
3. Our application of materiality and an overview of the
scope of our audit
Total Assets
£568.3m (2020: £465.4m )
Materiality
£5.6m (2020: £4.2m )
Materiality for the financial statem ents as a whole was set at
£5.6m (2020: £4.2m ), determ ined with reference to a
benchm ark of total assets, of which it represents 1% (2020:
0.9%).
In line with our audit m ethodology, our procedures on
individual account balances and disclosures were perform ed
to a lower threshold, perform ance m ateriality, so as to
reduce to an acceptable level the risk that individually
im m aterial m isstatem ents in individual account balances add
up to a m aterial am ount across the financial statem ents as a
whole. Perform ance m ateriality was set at 75% (2020: 75%)
of m ateriality for the financial statem ents as a whole, which
equates to £4.2m (2020: £3.1m . We applied this percentage
in our determ ination of perform ance m ateriality because we
did not identify any factors indicating an elevated level of risk.
In addition, we applied m ateriality of £0.9m (2020: £1.0m )
and perform ance m ateriality of £0.6m (2020: £0.7m ) to
investm ent and other incom e, for which we believe
m isstatem ents of lesser am ounts than m ateriality for the
financial statem ents as a whole could reasonably be
expected to influence the Com pany’s m em bers’ assessm ent
of the financial perform ance of the Com pany.
We agreed to report to the Audit and Risk Com m ittee any
corrected or uncorrected identified m isstatem ents exceeding
£0.28m (2020: £0.2m ) or £0.09m in relation to investm ent
and other incom e (2020: £0.09m ) in addition to other
identified m isstatem ents that warranted reporting on
qualitative grounds.
Our audit of the Com pany was undertaken to the m ateriality
level specified above and was perform ed by a single audit
team .
£5 .6m
Whole financial
statements materiality
(2020: £4.2m)
£4.2 m
Performance materiality
(2020: £3 .1m)
£0.9m
Investment and other
income materiality
(2020: £1.0m)
£0.2 8m
Misstatements reported
to the Audit and Risk
Committee (2020:
£0.2m)
Total Assets
4. Going concern
The Directors have prepared the financial statem ents on the
going concern basis as they do not intend to liquidate the
Com pany or to cease its operations, and as they have
concluded that the Com pany’s financial position m eans that
this is realistic. They have also concluded that there are no
m aterial uncertainties that could have cast significant doubt
over its ability to continue as a going concern for at least a
year from the date of approval of the financial statem ents
(“the going concern period”).
We used our knowledge of the Com pany, its industry,
and the general econom ic environm ent to identify the
inherent risks to its business m odel and analysed how
those risks m ight affect the Com pany’s financial
resources or ability to continue operations over the
going concern period. The risks that we considered
m ost likely to adversely affect the Com pany’s
available financial resources and its ability to operate
over this period were:
— The im pact of a significant reduction in the
valuation of investm ents and the im plications for
the Com pany’s debt covenants;
— The liquidity of the investm ent portfolio and its
ability to m eet the liabilities of the Com pany as and
when they fall due;
— The operational resilience of key service
organisations; and
— The forthcom ing continuation vote at the AGM of
the Com pany.
We considered whether these risks could plausibly
affect the liquidity in the going concern period by
assessing the degree of downside assum ption that,
individually and collectively, could result in a liquidity
issue, taking into account the Com pany’s liquid
investm ent position (and the results of their reverse
stress testing).
We considered whether the going concern disclosure
in note 1 to the financial statem ents gives a full and
accurate description of the Directors’ assessm ent of
going concern, including the identified risks and related
sensitivities.
Our conclusions based on this work:
— We consider that the Directors’ use of the going
concern basis of accounting in the preparation of
the financial statem ents is appropriate;
— We have not identified, and concur with the
Directors’ assessm ent that there is not, a m aterial
uncertainty related to events or conditions that,
individually or collectively, m ay cast significant
doubt on the Com pany's ability to continue as a
going concern for the going concern period;
— We have nothing m aterial to add or draw attention
to in relation to the Directors’ statem ent in note 1
to the financial statem ents on the use of the going
concern basis of accounting with no m aterial
uncertainties that m ay cast significant doubt over
the Com pany’s use of that basis for the going
concern period, and we found the going concern
disclosure in note 1 to be acceptable; and
— The related statem ent under the Listing Rules set
out on page 45 is m aterially consistent with the
financial statem ents and our audit knowledge.
However, as we cannot predict all future events or
conditions and as subsequent events m ay result in
outcom es that are inconsistent with judgem ents that
were reasonable at the tim e they were m ade, the above
conclusions are not a guarantee that the Com pany will
continue in operation.
Identifying and responding to risks of material
misstatement due to fraud
To identify risks of m aterial m isstatem ent due to fraud
(“fraud risks”) we assessed events or conditions that could
indicate an incentive or pressure to com m it fraud or provide
an opportunity to com m it fraud. Our risk assessm ent
procedures included:
— Enquiring of Directors as to the Com pany’s high-level
policies and procedures to prevent and detect fraud, as
well as whether they have knowledge of any actual,
suspected or alleged fraud;
— Assessing the segregation of duties in place between
the Directors, the Adm inistrator and the Com pany’s
Investm ent Manager; and
— Reading Board and Audit and Risk Com m ittee m inutes.
As required by auditing standards, we perform procedures
to address the risk of m anagem ent override of controls, in
particular to the risk that m anagem ent m ay be in a position
to m ake inappropriate accounting entries. We evaluated the
design and im plem entation of the controls over journal
entries and other adjustm ents and m ade inquiries of the
Adm inistrator about inappropriate or unusual activity relating
to the processing of journal entries and other
adjustm ents. We substantively tested all m aterial post-
closing entries and, based on the results of our risk
assessm ent procedures and understanding of the process,
including the segregation of duties between the Directors
and the Adm inistrator, no further high-risk journal entries or
other adjustm ents were identified.
On this audit we have rebutted the fraud risk related to
revenue recognition because the revenue is non-
judgem ental and straightforward, with lim ited opportunity
for m anipulation. We did not identify any significant unusual
transactions or additional fraud risks.
Identifying and responding to risks of material
misstatement due to non-compliance with laws and
regulations
We identified areas of laws and regulations that could
reasonably be expected to have a m aterial effect on the
financial statem ents from our general com m ercial and
sector experience and through discussion with the
Directors, the Investm ent Manager and the Adm inistrator
(as required by auditing standards) and discussed with the
Directors the policies and procedures regarding com pliance
with laws and regulations. As the Com pany is regulated, our
assessm ent of risks involved gaining an understanding of
the control environm ent including the entity’s procedures
for com plying with regulatory requirem ents.
The potential effect of these laws and regulations on the
financial statem ents varies considerably.
Firstly, the Com pany is subject to laws and regulations that
directly affect the financial statem ents including financial
reporting legislation (including related com panies
legislation), distributable profits legislation, and its
qualification as an Investm ent Trust under UK taxation
legislation, any breach of which could lead to the Com pany
losing various deductions and exem ptions from UK
corporation tax, and we assessed the extent of com pliance
64
65
5. Fraud and breaches of laws and regulations – ability
to detect (continued)
Identifying and responding to risks of m aterial m isstatem ent
due to non-com pliance with laws and regulations
(continued)
with these laws and regulations as part of our procedures
on the related financial statem ent item s.
Secondly, the Com pany is subject to m any other laws and
regulations where the consequences of non-com pliance
could have a m aterial effect on am ounts or disclosures in
the financial statem ents, for instance through the
im position of fines or litigation. We identified the following
areas as those m ost likely to have such an effect: m oney
laundering, data protection, bribery and corruption
legislation and certain aspects of com pany legislation
recognising the financial and regulated nature of the
Com pany’s activities and its legal form . Auditing standards
lim it the required audit procedures to identify non-
com pliance with these laws and regulations to enquiry of
the Directors and the Adm inistrator and inspection of
regulatory and legal correspondence, if any. Therefore if a
breach of operational regulations is not disclosed to us or
evident from relevant correspondence, an audit will not
detect that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent lim itations of an audit, there is an
unavoidable risk that we m ay not have detected som e
m aterial m isstatem ents in the financial statem ents, even
though we have properly planned and perform ed our audit
in accordance with auditing standards. For exam ple, the
further rem oved non-com pliance with laws and regulations
is from the events and transactions reflected in the financial
statem ents, the less likely the inherently lim ited procedures
required by auditing standards would identify it.
In addition, as with any audit, there rem ained a higher risk
of non-detection of fraud, as these m ay involve collusion,
forgery, intentional om issions, m isrepresentations, or the
override of internal controls. Our audit procedures are
designed to detect m aterial m isstatem ent. We are not
responsible for preventing non-com pliance or fraud and
cannot be expected to detect non-com pliance with all laws
and regulations.
6. We have nothing to rep ort on the other information in
the Annual Rep ort
The Directors are responsible for the other inform ation
presented in the Annual Report together with the financial
statem ents. Our opinion on the financial statem ents does
not cover the other inform ation and, accordingly, we do not
express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.
Our responsibility is to read the other inform ation and, in
doing so, consider whether, based on our financial
statem ents audit work, the inform ation therein is m aterially
m isstated or inconsistent with the financial statem ents or
our audit knowledge. Based solely on that work we have
not identified m aterial m isstatem ents in the other
inform ation.
Strategic Report an d Directors’ Report
Based solely on our work on the other inform ation:
— we have not identified m aterial m isstatem ents in the
Strategic Report and the Directors’ report;
— in our opinion the inform ation given in those reports for
the financial year is consistent with the financial
statem ents; and
— in our opinion those reports have been prepared in
accordance with the Com panies Act 2006.
Directors’ Rem uneration Report
In our opinion the part of the Directors’ Rem uneration
Report to be audited has been properly prepared in
accordance with the Com panies Act 2006.
Disclosures of em erging and prin cipal risks an d longer-
term viability
We are required to perform procedures to identify whether
there is a m aterial inconsistency between the Directors’
disclosures in respect of em erging and principal risks and
the Viability Statem ent, and the financial statem ents and
our audit knowledge.
Based on those procedures, we have nothing m aterial to
add or draw attention to in relation to:
— the Directors’ confirm ation within the Strategic Report
pages 35 and 36 that they have carried out a robust
assessm ent of the em erging and principal risks facing
the Com pany, including those that would threaten its
business m odel, future perform ance, solvency and
liquidity;
— the Principal Risks and Risk Mitigation disclosures
describing these risks and how em erging risks are
identified, and explaining how they are being m anaged
and m itigated; and
— the Directors’ explanation in the Viability Statem ent of
how they have assessed the prospects of the Com pany,
over what period they have done so and why they
considered that period to be appropriate, and their
statem ent as to whether they have a reasonable
expectation that the Com pany will be able to continue in
operation and m eet its liabilities as they fall due over the
period of their assessm ent, including any related
disclosures drawing attention to any necessary
qualifications or assum ptions.
We are also required to review the Viability Statem ent, set
out on page 37 under the Listing Rules. Based on the above
procedures, we have concluded that the above disclosures
are m aterially consistent with the financial statem ents and
our audit knowledge.
Our work is lim ited to assessing these m atters in the
context of only the knowledge acquired during our financial
statem ents audit. As we cannot predict all future events or
conditions and as subsequent events m ay result in
outcom es that are inconsistent with judgem ents that were
reasonable at the tim e they were m ade, the absence of
anything to report on these statem ents is not a guarantee
as to the Com pany’s longer-term viability.
6. We have nothing to report on the other information
in the Annual Report (Continued)
Corporate govern ance disclosures
We are required to perform procedures to identify whether
there is a m aterial inconsistency between the Directors’
corporate governance disclosures and the financial
statem ents and our audit knowledge.
Based on those procedures, we have concluded that each
of the following is m aterially consistent with the financial
statem ents and our audit knowledge:
— the Directors’ statem ent that they consider that the
annual report and financial statem ents taken as a whole
is fair, balanced and understandable, and provides the
inform ation necessary for shareholders to assess the
Com pany’s position and perform ance, business m odel
and strategy;
— the section of the annual report describing the work of
the Audit and Risk Com m ittee, including the significant
issues that the Audit and Risk Com m ittee considered in
relation to the financial statem ents, and how these
issues were addressed; and
— the section of the annual report that describes the
review of the effectiveness of the Com pany’s risk
m anagem ent and internal control system s.
We are required to review the part of the Corporate
Governance Statem ent relating to the Com pany’s
com pliance with the provisions of the UK Corporate
Governance Code specified by the Listing Rules for our
review. We have nothing to report in this respect.
7. We have nothing to report on the other matters on
which we are required to report by exception
Under the Com panies Act 2006, we are required to report
to you if, in our opinion:
— adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
— the financial statem ents and the part of the Directors’
Rem uneration Report to be audited are not in
agreem ent with the accounting records and
returns; or
— certain disclosures of Directors’ rem uneration specified
by law are not m ade; or
— we have not received all the inform ation and
explanations we require for our audit.
We have nothing to report in these respects.
8 . Respective responsibilities
Directors’ respon sibilities
As explained m ore fully in their statem ent set out on page
61, the Directors are responsible for: the preparation of the
financial statem ents including being satisfied that they give
a true and fair view; such internal control as they determ ine
is necessary to enable the preparation of financial
statem ents that are free from m aterial m isstatem ent,
whether due to fraud or error; assessing the Com pany’s
ability to continue as a going concern, disclosing, as
applicable, m atters related to going concern; and using the
going concern basis of accounting unless they either intend
to liquidate the Com pany or to cease operations, or have no
realistic alternative but to do so.
Auditor’s respon sibilities
Our objectives are to obtain reasonable assurance about
whether the financial statem ents as a whole are free from
m aterial m isstatem ent, whether due to fraud or error, and
to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a m aterial m isstatem ent when it
exists. Misstatem ents can arise from fraud or error and are
considered m aterial if, individually or in aggregate, they
could reasonably be expected to influence the econom ic
decisions of users taken on the basis of the financial
statem ents.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
9. The purpose of our audit work and to whom we
owe our responsibilities
This report is m ade solely to the Com pany’s m em bers, as a
body, in accordance with Chapter 3 of Part 16 of the
Com panies Act 2006. Our audit work has been undertaken
so that we m ight state to the Com pany’s m em bers those
m atters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
perm itted by law, we do not accept or assum e
responsibility to anyone other than the Com pany and the
Com pany’s m em bers, as a body, for our audit work, for this
report, or for the opinions we have form ed.
John Waterson (Senior Statutory Auditor)
for and on b ehalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Saltire Court,
20 Castle Terrace
Edinburgh
EH1 2EG
18 June 2021
66
67
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF CHANGES IN EQUITY
Notes
10 Gains/(losses) on investments
20 (Losses)/gains on derivative instruments
20 Foreign exchange gains/(losses)
for the year to
31 March 2021
for the year to
31 March 2020
Revenue
return
£’000s
Capital
return
£’000s
Total
return
£’000s
Revenue
return
£’000s
Capital
return
£’000s
Total
return
£’000s
–
–
–
114,303
114,303
(4,489)
(4,489)
2,247
2,247
–
–
–
(149,719)
(149,719)
1,521
1,521
(1,908)
(1,908)
3 Investment and other income
22,773
–
22,773
23,991
–
23,991
Total income/(loss)
22,773
112,061
134,834
23,991 (150,106)
(126,115)
4 Management and administration fees
(1,284)
(7,424)
(8,708)
(1,656)
(2,959)
(4,615)
5 Other expenses
(1,425)
–
(1,425)
(1,787)
–
(1,787)
Profit/(loss) before finance costs and taxation
20,064
104,637
124,701
20,548 (153,065)
(132,517)
6 Finance costs
(261)
(609)
(870)
(363)
(847)
(1,210)
Profit/(loss) for the year
18,225
102,443
120,668
18,006 (156,046)
(138,040)
8 Earnings per share (basic) – pence
8.13
45.73
53.86
7.88
(68.29)
(60.41)
All items in the above statement derive from continuing operations.
The ‘Total’ column of this statement is the profit and loss account of the Company and the ‘Revenue’ and ‘Capital’ columns represent supplementary
information prepared under guidance issued by the Association of Investment Companies.
The Company 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 for the period, as defined in International Accounting Standard 1 (revised).
All income is attributable to the equity holders of the Company.
Profit/(loss) before taxation
19,803
104,028
123,831
20,185 (153,912)
(133,727)
7 Taxation
(1,578)
(1,585)
(3,163)
(2,179)
(2,134)
(4,313)
Notes
for the year to 31 March 2021
Notes
Ordinary
share
capital
£’000s
Merger
reserves
£’000s
Capital
redemption
reserve
£’000s
Retained earnings
Special
reserve
£’000s
Capital
reserves
£’000s
Revenue
reserve
£’000s
Total
£’000s
Balance as at 31 March 2020
2,278
76,706
67
485,746
(156,311)
5,857
414,343
16, 18,
19
Shares purchased by the
Company and cancelled
20,21 Profit for the year
9 Dividends paid in the year
(65)
–
–
–
–
–
65
(12,112)
–
–
(12,112)
–
–
–
–
102,443
18,225
120,668
–
(17,203)
(17,203)
Balance as at 31 March 2021
2,213
76,706
132
473,634
(53,868)
6,879
505,696
for the year to 31 March 2020
Ordinary
share
capital
£’000s
Merger
reserves
£’000s
Capital
redemption
reserve
£’000s
Retained earnings
Special
reserve
£’000s
Capital
reserves
£’000s
Revenue
reserve
£’000s
Total
£’000s
Balance as at 31 March 2019
2,298
76,706
47
490,504
(265)
4,865
574,155
16, 18,
19
Shares purchased by the
Company and cancelled
20,21 (Loss)/profit for the year
9 Dividends paid in the year
(20)
–
–
–
–
–
20
–
–
(4,758)
–
–
(4,758)
–
–
(156,046)
18,006
(138,040)
–
(17,014)
(17,014)
Balance as at 31 March 2020
2,278
76,706
67
485,746
(156,311)
5,857
414,343
The notes on pages 72 to 89 form part of these financial statements.
The notes on pages 72 to 89 form part of these financial statements.
68
Utilico Emerging Markets Trust plc
Report and Accounts for the period to 31 March 2021
69
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CASH FLOWS
2021
£’000s
2020
£’000s
565,751
418,743
1,610
–
1,027
2,637
(10,795)
–
(10,795)
(8,158)
557,593
(50,373)
(1,524)
505,696
2,213
76,706
132
4,739
1,344
40,620
46,703
(3,746)
(278)
(4,024)
42,679
461,422
(47,079)
–
414,343
2,278
76,706
67
473,634
485,746
(53,868)
(156,311)
6,879
5,857
505,696
414,343
228.54
181.84
Notes as at 31 March
Non-current assets
10
11
Investments
Current assets
Other receivables
Derivative financial instruments
Cash and cash equivalents
12
Current liabilities
Other payables
Derivative financial instruments
Net current (liabilities)/assets
Total assets less current liabilities
Non-current liabilities
Bank loans
Provision for capital gains tax
13
14
Net assets
Equity attributable to equity holders
16
Ordinary share capital
17 Merger reserve
18
19
20
21
Capital redemption reserve
Special Reserve
Capital reserves
Revenue reserve
Total attributable to equity holders
22
Net asset value per share
Basic – pence
The notes on pages 72 to 89 form part of these financial statements.
Approved by the Board on 18 June 2021 and signed on its behalf by
John Rennocks
Chairman
Utilico Emerging Markets Trust plc
Registered in England, No 11102129
Year to 31 March
Operating activities
Profit/(loss) before taxation
Deduct investment income – dividends
Deduct investment income – interest
Deduct bank Interest received
Add back interest charged
Add back (gains)/losses on investments
Deduct losses/(gains) on derivative instruments
Add back foreign exchange (gains)/losses
Decrease in other receivables
Increase/(decrease) in other payables
Net cash outflow from operating activities before dividends and interest
Interest paid
Dividends received
Bank interest received
Investment income – interest
Taxation paid
Net cash inflow from operating activities
Investing activities
Purchase of investments
Sales of investments
Purchase of derivatives
Sales of derivatives
Net cash (outflow)/inflow from investing activities
Financing activities
Repurchase of shares for cancellation
Dividends paid
Drawdown of bank loans
Repayment of bank loans
Net cash (outflow)/inflow from financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the start of the year
Effect of movement in foreign exchange
Cash and cash equivalents as at the end of the year
Comprised of:
Cash
Bank overdraft
Total
The notes on pages 72 to 89 form part of these financial statements.
2021
£’000s
123,831
(21,670)
(1,096)
(7)
870
(114,303)
4,489
(2,247)
5
5,087
(5,041)
(852)
20,919
7
–
(1,700)
13,333
(172,491)
143,671
(4,152)
733
(32,239)
(12,112)
(17,203)
49,463
(42,536)
(22,388)
(41,294)
39,500
(1,390)
(3,184)
1,027
(4,211)
(3,184)
2020
£’000s
(133,727)
(23,079)
(887)
(25)
1,210
149,719
(1,521)
1,908
85
(176)
(6,493)
(1,196)
21,848
25
1,572
(4,325)
11,431
(272,580)
272,928
(2,449)
2,858
757
(4,758)
(17,014)
64,676
(26,033)
16,871
29,059
11,668
(1,227)
39,500
40,620
(1,120)
39,500
70
Utilico Emerging Markets Trust plc
Report and Accounts for the period to 31 March 2021
71
NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES
(b) Financial instruments
The Company is an investment company incorporated in the
United Kingdom with a premium listing on the London Stock
Exchange.
(a) Basis of accounting
The accounts have been prepared on a going concern basis
(see note 25) in accordance with IFRS, 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 and to the extent that they are in
conformity with the requirement of the Companies Act 2006.
The accounts have been prepared on a historical cost basis,
except for the measurement at fair value of investments and
derivative financial instruments.
The Board has determined by having regard to the currency
of the Company’s share capital and the predominant
currency in which its shareholders operate, that Sterling is
the functional and reporting currency.
Where presentational recommendations set out in the
Statement of Recommended Practice “Financial Statements
of Investment Trust Companies and Venture Capital Trusts”
(“SORP”), issued in the UK by the AIC in October 2019, do
not conflict with the requirements of IFRS, the Directors
have prepared the accounts on a basis consistent with the
recommendations of the SORP.
In accordance with the SORP, the Statement of
Comprehensive Income has been analysed between a
revenue return (dealing with items of a revenue nature) and a
capital return (relating to items of a capital nature). Revenue
returns include, but are not limited to, dividend income,
operating expenses, finance costs and taxation (insofar as
they are not allocated to capital, as described in notes 1(h),
1(i), 1(k) and 1(l) below). Net revenue returns are allocated
via the revenue return to the Revenue Reserve. Capital
returns include, but are not limited to, profits and losses on
the disposal and the valuation of non-current investments,
derivative instruments and on cash and borrowings,
operating costs and finance costs (insofar as they are not
allocated to revenue as described in notes 1(i) and 1(k)
below). Net capital returns are allocated via the capital return
to Capital Reserves.
Dividends on shares may be paid out of Special Reserve,
Capital Reserves and Revenue Reserve.
A number of new standards and amendments to standards
and interpretations, which have not been applied in
preparing these accounts, were in issue but not effective.
None of these are expected to have a material effect on the
accounts of the Company.
Financial Instruments include fixed asset investments,
derivative assets and liabilities and long-term debt
instruments. Accounting Standards recognise a hierarchy
of fair value measurements for Financial Instruments which
gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (Level 1)
and the lowest priority to unobservable inputs (Level 3).
The classification of Instruments depends on the lowest
significant applicable input.
(c) Valuation of investments and derivative instruments
Investment purchases and sales are accounted for on the
trade date, inclusive of transaction costs. Investments,
including both equity and loans, used for efficient portfolio
management are classified as being at fair value through
profit or loss. As the Company’s business is investing in
financial assets with a view to profiting from their total
return in the form of dividends, interest or increases in fair
value, its investments (including those ordinarily classified
as subsidiaries under IFRS 10 but exempted by that financial
reporting standard from requirement to be consolidated)
are designated as being at fair value through profit or loss
on initial recognition. Derivatives comprising forward foreign
exchange contracts, options and credit default swaps
are accounted for as a financial asset/liability at fair value
through profit or loss. The Company manages and evaluates
the performance of these investments and derivatives
on a fair value basis in accordance with its investment
strategy and information about the Company is provided
internally on this basis to the Company’s Directors and key
management personnel. Gains and losses on investments
and on derivatives are analysed within the Statement
of Comprehensive Income as capital return. Quoted
investments are shown at fair value using market bid prices.
The fair value of unquoted investments is determined by
the Board in accordance with IFRS and International Private
Equity and Venture Capital Valuation Guidelines in exercising
its judgement over the value of these investments, the Board
uses valuation techniques which take into account, where
appropriate, latest dealing prices, valuations from reliable
sources, net asset values, earnings multiples, recently orderly
transactions in similar securties, time to expected repayment
and other relevant factors.
(d) Subsidiary undertakings
Subsidiary undertakings of the Company, which are held as
part of the investment portfolio (see note 1(c) above), are
accounted for as investments at fair value through profit and
loss.
(e) Cash and cash equivalents
Cash and cash equivalents in the Statement of Financial
Position comprise cash at bank and short term deposits with
an original maturity of three months or less. Bank overdrafts
are included as a component of cash and cash equivalents
for the purpose of the cash flow statement only.
(f) Debt instruments
The Company’s debt instruments can include short-term and
long-term bank borrowings and overdrafts, initially measured
at fair value and subsequently measured at amortised cost
using the effective interest method. No debt instruments
held during the year required hierarchical classification.
(g) Foreign currency
Foreign currency assets and liabilities are expressed in
Sterling at rates of exchange ruling at the Statement of
Financial Position date. Foreign currency transactions are
translated at the rates of exchange ruling at the dates of
those transactions. Exchange profits and losses on currency
balances are credited or charged to the Statement of
Comprehensive Income and analysed as capital or revenue as
appropriate. Forward foreign exchange contracts are valued
in accordance with quoted market rates.
(h) Investment and other income
Dividends receivable are shown gross of withholding tax
and are analysed as revenue return within the Statement of
Comprehensive Income (except where, in the opinion of the
Directors, their nature indicates they should be recognised
as capital return) on the ex-dividend date or, where no ex-
dividend date is quoted, when the Company’s right to receive
payment is established. Where the Company has elected to
receive its dividends in the form of additional shares rather
than in cash, the amount of the cash dividend foregone is
allocated as revenue in the Statement of Comprehensive
Income. Any excess in the value of the shares received over
the amount of the cash dividend foregone is allocated as
capital in the Statement of Comprehensive Income. Interest
on debt securities is accrued on a time basis using the
effective interest rate method. Bank and short-term deposit
interest is recognised on an accruals basis.
(i) Expenses
All expenses are accounted for on an accruals basis.
Expenses are charged through the Statement of
Comprehensive Income and analysed under revenue return
except as stated below:
– the management fees, company secretarial fees and
research fees payable to ICM and ICMIM are allocated 70%
to capital return and 30% to revenue return.
– expenses incidental to the acquisition or disposal of
(j) Directors’ fees
Directors’ fees are charged quarterly through the revenue
column of the Statement of Comprehensive Income. The
net fee entitlement after any applicable tax deductions of
each Director is used to purchase shares of the Company in
the market by each Director as soon as possible after each
quarter end.
(k) Finance costs
Finance costs are accounted for using the effective
interest method, recognised through the Statement of
Comprehensive Income.
Finance costs are allocated 70% to capital return and 30% to
revenue return.
(l) Taxation
Taxation currently payable is calculated using tax rules and
rates in force at the year end, based on taxable profit for the
year, which differs from the net return before tax. Note 7(b)
sets out those items which are not subject to UK Corporation
Tax.
Deferred tax is provided on an undiscounted basis on all
timing differences that have originated but not reversed by
the Statement of Financial Position date, based on the tax
rates that have been enacted at the Statement of Financial
Position date and that are expected to apply in the period
when the liability is settled or the asset is realised. Deferred
tax assets are only recognised if it is considered more likely
than not that there will be suitable profits from which the
future reversal of timing differences can be deducted. In
line with the recommendations of the SORP, the allocation
method used to calculate the tax relief on expenses charged
to capital is the “marginal” basis. Under this basis, if taxable
income is capable of being offset entirely by expenses
charged through the revenue account, then no tax relief is
transferred to the capital account.
(m) Dividends payable
Dividends paid by the Company are accounted for in the
period in which the Company is liable to pay them and are
reflected in the Statement of Changes in Equity.
(n) Merger reserve
The surplus of the net assets of UEM Bermuda received
from the issue of new ordinary shares over the nominal
value of such shares is credited to this account which is
non-distributable. The nominal value of the shares issued is
recognised in called up share capital.
Investments are allocated to capital return.
(o) Capital reserves
– performance related management fees (calculated under
the terms of the Investment Management Agreement) are
allocated to capital return.
Capital reserves are distributable reserves to the extent
gains arising from investments held are from liquid holdings.
The following items are accounted for through the Statement
72
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
73
NOTES TO THE ACCOUNTS (continued)
of Comprehensive Income as capital returns and transferred
to capital reserves:
Capital reserve – arising on investments sold
– gains and losses on disposal of investments and
derivative instruments
– exchange differences of a capital nature
– expenses allocated in accordance with notes 1(i) and 1(k)
Capital reserve – arising on investments held
– increases and decreases in the valuation of investments
and derivative instruments held at the year end.
2.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES
AND ASSUMPTIONS
The presentation of the financial statements in conformity
with IFRS requires management to make judgements,
3.
INVESTMENT AND OTHER INCOME
Year to 31 March
estimates and assumptions that affect the application
of accounting policies and reported amounts of assets,
liabilities, income and expenses. Estimates and judgements
are continually evaluated and are based on perceived risks,
historical experience, expectations of plausible future events
and other factors. Actual results may differ from these
estimates.
The areas requiring the most significant judgement and
estimation in the preparation of the financial statements are:
accounting for the value of unquoted investments.
The policy for valuation of unquoted securities is set out in
note 1(c) to the accounts and further information on Board
procedures is contained in the Audit & Risk Committee
Report and note 26(d) to the accounts. The fair value of
unquoted (level 3) investments, as disclosed in note 27 to
the accounts, represented 3.9% of total investments as at 31
March 2021 (3.3% of total investments as at 31 March 2020).
Investment income
Dividends*
Interest
Total investment income
Other income
Bank interest
Total income
Revenue
£’000s
Capital
£’000s
21,670
1,096
22,766
7
22,773
–
–
–
–
–
Revenue
£’000s
Capital
£’000s
2021
Total
£’000s
21,670
1,096
22,766
23,079
887
23,966
7
25
22,773
23,991
–
–
–
–
–
*Includes scrip dividends of £1,109,000 (2020: £357,000)
4. MANAGEMENT AND ADMINISTRATION FEES
Year to 31 March
Payable to: ICM/ICMIM
– management, secretarial and
research fees
– performance fee
Administration fees
Revenue
£’000s
Capital
£’000s
1,005
–
279
1,284
2,345
5,079
–
7,424
2021
Total
£’000s
3,350
5,079
279
8,708
Revenue
£’000s
Capital
£’000s
1,268
2,959
4,227
–
388
–
–
–
388
1,656
2,959
4,615
2020
Total
£’000s
23,079
887
23,966
25
23,991
2020
Total
£’000s
The Company has appointed ICMIM as its Alternative
Investment Fund Manager and joint portfolio manager
with 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 Investment
Managers as agreed by them.
The relationship between ICMIM and ICM is compliant
with the requirements of the Alternative Investment Fund
Managers Directive and also such other requirements
applicable to ICMIM by virtue of its regulation by the Financial
Conduct Authority.
The annual management fee up to 31 March 2021 was 0.65%
per annum of net assets, payable quarterly in arrears. The
management fee is allocated 70% to capital return and 30%
to revenue return. The Investment Management Agreement
may be terminated upon six months’ notice.
In addition, up to 31 March 2021, the Investment Managers
were entitled to a performance fee payable in respect of
each financial period, equal to 15% of the amount of any
outperformance in that period by equity funds attributable to
shareholders of the higher of (i) the post-tax yield on the FTSE
Actuaries Government Securities UK Gilt 5 to 10 years Index,
plus inflation (on the RPIX basis), plus 2%; and (ii) 8%. The
maximum amount of a performance fee payable in respect
of any financial year is 1.85% of the average net assets of the
Company and any performance fee in excess of this cap is
written off. The NAV must also exceed the high watermark
established when the performance fee was last paid (31
March 2017), adjusted for capital events and dividends paid
since that date. The high watermark was 222.13p per share as
at 31 March 2020.
Half of the performance fee is payable in cash and half in
shares of the Company (“Performance Shares”), based on the
NAV per share as at the year end. The Investment Managers
will purchase the Performance Shares in the market at a price
equal to or below the NAV per share at the time of purchase.
If the Investment Managers are unable to purchase some
or all of the Performance Shares in the market at or below
the NAV per share, the Company will issue to the Investment
Managers shares at NAV equivalent to any shortfall. The full
performance fee is payable to the Investment Managers
as soon as practicable following the year end date in order
to reduce the risk to the Company of material movements
in the price of shares between the year end date and the
date of payment. Any subsequent adjustment to the fee
arising out of the audit process is paid to or recouped from
the Investment Managers in cash within seven days of the
publication of the annual report and accounts.
On 1 April 2021, the performance fee due to ICM in respect
of the year ended 31 March 2021 was estimated to be
£5,079,000 (2020: £nil). ICM and ICMIM received £2,540,000
of this fee in cash on 8 April 2021. The remaining balance
of £2,539,000 was settled through the purchase, based on
the estimated NAV of the Company as at 31 March 2021, of
1,111,193 ordinary shares of the Company in the market. The
cost of those shares to the Company was £2,283,000. The full
audited performance fee is £5,079,000.
With effect from 1 April 2021 the fees payable under the
Investment Management Agreement with ICM have been
amended. The performance fee will be discontinued and the
investment management fee payable to the Joint Portfolio
Managers will be amended from 0.65% per annum of the
Company’s net asset value (“NAV”) to a tiered structure as
follows: 1.0% of NAV up to and including £500m; 0.9% of NAV
exceeding £500m up to and including £750m; 0.85% of NAV
exceeding £750m up to and including £1,000m; and 0.75% of
NAV exceeding £1,000m.
ICMIM also provides company secretarial services to the
Company, with the Company paying 45% of the costs
associated with this office and recharges research fees to
the Company based on a budget of £0.3m per annum, paid
quarterly in arrears. These charges are allocated 70% to
capital return and 30% to revenue return.
JPMorgan Chase Bank N.A. – London Branch has been
appointed Administrator and ICMIM has appointed Waverton
to provide certain support services (including middle office,
market dealing and information technology support services).
74
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
75
NOTES TO THE ACCOUNTS (continued)
5. OTHER EXPENSES
Year to 31 March
Auditor's remuneration:
for audit services (1)
for other services (2)
Broker and consultancy fees
Custody fees
Depositary fees
Directors’ fees for services to the Company
(see Directors’ Remuneration Report on pages 55 to 57)
Travel expenses
Professional fees
Sundry expenses
2021
Revenue
£’000s
Capital
£’000s
Total
£’000s
Revenue
£’000s
Capital
£’000s
84
–
129
571
119
191
11
82
238
1,425
–
–
–
–
–
–
–
–
–
–
84
–
129
571
119
191
11
82
238
1,425
51
5
138
688
163
189
237
59
257
1,787
–
–
–
–
–
–
–
–
–
–
2020
Total
£’000s
51
5
138
688
163
189
237
59
257
1,787
All expenses are stated gross of irrecoverable VAT, where applicable.
(1) Total auditor’s remuneration for audit services, exclusive of VAT, amounted to £80,000, £70,000 for the year to 31 March 2021 and £10,000 for
additional audit costs for the year to 31 March 2020 (2020: £50,000).
(2) Total auditor’s remuneration for other services amounts to £nil (2020: £5,000, excluding VAT, for reviewing the interim accounts).
6. FINANCE COSTS
Year to 31 March
2021
Revenue
£’000s
Capital
£’000s
Total
£’000s
Revenue
£’000s
Capital
£’000s
2020
Total
£’000s
On loans and bank overdrafts
261
609
870
363
847
1,210
7. TAXATION
(a) Analysis of charge in the year :
Year to 31 March
2021
Tax on ordinary activities
UK corporation tax at 19.00% (2020: 19.00%)
Overseas tax suffered
Capital gains tax
Total current tax charge for the year
Deferred tax (see note 14)
Total tax charge for the year
Revenue
£’000s
Capital
£’000s
Total
£’000s
Revenue
£’000s
Capital
£’000s
–
1,578
–
1,578
–
1,578
–
–
61
61
1,524
1,585
–
55
1,578
2,124
61
1,639
1,524
3,163
–
2,179
–
–
–
2,134
2,134
–
–
2,179
2,134
4,313
2020
Total
£’000s
55
2,124
2,134
4,313
(b) Factors affecting current tax charge for the year
The tax assessed for the year can be reconciled to the profit/(loss) per the Statement of Comprehensive Income as follows:
Year to 31 March
Revenue
£’000s
Capital
£’000s
2021
Total
£’000s
Revenue
£’000s
Capital
£’000s
2020
Total
£’000s
Net profit/(loss) before taxation
19,803
104,028
123,831
20,185
(153,912)
(133,727)
Corporation tax at 19.00%
3,762
19,765
23,527
3,835
(29,243)
(25,408)
Effects of:
Non taxable dividend income
(3,620)
–
(3,620)
(4,244)
–
–
(21,291)
(21,291)
–
28,520
Non taxable capital returns
Overseas tax suffered
Excess expenses not utilised in the year
Tax attributable to expenses and finance costs
charged to capital
Double taxation relief
Capital gains tax
UK corporation tax suffered from subsidiary
income
1,578
1,408
–
–
(1,526)
1,526
–
1,585
(24)
–
–
(4,244)
28,520
2,124
1,184
–
(52)
1,578
1,408
–
(24)
1,585
2,124
1,184
(723)
(52)
–
–
723
–
–
–
–
2,134
2,134
55
2,179
–
2,134
55
4,313
Total tax charge for the year
1,578
1,585
3,163
At 31 March 2021 the Company has tax losses with a tax value of £3,100,000 (2020: £1,940,000) based on the enacted tax rates
of 19% in respect of which a deferred tax asset has not been recognised. The unrecognised deferred tax asset would have been
£4,079,000 had the projected increase in the UK corporation tax rate to 25% from 1 April 2023 been enacted as at 31 March 2021
(substantive enactment did not occur until 24 May 2021). The deferred tax asset would only be recovered if the Company were to
generate sufficient profits to utilise these losses. It is considered highly unlikely that this will occur and therefore, no deferred tax
asset has been recognised.
8. EARNINGS PER SHARE
Year to 31 March
Revenue return
Capital profit/(loss)
Total return
2021
£’000s
18,225
102,443
120,668
Number
2020
£’000s
18,006
(156,046)
(138,040)
Number
Weighted average number of shares in issue during the year
224,028,801
228,510,092
Revenue return per share
Capital profit/(loss) per share
Total profit/(loss) per share
Pence
8.13
45.73
53.86
Pence
7.88
(68.29)
(60.41)
The Company is liable to Indian capital gains tax (2020: Brazilian and Indian capital gains tax) and the deferred tax in the capital
account is in respect of capital gains tax on Indian investment holding gains that will be taxed in future years on realisations of the
investments.
76
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
77
NOTES TO THE ACCOUNTS (continued)
9. DIVIDENDS
Subsidiary undertakings
Year to 31 March
Record date
Payment date
2019 Fourth quarterly dividend of 1.80p per share
07-Jun-19
28-Jun-19
2020 First quarterly dividend of 1.80p per share
06-Sep-19
27-Sep-19
2020 Second quarterly dividend of 1.925p per share
29-Nov-19
20-Dec-19
2020 Third quarterly dividend of 1.925p per share
06-Mar-20
27-Mar-20
2020 Fourth quarterly dividend of 1.925p per share
05-Jun-20
19-Jun-20
2021 First quarterly dividend of 1.925p per share
04-Sep-20
18-Sep-20
2021 Second quarterly dividend of 1.925p per share
03-Dec-20
18-Dec-20
2021 Third quarterly dividend of 1.925p per share
05-Mar-21
24-Mar-21
2021
£’000s
–
–
–
–
4,348
4,308
4,283
4,264
17,203
2020
£’000s
4,132
4,105
4,390
4,387
–
–
–
–
17,014
The Directors have declared a fourth quarterly dividend in respect of the year ended 31 March 2021 of 2.000p per share payable on
23 June 2021 to shareholders on the register at close of business on 4 June 2021. The total cost of the dividend, which has not been
accrued in the results for the year to 31 March 2021, is £4,415,000 based on 220,773,519 shares in issue at the record date.
10. INVESTMENTS
Year to 31 March
Cost of investments brought forward
Net unrealised gains brought forward
Valuation brought forward
Purchases at cost
Sales proceeds
(Losses)/profits on investments
Valuation as at 31 March
Analysed as at 31 March
Cost of investments
Net unrealised losses on investments
Valuation
2021
£’000s
534,962
(116,219)
418,743
174,694
(142,057)
114,371
565,751
576,074
(10,323)
565,751
2020
£’000s
518,012
51,122
569,134
270,095
(270,816)
(149,670)
418,743
534,962
(116,219)
418,743
The Company received £142,057,000 (2020: £270,816,000) from investments sold in the year. The book cost of these investments
when they were purchased was £133,582,000 (2020: £253,145,000). These investments have been revalued over time and until they
were sold any unrealised gains/losses were included in the fair value of the investments.
Year to 31 March
Gains/(losses) on investments
Net gain on investments sold
Other capital charges
Movement in unrealised gains/(losses)
Total gains/(losses) on investments
2021
£'000
8,475
(68)
105,896
114,303
2020
£'000
17,671
(49)
(167,341)
(149,719)
Under IFRS 10 Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities, the following are
subsidiaries of the Company as at 31 March 2021 and as at 31 March 2020, held as part of the investment portfolio, and are
accounted for as investments at fair value through profit and loss.
Country of
registration and
incorporation
Number and class of
shares held
UEM (HK) Limited (1)
Hong Kong
1,000 ordinary shares
UEM Mauritius Holdings Limited (2)
Bermuda
Loan
Holding
and voting
rights
100
100
2021
Fair
value
£’000s
–
–
2020
Fair
value
£’000s
–
–
(1) Incorporated on 26 January 2017 and commenced trading on 18 July 2017 to carry on business as an investment company (see note 24 for related party
transactions).
(2) The terms of the loan agreement with UEM Mauritius Holdings Limited, the parent company of Utilico Emerging Markets (Mauritius), provides that UEM
retains effective control of the company since it can only appoint directors with the approval of UEM. Utilico Emerging Markets (Mauritius) is in liquidation
and following completion UEM Mauritius Holdings Limited will then be liquidated.
The subsidiary undertakings carry on business as investment companies and are considered to be investment entities.
As at 31 March 2020, the Company also held Global Equity Risk Protection Limited (“GERP”) as part of the investment portfolio.
GERP (3)
Country of
registration and
incorporation
Bermuda
Number and class of
shares held
Holding
and voting
rights
3,920 Class B shares linked to a
segregated account in GERP
100
2021
Fair
value
£’000s
n/a
2020
Fair
value
£’000s
–
(3) A Bermuda segregated accounts company which was incorporated and commenced trading on 4 May 2006. The segregated account, structured
as the Bermuda law equivalent of a protected cell, existed for the sole purpose of carrying out derivative transactions on behalf of the Company.
The holding represented 100% of the issued Class B shares and had no voting rights. On 6 May 2020, UEM’s segregated account was closed for nil
consideration. Since November 2019, the Company has directly traded in the derivative transactions.
Associated undertakings
Under IFRS10 Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities, the following associated
undertakings as at 31 March 2021 and 31 March 2020 are held as part of the investment portfolio and consequently are
accounted for as investments at fair value through profit and loss:
Country of incorporation
Country of listing
Country of operations
Number of ordinary shares held
Percentage of ordinary shares held
East Balkan Properties plc
Pitch Hero Holdings Limited
Isle of Man
Unlisted
United Kingdom
Unlisted
Bulgaria & Romania
United Kingdom
6,833
23.6%
58,951
34.4%
Transactions with associated undertaking were as follows:
East Balkan Properties plc
During the year, East Balkan Properties plc returned capital by way of dividends, UEM received £0.5m.
Pitch Hero Holdings Limited (“Pitch Hero”)
Pursuant to a loan agreement dated 1 March 2021 under which UEM has agreed to loan monies to Pitch Hero, UEM advanced to
Pitch Hero £150k. As at 31 March 2021, the balance of the loan and interest outstanding was £151k. The loan bears interest at an
annual rate of 5.0% with a 12 month payment holiday in the first year and is repayable on 1 March 2024.
78
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
79
NOTES TO THE ACCOUNTS (continued)
Significant interests
13. BANK LOANS – NON-CURRENT LIABILITIES
In addition to the above, the Company has a holding of 3% or more of any class of share capital of the following undertakings,
which are material in the context of the accounts:
Country of
registration and incorporation
Class of
shares held
2021
% of class of
instruments
held
2020
% of class of
instruments
held
USD 69.5m repayable March 2024
USD 58.4m repayable April 2021
2021
£’000s
50,373
–
50,373
2020
£’000s
–
47,079
47,079
APT Satellite Holdings Limited
Hong Kong
Bolsa De Valores De Colombia
Conpet S.A.
Kinx Inc
Colombia
Romania
South Korea
Ocean Wilsons Holdings Limited
Bermuda
Telelink Business Services Group
Umeme Limited
Bulgaria
Uganda
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
11. CURRENT ASSETS
Other receivables
Accrued income
Sales for future settlement
Overseas tax recoverable
Other debtors
Derivative financial assets
S&P Options
12. CURRENT LIABILITIES
Other payables
Bank overdraft
Interest payable
Other creditors and accruals
Purchases awaiting settlement
Derivative financial assets
S&P Options
n/a
7.4
7.3
4.8
6.1
10.0
8.4
2021
£’000s
1,381
126
73
30
3.7
6.4
7.9
3.0
5.6
–
8.1
2020
£’000s
2,898
1,794
12
35
The Company has an unsecured committed senior multicurrency revolving facility of £50,000,000 with the Bank of Nova Scotia,
London Branch which was extended in March 2021 to 15 March 2024 and novated from Scotiabank Europe PLC to the Bank of
Nova Scotia, London Branch. Commitment fees 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, are typical of those normally found in facilities
of this nature. The existing loan rolls over on a periodic basis subject to usual conditions including a covenant with which the
Company is comfortable it can ensure compliance.
14. PROVISION FOR CAPITAL GAINS TAX
Balance brought forward
Increase in provision for Indian tax on capital gains
Balance as at 31 March
2021
£’000s
-
1,524
1,524
2020
£’000s
-
-
-
Provision is made for deferred tax in respect of capital gains tax on chargeable investment holding gains in India.
15. OPERATING SEGMENTS
1,610
4,739
The Directors are of the opinion that the Company is engaged in a single segment of business of investing in equity and debt securities,
issued by companies operating and generating revenue in emerging markets and therefore no segmental reporting is provided.
2021
£’000s
–
2021
£’000s
4,211
35
6,549
–
10,795
2021
£’000s
–
2020
£’000s
1,344
2020
£’000s
1,120
17
1,447
1,162
3,746
2020
£’000s
278
16. ORDINARY SHARE CAPITAL
Issued, called up and fully paid
Ordinary shares of 1p each
Balance brought forward
Issue of ordinary shares
Number
2021
£'000
Number
227,862,470
2,278
229,812,473
2020
£'000
2,298
–
(20)
–
(1,950,003)
227,862,470
2,278
Purchased for cancellation by the Company
Balance as at 31 March
(6,589,096)
221,273,374
(65)
2,213
During the year the Company bought back for cancellation 6,589,096 (2020: 1,950,003) ordinary shares at a total cost of
£12,112,000 (2020: £4,758,000). A further 671,258 ordinary shares have been purchased for cancellation at a total cost of
£1,426,000 since the year end.
17. MERGER RESERVE
Balance brought forward
Balance as at 31 March
2021
£’000s
76,706
76,706
2020
£’000s
76,706
76,706
80
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
81
NOTES TO THE ACCOUNTS (continued)
18. CAPITAL REDEMPTION RESERVE
22. NET ASSET VALUE PER SHARE
2021
£’000s
2020
£’000s
The NAV per share is based on the net assets attributable to the equity shareholders of £505,696,000 (2020: £414,343,000) and
on 221,273,374 (2020: 227,862,470) shares, being the number of shares in issue at the year end.
47
20
67
2020
£’000s
490,504
(4,758)
485,746
2020
Total
£’000s
17,671
Balance brought forward
Purchased for cancellation by the Company (see note 16)
Balance as at 31 March
19. SPECIAL RESERVE
Balance brought forward
Purchased for cancellation by the Company (see note 16)
Balance as at 31 March
20. CAPITAL RESERVES
67
65
132
2021
£’000s
485,746
(12,112)
473,634
Realised gains on investments
Unrealised gains/(losses) on
investments
Realised (losses)/gains on
derivative instruments
Unrealised gains/(losses) on
derivative instruments
Foreign exchange gains/(losses)
Finance costs charged to capital
Expenses charged to capital
Capital gains tax
Other capital charges
Investment
holding
gains
£’000s
–
Realised
£’000s
8,475
2021
Total
£’000s
8,475
Investment
holding
gains
£’000s
–
Realised
£’000s
17,671
–
105,896
105,896
–
(167,341)
(167,341)
(4,543)
–
(4,489)
1,575
–
1,575
–
54
–
2,247
(609)
(7,424)
(1,585)
(68)
–
–
–
–
–
2,247
(609)
(7,424)
(1,585)
(68)
–
(1,908)
(847)
(2,959)
(2,134)
(49)
(54)
–
–
–
–
–
(54)
(1,908)
(847)
(2,959)
(2,134)
(49)
(3,507)
105,950
102,443
11,349
(167,395)
(156,046)
Balance brought forward
(40,038)
(116,273)
(156,311)
Balance as at 31 March
(43,545)
(10,323)
(53,868)
(51,387)
(40,038)
51,122
(265)
(116,273)
(156,311)
Included within the capital reserve movement for the year is £586,000 (2020: £3,645,000) of dividend receipts recognised as
capital in nature, £297,000 (2020: £636,000) of transaction costs on purchases of investments and £192,000 (2020: £373,000) of
transaction costs on sales of investments.
21. REVENUE RESERVE
Balance brought forward
Revenue profit for the year
Dividend paid in the year
Balance as at 31 March
2021
£’000s
5,857
18,225
2020
£’000s
4,865
18,006
(17,203)
(17,014)
6,879
5,857
23. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
2021
Bank loans
Repurchase of shares for cancellation
Dividends paid
Balance as at
31 March 2020
£’000s
Transactions in
the year
£’000s
New cashflow
payments
£’000s
Foreign
exchange loss
£’000s
Balance as at
31 March 2021
£’000s
47,079
–
–
47,079
–
12,112
17,203
29,315
6,927
(12,112)
(17,203)
(22,388)
(3,633)
50,373
–
–
–
–
(3,633)
50,373
2020
Bank loans
Repurchase of shares for cancellation
Dividends paid
Balance as at
31 March 2019
£’000s
Transactions in
the year
£’000s
New cashflow
payments
£’000s
Foreign
exchange loss
£’000s
Balance as at
31 March 2020
£’000s
7,755
–
–
7,755
–
4,758
17,014
21,772
38,643
(4,758)
(17,014)
16,871
681
–
–
681
47,079
–
–
47,079
24. RELATED PARTY TRANSACTIONS
The following are considered related parties of the Company:
the subsidiary undertakings and the associated undertakings of
the Company set out under note 10, the Board of UEM, ICM and
ICMIM (the Company’s joint portfolio managers), ICM Investment
Research Limited, ICM Corporate Services (Pty) Ltd, Mr Saville,
Mr Jillings (a key management person of ICMIM) and UIL Limited.
During the year the Company made payments to its subsidiary
UEM (HK) Limited of £781,000 and capitalised interest of
£1,903,000. As at 31 March 2021 the fair value of the loan was
£8,723,000 (2020: £6,420,000) and loan interest due to UEM was
£64,000 (2020: £1,249,000). There were no transactions with
GERP or UEM (Mauritius).
There were no transactions between the associated
undertakings and the Company other than transactions in the
ordinary course of UEM’s business and these are set out in note
10. As detailed in the Directors’ Remuneration Report on pages
55 to 57, the Board received aggregate remuneration of £191,000
(2020: £189,447) included within “Other expenses” for services as
Directors. As at the year end, £47,750 (2020: £23,800) remained
outstanding to the Directors. In addition to their fees, the
Directors received dividends totalling £101,225 (2020: £91,844)
during the year under review in respect of their shareholdings in
the Company. There were no further transactions with the Board
during the year.
There were no transactions with ICM, ICMIM, ICM Investment
Research Limited and ICM Corporate Services (Pty) Ltd,
subsidiaries of ICM, other than investment management,
secretarial costs, research fees and performance fees as set
out in note 4, reimbursed expenses included within note 5 of
£25,000 (2020: £235,000). As at the year end £5,079,000 (2020:
£nil) remained outstanding to ICM and ICMIM in respect of
performance fees and £846,000 (2020: £947,000) remained
outstanding in respect of management, company secretarial
and research fees. Mr Jillings received dividends totalling £39,622
(2020: £45,086) and UIL Limited received dividends totalling
£2,085,000 (2020: £2,733,000).
25. GOING CONCERN
Notwithstanding that the Company has reported net current
liabilities of £8,158,000 as at 31 March 2021 (31 March 2020:
net current assets £42,679,000), 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 focussed
on the forecast liquidity of the Company for at least twelve
months from the date of approval of the financial statements.
This analysis assumes that the Company would, if necessary,
be able to meet some of its short-term obligations through
the sale of listed securities, which represented 96% of the
Company’s total portfolio as at 31 March 2021. As part of this
assessment the Board has considered a severe but plausible
downside that reflects the impact of Covid-19 and an
assessment of the Company’s ability to meet its liabilities as
they fall due assuming a significant reduction in asset values
and accompanying currency volatility.
82
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
83
NOTES TO THE ACCOUNTS (continued)
The Board also considered reverse stress testing to identify
the reduction in the valuation of liquid investments that
would cause the Company to be unable to meet its net
liabilities, being primarily the bank loan. 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 believe that the
Company will have sufficient funds to continue to meet its
liabilities as they fall due for at least twelve months from the
date of approval of the financial statements.
In accordance with the Company's Articles of Association,
shareholders have the right to vote at the Annual General
Meeting every five years on whether to continue the
Company. The next continuation vote will be in September
2021. The Investment Managers and UEM’s brokers engage
with shareholders on an ongoing basis and the Board, having
taken into account recent discussions with many of UEM’s
major shareholders, the results of previous continuation
votes and the ongoing demand for UEM’s shares, considers it
to be likely that the resolution proposing the continuation of
the Company at this year’s AGM will be passed.
Accordingly, the Board considers it appropriate to continue to
adopt the going concern basis in preparing the accounts.
26. FINANCIAL RISK MANAGEMENT
The Company’s investment policy is to provide long-term total
return by investing predominantly in the infrastructure, utility
and related sectors, mainly in emerging markets. The Company
seeks to meet its investment policy by investing principally in
a diversified portfolio of both listed and unlisted companies.
Derivative instruments may be used for purposes of hedging
the underlying portfolio of investments. The Company has
the power to take out both short and long-term borrowings.
In pursuing the investment policy, the Company is exposed
to financial risks which could result in a reduction of either or
both of the value of the net assets and the profits available
for distribution by way of dividend. These financial risks are
principally related to the market (currency movements, interest
rate changes and security price movements), liquidity and credit
Currency exposure
and counterparty risk. The Board of Directors, together with
the Investment Managers, is responsible for the Company’s
risk management. The Directors’ policies and processes for
managing the financial risks are set out in (a), (b) and (c) below.
The accounting policies which govern the reported Statement
of Financial Position carrying values of the underlying financial
assets and liabilities, as well as the related income and
expenditure, are set out in note 1 to the accounts. The policies
are in compliance with IFRS in conformity with the requirements
of Companies Act 2006 and best practice and include the
valuation of financial assets and liabilities at fair value. The
Company does not make use of hedge accounting rules.
(a) Market risks
The fair value of equity and other financial securities held in
the Company’s portfolio and derivative financial instruments
fluctuates with changes in market prices. Prices are themselves
affected by movements in currencies and interest rates and
by other financial issues, including the market perception of
future risks. The Board sets policies for managing these risks
within the Company’s investment policy and meets regularly
to review full, timely and relevant information on investment
performance and financial results. ICMIM assesses exposure
to market risks when making each investment decision
and monitors on-going market risk within the portfolio of
investments and derivatives. The Company’s other assets
and liabilities may be denominated in currencies other than
Sterling and may also be exposed to interest rate risks. ICMIM
and the Board regularly monitor these risks. The Company
does not normally hold significant cash balances. Borrowings
are limited to amounts and currencies commensurate with
the portfolio’s exposure to those currencies, thereby limiting
the Company’s exposure to future changes in exchange rates.
Gearing may be short or long-term, in Sterling and foreign
currencies, and enables the Company to take a long-term view
of the countries and markets in which it is invested without
having to be concerned about short-term volatility. The Board
regularly monitors the effects on net revenue of interest
earned on deposits and paid on gearing.
The principal currencies to which the Company was exposed during the year are set out below. The exchange rates applying
against Sterling as at 31 March, and the average rates during the year, were as follows:
BRL
Brazilian Real
HKD Hong Kong Dollar
INR
Indian Rupee
PHP
Philippine Peso
KRW South Korea Won
USD United States Dollar
84
Utilico Emerging Markets Trust plc
2021
Average
7.7856
10.7264
100.8750
66.9672
7.0664
10.1381
97.0330
64.0465
2020
6.4311
9.6107
93.8038
63.0639
1561.4754
1515.0781
1509.4531
1.3797
1.3077
1.2399
The Company’s assets and liabilities as at 31 March (shown at fair value, except derivatives at gross exposure value), by currency
based on the country of primary exposure, are shown below:
2021
Current assets
Creditors
Foreign currency exposure on net monetary items
BRL
£’000s
HKD
£’000s
INR
£’000s
KRW
£’000s
PHP
£’000s
USD
£’000s
Other
£’000s
Total
£’000s
277
–
277
–
–
–
358
379
469
205
876
2,564
–
–
– (54,623)
– (54,623)
358
379
469 (54,418)
876 (52,059)
Investments
91,811
88,476
76,590
36,812
34,210
22,461 172,691 523,051
Total net foreign currency exposure
92,088
88,476
76,948
37,191
34,679 (31,957) 173,567 470,992
Percentage of net exposures
19.6%
18.8% 16.3%
7.9%
7.4%
(6.8%)
36.8% 100.0%
2020
Current assets
Creditors
BRL
£’000s
HKD
£’000s
INR
£’000s
PHP
£’000s
RON
£’000s
USD
£’000s
Other
£’000s
Total
£’000s
1,254
631
963
686
432
40,358
2,226
46,550
–
(529)
–
–
(432)
(47,535)
(40)
(48,536)
Foreign currency exposure on net monetary items
1,254
102
963
686
–
(7,177)
2,186
(1,986)
Investments
109,104
68,941 53,720
26,674
22,407
13,478
98,005 392,329
Total net foreign currency exposure
110,358
69,043 54,683
27,360
22,407
6,301 100,191 390,343
Percentage of net exposures
28.3%
17.7% 14.0%
7.0%
5.7%
1.6%
25.7% 100.0%
Based on the financial assets and liabilities held, and exchange rates applying, at the Statement of Financial Position date, a
weakening or strengthening of Sterling against each of these currencies by 10% would have had the following approximate effect
on annualised income after tax and on NAV per share:
Weakening of
Sterling
BRL
£’000s
HKD
£’000s
INR
£’000s
KRW
£’000s
PHP
£’000s
USD
£’000s
BRL
£’000s
HKD
£’000s
INR
£’000s
PHP
£’000s
RON
£’000s
USD
£’000s
2021
2020
Statement of Comprehensive Income return after tax
Revenue return
244
217
431
54
83
6
169
168
374
276
–
36
Capital return
10,201
9,831
8,510
4,090
3,801
2,496
12,123
7,660
5,969
2,964
2,490
1,616
Total return
10,445 10,048
8,941
4,144
3,884
2,502
12,292
7,828
6,343
3,240
2,490
1,652
NAV per share
Basic – pence
4.66
4.49
3.99
1.85
1.73
1.12
5.38
3.43
2.78
1.42
1.09
0.72
Strengthening of
Sterling
BRL
£’000s
HKD
£’000s
INR
£’000s
KRW
£’000s
PHP
£’000s
USD
£’000s
BRL
£’000s
HKD
£’000s
INR
£’000s
PHP
£’000s
RON
£’000s
USD
£’000s
2021
2020
Statement of Comprehensive Income return after tax
Revenue return
(244)
(217)
(431)
(54)
(83)
(6)
(169)
(168)
(374)
(276)
–
(36)
Capital return
(10,201)
(9,831)
(8,510)
(4,090)
(3,801)
(2,496)
(12,123)
(7,660)
(5,969)
(2,964)
(2,490)
(1,616)
Total return
(10,445) (10,048)
(8,941)
(4,144)
(3,884)
(2,502)
(12,292)
(7,828)
(6,343)
(3,240)
(2,490)
(1,652)
NAV per share
Basic – pence
(4.66)
(4.49)
(3.99)
(1.85)
(1.73)
(1.12)
(5.38)
(3.43)
(2.78)
(1.42)
(1.09)
(0.72)
Report and Accounts for the year to 31 March 2021
85
NOTES TO THE ACCOUNTS (continued)
Interest rate exposure
Exposure to floating rates
Cash
Bank overdrafts
Loans
Within
one year
£’000s
More than
one year
£’000s
1,027
(4,211)
–
(3,184)
–
–
(50,373)
(50,373)
2021
Total
£’000s
1,027
(4,211)
(50,373)
(53,557)
Within
one year
£’000s
More than
one year
£’000s
40,620
(1,120)
–
39,500
–
–
(47,079)
(47,079)
2020
Total
£’000s
40,620
(1,120)
(47,079)
(7,579)
Exposures vary throughout the year as a consequence of changes in the make-up of the net assets of the Company arising out of
the investment and risk management processes. Interest received on cash balances or paid on overdrafts and loans is at ruling
market rates. The Company’s total returns and net assets are sensitive to changes in interest rates on cash and borrowings.
Based on the financial assets and liabilities held and the interest rates pertaining at each Statement of Financial Position date,
a relative decrease or increase in market interest rates by 2% would have had the following approximate effects on the income
statement revenue and capital returns after tax and on the NAV per share.
Revenue return
Capital return
Net assets
Other market risk exposures
2% increase
in rate
£’000s
2021
2% decrease
in rate
£’000s
2% increase
in rate
£’000s
2020
2% decrease
in rate
£’000s
(366)
(705)
(1,071)
366
705
1,071
508
(659)
(151)
(508)
659
151
The portfolio of investments, valued at £565,751,000 as at 31 March 2021 (2020: £418,743,000) is exposed to market price
changes.
Based on the portfolio of investments at the Statement of Financial Position date and assuming other factors remain constant, a
decrease or increase in the fair values of the portfolio by 20% would have had the following approximate effects on the Statement
of Comprehensive Income capital return after tax and on the basic NAV per share:
Statement of Comprehensive Income capital return £’000s
108,769
(107,556)
83,580
(83,580)
Increase
in value
2021
Decrease in
value
Increase
in value
2020
Decrease in
value
NAV per share
Basic – pence
(b) Liquidity risk exposure
The Company is required to raise funds to meet commitments associated with financial instruments. These funds may be raised
either through the realisation of assets or through increased borrowing. The risk of the Company not having sufficient liquidity
at any time is not considered by the Board to be significant given: the number and value of quoted liquid investments held in the
Company’s portfolio (80 valued at £545m as at 31 March 2021); and the existence of the Bank of Nova Scotia, London Branch loan
facility agreement expiring on 15 March 2024.
Cash balances are held with reputable banks with high quality external credit ratings.
The Investment Managers review liquidity at the time of making each investment decision. The Board reviews liquidity exposure
at each meeting. The Company had a loan facility of £50m as set out in note 13. The remaining contractual maturities of the
financial liabilities as at 31 March, based on the earliest date on which payment can be required, were as follows:
2021
Creditors:
Bank overdrafts
Bank loans and interest
Other payables
2020
Creditors:
Bank overdrafts
Bank loans and interest
Other payables
Derivative financial instruments
Three
months
or less
£’000
4,211
212
625
5,048
Three
months
or less
£’000
1,120
153
2,626
278
4,177
More than three
months but less
than one year
£’000
More than
one year
£’000
Total
£’000
4,211
52,927
625
–
635
–
635
–
52,080
–
52,080
57,763
More than three
months but less
than one year
£’000
More than
one year
£’000
–
414
–
–
–
47,084
–
–
Total
£’000
1,120
47,651
2,626
278
414
47,084
51,675
(c) Credit risk and counterparty exposure
The Company is exposed to potential failure by counterparties to deliver securities for which the Company has paid, or to pay for
securities which the Company has delivered. The Board approves all counterparties used by the Company in such transactions, which
must be settled on the basis of delivery against payment (except where local market conditions do not permit). A list of pre-approved
counterparties is maintained and regularly reviewed by ICMIM, by Waverton and by the Board. Broker counterparties are selected
based on a combination of criteria, including credit rating, balance sheet strength and membership of a relevant regulatory body.
The rate of default in the past has been negligible. Cash and deposits are held with reputable banks with high quality external credit
ratings.
The Company has an on-going contract with its custodians for the provision of custody services. The contracts are reviewed regularly.
Details of securities held in custody on behalf of the Company are received and reconciled monthly. To the extent that the Investment
Managers and Waverton carry out duties (or cause similar duties to be carried out by third parties) on the Company’s behalf, the
Company is exposed to counterparty risk. The Board assesses this risk continuously through regular meetings with the Investment
Managers.
(d) Fair value of financial assets and financial liabilities
The assets and liabilities of the Company are, in the opinion of the Directors, reflected in the Statement of Financial Position at fair
value, or at a reasonable approximation thereof. Borrowings under the loan facility do not have a value materially different from
their capital repayment amounts. Borrowings in foreign currencies are converted into Sterling at exchange rates ruling at each
valuation date.
Unquoted investments are valued based on professional assumptions and advice that is not wholly supported by prices from
current market transactions or by observable market data. The Directors make use of recognised valuation techniques and may
take account of recent arms’ length transactions in the same or similar investments. The Directors regularly review the principles
applied by the Investment Managers to those valuations to ensure they comply with the Company’s accounting policies and with
fair value principles.
49.16
(48.61)
36.68
(36.68)
None of the Company’s financial assets is past due or impaired.
86
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
87
NOTES TO THE ACCOUNTS (continued)
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.
This is especially true considering the Covid-19 pandemic. The sensitivities shown in the table below give an indication of the
effect of applying reasonable and possible alternative assumptions.
The level of change selected is considered to be reasonable, based on observation of market conditions and historic trends. In
addition to these observations, the risk weightings of investments also considered the impact of Covid-19 on the valuations. The
valuations of fund interests are based on their managers’ NAVs and these NAVs have been reviewed to ensure that the economic
impact of Covid-19 has been considered. 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.
Investment
UEM (HK) Limited -
CGN F3
Conversant Pte
Limited
East Balkan
Properties plc
Other investments
Other investments
Other investments
Total
Investment
type
Valuation
methodology
Risk
weighting
Sensitivity
+/-
Equity
Equity
Equity
Equity
Equity
Loans
NAV
Last funding
round
Fair value of
net assets
Various
Various
Various
Low
High
High
Medium
High
High
10%
30%
30%
20%
30%
30%
Carrying
amount
£’000s
Sensitivity
£’000s
8,723
872
3,372
2,854
828
4,542
550
20,869
1,012
856
166
1,363
165
4,433
(e) Capital risk management
The investment policy of the Company is stated as being to provide long-term total return through a flexible investment policy
that permits it to make investments predominantly in infrastructure, utility and related sectors, mainly in emerging markets. The
capital of the Company comprises ordinary share capital and reserves equivalent to the net assets of the Company. In pursuing
the long-term investment policy, the Board has a responsibility for ensuring the Company’s ability to continue as a going concern.
It must therefore maintain an optimal capital structure through varying market conditions. This involves the ability to: issue and
buyback share capital within limits set by the shareholders in general meeting; borrow monies in the short and long term (up to a
limit of 25% of gross assets); and pay dividends to shareholders out of reserves. Changes to ordinary share capital are set out in
note 16. Dividend payments are set out in note 9. Loans are set out in note 13.
27. FAIR VALUE HIERARCHY
IFRS 13 ‘Financial Instruments: Disclosures’ require an entity to classify fair value measurements using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:
Level 1 reflects financial instruments quoted in an active market.
Level 2 reflects financial instruments whose fair value is evidenced by comparison with other observable current market
transactions in the same instrument or based on a valuation technique whose variables include only data from observable
markets.
Level 3 reflects financial instruments whose fair value is determined in whole or in part using a valuation technique based on
assumptions that are not supported by prices from observable market transactions in the same instrument and not based on
available observable market data.
The financial assets measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy as
follows:
As at 31 March 2021
Investments
As at 31 March 2020
Investments
Options – assets
Options – liabilities
Level 1
£’000
534,722
Level 1
£’000
394,623
1,344
(278)
Level 2
£’000
10,160
Level 2
£’000
10,242
–
–
Level 3
£’000
20,869
Level 3
£’000
13,878
–
–
Total
£’000
565,751
Total
£’000
418,743
1,344
(278)
395,689
10,242
13,878
419,809
During the year one stock with value of £3.6m was transferred from Level 1 to Level 2 due to investee company shares trading
irregularly and one stock with value of £6.8m was transferred from Level 2 to Level 1 due to investee company shares resuming
regular trading in the year. The book cost and fair values were transferred using the 31 March 2020 balances.
A reconciliation of fair value measurements in level 3 is set out in the following table:
Balance brought forward
Purchases
Sales
Gains on investments sold in the year
Losses on investments held at end of year
Balance as at 31 March
Analysed as at 31 March
Cost of investments
Losses on investments
Valuation
2021
£’000
13,878
8,423
(1,615)
524
(341)
20,869
22,519
(1,650)
20,869
2020
£’000
22,691
1,859
(11,092)
1,391
(971)
13,878
15,187
(1,309)
13,878
Level 3 inputs are sensitive to assumptions made when ascertaining fair value. Of Level 3 investments held as at 31 March
2021, 42% were valued using fund NAV, 24% using cost of recent investment or last funding round, 14% using the fair value
of the underlying net assets, 7% using a multiple of revenues and the remaining 13% were valued using alternative valuation
methodologies.
88
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
89
OTHER FINANCIAL INFORMATION (UNAUDITED)
NOTICE OF ANNUAL GENERAL MEETING
SECURITIES FINANCING TRANSACTIONS (“SFT”)
The Company has not, in the years to 31 March 2021
and 31 March 2020, participated in any: repurchase
transactions; securities lending or borrowing; buy-sell back
transactions; margin lending transactions; or total return
swap transactions (collectively called SFT). As such, it has no
disclosure to make in satisfaction of the UK version of the EU
regulation 2015/2365 on transparency of SFT which forms
part of UK law by virtue of the European Union (Withdrawal)
Act 2018, as amended.
ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE
(“AIFMD”)
In accordance with the AIFMD, information in relation to the
Company’s leverage and the remuneration of the Company’s
AIFM, ICMIM, is required to be made available to investors.
Detailed regulatory disclosures including those on the AIFM’s
remuneration policy are available on ICM’s website at www.
icm.limited/application/files/4815/6471/6027/2018.07_ICMIM_
Pillar_3_Disclosure.pdf
The Company’s maximum and actual leverage as at 31 March
are shown below:
Leverage
exposure
2021
Gross
method
Commitment
method
Maximum permitted limit
Actual
300%
110%
300%
110%
2020
Leverage
exposure
Maximum permitted limit
Actual
Gross
method
Commitment
method
300%
111%
300%
107%
The leverage limits are set by the AIFM and approved by the
Board. The AIFM is also required to comply with the gearing
parameters set by the Board in relation to borrowings.
Notice is hereby given that the Annual General Meeting
of Utilico Emerging Markets Trust plc will be held at
The Royal Society of Chemistry, Burlington House,
Piccadilly, London W1J 0BA on Tuesday, 21 September
2021 at 12.00 noon for the purpose of considering and,
if thought fit, passing the following resolutions (which
will be proposed in the case of resolutions 1 to 11, as
ordinary resolutions and, in the case of resolutions 12
and 13, as special resolutions).
ORDINARY BUSINESS
1. To receive and adopt the report of the Directors
of the Company and the financial statements for
the year ended 31 March 2021, together with the
report of the auditor thereon.
2. To approve the Directors’ Remuneration Report
for the year ended 31 March 2021.
3. To approve the Company’s dividend policy to pay
four interim dividends per year.
4. To re-elect Mr Rennocks as a Director.
5. To re-elect Ms Hansen as a Director.
6. To re-elect Mr Muh as a Director.
7. To re-elect Mr Stobart as a Director.
8. To re-appoint KPMG LLP as auditor to the
Company to hold office until the conclusion of the
next Annual General Meeting of the Company.
9. To authorise the Directors to determine the
auditor’s remuneration.
SPECIAL BUSINESS
Ordinary resolution
10. That the Company continues as presently
constituted.
11. That, in substitution for all existing authorities, the
Directors of the Company be and they are hereby
generally and unconditionally authorised pursuant
to section 551 of the Companies Act 2006 (the
“Act”), to exercise all the powers of the Company
to allot shares in the Company and to grant rights
to subscribe for or to convert any security into
shares in the Company (“Securities”) up to an
aggregate nominal amount of £110,300 (being 5%
of the aggregate nominal amount of the issued
share capital excluding treasury shares of the
Company as at the date of this notice) provided
that this authority shall expire at the conclusion of
the next Annual General Meeting of the Company
to be held in 2022 but so that the Company may,
at any time before such expiry, make any offer
or agreement which would or might require
Securities to be allotted after such expiry pursuant
to any such offer or agreement as if the authority
hereby conferred had not expired.
Special Resolutions
12. That, in substitution for all existing authorities
and subject to the passing of resolution 11, the
Directors of the Company be and are hereby
empowered pursuant to sections 570 and 573 of
the Companies Act 2006 (the “Act”) to allot equity
securities (as defined in section 560 of the Act)
pursuant to the authority granted by resolution 11,
and to sell equity securities held by the Company
as treasury shares (as defined in section 724 of
the Act) for cash, as if section 561(1) of the Act did
not apply to any such allotments or sales of equity
securities, provided that this power:
(a)
(b)
shall expire at the conclusion of the next
Annual General Meeting of the Company to be
held in 2022, except that the Company may
at any time before such expiry make offers
or agreements which would or might require
equity securities to be allotted or sold after
such expiry and notwithstanding such expiry
the Directors may allot or sell equity securities
in pursuance of such offers or agreements;
shall be limited to the allotment of equity
securities and/or sale of equity securities
held in treasury for cash up to an aggregate
nominal amount of £110,300 (representing
5% of the aggregate nominal amount of the
issued share capital, excluding treasury shares
of the Company as at the date of this notice);
and
(c)
shall be limited to the allotment of equity
securities and/or the sale of equity securities
held in treasury at a price of not less than
the net asset value per share as close as
practicable to the relevant allotment or sale.
13. That, in substitution for the Company’s existing
authority to make market purchases of ordinary
shares of 1p in the Company (“Shares”), the
Company be and is hereby authorised in
accordance with section 701 of the Companies
Act 2006 (the “Act”) to make market purchases of
90
90
Utilico Emerging Markets Trust plc
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
Report and Accounts for the year to 31 March 2021
91
91
NOTICE OF ANNUAL GENERAL MEETING (continued)
Shares (within the meaning of section 693 of the
Act), provided that:
(a) the maximum number of Shares hereby
authorised to be purchased is 33,068,000
(being 14.99% of the Company’s issued
ordinary share capital, excluding treasury
shares as at the date of this notice);
(b) the minimum price (exclusive of
expenses) which may be paid for a Share
shall be 1p being the nominal value per
share;
(c) the maximum price (exclusive of
expenses) which may be paid for a Share
shall be the higher of: (i) 5% above the
average of the market value of a Share
for the five business days immediately
preceding the date of purchase as derived
from the Daily Official List of the London
Stock Exchange; and (ii) that stipulated
by article 5(6) of the UK version of the
EU Market Abuse Regulation (2014/596)
which is part of UK law by virtue of the
European Union (Withdrawal) Act 2018, as
amended and supplemented from time
to time including by the Market Abuse
(Amendment) (EU Exit) Regulations 2019;
and
(d) unless renewed, the authority hereby
conferred shall expire at the conclusion
of the next Annual General Meeting of
the Company to be held in 2022 save
that the Company may, at any time prior
to such expiry, enter into a contract to
purchase Shares which will or may be
completed or executed wholly or partly
after such expiry and the Company may
purchase Shares pursuant to any such
contract or contracts as if the authority
conferred hereby had not expired.
All Shares purchased pursuant to the above authority
shall be either: (i) held, sold, transferred or otherwise
dealt with as treasury shares in accordance with the
provisions of the Act; or (ii) cancelled immediately upon
completion of the purchase.
By order of the Board
ICM Investment Management Limited
Company Secretary
18 June 2021
Registered Office:
The Cottage, Ridge Court
The Ridge
Epsom, Surrey KT18 7EP
NOTES:
1.
A member entitled to attend and vote at the meeting
convened by the above Notice is entitled to appoint one
or more proxies to exercise all or any of the rights of
the member to attend, speak and vote in his/her place.
A proxy need not be a member of the Company. If a
member appoints more than one proxy to attend the
meeting, each proxy must be appointed to exercise the
rights attached to a different share or shares held by the
member.
2.
To appoint a proxy, you may use the form of proxy
enclosed with this annual report. To be valid, the form
of proxy, together with the power of attorney or other
authority (if any) under which it is signed or a notarial
certified or office copy of the same, must be completed
and returned to the office of the Company’s registrar
in accordance with the instructions printed thereon as
soon as possible and in any event by not later than 12:00
noon on 17 September 2021. Amended instructions
must also be received by the Company’s registrar by
the deadline for receipt of forms of proxy. Alternatively,
you can vote or appoint a proxy electronically by visiting
www.investorcentre.co.uk/eproxy. You will be asked to
enter the Control Number, the Shareholder Reference
Number and PIN which are printed on the form of
proxy. The latest time for the submission of proxy votes
electronically is 12:00 noon on 17 September 2021.
To appoint more than one proxy, an additional proxy
form(s) may be obtained by contacting the Registrar’s
helpline on +44 (0370) 707 1375 or you may photocopy
the form of proxy. Please indicate in the box next to the
proxy holder’s name the number of shares in relation to
which they are authorised to act as your proxy. Please
also indicate by marking the box provided if the proxy
instruction is one of multiple instructions being given. All
forms of proxy must be signed and should be returned
together in the same envelope.
3. Completion and return of the form of proxy will not
prevent you from attending the meeting and voting in
person. If you have appointed a proxy and attend the
meeting in person, your proxy appointment will be
automatically terminated.
4. Any person receiving a copy of this Notice as a person
nominated by a member to enjoy information rights
under section 146 of the Companies Act 2006 (a
8.
Shareholders who hold their shares electronically may
“Nominated Person”) should note that the provisions
submit their votes through CREST, by submitting the
in Notes 1 and 2 above concerning the appointment of
appropriate and authenticated CREST message so as to
a proxy or proxies to attend the meeting in place of a
be received by the Company’s registrar not later than
member, do not apply to a Nominated Person as only
12:00 noon on 17 September 2021. Instructions on how
ordinary shareholders have the right to appoint a proxy.
to vote through CREST can be found by accessing the
However, a Nominated Person may have a right under
following website: euroclear.com/CREST. Shareholders
an agreement between the Nominated Person and
are advised that CREST and the internet are the only
the member by whom he or she was nominated to be
methods by which completed proxies can be submitted
appointed, or to have someone else appointed, as proxy
electronically.
for the meeting. If a Nominated Person has no such
proxy appointment right or does not wish to exercise it,
he/she may have a right under such agreement to give
instructions to the member as to the exercise of voting
rights at the meeting.
9.
If you are a CREST system user (including a CREST
personal member) you can appoint one or more proxies
or give an instruction to a proxy by having an appropriate
CREST message transmitted. To appoint one or more
proxies or to give an instruction to a proxy (whether
5. Nominated Persons should also remember that their
previously appointed or otherwise) via the CREST system,
main point of contact in terms of their investment in
CREST messages must be received by Computershare
the Company remains the member who nominated the
(ID number 3RA50) not later than 12:00 noon on 17
Nominated Person to enjoy the information rights (or
perhaps the custodian or broker who administers the
September 2021. For this purpose, the time of receipt
will be taken to be the time (as determined by the
investment on their behalf). Nominated Persons should
timestamp generated by the CREST system) from which
continue to contact that member, custodian or broker
Computershare is able to retrieve the message. CREST
(and not the Company) regarding any changes or queries
personal members or other CREST sponsored members
relating to the Nominated Person’s personal details and
should contact their CREST sponsor for assistance with
interest in the Company (including any administrative
appointing proxies via CREST. For further information
matter). The only exception to this is where the Company
on CREST procedures, limitations and system timings
expressly requests a response from the Nominated
Person.
please refer to the CREST manual. The Company may
treat as invalid a proxy appointment sent by CREST in
the circumstances set out in Regulation 35(5)(a) of The
6. Pursuant to Regulation 41 (1) of The Uncertificated
Uncertificated Securities Regulations 2001.
Securities Regulations 2001 and for the purposes of
section 360B of the Companies Act 2006, the Company
has specified that only shareholders registered on the
register of members of the Company by not later than
6.00 p.m. two days prior to the time fixed for the meeting
shall be entitled to attend and vote at the meeting in
respect of the number of the ordinary shares registered in
their name at such time. If the meeting is adjourned, the
time by which a person must be entered on the register
of members of the Company in order to have the right
to attend and vote at the adjourned meeting is 6.00 p.m.
two days prior to the time of adjournment. Changes to
the register of members after the relevant times shall be
disregarded in determining the rights of any person to
attend and vote at the meeting.
10.
If the Chairman, as a result of proxy appointments,
is given discretion as to how the votes the subject of
those proxies are cast and the voting rights in respect
of those discretionary proxies, when added to the
interests in the Company’s securities already held by the
Chairman, result in the Chairman holding such number
of voting rights that he has a notifiable obligation under
the Disclosure Guidance and Transparency Rules, the
Chairman will make the necessary notifications to the
Company and the Financial Conduct Authority. As a result,
any member holding 3% or more of the voting rights in
the Company, who grants the Chairman a discretionary
proxy in respect of some or all of those voting rights and
so would otherwise have a notification obligation under
the Disclosure Guidance and Transparency Rules, need
7.
In the case of joint holders, the vote of the senior holder
not make a separate notification to the Company and
who tenders a vote, whether in person or by proxy, shall
Financial Conduct Authority. Any such person holding 3%
be accepted to the exclusion of the votes of the other joint
or more of the voting rights in the Company who appoints
holders and, for this purpose, seniority will be determined
a person other than the Chairman as his proxy will
by the order in which the names stand in the register of
need to ensure that both he and such person complies
members of the Company in respect of the relevant joint
with their respective disclosure obligations under the
holding.
Disclosure Guidance and Transparency Rules.
92
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
93
NOTICE OF ANNUAL GENERAL MEETING (continued)
COMPANY INFORMATION
11. Any questions relevant to the business of the meeting
15. Further information regarding the meeting which the
may be asked at the meeting by anyone permitted to
Company is required by section 311A of the Companies
speak at the meeting. A shareholder may alternatively
Act 2006 to publish on a website in advance of the
submit a question in advance by a letter addressed to the
meeting, can be accessed at www.uemtrust.co.uk.
Company Secretary at the Company’s registered office.
Under section 319A of the Companies Act 2006, the
Company must answer any question a shareholder asks
relating to the business being dealt with at the meeting,
16. No service contracts exist between the Company and any
of the Directors, who hold office in accordance with letters
of appointment and the Articles of Association.
unless (i) answering the question would interfere unduly
17. Copies of the letters of the appointment and deeds of
with the preparation for the meeting or involve the
indemnity between the Company and the Directors, a
disclosure of confidential information; (ii) the answer has
copy of the Articles of Association of the Company and
already been given on a website in the form of an answer
the register of the Directors’ holdings will be available for
to a question; or (iii) it is undesirable in the interests of
inspection at the registered office of the Company during
the Company or the good order of the meeting that the
usual business hours on any weekday (Saturdays, Sundays
question be answered.
12. Any corporation which is a member can appoint one or
more corporate representatives who may exercise on its
behalf all of its powers as a member provided that, if it
and Bank Holidays excluded) until the date of the meeting
and also on the date of the meeting from 15 minutes prior
to commencement of the meeting until the conclusion
thereof.
is appointing more than one corporate representative, it
18. Under sections 338 and 338A of the Companies Act 2006,
does not do so in relation to the same shares.
13. Under section 527 of the Companies Act 2006, members
meeting the threshold requirements set out in that
section have the right to require the Company to publish
on a website a statement setting out any matter relating
to: (i) the audit of the Company’s accounts (including the
auditor’s report and the conduct of the audit) that are
to be laid before the meeting; or (ii) any circumstance
connected with an auditor of the Company ceasing to
hold office since the previous meeting at which annual
members meeting with the threshold requirements in
those sections have the right to require the Company: (i)
to give, to members of the Company entitled to receive
notice of the meeting, notice of a resolution which may
properly be moved and is intended to be moved at the
meeting; and/or (ii) to include in the business to be dealt
with at the meeting any matter (other than a proposed
resolution) which may be properly included in the
business. A resolution may properly be moved or a matter
may properly be included in the business unless:
accounts and reports were laid in accordance with section
(a)
(in the case of a resolution only), it would, if passed,
437 of the Companies Act 2006.
The Company may not require the members requesting
any such website publication to pay its expenses in
be ineffective (whether by reason of inconsistency
with any enactment or the Company’s constitution or
otherwise);
complying with sections 527 or 528 of the Companies
(b)
it is defamatory of any person; or
Act 2006. Where the Company is required to place
a statement on a website under section 527 of the
Companies Act 2006, it must forward the statement to
the Company’s auditors not later than the time when
it makes the statement available on the website. The
business which may be dealt with at the meeting includes
any statement that the Company has been required under
section 527 of the Companies Act 2006 to publish on a
website.
14. As at 17 June 2021 (being the last practicable date prior
to the publication of this Notice of Annual General
Meeting), the Company’s issued share capital consisted of
220,602,116 ordinary shares of 1p each, excluding shares
held in treasury. Each ordinary share carries the right
to one vote and therefore the total voting rights in the
Company as at the date of this report are 220,602,116.
(c)
it is frivolous or vexatious.
Such a request may be in hard copy form or in electronic
form, and must identify the resolution of which notice is
to be given or the matter to be included in the business,
must be authorised by the person or persons making it,
must be received by the Company not later than 9 August
2021 (being the date six clear weeks before the meeting,
and (in the case of a matter to be included in the business
only) must be accompanied by a statement setting out the
grounds for the request.
19. Any electronic address provided either in this Notice or in
any related documents (including the form of proxy) may
not be used to communicate with the Company for any
purpose other than those expressly stated.
DIRECTORS
John Rennocks (Chairman)
Garth Milne (Deputy Chairman)
Susan Hansen
Anthony Muh
Eric Stobart, FCA (Chairman of the Audit & Risk
Committee)
REGISTERED OFFICE
The Cottage
Ridge Court
The Ridge
Epsom
Surrey KT18 7EP
Company Registration Number: 11102129
Legal Entity Identifier: 2138005TJMCWR2394O39
AIFM, JOINT PORTFOLIO MANAGER AND
COMPANY SECRETARY
ICM Investment Management Limited
PO Box 208
Epsom
Surrey KT18 7YF
Telephone +44 (0)1372 271486
Authorised and regulated in the UK by the Financial Conduct Authority
LEGAL ADVISER TO THE COMPANY
Norton Rose Fulbright LLP
3 More London Riverside
London SE1 2AQ
AUDITOR
KPMG LLP
15 Canada Square
London E14 5GL
Member of the Institute of Chartered Accountants in England and Wales
DEPOSITARY SERVICES PROVIDER
JP Morgan Europe Limited
25 Bank Street
Canary Wharf
London E14 5JP
Authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation Authority
REGISTRAR
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Telephone +44 (0370) 707 1375
JOINT PORTFOLIO MANAGER
ICM Limited
34 Bermudiana Road
Hamilton HM 11
Bermuda
COMPANY BANKER
The Bank of Nova Scotia, London Branch
201 Bishopsgate, 6th Floor
London EC2M 3NS
Authorised and regulated in the UK by the Financial Conduct Authority
ADMINISTRATOR AND CUSTODIAN
JPMorgan Chase Bank N.A. – London Branch
25 Bank Street
Canary Wharf
London E14 5JP
Authorised and regulated in the UK by the Financial Conduct Authority
BROKER
Shore Capital and Corporate Limited
Cassini House, 57 St James’s Street
London SW1A 1LD
Authorised and regulated in the UK by the Financial Conduct Authority
PUBLIC RELATIONS
Montford Communications Limited
2nd Floor, Berkeley Square House
Berkeley Square
Mayfair
London W1J 6BD
Telephone + 44 (0)20 7887 6287
94
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
95
ALTERNATIVE PERFORMANCE MEASURES
The European Securities and Markets Authority
defines an Alternative Performance Measure as being
a financial measure of historical or future financial
performance, financial position or cash flows, other
than a financial measure defined or specified in the
applicable financial reporting framework. The Company
uses the following Alternative Performance Measures:
Discount/Premium – if the share price is lower than
the NAV per share, the shares are trading at a discount.
Shares trading at a price above NAV per share are said
to be at a premium. As at 31 March 2021 the share
price was 197.50p (2020: 161.50p) and the NAV per
share was 228.54p (2020: 181.84p), the discount was
therefore 13.6% (2020: 11.2%)
Gearing – represents the ratio of the borrowings less
cash of the Company to its net assets.
Year to
31 March
2021
£’000s
Period to
31 March
2020
£’000s
4,211
1,120
50,373
47,079
(1,027)
(40,620)
53,557
7,579
page
80
70
70
Bank overdrafts
Bank loans
Cash
Total debt
Equity holders' funds
70
505,696
414,343
Gearing (%)
10.6
1.8
NAV per share – the value of the Company’s net
assets divided by the number of shares in issue (see
note 22 to the accounts).
NAV/share price total return – the return to
shareholders calculated on a per share basis by adding
dividends paid in the year to the increase or decrease
in the NAV or share price in the year. The dividends are
assumed to have been re-invested in the form of net
assets or shares, respectively, on the date on which the
dividends were paid.
Year to 31 March 2021
Dividend
rate
(pence)
NAV
(pence)
Share
price
(pence)
31 March 2020
n/a
181.84
161.50
19 June 2020
1.925
214.19
182.50
18 September 2020
1.925
212.40
183.50
18 December 2020
1.925
222.48
194.00
Total return since inception
NAV
31 March 2021
Share price
31 March 2021
NAV
31 March 2020
Share price
31 March 2020
NAV/Share price 20 July 2005 (pence) (1)
98.36
100
98.36
100
Total dividend, warrants and subscription
shares adjustment factor
NAV/Share price at year end (pence)
Adjusted NAV/Share price at year end
(pence)
1.76721
228.54
403.88
310.6%
1.83592
197.50
362.59
262.6%
1.70645
181.84
310.30
215.5%
1.76322
161.50
284.76
184.8%
24 March 2021
1.925
228.07
199.50
Total return
31 March 2021
Total return (%)
n/a
228.54
197.50
30.2
27.3
Period to 31 March
2020
Dividend
rate
(pence)
NAV
(pence)
Share
price
(pence)
31 March 2019
n/a
249.84
217.90
28 June 2019
1.800
271.28
243.00
27 September 2019
1.800
268.59
237.00
20 December 2019
1.925
256.90
232.00
27 March 2020
1.925
182.41
161.50
31 March 2020
Total return (%)
n/a
181.84
161.50
(24.9)
(23.2)
NAV/share price total return since inception – the
return to shareholders calculated on a per share basis
by adding dividends paid in the year and adjusting for
the exercise of warrants and subscription shares in the
year to the increase or decrease in the NAV/share price
in the year. The dividends are assumed to have been
re-invested in the form of net assets on the date on
which the dividends were paid. The adjustment for the
exercise of warrants and subscription shares is made
on the date the warrants and subscription shares were
exercised.
(1) Date of admission to trading on the Alternative Investment Market of UEM Bermuda.
Annual compound NAV total return since inception – the annual return to shareholders calculated on the
same basis as NAV total return, since inception.
Annual compound
Annual compound NAV total return since inception (%)
31 March 2021
31 March 2020
9.4
8.1
Ongoing charges – all operating costs expected to be regularly incurred and that are payable by the Company
or suffered within underlying investee funds, expressed as a proportion of the average weekly net asset values of
the Company (valued in accordance with its accounting policies) over the reporting period. The costs of buying and
selling investments and derivatives are excluded, as are interest costs, taxation, non-recurring costs and the costs
of buying back or issuing share.
Ongoing charges calculation (excluding performance fees)
Management and administration fees
Other expenses
Total expenses for ongoing charges calculation
Average net asset values of the Company
Ongoing Charges
Ongoing charges calculation (including performance fees)
Management and administration fees
Other expenses
Total expenses for ongoing charges calculation
Average net asset values of the Company
Ongoing Charges
* changes to the management fee are set out on page 75
With effect from
1 April 2021*
£’000s
31 March 2021
£’000s
31 March 2020
£’000s
Page
74
74
5,264
1,425
6,689
474,748
1.4%
3,629
1,425
5,054
4,615
1,787
6,402
474,748
586,396
1.1%
1.1%
With effect from
1 April 2021*
£’000s
31 March 2021
£’000s
31 March 2020
£’000s
Page
74
74
5,264
1,425
6,689
474,748
1.4%
8,708
1,425
10,133
4,615
1,787
6,402
474,748
586,396
2.1%
1.1%
96
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
97
HISTORICAL PERFORMANCE
as at 31 March
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
NAV total return per
ordinary share (1) (annual) (%)
Share price total return per
ordinary share (1) (annual) (%)
Annual compound NAV total
return (1) (since inception) (%)
Undiluted NAV per ordinary
share (1) (pence)
Diluted NAV per ordinary
share (pence)
30.2
(24.9)
3.5
6.6
26.2
1.7
12.4
(3.4)
20.9
3.4
19.5
27.3
(23.2)
5.4
7.1
24.9
(1.8)
8.2
(2.6)
20.8
7.4
28.6
9.4
8.1
11.0
11.7
12.1
10.9
11.9
11.8
13.9
12.9
14.7
228.54
181.84
249.84
247.22
251.72
206.45
209.79
192.38
205.49
175.60
175.28
228.54 (2) 181.84 (2) 249.84 (2) 247.22 (2) 241.29
202.52
209.79 (2) 192.38 (2) 205.49 (2) 175.60 (2) 175.28 (2)
Ordinary share price (pence) 197.50
161.50
217.90
212.00
214.50
178.50
188.50
180.00
191.20
164.00
157.75
Discount (3) (%)
(13.6)
(11.2)
(12.8)
(14.2)
(11.1)
(11.9)
(10.1)
(6.4)
(7.0)
(6.6)
(10.0)
Earnings per ordinary share
(basic)
- Capital (pence)
45.73
(68.29)
(0.12)
4.66
44.46
(5.50)
18.53
(12.13)
30.71
1.19
25.63
- Revenue (pence)
8.13
7.88
7.47
9.27
7.80
8.23
4.98
4.80
5.20
4.12
5.61
Total (pence)
53.86
(60.41)
7.35
13.93
52.26
2.73
23.51
(7.33)
35.91
5.31
31.24
Dividends per ordinary
share (pence)
7.775
7.575
7.200
7.000
6.650
6.400
6.100
6.100
5.800
5.500
5.200
Gross assets (4) (£m)
556.1
461.4
581.9
579.8
579.0
455.2
479.2
433.4
452.1
382.9
393.4
Equity holders’ funds (£m)
505.7
414.3
574.2
579.8
532.2
436.6
447.4
410.2
442.9
378.5
383.2
Ordinary shares bought back
(£m)
12.0
4.8
9.5
21.9
10.0
3.0
–
3.9
–
4.9
11.5
Net cash/(overdraft) (£m)
(3.2)
39.5
11.7
8.1
15.3
12.6
0.5
(0.9)
2.6
(1.8)
(0.7)
Bank loans (£m)
(50.4)
(47.1)
(7.8)
0.0
(46.8)
(18.7)
(31.9)
(23.1)
(9.2)
(4.4)
(10.2)
Net (debt)/cash (£m)
(53.6)
(7.6)
3.9
8.1
(31.5)
(6.1)
(31.4)
(24.0)
(6.6)
(6.2)
(10.9)
Net (gearing)/cash on net
assets (%)
(10.6)
(1.8)
0.7
1.4
(5.9)
(1.4)
(7.0)
(5.9)
(1.5)
(1.6)
(2.8)
Management and
administration fees and
other expenses
- excluding performance fee
(£m)
- including performance fee
(£m)
Ongoing charges figure (1)
- excluding performance
fee (%)
- including performance fee
(%)
5.0
10.1
6.4
6.4
5.9
5.9
5.7
5.2
5.7
14.3
4.5
4.5
4.6
3.7
3.4
3.9
3.1
7.7
3.7
12.9
3.6
9.6
1.1 (5)
1.1
1.0
2.1 (5)
1.1
1.0
1.0
1.0
1.1
1.1
1.1
0.9
0.8
2.9
1.1
1.8
0.9
3.2
0.9
0.9
0.8
2.5
(1) See Alternative Performance Measures on pages 96 and 97
(2) There was no dilution
(3) Based on diluted NAV
(4) Gross assets less liabilities excluding loans
(5) 1.4% with effect from 1 April 2021 following changes to the management fee as set out on page 97
98
Utilico Emerging Markets Trust plc
EMERGING CITIES | EMERGING WEALTH | EMERGING OPPORTUNITIES
UK CONTACT
PO Box 208
Epsom Surrey
KT18 7YF
Telephone: +44 (0)1372 271486
www.uemtrust.co.uk
PB
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2021
100