2022
REPORT AND ACCOUNTS
EMERGING CITIES | EMERGING WEALTH | EMERGING OPPORTUNITIES
WHY UTILICO EMERGING MARKETS TRUST PLC?
Santos Brasil Participacoes S.A. (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,
and the shift to digital economy, deliver attractive
investment opportunities for UEM. The EM middle
class is expected to double in ten years, driving 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
resilient 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 2022
1
CONTENTS
PERFORMANCE
4
5
Current Year Performance
Performance Summary
6 Chairman’s Statement
11 Geographical Investment Exposure
12 Top Thirty Companies
14 Performance Since Inception (20 July 2005)
15 Ten Year Performance
STRATEGIC REPORT AND INVESTMENTS
16
Investment Managers’ Report
22 Macro Trends Affecting Our Portfolio
24 Our Investment Approach
26 ESG Spotlight
27 Largest Holdings Overview
33 Strategic Report
42
Investment Managers and Team
GOVERNANCE
44 Directors
46 Directors’ Report
52 Corporate Governance Statement
57 Directors’ Remuneration Report
60 Audit & Risk Committee Report
63 Directors’ Statement of Responsibilities
FINANCIAL STATEMENTS
64
Independent Auditor’s Report
70 Accounts
74 Notes to the Accounts
ADDITIONAL INFORMATION
94 Notice of Annual General Meeting
98 Company Information
99 Alternative Performance Measures
101 Historical Performance
Rumo S.A. (Brazil)
FINANCIAL CALENDAR
Year End
31 March
Annual General Meeting
20 September 2022
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”.
Front cover image – Alupar Investimento S.A.
(Brazil)
FINANCIAL HIGHLIGHTS
International Container Terminal Services, Inc. (The Philippines)
NET ASSET VALUE
(“NAV”) TOTAL RETURN
PER SHARE*
NAV OF 254.22P
PER SHARE*
REVENUE EARNINGS
PER SHARE OF
DIVIDENDS OF 8.00P
PER SHARE
14.9%
(2021: 30.2%)
11.2%
(2021: 25.7%)
8.17p
(2021: 8.13p)
2.9%
(2021: 2.6%)
* See Alternative Performance Measures on pages 99 and 100
UEM turned in a strong performance, delivering
a NAV total return of 14.9% for the year to
31 March 2022.
2
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
3
CURRENT YEAR PERFORMANCE
PERFORMANCE SUMMARY
NAV TOTAL RETURN
PER SHARE*
14.9%
(2021: 30.2%)
SHARE PRICE
TOTAL RETURN
PER SHARE*
17.6%
(2021: 27.3%)
NAV OF 254.22P
PER SHARE*
SHARE PRICE
OF 224.00P
11.2%
(2021: 25.7%)
13.4%
(2021: 22.3%)
DIVIDENDS OF 8.00P
PER SHARE
INVESTED
REALISED
DIVIDENDS PAID
2.9%
(2021: 2.6%)
£124.5m
£176.9m
£17.5m
(2021: £174.7m)
(2021: £142.1m)
(2021: £17.2m)
6.5M SHARES
BOUGHT BACK
TOTAL REVENUE
RETURN INCOME
ONGOING CHARGES*
NET DEBT REDUCED TO
£13.9m
(2021: £12.1m)
£22.6m
(2021: £22.8m)
1.4%
(2021: 1.1%)
£23.2m
(2021: £53.6m)
* See Alternative Performance Measures on pages 99 and 100
TOTAL RETURN COMPARATIVE PERFORMANCE
(1)
from 31 March 2021 to 31 March 2022
120
115
110
105
100
95
90
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(3) (£m)
Equity holders’ funds (£m)
Shares bought back (£m)
Net cash/(overdraft) (£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
2022
31 March
2021
% change
2022/21
14.9
17.6
9.7
254.22
224.00
(11.9)
24.49
8.17
32.66
2.000
2.000
2.000
(2)
2.000
8.000
569.6
545.9
13.9
0.5
(23.7)
(23.2)
(4.3)
7.3
7.3
1.4
1.4
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
7.775
556.1
505.7
12.1
(3.2)
(50.4)
(53.6)
(10.6)
5.0
10.1
(4)
1.1
(4)
2.1
n/a
n/a
n/a
11.2
13.4
n/a
(46.4)
0.5
(39.4)
3.9
3.9
3.9
0.0
2.9
2.4
7.9
14.9
115.6
(53.0)
(56.7)
n/a
46.0
(27.7)
n/a
n/a
(1)
(2)
See Alternative Performance Measures on pages 99 and 100
The fourth quarterly dividend has not been included as a liability in the accounts
Gross assets less liabilities excluding loans
(4) 1.4% with effect from 1 April 2021 following changes to the Investment Management Agreement and the performance fee was discontinued (see
(3)
page 77)
Mar 21
Apr 21
May 21
Jun 21
Jul 21
Aug 21
Sep 21
Oct 21
Nov 21
Dec 21
Jan 22
Feb 22
Mar 22
(1)
Rebased to 100 as at 31 March 2021
Source: ICM and Bloomberg
NAV total return per share
MSCI EM total return Index (GBP adjusted)
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.
4
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
5
CHAIRMAN’S STATEMENT
The year to 31 March 2022 has
again been truly challenging. The
war in Ukraine has taken us by
surprise. While we understood
the geopolitical tensions in
the region, we considered it
unlikely that Russia would invade
Ukraine to the extent that they
did. It has been devastating
to watch a brutal war erupt in
Europe. The response from the
West has been firm and quick.
But given Ukraine’s role in the world’s soft commodities
and Russia’s central role in energy supplies, to Europe in
particular, the global economic challenges have escalated
dramatically.
JOHN RENNOCKS
Chairman
Pleasingly, UEM turned in a strong performance and
importantly delivered a NAV total return of 14.9% for
the year to 31 March 2022, to end the year at an all-time
high of 254.22p. This was ahead of the MSCI EM total
return Index which was down 6.9% over the same period.
UEM measures its performance on a total return basis
and long-term annual compound NAV total return since
inception to 31 March 2022 was 9.7%. The Investment
Managers are seeking long-term performance to be
above 10.0% including a rising dividend, and during the
initial period of Covid-19 UEM did lag behind the MSCI EM
Index as investors focused on high growth technology
companies. Since the approval of the vaccine, the world
has moved steadily towards “living with Covid” and UEM’s
portfolio has regained value as a result. As at 31 March
2022, UEM’s NAV and share price total return are both
ahead of the MSCI EM total return index since inception
in 2005.
RUSSIAN INVESTMENTS
UEM has found investing in Russia challenging over
the years due to the weak governance and endemic
corruption, and has generally avoided investing there.
At the start of the war UEM had exposure to one
London listed company operating extensively in Russia,
the rail freight operator Globaltrans Investment plc
(“Globaltrans”). UEM’s holding in Globaltrans was worth
£4.3m (0.8% of the portfolio) as at 31 January 2022.
Immediately following the invasion, UEM sold around
two-thirds of its holding realising £1.5m in proceeds.
Globaltrans was not sanctioned. ICM has a strong
compliance and risk framework and will continue to
ensure UEM complies with any new sanctions as they
emerge. Globaltrans’ shares were suspended and the
residual holding is carried at nil value. UEM has no other
direct investments in Russia, Belarus or Ukraine.
GLOBAL ECONOMY
There are numerous headwinds currently faced by the
markets, each of which is challenging in its own right.
These include sharply rising inflation; increasing interest
rates; cyber security; shortage of commodities, especially
wheat from Ukraine; Covid-19 disruption to supply chains;
the Ukraine war; shift to green energy; US and China
trade friction; zero-Covid policy in China; and leveraged
economies. We have discussed a number of these before
MSCI EM SECTOR INDEX TOTAL RETURNS (GBP ADJUSTED)
from 31 March 2021 to 31 March 2022
16.3%
15.7%
14.9%
8.6%
7.9%
(2.1)%
(2.1)%
(5.4)%
(19.8)%
(23.9)%
(24.1)%
Financials
Utilities
UEM NAV
total return
per share
Materials
Industrials
Information
technology
Energy
Consumer
staples
Communication
services
Real
estate
Healthcare
Source: Bloomberg
INDICES MOVEMENTS
from 31 March 2021 to 31 March 2022
130
120
110
100
90
80
70
60
Mar
2021
Jun
2021
Sep
2021
Dec
2021
Mar
2022
NIFTY 50 Index
PSEi – Philippine SE Index
Hang Seng Index
Brazil Ibovespa Index
Shanghai SE Composite Index
Rebased to 100 as at 31 March 2021
Source: Bloomberg
and they largely remain unresolved. We are witnessing a
significant rise in nationalism and wealth inequality. This
combination of issues and challenges will no doubt tear
at the fabric of our societies and institutions.
The Russian war in Ukraine is devastating on a number
of levels. The brutality of the Russian army will be a
scar on liberal societies for decades to come. The need
to have resilient supply chains, energy security, green
energy and increased defence capabilities will see
resources diverted and reinvested with an urgency and
scale not experienced in our lifetime. This will give rise
to new opportunities for investors, including UEM. The
war has resulted in sharply rising commodity prices
and accelerating inflation. The scarcity of some soft
commodities might well be the biggest social challenge,
as food shortages emerge in a number of countries that
rely on food imports from Ukraine.
Our Investment Managers deserve a note of thanks.
Their approach to seeking out compelling opportunities
in difficult markets has stood them in good stead over
the years. A key aspect of their investment approach is
to seek out strong management teams who can deliver
resilient business performance. They have navigated the
challenges to date very well.
EMERGING MARKETS
During the year, the progress in EM has been correlated
to the development of Covid-19 in the individual
markets. Brazil and India have both emerged from
Covid restrictions and performed strongly, while China
has been unable to safely open up its economy. In the
year to 31 March 2022, EM markets have seen the India
Nifty 50 up by 18.9%, the Philippine PSEi up 11.8% and
Brazil’s Bovespa up 2.9%, while the Hang Seng Index was
down 22.5%. Currencies have been mixed too, with the
Brazilian Real up 24.4% against Sterling, the Hong Kong
Dollar up 4.0% and the Indian Rupee up 1.1%.
Commodities have moved higher during the period
under review, with oil up by 69.8%, wheat up by 62.8%,
copper up by 18.9% and soybean up by 12.6%. Much
of this is due to two factors: first, excess demand over
supply following years of under investment in resources
and the bounce in demand for goods as economies
opened up; and second, the elimination of supply arising
from the Ukraine war. We expect these conditions to
endure in the short term.
UNLISTED INVESTMENTS (LEVEL 3 INVESTMENTS)
UEM has over the years invested in unlisted businesses
at a modest level. This remains true today. The largest
investment was in CGN Capital Partners Infra Fund 3, a
Chinese wind and solar farm developer and operator
in mainland China. At year end this investment was
carried at £13.0m representing 1.9% of UEM’s portfolio.
The underlying fund investments were agreed to be
sold prior to UEM’s year end at a pleasing profit and the
6
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
7
CHAIRMAN’S STATEMENT (continued)
majority of the proceeds should be returned to UEM over
the coming quarters.
the rest of the portfolio worked harder to deliver this
earnings uplift.
In March 2020, an opportunity arose to invest into a
disruptive technology start up business, Petalite Limited
("Petalite"), giving UEM exposure to the electric vehicles
revolution (through charging infrastructure). UEM
invested a modest amount, some £1.5m for an interest
of approximately 30.0%. This business has delivered on
its expectations and in light of the accelerated move
to electric vehicles, its valuation has risen significantly.
At year end the position was valued at £17.6m and
shareholders can find more information in note 26(d) to
the accounts. We are excited about the prospects for this
business.
Given the increased level of unlisted investments,
some 8.4% of the total portfolio, we will report on this
separately going forward.
REVENUE EARNINGS AND DIVIDEND
It is pleasing to see UEM’s revenue earnings per share
(“EPS”) increase by 0.5% given the challenges faced by
investee businesses and the higher growth investment
mix. As at 31 March 2022, 15.6% of UEM’s portfolio was
invested in the Data Services and Digital Infrastructure
sector which is projected to see higher growth but
typically pays lower dividends, and as a consequence
UEM has now declared four quarterly dividends of 2.00p
each, totalling 8.00p per share, a 2.9% increase over the
previous year. Dividends remain fully covered by income.
The retained earnings revenue reserves increased by
£0.4m to £7.3m. The Board remains confident that the
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
operational assets that the Company’s Investment
Managers believe are structurally undervalued and offer
the potential for excellent total returns.
SHARE BUYBACKS
UEM’s share price discount narrowed over the year from
13.6% as at 31 March 2021 to 11.9% as at 31 March 2022.
This remains 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 6.5m shares bought back in the year to
31 March 2022, at an average price of 211.90p and total
cost of £13.9m.
CURRENCY MOVEMENTS vs STERLING
from 31 March 2021 to 31 March 2022
130
120
110
100
90
Mar
2021
Jun
2021
Sep
2021
Dec
2021
Mar
2022
Brazilian Real
Romanian Leu
Indian Rupee
Hong Kong Dollar
Philippine Peso
Rebased to 100 as at 31 March 2021
Source: Bloomberg
While the Board is keen to see the discount narrow, any
share buyback remains an independent investment
decision. Historically the Company has bought back
shares if the discount widens in normal market
conditions to over 10.0%. Since inception, UEM has
bought back 62.5m ordinary shares totalling £111.6m.
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
From 1 April 2021 the management fee was revised,
moving to 1.0% on NAV up to £500.0m but with the fee
reducing at higher levels; and the performance fee was
removed. More details are set out on page 77.
As a result of the above, ongoing charges were 1.4%,
compared to 2.1% (including the performance fee) for the
year to 31 March 2021.
BOARD
Garth Milne retired from the Board at the 2021 annual
general meeting ("AGM") and we announced last year that
board refreshment was being considered in the current
year. We were pleased to announce on 21 September
2021 the appointment of Mark Bridgeman as a Director
who brings a wealth of experience to our Board. We were
also delighted to announce on 22 November 2021 that
Isabel Liu joined our Board as a Director. Along with Mark,
Isabel is an outstanding director who brings with her
a robust skill set in infrastructure with experience and
knowledge across EM including Asia. We look forward to
working with them both over the coming years.
Anthony Muh has indicated his intention to retire
from the Board following the conclusion of UEM's
forthcoming AGM in September 2022. Anthony has been
a tremendous asset to the Board with his insights and
understanding of the Asian markets, and in particular
China. Anthony has contributed significantly to UEM’s
board and we will miss his wise counsel.
COVID-19 IMPACT ON UEM
Covid-19’s impact on the world’s GDP is reducing as
Covid itself mutates into less effective strains. Omicron is
certainly more transmissible but has been less harmful.
Together with rising vaccinations, this has seen Covid-
19’s impact reduce sharply as more and more countries
move to “living with Covid” policies and achieve “herd
China Everbright Greentech Limited (China)
DIVIDEND PER SHARE OF 8.00P, UP BY
2.9%
FOR THE YEAR TO 31 MARCH 2022
immunity”. The major EM economy which is out of
step with this progress is China. China’s zero-tolerance
policy puts their economy at risk as lockdowns destroy
economic activity.
UEM’s investments have emerged stronger from
Covid-19. The investee companies' management teams
have adapted their business models and driven higher
volumes and margins. 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 to their respective
headwinds. With additional strong government and
central bank support, the Board does not today see
a significant risk from Covid-19 outside of volatility in
market valuations.
8
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
9
CHAIRMAN’S STATEMENT (continued)
GEOGRAPHICAL INVESTMENT EXPOSURE
AS AT 31 MARCH 2022
UEM CONTINUATION VOTE
We were pleased with the strong support of shareholders
in favour of continuation for a further five-year period at
the AGM held in September 2021. In line with the Articles
of Association of the Company, a further continuation
vote will be put to shareholders in 2026 and thereafter at
five yearly intervals.
OUTLOOK
As long-term investors we remain optimistic that, once
these events are behind us and inflationary pressures
subside, most economies will rebound due to delayed
demand and government policy becoming more
supportive.
Our investee companies are well positioned and well
managed, and we expect they will continue to perform
well in these challenging times.
The short-term challenges, especially the war in Ukraine
and the zero-Covid policy in China are likely to persist
for much of this calendar year. Consequently, the global
economies will see heightened volatility as markets
absorb the unfolding implications of both these events.
John Rennocks
Chairman
17 June 2022
Other Europe
10.2%
(6.0%)
Romania
2.3%
(3.2%)
Other Asia
4.4%
(4.3%)
Middle East/
Africa
5.6%
(5.6%)
Brazil
20.9%
(18.0%)
Mexico
4.2%
(2.6%)
Colombia
3.5%
(4.8%)
Chile
1.8%
(3.3%)
India
11.3%
(13.5%)
Malaysia
2.8%
(3.2%)
China
(including Hong Kong)
15.9%
(17.8%)
South Korea
5.4%
(6.5%)
Vietnam
7.1%
(5.1%)
The Philippines
4.6%
(6.1%)
Figures in brackets as at 31 March 2021.
Source: ICM
THREE LARGEST GEOGRAPHIES:
THREE LARGEST SECTORS:
Rumo S.A. (Brazil)
10
Utilico Emerging Markets Trust plc
20.9% Brazil
15.9% China (inc Hong Kong)
11.3% India
51.9% Other
19.3% Ports & Logistics
15.6% Data Services & Digital Infrastructure
15.5% Electricity
49.6% Other
Report and Accounts for the year to 31 March 2022
11
TOP THIRTY COMPANIES
1
2
3
4
5
31 March
2022
Company (Country)
Description
Fair value
£’000s
% of total
investment
4.6%
3.7%
3.2%
3.1%
3.0%
International
Container Terminal
Services, Inc.
Alupar
Investimento S.A.
India Grid Trust
Petalite Limited
Gujarat State
Petronet Limited
Ports and Logistics
Electricity
Electricity
Renewables
Gas
A global port
management
company
headquartered in
the Philippines.
A Brazilian holding
company for energy
assets in the
electricity sector.
An infrastructure
investment trust
with electricity and
transmission assets
listed in India.
An electric
vehicle charging
infrastructure
company based in
the UK.
A natural gas
infrastructure and
gas transmission
company based in
India.
26,510
Fair value £’000s
21,223
Fair value £’000s
18,357
Fair value £’000s
17,621
Fair value £’000s
17,037
Fair value £’000s
6
7
8
9
10
2.9%
Simpar S.A.
2.9%
2.8%
2.5%
2.3%
My E.G. Services
Berhad
Ocean Wilsons
Holdings Limited
Rumo S.A.
FPT Corporation
Data Services
and Digital
Infrastructure
A provider of
e-government
services in Malaysia.
Ports and Logistics
A Brazilian holding
company providing,
through its
subsidiaries, services
in the logistics, freight
and transportation
sectors.
Ports and Logistics
Road and Rail
A rail-based logistics
operator in Brazil.
An investment
company which
operates as a
maritime service
provider, through its
Brazilian subsidiary.
Data Services
and Digital
Infrastructure
An information
technology and
telecommunications
services company in
Vietnam.
16,682
Fair value £’000s
16,230
Fair value £’000s
16,210
Fair value £’000s
14,122
Fair value £’000s
13,254
Fair value £’000s
Note: % of total investments
For more information on the top ten companies, see the holdings review starting on page 28.
11
CGN Capital Partners Infra Fund 3 (China)
Renewable assets fund
Power Grid Corporation of India Limited
(India)
Electricity transmission
Citic Telecom International Holdings
Limited (Hong Kong)
Telecommunications provider
11,918
12
13
14
15
16
VinaCapital Vietnam Opportunity Fund Ltd
(Vietnam)
Investment trust
China Datang Corporation Renewable
Power Co. Limited (China)
Electricity generation
Corporacion Financiera Colombiana S.A.
(Colombia)
Infrastructure investments
17
China Everbright Greentech Limited (China)
Biomass and waste treatment
18
Telelink Business Services Group (Bulgaria)
Information technology service
provider
19
20
Grupo Aeroportuario del Pacifico, S.A.B. de
C.V. (Mexico)
Airport operator
Societe Nationale des Telecommunications
du Senegal (Senegal)
Telecommunications operator
21
KunLun Energy Company Limited (China)
Gas distribution
22
Santos Brasil Participacoes S.A. (Brazil)
Port operator
23
Orizon Valorizacao de Resiuos S.A. (Brazil)
Waste treatment operator
24
Naver Corporation Limited (South Korea)
Internet services provider
25
KT Corporation (South Korea)
Telecommunications operator
26
PT Link Net Tbk. (Indonesia)
Fixed line broadband and cable
television operator
27
28
29
Grupo Aeroportuario del Centro Norte,
S.A.B. de C.V. (Mexico)
Airport operator
Korean Internet Neutral Exchange Inc.
(South Korea)
Data centre operator
Powergrid Infrastructure Investment Trust
(India)
Infrastructure investment trust
12,543
12,492
11,107
10,998
10,394
10,384
10,263
10,253
9,967
9,921
9,746
9,259
9,042
8,658
8,515
8,225
8,111
8,009
30
Engie Energia Chile S.A. (Chile)
Electricity generation and transmission
7,868
Other investments
Total portfolio
196,767
571,686
100.0
2.2
2.2
2.1
2.0
1.9
1.8
1.8
1.8
1.8
1.7
1.7
1.7
1.6
1.6
1.5
1.5
1.5
1.4
1.4
1.4
34.4
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PERFORMANCE SINCE INCEPTION (20 JULY 2005)
TEN YEAR PERFORMANCE
NAV ANNUAL
COMPOUND TOTAL
RETURN*
NAV TOTAL RETURN
PER SHARE*
SHARE PRICE TOTAL
RETURN PER SHARE*
9.7%
371.7%
326.5%
62.5M SHARES
BOUGHT BACK
DIVIDENDS PER SHARE
INCREASED FROM
1.50P TO
DIVIDENDS PAID
CUMULATIVE
£111.6m
8.00p
£203.4m
* See Alternative Performance Measures on pages 99 and 100
HISTORIC NAV AND SHARE PRICE PERFORMANCE (pence)
(1)
from 20 July 2005 to 31 March 2022
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
Mar
22
NAV total return per share
(2)
(2)
Share price total return
MSCI EM total return
Index (GBP adjusted)
MSCI EM Utilities total return
Index (GBP adjusted)
(1)
(2)
Rebased to 100 as at 20 July 2005
Adjusted for the exercise of warrants and subscription shares
Source: ICM and Bloomberg
DIVIDENDS PER SHARE (pence)
from March 2012 to March 2022
ONGOING CHARGES* (%)
from March 2012 to March 2022
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
1.6
1.2
0.8
0.4
0.0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021 2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021 2022
Source: ICM
*Excluding performance fees (see page 101 for
ongoing charges including performance fees)
Source: ICM
INVESTMENT PURCHASES AND REALISATIONS (£m)
from March 2012 to March 2022
PORTFOLIO PROGRESSION (£m) AND NUMBER
OF HOLDINGS
from March 2012 to March 2022
300
250
200
150
100
50
0
92
87
92
88
79
80
79
84
86
80
81
700
600
500
400
300
200
100
0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021 2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
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 primarily in companies and sectors
displaying the characteristics of essential services
or monopolies.
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INVESTMENT MANAGERS’ REPORT
It is pleasing to see UEM deliver
another positive NAV gain,
with a NAV total return for the
year of 14.9%, building on last
year’s 30.2% return. This was
significantly ahead of the MSCI
EM total return Index which was
down by 6.9% during the year
to 31 March 2022. As previously
noted, UEM’s asset class was
largely overlooked by the
markets early in the pandemic,
CHARLES JILLINGS
Investment Manager
which focused on the shift to working from home and
the accelerated digital explosion. This led to markets
rewarding the technology sector shares, but since the
approval of the Covid-19 vaccines, the market has shifted
and now the embedded value in UEM’s portfolio is being
increasingly recognised.
The world is faced with a number of unresolved deep-
seated challenges. As noted in the Chairman’s Statement
these range from inflation to climate change. Given we
have highlighted a number of these issues before we
will focus on four topics in particular that we discuss at
length as investors.
INFLATION AND INTEREST RATES
Inflation has two key drivers, excess demand and
shortage of supply or a combination of the two. As
nations emerged from Covid restrictions, demand for
consumables rose well above traditional trend lines. At
the same time supply was slow to respond and the net
effect has been a strengthening of inflationary pressures
as nations return to normal.
A surprise to us has been the tight labour market
conditions across the world which has led to wage
inflation as buying power shifts to the wider labour
markets. If left unaddressed this will cause further
inflationary pressures and may become embedded in
economies.
significant pace. The result will be heightened demand for
commodities. Structurally we therefore see commodity
demand rising and pricing to remain to the upside.
To address the rising inflationary outlook, Central Banks
have begun and will continue to raise interest rates. As
such we expect to see interest rates rise further over the
coming months.
UKRAINE
The war in Ukraine has disrupted a number of
commodity supplies, especially wheat. This is likely
to see commodity hoarding by some countries and
fundamental shortages in others. Food inflation and
food shortages are the potential drivers of social unrest.
Historically, most social change has been accelerated
by shortages of food, from the French Revolution to the
Arab Spring. We remain concerned that the ability of
governments to navigate a way forward for many poorer
nations and societies will lead to sharp social change.
The disruption in commodity supply due to the war has
accelerated inflationary pressures to levels not seen in
decades. We expect this to persist for months. However,
the imbalance will in time be addressed and supply led
inflationary pressures will reduce.
The wider inflationary legacy will persist. The threat
from energy supply and supply chain security will drive
significant investment to address these two concerns
and the inflationary pressures will be to the upside.
CHINA’S COVID POLICY
China’s zero-Covid policy is a concern. Omicron is
particularly virulent and is likely to see the need for
their heightened Covid restrictions to continue. As the
world’s major exporter, this has implications for supply
chains and economic activity. China has two fundamental
choices; either drive the economy or contain Covid. It is
difficult to see how it can maintain both.
We see commodities as potentially being at an imbalance
as demand exceeds supply in certain commodities. This
is likely to continue as decades of under-investment
cannot be redressed overnight. Further, the response
to the Ukraine war will see increased drive for energy
security, supply chain security and military security.
These three challenges are likely to be pursued at
What does this all mean? We expect rising nationalism
as governments look to address their country specific
demands, greater focus on food and energy security, and
a shift to a greener society. We see commodity producers
benefiting. For UEM, there will be plenty of opportunities
for our investee companies to benefit from these policy
changes.
NAV PER SHARE WAS 254.22P, INCREASING BY
11.2%
IN THE YEAR TO 31 MARCH 2022
ORIZON VALORIZACAO DE RESIUOS S.A. (BRAZIL)
(“ORIZON”)
Orizon is a leading waste management company in
Brazil, operating sanitary landfills with specialised
infrastructure to receive waste and process it. Orizon
uses its core waste processing business to offer biogas
extraction, recycling, materials processing, carbon credits
and waste-to-energy services.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)
The biggest challenge facing all of us is climate change
which needs a coordinated global response. At ICM,
we are committed to taking steps to become net
carbon neutral as a business and we have engaged our
employees in discussions around the need to reduce our
net carbon footprint individually and collectively.
As investors, we are turning our attention to the steps
businesses can and should be taking to be part of the
solution to carbon reduction. Given the wide range of
assets, geographies and governments involved in UEM’s
portfolio, these discussions are varied. A number of our
investee companies do have a key role to play in reducing
carbon emissions, from wind farms to rail and from hydro
to enabling businesses to work remotely. ICM's approach
is therefore driven by the need to see improvements over
time by each investee company.
CLIMATE CHANGE
The war in Ukraine has been a true setback for the
global energy ambitions of reducing carbon emissions.
However, the best way to address the energy shortfall
may be to invest in green technologies and electric
vehicles, thereby achieving two ambitions at once, energy
security and green energy supply.
PORTFOLIO
UEM’s gross assets (less liabilities excluding loans)
increased to £569.6m as at 31 March 2022 from £556.1m
as at 31 March 2021. This reflects valuation uplifts offset
by net realisations to fund the net debt reduction of
£30.4m.
UEM expanded the list of disclosed investments to thirty
holdings in its annual report and the monthly factsheet
last year. This increases the visibility for shareholders to
around two thirds of the portfolio by value. At the year
end the top thirty holdings accounted for 65.6% of the
total portfolio (31 March 2021: 65.9%). There have been
seven new entries into the top thirty holdings over the
year: Petalite; China Datang Corporation Renewable
Power Co. Limited (“China Datang”); Grupo Aeroportuario
del Pacifico, S.A.B. de C.V.; Orizon; PT Link Net Tbk.; Grupo
Aeroportuario del Centro Norte, S.A.B. de C.V.; and
Powergrid Infrastructure Investment Trust.
Falling out of the top thirty are China Gas Holdings
Limited (“China Gas”); Bolsa de Valores de Colombia;
Centrais Eletricas Brasileiras S.A.; Conpet SA; Starpharma
Holdings Limited (“Starpharma”); Ecorodovias
Infraestrutura e Logistica S.A.; and Torrent Power
Limited. All were due to realisations except for China Gas
and Starpharma which reduced due to lower market
valuations.
Purchases in the portfolio decreased to £124.5m in the
year ended 31 March 2022 (31 March 2021: £174.7m)
and realisations increased to £176.9m (31 March 2021:
£142.1m). This reflects investment activity more in line
with long-term averages. An active decision was taken
to reduce UEM’s debt as uncertainties rose. UEM ended
the year fully invested but with its bank loans drawn at
£23.7m, 47.4% of the facility.
There have been some small sector shifts during the year
to 31 March 2022 and more detail is set out on page 18.
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INVESTMENT MANAGERS’ REPORT (continued)
IN THE YEAR TO 31 MARCH 2022
BRAZIL REMAINS UEM’S LARGEST
COUNTRY EXPOSURE
CHINA REMAINS UEM’S SECOND
LARGEST COUNTRY EXPOSURE
INDIA IS UEM'S THIRD LARGEST
COUNTRY EXPOSURE
20.9%
2.9%
15.9%
1.9%
11.3%
2.2%
Note: increases/decreases refer to the movement in the portfolio percentage of the relevant country
LATAM’S EXPOSURE
ASIA’S EXPOSURE
REST OF THE WORLD
30.4%
(2021: 28.7%)
51.5%
(2021: 56.5%)
18.1%
(2021: 14.8%)
SECTOR SPLIT OF INVESTMENTS
Ports and Logistics
Data Services and
Digital Infrastructure
Electricity
19.3%
(16.3%)
15.6%
(13.6%)
15.5%
(19.2%)
Renewables
Telecommunications
Gas
9.7%
8.6%
(5.1%)
(8.9%)
Other
5.6%
(8.3%)
Infrastructure
Investment Funds
4.9%
(5.0%)
8.4%
(11.5%)
Airports
4.8%
(3.9%)
Water and Waste
Road and Rail
4.0%
(2.1%)
3.6%
(6.1%)
Figures in brackets as at 31 March 2021
Source: ICM
On a geographical basis there were some small changes
again and more detail is set out on page 11.
LEVEL 3 INVESTMENTS
UEM ended the year with level 3 investments totalling
£48.1m (31 March 2021: £20.9m), representing 8.4% of
total investments (31 March 2021: 3.7%). UEM’s level 3
investments increased mainly as a result of the revaluation
of Petalite and given this increase, we will report on
unlisted investments separately going forward.
As noted in the Chairman's Statement, an opportunity
arose to invest into Petalite in March 2020, giving UEM
exposure to the electric vehicles revolution.
BANK DEBT
UEM’s net debt, being bank loans and overdrafts,
decreased from £53.6m as at 31 March 2021 to £23.2m
as at 31 March 2022, as UEM actively decreased its
investment positions and therefore exposure to the stock
market. UEM’s £50.0m committed multicurrency loan
facility with The Bank of Nova Scotia, London Branch, was
renewed in March 2021 and matures in March 2024.
REVENUE RETURN
Revenue income was almost unchanged at £22.6m as at
31 March 2022, from £22.8m as at 31 March 2021. This
reflects both the impact of currencies and the increased
shift of the portfolio into the Data Services and Digital
Infrastructure sector which are lower yielding investments.
Management fees and other expenses increased by
12.3% to £3.0m in the year to 31 March 2022, from £2.7m
in the year to 31 March 2021. While the investment
management fee is higher at 1.0% of NAV for assets up
to £500.0m and reducing at higher levels, the impact
is reduced on the revenue return as, following the
removal of the performance fee (which was previously all
allocated to capital), the fund moved to allocating 80.0% of
management fees to capital return and 20.0% to revenue
return, versus 70.0% and 30.0% historically. Finance costs
remained modest at £0.1m (prior year £0.3m) given the
low interest rate environment. Taxation remained largely
unchanged at £1.5m during the year ended 31 March 2022
(31 March 2021: £1.6m).
Profit for the year decreased by 1.6% to £17.9m from
£18.2m for the prior year. EPS was higher, a rise of 0.5%
to 8.17p compared to the prior year of 8.13p due to the
reduced average number of shares in issue following
GRUPO AEROPORTUARIO DEL CENTRO NORTE, S.A.B. DE
C.V. (MEXICO) (“OMA”)
OMA is a Mexican airport operator. Operating thirteen
airports in the central and northern states of Mexico,
including Monterrey, one of Mexico's largest business
and industrial areas.
buybacks. Dividends per share ("DPS") of 8.00p were fully
covered by earnings.
Retained revenue reserves rose to £7.3m as at 31 March
2022, some 3.39p per share.
CAPITAL RETURN
The portfolio gained £58.3m on the capital account during
the year to 31 March 2022. Gains on foreign exchange
were £1.3m. The resultant total income gain on the capital
account was £59.6m against prior year gains of £112.1m.
Management and administration fees were lower at £4.2m
(31 March 2021: £7.4m), mainly as a result of the changes
to the management fee structure, with no performance
fee accruing in the current year and the change in
allocating 80.0% of management fees to capital versus
70.0% historically.
Finance costs decreased to £0.5m from £0.6m as a result
of lower interest costs and loans. There was a reduced
charge for taxation of £1.2m (31 March 2021: £1.6m) which
arose mainly from Indian capital gains tax. The net effect
of the above was a gain on capital return of £53.7m (31
March 2021: a gain of £102.4m).
Charles Jillings
ICM Investment Management Limited
and ICM Limited
17 June 2022
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GRUPO AEROPORTUARIO DEL PACIFICO, S.A.B. DE C.V.
Grupo Aeroportuario del Pacifico, S.A.B. de C.V. is a Mexican airport operator.
It operates twelve airports in the pacific region of Mexico and two in Jamaica. It
serves approximately 42.0m passengers annually. UEM first invested in 2015.
IN THE YEAR TO 31 DECEMBER 2021,
REVENUES INCREASED
61.7%
AND EBITDA 87.4%
FPT CORPORATION
FPT Corporation is the largest information technology service
company in Vietnam with its core business focusing on the
provision of information and communication technology
related services. It also provides broadband internet services
and operates the country’s largest private education
institution. UEM first invested in 2019.
IN THE YEAR TO 31 DECEMBER 2021,
REVENUES INCREASED
19.4%
AND EBITDA 21.2%
ORIZON VALORIZACAO DE RESIUOS S.A.
Orizon Valorizacao de Resiuos S.A. is a waste treatment
company, offering waste management and processing
solutions. Its core waste processing business offers biogas
extraction, recycling, carbon credits and waste-to-energy
services. UEM first invested in 2021.
IN THE YEAR TO 31 DECEMBER 2021,
REVENUES INCREASED
11.1%
AND EBITDA 15.7%
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MACRO TRENDS AFFECTING OUR PORTFOLIO
URBANISATION
GEOPOLITICS AND GLOBALISATION
• 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, sanitation and
digital infrastructure.
• 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.
RISE OF THE MIDDLE CLASS
GOVERNANCE AND TRANSPARENCY
• 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.
• An emerging middle class increasingly demands 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
DIGITALISATION
• 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.
• There were several leading indicators that suggested a 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”.
• 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 have the opportunity to provide digitally delivered services globally, leveraging
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”.
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23
OUR INVESTMENT APPROACH
ICM is a long-term investor and typically 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 2.6bn of assets directly
under management and is responsible indirectly for a
further USD 24.0bn 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:
01
02
UNDERSTANDING
INTEGRATION
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.
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.
03
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.
We seek out and make compelling investments
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
K
R
O
W
E
M
A
R
F
E
V
I
T
R
O
P
P
U
S
&
E
L
B
A
T
S
I
N
D
E
P
E
N
D
E
N
C
E
&
I
N
T
E
G
R
I
T
Y
VALUES
ICM’s origins date back to 1988 and our organisation has evolved with
offices now spanning the globe. We are focused on our values of:
• Independence and Integrity
• Creativity and Innovation
• Excellence
• Accountability
TEAM
We are proud of our diverse and inclusive environment for
our teams to work in, which reflects the diversity of our
communities.
ICM works to create
value by harnessing
our experience and
expertise to generate
and grow strong
relationships with
our stakeholders
We are focused
on creating
sustainable
long-term
value for our
shareholders,
team and
the broader
community
through our:
INVESTMENT PRACTICES
Our deep and extensive research and
understanding of the companies, sectors and
markets we invest in moderates our risk and
creates value for our investors. Our status as
a signatory of the United Nations-supported
Principles of Responsible Investment emphasises
our commitment to integrating ESG factors into
our investment decision making process.
FINANCIAL
Strong balance sheet and disciplined
capital allocation to drive sustainable
growth and shareholder value.
PLATFORMS
Technology, and digital and analytics enable our
investment platforms to deliver growth for our
shareholders.
COMMUNITIES
ICM supports the ICM Foundation, which has identified
sustainable, effective and focused education where
the biggest impact can be made on individuals and in
communities. Over the past decade ICM and its
stakeholders have contributed over USD 15.0m to
not-for-profit and community organisations.
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ESG SPOTLIGHT
LARGEST HOLDINGS OVERVIEW
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. Details of how
ESG forms part of the integrated research analysis, decision-making and ongoing monitoring are set out on page
40. Where companies in the portfolio are assessed as having a relatively low ESG score ICM’s approach is to engage
with the companies directly with the objective of seeing improvements over time. Set out below are examples of the
approach taken with two of UEM’s investments.
Largest railway operator in Brazil,
owning five rail concessions with
approximately 13,500 km of lines
and 1,200 locomotives.
ESG ANALYSIS:
Rumo continues to take steps to improve its ESG
transparency and enhance its environmental footprint.
Rumo has set goals to reduce greenhouse gas
emissions by 15% by 2023 and ensure traceability of
100% of the agricultural commodities transported by
2025.
Socially Rumo has improved its safety performance
and has made steps to improve its commitments
to community initiatives and social development.
Question marks remain around Rumo’s corporate
governance, with the lack of independent board
members being of prime concern.
ICM ESG CONCLUSION:
Pressure continues to focus on improving the
corporate governance of Rumo. Improving emissions
and social policy means Rumo is moving toward a
positive direction on its ESG journey.
A leading e-government service
provider in Malaysia, allowing
citizens to apply, renew and pay
for licences, permits, taxes, fines,
mandatory insurance etc. online.
ESG ANALYSIS:
MyEG has continued to strengthen its sustainability
and governance procedures and has significantly
improved its disclosure in recent years. It has
particularly focussed on reducing its environmental
footprint, significantly reducing fuel consumption
and CO2 emissions in the past two years. Electricity
consumption in FY21 was also 16.4% lower than in
FY20.
ICM ESG CONCLUSION:
MyEG is actively looking to market energy efficiency
and carbon offset solutions to third parties. MyEG
believes in the benefits of improved sustainability.
Ocean Wilsons Holdings Limited (Brazil)
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
31.0%
(2021: 31.3%) OF
TOTAL INVESTMENTS
50.3%
(2021: 50.4%) OF
TOTAL INVESTMENTS
65.6%
(2021: 65.9%) OF
TOTAL INVESTMENTS
79
(2021: 88)
The value of convertible securities represents 1.8% (2021: 0.3%) of the portfolio. The value of fixed income securities represents 2.6% (2021: 0.6%) of the portfolio.
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TEN LARGEST HOLDINGS REVIEW
1
Country
Sector
The Philippines
Ports and
Logistics
Fair Value £’000s
26,510
% of total
investments
4.6%
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 34
terminals, in 20 countries over six continents handling over 11.0m containers.
During 2021, ICT benefitted from the improvement in global trade activity as
countries began to recover from the impact of Covid-19. Gross revenues were
up for the twelve months to 31 December 2021 by 23.9% driven by a 9.5%
increase in the number of containers handled as well as an improvement in
container mix and tariff adjustments. The stringent cost reductions that ICT
management implemented during 2020 were also maintained during 2021
resulting in EBITDA increasing by 29.9% with EBITDA margin at an all-time
high of 61.1%. Adjusted net income was up by 57.0% with DPS up 264.1% as
management paid out the proportion of 2020 dividend that was retained in the
prior year (in light of the Covid-19 operating environment) and an additional
special dividend in 2021 given stronger free cash flow.
ICT’s share price increased by 85.6% in the year to 31 March 2022, with UEM
decreasing its position in ICT by 57.5%.
3
Country
Sector
India
Electricity
Fair Value £’000s
18,357
% of total
investments
3.2%
INDIA GRID TRUST (“INDIGRID”) is an infrastructure investment trust listed on
the Bombay Stock Exchange which owns power transmission assets in India.
It has 40 lines totalling 7,570km and 11 substations, with the assets having an
average of 30 years remaining contract life.
In the past twelve months Indigrid had one major acquisition, the 832km NER-II
transmission project, increasing its assets under management by almost 40%.
It also completed the acquisition of 100MW solar assets in mid-2021, both
of which were funded by an INR 12.8bn rights issue in April 2021. In the nine
months to 31 December 2021, revenue and EBITDA grew by 42.6% and 43.9%
respectively. The trust is required to pay out at least 90% of cash flows, which is
paid in quarterly dividends and over the nine-month period the aggregate DPS
were increased by 5.1%.
UEM’s position in Indigrid was reduced by 6.2% in the period under review.
During the year, Indigrid’s share price increased by 5.0%.
2
Country
Sector
Brazil
Electricity
Fair Value £’000s
21,223
% of total
investments
3.7%
ALUPAR INVESTIMENTO S.A. (“ALUPAR”) is a holding company for energy
assets focused on the electricity transmission and generation sectors in Brazil,
Peru and Colombia. It has 30 transmission assets totalling 7,729km of electricity
lines in Brazil, of which 6,974km are operational and 822MW of renewable
energy generation projects.
Over the past two years Alupar has been investing heavily in several new
projects, expanding its transmission network by over 35% in Brazil and
commissioning a new 94MW hydro plant in Peru. The transmission lines
benefit from annual inflation adjustments, with increases of 8.1% for IPCA-
linked concessions and 37.1% for IGPM-linked concessions applied in 2021.
These inflation adjustments combined with the contribution of new projects
to deliver underlying group revenues and EBITDA growth of 33.9% and 45.1%
respectively in its financial year to 31 December 2021. DPS increased by 21.7%.
Alupar’s share price increased by 7.5% in the year to 31 March 2022 and UEM
decreased its shareholding in Alupar by 8.0%.
4
Country
Sector
UK
Renewables
Fair Value £’000s
17,621
% of total
investments
3.1%
PETALITE is an unlisted early-stage company based in the UK. During the
past eight years Petalite has researched and developed an innovative electric
vehicle charging technology which offers greater reliability and efficiency than is
currently available in the market.
UEM first invested a modest amount in Petalite two years ago and supported
its growth with a convertible loan facility which was fully drawn in April 2021.
These funds enabled Petalite to validate the technology, augmented by Petalite
winning over £1.2m in Innovate UK grants to support the UK’s transition to net
zero, including the development of charging infrastructure for electric vertical
take-off and landing aircraft.
Since investment, Petalite has achieved significant milestones including
certification of the Power Core and delivered test units to a blue-chip customer.
Petalite is in commercial discussions with several large companies and in
advanced negotiations for further funding from new and existing investors.
Reflecting this progress, the valuation saw a material uplift in the year to 31
March 2022.
28
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
29
TEN LARGEST HOLDINGS REVIEW (continued)
5
Country
Sector
India
Gas
Fair Value £’000s
17,037
% of total
investments
3.0%
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 2,700km 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.
The rapid increase in commodity prices, particularly LNG, have resulted in an
extremely challenging operating environment for GSPL. In the nine months
to 31 December 2021, gas transmission volumes declined by 5.6% as the
economic impact of high prices stifled demand, particularly in the power sector
where volumes more than halved. Several successive tariff increases were
implemented but these failed to completely offset input gas costs with these
more than doubling. As such, while revenues increased by 67.5%, EBITDA
declined 4.6%. DPS relating to March 2021 year end was unchanged on the
prior year.
In the twelve months to 31 March 2022, GSPL’s share price declined by 5.0%
and UEM’s shareholding in GSPL was unchanged over the period.
6
Country
Sector
Brazil
Ports and
Logistics
Fair Value £’000s
16,682
% of total
investments
2.9%
SIMPAR S.A. (“SIMPAR”) is a Brazilian holding company that controls seven
independent companies that concentrate primarily on logistics services whilst
also providing full rental services to its customers. Most of Simpar’s businesses
are leveraged to the economic recovery in Brazil, which support the organic
growth story, while a great portion of revenues is derived from long term
contracts. Currently, Movida, a Brazilian car rental company (63.0% owned by
Simpar) contributes to 49.7% of EBITDA, Vamos, a leader in rental of trucks,
machinery and equipment (71.9% owned by Simpar) contributes 25.1%, whilst
JSL, a road logistics company, (71.9% owned by Simpar), contributes 18.1%. All
three main subsidiaries are listed on the Novo Mercado Brazil. Simpar saw a
strong performance with its full year results reporting net revenues up 41.4%
and EBITDA up by 80.6%.
Simpar’s share price decreased 68.5% in the year to 31 March 2022, with UEM’s
position unchanged during the period.
7
Country
Sector
Malaysia
Data Services
and Digital
Infrastructure
Fair Value £’000s
16,230
% of total
investments
2.9%
8
Country
Sector
Brazil
Ports and
Logistics
Fair Value £’000s
16,210
% of total
investments
2.8%
MY E.G. SERVICES BERHAD (“MyEG”) is a Malaysian provider of e-government
services, primarily serving applications in the areas of employment permits,
vehicle related licencing, tax and penalty processing. Increasingly, MyEG
is expanding its remit into new areas such as healthcare administration,
e-commerce and fintech services, as well as expanding internationally into the
Philippines, Indonesia and Bangladesh.
In the past year, MyEG has offered an increasing number of Covid-19 related
services including hotel quarantine, contact tracing, vaccine verification and
rapid testing, which contributed significantly to revenue growth, although the
longevity of these services is uncertain.
In the financial year to 31 December 2021, MyEG reported a 36.1% increase in
revenues, a 21.0% increase in EBITDA and growth in net profits of 18.5%.
MyEG is developing an international supply chain financing and traceability
application compatible with China’s national blockchain network, Xinghuo,
through a majority owned joint venture, Zetrix.
MyEG’s share price (adjusted for the bonus issue in September 2021) increased
by 3.6% in the year to 31 March 2022. UEM increased its shareholding in MyEG
by 1.0% (bonus issue adjusted) during the period by participating in MyEG’s
dividend reinvestment programme.
OCEAN WILSONS HOLDINGS LIMITED (“OCEAN WILSONS”) operates one of
the largest 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.
2021 was a year of recovery for Ocean Wilsons with OWIL driving the
performance, as assets under management increased 13.2% and the portfolio
delivered a net return of 14.2%. Wilson Sons continued to be impacted by
global logistics bottlenecks, supply chain disruptions and the lack of empty
containers resulting in container terminals volumes for the twelve months
to 31 December 2021 up only 2.4%, and the number of towage harbour
manoeuvres up 3.7%. During 2021, Wilson Sons obtained a new listing on the
Novo Mercado on the Sao Paulo Stock Exchange. Consolidated revenues for
the period were up by 12.4%, with reported net income up 64.5%. As at 31
March 2022, Ocean Wilsons’ discount to NAV increased to 47.7%.
Ocean Wilsons’ share price over the year to 31 March 2022 was up by 19.0%,
with UEM’s position decreasing by 24.5%.
30
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
31
TEN LARGEST HOLDINGS REVIEW (continued)
STRATEGIC REPORT
9
Country
Sector
Brazil
Road and Rail
Fair Value £’000s
14,122
% 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.
2021 was another challenging year for Rumo with the corn crop failure in the
second half resulting in Rumo following a strategy of gaining market share to
mitigate loss of volume. Total volumes handled by Rumo in the twelve months
to 31 December 2021 increased by 2.5% to 64.0bn ton kilometres, but this
came at the expense of yield which only increased 4.5%. This was not sufficient
to cover the higher variable costs partially driven by a 47.0% fuel price increase
and inflationary pressures witnessed over the period. EBITDA subsequently
was down 8.6% in 2021, with EBITDA margin falling to 45.0% from 52.6%.
Rumo’s management are more optimistic about the medium term, however
they remain cautious over 2022 guidance despite a strong harvest expected.
Rumo’s share price over the period was down 8.3% and UEM decreased its
shareholding in Rumo by 18.0% for the year to 31 March 2022.
10
Country
Sector
Vietnam
Data Services
and Digital
Infrastructure
Fair Value £’000s
13,254
% of total
investments
2.3%
FPT CORPORATION (“FPT”) is a Vietnamese telecommunications and
technology company. FPT provides information technology ("IT") services
to large multinationals globally, and to the public sector and corporates
domestically. Additionally, FPT is a major provider of fixed line broadband, data
centre and cloud services in Vietnam. It also operates the country’s largest
private education institution with over 74,000 students enrolled in its schools,
colleges and university.
Despite global and domestic Covid-19 related disruptions, FPT was able to
deliver strong growth in its three primary segments in 2021, especially in the
second half of the year. The global IT services segment saw revenue growth of
21.2% and profit before tax ("PBT") up 23.0% in the year to 31 December 2021,
with US customers increasing spending by 52% compared to FY 2020. FPT
was awarded a USD 40m+ project with the Singaporean Government during
the year and 128 customers signed contracts of over USD 1.0m. The domestic
IT services unit also reported strong growth in both revenues (up 29.0%) and
PBT (up 33.9%). The telecoms unit continues to expand with revenues up
11.2% and PBT up 16.5% in FY 2021 driven by broadband internet and pay TV
subscriber growth and increased data centre demand.
Overall, FPT reported consolidated revenue growth of 19.4% and a 22.6%
increase in net profits attributable to shareholders.
FPT’s share price increased by 58.3% in the year to 31 March 2022 (adjusted for
the 15.0% bonus issue in June 2021) and UEM’s shareholding was unchanged
in the period (bonus issue adjusted).
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 EM.
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
32
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
33
STRATEGIC REPORT (continued)
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.
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).
The Company has a £50.0m committed multicurrency
revolving facility with The Bank of Nova Scotia, London
Branch until 15 March 2024. 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 2022 are set out in the attached
accounts. The dividends in respect of the year, which
total 8.00p 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 EM total return
Index
• Share price
• Discount to NAV
• Revenue earnings
• Ongoing charges figure
34
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
35
STRATEGIC REPORT (continued)
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 99 and 100.
Year ended 31 March
2022
2021
NAV total return per share (%)
14.9
30.2
MSCI EM 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) (%)
(6.9)
42.3
224.00
197.50
(11.9)
(13.6)
3.0
2.9
Revenue earnings per share (pence)
8.17
8.13
Ongoing charges figure (%)
1.4
1.1*
*excluding performance fee
A graph showing the NAV total return performance
compared to the MSCI EM total return Index, can be
found on page 4. The ten-year record on page 101
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 9.0% to 14.2% and an average discount of 12.1%.
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 6,529,307 shares were bought back and cancelled
during the year, representing 3.0% 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 four quarterly dividends, each of
2.00p per share, in respect of the year ended 31 March
2022. The fourth quarterly dividend will be paid on 24
June 2022 to shareholders on the register on 6 June
2022. The total dividend for the year was 8.00p per
share (2021: 7.775p 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
2022 was 1.4% (2021: 1.1% excluding (2.1% including) a
performance fee which was discontinued with effect
from 1 April 2021). 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 2022, ICMIM was
the Company’s AIFM and had sole responsibility for
risk management, subject to the overall policies,
supervision, review and control of the Board.
As required by the Association of Investment
Companies (“AIC”) Code of Corporate Governance,
the Board has undertaken a robust assessment of
the principal risks facing the Company. It seeks to
mitigate these risks through regular review by the
Audit & Risk Committee of the Company’s risk register
which identifies the risks facing the Company and the
likelihood and potential impact of each risk, together
with the controls established for mitigation.
During the year the Audit & Risk Committee also
discussed and monitored a number of emerging
risks that could potentially impact the Company,
the principal ones being geopolitical risk and
climate change risk. The Audit & Risk Committee has
determined that they are not currently sufficiently
material to be categorised as separate key risks and
are considered within investment risk and market
risk below. The Covid-19 pandemic, which emerged in
2020, gave rise to significant challenges for businesses
worldwide and this was also taken into account as part
of the assessment of risks to the Company.
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.
KEY RISK FACTORS
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.
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. In addition, ESG factors are also considered when
selecting and retaining investments and political risks associated
with investing in EM are also 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
change, 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.
36
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
37
STRATEGIC REPORT (continued)
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 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 98.
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 2022, UEM had net gearing on net assets
of 4.3%. 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 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.
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, including lenders. 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 52 to 56. 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
38
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
39
STRATEGIC REPORT (continued)
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 appointment to the Board of two new
Directors following the engagement of an external
independent recruitment consultancy to conduct a
search and selection process;
• the repurchase of the Company’s shares, in line with
the Board’s policy to buy back shares for cancellation
in normal market conditions if they are trading at a
discount in excess of 10%;
• the recommendation that shareholders vote in
favour of the Company’s dividend policy at the
forthcoming AGM; and
• the recommendation that shareholders vote in
favour of the renewal of the buyback and allotment
authorities as set out in the notice of AGM.
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 concept of responsible investing has always been
a core component of the investment process and the
Investment Managers 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, populating an internally built
ESG framework due to lack of appropriate coverage
from external providers. 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 Investment Managers believe that “G” is the
core foundation on which all else is built, as strong
governance within a company ensures that minority
shareholder interests are aligned with other
shareholders, management and stakeholders. The
Investment Managers’ “G” assessment therefore
includes questions covering shareholders’ rights,
transparency and related parties, as well as audit and
accounting, board composition and effectiveness,
executive oversight and compensation. Each area is
assessed and weighted, and the Investment Managers
then apply an aggregated weighting towards “G” in
line with the strong empirical evidence linking robust
corporate governance and performance.
The “E” and “S” are also focal points for the Investment
Managers, as assessing key environmental and social
risks are essential to a long-term sustainable business
model. The Investment Managers identify the most
material “E” and “S” risks that are believed to affect
each sector and companies are then assessed against
each risk. The results from this analysis feed into an
“E” and “S” score for each company reflecting, for each
material risk, whether suitable/sustainable plans are in
place, how clear the company has been in disclosing its
approach and how well it is doing against its objective
to manage such risk.
Where a portfolio company is assessed as having a
relatively low “E”, “S” and/or “G” score, ICM’s approach
is to engage with the company to see improvements
over time. ESG considerations provide a way to identify
and review the long-term drivers of an investment that
are not found within the financial accounts, thereby
enabling the Investment Managers to fully question
a company’s investment potential from a number
of perspectives. Examples of ESG progress on two
portfolio companies are set out on page 26.
Where possible, the Investment Managers aim to
visit companies 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 an investee
company’s management team directly to ensure a full
understanding of any challenges and opportunities.
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 (including against resolutions)
to drive positive change. As referred to above, the
Investment Managers believe that governance factors
are fundamental to an investment.
ICM is 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 align
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 two
female directors. 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 55.
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 ESG issues, as outlined on page 40.
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 17 June 2022.
By order of the Board
ICM Investment Management Limited
Company Secretary
17 June 2022
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Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
41
INVESTMENT MANAGERS AND TEAM
ICMIM, a company authorised and regulated by
the FCA, was the Company’s AIFM during the year
ended 31 March 2022 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 2.6bn
IN FUNDS DIRECTLY AND IS RESPONSIBLE INDIRECTLY FOR A FURTHER USD 24.0BN 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
been a director in multiple companies in the financial services, utility, mining and
technology sectors. He is currently a non-executive director of ASX listed Resimac
Group Limited and Allectus Capital Limited.
SENIOR CORE TEAM ASSISTING ON UEM INCLUDE:
Jacqueline Broers, deputy portfolio manager, 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, deputy portfolio manager, 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. Mr Groocock qualified as a CFA charterholder in 2005 and is
a non executive director of Petalite Limited.
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.
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Report and Accounts for the year to 31 March 2022
43
DIRECTORS
JOHN RENNOCKS (CHAIRMAN)*
John Rennocks joined the Board in 2015 and was appointed Chairman in 2016. 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.
MARK BRIDGEMAN*
Mark Bridgeman joined the Board in 2021. He is UEM’s Senior Independent Director and
Chairman of the Remuneration Committee. His background is in fund management spending
19 years with Schroders plc as an analyst and then fund manager, rising to become Global
Head of Research. He left Schroders in 2009 to manage a rural estate and farming business in
Northumberland and was formerly President of the Country Land & Business Association.
ISABEL LIU*
Isabel Liu joined the Board in 2021. She has over 25 years' global experience investing equity in
infrastructure, including the AIG Asian Infrastructure Fund, the ABN AMRO Global Infrastructure
Fund and was managing director of the Asia Pacific investment business of John Laing plc. More
recently Isabel served as a non-executive director of Pensions Infrastructure Platform. She has
been a board member of Transport Focus, the consumer watchdog for public transport and
England's highways, and Heathrow Airport’s Consumer Challenge Board. She is currently a non-
executive director of Schroder Oriental Income Fund Limited.
ANTHONY MUH*
Anthony Muh joined the Board in 2010 and has indicated his intention to retire from the Board
following the conclusion of UEM’s AGM in September 2022. He 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 and chairman of JIDA Capital Partners Limited, a China focused
sustainable infrastructure investment manager. He is the current chairman and council member
of the Asia Corporate Governance Association.
SUSAN HANSEN
ERIC STOBART*
Susan Hansen joined the Board in 2013. She is a chartered accountant and MBA graduate and has
worked in financial services since 1980. She is currently a director of Resimac Group Limited (see
page 48) and The GO2 People Ltd, both 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.
Eric Stobart joined the Board in 2019 and is Chairman of UEM’s Audit & Risk Committee.
He 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 £4.0bn. Mr Stobart
is a chartered accountant with an MBA from London Business School.
*Independent director and member of the Audit & Risk Committee, Remuneration Committee and Management Engagement Committee
44
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Report and Accounts for the year to 31 March 2022
45
DIRECTORS’ REPORT
The Directors present the Annual Report and Accounts
of the Company for the year ended 31 March 2022.
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
In accordance with the Investment Management
Agreement (“IMA”), the Company pays to ICMIM and
ICM a management fee based on a tiered structure
comprising 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. This
structure has been in place since 1 April 2021 and
replaced the previous arrangement which comprised a
management fee of 0.65% per annum of NAV together
with a performance related fee. 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 amounts payable to
ICMIM and ICM 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
considered 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 EM total return
Index. 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 2022, 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 2.00p per share were paid on 24
September 2021, 17 December 2021 and 25 March
2022. A dividend of 2.00p per share was declared on
24 May 2022 and will be paid on 24 June 2022.
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 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 currently has a Board of six 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
Governance Statement, which is set out on pages 52 to
56, forms part of this Directors’ Report.
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Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
47
DIRECTORS’ REPORT (continued)
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 pages 44 and 45. 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 AGM.
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 59.
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.
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 2022 the issued share capital of the
Company and the total voting rights were 214,744,067
shares. As at the date of this report, the share capital of
the Company and total voting rights were 211,262,573
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.
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 2022 the Company purchased 6,529,307
shares for cancellation. The current authority to
repurchase shares was granted to Directors on 21
September 2021 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.
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 tender facility has not been operated to date by
the Company or previously by its predecessor, UEM
Bermuda.
SHARE ISSUES AND REPURCHASES
UIL Limited
CONTINUATION OF THE COMPANY
AUDIT INFORMATION AND AUDITOR
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 every
five years. The continuation vote was passed at the
AGM held in 2021 and shareholders will therefore have
further opportunities to vote on the continuation of the
Company in 2026 and every fifth AGM thereafter.
SUBSTANTIAL SHARE INTERESTS
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.
As at the date of this report, the Company had received
notification of the following holdings of voting rights:
LISTING RULE 9.8.4R
Number of
shares held
31,718,500
City of London Investment
Management Company Limited
26,316,542
Lazard Asset Management LLC
18,737,825
Rathbone Investment
Management Limited
Investec Wealth & Investment
Limited
10,728,364
10,293,426
% held
15.0
12.5
8.9
5.1
4.9
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.
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
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 14 resolutions.
Resolutions 1 to 12 (inclusive) will be proposed as
ordinary resolutions and resolutions 13 and 14 will be
proposed as special resolutions.
Ordinary Resolution 1 – Annual Report and
Financial Statements
This resolution seeks shareholder approval to receive
the report of the Directors and financial statements for
the year ended 31 March 2022 and the Auditor’s report
thereon.
48
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
49
DIRECTORS’ REPORT (continued)
Ordinary Resolution 2 – Approval of the Directors’
Remuneration Policy
This resolution is to approve the Directors’
Remuneration Policy which, if passed, will be effective
with immediate effect and will apply until it is next put
to shareholders for approval, which must be at intervals
of not more than three years.
Ordinary Resolution 3 – Approval of the Directors’
Remuneration Report
This resolution is an advisory vote on the Directors’
Remuneration Report.
Ordinary Resolution 4 – 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.
Ordinary Resolutions 5 to 9 (inclusive) – Election
and re-election of the Directors
The biographies of the Directors are set out on pages
44 and 45, and are incorporated into this report by
reference.
Resolution 5 relates to the election of Mr Mark
Bridgeman who was appointed on 21 September
2021. Mr Bridgeman’s experience in the investment
management industry and with other investment
funds means that he brings significant expertise in
investment matters to his role on the Board.
Resolution 6 relates to the election of Ms Isabel Liu
who was appointed on 22 November 2021. Ms Liu’s
long career in infrastructure investing brings in-depth
knowledge and expertise in such matters to her role as
Director.
Resolution 7 relates to the re-election of Mr John
Rennocks. 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 8 relates to the re-election of Ms Susan
Hansen. 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 9 relates to the re-election of Mr Eric
Stobart. 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 10 and 11 – 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.
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 2023.
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 AGM 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
17 June 2022
Resolutions relating to the following items of special
business will be proposed at the forthcoming AGM:
Ordinary Resolution 12 – 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 £105,000 per annum, which is
equivalent to 10,500,000 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 2023 unless renewed prior to that date at an
earlier general meeting.
Special Resolution 13 – 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 £105,000 which is equivalent to
10,500,000 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 2023 unless renewed
prior to that date at an earlier general meeting.
Special Resolution 14 – 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 31,600,000 ordinary shares (being 14.99% of the
issued ordinary share capital excluding treasury
50
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
51
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
Six non-executive directors (NEDs)
CHAIRMAN: John Rennocks
SENIOR INDEPENDENT DIRECTOR: Mark Bridgeman
• to set strategy, values
and standards;
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.
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:
Mark Bridgeman
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 2022, 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
• 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. 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.
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.
52
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
53
CORPORATE GOVERNANCE STATEMENT (continued)
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 2022 and
the attendance by the Directors was as follows:
Board
Audit & Risk
Committee
Management
Engagement
Committee
Remuneration
Committee
Number of meetings held during the year
John Rennocks
Mark Bridgeman (appointed 21 September 2021)
Susan Hansen
Isabel Liu (appointed 22 November 2021)
Garth Milne (retired 21 September 2021)
Anthony Muh
Eric Stobart
4
4
2/2
4
1/1
2/2
4
4
3
3
2/2
n/a
1/1
1/1
3
3
1
1
0/0
n/a
0/0
1
1
1
1
1
0/0
n/a
0/0
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 60.
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 2022, 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 Bridgeman, comprises all the independent
Directors of the Company. Further details are provided
in the Directors’ Remuneration Report on page 57.
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.
During the year ended 31 March 2022, following a
search and selection process managed by an external
independent recruitment company, Mr Bridgeman
and Ms Liu were appointed in September 2021 and
November 2021 respectively. As a result, the Board
currently consists of four men and two woman. As
referred to in the Chairman’s statement, Mr Muh
has indicated his intention to retire from the Board
at this year’s AGM and the Board will then return to
comprising five directors.
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
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 2022 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
54
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
55
CORPORATE GOVERNANCE STATEMENT (continued)
DIRECTORS’ REMUNERATION 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.
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 factsheets 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, Senior
Independent Director 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.
By order of the Board
ICM Investment Management Limited
Company Secretary
17 June 2022
the performance of the Board, the Committees
and individual Directors. This encompasses both
quantitative and qualitative measures of performance
including:
• 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 Senior
Independent Director 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.
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.
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.
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,
MARK BRIDGEMAN
Chairman of the
Remuneration Committee
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.
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 64.
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. The review in
respect of the year ending 31 March 2023 has resulted
in the increases being applied to the annual fees as
detailed in the table below.
Year ending 31 March
Chairman
Chairman of the Audit & Risk Committee
Directors
*Actual
2023
£’000s
2022*
£’000s
50.0
46.7
37.0
47.6
44.5
35.2
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 2021. Of the votes cast, 99.96% were in
favour and 0.04% were against; this resolution will be put
to shareholders again this year. In accordance 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, 99.84% were in favour and 0.16% were
against. A resolution to approve the remuneration policy
will be put to shareholders at the forthcoming AGM.
56
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
57
DIRECTORS’ REMUNERATION REPORT (continued)
DIRECTORS’ ANNUAL REPORT ON REMUNERATION (AUDITED)
DIRECTORS’ BENEFICIAL SHARE INTERESTS (AUDITED)
COMPANY PERFORMANCE
A single figure for the total remuneration of each Director who served during the year ended 31 March 2022 is set out
in the table below.
The Directors’ shareholdings (all beneficial) are set out
below:
2021/22
Shares
purchased(1)
2021/22
Entitlement
£(2)
2021/22
Taxable
benefits
£(3)
2021/22
Total
£
2020/21
Shares
purchased(1)
2020/21
Entitlement
£(2)
2020/21
Taxable
benefits
£(3)
2020/21
Total
£
11,855
5,200
15,721
4,129
4,050
15,721
10,841
67,517
47,600
18,548
35,200
12,681
16,697
35,200
44,500
–
413
850
18
–
850
–
47,600
18,961
36,050
12,699
16,697
36,050
44,500
210,426
2,131
212,557
13,526
46,000
–
46,000
17,860
34,000
850
34,850
14,288
17,860
12,305
75,839
34,000
34,000
43,000
–
850
–
34,000
34,850
43,000
191,000
1,700
192,700
Director
John Rennocks
(Chairman)
Mark Bridgeman(4)
Susan Hansen
Isabel Liu(5)
Garth Milne(6)
Anthony Muh
Eric Stobart
Totals
As at 31 March
John Rennocks(1)
17 June
2022
31 March
2022
31 March
2021
195,245
192,343
183,390
Mark Bridgeman
5,200
3,337
n/a
Susan Hansen
144,810
140,921
123,340
Isabel Liu
Anthony Muh
Eric Stobart(2)
10,931
10,931
n/a
243,887
239,998
215,641
46,000
43,000
30,250
(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 2012 to 31 March 2022
Including the performance of UEM Bermuda, the
graph below compares, for the ten years ended
31 March 2022, 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 EM total return Index.
The MSCI EM total return Index has been used as the
Company invests across a broad spread of emerging
markets.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
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
The Directors’ entitlement to fees is calculated in arrears
Taxable benefits comprise amounts reimbursed for expenses incurred in carrying out business for the Company
Appointed 21 September 2021
Appointed 22 November 2021
Retired 21 September 2021
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.
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
2022 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.
2022
£’000s
2021
£’000s
Change
£’000s
Year ended 31 March
Aggregate Directors’
emoluments
Aggregate dividends
17,379
17,270
210
191
19
109
ANNUAL PERCENTAGE CHANGE IN DIRECTORS’
REMUNERATION
The following table sets out the annual percentage
change in Directors’ remuneration compared to the
previous year.
Year ended 31 March
John Rennocks
Mark Bridgeman
Susan Hansen
Isabel Liu
Garth Milne
Anthony Muh
Eric Stobart
2022
Taxable
expenses
%
2021
Taxable
expenses
%
2021
Fees
%
2022
Fees
%
3.5
n/a
3.5
n/a
3.5
3.5
3.5
n/a
n/a
0.0
n/a
n/a
0.0
n/a
0.0
n/a
0.0
n/a
0.0
0.0
0.0
n/a
n/a
(2.9)
n/a
n/a
(2.9)
n/a
250
200
150
100
50
0
Mar 12
Mar 13
Mar 14
Mar 15
Mar 16
Mar 17
Mar 18
Mar 19
Mar 20
Mar 21
Mar 22
UEM ordinary share price total return adjusted
for the exercise of subscription shares
MSCI EM total return Index (GBP adjusted)
Rebased to 100 as at 31 March 2012
Source: ICM and Bloomberg
On behalf of the Board
Mark Bridgeman
Chairman of the Remuneration Committee
17 June 2022
Aggregate share buybacks
13,898
12,112
1,786
58
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
59
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 2022.
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 2022, 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 in 2020. 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 2022 (2021: £nil).
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 2022 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 2022 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.
60
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
61
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
36 to 38. 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
17 June 2022
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 2022, 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.
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 UK adopted
International Accounting Standards and 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 UK adopted International
Accounting Standards and 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,
Directors’ Report, Directors’ Remuneration Report and
Corporate Governance Statement that complies with
that law and those regulations.
In accordance with Disclosure Guidance and
Transparency Rule 4.1.14R, the financial statements
will form part of the annual financial report prepared
using the single electronic reporting format under
the TD ESEF Regulation. The auditor’s report on these
financial statements provides no assurance over the
ESEF format.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website, 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 17 June 2022 and signed on
its behalf by:
John Rennocks
Chairman
62
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
63
Independent
auditor’s report
to the members of Utilico Emerging Markets Trust plc
Overview
Materiality:
financial
statements as a
whole
£5.7m (2021:£5.6m)
1% (2021: 1%) of total assets
Key audit matters vs 2021
Recurring risks
Valuation of certain
Level 3 investments
Carrying amount of non
– derivative level 1
investments
▲
◄►
1. Our opinion is unmodified
We have audited the financial statements of Utilico
Emerging Markets Trust (“the Company”) for the year
ended 31 March 2022 which comprise the Statement of
Comprehensive Income, Statement of Changes in Equity,
Statement of Financial Position, Statement 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 the
Company’s affairs as at 31 March 2022 and of its
return for the year then ended;
— have been properly prepared in accordance with UK-
adopted international accounting standards; and
— have been prepared in accordance with the
requirements of the Companies 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 Committee.
We were first appointed as auditor by Directors on 7
February 2018. The period of total uninterrupted
engagement is for the four financial years ended 31
March 2022. We have fulfilled our ethical
responsibilities under, and we remain independent of
the Company in accordance with, UK ethical
requirements 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 matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (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
engagement team. We summarise below the key audit matters (unchanged from 2021), in decreasing order of audit significance, in
arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest
entities, our results from those procedures. These matters 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 statements as a whole, and in forming our opinion thereon, and
consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
The risk
Our response
Valuation of certain level 3
investments
(£48.1 million; 2021: £20.9
million)
Refer to page 61 (Audit and
Risk Committee Report),
page 74 (accounting policy)
and pages 80 and 89 to 92
(financial disclosures).
Subjective Valuation
8.4% (2021: 3.7%) of the company’s
total assets (by value) is held in
investments where no quoted market
price is available. Level 3 investments
are measured at fair value, which is
established in accordance with the
International Private Equity and
Venture Capital Valuation Guidelines
by using measurements of value such
as prices of recent orderly transactions,
milestone analysis and revenue
multiples, and valuing fund interests.
We assessed that the level of risk
associated with this matter has
increased in the year as both the
quantum of the balance, and the level
of judgement associated with certain
unobservable inputs have increased.
There is a significant risk over the
judgements and estimates inherent in
the valuation and therefore this is one
of the key areas that our audit has
focused on.
The effect of these matters is that, as
part of our risk assessment, we
determined that the valuation of
certain Level 3 investments has a high
degree of estimation uncertainty, with
a potential range of reasonable
outcomes greater than our materiality
for the financial statements as a whole.
We performed 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 primarily through the
detailed procedures described:
Our procedures included:
— Historical comparisons: We assessed investment realisations
in the period, comparing actual sales proceeds to prior year
end valuations to understand the reasons for significant
variances and determine whether they are indicative of bias or
error in the company’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 experience: We challenged the investment
manager on key judgements affecting investee company
valuations, such as discount factors and the choice of
benchmark for revenue multiples and probability applied to
milestone scenarios. We compared key underlying financial
data inputs to external sources, investee company audited
accounts and management information as applicable. We
challenged the assumptions around sustainability of revenue
based on the plans of the investee companies and whether
these are achievable and we obtained understanding of
milestones completed during the year and compared them to
the investee company plan prepared in the prior year. We also
obtained an understanding of existing and prospective
investee company cash flows to understand whether
borrowings can be serviced or whether refinancing may be
required. Our work included consideration of events which
occurred subsequent to the year end up until the date of this
audit report;
— Comparing valuations: Where a recent transaction has been
used to value a holding, we obtained an understanding of the
circumstances surrounding the transaction and vouched the
price to supporting documentation. We also assessed whether
subsequent changes or events such as market or entity specific
factors would imply a change in value. For the valuation of
fund interests, we obtained and agreed the latest reported net
asset values from the fund managers; and
— Assessing transparency: Consideration of the appropriateness,
in accordance with relevant accounting standards, of the
disclosures in respect of certain Level 3 investments and the
effect of changing one or more inputs to reasonably possible
alternative valuation assumptions.
Our results: We found the Company’s valuation of certain Level 3
investments to be acceptable (2021: acceptable).
64
65
2. Key audit matters: our assessment of risks of material misstatement (continued)
4. Going concern (continued)
5. Fraud and breaches of laws and regulations – ability to detect
The risk
Our response
Carrying amount of non-derivative
Level 1 investments
Low risk, high value
(£519.9m; 2021: £534.7m)
Refer to page 61 (Audit and Risk
Committee Report), page 74
(accounting policy) and pages 80, and
91 (financial disclosures).
The Company’s portfolio of non-derivative
Level 1 investments makes up 90.5% (2021:
94.0%) of the Company’s total assets by
value and is considered to be one of the key
drivers of results. We do not consider these
investments to be at a high risk of significant
misstatement, or to be subject to a
significant level of judgement because they
comprise liquid, quoted investments.
However, due to their materiality in the
context of the financial statements 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 completing our
audit.
We performed the detailed tests below rather than
seeking to rely on controls, because the nature of
the balance is such that detailed testing is
determined to be the most effective manner of
obtaining audit evidence.
Our procedure included
— Tests of detail: Agreed the valuation of 100% of
non-derivative Level 1 investments in the
portfolio to externally quoted prices; and
— Enquiry of custodians: All investments in non-
derivative level 1 investments were agreed to
independently received third party
confirmations from investment custodians or we
performed alternate procedures on
unconfirmed balances.
Our results:
We found the carrying amount of non-derivative
Level 1 investments to be acceptable (2021:
acceptable).
3. Our application of materiality and an overview of the
scope of our audit
Materiality for the financial statements as a whole was set at
£5.7m (2021: £5.6m), determined with reference to a
benchmark of total assets, of which it represents 1% (2021:
1%).
In line with our audit methodology, our procedures on
individual account balances and disclosures were performed
to a lower threshold, performance materiality, so as to
reduce to an acceptable level the risk that individually
immaterial misstatements in individual account balances add
up to a material amount across the financial statements as a
whole. Performance materiality was set at 75% (2021: 75%) of
materiality for the financial statements as a whole, which
equates to £4.3m (2021 : £4.2m). We applied this percentage
in our determination of performance materiality because we
did not identify any factors indicating an elevated level of
risk.
In addition, we applied materiality of £0.9m (2021: £0.9m)
and performance materiality of £0.7m (2021: £0.6m) to
investment and other income, for which we believe
misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected
to influence the Company’s members’ assessment of the
financial performance of the Company.
We agreed to report to the Audit and Risk Committee any
corrected or uncorrected identified misstatements exceeding
£0.28m (2021: £0.28m) or £0.09m in relation to investment
and other income (2021: £0.09m) in addition to other
identified misstatements that warranted reporting on
qualitative grounds.
Our audit of the Company was undertaken to the materiality
and performance materiality levels specified above and was
performed by a single audit team.
The scope of the audit work performed was fully substantive
as we did not rely upon the Company’s internal control over
financial reporting.
Total Assets
£574.2m (2021: £568.3m)
Materiality
£5.7m (2021: £5.6m)
£5.7m
Whole financial
statements materiality
(2021: £5.6m)
£4.3m
Performance materiality
(2021: £4.2m)
£0.9m
Investment and other
income materiality
(2021: £0.9m)
£0.28m
Misstatements reported to
the Audit and Risk
Committee (2021: £0.28m)
Total Assets
4. Going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Company or to
cease its operations, and as they have concluded that the Company’s
financial position means that this is realistic. They have also concluded
that there are no material 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 statements (“the going
concern period”).
We used our knowledge of the Company, its industry, and
the general economic environment to identify the inherent
risks to its business model and analysed how those risks
might affect the Company’s financial resources or ability to
continue operations over the going concern period. The
risks that we considered most likely to adversely affect the
Company’s available financial resources and its ability to
operate over this period were:
— The impact of a significant reduction in the valuation of
investments and the implications for the Company’s
debt covenants;
— The liquidity of the investment portfolio and its ability
to meet the liabilities of the Company as and when they
fall due;
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud (“fraud
risks”) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
— Enquiring of Directors as to the Company’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 Administrator and the Company’s Investment
Manager; and
— The operational resilience of key service organisations;
— Reading Board and Audit and Risk Committee minutes.
and
We considered whether these risks could plausibly affect
the liquidity in the going concern period by assessing the
degree of downside assumption that, individually and
collectively, could result in a liquidity issue, taking into
account the Company’s liquid investment position (and the
results of their reverse stress testing).
We considered whether the going concern disclosure in
note 1 and note 25 to the financial statements gives a full
and accurate description of the Directors’ assessment 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
statements is appropriate;
— we have not identified, and concur with the directors’
assessment that there is not, a material uncertainty
related to events or conditions that, individually or
collectively, may cast significant doubt on the
Company's ability to continue as a going concern for the
going concern period;
— we have nothing material to add or draw attention to in
relation to the Directors’ statement in note 1 and note
25 to the financial statements on the use of the going
concern basis of accounting with no material
uncertainties that may cast significant doubt over the
Company’s use of that basis for the going concern
period, and we found the going concern disclosure in
note 1 and note 25 to be acceptable; and
— the related statement under the Listing Rules set out on
page 47 is materially consistent with the financial
statements and our audit knowledge.
However, as we cannot predict all future events or
conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that were
reasonable at the time they were made, the above
conclusions are not a guarantee that the Company will
continue in operation.
As required by auditing standards, we perform procedures to
address the risk of management override of controls, in particular
to the risk that management may be in a position to make
inappropriate accounting entries. We evaluated the design and
implementation of the controls over journal entries and other
adjustments and made inquiries of the Administrator about
inappropriate or unusual activity relating to the processing of
journal entries and other adjustments. We substantively tested all
material post-closing entries and, based on the results of our risk
assessment procedures and understanding of the process,
including the segregation of duties between the Directors and the
Administrator, no further high-risk journal entries or other
adjustments were identified.
On this audit we have rebutted the fraud risk related to revenue
recognition because the revenue is non-judgemental and
straightforward, with limited opportunity for manipulation. 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 material effect on the financial statements
from our general commercial and sector experience and through
discussion with the Directors, the Investment Manager and the
Administrator (as required by auditing standards) and discussed
with the Directors the policies and procedures regarding
compliance with laws and regulations. As the Company is
regulated, our assessment of risks involved gaining an
understanding of the control environment including the entity’s
procedures for complying with regulatory requirements.
The potential effect of these laws and regulations on the financial
statements varies considerably.
66
Report and Accounts for the year to 31 March 2022
67
5. Fraud and breaches of laws and regulations – ability to detect
6. We have nothing to report on the other information in the
6. We have nothing to report on the other information in the
8. Respective responsibilities
(continued)
Annual Report
Annual Report (continued)
Identifying and responding to risks of material misstatement
due to non-compliance with laws and regulations (continued)
Firstly, the Company is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation), distributable
profits legislation, and its qualification as an Investment Trust
under UK taxation legislation, any breach of which could lead to the
Company losing various deductions and exemptions from UK
corporation tax, and we assessed the extent of compliance with
these laws and regulations as part of our procedures on the related
financial statement items.
Secondly, the Company is subject to many other laws and
regulations where the consequences of non-compliance could have
a material effect on amounts or disclosures in the financial
statements, for instance through the imposition of fines or
litigation. We identified the following areas as those most likely to
have such an effect: money laundering, data protection, bribery
and corruption legislation and certain aspects of company
legislation recognising the financial and regulated nature of the
Company’s activities and its legal form. Auditing standards limit the
required audit procedures to identify non-compliance with these
laws and regulations to enquiry of the Directors and the
Administrator 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 limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-
compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely the
inherently limited procedures required by auditing standards
would identify it.
In addition, as with any audit, there remained a higher risk of non-
detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing non-
compliance or fraud and cannot be expected to detect non-
compliance with all laws and regulations.
The Directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not
cover the other information 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 information and, in doing
so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
— we have not identified material misstatements in the
strategic report and the Directors’ report;
— in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
— in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of emerging and principal risks and longer-term
viability
We are required to perform procedures to identify whether
there is a material inconsistency between the Directors’
disclosures in respect of emerging and principal risks and the
viability statement, and the financial statements and our audit
knowledge.
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
— the Directors’ confirmation within the Strategic Report on
page 36 that they have carried out a robust assessment of
the emerging and principal risks facing the Company,
including those that would threaten its business model,
future performance, solvency and liquidity;
— the Principal Risks and Risk Mitigation disclosures describing
these risks and how emerging risks are identified, and
explaining how they are being managed and mitigated; and
— the Directors’ explanation in the Viability Statement of how
they have assessed the prospects of the Company, over what
period they have done so and why they considered that
period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as they
fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
We are also required to review the Viability statement, set out
on page 38 under the Listing Rules. Based on the above
procedures, we have concluded that the above disclosures are
materially consistent with the financial statements and our audit
knowledge.
Our work is limited to assessing these matters in the context of
only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were
made, the absence of anything to report on these statements is
not a guarantee as to the Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether
there is a material inconsistency between the Directors’
corporate governance disclosures and the financial statements
and our audit knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements
and our audit knowledge:
— the Directors’ statement that they consider that the annual
report and financial statements 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;
— the section of the annual report describing the work of the
Audit and Risk Committee, including the significant issues
that the Audit and Risk Committee considered in relation to
the financial statements, and how these issues were
addressed; and
— the section of the annual report that describes the review of
the effectiveness of the Company’s risk management and
internal control systems.
We are required to review the part of the Corporate Governance
Statement relating to the Company’s compliance 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 Companies 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 statements and the part of the Directors’
Remuneration Report to be audited are not in agreement
with the accounting records and
returns; or
Directors’ responsibilities
As explained more fully in their statement set out on page 63,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; 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; assessing
the Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern; and using 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.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, 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
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
In accordance with Disclosure Guidance and Transparency Rule
4.1.14R, the financial statements will form part of the annual
financial report prepared using the single electronic reporting
format under the TD ESEF Regulation. The auditor's report on
these financial statements provides no assurance over the ESEF
format
9.
The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
John Waterson (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Saltire Court
— certain disclosures of directors’ remuneration specified by
20 Castle Terrace
law are not made; or
— we have not received all the information and explanations
we require for our audit.
Edinburgh
EH1 2EG
We have nothing to report in these respects.
17 June 2022
68
69
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF CHANGES IN EQUITY
Notes
10 Gains on investments
20 Losses on derivative instruments
20 Foreign exchange gains
for the year to
31 March 2022
for the year to
31 March 2021
Revenue
return
£’000s
Capital
return
£’000s
Total
return
£’000s
Revenue
return
£’000s
Capital
return
£’000s
Total
return
£’000s
–
–
–
58,293
58,293
–
–
1,333
1,333
–
–
–
114,303
114,303
(4,489)
(4,489)
2,247
2,247
3 Investment and other income
22,593
–
22,593
22,773
–
22,773
Total income
22,593
59,626
82,219
22,773
112,061
134,834
4 Management and administration fees
(1,451)
(4,240)
(5,691)
(1,284)
(7,424)
(8,708)
5 Other expenses
(1,590)
–
(1,590)
(1,425)
–
(1,425)
Profit before finance costs and taxation
19,552
55,386
74,938
20,064
104,637
124,701
6 Finance costs
(119)
(469)
(588)
(261)
(609)
(870)
Profit before taxation
19,433
54,917
74,350
19,803
104,028
123,831
7 Taxation
Profit for the year
(1,500)
(1,188)
(2,688)
(1,578)
(1,585)
(3,163)
17,933
53,729
71,662
18,225
102,443
120,668
8 Earnings per share (basic) – pence
8.17
24.49
32.66
8.13
45.73
53.86
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 for the year and therefore the profit for the year is also the total
comprehensive income for the year, as defined in International Accounting Standard 1 (revised).
All income is attributable to the equity holders of the Company.
for the year to 31 March 2022
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 2021
2,213
76,706
132
473,634
(53,868)
6,879
505,696
16, 18,
19
Shares purchased by the
Company and cancelled
20,21 Profit for the year
9 Dividends paid in the year
(65)
–
–
–
–
–
65
(13,898)
–
–
(13,898)
–
–
–
–
53,729
17,933
71,662
–
(17,544)
(17,544)
Balance as at 31 March 2022
2,148
76,706
197
459,736
(139)
7,268
545,916
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
The notes on pages 74 to 92 form part of these financial statements.
The notes on pages 74 to 92 form part of these financial statements.
70
Utilico Emerging Markets Trust plc
Report and Accounts for the period to 31 March 2022
71
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CASH FLOWS
2022
£’000s
2021
£’000s
571,686
565,751
1,477
1,104
2,581
1,610
1,027
2,637
(2,799)
(10,795)
(218)
(8,158)
571,468
557,593
(23,662)
(1,890)
545,916
2,148
76,706
197
459,736
(139)
7,268
(50,373)
(1,524)
505,696
2,213
76,706
132
473,634
(53,868)
6,879
545,916
505,696
254.22
228.54
Notes as at 31 March
Non-current assets
10
Investments
Current assets
11
Other receivables
Cash and cash equivalents
Current liabilities
12
Other payables
Net current liabilities
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 74 to 92 form part of these financial statements.
Approved by the Board on 17 June 2022 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 before taxation
Deduct investment income – dividends
Deduct investment income – interest
Deduct bank Interest received
Add back interest charged
Add back gains on investments
Deduct losses on derivative instruments
Add back foreign exchange gains
(Increase)/decrease in other receivables
(Decrease)/increase 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 inflow/(outflow) from investing activities
Financing activities
Repurchase of shares for cancellation
Dividends paid
Drawdown of bank loans
Repayment of bank loans
Net cash outflow from financing activities
Increase/(decrease) 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 74 to 92 form part of these financial statements.
2022
£’000s
74,350
(21,604)
(988)
(1)
588
(58,293)
–
(1,333)
(16)
(4,701)
(11,998)
(600)
21,556
1
190
(2,465)
6,684
(122,600)
176,372
–
–
53,772
(13,898)
(17,544)
52,101
(77,576)
(56,917)
3,539
(3,184)
97
452
1,104
(652)
452
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)
72
Utilico Emerging Markets Trust plc
Report and Accounts for the period to 31 March 2022
73
NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES
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 UK adopted International
Accounting Standards, which comprise standards and
interpretations approved by the IASB and International
Accounting Standards and Standing Interpretations
Committee interpretations approved by the IASC that remain
in effect and 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 April 2021, do not
conflict with the requirements of International Financial
Reporting Standards ("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.
Following the change to the investment management fee
arrangements (see note 4), from 1 April 2021 management
fees, company secretarial fees, research fees and finance
costs are allocated 80% to capital return and 20% to revenue
return (prior to 1 April 2021: 70% to capital return and 30% to
revenue return).
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.
(b) Financial instruments
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 80% to capital
return and 20% to revenue return (31 March 2021: 70% to
capital return and 30% to revenue return).
– expenses incidental to the acquisition or disposal of
Investments are allocated to capital return.
– performance related management fees (calculated under the
terms of the Investment Management Agreement prior to 1
April 2021) are allocated to capital return.
(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 satisfied in shares of the Company, by either
purchasing shares in the market around each quarter end or,
if the shares are trading at a premium to the net asset value,
allotting new shares by dividing the net fee entitlement by the
net asset value on the date of allotment.
(k) Finance costs
Finance costs are accounted for using the effective interest
method, recognised through the Statement of Comprehensive
Income.
Finance costs are allocated 80% to capital return and 20% to
revenue return (31 March 2021: 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.
74
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
75
NOTES TO THE ACCOUNTS (continued)
(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 was credited to this account which is
non-distributable. The nominal value of the shares issued is
recognised in called up share capital.
(o) Capital reserves
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
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.
3.
INVESTMENT AND OTHER INCOME
Year to 31 March
2.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES
AND ASSUMPTIONS
The presentation of the financial statements in conformity
with IFRS requires management to make judgements,
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 area requiring the most significant judgement and
estimation in the preparation of the financial statements is
the 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 8.4% of total investments as at 31
March 2022 (3.9% of total investments as at 31 March 2021).
Investment income
Dividends*
Interest
Total investment income
Other income
Bank interest
Total income
Revenue
£’000s
Capital
£’000s
21,604
988
22,592
1
22,593
–
–
–
–
–
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
21,604
988
22,592
21,670
1,096
22,766
1
7
22,593
22,773
–
–
–
–
–
*Includes scrip dividends of £948,000 (2021: £1,109,000)
4. MANAGEMENT AND ADMINISTRATION FEES
Year to 31 March
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
Revenue
£’000s
Capital
£’000s
Payable to: ICM/ICMIM
– management, secretarial and
research fees
– performance fee adjustment in
respect of prior year
Administration fees
1,124
4,496
5,620
1,005
2,345
3,350
–
327
1,451
(256)
–
4,240
(256)
327
5,691
–
279
1,284
5,079
–
7,424
5,079
279
8,708
2021
Total
£’000s
21,670
1,096
22,766
7
22,773
2021
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. 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 UK version of the EU Alternative
Investment Fund Managers Directive as it forms part of UK
domestic law by virtue of the European Union (withdrawal)
Act 2018, as amended and also such other requirements
applicable to ICMIM by virtue of its regulation by the Financial
Conduct Authority
From 1 April 2021 the annual management fee is 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 (prior to 1 April 2021:
0.65% per annum of net assets), payable quarterly in arrears.
The management fee is allocated 80% to capital return (31
March 2021: 70% to capital return) and 20% to revenue return
(31 March 2021: 30% to revenue return). The investment
management agreement may be terminated upon six
months’ notice
Prior to 1 April 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 was 1.85% of the average net assets of
the Company and any performance fee in excess of this cap
was written off. The NAV must also have exceeded the high
watermark established when the performance fee was last
paid, adjusted for capital events and dividends paid since
that date. A performance fee was paid in respect of the year
ended 31 March 2021 of £5,079,000. Of this ICM and ICMIM
received £2,540,000 in cash and 1,111,193 ordinary shares
were purchased in the market at a cost to the Company of
£2,283,000. The saving arising on buying the shares at a
discount in the market was £256,000. This saving has been
recognised in the accounts for the year to 31 March 2022.
ICMIM also provides company secretarial services to the
Company, with the Company paying £70,000 (31 March 2021
£70,000) equivalent to 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 80% to capital return (31 March
2021: 70% to capital) and 20% to revenue return (31 March
2021: 30% to revenue).
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).
5. OTHER EXPENSES
Year to 31 March
Auditor's remuneration:
for audit services(1)
Broker and consultancy fees
Custody fees
Depositary fees
Directors’ fees for services to the Company
(see Directors’ Remuneration Report on pages 57 to 59)
Travel expenses
Professional fees
Sundry expenses
2022
Revenue
£’000s
Capital
£’000s
Total
£’000s
Revenue
£’000s
Capital
£’000s
86
128
648
138
210
5
118
257
1,590
–
–
–
–
–
–
–
–
–
86
128
648
138
210
5
118
257
1,590
84
129
571
119
191
11
82
238
1,425
–
–
–
–
–
–
–
–
–
2021
Total
£’000s
84
129
571
119
191
11
82
238
1,425
All expenses are stated gross of irrecoverable VAT, where applicable.
(1)
Total auditor’s remuneration for audit services, exclusive of VAT, amounted to £85,000, £75,000 for the year to 31 March 2022 and £10,000 for
additional audit costs for the year to 31 March 2021 (2021: £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).
76
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
77
NOTES TO THE ACCOUNTS (continued)
6. FINANCE COSTS
Year to 31 March
2022
Revenue
£’000s
Capital
£’000s
Total
£’000s
Revenue
£’000s
Capital
£’000s
2021
Total
£’000s
On loans and bank overdrafts
119
469
588
261
609
870
7. TAXATION
(a) Analysis of charge in the year :
Year to 31 March
2022
Tax on ordinary activities
UK corporation tax at 19.00% (2021: 19.00%)
Overseas tax suffered
Capital gains tax suffered
Deferred tax (see note 14)
Total tax charge for the year
Revenue
£’000s
Capital
£’000s
Total
£’000s
Revenue
£’000s
Capital
£’000s
–
1,500
–
–
–
–
822
366
–
–
1,500
1,578
822
366
–
–
1,500
1,188
2,688
1,578
–
–
61
1,524
1,585
2021
Total
£’000s
–
1,578
61
1,524
3,163
The Company is liable to 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.
(b) Factors affecting current tax charge for the year
The tax assessed for the year can be reconciled to the profit per the Statement of Comprehensive Income as follows:
Year to 31 March
2022
Revenue
£’000s
Capital
£’000s
Total
£’000s
Revenue
£’000s
Capital
£’000s
2021
Total
£’000s
Net profit before taxation
Corporation tax at 19.00%
Effects of:
Non taxable dividend income
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
Total tax charge for the year
19,433
54,917
74,350
19,803
104,028
123,831
3,692
10,434
14,126
3,762
19,765
23,527
(3,476)
–
(3,476)
(3,620)
–
(3,620)
–
(11,329)
(11,329)
–
(21,291)
(21,291)
1,500
694
(895)
(15)
–
1,500
–
–
1,500
694
1,578
1,408
–
–
895
–
1,188
1,188
–
(1,526)
1,526
(15)
1,188
2,688
(24)
–
1,578
–
1,585
1,585
1,578
1,408
–
(24)
1,585
3,163
As at 31 March 2022 the Company had tax losses with a value of £4,959,000 (2021: £3,100,000) based on the enacted tax rates of
25% which applies from 1 April 2023 (2021: 19%) in respect of which a deferred tax asset has not been recognised. The deferred
tax asset would only be recovered if the Company were to generate sufficient profits to utilise these losses in future periods. 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 return
Total return
2022
£’000s
17,933
53,729
71,662
Number
2021
£’000s
18,225
102,443
120,668
Number
Weighted average number of shares in issue during the year
219,416,396
224,028,801
Revenue return per share
Capital return per share
Total profit per share
9. DIVIDENDS
Year to 31 March
2020 Fourth quarterly dividend of 1.925p per share
2021 First quarterly dividend of 1.925p per share
2021 Second quarterly dividend of 1.925p per share
Record date
Payment date
05-Jun-20
04-Sep-20
03-Dec-20
19-Jun-20
18-Sep-20
18-Dec-20
2021 Third quarterly dividend of 1.925p per share
05-Mar-21
24-Mar-21
2021 Fourth quarterly dividend of 2.000p per share
2022 First quarterly dividend of 2.000p per share
2022 Second quarterly dividend of 2.000p per share
04-Jun-21
03-Sep-21
03-Dec-21
23-Jun-21
24-Sep-21
17-Dec-21
2022 Third quarterly dividend of 2.000p per share
04-Mar-22
25-Mar-22
Pence
8.17
24.49
32.66
2022
£’000s
–
–
–
–
4,415
4,393
4,385
4,351
17,544
Pence
8.13
45.73
53.86
2021
£’000s
4,348
4,308
4,283
4,264
–
–
–
–
17,203
The Directors have declared a fourth quarterly dividend in respect of the year ended 31 March 2022 of 2.00p per share payable on
24 June 2022 to shareholders on the register at close of business on 6 June 2022. The total cost of the dividend, which has not been
accrued in the results for the year to 31 March 2022, is £4,250,000 based on 212,488,390 shares in issue at the record date.
78
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
79
NOTES TO THE ACCOUNTS (continued)
10. INVESTMENTS
Year to 31 March
Cost of investments brought forward
Net unrealised losses brought forward
Valuation brought forward
Purchases at cost
Sales proceeds
Profits on investments
Valuation as at 31 March
Analysed as at 31 March
Cost of investments
Net unrealised gains/(losses) on investments
Valuation
2022
£’000s
576,074
(10,323)
565,751
124,508
(176,916)
58,343
571,686
523,644
48,042
571,686
2021
£’000s
534,962
(116,219)
418,743
174,694
(142,057)
114,371
565,751
576,074
(10,323)
565,751
The Company received £176,916,000 (2021: £142,057,000) from investments sold in the year. The book cost of these investments
when they were purchased was £176,938,000 (2021: £133,582,000). 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 (loss)/gain on investments sold
Other capital charges
Movement in unrealised gains
Total gains on investments
Subsidiary undertakings
2022
£'000
(22)
(50)
58,365
58,293
2021
£'000
8,475
(68)
105,896
114,303
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 2022 and as at 31 March 2021, held as part of the investment portfolio, and are
accounted for as investments at fair value through profit and loss.
UEM (HK) Limited(1)
UEM Mauritius Holdings Limited(2)
Country of
registration and
incorporation
Number and class of
shares held
Hong Kong
1,000 ordinary shares
Bermuda
Loan
Holding
and voting
rights
100
100
2022
Fair
value
£’000s
–
–
2021
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.
80
Utilico Emerging Markets Trust plc
Associated undertakings
Under IFRS10 Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities, the following associated
undertakings as at 31 March 2022 and as at 31 March 2021 are held as part of the investment portfolio and consequently are
accounted for as investments at fair value through profit and loss:
East Balkan Properties plc
Petalite Limited
Pitch Hero Holdings Limited
Country of incorporation
Country of listing
Isle of Man
Unlisted
United Kingdom
United Kingdom
Unlisted
Unlisted
Country of operations
Bulgaria & Romania
United Kingdom
United Kingdom
Number of ordinary shares held
Percentage of ordinary shares held
155
25.3%
10,256*
29.4%
62,874
36.7%
*Includes 5,820 shares that would be issued through the exchange of the convertible loan held into shares
Transactions with associated undertaking were as follows:
East Balkan Properties plc ("East Balkan")
East Balkan completed a 10-for-1 and 100-for-1 consolidation on the voting and non-voting shares respectively. UEM paid GBP
75,000 for extra shares. There were no other transactions between East Balkan and the Company.
Petalite Limited (“Petalite”)
Pursuant to a convertible loan agreement dated 16 July 2020 under which UEM has agreed to loan monies to Petalite, the
convertible loan balance and interest outstanding brought forward as at 31 March 2021 was £512,000. In the year, a further
£500,000 was advanced to Petalite. As at 31 March 2022, the balance of the loan and interest outstanding was £1,110,000. The
loan bears interest at an annual rate of 10.0% and exchangeable into shares at any time until 30 November 2022.
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, the loan balance
and interest outstanding brought forward as at 31 March 2021 was £151,000. No advancements were made in the year. As at
31 March 2022, the balance of the loan and interest outstanding was £158,000. The loan bears interest at an annual rate of 5.0%
and is repayable on 1 March 2024.
Significant interests
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
2022
% of class of
instruments
held
2021
% of class of
instruments
held
Bolsa de Valores de Colombia
Colombia
Korean Internet Neutral Exchange Inc.
South Korea
Ocean Wilsons
Telelink Business Services Group
Bermuda
Bulgaria
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
11. CURRENT ASSETS
Other receivables
Accrued income
Sales for future settlement
Overseas tax recoverable
Other debtors
6.6
4.8
4.6
13.9
2022
£’000s
796
607
29
45
7.4
4.8
6.1
10.0
2021
£’000s
1,381
126
73
30
1,477
1,610
Report and Accounts for the year to 31 March 2022
81
NOTES TO THE ACCOUNTS (continued)
12. CURRENT LIABILITIES
Other payables
Bank overdraft
Interest payable
Other creditors and accruals
Purchases awaiting settlement
13. BANK LOANS – NON-CURRENT LIABILITIES
EUR 28.0m repayable March 2024
USD 69.5m repaid
2022
£’000s
652
24
1,834
289
2,799
2022
£’000s
23,662
–
23,662
2021
£’000s
4,211
35
6,549
–
10,795
2021
£’000s
–
50,373
50,373
The Company has an unsecured committed senior multicurrency revolving facility of £50,000,000 with the Bank of Nova Scotia,
London Branch expiring on 15 March 2024. 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. The loan as at 31 March 2022 was rolled on 14 April 2022 to
14 July 2022.
14. PROVISION FOR CAPITAL GAINS TAX
Balance brought forward
Increase in provision for Indian tax on capital gains
Balance as at 31 March
2022
£’000s
1,524
366
1,890
2021
£’000s
–
1,524
1,524
Provision is made for deferred tax in respect of capital gains tax on chargeable investment holding gains in India.
15. OPERATING SEGMENTS
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.
16. ORDINARY SHARE CAPITAL
Issued, called up and fully paid
Ordinary shares of 1p each
Balance brought forward
Purchased for cancellation by the Company
Balance as at 31 March
Number
221,273,374
(6,529,307)
214,744,067
2022
£'000
2,213
(65)
2,148
Number
227,862,470
(6,589,096)
221,273,374
2021
£'000
2,278
(65)
2,213
During the year the Company bought back for cancellation 6,529,307 (2021: 6,589,096) ordinary shares at a total cost of
£13,898,000 (2021: £12,112,000). A further 3,481,494 ordinary shares have been purchased for cancellation at a total cost of
£7,641,000 since the year end.
17. MERGER RESERVE
Balance brought forward and carried forward
18. CAPITAL REDEMPTION RESERVE
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
Investment
holding
gains
£’000s
–
58,365
–
–
–
–
–
–
–
58,365
2022
Total
£’000s
(22)
58,365
–
–
1,333
(469)
(4,240)
(1,188)
(50)
53,729
(10,323)
(53,868)
48,042
(139)
Realised
£’000s
(22)
–
–
–
1,333
(469)
(4,240)
(1,188)
(50)
(4,636)
(43,545)
(48,181)
Realised gains on investments
Unrealised gains on investments
Realised losses on derivative
instruments
Unrealised gains on derivative
instruments
Foreign exchange gains
Finance costs charged to capital
Expenses charged to capital
Capital gains tax
Other capital charges
Balance brought forward
Balance as at 31 March
2022
£’000s
76,706
2021
£’000s
76,706
2022
£’000s
2021
£’000s
132
65
197
67
65
132
2022
£’000s
473,634
(13,898)
459,736
Investment
holding
gains
£’000s
–
Realised
£’000s
8,475
2021
£’000s
485,746
(12,112)
473,634
2021
Total
£’000s
8,475
–
105,896
105,896
(4,543)
–
2,247
(609)
(7,424)
(1,585)
(68)
(3,507)
(40,038)
(43,545)
–
54
–
–
–
–
–
(4,543)
54
2,247
(609)
(7,424)
(1,585)
(68)
105,950
102,443
(116,273)
(156,311)
(10,323)
(53,868)
Included within the capital reserve movement for the year is £3,975,000 (2021: £586,000) of dividend receipts recognised as
capital in nature, £169,000 (2021: £297,000) of transaction costs on purchases of investments and £436,000 (2021: £192,000) of
transaction costs on sales of investments.
82
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
83
NOTES TO THE ACCOUNTS (continued)
21. REVENUE RESERVE
Balance brought forward
Revenue profit for the year
Dividend paid in the year
Balance as at 31 March
22. NET ASSET VALUE PER SHARE
2022
£’000s
6,879
17,933
2021
£’000s
5,857
18,225
(17,544)
(17,203)
7,268
6,879
The net asset value per share is based on the net assets attributable to the equity shareholders of £545,916,000 (2021:
£505,696,000) and on 214,744,067 (2021: 221,273,374) shares, being the number of shares in issue at the year end.
23. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
2022
Bank loans
Repurchase of shares for cancellation
Dividends paid
Balance as at
31 March 2021
£’000s
Transactions in
the year
£’000s
Net
cashflow
£’000s
Foreign
exchange loss
£’000s
Balance as at
31 March 2022
£’000s
50,373
–
–
50,373
–
13,898
17,544
31,442
(25,475)
(13,898)
(17,544)
(56,917)
(1,236)
23,662
–
–
–
–
(1,236)
23,662
2021
Bank loans
Repurchase of shares for cancellation
Dividends paid
Balance as at
31 March 2020
£’000s
Transactions in
the year
£’000s
Net
cashflow
£’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
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), Mr Saville,
Mr Jillings (a key management person of ICMIM) and UIL Limited.
During the year the Company did not receive from or make
payments to its subsidiaries. As at 31 March 2021 the fair value
of the loan held with UEM (HK) Limited was £8,723,000 and
loan interest accrued was £64,000. In the year, loan interest of
£704,000 was capitalised and added to the balance of the loan.
As at 31 March 2022 the fair value of the loan held with UEM (HK)
Limited was £12,543,000 and loan interest accrued was £52,000.
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
57 to 59, the Board received aggregate remuneration of £210,000
(31 March 2021: £191,000) included within “other expenses” for
services as Directors. As at the year end, £nil (31 March 2021:
£47,750) remained outstanding to the Directors. In addition to
their fees, the Directors received dividends totalling £80,000
(31 March 2021: £101,225) during the period 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 or ICMIM other than
investment management fees, secretarial costs, research fees
and in the prior year to 31 March 2021 the performance fee as
set out in note 4, reimbursed expenses included within other
expenses of £60,000 (31 March 2021: £25,000) and ICM received
dividends totalling £74,000. As at the year end £1,393,000 (31
March 2021: £846,000) remained outstanding in respect of
management, secretarial and research fees and £5,079,000
as at 31 March 2021 remained outstanding in respect of the
performance fee.
Mr Jillings received dividends totalling £27,000 (31 March 2021:
£45,000) and UIL Limited received dividends totalling £2,831,000
(31 March 2021: £2,085,000). UIL sold to UEM at fair value,
3,923 Pitch Hero ordinary shares for £95,000. There were no
transactions with Mr Saville in the year.
25. GOING CONCERN
Notwithstanding that the Company has reported net current
liabilities of £218,000 as at 31 March 2022 (31 March 2021:
£8,158,000), 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 91.6% of the Company’s total
portfolio as at 31 March 2022. 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.
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.
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
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.
84
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
85
NOTES TO THE ACCOUNTS (continued)
Currency exposure
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
2022
Average
6.2567
7.2936
2021
7.7856
10.3112
10.6379
10.7264
99.7692
101.7883
100.8750
68.1301
68.4618
66.9672
1595.8456
1594.8615
1561.4754
1.3166
1.3666
1.3797
The Company’s assets and liabilities as at 31 March (shown at fair value), by currency based on the country of primary exposure,
are shown below:
2022
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
179
–
179
–
–
–
146
(9)
137
445
–
445
–
–
–
97
1,514
2,381
(652)
(24,011)
(24,672)
(555)
(22,497)
(22,291)
Investments
109,839
69,722
64,347
31,022
26,510
28,054 183,708 513,202
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
KRW
£’000s
PHP
£’000s
USD
£’000s
2022
2021
Statement of Comprehensive Income return after tax
Revenue return
266
222
441
64
–
–
244
217
431
54
83
6
Capital return
12,204
7,747
7,150
3,447
2,946
3,117
10,201
9,831
8,510
4,090
3,801
2,496
Total return
12,470
7,969
7,591
3,511
2,946
3,117
10,445
10,048
8,941
4,144
3,884
2,502
NAV per share
Basic – pence
5.68
3.63
3.46
1.60
1.40
1.42
4.66
4.49
3.99
1.85
1.73
1.12
Strengthening of
Sterling
BRL
£’000s
HKD
£’000s
INR
£’000s
KRW
£’000s
PHP
£’000s
USD
£’000s
BRL
£’000s
HKD
£’000s
INR
£’000s
KRW
£’000s
PHP
£’000s
USD
£’000s
Statement of Comprehensive Income return after tax
Revenue return
(266)
(222)
(441)
(64)
–
–
(244)
(217)
(431)
(54)
(83)
(6)
Capital return
(12,204)
(7,747)
(7,150)
(3,447)
(2,946)
(3,117)
(10,201)
(9,831)
(8,510)
(4,090)
(3,801)
(2,496)
Total return
(12,470)
(7,969)
(7,591)
(3,511)
(2,946)
(3,117)
(10,445)
(10,048)
(8,941)
(4,144)
(3,884)
(2,502)
Total net foreign currency exposure
110,018
69,722
64,484
31,467
26,510
27,499 161,211 490,911
NAV per share
Percentage of net exposures (%)
22.4
14.2
13.1
6.4
5.4
5.6
32.9
100.0
Basic – pence
(5.68)
(3.63)
(3.46)
(1.60)
(1.40)
(1.42)
(4.66)
(4.49)
(3.99)
(1.85)
(1.73)
(1.12)
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
Interest rate exposure
Exposure to floating rates
Cash
Bank overdrafts
Loans
Within
one year
£’000s
More than
one year
£’000s
1,104
(652)
–
452
–
–
(23,662)
(23,662)
2022
Total
£’000s
1,104
(652)
(23,662)
(23,210)
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)
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
2% increase
in rate
£’000s
2022
2% decrease
in rate
£’000s
2% increase
in rate
£’000s
2021
2% decrease
in rate
£’000s
(86)
(379)
(465)
86
379
465
(366)
(705)
(1,071)
366
705
1,071
86
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
87
NOTES TO THE ACCOUNTS (continued)
Other market risk exposures
The portfolio of investments, valued at £571,686,000 as at 31
March 2022 (2021: £565,751,000) 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:
Increase
in value
2022
Decrease in
value
Increase
in value
2021
Decrease in
value
Statement of Comprehensive Income capital return (£’000s)
113,743
(113,743)
108,769
(107,556)
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 (73 valued at
£524m as at 31 March 2022); and the existence of the Bank of
Nova Scotia, London Branch loan facility agreement expiring on
15 March 2024.
2022
Creditors:
Bank overdrafts
Bank loans and interest
Other payables
2021
Creditors:
Bank overdrafts
Bank loans and interest
Other payables
52.97
(52.97)
49.16
(48.61)
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 has 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:
Three
months
or less
£’000
652
112
730
1,494
Three
months
or less
£’000
4,211
212
625
5,048
More than three
months but less
than one year
£’000
More than
one year
£’000
Total
£’000
–
267
–
267
–
652
24,002
24,381
–
730
24,002
25,763
More than three
months but less
than one year
£’000
More than
one year
£’000
–
635
–
635
–
52,080
–
52,080
Total
£’000
4,211
52,927
625
57,763
(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.
None of the Company’s financial assets is past due or impaired.
(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.
Level 3 financial instruments Valuation methodology
The objective of using valuation techniques is to arrive at a
fair value measurement that reflects the price that would be
received to sell the asset or paid to transfer the liability in
an orderly transaction between market participants at the
measurement date.
The Company uses proprietary valuation models, which are
compliant with IPEV guidelines and IFRS 13 and which are
usually developed from recognised valuation techniques.
Some or all of the significant inputs into these models may
not be observable in the market and are derived from market
prices or rates or are estimated based on assumptions.
Valuation models that employ significant unobservable inputs
require a higher degree of management judgement and
estimation in the determination of fair value. Management
judgement and estimation are usually required for the
selection of the appropriate valuation model to be used,
determination of expected future cash flows of the financial
instrument being valued, determination of the probability of
counterparty default and prepayments, peer group multiple
and selection of appropriate discount rates.
Fair value estimates obtained from such models are adjusted
for any other factors, such as controlling interest, historical
and projected financial data, entity specific strengths and
weaknesses, or model uncertainties, to the extent that the
Company believes that a third party market participant would
take them into account in pricing a transaction.
The Directors have satisfied themselves as to the
methodology used, the discount rates and key assumptions
applied, and the valuations. The level 3 assets comprise
of a number of unlisted investments at various stages
of development and each has been assessed based on
its industry, location and business cycle. The valuation
methodologies include net assets, discounted cash flows,
cost of recent investment or last funding round, listed peer
comparison or peer group multiple or milestone analysis as
appropriate. Where applicable, the Directors have considered
observable data and events to underpin the valuations. A
discount has been applied, where appropriate, to reflect both
the unlisted nature of the investments and business risks.
Sensitivity of level 3 financial investments measured at
fair value to changes in key assumptions.
Level 3 inputs are sensitive to assumptions made when
ascertaining fair value. While the Directors believe that the
estimates of fair value are appropriate, the use of different
methodologies or assumptions could lead to different
measurements of fair value. The sensitivities shown in
the table below give an indication of the effect of applying
reasonable and possible alternative assumptions.
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.
88
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
89
NOTES TO THE ACCOUNTS (continued)
The following table shows the sensitivity of the fair value of level 3 financial investments to changes in key assumptions.
As at 31 March 2022
Investment
Petalite
UEM (HK) Limited
- CGN Capital
Partners Infra
Fund 3
Conversant Pte Ltd
Other investments
Other investments
Other investments
Other investments
Total
As at 31 March 2021
Investment
UEM (HK) Limited
- CGN Capital
Partners Infra
Fund 3
Conversant Pte Ltd
East Balkan
Other investments
Other investments
Other investments
Total
Investment
type
Valuation
methodology
Risk
weighting
Sensitivity
+/-
Carrying
amount
£’000s
Sensitivity
£’000s
Equity
Milestone
analysis*
High
40%
17,621
7,048
Loan
NAV
Low
Equity
Equity
Equity
Equity
Loans
Last funding
round
Various
Various
Last funding
round
Various
Medium
Medium
Low
High
High
10%
20%
20%
10%
30%
30%
12,543
7,267
6,547
3,632
350
150
1,254
1,453
1,309
363
105
45
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%
48,110
11,577
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
* Valuation of investment in Petalite
UEM has invested £1.5m in the prior two financial years in Petalite. Petalite is an unlisted electric vehicle (“EV”) charging
infrastructure company based in the UK that has been developing a new technology which enables more reliable and cost-
effective EV chargers. In the period since UEM’s investment, Petalite has achieved significant milestones including initial
certification of the Power Core and delivery of test units to a blue-chip customer. Petalite is in commercial discussions with
several large companies and is currently in advanced negotiations for further funding from new and existing investors. Reflecting
such progress, UEM valued Petalite’s ordinary shares at £1,718 per share as at 31 March 2022. This share price valued UEM’s
investment in Petalite at £17.6m at that date, representing a material uplift on UEM’s initial investment.
While the Directors believe that the estimate of Petalite’s fair value is appropriate, the Directors consider that this valuation was
more challenging and required a higher degree of management judgement and estimation in the determination of its fair value.
Petalite remains pre-revenue, has yet to achieve commercial rollout, and the valuation basis was made on assumptions which may
not prove to be accurate. It is therefore likely that uncertainty is greater for this investment and, accordingly a higher sensitivity
level of 40% has been applied to this valuation.
Subsequent to the year end, in June 2022, Petalite received £1.3m of equity funding from a new investor at a subscription price
of £2,667 per share. This investment, equating to 1.3% of pre money share capital, valued Petalite at £97.5m. Had UEM valued
its holding in Petalite at this share price, the value of UEM’s investment would have been £27.4m, an increase of £9.8m on its 31
March 2022 carrying value.
(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 2022
Investments
As at 31 March 2021
Investments
Level 1
£’000
519,853
Level 1
£’000
534,722
Level 2
£’000
3,723
Level 2
£’000
10,160
Level 3
£’000
48,110
Level 3
£’000
20,869
Total
£’000
571,686
Total
£’000
565,751
During the year one stock with value of £1.7m was transferred from level 1 to level 2 due to the investee company shares trading
irregularly, three stocks with value of £8.0m were transferred from level 2 to level 1 due to the investee companies shares
resuming regular trading in the year, one stock with value of £0.8m was transferred from level 3 to level 1 due to the investee
company shares becoming listed and one stock transferred from level 1 to level 3 at nil value due to the investee company shares
being suspended from trading. The book costs and fair values were transferred using the 31 March 2021 balances except for the
stock that was suspended, the book cost and fair value transferred at the time of suspension.
90
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
91
NOTES TO THE ACCOUNTS (continued)
OTHER FINANCIAL INFORMATION (UNAUDITED)
A reconciliation of fair value measurements in level 3 is set out in the following table:
Balance brought forward
Transfer to level 1
Purchases
Sales
(Losses)/gains on investments sold in the year
Gains/(losses) on investments held at end of year
Balance as at 31 March
Analysed as at 31 March
Cost of investments
Gains/(losses) on investments
Valuation
2022
£’000
20,869
(828)
7,205
(255)
(1,764)
22,883
48,110
28,456
19,654
48,110
2021
£’000
13,878
–
8,423
(1,615)
524
(341)
20,869
22,519
(1,650)
20,869
Level 3 inputs are sensitive to assumptions made when ascertaining fair value. Of level 3 investments held as at 31 March 2022,
36% (Petalite) were valued using milestone analysis, 35% using fund NAV, 16% using cost of recent investment or last funding
round, 9% using the fair value of the underlying net assets and 4% using a multiple of revenues.
SECURITIES FINANCING TRANSACTIONS (“SFT”)
The Company has not, in the years to 31 March 2022
and 31 March 2021, 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
2022
Gross
method
Commitment
method
Maximum permitted limit
Actual
300%
105%
300%
105%
2021
Leverage
exposure
Maximum permitted limit
Actual
Gross
method
Commitment
method
300%
110%
300%
110%
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.
92
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
93
NOTICE OF ANNUAL GENERAL MEETING
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, 20 September
2022 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 12, as
ordinary resolutions and, in the case of resolutions 13
and 14, 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 2022, together with the
report of the auditor thereon.
2. To approve the Directors’ Remuneration Policy.
3. To approve the Directors’ Remuneration Report
for the year ended 31 March 2022.
4. To approve the Company’s dividend policy to pay
four interim dividends per year.
5. To elect Mr Mark Bridgeman as a Director.
6. To elect Ms Isabel Liu as a Director.
7. To re-elect Mr John Rennocks as a Director.
8. To re-elect Ms Susan Hansen as a Director.
9. To re-elect Mr Eric Stobart as a Director.
10. 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.
11. To authorise the Directors to determine the
auditor’s remuneration.
SPECIAL BUSINESS
Ordinary resolution
12. 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 £105,000 (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 2023 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
13. That, in substitution for all existing authorities
and subject to the passing of resolution 12, 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 12,
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 2023, 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 £105,000 (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.
14. 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
Shares (within the meaning of section 693 of the
Act), provided that:
(a) the maximum number of Shares hereby
authorised to be purchased is 31,600,000
(being 14.99% of the Company’s issued
ordinary share capital, excluding treasury
shares of the Company, 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 2023 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
17 June 2022
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 16 September 2022. 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.eproxyappointment.com/login. 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 16 September 2022.
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
“Nominated Person”) should note that the provisions
94
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
95
NOTICE OF ANNUAL GENERAL MEETING (continued)
in Notes 1 and 2 above concerning the appointment of
appropriate and authenticated CREST message so as to
submit a question in advance by a letter addressed to
Act 2006 to publish on a website in advance of the
a proxy or proxies to attend the meeting in place of a
be received by the Company’s registrar not later than
the Company Secretary at the Company’s registered
meeting, can be accessed at www.uemtrust.co.uk.
member, do not apply to a Nominated Person as only
12:00 noon on 16 September 2022. Instructions on how to
ordinary shareholders have the right to appoint a proxy.
vote through CREST can be found by accessing the CREST
However, a Nominated Person may have a right under
manual via www.euroclear.com. Shareholders are advised
an agreement between the Nominated Person and
that CREST and the internet are the only methods by
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, unless (i) answering the question would
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.
the member by whom he or she was nominated to be
which completed proxies can be submitted electronically.
interfere unduly with the preparation for the meeting
17. Copies of the letters of the appointment and deeds of
previously appointed or otherwise) via the CREST system,
12. Any corporation which is a member can appoint one or
appointed, or to have someone else appointed, as proxy
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.
5. Nominated Persons should also remember that their
main point of contact in terms of their investment in
the Company remains the member who nominated the
Nominated Person to enjoy the information rights (or
perhaps the custodian or broker who administers the
investment on their behalf). Nominated Persons should
continue to contact that member, custodian or broker
(and not the Company) regarding any changes or queries
relating to the Nominated Person’s personal details and
interest in the Company (including any administrative
matter). The only exception to this is where the Company
expressly requests a response from the Nominated
Person.
6. Pursuant to Regulation 41 (1) of The Uncertificated
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.
7.
In the case of joint holders, the vote of the senior holder
who tenders a vote, whether in person or by proxy, shall
be accepted to the exclusion of the votes of the other joint
holders and, for this purpose, seniority will be determined
by the order in which the names stand in the register of
members of the Company in respect of the relevant joint
holding.
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
CREST messages must be received by Computershare
(ID number 3RA50) not later than 12:00 noon on 16
September 2022. For this purpose, the time of receipt
will be taken to be the time (as determined by the
timestamp generated by the CREST system) from which
Computershare is able to retrieve the message. CREST
personal members or other CREST sponsored members
should contact their CREST sponsor for assistance with
appointing proxies via CREST. For further information
on CREST procedures, limitations and system timings
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
Uncertificated Securities Regulations 2001.
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
not make a separate notification to the Company and
Financial Conduct Authority. Any such person holding 3%
or more of the voting rights in the Company who appoints
a person other than the Chairman as his proxy will
need to ensure that both he and such person complies
with their respective disclosure obligations under the
Disclosure Guidance and Transparency Rules.
11. Any questions relevant to the business of the meeting
8.
Shareholders who hold their shares electronically may
may be asked at the meeting by anyone permitted to
submit their votes through CREST, by submitting the
speak at the meeting. A shareholder may alternatively
or involve the disclosure of confidential information; (ii)
indemnity between the Company and the Directors, a
the answer has already been given on a website in the
copy of the Articles of Association of the Company and
form of an answer to a question; or (iii) it is undesirable
the register of the Directors’ holdings will be available
in the interests of the Company or the good order of the
for inspection at the registered office of the Company
meeting that the question be answered.
during usual business hours on any weekday (Saturdays,
Sundays 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.
more corporate representatives who may exercise on its
behalf all of its powers as a member provided that, if it
is appointing more than one corporate representative, it
does not do so in relation to the same shares.
18. Under sections 338 and 338A of the Companies
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
accounts and reports were laid in accordance with
section 437 of the Companies Act 2006.
The Company may not require the members requesting
any such website publication to pay its expenses in
Act 2006, 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:
(a)
(in the case of a resolution only), it would, if passed,
be ineffective (whether by reason of inconsistency
with any enactment or the Company’s constitution
complying with sections 527 or 528 of the Companies
or otherwise);
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 16 June 2022 (being the last practicable date prior
to the publication of this Notice of Annual General
(b)
it is defamatory of any person; or
(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 8
August 2022 (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
Meeting), the Company’s issued share capital consisted
setting out the grounds for the request.
of 211,262,573 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
211,262,573.
15. Further information regarding the meeting which the
Company is required by section 311A of the Companies
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.
96
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
97
COMPANY INFORMATION
ALTERNATIVE PERFORMANCE MEASURES
DIRECTORS
John Rennocks (Chairman)
Mark Bridgeman
Susan Hansen
Isabel Liu
Anthony Muh
Eric Stobart, FCA
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
JOINT PORTFOLIO MANAGER
ICM Limited
34 Bermudiana Road
Hamilton HM 11
Bermuda
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
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
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
PUBLIC RELATIONS
Montford Communications Limited
2nd Floor, Berkeley Square House
Berkeley Square
Mayfair
London W1J 6BD
Telephone + 44 (0)20 7887 6287
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 2022 the share
price was 224.00p (2021: 197.50p) and the NAV per
share was 254.22p (2021: 228.54p), the discount was
therefore 11.9% (2021: 13.6%).
Gearing – represents the ratio of the borrowings less
cash of the Company to its net assets.
Year to 31 March
page
2022
£’000s
2021
£’000s
Year to 31 March 2022
Dividend
rate
(pence)
NAV
(pence)
Share
price
(pence)
31 March 2021
n/a
228.54
197.50
23 June 2021
2.000
250.93
224.00
24 September 2021
2.000
248.92
220.00
17 December 2021
2.000
243.91
216.00
25 March 2022
2.000
247.03
214.00
31 March 2022
Total return (%)
n/a
254.22
224.00
14.9
17.6
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
Bank overdrafts
Bank loans
Cash
Total debt
82
72
72
652
4,211
18 September 2020
1.925
212.40
183.50
23,662
50,373
18 December 2020
1.925
222.48
194.00
(1,104)
(1,027)
24 March 2021
1.925
228.07
199.50
23,210
53,557
31 March 2021
n/a
228.54
197.50
Equity holders' funds
72
545,916
505,696
Total return (%)
30.2
27.3
Gearing (%)
4.3
10.6
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.
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 or shares 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.
98
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
99
ALTERNATIVE PERFORMANCE MEASURES (continued)
HISTORICAL PERFORMANCE
Total return since inception
NAV/Share price 20 July 2005 (pence) (1)
Total dividend, warrants and subscription
shares adjustment factor
NAV/Share price at year end (pence)
Adjusted NAV/Share price at year end
(pence)
Total return (%)
NAV
31 March 2022
Share price
31 March 2022
NAV
31 March 2021
Share price
31 March 2021
98.36
100.00
98.36
100.00
1.82499
254.22
463.95
371.7
1.90409
224.00
426.52
326.5
1.76721
228.54
403.88
310.6
1.83592
197.50
362.59
262.6
(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 2022
31 March 2021
9.7
9.4
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 fee)
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 fee)
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 in note 4 to the accounts
Page
76
77
Page
76
77
31 March 2022*
£’000s
31 March 2021
£’000s
5,947
1,590
7,537
532,661
1.4
3,629
1,425
5,054
474,748
1.1
31 March 2022*
£’000s
31 March 2021
£’000s
5,947
1,590
7,537
532,661
1.4
8,708
1,425
10,133
474,748
2.1
as at 31 March
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
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)
14.9
30.2
(24.9)
3.5
6.6
26.2
1.7
12.4
(3.4)
20.9
17.6
27.3
(23.2)
5.4
7.1
24.9
(1.8)
8.2
(2.6)
20.8
3.4
7.4
9.7
9.4
8.1
11.0
11.7
12.1
10.9
11.9
11.8
13.9
12.9
254.22
228.54
181.84
249.84
247.22 251.72
206.45
209.79
192.38
205.49
175.60
254.22(2) 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)
Ordinary share price (pence) 224.00
197.50
161.50
217.90
212.00 214.50
178.50
188.50
180.00
191.20
164.00
Discount(3) (%)
Earnings per ordinary share
(basic)
(11.9)
(13.6)
(11.2)
(12.8)
(14.2)
(11.1)
(11.9)
(10.1)
(6.4)
(7.0)
(6.6)
- Capital (pence)
24.49
45.73
(68.29)
(0.12)
4.66
44.46
(5.50)
18.53
(12.13)
30.71
1.19
- Revenue (pence)
8.17
8.13
7.88
7.47
9.27
7.80
8.23
4.98
4.80
5.20
4.12
Total (pence)
32.66
53.86
(60.41)
7.35
13.93
52.26
2.73
23.51
(7.33)
35.91
5.31
Dividends per ordinary
share (pence)
Gross assets(4) (£m)
8.000
7.775
7.575
7.200
7.000
6.650
6.400
6.100
6.100
5.800
5.500
569.6
556.1
461.4
581.9
579.8
579.0
455.2
479.2
433.4
452.1
382.9
Equity holders’ funds (£m)
545.9
505.7
414.3
574.2
579.8
532.2
436.6
447.4
410.2
442.9
378.5
Ordinary shares bought back
(£m)
13.9
12.1
4.8
9.5
21.9
10.0
3.0
–
3.9
–
4.9
Net cash/(overdraft) (£m)
0.5
(3.2)
39.5
11.7
8.1
15.3
12.6
0.5
(0.9)
2.6
(1.8)
Bank loans (£m)
(23.7)
(50.4)
(47.1)
(7.8)
0.0
(46.8)
(18.7)
(31.9)
(23.1)
(9.2)
(4.4)
Net (debt)/cash (£m)
(23.2)
(53.6)
(7.6)
3.9
8.1
(31.5)
(6.1)
(31.4)
(24.0)
(6.6)
(6.2)
Net (gearing)/cash on net
assets (%)
Management and
administration fees and
other expenses
- excluding performance
fee(5) (£m)
- including performance
fee(5) (£m)
Ongoing charges figure(1)
- excluding performance
fee(5) (%)
- including performance
fee(5) (%)
(4.3)
(10.6)
(1.8)
0.7
1.4
(5.9)
(1.4)
(7.0)
(5.9)
(1.5)
(1.6)
7.3
7.3
1.4
1.4
5.0
6.4
10.1
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
7.7
3.7
12.9
3.6
1.1
2.1
1.1
1.0
1.0
1.1
1.1
1.1
0.9
0.8
1.1
1.0
1.0
2.9
1.1
1.8
0.9
3.2
0.9
0.9
(1)
(2)
(3)
(4)
(5)
See Alternative Performance Measures on pages 99 and 100
There was no dilution
Based on diluted NAV
Gross assets less liabilities excluding loans
Investment Management Agreement amended from 1 April 2021 and the performance fee discontinued
100
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2022
101
EMERGING CITIES | EMERGING WEALTH | EMERGING OPPORTUNITIES
UK CONTACT
PO Box 208
Epsom Surrey
KT18 7YF
Telephone: +44 (0)1372 271486
www.uemtrust.co.uk