2023
REPORT AND ACCOUNTS
EMERGING CITIES | EMERGING WEALTH | EMERGING OPPORTUNITIES
WHY UTILICO EMERGING MARKETS TRUST PLC?
International Container Terminal Services, Inc. (The Philippines)
Utilico Emerging Markets Trust plc’s 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
Utilico Emerging Markets Trust plc is a unique
UK listed fund focused on global infrastructure
megatrends in emerging markets.
UNIQUE EXPOSURE
EXPERIENCED MANAGEMENT
UEM offers a diverse portfolio of high conviction, bottom-
up investments in utilities and infrastructure, providing
unique exposure to emerging markets megatrends.
REAL ASSETS DRIVING COMPELLING RETURNS
The portfolio of operational infrastructure assets
benefitting from megatrends typically offers attractive
growth and yields. As a result of long term cash flows,
which are often underpinned by established regulatory
frameworks, the portfolio provides predictable,
sustainable and growing income.
Since UEM’s inception in 2005, the portfolio has been
managed by a dedicated, active investment team with
a long track record of investing successfully in this
highly specialised asset class.
STRONG PERFORMANCE
As at 31 March 2023, UEM has delivered a 9.3%
annualised NAV total return over 17 years with a 3.8%
dividend yield and has outperformed the MSCI Emerging
Markets Index over the last one, three, and five years and
since inception.
Report and Accounts for the year to 31 March 2023
1
CONTENTS
PERFORMANCE
4
5
Current Year Performance
Performance Summary
6 Chairman’s Statement
10 Geographical Investment Exposure
11 Top Thirty Companies
13 Performance Since Inception (20 July 2005)
14 Ten Year Performance
STRATEGIC REPORT AND INVESTMENTS
15
Investment Managers’ Report
19 Megatrends Driving Upside in Emerging Markets
22 Our Investment Approach
24 ESG Spotlight
25 Largest Holdings Overview
31 Strategic Report
40
Investment Managers and Team
GOVERNANCE
42 Directors
43 Directors’ Report
49 Corporate Governance Statement
55 Directors’ Remuneration Report
58 Audit & Risk Committee Report
61 Directors’ Statement of Responsibilities
FINANCIAL STATEMENTS
62
Independent Auditor’s Report
68 Accounts
72 Notes to the Accounts
ADDITIONAL INFORMATION
91 Notice of Annual General Meeting
95 Company Information
96 Alternative Performance Measures
98 Historical Performance
China Gas Holdings Limited (China)
FINANCIAL CALENDAR
Year End
31 March
Annual General Meeting
19 September 2023
Half Year
30 September
Dividends Payable
March, June, September
and December
The business of Utilico Emerging
Markets Trust plc ("UEM" or
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) – Andre S Prietsch
FINANCIAL HIGHLIGHTS
Petalite Limited (UK)
NET ASSET VALUE
(“NAV”) TOTAL RETURN
PER SHARE*
SHARE PRICE TOTAL
RETURN PER SHARE*
REVENUE EARNINGS
OF 9.40P PER SHARE
DIVIDENDS OF 8.45P
PER SHARE
2.1%
(2022: 14.9%)
0.8%
(2022: 17.6%)
* See Alternative Performance Measures on pages 96 and 97
15.1%
(2022: 0.5%)
5.6%
(2022: 2.9%)
UEM turned in a strong performance in the second
half of the year and delivered a positive NAV total
return of 2.1% for the year to 31 March 2023.
2
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
3
CURRENT YEAR PERFORMANCE
PERFORMANCE SUMMARY
NAV TOTAL RETURN
PER SHARE*
2.1%
(2022: 14.9%)
SHARE PRICE
TOTAL RETURN
PER SHARE*
0.8%
(2022: 17.6%)
NAV OF 250.91P
PER SHARE*
SHARE PRICE
OF 217.00P
1.3%
(2022: 11.2%)
3.1%
(2022: 13.4%)
DIVIDENDS OF 8.45P
PER SHARE
DIVIDENDS PAID
INVESTED
REALISED
5.6%
(2022: 2.9%)
£17.2m
£108.9m
£126.6m
(2022: £17.5m)
(2022: £124.5m)
(2022: £176.9m)
12.5M SHARES
BOUGHT BACK
TOTAL REVENUE
RETURN INCOME
ONGOING CHARGES*
NET DEBT
INCREASED TO
£27.2m
£24.3m
(2022: £13.9m)
(2022: £22.6m)
1.4%
(2022: 1.4%)
£36.1m
(2022: £23.2m)
* See Alternative Performance Measures on pages 96 and 97
TOTAL RETURN COMPARATIVE PERFORMANCE
(1)
from 31 March 2022 to 31 March 2023
105
100
95
90
85
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 (overdraft)/cash (£m)
Bank loans (£m)
Net debt (£m)
Gearing(1) (%)
Management and administration fees and other expenses
Ongoing charges figure(1)
31 March
2023
31 March
2022
% change
2023/22
2.1
0.8
9.3
250.91
217.00
(13.5)
(6.61)
9.40
2.79
2.00
2.15
2.15
2.15(2)
8.45
542.5
507.4
27.2
(1.0)
(35.1)
(36.1)
(7.1)
7.4
1.4
14.9
17.6
9.7
254.22
224.00
(11.9)
24.49
8.17
32.66
2.00
2.00
2.00
2.00
8.00
569.6
545.9
13.9
0.5
(23.7)
(23.2)
(4.3)
7.3
1.4
n/a
n/a
n/a
(1.3)
(3.1)
n/a
(127.0)
15.1
(91.5)
0.0
7.5
7.5
7.5
5.6
(4.8)
(7.1)
95.7
(300.0)
48.1
55.6
n/a
1.4
n/a
(1)
(2)
(3)
See Alternative Performance Measures on pages 96 and 97
The fourth quarterly dividend has not been included as a liability in the accounts
Gross assets less liabilities excluding loans
Mar 22
Apr 22
May 22
Jun 22
Jul 22
Aug 22
Sep 22
Oct 22
Nov 22
Dec 22
Jan 23
Feb 23
Mar 23
(1)
Rebased to 100 as at 31 March 2022
Source: ICM and Bloomberg
NAV total return per share
MSCI Emerging Markets total return Index (GBP adjusted)
On 3 April 2018, as a result of the proposals to redomicile Utilico Emerging Markets Limited (“UEM Limited”) from Bermuda to the
United Kingdom, the shareholders of UEM Limited exchanged all their shares in UEM Limited for shares in UEM on a one for one
basis and UEM Limited became a wholly owned subsidiary of UEM. All performance data relating to periods prior to 3 April 2018 are
in respect of UEM Limited.
4
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
5
CHAIRMAN’S STATEMENT
The year to 31 March 2023
has continued to be truly
challenging for all, including
investors. From the war in
Ukraine through to inflation
and sharply higher central
bank interest rates; to rising
geopolitical friction; and to
the challenges on climate
change and significant natural
disasters. Understandably,
volatility in most markets has
JOHN RENNOCKS
Chairman
been elevated as uncertainty has dominated.
UEM turned in a strong performance in the second
half of the year and importantly delivered a positive
NAV total return of 2.1% for the year to 31 March 2023.
This was once again significantly ahead of the MSCI EM
total return Index which was down 5.0% over the same
period.
UEM measures its performance on a total return basis
over the long term and the Investment Managers are
seeking long term performance to be above 10.0% per
annum including a rising dividend. Over one, three and
five years and since inception, UEM has outperformed
the MSCI EM Index. It is pleasing to highlight the
long term annual compound NAV total return since
inception to 31 March 2023 of 9.3% exceeding the
MSCI EM total return Index of 7.6%.
GLOBAL ECONOMY
As referred to earlier, there are numerous headwinds
currently faced by the markets, each of which is
challenging in its own right. We have historically
discussed a number of these and they largely remain
unresolved. We continue to witness a significant rise in
nationalism, wealth inequality and global immigration.
All of these issues and challenges no doubt tear at the
fabric of our societies and institutions.
One positive is that Covid looks to be behind us. The
World Health Organisation finally declared the Covid
emergency over in May 2023. At the time of publishing
UEM’s half yearly report in November 2022, we were
deeply concerned about the challenges faced by
China given their zero Covid policy. The about-turn by
China on Covid was a surprise in both its timing and
approach. We had expected China to vaccinate its
population and slowly lift restrictions in the summer
this year. Faced with the highly infectious Omicron
variant already penetrating the wider Chinese
population and the heavy burden of ineffective
lockdowns, the decision to go from zero Covid
tolerance to total tolerance was bold. Certainly, at an
investee level, it has had very limited impact on the
ability of corporates to run their businesses today.
Unfortunately the same cannot be said of the war in
Ukraine. It remains devastating on a number of levels.
The harshness of the Russian army will be a wound on
MSCI EMERGING MARKETS SECTOR INDEX TOTAL RETURNS (GBP ADJUSTED)
from 31 March 2022 to 31 March 2023
5.8%
2.3%
2.1%
1.3%
(0.3)%
(1.5)%
Consumer
staples
Consumer
discretionary
UEM NAV
total return
per share
Energy
Industrials Communication
Financials
services
Information
technology
Utilities
Healthcare
Materials
Source: Bloomberg
(8.0)%
(8.4)%
(8.9)%
(10.0)%
(10.2)%
INDICES MOVEMENTS
from 31 March 2022 to 31 March 2023
110
100
90
80
70
60
Mar
2022
Jun
2022
Sep
2022
Dec
2022
Mar
2023
NIFTY 50 Index
PSEi – Philippine SE Index
Hang Seng Index
Brazil Ibovespa Index
Shanghai SE Composite Index
Rebased to 100 as at 31 March 2022
Source: Bloomberg
liberal societies for decades to come. The need to have
resilient and diversified supply chains, energy security,
green energy and increased defence capabilities will
see resources diverted and reinvested with an urgency
and scale not witnessed in our lifetime. This shift will
give rise to new opportunities for investors, including
UEM.
The legacy of Covid and the West’s response to it has
undoubtedly led to higher debt and higher inflation,
and the Russian war in Ukraine has seen sharply higher
commodity prices and accelerating inflation. The
response by the Central Banks to higher inflation has
been to rapidly raise interest rates to bring inflation
under control. The surprising part has been the
resilience in the labour market where in most Western
countries, unemployment levels are at record lows.
This is good for workers but ultimately negative for the
inflation outlook if it persists, as wage demands will
keep inflation high.
EMERGING MARKETS
Most EM markets were down over the year reflecting
local headwinds, higher interest rates and lower
valuations. Brazil’s Bovespa Index was down 15.1%, the
Philippine PSEI Index was down 9.8% and the Hong
Kong Hang Seng Index was down 7.3%. Some markets
have held up, most notably India’s Sensex which was
up by 0.7%. A common theme has been rising inflation
in Latam and Eastern Europe and weakening property
markets in Asia. Of note is the volatility – at its low
the Hang Seng Index was down over 30.0% and the
Philippine PSEI was down over 20.0%.
In comparison most currencies were up against UK
Sterling although for UEM notably the Brazilian Real,
Chinese Renminbi and Indian Rupee were all down
0.2%, 1.7% and 1.8% respectively. Again, volatility was
high. The Hong Kong Dollar was at one point during the
year up over 20.0% and the Indian Rupee was up by
15.0% against Sterling.
Most commodities have moved lower during the
period under review as supply chains have adjusted,
with oil down by 26.1%, wheat down by 31.2% and
soybean down by 12.6%. Although copper moved
higher, up by 16.0%. But most remain elevated
compared to historic levels which is feeding through
into inflation.
UNLISTED INVESTMENTS (LEVEL 3 INVESTMENTS)
UEM has over the years invested in unlisted businesses
at a modest level. This remains true today. As at
31 March 2023 the value of the unlisted portfolio has
risen to 10.8% which has been driven primarily by
the revaluation of Petalite Limited ("Petalite"). UEM is
unable to invest further in unlisted investments while
the valuation of its unlisted portfolio is over 10.0% of
gross assets. Petalite is a disruptive technology start
6
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
7
SHARE BUYBACKS
BOARD
CHAIRMAN’S STATEMENT (continued)
Disappointingly UEM’s share price discount widened
over the year from 11.9% as at 31 March 2022 to 13.5%
as at 31 March 2023. This remains above the level that
the Board would wish to see over the medium term.
The Company has continued buying back shares for
cancellation, with 12.5m shares bought back in the year
to 31 March 2023, at an average price of 215.45p and
total cost of £27.2m.
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 75.1m ordinary shares totalling £138.8m.
The buybacks now represent significantly more than
the initial IPO capitalisation of UEM Limited when it
came to market in July 2005. The share buybacks have
contributed 0.8% to UEM's total returns.
ONGOING CHARGES
Ongoing charges were unchanged at 1.4% for the year
to 31 March 2023, a good result especially given the
wider inflationary environment.
up business and gives 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%. Following external
fund raising, in which UEM invested a further £1.25m,
and significant progress, our holding in Petalite was
valued upwards in the year to £28.6m.
REVENUE EARNINGS AND DIVIDEND
It is excellent to see UEM’s revenue earnings per share
(“EPS”) increase by 15.1% to 9.40p given the wider
market challenges as inflation and interest rates have
risen sharply during the year to 31 March 2023.
UEM has declared one quarterly dividend of 2.00p and
three quarterly dividends of 2.15p each, totalling 8.45p
per share, a 5.6% increase over the previous year.
Dividends remain fully covered by income. The retained
earnings revenue reserves increased by £2.3m in the
year to £9.6m as at 31 March 2023, equal to 4.74p per
share.
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, infrastructure and utility assets that
the Company’s Investment Managers believe are
structurally undervalued and offer the potential for
excellent total returns.
CURRENCY MOVEMENTS vs STERLING
from 31 March 2022 to 31 March 2023
130
120
110
100
90
Mar
2022
Jun
2022
Sep
2022
Dec
2022
Mar
2023
Brazilian Real
Romanian Leu
Indian Rupee
Hong Kong Dollar
Philippine Peso
We announced plans for board refreshment in 2021,
which included the appointments of Mark Bridgeman
and Isabel Liu later that year and after the 2022 Annual
General Meeting (“AGM”) Anthony Muh stepped down
from the Board. Continuing with these initiatives,
Susan Hansen has confirmed her intention to retire
from the Board following the conclusion of UEM’s next
AGM in September 2023. Susan has brought significant
insight, experience and challenge to the Board since
she joined in 2013.
As noted in the half yearly report, the Directors have
reviewed the composition of the Board and the current
intention is to continue as a Board of four Directors.
This will be kept under review as part of the annual
Board evaluation process.
Santos Brasil Participacoes S.A. (Brazil)
ADVISER AND INVESTOR COMMUNICATION
DIVIDEND PER SHARE OF 8.45P, UP BY
We referred to proposals for increased investor
communication in the half yearly report and the
continued focus on marketing UEM to the wider
investment community. As part of these initiatives
we were pleased to announce, after a competitive
pitch process, the appointments of Barclays as joint
corporate broker alongside Shore Capital, and RMS
Partners to help lead investor engagement with
regional institutions and private client fund managers.
We also draw investors’ attention to UEM’s website
which has extended its content significantly, providing
comprehensive insights from the Investment Managers
on areas such as individual EM countries and portfolio
stocks.
UEM is working with its advisers to rejuvenate the
marketing presentation and draw attention to a
number of megatrend tailwinds benefitting UEM, see
page 19. Our drive is to improve investor knowledge
and broaden its investor base, especially retail.
5.6%
FOR THE YEAR TO 31 MARCH 2023
OUTLOOK
The megatrends driving much of the global growth
in emerging markets are strengthening. We see
UEM’s portfolio as well placed to benefit from these
megatrends.
The investee company’s management teams have
demonstrated an enviable ability to seize the
opportunity even in these challenging markets. We
remain optimistic for UEM.
John Rennocks
Chairman
16 June 2023
Rebased to 100 as at 31 March 2022
Source: Bloomberg
8
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
9
GEOGRAPHICAL INVESTMENT EXPOSURE
AS AT 31 MARCH 2023
TOP THIRTY COMPANIES
Other Europe
5.9%
(6.9%)
Poland
2.6%
(1.8%)
Other Asia
4.8%
(7.2%)
UK
6.2%
(3.8%)
Middle East/
Africa
5.8%
(5.6%)
Brazil
20.9%
(20.9%)
Mexico
5.4%
(4.2%)
Colombia
2.2%
(3.5%)
Chile
3.7%
(1.8%)
India
10.7%
(11.3%)
China
(including Hong Kong)
15.8%
(15.9%)
South Korea
4.1%
(5.4%)
Vietnam
7.0%
(7.1%)
The Philippines
4.9%
(4.6%)
1
2
3
4
5
5.2%
4.9%
3.8%
3.4%
3.1%
Petalite Limited
International
Container Terminal
Services, Inc.
Alupar
Investimento S.A.
Orizon Valorizacao
de Residuos S.A.
Gujarat State
Petronet Limited
Renewables
Ports and Logistics
Electricity
Water and Waste
Gas
An electric
vehicle charging
infrastructure
company based in
the UK.
A global port
management
company
headquartered in the
Philippines.
A Brazilian
holding company
for electricity
transmission and
renewable assets.
A waste treatment
operator in Brazil.
A natural gas
transmission and
distribution company
in India.
28,607
Fair value £’000s
26,584
Fair value £’000s
20,643
Fair value £’000s
18,432
Fair value £’000s
17,085
Fair value £’000s
6
7
8
9
10
2.8%
2.4%
2.4%
2.3%
2.3%
Figures in brackets as at 31 March 2022.
Source: ICM
India Grid Trust
Grupo
Aeroportuario del
Centro Norte, S.A.B.
de C.V.
FPT Corporation
Power Grid
Corporation of India
Limited
Citic Telecom
International
Holdings Limited
Electricity
Airports
An infrastructure
investment trust
with electricity
transmission and
solar assets in India.
A Mexican airport
operator.
Data Services
and Digital
Infrastructure
An information
technology and
telecommunications
service company in
Vietnam.
Electricity
Telecommunications
An electricity
transmission
company in India.
A
telecommunications
service provider in
Asia.
15,057
Fair value £’000s
13,146
Fair value £’000s
12,983
Fair value £’000s
12,755
Fair value £’000s
12,489
Fair value £’000s
Note: % of total investments
For more information on the top ten companies, see the holdings review starting on page 26.
10
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
11
TOP THIRTY COMPANIES (continued)
PERFORMANCE SINCE INCEPTION (20 JULY 2005)
11
12
24
25
26
31 March
2023
Company (Country)
VinaCapital Vietnam Opportunity Fund Ltd
(Vietnam)
Description
Investment trust
CGN Capital Partners Infra Fund 3
(Hong Kong)
Renewable assets fund
13
China Gas Holdings Limited (China)
Gas distributor
14
Rumo S.A. (Brazil)
Rail-based logistics operator
15
China Datang Corporation Renewable
Power Co., Limited (China)
Electricity generation
16
Engie Energia Chile S.A. (Chile)
Electricity generation and transmission
10,745
17
Korean Internet Neutral Exchange Inc.
(South Korea)
Data centre operator
10,388
18
Aguas Andinas S.A. (Chile)
Water distributor and sanitation
19
Umeme Limited (Uganda)
Electricity distributor
20
Centrais Eletricas Brasileiras S.A. (Brazil)
Electricity generation and transmission
21
Santos Brasil Participacoes S.A. (Brazil)
Port operator
22
KunLun Energy Company Limited (China)
Gas transmission and distributor
23
InPost S.A. (Poland)
Grupo Aeroportuario del Pacifico, S.A.B. de
C.V. (Mexico)
Logistics operator
Airport operator
Vamos Locacao de Caminhoes Maquinas e
Equipamentos S.A. (Brazil)
Trucks and machinery leasing and
sales
Powergrid Infrastructure Investment Trust
(India)
Infrastructure investment trust
27
Conversant Solutions Pte Ltd (Singapore)
Technology company
28
Telelink Business Services Group (Bulgaria)
Information technology service
provider
29
Shanghai International Airport Co., Ltd
(China)
Airport operator
30
Grupo Traxion S.A.B. de C.V. (Mexico)
Logistics operator
Other investments
Total portfolio
Fair value
£’000s
% of total
investment
12,092
11,615
11,395
10,939
10,857
9,708
9,637
9,621
9,612
9,473
9,345
8,901
8,875
8,181
7,877
7,726
7,508
2.2
2.1
2.1
2.0
2.0
2.0
1.9
1.8
1.8
1.8
1.8
1.7
1.7
1.6
1.6
1.5
1.4
1.4
1.4
7,220
176,161
1.3
32.3
545,657
100.0
NAV ANNUAL
COMPOUND TOTAL
RETURN*
NAV TOTAL RETURN
PER SHARE*
SHARE PRICE TOTAL
RETURN PER SHARE*
9.3%
381.6%
329.7%
75.1M SHARES
BOUGHT BACK
DIVIDENDS PER SHARE
INCREASED FROM
1.50P TO
DIVIDENDS PAID
CUMULATIVE
£138.8m
8.45p
£220.6m
* See Alternative Performance Measures on pages 96 and 97
HISTORIC NAV AND SHARE PRICE PERFORMANCE (pence)
(1)
from 20 July 2005 to 31 March 2023
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
Mar
23
NAV total return per share
(2)
Share price total return
(2)
(1)
(2)
Rebased to 100 as at 20 July 2005
Adjusted for the exercise of warrants and subscription shares
MSCI Emerging Markets
total return
Index (GBP adjusted)
MSCI Emerging Markets
Utilities total return
Index (GBP adjusted)
Source: ICM and Bloomberg
12
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
13
TEN YEAR PERFORMANCE
INVESTMENT MANAGERS’ REPORT
DIVIDENDS PER SHARE (pence)
from March 2013 to March 2023
REVENUE EARNINGS PER ORDINARY SHARE (pence)
from March 2013 to March 2023
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
10.0
8.0
6.0
4.0
2.0
0.0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022 2023
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022 2023
Source: ICM
Source: ICM
INVESTMENT PURCHASES AND REALISATIONS (£m)
from March 2013 to March 2023
PORTFOLIO PROGRESSION (£m) AND NUMBER
OF HOLDINGS
from March 2013 to March 2023
300
250
200
150
100
50
0
92
87
92
88
79
81
80
79
84
86
81
700
600
500
400
300
200
100
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022 2023
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
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, benefitting from global megatrends.
It is pleasing to see UEM deliver
another positive NAV gain, with
a NAV total return for the year
of 2.1%, building on last year’s
14.9% uplift and the prior year’s
30.2% return. This performance
was again significantly ahead of
the MSCI EM total return Index
which was down by 5.0% during
the year to 31 March 2023 and
down by 6.9% in the year to
31 March 2022. As previously
noted, UEM’s asset sector class was largely overlooked
by the markets early in the pandemic, which focused
on the shift to working from home. 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.
CHARLES JILLINGS
Investment Manager
UEM’s one year, three years, five years and since
inception performance is ahead of the MSCI Index. UEM
has delivered this together with a rising dividend; a low
Beta (as at 31 March 2023, UEM’s five year Beta was
0.76x); and with a portfolio which is very different from
the MSCI Index (UEM’s active share is over 95.0%). This
should be compelling to investors who want exposure to
emerging markets, top performance and comparatively
low levels of volatility.
We were surprised by China's decision to go from zero
Covid tolerance to total tolerance. We assumed China
would vaccinate then exit their zero Covid policy in the
summer of 2023. It has been very pleasing to see that
globally the focus on Covid has evaporated and in our
travels to India, Poland, Mexico, Chile and Brazil this year,
Covid was hardly mentioned.
However, the world is still 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 an investment
team. Finding consensus on these issues has been and
continues to be challenging.
INFLATION AND INTEREST RATES
Inflation has risen sharply and remained elevated in the
developed economies. An undoubted driver of this has
been tight labour markets which has led to wage inflation
as buying power shifts to the wider workforce. If left
unaddressed this will cause further inflationary pressures
and may become embedded in economies.
We have been surprised by the tightness of labour
markets. Unemployment levels are at record lows in
many countries. Our view is that the combination of
workers suffering from long Covid and increased social
care falling on families, together with early retirement has
all contributed to the reduction in the available labour
force.
Inflation has also been exacerbated by changes in supply
chains. The drive for food security, energy independence
and the shift to nearshoring however will all have likely
added to the cost of supply chains. The lowest cost of
production is no longer the sole driver of decisions.
Commodities have also played a part in inflation
reflecting an imbalance as demand exceeds supply in
certain products. This is likely to continue as decades of
under-investment cannot be redressed overnight.
Further, the response to the Ukraine war will see an
increased drive for energy security, supply chain security
and military security. These three challenges are likely
to be pursued at a significant pace and will result in
heightened demand for commodities. Structurally we
therefore see commodity demand rising and pricing to
remain on the upside.
To address the rising inflationary outlook in the
developed world, Central Banks have raised interest rates
at a rapid pace. We expect we are at the point where
interest rates plateau before declining. The “lower for
longer” mantra has been replaced by “higher for longer”.
A point to note is that Latam has seen inflationary
pressures well ahead of the developed world and its
Central Banks have responded firmly and early. Most
Latam countries have Central Bank interest rates of
over 10.0%. Correspondingly we are seeing inflation in
Latam firmly roll over. Our expectation is that a number
of Central Banks are now in a position to lower interest
rates.
14
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
15
INVESTMENT MANAGERS’ REPORT (continued)
to be carefully managed to ensure that the impact
generated from clean technologies is maximised.
ICM’s approach therefore encompasses the need to
understand the upstream supply chains of investees’
products.
CLIMATE CHANGE
The war in Ukraine has been a true setback for the
globally supported aim 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.
The past year has provided a stark reminder of the
devastation that can arise from climate change-related
disasters. Climate-driven events are becoming more
frequent and severe. China featured twice in the ten
most costly climate change-related disasters in 2022.
Climate change risk is monitored across the portfolio,
however predicting the likelihood and impact of events
remains a difficult task. Currently, we see geographical
diversification as the best way to mitigate the risk posed
by climate-related disasters.
PORTFOLIO
UEM’s gross assets (less liabilities excluding loans)
decreased to £542.5m as at 31 March 2023 from
£569.6m as at 31 March 2022. This reflects valuation
uplifts offset by net realisations to fund, in part, the share
buybacks of £27.2m in the year.
At the year end the top thirty holdings accounted for
67.7% of the total portfolio (31 March 2022: 65.6%).
There have been nine new entrants into the top thirty
holdings over the year. UEM increased its investment
in China Gas Holdings Limited (“China Gas”) by 42.9%,
Aguas Andinas S.A. (“Aguas Andinas”) by 203.1%,
Centrais Eletricas Brasileiras S.A. (“Eletrobras”) by 73.6%,
InPost S.A. (“InPost”) by 53.2% and Vamos Locacao de
Caminhoes Macquinas e Equipamentos S.A. (“Vamos”)
by 93.6%. Shanghai International Airport Co., Ltd (“SHIA”)
is a new investment in the year. This together with some
strong share price performances from China Gas up
by 10.4%, Aguas Andinas up 38.6%, InPost up 46.0%
and SHIA up 13.3% moved them all into the top thirty
holdings. Umeme Limited saw its share price recover by
74.2% and is now in nineteenth position in our portfolio.
Grupo Traxion S.A.B. de C.V. rose into the top thirty as we
reduced other holdings.
UMEME LIMITED (UGANDA) (“UMEME”)
Umeme is the largest energy distributor in Uganda,
distributing around 97.0% of all the electricity in the
country.
Inflation has not been as much of a challenge in Asia. We
suspect this results from higher unemployment levels at
the start of Covid. As a consequence, wage pressures are
lower, as is inflation. It is worth noting China’s inflation is
running at under 2.0%.
UKRAINE
The war in Ukraine has gone on longer than we expected
but has had less of a long-term impact on energy and
wheat markets than we thought. Both these commodities
have seen their prices fall significantly over the year. As
such, inflationary pressures are much reduced for these
two commodities.
However, the wider global inflationary legacy is expected
to persist. The threat from energy supply and supply chain
security will require significant investment to address
these two concerns and inflationary pressures will remain.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)
Climate change remains at the forefront of global debate,
heightened by the increased impact of climate disasters
worldwide. ICM has committed to measuring and reducing
its own carbon emissions through a range of initiatives. As
an investor who expects our investees to consider their
impact on the environment, it is therefore important to
lead by example.
Energy transition is a megatrend which is the catalyst that
will enable nations to reach their net zero commitments.
As the transition intensifies attention will turn to new
technologies within supply chains. Production will face
increased scrutiny from downstream industries, investors
and the public over ESG issues. The transition will need
16
Utilico Emerging Markets Trust plc
SECTOR SPLIT OF INVESTMENTS
Electricity
Ports and Logistics
Data Services and
Digital Infrastructure
17.4%
(15.5%)
17.0%
(19.3%)
13.1%
(15.6%)
Renewables
Gas
Airports
12.7%
7.5%
(9.7%)
(8.4%)
7.4%
(4.8%)
Telecommunications
Water and Waste
Other
4.5%
(5.6%)
6.7%
(8.6%)
Infrastructure
Investment Funds
3.7%
(4.9%)
Figures in brackets as at 31 March 2022
IN THE YEAR TO 31 MARCH 2023
6.6%
(4.0%)
Road and Rail
3.4%
(3.6%)
BRAZIL REMAINS UEM’S LARGEST
COUNTRY EXPOSURE
CHINA REMAINS UEM’S SECOND
LARGEST COUNTRY EXPOSURE
INDIA REMAINS UEM'S THIRD
LARGEST COUNTRY EXPOSURE
20.9%
(2022: 20.9%)
15.8%
(2022: 15.9%)
10.7%
(2022: 11.3%)
See page 10 for the full geographic exposure
LATAM’S EXPOSURE
ASIA’S EXPOSURE
REST OF THE WORLD
32.2%
(2022: 30.4%)
47.3%
(2022: 51.5%)
20.5%
(2022: 18.1%)
Source: ICM
Report and Accounts for the year to 31 March 2023
17
INVESTMENT MANAGERS’ REPORT (continued)
MEGATRENDS DRIVING UPSIDE IN EMERGING MARKETS
UEM exited from PT Link Net Tbk following an offer for
the business at a premium. UEM reduced its investment
in Simpar S.A., My E.G. Services Berhad, Ocean Wilsons
Holdings Limited, Corporacion Financiera Colombiana S.A.,
China Everbright Greentech Limited, Societe Nationale des
Telecommunications du Senegal, Naver Corporation Limited
and KT Corporation, all of which fell outside the top thirty
holdings.
Purchases in the portfolio decreased again to £108.9m in the
year ended 31 March 2023 (31 March 2022: £124.5m) and
realisations decreased to £126.6m (31 March 2022: £176.9m).
This reflects investment activity more in line with long term
averages. An active decision was taken to slowly increase
UEM’s debt as confidence in investee companies grew. UEM
ended the year with its bank loans drawn to £35.1m, 70.2%
of the available £50.0m facility.
There have been some small sector shifts during the year to
31 March 2023 and more detail is set out on page 17. On a
geographical basis there were some small changes again and
more detail is set out on page 10.
LEVEL 3 INVESTMENTS
UEM ended the year with level 3 investments totalling
£58.7m (31 March 2022: £48.1m), representing 10.8% of
total investments (31 March 2022: 8.4%). UEM’s level 3
investments increased mainly as a result of the revaluation
of Petalite. UEM first invested in Petalite in March 2020,
since which time the electric vehicle charging technology
company has won several UK government innovation
grants, and further developed, patented and certified its
core SDC technology. SDC, or Sinusoidal Direct Current,
is a revolutionary method of converting AC to DC more
efficiently and with a higher degree of reliability than existing
“full bridge” technology used in electric vehicle chargers.
In June 2022 Petalite received investment from AM Impact
Partners, a strategic investor, in a funding round in which
UEM also participated. The funding round was completed at
a premium to the carrying valuation as reported in the March
2022 annual accounts, which resulted in an uplift of £9.9m
to NAV during the period ended 31 March 2023. Attention
is drawn to note 26(d) of the accounts which provides more
information on Petalite’s valuation methodology and the 50%
level of sensitivity to its fair value which has been applied.
UEM is a 28.6% shareholder in Petalite.
BANK DEBT
31 March 2023, as UEM actively increased its investment
positions. UEM’s £50.0m committed multicurrency loan
facility is with The Bank of Nova Scotia, London Branch,
and matures in March 2024.
REVENUE RETURN
Revenue income increased by 7.7% to £24.3m in the year
to 31 March 2023, from £22.6m in the prior year. This is a
good outcome given the uncertain markets.
Management fees and other expenses were flat at £3.0m
in the year to 31 March 2023, unchanged from the year
to 31 March 2022. This is a positive given the inflationary
pressures in the wider market. Finance costs remained
modest at £0.2m (31 March 2022: £0.1m). Taxation
remained largely unchanged at £1.6m during the year
ended 31 March 2023 (31 March 2022: £1.5m).
Profit for the year increased by 8.6% to £19.5m from
£17.9m for the prior year. EPS was higher, increasing by
15.1% to 9.40p compared to the prior year of 8.17p due
to the higher earnings and reduced average number of
shares in issue following the buybacks. Dividends per
share ("DPS") of 8.45p were fully covered by earnings.
Retained revenue reserves rose to £9.6m as at 31 March
2023, equal to 4.74p per share.
CAPITAL RETURN
The portfolio losses were £8.4m on the capital account
during the year to 31 March 2023. Losses on foreign
exchange were £0.5m and therefore the resultant total
income loss on the capital account was £8.9m against
prior year gains of £59.6m.
Management and administration fees were almost flat at
£4.3m (31 March 2022: £4.2m).
Finance costs increased to £0.7m from £0.5m as a result
of higher interest costs. There was a taxation gain of
£0.2m (31 March 2022: loss of £1.2m) which arose mainly
from Indian capital gains tax reductions. The net effect of
the above was a loss on capital return of £13.7m (31 March
2022: a gain of £53.7m).
Charles Jillings
ICM Investment Management Limited
and ICM Limited
UEM’s net debt, being bank loans and net overdrafts,
increased from £23.2m as at 31 March 2022 to £36.1m as at
16 June 2023
ENERGY TRANSITION
SOCIAL INFRA
GLOBAL TRADE
DIGITAL INFRA
• Lower or net zero emissions targets to combat climate change requires
decarbonisation of the energy matrix.
• Geopolitical concerns are driving energy security higher up the agenda as countries
look to cut reliance on imported oil/gas.
• Huge investment in wind/solar assets and supporting grid and battery storage
infrastructure across EM.
• Displacement of dirty coal- and oil-fired assets with cleaner and more flexible gas-
fired facilities.
• Most emerging market countries lack adequate essential social infrastructure.
• The growing middle class is demanding better quality services and infrastructure.
• Rapid urbanisation is driving the need for huge investments in infrastructure,
transportation, communication and internet services, creating exciting opportunities
for portfolio companies.
• Emerging market economies offer strong domestically-driven growth, as well as a
growing share of world exports driving international trade.
• The increasingly multi-polar world and the reshaping of the competitive environment
will provide EM countries with new opportunities.
• As a result of Covid-19 and recent geopolitical pressures, there has been an increase
in nearshoring and the need to diversify supply chains.
• Data drives innovation, enables personalisation and enhances decision making
driving social and commercial returns.
• Technology facilitates EM companies to market and deliver goods and services to a
potentially global customer base.
• New innovative and disruptive applications developed in EM are driving new business
models and efficiencies
18
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
19
ALUPAR INVESTIMENTO S.A.
Alupar Investimento S.A. is a holding company for electricity generation and
transmission assets in Brazil, Peru and Colombia. It has 30 transmission
projects, with 6,974km of operational electricity lines and 822MW renewable
energy generation assets. UEM first invested in 2013.
IN THE YEAR TO 31 DECEMBER 2022,
REVENUES INCREASED
15.5%
AND EBITDA 17.1%
Andre S Prietsch
20
Utilico Emerging Markets Trust plc
GRUPO AEROPORTUARIO DEL CENTRO NORTE, S.A.B. DE C.V.
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. is a
Mexican airport operator. It operates thirteen international
airports in central and northern states of Mexico, including
Monterrey, one of Mexico’s largest business and industrial
areas. In 2022, it served over 23.0m passengers. UEM first
invested in 2015.
IN THE YEAR TO 31 DECEMBER 2022,
REVENUES INCREASED
34.0%
AND EBITDA 43.9%
FPT CORPORATION
FPT Corporation is the largest information technology service
company in Vietnam. It also provides fibre broadband and
data centre services. Its education division has over 100,000
students enrolled in its private schools, colleges and university.
UEM first invested in 2019.
IN THE YEAR TO 31 DECEMBER 2022,
REVENUES INCREASED
23.4%
AND EBITDA 16.6%
Report and Accounts for the year to 31 March 2023
21
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 1.8bn of assets directly
under management and is responsible indirectly for a
further USD 22.5bn 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 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
Operational Cash Generative
Bottom Up Approach
ACTIVE
INVESTORS
Investee Relationships
Detailed Company Knowledge
Extensive Industry Experience
Infrastructure 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 16.5m to not-for-profit and
community organisations.
22
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
23
ESG SPOTLIGHT
LARGEST HOLDINGS OVERVIEW
The Board believes that it is in 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 38.
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.
A leader in Brazil offering a
comprehensive range of waste
management and value recovery
solutions, from recycling through
biogas and power generation.
A leading e-commerce logistics
infrastructure player primarily
in Poland operating automated
parcel machines, with a growing
presence in France and the UK.
ESG ANALYSIS:
ESG ANALYSIS:
Orizon has strong environmental credentials and its
core business plays a crucial role in reducing greenhouse
gas emissions. Orizon was the first company in Brazil
to implement clean power generation systems at its
ecoparks. The facilities can capture and treat the methane
gas produced by decomposing waste, either for sale or for
on-site use. The ecoparks handle approximately 10% of all
compliantly treated waste volumes in Brazil, with this figure
due to grow as capacity increases. On-site biogas power
plants at two of Orizon's ecoparks have a generation
capacity greater than 190,000 MWh per year, enough to
supply power to 290,000 people.
ICM ESG CONCLUSION:
As a company that promotes the circular economy, Orizon
is well placed to benefit from the opportunities that arise
from climate change and the energy transition.
InPost continues to be focused on its ESG
commitments and has a comprehensive ESG
approach. Although having an aggressive expansion
policy, InPost has and continues to make good steps to
reach its target of becoming climate neutral by 2025 in
scope 1 and 2 emissions and the entire supply chain
(including scope 3) by 2040.
ICM ESG CONCLUSION:
Only a year after InPost released its ESG strategy
there is evidence of the strategy taking shape with the
most significant achievement being the development
of InPost’s decarbonisation strategy. There is a clear
path to implementation which will enable InPost to
efficiently continue its ESG journey.
Rumo SA (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
32.6%
(2022: 31.0%) OF
TOTAL INVESTMENTS
52.3%
(2022: 50.3%) OF
TOTAL INVESTMENTS
67.7%
(2022: 65.6%) OF
TOTAL INVESTMENTS
81
(2022: 79)
The value of convertible securities represents 0.0% (2022: 1.8%) of the portfolio. The value of fixed income securities represents 3.4% (2022: 2.6%) of the portfolio.
24
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
25
TEN LARGEST HOLDINGS REVIEW
1
Country
Sector
UK
Renewables
Fair Value £’000s
28,607
% of total
investments
5.2%
PETALITE LIMITED (“PETALITE”) is an unlisted early-stage company based
in the UK. Petalite has developed an innovative electric vehicle charging
technology called SDC which offers greater reliability and efficiency than is
currently available in the market, filing its first patent application in 2016.
UEM first invested in Petalite in March 2020, enabling it to validate the
technology with certification of the Power Core modular unit. UEM’s funding
was augmented by Innovate UK awards, and to date Petalite has won seven
grants totalling over £12.0m to support the UK’s transition to net zero. This
includes a £1.4m grant won in November 2022 for developing charging
infrastructure for electric vertical take-off and landing aircraft.
In June 2022 strategic investor AM Impact Partners (“AMIP”) invested in a
funding round alongside UEM, which also converted its convertible loan
note into equity as part of the transaction. AMIP co-founder Ashley Unwin
was subsequently appointed Chairman of the Board, and Petalite has now
established a go-to-market strategy to commercialise its technology in the
coming year. At the end of March 2023, the carrying value of Petalite was
increased to the valuation of the June 2022 fundraise.
2
Country
Sector
The Philippines
Ports and
Logistics
Fair Value £’000s
26,584
% of total
investments
4.9%
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 33
terminals in 20 countries across six continents, handling 12.2m containers in
2022.
During 2022, ICT continued to benefit from the improvement in trade activities
and easing of Covid-19 lock down restrictions, resulting in volumes for the full
year 2022 increasing by 9.4%. Volume growth coupled with management’s
continued focus on improving container tariff rates and container mix, resulted
in yields increasing 9.0% and gross revenues for FY22 increasing by 20.3%.
Despite the inflationary pressures witnessed during the year, management's
ongoing stringent cost control ensured that EBITDA for 2022 increased by
23.7% and EBITDA margin expanded to 62.8%, another record high. Adjusted
net income was up by 43.3% with the dividend again increasing by 15.0%
to PHP 10.0, which includes a special dividend of PHP 1.44, payable as ICT
continues to experience an increasing free cash flow position.
ICT’s share price decreased by 5.1% in the year to 31 March 2023. UEM
increased its position in ICT by 4.2%.
3
Country
Sector
Brazil
Electricity
Fair Value £’000s
20,643
% of total
investments
3.8%
ALUPAR INVESTIMENTO S.A. (“ALUPAR”) is a holding company for assets
focused on the electricity transmission and generation sectors in Brazil, Peru and
Colombia. It has 30 transmission projects totalling 7,964km of electricity lines
of which 6,974km are operational, and 822MW of renewable energy generation
assets.
Over the past three years Alupar has been investing heavily in several new
projects, expanding its transmission network kilometres by over 40% and
commissioning a new 94MW hydro plant in Peru. All operational transmission
lines are in Brazil with fixed revenue concession contracts which benefit from
annual inflation adjustments. In July 2022 indexation increases of 11.7% for IPCA-
linked concessions and 10.7% for IGPM-linked concessions were applied. These
inflation adjustments, combined with the contribution of new projects resulted
in underlying group revenue growth of 15.5% and EBITDA growth of 17.1% in its
financial year to 31 December 2022. Dividends per share increased by 46%.
Alupar’s share price decreased by 2.5% in the year to 31 March 2023. UEM’s
shareholding in Alupar was unchanged over the period.
Andre S Prietsch
4
Country
Sector
Brazil
Water and Waste
Fair Value £’000s
18,432
% of total
investments
3.4%
ORIZON VALORIZACAO DE RESIDUOS S.A. (“ORIZON”) is Brazil's leader
in waste management and operates 15 sanitary landfill sites. Referred to as
"ecoparks" by Orizon, these sites are sophisticated complexes which require
specialised infrastructure to safely process waste. This includes sorting facilities
to remove recyclable materials such as metals, plastics and cardboard; leachate
collection and treatment; biogas extraction; and waste-to-energy services. With
over 8.0m tons of waste processed in 2022, Orizon is the market leader in a
highly fragmented market with 10.2% market share. The UN recognises the
collection and use of biogas as directly reducing emissions, thereby qualifying
Orizon's activities for carbon credits.
In 2022, Orizon acquired Estre's landfill assets, a milestone acquisition which
almost doubled its processed volume. This acquisition will also increase
significantly Orizon's capacity in value-added activities, like biogas extraction. In
the financial year to 31 December 2022, Orizon delivered 65.0% and 76.0% pro
forma revenue and EBITDA growth, respectively.
UEM’s position in Orizon increased 68.7% in the year to 31 March 2023.
Orizon’s share price was up by 18.2% during the period.
26
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
27
TEN LARGEST HOLDINGS REVIEW (continued)
5
Country
Sector
India
Gas
Fair Value £’000s
17,085
% of total
investments
3.1%
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.
Elevated LNG prices have resulted in an extremely challenging operating
environment for GSPL. In the twelve months to 31 March 2023, gas
transmission volumes declined by 25.0% as the economic impact of high prices
stifled demand and encouraged customers to switch to alternate fuel sources.
Demand from the power sector plummeted by almost 75% as gas-fired
electricity was uneconomic. However, several successive tariff increases offset
this and preserved margins, with revenues and EBITDA increasing by 1.9% and
3.6% respectively. DPS relating to March 2023 year end was up by 150% on the
prior year.
In the twelve months to 31 March 2023 GSPL’s share price increased by 2.1%;
UEM’s shareholding in GSPL was unchanged over the period.
6
Country
Sector
India
Electricity
Fair Value £’000s
15,057
% of total
investments
2.8%
INDIA GRID TRUST (“INDIGRID”) is an infrastructure investment trust listed on
the Bombay Stock Exchange which owns power transmission assets in India.
It has 42 lines totalling 7,790km and 12 substations, with the assets having an
average of 29 years' remaining contract life. The trust is managed by KKR, which
is also a 24% shareholder.
In November 2022, Indigrid completed the acquisition of the 208km Raichur
Sholapur transmission project and subsequently signed an agreement with
Sterlite to acquire the 626km KTL project. These two projects increase the
AUM of the trust by 8.0% to INR228bn (USD 2.8bn). In the twelve months to
31 March 2023, revenue and EBITDA grew by 5.1% and 4.3% respectively. The
trust is required to pay out at least 90% of cash flows, which is paid in quarterly
dividends, and over the twelve-month period the aggregate dividends per unit
were increased by 4.7%.
UEM’s position in Indigrid was reduced by 8.4% in the period and during the
year Indigrid’s share price declined by 8.8%.
7
Country
Sector
Mexico
Airports
Fair Value £’000s
13,146
% of total
investments
2.4%
GRUPO AEROPORTUARIO DEL CENTRO NORTE, S.A.B. DE C.V. (“OMA”)
is one of the three listed airport operators in Mexico that has a 50-year
concession ending in 2048 to operate, manage and develop 13 international
airports in central and northern Mexico. OMA’s concession includes Monterrey
International Airport, located in Mexico’s second largest business and industrial
centre, and contributes to 47.1% of total traffic. Of the 23.3m passengers
handled by OMA in 2022, 88.3% were domestic and 11.7% international, with
around two thirds of passengers travelling for corporate purposes rather than
visiting family and friends or for leisure. FY22 passenger volumes were higher
than pre-pandemic levels illustrating the robust recovery OMA has witnessed,
which is reflected in the strong financial results, with full year 2022 revenues up
by 34.0% YoY and up by 22.6% compared to pre-Covid-19 levels in 2019. Given
the high operational leverage of an airport, EBITDA for FY22 was up 43.9%
YoY and increased by 25.5% versus FY19 with EBITDA margin in FY22 reaching
71.2%. Net income was up by 26.5% for the year with dividends increasing
233.1%.
OMA’s share price increased by 35.9% in the year to 31 March 2023, with UEM
maintaining its position in OMA.
8
Country
Sector
Vietnam
Data Services and
Digital Infrastructure
Fair Value £’000s 12,983
% of total
investments
2.4%
FPT CORPORATION (“FPT”) is a Vietnamese technology and
telecommunications company. FPT provides IT services to large multinationals
globally, and to the public sector and enterprise customers domestically.
Additionally, FPT is a major provider of fixed line broadband, internet, data
centre and cloud services in Vietnam though its FPT Telecom subsidiary.
2022 was another good year for FPT with strong growth reported in each of
its three primary segments. The global IT services segment reported revenues
growing by 30.1% to over USD 800m, and profit before tax (“PBT”) up 22.9% in
the year to 31 December 2022. Domestic IT services also reported impressive
PBT growth of 19.2% on an 8.1% increase in sales. FPT Telecom reported
revenue growth of 16.1% for the year and PBT advanced by 17.6% driven by a
9.0% increase in broadband subscribers and Pay TV customer growth of over
20.0%, as well as strong demand for its data centres. FPT continues to expand
its broadband network into new districts and is investing in new long distance
and undersea fibre to meet customers’ increasing data demands. Overall, FPT
reported consolidated revenue growth of 23.4% and a 22.2% growth in net
profit attributable to shareholders.
FPT’s share price declined by 11.3% for the year to 31 March 2023 (adjusted
for the 20.0% bonus issue in June 2022). The MSCI Vietnam Index declined by
35.2% over the same period. UEM’s position in FPT increased 6.5% during the
year.
28
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
29
TEN LARGEST HOLDINGS REVIEW (continued)
STRATEGIC REPORT
9
Country
Sector
India
Electricity
Fair Value £’000s
12,755
% of total
investments
2.3%
POWER GRID CORPORATION OF INDIA (“POWERGRID”) is the national
electricity grid operator in India and is 51% owned by the Indian government.
Powergrid transmits 45% of the country’s power through 174,000km of
transmission lines and 270 substations. Tariffs for most of its transmission lines
are regulated and are calculated on a return on asset base.
With the rapid rollout of new renewable assets in India, there is a significant
need for additional grid connectivity and capacity. As the dominant player,
Powergrid has been in a strong position to win several Tariff Based Competitive
Bidding auctions for new projects. In the twelve months to 31 March 2023,
Powergrid reported INR 92bn in capital expenditure investing in new
transmission line projects, with revenue growth of 9.5% and EBITDA increasing
by 7.5%. Total dividends per share were flat even though the special dividend in
the prior period was not repeated.
During the year Powergrid’s share price increased by 4.0% and UEM’s
shareholding in Powergrid was unchanged.
10
Country
Sector
China
Telecommunications
Fair Value £’000s 12,489
% of total
investments
2.3%
CITIC TELECOM INTERNATIONAL HOLDINGS LIMITED (“CITIC”) is a
telecommunications and IT services provider principally operating in and
connecting Hong Kong, Macau and mainland China to the rest of the world
with international voice, text message and secure data connections. Citic also
provides data centre, cloud computing, cyber security and related services.
Citic controls CTM, the dominant telecoms operator in Macau and Acclivis, a
Singapore based IT services provider.
Despite the headwinds of low visitor numbers to Hong Kong and Macau
and suppressed business confidence, especially in Macau, Citic reported
pleasing results for the full year to 31 December 2022. Revenues grew by
6.6% in the year to 31 December 2022 and reported net profit was 10.7%
higher than 2021. Citic raised dividends by 8.9%. Citic continues to report
very strong growth of 52.4% for its corporate messaging services, driven by
SMS notifications (e.g. for passcodes, payment verification and marketing
applications). These services generated over HKD 2.5bn (USD 325m) in 2022,
over a quarter of Citic’s revenue.
Citic’s share price rose by 11.1% in the year to 31 March 2023 and additionally
Citic’s shareholders received significant dividends during the period equating
to 8.0% of the share price on 31 March 2022. UEM’s position in Citic decreased
11.3% during the year.
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
30
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
31
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.
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.
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 2023 are set out in the attached
accounts. The dividends in respect of the year, which
total 8.45p per share, have been declared by way of
four interim dividends.
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
32
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
33
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 96 and 97.
Year ended 31 March
2023
2022
NAV total return per share (%)
2.1
14.9
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) (%)
(5.0)
(6.9)
217.00
224.00
(13.5)
(11.9)
5.8
3.0
Revenue earnings per share (pence)
9.40
8.17
Ongoing charges figure (%)
1.4
1.4
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 98 shows
historic data for the Company and its predecessor, UEM
Limited.
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 10.8% to 17.2% and an average discount of 13.8%.
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
12,531,811 shares were bought back and cancelled
during the year, representing 5.8% 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 one quarterly dividend of 2.00p per
share and three quarterly dividends, each of 2.15p per
share, in respect of the year ended 31 March 2023. The
fourth quarterly dividend will be paid on 23 June 2023
to shareholders on the register on 2 June 2023. The
total dividend for the year was 8.45p per share (2022:
8.00p 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 2023 was
1.4% (2022: 1.4%). 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 2023, 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, geo-
political confrontations, 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 programmes 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.
34
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
35
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 95.
The Audit & Risk Committee monitors the performance and
controls (including business continuity procedures) of the service
providers at regular intervals.
All listed and a number of unlisted investments are held in
custody for the Company by JPMorgan Chase Bank N.A. – London
Branch. 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 2023, UEM had net gearing on net assets
of 7.1%. 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, reflecting the long-term strategy of the
Company and is in line with the five-yearly cycle of the
Company's continuation vote.
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 next opportunity for shareholders to vote on
the continuation of the Company is at the AGM in
September 2026.
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. The first
stress test considered a fall in markets of 30% in the
first year with recovery of 10% per annum thereafter.
A second test considered a fall in markets of 30% and
adverse sterling movement, the Company’s reporting
currency, of 10% in the first year with a further fall in
markets of 20% in the second year and no movement
thereafter. 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 49 to 54. As part of
this, the AGM provides a key forum for the Board and
Investment Managers to present to shareholders on the
performance of UEM and its future prospects. It also
allows shareholders the opportunity to meet with the
Board and Investment Managers and to raise questions
and concerns. The Chairman is available to meet with
shareholders as appropriate and the Investment
Managers meet regularly with shareholders and their
respective representatives, reporting back on views
to the Board. Shareholders may also communicate
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Report and Accounts for the year to 31 March 2023
37
STRATEGIC REPORT (continued)
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 of a joint broker and a regional
marketing adviser, following a competitive pitch
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 24.
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
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 38.
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 16 June 2023.
By order of the Board
ICM Investment Management Limited
Company Secretary
16 June 2023
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. The Investment
Managers believe that good stewardship is essential
and these principles 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 three 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 pages 52 and 53.
GREENHOUSE GAS EMISSIONS AND STREAMLINED
ENERGY AND CARBON REPORTING ("SECR")
All the Company’s activities are outsourced to third
parties. The Company therefore has no greenhouse gas
emissions to report from its operations. In addition, the
Company considers itself to be a low energy user under
the SECR regulations and therefore is not required to
disclose energy and carbon information.
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Report and Accounts for the year to 31 March 2023
39
INVESTMENT MANAGERS AND TEAM
ICMIM, a company authorised and regulated by
the FCA, was the Company’s AIFM during the year
ended 31 March 2023 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 1.8bn
IN FUNDS DIRECTLY AND IS RESPONSIBLE INDIRECTLY FOR A FURTHER USD 22.5BN OF ASSETS IN SUBSIDIARY
INVESTMENTS. ICM HAS OVER 80 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 and Waverton Investment Management 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 H.R.L Morrison & Co Limited.
SENIOR CORE TEAM ASSISTING ON UEM INCLUDE:
Jacqueline Broers, deputy portfolio manager, 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, 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 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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Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
41
DIRECTORS
DIRECTORS’ REPORT
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 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 with various roles including Emerging Markets Fund Manager and 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. He is
currently a non-executive director of abrdn China Investment Company Limited.
SUSAN HANSEN
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 45) a non-bank lending company listed on the Australian Securities Exchange and the
principal of a financial training organisation 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.
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 and Gresham House Energy Storage Fund plc.
ERIC STOBART*
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 12 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 three pension schemes with combined assets of some £2.7bn. 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
The Directors present the Annual Report and Accounts
of the Company for the year ended 31 March 2023.
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
Limited to the United Kingdom, the shareholders of
UEM Limited exchanged all their shares in UEM Limited
for shares in the Company on a one for one basis
and UEM Limited became a wholly owned subsidiary
of the Company. All the assets of UEM Limited were
transferred to the Company and UEM Limited 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.
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Report and Accounts for the year to 31 March 2023
43
DIRECTORS’ REPORT (continued)
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
Investment Management Limited (“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 2023, all listed and a
number of 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.
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
A dividend of 2.00p per share was paid on
23 September 2022 and a dividend of 2.15p per share
was paid on 16 December 2022 and 24 March 2023.
A dividend of 2.15p per share was declared on 22 May
2023 and will be paid on 23 June 2023.
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 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 five non-executive
directors who oversee and monitor the activities of
the Investment Managers and other service providers
and ensure that the Company’s investment policy is
adhered to. The Board is supported by an Audit & Risk
Committee, a Management Engagement Committee
and a Remuneration Committee, which deal with
specific aspects of the Company’s affairs. The Corporate
Governance Statement, which is set out on pages 49 to
54, forms part of this Directors’ Report.
The Directors have a range of business, financial and
asset management skills, as well as experience relevant
to the direction and control of the Company. Brief
biographical details of the members of the Board are
shown on page 42. 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 57.
No Director was a party to, or had any interests in,
any contract or arrangement with the Company at any
time during the year or at the year end. There are no
agreements between the Company and the Directors
concerning compensation for loss of office.
A Director must avoid a situation where he/she has,
or can have, a direct or indirect interest that conflicts,
or possibly may conflict, with the Company’s interests.
The Directors have declared any potential conflicts of
interest to the Company, which are reviewed regularly
by the Board. The Directors have undertaken to advise
the Company Secretary and/or Chairman as soon as
they become aware of any potential conflicts of interest.
SHARE CAPITAL
As at 31 March 2023 the issued share capital of the
Company and the total voting rights were 202,212,256
shares. As at the date of this report, the share capital of
the Company and total voting rights were 201,471,467
shares. There are no restrictions on the transfer of
securities in the Company and there are no special
rights attached to any of the shares.
SHARE ISSUES AND REPURCHASES
UEM has the authority to purchase shares in the
market to be held in treasury or for cancellation and to
issue new shares for cash. During the year ended
31 March 2023 the Company purchased 12,531,811
shares for cancellation. The current authority to
repurchase shares was granted to Directors on
20 September 2022 and expires at the conclusion of
the next AGM. The Directors are proposing that their
authority to buy back up to 14.99% of the Company’s
shares for cancellation or to be held in treasury and
to issue new shares or sell shares from treasury be
renewed at the forthcoming AGM.
TENDER FACILITY
At the Directors’ discretion, the Company can operate
a tender facility subject to certain limitations. The
tender facility is not expected to be made available
in circumstances where the annual compound
growth rate of the Company’s gross assets exceeds
10% or where the Company’s net assets total return
performance exceeds 10% in the relevant period. The
maximum number of shares which may be tendered
pursuant to the tender facility in any financial year
would be limited to 12.5% of the shares in issue at the
commencement of the relevant financial year, with any
excess tender requests being scaled back pro-rata.
The tender facility has not been operated to date by
the Company or previously by its predecessor, UEM
Limited.
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Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
45
DIRECTORS’ REPORT (continued)
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
% held
City of London Investment
Management Company Limited
UIL Limited
34,425,869
20,126,014
Lazard Asset Management LLC
18,737,825
Rathbone Investment
Management Limited
Ameriprise Financial, Inc.
10,728,364
10,127,839
17.1
10.0
9.3
5.3
5.0
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 12 resolutions.
Resolutions 1 to 10 (inclusive) will be proposed as
ordinary resolutions and resolutions 11 and 12 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 2023 and the Auditor’s report
thereon.
Ordinary Resolution 2 – Approval of the Directors’
Remuneration Report
This resolution is an advisory vote on the Directors’
Remuneration Report.
Ordinary Resolution 3 – Approval of the Company’s
dividend policy
This resolution seeks shareholder approval of the
Company’s dividend policy to pay four interim
dividends per year. Under the Company’s Articles of
Association, the Board is authorised to approve the
payment of interim dividends without the need for
the prior approval of the Company’s shareholders.
Having regard to corporate governance best practice
relating to the payment of interim dividends without
the approval of a final dividend by a company’s
shareholders, the Board has decided to seek express
approval from shareholders of its dividend policy to pay
four interim dividends per year. If this resolution is not
passed, it is the intention of the Board to refrain from
authorising any further interim dividends until such
time as the Company’s dividend policy is approved by
its shareholders.
Ordinary Resolutions 4 to 7 (inclusive) – Re-election
of the Directors
The biographies of the Directors are set out on page 42
and are incorporated into this report by reference.
Resolution 4 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 5 relates to the re-election of Mr Mark
Bridgeman. 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 re-election of Ms Isabel Liu.
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 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 8 and 9 – Appointment of the
external Auditor and the Auditor’s Remuneration
These resolutions relate to the appointment and
remuneration of the Company’s auditor. The Company,
through its Audit & Risk Committee, has considered
the independence and objectivity of the external
auditor and is satisfied that the proposed Auditor is
independent. Further information in relation to the
assessment of the existing Auditor’s independence can
be found in the report of the Audit & Risk Committee.
Resolutions relating to the following items of special
business will be proposed at the forthcoming AGM:
Ordinary Resolution 10 – 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 £201,470 per annum, which is
equivalent to 20,147,000 ordinary shares of 1p each and
represents approximately 10% 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 2024 unless renewed prior to
that date at an earlier general meeting.
46
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
47
DIRECTORS’ REPORT (continued)
CORPORATE GOVERNANCE STATEMENT
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
16 June 2023
Special Resolution 11 – 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 £201,470 which is equivalent to
20,147,000 ordinary shares of 1p each and represents
approximately 10% 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 2024
unless renewed prior to that date at an earlier general
meeting.
Special Resolution 12 – Authority to buy back shares
This resolution seeks to renew the authority granted
to the 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 30,200,000 ordinary shares (being approximately
14.99% of the issued ordinary share capital excluding
treasury shares as at the date of the Notice of the
AGM). This authority, unless renewed at an earlier
general meeting, will expire at the conclusion of the
next AGM of the Company to be held in 2024.
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.
THE COMPANY‘S CORPORATE GOVERNANCE
FRAMEWORK
Corporate Governance is the process by which the
board of directors of a company protects shareholders’
interests and by which it seeks to enhance shareholder
value. Shareholders hold the directors responsible
for the stewardship of a company’s affairs, delegating
authority and responsibility to the directors to
manage the company on their behalf and holding
them accountable for its performance. Responsibility
for good governance lies with the Board. The Board
considers the practice of good governance to be an
integral part of the way it manages the Company and
is committed to maintaining high standards of financial
reporting, transparency and business integrity.
The governance framework of the Company reflects
the fact that, as an investment company, it has no full-
time employees and outsources its activities to third
party service providers.
THE BOARD
Five non-executive directors (NEDs)
CHAIRMAN: John Rennocks
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.
48
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
49
CORPORATE GOVERNANCE STATEMENT (continued)
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 2023, 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.
Two board meetings a year are usually held in
countries where the Company holds investments
and, as part of its monitoring and risk management
responsibilities, 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.
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 2023 and
the attendance by the Directors was as follows:
Number of meetings held during the year
John Rennocks
Mark Bridgeman
Susan Hansen
Isabel Liu
Anthony Muh (retired 20 September 2022)
Eric Stobart
Board
Audit & Risk
Committee
Management
Engagement
Committee
Remuneration
Committee
4
4
4
4
4
2/2
4
3
3
3
n/a
3
1/1
3
1
1
1
n/a
1
1
1
1
1
1
n/a
1
1
1
Apart from the meetings detailed above, there were a
number of meetings held by committees of the Board
to approve the declaration of quarterly dividends and
other ad hoc items.
AUDIT & RISK COMMITTEE
The Audit & Risk Committee comprises all the
independent Directors of the Company and is chaired
by Mr Stobart. Further details of the Audit & Risk
Committee are provided in its report starting on
page 58.
MANAGEMENT ENGAGEMENT COMMITTEE
The Management Engagement Committee, which
is chaired by Mr Rennocks, comprises all the
independent Directors of the Company and meets at
least once a year.
The Investment Managers’ performance is considered
by the Board at every meeting, with a formal evaluation
by the Management Engagement Committee annually.
The Board received detailed reports and views from
the Investment Managers on investment policy, asset
allocation, gearing and risk at each Board meeting in
the year ended 31 March 2023, with ad hoc market/
company updates if there were significant movements
in the intervening period.
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 55.
INTERNAL CONTROLS
The Directors acknowledge that they are responsible
for ensuring that the Company maintains a sound
system of internal financial and non-financial controls
(“internal controls”) to safeguard shareholders’
investments and the Company’s assets.
The Company’s system of internal control is designed
to manage rather than eliminate risk of failure to
achieve the Company’s investment objective and/
or adhere to the Company’s investment policy and/
or investment limits. The system can therefore only
provide reasonable and not absolute assurance
against material misstatement or loss.
The Management Engagement Committee also
considers the effectiveness of the administration
services provided by the Investment Managers and
The Investment Managers, Administrator and
Custodian maintain their own systems of internal
controls and the Board and the Audit & Risk
50
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
51
CORPORATE GOVERNANCE STATEMENT (continued)
committee. It considers the size and structure of
the Board, including the balance of expertise and
skills brought by individual Directors. It supports the
principles of boardroom diversity, including gender
and ethnicity, progressive refreshing and succession
planning and such matters are discussed by the Board
as a whole at least annually. The Company’s policy is
that the Board should be comprised of directors with
a diverse range of skills, knowledge and experience
and that any new appointments should be made on
the basis of merit, against objective criteria including
diversity. The Listing Rules, requires companies to
report against the following three diversity targets:
(i)
(ii)
At least 40% of individuals on the board are
women;
At least one of the senior board positions (defined
in the Listing Rules as the chair, CEO, SID and CFO)
is held by a woman; and
(iii) At least one individual on the board is from a
minority ethnic background
As at 31 March 2023, UEM complies with targets (i) and
(iii). As provided for in the Listing Rules, investment
companies do not need to report against target (ii) if
it is inapplicable. The Board believes that, since UEM
is an externally managed investment company which
does not have executive management functions,
including the roles of CEO or CFO, this target is not
applicable.
The Board has chosen to align its diversity reporting
reference date with the Company’s financial year
end. As required by the Listing Rules, further details
in relation to the three diversity targets are set out in
the tables below. The information was obtained by
asking each of the Directors how they wished to be
categorised for the purposes of these disclosures:
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 2023 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
31 March 2023
Number of Board members
Percentage of the Board
Men
Women
Other
Not specified/prefer not to say
52
Utilico Emerging Markets Trust plc
3
2
–
–
60%
40%
–
–
Number of senior positions on
the Board (CEO, CFO, SID,
Chair)
Not applicable
See above
Number of Board
members
Percentage of the Board
Number of senior positions
on the Board (CEO, CFO,
SID, Chair)
31 March 2023
White British or other White (including
minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say
The Board currently consists of three men and two
women. As referred to in the Chairman’s statement,
Ms Hansen has indicated her intention to retire from
the Board at this year’s AGM and the current intention
is to continue as a Board of four Directors. This will
mean that target (i) will not be complied with following
19 September 2023. Given the relatively small size of
UEM’s Board, any change in membership has a much
greater impact on the representation of a particular
group. The Board will continue to have regard to
boardroom diversity, including gender and ethnicity,
during its consideration of succession planning and
future Board appointments.
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,
4
-
1
-
-
-
80%
-
20%
-
-
-
Not applicable
See above
the company secretary and other appropriate
persons. All appointments are subject to subsequent
confirmation by shareholders in general meeting.
BOARD, COMMITTEE AND DIRECTORS’
PERFORMANCE APPRAISAL
The Directors recognise the importance of the AIC
Code’s recommendations in respect of evaluating
the performance of the Board, the Committees
and individual Directors. This encompasses both
quantitative and qualitative measures of performance
including:
•
•
•
•
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
Report and Accounts for the year to 31 March 2023
53
CORPORATE GOVERNANCE STATEMENT (continued)
DIRECTORS’ REMUNERATION REPORT
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.
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
16 June 2023
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.
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
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 62.
The Remuneration Committee is responsible for
reviewing and making recommendations to the Board in
respect of the fees of Directors. In line with the AIC Code,
it reviews the ongoing appropriateness of the Company’s
remuneration policy and the individual remuneration of
Directors by reference to the activities of the Company
and in comparison with other companies of a similar
structure and size. Any views expressed by shareholders
on the fees being paid to Directors will also be taken into
consideration. Following recommendations from the
Remuneration Committee, the Board reviews the fees
payable to the Chairman and Directors annually. There
were no changes to the remuneration policy during the
year.
All the Directors invest the full amount of their fees
(net of tax) in the shares of the Company. The review in
respect of the year ending 31 March 2024 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
2024
£’000s
2023*
£’000s
52.5
49.1
38.9
50.0
46.7
37.0
DIRECTORS’ REMUNERATION POLICY
The Board, on the recommendation of its Remuneration
Committee, considers the level of the Directors fees
at least annually. The Board determines the level of
Directors’ fees within the limit currently set by the
Company’s Articles, which limit the aggregate fees
payable to the Board of Directors to a total of £250,000
per annum.
The Board’s policy is to set Directors’ remuneration at
a level commensurate with the skills and experience
necessary for the effective stewardship of the Company
and the expected contribution of the Board as a whole
in continuing to achieve the investment objective. Time
committed to the Company’s business and the specific
responsibilities of the Chairman, Directors and the
chairman of the Audit & Risk Committee are taken into
account. The policy aims to be fair and reasonable in
relation to comparable investment companies.
The fees are fixed and the monetary amount (net of
tax) is used by the Directors to purchase shares in the
Company quarterly in arrears. Directors are entitled to
be reimbursed for any reasonable expenses properly
incurred by them in connection with the performance
of their duties and attendance at Board and general
meetings and Committee meetings. Directors are not
eligible for bonuses, pension benefits, share options,
long-term incentive schemes or other benefits.
Directors are provided with a letter of appointment
when they join the Board. There is no provision for
compensation upon early termination of appointment.
The letters of appointment are available on request at
the Company’s registered office during business hours.
VOTING AT ANNUAL GENERAL MEETING
A resolution to approve the Remuneration Report was
put to shareholders at the AGM of the Company held on
20 September 2022. Of the votes cast, 99.95% were in
favour and 0.05% 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 20 September 2022.
Of the votes cast, 99.94% were in favour and 0.06% were
against. A resolution to approve the remuneration policy
will be put to shareholders at the AGM in 2025.
54
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
55
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 2023 is set out
in the table below.
The beneficial shareholdings of the Directors who
served during the year are set out below:
2022/23
Shares
purchased(1)
2022/23
Entitlement
£(2)
2022/23
Taxable
benefits
£(3)
2022/23
Total
£
2021/22
Shares
purchased(1)
2021/22
Entitlement
£(2)
2021/22
Taxable
benefits
£(3)
2021/22
Total
£
12,982
9,819
17,340
12,432
–
8,191
11,933
72,697
50,000
37,000
37,000
37,000
–
17,409
46,725
–
451
1,000
–
–
1,000
–
50,000
37,451
38,000
37,000
–
18,409
46,725
225,134
2,451
227,585
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
Director
John Rennocks
(Chairman)
Mark Bridgeman
Susan Hansen
Isabel Liu
Gareth Milne(4)
Anthony Muh(5)
Eric Stobart
Totals
(1) All the shares were purchased in the market, using the net fee entitlement after applicable tax deductions of each director, as set out in note 1(j) to
the accounts
(2) The Directors’ entitlement to fees is calculated in arrears
(3) Taxable benefits comprise amounts reimbursed for expenses incurred in carrying out business for the Company
(4) Retired 21 September 2021
(5) Retired 20 September 2022
(6) There were no payments to third parties included in the fees referred to in the table above. There are no further fees to disclose as the Company
has no employees, chief executive or executive directors.
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
2023 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.
Year ended 31 March
Aggregate Directors’
emoluments
2023
£’000s
2022
£’000s
Change
£’000s
225
210
15
Aggregate dividends
17,239
17,379
(140)
Aggregate share buybacks
27,159
13,898
13,261
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
Anthony Muh
Eric Stobart
2023
Fees
%
2022
Fees
%
2021
Fees
%
5.0
5.1
5.1
5.1
5.1
5.0
3.5
n/a
3.5
n/a
3.5
3.5
0.0
n/a
0.0
n/a
0.0
0.0
Including the performance of UEM Limited, the graph
below compares, for the ten years ended 31 March
2023, 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.
As at 31 March
John Rennocks(1)
16 June
2023
31 March
2023
31 March
2022
208,227
208,227
192,343
Mark Bridgeman
15,019
15,019
3,337
Susan Hansen
Isabel Liu(2)
Anthony Muh
Eric Stobart(4)
162,150
162,150
140,921
23,230
n/a
20,348
250,069(3)
60,000
60,000
10,931
239,998
43,000
(1)
(2)
(3)
(4)
Including 2,645 shares held by Mrs Rennocks
The shares are held by Ms Liu's husband, Mak Lo Chiu
As at 20 September 2022, the date Mr Muh retired from the Board
Including 5,500 shares held by Mrs Stobart
TOTAL RETURN COMPARATIVE PERFORMANCE
from 31 March 2013 to 31 March 2023
200
150
100
50
0
Mar 13
Mar 14
Mar 15
Mar 16
Mar 17
Mar 18
Mar 19
Mar 20
Mar 21
Mar 22
Mar 23
UEM ordinary share price total return adjusted
for the exercise of subscription shares
MSCI Emerging Markets total return Index (GBP adjusted)
Rebased to 100 as at 31 March 2013
Source: ICM and Bloomberg
On behalf of the Board
Mark Bridgeman
Chairman of the Remuneration Committee
16 June 2023
56
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
57
AUDIT & RISK COMMITTEE REPORT
As Chairman of the Audit & Risk
Committee, I am pleased to
present the Committee’s report
to shareholders for the year
ended 31 March 2023.
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 2023, 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 Limited 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 2023 (2022: £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 2023 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 2023 is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Company’s performance,
business model and strategy. In reaching this conclusion, the Audit & Risk Committee has assumed that the reader
of the report would have a reasonable level of knowledge of the investment company industry.
58
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
59
AUDIT & RISK COMMITTEE REPORT (continued)
DIRECTORS’ STATEMENT OF RESPONSIBILITIES
in respect of the Annual Report and the Financial Statements
driven by the Audit & Risk Committee’s assessment
of the risks arising in the Company’s operations and
identification of the controls exercised by the Board
and its delegates, the Investment Managers, the
Administrator and other service providers. These
are recorded in risk matrices produced by ICMIM,
as the Company’s AIFM with responsibility for risk
management, which continue to serve as an effective
tool to highlight and monitor the principal risks, details
of which are provided in the Strategic Report on pages
34 to 36. 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
16 June 2023
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 2023, 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 16 June 2023 and signed on
its behalf by:
John Rennocks
Chairman
60
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
61
Independent
auditor’s report
to the members of Utilico Emerging Markets Trust plc
Overview
Materiality:
financial
statements as a
whole
£5.5m (2022:£5.7m)
1% (2022: 1%) of total assets
Key audit matters vs 2022
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 plc (“the Company”) for the
year ended 31 March 2023 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 Company’s
affairs as at 31 March 2023 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 five financial years ended 31
March 2023. 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 2022), 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
(Certain specific investments within the
total of level 3 investments of £58.7
million; 2022: £48.1million)
Refer to page 59 (Audit Committee
Report), page 72 (accounting policy),
pages 77 to 78 and 86 to 89 (financial
disclosures).
Subjective Valuation
10.7% (2022: 8.4%) 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,
revenue multiples and valuing fund
interest by reference to their reported
Net Asset Value.
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 below:
Our procedures included:
— 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 valuation experience: We challenged the investment
manager on key judgements affecting investee company
valuations, such as discount factors and the choice of
benchmark for multiples. We compared key underlying
operational and financial data inputs to external sources,
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.
We also obtained an understanding of existing and
prospective investee company cash flows to understand
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;
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;
— Our Corporate Finance Expertise: Through the use of our
Corporate Finance specialists, we assessed the valuation
methodology and the completeness and accuracy of peer
group comparable companies, as well as relevant
benchmarks or multiples based on their knowledge and
experience of the industry; and
— Assessing transparency: We considered 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 (2022: acceptable).
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 this matter is
that, as part of our risk assessment, we
determined that certain level 3
investment valuations have a high
degree of estimation uncertainty, with
a potential range of reasonable
outcomes greater than our materiality
for the financial statements as a whole
The factors considered in assessing
which unlisted investments were
subject to significant risk included the
quantum of the individual investment,
performance of the investment, nature
of the asset held as well as the
estimation uncertainty of the
methodology and inputs used.
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.
The quantum of the investments
subject to the significant risk is £28.6m
out of a total unlisted investment
balance of £58.7m.
The financial statements note 26(d)
discloses the range/sensitivity
estimated by the Company.
[We continue to perform procedures over [identify key audit matter]. However, following [explain why risk is less significant this year], we
have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our report
this year.]
— Comparing valuations: Where a recent transaction has
62
63
2. Key audit matters: our assessment of risks of material misstatement (continued)
4. Going concern
5. Fraud and breaches of laws and regulations – ability to detect
Carrying amount of non-derivative
Level 1 investments
(£483.1m; 2022: £519.9m)
Refer to page 59 (Audit Committee
Report), page 72 (accounting policy),
pages 77 to 78 and 89 (financial
disclosures).
The risk
Our response
Low risk, high value:
The Company’s portfolio of non-derivative
Level 1 investments makes up 88.2% (2022:
90.5%) 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 procedures 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.
Our results
— We found the carrying amount of non-derivative
Level 1 investments to be acceptable (2022:
acceptable).
3. Our application of materiality and an overview of the
scope of our audit
Total Assets
£547.5m (2022 £574.2m)
Materiality
£5.5m (2022: £5.7m)
£5.4m
Whole financial
statements materiality
(2022: £5.7m)
£4.1m
Whole financial statements
performance materiality (2022:
£4.3m)
£1.0m
Investment and other income
materiality
(2022: £0.9m)
£0.27m
Misstatements reported to the
Audit and Risk Committee (2022:
£0.28m)
Total Assets Materiality
Materiality for the financial statements as a whole was set
at £5.5m (2022: £5.7m), determined with reference to a
benchmark of total assets, of which it represents 1% (2022:
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% (2022 : 75%) of materiality for the financial statements
as a whole, which equates to £4.1m (2022 : £4.3m). 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 £1.0m (2022: £0.9m)
and performance materiality of £0.8m (2022: £0.7m) 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 £0.27m (2022: £0.28m), or £0.1m in relation to
investment and other income (2022: £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.
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;
— The operational resilience of key service organisations.
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 stress testing).
We considered whether the going concern disclosure in note 1
and 25 of 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
44 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.
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
— Reading Board and Audit and Risk Committee minutes.
We communicated identified fraud risks throughout the audit team and
remained alert to any indications of fraud throughout the audit.
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 and the risk of bias in accounting estimates and
judgements such as the valuation of level 3 investments. We evaluated
the design and implementation of the relevant 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. Based on these procedures, we
selected journal entries for testing, which included material post-
closing journal entries.
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.
We communicated identified laws and regulations throughout our team
and remained alert to any indications of non-compliance throughout
the audit .
The potential effect of these laws and regulations on the financial
statements varies considerably.
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.
64
Report and Accounts for the year to 31 March 2022
65
5. Fraud and breaches of laws and regulations – ability to
6. We have nothing to report on the other information in the Annual
6. We have nothing to report on the other information in the
detect (continued)
Report
Identifying and responding to risks of material misstatement
due to non-compliance with laws and regulations (continued)
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 34
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.
Annual Report (continued)
We are also required to review the viability statement, set out on
page 36 and 37 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 Committee, including the significant issues that the
audit 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
— certain disclosures of directors’ remuneration specified by
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 61,
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.
The Company will be including these financial statements in an
annual financial report prepared using the single electronic
reporting format specified in the TD ESEF Regulation. This
auditor’s report provides no assurance over whether the annual
financial report has been prepared in accordance with that
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
law are not made; or
Saltire Court
— we have not received all the information and explanations
20 Castle Terrace
we require for our audit.
We have nothing to report in these respects.
Edinburgh
EH1 2EG
16 June 2023
66
67
STATEMENT OF COMPREHENSIVE INCOME
STATEMENT OF CHANGES IN EQUITY
Notes
10 (Losses)/gains on investments
20 Foreign exchange (losses)/gains
for the year to
31 March 2023
for the year to
31 March 2022
Revenue
return
£’000s
Capital
return
£’000s
Total
return
£’000s
Revenue
return
£’000s
Capital
return
£’000s
Total
return
£’000s
–
–
(8,389)
(8,389)
(515)
(515)
–
–
58,293
58,293
1,333
1,333
3 Investment and other income
24,326
–
24,326
22,593
–
22,593
Total income/(loss)
24,326
(8,904)
15,422
22,593
59,626
82,219
4 Management and administration fees
(1,394)
(4,336)
(5,730)
(1,451)
(4,240)
(5,691)
5 Other expenses
(1,651)
–
(1,651)
(1,590)
–
(1,590)
Profit/(loss) before finance costs and taxation
21,281
(13,240)
6 Finance costs
Profit/(loss) before taxation
(169)
(674)
21,112
(13,914)
8,041
(843)
7,198
19,552
55,386
74,938
(119)
(469)
(588)
19,433
54,917
74,350
7 Taxation
(1,638)
212
(1,426)
(1,500)
(1,188)
(2,688)
Profit/(loss) for the year
19,474
(13,702)
5,772
17,933
53,729
71,662
8 Earnings per share (basic) – pence
9.40
(6.61)
2.79
8.17
24.49
32.66
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 2023
Notes
Ordinary
share
capital
£’000s
Merger
reserve
£’000s
Capital
redemption
reserve
£’000s
Retained earnings
Special
reserve
£’000s
Capital
reserves
£’000s
Revenue
reserve
£’000s
Total
£’000s
Balance as at 31 March 2022
2,148
76,706
197
459,736
(139)
7,268
545,916
16, 18,
19
Shares purchased by the
Company and cancelled
20,21 (Loss)/profit for the year
9 Dividends paid in the year
(125)
–
–
–
–
–
125
(27,159)
–
–
(27,159)
–
–
–
–
(13,702)
19,474
5,772
–
(17,155)
(17,155)
Balance as at 31 March 2023
2,023
76,706
322
432,577
(13,841)
9,587
507,374
for the year to 31 March 2022
Notes
Ordinary
share
capital
£’000s
Merger
reserve
£’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
The notes on pages 72 to 89 form part of these financial statements.
The notes on pages 72 to 89 form part of these financial statements.
68
Utilico Emerging Markets Trust plc
Report and Accounts for the period to 31 March 2023
69
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CASH FLOWS
2023
£’000s
2022
£’000s
545,657
571,686
1,444
456
1,900
(3,461)
(35,102)
(38,563)
(36,663)
508,994
–
(1,620)
507,374
2,023
76,706
322
432,577
(13,841)
9,587
1,477
1,104
2,581
(2,799)
–
(2,799)
(218)
571,468
(23,662)
(1,890)
545,916
2,148
76,706
197
459,736
(139)
7,268
507,374
545,916
250.91
254.22
Notes as at 31 March
Non-current assets
10
Investments
Current assets
11
Other receivables
Cash and cash equivalents
Current liabilities
12
13
Other payables
Bank loans
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 72 to 89 form part of these financial statements.
Approved by the Board on 16 June 2023 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 losses/(gains) on investments
Add back foreign exchange losses/(gains)
Increase in other receivables
Decrease in other payables
Net cash outflow from operating activities before dividends and interest
Interest paid
Dividends received
Investment income – interest
Bank interest received
Taxation paid
Net cash inflow from operating activities
Investing activities
Purchase of investments
Sales of investments
Net cash inflow 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
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the start of the year
Effect of movement in foreign exchange
Cash and cash equivalents as at the end of the year
Comprised of:
Cash
Bank overdraft
Total
The notes on pages 72 to 89 form part of these financial statements.
2023
£’000s
7,198
(22,671)
(1,627)
(28)
843
8,389
515
(31)
(88)
(7,500)
(646)
22,417
475
28
(1,691)
13,083
(106,821)
125,649
18,828
(27,159)
(17,155)
35,385
(24,440)
(33,369)
(1,458)
452
(20)
(1,026)
456
(1,482)
(1,026)
2022
£’000s
74,350
(21,604)
(988)
(1)
588
(58,293)
(1,333)
(16)
(4,701)
(11,998)
(600)
21,556
190
1
(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
70
Utilico Emerging Markets Trust plc
Report and Accounts for the period to 31 March 2023
71
NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES
(e) Cash and cash equivalents
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 July 2022, 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.
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 securities, time to expected
repayment and other relevant factors (see key valuation techniques on pages 86 to 88).
(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.
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.
– expenses incidental to the acquisition or disposal of Investments 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.
(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.
72
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
73
NOTES TO THE ACCOUNTS (continued)
(m) Dividends payable
Dividends paid by the Company are accounted for in the period in which the Company is liable to pay them and are reflected in
the Statement of Changes in Equity.
(n) Merger reserve
The surplus of the net assets of UEM Limited 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.
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 10.8% of total investments as at 31 March 2022 (8.4% of total
investments as at 31 March 2022).
3.
INVESTMENT AND OTHER INCOME
Year to 31 March
Investment income
Dividends*
Interest
Total investment income
Other income
Bank interest
Total income
Revenue
£’000s
Capital
£’000s
22,671
1,627
24,298
28
24,326
–
–
–
–
–
*Includes scrip dividends of £346,000 (2022: £948,000)
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
22,671
1,627
24,298
21,604
988
22,592
28
1
24,326
22,593
2022
Total
£’000s
21,604
988
22,592
1
22,593
–
–
–
–
–
4. MANAGEMENT AND ADMINISTRATION FEES
Year to 31 March
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
Payable to: ICM/ICMIM
– management, secretarial and
research fees
– performance fee adjustment in
respect of prior year
Administration fees
1,084
4,336
5,420
1,124
4,496
5,620
–
310
–
–
–
310
1,394
4,336
5,730
–
327
1,451
(256)
–
4,240
(256)
327
5,691
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.
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, payable quarterly in arrears. The management fee is allocated 80% to capital return and 20% to revenue return. The
investment management agreement may be terminated upon six months’ notice.
ICMIM also provides company secretarial services to the Company, with the Company paying £70,000 (31 March 2022: £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 and 20% to revenue return.
JPMorgan Chase Bank N.A. – London Branch has been appointed Administrator and ICMIM has appointed Waverton to provide
certain support services (including middle office, market dealing and information technology support services).
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 55 to 57)
Travel expenses
Professional fees
Sundry expenses
2023
Revenue
£’000s
Capital
£’000s
Total
£’000s
Revenue
£’000s
Capital
£’000s
111
109
549
129
225
215
48
265
1,651
–
–
–
–
–
–
–
–
–
111
109
549
129
225
215
48
265
86
128
648
138
210
5
118
257
1,651
1,590
–
–
–
–
–
–
–
–
–
2022
Total
£’000s
86
128
648
138
210
5
118
257
1,590
All expenses are stated gross of irrecoverable VAT, where applicable.
(1)
Total auditor’s remuneration for audit services, exclusive of VAT, amounted to £110,000, £100,000 for the year to 31 March 2023 and £10,000 for
additional audit costs for the year to 31 March 2022 (2022: £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).
74
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
75
NOTES TO THE ACCOUNTS (continued)
6. FINANCE COSTS
Year to 31 March
2023
Revenue
£’000s
Capital
£’000s
Total
£’000s
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
On loans and bank overdrafts
169
674
843
119
469
588
8. EARNINGS PER SHARE
Year to 31 March
Revenue return
Capital return
Total return
7. TAXATION
(a) Analysis of charge in the year :
Year to 31 March
2023
Tax on ordinary activities
UK corporation tax at 19.0% (2022: 19.0%)
Overseas tax suffered
Capital gains tax
Deferred tax (see note 14)
Total tax charge for the year
Revenue
£’000s
Capital
£’000s
Total
£’000s
Revenue
£’000s
Capital
£’000s
–
1,638
–
–
1,638
–
–
58
(270)
(212)
–
–
1,638
1,500
58
(270)
1,426
–
–
–
–
822
366
1,500
1,188
2,688
2022
Total
£’000s
–
1,500
822
366
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
2023
Revenue
£’000s
Capital
£’000s
Total
£’000s
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
Net profit/(loss) before taxation
Corporation tax at 19.0%
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
Movement in tax losses that no deferred tax asset is
recognised on
Capital gains tax
Total tax charge for the year
21,112
(13,914)
4,011
(2,644)
7,198
1,367
19,433
54,917
74,350
3,692
10,434
14,126
(3,607)
–
(3,607)
(3,476)
–
(3,476)
–
1,692
1,638
–
–
–
–
–
1,692
1,638
–
–
(265)
187
(78)
(139)
–
1,638
765
(212)
(212)
626
(212)
1,426
–
(11,329)
(11,329)
1,500
694
(895)
(15)
–
–
1,500
–
–
895
–
–
1,188
1,188
1,500
694
–
(15)
–
1,188
2,688
As at 31 March 2023, the Company had net surplus management expenses of £23,253,000 (2022: £19,957,000) and a non-trade
loan relationship deficit of £299,000 (2022: £299,000), giving total unutilised tax losses of £23,552,000 (2022: £20,256,000). A
deferred tax asset has not been recognised in respect of these tax losses because the Company is not expected to generate
taxable income in the future in excess of the deductible expenses of those future periods and, accordingly, it is unlikely that the
Company will be able to reduce future tax liabilities through the use of the existing management expenses and non-trade loan
relationship deficit. The Company has an unrecognised deferred tax asset of £5.9m as at 31 March 2023 (2022: £5.0m) based on
the corporation tax rate of 25% which took effect from 1 April 2023.
76
Utilico Emerging Markets Trust plc
2023
£’000s
19,474
(13,702)
5,772
Number
2022
£’000s
17,933
53,729
71,662
Number
Weighted average number of shares in issue during the year
207,220,648
219,416,396
Revenue return per share
Capital return per share
Total profit per share
9. DIVIDENDS
Year to 31 March
2021 Fourth quarterly dividend of 2.00p per share
2022 First quarterly dividend of 2.00p per share
2022 Second quarterly dividend of 2.00p per share
Record date
Payment date
04-Jun-21
03-Sep-21
03-Dec-21
23-Jun-21
24-Sep-21
17-Dec-21
2022 Third quarterly dividend of 2.00p per share
04-Mar-22
25-Mar-22
2022 Fourth quarterly dividend of 2.00p per share
2023 First quarterly dividend of 2.00p per share
2023 Second quarterly dividend of 2.15p per share
06-Jun-22
02-Sep-22
02-Dec-22
24-Jun-22
23-Sep-22
16-Dec-22
2023 Third quarterly dividend of 2.15p per share
03-Mar-23
24-Mar-23
Pence
9.40
(6.61)
2.79
2023
£’000s
–
–
–
–
4,250
4,164
4,384
4,357
17,155
Pence
8.17
24.49
32.66
2022
£’000s
4,415
4,393
4,385
4,351
–
–
–
–
17,544
The Directors have declared a fourth quarterly dividend in respect of the year ended 31 March 2023 of 2.15p per share payable on
23 June 2023 to shareholders on the register at close of business on 2 June 2023. The total cost of the dividend, which has not been
accrued in the results for the year to 31 March 2023, is £4,334,000 based on 201,579,356 shares in issue at the record date, see note
16 for changes in share capital.
10. INVESTMENTS
Year to 31 March
Cost of investments brought forward
Net unrealised profits/(losses) brought forward
Valuation brought forward
Purchases at cost
Sales proceeds
(Losses)/profits on investments
Valuation as at 31 March
Analysed as at 31 March
Cost of investments
Net unrealised gains on investments
Valuation
2023
£’000s
523,644
48,042
571,686
108,938
(126,638)
(8,329)
545,657
491,177
54,480
545,657
2022
£’000s
576,074
(10,323)
565,751
124,508
(176,916)
58,343
571,686
523,644
48,042
571,686
The Company received £126,638,000 (2022: £176,916,000) from investments sold in the year. The book cost of these investments
when they were purchased was £141,405,000 (2022: £176,938,000). 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.
Report and Accounts for the year to 31 March 2023
77
NOTES TO THE ACCOUNTS (continued)
Year to 31 March
Gains/(losses) on investments
Net loss on investments sold
Other capital charges
Movement in unrealised gains
Total (losses)/gains on investments
Subsidiary undertakings
2023
£'000
(14,767)
(60)
6,438
(8,389)
2022
£'000
(22)
(50)
58,365
58,293
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 2023 and as at 31 March 2022, 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
2023
Fair
value
£’000s
1,498
–
2022
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.
Associated undertakings
Under IFRS 10 Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities, the following associated
undertakings as at 31 March 2023 and 31 March 2022 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%
10,725
28.6%
62,874
36.7%
Transactions with associated undertaking were as follows:
East Balkan Properties plc ("East Balkan")
During the year the Company received £1,303,000 from East Balkan Properties plc by way of a capital return.
Petalite Limited (“Petalite”)
During the year the Company participated in an equity raise in Petalite, in which it invested £1.25m. At that time, the Company
also converted its £1,000,000 investment of 10% convertible loan note into equity and the Company received loan interest of
£131,000. At the year end the Company held 10,725 equity shares and continued to hold 29.4% of the undiluted shareholding of
Petalite (31 March 2022: 29.4%). Factoring in dilutive options the Company's stake in Petalite is 28.6%.
Pitch Hero Holdings Limited (“Pitch Hero”)
Pursuant to a loan agreement dated 1 March 2021 under which UEM has agreed to loan monies to Pitch Hero, UEM advanced to
Pitch Hero a loan of £300,000. As at 31 March 2023, the balance of the loan and interest outstanding was £470,000 (31 March
2022: £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
Korean Internet Neutral Exchange Inc.
South Korea
Orizon Valorizacao De Residuos S.A.
Brazil
Telelink Business Services Group
Umeme Limited
Bulgaria
Uganda
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
11. OTHER RECEIVABLES
Accrued income
Sales for future settlement
Overseas tax recoverable
Other debtors
12. OTHER PAYABLES
Bank overdraft
Interest payable
Other creditors and accruals
Purchases awaiting settlement
13. BANK LOANS
– CURRENT LIABILITIES
EUR 12.0m repayable March 2024
GBP 10.0m repayable March 2024
USD 18.0m repayable March 2024
– NON-CURRENT LIABILITIES
EUR 28.0m repayable March 2024
2023
% of class of
instruments
held
2022
% of class of
instruments
held
5.6
3.9
13.9
8.4
4.8
2.6
13.9
8.4
2023
£’000s
2022
£’000s
796
548
24
76
796
607
29
45
1,444
1,477
2023
£’000s
1,482
221
1,758
–
3,461
2023
£’000s
10,544
10,000
14,558
35,102
2023
£’000s
–
2022
£’000s
652
24
1,834
289
2,799
2022
£’000s
–
–
–
–
2022
£’000s
23,662
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.
78
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
79
NOTES TO THE ACCOUNTS (continued)
14. PROVISION FOR CAPITAL GAINS TAX
20. CAPITAL RESERVES
Balance brought forward
(Decrease)/increase in provision for Indian tax on capital gains
Balance as at 31 March
2023
£’000s
1,890
(270)
1,620
2022
£’000s
1,524
366
1,890
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
214,744,067
(12,531,811)
202,212,256
2023
£'000
2,148
(125)
2,023
Number
221,273,374
(6,529,307)
214,744,067
2022
£'000
2,213
(65)
2,148
During the year the Company bought back for cancellation 12,531,811 (2022: 6,529,307) ordinary shares at a total cost of
£27,159,000 (2022: £13,898,000). A further 740,789 ordinary shares have been purchased for cancellation at a total cost of
£1,661,000 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
2023
£’000s
76,706
2022
£’000s
76,706
2023
£’000s
2022
£’000s
197
125
322
132
65
197
2023
£’000s
459,736
(27,159)
432,577
2022
£’000s
473,634
(13,898)
459,736
Investment
holding
gains
£’000s
2023
Total
£’000s
Realised
£’000s
–
(14,767)
6,438
–
–
–
–
–
6,438
48,042
54,480
6,438
(515)
(674)
(4,336)
212
(60)
(13,702)
(139)
(13,841)
(22)
–
1,333
(469)
(4,240)
(1,188)
(50)
(4,636)
(43,545)
(48,181)
Realised
£’000s
(14,767)
–
(515)
(674)
(4,336)
212
(60)
(20,140)
(48,181)
(68,321)
Investment
holding
gains
£’000s
–
58,365
–
–
–
–
–
58,365
(10,323)
48,042
2022
Total
£’000s
(22)
58,365
1,333
(469)
(4,240)
(1,188)
(50)
53,729
(53,868)
(139)
Realised losses on investments
Unrealised gains on investments
Foreign exchange (losses)/gains
Finance costs charged to capital
Expenses charged to capital
Capital gains tax
Other capital charges
Balance brought forward
Balance as at 31 March
Included within the capital reserve movement for the year is £1,303,000 (2022: £3,975,000) of dividend receipts recognised as
capital in nature, £189,000 (2022: £169,000) of transaction costs on purchases of investments and £251,000 (2022: £436,000) of
transaction costs on sales of investments.
21. REVENUE RESERVE
Balance brought forward
Revenue profit for the year
Dividend paid in the year
Balance as at 31 March
22. NET ASSET VALUE PER SHARE
2023
£’000s
7,268
19,474
2022
£’000s
6,879
17,933
(17,155)
(17,544)
9,587
7,268
The net asset value per share is based on the net assets attributable to the equity shareholders of £507,374,000
(2022: £545,916,000) and on 202,212,256 (2022: 214,744,067) shares, being the number of shares in issue at the year end.
23. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
2023
Bank loans
Repurchase of shares for cancellation
Dividends paid
Balance as at
31 March 2022
£’000s
Transactions in
the year
£’000s
Net
cashflow
£’000s
Foreign
exchange loss
£’000s
Balance as at
31 March 2023
£’000s
23,662
–
–
23,662
–
27,159
17,155
44,314
10,945
(27,159)
(17,155)
(33,369)
495
–
–
495
35,102
–
–
35,102
80
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
81
NOTES TO THE ACCOUNTS (continued)
2022
Bank loans
Repurchase of shares for cancellation
Dividends paid
24. RELATED PARTY TRANSACTIONS
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
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.
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. In the
year, UEM(HK) Limited repaid £2,120,000 and £879,000 loan interest was capitalised and added to the balance of the loan. As at 31 March
2023 the fair value of the loan held with UEM (HK) Limited was £10,118,000 and loan interest accrued was £71,000. As at 31 March 2023,
the fair value of the equity holdings held in UEM(HK) Limited was £1,498,000 (2022: £nil). During the year the Company did not receive or
make payments to UEM Mauritius Holdings Limited.
There were no transactions between the associated undertakings and the Company other than transactions in the ordinary course of
UEM’s business and these are set out in note 10. As detailed in the Directors’ Remuneration Report on pages 55 to 57, the Board received
aggregate remuneration of £225,000 (31 March 2022: £210,000) included within “other expenses” for services as Directors. As at the year
end, £nil (31 March 2022: £nil) remained outstanding to the Directors. In addition to their fees, the Directors received dividends totalling
£45,000 (31 March 2022: £80,000) during the year under review in respect of their shareholdings in the Company. There were no further
transactions with the Board during the year.
There were no transactions with ICM or ICMIM other than investment management, secretarial costs, research fees as set out in note 4
and reimbursed expenses included within Other Expenses of £134,000 (31 March 2022: £60,000). As at the year end £1,330,000
(31 March 2022: £1,393,000) remained outstanding in respect of management, company secretarial and research fees.
Mr Jillings received dividends totalling £38,000 (31 March 2022: £27,000) and UIL Limited received dividends totalling £2,051,000
(31 March 2022: £2,831,000). There were no transactions with Mr Saville in the year.
25. GOING CONCERN
Notwithstanding that the Company has reported net current liabilities of £36,663,000 as at 31 March 2023 (31 March 2022:
£218,000), the financial statements have been prepared on a going concern basis which the Directors consider to be appropriate
for the following reasons. The Board’s going concern assessment has focused on the forecast liquidity of the 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 its short-term obligations through the sale of listed securities, which represented 89.2% of the Company’s total
portfolio as at 31 March 2023. As part of this assessment the Board has considered a severe but plausible downside that reflects
the impact of the Company’s key risks 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.
As at the year end, the Company had a £50m multicurrency loan facility with Bank of Nova Scotia expiring on 15 March 2024.
Drawdowns under the facility are detailed in note 13. The Company will either extend or replace the facility or repay the
outstanding debt when due from portfolio realisations. 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.
Currency exposure
The principal currencies to which the Company was exposed during the year are set out below (2022: Brazilian Real, Hong Kong
Dollar, Indian Rupee, South Korean Won, Phillipine Peso and United States Dollar) . 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
MXN Mexican Peso
PHP
Philippine Peso
USD United States Dollar
2023
Average
6.2691
9.7061
101.6145
22.3253
67.2196
1.2364
6.2078
9.4513
96.7972
23.7016
66.6092
1.2058
2022
6.2567
10.3112
99.7692
26.2566
68.1301
1.3166
The Company’s assets and liabilities as at 31 March (shown at fair value, except derivatives at gross exposure value), by currency
based on the country of primary exposure, are shown below:
2023
Current assets
Creditors
Foreign currency exposure on net monetary items
BRL
£’000s
HKD
£’000s
INR
£’000s
MXN
£’000s
PHP
£’000s
USD
£’000s
Other
£’000s
Total
£’000s
141
–
141
–
165
–
(1,621)
–
(1,456)
–
–
–
21
(1,060)
405
(328)
–
(91)
(35,168)
(36,880)
21
(1,151)
(34,763)
(37,208)
Investments
109,417
59,737
56,669
29,267
26,584
35,623 169,234 486,531
Total net foreign currency exposure
109,558
59,737
55,213
29,267
26,605
34,472 134,471 449,323
Percentage of net exposures (%)
24.4
13.3
12.3
6.5
5.9
7.7
29.9
100.0
82
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
83
NOTES TO THE ACCOUNTS (continued)
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
Total net foreign currency exposure
110,018
69,722 64,484
31,467
26,510
27,499 161,211 490,911
Percentage of net exposures (%)
22.4
14.2
13.1
6.4
5.4
5.6
32.9
100.0
Based on the financial assets and liabilities held, and exchange rates applying, at the Statement of Financial Position date, a
weakening or strengthening of Sterling against each of these currencies by 10% would have had the following approximate effect
on annualised income after tax and on NAV per share:
Weakening of
Sterling
BRL
£’000s
HKD
£’000s
INR
£’000s
MXN
£’000s
PHP
£’000s
USD
£’000s
BRL
£’000s
HKD
£’000s
INR
£’000s
KRW
£’000s
PHP
£’000s
USD
£’000s
2023
2022
Statement of Comprehensive Income return after tax
Revenue return
518
252
432
116
139
–
266
222
441
64
–
–
Capital return
12,157
6,637
6,297
3,252
2,954
3,958
12,204
7,747
7,150
3,447
2,946
3,117
Total return
12,675
6,889
6,729
3,368
3,093
3,958
12,470
7,969
7,591
3,511
2,946
3,117
NAV per share
Basic – pence
6.12
3.32
3.25
1.63
1.49
1.91
5.68
3.63
3.46
1.60
1.40
1.42
Strengthening of
Sterling
BRL
£’000s
HKD
£’000s
INR
£’000s
MXN
£’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
(518)
(252)
(432)
(116)
(139)
–
(266)
(222)
(441)
(64)
–
–
Capital return
(12,157)
(6,637)
(6,297)
(3,252)
(2,954)
(3,958)
(12,204)
(7,747)
(7,150)
(3,447)
(2,946)
(3,117)
Total return
(12,675)
(6,889)
(6,729)
(3,368)
(3,093)
(3,958)
(12,470)
(7,969)
(7,591)
(3,511)
(2,946)
(3,117)
NAV per share
Basic – pence
(6.12)
(3.32)
(3.25)
(1.63)
(1.49)
(1.91)
(5.68)
(3.63)
(3.46)
(1.60)
(1.40)
(1.42)
Interest rate exposure
Exposure to floating rates
Cash
Bank overdrafts
Loans
Within
one year
£’000s
More than
one year
£’000s
456
(1,482)
(35,102)
(36,128)
–
–
–
–
2023
Total
£’000s
456
(1,482)
(35,102)
(36,128)
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)
Exposures vary throughout the year as a consequence of changes in the make-up of the net assets of the Company arising out of
the investment and risk management processes. Interest received on cash balances or paid on overdrafts and loans is at ruling
market rates. The Company’s total returns and net assets are sensitive to changes in interest rates on cash and borrowings.
Based on the financial assets and liabilities held and the interest rates pertaining at each Statement of Financial Position date,
a relative decrease or increase in market interest rates by 2% would have had the following approximate effects on the income
statement revenue and capital returns after tax and on the NAV per share.
Revenue return
Capital return
Net assets
Other market risk exposures
2% increase
in rate
£’000s
2023
2% decrease
in rate
£’000s
2% increase
in rate
£’000s
2022
2% decrease
in rate
£’000s
(161)
(562)
(723)
161
562
723
(86)
(379)
(465)
86
379
465
The portfolio of investments, valued at £545,657,000 as at 31 March 2023 (2022: £571,686,000) is exposed to market price
changes.
Based on the portfolio of investments at the Statement of Financial Position date and assuming other factors remain constant, a
decrease or increase in the fair values of the portfolio by 20% would have had the following approximate effects on the Statement
of Comprehensive Income capital return after tax and on the basic NAV per share:
Statement of Comprehensive Income capital return £’000s
108,564
(108,564)
113,743
(113,743)
Increase
in value
2023
Decrease in
value
Increase
in value
2022
Decrease in
value
NAV per share
Basic – pence
(b) Liquidity risk exposure
53.69
(53.69)
52.97
(52.97)
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 £486,694,000 as at 31 March 2023); and the existence of the Bank of Nova Scotia, London
Branch loan facility agreement expiring on 15 March 2024.
Cash balances are held with reputable banks with high quality external credit ratings.
The Investment Managers review liquidity at the time of making each investment decision. The Board reviews liquidity exposure
at each meeting. The Company 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:
2023
Creditors:
Bank overdrafts
Bank loans and interest
Other payables
Three
months
or less
£’000
More than three
months but less
than one year
£’000
More than
one year
£’000
1,482
690
428
2,600
–
36,458
–
36,458
–
–
–
–
Total
£’000
1,482
37,148
428
39,058
84
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
85
NOTES TO THE ACCOUNTS (continued)
2022
Creditors:
Bank overdrafts
Bank loans and interest
Other payables
Three
months
or less
£’000
More than three
months but less
than one year
£’000
More than
one year
£’000
652
112
730
1,494
–
267
–
267
–
24,002
–
24,002
Total
£’000
652
24,381
730
25,763
(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, or listed peer comparison or peer group multiple 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.
In assessing the level of reasonably possible outcomes consideration was also given to the impact on valuations of the increased
level of volatility in equity markets since early 2022, principally reflecting concerns about increasing rates of inflation, tightening
energy supplies, rising interest rates and the Ukraine war. 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.
For each unlisted holding valued over £5.0m, the significant valuation inputs have been sensitised by a percentage deemed to
reflect the relative degree of estimation uncertainty.
The following table shows the sensitivity of the fair value of level 3 financial investments to changes in key assumptions.
Investment
type
Valuation
methodology
Risk
weighting
Sensitivity
+/-
Carrying
amount
£’000s
Sensitivity
£’000s
UEM (HK) Limited
Equity/Loan
NAV
Equity
Last funding
round
Equity
Equity
Equity
Last funding
round
Various
Various
Discounted cash
flows
Loans
High
Low
Medium
Medium
Low
Medium
50%
10%
20%
20%
10%
20%
28,607
11,615
7,877
5,956
4,187
450
58,692
Carrying
amount
£’000s
17,621
12,543
7,267
6,547
3,632
350
150
14,304
1,162
1,575
1,191
419
90
18,741
Sensitivity
£’000s
7,048
1,254
1,453
1,309
363
105
45
48,110
11,577
Investment
type
Valuation
methodology
Risk
weighting
Sensitivity
+/-
Equity
Loan
Equity
Equity
Equity
Equity
Loans
Milestone
analysis
NAV
Last funding
round
Various
Various
Last funding
round
Various
High
Low
Medium
Medium
Low
High
High
40%
10%
20%
20%
10%
30%
30%
As at 31 March 2023
Investment
Petalite
Conversant Pte Ltd
Other investments
Other investments
Other investments
Total
As at 31 March 2022
Investment
Petalite
UEM (HK) Limited
Conversant Pte Ltd
Other investments
Other investments
Other investments
Other investments
Total
86
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
87
NOTES TO THE ACCOUNTS (continued)
Petalite
27. FAIR VALUE HIERARCHY
UEM holds 10,725 ordinary shares in Petalite and, as at 31 March 2023, carried this investment at £28.6m. The cost of this
investment was £2.8m (2022: £1.5m).
Valuation Methodology: Petalite has been valued based on the most recent equity fundraising event that occurred in June
2022. Petalite is an unlisted early stage company based in the UK. Petalite has developed an innovative electric vehicle charging
technology which offers greater reliability and efficiency than is currently available in the market, filing its first patent application
in 2016. Petalite has validated the technology with certification of the Power Core modular unit. In the period since the last
fundraising, Petalite has progressed satisfactorily and has established a go-to-market strategy to commercialise its technology
in the coming year. While the Directors consider that the last fundraise price remains representative of fair value as at 31 March
2023, Petalite’s fair value has been given a sensitivity of 50% (2022: 40%) reflecting the high level of uncertainty due to the length
of time since the last fundraise and the fact that the company remains pre-revenue. As Petalite has yet to commercialise its
technology and is pre-revenue it remains reliant on external funding.
Key valuation inputs: Most recent fundraise price of £2,667 per ordinary share. A triangulation exercise utilising Petalite's peer
multiples has been carried out to support this valuation.
Sensitivities: Should the value of Petalite move by 50% the gain or loss would be £14.3m.
UEM (HK) Limited
Valuation methodology: UEM (HK) Limited holds CGN Capital Partners Infra Fund 3 ("CGN"). The Company has used CGN’s
NAV and carried its investment at £11.6m as at 31 March 2023 (2022: £12.5m). The cost of this investment was £8.7m
(2022: £9.4m). CGN is a Chinese wind and solar farm developer and operator in mainland China and its NAV was valued using
valuation techniques consistent with IFRS and is subject to annual audit. CGN’s financial assets at fair value are all unlisted
equity investments, with fair value estimated by the method of discounted cash flow and these investments have been given a
sensitivity of 10% (2022: 10%) to reflect a degree of uncertainty over the managers valuations.
Key valuation inputs: Market value for portfolio of investments.
Sensitivities: Should the value of UEM (HK) Limited move by 10% the gain or loss would be £1.2m.
Conversant Pte Ltd (“Conversant”)
The Company holds 2,158,246 ordinary shares in Conversant and, as at 31 March 2023, carried this investment at £7.9m. The cost
of this investment was £4.7m (2022: £4.7m).
Valuation Methodology: Conversant has been valued based on the most recent equity fundraising event that occurred in June
2022. Conversant is a Singapore incorporated content delivery network provider primarily for delivery of media as well as security
for both websites and media delivery. Conversant has performed satisfactorily and its revenues have increased in the period
since the last fundraising. While the Directors consider that the last fundraise price remains representative of fair value as at
31 March 2023, Conversant’s fair value has been given a sensitivity of 20% (2022: 20%) to reflect a level of uncertainty due to the
length of time since the last fundraise.
Key valuation inputs: Most recent fundraise price of SGD 6.00 per ordinary share.
Sensitivities: Should the value of Conversant move by 20% the gain or loss would be £1.6m.
(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.
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 2023
Investments
As at 31 March 2022
Investments
Level 1
£’000
483,146
Level 1
£’000
519,853
Level 2
£’000
3,818
Level 2
£’000
3,723
Level 3
£’000
58,693
Level 3
£’000
48,110
Total
£’000
545,657
Total
£’000
571,686
2022: 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.
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
Gains/(losses) on investments sold in the year
Gains on investments held at end of year
Balance as at 31 March
Analysed as at 31 March
Cost of investments
Gains on investments
Valuation
2023
£’000
48,110
–
3,691
(4,423)
1,760
9,555
58,693
29,484
29,209
58,693
2022
£’000
20,869
(828)
7,205
(255)
(1,764)
22,883
48,110
28,456
19,654
48,110
88
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
89
OTHER FINANCIAL INFORMATION (UNAUDITED)
NOTICE OF ANNUAL GENERAL MEETING
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 https://www.icm.limited/icm-investment-management.
The Company’s maximum and actual leverage as at 31 March are shown below
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, 19 September 2023 at 10.00 a.m. for
the purpose of considering and, if thought fit, passing the following resolutions (which will be proposed in the case of
resolutions 1 to 10, as ordinary resolutions and, in the case of resolutions 11 and 12, as special resolutions).
2023
ORDINARY BUSINESS
Leverage
exposure
Maximum permitted limit
Actual
Leverage
exposure
Maximum permitted limit
Actual
Gross
method
Commitment
method
300%
107%
300%
107%
2022
Gross
method
Commitment
method
300%
105%
300%
105%
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.
SECURITIES FINANCING TRANSACTIONS (“SFT”)
The Company has not, in the years to 31 March 2023 and 31 March 2022, 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.
1. To receive and adopt the report of the Directors of the Company and the financial statements for the year ended
31 March 2023, together with the report of the auditor thereon.
2. To approve the Directors’ Remuneration Report for the year ended 31 March 2023.
3. To approve the Company’s dividend policy to pay four interim dividends per year.
4. To re-elect Mr John Rennocks as a Director.
5. To re-elect Mr Mark Bridgeman as a Director.
6. To re-elect Ms Isabel Liu as a Director.
7.
To re-elect Mr Eric Stobart as a Director.
8. To re-appoint KPMG LLP as auditor to the Company to hold office until the conclusion of the next Annual General
Meeting of the Company.
9. To authorise the Directors to determine the auditor’s remuneration.
SPECIAL BUSINESS
Ordinary resolution
10. That, 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 £201,470 (being 10% 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 2024 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
11. That, in substitution for all existing authorities and subject to the passing of resolution 10, 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 10, 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)
shall expire at the conclusion of the next Annual General Meeting of the Company to be held in 2024, 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;
90
90
Utilico Emerging Markets Trust plc
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
Report and Accounts for the year to 31 March 2023
91
91
NOTICE OF ANNUAL GENERAL MEETING (continued)
(b)
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 £201,470 (representing 10% 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.
12. 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 30,200,000 (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 2024 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
16 June 2023
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 10:00 a.m. on 15 September
2023. 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 10:00 a.m. on 15 September
2023. 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 in Notes 1 and 2
above concerning the appointment of a proxy or proxies to
attend the meeting in place of a member, do not apply to a
Nominated Person as only ordinary shareholders have the
right to appoint a proxy. However, a Nominated Person may
have a right under an agreement between the Nominated
Person and the member by whom he or she was nominated
to be 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.
8. Shareholders who hold their shares electronically may
submit their votes through CREST, by submitting the
appropriate and authenticated CREST message so as to
be received by the Company’s registrar not later than
10:00 a.m. on 15 September 2023. Instructions on how to
vote through CREST can be found by accessing the CREST
manual via www.euroclear.com. Shareholders are advised
that CREST and the internet are the only methods by which
completed proxies can be submitted electronically.
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 previously
appointed or otherwise) via the CREST system, CREST
messages must be received by Computershare (ID number
3RA50) not later than 10:00 a.m. on 15 September 2023.
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.
92
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
93
NOTICE OF ANNUAL GENERAL MEETING (continued)
COMPANY INFORMATION
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 may
be asked at the meeting by anyone permitted to speak
at the meeting. A shareholder may alternatively submit a
question in advance by a letter addressed to the Company
Secretary at the Company’s registered office. Under
section 319A of the Companies Act 2006, the Company
must answer any question a shareholder asks relating to
the business being dealt with at the meeting, unless (i)
answering the question would interfere unduly with the
preparation for the meeting or involve the disclosure of
confidential information; (ii) the answer has already been
given on a website in the form of an answer to a question;
or (iii) it is undesirable in the interests of the Company
or the good order of the meeting that the question be
answered.
12. Any corporation which is a member can appoint one or
more corporate representatives who may exercise on its
behalf all of its powers as a member provided that, if it is
appointing more than one corporate representative, it does
not do so in relation to the same shares.
13. Under section 527 of the Companies Act 2006, members
meeting the threshold requirements set out in that section
have the right to require the Company to publish on a
website a statement setting out any matter relating to: (i)
the audit of the Company’s accounts (including the auditor’s
report and the conduct of the audit) that are to be laid
before the meeting; or (ii) any circumstance connected with
an auditor of the Company ceasing to hold office since the
previous meeting at which annual 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 complying
with sections 527 or 528 of the Companies 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 2023 (being the last practicable date prior
to the publication of this Notice of Annual General
Meeting), the Company’s issued share capital consisted of
201,471,467 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 Notice are 201,471,467.
15. Further information regarding the meeting which the
Company is required by section 311A of the Companies Act
2006 to publish on a website in advance of the meeting, can
be accessed at www.uemtrust.co.uk.
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.
17. Copies of the letters of the appointment and deeds of
indemnity between the Company and the Directors, a
copy of the Articles of Association of the Company and
the register of the Directors’ holdings will be available for
inspection at the registered office of the Company 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.
18. Under sections 338 and 338A of the Companies 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 or
otherwise);
(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 7 August
2023 (being the date six clear weeks before the meeting)
and, in the case of a matter to be included in the business
only, must be accompanied by a statement setting out the
grounds for the request.
19. Any electronic address provided either in this Notice or in
any related documents (including the form of proxy) may
not be used to communicate with the Company for any
purpose other than those expressly stated.
DIRECTORS
John Rennocks (Chairman)
Mark Bridgeman
Susan Hansen
Isabel Liu
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
BROKERS
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
Barclays Bank PLC
1 Churchill Place
London E14 5HP
Authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation 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 in the UK by the Prudential Regulation Authority and
regulated by the Financial Conduct Authority and the Prudential
Regulation Authority
PUBLIC RELATIONS
Montford Communications Limited
2nd Floor, Berkeley Square House
Berkeley Square
Mayfair
London W1J 6BD
Telephone + 44 (0)20 7887 6287
94
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
95
ALTERNATIVE PERFORMANCE MEASURES
The European Securities and Markets Authority defines an Alternative Performance Measure as being a financial
measure of historical or future financial performance, financial position or cash flows, other than a financial measure
defined or specified in the applicable financial reporting framework. The Company uses the following Alternative
Performance Measures:
Discount/Premium – if the share price is lower than the NAV per share, the shares are trading at a discount.
Shares trading at a price above NAV per share are said to be at a premium. As at 31 March 2023 the share price
was 217.00p (2022: 224.00p) and the NAV per share was 250.91p (2022: 254.22p), the discount was therefore 13.5%
(2022: 11.9%).
Gearing – represents the ratio of the borrowings less cash of the Company to its net assets.
Year to 31 March
Bank overdrafts
Bank loans
Cash
Total debt
Equity holders' funds
Gearing (%)
Page
79
70
70
70
2023
£’000s
1,482
35,102
(456)
36,128
507,374
7.1
2022
£’000s
652
23,662
(1,104)
23,210
545,916
4.3
NAV per share – the value of the Company’s net assets divided by the number of shares in issue (see note 22 to
the accounts).
NAV/share price total return – the return to shareholders calculated on a per share basis by adding dividends
paid in the year to the increase or decrease in the NAV or share price in the year. The dividends are assumed to have
been re-invested in the form of net assets or shares, respectively, on the date on which the dividends were paid.
Year to 31 March 2023
31 March 2022
24 June 2022
23 September 2022
16 December 2022
24 March 2023
31 March 2023
Total return (%)
Year to 31 March 2022
31 March 2021
23 June 2021
24 September 2021
17 December 2021
25 March 2022
31 March 2022
Total return (%)
Dividend rate
(pence)
NAV
(pence)
Share price
(pence)
n/a
2.00
2.00
2.15
2.15
n/a
254.22
238.47
260.38
234.69
246.23
250.91
2.1
224.00
208.00
221.00
204.00
210.00
217.00
0.8
Dividend rate
(pence)
NAV
(pence)
Share price
(pence)
n/a
2.000
2.000
2.000
2.000
n/a
228.54
250.93
248.92
243.91
247.03
254.22
14.9
197.50
224.00
220.00
216.00
214.00
224.00
17.6
NAV/share price total return since inception – the return to shareholders calculated on a per share basis by
adding dividends paid in the year and adjusting for the exercise of warrants and subscription shares in the year to
the increase or decrease in the NAV/share price in the year. The dividends are assumed to have been re-invested in
the form of net assets on the date on which the dividends were paid. The adjustment for the exercise of warrants
and subscription shares is made on the date the warrants and subscription shares were exercised.
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 2023
Share price
31 March 2023
NAV
31 March 2022
Share price
31 March 2022
98.36
100.00
98.36
100.00
1.88776
250.91
473.66
381.6
1.98031
217.00
429.73
329.7
1.82499
254.22
463.95
371.7
1.90409
224.00
426.52
326.5
(1)
Date of admission to trading on the Alternative Investment Market of UEM Limited.
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 2023
31 March 2022
9.3
9.7
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 (%)
Page
68
68
31 March 2023
£’000s
31 March 2022
£’000s
5,730
1,651
7,381
5,947
1,590
7,537
512,080
532,661
1.4
1.4
96
Utilico Emerging Markets Trust plc
Report and Accounts for the year to 31 March 2023
97
HISTORICAL PERFORMANCE
as at 31 March
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
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)
2.1
14.9
30.2
(24.9)
3.5
6.6
26.2
1.7
12.4
(3.4)
20.9
0.8
9.3
17.6
27.3
(23.2)
5.4
7.1
24.9
(1.8)
8.2
(2.6)
20.8
9.7
9.4
8.1
11.0
11.7
12.1
10.9
11.9
11.8
13.9
250.91
254.22
228.54
181.84
249.84
247.22 251.72
206.45
209.79
192.38
205.49
250.91(2) 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)
Ordinary share price (pence) 217.00
224.00
197.50
161.50
217.90
212.00 214.50
178.50
188.50
180.00
191.20
Discount(3) (%)
Earnings per ordinary
share (basic)
(13.5)
(11.9)
(13.6)
(11.2)
(12.8)
(14.2)
(11.1)
(11.9)
(10.1)
(6.4)
(7.0)
- Capital (pence)
(6.61)
24.49
45.73
(68.29)
(0.12)
4.66
44.46
(5.50)
18.53
(12.13)
30.71
- Revenue (pence)
Total (pence)
Dividends per ordinary
share (pence)
Gross assets(4) (£m)
9.40
2.79
8.17
8.13
7.88
7.47
9.27
7.80
8.23
4.98
4.80
5.20
32.66
53.86
(60.41)
7.35
13.93
52.26
2.73
23.51
(7.33)
35.91
8.450
8.000
7.775
7.575
7.200
7.000
6.650
6.400
6.100
6.100
5.800
542.5
569.6
556.1
461.4
581.9
579.8
579.0
455.2
479.2
433.4
452.1
Equity holders’ funds (£m)
507.4
545.9
505.7
414.3
574.2
579.8
532.2
436.6
447.4
410.2
442.9
Ordinary shares bought
back (£m)
27.2
13.9
12.1
4.8
9.5
21.9
10.0
3.0
–
3.9
–
Net (overdraft)/cash (£m)
(1.0)
0.5
(3.2)
39.5
11.7
8.1
15.3
12.6
0.5
(0.9)
2.6
Bank loans (£m)
(35.1)
(23.7)
(50.4)
(47.1)
(7.8)
0.0
(46.8)
(18.7)
(31.9)
(23.1)
(9.2)
Net (debt)/cash (£m)
(36.1)
(23.2)
(53.6)
(7.6)
3.9
8.1
(31.5)
(6.1)
(31.4)
(24.0)
(6.6)
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 (%)
- including performance
fee (%)
(7.1)
(4.3)
(10.6)
(1.8)
0.7
1.4
(5.9)
(1.4)
(7.0)
(5.9)
(1.5)
7.4
7.4
1.4(5)
1.4(5)
7.3
5.0
6.4
7.3
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
7.7
3.7
12.9
1.4(5)
1.4(5)
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
(1)
(2)
(3)
(4)
(5)
See Alternative Performance Measures on pages 96 and 97
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
98
Utilico Emerging Markets Trust plc
EMERGING CITIES | EMERGING WEALTH | EMERGING OPPORTUNITIES
UK CONTACT
PO Box 208
Epsom Surrey
KT18 7YF
Telephone: +44 (0)1372 271486
www.uemtrust.co.uk