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
Utilico Emerging Markets Trust plc is a unique UK listed fund focused on global infrastructure megatrends in emerging markets.
infrastructure, utility and related sectors, mainly in emerging markets.
TRUSTED | DIVERSIFIED | PROVEN |
A closed end fund | A diverse portfolio of | Strong management team |
focused on long-term | operational cash | with a long-term record |
total return | generative investments | of outperformance |
UNIQUE EXPOSURE
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.
EXPERIENCED MANAGEMENT
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
-
Current Year Performance
5 Performance Summary
- Chairman's Statement
- Geographical Investment Exposure
- Top Thirty Companies
- Performance Since Inception (20 July 2005)
- Ten Year Performance
STRATEGIC REPORT AND INVESTMENTS
15 Investment Managers' Report
- Megatrends Driving Upside in Emerging Markets
- Our Investment Approach
- ESG Spotlight
- Largest Holdings Overview
- Strategic Report
- Investment Managers and Team
GOVERNANCE
- Directors
- Directors' Report
- Corporate Governance Statement
- Directors' Remuneration Report
- Audit & Risk Committee Report
- Directors' Statement of Responsibilities
FINANCIAL STATEMENTS
- Independent Auditor's Report
- Accounts
- Notes to the Accounts
ADDITIONAL INFORMATION
- Notice of Annual General Meeting
- Company Information
- Alternative Performance Measures
- 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 | SHARE PRICE TOTAL | REVENUE EARNINGS | DIVIDENDS OF 8.45P |
("NAV") TOTAL RETURN | RETURN PER SHARE* | OF 9.40P PER SHARE | PER SHARE |
PER SHARE* |
2.1% | 0.8% | 15.1% | 5.6% |
(2022: 14.9%) | (2022: 17.6%) | (2022: 0.5%) | (2022: 2.9%) |
* See Alternative Performance Measures on pages 96 and 97
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
NAV TOTAL RETURN | SHARE PRICE | NAV OF 250.91P | SHARE PRICE |
PER SHARE* | TOTAL RETURN | PER SHARE* | OF 217.00P |
PER SHARE* |
2.1% | 0.8% | 1.3% | 3.1% |
(2022: 14.9%) | (2022: 17.6%) | (2022: 11.2%) | (2022: 13.4%) |
DIVIDENDS OF 8.45P | DIVIDENDS PAID | INVESTED | REALISED |
PER SHARE |
5.6% | £17.2m | £108.9m | £126.6m |
(2022: 2.9%) | (2022: £17.5m) | (2022: £124.5m) | (2022: £176.9m) |
12.5M SHARES | TOTAL REVENUE | ONGOING CHARGES* | NET DEBT |
BOUGHT BACK | RETURN INCOME | INCREASED TO |
£27.2m | £24.3m | 1.4% | £36.1m |
(2022: £13.9m) | (2022: £22.6m) | (2022: 1.4%) | (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
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 | |
NAV total return per share | MSCI Emerging Markets total return Index (GBP adjusted) | ||||||||||||
(1) Rebased to 100 as at 31 March 2022 | Source: ICM and Bloomberg |
4 Utilico Emerging Markets Trust plc
PERFORMANCE SUMMARY
31 March | 31 March | % change | |
2023 | 2022 | 2023/22 | |
NAV total return per share(1) (annual) (%) | 2.1 | 14.9 | n/a |
Share price total return per share(1) (annual) (%) | 0.8 | 17.6 | n/a |
Annual compound NAV total return(1) (since inception - 20 July 2005) (%) | 9.3 | 9.7 | n/a |
NAV per share(1) (pence) | 250.91 | 254.22 | (1.3) |
Share price (pence) | 217.00 | 224.00 | (3.1) |
Discount(1) (%) | (13.5) | (11.9) | n/a |
Earnings per share (basic) | |||
- Capital (pence) | (6.61) | 24.49 | (127.0) |
- Revenue (pence) | 9.40 | 8.17 | 15.1 |
Total (pence) | 2.79 | 32.66 | (91.5) |
Dividends per share | |||
- 1st quarter (pence) | 2.00 | 2.00 | 0.0 |
- 2nd quarter (pence) | 2.15 | 2.00 | 7.5 |
- 3rd quarter (pence) | 2.15 | 2.00 | 7.5 |
- 4th quarter (pence) | 2.15(2) | 2.00 | 7.5 |
Total (pence) | 8.45 | 8.00 | 5.6 |
Gross assets(3) (£m) | 542.5 | 569.6 | (4.8) |
Equity holders' funds (£m) | 507.4 | 545.9 | (7.1) |
Shares bought back (£m) | 27.2 | 13.9 | 95.7 |
Net (overdraft)/cash (£m) | (1.0) | 0.5 | (300.0) |
Bank loans (£m) | (35.1) | (23.7) | 48.1 |
Net debt (£m) | (36.1) | (23.2) | 55.6 |
Gearing(1) (%) | (7.1) | (4.3) | n/a |
Management and administration fees and other expenses | 7.4 | 7.3 | 1.4 |
Ongoing charges figure(1) | 1.4 | 1.4 | n/a |
- 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
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.
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
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.
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
INDICES MOVEMENTS
from 31 March 2022 to 31 March 2023
110 | ||||
100 | ||||
90 | ||||
80 | ||||
70 | ||||
60 | ||||
Mar | Jun | Sep | Dec | Mar |
2022 | 2022 | 2022 | 2022 | 2023 |
NIFTY 50 Index | Hang Seng Index | Shanghai SE Composite Index | ||
PSEi - Philippine SE Index | Brazil Ibovespa Index | |||
Rebased to 100 as at 31 March 2022 | Source: Bloomberg |
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%.
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
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
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.
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)% | ||||
(8.0)% | (8.4)% | (8.9)% | (10.0)% | (10.2)% | |
Consumer | Consumer | UEM NAV | Energy | Industrials Communication Financials | Information | Utilities | Healthcare | Materials |
staples | discretionary | total return | services | technology | ||||
per share |
Source: Bloomberg
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
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 |
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UIL Limited published this content on 16 June 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 June 2023 07:30:07 UTC.