RNS Number : 1785C
Utilico Emerging Markets Trust PLC
14 June 2019
 

Date:                      13 June 2019

Contact:                 Charles Jillings     

                                Utilico Emerging Markets Trust plc  

                                01372 271 486   

 

Gay Collins/Mike Foster

Montfort Communications

0203 770 7905

Utilico@montfort.london

 

 

UTILICO EMERGING MARKETS TRUST PLC

 

ANNUAL FINANCIAL REPORT

FOR THE PERIOD TO 31 MARCH 2019

 

Utilico Emerging Markets Trust plc ("UEM" or the "Company") today announced its audited financial results for the period to 31 March 2019.

 

Highlights of results

 

·      Net asset value ("NAV") total return per share of 3.5%*

·      NAV of 249.84p per share, up 1.1%*

·      Revenue earnings per share ("EPS") of 7.47p

·      Dividends per share totalled 7.20p for the period, an increase of 2.9%. Dividends were fully covered by earnings

·      Total revenue income of £21.4m, in line with expectations

·      Gross assets of £581.9m, an increase of 0.4%

*See Alternate Performance Measures on page 90 of the Report and Accounts

Notable developments

The redomicile of Utilico Emerging Markets Limited ("UEM Bermuda") to the UK became effective on 3 April 2018. UEM is a newly established company and through a share for share exchange, UEM Bermuda became a wholly owned subsidiary of UEM.

 

John Rennocks, Chairman of UEM said:

 

"I am pleased to report that, in difficult markets, UEM has continued to deliver a positive performance, achieving a NAV total return per share of 3.5% for the year, ahead of the MSCI Emerging Markets Total Return Index (GBP adjusted) which was unchanged over the period. Although UEM's share price discount remains above the levels the Board would wish to see, it has narrowed from 14.2% as at 31 March 2018 to 13.6% as at 30 September 2018 and narrowed further to 12.8% as at 31 March 2019.   The Board has declared this year four quarterly dividends totalling 7.20p, an uplift of 2.9% over the previous year, with dividends remaining fully covered by income."

Charles Jillings, Investment Manager of UEM added:

 

"UEM was relatively active during the year, increasing the weight of its top twenty investments, particularly those in Latin America. Brazil remains UEM's largest country exposure at 29.0%, followed by China at 20.3% then the Philippines at 8.3%.

 

"UEM's portfolio is well positioned with a diverse portfolio and an ungeared balance sheet. The management team continues to travel extensively in order to seek out compelling investments that offer excellent returns. As such, it is notable that UEM's portfolio consists of a diverse range of companies that are often under-represented in the MSCI.

 

"Our focus remains on delivering positive long-term absolute returns and during the year over 80.0% of our investments declared or paid a dividend."

 



 

 

On 3 April 2018, as a result of the proposals to redomicile UEM Bermuda to the United Kingdom, the shareholders of UEM Bermuda exchanged all their shares in UEM Bermuda for shares in UEM on a one for one basis and UEM Bermuda became a wholly owned subsidiary of UEM. In the years prior to 31 March 2019, where reference is made to comparative numbers for information purposes, these will relate to UEM's predecessor, UEM Bermuda.

 



 

CHAIRMAN'S STATEMENT

I am pleased to report that, in difficult markets, UEM has continued to deliver a positive performance achieving a NAV total return per share of 3.5% for the period to 31 March 2019.

The past year has seen rising economic and stock market volatility and presented a challenge for UK domestic EM investors, especially in the face of continued Brexit uncertainties. Volatility was magnified by geopolitical concerns, trade skirmishes initiated by the Trump administration, concerns over Central Banks' withdrawal of Quantitative Easing ("QE") and a firming interest rate outlook, all of which heightened market risk. In this context, the positive performance of UEM is a good achievement. 

As at the half year, UEM's NAV total return per share was down 7.5%, which partly reflected our strong conviction in Brazil. The Brazilian Ibovespa Index (GBP adjusted) was down 17.9% for that half year period. I am pleased to report that our conviction paid off as the Brazilian Index was up 24.4% in the second half of the year. Pleasingly, the current year's performance for UEM of 3.5% was ahead of the MSCI Emerging Markets Total Return Index (GBP adjusted) ("MSCI") which was unchanged over the period. UEM also continues to receive strong industry recognition, which included being selected again as one of Money Observer's 'rated funds' for 2019. The fund was also featured in the Daily Telegraph's Investing Fund of the Week.

As we noted at the half year stage, there are two opposing forces at work in global markets at the moment: populist political leadership and Central Bank activity. Populist leaders are elected to challenge the existing political establishment, while Central Banks are seeking to move policies back to a more "normal" setting. In the US, President Trump is pursuing populist protectionist policies that include import duties, sanctions, tax cuts for US corporates and a USA first policy. The US Federal Reserve on the other hand is pursuing a policy aimed at tightening financial conditions that include Quantitative Tightening and raising interest rates. The populists are looking to deliver policy changes with little regard for more traditional economics while the Central Banks are looking to contain the inflationary policies that are being implemented.

Over the year we have seen a continuing rise in populism from the election of Andres Manuel Lopez Obrador in Mexico through to the Five Star Movement in Italy, and more recently the election of Volodymyr Zelensky in the Ukraine. We expect this trend to continue. The Central Banks have collectively had to moderate their fiscal policies as economies have slowed down. While the US Federal Reserve continues its reversal of QE, it has moderated its interest rate outlook, as has the European Central Bank, the Reserve Bank of Australia and the Chinese Central Bank. All are being more accommodating in their messaging to the market.

The combination of weaker Central Bank positioning and firmer than expected global growth has seen the stock markets recover much of the ground in 2019 that was given up in late 2018. The S&P at the time of writing is close to its all-time high.

One challenge for EM has been reduced US Dollars in circulation, leading to a broad economic slowdown. This has placed pressure on EM economies and markets. Added to this, the continued rise in oil prices has had the effect of weakening several EM economies as energy costs rise sharply.

The level of market volatility that has resulted from these activities has been much higher. As a general statement Sterling was down versus Asian currencies but up against Latin American currencies.

China remains a key driver of the EM economies and there is no doubt that Trump's relentless focus on China trade is having a negative impact. China's desire to pivot away from a capital investment-driven economy towards a more consumer-led economy is proving to be a challenge. It will be some time before we understand the full impact of the economic confrontation between the US and China. However, we are hopeful that an agreement is reached between the world's top two economies and that investment markets will respond favourably. For its part, China has softened a number of factors domestically which should stimulate both consumer demand (lower taxes) and SMEs activity (easier access to capital). Both the US and China are expected to see firmer Gross Domestic Product growth this year.

DIVIDEND

The profile of UEM's existing investments remains largely the same. These are businesses that are predominantly profitable, dividend-paying, cash generative and offer attractive long-term total returns. These investee companies continued to deliver steady growth in both income and revenue earnings per share for UEM. This result is particularly pleasing given the combined impact of an increased number of shares in issue (following the exercise of subscription shares in February 2018) and the currency headwinds resulting from Sterling's appreciation against Latin American currencies, where corporates are higher dividend payers. The Board has declared this year four quarterly dividends totalling 7.20p, an uplift of 2.9% over the previous year. Dividends remain fully covered by income. Ongoing charges were 1.0%, in line with last year and no performance fee was paid.

CHANGE OF DOMICILE

UEM successfully redomiciled to the UK with shares in UEM admitted to the premium listing segment of the Financial Conduct Authority's Official List and trading on the London Stock Exchange's main market on 3 April 2018. The Board is hopeful that, with UEM now a UK-based investment trust with a premium listing (seen as the 'gold standard' for investment companies), the move will have the potential to improve investor perception and accordingly narrow the discount to NAV.

The redomicile was effected by way of a share-for-share exchange with UEM Bermuda, which became a wholly-owned subsidiary of UEM. I am pleased to report that ICM, ICMIM and our other service providers have worked seamlessly to transfer the portfolio from UEM Bermuda to UEM. I thank them for their diligence and commitment. In our new world of heightened KYC and regulation this has been no mean feat.

Since UEM is a new company it has no comparatives. However, we continue to refer to UEM Bermuda's historic financial record and any references to prior periods for comparison purposes are to UEM Bermuda. 

As at UEM Bermuda's last year end, the revenue reserves carried forward were £14.3m and capital reserves were £292.7m. At the outset UEM, as a new company, had no revenue or capital reserves. However, in May 2018, under a court sanctioned capital reduction, UEM transferred £500.0m from its capital redemption reserve into a distributable special reserve, enabling UEM to subsequently buy back shares and to declare dividends.

SHARE BUYBACKS

UEM's share price discount narrowed from 14.2% as at 31 March 2018 to 13.6% as at 30 September 2018, and narrowed further to 12.8% as at 31 March 2019, although it remains above levels the Board would wish to see. The Investment Managers have continued buying back UEM's shares for cancellation with 4.7m shares bought back in the period to 31 March 2019, at an average price of 201.02p. While the Board would like to see the discount narrow even more, any share buy back remains an investment decision. Traditionally the Investment Managers have bought back shares if the discount widens to over 10.0%. Since inception, the Company has bought back 47.5m ordinary shares totalling £80.9m. The buybacks now represent more than the initial capitalisation of UEM Bermuda when it came to market in July 2005.

BOARD

Garry Madeiros has been a non-executive director of UEM since 2007 and he has informed the Board that he intends to retire following the conclusion of UEM's Annual General Meeting in September 2019. I would like to thank Garry, on behalf of the Board, for his excellent contributions and the experience he has brought to Board discussions during his time as both director and Chair of the Audit Committee. I am pleased to report that Eric Stobart has agreed to join the Board and will also chair the Audit Committee. Mr Stobart is currently a non-executive director and chair of the audit committee of UIL Limited and intends to step down from UIL Limited and join the Board of UEM in September 2019.

IMPACT OF TRADING RELATIONSHIPS

The US China trade dispute is a concern and could, if it continues to escalate, impact world growth and UEM's portfolio. Brexit could, under a hard Brexit scenario, negatively impact European trade and therefore UEM's East European investments.

OUTLOOK

We expect populism to continue to rise and influence the global agendas. This is likely to result in continuing volatility in investment markets as political positions harden or change sharply. The outcome of the US China trade talks is now enmeshed in a deeper conflict around technology and security. This heightens the risk of sharp divisions and outcomes are more volatile. Against this, the World's central banks are for the most part looking to soften their stance, which should help to moderate the political impact of the populist governments.

I would note that, in the EM world, Bolsonaro is leading Brazil in the right direction on government costs, pensions and privatisations. Modi has been returned with a stronger mandate and President Xi is committed to growth. These economies, which account for 55.1% of UEM's portfolio, should respond to this.

It is worth re-emphasising that UEM's performance continues to be driven by bottom-up stock selection. The portfolio is predominantly invested in relatively liquid, cash-generative companies with long-duration assets that the Investment Managers believe are structurally undervalued and offer excellent total returns. Since inception over 10 years ago, UEM's track record of performance is proven and the Board has every confidence that the Investment Managers will continue to find investments offering attractive, long-term returns for UEM.

 

John Rennocks

Chairman

13 June 2019

PERFORMANCE SUMMARY

 






31 March

2019

31 March

2018 (1)

Change %

2019/18

NAV total return per share (2) (annual) (%)

3.5

6.6

n/a

Share price total return per share (2) (annual) (%)

5.4

7.1

n/a

Annual compound NAV total return

(since inception) (%)

 

11.0

 

11.7

 

n/a





NAV per share (2) (pence)

249.84

247.22

1.1

Share price (pence)

217.90

212.00

2.8

Discount (2) (%)

(12.8)

(14.2)

n/a




Earnings per share (basic)




- Capital (pence)

(0.12)

4.66

(102.6)

- Revenue (pence)

7.47

9.27

(19.4)

Total (pence)

7.35

13.93

(47.2)





Dividends per share




- 1st quarter (pence)

1.80

1.70

5.9

- 2nd quarter (pence)

1.80

1.70

5.9

- 3rd quarter (pence)

1.80

1.80

0.0

- 4th quarter (pence)

1.80

1.80

0.0

Total (pence)

7.20

7.00

2.9





Gross assets(3)(£m)

581.9

579.8

0.4

Equity holders' funds (£m)

574.2

579.8

(1.0)

Ordinary shares bought back (£m)

9.5

21.9

(56.6)





Cash (£m)

11.7

8.1

44.4

Bank debt (£m)

(7.8)

-

100.0

Net cash/(debt) (£m)

3.9

8.1

(51.9)

Net cash/(debt) on net assets (%)

0.7

1.4

n/a





Management and administration fees

and other expenses




- excluding performance fee (£m)

5.9

5.7

3.5

- including performance fee (£m)

5.9

5.7

3.5





Ongoing charges figure




- excluding performance fee (%)

1.0

1.0

n/a

- including performance fee (%)

1.0

1.0

n/a

 

(1)        Figures for 2018 relate to UEM Bermuda and are shown for comparative purposes

(2)        See Alternative Performance Measures on page 90 of the Report and Accounts

(3)         Gross assets less liabilities excluding loans

 



 

INVESTMENT MANAGERS' REPORT

EM in the year to 31 March 2019 were mixed with most EM indices in negative territory. Notable exceptions were Brazil, up 11.8% and India up 17.3%. The net result was the MSCI remaining largely unchanged. In contrast the EM currency markets were mostly positive against Sterling although the Brazilian Real declined 8.1% versus Sterling.

UEM was relatively active during the year, increasing the weight of its top twenty investments, particularly those in Latin America ("Latam"). Over the past two years UEM's Latam exposure has increased from 34.8% to 41.4%. Latam typically offers investments that trade on more attractive valuation metrics, including higher yields.

UEM ended the year largely ungeared, partially reflecting the ongoing concerns about the wider markets in which UEM invests and the potential challenges given the US-China trade negotiations.

UEM's portfolio is well positioned with a diverse portfolio and an ungeared balance sheet. The management team continues to travel extensively in order to seek out compelling investments that offer excellent returns. As such, it is notable that UEM's portfolio consists of a diverse range of companies that are often under-represented in the MSCI. Our focus remains on delivering positive long-term absolute returns. During the year 80.0% of our investments declared or paid a dividend.

MIGRATION

Following completion of the redomicile of UEM, UEM Bermuda became a wholly-owned subsidiary of UEM. The ICM investment team started to transfer assets from UEM Bermuda to UEM which took most of the period to complete, with the transfer of the Indian holdings completed in March this year. It has been a time-consuming exercise ensuring that the transfers complied with each jurisdiction's requirements, and it is pleasing to see that the transfer of assets was completed before the year end. This was a real team effort across all parties involved and I want to thank all those who made sure we achieved our objectives without incurring unnecessary costs.

UEM Bermuda was dissolved in March 2019 and work has commenced on the liquidation of UEM Mauritius.

ACCOUNTING TREATMENT

UEM acquired the underlying portfolio from UEM Bermuda in exchange for an intercompany loan for the amounts paid. The intercompany loan was cancelled during the liquidation of UEM Bermuda.

In line with International Financial Reporting Standards ("IFRS"), the report and accounts are presented on an unconsolidated basis. The migration of the portfolio to UEM has resulted in a number of distortions in the presentation of these results. For example, investment purchases are inflated as they include both the market purchases made by UEM as well as UEM's purchase of the underlying investments held by UEM Bermuda.

PORTFOLIO

UEM's gross assets (less liabilities excluding loans) increased marginally from £579.8m to £581.9m in the period to 31 March 2019, reflecting gains offset by dividends paid.

There have been six new entries into the top twenty holdings of the portfolio over the year: Companhia de Saneamento do Parana, a Brazilian water and waste management company; China Everbright Greentech Limited, a Chinese environmental protection service provider; Cosan Logistica S.A., a Brazilian company who invests in assets to operate logistic networks integrated with rail and ports; Metro Pacific Investments Corporation, a Philippine investment holding company; Power Grid Corporation of India Limited, an Indian electric utilities company; and CITIC Telecom International Holdings Limited, a Chinese telecommunication company.

The following investments were scaled back and are no longer top twenty holdings: Bolsas Y Mercados Argentinos S.A., the Argentine stock exchange; Malaysia Airports Holdings Berhad, the operator of airports in Malaysia and Turkey; Transelectria S.A., the Romanian electricity distribution company; Transportadora de Gas del Sur S.A., the Argentinian gas transportation company; and Pampa Energia S.A., the Argentinian electricity generation and transportation company. Enel Chile S.A., a Chilean energy generation and transmission company which was also in the top twenty has now exited the portfolio. 

Investments in the portfolio (excluding portfolio transfers due to the redomicile of UEM Bermuda) decreased from £187.1m to £108.7m in the period ended 31 March 2019 and realisations decreased from £198.6m to £123.6m. This reflects a return to normal investment/realisation levels following last years' heightened investment activity as UEM pivoted towards Latam.

One outcome from this has been an increase in the concentration of the portfolio with the top twenty holdings reversing a four-year trend and climbing to 58.4% from 54.9% last year. This statistic is reflected in the portfolio progression and number of holdings in the bar chart on page 11 of this report and accounts. Changes to the portfolio's geographic allocation reflect new investments plus the relative market performance as outlined above.

BANK DEBT

UEM's bank debt increased from nil to £7.8m in the period to 31 March 2019. UEM remained net cash positive for most of the period as it prefunded the transfer of assets from UEM Bermuda to UEM. Many markets required prefunding and that was certainly the case with India. Indian transfers settled in late March 2019, which resulted in the cash on hand. UEM's net cash reduced from £8.1m to £3.9m over the period to 31 March 2019. The Scotiabank facility is a three-year unsecured £50.0m multicurrency revolving facility maturing in April 2021.

REVENUE RETURN

Revenue income decreased to £21.4m, from £24.8m, a decline of 13.6%. This reflects a combination of fewer special dividends and a weaker Brazilian currency in the first half of the period, which reduced dividend amounts received by UEM in Sterling. 

Management fees and other expenses were unchanged at £3.1m. Finance costs reduced to £0.1m from £0.2m on lower average borrowings. Taxation was lower at £0.8m from £1.4m.

Arising from the above, the profit for the period reduced to £17.4m from £19.9m and earnings per share were lower at 7.47p from 9.27p, a decline of 19.4%. Dividends per share of 7.20p were fully covered by earnings.

CAPITAL RETURN

The portfolio gained £1.3m on the capital account during the period to 31 March 2019. In addition, there were £1.4m net gains on derivatives and foreign exchange. The total income gain on the capital account was £2.7m (2018: a gain of £15.6m).

Management and administration fees were higher at £2.7m (2018: £2.1m), an increase of 30.0% mainly as a result of higher average gross assets. Finance costs reduced to £0.2m from £0.5m as a result of lower average borrowings. The Company is no longer subject to Brazilian capital gains tax due to UEM's redomiciliation to the UK and taxation decreased to nil from £2.6m. The net effect of the above was a loss on the capital return of £0.3m (2018: a gain of £10.0m).


Charles Jillings
ICM Investment Management Limited and ICM Limited

13 June 2019

 



 

PRINCIPAL RISKS AND RISK MITIGATION

During the period ended 31 March 2019, ICMIM was the Company's AIFM and had sole responsibility for risk management subject to the overall policies, supervision, review and control of the Board.

 

The Board considers carefully the Company's principal risks and seeks to mitigate these risks through regular review by the Audit 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. Where produced, the Audit Committee also reviews summaries of the Service Organisation Control (SOC1) reports from the Company's service providers.

 

The Board applies the principles and recommendations of the UK Corporate Governance Code and the AIC Code of Corporate Governance as described on page 48 of the Report and Accounts. The Company's internal controls are described in more detail on page 57 of the Report and Accounts. As required by the AIC Code of Corporate Governance, the Board has undertaken a robust assessment of the principal risks facing the Company. Most of the Company's principal risks are market-related and similar to those of other investment companies which invest primarily in listed investments.

 

UEM's business model and strategy are not time limited and, as an investor in emerging markets, are unlikely to be adversely impacted as a direct result of Brexit. However, since UEM's reporting currency is Sterling, any rise or fall in Sterling will lead, respectively, to a fall or rise in the Company's reported net asset value.

 

The principal ongoing risks and uncertainties currently faced by the Company, and the controls and actions to mitigate those risks, are described below. Further details of risks and risk management policies as they relate to the financial assets and liabilities of the Company are detailed in note 28 to the Accounts.

 

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 investment policy that has been approved 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 statement of financial positions, good cash flows, the ability to pay and sustain dividends, good asset bases and market conditions. The political risks associated with investing in these countries 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.

 

The Company's results are reported in Sterling, whilst the majority of its assets are priced in foreign currencies. The impact of adverse movements in exchange rates can significantly affect the returns in Sterling of both capital and income. 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 emerging markets' currencies.

 

In addition, the shares of the Company may trade at a discount to their NAV. 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 if they are trading at a discount in excess of 10% and the Investment Managers agree that it is a good investment decision.

 

The Board regularly reviews strategy in relation to a range of issues including the balance between quoted and unquoted stocks, the allocation of assets between geographic regions and sectors and gearing. Periodically the Board holds a separate meeting devoted to strategy, the most recent one having been held in November 2018.

 

A more detailed review of economic and market conditions is included in the Investment Managers' Report.

 

There is no guarantee that the Company's strategy and business model will be successful in achieving its investment objective. The value of an investment in the Company and the income derived from that investment may go down as well as up and an investor may not get back the amount invested. Past performance of the Company is not necessarily indicative of future performance.

 

No material change in overall risk in period*.

 

GEARING: the risk that the use of gearing may adversely impact on the Company's performance

 

Gearing levels may change from time to time in accordance with the Board and Investment Managers' assessment of risk and reward. 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. As at 31 March 2019, UEM had a net cash position and therefore no gearing.

 

No material change in overall risk in period.

 

BANKING: A breach of the Company's loan covenants might lead to funding being summarily withdrawn

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.

 

No material change in overall risk in period*.

 

KEY STAFF: Loss by the Investment Managers of key staff could affect investment returns

 

The quality of the investment management team is a crucial factor in delivering good performance. There are training and development programs in place for employees and the remuneration packages have been developed in order to retain key staff.

 

Any material changes to the management team are considered by the Board at its next meeting; the Board discusses succession planning with the Investment Managers at regular intervals.

 

No material change in overall risk in period*.

 

RELIANCE ON THE INVESTMENT MANAGERS AND OTHER SERVICE PROVIDERS: Inadequate controls by the Investment Managers or Administrator or third party service providers could lead to misappropriation of assets

 

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 Company's main service providers are listed on page [*] of the Report and Accounts. The Audit Committee monitors the performance of the service providers.

 

All listed and most unlisted investments are held in custody for the Company by JPMorgan Chase Bank N.A. - London Branch with a small number of unlisted investments held in custody by Waverton Investment Management Limited ("Waverton"). JP Morgan Europe Limited, the Company's depositary services provider, also monitors the movement of cash and assets across the Company's accounts. The Audit 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.

 

Although there has been no change in overall risk in the period*, the possibility of cybercrime continues to be a concern. The Company's assets are considered to be relatively secure, so the risks are the inability to transact investment decisions for a period of time and reputational risk.

 

*comparison with UEM Bermuda

 



 

DIRECTORS' STATEMENT OF RESPONSIBILITIES

in respect of the Annual Report and the Financial Statements

 

The Directors are responsible for preparing the Annual Report and Financial Statements, the Directors' Remuneration Report and the 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, the Directors are required to prepare the financial statements in accordance with IFRS as adopted by the European Union. 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 and prudent; 

·      state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; 

·      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 its 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. 

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website.  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 includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face. 

 

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 13 June 2019 and signed on its behalf by:

 

 

John Rennocks

Chairman

 



 

STATEMENT OF COMPREHENSIVE INCOME

 

 

for the period 7 December 2017 to 31 March 2019







Revenue

Capital

Total






return

return

return






£'000s

£'000s

£'000s









Gains investments





-

1,271

1,271

Gains on derivative instruments





-

2,306

2,306

Foreign exchange losses





-

(889)

(889)

Investment and other income





21,421

24

21,445

Total income





21,421

2,712

24,133

Management and administration fees





(1,503)

(2,731)

(4,234)

Other expenses





(1,644)

-

(1,644)

Profit/(loss) before finance costs and taxation





18,274

(19)

18,255

Finance costs





(106)

(246)

(352)

Profit/(loss) before taxation





18,168

(265)

17,903

Taxation





(798)

-

(798)

Profit/(loss) for the period





17,370

(265)

17,105









Earnings per share (basic) - pence





7.47

(0.12)

7.35

 

All items in the above statement derive from continuing operations.

 

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies.

 

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

 

All income is attributable to the equity holders of the Company.

 



 

STATEMENT OF CHANGES IN EQUITY

 

 

 

for the period 7 December 2017 to 31 March 2019




Ordinary

Redeemable


Capital


Retained earnings



share

deferred

Merger

redemption

Special

Capital

Revenue



capital

shares

reserve

reserve

reserve

reserves

reserve

Total


£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

Shares issued

2,345

-

577,416

-

-

-

-

579,761

Transfer on issue of redeemable

deferred shares

-

500,000

(500,000)

-

-

-

-

-

Shares purchased by the

Company and cancelled

(47)

(500,000)

-

500,047

(9,496)

-

-

(9,496)

Transfer to special reserve

-

-

-

(500,000)

500,000

-

-

-

Fund launch fees

-

-

(710)

-

-

-

-

(710)

(Loss)/profit for the period

-

-

-

-

-

(265)

17,370

17,105

Dividends paid in the period

-

-

-

-

-

-

(12,505)

(12,505)

Balance at 31 March 2019

2,298

-

76,706

47

490,504

(265)

4,865

574,155

 

 



 

STATEMENT OF FINANCIAL POSITION

 

as at 31 March 2019









£'000s

Non-current assets





Investments




569,134

Current assets





Other receivables




6,793

Derivative financial instruments




77

Cash and cash equivalents




11,668





18,538

Current liabilities





Other payables




(5,638)

Derivative financial instruments




(124)





(5,762)

Net current assets




12,776

Total assets less current liabilities




581,910

Non-current liabilities





Bank loans




(7,755)

Net assets




574,155






Equity attributable to equity holders





Ordinary share capital




2,298

Redeemable deferred shares




-

Merger reserve




76,706

Capital redemption reserve




47

Special reserve




490,504

Capital reserves




(265)

Revenue reserve




4,865

Total attributable to equity holders




574,155






Net asset value per ordinary share





Basic - pence




249.84

 

 



STATEMENT OF CASH FLOWS

 

for the period 7 December 2017 to 31 March 2019




£'000s

Operating activities




Profit before taxation



17,903

Deduct investment income - dividends



(19,580)

Deduct investment income - interest



(1,825)

Deduct bank Interest received



(16)

Add back interest paid



352

Add back gains on investments



(1,271)

Add back gains on derivative instruments



(2,306)

Add back foreign exchange losses



889

Increase in other receivables



(119)

Increase in other payables



1,617

Net cash outflow from operating activities before dividends and interest


(4,356)

Interest paid



(349)

Dividends received



11,039

Bank interest received



16

Investment income - interest



975

Taxation paid



(798)

Net cash inflow from operating activities



6,527

Investing activities




Purchases of investments



(257,917)

Sales of investments



126,426

Sales of derivatives



2,352

Net cash outflows from investing activities



(129,139)

Financing activities:




Repurchase of shares for cancellation



(9,496)

Dividends paid



(12,505)

Drawdown of bank loans



27,785

Repayment of bank loans



(19,941)

Loan from subsidiary



150,125

Fund launch fees



(710)

Net cash flows from financing activities



135,258

Increase in cash and cash equivalents



12,646

Cash and cash equivalents at the start of the period



-

Effect of movement in foreign exchange



(978)

Cash and cash equivalents as at 31 March 2019



11,668

 



 

NOTES

The Directors have declared a fourth quarterly dividend in respect of the period ended 31 March 2019 of 1.80p per share payable

on 28 June 2019 to shareholders on the register at close of business on 7 June 2019. The total cost of the dividend, which has not

been accrued in the results for the period to 31 March 2019, is £4,132,000 based on 229,562,473 shares in issue at the date of this

report.

 

This statement was approved by the Board on 13 June 2019. It is not the Company's statutory accounts. The statutory accounts for the financial year ended 31 March 2019 have been approved and audited and received an audit report which was unqualified. The Company commenced trading on 3 April 2018 and its first accounting reference date is 31 March 2019 and thus there are no comparatives.

 

The Report & Accounts for the year ended 31 March 2019 will be delivered to the Registrar of Companies and will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM and on the Company's website www.uemtrust.co.uk.  They will be posted to shareholders in early July 2019.

 

 

Legal Entity Identifier: 2138005TJMCWR2394O39


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