Annual Financial Report

RNS Number : 8749B

Utilico Emerging Markets Limited

22 June 2016

 

Date:                21 June 2016

Contact:           Charles Jillings

                        ICM Investment Management Limited

                        01372 271 486  

                        Alastair Moreton

                        Stockdale Securities

                        0207 601 6100

Utilico Emerging Markets Limited

Statement of Results

for the year to 31 March 2016

Highlights of results

·      Diluted net asset value of 202.52p per ordinary share

·      Dividends per ordinary share increased to 6.40p

·      NAV annual compound return since inception of 11.4%

·      Dividends per ordinary share have increased from 1.50p to 6.40p

Chairman's Statement

I am pleased to report UEM recovered nearly all the losses suffered in the first six months of the financial year and ended the year to 31 March 2016 almost unchanged at 202.52p. Based on a total return to an ordinary shareholder who received one subscription share for every five shares held, the total return on basic NAV over the twelve months was positive at 1.4%. The diluted NAV per ordinary share total return was negative 0.5% over the year. Having seen the NAV reach a low on 24 August 2015 of 170.88p, this is pleasing to see and reflects the resilience in UEM's portfolio of investments. This was a strong out performance in challenging times against the MSCI Emerging Markets Total Return Index, GBP adjusted, which lost 8.8% over the year.

UEM's performance over one, three and five years has been significantly ahead of the Index. Over three and five years, UEM achieved a total return of 7.6% and 32.5% versus the MSCI Emerging Markets Total Return Index (GBP adjusted) which lost 7.0% and 8.1% respectively over both periods. This strong performance continues to ensure UEM receives industry recognition. UEM was highly commended at the Money Observer Trust Awards 2016 for the Best Emerging Markets Trust, in recognition of consistently superior three year performance and was also one of Money Observer's rated funds for 2016.

A strong positive for the year has been the increased revenue earnings per share of 8.23p, up by 65.3%. On the back of its increased revenue, the Board declared a maintained first quarterly dividend of 1.525p followed by three increased quarterly dividends of 1.625p, amounting to 6.40p for the year to 31 March 2016, an increase of 4.9%. The retained revenue reserves carried forward after payment of the fourth quarter dividend are some 3.2p per share. The 6.40p distributed represents a yield on the opening share price of 188.50p of 3.4%.

Management and administration fees excluding performance fees were 3.3% lower at £4.5m. No performance fee is payable in respect of the year to 31 March 2016.

Our share price discount to NAV remains stubbornly high, given both the strong performance and the current dividend yield offered by UEM's shares. The Board keeps this under constant review and may exercise a buyback investment policy at over a 10% discount, but this is an investment decision and will remain so. Over the ten years the Company has exercised its investment discretion and has bought back 27.8m ordinary shares amounting to £39.3m, including 115,000 shares bought back at 163.75p in October 2015 and 1.7m shares at an average cost of 163.88p per share in January to March this year. This was at a time when much of the market was withdrawing capital from the emerging markets and discounts widened.

In September 2015 UEM announced and the shareholders approved a one-for-five bonus issue of subscription shares. This resulted in 42.6m subscription shares being issued on 24 September 2015.

UEM has a continuation vote at this year's AGM in September. Your Board unanimously supports the continuation of UEM and will be voting in favour of the resolution. If passed, a similar resolution will be put to shareholders every fifth year hereafter.

Given the upcoming continuation vote it is an appropriate time for me to stand down as Chairman after ten enjoyable years. This will allow the next Chairman to take UEM forward after the AGM. I would like to thank my fellow Board members for their support over this time. They have made my job as Chairman a pleasure and have been a delight to work with. I would like to thank the Investment Managers for their professionalism and drive in delivering what has been a strong performance. I would also like to thank our professional team who support us in this increasingly complex and regulated world. Thank you all and I wish you all every success.

John Rennocks who joined the Board in November 2015 has agreed to become the new Chairman following the AGM in September 2016. John has both the capability and experience to take this investment company forward.

OUTLOOK

The markets remain outside normal historic parameters with negative interest rates in a number of countries and Quantitative Easing ("QE") still being implemented in Europe and Japan. The normalisation of monetary conditions will result in sharp volatility as global markets react to decisions in the main being made by central banks. The USA is looking to edge towards normalisation. Given this backdrop, it is encouraging that most emerging market economies continue to achieve positive GDP growth. UEM's performance is driven by stock selection and the Board remains confident that the Investment Managers will continue to find attractive long term investments.

Alexander Zagoreos
Chairman
21 June 2016

Investment Manager's Report

The year to 31 March 2016 was challenging for emerging markets, with most key emerging market indices negative over the twelve months. China was particularly weak, with Hong Kong's Hang Seng Index down by 16.6%. Currencies were more mixed, with the Brazilian Real up by 7.4% and the Romanian Leu down by 7.6%.

UEM's portfolio remained largely unchanged as it continues to focus on listed companies which are, for the most part, offering long-term growth, profitable and paying dividends.

PORTFOLIO

UEM's gross assets (less liabilities excluding loans) decreased from £479.2m to £455.2m over the twelve months to 31 March 2016, due to net realisations enabling the repayment of part of the loans and the purchase for cancellation of ordinary shares.

Some of the constituents of the top ten investments have changed over the year, with UEM partially exiting from China Everbright International Limited ("China Everbright") and Asia Satellite Telecommunications Holdings Limited ("Asiasat") moving from ninth to nineteenth. UEM partially exited China Everbright on valuation considerations at the time the Hang Seng Index gained substantially in April 2015. Asiasat moved lower in the portfolio as its share price fell following a substantial dividend to shareholders; UEM received some £7.4m, accounting for most of the value change in Asiasat. The investment in MyEG Services Berhad ("MYEG") was substantially reduced following its strong run, moving it from second to fifth position in the portfolio. As a result the top ten investments, as a percentage of the portfolio, reduced from 53.7% to 47.2%. Unlisted investments remain modest at 3.2%, prior year 2.3%, of the gross assets.

Since February 2016, UEM has been disclosing its top twenty holdings in response to increased investor interest in the portfolio. By doing so UEM has given visibility on some 67.2% of its portfolio.

China (including Hong Kong) continues to be UEM's biggest country investment, decreasing from 30.9% to 26.3% of the portfolio. This decline reflects mainly market realisations last April as the Hang Seng Index strengthened, following the A-share market, which jumped upwards. UEM exited a number of positions into this strength. In addition Asiasat's significant dividend resulted in Asiasat being marked lower after its distribution. The Shanghai Composite Index was a weak performer, down by 19.9% and the Hang Seng Index was little better, down by 16.6%. This combined with a weaker Hong Kong Dollar, down by 3.1%, resulted in the total investment in China being reduced. It should be noted UEM continues to be predominantly invested in China through the Hong Kong Stock Exchange.

China Gas Holdings Limited's ("China Gas") share price fell by 9.8% in the year to 31 March 2016. Chinese gas distribution companies continued to be impacted by the rapid drop in oil prices, which meant that natural gas was not competitive against fuel oil as an energy source for industrial customers. While the National Development and Reform Commission implemented gas price cuts for non-residential customers from 1 April 2015, this only temporarily improved the competitiveness of natural gas, a position which was swiftly eroded by falls in the oil price in the second half of calendar 2015. This was exacerbated by the slowdown in the Chinese manufacturing and industrial economy, to which China Gas is heavily exposed with approximately 75% of volumes sold to commercial and industrial customers. Driven by environmental concerns, the Chinese government has reiterated its commitment to increasing the proportion of natural gas in the energy matrix, with proposals to move towards liberalised gas markets. This would help restore the competitiveness of the gas distribution sector.

Against this tough backdrop, China Gas continued to deliver excellent operational and financial results. As at 30 September 2015 China Gas had expanded its total number of city gas concessions to 299, covering an urban population of 93m. It had 11.7m customer connections, up 20.9% on the previous year, and just 47% of households within its concession areas are connected to the gas network. In the six months to 30 September 2015 China Gas reported total piped gas and LPG volume growth of 7.0% and 18.6% respectively. Reflecting the aforementioned tariff cuts and lower LPG prices, revenues fell by 9.2%, but with corresponding drops in input prices EBITDA increased by 8.7% and normalised earnings per share were up by 22.0%. The dividend per share was more than doubled. In the year ended 31 March 2016, UEM decreased its position in China Gas by 4.5%.

APT Satellite Holdings Limited ("APT") saw its share price increase by 4.7% in the period. For the year to December 2015, revenues disappointingly declined by 4.3%. However, in October the company successfully launched a new satellite, ApStar 9 and this came into service in December 2015. At the end of December, the satellite had a 48% utilisation rate and as a result of the new capacity, the company expects to report a return to revenue growth in 2016.

The satellite market in Asia has turned increasingly competitive over the past couple of years, as new capacity has been launched and some large customers, principally government users, have scaled back their use of satellite communications. The core television broadcast market remains a growth driver. During the year, UEM increased its holding in APT by 0.6%, adjusted for a bonus issue of one share for every two held.

China Resources Gas Group Ltd's ("CR Gas") share price fell by 8.3% in the year under review. CR Gas' operational assets are comparable to those of China Gas although it is purely focused on natural gas and does not participate in the LPG sector. CR Gas is a subsidiary of China Resources, one of the largest State-Owned Enterprises in the country. As at 31 December 2015, CR Gas had 220 city gas concessions and 23.8m customer connections, up by 13.9% on the previous year. In comparison to China Gas, residential piped gas penetration in its concession areas was slightly lower at 44.4%. In the year ended 31 December 2015 CR Gas reported natural gas volume growth of 11.9% and group revenue growth of 8.3%. Adjusted EBITDA grew by 13.7% and normalised earnings per share were up by 20.6%. The dividend per share was increased by 32.0%. UEM has been invested in CR Gas since 2011 and during the year ended 31 March 2016 it increased its position in CR Gas by 8.0%.

Shanghai International Airport Co Ltd's ("Shanghai Airport") share price increased by 19.6% over the year to 31 March 2016, driven by the strong passenger growth that is being witnessed at the airport. Over the year to 31 December 2015, total passenger growth was up by 16.2% on the back of strong aviation demand, which is being driven by the increasing level of the average Chinese income, as well as the introduction of more low cost carrier airlines to the market. With the upcoming opening of Disneyland in China in June 2016, the outlook for passenger growth remains strong. For the year to 31 December 2015, revenues were up by 9.3%, with EBIT up by 19.1%, helped by strong operational leverage and stringent cost control. Net income for the year was up by 20.8%.

In the year to 31 March 2016, UEM more than doubled its holding in Shanghai Airport.

Yuexiu Transport Infrastructure Limited ("Yuexiu") saw a 6.1% increase in its share price for the year to 31 March 2016. During the year, Yuexiu acquired Suiyuenan Expressway, which helped boost its revenue growth for the year ended 31 December 2015 by 19.8%. Excluding acquisitions, revenues increased by 8.4%, primarily due to the 6.0% increase in traffic volumes (excluding the new road). Adjusted EBITDA increased by 22.2% in line with revenue growth whilst adjusted net income increased by 36.8%. During the financial year 2015, Yuexiu also announced the disposal of its 51% equity interest in Wuzhou Chishui Port in Guangxi, which will be completed and realized in 2016, making Yuexiu a pure toll road operator.

Asiasat had a difficult year operationally in 2015. The company launched two new satellites in 2014 but faced problems in getting regulatory approval for services to commence. A permit to distribute video into China was granted on 1 January 2016, much later than originally anticipated. Another contract, which would have seen substantially all the capacity on Asiasat 8 taken up, failed to materialise due to the customer being unable to overcome regulatory issues.

The market for satellite services in Asia remains highly competitive and, as with APT, the company does not expect competition to lessen in the near term. The company reported a 1.9% decline in revenues in the year to December 2015 and EBITDA declined by 3.0%.

During the year, following the sale of GE's stake to a fund managed by Carlyle Group, Asiasat paid a special dividend of HK$11.89 per share, which was worth £7.4m to UEM. The company now has what we consider to be an appropriately geared balance sheet, having been in a net cash position for many years. The debt has increased interest charges, impacting net profit. Net profit (excluding exceptional items) declined by 11.2% in the year to December.

Asiasat's share price declined by 42.1%, mainly as a result of the distribution of the special dividend in the year to 31 March 2016. During the year, UEM increased its shareholding in Asiasat by 2.8%.

Malaysia continues to be UEM's second largest country investment, decreasing from 17.8% to 13.7% of the portfolio. This was due mainly to realisations and in particular the reduced investment in MYEG. Malaysia, as a producer of oil, has seen its economy negatively impacted by weakness of the oil price. This has affected the market, with the FTSE Bursa Malaysia KLCI Index down by 6.2%. The Malaysian Ringgit strengthened by 2.0% partly offsetting the prior year currency market weakness.

Malaysia Airports Holdings Berhad's ("Malaysia Airports") share price declined by 3.4% in the year to 31 March 2016. Passenger traffic at the Malaysia-based airports only grew by 0.6%, as volumes continued to be impacted by the difficult series of events that occurred in 2014, which has affected traveller sentiment. Traffic has also been affected by the restructuring of Malaysia Airlines, which has resulted in the reduction of some routes and flight frequencies, as well as the difficult macro environment. Malaysia Airports' investment in Sabiha Gokcen International Airport ("ISG") Istanbul, Turkey, however fared better, seeing strong passenger growth of 19.7%. With the release of Malaysia Airports' new business plan "Runway to Success 2020", management are working hard to ensure that the Group is poised for future growth. For 2016, management are expecting to see passenger growth of 2.5% for its Malaysian operations owing to visa free entry into Malaysia for Chinese tourists. ISG is also expected to see passenger growth in the high teens. Malaysia Airports' financials for the year to December 2015 saw revenues (excluding construction) and adjusted EBITDA increase by 10.1% and 9.9% respectively whilst normalised net income declined by 44.9% as a result of higher financing costs following the acquisition of the remaining 40% stake of ISG in 2014.

In the period under review UEM increased its holding in Malaysia Airports by 0.6%.

MYEG's share price continued to be very strong, gaining 53.2% in the year to 31 March 2016. The company once again split its shares on a two-for-one basis during the period.

Growth in the nine months to 31 March 2016 has been especially strong following the closure of government counters for processing immigrant workers' permit renewals in May 2015, making MYEG's online system mandatory for permit renewals. Revenues in the nine months to 31 March 2016 were up by 101.5%. EBITDA advanced by 86.9% and net profit increased by 103.4% compared to the nine months to 31 March 2015.

During the year to 31 March 2016, UEM took profits on its MYEG position, selling 64.3% of the position held at 31 March 2015 for proceeds of £30.8m. Despite these sales, MYEG remained a top 5 stock in the portfolio at the end of March 2016.

Brazil remains the third largest country investment but reduced to 9.8% from 11.2%, mainly due to portfolio investments underperforming the market. The Brazilian Real recovered 7.4% over the year to 31 March 2016 whilst the Brazil Ibovespa Index was down by 2.1%. Short term concerns are overshadowing the longer term outlook, with the investment environment remaining challenging.

Ocean Wilsons Holdings Limited ("Ocean Wilsons") had another year of poor share price performance, down by 12.4% despite a relatively sound operational performance at its 58.3% owned subsidiary, Wilson Sons. Wilson Sons, the Brazilian port and shipping service provider, saw volumes at its container terminals Tecon Rio Grande and Tecon Salvador increase by 6.2% in 2015 as export volumes were boosted by the weakness of the Brazilian Real, which depreciated 47.0% against the US Dollar. The towage business also remained resilient during the period with volumes essentially flat for the year. That said, trading at the shipyard, logistics and in offshore oil and gas was poor as a result of the weaker Brazilian oil and gas sector. Performance of the investment portfolio (Ocean Wilsons Investment Limited) saw its valuation fall by 2.9% to US$244.4m for the period to 31 December 2015 which, given the assets are weighted towards global equities including material exposure to weaker emerging markets, was respectable. Over the period to 31 December 2015, revenues were down by 19.7% as a result of the depreciation of the Brazilian Real, whilst adjusted EBITDA was up by 4.8% and normalised net income down by 23.6%.

There was no change in UEM's holding in Ocean Wilsons during the year to 31 March 2016.

UEM has been invested in Alupar Investimento S.A. ("Alupar") for the past three years. Alupar is a holding company for electricity transmission and generation assets located in Brazil, Peru, and Colombia. The majority of income is derived from 23 transmission concessions in Brazil, with the remainder coming from five operational hydro plants with capacity of 351MW. In Colombia and Peru it has five additional hydro and wind generation projects totalling 211MW, including two hydro plants under construction. Alupar's transmission assets are particularly attractive as they enjoy long-life concessions with fully inflation-protected returns due to annual IPCA or IGP-M inflation adjustments to regulated revenue. The majority of Alupar's transmission concessions are due to expire between 2030 and 2042, while its generation assets have concession lives extending to 2045. As well as new generation plants, Alupar has two new transmission projects under development in Brazil.

In its financial year ended 31 December 2015, Alupar fully commissioned its Ferreira Gomes hydro plant, its largest facility, resulting in an increase in installed capacity of 31.5%. Combined with the full-year effect on operations, this resulted in energy sales volumes at its generation business more than doubling, which was partly offset by lower effective tariffs. Combined with a 6.0% inflation adjustment to transmission tariffs, underlying revenues increased by 8.3%, though factoring in a decline in construction revenue reported figures showed a more modest 1.3% increase. EBITDA grew by 5.6%, but normalised earnings declined by 42.3% due to higher effective tax rates and fixed costs reflecting the inclusion of the new assets in financials. Dividends per share correspondingly fell by 44.4%, and in March 2016 Alupar announced a further reduction in cash dividends for its financial year to 31 December 2016, partly offset by the issuance of bonus shares at a ratio of 6.5 new shares for every 100 existing shares. In the year to 31 March 2016, Alupar's share price fell by 23.4% and UEM increased its position in the company by 22.2%.

Romania rose from seventh to be the fourth largest country investment in the portfolio, increasing from 5.3% to 8.8%, due to both increased investment and investee company performance. The Romanian BET Index was down by 4.8% and the currency was down by 7.6%.

Transelectrica S.A. ("Transelectrica") is a relatively recent holding accumulated over the past two years. Transelectrica manages and operates the Romanian electricity transmission system and provides the electricity exchanges between central and eastern European countries, including Hungary, Serbia and Bulgaria. It is a regulated entity which was created in 2000 when the National Regulatory Authority for Energy ("ANRE") split government-held assets into four independent entities. Transelectrica operates in a well-established regulatory regime and is currently in its third regulatory period which runs through to 30 June 2019, with a regulated rate of return set at 7.7%. With a net cash balance sheet and strong recurring cash flows, the company sustains a highly attractive dividend stream, with a yield typically approaching double digits.

In the year to 31 December 2015, billed energy volumes transmitted by the network increased by 2.2%, with domestic consumption up by 2.7%, partly offset by exports down by 5.6%. Effective tariffs fell by 4.2% following a regulatory adjustment in July 2015 due to over-recovery of profits in the previous regulatory year. This meant that group revenues fell by 2.5%, excluding balancing market services which are profit-neutral to Transelectrica. Good cost control including continued reductions in transmission losses, sustained absolute EBITDA, down by 0.2%, and normalised earnings grew by 4.7%. Dividends per share were slightly reduced by 5.5%. In the year to 31 March 2016, Transelectrica's share price increased by 2.1% and UEM increased its position in the company by 42.2%.

UEM has been a shareholder in Transgaz S.A. ("Transgaz") since 2013. Transgaz is the national gas transmission company in Romania whose domestic transmission activities are fully regulated by ANRE. Similar to Transelectrica, the company is in its third regulatory cycle with a regulated rate of return of 7.7%, which ends in September 2017. Transgaz separately has international transit activities which operates dedicated pipelines transmitting Russian natural gas from Ukraine to Bulgaria. These activities are not regulated and transit tariffs are set on a commercial basis. Transgaz currently has several major projects under development, including a new 480km pipeline connecting Bulgaria and Hungary which is expected to be commissioned in 2019, as well as a pipeline connection to the Black Sea if recent gas field discoveries are developed.

In its financial year to 31 December 2015, domestic gas volumes transmitted increased by 3.5%, which was offset by effective tariff cuts of 9.4% reflecting recent regulatory adjustments. This saw domestic transport revenues fall by 6.3%, but transit revenues were up by 16.4%, boosted by foreign currency movements under which capacity is contracted. This resulted in stable financials at a group level, with revenues and EBITDA softening by 0.3% and 0.4% respectively. Normalised earnings fell by 1.5%, but dividends per share were increased by 26.7% given Transgaz's strong net cash position and continued strong cash flow. This represents a dividend yield of just over 10%. In the year to 31 March 2016 Transgaz's share price was down by 1.6% and UEM increased its position in the company by 22.2%.

Towards the end of 2014 UEM participated in a placing of Conpet S.A. ("Conpet"), the monopoly operator of the national crude oil and condensate pipeline network in Romania. Since this time, UEM has steadily increased its position in Conpet which continues to offer exceptional value. Conpet has a 30-year concession agreement which expires in 2032 and manages a network of 3,800km of pipeline as well as railway systems for both domestic and imported crude oil transport. Tariffs are regulated on a cost-plus basis. Conpet transports crude from domestic oil fields and the Black Sea terminal at Constanta to oil refineries for its two main customers: Petrom and Petrotel Lukoil. Conpet's growth opportunities are limited but Conpet has a significant surplus cash balance, which it is starting to return to investors.

In its financial year to 31 December 2015, Conpet reported oil transport volume growth of 5.5%, with a 1.3% decline in domestic transport more than offset by a 15.6% increase in imports. Effective tariffs fell by 3.7%, resulting in group revenue growth of 2.2%. However strong cost control saw EBITDA up by 12.2% and normalised earnings up by 5.6%. With no debt and excess cash amounting to approximately half of the market capitalisation accruing on the balance sheet, Conpet announced a 22.9% increase in its ordinary dividends. In the year to 31 March 2016 Conpet's share price increased by 39.5% and UEM increased its position in the company by 41.9%.

Thailand has remained largely unchanged at 6.8%, up from 6.4% and is now the fifth largest country investment. The Thailand Set Index was down by 6.5% and the Thai Bhat was up by 4.7%.

Eastern Water Resources Development and Management PCL ("Eastwater") shares were up by 18.3% in the year to 31 March 2016. Eastwater's strategic direction has been impacted by a lack of stability within the board of directors and senior management team, including the arrival (and subsequent resignation in May 2015) of the CEO who cut the Provincial Waterworks Authority's ("PWA") tariffs and embarked on a hefty investment program in backup pipeline infrastructure. This was notable given that the PWA is one of Eastwater's main customers, is its largest shareholder with a 40.2% stake and has board representation. Since the most recent change in management, Eastwater has announced plans to publicly list its tap water subsidiary, Universal Utilities Public Company Limited, on the Thailand Stock Exchange.

In its financial year to 31 December 2015 Eastwater's  raw water volumes grew by 5.3%, wholly driven by a 27.8% rebound in demand by the PWA following the tariff cuts implemented in the previous year. By comparison, raw water volumes sold to more profitable private customers and industrial estates fell by 2.2%, primarily reflecting slower economic growth particularly in the manufacturing and petrochemical industries. Tap water demand has remained strong, with volumes up by 10.9%. With effective tariffs for raw water falling by 0.6% and tap water tariffs up by 5.7%, group revenues grew by 3.0%, with EBITDA up by 5.8% and normalised earnings per share up by 1.8%. Dividends per share were increased by 4.4%. In the period under review UEM decreased its position in Eastwater by 16.3%.

The Middle East/Africa increased from 5.5% to 6.6% and is now the sixth largest country investment; included in this in the top twenty is The Egyptian Satellite Company ("Nilesat").

Nilesat is a holding that UEM has held for many years, during which time there has been a significant growth in its revenues, profits and cash balances, as well as a significant appreciation in Nilesat's share price.

Nilesat's owned satellite, plus capacity leased from Eutelsat, broadcasts over 1,000 TV channels, principally in Arabic, directly to over 50 million homes across the Middle East and North Africa. Nilesat broadcasts a mixture of pay TV and free-to-air content on behalf of broadcasters based across its broadcast footprint. Unlike the other satellite operators that UEM holds, which service a number of different broadcasting and telecoms applications, Nilesat is solely focused on broadcasting direct-to-home television services and is able to charge a premium for the services it provides.

Revenues for the year to December 2015, which are reported in US Dollars, increased by 6.5% and EBITDA rose by 6.8%. Lower depreciation and interest costs helped reported net profit increase by 23.9% for the year to December 2015. Cashflow remains strong and Nilesat had net cash balances of US$226m at the year end. This is equivalent to 43.0% of its US$526m market capitalisation on 31 March 2016.

Shares in Nilesat, which are listed in Cairo but priced in US Dollars, increased by 26.0% during the year to 31 March 2016. UEM increased its shareholding in Nilesat by 4.3% during the period.

The Philippines reduced from 7.9% to 6.3% and fell from fourth to seventh largest country investment, as there are a number of countries around 6% to 7%. The Philippine PSEi Index and the Philippine Peso were both down, by 8.5% and 0.3% respectively, in the year to 31 March 2016.

International Container Terminal Services, Inc. ("ICT") share price declined by 38.1% in the year to 31 March 2016. For its financial year to 31 December 2015, ICT saw consolidated container volumes increase by 5% due to the volume expansion at its new terminals in Mexico and Honduras, the favourable impact of consolidating its terminal in Yantai, China, as well as benefiting from the contribution from its newly acquired terminal in Qsar, Iraq. Total revenue decreased by 0.9% as it was impacted by foreign exchange weakness and less favourable volume mix, which reduced yield per container box from US$143 to US$135. EBITDA only increased by 1.6%, whilst normalised net income for the period was up by 2.6%. ICT continues to target portfolio expansion, with new greenfield projects in Colombia and Buenos Aires expected to come on line in 2016 and the Port of Melbourne in 2017.

UEM increased its position in ICT by 1.0% during the period under review.

Metro Pacific Investments Corporation ("Metro Pacific") is an investment holding company of infrastructure assets in The Philippines and has been held by UEM for over five years. Metro Pacific is focused on five separate business lines. It owns a 52.8% stake in Maynilad Water, the concessionaire for water and sewerage services in the west zone of Metro Manila. It has a 35.0% effective stake in Meralco, the largest electricity distribution utility in The Philippines, which is itself publicly listed. Through Metro Pacific Tollways Corporation ("MPTC") it has the concession rights to several toll roads in The Philippines, as well as minority stakes in toll roads in Thailand and Vietnam. It also has a shareholding in a group of hospitals, as well as a stake in the Light Rail Manila project due to come online in 2021. During the period under review, Metro Pacific has faced challenging political conditions whereby tariff increases for its toll road and water assets have been substantially delayed and referred for arbitration. Notwithstanding this, the assets have continued to deliver excellent growth and Metro Pacific has the potential to crystallise value from the partial sale or IPO of some of its subsidiaries.

In its financial year to 31 December 2015 Metro Pacific reported revenue growth of 10.1%, with adjusted EBITDA up by 11.9% and normalised earnings up by 20.2%. Billed volumes at Maynilad Water increased by 4.0%, which given the lack of tariff increase, was directly reflected in revenue growth. Meralco saw energy demand grow by 5.6%, which was only slightly diluted by effective tariffs down by 0.5%. At MPTC the daily traffic growth continued to be robust, up by 8.6%, further boosted by a 3.2% increase in effective tariffs. The number of beds at its hospital division also increased by 17.6%. Dividends per share fell by 11.6% as a special dividend paid in 2014 was not repeated. In the year to 31 March 2016 Metro Pacific's share price was up by 21.1% and UEM increased its position in the company by 6.1%.

Chile increased from 5.1% to 6.2% and is now the eighth largest country investment. The Chile IPSA index was up by 0.5% and the Chilean Peso was up by 3.9%.

Gasco S.A.'s ("Gasco") share price increased by 7.0% in the year to 31 March 2016. During this period there has been little progress with the draft of the new law which seeks to clarify both the asset base and allowable returns at Gasco's primary asset, Metrogas, Santiago's gas distribution monopoly. The main outstanding issue remains whether customer equipment installed by Metrogas could be included in the regulatory asset base. This is a significant factor in the cost of customer connections and the lack of certainty on this issue is an impediment to growth at the subsidiary. At present there seems to be little appetite from the government to resolve this issue, as it has been overtaken by other events including a government scandal which have resulted in other proposed reforms being shelved or watered down.

The most notable news for Gasco in the period under review was the announcement by its ultimate parent company, Gas Natural Fenosa and its major shareholder, the Perez Cruz family, of plans to demerge Gasco into two entities along the natural gas and LPG business lines. Following the split, Gas Natural Fenosa intends to launch a tender offer to increase its stake in Gasco Gas Natural to 100% at CLP3,200 per share and the Perez Cruz family also intends to increase its stake in Gasco LPG to 100% at CLP2,100 per share. The Investment Managers believe that the proposed offers do not fully reflect the value of the assets, however any decision to accept the tender offers will need to be assessed against the limited recourse given the existing controlling positions of the major shareholders and the potential impact on liquidity of shares post-tender.

In the year to 31 December 2015 natural gas volumes sold in Chile increased by 11.1%, primarily driven by a 38.6% increase in demand from lower-margin gas-fired thermal plants. LPG volumes sold fell by 2.6% due to continued competitive pressures in the Chilean and Colombian markets. Effective tariffs fell in both the natural gas and LPG operations, reflecting lower commodity pricing as well as lower allowable returns. As such group revenues fell by 22.1% and EBITDA decreased by 8.3%. Gasco did not repeat the special dividend paid out last year, with a resultant drop in dividends per share of 52.5%. In the period under review UEM increased its position in Gasco by 0.1%.

E.CL S.A. ("E.CL") is a relatively new investment for UEM, first entering the portfolio in early 2014. E.CL is the largest electricity generation company operating in the northern grid in Chile, primarily serving mining companies. It has installed generation capacity of 2,108MW, and also owns and operates 2,199km of transmission lines, a gas pipeline to Argentina and a port. The business is almost entirely dollarized, with long-term energy contracts signed in USD with limited exposure to commodity prices, which are passed-through to customers. Recently E.CL secured a major 15-year contract to supply electricity to distribution companies in the central grid starting in 2019. To support this contract it has commenced construction of a $1.1bn 375MW facility ("IEM"), as well as a $780m transmission line project ("TEN"), to connect the northern and central grids. E.CL is a 50% shareholder in the 600km transmission line, which attracts fully inflation-protected regulated returns. E.CL sold the other half of TEN to Red Electrica for $218m, with a gain on disposal of $187m.

In its financial year to 31 December 2015 E.CL reported electricity generation volumes up by 1.0% and energy sales up by 2.8%. This growth was more than offset by declines in tariffs which are heavily indexed to commodity prices, with group revenues down by 7.9%. However the impact on profitability was minimal given the lower input costs, which combined with an improved efficiency of generation mix, resulted in EBITDA growth of 1.1% and normalised earnings up by 16.5%. Dividends per share fell by 19.4% to the legal minimum payout given the company's forthcoming investment requirements in IEM and TEN. In the year to 31 March 2016 E.CL's share price increased by 12.1% and there was no change in UEM's position in its shares.

India increased from 2.9% to 4.6% mainly as a result of investments and is now the ninth largest country investment. The Indian S&P BSE Sensex Index was down by 9.4% and the Indian Rupee rose by 3.2% during the year to 31 March 2016.

SJVN Limited ("SJVN") is UEM's largest investment in India, a position initiated at the end of 2013. SJVN owns and operates 1,960MW of hydro and wind farm capacity in India. SJVN is 90% co-owned by the Government of India and the Government of Himachal Pradesh, the State where its flagship 1,500MW Nathpa Jhakri hydro plant, being the country's largest, is located. SJVN recently commissioned a second hydro 412MW facility on the same water system at Rampur and also operates a 48MW wind farm in Maharashtra. SJVN has several projects at various stages of development. These include two major hydro plants in Bhutan via a joint venture with the Government of Bhutan totalling 1,170MW, which has started forest clearance for access roads, a 1,320MW thermal plant in Bihar, a 16% stake in a 4,000MW solar park in Rajasthan, as well as other additional hydro projects in both India and Nepal. SJVN hydro facilities are fully regulated to allow a 16.5% return on equity.

In the six months to 30 September 2015 SJVN reported energy generation up by 17.7% due to a combination of good hydrology and all six turbines being in operation at Rampur. It is notable that Nathpa Jhakri reported record output equating to a load factor of 86.5%, well above seasonal operating levels. While this was partly offset by a regulatory tariff reduction at Nathpa Jhakri, the tariff for the Rampur project was re-based higher, resulting in an overall effective tariff increase of 5.2%. This resulted in underlying revenue and EBITDA growth of 23.8% and 24.7% respectively, with normalised earnings per share up by 43.7%. These figures exclude the impact of the collection of arrears for the 2009-14 period in its financial year ended 31 March 2015. Notwithstanding a net cash balance sheet and continued strong cash generation, interim dividends were unchanged on the previous year. In the year to 31 March 2016 SJVN's share price strengthened by 16.2% and UEM increased its position in SJVN by 47.8%.

PORTFOLIO GENERAL

Investment purchases continued at similar levels to recent years, with purchases of £96.1m (2015: £89.3m). However, realisations were much higher at £130.5m (2015: £87.3m) as UEM sold a number of Chinese investments into the H‑Share market rally in April 2015. Within the top twenty, UEM's most significant investments included £9.6m into Shanghai Airport, £5.5m into Yuexiu, £2.3m into SJVN and £2.2m into Conpet. Partial realisations in the top twenty include £30.8m from MYEG, £4.6m from Shanghai Airport and £4.2m from Eastwater.

Changes in the geographic split reflect the realisations plus relative market performance as discussed above. The main sector change has been an increase in weighting in electricity from 9.9% to 16.3%, airports from 9.4% to 13.1%, gas from 15.5% to 18.7% and toll roads down from 7.3% to 3.9%.

BANK DEBT

Bank debt decreased from £31.9m to £18.7m as a result of repayments over the twelve months to 31 March 2016. At the year end this debt was drawn as Hong Kong Dollars. The bank facility of £50.0m was renewed in April 2016 for two years to 27 April 2018, on similar terms to the existing facility at the time of renewal.

MARKET HEDGING

Having started the year with net derivatives of £1.3m, UEM ended the year with net derivatives contracts of £3.3m. The continuing good performance of the US S&P Index has undermined the carrying value of the hedged position and resulted in a moderate loss of £0.9m for the year to 31 March 2016. UEM ended the year with a net 575 S&P 500 put contract at approximately 1950 versus the market S&P Index of 2060, giving UEM US$57.5m protection against any fall in the S&P Index below this level.

REVENUE RETURN

Revenue income increased over the year by 45.9% from £14.6m to £21.3m. This reflects a yield on the average gross assets of 4.8% (prior year: 3.0%). As noted in UEM's interims much of this increase is as a result of Asiasat distributing its revenue reserves by way of dividends, with UEM receiving £7.4m in total from Asiasat.

Management fees and administration expenses were in line with last year at £1.1m (prior year £1.1m). The other expenses were again in line with prior years at £1.5m (prior year £1.5m).

Finance costs were lower at £0.1m from £0.3m the year before, reflecting lower borrowings over the year.

Taxation at £1.1m was in line with the prior year of £1.0m.

The net impact of the increased income and lower costs was an increased revenue return of £17.5m, up from £10.6m, an increase of 65.1% on last year.

CAPITAL RETURN

The portfolio lost £8.2m on capital accounts during the year reflecting weak markets. The total income loss on the capital return was £9.5m (2015: a gain of £45.3m).

Management and administration fees were lower at £1.9m (prior year: £5.0m) mainly as a result of no performance fee being payable in the year to 31 March 2016.

The lower borrowings resulted in lower interest costs, which reduced from £0.7m to £0.3m.

The net effect of the above was a loss on the capital return of £11.7m (2015: a gain of £39.5m).

Charles Jillings
ICM Investment Management Limited and ICM Limited
21 June 2016

Group Performance Summary

	31 March 2016	31 March 2015	Change % 2016/15
Total return(1) (annual) (%)	(0.5)	12.2	n/a
Annual compound total return (since inception)(2) (%)	11.4	12.4	n/a
Diluted net asset value per ordinary share (pence)	202.52	209.79	(3.5)
Ordinary share price (pence)	178.50	188.50	(5.3)
Discount (%)	(11.9)	(10.1)	n/a
Subscription share price (pence)	17.25	n/a	n/a
Earnings per ordinary share (pence)
- Capital	(5.50)	18.53	n/a
- Revenue	8.23	4.98	65.3
Total (pence)	2.73	23.51	n/a
Dividends per ordinary share (pence)
- 1st Quarter	1.525	1.525	0.0
- 2nd Quarter	1.625	1.525	6.6
- 3rd Quarter	1.625	1.525	6.6
- 4th Quarter(3)	1.625	1.525	6.6
Total (pence)	6.400	6.100	4.9
Equity holders' funds (£m)	436.6	447.4	(2.4)
Gross assets (£m)(4)	455.2	479.2	(5.0)
Ordinary shares bought back (£m)	3.0	-	n/a
Cash/(overdraft) (£m)	12.6	0.5	n/a
Bank debt (£m)	(18.7)	(31.9)	(41.4)
Net debt (£m)	(6.1)	(31.4)	(80.6)
Net debt gearing on gross assets (%)	1.3	6.6	n/a
Management and administration fees and other expenses
- excluding performance fee (£m)	4.5	4.6	(2.2)
- including performance fee (£m)	4.5	7.7	(41.6)
Ongoing charges figure(5)(%)
- excluding performance fee	1.1	1.1	n/a
- including performance fee	1.1	1.8	n/a

(1)     Total return is calculated based on diluted NAV return plus dividends reinvested from the payment date

(2)     Annual total return based on diluted NAV per ordinary share return, plus dividends reinvested from the payment date and return on warrants

converted on 2 August 2010

(3)     The fourth quarterly interim dividend has not been included as a liability in the accounts

(4)     Gross assets less liabilities excluding loans

(5)     Expressed as percentage of average net assets, ongoing charges comprise all operational, recurring costs that are payable by the

Company or suffered within underlying investee funds, in the absence of any purchases or sales of investments

Investment Objective and Policy

INVESTMENT OBJECTIVE

The Company's objective is to provide long-term total return through a flexible investment policy that permits it to make investments predominantly in infrastructure, utility and related sectors, mainly in emerging markets.

INVESTMENT POLICY AND RISK

The Company'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 in 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, utilities 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 Board and Investment Managers review the risk profile of the Company every six months. Agreed risk parameters are established and compliance is reviewed at quarterly board meetings.

The Company has the flexibility to invest in shares, bonds, convertibles and other types of securities, including noninvestment grade bonds and to invest in unlisted securities. The Company may also use derivative instruments such as American Depository Receipts, promissory notes, contracts for difference, financial futures, call and put options, and warrants for the purpose of efficient portfolio management.

The Company may, from time to time, actively seek to protect the Company's portfolio and balance sheet from major corrections. This would include foreign currency hedges, interest rate hedges, stock market index put and call options, and similar instruments.

UEM seeks to identify and invest in undervalued investments predominantly in the infrastructure and utility sectors, mainly in emerging markets. 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, including encouraging the optimisation of capital structures and business efficiencies. The investment team maintains regular contact with investee companies and UEM is often among its investee companies' largest international shareholders.

The Company aims to maximise value for shareholders by holding a relatively concentrated portfolio of securities and invests 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 and 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.

There will be no material change to the Company's investment policy without prior approval of the FCA and shareholders.

Principal Risks and Risk Mitigation

ICMIM was appointed as the Company's alternative investment fund manager with effect from 13 April 2015 and has sole responsibility for risk management subject to the overall policies, supervision, review and control of the Board.

The Board carefully considers the Company's principal risks and seeks to mitigate these risks through continual and regular review, policy setting, compliance with and enforcement of contractual obligations and active communication with both the Investment Managers and the Company's Administrator.

The Board applies the principles and recommendations of the UK Code on Corporate Governance and the AIC's Code on Corporate Governance as described on page 55 of the Report and Accounts. The Company's internal controls are described in more detail on page 48 of the Report and Accounts. Through these procedures, and in accordance with Internal Control: Revised Guidance for Directors on  the Combined Code (the "FRC guidance"), the Board has established an on-going process for identifying, evaluating and managing the significant risks faced by the Company and has regularly reviewed the effectiveness of the internal control systems. This process has been in place throughout the year under review and to the date hereof and will continue to be regularly reviewed by the Board going forward.

Most of the Company's principal risks are market-related and similar to those of other investment companies which invest primarily in listed investments. 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 27 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 balance sheets, 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 is aiming 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 ordinary 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 will buy back shares for cancellation if they are trading at a discount in excess of 10% and the Investment Managers agree 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 2015.

A fuller 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 year.

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 Investment Managers' and the Board's assessment of risk and reward. Whilst the use of borrowings by the Company 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 2016, net debt gearing on gross assets was 1.3%.

No material change in overall risk in year.

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 draw down is made and at each month end. The Board reviews compliance with the banking covenants at each Board meeting.

No material change in overall risk in year.

Key staff: loss by the Investment Managers of key staff could affect investment returns

The quality of the management team is a crucial factor in delivering good performance. There are training and development programs in place for employees and the recruitment and remuneration package has 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 year.

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 101 of the Report and Accounts. The Audit Committee monitors the performance of the service providers.

All listed investments are held in custody for the Company by JPMorgan Chase; the unlisted investments are held in custody by Bermuda Commercial Bank Limited (together, the "Custodians").

Following the appointment of J.P.Morgan Europe Limited ("JPMEL") as the Company's depositary services provider, JPMEL also monitors the movement of cash and assets across the Company's accounts.

The Audit Committee reviews the Administrator's annual internal control report which details the controls around the reconciliation of the Administrator's records to those of the Custodians. The Administrator reviews the control reports published by JPMorgan Chase and draws any issues to the attention of the Board.

The Board reviews operational issues at each Board meeting and the Audit Committee receives reports on the operation of internal controls, and the risk of cybercrime, as explained in more detail within Internal Controls on page 48 of the Report and Accounts. 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 year, 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.

VIABILITY STATEMENT

In accordance with the provisions of the UK Corporate Governance Code, published by the Financial Reporting Council in September 2014 (the "Code"), the Directors have assessed the prospects of the Company over the next three financial years. The Board has determined that a three year period is a reasonable time horizon to consider the continuing viability of the Company, given the current regulatory environment, as they do not expect there to be any significant change to the current principal risks and to the mitigating controls in place over this period.

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 emerging market 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 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 majority of the Company's investments comprise readily realisable securities which can be sold to meet funding requirements if necessary.

Based on the Company's processes for monitoring operating costs, share price discount, the Investment Managers' compliance with the investment objective, asset allocation, the portfolio risk profile, gearing, counterparty exposure, liquidity risk and financial controls, 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 three financial years.

Directors' Statement of Responsibilities

The Directors are responsible for preparing the annual report and accounts, which is required to include a Strategic Report, a Corporate Governance Statement, a Directors' Remuneration Report and a Report of the Directors.

The Directors must not approve the Group financial statements unless in their opinion they give a true and fair view of the state of affairs of the Company and the Group as at 31 March 2016 and of the results for the year then ended. The Directors are also responsible for ensuring that the annual report and accounts is fair, balanced and understandable and that the accounting records 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 the Group and enable them to ensure that the financial statements and the Directors' annual report on remuneration comply with IFRS. They have a 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.

In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• make judgments and estimates that are reasonable and prudent;

• provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

• state that the Company has complied with IFRS, subject to any material departures disclosed and explained in the financial statements.

The Directors of the Company, each confirm to the best of their knowledge that:

• the financial statements, which have been prepared in accordance with applicable Bermuda law and IFRS, as adopted by the European Union, on a going concern basis, give a true and fair view of the assets, liabilities, financial position and net return of the Company and Group;

• the annual financial report includes a fair review of the development and performance of the Company and the important events that have occurred during the financial year and their impact on the financial statements, including a description of the principal risks and uncertainties that it faces; and

• the financial statements and the Report of the Directors include details of any related party transactions.

Approved by the Board on 21 June 2016 and signed on its behalf by:

Alexander Zagoreos

Chairman

Group Income Statement

for the year to 31 March	2016				2015
		Revenue	Capital	Total	Revenue	Capital	Total
		return	return	return	return	return	return
		£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
(Losses)/gains investments		-	(8,213)	(8,213)	-	45,390	45,390
Losses on derivative instruments		-	(896)	(896)	-	(2,721)	(2,721)
Exchange (losses)/gains		(136)	(404)	(540)	38	2,623	2,661
Investment and other income		21,418	-	21,418	14,531	-	14,531
Total income		21,282	(9,513)	11,769	14,569	45,292	59,861
Management and administration fees		(1,102)	(1,870)	(2,972)	(1,117)	(5,014)	(6,131)
Other expenses		(1,496)	(19)	(1,515)	(1,534)	(23)	(1,557)
Profit/(loss) before finance costs and taxation		18,684	(11,402)	7,282	11,918	40,255	52,173
Finance costs		(118)	(274)	(392)	(299)	(698)	(997)
Profit/(loss) before taxation		18,566	(11,676)	6,890	11,619	39,557	51,176
Taxation		(1,056)	(24)	(1,080)	(1,000)	(42)	(1,042)
Profit/(loss) for the year		17,510	(11,700)	5,810	10,619	39,515	50,134
Earnings per ordinary share (basic) - pence		8.23	(5.50)	2.73	4.98	18.53	23.51
Earnings per ordinary share (diluted) - pence		8.23	(5.50)	2.73	n/a	n/a	n/a

The total column of this statement represents the Group's Income Statement and the Group's Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards ("IFRS"). The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies ("AIC") in the UK.

The Group 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 items in the above statement derive from continuing operations.

All income is attributable to the equity holders of the Company. There are no minority interests.

Company Income Statement

for the year to 31 March	2016				2015
		Revenue	Capital	Total	Revenue	Capital	Total
		return	return	return	return	return	return
		£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
(Losses)/gains on investments		-	(8,776)	(8,776)	-	42,887	42,887
Exchange (losses)/gains		(156)	(369)	(525)	2	2,539	2,541
Investment and other income		20,944	-	20,944	14,324	-	14,324
Total income		20,788	(9,145)	11,643	14,326	45,426	59,752
Management and administration fees		(1,071)	(1,870)	(2,941)	(1,104)	(5,014)	(6,118)
Other expenses		(1,413)	(19)	(1,432)	(1,438)	(23)	(1,461)
Profit/(loss) before finance costs and taxation		18,304	(11,034)	7,270	11,784	40,389	52,173
Finance costs		(118)	(274)	(392)	(299)	(698)	(997)
Profit/(loss) before taxation		18,186	(11,308)	6,878	11,485	39,691	51,176
Taxation		(1,044)	(24)	(1,068)	(1,000)	(42)	(1,042)
Profit/(loss) for the year		17,142	(11,332)	5,810	10,485	39,649	50,134
Earnings per ordinary share (basic) - pence		8.05	(5.32)	2.73	4.92	18.59	23.51
Earnings per ordinary share (diluted) - pence		8.05	(5.32)	2.73	n/a	n/a	n/a

The total column of this statement represents the Company's Income Statement and the Company's Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the AIC in the UK.

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 items in the above statement derive from continuing operations.

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

Group Statement of Changes in Equity

for the year to 31 March 2016
	Ordinary	Share		Other non-	Retained earnings
	share	premium	Special	distributable	Capital	Revenue
	capital	account	reserve	reserve	reserves	reserve	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 31 March 2015	21,324	3,796	204,587	11,093	203,380	3,181	447,361
(Loss)/profit for the year	-	-	-	-	(11,700)	17,510	5,810
Ordinary dividends paid	-	-	-	-	(3,252)	(10,154)	(13,406)
Shares purchased by the Company	(182)	(2,800)	-	-	-	-	(2,982)
Shares issued on exercise of subscription share rights	4	74	-	-	-	-	78
Issue cost of subscription shares	-	(299)	-	-	-	-	(299)
Balance at 31 March 2016	21,146	771	204,587	11,093	188,428	10,537	436,562

for the year to 31 March 2015
	Ordinary	Share		Other non-	Retained earnings
	share	premium	Special	distributable	Capital	Revenue
	capital	account	reserve	reserve	reserves	reserve	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 31 March 2014	21,324	3,796	204,587	11,093	167,117	2,318	410,235
Profit for the year	-	-	-	-	39,515	10,619	50,134
Ordinary dividends paid	-	-	-	-	(3,252)	(9,756)	(13,008)
Balance at 31 March 2015	21,324	3,796	204,587	11,093	203,380	3,181	447,361

Company Statement of Changes in Equity

for the year to 31 March 2016
	Ordinary	Share		Other non-	Retained earnings
	share	premium	Special	distributable	Capital	Revenue
	capital	account	reserve	reserve	reserves	reserve	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 31 March 2015	21,324	3,796	204,587	11,093	203,285	3,276	447,361
(Loss)/profit for the year	-	-	-	-	(11,332)	17,142	5,810
Ordinary dividends paid	-	-	-	-	(3,252)	(10,154)	(13,406)
Shares purchased by the Company	(182)	(2,800)	-	-	-	-	(2,982)
Shares issued on exercise of subscription share rights	4	74	-	-	-	-	78
Issue cost of subscription shares	-	(299)	-	-	-	-	(299)
Balance at 31 March 2016	21,146	771	204,587	11,093	188,701	10,264	436,562

for the year to 31 March 2015
	Ordinary	Share		Other non-	Retained earnings
	share	premium	Special	distributable	Capital	Revenue
	capital	account	reserve	reserve	reserves	reserve	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 31 March 2014	21,324	3,796	204,587	11,093	166,888	2,547	410,235
Profit for the year	-	-	-	-	39,649	10,485	50,134
Ordinary dividends paid	-	-	-	-	(3,252)	(9,756)	(13,008)
Balance at 31 March 2015	21,324	3,796	204,587	11,093	203,285	3,276	447,361

Balance Sheets

	GROUP		COMPANY
at 31 March	2016	2015	2016	2015
	£'000s	£'000s	£'000s	£'000s
Non-current assets
Investments	438,639	481,268	442,941	482,895
Current assets
Other receivables	2,686	3,082	2,676	3,082
Derivative financial instruments	3,636	1,839	-	-
Cash and cash equivalents	12,609	1,804	11,629	195
	18,931	6,725	14,305	3,277
Current liabilities
Bank loans	(18,657)	-	(18,657)	-
Other payables	(1,787)	(7,313)	(1,763)	(6,016)
Derivative financial instruments	(300)	(524)	-	-
	(20,744)	(7,837)	(20,420)	(6,016)
Net current liabilities	(1,813)	(1,112)	(6,115)	(2,739)
Total assets less current liabilities	436,826	480,156	436,826	480,156
Non-current liabilities
Bank loans	-	(31,862)	-	(31,862)
Deferred tax	(264)	(933)	(264)	(933)
Net assets	436,562	447,361	436,562	447,361
Equity attributable to equity holders
Ordinary share capital	21,146	21,324	21,146	21,324
Share premium account	771	3,796	771	3,796
Special reserve	204,587	204,587	204,587	204,587
Other non-distributable reserve	11,093	11,093	11,093	11,093
Capital reserves	188,428	203,380	188,701	203,285
Revenue reserve	10,537	3,181	10,264	3,276
Total attributable to equity holders	436,562	447,361	436,562	447,361
Net asset value per ordinary share
Basic - pence	206.45	209.79	206.45	209.79
Diluted - pence	202.52	n/a	202.52	n/a

Statements of Cash Flows

	GROUP		COMPANY
for the year to 31 March	2016	2015	2016	2015
	£'000s	£'000s	£'000s	£'000s
Cash flows from operating activities	12,048	7,718	11,703	7,609
Investing activities:
Purchases of investments	(97,303)	(87,749)	(99,017)	(88,972)
Sales of investments	130,611	85,255	129,087	85,255
Purchases of derivatives	(14,912)	(3,004)	-	-
Sales of derivatives	11,995	825	-	-
Cash flows from investing activities	30,391	(4,673)	30,070	(3,717)
Cash flows before financing activities	42,439	3,045	41,773	3,892
Financing activities: Ordinary dividends paid	(13,406)	(13,008)	(13,406)	(13,008)
Movements from loans	(14,133)	10,973	(14,133)	10,973
Cost of ordinary shares purchased	(2,982)	-	(2,982)	-
Issue cost of subscription shares	(299)	-	(299)
Proceeds from issue of shares	78	-	78
Cash flows from financing activities	(30,742)	(2,035)	(30,742)	(2,035)
Net movement in cash and cash equivalents	11,697	1,010	11,031	1,857
Cash and cash equivalents at the beginning of the year	526	(875)	195	(1,960)
Effect of movement in foreign exchange	386	391	403	298
Cash and cash equivalents at the end of the year	12,609	526	11,629	195

Comprised of:
Cash	12,609	1,804	11,629	195
Bank overdraft	-	(1,278)	-	-
Total	12,609	526	11,629	195

Notes

The Directors have paid a fourth quarterly interim dividend in respect of the year ended 31 March 2016 of 1.625p per ordinary share on 20 June 2016 to shareholders on the register at close of business on 3 June 2016. The total cost of the dividend, which has not been accrued in the results for the year to 31 March 2016, was £3,436,000 and will be paid from Revenue.

This statement was approved by the Board on 21 June 2016. It is not the Group's or Company's statutory accounts. The statutory accounts for the financial year ended 31 March 2016 have been approved and audited, and received an audit report which was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report. The statutory accounts for the financial year ended 31 March 2015 received an audit report which was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report.

The Report & Accounts for the year ended 31 March 2016 will be posted to shareholders in early July 2016. A copy is available to view and download from the Company's website at www.uem.bm. Copies may also be obtained during normal business hours from Exchange House, Primrose Street, London, EC2A 2NY.

By order of the Board

ICM Investment Management Limited, Secretary

21 June 2016

 

END

 

 

FR EASKFALDKEFF