Annual Report • Dec 21, 2021
Annual Report
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Annual Report and Accounts 2021
EGL's purpose is to provide attractive dividend income and long-term capital growth for shareholders by investing in listed utilities, environmental services and other economic infrastructure sectors globally. EGL targets a total return (including dividends) of 6–12% per annum over the longer term.
"To be considered for investment, companies must derive the majority of their revenues and cash flows from businesses which directly tap into structural growth opportunities such as the shift to renewable energy, the electrification of the economy, or the upgrade of water, waste and transport infrastructure."
26 September 2016 to 30 September 2021
NAV total return 11.3% per annum1 Share price total return 17.1% per annum1
EGL invests in companies whose core assets respond to essential needs, operate within solid regulatory frameworks, and have predictable and sustainable cash flows. These businesses are growing as they invest to accomplish vital infrastructure upgrades and sustainability objectives.
Infrastructure globally requires major investment to keep pace with projected GDP growth, the energy transition and adoption of renewables, and to meet sustainable development goals. The policy environment is becoming much more supportive, in view of increasingly ambitious government and corporate sustainability commitments, just as renewable energies have become the cheapest sources of electricity in most areas of the world.
Contracted cash flows
"We aim to strike a balance between growth and income as sources of equity returns. Therefore, we select companies that combine attractive growth profiles with asset-backed, contracted or regulated cash flows, providing visibility on future shareholder returns."
The electric power sector is undergoing a profound transformation driven by the decarbonisation and electrification of energy demand.
Utilities are at the forefront of this multi-decade transition. By adapting and, in many cases, substantially overhauling their business models to accommodate new greener technologies and decentralised power sources, utilities are bound to be major beneficiaries of structural growth and attractive returns on significant capital investments.
"We generally invest in companies with earnings growth and dividends supporting a total return well within our targeted 6-12% range, and always aim to achieve the best possible entry point.
As a result, we periodically screen our investment universe for stocks suffering from unjustified value dislocations. We also actively manage positions around periods of under- and overvaluation to optimise our cost base."
We identify and invest in companies which are on the verge of substantial improvements in their growth trajectories, whether through transformational transactions (acquisitions, disposals or spin-offs) or more gradual shifts in capital allocation. These opportunities can offer uniquely attractive returns.
(data as at 30 September, 2021) %
| Europe | 39 |
|---|---|
| North America | 39 |
| UK | 11 |
| Other OECD | 6 |
| Emerging markets | 5 |
Represents the aggregate rating of EGL's holdings as of 9/30/2021. Certain information ©2021 MSCI ESG Research LLC. Reproduced by permission; no further distribution permitted.
Ecofin Global Utilities and Infrastructure Trust plc Annual Report and Accounts 2021
as at 30 September, 2021
Ecofin Global Utilities and Infrastructure Trust plc (the "Company") is an authorised UK investment trust whose objectives are to achieve a high, secure dividend yield on a portfolio invested primarily in the equities of utility and infrastructure companies in developed countries and long-term growth in the capital value of the portfolio while preserving shareholders' capital in adverse market conditions.
| Summary | As at or year to 30 September 2021 |
As at or year to 30 September 2020 |
|---|---|---|
| Net assets attributable to shareholders (£000) | 196,547 | 156,393 |
| Net asset value ("NAV") per share1 | 195.11p | 164.60p |
| Share price (mid-market) | 198.00p | 159.25p |
| Premium/(Discount) to NAV1 | 1.5% | (3.3)% |
| Revenue return per share | 5.98p | 4.97p |
| Dividends paid per share | 6.60p | 6.55p |
| Dividend yield1,2 | 3.3% | 4.1% |
| Gearing on net assets1,3 | 12.5% | 14.8% |
| Ongoing charges ratio1,4 | 1.43% | 1.48% |
Please refer to Alternative Performance Measures on page 65.
Dividends paid (annualised) as a percentage of share price.
Gearing is the Company's borrowings (including the net amounts due from brokers) less cash divided by net assets attributable to shareholders.
The ongoing charges ratio is calculated in accordance with guidance issued by the Association of Investment Companies ("AIC") as the operating costs (annualised) divided by the average NAV (with income) throughout the period.
| Performance for periods to 30 September 2021 (all total returns in £) |
1 year % |
3 years % |
5 years % |
Since admission5 % |
Since admission % per annum |
|---|---|---|---|---|---|
| NAV per share 6 | 22.9 | 52.4 | 73.4 | 71.2 | 11.3 |
| Share price 6 | 28.9 | 80.1 | 105.3 | 120.2 | 17.1 |
| Indices 6, 7 | |||||
| S&P Global Infrastructure Index | 17.1 | 14.5 | 23.1 | 22.1 | 4.1 |
| MSCI World Utilities Index | 3.5 | 23.3 | 37.0 | 34.1 | 6.0 |
| MSCI World Index | 24.1 | 42.5 | 88.2 | 88.0 | 13.4 |
| FTSE All-Share Index | 27.8 | 9.6 | 29.8 | 29.6 | 5.3 |
| FTSE ASX Utilities Index | 16.5 | 32.7 | 7.5 | 8.9 | 1.7 |
Source: Bloomberg, Ecofin
The Company was incorporated on 27 June, 2016 and its investment activities began on 13 September, 2016 when the liquid assets of Ecofin Water & Power Opportunities plc ("EWPO") were transferred to it. The formal inception date for the measurement of the Company's performance is 26 September, 2016, the date its shares were listed on the London Stock Exchange.
Total return includes dividends paid and reinvested immediately. Please also refer to the Alternative Performance Measures on page 65.
The S&P Global Infrastructure Index and MSCI World Utilities Index are the global sector indices deemed the most appropriate for performance comparison purposes. The Company does not have a formal benchmark index. The other indices are provided for general interest.
The end of the last financial year marked EGL's fifth anniversary and I am delighted to report that your Company's performance has been strong. The Company's net asset value (NAV) per share increased by 18.5% during the year to 30 September, 2021 and, including the reinvestment of dividends paid, the total return was 22.9%. The price of the Company's shares increased by 24.3% and the total return on the shares was 28.9%. In sterling terms, the MSCI World Utilities Index and the S&P Global Infrastructure Index recorded total returns of 3.5% and 17.1%, respectively.
Your Company's five year performance record is testament to the attractions of its investment universe and to the capabilities of our specialist investment manager. Our purpose is to provide an attractive dividend income and long-term capital growth for shareholders by investing in listed utilities, environmental services and other economic infrastructure sectors globally. Our goal is to deliver 6-12% per annum (total return) over time. From launch on 26 September, 2016 to 30 September, 2021 NAV total return averaged 11.3% per annum and share price total return averaged 17.1% per annum.
The Company last increased its annual dividend rate (to 6.60p per share) in December 2019, just before the COVID-19 pandemic began. We are pleased to have maintained that rate even though investment income fell in the initial months of the pandemic. It subsequently recovered sharply and, with expenses under tight control, our revenue return per share increased by 20.3% in the year to 30 September, 2021.
In view of this progress and expected continuing growth in investment income we have decided to increase the quarterly dividend to 1.85p per share (7.4p per annum), effective from the interim payment at the end of February 2022.
The Company is taking every opportunity to issue new shares (at a premium to NAV) in response to investor demand. During the financial year, 5.725 million new shares (worth £10.6 million) were issued and another 355,000 shares have been issued since the end of September. We want to continue to increase the size of the Company because we believe that this will boost liquidity in the shares, thereby fostering participation by new investors; this will also reduce cost ratios.
Our investment manager, Ecofin, carefully considers environmental, social and governance issues in its investment process. These standards and risk factors are assessed at every stage of decision making, as outlined on page 9. Ecofin uses its regular meetings with companies to challenge management teams about their adherence to best practices.
The Company's annual general meeting will be held on Wednesday, 2 March, 2022 at The Clermont, Charing Cross, Strand, London WC2N 5HX at 2.30pm and will include a presentation from the Investment Manager.
At the time of writing the situation with respect to COVID-19 is uncertain. In the event that it is necessary to change the AGM arrangements the Company will update shareholders through an announcement to the London Stock Exchange.
The Board strongly encourages all shareholders to exercise their votes in respect of the meeting in advance by completing and returning their proxy forms and appoint the Chairman of the meeting as proxy with voting instructions. This will ensure votes are registered. In addition shareholders are encouraged to raise any questions in advance with the Company Secretary via email to [email protected].
Since 30 September (to 14 December), the Company's NAV has increased by 7.8% and the share price by 0.2% (both on a total return basis). Economic recovery has been strong this year but pandemic-related manufacturing and supply chain disruptions are resulting in inflationary pressures. These risk curtailing GDP growth and margins for some companies unable to pass through cost increases. Whether these cost pressures prove transient or persistent will make a difference for the course of market interest rates, which are progressively rising from decade lows to levels closer to long-term inflation expectations. Over the medium term, inflationary pressures should have a neutral impact on most infrastructure owners, or even a positive one for companies where revenues are directly linked to inflation indices.
Your Company is investing in economic infrastructure businesses with long-term structural growth drivers and opportunities for sustained profitable development, as described in the investment manager's report. These companies continue to deliver solid results and have generally modest equity valuations, which is contributing to a flurry of M&A activity. There has been a distinct shift in gear with decarbonisation and environmental protection now top of mind for policy-makers and corporates, at a time when better technological solutions are becoming more available and, most importantly, increasingly cost efficient. The Company's portfolio companies are the global leaders in delivering these solutions and stand to benefit from accelerating structural growth as a result.
In addition to the potential for capital growth, our investment manager anticipates continuing growth in income from the portfolio which would enable further dividend increases in future years.
David Simpson Chairman 20 December, 2021
Economic optimism and equity markets increased for a large part of EGL's financial year with vaccine roll-outs, the relaxation of COVID-19 restrictions and additional central government stimulus packages. President Biden's inauguration and early priorities, including around fighting climate change and rebuilding infrastructure with sustainability prioritised, encouraged investors too, despite high equity valuations in many areas.
Sector leadership in equity markets changed abruptly as we entered calendar 2021 and the focus became the normalisation of activity levels, business operations and earnings, especially in those sectors which had been most bruised during the height of the pandemic in 2020. In EGL's investment universe, the more cyclical transportation infrastructure and waste management stocks were strong performers. 'Clean and green' equities, in contrast, were notable underperformers despite the positive tailwind of massive policy support and an abundance of positive catalysts for long-term growth. A degree of mean-reversion was perhaps due after the dramatic outperformance for the clean energy universe – which was largely unaffected by COVID – in 2020 and the attendant very large new ESG fund inflows.
Another factor pressuring performance for utilities, particularly renewables as well as other long duration business models, has been higher inflation and the increase in market interest rates. Shares in Enel, Iberdrola, RWE, Brookfield Renewable and NextEra Energy all reacted to the strength in commodities and freight prices threatening to squeeze renewables developer returns in the near term. Notwithstanding these headwinds, we maintained our conviction as renewables' economic competitiveness vis-à-vis fossil fuel alternatives continues to improve. This should allow large renewables developers to exert pricing power and defend future project returns.
We see encouraging signs that market prices for power price agreements (PPAs) are moving higher to accommodate increased capital expenditure. In most cases, because project returns are earned over a 20–30 year useful life, the pricing differential required to offset the cost increases is modest. For example, a 50% rise in the price of copper might only require a 3-5% increase in the price of the next PPA to keep expected project returns constant. Simultaneously, other factors such as improving productivity and efficiency of equipment as well as economies of scale continue to improve the economics of renewable energy.
Yet, the most significant factor in support of greater and faster investments in renewables is the higher market price for electricity. This is due to a variety of factors including recovering – or, in the case of China, even materially increasing – power demand, rising prices for coal and natural gas, poor hydro conditions in key regions such as Chile, Brazil and southern China, poor wind conditions in Western Europe, as well as a significant increase in the cost of carbon credits in Europe and Canada. This substantially improves the competitiveness of renewables. With a full-blown energy crisis underway by EGL's financial year-end, governments are seeking to accelerate the development of renewables and reduce the dependence of energy systems on highly volatile fossil fuels.
Persistently higher fuel commodity prices will increase substitution and conservation over time, both of which are needed to achieve climate goals, but in the near-term such dramatically higher energy prices are increasing the inflationary pressures. This is not only proving beneficial to power producers, which have outperformed this year in expectation of expanded margins on the back of higher realised prices, but should also over time benefit those regulated utilities operating in real regulatory environments (i.e., whose regulatory asset values are adjusted higher by inflation with a lag).
EGL's renewables-focussed utilities holdings started to perform again more recently and portfolio returns were also helped by the return of take-over activity in the listed infrastructure space. Portfolio holdings Covanta (US) and Spark Infrastructure (Australia) were both bid for within months of each other, an unsurprising turn of events given their quality businesses and the deep undervaluation of listed infrastructure compared to private markets. With cash-rich private equity firms continuing to look for investment opportunities in listed companies and larger public groups seeking to unlock hidden value, we expect further deals in the months and years ahead.
EGL's portfolio returns substantially exceeded those of comparable global indices during the financial year. Performance was broadly unaffected by the acute underperformance of utilities and renewables, thanks to successful stock selection and geographical diversification. EGL's NAV total return was 22.9%. While we do not manage the portfolio by reference to any single index, performance is generally measured against the S&P Global Infrastructure Index, which comprises utilities and economic infrastructure (like EGL's portfolio), and the MSCI World Utilities Index, which returned 17.1% and 3.5%, respectively, during the year in sterling.
Actively managed leverage was helpful to returns, contributing +4.7%, but sterling's strength against the US dollar (+4.3%) and Euro (+5.6%) produced a slightly larger drag on the NAV of -5.2%.
Leverage provided a small boost to the revenue account too. Although income from investments held up comparatively well in 2020, it increased 23.7% during 2021 helped by a normalisation of dividends from certain French holdings which had suspended shareholder remuneration last year. Also, dividend flows from portfolio holdings were generally strong, supporting our longer term expectation of 5-7% per annum growth in income.
The stock picking that allowed EGL to outperform its sectors included:
The share prices of China Longyuan Power and China Suntien Green Power increased by 303% and 338%, respectively. China Suntien's shares have been re-rating to better reflect the value of and growth prospects for the business as China incrementally pivots to cleaner electricity generation. It has a sustainable competitive advantage from a low carbon footprint and lower cost of power generation relative to rapidly rising power prices in China. Despite equally strong performance, Longyuan's three main catalysts remain on the horizon: an A-share listing potentially allowing a lower cost of capital; asset swaps with its parent such that Longyuan receives additional renewables projects while shifting its coal-fired assets to its parent; and a reduction in government incentives.
Covanta, a US waste-to-energy company, was bid for by EQT Infrastructure. Ecofin, which held approximately 1.7% of Covanta's outstanding shares across client portfolios, wrote to the company's board, which recommended that shareholders support the terms of the deal, twice to explain why we believed the bid significantly undervalued Covanta, which stands at the very outset of an earnings inflection, and to relay our dissatisfaction that the board did not consult with shareholders during the strategic review. We voted against the offer, but the resolution passed and the deal will close before year-end. The holding was a highly positive contributor to the NAV this year.
At the beginning of the fiscal year, another environmental share, Veolia, was reintroduced into the portfolio after a long-awaited bid for its main competitor Suez. The bid succeeded as expected and the shares rose by approximately 75% from our purchase level, buoyed by improving fundamentals driven by increased global economic activity and the increasingly tangible prospect of a 40% medium-term accretion from the deal.
Spark Infrastructure received what we believe is an attractive takeover offer at a fair premium, leading the stock to rise over 45% during the fiscal year. The investment fund, which owns a major proportion of Australia's electricity infrastructure, received a bid from a consortium including the large private infrastructure investors KKR and Ontario Teachers' Pension Plan. We await the details on the vote but are supportive in principle.
Drax and SSE performed very well in a poor year for many utilities. Drax was just outside the 'top 10' by year-end as we had increased the position significantly earlier in the year. The shares performed strongly on the back of rising power prices in the UK. Our forecasts for the longer term profitability of the biomass supply business and BECCS (bioenergy with carbon capture and storage) prospects are materially more optimistic than consensus. SSE's share price has been underpinned by press reports that activist investor Elliott is building a stake to push for a value-unlocking reorganisation of the group. The company's fundamentals are strong, with renewables generation resources (wind and hydro) set to expand considerably, coupled with above-average growth rates in the electricity networks business. This is sufficient to justify sector-leading returns in the medium term.
Exelon, a major investor in grid modernisation and power infrastructure in the US, saw its shares benefit from discussions surrounding policy support for its nuclear fleet – the largest source of zero-carbon electrons in the US market – from both State and Federal legislators. Rising electricity prices are increasingly positive for Exelon's fundamentals, giving the company the opportunity to lock in higher prices in the mediumterm. The upcoming separation of the business into two entities – one focused on generation and one focused on utilities – has also been supportive to share price performance.
Finally, NextEra Energy continued to contribute positively to the NAV as the largest position in the portfolio through impeccable execution, reporting solid quarterly results with management conveying an optimistic message about the company's growth prospects, with limited impact from equipment cost inflation.
Outside China, shares in renewables-focussed utilities were under pressure for much of the year. Enel, Iberdrola, EDF, RWE, Endesa, Brookfield Renewable and TransAlta Renewables, all prominent holdings in our portfolio, underperformed. Sectorwide concerns centred on developer returns in an environment of higher inflation and interest rates were exacerbated by an array of idiosyncratic issues. The Spanish government's move in September to tax 'surplus' profits for utilities for six months hurt the share prices of Iberdrola, Endesa and Enel beyond that justified by the likely impact of the temporary measures, only for most of the impact to be reversed by the beginning of November. The French government's inconclusiveness on the restructuring of EDF hurt its share price performance throughout the year, offering only limited room for performance despite dramatically improved fundamentals. Elections in Germany, which to a large extent delivered continuity vis-à-vis the outgoing administration albeit with a notably larger role to play for the Green Party, detracted from RWE's performance by raising concerns that a faster closure of the company's coal plants may negatively impact profitability.
The Company
These large European renewables majors have received more favourable attention in recent months and their shares have started to recover.
As the year progressed, we gradually rebalanced the portfolio with four guiding principles:
Some holdings were reduced or sold during the year to accommodate the re-positioning. The largest of these was A2A, Italy's largest municipal utility, which had been added to the portfolio in November 2020. Our expectation of a significant increase in its growth ambitions was duly met at the company's capital markets day in January 2021 and the business continued to benefit from the rise in Italian power prices. The shares appreciated significantly, and the position was sold in June to lock in profits after the shares reached a level that was reasonably close to our fundamental valuation.
We lost conviction in Edison International, which continues to trade at attractive value but not getting the benefit of the doubt from investors around wildfire risks. Towards the end of the fiscal year, we reduced the holdings in China Longyuan and China Suntien Green as a risk management exercise rather than a reflection of a change in heart for their strong prospects. This proved particularly well-timed considering the shares' performance over the subsequent couple of months. We also reduced the holdings in renewables major Brookfield Renewable and exited Algonquin Power & Utilities, which have been disappointing stocks of late yet remain richly valued.
This renewables exposure was replaced through our investment in Transition, which was listed in Paris in June with a mission to invest in the energy transition, and the IPO of Acciona Energia, a 100% pure renewable energy company listed on the Spanish exchange with 11GW of renewables in operation, heading for 20GW by 2025, and a very attractive valuation.
In the Interim Report we forecast that income from investments would increase this year by 15%; the final tally shows +23.7%. While we anticipated a strong year-over-year increase in cashflows and dividends for the portfolio constituents given the relatively low base of 2020, this was boosted by the resumption of payments from a few companies forced to suspend payments during the pandemic. The NAV also benefitted from a special dividend of £1.28m from Pennon, funded by the disposal of its waste business, which was categorised as a 'return of capital' rather than revenue. Over the coming years we expect the growth in income from investments in the portfolio to revert to approximately 5-7% per annum.
The level of gearing averaged 14% during the year. Borrowings were stepped up to approximately 16-17% early in 2021 and maintained until September, when leverage was scaled back following strong performance. At year-end gearing was 12.6%, although this measure included a 1.9% quasi-cash position in Transition, as well as two companies (Covanta and Spark Infrastructure), together 5.9% of the portfolio, which are subject to take-over offers. The portfolio yield was 4.2% as at 30 September, 2021.
Extreme weather events, environmental disasters and spiking energy costs this year are more than ever pushing the public's attention to the increasing impact of climate change on our daily lives. Regulation and attitudes (including investor and consumer preferences) point to an increasingly constructive context for rapid progress towards sustainability targets, but significant action is both needed and likely.
Even before COP26, there were several favourable policy developments for infrastructure modernisation and development and more have been announced since. Xi Jinping reiterated China's target of carbon neutrality by 2060 and added that China would increase support for other developing countries in expanding low-carbon energy and not build new coal-fired power projects abroad. The EU released its "Fit for 55" plan with specific 2030 targets for renewables across the energy, building, industry and transport sectors. Japan issued a new draft energy policy with much higher renewable energy generation targets, particularly focused on offshore wind. Progress on the US Infrastructure Bill and Budget Reconciliation was slower than anticipated, but many measures announced so far would be very supportive of energy transition end-markets.
These serve as positive catalysts for EGL's sectors, at a time when government policy, once the main and often only driver of energy transition investments, is being complemented by increasing corporate demand for solutions to improve the sustainability of their business models. Companies are turning to renewables to lock in their electricity cost base, gaining the double benefit of long-term cost visibility and reducing or eliminating their carbon footprint. While the smaller renewables developers may struggle to tap into this opportunity due to delays and cost increases, the larger utilities should emerge stronger, with increased demand for their renewable output and more projects to choose from.
We remain confident that new investment in the renewables industry will maintain historic levels of returns going forward. Renewables remain the lowest cost option for new electricity development almost everywhere, and the speed and scale of substitution continues to accelerate. Decarbonisation of the grid with these resources will be a multi-decade undertaking. Supply constraints forcing price increases for natural gas, coal, oil and electricity will not derail and instead should accelerate the (not always smooth) transition underway.
We believe that EGL's portfolio can deliver solid growth in a variety of economic and market environments. We continue to find opportunities, with companies in the portfolio and on our watchlists proving their resilience. The development of their pipeline of opportunities provides investors with greater visibility on cash flow growth over the coming years. Valuations in our sectors still largely reflect historical norms rather than the substantial growth we envisage given the course of policy and corporate capital allocation plans, and they became increasingly attractive during the year as the broader market extended its rally. We are seeing the impact of well-funded private equity investors bidding for listed infrastructure companies and expect corporate activity to continue and even accelerate in the coming years. With government policy, public opinion and corporate governance all pushing in the same direction, the underperformance of renewable energy equities earlier this year should prove to have been nothing more than a short-term setback.
20 December, 2021
The Company's Board believes that analysis of ESG factors and an active approach to stewardship are essential elements of the investment management process and contributors to superior financial returns over the longer term. These principles are set out on pages 21 and 24. This page describes the approach to ESG and stewardship pursued by Ecofin Advisors Limited on behalf of the Company.
Ecofin is a specialist investment manager with wide-ranging expertise across sustainable infrastructure, the energy transition, water & environment, and social impact, managing portfolios designed to deliver strong risk-adjusted returns as well as a positive impact on the environment, society and its communities. Understanding ESG profiles and mitigating ESG risks is a core part of our philosophy and investment process and has been pivotal to the delivery of attractive risk-adjusted returns. More details about Ecofin's investment stewardship process can be found on our website at www.ecofininvest.com.
Analysis of ESG issues is integrated into the life cycle of our investment activities including due diligence and ongoing portfolio management.
The Company retains an unrestricted investment universe, allowing us to invest in both best-in-class sustainability stocks and companies with legacy asset portfolios preventing them from featuring in most ESG funds but with a clear trajectory to significantly improve their emissions profile. We deep-dive into the sustainability credentials of each company considered for inclusion in the portfolio, and analyse specific environmental, social and governance risks insofar as they would be expected to have a material impact on shareholder returns.
The investment team's frequent contact with industry management teams ensures we develop and maintain strong relationships with corporates, allowing a more appropriate reflection on the risk and reward of various investments. This allows us to complement quantitative models and analysis with a qualitative assessment of each company's managerial actions concerning both strategic and sustainability decisions.
Ecofin also believes that shareholders can contribute strongly to the dialogue with a company through proxy voting. We vote on every resolution for every company's general meeting or proxy, without exception, and always vote in the best interest of shareholders, irrespective of the company's recommendation. This is especially true for any item that could impact ESG considerations in a negative way, such as matters that could affect corporate governance and climate change, reduce the protection of minority holders' interests, or lead to management compensation being misaligned with the interests of shareholders. Progress is tracked against our objectives. In exceptional instances we write to a company's board to express our views.
Ecofin partners with CarbonAnalytics to verify and measure carbon emissions for portfolio companies. The Company's portfolio screens well in terms of carbon footprint (i.e. tonnes of CO2 emitted per megawatt hour of electricity generation): electricity generators in the portfolio generally have CO2 emissions which are significantly below both the average emissions of their relevant electricity grids and the average of companies included in the global utilities index.
As mentioned, we do not set firm limits on fossil fuel exposure and invest in companies transitioning to better growth and ESG profiles (rather than permitting only 'clean' stocks). Nevertheless, at a portfolio level our approach delivers an emissions profile which is well within the spectrum of typical impact funds. As of 30 September, the Company's portfolio's electricity generators had CO2 emissions which were 25% below the average emissions of the electricity grids in which the companies operate, largely because of a relatively small reliance on coal (only about 10% of the mix), and 21% lower than those of companies in the global utilities index (as measured in tCO2/\$million invested). On a forward-looking basis, specifically due to our focus on companies in transition, the portfolio's emissions profile looks even better, with almost all companies having committed to both a full phase-out of fossil fuels in the medium term and a net zero emissions target in the long run.
| 30 September, 2021 | Share of electricity generation from coal |
Share of electricity generation from renewables |
CO2 emissions compared to relevant grid |
tCO2 per \$mn invested |
|---|---|---|---|---|
| EGL portfolio | 10% | 31% | -25% | 581 |
| MSCI World | ||||
| Utilities Index | 18% | 20% | -12% | 733 |
Represents the aggregate rating of EGL's holdings as of 9/30/2021. Certain information ©2021 MSCI ESG Research LLC. Reproduced by permission; no further distribution permitted.
20 December, 2021
as at 30 September, 2021
| NextEra Energy Largest producer globally of wind and solar energy |
NextEra Energy is renowned for its sustainability credentials, the \$90 billion invested in clean energy infrastructure over the last decade and its operational excellence. Its principal subsidiaries are Florida Power & Light, a rate-regulated electric utility serving approximately 5 million customers in Florida, and NextEra Energy Resources which, with its affiliated entities, is the largest generator of |
|---|---|
| 5.5% (30 September, 2020: 5.7%) |
energy from wind and sun in the world. NextEra Energy also develops and builds battery storage projects and is involved in pipeline infrastructure management. NextEra spent \$14 billion on capital projects in 2020 and its target to build between 23GW and 30GW of incremental renewables capacity by 2024 represents the largest near-term renewables development plan in the world. We expect the long-term dividend per share growth rate of nearly 10% per annum to continue to be achieved by this highly experienced renewables specialist. www.nexteraenergy.com |
| Enel Largest integrated electric utility globally |
Since the early 2000s, Enel, Italy's largest producer, distributor and supplier of power, has pioneered the development of renewable energy technology, focusing on wind and solar. With the acquisition of Endesa in 2007, Enel entered the Spanish market as the largest utility in the Iberian |
| 3.5% (30 September, 2020: 5.1%) |
Peninsula and gained significant exposure to Latin American markets which now constitute an important region for growth. Today, Enel is the world's largest utility by customer base (over 70 million clients), the world's largest renewable energy operator (circa 50GW of capacity) and the world's largest electricity network operator (over 70 million end-users). Approximately 75% of Enel's EBITDA is regulated or quasi-regulated, with a strong focus on renewables, electricity network infrastructure and customer services. While it continues to operate thermal power plants, all remaining coal exposure will be phased out early, by 2027. Enel expects to reduce its scope 1 emissions by 80% by 2030 and become fully carbon-neutral by 2050. Thanks to its leading position in the energy transition and an infrastructure investment program targeting renewables capacity and networks, Enel aims to deliver sector-leading earnings and dividend growth over the coming decade, targeting a double-digit annual total shareholder return until 2030. www.enel.com |
| Exelon Diversified clean energy generator and supplier |
As the owner of nearly 19,000 MW of zero-carbon generation capacity at 23 nuclear units Exelon has the cleanest generation fleet of the largest 20 investor-owned power producers in the U.S. and produces 11.1% of U.S. zero-carbon electricity supply. Exelon's six utilities serve 10 million electric and gas customers in 48 states and the company is involved in every part of the energy value |
| 3.5% (30 September, 2020: 3.0%) |
chain: power generation (predominantly nuclear and natural gas but also hydro, wind and solar), competitive energy sales, as well as rate-regulated transmission and distribution networks. Its subsidiaries are involved in grid modernisation projects and the electrification of transportation to uphold states' commitments to reduce emissions in line with the Paris Climate Accord. Exelon invested \$6.6 billion in infrastructure and systems in 2020 and nearly \$27 billion is planned for 2021-2024, targeting resilience and reliability and to support the integration of renewable energy resources. This should lead to attractive cash flow and dividend growth metrics. www.exeloncorp.com |
| Iberdrola Leading multinational integrated electric utility |
Iberdrola, the world's largest producer of wind power, is an integrated utility operating across generation, distribution and commercialisation of electricity in the Eurozone, the U.S., UK, Mexico and Brazil. In Europe, Iberdrola is the second largest generator in Spain (its home market) with a portfolio largely focused on zero-carbon fuels (wind, hydro and nuclear). In the UK, Iberdrola owns Scottish |
| 3.5% (30 September, 2020: 4.5%) |
Power, one of the country's largest players in offshore wind and the operator of electricity transmission and distribution networks for the southern half of Scotland. In the U.S., Iberdrola holds an 81% stake in Avangrid, making it the third largest wind energy producer in the U.S. and a distributor of electricity and gas in several northeastern states. Its Brazilian operation, Neoenergia, provides electricity to over 34 million people from 85% renewable sources. Iberdrola's strategy is overwhelmingly focused on growing renewable generation across offshore and onshore wind as well as solar PV, and the company recently undertook acquisitions in France, Australia, Japan and Sweden to increase its global footprint. |
| www.iberdrola.com |
RWE
Leading global renewable energy generator
(30 September, 2020: 4.6%)
3.4%
Covanta Waste-to-energy and waste management
3.0%
(30 September, 2020: 1.7%)
UK electricity generator and distributor
3.4% (30 September, 2020: 3.4%) SSE's business is focused on the generation and supply of (largely renewable) electricity in the UK and Ireland. The company also owns and operates the electricity transmission and distribution networks in northern Scotland. Already the UK's leading renewable electricity generator with a portfolio of circa 4GW, by 2030 SSE intends to quadruple its wind power output and treble its overall output from renewable resources, leveraging an 8GW pipeline of development opportunities, more than half of which is in offshore wind. It is currently building the world's largest offshore wind farm as well as the UK's largest hydro power plant in 30 years which, upon completion, will double the country's hydro storage capacity from 1.5GW to 3GW. To further monetise its expertise in renewables, SSE is stepping up its international competitive efforts with the aim of securing incremental opportunities in offshore wind outside of its home market, with partnerships established to compete in the US, Japan, Spain, Poland and several other markets. SSE's electricity networks in northern Scotland are also set be among the fastest growing in Europe, as the UK pursues an ambitious offshore wind policy to reach 40GW of capacity by 2030 (vs 10GW installed today). SSE's commitment to real dividend growth remains at the core of its financial targets.
www.sse.com
RWE, Germany's largest electricity producer, has through a recent acquisition dramatically reshaped its portfolio to become one of the world's largest renewable energy producers and the second largest player in offshore wind. Following completion of the deal in late 2019, RWE is committed to a renewables-focused growth strategy, leveraging its existing solar and wind portfolio of nearly 10GW as well as its expanding pipeline of development projects which now totals about 34GW. RWE's accelerating growth in renewables is being accompanied by a managed phase-out of its legacy fleet of coal power plants. The company's agreement with the German government grants RWE €2.6 billion in compensation, enough to offset most of the costs and liabilities associated with the coal phase-out and incorporates an option to eventually externalise the coal assets into a separate entity. In November, RWE committed to substantial growth in its renewables portfolio over the coming decade, while the potential spin off of its coal assets into a foundation is starting to be discussed at the federal level in Germany as a potential solution to accelerate the country's coal phase-out.
www.group.rwe
Covanta, a US based company, is a leading provider of sustainable waste-to-energy services (circa 70% market share). The company generates revenues from waste disposal contracts with municipalities a s well as from sales of the electricity and recycled metals produced as outputs. Covanta provides municipalities with an environmentally sustainable alternative to landfills for waste while also generating electricity; its energy-from-waste facilities convert waste into sufficient renewable energy to power more than one million homes. Covanta generates stable cash flows backed by contracts and hedges on 85% of revenues and further supported by 25% EBITDA margins. Earlier this year Covanta's board accepted EQT Infrastructure's offer to buy the company for \$20.25 per share which, in our opinion, significantly undervalues the company and its growth prospects. We wrote to Covanta's board twice to substantiate our view and reasons for voting against the proxy resolution.
Spark Infrastructure Electricity infrastructure
assets in Australia
Spark Infrastructure is an Australian-listed fund which invests directly in essential electricity infrastructure businesses. It owns 49% of the operator of South Australia's electricity distribution network, 49% of Victoria Power Networks, 15% of the largest high-voltage electricity transmission network which connects several states and territories and delivers around 80% of electricity consumed in Australia, and 100% of the Bomen Solar Farm in south-eastern Australia. Spark seeks to maximise the performance and efficiency of these regulated electricity businesses to generate long-term growth and pay attractive dividends. With the energy transition playing out in Australia, these network businesses are investing heavily to accommodate renewable energy sources, in transmission interconnections and in technology to ensure resilience. Spark received a bid from a consortium of private investors led by KKR and Ontario Teachers' Pension Plan, subsequently joined by the Public Sector Pension Investment Board; the original bid price was raised twice and the final terms agreed with Spark's board value the equity at A\$5.2 billion or A\$2.95 cash per share (including distributions). Spark's shareholders have approved the scheme.
www.sparkinfrastructure.com
as at 30 September, 2021 continued
as at 30 September, 2021
| 30 September 2021 | 30 September 2020 | |||
|---|---|---|---|---|
| Market value £'000 |
% of investments |
Market value £'000 |
% of investments |
|
| Continental Europe | 85,566 | 38.7 | 65,887 | 36.8 |
| North America | 85,532 | 38.7 | 74,564 | 41.6 |
| UK | 24,255 | 11.0 | 20,179 | 11.3 |
| Other OECD | 14,523 | 6.6 | 12,984 | 7.2 |
| Total OECD | 209,876 | 95.0 | 173,614 | 96.9 |
| Emerging markets | 11,040 | 5.0 | 5,539 | 3.1 |
| Total | 220,916 | 100.0 | 179,153 | 100.0 |
By sector
| 30 September 2021 | 30 September 2020 | |||
|---|---|---|---|---|
| Market value £'000 |
% of investments |
Market value £'000 |
% of investments |
|
| Integrated utilities | 81,020 | 36.7 | 72,517 | 40.5 |
| Renewables | 63,855 | 28.9 | 40,948 | 22.9 |
| Regulated utilities | 44,824 | 20.3 | 40,219 | 22.4 |
| Transportation | 31,217 | 14.1 | 25,469 | 14.2 |
| Total | 220,916 | 100.0 | 179,153 | 100.0 |
| 30 September 2021 | 30 September 2020 | |||
|---|---|---|---|---|
| Market value £'000 |
% of investments |
Market value £'000 |
% of investments |
|
| More than £10,000 million | 159,946 | 72.4 | 115,498 | 64.5 |
| £5,000 to £10,000 million | 13,510 | 6.1 | 18,667 | 10.4 |
| £1,000 to £5,000 million | 43,352 | 19.6 | 42,019 | 23.4 |
| £200 to £1,000 million | 4,108 | 1.9 | 2,969 | 1.7 |
| Total | 220,916 | 100.0 | 179,153 | 100.0 |
Fair values and sub-totals have been rounded to the nearest thousand.
as at 30 September, 2021
| Company | Country | Fair value £'000 |
% of investments |
|---|---|---|---|
| NextEra Energy | United States | 12,164 | 5.5 |
| Enel | Italy | 7,756 | 3.5 |
| Exelon | United States | 7,729 | 3.5 |
| Iberdrola | Spain | 7,635 | 3.5 |
| SSE | Britain | 7,620 | 3.4 |
| RWE | Germany | 7,405 | 3.4 |
| Covanta | United States | 6,652 | 3.0 |
| Spark Infrastructure Group | Australia | 6,436 | 2.9 |
| Ferrovial | Spain | 6,362 | 2.9 |
| EDP-Energias De Portugal | Portugal | 6,061 | 2.7 |
| Ten largest investments | 75,820 | 34.3 | |
| Atlas Arteria | Australia | 5,962 | 2.7 |
| Drax Group | Britain | 5,961 | 2.7 |
| EDF | France | 5,639 | 2.6 |
| China Longyuan Power | China | 5,614 | 2.5 |
| Endesa | Spain | 5,555 | 2.5 |
| National Grid | Britain | 5,522 | 2.5 |
| China Suntien Green Energy | China | 5,427 | 2.5 |
| TransAlta Renewables | Canada | 5,383 | 2.4 |
| Dominion Energy | United States | 5,291 | 2.4 |
| Terna Group | Italy | 5,127 | 2.3 |
| Twenty largest investments | 131,301 | 59.4 | |
| American Electric Power | United States | 5,106 | 2.3 |
| Uniper | Germany | 5,080 | 2.3 |
| Veolia Environnement | France | 4,971 | 2.3 |
| E.ON | Germany | 4,853 | 2.2 |
| NextEra Energy Partners | United States | 4,717 | 2.1 |
| Brookfield Renewable Corp | Canada | 4,597 | 2.1 |
| Engie | France | 4,117 | 1.9 |
| Evergy | United States | 4,116 | 1.9 |
| Transition | France | 4,108 | 1.9 |
| AES Corp | United States | 4,018 | 1.8 |
| Thirty largest investments | 176,983 | 80.2 | |
| Atlantia | Italy | 3,859 | 1.7 |
| Acciona Energia | Spain | 3,837 | 1.7 |
| Eversource | United States | 3,629 | 1.6 |
| Williams | United States | 3,384 | 1.5 |
| PPL Corp | United States | 3,283 | 1.5 |
| ENAV | Italy | 3,088 | 1.4 |
| NextEra Energy (4.872% Corporate Units) | United States | 2,972 | 1.3 |
| Alliant Energy | United States | 2,820 | 1.3 |
| DTE Energy | United States | 2,798 | 1.3 |
| Pennon Group | Britain | 2,730 | 1.2 |
| Public Service Enterprise Group | United States | 2,470 | 1.1 |
| Greencoat UK Wind Plc | Britain | 2,423 | 1.1 |
| American Water Works | United States | 2,281 | 1.0 |
| APA Group | Australia | 2,125 | 1.0 |
| Essential Utilities | United States | 2,121 | 1.0 |
| Veolia Environnement – Rights | France | 112 | 0.1 |
| Total number of investments: 46 | 220,916 | 100.0 |
Figures have been rounded to the nearest thousand.
The Directors are all non-executive and independent. The Directors, apart from Max King and Susannah Nicklin, were appointed at admission on 26 September, 2016. All Directors are members of the Audit Committee, Management Engagement Committee and Remuneration Committee.
David Simpson, the Chairman of the Company, is a qualified solicitor and was a partner at KPMG for 15 years until 2013, culminating as global head of M&A. Before that he spent 15 years in investment banking, latterly at Barclays de Zoete Wedd Ltd. He is chairman of M&G Credit Income Investment Trust plc, a director of Aberdeen New India Investment Trust PLC, the British Geological Survey and ITC Limited, a major listed Indian company.
Max King is a chartered accountant and has over 30 years' experience in fund management having worked at Finsbury Asset Management, J O Hambro Capital Management and Investec Asset Management. He is also a columnist for MoneyWeek magazine. Max is currently a director of Gore Street Energy Storage Fund plc. He was appointed as a Director of the Company on 11 September, 2017.
Iain McLaren is a chartered accountant and was a partner at KPMG for 27 years, including senior partner in Scotland from 1999 to 2004, retiring from the firm in 2008. He is a director of Wentworth Resources plc and Jadestone Energy Inc. He is a past president of the Institute of Chartered Accountants of Scotland.
Susannah Nicklin is an experienced non-executive director and financial services professional with 25 years of experience in executive roles in investment banking, equity research and wealth management at Goldman Sachs and Alliance Bernstein in the US, Australia and the UK. Susannah is Chair of the Schroder BSC Social Impact Trust plc, and a director of Amati AIM VCT plc, Baronsmead Venture Trust plc, and The North American Income Trust plc and retired as senior independent director of Pantheon International plc on 27 October, 2021. She holds the Chartered Financial Analyst qualification. She was appointed as a Director on 9 September, 2020.
The Directors present their Strategic Report for the Company for the financial year ended 30 September, 2021.
The Strategic Report contains a summary of the Company's business model, a statement of its objectives and investment policy, a review of performance and a description of the principal and emerging risks it faces. Please refer to the Chairman's Statement and the Investment Manager's Report for an analysis of the Company's performance during the financial year and a summary of its future prospects. Pages 4 to 22, together with the sections of this Annual Report and Accounts incorporated by reference, consist of a Strategic Report that has been prepared in accordance with Section 414A of the Companies Act 2006 (the "Act").
The Company is an investment company and its principal activity and therefore its purpose is portfolio investment.
The Company is an investment trust which allows it to be exempt from paying taxes on capital gains made from the sale of its investments. Investment trusts offer advantages for investors, including access to professional investment skills and opportunities that might not otherwise be available to them, and the ability to borrow money to enhance investment returns. The Company exploits the advantages of its closed-end structure by being fully invested and by borrowing against its assets. The Company employs gearing to enable it to earn a higher level of dividend income and to offer shareholders a geared return on their investment. The Company may borrow, to a limited extent, at floating rates of interest under a prime brokerage facility; these borrowings are variable and can be repaid at any time.
The investment objectives of the Company are to achieve a high, secure dividend yield on its investment portfolio and to realise long-term growth in the capital value of the portfolio for the benefit of shareholders while taking care to preserve shareholders' capital. The Company's assets are primarily invested in the equity and equity-related securities of utility and infrastructure companies in developed countries, although up to 10% of the portfolio may be comprised of investments in debt securities and a significant portion of the portfolio may also be comprised of holdings in cash or cash-equivalents from time to time.
For the purposes of investment, utility companies are those involved in the generation, transmission and distribution of electricity including the production of electricity from renewable sources; the transport, storage and distribution of gas; the abstraction, treatment and supply of water and the treatment of waste water; and the provision of environmental services such as recycling and waste management. Infrastructure companies are those that own and operate assets which are essential to the functioning of developed economies and to economic development and growth, notably transportation-related assets such as roads, railways, ports and airports.
The portfolio is diversified with respect to geography and sub-sectors of the global utility and infrastructure investment universe. While the portfolio is comprised principally of investments in companies listed on recognised stock exchanges in the UK, Continental Europe, the US, Canada and other OECD countries, the Company may invest up to 10% of the portfolio, at the time of acquisition, in the securities of companies quoted on recognised stock exchanges in non-OECD countries. The total of the Company's investments in the US may amount to 60% of the portfolio and, with the approval of the Directors, that limit may be increased to 70%. The limit for each other country is 40% although it is highly unlikely that this limit will be reached.
Up to 15% of the portfolio may be comprised of investments in collective investment vehicles, including UK investment companies. The Company does not invest in any collective investment vehicles managed by the Investment Manager or its affiliates.
Other investment restrictions include:
These restrictions apply as at the time of investment. The Company would, therefore, not be required to effect changes to its investments owing to the appreciation or depreciation in the value of any investment. The size of the Company's holdings as shown in the Ten Largest Holdings, the Portfolio Analysis and the Portfolio Holdings on pages 10 to 14 and references to the size of positions in the Company's investment portfolio elsewhere in this Annual Report and Accounts are expressed in terms of total investments.
Any material change to the Company's investment policy would be subject to Financial Conduct Authority ("FCA") and shareholder approval.
The portfolio of investments is diversified by geographical region, sub-sector of the Company's investment universe, regulatory regime and company size. A description of the Company's Ten Largest Holdings and an analysis of its portfolio can be found on pages 10 to 14, respectively.
The maximum level of gearing utilised and the nature and term of any borrowings are the responsibility of the Directors. They have authorised the Investment Manager to utilise gearing of up to 25%. Gearing is the amount of the Company's borrowings less cash, divided by net assets attributable to shareholders. Cash includes the net amounts due from or owed to brokers. If the Company's gearing were to exceed 25% for any significant length of time, the Investment Manager would take action to reduce gearing by raising cash and repaying borrowings.
Borrowings provide a gearing effect on the NAV. When the Company is geared, a change in the value of the Company's investment portfolio will cause its NAV to change by a larger percentage amount.
The effect of gearing was positive for shareholders during the year. Gearing averaged 14% of net assets over the course of the year, and it varied between approximately 11.6% and 17.4%. As at 14 December, 2021 the level of gearing was 13.5%. The effect of gearing on the performance of the NAV could be negative in a year when the value of the portfolio declines.
The Company's accounts are maintained in sterling but many of its investments are denominated and quoted in currencies other than sterling. Although the Company does not pursue a policy of hedging such investments back into sterling, it may do so from time to time, depending on market conditions. The Company's exposure to fluctuations in exchange rates is, to some extent, mitigated by any borrowings in currencies other than sterling. During the financial year ended 30 September, 2021 the portfolio was unhedged and, as such, the changes in currency exposure during the year principally reflected portfolio changes.
Currency exposure was as follows:
| % currency exposure | 30 September 2021 | 30 September 2020 |
|---|---|---|
| Sterling | 11.0 | 11.4 |
| US dollar | 29.9 | 31.6 |
| Euro | 35.8 | 37.0 |
| Canadian dollar | 7.1 | 9.6 |
| Hong Kong dollar | 9.4 | 3.1 |
| Other currencies | 6.8 | 7.3 |
The Company may make use of derivative instruments, such as options, financial futures and contracts for difference, for the management of risk within limits set by the Directors. It is the Company's policy that the total exposure to such derivative instruments (excluding such instruments entered into for cash management purposes or to hedge the currency profile of the portfolio) will not exceed 10% of the Company's investments. Total exposure is the sum of the investments comprising the Company's portfolio and, in the case of derivatives, the value of the underlying securities adjusted for volatility.
The Company's exposure to derivative instruments (excluding such instruments entered into for cash management purposes or to hedge the currency profile of the portfolio) was, at 30 September, 2021, and throughout the year, nil.
The Company's NAV per share increased by 18.5% during the financial year ended 30 September, 2021 and by 22.9% on a total return basis (which assumes the reinvestment of dividends paid). Over the year, the share price increased by 24.3% and the total return on a share, assuming reinvestment of dividends, was 28.9%. The Investment Manager's Report beginning on page 5 reviews developments in financial markets and the Company's portfolio during the financial year.
Shortly after admission, the Company applied successfully to court to cancel its share premium account to establish distributable reserves, thereby enabling the Company immediately to commence dividend distributions to shareholders. On an ongoing basis, these distributable reserves are available to augment the portfolio's yield.
During the financial year, the Directors paid quarterly dividends of:
| Interim dividend | |||
|---|---|---|---|
| per share | Financial year | Payment date | Dividend |
| Fourth | 2020 | 30 November, 2020 | 1.65p |
| First | 2021 | 26 February, 2021 | 1.65p |
| Second | 2021 | 28 May, 2021 | 1.65p |
| Third | 2021 | 31 August, 2021 | 1.65p |
Based on the price of a share at the end of the financial year, the annualised yield on a share was 3.3%.
The Company's Directors meet regularly to review the performance of the Company and its shares. Key performance indicators ("KPIs") used to assess the Company's progress and its success in meeting its objectives are set out below. Please also refer to Alternative Performance Measures on page 65.
| KPIs | As at or year ended 30 September 2021 |
As at or year ended 30 September 2020 |
|---|---|---|
| Change in: | ||
| NAV per share 1 | 22.9% | –2.6% |
| Share price 1 | 28.9% | 5.6% |
| Premium/(Discount) to NAV | ||
| at year-end | 1.5% | (3.3)% |
| Average premium/(discount) | ||
| to NAV during the year | (1.3)% | (2.6)% |
| Revenue return per share | 5.98p | 4.97p |
| Dividends paid per share | 6.60p | 6.55p |
| Dividend yield | 3.3% | 4.1% |
| Dividend cover 2 | 90.6% | 75.9% |
| Ongoing charges | 1.43% | 1.48% |
Total return, assuming reinvestment of dividends.
The dividend cover is the proportion of the dividends paid to shareholders which was covered by net revenues.
The performance of the Company's portfolio is not measured against an equity index benchmark. The Investment Manager's asset allocation process pays little attention to the country and regional compositions of the main global utilities index, and the global listed infrastructure indices which are typically dominated by utilities. The Directors, therefore, review portfolio performance against the most comparable global sector indices, the MSCI World Utilities Index and the S&P Global Infrastructure Index which serve as reference points, and ratios to understand the impact of gearing, currencies, sub-sector performance, geographical allocations and stock selection decisions on the Company's overall investment performance. Stock selection is measured against relevant local and regional indices and monitored by the Board. The Directors also review the level of the share price premium/discount to NAV and the level and composition of ongoing charges incurred.
As outlined in the Chairman's Statement, the Directors were pleased with the overall performance of the Company in the financial year. The NAV and share price returns exceeded those of the global sector indices by a considerable margin, dividend cover increased and the ongoing charges ratio declined.
The net revenue return per share for the financial year was 5.98p, a 20.3% increase from the previous year (please refer to the Investment Manager's Report for detail). Income increased by 23.7% year-over-year, expenses charged to the Company's revenue account increased by 13.7%, and the weighted average number of shares outstanding rose by 6.9%. The ongoing charges ratio declined to 1.43% (from 1.48% last year).
The ongoing charges ratio is calculated in accordance with AIC recommended methodology using the charges for the current year and the average NAV during the year of £183,936,000.
The Directors have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity. The specific financial risks associated with foreign currencies, interest rates, market prices, liquidity, credit, valuations and the use of derivatives – which may or may not be material to the Company – are described in note 16 to the Financial Statements. The Board conducts this robust assessment by reviewing a detailed Risk Matrix on a regular basis. A full analysis of the Directors' review of internal controls is set out in the Corporate Governance Statement on pages 29 to 30.
The principal risks facing the Company are summarised below along with, where appropriate, the steps taken by the Board to monitor and mitigate such risks.
The Board continued its diligence on the impact of COVID-19 on the Company and its service providers. As lockdowns were lifted the Company's third-party service providers either continued to work from home or migrated into offices, in both cases without any disruption to service or impact on quality or communication. The Board is comfortable that the Company's third-party service providers' business continuity plans are sufficient to mitigate ongoing risks posed by COVID-19.
The performance of the Company depends primarily on the investment strategy, asset allocation and stock selection decisions taken by the Investment Manager within the parameters and constraints imposed by the Company's investment policy. The investment policy guidelines can only be materially changed by proposing an ordinary resolution at a General Meeting for shareholders' approval. The Company invests in securities which are listed on recognised stock exchanges so it is regularly exposed to market risk and the value of the Company's portfolio can fluctuate, particularly over the short-term, in response to developments in financial markets. The Board has put in place limits on the Company's gearing, portfolio concentration, and the use of derivatives which it believes to be appropriate to ensure that the Company's investment portfolio is adequately diversified and to manage risk. The Board meets formally at least four times a year with the Investment Manager to review the Company's strategy and performance, the composition of the investment portfolio and the management of risk. The Board examines the sources of investment performance, which are described in attribution analyses prepared by the Investment Manager's Head of Risk for each Meeting, volatility measures, liquidity and currency exposure, and the Company's gearing. The Investment Manager's Head of Risk monitors and helps to manage portfolio risk.
The Company is committed to paying its shareholders regular quarterly dividends and to increasing the level of dividends paid over time. The dividends that the Company can pay depend on the income it receives on its investment portfolio, the extent of its distributable reserves and, to a lesser extent, its level of gearing and accounting policies. Cuts in dividend rates by portfolio companies, a change in the tax treatment of the dividends received by the Company, a significant reduction in the Company's level of gearing or a change to its accounting policies, under which 50% of the investment management fee is currently charged to capital, could adversely affect the net income available to pay dividends.
The Board monitors the net income forecast, including each component revenue and expense line item, prepared by the Administrator for quarterly Board meetings. These are discussed in some detail to assess the Investment Manager's level of confidence in the income growth profile of the portfolio and to mitigate any risk of revenue shortfall relative to expectations.
The Board applied successfully to cancel the Company's share premium account in November 2016 and the resulting special reserve is available, when the Board considers it appropriate, to augment the net income available to pay dividends to shareholders.
While the Company invests principally in highly liquid securities listed on recognised stock exchanges in developed economies, it also invests to a limited extent in securities traded in emerging markets and in securities which are more thinly traded. As the Company is a closed-end investment company it does not run the risk of having to liquidate investments on unattractive terms to meet redemptions by investors although it is exposed to price risk; that is, that it will be unable to liquidate a position in a thinly traded security at the valuation at which it is carried in the Company's accounts. It is also exposed to a risk that its prime broker, Citigroup Global Markets Limited ("Citigroup"), which provides a flexible borrowing facility, could request that borrowings be repaid with three days' notice. The Board reviews the liquidity profile of the Company's portfolio on a regular basis. The Investment Manager's Head of Risk also keeps the liquidity risk profile of the Company's portfolio under close review. The liquidity analysis regularly shows that, if required, 98% of the portfolio could be liquidated within five business days assuming trades to accomplish this accounted for up to 30% of average daily trading volumes.
In common with most other investment trusts, the Company has no executive directors, no executive management and no employees. The Company delegates key operational tasks to third-party service providers which are specialists in their fields: the management of the Company's investment portfolio to the Investment Manager, Ecofin Advisors Limited; the preparation and maintenance of the Company's Financial Statements and maintenance of its records to the Administrator and Company Secretary, BNP Paribas Securities Services S.C.A and Maitland Administration Services Limited, respectively; the worldwide custody of the Company's assets to Citigroup and the safekeeping and oversight services to Citibank UK Limited ("Citibank") as Depositary. The Board reviews the performance of these third-party service providers and their risk control procedures on a regular basis as well as the terms on which they provide services to the Company.
ESG considerations and policies have become some of the most critical issues confronting companies and their shareholders and can have a significant impact on the business models, sustainability and even viability of individual companies. These sustainability issues are a key area of focus for the Board, and the Board maintains a regular oversight of the Investment Manager in this area.
ESG factor analysis is undertaken on all portfolio holdings and prospective investments by the Investment Manager, Ecofin, a specialist investor in sustainable infrastructure and the energy transition. In a rapidly changing environment surrounding sustainability and ESG, Ecofin works to determine the best practices to incorporate into investment criteria and to make reporting available to the market. As a long-standing specialist in the Company's sectors, Ecofin actively engages with portfolio companies and investments in an effort to drive continuous improvement in their sustainability practices and metrics. The Board regularly reviews the way ESG considerations are integrated into the decision making process by the Investment Manager to mitigate risk at the stock selection and portfolio levels.
Ecofin Advisors Limited ("Ecofin UK") is the Investment Manager, regulated by the FCA and registered with the SEC. Ecofin UK is indirectly wholly owned by TortoiseEcofin Investments, LLC, (previously Tortoise Investments, LLC), a US-based firm which owns a family of investment management companies (collectively "TortoiseEcofin") (previously Tortoise). TortoiseEcofin provides support across a variety of functions and integrated teams across the firm allow for collaboration and synergies.
Viability statement
The UK Financial Reporting Council ("FRC") maintains the UK's Corporate Governance Code (the "Code") to promote high quality corporate governance and reporting. Under the Code, the Directors are required to state that in their opinion the Company's resources are adequate for it to continue in business for at least twelve months from the date of the Financial Statements and, therefore, it is appropriate that the Financial Statements be prepared on a going concern basis. This statement appears on page 25 in the Directors' Report.
In accordance with provision 31 of the 2018 Code, the Directors are also required to assess the prospects for the Company over a longer period than the twelve months referred to in the going concern guidance and statement. The Directors have elected to review the viability of the Company for a five year period up to the Annual General Meeting ("AGM") of the Company to be held in 2027 principally because they consider that any investment in the shares of the Company should be made on a medium to long-term basis.
In assessing the viability of the Company over this five year period, the Board has performed a robust assessment of controls over the principal risks. The Board considers, on an ongoing basis, each of the principal risks noted in the Strategic Report and set out in note 16 to the Financial Statements. The Board has evaluated scenarios of possible future circumstances, including a significant and prolonged fall in equity markets and a material increase in expenses, and considered the latest assessment of portfolio liquidity. The Board monitors income and expense projections for the Company, with most of the expenses being predictable and modest in comparison with the assets of the Company. A significant proportion of the Company's expenses are investment management fees based on the Company's NAV and these would naturally decline if the market value of the Company's investments were to fall. The Board also took into consideration the operational resilience of its service providers during the COVID-19 pandemic.
Based on the above, their assessment of the nature of the Company, its investment policy and financial resources, and with careful consideration given to the current market situation, the Board has concluded that there is a reasonable expectation that the Company will be able to continue to operate and meet its liabilities as they fall due over the next five years.
In the opinion of the Directors, an investment in the shares of the Company entails a greater than average degree of risk, in the context of the investment trust industry, because the Company employs gearing, as explained on page 17. In addition to the risks borne by the Company described above, investors in the shares of the Company are exposed to risks due to the investment policy (described on page 16) of the Company. These are risks that cannot be mitigated without changing the investment policy, and one risk, the risk that the price of a share might trade at a substantial discount to its NAV, reflects the demand for the Company's shares in the secondary market.
The Board has authorised the Investment Manager to utilise gearing, in the form of borrowings under the Company's prime brokerage facility, although the gearing is not structural in nature and can be reduced at any time. Whilst the use of gearing will enhance the NAV per share when the value of the Company's assets is rising, it will have the opposite effect when the underlying asset value is falling. In the event that the prime brokerage facility were to be renegotiated or terminated, the Company might not be able to finance its borrowings on as favourable terms.
The Company's policy on diversification, noted on page 17, permits the Investment Manager to invest up to 10% of its investments, measured at the time of acquisition, in the securities of companies incorporated in countries which are not members of the OECD – such as emerging markets – and quoted on stock exchanges in such countries. Investment in emerging markets may involve a higher degree of risk and expose the Company to, among other things, less well developed legal and corporate governance systems, a greater threat of unilateral government action with respect to regulation and taxation, and a higher risk of political, social and economic instability than an investment in developed, OECD markets. These risks are mitigated through diversification and fundamental analysis.
As noted in the investment policy on page 16, the Company's Financial Statements are prepared in sterling and its shares are denominated in sterling. Many of the Company's investments, however, are denominated in currencies other than sterling and, as a result, the value of the Company's investment portfolio is exposed to fluctuations in exchange rates. Although the Company may hedge non-sterling exposure from time to time, it is not the Company's policy to try to minimise or eliminate foreign exchange risk as over the long-term this could restrict the investment returns potentially available to sterling-based investors in international securities. There is a risk for the NAV, therefore, if sterling appreciates significantly against foreign currencies.
The Board has considered the political uncertainties prevailing in the UK while the impact of Brexit evolves and the risks associated with potential changes to regulations, laws and/or taxes. The Board continues to believe that the Company's strategy of investing in an internationally diversified portfolio of companies is the correct model to achieve its investment objectives.
While some investors may view the opportunity to purchase a share of the Company at a discount to its NAV as attractive, the volatility of the price of a share and the premium/discount adds to the risks associated with an investment in the Company's shares. The Directors review the level of the premium/discount on a regular basis and will use their ability as granted by shareholders to address any sustained or significant discount or premium to NAV, as and when it is appropriate, through the repurchase or issuance of stock. The repurchase of stock will be subject to, but not limited to, market conditions and availability of cash resources.
Your Board believes that analysis of ESG factors is an essential element of the investment management process and that companies exhibiting good ESG credentials are more likely to perform well over the longer-term. The Investment Manager's research process integrates traditional fundamental analysis and a study of ESG factors which it believes may affect stock valuations and shareholder value. Engagement and proxy voting are integral parts of active management and a case-by-case assessment is made for decisions relating to all proxies, corporate actions and events relating to portfolio holdings. We endorse the Investment Manager's active stewardship approach and are pleased that its parent company is a signatory of the United Nations-supported Principles for Responsible Investment ("PRI").
In the power sector, your Company's strategy is to invest predominantly in companies investing to achieve their own or government targets for emissions reductions and greener grids and eventually decarbonisation. The portfolio is oriented, therefore, toward clean generators and suppliers of electricity, and we fully expect that it will be at all times cleaner in terms of carbon emissions (tons of CO2 emitted per megawatt hour of generation) than the overall power sector (as measured by the MSCI World Utilities Index). Please refer to page 9 for further detail about the Investment Manager's integration of ESG factors in its investment philosophy and approach and to page 24 for an outline of the Investment Manager's stewardship policy.
The Company is an investment trust with no executive directors or employees and no operating assets. Apart from the need for Directors to travel to Board meetings, the Company has no direct impact on the environment or on the communities in which it carries on its investment activities.
The Company does not fall within the scope of the Modern Slavery Act 2015 and the Directors consider the Company's suppliers, which are typically professional advisors, to be low risk. Accordingly, a slavery and human trafficking statement has not been included.
The Board comprises four non-executive Directors, three men and one woman. In accordance with best practice, all Directors stand for re-election annually. The Board is attentive to the composition of the Board, its breadth of skills and its diversity. The Board is committed to ensuring that any vacancies arising are filled by the most qualified candidates and recognises the value of diversity in the composition of the Board.
The outlook for the Company is described in the Chairman's Statement on page 4 and the Investment Manager's Report on page 7.
Section 172 of the Companies Act 2006 requires that a Director must act in the way he/she considers, in good faith, would be most likely to promote the success of the Company for the benefit of its members (i.e. shareholders) as a whole and, in doing so, have regard (amongst other matters) to: the likely consequences of any decision in the long term; the need to foster the Company's business relationships with suppliers, customers and others; the impact of the Company's operations on the community and the environment; the desirability of the Company maintaining a reputation for high standards of business conduct; and the need to act fairly as between members of the Company.
The Board ensures that it promotes the success of the Company by engaging the Investment Manager and other specialist third-party suppliers with appropriate performance records, resources and controls in place to deliver the services that the Company requires. Their performance is monitored by the Board and its committees, which have oversight of the Company's operations. The principal supplier is the Investment Manager, in particular the investment management team responsible for managing the Company's assets in order to achieve its stated investment objectives. The Board maintains a good working relationship with the Investment Manager, which also provides administrative support and promotes the Company through its marketing and investor relations efforts. Whilst strong long-term investment performance is essential, the Board recognises that for an investment vehicle to be sustainable over the long term, both it and the Investment Manager must have regard to ethical and environmental issues that impact society at large. Environmental, social and governance considerations are fully integrated in the Investment Manager's investment process; please refer to page 9.
The Directors confirm that they have considered their duty under Section 172 when making decisions during the financial year under review. The Directors have considered this duty when making strategic decisions that impact shareholders, including the appointment of a new auditor, the dividend policy and the issue of new shares.
The Board regularly monitors the shareholder profile of the Company. Please refer to page 30 for details of communication with shareholders. The Board also widely consults with its investment advisers when considering key decisions.
The key decisions taken by the Directors during the year under review are set out below.
The Chairman's Statement on page 4 and the Investment Manager's Report on pages 5 to 9 include details of the Company's strategy, portfolio activity and performance during the year under review. This Strategic Report on pages 16 to 22 also describes the investment strategy undertaken by the Investment Manager.
These strategic decisions contribute to the long-term success of the Company and are communicated to investors so they may make personal investment decisions.
continued
In accordance with the Dividend Policy approved by shareholders and explained on page 23, quarterly dividends were paid in November 2020 and February, May and August 2021.
Last year, the Board maintained the quarterly dividend rate at 1.65p per share. The Board has carefully considered the dividend level and, following review of detailed income forecasts, decided to increase the quarterly rate to 1.85p.
Strong NAV performance and concerted efforts to raise appreciation of the Company's investment universe and strategy amongst a wider audience have had a beneficial effect on the rating of the Company's shares. During the year the shares often traded at a small premium to NAV and this enabled the Company to issue 5,725,000 new shares. The Board keeps the discount/ premium management policy under careful review, in the interest of all shareholders. Increasing the size of the Company can benefit liquidity as well as spread costs.
On behalf of the Board
Maitland Administration Services Limited Company Secretary
20 December, 2021
The Directors present their Annual Report and Accounts together with the audited Financial Statements of the Company for the year ended 30 September, 2021. The Directors serving during the year were Max King, Iain McLaren, Susannah Nicklin and David Simpson and their biographies are provided on page 15. Martin Nègre resigned as a Director on 9 March, 2021 and served as a Director up until that time.
The following matters required to be disclosed in this Report under the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 are covered in the Chairman's Statement, the Investment Manager's Report and the Strategic Report on pages 16 to 22: the Company's objectives, policies and financial risk management, the Company's exposure to risks and its prospects, as well as important events affecting the Company since the year-end.
The Company was incorporated in England and Wales as a public limited company and is domiciled in the UK. It is an investment company as defined by Section 833 of the Company's Act 2006 (the "Act") and the Company's ordinary shares are listed on the London Stock Exchange.
The Company has been approved by HM Revenue & Customs ("HMRC") as an investment trust in accordance with Section 1158 Corporation Tax Act 2010 ("CTA"). In the opinion of the Directors it continues to meet the eligibility criteria to qualify as an investment trust. As an investment trust, the Company is exempt from capital gains tax and, given the Company's current portfolio, its shares are eligible for inclusion in an Individual Savings Account.
The net assets of the Company attributable to ordinary shares as at 30 September, 2021 were £196,547,000 (30 September, 2020: £156,393,000). The results for the Company are reviewed in the Chairman's Statement on page 4 and the Investment Manager's Report on page 5 and set out in the Financial Statements on pages 42 to 57.
The net revenue (after taxation) of the Company which was available for dividend payments on ordinary shares for the year ended 30 September, 2021 amounted to £5,925,000 (30 September, 2020: £4,607,000). The Company is able to supplement the revenue account with reserves of distributable capital and it did so during the financial year.
The Board believes that a relatively high level of income from a global specialist equity fund should provide an appealing investment proposition for investors searching for yield at a time of low interest rates. The Company targets a dividend yield of 4 per cent on net assets using gearing and, if necessary, reserves to augment the yield on the portfolio. The Company pays dividends to shareholders on a quarterly basis, payable on the last business day of February, May, August and November each year.
In accordance with best practice, the Board will be seeking shareholder approval of this dividend policy, and a resolution will be put to shareholders at the forthcoming AGM. In respect of the year ended 30 September, 2021, an interim dividend of 1.65p per ordinary share was paid on 30 November, 2020, 26 February, 2021, 28 May, 2021 and 31 August, 2021. Subsequent to the year-end, an interim dividend of 1.65p per ordinary share was paid on 30 November, 2021. The Directors are not proposing the payment of any final dividend for the year ended 30 September, 2021 (final dividend for the year ended 30 September, 2020: nil).
| Year ended 30 September 2021 £'000 |
Year ended 30 September 2020 £'000 |
|
|---|---|---|
| Revenue reserves at | ||
| beginning of year | – | – |
| Revenue available for | ||
| dividends | 5,925 | 4,607 |
| Transfer from special | ||
| reserve for dividends | 608 | 1,458 |
| Dividends paid | 6,533 | 6,065 |
The issued share capital of the Company as at 30 September, 2021 comprised 100,738,423 (2020: 95,013,423) ordinary shares. At General Meetings of the Company, holders of ordinary shares are entitled to one vote per person on a show of hands and one vote per share on a poll. They are entitled to such dividends as the Directors may from time to time declare and to participate in the Company's capital growth. On a winding-up, after settling amounts due to creditors, ordinary shareholders are entitled to any remaining assets.
There are no restrictions on transfers of the ordinary shares nor special rights regarding control of the securities. Neither the Company nor the Directors are aware of any agreements or arrangements with or between shareholders which restrict the transfer of shares, or which would take effect, alter or terminate in the event of a change of control of the Company.
Following strong NAV performance and concerted efforts to raise appreciation of the Company's investment universe and strategy amongst a wider audience, the shares often traded at a small premium to NAV during the year. As a result, the Company continued to use its Block Listing Facility to satisfy investor demand for the Company's shares which could not be met through the secondary market. The Company issued 5,725,000 shares during the year ended 30 September, 2021, and a further 355,000 shares subsequent to the year-end and up to 14 December, 2021 at a premium to NAV.
Ecofin UK provides discretionary fund management services to the Company under an Investment Management Agreement ("IMA") dated 6 July, 2016 and amended on 13 December, 2018 and 16 June, 2021. The IMA provides for an investment management fee equal to 1.0% per annum of the Company's net assets up to £200 million and 0.75% per annum in excess of £200 million, calculated and payable quarterly in arrears. Details of the fees paid to Ecofin UK during the financial year are given in note 3 to the Financial Statements.
In accordance with the Alternative Investment Fund Managers Directive ("AIFMD"), the Board appointed Ecofin UK as the Company's Alternative Investment Fund Manager ("AIFM").
The AIFM Remuneration Code requires the AIFM to supply the following information in respect of the remuneration paid to relevant staff: For the Company's financial year, the total amount of remuneration paid by the AIFM, Ecofin UK, to its staff was £3,610,813 (2020: £3,337,688). This included £1,892,224 (2020: £2,112,809) in fixed remuneration and £1,718,589 (2020: £1,224,879) in variable remuneration to 18 (2020: 21) employees. The total remuneration of the seven members of staff of the AIFM who are fully or partly involved in the activities of the AIF, Ecofin Global Utilities and Infrastructure Trust plc, was £1,491,835 (2020: £1,292,150). The proportion of the total remuneration of the staff of the AIFM attributable to the AIF was 41% (2020: 39%). Ecofin UK's professional indemnity insurance policy complies with the enhanced requirements of AIFMD. This information is unaudited.
The Board has reviewed the performance of the Investment Manager and believes that its continued appointment is in the interests of the Company and shareholders. Such a review is carried out on an annual basis.
Because of its industry knowledge and extensive company research, the Investment Manager has been granted discretion by the Directors to vote on the shares of investee companies. The Board reviews periodically the provisions of the FRC's Stewardship Code (September 2020) (the "Code") and the Investment Manager's principles relating to engagement with issuers and their management and proxy voting activities. The Investment Manager's guidelines for proxy voting state:
Ecofin UK invests in a range of securities and jurisdictions. Where it invests on behalf of funds in single UK equities, this does not constitute a majority of its business. Ecofin UK takes a consistent approach to engagement with issuers and their management in all of the jurisdictions in which it invests and, therefore, does not consider it appropriate to commit to any particular voluntary code of practice.
BNP Paribas Securities Services S.C.A is appointed as Administrator, effective from the admission of the Company's shares on 26 September, 2016, and until April 2021 Company Secretarial services were delegated to BNP Paribas Secretarial Services Limited. BNP Paribas Securities Services provided notice to the Company in October 2020 to terminate Company Secretarial services and Maitland Administration Services Limited ("Maitland") was appointed Company Secretary on 1 April, 2021. The agreements with BNP Paribas Securities Services S.C.A and Maitland may be terminated on six months' written notice.
The Company is required to appoint a depositary to provide safekeeping and oversight services, and in 2016 the Board appointed Citibank Europe plc. A Depositary Services Agreement between Citibank Europe plc, Ecofin UK and the Company was signed on 14 September, 2016 (novated to Citibank UK Limited ("Citibank") in June 2021) and stipulates that Citibank will receive an annual fee of 3.75bps, charged on net assets, for Depositary services. The Depositary Services Agreement may be terminated by either party by giving at least 90 days' written notice and in other specified circumstances. Under the Depositary Services Agreement, Citibank, as Depositary, can be instructed to transfer the Company's assets in connection with the prime brokerage arrangement which is in place with Citigroup.
The Company has a prime brokerage facility with Citigroup Global Markets Limited ("Citigroup") and benefits from a flexible borrowing arrangement. Citigroup is also custodian of the Company's assets. As prime broker and custodian, Citigroup is remunerated principally by the rates of interest charged on the Company's borrowings. The interest rate on borrowings under the Prime Brokerage Agreement depends on the currency of the borrowing but is generally 50 basis points over the applicable benchmark rate. The gearing is not structural in nature and borrowings can be repaid at any time. Citigroup also receives remuneration for stock borrowing and transaction fees on each trade settled. The Prime Brokerage Agreement may be terminated by either party by giving three business days' written notice.
At the end of the financial year the interests in the voting rights of the Company, as notified to the Company or ascertained by the Company in accordance with Chapter 5 of the FCA's Disclosure Guidance and Transparency Rules, were as follows:
| As at 30 September, 2021 Shareholder |
Number of voting rights |
% |
|---|---|---|
| Hargreaves Lansdown Asset Management | 16,598,826 | 16.48 |
| Interactive Investor Services Ltd | 10,793,906 | 10.71 |
| Charles Stanley & Co Ltd | 8,510,558 | 8.45 |
| Canaccord Genuity Wealth Management | 5,950,027 | 5.91 |
| AJ Bell Securities Ltd | 5,433,779 | 5.39 |
As at 14 December, 2021 Charles Stanley & Co Ltd had an interest in 4.55% of the voting rights of the Company. No further material changes to the above holdings have been notified.
The Company has reviewed the guidance issued by the FRC in order to determine whether the going concern basis should be used in preparing the Financial Statements for the year ended 30 September, 2021. In doing so, the Directors have carefully reviewed the Company's financial resources, its investment policy and the risks associated with its business as an investment trust, including the impact of COVID-19 on the Company's operations. They have noted that the Company's assets are liquid securities traded on recognised stock exchanges and that its revenues substantially exceed its expenses which are largely fixed and are a small percentage of its net assets. The Directors have evaluated scenarios of possible future circumstances including a sharp and prolonged decline in equity markets and concluded that revenues should still amply exceed expenses. The Directors have also assessed the liquidity characteristics of the portfolio in view of the Company's borrowing facility and circumstances which could require repayment of funds at short notice.
The Directors have concluded that the Company has adequate resources to continue in operational existence for the foreseeable future and believe that it is appropriate to adopt the going concern basis as set out in note 1 (a).
The Directors are also required to assess the prospects of the Company over a longer period than the outlook for the next twelve months on which the going concern assumption is based. This Viability Statement appears on page 20.
The rules concerning the appointment and replacement of Directors are contained in Sections 154 to 169 of the Act and the Company's Articles of Association. The rules concerning the amendment of the Articles are contained in Section 21 of the Act and provide that a special resolution be passed at a General Meeting of the Company. The rules concerning the power to issue or buy-back the Company's shares are contained in Sections 549 to 657 and Sections 690 to 708 of the Act, respectively, and within Articles 4 and 43, respectively, of the Company's Articles of Association.
No agreements exist to which the Company is a party that take effect, are altered or terminated upon a change of control of the Company following a takeover bid; and no agreements exist between the Company and its Directors providing for
compensation for loss of office that may occur because of a takeover bid.
Article 162 of the Company's Articles of Association requires the Company to hold a meeting to consider an ordinary resolution on the continuation of the Company as a closed ended investment company no later than the end of June 2019 and thereafter every five years. An ordinary resolution was considered and passed in 2019. Accordingly, the Board is required to next propose a resolution on the continuation of the Company in 2024.
As an investment company, all the Company's activities are outsourced to third-party service providers and, as such, the Company does not have greenhouse gas emissions to report from its operations and it does not have responsibility for any other emissions-producing entities under the Act (Strategic Report and Directors' Report) Regulations 2013. Further, for the same reason, the Company considers that it is a 'low energy user' under the Streamlined Energy & Carbon Reporting regulations and therefore a disclosure on energy and carbon emissions is not required. The Company has included a statement of how the Investment Manager considers ESG matters on page 9, and the Investment Manager' Report discusses the portfolio's carbon performance.
The Company conducted an audit tender in December 2020 and BDO LLP was appointed as external Auditor for the year ending 30 September, 2021. This appointment was approved by shareholders at the AGM in March 2021. Resolutions will be proposed at the forthcoming AGM to re-appoint BDO LLP as independent Auditor and to authorise the Directors to determine the Auditor's remuneration for the forthcoming year.
The Directors, as at the date of approval of this Annual Report and Accounts, confirm that:
The Company's Annual General Meeting ("AGM") will be held on Wednesday, 2 March, 2022 at the The Clermont, Charing Cross, The Strand, London WC2N 5HX at 2.30pm and will include a presentation from the Investment Manager.
Shareholders who are unable to attend the AGM are encouraged to use their proxy votes.
Details of the business of the AGM are set out in the Notice of Meeting on pages 58 to 59, amongst which the Board is seeking shareholders' approval of the following resolutions as set out overleaf.
Directors' authority to allot shares
Resolution 11, to be proposed as an ordinary resolution, will authorise the Directors to allot unissued shares up to a nominal amount of £332,310 for general purposes. This would allow the issue of 33,231,000 ordinary shares, which would represent approximately one-third of the number of ordinary shares in issue as at 30 September, 2021.
If resolution 11 is passed, the authority shall continue in force until the earlier of the conclusion of the AGM of the Company in 2023 or 2 June, 2023.
Resolution 12, being proposed as a special resolution, will empower the Directors to allot equity securities for cash, otherwise than to existing shareholders, on a pro rata basis or in accordance with their rights (i) by way of a rights issue (subject to certain exclusions), (ii) by way of an open offer or other offer of securities (not being a rights issue) in favour of ordinary shareholders and (if applicable) holders of other relevant securities of the Company in proportion to their shareholdings (subject to certain exclusions), and (iii) (other than pursuant to (i) and (ii)) up to an aggregate nominal amount of £100,700, which would represent approximately 10% of the Company's issued ordinary share capital as at 30 September, 2021.
This will provide flexibility to increase the assets of the Company by the issue of new shares for cash should favourable opportunities arise. Any issue of shares would be at prices which are not less than the NAV attributable to those shares at the time of issue.
Under the Act, the Company may hold shares which it buys-back into treasury and then sell or transfer them at a later date rather than cancelling them. The Act requires such sales and transfers to be on a pre-emptive, pro rata basis to existing shareholders, unless shareholders agree by special resolution to dis-apply such pre-emption rights.
Accordingly, for the reason given above, in addition to giving the Directors power to allot unissued shares on a non-pre-emptive basis, resolution 12 will, if passed, empower the Directors to sell or transfer any shares held in treasury on a non-pre-emptive basis, subject to the overall limit described above; also, the shares would not be transferred or sold at prices below the then prevailing NAV for those shares at the time of transfer or sale.
If granted, the authority will continue in force until the earlier of the conclusion of the AGM of the Company in 2023 or 2 June, 2023. At the date of this Report, the Company held no ordinary shares in treasury.
The Board recommends the renewal of the Company's existing authority to make market purchases of its shares. Resolution 13, to be proposed as a special resolution, will, if passed, authorise the Company to make market purchases of up to 15,100,689 ordinary shares, which would represent approximately 14.99% of the number of ordinary shares in issue (excluding treasury shares) as at 30 September, 2021.
At the date of this Annual Report and Accounts, the Company still had authority to buy-back up to 14,242,512 ordinary shares from the authority granted to it by shareholders on 9 March, 2021. Purchases of shares will be made within guidelines established from time to time by the Board, but the Board will only exercise the authority if, in its opinion, it would be in the interests of the Company generally to do so.
Under the FCA Listing Rules, the maximum price which may be paid for shares purchased pursuant to the share buy-back authority must not be more than (a) 5% above the average of the market values of the relevant class of shares for the five business days before any purchase is made and (b) the higher of the price of the last independent trade and the then prevailing highest bid. Any shares so purchased may be cancelled or, if the Directors determine and subject to the provisions of the Act and any applicable regulations of the FCA, be held as treasury shares. Treasury shares are not entitled to voting rights nor any distributions either by way of dividend or on a winding-up.
The authority, if granted, will continue in force until the earlier of the conclusion of the AGM of the Company in 2023 or 2 June, 2023.
The Act, as amended by the Shareholders' Rights Regulations, increased the minimum notice required for General Meetings from 14 days to 21 days unless shareholders authorise shorter notice. Resolution 14 is proposed as a special resolution to grant the Company the flexibility to call General Meetings, other than AGMs, on not less than 14 clear days' notice. AGMs will continue to be held on at least 21 clear days' notice. The shorter notice period would not be used as a matter of routine as the Board recognises that shareholders should have ample time to consider proposals being put to them, and it would only convene a General Meeting on the shorter notice where the business of the Meeting was in the interests of shareholders generally and justified the Meeting being called on shorter notice. If granted, the approval will be effective until the Company's next AGM when a renewal of the authority will be sought. In order to be able to call a General Meeting on less than 21 clear days' notice, the Company must make a means of electronic voting available to all shareholders for that Meeting.
The Directors recommend that shareholders vote in favour of all resolutions being put to the AGM, as they themselves intend to do in respect of their own beneficial shareholdings.
Information on the corporate governance of the Company is given in the Corporate Governance Statement on pages 27 to 30 which forms part of this Directors' Report.
On behalf of the Board
20 December, 2021
Corporate governance is the process by which the Board looks after the interests of shareholders and seeks to enhance shareholder value. Shareholders delegate authority to the Directors (the "Board") to enable them to manage the Company, and hold the Directors responsible for the Company's performance. The Board is ultimately responsible for setting the Company's strategy, ensuring itself that this and its culture are aligned, and for monitoring and managing the risks to which the Company is exposed. Good governance means managing the Company's business well and engaging effectively with shareholders, and the Board is committed to doing so and to maintaining high standards of business integrity, transparency and financial reporting.
The Company's sole business is portfolio investment and in common with most investment trust companies it has no executive directors or management, no operating assets and no employees. The Company delegates the management of its day-to-day activities to third-parties which are specialists in their fields, the most important of which are the Investment Manager, the Administrator and Company Secretary, the Custodian of the Company's assets and the Depositary. As a result, much of the work of the Board is the monitoring and supervision of the services provided to the Company by these third-parties. The division of responsibilities among these independent third-party service providers is also a key element of the system of controls the Board uses to check and verify the information provided to it, to protect the Company's assets and to manage the risks to which the Company is exposed.
As an investment trust whose shares are listed on the London Stock Exchange, the Company has an obligation to comply with the Code issued by the FRC in September 2018. Listed investment trusts, however, differ in many respects from most other listed companies which are trading companies. The AIC has its own reporting guidelines, the AIC Code of Corporate Governance (the "AIC Code"), which the FRC recognises as an appropriate reporting regime for investment trust companies.
The Code is available from the FRC's website at www.frc.org.uk. The AIC Code is available from the AIC's website at www.theaic.co.uk.
This statement of Corporate Governance forms part of the Directors' Report and explains how the Board complies with the Company's reporting requirements and how it performs its functions.
The Board considers that the Company has complied with the recommendations of the AIC Code and the provisions of the Code published in 2018 that are relevant to the Company throughout the year under review except as summarised and explained below.
The Board believes that it has made the appropriate disclosures in this Annual Report and Accounts to ensure the Company meets its continuing reporting obligations. As noted above, however, as the Company has no executive directors, management or employees, not all the provisions of the Code are relevant to the Company. The requirement under the Code that a UK company must maintain an internal audit function, for example, is not relevant to the Company as its day-to-day operations are delegated to third-parties which have their own internal audit functions; the Audit Committee does, however, re-consider this requirement annually. The provision of the Code relating to the roles of the chairman and chief executive officer does not apply as the Company has no executive directors.
The Directors collectively have a duty to promote the long-term success of the Company. The Board currently comprises four non-executive Directors, all of whom are deemed to be independent. In accordance with best practice and AIC Code principles, the independence of the members of the Board and its Chairman, David Simpson, has been considered as part of the Board evaluation process which is discussed on page 28 under Performance evaluation. The Board is independent of the Company's Investment Manager and the Chairman is deemed to be independent by his fellow independent Board members.
The Board meets ordinarily at least four times a year to review the Company's investments, performance and other matters of relevance. Between these meetings, the Directors are in regular contact with the Investment Manager. The Board has a schedule of matters reserved for consideration which include decisions relating to investment policy and strategy, gearing, the repurchase and issue of shares, the appointment of Directors, and the entering into of material contracts. In addition, changes to the Company's capital structure, circulars to shareholders and any significant changes in accounting policies require the prior approval of the Board. There is a clear division of responsibility between the Chairman, the Directors, the Investment Manager and the third-party service providers, and no one individual has unfettered powers of decision making. The Chairman is responsible for leading the Board and ensuring its effectiveness in all aspects of its role, promoting a culture of openness and debate by facilitating the effective contribution of Directors, and for ensuring the Directors receive accurate, timely and clear information. The Investment Manager and the Company Secretary liaise with the Chairman prior to each meeting to agree the agenda content and papers to be submitted to the Board and Committee meetings.
All Directors have access to the advice and services of the Company Secretary. The appointment and removal of the Company Secretary is a matter for the whole Board. Where necessary, in the furtherance of their duties, Directors may seek independent professional advice at the expense of the Company.
The terms and conditions of the Directors' appointments are set out in formal Letters of Appointment, copies of which are available from the registered office of the Company during usual business hours on any weekday. Details of the interests of the Directors and their remuneration are given in the Directors' Remuneration Report on page 31 and related party disclosures are provided in note 19 on page 57.
The Company's Articles of Association require that Directors stand for election at the first AGM following their appointment and annually thereafter. In compliance with the AIC Code, which recommends that directors should be submitted for re-election at regular intervals, the Directors submit themselves for re‑election annually. Max King, Iain McLaren, Susannah Nicklin and David Simpson will, therefore, stand for re-election at the forthcoming AGM. The Board has considered the position of each of these Directors as part of the evaluation process and believes it is in the Company's best interests for each of them to be proposed for re-election at the forthcoming AGM. They have each made a significant commitment of time to the Company and a material contribution to its governance while bringing unique skills and knowledge to the discussions and deliberations of the Board. The Directors' biographies are shown on page 15 and these summarise their respective business, financial and investment experience.
The Board believes it is appropriate for a Director to serve up to 9 years following their initial election, and it is expected that Directors will stand down from the Board by the conclusion of the AGM following that period.
Prior to their appointments to the Board of the Company in September 2016, David Simpson and Iain McLaren were directors of Ecofin Water & Power Opportunities Plc ("EWPO"). The Board is of the view that the terms of their directorships of EWPO should not be considered as additional to the terms of their directorships of the Company when assessing their independence as Board members.
The proposal of Directors for re-election is reflected in the Notice of AGM on page 58.
The Board formally reviews its performance and the performance of its Committees on an annual basis. The annual review took place following the end of the financial year and questionnaires were used to allow Directors to assess the performance of the Board, individual Directors and the Chairman and to make recommendations about how the effectiveness of the Board might be improved. The performance of the Chairman was reviewed by the other Directors and led by Iain McLaren. The results of the review were discussed among the Directors and it was agreed that the composition of the Board and its Committees reflected a suitable mix of skills and experience and that the Board, as a whole, and its Committees were functioning effectively.
The Board has approved a policy regarding Directors' conflicts of interest and a Register of Potential Conflicts of Interest has been compiled and approved by the Board. The Directors have also undertaken to notify the Chairman and the Company Secretary as soon as they become aware of any new actual or potential conflict of interest that would need to be considered and approved by the disinterested Directors and added to the Register. The Register is reviewed by the Board at each Board meeting. The Board can impose limits or conditions when giving authorisation if the Directors consider this to be appropriate.
The Company has a full, formal and tailored induction programme for new Directors covering all the Company's policies, practices and strategies. A new Director is provided with all necessary and relevant information about the Company, meets representatives of the Investment Manager and, where appropriate, the Company's other third-party service providers and is offered any training deemed necessary to fulfil their responsibilities and to familiarise them with all aspects of the business. Throughout their time in office, the Directors are continually updated on the Company's business, the regulatory environment in which it operates and other changes affecting the Company by its advisers through written briefings and at Board meetings. In addition, the Chairman reviews the training and development needs of each Director annually, as part of the evaluation process outlined above.
It is the Company's policy to maintain Directors' and Officers' liability insurance at the Company's expense. This is due for renewal in September 2022.
As permitted by the Company's Articles of Association, the Directors have the benefit of an indemnity, as defined by section 234 of the Companies Act 2006. It is the Company's policy to indemnify its Directors in respect of costs or other liabilities which they may incur in connection with any claims made against them relating to their performance as Directors or the performance of the Company. These indemnities would provide additional financial support if the level of cover provided by the Directors' and Officers' liability insurance maintained by the Company were exhausted. There is no cover against fraudulent or dishonest actions.
To enable the Directors to discharge their duties, Board Committees ("Committee(s)"), with written terms of reference, have operated throughout the year under review. The membership of each Committee is detailed on page 15. Attendance at the meetings of the various Committees is restricted to members and those expressly invited to attend. Maitland Administration Services Limited acts as Company Secretary to each Committee.
Copies of the terms of reference of all Committees are available from the Company Secretary at the Registered Office of the Company and on the Investment Manager's website, www.ecofininvest.com/egl.
The Audit Committee comprises lain McLaren as Chairman, Max King, Susannah Nicklin and David Simpson. It is the responsibility of the Audit Committee to ensure that the Company maintains the highest standards of integrity and financial reporting. As David Simpson is independent and provides significant input at meetings of the Audit Committee, the Board considers it desirable for him to be a member of that Committee notwithstanding Provision 29 of the AlC Code.
Further information on the Audit Committee is given in the Report of the Audit Committee on page 34.
The independent Directors act as the Management Engagement Committee, under the Chairmanship of David Simpson, and review the performance of all third-party service providers, their terms of appointment and remuneration. The Committee meets at least annually. The Committee conducts a formal evaluation of the Investment Manager on an annual basis. The evaluation includes the consideration of the investment strategy and process of the Investment Manager and its overall service to the Company and shareholders. As a result of the evaluation process the Board, having been advised by the Management Engagement Committee, is satisfied that the continuing appointment of the Investment Manager is in the interests of shareholders as a whole.
The Board as a whole fulfils the role of Nomination Committee. The Board is relatively small and comprises only non-executive Directors and therefore a separate committee is not considered necessary. New appointments to the Board reflect the existing balance and profile of the Directors and any areas that may benefit from the particular skills or experience of a new Board member. The appropriate balance of skills and experience of the Board is reviewed on an ongoing basis. The Board recognises the objectives of the Hampton-Alexander Review to improve the performance of corporate boards. Whilst the Board does not feel that it would be appropriate to set targets as all appointments are made on merit, when Board positions become available, the Company will ensure that a diverse group of candidates is considered.
In accordance with best practice and the AIC Code, the Board has established a Remuneration Committee which meets at least annually to consider Directors' remuneration in future years. The Directors' Remuneration Report, including the remuneration policy report, are set out on pages 31 to 33.
A schedule of Directors' attendance at Board and Committee meetings during the year ended 30 September, 2021 is shown below:
| Board | Audit Committee |
Management Engagement Committee |
Remuneration Committee |
|
|---|---|---|---|---|
| Number of | ||||
| scheduled | ||||
| Meetings | 4 | 3 | 1 | 1 |
| Attended by: | ||||
| Max King | 4 | 3 | 1 | 1 |
| Iain McLaren | 4 | 3 | 1 | 1 |
| Martin Nègre1 | 1 | n/a | n/a | n/a |
| Susannah Nicklin | 4 | 3 | 1 | 1 |
| David Simpson | 4 | 3 | 1 | 1 |
In addition to the above, a number of ad hoc meetings of the Directors were held during the year ended 30 September, 2021, to cover procedural matters and formal approvals.
A key element of the system of controls adopted by the Board is the employment of third-parties to provide services to the Company, and the establishment of clearly defined responsibilities and reporting procedures both between the Board and those third-parties and amongst the third-parties themselves.
The Board has contractually delegated management of the Company's investment portfolio to the Investment Manager, Ecofin UK. The Investment Manager does not, however, have custody of the Company's assets as they are held by Citigroup as independent custodian and with whom the Company has a Prime Brokerage Agreement. The day-to-day accounting and administration of the Company are undertaken by BNP Paribas Securities Services S.C.A and company secretarial services are provided by Maitland Administration Services Limited.
The Investment Manager attends each Board meeting, enabling the Board to assess the Investment Manager's performance and to review its investment strategy. Please refer to the section titled Performance and market risk on page 18 of the Strategic Report which outlines the reporting provided by the Investment Manager to the Board in advance of formal Meetings and on an ad hoc basis. The Board does not consider it necessary to obtain an independent appraisal of the Investment Manager's services.
The Board confirms that there is an ongoing process for identifying, evaluating and managing those risks that are significant for the Company. A robust assessment of the principal financial and non-financial risks faced by the Company as summarised in the Strategic Report on pages 18 to 20 and in note 16 to the Financial Statements has been carried out. This risk management process reflects the direction provided by the FRC's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued in September 2014, and which was in place during the year ended 30 September, 2021 and up to the date of signing of this Annual Report and Accounts.
The Board has ultimate responsibility for the internal controls adopted by the Company and for reviewing their effectiveness.
The Investment Manager, the Prime Broker and Custodian and the Administrator each has its own system of internal controls and prepares reports on its systems which are available to the Board. At least annually, the Prime Broker and Custodian and the Administrator have their systems of internal controls formally reviewed by an independent external auditor and these reports on the effectiveness of their internal controls are provided to the Investment Manager which reviews them on behalf of the Board and makes them available to the Board as required. The Investment Manager is in regular contact with the Prime Broker and Custodian and Administrator and reviews their performance with the Board on a regular basis. The Company Secretary would also report any breaches of law and regulation if they arose.
The system of controls the Board has adopted is designed to manage, rather than to eliminate, the risk that the Company will be unable to meet its business objectives and can provide reasonable, but not absolute, assurance against material misstatement or loss. The Board monitored and reviewed the operation and effectiveness of the Company's system of internal controls and risk management during the year under review and assesses and manages the Company's key risks on an ongoing basis. The Audit Committee has established a framework to provide it and the Board with reasonable assurance as to the effectiveness of the internal controls operated by third-party service providers.
The Company does not have a whistleblowing policy in place. The Company delegates its main functions to the Investment Manager and third-party service providers who do have such policies in place and these policies have been reviewed by the Audit Committee during the year.
During the review of the system of internal controls, the Board has not identified or been advised of any significant failings or weaknesses.
The provision of bribes of any nature to third-parties, in order to gain a commercial advantage, and tax evasion are prohibited by law and are criminal offences. The Board has zero tolerance for bribery and is dedicated to ensuring the Company's business is conducted in a fair, honest and open manner. The Company has adopted an anti-bribery policy and the Company's service providers also have anti-bribery policies in place. Further, the Board has zero tolerance for tax evasion and is committed to compliance with anti-tax evasion legislation including, but not limited to, the Criminal Finances Act 2017.
The Board aims to ensure that shareholders are kept informed of developments in the Company's business through its published Interim and Annual Report and Accounts. This information is supplemented by the publication of monthly newsletters which are announced to the London Stock Exchange and are available on the Investment Manager's website.
Communication with shareholders is given a high priority by the Board and on its behalf the Investment Manager maintains regular contact with shareholders and prospective investors and makes the Board fully aware of their views. The Chairman and Directors make themselves available as required to support these discussions and to address shareholders' queries.
The Board supports the principle that, in usual circumstances, the AGM be used to communicate with investors, and all shareholders are encouraged to attend and vote at the Meeting. Directors are available at the AGM to discuss issues affecting the Company. It is the intention of the Board that the Annual Report and Accounts for the year ended 30 September, 2021 and the Notice of AGM be issued to shareholders so as to provide at least twenty working days' notice. Shareholders wishing to lodge questions in advance of the AGM are invited to do so by writing to the Company Secretary by email to [email protected]
A summary of all proxy voting on all resolutions will be made available on the Investment Manager's website following the Meeting.
Other information required to be disclosed pursuant to the FCA Disclosure Guidance and Transparency Rules can be found in the Directors' Report on page 26 and the Directors' Remuneration Report on page 32.
For and on behalf of the Board
20 December, 2021
The Company
Governance
The Board presents the Directors' Remuneration Report (the "Remuneration Report") for the year ended 30 September, 2021 which has been prepared in accordance with the requirements of Schedule 8 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008 (the "Regulations"), as amended, by the Act and the relevant FCA Listing Rules.
The Remuneration Report includes a remuneration policy report which must be approved by a binding shareholder vote at least every three years, or less if the Company wishes to change its remuneration policy. The remuneration policy report, which was approved by shareholders on 5 March, 2019 at the Company's AGM, is set out below under "Remuneration policy report" and includes the table entitled "Component parts of the Directors' remuneration".
This Remuneration Report also includes an annual report on remuneration implementation which is put to an advisory shareholder vote annually.
The Company's Auditor is required to report on certain information within this Remuneration Report. Where information set out below has been audited, it is indicated as such. The Auditor's opinion is included within the Independent Auditor's Report on page 37.
In accordance with best practice and the AIC Code, the Board has established a separate Remuneration Committee which meets at least annually to consider remuneration of Directors in future years. The Remuneration Committee operates within clearly defined terms of reference, which are reviewed annually, and is chaired by Max King with the other Members of the Committee comprising the other independent non-executive Directors, being Iain McLaren, Susannah Nicklin and David Simpson.
The maximum aggregate remuneration of the Company's Directors is set out in the Company's Articles of Association and currently amounts to £200,000 per annum. Subject to this limit, the Remuneration Committee takes a number of factors into consideration when reviewing the level of Directors' fees. These include the time spent on the Company's affairs, the responsibilities borne by the Directors and the rate of inflation since any previous increase in Directors' pay. The Company's policy is that fees payable to Directors should be sufficient to motivate and retain candidates of a high calibre to deliver the Company's strategy. The Remuneration Committee also takes into account the level of Directors' pay at other investment trusts of similar size which invest globally, as the Company does, in order to be able to attract new Directors with appropriate experience and knowledge. The Remuneration Committee has not used remuneration advisors during the year under review.
It is the Company's policy that no Director shall be entitled to any benefits in kind, performance-related pay, share options, medical or life assurance, pensions or other retirement benefits. No Director has a service contract with the Company or is entitled to compensation for loss of office. The Company does, however, reimburse any reasonable travel or similar expenses incurred by Directors in connection with the performance of their duties as Directors. The terms and conditions of appointment of the Directors are set out in a Letter of Appointment and these are available for inspection at the registered office of the Company during normal business hours. A Director may resign by providing notice in writing to the Board at any time; there is no fixed notice period.
The Chairman's and non-executive Directors' remuneration is fixed at annual rates, and there are no other scenarios where remuneration would vary. Please also refer to "Directors' appointment and tenure" on page 28 in the Corporate Governance Statement.
| Year ended 30 September 2021 |
Year ended 30 September 2020 |
|
|---|---|---|
| Chairman of the Board | £34,000 | £33,000 |
| Chairman of the | ||
| Audit Committee | £28,750 | £28,000 |
| Non-executive Director | £25,500 | £25,000 |
The Company's policy is for the Chairman of the Board and the Chairman of the Audit Committee to be paid higher fees than other Directors to reflect their more time-consuming roles.
Directors' fees are paid up to the date of termination of their appointment, with no exit payments or compensation for loss of office payments applicable.
As the Company has no employees, there are no comparisons to be made between this Directors' remuneration policy and a policy on the remuneration of employees.
This report sets out how the Directors' remuneration policy was implemented during the year ended 30 September, 2021.
The Remuneration Committee reviews the fees paid to Directors on an annual basis. Upon review of the work and responsibilities of the Directors, the level of inflation and an analysis of fees payable to directors of other comparable investment trust companies, a decision was taken to increase Directors' fees with effect from 1 October, 2021 to the following levels: Chairman of the Board, £35,250; Chairman of the Audit Committee, £29,750; and non-executive Director, £26,250.
Company Information
Financials
Directors are only entitled to fees at such rates as are determined by the Remuneration Committee from time to time. No Director is entitled to any other form of monetary payment or any assets of the Company. Accordingly, the single figure for the total remuneration of each Director set out in the table overleaf does not include any of these items or their monetary equivalents.
The Directors who served during the year under review received the following emoluments.
| Year ended 30 September 2021 |
Year ended 30 September 2020 |
|||||
|---|---|---|---|---|---|---|
| Directors | Fees £ |
Taxable benefits 1 £ |
Total £ |
Fees £ |
Taxable benefits 1 £ |
Total £ |
| Max King | 25,500 | – | 25,500 | 25,000 | – | 25,000 |
| Iain McLaren 28,750 | – | 28,750 | 28,000 | 3,755 | 31,755 | |
| Martin Nègre2 Susannah |
11,254 | – | 11,254 | 25,000 | – | 25,000 |
| Nicklin | 25,500 | – | 25,500 | 1,502 | – | 1,502 |
| David Simpson |
34,000 | – | 34,000 | 33,000 | – | 33,000 |
Taxable benefits refer to travel costs.
Martin Nègre resigned as a Director with effect from 9 March, 2021.
None of the fees referred to in the table above were paid to any third-party in respect of the services provided by any of the Directors.
The following table sets out the annual percentage change in Directors' fees for the year to 30 September, 2021:
| Director name | Percentage change on prior year |
|---|---|
| Max King | 2.0% |
| Ian McLaren | 2.7% |
| Martin Nègre1 | n/a |
| Susannah Nicklin2 | n/a |
| David Simpson | 3.0% |
Retired from the Board on 9 March, 2021
Appointed to the Board on 9 September, 2020
The graph below compares the Company's NAV and price per ordinary share, on a total return basis (assuming reinvestment of dividends), with the performance of an investment in the MSCI World Utilities Index and the S&P Global Infrastructure Index, also in sterling terms and assuming reinvestment of dividends, for the period since admission. These indices are deemed appropriate given the specialised, global nature of the Company's investment remit. The data has been rebased to 100 as at admission on 26 September, 2016.
To enable shareholders to assess the relative importance of spend on Directors' remuneration, the table below shows the Company's total income and net profit as well as the amount of the Company's income spent on Directors' fees and dividends paid to shareholders.
| Year ended 30 September 2021 (£'000) |
Year ended 30 September 2020 (£'000) |
|
|---|---|---|
| Directors' fees | 125 | 113 |
| Dividends paid | ||
| to shareholders | 6,533 | 6,065 |
| Total income | 8,476 | 6,851 |
| Net return after tax | 36,086 | (4,031) |
Neither the Company's Articles of Association nor the Directors' Letters of Appointment require any Director to own shares in the Company. The interests of the Directors and their connected persons in the equity securities of the Company are shown in the table below:
| Ordinary shares | ||||
|---|---|---|---|---|
| Director | 30 September 20211 | 30 September 2020 | ||
| Max King | 30,000 | 20,000 | ||
| Iain McLaren | 24,983 | 24,105 | ||
| Martin Nègre1 | 1,281,455 | 1,281,455 | ||
| Susannah Nicklin | 10,054 | 10,054 | ||
| David Simpson | 94,050 | 94,050 |
The Company
On 13 December, 2021 Iain McLaren acquired 205 shares at 197.205p per share by way of dividend reinvestment. At the latest date practicable before publication, there have been no further changes to the Directors' shareholdings since the year end.
In addition to the Directors' shareholdings above, at 30 September, 2021, employees of Ecofin UK and related parties owned 927,200 shares, representing 0.9% of the issued ordinary share capital of the Company (unaudited).
The Company has not received any views from shareholders in respect of the Directors' remuneration.
At the Company's last AGM held on 9 March, 2021, 16,278,073 (99.25%) of votes cast were in favour of the resolution to approve the annual remuneration report, 123,340 (0.75%) of the votes cast were against the resolution, and 180,874 votes were withheld. The Directors' Remuneration Policy requires approval at least every three years and was last approved at the Company's AGM held on 5 March, 2019, where 36,989,264 (99.87%) of votes cast were in favour of the resolution, 48,307 (0.13%) of the votes cast were against the resolution, and 3,680,387 votes were withheld.
A resolution to approve the Remuneration Policy is set out in the Notice of Annual General Meeting on page 58 as resolution 3.
The Board does not envisage that there will be any significant changes to the implementation of the Directors' remuneration policy during the current financial year compared to how it was implemented during the year ended 30 September, 2021.
The Company is an investment trust which invests globally in specific industry sectors. The Board believes, therefore, that the remuneration of Directors should be sufficient to attract and retain individuals who are knowledgeable about the investment trust industry and also may have special knowledge of the sectors in which the Company invests, the issues it faces in investing globally, and the risks to which it is exposed.
On behalf of the Board, I, as Chairman of the Remuneration Committee, confirm that this Directors' Report on Remuneration summarises, as applicable, for the year ended 30 September, 2021:
The Board considers the resolutions to be proposed at the forthcoming AGM are in the best interests of shareholders as a whole. Accordingly, the Board unanimously recommends to shareholders that they vote in favour of resolutions 2 and 3 in the Notice of Meeting, as they intend to do so in respect of their own beneficial holdings.
For and on behalf of the Board
Chairman of the Remuneration Committee
20 December, 2021
As Chairman of the Company's Audit Committee (the "Committee"), I am pleased to present the Committee's report for the year ended 30 September, 2021.
The Audit Committee operates within clearly defined terms of reference, which are reviewed annually, and provides a forum through which the Company's external Auditor reports to the Directors.
The principal tasks of the Committee are to consider the appropriateness of the Company's accounting policies, to review the Company's Interim Report and Annual Report and Accounts before recommending them to the Board for approval, and to oversee the external audit process. The Committee also recommends to the Board whether the Company's Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides shareholders with the information they need to assess the Company's business model, strategy and position and performance.
With regard to the annual audit, the Committee reports on the effectiveness of the external audit process and on the areas of audit risk with respect to the Company's Annual Report and Accounts it considers to be most significant. The Committee also assesses the adequacy of the internal controls of third-parties which provide services to the Company.
The Committee is chaired by me, Iain McLaren, and the other members are Max King, Susannah Nicklin and David Simpson. As Chairman of the Committee, I have relevant and recent financial experience as a chartered accountant, and the other members have spent their careers working for a number of leading financial institutions. Accordingly, it is considered that the Committee as a whole has competence relevant to the sector. The Board notes that the AIC Code allows for the Chairman of the Board to be a member of the Audit Committee if they were independent on appointment. The Board considers it desirable for David Simpson to be a member of the Committee as he provides significant input at Committee meetings. The Committee met three times during the year under review and intends to continue to hold three meetings per annum to consider and approve the Company's Interim and Annual results and, prior to the Annual results, to consider the re-appointment of the Auditor. The Committee may also meet at other times during the year as required. More information on the members of the Committee can be found on page 15.
BDO LLP ("BDO") was appointed as the Company's Auditor in March 2021 as a result of the audit tender undertaken in 2020. The Company will pay fees of £31,500 for the external audit with respect to the year ended 30 September, 2021. There are no contractual obligations that restrict the Company's choice of Auditor and the Committee, in conjunction with the Board, is committed to reviewing the appointment of the Auditor every year.
The Committee reviews the independence of the Auditor and, in particular, whether the provision of any non-audit services to the Company by BDO could compromise BDO's independence and objectivity as Auditor. BDO reviews its relationship with the Company on an annual basis and reports to the Board, providing details of any other relationships it may have with the Investment Manager. As part of this process, the Company also receives confirmation from BDO of its independence.
The Company's policy with respect to appointing its Auditor to carry out any proposed non-audit service is to allow this where permitted by regulation, where BDO has a competitive advantage over alternative suppliers, and where this does not result in levels of non-audit fees being 70% of the average of the fees paid in the last three consecutive financial years for the Statutory Audit on a rolling basis. No non-audit services were provided during the year.
Over the course of the year under review, the Committee:
These activities allowed the Committee to assess the effectiveness of the Auditor. To further assess the effectiveness of the audit, the Committee held discussions with the Investment Manager which, in turn, worked closely with the Company's Administrator and Auditor. The Auditor attended the Committee Meeting at which the Annual Report and Accounts were considered and the Committee had opportunities to discuss the progress of the audit with the Auditor without either the Investment Manager or the Administrator being present.
In the course of this evaluation, the Audit Committee received management assessments and reports from the Auditor and reviews annual assessments on BDO from the FRC.
| ISSUE CONSIDERED | HOW THE ISSUE WAS ADDRESSED |
|---|---|
| Accuracy and integrity of the Financial Statements. | Review of Audit Plan. Consideration of draft Annual Report and Accounts and Interim Report, including a review of the appropriateness of accounting policies, the effectiveness of the system of internal controls and regulatory developments during the year and approval of Letters of Representation. |
| Incorrect holdings in or valuation of the investment portfolio, including incorrect application of exchange rate movements or failure to assess share liquidity appropriately. |
Consideration and review of valuation process and methodology to establish the existence of portfolio holdings and the accuracy and completeness over the valuations being recommended for approval to the Board. The Investment Manager reports on the liquidity profile of the Company's portfolio at least quarterly in presentations to the Board. |
| Incomplete or inaccurate recognition of revenues (including special dividends). |
Consideration and review of all revenues received compared with forecasts and of allocation of special dividends between revenue and capital. |
| Review of internal control system and risks. | Review of risk map, compliance against the AIC Code, compliance with Section 1158 Corporation Tax Act 2010 and all policies and procedures in place. |
The production of the Company's Annual Report and Accounts is a complex process and the external audit involves a number of parties including the Board, the Investment Manager, the Administrator and Company Secretary and the custodian of the Company's assets, Citigroup.
The Committee has reviewed the controls which are in place at the Investment Manager and other third-party service providers to ensure the completeness and accuracy of the Company's financial records and the security of its assets. The Committee has also noted the reviews that are undertaken at different stages in the production process by the Board, the Investment Manager, the Administrator and Company Secretary and the Auditor to ensure consistency and balance in the presentation of the Annual Report and Accounts.
The Board has also been made fully aware of any significant financial reporting issues and judgements made in connection with the preparation of the Financial Statements.
As a result, the Committee has concluded that the Annual Report and Accounts for the year ended 30 September, 2021, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy. The Committee has reported to the Board and the Board's conclusions are set out in the Statement of Directors' responsibilities on page 36.
The Committee is satisfied as to the independence of BDO and recommends its re-appointment at the forthcoming AGM.
Chairman of the Audit Committee
20 December, 2021
Listed companies are required by the FCA's Disclosure Guidance and Transparency Rules (the "Rules") to include a management report in their Financial Statements. This information is included in the Strategic Report on pages 16 to 22 inclusive (together with the sections of the Annual Report and Accounts incorporated by reference) and the Directors' Report on pages 23 to 26. Therefore, a separate management report has not been included.
The Directors are responsible for preparing the Strategic Report, the Directors' Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", and applicable law (United Kingdom Generally Accepted Accounting Practice ("UK GAAP")). 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 the profit or loss of the Company for that period.
In preparing those Financial Statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Annual Report and Accounts is published on the Investment Manager's website https://ecofininvest.com/egl and the Directors are responsible for the maintenance and integrity of the corporate and financial information about the Company included on this website. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that may have occurred to the Annual Report and Accounts since it was initially presented on the website.
The Directors listed on page 36 as the persons responsible within the Company hereby confirm that, to the best of their knowledge:
Having taken advice from the Audit Committee, the Directors consider that 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.
The Directors have reached these conclusions through a process which is described in the Report of the Audit Committee on page 35.
On behalf of the Board
Chairman
20 December, 2021
to the members of Ecofin Global Utilities and Infrastructure Trust plc
In our opinion the financial statements:
We have audited the financial statements of Ecofin Global Utilities and Infrastructure Trust plc (the "Company") for the year ended 30 September 2021 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash flows, and the related notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the audit committee.
Following the recommendation of the Audit Committee, we were appointed as Independent Auditor by the members at the Annual General Meeting on 9 March 2021 to audit the financial statements for the year ending 30 September 2021 and subsequent financial periods. The period of total uninterrupted engagement is one year, covering the year ended 30 September 2021. We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Company.
In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included:
liquid that, if necessary, it could be liquidated in order to meet the Company's liabilities as they fall due;
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the Company's reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors' statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
| 2021 | ||
|---|---|---|
| Key audit matters | • Valuation and ownership of investments |
|
| • Revenue recognition | | |
| Materiality | • Financial statements as a whole | |
| • £1,960,000 based on 1% of net assets | ||
Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company's system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
to the members of Ecofin Global Utilities and Infrastructure Trust plc continued
| Key audit matter | How the scope of our audit addressed the key audit matter | |||
|---|---|---|---|---|
| Valuation and The valuation and ownership of investments is ownership of the most significant audit area as investments investments represent the most significant balance in the |
We have responded to this matter by testing the valuation and ownership of 100% of the portfolio of investments. |
|||
| Note 1 and note 9 | financial statements and underpin the principal activity of the entity. We therefore considered this to be a key audit matter. |
We performed the following procedures on valuation: | ||
| • Confirmed that bid price has been used by agreeing to externally quoted prices; |
||||
| • Checked the foreign currency exchange rate adopted to independent sources; |
||||
| • Recalculated the valuation by multiplying the number of shares held by the bid price per share; |
||||
| • Checked that there are no contra indicators, such as liquidity considerations, to suggest the bid price is not the most appropriate indication of fair value by considering the realisation period for individual holdings. |
||||
| We have corroborated ownership of the investments by reference to confirmation from the custodian. |
||||
| Key observations: The results of our procedures supported the investment valuations used by management and we did not note any issues relating to the ownership of the investments. |
||||
| Revenue recognition | Income arises predominately from overseas | We have responded to this matter by developing an | ||
| Note 1 and note 2 | dividends and to a lesser extent UK dividends. It is material and can be volatile and is a key factor in demonstrating the performance of the portfolio. |
independent expectation of 100% of dividend income based on the investment holding and data on portfolio company distributions obtained from independent sources. |
||
| Furthermore, judgement is required in the allocation of income to revenue or capital. Accordingly, we considered revenue recognition to be a key audit matter. |
We have analysed the population of dividend receipts to identify any items that could indicate a potential capital distribution, for example where a dividend represents a particularly high yield. For such items, we reviewed the company's announcement and other relevant information to determine whether the dividend had been appropriately treated as revenue or capital. |
|||
| We traced a sample of dividend income receipts to bank. | ||||
| Key observations: Based on our procedures performed we concur with management's judgements and consider revenue recognition to be appropriate. |
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
| Financial statements 2021 |
|
|---|---|
| Materiality | £1,960,000 |
| Basis for determining materiality | 1% of net assets |
| Rationale for the benchmark applied | As an investment trust, net asset value is considered to be the key measure of performance. |
| Performance materiality | £1,470,000 |
| Basis for determining performance materiality |
75% of materiality based on the brought forward uncorrected misstatements, known or expected misstatements for the current year, prior year corrected misstatements and the number of areas of the financial statements subject to estimation uncertainty. |
We also determined that for items impacting on revenue return, a misstatement of less than materiality for the financial statements as a whole, could influence the economic decisions of users. As a result, we determined a specific materiality of £335,000 for these items based on 5% of revenue return before tax. We further applied a performance materiality level of 75% of specific materiality, namely £251,000, to ensure that the risk of errors exceeding specific materiality was appropriately mitigated.
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £98,000, or £16,000 for items impacting on the revenue return, which is set at 5% of materiality of the respective materiality levels. We also agreed to report differences below these thresholds that, in our view, warranted reporting on qualitative grounds.
The directors are responsible for the other information. The other information comprises the information included in the Report and Accounts, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
The Listing Rules require us to review the Directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company's compliance with the provisions of the UK Corporate Governance Statement specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements, or our knowledge obtained during the audit.
| Going concern and longer-term viability |
• The Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified; and |
|---|---|
| • The Directors' explanation as to its assessment of the entity's prospects, the period this assessment covers and why the period is appropriate. |
|
| Other Code provisions |
• Directors' statement is fair, balanced and understandable; |
| • Board's confirmation that it has carried out a robust assessment of the emerging and principal risks; |
|
| • The section of the annual report that describes the review of effectiveness of risk management and internal control systems; and |
|
| • The section describing the work of the audit committee. |
to the members of Ecofin Global Utilities and Infrastructure Trust plc continued
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
| Strategic report and Directors' report |
In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements. |
|---|---|
| In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors' report. |
|
| Directors' remuneration |
In our opinion, the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. |
| Matters on which we are required to report by exception |
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: |
| • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or |
|
| • the financial statements and the part of the Directors' remuneration report to be audited are not in agreement with the accounting records and returns; or |
|
| • certain disclosures of Directors' remuneration specified by law are not made; or |
|
| • we have not received all the information and explanations we require for our audit. |
As explained more fully in the Statement of Directors' responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
We gained an understanding of the legal and regulatory framework applicable to the Company and industry in which the Company operates and considered the risk of acts by the Company which were contrary to applicable laws and regulations, including fraud. These included but were not limited to compliance with the Companies Act 2006, the FCA listing and DTR rules, the principles of the UK Corporate Governance Code, and industry practice represented by the AIC SORP and FRS 102. We also considered the Company's qualification as an Investment Trust under UK tax legislation (s1158/1159 of the Corporation Tax Act 2010). We considered the area where the financial statements could be materially misstated due to fraud to be management override. Our response to revenue recognition is documented in the key audit matter.
We considered compliance with this framework through discussions with the Audit Committee and performed audit procedures on these areas as considered necessary.
We focused on laws and regulations that could give rise to a material misstatement in the Company's financial statements and the susceptibility of the entity's financial statements to material misstatement including fraud. Our tests included, but were not limited to:
We gained an understanding of the relevant laws and regulations impacting the entity and the susceptibility of the financial statements to fraud through our knowledge of investment trusts, review of the prior year financial statements, discussions with management at the audit planning meeting and with Those Charged With Governance at the Audit Committee meetings. The engagement team was deemed to collectively have the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Statutory Auditor London, UK 20 December, 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)
| Year ended 30 September 2021 | Year ended 30 September 2020 | ||||||
|---|---|---|---|---|---|---|---|
| Notes | Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Gains/(losses) on investments held | |||||||
| at fair value through profit or loss | 9 | – | 28,742 | 28,742 | – | (7,551) | (7,551) |
| Foreign exchange gains/(losses) | – | 1,115 | 1,115 | – | (280) | (280) | |
| Investment income | 2 | 8,476 | 1,281 | 9,757 | 6,851 | – | 6,851 |
| Investment management fees | 3 | (935) | (935) | (1,870) | (750) | (750) | (1,500) |
| Administrative expenses | 4 | (780) | – | (780) | (789) | – | (789) |
| Net return/(loss) before finance | |||||||
| costs and taxation | 6,761 | 30,203 | 36,964 | 5,312 | (8,581) | (3,269) | |
| Finance costs | 5 | (42) | (42) | (84) | (57) | (57) | (114) |
| Net return/(loss) before taxation | 6,719 | 30,161 | 36,880 | 5,255 | (8,638) | (3,383) | |
| Taxation | 7 | (794) | – | (794) | (648) | – | (648) |
| Net return/(loss) after taxation | 5,925 | 30,161 | 36,086 | 4,607 | (8,638) | (4,031) | |
| Return/(Loss) per ordinary share | |||||||
| (pence) | 8 | 5.98 | 30.42 | 36.40 | 4.97 | (9.31) | (4.34) |
The total column of the Statement of Comprehensive Income is the profit and loss account of the Company.
The revenue and capital columns are supplementary to this and are published under guidance from the AIC.
All revenue and capital returns in the above statement derive from continuing operations. No operations were acquired or discontinued during the year ended 30 September, 2021.
The Company has no other comprehensive income and therefore the net return on ordinary activities after taxation is also the total comprehensive income for the year.
The accompanying notes are an integral part of the Financial Statements.
Notes:
1. The maintenance and integrity of the Ecofin Global Utilities and Infrastructure Trust plc web site is the responsibility of the Directors; the work carried out by the Auditor does not involve consideration of these matters and, accordingly, the Auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site.
| As at 30 September 2021 |
As at 30 September 2020 |
||
|---|---|---|---|
| Notes | £'000 | £'000 | |
| Non-current assets | |||
| Equity securities | 220,916 | 179,153 | |
| Investments at fair value through profit or loss | 9 | 220,916 | 179,153 |
| Current assets | |||
| Debtors and prepayments | 10 | 1,103 | 2,600 |
| Cash at bank | 11,251 | – | |
| 12,354 | 2,600 | ||
| Creditors: amounts falling due within one year | |||
| Prime brokerage borrowings | 16 | (35,873) | (22,757) |
| Other creditors | 11 | (850) | (2,603) |
| (36,723) | (25,360) | ||
| Net current liabilities | (24,369) | (22,760) | |
| Net assets | 196,547 | 156,393 | |
| Share capital and reserves | |||
| Called-up share capital | 12 | 1,007 | 950 |
| Share premium account | 13 | 15,500 | 4,956 |
| Special reserve | 117,730 | 118,338 | |
| Capital reserve | 14 | 62,310 | 32,149 |
| Revenue reserve | – | – | |
| Total shareholders' funds | 196,547 | 156,393 | |
| Net asset value per ordinary share (pence) | 15 | 195.11 | 164.60 |
The Financial Statements were approved by the Board of Directors and authorised for issue on 20 December, 2021 and were signed on its behalf by:
Director
The accompanying notes are an integral part of the Financial Statements.
The Company
| For the year ended 30 September 2021 | |||||||
|---|---|---|---|---|---|---|---|
| Notes | Share capital £'000 |
Share premium account £'000 |
Special reserve1 £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total £'000 |
|
| Balance at 1 October 2020 | 950 | 4,956 | 118,338 | 32,149 | – | 156,393 | |
| Return after taxation | – | – | – | 30,161 | 5,925 | 36,086 | |
| Issue of ordinary shares | 12, 13 | 57 | 10,544 | – | – | – | 10,601 |
| Dividends paid | 6 | – | – | (608) | – | (5,925) | (6,533) |
| Balance at 30 September 2021 | 1,007 | 15,500 | 117,730 | 62,310 | – | 196,547 |
| For the year ended 30 September 2020 | |||||||
|---|---|---|---|---|---|---|---|
| Notes | Share capital £'000 |
Share premium account £'000 |
Special reserve 1 £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total £'000 |
|
| Balance at 1 October 2019 | 919 | – | 119,796 | 40,787 | – | 161,502 | |
| Return after taxation | – | – | – | (8,638) | 4,607 | (4,031) | |
| Issue of ordinary shares | 12, 13 | 31 | 4,956 | – | – | – | 4,987 |
| Dividends paid | 6 | – | – | (1,458) | – | (4,607) | (6,065) |
| Balance at 30 September 2020 | 950 | 4,956 | 118,338 | 32,149 | – | 156,393 |
The accompanying notes are an integral part of the Financial Statements.
| Year ended 30 September 2021 |
Year ended 30 September 2020 |
|
|---|---|---|
| Notes | £'000 | £'000 |
| Net return/(loss) before finance costs and taxation | 36,964 | (3,269) |
| Increase in accrued expenses | 85 | 31 |
| Overseas withholding tax | (753) | (795) |
| Deposit interest income | (21) | (20) |
| Dividends income | (8,455) | (6,803) |
| Fixed interest income | – | (28) |
| Realised (gains)/losses on foreign exchange transactions | (1,115) | 280 |
| Dividends received | 8,227 | 6,405 |
| Deposit interest received | 21 | 20 |
| Fixed interest received | – | 49 |
| Interest paid | (84) | (114) |
| (Gains)/losses on investments | (28,742) | 7,551 |
| Decrease in other debtors | 2 | 2 |
| Net cash flow from operating activities | 6,129 | 3,309 |
| Investing activities | ||
| Purchases of investments | (97,893) | (71,379) |
| Sales of investments | 84,716 | 56,805 |
| Net cash used in investing activities | (13,177) | (14,574) |
| Financing activities | ||
| Movement in prime brokerage borrowings | 13,985 | 4,299 |
| Dividends paid 6 |
(6,533) | (6,065) |
| Share issue proceeds | 10,601 | 4,987 |
| Net cash from financing activities | 18,053 | 3,221 |
| Increase/(decrease) in cash | 11,005 | (8,044) |
| Analysis of changes in cash during the year | ||
| Cash and cash equivalents at the start of year | – | 8,228 |
| Foreign exchange movement | 246 | (184) |
| Increase/(decrease) in cash as above | 11,005 | (8,044) |
| Cash and cash equivalents at the end of year | 11,251 | – |
The accompanying notes are an integral part of these Financial Statements.
For the year ended 30 September, 2021
The Financial Statements have been prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ("UK GAAP"), including the Financial Reporting Standard applicable in the U.K. and Republic of Ireland ("FRS 102") and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in October 2020. The Financial Statements are prepared in Sterling which is the functional currency of the Company and rounded to the nearest £'000. They have also been prepared on a going concern basis and approval as an investment trust has been granted by HMRC.
The Company's assets consist substantially of equity shares in companies listed on recognised stock exchanges and in most circumstances are realisable within a short timescale. The Board has set limits for borrowing and regularly reviews actual exposures and cash flow projections. The Company has prime broker borrowings to draw upon, and these borrowings are repayable on demand.
Having taken these factors into account as well as the impact of Covid-19 and having assessed the principal risks and other matters set out in the Viability Statement on page 20, the Directors believe that, after making enquiries, the Company has adequate resources to continue in operational existence for the foreseeable future and has the ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of this Report. Accordingly, they continue to adopt the going concern basis of accounting in preparing the financial statements.
Further detail is included in the Directors' Report (unaudited) on page 25.
The preparation of financial statements requires the use of certain significant accounting judgements, estimates and assumptions which requires management to exercise its judgement in the process of applying the accounting policies and are continually evaluated. Special dividends are assessed and credited to capital or revenue according to their circumstances and are considered to require significant judgement. The Directors do not consider there to be any significant estimates within the Financial Statements.
Income from investments, including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are credited to capital or revenue, according to the circumstances. The fixed returns on debt securities are recognised on a time apportionment basis so as to reflect the effective yield on the debt securities. Interest receivable from cash and short-term deposits is treated on an accruals basis.
All expenses are accounted for on an accruals basis. Expenses are charged to the revenue account except where they directly relate to the acquisition or disposal of an investment, in which case they are charged to the capital account; in addition, expenses are charged to the capital account where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the management fee and overdraft interest have been allocated 50% to the capital account and 50% to the revenue account.
The charge for taxation is based on the profit for the year to date and takes into account, if applicable, taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred taxation is provided using the liability method on all timing differences, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in future against which the deferred tax asset can be offset.
Due to the Company's status as an investment trust company and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue within the Statement of Comprehensive Income on the same basis as the particular item to which it relates using the Company's effective rate of tax for the year, based on the marginal basis.
For the purposes of preparing the Financial Statements, the Company has applied Sections 11 and 12 of FRS 102 in respect of financial instruments. All investments are measured initially and subsequently at fair value and transaction costs are expensed immediately. Investment transactions are accounted for on a trade date basis. The fair value of the financial instruments in the Statement of Financial Position is based on their quoted bid price at the reporting date, without deduction of the estimated future selling costs.
The Company
Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Statement of Comprehensive Income as "Gains on investments held at fair value through profit or loss". Also included within this caption are transaction costs in relation to the purchase or sale of investments, including the difference between the purchase price of an investment and its bid price at the date of purchase.
Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to insignificant risk of change in value.
Short-term borrowings, which comprise of prime brokerage borrowings, are recognised initially at the fair value of the consideration received, net of any issue expenses, and subsequently at amortised cost using the effective interest method. The finance costs, being the difference between the net proceeds of borrowings and the total amount of payments required to be made in respect of those borrowings, accrue evenly over the life of the borrowings and are allocated 50% to revenue and 50% to capital.
The Directors are of the opinion that the Company is engaged in a single segment of business activity, being investment business. Consequently, no business segmental analysis is provided.
The balance classified as share premium includes the premium above nominal value received by the Company on issuing shares net of issue costs.
The special reserve arose following court approval in November 2016 to transfer the £123,609,000 from the share premium account. This reserve is distributable and may be used, where the Board considers it appropriate, by the Company for the purposes of paying dividends to shareholders and, in particular, augmenting or smoothing payments of dividends to shareholders. There is no guarantee that the Board will in fact make use of this reserve for the purpose of the payment of dividends to shareholders. The special reserve can also be used to fund the cost of share buy-backs.
Gains and losses on disposal of investments and changes in fair values of investments are transferred to the capital account. Foreign exchange differences of a capital nature are also transferred to the capital account. The capital element of the management fee and relevant finance costs are charged to this account. Any associated tax relief is also credited to this account.
This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income.
The Company's special reserve, capital reserve and revenue reserve may be distributed by way of dividend.
Monetary assets and liabilities and non-monetary assets held at fair value in foreign currencies are translated into Sterling at the rates of exchange ruling at the Statement of Financial Position date. Transactions involving foreign currencies are converted at the rate ruling on the date of the transaction. Gains and losses on the translation of foreign currencies are recognised in the revenue or capital account of the Statement of Comprehensive Income depending on the nature of the underlying item.
Dividends are recognised in the period in which they are paid.
For the year ended 30 September, 2021 continued
| 2. Income | ||
|---|---|---|
| Year ended 30 September 2021 £'000 |
Year ended 30 September 2020 £'000 |
|
| Income from investments (revenue account) | ||
| UK dividends | 1,233 | 944 |
| Overseas dividends | 6,995 | 5,410 |
| Overseas fixed interest | – | 28 |
| Stock dividends | 227 | 449 |
| 8,455 | 6,831 | |
| Other income (revenue account) | ||
| Deposit interest | 21 | 20 |
| Total income | 8,476 | 6,851 |
During the year to 30 September, 2021 the Company received special dividends totalling £1,281,000 (30 September, 2020: nil), all of which was recognised as capital and is included in the capital column of the Statement of Comprehensive Income.
| Year ended 30 September 2021 | Year ended 30 September 2020 | |||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Investment management fee | 935 | 935 | 1,870 | 750 | 750 | 1,500 |
The Company has an agreement with Ecofin Advisors Limited for the provision of investment management services.
The management fee for the first half of the year ended 30 September, 2021 was calculated, on a quarterly basis, at 1.00% per annum of the net assets of the Company. From 1 April, 2021, the management fee was calculated at 1.00% per annum of the Company's NAV on the first £200million and 0.75% per annum of NAV thereafter, payable quarterly in arrears. The management fee is chargeable 50% to revenue and 50% to capital. During the year £1,870,000 (30 September, 2020: £1,500,000) of investment management fees were earned by the Investment Manager, with a balance of £491,000 (30 September, 2020: £391,000) being payable to Ecofin Advisors Limited at the year-end.
| Year ended 30 September 2021 £'000 |
Year ended 30 September 2020 £'000 |
|
|---|---|---|
| Administration fee | 262 | 265 |
| Directors' remuneration1 | 125 | 113 |
| Auditor's remuneration: | ||
| fees payable to the Company's Auditor for the audit of the Company's annual accounts | 38 | 42 |
| Printing and postage fees | 25 | 27 |
| Directors' liability insurance | 6 | 5 |
| Depositary fees | 84 | 68 |
| Regulatory fees | 26 | 20 |
| Employer's National Insurance contributions | 3 | 14 |
| Registrar's fees | 27 | 55 |
| Legal and advisory fees | 166 | 163 |
| Other expenses | 18 | 17 |
| 780 | 789 |
All of the expenses above include irrecoverable VAT where applicable. For the Auditor's remuneration for the statutory audit, irrecoverable VAT amounted to £6,000 (30 September, 2020: £7,000).
Advisory and legal fees include: fees in respect of sponsored research and other marketing resources, any legal fees and a substantial accrual for expenses relating to the recovery of excess taxes withheld on foreign dividends.
| Year ended 30 September 2021 | Year ended 30 September 2020 | |||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Prime brokerage borrowings – interest | 42 | 42 | 84 | 57 | 57 | 114 |
| Year ended 30 September 2021 £'000 |
Year ended 30 September 2020 £'000 |
|
|---|---|---|
| Fourth interim for 2019 of 1.60p (paid 29 November, 2019) | – | 1,470 |
| First interim for 2020 of 1.65p (paid 28 February, 2020) | – | 1,516 |
| Second interim for 2020 of 1.65p (paid 29 May, 2020) | – | 1,528 |
| Third interim for 2020 of 1.65p (paid 28 August, 2020) | – | 1,551 |
| Fourth interim for 2020 of 1.65p (paid 30 November, 2020) | 1,576 | – |
| First interim for 2021 of 1.65p (paid 26 February, 2021) | 1,633 | – |
| Second interim for 2021 of 1.65p (paid 28 May, 2021) | 1,662 | – |
| Third interim for 2021 of 1.65p (paid 31 August, 2021) | 1,662 | – |
| 6,533 | 6,065 |
The proposed fourth interim dividend for 2021 has not been included as a liability in these Financial Statements as it was not payable until after the reporting date.
For the year ended 30 September, 2021 continued
Set out below are the total dividends paid and proposed in respect of the financial period, which is the basis on which the requirements of Section 1158-1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year was £5,925,000 (30 September, 2020: £4,607,000).
| Year ended 30 September 2021 £'000 |
Year ended 30 September 2020 £'000 |
|
|---|---|---|
| Three interim dividends of 1.65p each (2020: three interim dividends of 1.65p each) | 4,957 | 4,595 |
| Fourth interim dividend of 1.65p (2020: 1.60p) | 1,666 | 1,579 |
| 6,623 | 6,174 |
The amount reflected above for the cost of the fourth interim dividend for 2021 is based on 100,963,423 ordinary shares, being the number of ordinary shares in issue on the ex-dividend date 28 October, 2021.
| Year ended 30 September 2021 | Year ended 30 September 2020 | ||||||
|---|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
||
| Overseas tax suffered | 1,134 | – | 1,134 | 882 | – | 882 | |
| Overseas tax reclaimable | (340) | – | (340) | (234) | – | (234) | |
| Total tax charge for the period | 794 | – | 794 | 648 | – | 648 |
The tax assessed for the year is higher than the standard rate of corporation tax rate of 19.00% (2020: 19.00%). The differences are explained as follows:
| Year ended 30 September 2021 | Year ended 30 September 2020 | |||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Net profit/(loss) on ordinary activities | ||||||
| before taxation | 6,719 | 30,161 | 36,880 | 5,255 | (8,638) | (3,383) |
| Net return/(loss) multiplied by the standard rate of corporation tax of 19.00% (30 September, 2020: 19.00%) |
1,277 | 5,730 | 7,007 | 998 | (1,641) | (643) |
| Effects of: | ||||||
| Non-taxable U.K. dividends | (234) | (243) | (477) | (204) | – | (204) |
| Non-taxable overseas dividends | (1,216) | – | (1,216) | (932) | – | (932) |
| Tax effect of expensed double taxation relief | (11) | – | (11) | (6) | – | (6) |
| Expenses not deductible for tax purposes | – | – | – | 1 | – | 1 |
| Movement in unutilised expenses | 184 | 186 | 370 | 143 | 153 | 296 |
| Other capital returns/losses | – | (5,673) | (5,673) | – | 1,488 | 1,488 |
| Overseas tax suffered | 1,134 | – | 1,134 | 882 | – | 882 |
| Overseas tax reclaimable | (340) | – | (340) | (234) | – | (234) |
| Total tax charge | 794 | – | 794 | 648 | – | 648 |
No provision for deferred tax has been made in the accounting year. The Company has not provided for deferred tax on capital gains or losses arising on the revaluation or disposal of investments as it is exempt from tax on these items because of its status as an investment trust company.
At the year-end, the Company has, for taxation purposes only, accumulated unrelieved management expenses and loan relationship deficits of £8,835,000 (30 September, 2020: £6,888,000). A deferred tax asset in respect of this has not been recognised and these expenses will only be utilised if the Company has profits chargeable to corporation tax in the future. It is considered too uncertain that the Company will generate such profits and therefore no deferred tax asset has been recognised.
| Year ended 30 September 2021 | Year ended 30 September 2020 | |||
|---|---|---|---|---|
| £'000 | p | £'000 | p | |
| Returns are based on the following figures: | ||||
| Revenue return | 5,925 | 5.98 | 4,607 | 4.97 |
| Capital return/(loss) | 30,161 | 30.42 | (8,638) | (9.31) |
| Total return/(loss) | 36,086 | 36.40 | (4,031) | (4.34) |
| Weighted average number of ordinary shares in issue | 99,135,779 | 92,774,379 |
| Year ended | Year ended 30 September 2020 |
|
|---|---|---|
| 30 September 2021 £'000 |
£'000 | |
| Held at fair value through profit or loss: | ||
| Opening book cost | 159,259 | 136,702 |
| Opening investment holding gains | 19,894 | 34,596 |
| Opening fair value | 179,153 | 171,298 |
| Analysis of transactions made during the year | ||
| Purchases at cost | 96,282 | 73,666 |
| Sales proceeds received | (83,261) | (58,260) |
| Gains/(losses) on investments | 28,742 | (7,551) |
| Closing fair value | 220,916 | 179,153 |
| Closing book cost | 184,640 | 159,259 |
| Closing investment gains | 36,276 | 19,894 |
| Closing fair value | 220,916 | 179,153 |
The Company received £83,261,000 (2020: £58,260,000) from investments sold in the period. The book cost of these investments when they were purchased was £70,902,000 (2020: £51,109,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
For the year ended 30 September, 2021 continued
During the year expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within losses on investments in the Statement of Comprehensive Income. The total costs were as follows:
| Year ended 30 September 2021 £'000 |
Year ended 30 September 2020 £'000 |
|
|---|---|---|
| Purchases | 152 | 88 |
| Sales | 59 | 32 |
| 211 | 120 |
The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document are calculated on a different basis and in line with the PRIIPs regulations.
| Year ended | Year ended | |
|---|---|---|
| 30 September 2021 | 30 September 2020 | |
| £'000 | £'000 | |
| Amounts due from brokers | – | 1,455 |
| Prepayments and accrued income | 1,103 | 1,145 |
| 1,103 | 2,600 |
| Year ended | Year ended | |
|---|---|---|
| 30 September 2021 | 30 September 2020 | |
| £'000 | £'000 | |
| Amounts due to brokers | – | 1,838 |
| Other creditors | 850 | 765 |
| 850 | 2,603 |
| As at 30 September 2021 | As at 30 September 2020 | |||
|---|---|---|---|---|
| Shares | £'000 | Shares | £'000 | |
| Issued and fully paid | ||||
| Ordinary shares of 1p each at 1 October | 95,013,423 | 950 | 91,872,247 | 919 |
| Issue of new ordinary shares | 5,725,000 | 57 | 3,141,176 | 31 |
| Ordinary shares of 1p each at 30 September | 100,738,423 | 1,007 | 95,013,423 | 950 |
The Company was admitted to the Main Market of the London Stock Exchange on 26 September, 2016. The total number of ordinary shares in the Company in issue immediately following admission was 91,872,247, each with equal voting rights. During the year, the Company issued 5,725,000 (2020: 3,141,176) ordinary shares with net proceeds of £10,601,000 (2020: £4,987,000).
| Year ended 30 September 2021 £'000 |
Year ended 30 September 2020 £'000 |
|
|---|---|---|
| At 1 October | 4,956 | – |
| Issue of shares | 10,544 | 4,956 |
| At 30 September | 15,500 | 4,956 |
| As at 30 September 2021 £'000 |
As at 30 September 2020 £'000 |
|
|---|---|---|
| At 30 September | 32,149 | 40,787 |
| Movement in investment holdings gains/(losses) | 16,382 | (14,702) |
| Gains on realisation of investments at fair value | 12,360 | 7,151 |
| Special dividend | 1,281 | – |
| Foreign exchange gains/(losses) | 1,115 | (280) |
| Investment management fees | (935) | (750) |
| Finance costs | (42) | (57) |
| At 30 September | 62,310 | 32,149 |
The NAV attributable to the ordinary shares and the NAV per ordinary share at the year-end were as follows:
| As at 30 September 2021 |
As at 30 September 2020 |
|
|---|---|---|
| Net asset value attributable (£'000) | 196,547 | 156,393 |
| Number of ordinary shares in issue (note 12) | 100,738,423 | 95,013,423 |
| Net asset value per share (p) | 195.11 | 164.60 |
Risk management policies and procedures
The investment objectives of the Company are to achieve a high, secure dividend yield on its investment portfolio and to realise long-term growth in the capital value of the portfolio for the benefit of shareholders, while taking care to preserve shareholders' capital.
The Company's financial instruments comprise:
The Company may enter into derivative contracts in order to manage the risks arising from its investment activities. As at the year-end there were no derivative contracts outstanding (2020: nil).
For the year ended 30 September, 2021 continued
The Board sets out its investment policies, including its policies on gearing and diversification, in the Strategic Report beginning on page 17. The Board and the Company's Investment Manager consider and review the financial risks inherent in managing the Company's assets and these are detailed below.
The Company's investment portfolio is subject to fluctuations, volatility and the vagaries of market prices. The Directors seek to mitigate this risk by ensuring proper controls exist through the IMA for maintaining a diversified portfolio of the securities of utility and other economic infrastructure companies and ensuring that there are balances within the portfolio by geography, sub-sector and types of instrument. If the fair value of the Company's investments at year-end (see portfolio holdings on page 14) had increased or decreased by 10% then it would have had an effect on the Group's capital return and equity equal to £22,092,000 (30 September, 2020: £17,915,000).
The value of the Company's assets and the total return earned by the Company's shareholders can be significantly affected by foreign exchange movements as most of the Company's assets are denominated in currencies other than Sterling, the currency in which the Company's accounts are prepared. It is not the Company's policy to try to minimise or eliminate foreign exchange risk; over the long-term this could restrict the investment returns potentially available to Sterling-based investors in international securities. There is a risk for the NAV and shareholders, therefore, if Sterling appreciates significantly against foreign currencies. This risk is partially offset by the Company's borrowings in currencies other than Sterling.
| As at 30 September 2021 | |||
|---|---|---|---|
| Investments £'000 |
Net monetary assets/(liabilities) £'000 |
Total currency exposure £'000 |
|
| Australian dollar | 14,523 | (1,216) | 13,307 |
| Canadian dollar | 9,980 | 3,956 | 13,936 |
| Euro | 85,565 | (15,114) | 70,451 |
| Hong Kong dollar | 11,041 | 7,371 | 18,412 |
| Philippine peso | – | 14 | 14 |
| Sterling | 24,255 | (2,663) | 21,592 |
| Swiss franc | – | 15 | 15 |
| US dollar | 75,552 | (16,732) | 58,820 |
| Total | 220,916 | (24,369) | 196,547 |
| As at 30 September 2020 | ||||
|---|---|---|---|---|
| Investments £'000 |
Net monetary assets/(liabilities) £'000 |
Total currency exposure £'000 |
||
| Australian dollar | 12,984 | (1,741) | 11,243 | |
| Canadian dollar | 16,225 | (1,135) | 15,090 | |
| Euro | 65,887 | (8,043) | 57,844 | |
| Hong Kong dollar | 5,539 | (653) | 4,886 | |
| Philippine peso | – | 14 | 14 | |
| Sterling | 20,179 | (2,354) | 17,825 | |
| Swiss franc | – | 25 | 25 | |
| US dollar | 58,339 | (8,873) | 49,466 | |
| Total | 179,153 | (22,760) | 156,393 |
A 10% rise or decline of Sterling against foreign currency denominated (i.e. non-Sterling) assets held at the year-end would have decreased/increased the total return and net asset value by £17,496,000 or 8.9% (30 September, 2020: £13,857,000 or 8.9%). This is considered to be a reasonable illustration based on the volatility of exchange rates during the year.
The Company is only exposed to significant interest rate risk through its borrowings with Citigroup Global Markets Limited and through the fair value of investments in fixed interest rate securities, if any.
Borrowings varied throughout the period as part of a Board endorsed policy and at year-end amounted to the equivalent of £35,873,000 (30 September, 2020: £22,757,000) in a variety of currencies. All of these borrowings were at floating rates of interest.
If this level of borrowing was maintained for the year, a 1% increase/decrease in LIBOR would decrease/increase the revenue return by £123,000 (30 September, 2020 £114,000) and decrease/increase the capital return by £123,000 (30 September, 2020: £114,000). In the event that the prime brokerage facility were to be renegotiated or terminated, the Company may not be able to finance its borrowings on as favourable terms and this risk is monitored.
The interest rates on prime brokerage borrowings varied by currency from -0.09% to 0.75% during the year ended 30 September, 2021.
The Company's assets mainly comprise readily realisable securities which can be easily sold to meet funding commitments if necessary. A liquidity analysis is prepared on at least a quarterly basis as part of the Investment Manager's report to the Board and the liquidity profile of all securities is reviewed. The Investment Manager reviews the liquidity profile of the investments continuously.
The contractual maturities of the Company's financial liabilities at 30 September, 2021 based on the earliest date on which payment can be required was as follows:
| Due within 3 months | As at 30 September 2021 £'000 |
As at 30 September 2020 £'000 |
|---|---|---|
| Prime brokerage borrowings | (35,873) | (22,757) |
| Other creditors | (850) | (2,603) |
| (36,723) | (25,360) |
Prime brokerage borrowings are repayable on demand.
Credit risk is mitigated by diversifying the counterparties with which the Investment Manager conducts investment transactions. The credit standing of all counterparties is reviewed periodically with limits set on amounts due from any one broker. The Company's exposure to its counterparty for forward currency contracts, Citigroup, at 30 September, 2021 was £nil (30 September, 2020: £nil). There were no items past due or impaired.
The maximum exposure to credit risk at 30 September, 2021 and 30 September, 2020 was considered to be the same as the carrying amount of the financial assets in the Statement of Financial Position.
For the year ended 30 September, 2021 continued
FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following levels:
Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date;
Level 2: inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly; and
Level 3: inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:
| As at 30 September 2021 | Note | Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
|---|---|---|---|---|---|
| Financial assets at fair value through profit or loss |
|||||
| Quoted equities | a) | 216,808 | 4,108 | – | 220,916 |
| Net fair value | 216,808 | 4,108 | – | 220,916 | |
| As at 30 September 2020 | Note | Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
| Financial assets at fair value through profit or loss |
|||||
| Quoted equities | a) | 179,153 | – | – | 179,153 |
| Net fair value | 179,153 | – | – | 179,153 |
The fair value of the Company's investments in equities and preference shares has been determined by reference to their quoted bid prices at the reporting date. Equities and preference shares included in Fair Value Level 1 are actively traded on recognised stock exchanges. Investments categorised as Level 2 are not considered to trade in active markets.
| As at 30 September 2020 £'000 |
Currency differences £'000 |
Cash flows £'000 |
As at 30 September 2021 £'000 |
|
|---|---|---|---|---|
| Cash and short term deposits | – | 246 | 11,005 | 11,251 |
| Debt due within one year | (22,757) | 869 | (13,985) | (35,873) |
| (22,757) | 1,115 | (2,980) | (24,622) | |
| As at 30 September 2019 £'000 |
Currency differences £'000 |
Cash flows £'000 |
As at 30 September 2020 £'000 |
|
| Cash and short term deposits | 8,228 | (184) | (8,044) | – |
| Debt due within one year | (18,362) | (96) | (4,299) | (22,757) |
| (10,134) | (280) | (12,343) | (22,757) |
A statement reconciling the movement in net funds to the net cash flow has not been presented as there are no differences from the above analysis.
Fees payable during the year to the Directors and their interests in shares of the Company are considered to be related party transactions and are disclosed within the Directors' Remuneration Report on pages 31 to 33. The balance of fees due to Directors at the year-end was £nil (30 September, 2020: £nil).
The Company has an agreement with Ecofin Advisors Limited for the provision of investment management services. Details of fees earned during the year and balances outstanding at the year-end are disclosed in note 3.
The Company's investment objective is to achieve a high, secure dividend yield on its portfolio and to realise long-term growth in the capital value of the portfolio for the benefit of shareholders.
The capital of the Company consists of debt, comprising prime brokerage borrowings, and equity, comprising issued capital, reserves and retained earnings. The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.
The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes:
The Company is not subject to any externally imposed capital requirements.
Notice is hereby given that the fifth AGM of Ecofin Global Utilities and Infrastructure Trust plc will be held on Wednesday, 2 March, 2022 at 2.30 pm at The Clermont, Charing Cross, The Strand, London WC2N 5HX for the following purposes:
To consider, and if thought fit to pass, the following resolution:
The authority hereby conferred on the Directors shall expire at the conclusion of the next AGM of the Company after the passing of this resolution or 2 June, 2023, whichever is the earlier, save that the Company may, before such expiry, make an offer or agreement which would or might require shares to be allotted or rights to subscribe for, or to convert any security into, shares to be granted after such expiry and the Directors may allot shares or grant rights to subscribe for, or to convert any security into, shares (as the case may be) in pursuance of such an offer or agreement as if the authority conferred hereby had not expired.
To consider, and if thought fit to pass, the following resolutions:
(b) the minimum price (exclusive of all expenses) which may be paid for an ordinary share is its nominal value, being 1p;
(c) the maximum price (exclusive of all expenses) which may be paid for an ordinary share is the higher of (i) an amount equal to 5% above the average of the closing mid-market price of an ordinary share (as derived from the Daily Official List of the London Stock Exchange) for the five business days immediately preceding the date on which that ordinary share is contracted to be purchased and (ii) the higher of the price of the last independent trade and the highest current independent bid for a share in the Company on the trading venues where the market purchases by the Company pursuant to the authority conferred by this resolution will be carried out;
By Order of the Board
11 January, 2022
Registered Office: Hamilton Centre Rodney Way Chelmsford, CM1 3BY
In order for a proxy appointment to be valid a form of proxy must be completed. In each case the form of proxy must be received by Computershare Investor Services PLC, The Pavillions, Bridgewater Road, Bristol, BS99 6ZY by 2.30pm on Monday, 28 February 2022.
If you return more than one proxy appointment, either by paper or electronic communication, the appointment received last by the Registrar before the latest time for the receipt of proxies will take precedence. You are advised to read the terms and conditions of use carefully. Electronic communication facilities are open to all shareholders and those who use them will not be disadvantaged.
The return of a completed form of proxy, electronic filing or any CREST Proxy Instruction (as described in note 5 below) will not prevent a shareholder from attending the Meeting and voting in person if he/she wishes to do so.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a CREST Proxy Instruction') must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to an instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by the Company's agent (ID 3RA50) by the latest time(s) for receipt of proxy appointments specified in note (2) above. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Application Host) from which the Company's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
The Company
CREST Members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST Member concerned to take (or, if the CREST Member is a CREST personal Member or sponsored Member or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider takes) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST Members and, where applicable, their CREST sponsors or voting service provider(s) are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat a CREST Proxy Instruction as invalid in the circumstances set out in regulation 35(5)(a) of the Uncertificated Securities Regulations 2001 (as amended).
(8) Any person receiving a copy of this Notice as a person nominated by a Member to enjoy information rights under Section 146 of the Act ("Nominated Person") should note that the provisions in notes 1 and 2 concerning the appointment of a proxy or proxies to attend the Meeting in place of a Member do not apply to a Nominated Person, as only shareholders have the right to appoint a proxy. However, a Nominated Person may have a right under an agreement between the Nominated Person and the Member by whom he or she was nominated to be appointed, or to have someone else appointed, as a proxy for the Meeting.
If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may have a right under such an agreement to give instructions to the Member as to the exercise of voting rights at the Meeting. Nominated Persons should also remember that their main point of contact in terms of their investment in the Company remains the Member who nominated the Nominated Person to enjoy information rights (or perhaps the custodian or broker who administers the investment on their behalf). Nominated Persons should continue to contact that Member, custodian or broker (and not the Company) regarding any changes or queries relating to the Nominated Person's personal details and interest in the Company (including any administrative matters). The only exception to this is where the Company expressly requests a response from a Nominated Person.
The Company may not require the Members requesting any such website publication to pay its expenses in complying with Sections 527 or 528 of the Act. Where the Company is required to place a statement on a website under Section 527 of the Act, it must forward the statement to the Company's auditor no later than the time when it makes the statement available on the website. The business which may be dealt with at the Meeting includes any statement that the Company has been required under Section 527 of the Act to publish on a website.
(15) As soon as practicable following the AGM, the results of the proxy voting at the Meeting and the number of proxy votes received for and against and the number of votes withheld, in respect of each resolution, as well as a result of any poll, will be announced via a Regulatory Information Service and placed on the Company's website.
(16) Shareholders have the right, under Section 338 of the Act, to require the Company to give its shareholders notice of a resolution which the shareholders wish to be moved at an AGM of the Company. Additionally, shareholders have the right under Section 338A of the Act to require the Company to include a matter (other than a proposed resolution) in the business to be dealt with at the AGM. The Company is required to give such notice of a resolution or include such matter once it has received requests from shareholders representing at least 5% of the total voting rights of all the shareholder who have a right to vote at the AGM or from at least 100 shareholders with the same right to vote who hold shares in the Company on which there has been paid up an average sum per shareholder of at least £100. This request must be received by the Company not later than six weeks before the AGM (or, if later, the time at which notice is given of the AGM). In the case of a request relating to Section 338A of the Act, the request must be accompanied by a statement setting out the grounds for the request.
Administrator – the administrator is BNP Paribas Securities Services S.C.A to which the Company has delegated certain trade processing, valuation and middle office tasks and systems.
AIC – Association of Investment Companies, the trade body for closed-end investment companies.
AIFMD – Alternative Investment Fund Managers Directive. Issued by the European Parliament in 2012 and 2013, the Directive requires that all investment vehicles ("AIFs") in the European Union, including investment trusts, appoint a Depositary and an Alternative Investment Fund Manager ("AIFM"). The Board remains responsible, however, for all aspects of the Company's strategy, operations and compliance with regulations. The Company's AIFM is Ecofin Advisors Limited.
APM – Alternative Performance Measures (please refer to page 65.
BDO – the Company's Auditor, BDO LLP.
Benchmark – the Company's portfolio is not measured against an equity index benchmark. This is because the Investment Manager's asset allocation process pays little attention to the country and regional compositions of the main global utilities index, the MSCI World Utilities Index, or the global listed infrastructure indices. The Directors, therefore, review portfolio performance against a number of equity market indices, including the MSCI World Utilities Index and S&P Global Infrastructure Index which serve as reference points, and ratios to understand the impact of factors such as gearing, currencies, sub-sectors, geographical allocation and stock selection decisions on the Company's overall investment performance. Stock selection is measured against relevant local and regional indices and monitored by the Board.
Closed-end collective investment vehicle – a company, including an investment company, with a fixed issued ordinary share capital, the shares of which are traded on an exchange at a price not necessarily related to NAV of the company and which can only be issued or bought back by the company in certain circumstances.
Company – Ecofin Global Utilities and Infrastructure Trust plc.
Custodian – the Custodian is Citigroup Global Markets Limited. The Custodian is a financial institution responsible for safeguarding the securities and cash assets of the Company, as well as the income arising therefrom, through provision of custodial, settlement and associated services.
Depositary – the Depositary is Citibank UK Limited. Under AIFMD rules, the Company must have a Depositary whose duties in respect of investments and cash include safekeeping, verification of ownership and valuation, and cash monitoring. Under the AIFMD rules, the Depositary has strict liability for the loss of the Company's financial assets in respect of which it has safekeeping duties.
Discount/Premium – the share price of an investment trust is derived from buyers and sellers trading their shares on the stock market. The share price is not likely to be identical to NAV per share of the underlying assets less the liabilities of the company. If the share price is lower than the NAV per share, the shares are said to be trading 'at a discount'. If the share price is above the NAV per share, the shares are said to be trading 'at a premium'.
Distributable reserves – reserves distributable by way of dividend or for the purpose of buying back ordinary share capital. Shortly after admission, the Company applied successfully to court to cancel its share premium account in order to establish distributable reserves (the special reserve), thereby enabling the Company immediately to commence dividend distributions to shareholders. On an ongoing basis, these distributable reserves may be used, when the Board considers it appropriate, for the purposes of paying dividends to shareholders and smoothing payments of dividends to shareholders. The special reserve can also be used to fund the cost of any share buy-backs.
Dividend dates – reference is made in announcements of dividends to three dates. The "record" date is the date after which buyers of the shares will not be recorded on the register of shareholders as qualifying for the pending dividend payment. The "payment" date is the date that dividends are credited to shareholders' bank accounts. The "ex-dividend" date is normally the business day prior to the record date.
EBITDA – earnings before interest, tax, depreciation and amortisation, which is a measure of a company's operating performance.
Ecofin Advisors Limited – the Investment Manager and AIFM. Ecofin Advisors Limited ("Ecofin UK") is regulated by the FCA and registered with the SEC and indirectly wholly owned by TortoiseEcofin.
Ecofin Limited – the Investment Manager until its acquisition in December 2018 by Tortoise Investments, LLC. Ecofin Limited was renamed Tortoise Advisors UK Limited. In 2020, Tortoise Advisors UK Limited was renamed Ecofin Advisors Limited and Tortoise Investments, LLC was renamed TortoiseEcofin Investments, LLC.
EWPO – Ecofin Water & Power Opportunities plc, the predecessor vehicle to the Company.
FRC – Financial Reporting Council.
Portfolio Manager – Jean-Hugues de Lamaze, an employee of the Investment Manager with overall management responsibility for the portfolio.
Gearing – this is the sum of the Company's borrowings from its prime broker (including the net amounts due from brokers) less cash divided by net assets attributable to shareholders. The maximum permitted level of gearing, which is set by the Board, is 25%.
Investment Manager and Alternative Investment Fund Manager ("AIFM") – Ecofin Advisors Limited. The responsibilities and remuneration of Ecofin Advisors Limited are set out in the Directors' Report contained on page 24 and note 3 to the Financial Statements.
Market capitalisation – the stock market quoted price of the Company's shares multiplied by the number of shares in issue.
Net asset value (NAV) – the assets less the liabilities of the Company, as set out in the Statement of Financial Position, all valued in accordance with the Company's accounting policies (see note 1).
Non-executive Director – a Director who has a letter of appointment, rather than a contract of employment, with the Company. The Company does not have any executive Directors. Non-executive Directors' remuneration is set out in the Remuneration Report on page 32.
Ongoing charges – ongoing charges are all operating costs expected to be regularly incurred and that are payable by the Company, expressed as a proportion of the average NAV of the Company over the financial year. Ongoing charges are calculated in accordance with AIC recommended methodology. The costs of buying and selling investments are excluded, as are interest costs, taxation, non-recurring costs and the costs of buying back or issuing ordinary shares.
Special dividends – dividends received from investee companies which have been paid out of capital reconstructions or reorganisations of the investees are sometimes referred to as 'special dividends' and may be allocated to the capital account in accordance with the Company's accounting policies and the SORP. Dividends which are unusually large in terms of the investee companies' annual earnings or normal payment pattern are also sometimes referred to as 'special' but are treated as revenue in nature unless the evidence suggests otherwise.
TortoiseEcofin – TortoiseEcofin Investments, LLC (formerly Tortoise Investments, LLC) is a privately owned US-based firm which owns a family of investment management companies (collectively "TortoiseEcofin"). TortoiseEcofin has approximately US\$8 billion of client funds under management. TortoiseEcofin invests in essential assets including energy infrastructure. In December 2018 Ecofin Limited was acquired by Tortoise Investments, LLC. Ecofin Limited's name was changed to Tortoise Advisors UK Limited and has since been changed to Ecofin Advisors Limited.
Total return – total return measures assume dividends are immediately reinvested in the NAV or shares or index.
UK Code of Corporate Governance (UK Code) – the standards of good practice in relation to board leadership and effectiveness, remuneration, accountability and relations with shareholders that all companies with a Premium Listing on the London Stock Exchange are required to report on in their annual report and accounts.
The Company uses the following Alternative Performance Measures ("APMs"):
Dividends paid are set out in note 6 on page 49. In respect of the year to 30 September, 2021, the Company paid four quarterly dividends, each of 1.65p per share, in November 2020 and February, May and August 2021, and these totalled 6.60p per share (year to 30 September, 2020: 6.55p per share). A dividend yield is shown as a percentage and calculated by dividing the value of dividends paid (in a certain year) by the prevailing share price (or NAV). The dividend yield, expressed as a percentage of the closing price of the Company's shares on 30 September, 2021 was 3.3% (30 September, 2020: 4.1%).
Gearing is the sum of the Company's borrowings (including the net amounts due to/from brokers) less its cash divided by the net assets attributable to shareholders. The Company has a prime brokerage facility with Citigroup which allows it to borrow and repay borrowings at any time; the gearing is not structural in nature. The interest rate on the borrowings depends on the currency of the borrowing but is generally 50 basis points above the applicable LIBOR rate. Borrowings provide a gearing effect on net assets. When the Company is geared, a change in the value of the Company's investment portfolio will cause its NAV to change by a larger amount. The Investment Manager is permitted by the Board to utilise gearing of up to 25% of net assets. During the year to 30 September, 2021 the level of gearing averaged 14.0% of net assets (year to 30 September, 2020: 10.0%).
Total return – the return to shareholders is calculated on a per share basis by adding dividends paid in the year to the increase or decrease in the share price or NAV (or comparative reference index) in the year. The source for this data is Bloomberg.
The total return on the NAV per share assumes that each dividend paid by the Company was reinvested into the shares of the Company at the NAV per share prevailing at the time the shares were quoted ex-dividend. The disclosures provided are the major components of the calculation but do not take into account the impact of re-invested dividends.
| Page | Year ended 30 September 2021 |
Year ended 30 September 2020 |
|
|---|---|---|---|
| Opening NAV | |||
| per share | 3 | 164.60p | 175.79p |
| Dividends paid | 3, 49 | 6.60p | 6.55p |
| Closing NAV | |||
| per share | 3 | 194.99p | 164.60p |
| Total return | |||
| on NAV | 22.9% | –2.6% |
The total return to the shareholder assumes that each dividend received was reinvested into the Company's shares on the date on which the shares were quoted ex-dividend. The disclosures provided are the major components of the calculation but do not take into account the impact of re-invested dividends.
| Page | Year ended 30 September 2021 |
Year ended 30 September 2020 |
|
|---|---|---|---|
| Opening share | |||
| price | 3 | 159.25p | 157.00p |
| Dividends paid | 3, 49 | 6.60p | 6.55p |
| Closing share | |||
| price | 3 | 198.00p | 159.25p |
| Total return to | |||
| shareholder | 28.9% | 5.6% |
Discount/Premium – the share price of an investment trust is derived from buyers and sellers trading their shares on the stock market. The share price is not likely to be identical to NAV per share of the underlying assets less the liabilities of the Company. If the share price is lower than the NAV per share, the shares are trading 'at a discount'. If the share price is above the NAV per share, the shares are trading 'at a premium'. As at 30 September, 2021, the Company's shares were trading at a premium to NAV of 1.5%.
Ongoing charges – ongoing charges are calculated in accordance with AIC recommended methodology using the charges for the current year and the average NAV during the period. Ongoing charges are all operating costs expected to be regularly incurred and that are payable by the Company over the financial year. The costs of buying and selling investments are excluded, as are interest costs, taxation, non-recurring costs and the costs of buying back or issuing ordinary shares.
| Year ended 30 September 2021 |
Year ended 30 September 2020 |
||
|---|---|---|---|
| Investment management fee |
1,870 | 1,500 | |
| Administrative expenses Total ongoing |
780 | 769 | |
| expenses Average daily NAV |
(a) (b) |
2,650 183,936 |
2,269 153,209 |
| Ongoing charges figure (c = a / b) |
(c) | 1.43% | 1.48% |
See page 18 for details of the Company's Key Performance Indicators and how the Directors assess some of these APMs.
David Simpson (Chairman) Iain McLaren (Audit Committee Chairman and Senior Independent Director) Malcolm (Max) King (Remuneration Committee Chairman) Susannah Nicklin
Ecofin Advisors Limited Burdett House, 15 Buckingham Street London WC2N 6DU Tel: 020 7451 2929 Email: [email protected]
Citigroup Citigroup Centre, Canada Square Canary Wharf London E14 5LB
Norton Rose Fulbright LLP 3 More London Riverside London SE1 2AQ
BDO LLP 55 Baker Street London W1U 7EU
Stifel Nicolaus Europe Limited 150 Cheapside London EC2V 6ET
Maitland Administration Services Limited Hamilton Centre Rodney Way Chelmsford Essex CM1 3BY
Tel: +44 (0)1245 950317 Email: [email protected]
BNP Paribas Securities Services S.C.A. 10 Harewood Avenue London NW1 6AA
Computershare Investor Services PLC The Pavilions, Bridgwater Road Bristol BS99 6ZZ, United Kingdom
Tel: +44 (0)370 703 6234 www.investorcentre.co.uk [email protected]
| Ordinary share dividends payable | February, May, |
|---|---|
| (last day of) | August, November |
| AGM | March |
| Half-year end | 31 March |
| Release of Interim Report | May |
| Financial year-end | 30 September |
| Release of Annual Report | December |
The Company's ordinary shares are traded on the London Stock Exchange.
| Ordinary shares | |
|---|---|
| SEDOL number | BD3V464 |
| ISIN number | GB00BD3V4641 |
| LEI | 2138005JQTYKU92QOF30 |
| Reuters ticker | EGL.L |
| Bloomberg ticker | EGL:LN |
The Company releases its NAV to the London Stock Exchange daily. These announcements are available on the Reuters and Bloomberg news services, as is other information about the Company. They are also available on the Investment Manager's website www.ecofininvest.com/egl
Prices of the Company's ordinary share are listed in the Financial Times under the London Share Service 'Investment Companies' section.
Copies of the Company's Annual and Interim Reports are available from the Company Secretary.
The Investment Manager publishes a monthly report; availability of these reports is announced to the London Stock Exchange and posted on the Reuters and Bloomberg news services. The reports are also available on the Investment Manager's website www.ecofininvest.com/egl
The Company's shares may be dealt in directly through a stockbroker or professional advisor acting on an investor's behalf.
The Company's shares are eligible to be held in an ISA account subject to HM Revenue & Customs limits.
Registered in England & Wales No: 10253041
Ecofin Advisors Limited Burdett House 15 Buckingham Street London WC2N 6DU
Tel 020 7451 2929 Fax 020 7451 2928
www.ecofininvest.com/egl
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