Utilico Emerging Markets Trust — Differentiated, undervalued cash-generative assets

Utilico Emerging Markets Trust (LSE: UEM)

Currency in GBP

Last close As at 30/01/2023

GBP2.16

−4.00 (−1.82%)

Market capitalisation

GBP448m

Research: Investment Companies

Utilico Emerging Markets Trust — Differentiated, undervalued cash-generative assets

Utilico Emerging Markets Trust (UEM) is managed by Charles Jillings at value-focused investment firm ICM Group. He says that the trust’s high- conviction, differentiated portfolio offers exposure to attractive long-term investment opportunities. More than 95% of the fund is invested in operational assets, and greater than 90% is held in listed securities. UEM’s portfolio companies have long-term assets and most of them have established regulatory frameworks. The manager stresses the importance of site visits and meeting with local employees to gain a deeper understanding of investee companies and the quality of their management teams. UEM’s dividend is more than fully covered by portfolio income and the trust offers an attractive 3.7% yield.

Melanie Jenner

Written by

Mel Jenner

Director, Investment Trusts

Investment Companies

Utilico Emerging Markets Trust

Differentiated, undervalued cash-generative assets

Investment trusts
EM infrastructure and utilities

16 August 2022

Price

216.5p

Market cap

£452m

Total assets

£586m

NAV*

252.0p

Discount to NAV

14.1%

*Including income. At 12 August 2022.

Yield

3.7%

Ordinary shares in issue

208.6m

Code/ISIN

UEM/GB00BD45S967

Primary exchange

LSE

AIC sector

Global Emerging Markets

Financial year end

31 March

52-week high/low

225.5p

198.0p

NAV* high/low

261.5p

227.6p

*Including income

Net gearing*

3.2%

*At 31 July 2022.

Fund objective

Utilico Emerging Markets Trust’s investment objective is to provide long-term total returns by investing predominantly in infrastructure, utility and related equities, mainly in emerging markets.

Bull points

Specialist fund investing in high-quality emerging market companies, with 9.2% annual total returns since the fund’s inception in 2005.

Progressive dividend policy and attractive yield.

Higher economic growth and lower valuations in emerging versus developed markets.

Bear points

Discount persistently wider than board’s desired level of 10%.

Although improving, the utility and infrastructure sectors have lagged the performance of the MSCI Emerging Markets Index.

Emerging market indices can be more volatile than those in developed markets.

Analyst

Mel Jenner

+44 (0)20 3077 5700

Utilico Emerging Markets Trust is a research client of Edison Investment Research Limited

Utilico Emerging Markets Trust (UEM) is managed by Charles Jillings at value-focused investment firm ICM Group. He says that the trust’s high- conviction, differentiated portfolio offers exposure to attractive long-term investment opportunities. More than 95% of the fund is invested in operational assets, and greater than 90% is held in listed securities. UEM’s portfolio companies have long-term assets and most of them have established regulatory frameworks. The manager stresses the importance of site visits and meeting with local employees to gain a deeper understanding of investee companies and the quality of their management teams. UEM’s dividend is more than fully covered by portfolio income and the trust offers an attractive 3.7% yield.

Emerging market technology stocks have gone off the boil

Source: Refinitiv, Edison Investment Research

The analyst’s view

Economic growth prospects in emerging markets exceed those in developed markets, and UEM’s long-term approach looks well positioned to benefit from this differential. ICM has a very experienced investment team, which can navigate the challenges of emerging markets, where reporting, governance and regulatory standards tend to be lower than in developed regions. For UEM, it invests in a broad range of utility and infrastructure assets, seeking well-managed, long-term assets operating in favourable regulatory environments that should be able to generate long-term, stable cash flows. These businesses are monopolistic in nature and have high barriers to entry and their long-term contracts often have inflation protection embedded in them. Jillings considers that UEM’s portfolio is undervalued and he has been pleasantly surprised by how its investee companies have managed through the challenges of COVID-19 and the Russian invasion of Ukraine, illustrating the quality of their management teams.

Potential for a narrower discount

Given UEM’s portfolio of high-quality assets and long-term record of outperformance, one could argue that the trust warrants a higher valuation. Its 14.1% discount is towards the wider end of the 9.0% to 15.1% range of discounts over the last 12 months. Over the last one, three and five years, UEM’s average discounts are in a range of 12.4% to 12.6%.

EM: Indices, growth outlook and valuations

As shown in Exhibit 1, left-hand side, over the last five years, emerging market stocks have lagged the global market. However, it is notable how well emerging market utility stocks have performed so far in 2022, despite above-average volatility in other parts of the market.

In aggregate, emerging economies have better growth prospects compared with developed regions (Exhibit 2, right-hand side). In its World Economic Outlook, July 2022 update, the International Monetary Fund (IMF) projects GDP growth of 3.6% and 3.9% in 2022 and 2023 respectively for emerging market and developing economies, which is higher than the 2.5% and 1.4% in 2022 and 2023 respectively for advanced economies. It is worth noting that the negative revisions compared with the April 2022 update are larger for the developed rather than the developing economies.

Exhibit 1: Market performance and growth outlook

Indices’ total return performance (£-adjusted, past five years)

GDP growth (IMF World Economic Outlook – July 2022)

Source: Refinitiv, IMF, Edison Investment Research

Exhibit 2: Index valuations

Datastream EM Index valuation (last five years, at 12 August 2022)

Indices valuation metrics at 31 July 2022

Source: Refinitiv, MSCI, Edison Investment Research

Emerging market equities look very attractively valued on both an absolute and relative basis (Exhibit 2, left-hand side). The Datastream Emerging Market Index is trading on a 10.6x forward P/E multiple, which is an 19.9% discount to its 13.3x five-year average. It is also trading at a 28.5% discount to the Datastream World Index, which is meaningfully wider than the 18.5% average discount over the last five years.

Drilling down a little deeper, at 31 July 2022, the MSCI Emerging Markets Utilities Index was trading at a lower forward P/E and P/B multiple, while offering a higher dividend yield than the MSCI World Index (Exhibit 2, right-hand side).

The fund manager: Charles Jillings

The manager’s view: Why consider emerging markets?

Jillings focuses on why he believes that investors should consider emerging markets. The manager points to their higher economic growth prospects and attractive secular dynamics. Growth of the emerging market middle class is driving increased consumption, urbanisation and infrastructure investment, and in aggregate, 60% of global economic growth is generated in these regions. The primary country drivers for this are Brazil, China and India. Jillings highlights that investment in emerging markets bring diversification, as they are heterogenous, providing interesting investment opportunities across economic, political and business cycles. He explains that there can be inefficiencies in the pricing of emerging market assets, as many companies are not well researched or considered by UEM’s peers, while higher stock market volatility in less developed regions can provide attractive entry points for an investor. The manager says that, in aggregate, the valuations of emerging market equities look very attractive on both an absolute and relative basis. Jillings comments that UEM’s investee companies are growing their earnings and improving their financial metrics, but their shares have derated, so he suggests that now looks to be an opportune time to consider an investment in the fund. The manager says he has access to all emerging markets and ensures that there is adequate liquidity in UEM’s holdings to enable him to buy and sell shares when necessary.

Current portfolio positioning

At end-July 2022, UEM’s top 10 holdings made up 31.2% of the portfolio, which was modestly lower than 30.7% a year before; five positions were common to both periods. It is interesting to note that there are now two unlisted companies in the trust’s top 10. At end-FY22, unlisted investments made up 8.4% of the fund versus a maximum permitted 10.0%.

Exhibit 3: Top 10 holdings (at 31 July 2022)

Company

Country

Sector

Portfolio weight %

31 July 2022

31 July 2021*

International Container Terminal Services

Philippines

Ports operator & shipping services

4.4

5.2

Alupar Investimento

Brazil

Electricity generation & transmission

4.0

2.9

Petalite**

UK

Technology

3.5

N/A

India Grid Trust

India

Electricity transmission

3.3

3.1

Gujarat State Petronet

India

Gas transmission

3.0

3.9

Eletrobras

Brazil

Electricity generation & transmission

2.7

N/A

CGN Capital Partners Infrastructure Fund 3**

China

Renewable energy

2.6

1.6

FPT Corporation

Vietnam

Data services

2.6

1.9

Ocean Wilsons Holdings

Brazil

Ports operator & shipping services

2.6

3.0

VinaCapital Vietnam Opportunity Fund

Vietnam

Investment fund

2.5

1.7

Top 10 (% of portfolio)

31.2

30.7

Source: UEM, Edison Investment Research. Note: *N/A where not in end-July 2021 top 30. **Unlisted investments.

As shown in Exhibit 4 below, UEM’s portfolio is diversified by sector and geography. While the MSCI Emerging Markets Index is used as a reference, the fund is constructed on a bottom-up basis, taking into account macroeconomic and political risks, without a consideration of the index’s breakdown. For example, at end-July 2022, 21.5% of the MSCI Emerging Markets Index was made up of financial stocks, while UEM has a zero weighting. The index had a 32.0% exposure to China (including Hong Kong) and a 14.8% exposure to Taiwan, while UEM’s weightings were 15.9% and 0% respectively. The manager also invests in small- and mid-cap companies that are often overlooked by other market participants.

Exhibit 4: Portfolio industry (left) and geographic (right) exposure (at 31 July 2022)

Source: UEM, Edison Investment Research

Exhibit 4: Portfolio industry (left) and geographic (right) exposure (at 31 July 2022)

Source: UEM, Edison Investment Research

International Container Terminal Services (ICTS) is UEM’s largest holding, making up 4.4% of the fund. It is a global emerging market container port operator with 33 terminals in 20 countries. While the company is listed in the Philippines, just 15–20% of its revenues are generated there. The business has many long-term concession agreements, its import and export volumes are sticky, and there is an increase in the use of containers as it is an easier and more efficient method to handle goods. The manager says that ICTS has an operationally and very cost-focused management team and the company has generated strong revenue and profits growth over the last four years, helped by operational leverage. ICTS has made a series of accretive acquisitions and has recently announced the purchase of a 66.7% stake in an underperforming asset, a multipurpose port in Indonesia, which is South-East Asia’s largest economy. Jillings comments that ICTS is a well-run business trading on an inexpensive valuation that has generated a greater than 110% total shareholder return over the last five years.

UEM’s second-largest holding is Alupar Investimento, a Brazilian transmission operator with smaller renewables and transmission businesses in Brazil, Peru and Colombia. The company maintains 30 transmission lines totalling 6,974km (greater than National Grid’s) and owns an 822MW renewables portfolio. The manager considers that it has a high-quality asset base and management team. Alupar’s transmission projects have a 30-year concession with an annual inflation adjustment and regulated annual revenues. Jillings explains that the risk in transmission projects is at the development stage, and the company’s management is very good at executing these. Over the last five years, Alupar’s network has grown organically by more than 50%, while its management team invests in the company and employs disciplined capital allocation. It has lost bids for new business in recent years because the proposed terms did not offer sufficient returns (there is a 12% real annual return requirement); however, those bids that it won have generated very strong margins. On average, the team spends 20% less capex on comparable projects than its peers and they come on line 12 months earlier, so Alupar gets an additional year of revenue, while via creative financing it takes advantage of low interest rates to maximise returns. As development projects progress, the company cuts its dividend payout ratio until it is in a position to restore it. Jillings believes that a c 10x forward P/E multiple is far too low given Alupar’s high-quality asset base.

Also in UEM’s top 10 list of holdings, and added to the portfolio in 2019, is FPT Corporation, which is a Vietnamese telecoms and IT services company with a global client base. It has a series of subsidiaries grouped into three segments: technology software solutions and IT services (contracts with governments and multinational corporates); telecom (one of Vietnam’s largest fibre broadband and data centre providers); and Vietnam’s largest private-sector education company (only around 10% of revenues, but the fastest growing of the three segments, with c 75k full-time students). FPT is leveraging Vietnam’s skilled workforce, while training the next generation. The manager is impressed with the strength and the ambition of the company’s management team, and it has a high-quality client base including Hitachi, Sony, Honda, Bayer, RWE and Airbus. FPT has a growing US business, and this country is likely to become its largest geography. The company is targeting annual revenue and EBITDA growth of 20% for the next several years. Its H122 revenue grew by 22% and its pre-tax profits by 24%. FPT signed $500m of new contracts, +40% compared with H121, and 77% of which were greater than $1m.

Performance: FY22 well ahead of the reference index

Exhibit 5: Five-year discrete performance data

12 months ending

Share price
(%)

NAV
(%)

MSCI Emerging
Markets (%)

MSCI EM Utilities
(%)

CBOE UK All Companies (%)

31/07/18

(3.9)

0.3

5.3

3.2

9.1

31/07/19

27.6

21.3

5.2

11.9

1.1

31/07/20

(29.4)

(24.2)

(0.3)

(19.8)

(18.5)

31/07/21

28.1

21.9

14.2

6.6

26.4

31/07/22

0.9

1.2

(8.3)

25.3

6.1

Source: Refinitiv. Note: All % on a total return basis in pounds sterling. MSCI and CBOE indices are shown for illustrative purposes.

In FY22 (ending 31 March) UEM’s NAV and share price total returns of 14.9% and 17.6% respectively were considerably ahead of the MSCI Emerging Markets Index’s -6.9% total return. The trust’s asset class was largely overlooked by investors early in the pandemic, as they focused on the shift to working from home and the growth of digitisation. Technology stocks were very much in favour then, but since the approval of COVID-19 vaccines, and people returning to work and spending less time at home, their popularity has waned (as illustrated in the front-page chart).

Exhibit 6: Investment trust performance to 31 July 2022

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Refinitiv, Edison Investment Research. Note: Three-, five- and 10-year performance figures annualised.

Exhibit 7 shows UEM’s relative performance. It has outpaced the MSCI Emerging Markets Index over the past one, six and 12 months and is also ahead over the last decade.

Exhibit 7: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to MSCI Emerging Markets

0.4

(4.2)

5.0

10.0

(12.7)

(3.3)

3.6

NAV relative to MSCI Emerging Markets

0.5

(1.9)

8.6

10.4

(10.5)

(1.7)

6.5

Price relative to MSCI EM Utilities

(3.2)

(8.4)

(12.1)

(19.5)

(14.9)

(9.6)

30.8

NAV relative to MSCI EM Utilities

(3.1)

(6.2)

(9.1)

(19.3)

(12.8)

(8.1)

34.4

Price relative to CBOE UK All Cos

(4.2)

(6.6)

(3.4)

(5.0)

(16.6)

(7.3)

(8.4)

NAV relative to CBOE UK All Cos

(4.1)

(4.3)

(0.1)

(4.7)

(14.5)

(5.8)

(5.9)

Source: Refinitiv, Edison Investment Research. Note: Data to end-July 2022. Geometric calculation.

In Exhibit 8, we show the performance of UEM’s NAV compared with the MSCI Emerging Markets Utilities Index over the last 10 years. While significantly outperforming this index over the last decade, over the shorter periods shown in Exhibit 7, the trust has lagged. As a reminder to our readers, stocks are selected on a bottom-up basis and held for the long term; the manager is confident in the long-term prospects for the companies in UEM’s fund.

Exhibit 8: NAV total return performance relative to MSCI EM Utilities Index over 10 years

Source: Refinitiv, Edison Investment Research

Peer group comparison

Of the 12 funds in the AIC Global Emerging Markets sector, UEM is the fourth largest. Due to the trust’s unique strategy, it cannot be directly compared with its peers, although Exhibit 9 does provide some context. UEM’s NAV total return is above average over the last 12 months, ranking fourth, although it is below the mean over the other periods shown, which is unsurprising given that growth stocks have led the market for most of the last decade. These returns do not take the dilutive effect of the trust’s historical subscription shares before February 2018 into account. UEM’s discount is wider than average in a peer group where no funds are trading at a premium. It has an average ongoing charge and a level of net gearing that is in modestly above the mean; most of its peers are ungeared. The trust’s dividend yield is the fourth highest, 1.3pp above the average, and the manager is proud that UEM was one of the few funds in the group that had a covered dividend during the pandemic.

Exhibit 9: Selected peer group at 12 August 2022*

% unless stated

Market cap (£m)

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount (cum-fair)

Ongoing charge

Perf.
fee

Net gearing

Dividend yield (%)

Utilico Emerging Markets

446.7

4.5

0.0

17.2

91.6

(14.1)

1.4

No

104

3.7

Africa Opportunity

12.3

11.8

46.8

28.5

47.0

(22.8)

2.0

No

100

2.3

Barings Emerging EMEA Opps

66.4

(22.6)

(21.0)

(7.0)

22.0

(17.5)

1.7

No

100

4.7

BlackRock Frontiers

245.2

15.3

20.9

23.2

163.4

(10.4)

1.3

Yes

111

4.1

Fidelity Emerging Markets

560.3

(22.6)

(11.1)

(0.2)

45.2

(15.7)

1.0

No

100

2.1

Fundsmith Emerging Equities Trust

312.8

(7.6)

8.6

21.4

(14.3)

1.3

No

101

0.2

Gulf Investment Fund

70.6

39.2

72.9

124.8

258.9

(4.3)

1.9

No

100

2.4

JPMorgan Emerging Markets

1,278.6

(12.0)

17.7

41.5

124.2

(11.1)

0.9

No

100

1.2

JPMorgan Global Emerg Mkts Inc

369.6

(6.6)

15.0

29.7

88.2

(13.4)

1.0

No

106

4.1

Mobius Investment Trust

135.9

(4.4)

44.8

(6.2)

1.5

No

100

0.3

ScotGems

42.3

(9.3)

(12.3)

(15.2)

(7.0)

1.5

No

100

1.8

Templeton Emerging Mkts Inv Trust

1,758.5

(15.1)

7.3

16.4

68.7

(13.0)

1.0

No

100

2.5

Simple average

441.6

(2.4)

15.8

25.5

101.0

(12.5)

1.4

102

2.4

UEM rank (out of 12 funds)

4

4

9

7

4

8

7

3

4

Source: Morningstar, Edison Investment Research. Note: *Performance data at 12 August 2022 based on ex-par NAV. TR is total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

Dividends: Progressive, fully covered payments

UEM’s annual dividend has been increased or maintained every year since the fund was launched in July 2005. Quarterly payments are paid in September, December, March and June from income or capital when required. In FY22, the trust’s revenue earnings per share was 0.5% higher year-on-year. This is despite c 15% of the portfolio being invested in the data services and digital infrastructure sector; these businesses tend to be higher growth but pay lower dividends. More than 75% of UEM’s investee companies pay dividends.

Exhibit 10: Dividend history since FY17

Source: Bloomberg, Edison Investment Research

The 8.0p FY22 annual dividend was a 2.9% increase compared with the FY21 distribution and remains fully covered by income. At the end of FY22, UEM had £7.3m in revenue reserves, which is equivalent to c 0.4x the last annual dividend payment. Based on its current share price, UEM offers an attractive 3.7% yield.

Valuation: Board aspires for a sub-10% discount

UEM’s discount remains stubbornly above 10%. The trust’s 14.1% share price discount to cum-income NAV compares with a 9.0% to 15.1% range over the last 12 months and average discounts of 12.4%, 12.6%, 12.6% and 10.5% over the past one, three, five and 10 years respectively.

The board typically repurchases UEM’s shares when the discount has widened to more than 10% in normal market conditions. In FY22, c 6.5m shares (c 3.0% of the share base) were repurchased at a cost of c £13.9m. So far in FY23, a further c 2.9% of the share base has been bought back at a cost of c £13.3m.

Exhibit 11: Discount over three years (%)

Exhibit 12: Buybacks and issuance

Source: Refinitiv, Edison Investment Research

Source: Morningstar, Edison Investment Research

Exhibit 11: Discount over three years (%)

Source: Refinitiv, Edison Investment Research

Exhibit 12: Buybacks and issuance

Source: Morningstar, Edison Investment Research

Fund profile: An emerging market equity specialist

Launched in July 2005, UEM was historically a Bermudan investment company, but redomiciled to the UK as an investment trust via a scheme of arrangement on 3 April 2018. It is listed on the Main Market of the London Stock Exchange and is managed by the ICM Group (ICM and ICM Investment Management), which is a specialist fund manager based in Bermuda and the UK with c $24.4bn of assets under management (c $2.1bn directly and c $22.3bn indirectly). ICM Group has more than 70 employees, greater than 20 of whom are sector and country specialists, who operate from 10 offices around the globe.

UEM is managed by qualified chartered accountant Charles Jillings, who has more than 30 years’ experience in global financial markets. He aims to generate an attractive long-term total return from a diversified portfolio of emerging market equities, primarily in the infrastructure, utility and related sectors. Jillings employs a bottom-up stock-selection process and is unconstrained by benchmark allocations, although the MSCI Emerging Markets Index is used as a reference.

To mitigate risk, there are a series of investment guidelines in place (as a maximum percentage of gross assets at the time of investment): individual investment 10%; single country 35%; individual sector 25%; unquoted investments 10%; and top 10 holdings 60%. Gearing of up to 25% of gross assets is permitted; at end-July 2022, UEM had net gearing of 3.2%. The trust’s currency exposure is unhedged. From launch to end-June 2022, UEM’s NAV total return compounded at an annual rate of 9.3% versus 7.9% for the MSCI Emerging Markets Index.

Investment process: Diligent bottom-up stock selection

Jillings seeks to identify and invest in companies predominantly in the infrastructure and utility sectors that are trading at a discount to his estimated intrinsic value, and which he believes have the potential to generate total returns of at least 15% pa, at an investee company level, over a five-year horizon. The manager focuses on emerging market countries with positive attributes such as political stability, economic development, an acceptable legal framework and an encouraging attitude to foreign investment. Jillings has a long-term investment horizon and avoids short-term stock market ‘noise’.

Stocks are selected on a bottom-up basis following thorough fundamental research (including the construction of a detailed financial model and valuation targets) from an investible universe of more than 1,000 companies. There are c 80 holdings in the portfolio (typical range of 60–90). UEM has an active share approaching 100% versus the MSCI Emerging Markets Index; this is a measure of how a fund differs from an index, with 0% representing full replication and 100% no commonality. Jillings is supportive of UEM’s investee firms in terms of their capital requirements by participating in follow-on equity offerings and the trust is often among their largest international shareholders.

Because of the nature of UEM’s investments, in companies providing essential services, the trust has tended to underperform the MSCI Emerging Markets Index during a cyclical upturn led by sectors such as technology and consumer discretionary, while outperforming in a falling market.

UEM’s approach to ESG

While UEM is not an ESG fund, its board believes it is in shareholders’ best interests to consider environmental, social and governance factors when selecting and retaining investments. In conjunction with assessing the financial, macroeconomic and political drivers when making and monitoring an investment, the manager embeds ESG opportunities and risks into the trust’s investment process. Companies are scanned using a rigorous in-depth framework; however, the decision as to whether to make an investment is not made on ESG grounds alone. The manager can consider a potential investment with a low ESG score but this will need to be outweighed by an attractive total return potential. Every investee company’s ESG footprint is analysed, and there is often still room for improvement at some of these businesses. The manager works to understand a company’s ESG journey and seeks an improving score.

Factors are incorporated into the trust’s investment process in three main ways:

Understanding – in-depth analysis of the key issues that face potential and current holdings, as well as a deep understanding of the industry in which they operate.

Integration – incorporation of the output of the ‘understanding’ into the full financial analysis to ensure a clear and complete picture of the investment opportunity is obtained.

Engagement – communication with investee companies on the key issues on a regular basis, both virtually and on location, where possible, to discuss and identify any gaps in their ESG policy to further develop and improve their disclosure and implementation.

ICM is a signatory to the United Nations-supported Principles for Responsible Investment, a code of best practice for incorporating ESG issues.

Gearing

UEM has a three-year unsecured £50m multicurrency revolving credit facility with The Bank of Nova Scotia (London branch) that expires on 15 March 2024. At end-July 2022, UEM’s net gearing was 3.2%.

Fees and charges

Since 1 April 2021 ICM is paid 1.00% of UEM’s NAV up to £500m; 0.90% above £500m up to £750m; 0.85% above £750m up to £1bn; and 0.75% above £1bn (previously a flat fee of 0.65% of NAV was charged); and the performance fee has been removed.

UEM’s board believes that the simpler and more transparent cost structure should contribute to a stable and competitive ongoing charge, while helping to attract private wealth managers and retail investors. A tiered fee structure allows shareholders to benefit from the increasing economies of scale that a larger portfolio provides. In FY22, UEM’s ongoing charge ratio was 1.4%, which was 30bp higher than 1.1% in FY21 (no performance fee was payable). During FY21, the ongoing charge including performance fees was 2.1%.

Capital structure

Exhibit 13: Major shareholders

Exhibit 14: Average daily volume

Source: UEM, at 31 July 2022

Source: Refinitiv. Note: 12 months to 12 August 2022.

Exhibit 13: Major shareholders

Source: UEM, at 31 July 2022

Exhibit 14: Average daily volume

Source: Refinitiv. Note: 12 months to 12 August 2022.

UEM has 208.6m ordinary shares in issue and its average daily trading volume over the last 12 months is c 255k shares. The trust has a five-yearly continuation vote, next due at the September 2026 AGM. The September 2021 vote was passed with 84.2% of shareholders voting in favour of UEM’s continuation.

The board

Exhibit 15: UEM’s board of directors at end-FY22

Board member

Date of appointment

Entitlement in FY22

Shareholding at 31 July 2022

John Rennocks (chairman since 2016)

November 2015

£47,600

198,490*

Anthony Muh

October 2010

£35,200

248,268

Susan Hansen

September 2013

£35,200

149,191

Eric Stobart

October 2019

£44,500

50,000**

Mark Bridgeman

September 2021

£18,548

7,828

Isabel Liu

November 2021

£12,681

14,413

Source: UEM. Note: *Includes 2,645 shares held by Mrs Rennocks. **Includes 4,750 shares held by Mrs Stobart.

The directors’ fees are used to acquire UEM shares, ensuring all shareholders’ interests are aligned. Susan Hansen is considered non-independent as she is also on the board of Resimac Group, which is associated with ICM. Anthony Muh has indicated that he will retire following the conclusion of UEM’s September 2022 AGM.

General disclaimer and copyright

This report has been commissioned by Utilico Emerging Markets Trust and prepared and issued by Edison, in consideration of a fee payable by Utilico Emerging Markets Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Utilico Emerging Markets Trust and prepared and issued by Edison, in consideration of a fee payable by Utilico Emerging Markets Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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