Utilico Emerging Markets Trust — Manager believes the portfolio is undervalued

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 — Manager believes the portfolio is undervalued

Utilico Emerging Markets Trust (UEM) is managed by Charles Jillings at specialist investment firm ICM Group. He strongly believes the trust’s portfolio is undervalued and is encouraged by the recent earnings reports from the majority of UEM’s investee companies. The trust has generated robust absolute and relative performance compared with the MSCI Emerging Markets Index over the last 12 months. Jillings continues to invest for the medium to long term in companies with attractive business models and avoids short-term ‘noise’ in global stock markets. UEM’s dividend is more than fully covered by portfolio income and the manager says his confidence in the trust’s prospects is reinforced by the board’s regular repurchases of UEM’s shares.

Melanie Jenner

Written by

Mel Jenner

Director, Investment Trusts

Investment Companies

Utilico Emerging Markets Trust

Manager believes the portfolio is undervalued

Investment trusts
EM infrastructure and utilities

16 March 2022

Price

198.0p

Market cap

£428m

AUM

£545m

NAV*

231.5p

Discount to NAV

14.5%

*Including income. At 14 March 2022.

Yield

4.0%

Ordinary shares in issue

215.9m

Code/ISIN

UEM/GB00BD45S967

Primary exchange

LSE

AIC sector

Global Emerging Markets

52-week high/low

229.0p

196.5p

NAV* high/low

253.0p

226.3p

*Including income

Net gearing*

2.6%

*At 28 February 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 9.3% 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.

Analysts

Mel Jenner

+44 (0)20 3077 5700

Sarah Godfrey

+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 specialist investment firm ICM Group. He strongly believes the trust’s portfolio is undervalued and is encouraged by the recent earnings reports from the majority of UEM’s investee companies. The trust has generated robust absolute and relative performance compared with the MSCI Emerging Markets Index over the last 12 months. Jillings continues to invest for the medium to long term in companies with attractive business models and avoids short-term ‘noise’ in global stock markets. UEM’s dividend is more than fully covered by portfolio income and the manager says his confidence in the trust’s prospects is reinforced by the board’s regular repurchases of UEM’s shares.

Emerging market technology stocks now performing less well compared with emerging markets and emerging market utility stocks

Source: Refinitiv, Edison Investment Research

The analyst’s view

The positive relative growth prospects and attractive valuations of emerging compared with developed markets remains intact. UEM offers investors unique exposure to the relatively stable business models of infrastructure and utility companies in emerging regions. They generally have high operating leverage, with long-term assets operating under established regulatory frameworks, which should continue to deliver predictable and sustainable income streams. UEM has a covered dividend, and the annual distribution has grown or held steady every year since the fund was launched in July 2005, while Jillings remains very confident that the trust’s portfolio is undervalued. ESG considerations are becoming an increasingly important element to UEM’s investment process. However, if a potential investment has a high total return potential but a low ESG score, it will not automatically be disregarded as an addition to the trust’s portfolio, as ESG is part of the investment process, not the driver.

Outperformance may warrant a higher valuation

UEM’s discount remains higher than the board’s desired sub-10%. One may argue that the trust’s solid absolute and relative performance over the last 12 months could warrant a higher valuation. UEM’s shares are currently trading at a 14.5% discount to cum-income NAV, which compares with the 12.1% to 12.4% range of average discounts over the last one, three and five years.

Market outlook: Reiteration of favourable growth in EM

While there is undoubtably uncertainty in global markets due to the ongoing pandemic effects and more recently the war in Ukraine, emerging markets continue to have higher growth potential compared with developed markets. Factors driving this higher growth rate include urbanisation, a rising middle class and digitisation. In its January 2022 World Economic Outlook update, the International Monetary Fund forecast GDP growth of 4.8% in 2022 and 4.7% in 2023 for emerging markets and developing economies compared with 3.9% and 2.6% respectively for advanced economies. Highlighted in Exhibit 1 (right-hand side), emerging market and emerging market infrastructure equities remain more attractively valued compared with the world market on a forward P/E and price-to-book multiple basis and offer a higher dividend yield. With better growth potential and relatively attractive valuations, investors may benefit from considering an allocation to emerging markets, taking into account that infrastructure and utility businesses may have more stable returns compared with those in other areas.

Exhibit 1: Market performance and valuation

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

Indices valuation metrics at 28 February 2022

Source: Refinitiv, MSCI, Edison Investment Research

The fund manager: Charles Jillings

The manager’s view: A challenging macro backdrop

Jillings says the world’s attention is now focused on Ukraine following the Russian invasion. He considers it shocking that Russian President Vladimir Putin is going down the route of victory at all costs and has escalated the level of aggression. Western nations are trying to put as much pressure as possible on Russia via sanctions and these are expected to increase, with the refusal to accept Russian oil imports by the US an important development. The manager says that unfortunately, the next major step is likely to be weeks or months away. He believes that energy sanctions will bring a whole different ball game, as it will have a material effect on global markets given that the West is short of energy. He suggests that even if a resolution is found or there is a change in direction, taking a medium-term view, Russia will be a pariah state as the West will not back down now and has recognised the leadership’s real motives. Jillings expects commodity prices to remain elevated; he sees the beneficiaries as emerging markets, including Latin America. He opines that there will be a scramble for soft commodities, with farmers likely to offload their excess stocks.

The manager believes that the loss of economic activity in Russia and Ukraine will be more than made up for by strength elsewhere in the medium term. He is optimistic about the prospects for emerging market equities over this time frame; however, over the short term he thinks that it is unclear how the Ukrainian-Russian situation will be resolved and how much of an impact it will have on global stock markets.

While everyone is understandably talking about Ukraine rather than the global pandemic, Jillings says that a real challenge is how China will deal with its zero-COVID-19 policy and move towards a strategy of living with the disease, which has been adopted in other parts of the world. Now that antiviral therapies have been developed and the Omicron variant has been less severe that prior strains, hospitalisation and death rates have declined. However, as evidenced in the UK, with people developing COVID-19 symptoms and isolating, there can be significant disruptions within the work force. The manager suggests that China will have to change its zero-tolerance approach to the disease, but this could lead to disruption in global supply chains and affect China’s short-term GDP growth.

Turning his attention to inflation and interest rates, Jillings believes that while higher interest rates are a headwind to global stock markets, they will not restrict economic activity and business performance; instead, he views them a sensible normalisation following an extended period of very loose monetary policy. The manager says that before the war in Ukraine, European inflation was declining, compared to an acceleration in the United States due to higher wage pressure. He suggests that the war has dented central banks’ confidence in raising interest rates, although an energy price shock remains an issue. Jillings opines that it will be very difficult to deal with a global energy shortage, which he considers is very different to straightforward higher fuel prices.

UEM had less than 0.5% of the portfolio invested in Russian securities before the local stock market closed, as the manager had already sold two-thirds of the trust’s single Russian exposure as tensions built. The residual holding has been written down to zero (for more detail please see the Current portfolio positioning section below). Jillings suggests that the world will recognise that there are a lot of checks and balances that need to be put in place, and the fact that NATO, the United States, Europe and the UK are standing shoulder-to-shoulder against Russia is important as it means that China should think twice before undertaking any aggressive policies. As a result, the manager believes that geopolitical risks should actually decline in the future rather than escalate, although he thinks that China–US trade frictions are likely to continue, and in the short term, tensions remain high.

In general, UEM’s portfolio companies’ earnings continue to surprise to the upside. Its largest holding International Container Terminal Services (ICTS) is a global port management company headquartered in the Philippines. Jillings refers to the firm as a ‘poster child’ that rightly deserves to be UEM’s number one position. ICTS’s recent earnings release was very strong, with Q421 revenues rising by 24.4% and EBITDA by 32.5% with a 61.9% EBITDA margin. Volumes increased by 4.7% and yields rose due to higher port tariffs and the addition of ancillary services. The company’s management is confident that current yields can be sustained, which provides a firm footing for its business in 2022, while it is cautiously optimistic that volumes this year can rise in the mid- to high-single-digit range. ICTS’s exposure to Russia/Ukraine is only via two ports, one in Georgia where 20% of volumes are from Russia and Ukraine, but this represents c 1% of the company’s total throughput, while the other port is in Poland, which has low exposure to Russian businesses. The manager believes that although there may be a disconnect from the conflict in Ukraine, global trade remains strong and ICTS is well positioned given higher tariffs and strong cost controls, which the company implemented during the COVID-19 pandemic-driven economic slowdown.

Jillings notes that portfolio companies provided conservative revenue and earnings guidance during the pandemic, but now some firms are increasing their dividends, including ICTS, which increased its annual distribution and also paid out a special dividend. Generally, capex was reduced during the pandemic but now cash flows are coming through strongly and companies are more willing to return cash to shareholders.

Current portfolio positioning

At end-February 2022, UEM’s top 10 holdings made up 29.8% of the portfolio, which was lower than 31.9% a year before; seven positions were common to both periods. Jillings is encouraged by the fact that dividends are coming through strongly from a number of portfolio companies; for example, within the top 30 holdings, Sonatel increased its dividend by 15%, Telecom Egypt by 33%, KT Corp by 42% and Citic Telecom by 7%.

Exhibit 2: Top 10 holdings (at 28 February 2022)

Company

Country

Sector

Portfolio weight %

28 February 2022

28 February 2021*

International Container Terminal Services

Philippines

Ports operator & shipping services

4.9

6.2

Gujarat State Petronet

India

Gas transmission

3.5

3.0

India Grid Trust

India

Electricity transmission

3.4

3.1

Alupar Investimento

Brazil

Electricity generation & transmission

3.3

3.0

MyEG Services

Malaysia

Payments technology

2.8

3.1

Ocean Wilsons Holdings

Brazil

Ports operator & shipping services

2.8

3.3

Simpar

Brazil

Logistics & transportation

2.5

N/A

Power Grid Corporation of India

India

Electricity transmission

2.2

N/A

China Everbright Greentech

China

Biomass & waste treatment

2.2

2.7

Sonatel**

Senegal

Telecommunications operator

2.2

N/A

Top 10 (% of portfolio)

29.8

31.9

Source: UEM, Edison Investment Research. Note *N/A where not in end-February 2021 top 10. **Sonatel is Société Nationale des Télécommunications du Senegal.

UEM’s portfolio is widely diversified by industry and geography, as shown in Exhibit 3. The trust holds only one London-listed company operating extensively in Russia: rail freight operator Globaltrans Investment, which was worth £4.3m (0.8% of the portfolio) as at 31 January 2022. During February, the manager sold around two-thirds of this position, realising £1.5m in proceeds. Globaltrans has not been sanctioned; ICM has a strong compliance and risk framework and will continue to ensure that UEM complies with any new sanctions as they emerge. Globaltrans’s shares have now been suspended and the residual holding has been written down to zero. The trust has no direct investments in Ukraine, and its European exposure, primarily investments in Romania, Poland and Bulgaria, was 11.7% of the portfolio at 28 February 2022.

Exhibit 3: Portfolio industry (left) and geographic (right) exposure (at 28 February 2022)

Source: UEM, Edison Investment Research

Exhibit 3: Portfolio industry (left) and geographic (right) exposure (at 28 February 2022)

Source: UEM, Edison Investment Research

Alupar Investimento is a Brazilian electricity generation and transmission company that has a growing number of projects including four new transmission lines. Its recent earnings results showed strong EBITDA growth helped by inflation-adjusted pricing. The manager reports that this holding has been a significant and successful investment for UEM which has been in the fund for nine years. Some portfolio companies are finding business conditions more challenging, such as Gujarat State Petronet, which is an Indian gas transmission and distribution company that is experiencing higher liquified natural gas (LNG) input costs. The company has put through three rapid tariff hikes, but these have not kept pace with the rate of higher LNG prices, which is squeezing its margins. However, the manager considers that this situation is temporary, and margins will improve.

Performance: Very strong 12-month relative results

Exhibit 4: Five-year discrete performance data

12 months ending

Share price
(%)

NAV
(%)

MSCI Emerging
Markets (%)

MSCI EM Utilities
(%)

CBOE UK All Companies (%)

28/02/18

10.3

12.8

18.3

0.0

4.4

28/02/19

1.3

(1.2)

(6.3)

3.5

1.6

29/02/20

(2.9)

(1.5)

2.6

(7.1)

(2.1)

28/02/21

(1.5)

(2.2)

24.7

(1.6)

2.8

28/02/22

13.8

9.9

(6.6)

17.3

16.7

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

Exhibit 5: Investment trust performance to 28 February 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 6: 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

0.5

6.3

5.2

21.9

(8.9)

(8.1)

8.4

NAV relative to MSCI Emerging Markets

0.6

4.6

4.1

17.7

(11.4)

(10.9)

7.0

Price relative to MSCI EM Utilities

(2.0)

(1.5)

(4.7)

(3.0)

1.4

9.4

57.4

NAV relative to MSCI EM Utilities

(1.9)

(3.0)

(5.7)

(6.3)

(1.4)

6.1

55.3

Price relative to CBOE UK All Cos

(2.5)

(2.6)

(5.2)

(2.5)

(7.3)

(2.4)

(5.5)

NAV relative to CBOE UK All Cos

(2.4)

(4.2)

(6.3)

(5.9)

(9.9)

(5.4)

(6.8)

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

Exhibit 7: NAV total return performance relative to MSCI EM Utilities Index over three years

Source: Refinitiv, Edison Investment Research

UEM’s relative performance is shown in Exhibit 6. It has performed particularly well versus the MSCI Emerging Markets Index over the past 12 months and is also ahead over the last decade. The trust’s NAV has outperformed the MSCI Emerging Markets Utilities Index over the last five and 10 years, while its share price has also modestly outperformed over the last three years. Jillings explains that during the pandemic, companies involved in digital technology and working from home performed very well. However, since COVID-19 vaccines were approved in November 2020, there has been a steady rotation back into value and cyclical stocks, while technology stocks have come under pressure. Hence, the manager is unsurprised that UEM has performed so well versus the MSCI Emerging Markets Index over the last year. Meanwhile, he suggests that the valuation metrics of UEM’s portfolio are more attractive now than they have been over the last 15 years.

Peer group comparison

Exhibit 8: Selected peer group at 15 March 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

427.6

4.2

2.2

11.1

75.7

(13.4)

1.3

No

103

4.0

Africa Opportunity

13.3

59.2

60.7

14.8

45.6

(34.9)

3.3

Yes

100

2.3

Barings Emerging EMEA Opps

63.7

(19.1)

(10.1)

(1.7)

8.5

(21.0)

1.7

No

100

4.9

BlackRock Frontiers

228.6

13.2

14.5

17.1

133.7

(11.6)

1.3

Yes

113

4.3

Fidelity Emerging Markets

573.0

(24.3)

(3.1)

5.5

39.3

(13.4)

1.0

No

100

2.1

Fundsmith Emerging Equities Trust

285.2

(9.2)

6.7

14.8

(15.1)

1.3

No

101

0.2

Gulf Investment Fund

71.3

43.9

82.4

74.5

206.0

(2.9)

1.9

No

100

2.5

JPMorgan Emerging Markets

1,201.2

(16.6)

17.3

36.5

97.0

(8.4)

0.9

No

100

1.3

JPMorgan Global Emerg Mkts Inc

371.1

(7.2)

21.7

30.1

82.8

(11.0)

1.0

No

106

4.1

Jupiter Emerging & Frontier Income

53.2

(5.8)

17.2

(7.5)

1.4

No

111

5.6

Mobius Investment Trust

142.7

15.4

39.4

(4.1)

1.5

No

100

0.3

ScotGems

37.2

(2.3)

(8.1)

(21.1)

1.5

No

100

2.0

Templeton Emerging Mkts Inv Trust

1,659.8

(26.4)

4.4

14.6

40.9

(11.8)

1.0

No

102

4.1

Simple average

394.5

1.9

18.9

21.7

81.1

(13.5)

1.5

103

2.9

UEM rank (out of 13 funds)

4

5

10

8

5

9

6

4

6

Source: Morningstar, Edison Investment Research. Note: *Performance data at 15 March 2022 based on ex-par NAV. TR, total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

There are 13 funds in the AIC Global Emerging Markets sector, of which UEM is the fourth largest. The trust has a unique strategy so cannot be directly compared with its peers, although the table above does provide some context. UEM’s NAV total return is above average over the last 12 months, ranking fifth, although it is below the mean over the other periods shown. This is unsurprising given the lower-beta nature of its investments and a strong bull market over 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 valuation is currently the ninth highest in the peer group, where no funds are trading at a premium. It has a below-average ongoing charge and a level of gearing that is in line with the mean. The trust’s dividend yield is the sixth highest in the peer group, 1.1pp above the average, and Jillings reports that UEM is one of the very few funds in the group that had a covered dividend during the pandemic.

Dividends: Progressive policy

UEM’s annual distribution has been increased or maintained every year since the fund was launched in July 2005. Quarterly dividends are paid in September, December, March and June from income or capital when required. So far in FY22, (ending 31 March 2022), three quarterly dividends of 2.0p per share have been declared, and the board expects to pay out the same amount for the fourth quarter; they have been fully covered by income. An 8.0p per share total dividend for FY22 would equate to a 2.9% increase year-on-year, and based on its current share price, UEM offers an attractive 4.0% dividend yield.

Exhibit 9: Dividend history since FY16

Source: Bloomberg, Edison Investment Research

Valuation: Board still aspires for a sub-10% discount

UEM’s discount is narrowing gradually, but Jillings comments that it remains stubbornly above 10%. The trust’s current 14.5% share price discount to cum-income NAV compares with a 9.0% to 14.5% range over the last 12 months and average discounts of 12.1%, 12.4%, 12.3% and 10.2% 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. So far in FY22, c 5.3m shares (c 2.4% of the share base) have been bought back at a cost of c £11.3m.

Exhibit 10: Discount over three years (%)

Exhibit 11: Buybacks and issuance

Source: Refinitiv, Edison Investment Research

Source: Morningstar, Edison Investment Research

Exhibit 10: Discount over three years (%)

Source: Refinitiv, Edison Investment Research

Exhibit 11: 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 $26.9bn of assets under management (c $2.8bn directly and c $24.1bn indirectly).

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-February 2022, UEM had net gearing of 2.6%. From launch to the end-February 2022, UEM’s NAV total return has compounded at 9.3% pa.

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 90 holdings in the portfolio, which is at the high end of the typical 60–90 range. 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 an attractive total return potential. Every investee company is questioned about its ESG footprint, 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 revolving credit facility with The Bank of Nova Scotia (London branch) that expires on 15 March 2024. The trust’s debt is reduced as investments reach fair value; however, Jillings continues to invest in the portfolio, so he expects the level of gearing to gently increase. At end-February 2022, UEM’s net gearing was 2.6%.

Fees and charges

From the start of FY22 (1 April 2021) ICM is paid 1.00% of 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); 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 H122, UEM’s annualised ongoing charge ratio was 1.3%, which was 20bp higher year-on-year.

Capital structure

UEM has 215.9m ordinary shares in issue and its average daily trading volume over the last 12 months is c 245k 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.

Exhibit 12: Major shareholders

Exhibit 13: Average daily volume

Source: Bloomberg, at 28 February 2022

Source: Refinitiv. Note: 12 months to 15 March 2022.

Exhibit 12: Major shareholders

Source: Bloomberg, at 28 February 2022

Exhibit 13: Average daily volume

Source: Refinitiv. Note: 12 months to 15 March 2022.

The board

Exhibit 14: UEM’s board of directors

Board member

Date of appointment

Entitlement in FY21

Shareholding at 28 Feb 2022

John Rennocks (chairman since 2016)

November 2015

£46,000

192,343

Anthony Muh

October 2010

£34,000

238,239

Susan Hansen

September 2013

£34,000

140,921

Eric Stobart

October 2019

£43,000

43,000

Mark Bridgeman

September 2021

£0

3,337

Isabel Liu

November 2021

£0

8,242

Source: UEM

The directors’ fees are paid in 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.

As part of a board refresh, the trust has two new directors. On 26 November 2021, the board announced the appointment of Isabel Liu as an independent non-executive director with immediate effect, following an external search. She has more than 25 years of global experience investing equity in infrastructure, including the $1bn AIG Asian Infrastructure Fund, the €1bn ABN AMRO Global Infrastructure Fund and was managing director of the Asia-Pacific investment business of John Laing. More recently, Liu served as a non-executive director of Pensions Infrastructure Platform, which is backed by UK pension schemes to invest in UK infrastructure. She has been a board member of Transport Focus, the consumer watchdog for public transport and England's highways, and Heathrow Airport's Consumer Challenge Board. Liu is currently a non-executive director of Schroder Oriental Income Fund. She holds a BA in economics from the Ohio State University, a master’s in public policy from Harvard Kennedy School and an MBA from the University of Chicago Booth School of Business. On the date of her appointment, Liu’s husband held 6,802 UEM shares.

Mark Bridgeman joined the board on 22 September 2021 as an independent non-executive director following an external search. He is currently a non-executive director of Law Debenture Corporation, where he is also chair of the audit and risk committee. Bridgeman has a fund management background, having spent 19 years at Schroders as an analyst and then fund manager, rising to become global head of research. Previous roles at Schroders included head of pan-European research, head of global sector research and an emerging markets fund manager. He left Schroders in 2009 to manage a rural estate and farming business in Northumberland. Bridgeman was also previously a non-executive director of JPMorgan Brazil Investment Trust and Blackrock Emerging Europe.

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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.

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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.

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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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