Utilico Emerging Markets Trust : Half Yearly Financial Report for the six months ended 30 September 2022

EMERGING CITIES EMERGING WEALTH EMERGING OPPORTUNITIES

The Cottage, Ridge Court

The Ridge, Epsom Surrey

KT18 7EP

Telephone: [phone]

www.uemtrust.co.uk

HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS TO 30 SEPTEMBER 2022

UEM/Int/22

EMERGING CITIES | EMERGING WEALTH | EMERGING OPPORTUNITIES

International Container Terminal Services, Inc (The Philippines)

The investment objective is to provide long-term total return through a flexible investment policy that permits investing predominantly in emerging markets ("EM") via infrastructure, utility and related sectors.

SIX MONTHS TO 30 SEPTEMBER 2022
NET ASSET VALUE ("NAV")	NAV PER SHARE*
TOTAL RETURN PER SHARE*	243.29p
-2.8%
(2021: 11.0%)	(2021: 249.63p)
REVENUE EARNINGS	DIVIDENDS
PER SHARE	PER SHARE
6.83p	4.15p
(2021: 6.04p)	(2021: 4.00p)

* See Alternative Performance Measures on pages 43 to 45

WHY UTILICO EMERGING MARKETS TRUST PLC?

Utilico Emerging Markets Trust plc ("UEM"or the "Company") is an EM specialist fund focused on long-term total return predominantly in infrastructure and utility investments.

WHY INVEST IN EM?

• Offers higher Gross Domestic Product ("GDP") growth than developed markets with EM now generating c.60% of global economic growth.
• Provides attractive secular dynamics with the growth of the middle class, which is expected to double in the next ten years, driving an increase in consumption, urbanisation and investment in infrastructure.
• Heterogeneous markets providing investment opportunities through the economic, political and business cycle.

WHY UEM?

• Dedicated and specialised investment trust providing access to EM.
• A high conviction, benchmark agnostic portfolio, predominantly operational cash generative assets offering high operational leverage.
• Utilities and infrastructure focused, typically investing in long-term assets with established regulatory frameworks, delivering predictable and sustainable cash flows, helping to underpin UEM's dividend payment.

TRUSTED	DIVERSIFIED	PROVEN
A closed end fund focused	A diverse portfolio of	Strong management team
on long-term total return	operational cash generative	with a long-term record of
	investments	outperformance

4	Front cover image - Alupar Investimento S.A. (Brazil)	Half-yearly financial report for the six months to 30 September 2022	1
Utilico Emerging Markets Trust plc

CHAIRMAN'S STATEMENT

The half year to

30 September 2022 has again continued to be difficult for everybody, including investors. Against this challenging environment UEM delivered a credible performance with its NAV total return of negative 2.8% over the six months being

significantly better than the MSCI Emerging Markets total return Index ("MSCI") which was down 7.6%.

UEM measures its performance on a total return basis and the long-term annual compound NAV total return since inception was 9.3%. The Investment Managers are seeking long-term performance to be above 10.0% including a rising dividend.

Since inception, UEM has continued to outperform and as at 30 September 2022, UEM's NAV total return was 358.7%, ahead of the MSCI, standing at 251.0%.

It is also pleasing to see UEM's revenue earnings per share ("EPS") rise by 13.1% over the comparable six months to 30 September 2021. This has enabled the Board to recommend an

Further, we are witnessing a rise in nationalism and wealth inequality which in turn is seeing countries focusing increasingly inwards for a solution to the challenges they face.

EMERGING MARKETS

There are four trends to highlight in the EM. Inflation is absolutely a key focus in the western economies, but for Asia this is not yet a challenge. By way of example, Vietnamese inflation is running at 3.2% and GDP growth for the full year to 31 December 2022 is expected to be some 7.7%. Latin America has seen strong inflationary pressures, but central banks have been ahead of the curve. Brazil's interest rates are at 13.75% and inflation, having peaked at 12.0%, is down at 8.7%, with the expectations of falling to 5.0% in the next twelve months. Eastern Europe on the other hand faces some of the highest inflationary rates, unsurprising due to their proximity to Russia and Ukraine and the ensuing supply disruption. Poland's core inflation is running at around 11.0%. This has meant different approaches by each of the monetary authorities in the EM regions.

China has elected Xi Jinping as its President for the foreseeable future. China's zero-Covid policy remains a concern, and it is a clear headwind for economic activity and particularly the consumer in China. Much of China's growth is driven by the housing market which relies on a confident

Brazil's elections should be seen as a positive and they were closely fought, but the transition to Lula has been peaceful. That is a big endorsement for Brazil's institutions.

We would note the following; interest rates are likely to fall in EM benefiting UEM's portfolio as the cost of capital reduces; China's policies are likely to see a rising of "near shoring" to the benefit of countries such as Vietnam and India; the war in Ukraine is likely to see Latin America benefit from heightened commodity pricing and the increased focus on "supply chain security".

One key event to come is the reversal of the Chinese zero-Covid policy. This is expected to happen at some point. China is rapidly eroding much of the economic and social gains it has made over recent years due to the zero-Covid policy which is socially unsustainable. When it reverses, we expect a very significant surge in demand, and a sharp rise in commodities and trade. UEM's portfolio should benefit from this.

LEVEL 3 INVESTMENTS

The level 3 investments as at 30 September 2022 stand at £49.5m representing 9.4% of the total portfolio, largely unchanged from the £48.1m as at 31 March 2022 which represented 8.4% of the

total portfolio. Further details are set out in the Investment Managers' report.

BOARD

We announced plans for board refreshment last year, which included the appointments of Mark Bridgeman and Isabel Liu and after the 2022 Annual General Meeting ("AGM") Anthony Muh stepped down from the Board. Continuing with these initiatives, Susan Hansen has indicated her intention to retire from the Board following the conclusion of UEM's next AGM in September 2023. Susan has brought significant insight, experience and challenge to the Board since she joined in 2013. The Directors have reviewed the composition of the Board and the current intention is to continue as a Board of four Directors. This will be kept under review as part of the annual Board evaluation process.

SHARE BUYBACKS

It is disappointing to see UEM's share price discount widen over the half year from 11.9% as at 31 March 2022 to 13.3% as at 30 September 2022. This remains above levels that the Board would wish to see over the medium term. The Company has continued buying back shares for cancellation with 8.6m shares bought back in the

increase in the quarterly dividend going forward of 7.5% to 2.15p a quarter.

GLOBAL ECONOMY

As previously noted there are numerous headwinds currently faced by the markets, including rising inflation; increasing interest rates; the Ukraine war; shift to green energy; US and China trade friction; zero-Covid policy in China; cyber security; shortage of commodities; and leveraged economies. A number of these headwinds remain largely unresolved and highly intertwined, making it difficult to resolve in the near term.

consumer.

Russia's invasion of Ukraine driven by Putin has been devastating to watch and it has turned into a shockingly destructive war. Today, as the Russian military is found wanting, the response from Putin has been to take the war to the people of Ukraine, destroying infrastructure and even whole cities. Putin is prepared to weaponise every element he can. Sadly, going forward, we expect more of this policy as increasingly the Russian army finds it difficult to repel a highly motivated Ukraine army. This war has put strain on already tight global energy markets.

TOTAL RETURN COMPARATIVE PERFORMANCE (pence)*

from 31 March 2022 to 30 September 2022

105

100
95
90
Mar 22	Apr 22	May 22		Jun 22	Jul 22	Aug 22	Sep 22
			NAV total return per share			MSCI Emerging Markets total return Index (GBP adjusted)
*Rebased to 100 as at 31 March 2022					Source: ICM and Bloomberg

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Utilico Emerging Markets Trust plc

Half-yearly financial report for the six months to 30 September 2022

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CHAIRMAN'S STATEMENT (continued)

DIVIDENDS PER SHARE (pence)

from 31 March 2014 to 30 September 2022

							7.775p	8.000p	8.450p
			6.650p	7.000p	7.200p	7.575p
6.100p	6.100p	6.400p
2014	2015	2016	2017	2018	2019	2020	2021	2022	2023*

*Pro forma, based on dividends declared for Q1 and Q2 and, in the absence of	Source: ICM
unforeseen circumstances, dividends of 2.15p per share for each of Q3 and Q4

PERFORMANCE SUMMARY

	Half-year	Half-year	Annual	% change
	30 Sep 2022	30 Sep 2021 31 Mar 2022 Mar-Sep 2022
NAV total return per share (1) (%)	(2.8)	11.0	14.9	n/a
Share price total return per share (1) (%)	(4.0)	12.9	17.6	n/a
Annual compound NAV total return (1) (since inception) (%)	9.3	9.8	9.7	n/a
NAV per share (1) (pence)	243.29	249.63	254.22	(4.3)
Share price (pence)	211.00	219.00	224.00	(5.8)
Discount (1) (%)	(13.3)	(12.3)	(11.9)	n/a
Earnings per share
- Capital (pence)	(14.99)	18.83	24.49	(179.6)(4)
- Revenue (pence)	6.83	6.04	8.17	13.1(4)
Total (pence)	(8.16)	24.87	32.66	(132.8)(4)
Dividends per share (pence)	4.15(2)	4.00	8.00	3.8(4)
Gross assets (3) (£m)	521.8	568.7	569.6	(8.4)

six months to 30 September 2022, at an average price of 216.91p, and total cost of £18.7m.

UEM has now invested over £130.0m in ordinary share buybacks since inception. While the Board is keen to see the discount narrow, any share buyback remains an investment decision. Traditionally the Company has bought back shares if the discount widens in normal market conditions to over 10.0%.

REVENUE EARNINGS AND DIVIDEND

It is pleasing to report UEM's revenue EPS increased by 13.1% compared to the half year to 30 September 2021, given the ongoing challenges faced by investee businesses.

The Board is pleased to announce an increase in the second quarterly dividend in respect of the year to 31 March 2023 from 2.00p to 2.15p, an increase of 7.5%. UEM has now declared two quarterly dividends totalling 4.15p per share, a 3.8% improvement over the previous half-year. Dividends remain fully covered by income. In the absence of unforeseen circumstances, the Board remains confident the increased quarterly rate

will be maintained for the next two quarters. The retained revenue reserves increased by £6.0m to £13.2m in the six months to 30 September 2022.

The Board would like to re-emphasise that UEM's portfolio is predominantly invested in relatively liquid, cash-generative companies. The Company's Investment Managers believe these long-duration assets are structurally undervalued and offer excellent total returns.

OUTLOOK

While short term challenges are numerous, and volatility remains elevated we remain optimistic that the opportunities to invest for the long-term are good.

Our investee companies remain well managed and well positioned to respond to the challenges and have the potential to emerge stronger from them.

John Rennocks

Chairman

22 November 2022

Equity holders' funds (£m)	501.6	547.3	545.9	(8.1)
Shares bought back (£m)	18.7	4.5	13.9	315.6(4)
Net (overdraft)/cash (£m)	(3.5)	1.9	0.5	(800.0)
Bank loans (£m)	(20.2)	(21.5)	(23.7)	(14.8)
Net debt (£m)	(23.7)	(19.6)	(23.2)	2.2
Gearing (1) (%)	(4.7)	(3.6)	(4.3)	n/a
Management and administration fees and other	3.7
expenses (£m)	3.6	7.3	2.8(4)
Ongoing charges figure (1) (%)	1.4(5)	1.3(5)	1.4	n/a

1. See Alternative Performance Measures on pages 43 to 45
2. The second quarterly dividend declared has not been included as a liability in the accounts
3. Gross assets less liabilities excluding loans
4. Percentage change based on comparable six month period to 30 September 2021
5. For comparative purposes the figures have been annualised

On 3 April 2018, the shareholders of Utilico Emerging Markets Limited ("UEM Bermuda") exchanged all their shares in UEM Bermuda for shares in UEM on a one for one basis and UEM Bermuda became a wholly owned subsidiary of UEM. All performance data relating to periods prior to 3 April 2018 are in respect of UEM Bermuda.

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Utilico Emerging Markets Trust plc

Half-yearly financial report for the six months to 30 September 2022

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INVESTMENT MANAGERS' REPORT

We see commodities markets as potentially being at an imbalance as demand exceeds supply in certain products. This is likely to continue as decades of underinvestment cannot be redressed overnight.

Further, the response to the Ukraine war will see increased drive for energy security, food security, supply chain security and military security. These four challenges are likely to be pursued at significant pace. The result will be heightened demand for commodities.

Structurally we therefore see commodity demand rising and pricing to remain to the upside.

To address the rising inflationary outlook, central banks have begun and will continue to raise interest rates. As such we expect to see interest rates rise further over the coming months, but we do expect that, after significant interest rate increases, the rate of rises over the next six months will likely moderate.

strong inflationary pressures but the central banks have been aggressive in their response and as a result inflation in some of the regions' economies is now falling.

UKRAINE

The war in Ukraine has disrupted a number of commodity supplies which have accelerated inflationary pressures to levels not seen in decades. We expect this to persist for at least the next six months. However, the imbalance will in time be addressed and supply led inflationary pressures will reduce.

It is disappointing to note that after six months the war looks set to go deep into the winter. This means the wider inflationary legacy will persist. Neither side looks capable of winning the war in the coming months. The threat to energy supply and supply chain security will drive significant investment to address these two concerns and the inflationary pressures will continue to be to the upside.

FPT Corporation (Vietnam)

The half year has been one of the most challenging for investors since the

although sadly they still remain significant issues.

INFLATION AND INTEREST RATES

We would note two points on inflation. First, Asia has been largely immune and this may be due to the younger workforce having lower impacts from Covid-19. Second, Latin America has seen

Of course, the big unknown is the reaction of Putin. Does he choose to escalate the conflict in an uncontrollable way in his frustration at the lack of meaningful progress?

inception of UEM, with a number of escalating concerns and market contagion in certain jurisdictions. Despite this, UEM's NAV total return for the half year of negative 2.8% was

a strong performance against weak markets. It was pleasing to see the underlying investee companies deliver rising earnings, reflected in UEM's EPS increase of 13.1% from 6.04p to 6.83p as at 30 September 2022.

In the report and accounts for the year to 31 March 2022 we highlighted a number of concerns for investors. We have updated these below

An ongoing surprise to us has been the tight labour market conditions across the world which has led to wage inflation as buying power shifts to the wider labour markets. This has led to unemployment rates in many markets being stubbornly low. It would appear to us that the workforce has reduced, partly owing to retirement, partly higher death rates and partly due to long Covid. This is in turn driving wage inflation and therefore core inflationary pressures. Furthermore, there appears to be high churn in the labour force which in certain sectors has reduced productivity as training

is required. These factors may well cause further inflationary pressures and may become embedded in economies.

CURRENCY MOVEMENTS VS STERLING

from 31 March 2022 to 30 September 2022

125
120
115
110
105
100
95
90	Mar 22	Apr 22	May 22	Jun 22	Jul 22	Aug 22	Sep 22
	Brazilian Real	Romanian Leu		Indian Rupee
	Hong Kong Dollar	Philippine Peso		Chinese Renminbi
	Rebased to 100 as at 31 March 2022				Source: Bloomberg

6 Utilico Emerging Markets Trust plc

Half-yearly financial report for the six months to 30 September 2022

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