Utilico Emerging Markets Trust : Half-Yearly Financial Report for the six months to 30 September 2021

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 2021

UEM/Int/21

EMERGING CITIES | EMERGING WEALTH | EMERGING OPPORTUNITIES

Alupar Investimento S.A. (Brazil)

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 2021
NET ASSET VALUE ("NAV")	NAV OF 249.63P
TOTAL RETURN PER SHARE*	PER SHARE*
11.0%	9.2%
(2020: 12.3% )	(2020: 10.3% )
REVENUE EARNINGS	DIVIDENDS
PER SHARE OF	PER SHARE OF
6.04p	4.00p
(2020: 5.59p)	(2020: 3.85p)

* See Alternative Performance Measures on pages 44 to 46

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.

UEM OFFERS SHAREHOLDERS:

• the opportunity of a diverse portfolio of high conviction, bottom up investments spread across jurisdictions and sectors
• higher operating leverage via a concentration of operational, infrastructure and utility assets as these are enablers of growth in EM
• long-termutilities and infrastructure assets, typically with established regulatory frameworks which, during uncertain times, should continue to deliver sustainable income streams, helping to underpin UEM's dividend payments

EMERGING MARKETS:

• offer higher Gross Domestic Product ("GDP") growth than developed markets
• provide attractive investment opportunities for UEM via GDP growth, coupled with the urbanisation and expansion of the middle class
• have a middle class sector which is expected to double in ten years, thereby driving infrastructure and utility investment needs

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 - International Container Terminal Services, Inc. (The Philippines)	Half-yearly financial report for the six months to 30 September 2021	1
Utilico Emerging Markets Trust plc

CHAIRMAN'S STATEMENT

The half-year to 30 September 2021 has continued to be challenging for everybody, including investors. It was pleasing to see UEM deliver a NAV total return over the six months of 11.0%, significantly better than the MSCI Emerging Markets total return

Index ("MSCI") which was down 1.0%.

We noted in the full year 2021 report and accounts that, as economies reopen, demand for goods and services is likely to accelerate above normal trend lines. Coupled with the cost savings implemented by many businesses in the face of huge economic uncertainties from the pandemic fallout, reported margins are actually widening. We expect this to continue for much of this year. This was certainly the case for UEM's investee companies in the quarter to June 2021.

It is increasingly evident that the above trend demand surge has stretched logistic chains to breaking point. Even in "normal" conditions most business logistics would be over stretched by the level of demand seen in recent months.

These acute supply shortages and disruptions are leading to significantly higher costs as businesses compete for resources to meet demand. This has pushed cost increases from wages to raw materials and has resulted in a surge in inflation. We expect demand to normalise to long-term trends and as the logistics bottlenecks are resolved that inflation will moderate. However, the under investment over the past decade in commodities and the shift to green energy have left many commodities in short supply. As a result, we can see a bias to the upside of inflation.

The upshot of all the above is heightened volatility across all asset classes. We expect this to remain the case as individual nations are at different points of the pandemic cycle and their policy responses have ranged from "return to normal" to "Covid-19 elimination". This of itself will cause stresses to the logistics for global businesses.

Pleasingly UEM has continued to outperform and as at 30 September 2021, UEM's NAV total return since inception was 355.7%, once again ahead of the MSCI, standing at 303.7%.

UEM measures its performance on a total absolute return objective and long-term annual compound NAV total return since inception is now 9.8%, although the Investment Managers are seeking long-term performance to be above

Economically there have been two parts to the Covid-19 response: central banks have dramatically increased the supply of funding while reducing the cost of capital; and governments have introduced significant support schemes for businesses especially around continued employment and social welfare. These are truly unprecedented steps which have come at a very high economic cost but were needed to balance the stress from the Covid-19 policy responses. As we have seen they have largely worked and today governments and central banks face the unenviable challenge of returning to normal.

We expect the next eighteen months will see a withdrawal of Covid-19 support schemes, an end to market support and a return to higher interest rates.

We see the interest rate response as key to markets and their outlook over the coming months.

Over the last year climate change has taken centre stage as the evidence increases that we need to collectively shift our global emissions output to avoid a steady but fatal rise in global warming. Our Investment Managers are committed to taking steps to becoming net carbon neutral. In addition, ICM is engaging with the investee companies

in UEM's portfolio with a view to ensuring that they are all on a journey to reduce their carbon footprint.

In the six months to 30 September 2021, the individual markets have seen strong divergences in market indices and currencies as country-by- country responses have varied, and the impact of Covid-19 has differed in its timing and its severity. A common theme within markets has been the acceleration of disruptive technology or enabling digital businesses, which have thrived with the shift to working from home. We expect this trend to continue and even accelerate further. There are significant technology disruption opportunities from finance to health and from businesses through to government.

The EM markets have been mixed with the Indian Sensex Index up 19.4%, the Philippines PSEi Index up 7.9%, the Shanghai Composite Index up 3.7%, while the Hang Seng Index was down 13.4% and Brazil's Bovespa Index was down 4.8%. The tailwind has been currency, with the Chinese Renminbi up 3.8% against Sterling, the Hong Kong Dollar up 2.1% and the Brazilian Real up 6.0%.

Commodities have continued to move higher, especially oil. Oil was caught up in the pandemic

Governments largely protected and even strengthened the low- and middle-class financial resilience through the pandemic lockdowns, while as a group their consumption fell sharply during this time. As a result, they have generally emerged financially stronger and are driving an above average demand growth.

With vaccination availability being uneven, businesses are struggling to maintain staffing levels to meet the rising demand. Combined with a perfect storm in the energy markets, the knock- on effects are evidenced by supply shortages, from critical components in the semiconductor chip market through to liquefied natural gas ("LNG"). It is obvious that there are significant logistics and supply chain challenges.

10.0% and this includes a rising dividend.

Covid-19 continues to be a global pandemic impacting every continent and every community, and this cannot be over emphasised. It has exposed the stresses and weaknesses in our economies, politics, and social fabric, from disrupted health services, education, business and social activities. The policy response has been to seek to break community transmission of Covid- 19, ranging from isolation, lockdowns, to testing, through to vaccination programmes. Vaccination looks to be the best way out and programmes have reached sufficient levels in many economies where opening up is a reasonable step to take.

TOTAL RETURN COMPARATIVE PERFORMANCE (pence)*

from 31 March 2021 to 30 September 2021

115

110
105
100
95
Mar 21	Apr 21	May 21		Jun 21	Jul 21	Aug 21	Sep 21
			NAV total return per share			MSCI Emerging Markets total return Index (GBP adjusted)
			MSCI Emerging Markets Utilities total return Index (GBP adjusted)
*Rebased to 100 as at 31 March 2021					Source: ICM and Bloomberg

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Utilico Emerging Markets Trust plc

Half-yearly financial report for the six months to 30 September 2021

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CHAIRMAN'S STATEMENT (continued)

DIVIDENDS PER SHARE (pence)

from 31 March 2013 to 30 September 2021

					7.000p	7.200p	7.575p	7.775p
	6.100p	6.100p	6.400p	6.650p
5.800p
									4.000p
2013	2014	2015	2016	2017	2018	2019	2020	2021	HY2022

Source: ICM

over the fiscal constraints in the constitution. This uncertainty will see volatility rise in Brazil.

REVENUE EARNINGS AND DIVIDEND

It is pleasing to report UEM's revenue earnings per share increased by 8.1%, given the ongoing challenges faced by investee businesses.

As at 30 September 2021 UEM's portfolio invested in the data services and digital infrastructure sector had risen to 16.1%; this sector is projected to be higher growth but typically pays lower dividends and as such the rest of the portfolio worked harder to deliver this earnings uplift.

UEM has now declared two quarterly dividends

shares if the discount widens in normal market conditions to over 10.0%.

MANAGEMENT AND PERFORMANCE FEES From 1 April 2021 the management fee was revised, moving to 1.0% on NAV up to

£500.0m and reducing at higher levels, with the performance fee being removed. More details are set out on page 36.

Following consultation with the Board, we are pleased to announce that ICM has appointed Jacqueline Broers and Jonathan Groocock as deputy portfolio managers to the Company's portfolio with immediate effect. Both have extensive experience in EM with over ten years

demand shock and the power struggle between oil suppliers. Oil famously traded on the Houston Exchange at negative values as oversupply, combined with the shortage of storage resulted in surplus oil for immediate delivery. However, oil ended the year to 31 March 2021 up 179.4% and this has continued into the six months to

30 September 2021, with oil up 23.6% at USD

78.52 a barrel. Expectations of a new super cycle in copper, driven by both the above trend demand for goods, the green agenda and a construction boom are driving most commodities to new highs. We expect this demand growth to continue although price volatility may continue in commodities.

The stresses within supply chains due to rebounding economic activity have been very evident in global energy markets. In the past year thermal coal delivery for China was up over 140% but the greatest impact has been seen in the LNG markets, with Asia LNG prices rocketing almost six-fold, surpassing previous record highs, as global supplies have proven unable to meet surging demand. This situation has been exacerbated by the rapid transition in developed markets away from baseload coal facilities towards renewables, leaving national electricity grids increasingly exposed to intermittency of supply. As gas-fired plants are increasingly being used to plug this gap, demand has soared.

China remains key to EM, given its size and growth. We see two trends in China. The first is a continuing surge in exports to meet global demand, and we think this continues above trend for some time. The other trend is a move to reset the social contract in an effort to level up the economic gains, or "common prosperity" as articulated

by the Chinese government. This has seen the government intervene in the education, gaming, internet and housing sectors, and has resulted in a fundamental shift in each of these sectors. There have been some spectacular losses as a result

of this shift in policy and the fallout will continue. The housing sector is the most concerning as it is estimated to account for some one third of China's GDP. If these changes see house prices weaken then that will impact the consumer and consumer demand is likely to reduce. We, along with all China investors, will be watching out for any signs of change in consumer behaviour. In the short-term we expect China's GDP to remain firm, driven by export demands.

Brazil is benefiting from strong commodity demand and the ongoing privatisation process should continue to attract capital into the country. However, the elections next year have injected significant uncertainty into the markets as a result of government actions. In particular, in October the market has rightly reacted poorly to the introduction of a social programme which steps

totalling 4.00p per share, a 3.9% improvement over the previous half-year. Dividends remain fully covered by income. The Board remains confident this quarterly rate will be maintained for the next two quarters. The retained revenue reserves increased by £4.5m to £11.4m in the six months to 30 September 2021.

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.

SHARE BUYBACKS

UEM's share price discount narrowed over the half-year from 13.6% as at 31 March 2021 to 12.3% as at 30 September 2021. 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 2.0m shares bought back in the six months to

30 September 2021, at an average price of 216.82p, and total cost of £4.5m.

UEM has now invested over £100.0m 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

as senior analysts at ICM and will continue in this role, assisting Charles Jillings in day-to-day portfolio decisions.

BOARD

We announced in June that Garth Milne would retire from the Board following the forthcoming Annual General Meeting ("AGM") and that the Board planned to consider board refreshment in the current year. Following the appointment of an external independent recruitment consultancy to conduct a search and selection process,

we announced on 21 September 2021 the appointment of Mark Bridgeman as a Director who brings a wealth of experience to our Board.

We were also delighted to announce on 22 November 2021 that Isabel Liu has agreed to join our Board as a Director. Along with Mark, Isabel is an outstanding candidate who brings with her a robust skill set in infrastructure and experience, and knowledge across EM including Asia. We look forward to working with them both over the coming years.

AGM

We were pleased with the strong support of shareholders in favour of continuation for a further five year period at the AGM held in September 2021. In line with the Articles of Association of the Company a further continuation

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Utilico Emerging Markets Trust plc

Half-yearly financial report for the six months to 30 September 2021

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CHAIRMAN'S STATEMENT (continued)

PERFORMANCE SUMMARY

vote will be put to shareholders in 2026 and thereafter at five yearly intervals.

COVID-19 IMPACT ON UEM

The Covid-19 impact on UEM's portfolio is detailed in the Investment Managers' Report on page 8. However, it is worth noting that no UEM investee company has needed or is expected to require significant restructuring or refinancing. The strategic nature and business model strength

of UEM's portfolio has been excellent. Although market valuations of some companies initially reduced sharply, most of the businesses have proved resilient. Coupled with strong government and central bank support the Board does not today see a significant risk from Covid-19 outside of market volatility in valuations.

Today the outlook is improving. Vaccinations are proving to be effective in reducing the severity of Covid-19 and this is best illustrated by the UK, where rising Covid-19 cases have not led to significant rises in hospitalisations and deaths. The added emergence of Covid treatments should also improve outcomes. We hope that there is an acceleration in vaccination programmes over the coming six months in EM markets.

OUTLOOK

We remain optimistic that vaccinations and the newer treatments available will see the world learn to live with Covid-19 and that no variants will emerge where vaccinations are ineffective; that inflation will not accelerate out of control; and that governments and central banks will make the right policy decision individually and collectively.

We also remain expectant that the "above trend goods demand" will remain elevated and that an "above trend services demand" is about to start as the services sector bounces back in the first half of 2022.

However, we continue to be cautious in the short term given the many challenges. That said, governments remain acutely aware of the need to invest to both redress the Covid-19 impact on their economies but also to step change the

environmental challenge we all face. These two, we believe, will deliver a firm world economy and UEM's asset base should be well placed to benefit.

John Rennocks

Chairman

24 November 2021

	Half-year	Half-year	Annual	% change
	30 Sep 2021	30 Sep 2020 31 Mar 2021 Mar-Sep 2021
NAV total return per share (1) (%)	11.0	12.3	30.2	n/a
Share price total return per share (1) (%)	12.9	10.0	27.3	n/a
Annual compound NAV total return (1) (since inception) (%)	9.8	8.7	9.4	n/a
NAV per share (1) (pence)	249.63	200.56	228.54	9.2
Share price (pence)	219.00	174.00	197.50	10.9
Discount (1) (%)	(12.3)	(13.2)	(13.6)	n/a
Earnings per share
- Capital (pence)	18.83	16.77	45.73	12.3(4)
- Revenue (pence)	6.04	5.59	8.13	8.1(4)
Total (pence)	24.87	22.36	53.86	11.2(4)
Dividends per share (pence)	4.000(2)	3.850	7.775	3.9(4)
Gross assets (3) (£m)	568.7	481.0	556.1	2.3
Equity holders' funds (£m)	547.3	448.9	505.7	8.2
Shares bought back (£m)	4.5	7.2	12.1	(37.5)(4)
Cash/(overdraft) (£m)	1.9	(1.6)	(3.2)	(159.4)
Bank loans (£m)	(21.5)	(32.1)	(50.4)	(57.3)
Net debt (£m)	(19.6)	(33.7)	(53.6)	(63.4)
Gearing (1) (%)	(3.6)	(7.5)	(10.6)	n/a
Management and administration fees and other
expenses
- excluding performance fee (£m)	3.6	2.5	5.0	44.0(4)
- including performance fee (£m)	3.6	2.5	10.1	44.0(4)
Ongoing charges figure (1)
- excluding performance fee (%)	1.3(5)	1.1(5)	1.1	n/a
- including performance fee (%)	1.3(5)	1.1(5)	2.1	n/a

1. See Alternative Performance Measures on pages 44 to 46
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 2020
5. For comparative purposes the figures have been annualised

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Utilico Emerging Markets Trust plc

Half-yearly financial report for the six months to 30 September 2021

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