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First State Global Listed Infrastructure Fund
Fund update
January 2014
Welcome to the latest monthly update on the First State Global Listed Infrastructure Fund, providing a review of the Fund and latest outlook for the sector. Market review
Global Listed Infrastructure stocks outperformed global equities in January on investor demand for defensive assets amid turmoil in emerging markets. The best performing infrastructure sectors were Regulated Utilities and Energy Pipelines, which were supported by falling bond yields. Regulated Utilities rose as the market sought low risk, defensive companies with sustainable cash flows. Spanish electricity transmission company, Red Electrica gained as a revision to its regulated returns turned out better than expected. Spanish gas transmission company, Enagas also gained as the gas sector’s regulatory terms are due to be reviewed next. North American energy pipeline companies benefited from the continued US energy infrastructure build-out. ONEOK surged as it completed the spin-off of natural gas distribution unit ONE Gas. The worst-performing sector was Passenger Rail. Japanese bullet train (shinkansen) operators were impacted by a broad-based Japanese stock market sell-off despite the quality of these highly cash generative infrastructure assets. Europe ex UK and Oceania were the best performing regions for infrastructure in January, on increased demand for developed market exposure and as sentiment towards European markets continued to improve. Japan and South America underperformed. Japan declined despite its improving economic fundamentals, as a spike in global risk aversion triggered a broad-based sale of Japanese equities. South American assets were impacted by volatility in emerging markets, driven by fears of an economic slowdown led by lower capital flows into the region as the Fed commenced its (long-awaited) tapering process. Fund review
The Fund slid by 0.6%* in January, underperforming the UBS Global Infrastructure & Utilities 50-50 Index, which fell by 0.1%*. The best performing stock in the Fund this month was US regulated utility ITC Holdings, which rose on
strong demand for the stability and earnings visibility offered by the sector. The Fund further benefited from
exposure to peers Atmos Energy, PG&E, NiSource and Northeast Utilities.
Groupe Eurotunnel achieved a new traffic record over the Christmas period, reflecting an increase in the
departure frequency of its cross-Channel passenger vehicle shuttles and the recovering UK economy. US
railroad operator Union Pacific climbed on a better pricing environment that underpinned strong yields
across its business segments, robust operational performance, and a positive outlook driven by an improving
US economy.
US integrated utilities Exelon and Public Service Enterprise Group also contributed to Fund performance.
Wholesale energy markets were boosted by exceptionally cold weather across the North American land mass
in January, likely providing a tailwind to company earnings.
The worst performing stocks in the Fund were Japanese passenger rail operators East Japan Railway and
Central Japan Railway. Despite low risk business models and robust recent results, they fell in line with the
broad-based Japanese market sell-off. Central Japan Railway announced in-line third quarter results,
including passenger growth and revenue growth of 5.3%. Japanese port operator Kamigumi was not
immune to local market falls, although its attractive valuation, underpinned by a large net cash position,
enabled it to outperform the broader Japanese market.
Hong Kong port operator China Merchants Holdings fell on concerns that this volume-sensitive company
may be impacted by an Emerging Markets slowdown. Hong Kong-listed international utility company Power
Assets Holdings underperformed as it completed the US$3.1 billion IPO of its Hong Kong electricity
business, HK Electric Investments. The IPO was overshadowed by concerns about future allowed rates of
return and insiders selling out of Hong Kong. At current levels, the valuation multiples of Power Assets
Holdings are supportive.
Energy storage company Vopak declined on news that its conversion of the Coryton, UK oil refinery to an
import terminal for oil products would be delayed by approximately a year, until the fourth quarter of 2014.
The company is currently expanding a number of its existing terminals which, once on-line, should deliver
high growth and high returns on capital.
The Fund invests in a wide range of global listed infrastructure assets including toll roads, airports, ports, railroads, utilities, pipelines, energy storage, mobile towers and satellites. These sectors share common characteristics like barriers to entry and pricing power which can provide investors with inflation-protected income and strong capital growth over the medium-term. Equities had a tremendous run in 2013 with the MSCI up around 30% in local currency. With roughly two-thirds of this return driven by multiple expansion rather than earnings growth or dividends, we would expect *1 Source: Lipper Hindsight January 2014 2014 total returns to be more modest. Providing some optimism for 2014, infrastructure stocks lagged in 2013 and forward valuation multiples are not high by historical standards. Strong cash flows have also left many infrastructure companies with low leverage and scope to return capital to shareholders through higher dividends or share buy-backs. Our funds have limited exposure to emerging markets. We have struggled to understand how expected returns would compensate investors for the higher political, regulatory and governance risks inherent in EM infrastructure. But market sentiment has shifted and EM has materially underperformed. The prospect of “EM decoupling” has been replaced by “US decoupling”…both concepts are absurd in a global market. We are watching the current volatility in EM with interest and will be patient and selective if markets overreact. Wholesale Business Development
Sales Director, North of England & Ireland Associate Sales Director, South of England, I nstitutional Relationship Management
Head of Institutional Relationships, EMEA This presentation is directed at professional clients only and is not intended for, and should not be relied upon by, other clients.
The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back less than the original amount invested and past performance information is not a guide to future performance. Investment should be made on the basis of the Prospectus and Key Investor Information Document available free of charge by writing to: Client Services, First State Investments (UK) Limited, 23 St Andrew Square, Edinburgh, EH2 1BB; or by telephoning 0800 587 4141 between 9am and 5pm Monday to Friday; or by visiting www.firststate.co.uk. If you are in any doubt as to the suitability of any of our funds for your investment needs, please seek independent financial advice. The Fund referred to in this document may be a sub-fund of First State Investments ICVC, an open-ended investment company with variable capital, regulated by the Financial Conduct Authority, incorporated in England and Wales; or First State Global Umbrella Fund plc, an umbrella investment company with variable capital and with segregated liability between sub-funds incorporated with limited liability under the laws of Ireland and authorised in the Republic of Ireland. Each fund may issue different classes of share and within each class there may be different types of share. The fund invests in assets which are denominated in other currencies; hence changes in the relevant exchange rate will affect the value of the investment. The fund invests in a single sector, which offers the possibility of higher returns, but may involve a higher degree of risk compared to investments which spread investment risk through a variety of sectors. Share price movements may have a greater effect on the overall value of these funds. The fund typically invests in a concentrated portfolio of investments and should a particular investment decline in value, this will have a pronounced effect on the overall value of the fund. Companies in the infrastructure sector (utilities, transportation and energy industries) are subject to a variety of factors which may adversely affect their business or operations. Adverse developments within these industries may affect the value of the underlying securities of the Fund. Companies involved in these industries are subject to environmental considerations, taxes, government regulation, price and supply considerations and competition. Fees and expenses are charged against the capital of the Fund. Deducting expenses from capital reduces the potential for capital growth and on any redemption Shareholders may not receive back the full amount invested. Reference to the names of each company mentioned in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies. All securities mentioned herein may or may not form part of the holdings of First State Investments’ portfolios at a certain point in time, and the holdings may change over time. Issued by First State Investments (UK) Limited which is authorised and regulated by the Financial Conduct Authority (registration number 143359). Registered office 3rd Floor, 30 Cannon Street, London, EC4M 6YQ, number 2294743. Telephone calls with First State Investments may be recorded.

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