Utilico Emerging Markets is doing well in a testing time for emerging markets generally, according to chairman Alexander Zagoreos.

In common with previous periods, the portfolio has outperformed the MSCI EMF (Sterling adjusted) index.

The MSCI gained 24.9 percent for the six months versus 28.2 percent for UEM. Over the last year UEM has seen its net asset value per ordinary share gain 56.8 percent versus the MSCI, which gained 42.3 percent. During this period UEM underperformed the MSCI in only two of the past 12 months.

"Once again the first six months of UEM's year have been testing times for emerging markets investors so I am pleased to report UEM has performed well," said Mr. Zagoreos.

"The NAV per ordinary share rose from 146.45p to 187.80p after paying a final dividend of 0.70p for the year ended 31 March 2007. This represents a gain of 28.2 percent. The average annual compound return per ordinary share since inception stood at 36.0 percent at the end of the half-year."

During the six months UEM increased its bank facility with Halifax Bank of Scotland to £80 million. As at 30 September 2007, £64.2 million of this facility was drawn, all in US dollars.

As a result gearing has increased to 16.9 percent from 15.6 percent.

The managers continue to utilise contracts for difference and have increased the gross position to £25.3 million (£14.4 million at 31 March 2007) against which £14.4 million was held as collateral.

The managers have continued to increase the absolute level of market protection by investing in Standard & Poor's 500 index put options and put option spreads. As at September 30 there were no short put options as these had expired the week before and total market protection at that date was £200 million. Since period end the put option spreads have been completed and the current net equity protection is £105 million equivalent to 25 percent of the gross assets.

The revenue and expenses were broadly in line with the manager's expectations. The revenue return per share was negatively impacted by the increased costs associated with the increased borrowings taken on by UEM. Offsetting this was the change in accounting policy to capitalise 70 percent of finance costs and management fees.

The resultant revenue earnings per share was 3.58p per ordinary share, up 49.8 percent on the same period last year. The board has declared an interim dividend of 3.50p.

The market price of the ordinary shares increased by 26.4 percent to 173.50p as at September 30. This represents a small premium to the diluted NAV per ordinary share of 173.43p.