Interim Management Statement

RNS Number : 3444O

Advance Developing Markets Fund Ltd

15 September 2011

 



Advance Developing Markets Fund Limited ("the Company")

Interim Management Statement

For the period from 1 May 2011 to 31 August 2011

This interim statement covers the period from 1 May 2011 to 31 August 2011. It is the second interim management statement issued by the Company in its financial year to 31 October 2011, as required by the UK Listing Authority's Disclosure and Transparency Rule 4.3.

Investment objective and policy

The Company's objective is to achieve consistent returns for shareholders in excess of the S&P/IFCI Emerging Markets Composite Index (PR) in Sterling terms (the "Benchmark"). Advance Emerging Capital Limited (the "Manager") invests in a portfolio of funds and products which give diversified exposure to global emerging markets. The Company's geographic asset allocation is derived from the Investment Manager's analysis of the prospects for regions and countries and of the underlying opportunities for investment. Individual investments are selected for their potential to outperform as a result of one or more of the following criteria: the performance of the region, market or asset class in which they invest; the skill of the underlying fund manager; and, in the case of closed end funds, through the narrowing of discounts at which their shares trade to net asset value. The Manager may employ hedging mechanisms where it believes that this would protect the performance of the Company's investment portfolio in a cost effective manner.

Highlights

During the period from 1 May 2011 to 31 August 2011:

*    Undiluted Net Asset Value ("NAV") per ordinary share ("Share") fell by 10.1%

*    Share price fell by 7.5%

*    S&P/IFCI Emerging Markets Composite Index (PR) (sterling adjusted) fell by 11.9%

*    Undiluted NAV per Share 518.7p as at 31 August 2011

*    Diluted NAV per Share 489.2p as at 31 August 2011

*    Share price 457.6p as at 31 August 2011

*    Net assets £342.9m as at 31 August 2011

Gearing

Gearing is not used as a tool to enhance performance but short term borrowing is permitted to assist in the management of liquidity.

Material transactions and events

On 8 June 2011 Advance Developing Markets Fund purchased 2,177,050 of its own Ordinary Shares of 1p each at a price of 471.75p per share. Those shares are currently held in treasury. Following this purchase  the  Company's  issued  share  capital  consists  of 66,113,801 Ordinary Shares with voting rights and 9,830,153 Subscription Shares  with  no  voting  rights  (with 2,177,050 ordinary  shares  being  held  in  treasury).

The Board of Directors is not aware of any other significant events or transactions that have occurred between 1 May 2011 and the date of this interim management statement that would have a material impact on the financial position or performance of the Company.

Manager's Comment

Global emerging markets traded sideways for the first three months of the period. However, in early August risk appetite drained away and emerging markets fell by 8.6% over the month. Market participants continue to struggle with political, social and economic headwinds, however, these problems largely emanate from the developed world. In emerging markets, the contrast is quite stark. Sovereign balance sheets are significantly less leveraged than in developed markets (having gone through the process of de-gearing after the Asian and Russian crises of 1998/99) and foreign exchange reserves continue to grow. After tightening for several quarters, and with interest rates that are in many cases 1 per cent. or less in developed markets and frequently between 5 and 10 per cent. in emerging markets, emerging market governments have plenty of policy options available to stimulate their domestic economies. Indeed, there have recently been interest rates cuts in several emerging countries and the inflation concerns that have dogged emerging markets can reasonably be expected to decline if developed market demand goes into decline.

The Company outperformed its benchmark by 1.8% over the period, with underlying fund selection the largest contributing factor to that outperformance. Given the current volatility within markets the Company's Manager is focussed on seeking out opportunities in US and UK listed closed end funds trading on attractive discounts to their net asset values. As opportunities present themselves the Manager anticipates using the liquidity afforded by the Company's holdings in open ended investments to take advantage of them.  From a top down point of view, the Company's biggest overweight positions remain in Brazil and Russia, which are trading on attractive forward Price to Earnings multiples of 8.8 times and 5.1 times according to index provider MSCI.

Top 10 Holdings at 31 August 2011                          % of  NAV

BlackRock Latin American IT                                       7.6%

Atlantis China Fund                                                       6.5%

Taiwan Fund Inc                                                           5.4%

Henderson TR Pacific IT                                               5.0%

JP Morgan Russian Securities                                        4.6%

Tarpon All Equities Fund                                                4.4%

Korea Fund Inc                                                             4.2%

Aberdeen Latin America Equity                                     4.1%

Mirae Asset GD - Korea Equity Fund (I Class)               3.7%

Coronation Top 20 Fund (Offshore)                                3.7%

15 September 2011

Enquiries:

Advance Emerging Capital Limited (Investment Manager to Advance Developing Markets Fund Limited)

Roger Allen

Tel: [phone]           Email: [e-mail]

 

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