Half Yearly Report

RNS Number : 0724I

Advance Developing Markets Fund Ltd

08 June 2011

ADVANCE DEVELOPING MARKETS FUND LIMITED

HALF-YEARLY FINANCIAL REPORT

For the six months ended 30 April 2011

KEY FEATURES

Investment objective

The Company's investment objective is to achieve consistent returns for Shareholders in excess of the S&P/IFCI Emerging Markets Composite Index in Sterling terms¹ (the "Benchmark")

Performance

For the period ended 30 April 2011

Net Asset Value ("NAV") per ordinary share - undiluted¹ +3.2%

Net Asset Value per ordinary share - diluted² +4.6%

Ordinary share price - mid market³ +5.9%

S&P/IFCI Emerging Markets Composite Index in Sterling terms¹ +4.9%

As at 30 April 2011
NAV per ordinary share - undiluted	577.0p
NAV per ordinary share - diluted	541.0p
Ordinary share price - mid market	495.0p
Subscription share price - mid market	195.8p
Net Assets	£394.0m

¹ Price return

² Measured against an opening undiluted NAV of 559.2p

³ Measured against an opening diluted NAV of 517.4p

⁴ Measured against an opening mid market ordinary share price of 467.5p

This report will be sent to shareholders and copies will be made available to the public at the registered office of the Company. It will also be made available in electronic form on the Investment Manager's website, www.advance-emerging.com

CHAIRMAN'S STATEMENT

I am pleased to present the half-yearly financial report for the six months ended 30 April 2011. Over the reporting period the Company's net asset value per ordinary share (diluted for subscription shares in issue) returned 4.6% whilst the Benchmark, the S&P/IFCI Emerging Markets Composite Index in Sterling terms returned 4.9%. The mid-market price of the ordinary shares at 30 April 2011 stood at 495.0p, the subscription shares at 195.8p, increases of 5.9% and 14.3% respectively from 31 October 2010.

I wish to remind shareholders that the final subscription date will be on 31 October 2011. Each subscription share gives a subscription shareholder the right to subscribe for one ordinary share at a price of 291p per ordinary share. A letter detailing the subscription process will be sent to subscription shareholders in September.

The interim period from 1 November 2010 to 30 April 2011 was characterised by the differing monetary and fiscal policies of the USA and China which have actually ensured that real interest rates have remained negative in these countries. This has been compounded by the actions of the European Central Bank as it urgently endeavours to prevent sovereign debt defaults and a further subsequent run on European and global banks in the developed economies. Negative real interest rates in these enormous economic blocs are generating excessive liquidity. This liquidity has been deployed in investment or speculation in currency, financial, property and commodity markets, particularly in the developing economies. The deliberate debasing of the US dollar, and the equally infuriating reluctance of those mercantilist governments who refuse to allow their currencies to appreciate to rectify the current imbalances in the global economy, has permitted inflation to re-emerge. The increase in capital flows to the emerging markets and to commodities has required substantial currency interventions by monetary authorities. These purchases of US dollars by emerging market central bankers have resulted in large increases in money and credit growth which have created undesirable inflationary trends.

This, in turn, has created problems in both the developed and developing economies. Nobody now takes seriously the claims of central bankers in the former that inflation is low. The absurdity of the measurement of "core" inflation is evident to all: inflation, which includes food/energy/transport/utilities and other services, is rising significantly. This is particularly important in emerging economies where such items compose a much larger proportion of the average consumption basket than in the developed economies. Subsequent efforts to reduce this credit growth, and dampen inflationary pressures by means of interest rate and reserve requirement increases, have led to wage cost problems and a decline in productivity and other distortions in the balance of global economic growth and trade patterns. For example, global food prices have increased 37% (year on year), according to the Food and Agriculture Organisation. Energy prices have also risen significantly. Rising populations in Latin America and Africa when taken in conjunction with high rates of unemployment, especially in the 15-25 age bracket, have contributed to geo-political tensions in both developed and developing economic zones. Examples include North Africa, the Middle East and Spain.

Meanwhile the spectre of the enduring problem of Eurozone sovereign and commercial bank debt overshadows the financial markets in Europe and the USA. One commentator had noted that the Government Debt to Revenue Ratio in the PIIGS countries ranges from 125 to 600 per cent: he describes it as "inherent instability, patched together by monetary and fiscal stimuli" on an unprecedented scale. The prospects for a sustained recovery without restructuring the debts of these countries is minimal. The UK would have followed the same path to ruin were it not for a floating currency which absorbed much of the shock and the advent of a new government, determined to ensure that the country retreated from bankruptcy by living within its means.

The outlook is positive for emerging economies and financial markets. Most of the problems of the developed economies are the mirror images of those in emerging economies. Your Investment Manager has described in detail the excellent investment opportunities that present themselves in these regions. Emerging markets are currently trading on forecast price to earnings ratio of 11x for 2011 and a price to book ratio of 1.8x. The prospect of a growth in earnings of 25% or better is attractive and represents reasonable value on a historical basis. Emerging markets offer a comparative advantage in terms of asset allocation.

Board

Finally, I will be retiring as a Director, and Chairman, of the Board at the next Annual General meeting expected to be held in Guernsey in March 2012. It has been a privilege and a pleasure to serve shareholders over the years. I would like to thank my colleagues, present and past, for their wise counsel and support and also to thank the management team who have consistently delivered excellent results in turbulent times. Richard Bonsor will be proposed to shareholders as your new Chairman, and John Hawkins as your Deputy Chairman, at the meeting. I commend these gentlemen to you.

P E O'Connor

Chairman

8 June 2011

INVESTMENT MANAGER'S REPORT

Performance review

The Benchmark, the S&P/IFCI Emerging Markets Composite Index, delivered a return of 4.9% in Sterling terms for the six months to the end of April 2011. Whilst the overall return might be considered unspectacular, the environment in which it was achieved provided a number of challenges. During the early part of the period equity markets rallied strongly, driven by renewed quantitative easing. This gave way to a first quarter of political and social turmoil across North Africa and the Middle East which was closely followed by a major earthquake and tsunami in Japan and renewed concerns about the abilities of several weaker Eurozone member states to refinance maturing debt. Despite these events, emerging markets made headway, notably over the final two months of the half year as asset allocators reassessed fundamentals and started recommitting capital to the asset class.

Advance Developing Markets Fund Limited's ("ADMF" or the "Company") undiluted net asset value ("NAV") rose by 3.2% in Sterling terms during the reporting period, while the Benchmark was up 4.9%. The share price gained 5.9%, with the discount to diluted NAV at which the Company's shares trade closing the period at 8.5% having commenced it at 9.6%.

The main cause of the underperformance at the undiluted NAV level during the period was the exercise of subscription shares, at a price of 291p, at the end of October 2010 which resulted in 2.35 million new ordinary shares being issued and admitted to trading on 9 November 2010. The issue of these new ordinary shares negatively impacted the undiluted NAV by approximately 1.6%. The final subscription date will be at the end of October 2011.

In terms of attribution, manager and product selection was a small positive with excellent returns from a number of underlying holdings. In China, ADMF's core holdings in Atlantis China (NAV +6.2% vs S&P/IFCI China -1.2%), China Fund Inc (NAV +2.8% vs S&P/IFCI China -1.2%), and Henderson Horizon China (NAV +3.4% vs S&P/IFCI China -1.2%) all beat the Benchmark. In Brazil our two preferred managers both outperformed by a significant margin: Advance Brazil Leblon Equity Fund (NAV +9.5% vs S&P/IFCI Brazil -1.1%) and Tarpon All Equities Fund (NAV +9.8% vs S&P/IFCI Brazil -1.1%). However, performance of the Company's Russian holdings was disappointing as they typically held underweight positions in the strongly performing natural resource stocks which led that market's returns. JP Morgan Russian Securities (NAV +7.6% vs S&P/IFCI Russia +20.8%) and Prosperity Voskhod Fund (NAV +11.3% vs S&P/IFCI Russia +20.8%) both suffered from this trend.

Asset allocation had a minor negative impact on relative performance with our underweight positions in Korea and Taiwan both detracting in the Asian part of the portfolio. This was partly compensated for by an underweight allocation to India which was the worst performing market in the region. Within Eastern Europe our positive stance on Russia proved to be correct although the same could not be said for Turkey. In Latin America, our overweight allocation to Brazil detracted as that market lagged the emerging benchmark.

Discounts on underlying closed ended investments proved to be a neutral over the period with discount widening early on in the period cancelled out by subsequent narrowing over the final two months.

Market Environment

The performances of the various markets that make up the Benchmark are shown in Chart 1, in Sterling terms. For comparison purposes, we also include the performance of the MSCI World (+9.1%), MSCI Frontier (-4.5%), MSCI UK (+6.9%), MSCI US (+10.9%) and MSCI Japan (-0.7%).

The period under review was one in which the majority of emerging markets rose, despite fund flows being clearly negative in early 2011. However, as is normal with such a diverse collection of markets there were substantial performance differences between individual constituents. On a regional basis, Europe, the Middle East and Africa (EMEA) led the way with the EMEA index gaining 10.1% over the six months. Russia (+21.8%) was the outstanding performer in the region thanks to a surging oil price (the price of Brent crude oil rose by 51.4% over the period) and cheap starting valuations. Egypt (-28.4%), on the other hand was the single worst performing market across the entire emerging universe. With political turmoil contributing to a market collapse, a decision was made to close the market in late January. It finally reopened on 23 March but an initial rally from depressed levels soon petered out and sentiment remains poor. Turkey (-10.3%), one of 2010's better performing markets had a poor six months as higher oil prices and the impact of unorthodox monetary policy negatively impacted a market that is dominated by banks.

Latin America (-0.4%) lagged the global benchmark as index heavyweight Brazil (-1.1%) underperformed Mexico (+5.4%). Brazil continues to struggle to control currency appreciation pressures and inflation which weighed on investor sentiment. Mexico, meanwhile, continued to benefit from somewhat better newsflow from the US economy. Although not a large index constituent, Peru (-18.3%) had a poor six months as investors took fright that former army officer, Ollanta Humala might win the forthcoming election and roll back free market reforms in that country.

Asia proved to be something of a conundrum with China (-1.2%) and India (-10.9%) both down while all other emerging markets in the region rose. Despite a good monsoon last year India has struggled to contain inflation and the central bank has now raised its main policy rate nine times in little more than a year. In China the authorities also have inflation as a top priority and the market continues to expect further policy tightening in the coming months. Korea (+19.6%) was the best performing Asian market and benefited from a strong rebound in its export sector.

see chart 1 in half-yearly financial report

Portfolio

The portfolio breakdown by investment type was as follows at the end of the period.

April 2011 October 2010

Closed ended investment funds 53.0% 54.0%

Open ended investment funds 41.1% 40.3%

Market access products 5.3% 5.8%

Cash and other net assets 0.6% -0.1%

There was little change in the overall structure of the portfolio in terms of allocations to closed ended, open ended and market access products. However, there were a number of changes within the portfolio in terms of holdings and asset allocation. Within Asia the Company's allocation to Korea was increased at the expense of China in late 2010 when a new holding was started in Mirae Asset's Korea Equity Fund which is managed by a knowledgeable and locally based team with an exacting process that has typically delivered above average returns. Our decision to add to Korea was postulated on strong export orders supporting Korea's large industrial manufacturing base in combination with particularly attractive valuations in that market. Taiwan was reduced towards the end of the period when the Company exited a long held position in the US listed Taiwan Greater China Fund on a narrow discount following news that it would convert to an open ended fund later in the year. Finally, at the end of April an addition was made to Indonesia by initiating a holding in Komodo Fund, which is managed by a local boutique with many years experience operating in that market. This is ADMF's first investment in a dedicated Indonesian fund. Historically the market has been overlooked because it is a small index constituent that, in recent years, has traded at premium valuations. However, it appears to us that the clear and strong structural growth story in this country of 250 million people merits some exposure.

In the EMEA region the allocation to Russia increased as a result of the market's strong performance as well as a new position in the London listed Prosperity Russia Domestic Fund that was purchased on discounts to net asset value as high as 19.0%. The fund is managed by one of the most respected teams in Russia and has a value biased portfolio with a domestic consumption remit. Elsewhere in the region we reduced a long held underweight allocation to South Africa following a country visit in early 2011. The economy is currently enjoying the benefits of high commodity demand and remains one of the key beneficiaries of growth in the rest of the continent and, increasingly, in global emerging markets more broadly. Valuations have declined markedly, and the currency is also trading at more reasonable levels relative to its own history. Growth is reasonable and stable and inflation is less of an issue than in many other markets at the moment. Initially we increased our allocation through an exchange traded fund before, having completed our due diligence, switching to an open ended vehicle focused on smaller companies.

In Latin America the Company's allocation to Brazil increased to 19.5% of NAV as a result of strong performance from underlying managers despite the market itself lagging the overall Benchmark. Brazil continues to offer the most compelling mix of fundamentals within our framework for assessing markets of "Quality, Value, Growth and Change".

The asset allocation is shown on page 6.

Market Outlook

We view the events of the first half of the financial year as representative of a pattern that is likely to be sustained through the remainder of the year. Despite apocalyptic headlines relating to the Middle East, the North Africa region and Japan during recent months and the substantial outflows that emerging markets witnessed in January and February, the Benchmark was never down by more than 2% in Sterling terms from the level at which we commenced the financial year. During the first quarter of 2011 and despite increased risk aversion, there appeared to be money on the sidelines willing to buy, particularly in those markets that had performed worst in the decline. It is clear to us that any such "dips" will continue to represent good buying opportunities for investors who, still underweight emerging markets, are looking to add to their exposure on attractive valuations. This points to limited downside in the asset class if anything like a "normal" market environment plays out in 2011.

The potential risks to this benign scenario playing out could conceivably emanate from renewed Eurozone sovereign debt concerns, further contagion from events in the Middle East and North Africa, or spikes in food or energy prices leading to spiralling inflation. This last risk seems to be most prominent in investors' minds at present. With hindsight it should perhaps have been predictable that with monetary policy remaining accommodative in the western world, inflation would eventually rear its head in the emerging world where economic growth rates have remained high and a mercantilist mindset with a reluctance to let currencies appreciate prevails in many cases. The situation was exacerbated by severe weather conditions during 2010 which added to the pressure on food prices. Many emerging countries have made use of both standard monetary policy as well as more unorthodox tools in their attempts to control the problem. Current indications are that the inflation problem is coming under control and we may see signs of it receding by late summer. We shall continue to closely monitor both energy and food prices for any indications that this is not the case.

In terms of fundamental attractiveness, at the time of writing, emerging markets were trading on a forecast Price to Earnings ratio of 11.0 times for 2011 with growth in earnings expected to be just over 23% (Source: Credit Suisse, 6 May 2011). This represents good value in absolute terms and also relative to historical averages. Table 1 below illustrates that several of our preferred markets, notably Russia and Brazil are trading below 10 times 2011 earnings. We continue to travel the globe while monitoring the portfolio's existing holdings and in the search for new opportunities. These trips provide us with a top down view of the health of our markets and we believe that investors buying emerging markets now can expect to make money not only from strong earnings growth but also from multiple expansion, particularly as fund flows towards emerging markets have now resumed. Your portfolio remains exposed to the most attractive managers and markets that we can find within our universe and we anticipate continuing to deliver solid returns for our investors.

Table 1. Emerging market country valuations

Country / Region	Price/Earnings Ratio 2011 Estimate	Price/Book Ratio 2011 Estimate	EPS Growth 2011 Estimate

China	10.8	1.9	17.5
India	14.5	2.3	21.5
Indonesia	14.8	3.9	28.7
Malaysia	14.9	2.2	23.4
Philippines	14.8	2.6	8.8
South Korea	10.5	1.6	28.2
Taiwan	14.2	1.9	9.7
Thailand	12.7	2.3	24.8
Asia	11.7	1.9	18.8

Czech	12.4	2.1	10.3
Egypt	10.2	1.3	-5.6
Hungary	10.0	1.2	38.7
Poland	11.0	1.6	32.4
Russia	7.1	1.0	18.4
South Africa	10.8	2.4	53.6
Turkey	11.1	1.7	2.8
EMEA	9.5	1.7	34.2

Brazil	9.4	1.5	23.9
Chile	18.0	2.8	6.5
Mexico	16.1	2.6	28.9
Latin America	16.0	1.7	23.8

Emerging Markets	11.0	1.8	23.0

Source: Credit Suisse, 6 May 2011

Advance Emerging Capital Limited

June 2011

TWENTY LARGEST INVESTMENTS

At 30 April 2011

Fund Name	Asset Class	Investment Manager	Style	Structure	Investment Size £'000	% of Net Assets
Atlantis China Fund	Chinese equities	Atlantis IM	Value & growth	Irish OEIC	29,437	7.5
JP Morgan Russian	Russian equities	JP Morgan AM	GARP	UK Investment trust	20,704	5.2
Taiwan Fund Inc	Taiwanese equities	Martin Currie	GARP/Value	US closed end fund	19,802	5.0
Henderson TR Pacific	Asian equities	Henderson AM	Growth	UK Investment trust	19,191	4.9
BlackRock Latin American	Latin American equities	Blackrock IM	Value & growth	UK Investment trust	18,232	4.6
Baring Emerging Europe	Eastern European equities	Baring AM	GARP	UK Investment trust	16,128	4.1
Korea Fund Inc	Korean equities	RCM Capital Management	Value & growth	US closed end fund	16,071	4.1
Tarpon All Equities Fund	Brazilian small/mid cap and private equities	Tarpon Investimentos	Deep value	Cayman feeder into Delaware LLC	15,597	4.0
Aberdeen Latin American Equity	Latin American equities	Aberdeen AM	Value & quality	US closed end fund	15,479	3.9
Mirae Asset Korea Equity Fund	Korean equities	Mirae Asset	Growth	Luxembourg SICAV	14,579	3.7
Advance Brazil Leblon Equity Fund	Brazilian equities	AECL/Leblon Equities	Value	Irish OEIC	14,058	3.6
Coronation Top 20 Fund	South African equities	Coronation AM	GARP	Cayman OEIC	13,574	3.4
Baring Korea Trust	Korean equities	Baring AM	Value	UK OEIC	13,445	3.4
Lazard Emerging World Fund	General emerging markets fund of funds	Lazard FM	Discount orientated	Irish OEIC	12,631	3.2
Edinburgh Dragon Trust	Asian equities ex Japan	Aberdeen AM	Value & quality	UK Investment trust	12,403	3.1
India Capita Fund A4	Indian small cap equities	India Capital Management	Value	Mauritius OEIC	8,636	2.2
iShare MSCI Turkey Index Fund	Turkish equities	Blackrock IM	Index tracker	Irish OEIC	8,520	2.2
BlackRock Latin American IT Corporate Bond	Latin American equities	Blackrock IM	Value & growth	Corporate Bond	8,248	2.1
iShare MSCI Brazil Index Fund	Brazilian equities	Blackrock IM	Index tracker	Irish OEIC	7,387	1.9
Komodo Fund	Indonesian equities	HB Capital Partners	Domestic consumption focus	Cayman OEIC	7,183	1.8
Top twenty holdings					291,305	73.9

Other holdings					107,009	27.2

Total Holdings					398,314	101.1
Cash and other net assets					(4,278)	(1.1)
Net Assets					394,036	100.0

GARP = Growth at a reasonable price

AECL = Advance Emerging Capital Limited

ASSET ALLOCATION - at 30 April 2011

COUNTRY SPLIT	ADMF %	Benchmark %
Asia
China	12.2	16.9
India	5.4	8.0
Indonesia	2.1	2.4
Korea	11.9	15.7
Malaysia	0.5	2.4
Philippines	0.2	0.7
Taiwan	6.4	12.4
Thailand	1.7	1.7
Hong Kong	2.6	-
Singapore	1.4	-
Vietnam	0.6	-
Other	2.6	-
	47.6	60.2

EMEA
Czech Republic	0.1	0.4
Croatia	0.2	-
Egypt	0.3	0.3
Hungary	0.3	0.4
Morocco	-	0.2
Nigeria	0.4	-
Poland	0.7	1.5
Qatar	0.1	-
Russia	11.8	7.2
Saudi Arabia	0.2	-
South Africa	4.9	7.0
Turkey	3.6	1.7
UAE	0.1	-
Zimbabwe	0.4	-
Other	1.5	-
	24.6	18.7

Latin America
Argentina	0.1	-
Brazil	19.2	14.2
Chile	0.7	2.1
Mexico	2.9	4.2
Peru	0.3	0.6
Other	0.5	-
	23.7	21.1
Cash and other	4.1	-

	100.0	100.0

Benchmark and benchmark source: S&P/IFCI Emerging Markets Composite Index in Sterling terms

The above analysis has been prepared on a portfolio look-through basis.

INTERIM MANAGEMENT REPORT

The Chairman's statement on page 1 and the Investment Manager's report on pages 2 to 4 provide details on the performance of the Company. Those reports also include an indication of the important events that have occurred during the first six months of the financial year ending 31 October 2011 and the impact of those events on the condensed unaudited financial statements included in this half-yearly financial report.

Details of the twenty largest investments held at the period end are provided on page 5 and the asset allocation at the period end is shown on page 6.

PRINCIPAL RISKS AND UNCERTAINTIES

The Board considers that the main risks and uncertainties faced by the Company fall into the categories of (i) General market risks, (ii) Developing Markets risks, (iii) Other portfolio specific risks and (iv) Internal risks (corporate governance and internal control). A detailed explanation of these risks and uncertainties can be found in the Company's most recent Annual Report for the period from 16 September 2009 to 31 October 2010 (the "Annual Report"). The principal risks and uncertainties facing the Company remain unchanged from those disclosed in the Annual Report. The Chairman's statement and the Investment Manager's report contain market outlook sections.

RELATED PARTY TRANSACTIONS

Full details of the investment management arrangements were provided in the Annual Report. There have been no changes to the related party transactions described in the Annual Report that could have a material effect on the financial position or performance of the Company. Amounts payable to the investment manager in the six months ended 30 April 2011 are detailed in note 7 of the notes to the condensed set of financial statements.

Board of Directors

8 June 2011

INDEPENDENT REVIEW REPORT TO ADVANCE DEVELOPING MARKETS FUND LIMITED

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 April 2011, which comprises the condensed unaudited statement of comprehensive income, the condensed unaudited statement of financial position, the condensed unaudited statement of changes in equity, the condensed unaudited statement of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA. As disclosed in note 2, the annual financial statements are prepared in accordance with IFRSs. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 April 2011 is not prepared, in all material respects, in accordance with IAS 34 and the DTR of the UK FSA.

Steven D. Stormonth

For and on behalf of KPMG Channel Islands Limited

Chartered Accountants and Recognised Auditors

Guernsey

8 June 2011

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEARLY FINANCIAL REPORT

We confirm that to the best of our knowledge:

· the condensed half-yearly financial statements which have been prepared in accordance with International Accounting Standards 34 Interim Financial Reporting, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;and

· the half-yearly financial report provides a fair review of the information required by:

a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed half-yearly financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year ending 31 October 2011; and

b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could materially affect the financial position or performance of the entity.

Signed on behalf of the Board of Directors on 8 June 2011

Richard Hotchkis

Director

CONDENSED UNAUDITED

STATEMENT OF COMPREHENSIVE INCOME

		6 months to 30 April 2011	6 months to 30 April 2011	6 months to 30 April 2011	For the period from 16 September 2009 to 30 April 2010	For the period from 16 September 2009 to 30 April 2010	For the period from 16 September 2009 to 30 April 2010
	Notes	Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments designated as fair value through profit or loss		-	18,924	18,924	-	60,009	60,009
Capital (loss)/gains on currency movements		-	(178)	(178)	-	205	205
Net investment gains		-	18,746	18,746	-	60,214	60,214
Investment income		1,838	-	1,838	1,616	-	1,616
Total income		1,838	18,746	20,584	1,616	60,214	61,830
Investment management fees		(1,657)	-	(1,657)	(1,284)	-	(1,284)
Performance fee		-	-	-	-	(875)	(875)
Other expenses		(262)	-	(262)	(277)	-	(277)
Operating (loss)/profit before finance costs and taxation		(81)	18,746	18,665	55	59,339	59,394
Finance costs		(56)	-	(56)	-	-	-
Operating (loss)/profit before taxation		(137)	18,746	18,609	55	59,339	59,394
Taxation		(167)	-	(167)	(151)	-	(151)
Total comprehensive income for the period		(304)	18,746	18,442	(96)	59,339	59,243

Earnings per ordinary share
-Basic	5	(0.44p)	27.49p	27.05p	(0.15p)	89.99p	89.84p
-Diluted	5	(0.42p)	26.01p	25.59p	(0.14p)	85.74p	85.60p

The Company does not have any income or expense that is not included in the profit for the period and therefore the 'profit for the period' is also the 'Total comprehensive income for the period', as defined in International Accounting Standards 1 (revised).

The total column of this statement represents the Company's Statement of Comprehensive Income, prepared under IAS 34. The revenue and capital columns, including the revenue and capital earnings per share, are supplementary information prepared under guidance published by the Association of Investment Companies.

All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.

TheCompany was incorporated on 16 September 2009 and its shares were admitted to trading on the London Stock Exchange on 10 November 2009.

The notes on pages 14 to 16 form an integral part of these financial statements.

CONDENSED UNAUDITED

STATEMENT OF FINANCIAL POSITION

		At 30 April 2011	At 31 October 2010
	Notes	£'000	£'000
Non-current assets
Investments designated as fair value through profit or loss		398,314	369,595
Current assets
Cash and cash equivalents		128	601
Sales awaiting settlement		396	1,263
Other receivables		222	113
		746	1,977
Total assets		399,060	371,572
Current liabilities
Other payables		524	323
Bank borrowings		4,500	-
Performance fee accrual		-	2,484
Total liabilities		5,024	2,807
Net assets attributable to holders of ordinary shares		394,036	368,765

Share capital		289,670	282,841
Capital reserves		106,009	87,263
Revenue reserve		(1,643)	(1,339)
Total equity		394,036	368,765

Net asset value per ordinary share - undiluted	6	577.00p	559.24p
Net asset value per ordinary share - diluted	6	541.01p	517.42p
Number of ordinary shares in issue	4	68,290,851	65,940,247

The notes on pages 14 to 16 form an integral part of these financial statements.

Approved by the Board of directors and authorised for issue 8 June 2011 signed on their behalf by:

Richard Hotchkis

CONDENSED UNAUDITED

STATEMENT OF CHANGES IN EQUITY

6 months to 30 April 2011
	Share capital	Capital reserve	Revenue reserve	Total
	£'000	£'000	£'000	£'000
Opening shareholders' funds	282,841	87,263	(1,339)	368,765
Issue of shares	6,840	-	-	6,840
Share issue expenses	(11)	-	-	(11)
Increase / (decrease) in equity	-	18,746	(304)	18,442
Closing shareholders' funds	289,670	106,009	(1,643)	394,036

Period from 16 September 2009 to 30 April 2010
	Share capital	Capital reserve	Revenue reserve	Total
	£'000	£'000	£'000	£'000
Issue of shares	283,676	-	-	283,676
Share issue expenses	(835)	-	-	(835)
Increase/ (decrease) in equity	-	59,339	(96)	59,243
Closing shareholders' funds	282,841	59,339	(96)	342,084

CONDENSED UNAUDITED

STATEMENT OF CASH FLOW

	6 months to 30 April 2011	For the period from 16 September 2009 (date of incorporation) to 30 April 2010
	£'000	£'000
Operating activities
Cash inflow from investment income and bank interest	1,769	1,500
Cash outflow from management expenses	(4,237)	(1,008)
Cash inflow from disposal of investments	49,328	39,329
Cash outflow from purchase of investments	(58,255)	(40,000)
Net cash (outflow) / inflow on foreign exchange transactions	(178)	205
Net cash outflow from taxation	(167)	(151)
Net cash used in operating activities	(11,740)	(125)
Financing
Cash inflow from reconstruction	-	2,617
Increase in bank borrowings	4,500	-
Borrowing commitment fee and interest charges	(62)	-
Share issue expenses	(11)	(676)
Conversion of subscription shares	6,840	-
Net cash flow from financing activities	11,267	1,941
Net (decrease) / increase in cash and cash equivalents	(473)	1,816

Opening balance	601	-
Cash flow	(473)	1,816
Balance at 30 April	128	1,816

NOTES

1. Reporting entity

Advance Developing Markets Fund Limited (the "Company") is a closed-ended investment company, incorporated in Guernsey on 16 September 2009. The Company's registered office is 11 New Street, St Peter Port, Guernsey GY1 2PF. The Company's shares hold a premium listing on the London Stock Exchange and commenced trading on 10 November 2009. The condensed interim financial statements of the Company are presented for the six months to 30 April 2011.

The Company invests in a portfolio of funds and products which give diversified exposure to emerging market economies and those of the Pacific Rim with the objective of achieving consistent returns for shareholders in excess of the S&P/IFCI Emerging Markets Composite Index in Sterling terms.

The investment activities of the Company are managed by Advance Emerging Capital Limited.

2. Basis of preparation

The interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and the Disclosure and Transparency Rules ("the DTR") of UK's Financial Services Authority. They do not include all of the information required for full annual financial statements and should be read in conjunction with the financial statements of the Company as at and for the period ended 31 October 2010. The financial statements of the Company as at and for the period ended 31 October 2010 were prepared in accordance with International Financial Reporting Standards ("IFRS"). Those financial statements were not qualified. The accounting policies used by the Company are the same as those applied by the Company in its financial statements as at and for the period ended 31 October 2010.

When presentational guidance set out in the Statement of Recommended Practice ("SORP") for Investment Companies issued by the Association of Investment Companies ("AIC") in January 2009 is consistent with the requirements of IFRS, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

The total column of the Condensed Unaudited Statement of Comprehensive Income is the profit and loss account of the Company. The capital and revenue columns provide supplementary information.

The Half-yearly financial report was authorised for issue by the Board of directors on 8 June 2011.

3. Operating segments

The Company has adopted IFRS 8, 'Operating segments'. This standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes. The Board, as a whole, has been determined as constituting the chief operating decision maker of the Company. The Board has considered the requirements of the standard and is of the view that the Company is engaged in a single segment of business, which is investing in a portfolio of funds and products which give exposure to the emerging market economies and those of the Pacific Rim. The key measure of performance used by the Board is the Net Asset Value of the Company (which is calculated under IFRS). Therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the financial statements.

The Board of directors is responsible for ensuring that the Company's objective and investment strategy is followed. The day-to-day implementation of the investment strategy has been delegated to the Investment Manager but the Board retain responsibility for the overall direction of the Company. The Board review the investment decisions of the Investment Manager at regular Board meetings to ensure compliance with the investment strategy and to assess the achievement of the Company's objective. The Investment Manager has been given full authority to make investment decisions on behalf of the Company in accordance with the investment strategy. Details of the portfolio's asset allocation of the can be found on page 6. Any significant change to the Company's investment strategy requires shareholder approval.

The Company has a diversified portfolio of investments and as disclosed in the Twenty Largest Investments on page 5 no single investment accounts for more than 7.5% of the Company's net assets. The Investment Manager aims to identify funds which it considers are likely to deliver consistent capital growth over the longer term, as such investment income is not a focus of the investment policy and it does not anticipate regular income from its investments. The largest income from an individual investment accounted for 18% of the total income received in the period.

At 30 April 2011 there were two shareholders who each held more than 10% of the issued share capital. Their holdings were both 22%. As at 30 April 2011 the Company had 724 registered shareholders.

4. Share Capital

The Company's share capital consists of 68,290,851 (2010: 65,940,247) ordinary shares of 1p nominal value per share and 9,830,153 (2010: 12,180,757) subscription shares of 1p nominal value per subscription share.

Subscription shares

Each subscription share confers the right to subscribe for one ordinary share at a price equal to 291p per ordinary share. Subscription for the ordinary shares may take place on 31 October 2011.

2,350,604 subscription shares were put forward for exercise on 29 October 2010. As a result 2,350,604 ordinary shares were allotted and began trading on the London Stock Exchange on 9 November 2010.

5. Earnings per share

Earnings per share is based on the total earnings for the period of £18,442,000 (2010: £59,243,000 total comprehensive income) attributable to the weighted average of 68,186,957 ordinary shares in issue in the six months to 30 April 2011 (2010: 65,940,247).

Earnings per share may be diluted by the impact of the subscription shares in issue during each period.

The diluted earnings per share for the period to 30 April 2011 is based on the total comprehensive income on ordinary activities after taxation attributable to the diluted weighted average of 72,055,805 (2010: 69,206,974) ordinary shares.

6. Net asset value per share

Undiluted net asset value per ordinary share is based on net assets of £394,036,000 (2010: £342,084,000) divided by 68,290,851 (2010: 65,940,247) ordinary shares in issue at the period end.

Dilution in the net asset value per ordinary share at the end of the period was due to the undiluted net asset value per ordinary share being higher than the price at which the subscription shares can subscribe for ordinary shares, being 291p per share. Diluted net assets per ordinary share is based on net assets of £422,642,000 (2010: £377,530,000) divided by 78,121,004 (2010: 78,121,004) diluted ordinary shares at the Statement of Financial Position date.

7. Related party disclosures

Fees payable to the Investment Manager are shown in the Statement of Comprehensive Income. No performance fee accrual has been made (2010: £874,826). A performance fee of £2,483,844 was paid in respect of the period ended 31 October 2010.

At 30 April 2011, in addition to the performance fee accrual, investment management fees of £281,700 (2010: £234,088) were accrued in the condensed unaudited Statement of Financial Position. Total investment management fees for the period were £1,656,907 (2010: £1,284,076 excludng performance fee accrual).

As at 30 April 2011 the Company held an investment with a valuation of £14,058,000 in Advance Brazil Leblon Equities Fund, a fund established in 2010 by Advance Emerging Capital Limited ("AECL") to invest in domestic growth opportunities within Brazil. Leblon Equities Gestao de Recursos, a locally based investment manager with a highly experienced team, has been appointed as sub investment manager to run the portfolio on a day-to-day basis. The launch of this fund was a means to take account of the lack of closed end product or appropriately structured open-ended vehicles in this highly attractive market. The Company's shareholders benefit from significantly reduced management and performance fees on the investment and no double fees are charged by AECL.

8. Dividend

The directors do not recommend an interim dividend. As the Company's investment objective is based on capital appreciation and it expects to re-investrealised returns from investments that are consistent with its investment strategy, the directors do not presently intend to make dividend distributions to shareholders.

9. Bank borrowing

The Company has a loan facility of £10 million with Investec Bank plc, available for 364 days from 15 February 2011. The purpose of the borrowing is to act as a bridging facility, providing short term liquidity to finance investment purchases. As at 30 April 2011 the Company had £4.5 million drawn down. The commitment fee on the unutilised part of the facility is 1.25% and the interest charge on any amount drawn down is LIBOR + 4%. A debenture has been issued which gives Investec Bank plc a floating charge over the Company's assets.

10. Classification of financial instruments

The Company adopted IFRS 7 and established a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy under IFRS 7 are as follows:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices);

Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability.

The determination of what constitutes 'observable' requires significant judgment by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market.

The classification of the Company's investments held at fair value as at 30 April 2011 is detailed in the table below:

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000

Investments designated as fair value through profit and loss
- Quoted	302,147	-	-	302,147
- Unquoted	-	95,397	770	96,167
	302,147	95,397	770	398,314

The classification of the Company's investments held at fair value as at 30 April 2010 is detailed in the table below:

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000

Investments designated as fair value through profit and loss
- Quoted	254,941	-	-	254,941
- Unquoted	-	84,538	2,102	86,640
	254,941	84,538	2,102	341,581

Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1, include listed equities in active markets. The Company does not adjust the quoted price for these instruments.

Investments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. These include monthly priced investments funds.

Investments classified within level 3 have significant unobservable inputs, as they trade infrequently. The level 3 figure consists of private equity investments held by IP Brazil and Tarpon All Equities Fund. The Company has access to daily prices from the IP Brazil investment managers website and monthly valuations from the Tarpon administrators.

The movement on the level 3 classified investments is shown below:

	From 31 October 2010 to 30 April 2011	Opening balance 10 November 2009 to 30 April 2010
	£'000	£'000
Opening balance	224	940
Additions during the period	547	-
Disposals during the period	-	(226)
Valuation adjustments	(1)	1,388
Closing balance	770	2,102

DIRECTORS, INVESTMENT MANAGER AND ADVISERS

DIRECTORS	INVESTMENT MANAGER
Mr PE O'Connor (Chairman)	Advance Emerging Capital Limited
Mr AR Bonsor	1^st Floor, Colette House
MR JA Hawkins	52/55 Piccadilly
Mr RDN Hotchkis	London W1J 0DX
Mr TF Mahony	Telephone: 020 7016 0030
	www.advance-emerging.com

SECRETARY AND	UK ADMINISTRATION AGENT
ADMINISTRATOR	Cavendish Administration Limited
Legis Fund Services Limited	145-157 St John Street
11 New Street	London EC1V 4RU
St Peter Port
Guernsey GY1 2PF

STOCKBROKER	SOLICITORS AS TO ENGLISH LAW
Westhouse Securities Limited	Lawrence Graham LLP
One Angel Court	4 More London Riverside
London EC2R 7HJ	London SE1 2AU

AUDITOR	ADVISERS AS TO GUERNSEY LAW
KPMG Channel Islands Limited	Mourant Ozannes
PO Box 20	1 Le Marchant Street
20 New Street	St Peter Port
St Peter Port	Guernsey GY1 4HP
Guernsey GY1 4AN

REGISTRARS	CUSTODIAN
Capita Registrars (Guernsey) Limited	The Northern Trust Company
Longue Hougue House	50 Bank Street
St Sampson	Canary Wharf
Guernsey GY2 4JN	London E14 5NT

REGISTERED OFFICE*
11 New Street
St Peter Port
Guernsey GY1 2PF

* Incorporated in Guernsey with registered number 50900