Interim Management Statement

RNS Number : 5377Z

Advance Developing Markets Fund Ltd

19 March 2012

 



Advance Developing Markets Fund Limited ("the Company")

Interim Management Statement

This interim statement covers the period from 1 November 2011 to 29 February 2012. It is the first interim management statement issued by the Company in its financial year to 31 October 2012, as required by the UK Listing Authority's Disclosure and Transparency Rule 4.3.

Investment objective and policy

The Company's investment objective is to achieve consistent returns for Shareholders in excess of the MSCI Emerging Markets Net Total Return Index in Sterling terms.

Advance Emerging Capital Limited (the "Investment Manager") invests in a portfolio of funds and products which give diversified exposure to emerging market economies and those of the pacific rim. 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 Investment 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.

Benchmark

MSCI Emerging Markets Net Total Return Index in Sterling terms (the "Benchmark").Until 31 October 2011 the benchmark was the S&P/IFCI Emerging Markets Composite Index in Sterling terms.

Highlights

During the period from 1 November 2011 to 29 February 2012:

*  Net Asset Value ("NAV") per ordinary share ("Share") rose by 8.6%¹

*  Share price rose by 8.5%

*  MSCI Emerging Markets Net Total Return Index in Sterling terms rose by 10.0%

*  NAV per Share was 507.6p as at 29 February 2012

*  Share price was 465.0p as at 29 February 2012

*  Net assets were £385.5 million as at 29 February 2012

^1.    Adjusted for the impact of the subscription share exercise.

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 the final subscription date of 31 October 2011 a total of 9,830,153 Subscription Shares were exercised, which resulted in 9,830,153 Ordinary Shares being issued and admitted to the Official List on 8 November 2011. There are currently 75,943,954 Ordinary Shares in issue.

On 26 October 2011 the Company announced that it would adopt a new benchmark effective from 1 November 2011. The new benchmark is the MSCI Emerging Markets Net Total Return Index in Sterling terms. The change aligns the Company's benchmark with that of the majority of its peers in the global emerging markets equity fund sector.

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

Investment Manager's Comment

Global emerging markets traded sideways in November and December. The commencement of the New Year, however, coincided with the start of a rally in emerging market equities as fears receded over a sovereign debt crisis in Europe, US economic data continued on a firm footing and the fundamental attractiveness of emerging markets encouraged investors to reallocate money to the asset class.  According to Morgan Stanley, emerging markets equity funds saw inflows of US$25.3 billion in the first two months of 2012 compared with outflows of US$47.2 billion over calendar year 2011 based on Emerging Portfolio Fund Research data. The Benchmark index returned 10.0% in Sterling terms over the period.

The Company's NAV underperformed the Benchmark by 1.4% during the period. This was largely attributable to manager selection, as several investee funds lagged their respective benchmarks over the final months of 2011. Asset allocation and discount movements were small positive contributors.

Global emerging markets continue to offer superior growth at reasonable valuations and the Investment Manager is focussed on seeking out opportunities in closed end funds trading on attractive discounts to their net asset values as well as identifying premium quality managers of open ended funds. In asset allocation terms the Investment Manager invests in the most attractive markets within its investment framework of "Quality, Value, Growth and Change". From a top down point of view, the Company's biggest overweight positions remain in Russia and Brazil, which are trading on attractive forward Price to Earnings multiples of 5.9 times and 9.9 times according to index provider MSCI.

Top 10 Holdings as at 29 February 2012                   % of NAV

BlackRock Latin American IT                                       8.1%

Henderson Asian Growth Trust                                      5.2%

Atlantis China Fund                                                       5.1%

Taiwan Fund Inc                                                            4.7%

JP Morgan Russian Securities                                        4.5%

Tarpon All Equities Fund                                               4.2%

Aberdeen Latin America Equity                                     3.8%

Neuberger Berman - China Equity Fund                         3.7%

Korea Fund Inc                                                            3.6%

Coronation Top 20 Fund (Offshore)                                3.6%

19 March 2012

Enquiries:

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

Roger Allen

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

 

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