Final Results

RNS Number : 9419M

Advance Developing Markets Fund Ltd

26 January 2016

 

 

ADVANCE DEVELOPING MARKETS FUND LIMITED

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 OCTOBER 2015

INVESTMENT OBJECTIVE

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 (the "Benchmark")

PERFORMANCE

For the year ended 31 October 2015

Net Asset Value ("NAV") per share1	-8.1%
Share price - mid market2	-9.5%
MSCI Emerging Markets Net Total Return Index in Sterling terms	-11.4%

As at 31 October 2015
NAV per share3	453.5p
Ordinary share price - mid market	400.4p
Net Assets	£235.5m

¹  Measured against a closing NAV at 31 October 2014 of 493.5p

²  Measured against a closing mid-market ordinary share price at 31 October 2014 of  442.3p

³  See notes to the Financial Statements for basis of calculation

The Annual Report can be downloaded in electronic format from the website of the Investment Manager aberdeen-emerging-capital.com

CHAIRMAN'S STATEMENT 

On behalf of the Board, I am pleased to present the annual financial report of Advance Developing Markets Fund Limited ("ADMF", the "Company" or the "Fund") for the period ended 31 October 2015.

Performance

The reporting period proved to be highly challenging for investors in emerging markets, with currency weakness a persistent theme as investors reacted to China's slowdown, the expectation of rising US interest rates, a sovereign debt crisis in Greece, geo-political concerns in parts of the Middle East and Ukraine as well as a home-grown political scandal in Brazil.

Against this backdrop, the twelve months to the end of October 2015 saw the Company's NAV decline by 8.1% compared with an 11.4% fall in the benchmark MSCI Emerging Markets Index. While I am disappointed that the Company's net asset value declined in absolute terms, I take some comfort from the fact that the Investment Manager's investment approach of investing in a combination of discounted closed-end funds and best-of-breed managers of open ended funds outperformed the benchmark by 3.3%.

Discount

Over the course of the year the Company's ordinary shares traded at an average discount to net asset value of 11.0%. While this level of discount is not one that I view with any satisfaction, I note that it is broadly consistent with comparable funds investing in mainstream emerging market equities, evidencing a general lack of appetite for emerging market assets.

Acquisition of Investment Manager

On 15 September 2015 it was announced that the Company's Investment Manager, Aberdeen Emerging Capital Limited which was formerly named Advance Emerging Capital Limited ("AECL") had reached an agreement with Aberdeen Asset Management PLC ("Aberdeen") whereby Aberdeen would acquire 100% ownership of AECL. The transaction received regulatory approval from the UK Financial Conduct Authority and was completed in December 2015.

The Board of the Company is supportive of the transaction.  The investment management team of AECL will remain unchanged and AECL is expected to benefit from the significant additional resources available within Aberdeen.

Proposal to Change the Company's Name

As a consequence of the Aberdeen transaction the Board considered the merits of changing the Company's name. We believe that there are benefits that will accrue from Aberdeen's high profile and good reputation, notably in attracting additional retail demand for the Company's shares. Therefore we are proposing that the Company's name be changed to Aberdeen Emerging Markets Investment Company Limited. This will be proposed at the Company's forthcoming Annual General Meeting scheduled for 14 April 2016. I and my fellow directors intend to vote our shareholdings in favour and I would encourage shareholders to support this change.

Outlook

The last few years have been challenging for investors in emerging markets with some commentators even questioning whether or not the concept of emerging markets as an asset class remains valid. Sentiment is at a low ebb and uncertainty prevails despite market valuations appearing to be reasonably attractive. The Investment Manager discusses the issues facing the asset class in its report and I concur with their conclusion that emerging markets are still relevant and currently present active managers with many opportunities to deliver superior returns. Much will depend on how the Chinese economy fares and the better performance of commodity prices which affect a large segment of our investment universe.

As always, I would like to thank the Company's shareholders for their continued support, my fellow directors for their diligence and professionalism and all our advisers for their advice and assistance.

Richard Bonsor

Chairman

25 January 2016

INVESTMENT MANAGER'S REPORT

During the financial year the Company's net asset value per share and share price fell by 8.1% and 9.5% respectively. Both were comfortably ahead of the benchmark MSCI Emerging Markets Net Total Return Index which declined by 11.4%.

Looking at the sources of benchmark outperformance, fund selection was the major contributor, with strong relative returns from the Company's holdings in China (Neuberger Berman - China Equity Fund, Fidelity China Special Situations PLC), India (Goldman Sachs India Equity Portfolio), Korea (KIM Korea Navigator Fund, Weiss Korea Opportunity Fund Limited) and Thailand (Ton Poh Thailand Fund - Class C). A positive contribution was achieved through asset allocation with underweight positions in Brazil, Colombia, Malaysia and Poland aiding to relative performance. Discount movements detracted from performance as poor sentiment led to widening across a number of portfolio holdings, including Aberdeen Asian Smaller Companies Investment Trust PLC, Edinburgh Dragon Trust PLC, Korea Fund Inc and Weiss Korea Opportunity Fund Limited.

Performance attribution for the year ended 31 October 2015

Fund Selection	4.2%
Asia	4.4%
EMEA	(0.1%)
Latin America	(0.1%)
Asset Allocation	0.6%
Asia	(0.4%)
EMEA	(0.2%)
Latin America	0.7%
Cash (direct and underlying)	0.5%
Discount Movements	(0.3%)
Fees and Expenses	(1.2%)
Relative Net Asset Value Performance	3.3%

Market Environment

Emerging markets declined during the period, despite enjoying several sharp rallies, with sentiment towards the asset class as a whole largely driven by investors' focus on a handful of high-level issues. These included the timing and impact of a long-anticipated increase in US interest rates, the consequences of slowing economic growth in China and the knock-on effects of this which were felt around the emerging world. Much of this concern was reflected in currency weakness with JP Morgan's index of emerging market currencies declining by almost 18% during the year and the Brazilian real, Turkish lira, South African rand and Russian ruble falling to all-time lows against the US dollar. Foreign investors continued to exit the asset class with Bank of America Merrill Lynch reporting that emerging market equity funds saw outflows of USD 62 billion over the first ten months of 2015 compared with USD 25 billion for the whole of 2014.

Chart 1. Emerging and developed market performance during the year to 31 October 2015

See Annual Report for chart

On a regional basis, Asia outperformed despite declining by 4.3%. China was the best performing market in the region, delivering a return of 3.0%, which masks a hugely volatile and eventful year for China's stock markets, currency and economy. By mid-April the MSCI China Index had surged by more than 40% from its October 2014 level as investors took encouragement from monetary policy easing measures and the opening up of China's securities markets following the launch of the Shanghai-Hong Kong Stock Connect program in November 2014 allowing investors in the Hong Kong and Shanghai markets to trade eligible shares in either market using their local brokers and trading accounts. The market then more than relinquished those prior gains on valuation concerns and fears over the impact of a clamp-down on margin trading in domestic A-Shares. The People's Bank of China attempted to stabilise the market with interest rate and reserve requirement cuts but these had limited immediate impact. Weak economic data releases through the summer added to the negativity and the authorities delivered a surprise currency devaluation in August as well as further reductions in both interest rates and reserve requirements and numerous other measures designed to support economic growth, the stock market and real estate markets.

South Korea's stock market fell by just 2.8% despite an outbreak of viral respiratory illness MERS contributing to weak summer domestic consumption and a challenging year for exports. Towards the end of the period, Samsung Electronics, the largest stock in the market, announced a large share buyback programme and a commitment to distribute 30%-50% of free cash flow to shareholders over the coming years. This positive development, coming from such a high profile company, is significant given that Korea's low dividend payout ratio and the reluctance of corporate managements to return capital to shareholders are often cited as reasons for the market trading at a discount to its peers.

The Indian market declined by 4.7% as some of the euphoria that existed post Prime Minister Modi's decisive election victory in May 2014 dissipated, with investors growing impatient over a perceived lack of progress on key reforms including delays to the introduction of  the Goods and Services Tax.. Lacklustre earnings and mooted changes to the tax regime for foreign investors were inconsistent with investors' elevated expectations and also contributed to profit taking during the period. The Indonesian market was among the weaker performers in Asia, losing 19.8% with currency weakness contributing meaningfully to that loss. President Joko Widodo was slow to gain traction with his reform initiatives and investors took fright at rising inflation, weak GDP growth and disappointing corporate earnings. Malaysia delivered the worst return in Asia, a loss of 27.4% as the ringgit reached lows last seen during the Asian crisis and an ongoing political and financial scandal at government-run strategic development company 1MDB continued to create negative headlines. Weak commodity prices, especially oil, did nothing to help either Indonesia or Malaysia.

In Eastern Europe, the Russian index fell by 18.0% and continued to be affected by the direction of energy prices as well as geo-political tensions. The Turkish market fell 19.7% in a year of political uncertainty and rising tensions around its borders. President Erdogan lost his parliamentary majority in early June but a coalition government failed to emerge and the election was re-run on 1 November, the day after the Company's financial year end, resulting in Erdogan regaining his parliamentary majority. Greek equities lost 54.4% during what was a volatile period as the country narrowly avoided default and potential ejection from the Eurozone.

Qatar and the United Arab Emirates, both recent entrants to the emerging market universe, saw their stock markets decline by 14.1% and 18.4% respectively. Sentiment towards the region was impacted by weak energy prices and Qatar's case was not helped by ongoing investigations by the US authorities and Swiss prosecutors into FIFA's award of the World Cup to the country.

South Africa fared better than other markets in the region but still declined by 10.6%. The country continues to face a challenging macroeconomic and political outlook, with ongoing electricity blackouts, a general acceptance that the state energy utility is bankrupt and the obvious challenges facing the mining sector.

In Latin America, the Brazilian market lost 44.0%. The economy is in the middle of a deep recession that is expected to last until 2017. The position of President Rousseff looks increasingly precarious as a consequence of the "Car Wash" scandal at state controlled oil company Petrobras. Impeachment may yet await her. The equity and currency market discounted this bleak picture aggressively and S&P downgraded Brazil's credit rating to junk status in September. Mexico fared better, but still lost 15.2% with currency weakness contributing to that loss despite a relatively robust economic performance supported by reforms, remittances and trade with the US.

Chart 2. Market performances during the half year to 31 October 2015

See Annual Report for chart

Portfolio

At the end of the period the portfolio comprised 44 positions with the top 20 accounting for 76.8% of net assets. As noted in the Company's half yearly report the early part of the year saw the addition of Goldman Sachs India Equity Portfolio to the portfolio as a best-of-breed open ended holding with a manager focused on identifying long term fundamental value opportunities. In the first half of the year opportunistic acquisitions of shares in Genesis Emerging Markets Fund Limited were made on discounts exceeding 13%. The average discount over the twelve months prior to the Company's purchase was 7.7%.

In the second half of the year we made several significant changes to the portfolio. Within South Africa we chose to exit a longstanding position in Coronation Top 20 South Africa Fund (Cayman Islands) after a period of rapid growth in assets and disappointing relative returns. After extensive due diligence on a number of managers, we initiated a position in Steyn Capital SA Equity Fund SP. This vehicle is managed by Cape Town based boutique Steyn Capital Management, with a focus on identifying companies with high earnings quality and strong fundamental tailwinds while avoiding those that are suspected of hiding structural weaknesses. The firm is well resourced, a seasoned investor in South Africa, manages a reasonable level of assets and we were able to secure attractive terms for the Company's investment. 

Another major new investment during the period was made into the Korea Value Strategy Fund Ltd - Class B. The fund is managed by an experienced team at Petra Capital in Seoul. The approach is one of fundamentally driven deep value investing with a private equity mind-set. The managers run a concentrated, high-conviction portfolio. In simple terms, Petra aims to buy shares of great companies at attractive prices or average companies at give-away prices. Long-term investments are made in companies with durable competitive advantages when the market price does not fully reflect growth potential. Shorter-term investments are focussed on companies when the market price is significantly discounted to its intrinsic value and a catalyst for narrowing discounts exists. Petra's client base is dominated by foundations, endowment funds, family offices and pension funds with long term investment horizons. This investment was the culmination of 24 months of due diligence including several trips to Korea. Funds for this investment were provided by a full exit from KIM Korea Navigator Fund where, as a result of strong performance, the valuation of the underlying portfolio had reached a level we viewed as fully valued.

Late in the period we added significantly to the Company's holding in Korean preferred share vehicle Weiss Korea Opportunity Fund Limited as its discount widened beyond 5%, a level at which the fund's board and management has indicated they would step in and use their 40% buyback authority. Preferred shares in Korea are essentially non-voting ordinary shares with a small extra dividend. Weiss's underlying portfolio traded at a weighted average discount to the equivalent ordinary shares of 35.7% at the end of October 2015. There are several reasons to remain optimistic that the underlying discount can narrow from that level, including gradual improvements in corporate governance, tax and legislative changes and the higher dividend yields offered by preferred shares.

Over the course of the year there was a significant rotation within the Company's closed end fund holdings. New investments or additions were made in Aberdeen Asian Smaller Companies Investment Trust PLC, JPMorgan Chinese Investment Trust PLC, JPMorgan Global Emerging Markets Income Trust PLC, The Mexico Fund Inc, Morgan Stanley China A Share Fund Inc, BlackRock Emerging Europe PLC, JPMorgan Asian Investment Trust PLC and Fidelity China Special Situations PLC on the basis of attractive discounts and/or positive asset allocation views. As a result, the percentage of the fund invested in closed end funds increased to 57.7% over the year. Counterbalancing these were sales of a handful of closed end funds which were largely made on asset allocation or underlying valuation grounds including The India Fund Inc, India Capital Growth Fund Limited, BlackRock World Mining Trust PLC and JPMorgan Russian Securities PLC.  Exposure to market access products was stable, with these products used for asset allocation purposes and to manage portfolio liquidity.

The composition of the portfolio by fund structure as at 31 October 2015 was as follows:

	October 2014	October 2015
Closed ended investment funds	56.9%	57.7%
Open ended investment funds	36.5%	36.5%
Market access products	5.9%	4.8%
Cash and other net assets	0.7%	1.0%

The Fund's geographic allocation is shown on page 6 of the Annual Report and Accounts. The period saw the allocation in Asia increase by 8.2% to 68.6% as a result of the relative outperformance of Asian markets and net additions to China and India. In Eastern Europe the size of the overweight positioning in Russia was reduced as a consequence of sales of JP Morgan Russian Securities PLC from March to May as the Russian market recovered strongly.  The allocation to Turkey was increased in the first half of the year on valuation grounds to double that of the benchmark. South Africa saw a net decrease as we chose not to reinvest the entire proceeds of the redemption from Coronation Top 20 South Africa Fund (Cayman Islands) back into Steyn Capital SA Equity Fund SP given a challenging top down outlook. The Fund's allocation to Brazil more than halved over the course of the year but was mainly a result of that market's underperformance.

Market Outlook

In the Company's annual report published a year ago, we stated our belief that "positive surprises in terms of growth, reform or political change" would be required to prompt a turnaround in the performance of emerging market assets. Sadly, what occurred instead in 2015 was continued deterioration in most of these factors, with the trend for weaker currencies, energy and commodity prices prevailing and further political and governance issues generating volatility and weighing negatively on sentiment. Investors responded by withdrawing a record USD 73 billion from dedicated emerging market funds over the year according to EPFR data.

With emerging markets experiencing a third successive year of both absolute declines and underperformance of developed markets, some commentators have called into question the traditional aggregation of such a diverse group of markets into a single asset class. We disagree and see reasons for selective optimism in 2016.

Sentiment towards emerging markets is as negative as we can recall, even during the depths of the global financial crisis, which we view as a strong contrary indicator. Valuations are very reasonable, both compared to history, developed markets and in absolute terms. In China, while one may question the authorities' methods, we believe a soft landing is being managed. Those same authorities have significant levers they can still pull to avert a crisis, which cannot be said of other emerging markets including Brazil and South Africa, where a turnaround seems dependent on reform or a strong pick-up in global demand and thus export prices. The Chinese market itself is set to grow within an emerging market context, as an increasing number of companies are included in Chinese indices over the coming years. In markets such as India and Mexico, the macroeconomic outlook is robust, although valuations in those markets are commensurately higher. In Eastern Europe, highly attractive valuations, moderate growth and the potential for further stimulus point to better times ahead for investors.

At a bottom up level, discount widening and market volatility have thrown up opportunities for nimble investors in the short term, as well as for the patient ones over the longer term. We are actively taking advantage of such opportunities. The same type of inefficiency at a stock specific level is what has enabled many of our underlying managers to perform admirably in what has been a challenging environment, and we are confident that they will continue to do so.

Aberdeen Acquisition Update

As a consequence of Aberdeen's acquisition of us, the investment team has relocated to Aberdeen's London office and is in the process of being integrated into Aberdeen's Alternatives business. Aberdeen is an investment house we have immense respect for, and with which we share a similar investment philosophy and appreciation of the benefits of the closed end fund structure. We are therefore delighted to have joined them and we look forward to continuing to implement our current strategy and process with significant additional support provided by Aberdeen's Closed End Funds team and the operational infrastructure that comes with being part of a FTSE 100 company. Sitting within Aberdeen's rapidly growing Alternatives business will, we believe, enable us to share ideas and best practice to the benefit of the Company's shareholders

Aberdeen Emerging Capital Limited (formerly Advance Emerging Capital Limited)

25 January 2016

PRINCIPAL RISKS AND UNCERTAINTIES

Together with the issues discussed in the Chairman's Statement and the Investment Manager's Report, the Board considers that the main risks and uncertainties faced by the Company fall into the following categories:

(i) General market risks associated with the Company's investments

Changes in economic conditions, interest rates, foreign exchange rates and inflationary pressures, industry conditions, competition, political and diplomatic events, tax, environmental and other laws and other factors can substantially and either adversely or favourably affect the value of the securities in which the Company invests and, therefore, the Company's performance and prospects.

The Company's investments are subject to normal market fluctuations and the risks inherent in the purchase, holding or selling of securities, and there can be no assurance that appreciation in the value of those investments will occur. There can be no guarantee that any realisation of an investment will be on a basis which necessarily reflects the Company's valuation of that investment for the purposes of calculating the net asset value.

The Company's investments, although not made into developed economies, are not entirely sheltered from the negative impact of economic slowdowns, decreasing consumer demands and credit shortages in such developed economies which, amongst other things, affects the demand for the products and services offered by the companies in which the Company directly or indirectly invests.

A proportion of the Company's portfolio may be held in cash or cash equivalent investments from time to time. Such proportion of the Company's assets will be out of the market and will not benefit from positive stock market movements, but may give some protection against negative stock market movements.

(ii) Developing markets

The funds selected by the Investment Manager invest in developing markets. Investing in developing markets involves certain risks and special considerations not typically associated with investing in other more established economies or securities markets. In particular there may be: (a) the risk of nationalisation or expropriation of assets or confiscatory taxation; (b) social, economic and political uncertainty including war and revolution; (c) dependence on exports and the corresponding importance of international trade and commodities prices; (d) less liquidity of securities markets; (e) currency exchange rate fluctuations; (f) potentially higher rates of inflation (including hyper-inflation); (g) controls on foreign investment and limitations on repatriation of invested capital and a fund manager's ability to exchange local currencies for pounds Sterling; (h) a higher degree of governmental involvement and control over the economies; (i) government decisions to discontinue support for economic reform programmes and imposition of centrally planned economies; (j) differences in auditing and financial reporting standards which may result in the unavailability of material information about economies and issuers; (k) less extensive regulatory oversight of securities markets; (l) longer settlement periods for securities transactions; (m) less stringent laws regarding the fiduciary duties of officers and directors and protection of investors; and (n) certain consequences regarding the maintenance of portfolio securities and cash with sub-custodians and securities depositories in developing markets.

(iii) Other portfolio specific risks

(a) Small cap stocks

The underlying investee funds selected by the Investment Manager may have significant investments in smaller to medium sized companies of a less seasoned nature whose securities are traded in an "over-the-counter" market. These "secondary" securities often involve significantly greater risks than the securities of larger, better-known companies, due to shorter operating histories, potentially lower credit ratings and, if they are not listed companies, a potential lack of liquidity in their securities. As a result of lower liquidity and greater share price volatility of these "secondary" securities, there may be a disproportionate effect on the value of the investee funds and, indirectly, on the value of the Company's portfolio.

(b) Liquidity of the portfolio

The fact that a share is traded does not guarantee its liquidity and the Company's investments may be less liquid than other listed and publicly traded securities. The Company may invest in securities that are not readily tradable or may accumulate investment positions that represent a significant multiple of the normal trading volumes of an investment, which may make it difficult for the Company to sell its investments. Investors should not expect that the Company will necessarily be able to realise its investments, within a period which they would otherwise regard as reasonable, and any such realisations that may be achieved may be at a considerably lower price than prevailing indicative market prices.  The Company has an overdraft facility in place which may be utilised to assist in the management of liquidity.  The borrowing facility is described later in this Directors' Report.

Liquidity of the portfolio is further discussed in note 16 to the financial statements.

(c) Foreign exchange risks

It is not the Company's present policy to engage in currency hedging. Accordingly, the movement of exchange rates between Sterling and the other currencies in which the Company's investments are denominated or its borrowings are drawn down may have a material effect, unfavourable or favourable, on the returns otherwise experienced on the investments made by the Company.

Movements in the foreign exchange rate between Sterling and the currency applicable to a particular shareholder may have an impact upon that shareholder's returns in their own currency of account.

Management or mitigation of the above risks

Risk	Management or mitigation of risk
General market risks associated with the Company's investments	These risks are largely a consequence of the Company's investment strategy but the Investment Manager attempts to mitigate such risks by maintaining an appropriately diversified portfolio by number of holdings, fund structure, geographic focus, investment style and market capitalisation focus. Liquidity, risk and exposure measures are produced on a monthly basis by the Investment Manager's Compliance Consultant and monitored against internal limits.
Developing markets
Other portfolio specific risks   (a) Small cap risks   (b) Liquidity of the portfolio   (c) Foreign exchange risks

The investment management of the Company has been delegated to the Company's Investment Manager.  The Investment Manager's investment process takes into account the material risks associated with the Company's portfolio and the markets and holdings in which the Company is invested.  The Board monitors the portfolio and the performance of the Investment Manager at regular Board meetings.

(iv) Internal risks 

Poor allocation of the Company's assets to both markets and investee funds by the Investment Manager, poor governance, compliance or administration, could result in shareholders not making acceptable returns on their investment in the Company.

Management or mitigation of internal risks

The Board monitors the performance of the Investment Manager and the other key service providers at regular Board meetings.  The Investment Manager provides reports to the Board on compliance matters and the Administrator provides reports to the Board on compliance and other administrative matters.  The Board has established various committees to ensure that relevant governance matters are addressed by the Board.

The management or mitigation of internal risks is described in detail in the corporate governance statement on pages 14 to 18 of the Annual Report and Accounts.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations. 

Company law requires the directors to prepare financial statements for each financial year.  Under that law they have elected to prepare the financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IASB") and applicable law. 

The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. 

In preparing these financial statements, the directors are required to:

·     select suitable accounting policies and then apply them consistently;

·     make judgements and estimates that are reasonable and prudent;

·     state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

·     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008.  They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities. 

Disclosure of information to auditor

The directors who held office at the date of approval of this directors' report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware; and each director has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

The maintenance and integrity of the Aberdeen Emerging Capital Limited (formerly named Advance Emerging Capital Limited) website is the responsibility of their directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements or audit report since they were initially presented on the website.

Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' responsibility statement in respect of the annual report and financial statements

The directors confirm that to the best of their knowledge and belief the Annual Report and Financial Statements taken as a whole, is fair, balanced and understandable and provides the information necessary to assess the Company's performance, business model and strategy.  During the course of this assessment, the directors have received input from the Audit Committee, the Investment Manager, the Company Secretary and the UK Administration Agent.

Directors' responsibility statement under the disclosure and transparency rules 4.1.12

The directors confirm that to the best of their knowledge and belief;

(a)  the financial statements, prepared in accordance with International Financial Reporting Standards as issued by the IASB, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

(b)  the management report (comprising the Chairman's Statement, the Investment Manager's Report and the Directors' Report) includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces.

John Hawkins - Director

William Collins - Director

25 January 2016

 

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 October 2015

	Revenue	2015 Capital	Total	Revenue	2014 Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Losses on investments designated as fair value through profit or loss	-	(19,622)	(19,622)	-	(2,525)	(2,525)
Capital losses on currency movements	-	(140)	(140)	-	(176)	(176)
Net investment losses	-	(19,762)	(19,762)	-	(2,701)	(2,701)
Investment income	2,243	-	2,243	2,608	-	2,608
	2,243	(19,762)	(17,519)	2,608	(2,701)	(93)
Investment management fees	(2,252)	-	(2,252)	(2,315)	-	(2,315)
Other expenses	(745)	-	(745)	(665)	-	(665)
Operating loss before finance costs and taxation	(754)	(19,762)	(20,516)	(372)	(2,701)	(3,073)
Finance costs	(41)	-	(41)	(19)	-	(19)
Operating loss before taxation	(795)	(19,762)	(20,557)	(391)	(2,701)	(3,092)
Withholding tax expense	(188)	-	(188)	(271)	-	(271)
Total comprehensive income for the year	(983)	(19,762)	(20,745)	(662)	(2,701)	(3,363)
Earnings per ordinary share
- Basic and diluted	(1.89p)	(38.06p)	(39.95p)	(1.17p)	(4.80p)	(5.97p)

The Company does not have any income or expenses that are not included in the loss for the year and therefore the loss for the year" is also the "Total comprehensive income for the year", as defined in International Accounting Standard 1 (revised).

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

All revenue and capital items in the above statement derive from continuing operations.  No operations were acquired or discontinued during the year. 

 

STATEMENT OF FINANCIAL POSITION

At 31 October 2015

	2015 £'000			2014 £'000
Non-current assets
Investments designated as fair value through profit or loss	233,110			254,386
Current assets
Cash and cash equivalents	1,996			2,018
Sales for future settlement	573			-
Other receivables	116			148
	2,685			2,166
Total assets	235,795			256,552
Current liabilities
Purchases for future settlement	53			-
Other payables	243			308
Total liabilities	296			308
Net assets	235,499			256,244
Equity
Share capital	187,725			187,725
Capital reserve	54,245			74,007
Revenue reserve	(6,471)			(5,488)
Total equity	235,499			256,244
Net assets per ordinary share	453.53p			493.48p
Number of ordinary shares in issue (excluding shares held in treasury)	51,926,229			51,926,229

Approved by the Board of Directors on 25 January 2016 and signed on their behalf by:

John Hawkins - Director

William Collins - Director

 

 

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 October 2015

	Share capital account	Capital reserve	Revenue reserve	Total
	£'000	£'000	£'000	£'000
Opening equity	187,725	74,007	(5,488)	256,244
Loss for the year	-	(19,762)	(983)	(20,745)
Balance at 31 October 2015	187,725	54,245	(6,471)	235,499

For the year ended 31 October 2014

	Share capital account	Capital reserve	Revenue reserve	Total
	£'000	£'000	£'000	£'000
Opening equity	245,381	76,708	(4,826)	317,263
Tender offer	(57,576)	-	-	(57,576)
Other share buy backs	(80)	-	-	(80)
Loss for the year	-	(2,701)	(662)	(3,363)
Balance at 31 October 2014	187,725	74,007	(5,488)	256,244

STATEMENT OF CASH FLOW

For the year ended 31 October 2015

	2015 £'000	2014 £'000
Cash flows from operating activities
Cash inflow from investment income and bank interest	2,238	2,559
Cash outflow from management expenses	(3,027)	(2,903)
Cash inflow from disposal of investments	98,887	119,981
Cash outflow from purchase of investments	(97,754)	(64,911)
Cash outflow from taxation	(188)	(271)
Net cash flow from operating activities	156	54,455
Cash flows from financing activities
Borrowing commitment fee and interest charges	(41)	(19)
Share buy backs/Tender offer	-	(57,656)
Net cash flow used in financing activities	(41)	(57,675)
Net increase/(decrease) in cash and cash equivalents	115	(3,220)
Opening balance	2,018	5,413
Cash flow	115	(3,220)
Effect of foreign exchange	(137)	(175)
Balance at 31 October	1,996	2,018

NOTES

1. REPORTING ENTITY

Advance Developing Markets Fund Limited (the "Company") is a closed-ended investment company, registered in Guernsey on 16 September 2009. The Company's registered office is 11 New Street, St Peter Port, Guernsey GY1 2PF.  The Company's ordinary shares hold a premium listing on the London Stock Exchange. The financial statements of the Company are presented for the year ended 31 October 2015.

The Company invests in a portfolio of funds and products which give diversified exposure to developing and emerging market economies. 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 (Bloomberg ticker: NDUEEGF Index) (the "Benchmark").

The investment activities of the Company are managed by Aberdeen Emerging Capital Limited which was formerly named Advance Emerging Capital Limited ("AECL").

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 available in electronic form on the Investment Manager's website, aberdeen-emerging-capital.com. 

2. BASIS OF PREPARATION

(a) Statement of compliance

The financial statements which give a true and fair view have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and are in compliance with the Companies (Guernsey) Law, 2008. There were no changes in the accounting policies of the Company in the year to 31 October 2015.

Where 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 Statement of Comprehensive Income is the profit and loss account of the Company.  The capital and revenue columns provide supplementary information.

The financial statements were approved and authorised for issue by the Board on 25 January 2016.

(b) Going concern

The directors have adopted the going concern basis in preparing the financial statements. The following is a summary of the directors' assessment of the going concern status of the Company.

The directors have a reasonable expectation that the Company has adequate operational resources to continue in operational existence for at least twelve months from the date of approval of this document.  In reaching this conclusion, the directors have considered the liquidity of the Company's portfolio of investments as well as its cash position, income and expense flows.  As at 31 October 2015, the Company held £2.0m in cash and £233.1m in investments. It is estimated that approximately 59% of the investments held at the year end could be realised in one month.  The total operating expenses for the year ended 31 October 2015 were £3.0m, which represented approximately 1.2% of average net assets during the year.  The Company therefore has substantial operating expense cover.  The Company's net assets at 31 December 2015 were £236.5m.

The directors are satisfied that it is appropriate to adopt the going concern basis in preparing the financial statements and, after due consideration, the directors consider that the Company is able to continue for a period of at least twelve months from the date of approval of the financial statements.

(c) Basis of measurement

The financial statements have been prepared on the historical cost basis except for financial instruments at fair value through profit or loss which are measured at fair value.

(d) Functional and presentation currency

The Company's investments are denominated in multiple currencies.  However, the Company's shares are issued in Sterling and the majority of its investors are UK based.  Therefore the financial statements are presented in Sterling, which is the Company's functional currency. All financial information presented in Sterling has been rounded to the nearest thousand pounds.

(e) Capital reserve

Profits achieved by selling investments and changes in fair value arising upon the revaluation of investments that remain in the portfolio are all charged to the capital column of the Statement of Comprehensive Income and allocated to the capital reserve.

(f) Revenue reserve

The balance of all items allocated to the revenue column of the Statement of Comprehensive Income in each year is transferred to the Company's revenue reserve. 

(g) Use of estimates and judgements

The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described below.

Classification and valuation of investments

Investments are designated as fair value through profit or loss on initial recognition and are subsequently measured at fair value.  The valuation of such investments requires estimates and assumptions made by the management of the Company depending on the nature of the investments as described in notes 3 (a) and 17 and fair value may not represent actual realisable value for those investments.

Allocation of investments to fair value hierarchy

IFRS 13 requires the Company to measure fair value using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements. IFRS 13 establishes 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 13 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 judgement, considering factors specific to the asset or liability.

The determination of what constitutes 'observable' requires significant judgement 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.

3. SIGNIFICANT ACCOUNTING POLICIES

(a) Investments

As the Company's business is investing in financial assets with a view to profiting from their total return in the form of increases in fair value, financial assets are designated as fair value through profit or loss on initial recognition.  These investments are recognised on the trade date of their acquisition at which the Company becomes a party to the contractual provisions of the instrument.  At this time, the best evidence of the fair value of the financial assets is the transaction price.  Transaction costs that are directly attributable to the acquisition or issue of the financial assets are charged to the Statement of Comprehensive Income as a capital item. Subsequent to initial recognition, investments designated as fair value through profit or loss are measured at fair value with changes in their fair value recognised in the Statement of  Comprehensive Income and determined by reference to:

i)  investments quoted or dealt on recognised stock exchanges in an active market are valued by reference to their market bid prices;

ii)  investments other than those in i) above which are dealt on a trading facility in an active market are valued by reference to broker bid price quotations, if available, for those investments;

iii)  investments in underlying funds, which are not quoted or dealt on a recognised stock exchange or other trading facility or in an active market, are valued at the net asset values provided by such entities or their administrators. These values may be unaudited or may themselves be estimates and may not be produced in a timely manner. If such information is not provided, or is insufficiently timely, the Investment Manager uses appropriate valuation techniques to estimate the value of investments. In determining fair value of such investments, the Investment Manager takes into consideration the relevant issues, which may include the impact of suspension, redemptions, liquidation proceedings and other significant factors. Any such valuations are assessed and approved by the directors. The estimates may differ from actual realisable values;   

iv) investments which are in liquidation are valued at the estimate of their remaining realisable value; and

v) any other investments are valued at the directors' best estimate of fair value.

Investments are derecognised on the trade date of their disposal, which is the point where the Company transfers substantially all the risks and rewards of the ownership of the financial asset.  Gains or losses are recognised in the capital column of the Statement of Comprehensive Income. The Company uses the weighted average cost method to determine realised gains and losses on disposal of investments.  

(b) Foreign currency

Transactions in foreign currencies are translated into Sterling at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into Sterling at the spot exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value through profit or loss are retranslated into Sterling at the exchange rate at the date that the fair value was determined. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into Sterling using the exchange rate at the date of the transaction.

Foreign currency differences arising on retranslation are recognised in profit or loss and, depending on the nature of the gain or loss, are allocated to the revenue or capital column of the Statement of Comprehensive Income. Foreign currency differences on retranslation of financial instruments designated as fair value through profit or loss are shown in the "Capital losses on currency movements" line.

(c) Income from investments

Dividend income is recognised when the right to receive it is established and is reflected in the Statement of Comprehensive Income as Investment Income in the revenue column. For quoted equity securities this is usually on the basis of ex-dividend dates. For unquoted investments this is usually on the entitlement date confirmed by the relevant holding.  Income from bonds is accounted for using the effective interest method.

Special dividends and distributions described as capital distributions are assessed on their individual merits and may be credited to the capital reserve if considered to be closely linked to reconstructions of the investee company or other capital transactions. Bank interest receivable is accounted for on a time apportionment basis and is based on the prevailing variable interest rates for the Company's bank accounts.

(d) Treasury shares

Where the Company purchases its own share capital, the consideration paid, which includes any directly attributable costs, is recognised as a deduction from equity shareholders' funds through the Company's reserves. When such shares are subsequently sold or re-issued to the market any consideration received, net of any directly attributable incremental transaction costs, is recognised as an increase in equity shareholders' funds through the Share capital account. Shares held in treasury are excluded from calculations when determining NAV per share as detailed in note 13.

(e) Cash and cash equivalents

Cash comprises cash at hand and demand deposits. Cash equivalents, which include bank overdrafts, are short term, highly liquid investments that are readily convertible to known amounts of cash, are subject to insignificant risks of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

(f) Investment management fees and finance costs

Investment management fees and finance costs are charged to the Statement of Comprehensive Income as a revenue item and are accrued monthly in arrears. Finance costs include interest payable and direct loan costs. Performance-related fees, if any, are payable directly by reference to the capital performance of the Company and are therefore charged to the Statement of Comprehensive Income as a capital item. 

(g) Financial liabilities

Financial liabilities (including bank loans) are classified according to the substance of the contractual arrangements entered into. Financial liabilities at fair value through profit or loss are measured initially at fair value, with transaction costs recognised in the Statement of Comprehensive Income.

(h) Taxation

The Company applied for exempt status under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and is charged an annual exemption fee. Effective 1 January 2015, the annual exemption fee is £1,200 (2014: £600).

Dividend and interest income received by the Company may be subject to withholding tax imposed in the country of origin. The tax charges shown in the Statement of Comprehensive Income relate to overseas withholding tax on dividend income.

(i) 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 developing and emerging market economies. 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. 

Further information on the Company's operating segment is provided in note 18.

(j) Offsetting

Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Company has a legal right to set off the recognised amounts and it intends to either settle on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are only presented on a net basis when permitted under IFRS.

(k)  Structured entities

A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. A structured entity often has some or all of the following features or attributes; (a) restricted activities, (b) a narrow and well-defined objective, such as to provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors, (c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support and (d) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks.

The Company holds shares, units or partnership interests in the funds or investment products held in the Company's portfolio.  The Company does not consider its investments in listed funds to be structured entities but does consider its investments in unlisted funds to be investments in structured entities because the voting rights in such entities are limited to administrative tasks and are not the dominant factor in deciding who controls those entities.

Changes in fair value of investments, including structured entities, are included in the Statement of Comprehensive Income.

(l)  New standards and interpretations effective in the current financial year

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1 January 2014. 

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27 (2012)) (the amendments)

The amendments are effective for annual periods beginning on or after 1 January 2014. The directors have concluded that the Company meets the definition of an investment entity. The Company has no subsidiaries; therefore, the adoption of the amendments did not have an impact on the Company's financial statements.

Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)

The amendments to IAS 32 are effective for annual periods beginning on or after 1 January 2014. The amendment updates the application guidance in IAS 32, 'Financial Instruments: Presentation', to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. The adoption of the amendments to IAS 32 did not have a material impact on the financial statements of the Company.

(m)  New standards and interpretations in issue but not yet effective

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:

IFRS 9 Financial Instruments (2010) and IFRS 9 Financial Instruments (2009) (together, IFRS 9)

IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. IFRS 9 (2010) introduces additional disclosures relating to financial liabilities. The IASB currently has an active project to make limited amendments to the classification and measurement requirements of IFRS 9 and add new requirements to address the impairment of financial assets.

IFRS 9 (2010) introduces a new requirement in respect of financial liabilities designated under the fair value option to generally present fair value changes that are attributable to the liability's credit risk in other comprehensive income rather than in profit or loss. Apart from this change, IFRS 9 (2010) largely carries forward without substantive amendment the guidance on classification and measurement of financial liabilities from IAS 39.

The IFRS 9 (2014) requirements represent a significant change from the existing requirements in IAS 39 in respect of financial assets. The standard contains two primary measurement categories for financial assets: amortised cost and fair value. The standard eliminates the existing IAS 39 categories of held-to-maturity, available-for-sale and loans and receivables. The standard also replaces the incurred loss model in IAS 39 with an expected credit loss model, which means that a loss event will no longer need to occur before an impairment allowance is recognised.

The mandatory effective date of IFRS 9 is not specified but will be determined when the outstanding phases are finalised. However, early application of IFRS 9 is permitted.

Based on the initial assessment, the standard is not expected to have a material impact on the Company's financial statements.

4.	INVESTMENT INCOME
	Income from investments:	2015 £'000	2014 £'000
	Dividend income	2,243	2,608

5.	INVESTMENT MANAGEMENT FEES AND OTHER EXPENSES		2015			2014
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
	Investment management fee	2,287	-	2,287	2,365	-	2,365
	-management fee rebate	(35)	-	(35)	(50)	-	(50)
		2,252	-	2,252	2,315	-	2,315
	Administration fees	175	-	175	194	-	194
	Depositary and custody service fees	100	-	100	58	-	58
	Registration fees	18	-	18	17	-	17
	Directors' fees	173	-	173	120	-	120
	Auditor's fees	52	-	52	52	-	52
	Marketing fees	31	-	31	32	-	32
	Broker fees	40	-	40	40	-	40
	Other expenses	156	-	156	152	-	152
	Total other expenses	745	-	745	665	-	665
	Total expenses	2,997	-	2,997	2,980	-	2,980

Details of the Investment Management fee and agreement are provided below.

The investment management agreement is terminable by either party thereto on not less than six months' written notice at any time, subject to earlier termination in certain circumstances including certain breaches or the insolvency of either party. 

The Investment Manager is entitled to receive from the Company for its services as Investment Manager a basic fee and, in certain circumstances, a performance fee.  The basic fee is payable monthly in arrears (and pro rata for part of any month during which the investment management agreement is in force). This monthly fee is equivalent to one twelfth of one per cent. of the Company's Adjusted Market Capitalisation.  The investment management agreement defines the "Company's Adjusted Market Capitalisation" as the aggregate closing mid-market price of the ordinary shares on the last business day of the month or part of a month for which the basic fee is being calculated plus the aggregate amount, if any, paid by the Company in purchasing its own ordinary shares at a discount in the twelve month period ending on such business day.

The Investment Manager may receive, in addition to the basic fee, a performance fee in respect of each Relevant Period ending 31 October. It is based on the outperformance of NAV per share (before deducting the performance fee) over the Benchmark NAV per share. The Benchmark NAV per share is the Base NAV per share for the Relevant Period, increased or reduced by the percentage, if any, by which the MSCI Emerging Markets Net Total Return Index in Sterling terms (Bloomberg ticker: NDUEEGF Index) has increased or reduced over the Relevant Period.

For the year ended 31 October 2015 the Base NAV per share was 493.48p (2014: 494.73p). The Base NAV is the NAV at the commencement of business on the first day of such Relevant Period, adjusted for the number of ordinary shares to be issued during such Relevant Period pursuant to the exercise of subscription shares prior to the commencement of such Relevant Period.  The performance fee is 10% of the outperformance of the NAV per share over the Benchmark NAV per share, provided that the NAV per ordinary share has increased since the end of the last period in respect a performance fee was payable, i.e. the High Water Mark of 559.24p per share (2014: 559.24p). The performance fee calculation is based on figures taken from the audited financial statements.

The performance fee in respect of a particular Relevant Period will not exceed 2% of the Company's Net Asset Value at the close of business on the final Business Day of the Relevant Period to which such fees relate. There was no performance fee in the current year (2014: nil).

Orangefield Legis Fund Services Limited ("Orangefield Legis") is appointed as Administrator and Secretary to the Company.  Orangefield Legis is appointed under a contract subject to ninety days' written notice and receives a fee at a rate of £40,000 per annum plus certain additional fees, as well as the fees payable to the UK Administration Agent.

Cavendish Administration Limited ("Cavendish") is appointed by Orangefield Legis to act as administration agent in the United Kingdom.  Cavendish is appointed under a contract subject to not less than ninety days' notice.  The UK Administration Agent receives from the Administrator a monthly fee equal to one twelfth of 0.1% of Net Asset Value subject to a maximum fee for the year ended 31 October 2015 of £134,650 (2014: £131,620) per annum. The maximum fee is increased annually, in November, by the change in the UK Retail Price Index (all items) over the preceding 12 months.

Northern Trust (Guernsey) Limited, receives fees for depositary services calculated at the rate of 2.95 basis points per annum subject to a minimum annual fee of £60,000.  Northern Trust (Guernsey) Limited also receives a fee for custody services comprising an account fee of £2,500 per account per annum, principal/income split of £1,250 per account per annum and single line items (unit trust) reporting of £500 per line per annum. It also receives an asset based fee equal to between 1.00 basis points and 40.00 basis points of the value of the assets of the Company. Transaction based fees are also payable of between £10 and £125 per transaction. The variable fees are dependent on the countries in which the individual holdings are registered.

The Company's ongoing charges for the year ended 31 October 2015, calculated using the Association of Investment Companies methodology were 1.20% (2014: 1.12%).

6.      EARNINGS PER SHARE

Earnings per share is based on the total comprehensive income for the year ended 31 October 2015, being a loss of £20,745,000 (2014: loss of £3,363,000) attributable to the weighted average of 51,926,229 (2014: 56,288,614) ordinary shares in issue (excluding shares held in treasury) in the year ended 31 October 2015.

Supplementary information is provided as follows: revenue per share is based on the net revenue loss of £983,000 (2014: loss £662,000) and capital earnings per share is based on the net capital loss of £19,762,000 (2014: loss of £2,701,000) attributable to the above ordinary shares.

7.        NET ASSET VALUE PER SHARE

Net assets per share is based on net assets of £235,499,000 (2014: £256,244,000) divided by 51,926,229 (2014: 51,926,229) shares (excluding shares held in treasury) in issue at the Statement of Financial Position date.

8.    RELATED PARTY DISCLOSURES

Investment Manager

Aberdeen Emerging Capital Limited which was formerly named Advance Emerging Capital Limited ("AECL" or the "Investment Manager") has been appointed as the Company's investment manager. Details of its fee and agreement are provided in note 5.

Fees payable to the Investment Manager are shown in the Statement of Comprehensive Income.  No performance fee accrual has been included (2014: £nil).

A director of AECL has a direct interest in 3,635 (2014: 3,635) ordinary shares in the Company.  The investment management team at AECL has, in aggregate, direct or indirect interests in 7,644 (2014: 7,644) ordinary shares in the Company.

Advance Brazil Leblon Equities Fund

As at 31 October 2015 the Company held an investment with a valuation of £4,416,726 (2014: £8,531,098) in Advance Brazil Leblon Equities Fund ("ABLE"), a fund established by 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 circumvent the lack of closed ended products 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. A rebate on management fees charged by ABLE equivalent to £34,560 (2014: £49,686) was payable to the Company in the year ended 31 October 2015.

Funds held at 31 October 2015 which are managed by Aberdeen Asset Management plc

As at 31 October 2015, the Company held investments in Aberdeen Asian Smaller Companies Investment Trust PLC, Aberdeen Latin American Equity Fund Inc, Edinburgh Dragon Trust PLC and The India Fund Inc.  The valuation of these holdings at 31 October 2015 can be found in the Investments table on page 7 of the Annual Report and Accounts.  During the year ended 31 October 2015, there were no fee rebates from investments held in funds managed by Aberdeen Asset Management plc.

Details of the directors' contracts and fees are provided in the Directors' Remuneration Report on page 21 of the Annual Report and Accounts. Total fees for the directors in the year ended 31 October 2015 were £172,500 (2014: £120,000). Of this amount £172,500 (2014: £120,000) had been paid at the year end, with an accrual of £nil (2014: £nil) outstanding. 

9. ANNUAL GENERAL MEETING

The Company's Annual General Meeting will be held at the Company's registered office at 11:00 a.m. on 14 April 2016.

10. FINANCIAL INFORMATION

The annual report was approved by the Board of directors on 25 January 2016.  The information in this announcement has been extracted from the annual report on which the Company's auditors have given an unqualified report.  The annual report will be posted to shareholders and will be made available on the Investment Manager's website at aberdeen-emerging-capital.com It will also be available from the registered office of Company and the UK Administration Agent.

This announcement contains regulated information under the Disclosure Rules and Transparency Rules of the FCA.

A copy of the annual report will be submitted to the National Storage Mechanism and will shortly be available at: http://www.morningstar.co.uk/uk/NSM

Registered office

11 New Street

St Peter Port

Guernsey GY1 2PF

Enquiries:

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

Andrew Lister / Bernard Moody        Tel: [phone]      

Stockdale Securities Limited (Financial adviser and stockbroker)

Alastair Moreton  Tel: [phone]

Orangefield Legis Fund Services Limited (Company Secretary)

Lisa Garnham         Tel: [phone]

Cavendish Administration Limited (UK Administration Agent)

Anthony Lee         Tel: [phone]

Ordinary Shares - Listing Category: Premium - Equity Closed-ended Investment Funds

25 January 2016

END

 

END

 

 

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