ADVANCE DEVELOPING MARKETS FUND LIMITED
Annual Financial Report Announcement
For the year ended 31 October 2012
INVESTMENT OBJECTIVE AND PERFORMANCE
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 2012
|
Net Asset Value ("NAV") per share1
|
-0.3%
|
|
Ordinary share price - mid market2
|
-1.9%
|
|
MSCI Emerging Markets Net Total Return Index in Sterling terms
|
+2.4%
|
|
As at 31 October 2012
|
|
|
NAV per share3
|
466.4p
|
|
Ordinary share price - mid market
|
420.3p
|
|
Net Assets
|
£352.0m
|
1 Measured against a closing diluted NAV for 31 October 2011 of 467.6p
2 Measured against an opening mid-market ordinary share price of 428.5p
3 See note 13 in the Notes for basis of calculation
The Annual Report can be downloaded in electronic format from the website of the Investment Manager www.advance-emerging.com
CHAIRMAN'S STATEMENT
Performance
During the financial year to 31 October 2012 the Company's net asset value and share price fell by 0.3% and 1.9% respectively. The benchmark index (MSCI Emerging Markets Net Total Return Index in Sterling terms) rose 2.4%. The Investment Management Report provides an analysis of the Company's performance across the areas of fund selection, asset allocation and discount narrowing. Whilst short term underperformance is disappointing, the Company has delivered a much stronger performance compared to the benchmark index over longer periods such as three years and ten years.
As described in the Investment Manager's Report, global emerging markets had a difficult year, being profoundly influenced by global macroeconomic factors, in particular those relating to the ongoing debt crises in peripheral Eurozone member states and the lacklustre recovery in the economy of the United States of America. Emerging markets themselves also provided some cause for concern, with a weaker growth outlook in China combined with a perceived lack of policy response in the run up to that country's leadership transition doing little to engender confidence.
Continuation Vote
At the Company's Annual General Meeting, expected to be held in March 2013, shareholders will be given the opportunity to vote on the continuation of the Company in accordance with the Company's articles of incorporation which provides for a continuation vote every 5 years. In light of the forthcoming vote, the Board undertook a broad shareholder consultation exercise in the fourth quarter of 2012, which covered shareholders owning over 75% of the Company's ordinary shares and appointed an external investment consultant to review the Company's investment management arrangements and performance. As a result of these two exercises the Board has concluded that the continuation of the Company and the continuing appointment of Advance Emerging Capital Limited as its investment manager are in the interests of shareholders as a whole. Accordingly, the Board will be recommending that shareholders vote in favour of the continuation resolution at the Annual General Meeting and at the same time will put forward proposals for a tender offer and further conditional tender offers as outlined below.
The Board believes that the proposals to be put forward at the time of the continuation vote strike a fair balance between those shareholders who wish to realise part of their investment in the Company at close to net asset value and those who wish to maintain their investment in the Company. A circular detailing the proposals and the Notice of Annual General Meeting will be sent to shareholders in February 2013.
Tender Offer
In conjunction with the continuation resolution shareholders will also be asked to approve a tender offer for up to 15% of the Company's ordinary shares in issue at a price reflecting a discount of 1% to formula asset value ("FAV"), being the net asset value of the tendered shares less the costs and expenses of the tender offer. The record date for participation in the tender was 21 December 2012.
Further Conditional Tender Offers
The Board also proposes, subject to shareholder approval, to conduct two further conditional tender offers in respect of the six month periods ending 31 October 2013 and 30 April 2014. Such conditional tender offers would be made for up to 10% of the ordinary shares in issue at a 1% discount to FAV if either (i) the Shares trade at an average discount of more than 10% over the period from 1 May 2013 to 31 October 2013 and 1 November 2013 to 30 April 2014 or (ii) the Company's performance over those periods, as measured by its net asset value total return, is less than that of the MSCI Emerging Markets Net Total Return Index in Sterling terms.
Discount Management Policy and Share Buybacks
The Company has a stated discount management policy that, in normal market conditions, the Company's ordinary shares should trade at a discount of less than 10 per cent to net asset value. During the year, the discount to net asset value averaged 8.7% and the Company repurchased 475,000 ordinary shares during the year, representing 0.6% of the shares in issue at the time of repurchase. These shares were repurchased at a discount to net asset value of 10.3% and are held in treasury but will not be re-issued at a discount to net asset value. The Board will again seek authority to purchase up to a maximum of 14.99% of the ordinary shares in issue at the Annual General Meeting.
Changes to the Company's Board
The year saw several changes to the composition of the Company's Board of Directors. Peter O'Connor retired as a Director and Chairman of the Company following the Annual General Meeting held on 26 April 2012. During his time in office, Mr O'Connor proved to be an invaluable member of the Board and his insights into markets will be sorely missed. Following Mr O'Connor's departure I assumed the responsibility of Chairman and John Hawkins became Deputy Chairman.
At the 2012 Annual General Meeting the Board was pleased to welcome Mark Hadsley-Chaplin to its ranks as a non-executive Director. Mr Hadsley-Chaplin has over a decade's experience in the asset management industry. I am also pleased to take this opportunity to officially welcome William Collins to the Board. Mr Collins was appointed as a non-executive Director with effect from 14 June 2012 while Richard Hotchkis resigned as a Director of the Company on the same day. Mr Collins has many years of experience in banking and investment. Both Mr Hadsley-Chaplin and Mr Collins are entirely independent and I am sure will prove to be strong and complementary additions to the Board. I would also like to thank Mr Hotchkis for his highly valuable contribution to the Company during his tenure.
Prospects for 2013
While global headwinds will no doubt provide a similar level of distraction for investors next year as they did in the last, your Board remains convinced of the long term case for investing in emerging markets and takes encouragement from the fact that underlying fundamentals remain attractive in the majority of markets in which the Company's assets are ultimately invested.
Finally, 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
23 January 2013
INVESTMENT MANAGER'S REPORT
Performance review
Advance Developing Markets Fund Limited's ("ADMF", the "Fund" or the "Company") net asset value ("NAV") per share fell by 0.3% in Sterling terms during the reporting period, compared with a return of +2.4% for the Company's benchmark index (MSCI Emerging Markets Net Total Return Index in Sterling terms). The share price declined by 1.9%, with the discount to diluted net asset value at which the Company's shares trade closing the period at 9.9%, having commenced it at 8.4%.
An analysis of the Company's performance shows that fund selection, asset allocation and discount narrowing were all negative, the first time this has been the case since at least 2002. The performance of underlying managers was generally good during the year, with many investee funds outperforming. This outperformance was unfortunately offset by particularly weak performance from a small number of holdings focussed on China and the natural resources sector. There was no great differentiation between performances in open or closed end funds during the year in NAV terms, although closed end funds generally saw their discounts to net asset value widen which adversely impacted share price performance. Asset allocation was a small negative contributor with a positive result in Asia offset by poor performance from the Brazilian and Russian markets where overweight positions were maintained throughout the period.
Performance attribution for the 12 months to 31/10/12
Fund Selection (0.89%)
Open Ended (0.37%)
Closed Ended (0.47%)
Other (0.05%)
Asset Allocation (0.31%)
Asia 0.30%
EMEA (0.22%)
Latin America (0.22%)
Cash (direct & underlying) (0.16%)
Discount Narrowing (0.42%)
Fees & Expenses (1.09%)
Relative net asset value Performance (2.70%)
Market Environment
The performances of the various markets that make up the benchmark are shown in Sterling terms in Chart 1. For comparison, we also include the performances of the MSCI World (+9.2%), Frontier (+0.4%), UK (+8.3%), US (+14.0%) and Japan (-3.5%) indices.
see chart 1 in Annual report
Chart 1. Market performances during the financial year to 31 October 2012
Source: Bloomberg. GBP returns for the period from 31 October 2011 to 31 October 2012.
The year witnessed continued volatility with short term market swings driven by variations in the global growth outlook and the responses of the world's central banks, and especially the Federal Reserve. It was noticeable in emerging markets that the BRICs (Brazil, Russia, India and China) continued to fare poorly when compared to many of the smaller markets, largely on account of moderating, or even declining, corporate earnings. In Brazil, an increasingly interventionist approach by the government in the currency market and certain sectors of the economy weighed particularly heavily on returns.
In contrast, the smaller markets of Turkey, Thailand, the Philippines, Egypt and Colombia all experienced gains of 20% - 30%. In most instances this was accompanied by a re-rating of valuations to levels that we now find difficult to justify unless companies can continue to grow earnings at the same rapid rates they achieved in 2012.
Portfolio
It was a busy year for the portfolio with an elevated level of corporate activity, much of which we elaborate on below. The Investment Manager continued to expend considerable energy on proprietary research with numerous country visits helping to formulate a top down view as well as ensuring that ADMF is invested with the "best of breed" managers in each market. Progress continued to be made in reducing the level of management fees paid to the managers of the Company's open ended fund holdings. A concerted effort was made during the year to further concentrate the portfolio into our highest conviction ideas. At the end of the period the Fund held 49 positions with the top 20 accounting for 71.7% of net assets.
The composition of the portfolio by fund structure at 31 October 2012 was similar to the position at the start of the period.
October 2012 October 2011
Closed ended investment funds 55.6% 53.3%
Open ended investment funds 40.7% 42.5%
Market access products 3.4% 3.3%
Cash and other net assets 0.3% 0.9%
The average discount to net asset value on the closed end portion of the portfolio was 11.0% at the end of the period, up from 9.4% a year ago. Portfolio turnover for the year was consistent with previous years, at approximately 30%, with the level of corporate activity contributing to this.
The asset allocation at the end of the year is shown on page 5 of the Annual Report. The most significant change during the year was an increase in the Asian element of the portfolio which rose from 46.3% at the start of the year to 51.7% by year end which was funded by reductions to EMEA, Latin America and cash. Within Asia, China, Korea and Thailand were all added to largely on valuation grounds whereas the weighting to Taiwan was allowed to decline materially on the back of corporate activity in our core holding there. In EMEA we made modest additions to Turkey while in Latin America, Brazil's weight declined as the market lagged emerging markets in general.
Further details on the top 10 investments follow below.
Blackrock Latin American Investment Trust (7.3% of net asset value)
ADMF's holding is composed of both ordinary shares (5.5% of net asset value) and Convertible Unsecured Loan Stock (CULS) (1.8% of net asset value). Net asset value performance over the year was reasonable, with a total return of -5.1% which was in line with the return of the MSCI Latin America Index. Share price performance was impacted by a discount to cum income net asset value that widened from 7.1% to 9.1%. The CULS generated a total return of 1.7%, outperforming both the ordinary shares and regional indices. In March 2012 the trust conducted a tender offer for 5% of its ordinary outstanding shares at a 2% discount to net asset value. The board chose not to conduct a tender offer in September. We have been in regular communication with the board and made suggestions as to how, in our opinion, the capital structure, investment approach, level of discount and performance might be improved.
Henderson Asian Growth Trust (5.3% of net asset value)
The trust's manager, Andrew Beal, is well regarded for his growth biased investment approach but unfortunately, markets proved unsuited to that style during the period. While net asset value rose 5.0%, the benchmark MSCI All Country Asia ex Japan Index gained 6.2%, thus continuing a trend of underperformance over the medium term. In October 2012 the board announced that it was undertaking a strategic review of investment management arrangements. That process resulted in a further announcement in December 2012 that the board had decided to move the management contract to Schroders. In addition, the board proposed the introduction of a 9% discount control target, three yearly continuation votes and, most significantly, a tender offer for up to 50% of shares in issue at a net asset value less costs.
Korea Fund Inc (4.8% of net asset value)
The US listed closed end Korea Fund Inc is managed by the team at RCM Asia Pacific in Hong Kong under the stewardship of Sang Won Kim and Raymond Chan who invest with a fundamental growth mindset. Over the year the share price total return was 3.0% and the net asset value return was 2.1%, broadly in line with the 3.5% gain in the MSCI Korea Index. The fund finished the year on a discount to net asset value of 9.4%.
Atlantis China Fund (4.7% of net asset value)
Performance during ADMF's financial year was disappointing as the net asset value fell by 12.1% compared to an 11.0% rise in the MSCI China Net Total Return Index. The disparity is explained by a flight to quality as moderating Chinese growth and corporate governance concerns relating to a small number of Chinese mid and small sized companies caused that segment of the market to underperform significantly, irrespective of the reality. While disappointed with recent performance, we have been invested with Atlantis long enough to understand their investment style and the logic behind the portfolio's positioning. We have also experienced several previous periods of underperformance that were subsequently more than reversed. The investment team has a strength, depth and stability that few other China teams can match with 30 staff spread across offices in Hong Kong, mainland China and London. During multiple meetings we have detected no signs of style drift and the portfolio retains its usual concentration and focus. We retain confidence in the fund and have maintained our holding at the same level throughout last year on the basis that the fund complements ADMF's other, more large-cap focussed Chinese holdings.
JP Morgan Russian Securities (4.1% of net asset value)
JP Morgan Russian Securities is one of ADMF's longest standing and best performing holdings. Moscow based manager, Oleg Biryulov, produced good relative outperformance during the year with the net asset value down just 2.6% compared to a fall of 4.8% in the MSCI Russia Net Total Return Index. During the period the board conducted a thorough review of the trust's affairs. As a result of the review the management fee was reduced from 1.5% to 1.2% and risk controls were strengthened. In January 2012, the trust successfully passed a continuation vote.
Tarpon All Equities Fund (4.0% of net asset value)
One of ADMF's best performing investments over the long term, the Tarpon team continued to add value on a relative basis this year through their aggressive stock picking approach in Brazil. The fund declined by 5.9% compared with a 12.9% decline in the MSCI Brazil Net Total Return Index. Performance was driven by holdings in the consumer and retail space including Arezzo, previously a private equity investment, which was fully divested in March 2012 locking in an annualised return of over 70% since the initial investment was made in November 2007. Over the last 3 years, the fund has outperformed the MSCI Brazil Net Total Return Index by 68.1%.
Aberdeen Latin America Equities Fund (4.0% of net asset value)
Aberdeen Asset Management's focus on investing in high quality companies trading on reasonable valuations has seen the group perform particularly well in the challenging markets of the last few years. Their Latin America focused closed end fund was no exception with a net asset value total return of 9.7% compared to a 4.2% decline in the MSCI Latin America TR Index. The share price closely tracked the net asset value and the discount finished the period at 9.4%, from where we would expect it to narrow if risk appetite improves and the strong performance continues. The outperformance was driven by Aberdeen's focus on quality businesses in more domestic growth oriented sectors, including consumer staples, and an underweight position in financials.
Neuberger Berman - China Equity Fund (3.9% of net asset value)
Since investing in December 2011 the fund gained 7.1% compared with a return of 11.8% from the MSCI China Index. The key attractions of this fund remain the quality and depth of the investment team, the exacting nature of the investment process and the attractive investment terms that we were able to negotiate. Neuberger's China team is headed by Frank Yao who is one of the most respected and experienced investors in China with a CV that encompasses spells at Goldman Sachs, Berens Capital and Hua An Fund Management amongst others. He is supported by a deputy portfolio manager, a team of seven analysts and two dedicated traders operating out of offices in Hong Kong and Shanghai. The fund is focussed on the large to mid cap segment of the market and is run on a relatively concentrated basis with a distinct value bias.
Coronation Top 20 Fund (3.7% of net asset value)
South Africa focused Coronation continued to manage this high conviction portfolio in a sound manner during the year. The fund outperformed the MSCI South Africa Index by 3.3% during the year. Their portfolio is currently positioned to benefit from a recovery in resources companies and continued strong performance of companies with a Pan African footprint.
Edinburgh Dragon Trust (3.6% of net asset value)
Also managed by Aberdeen Asset Management, Edinburgh Dragon was another holding which contributed to positive performance during the period. The trust's net asset value rose by 13.4% and its share price by 10.7% compared with a gain of 6.2% in the MSCI AC Asia ex Japan Index and just 4.4% in the MSCI Emerging Asia Index.
Holdings outside the top 10 where material change occurred include the following:
China Fund Inc (2.5% of net asset value)
At the end of March, China Fund Inc, a US listed fund of Chinese equities, announced that, subject to approval of shareholders to move the management contract to RCM Asset Management, the fund would buy back shares in the market at discounts in excess of 8%. The fund also announced a one-time tender offer for 25% of outstanding shares at a 1% discount to net asset value. ADMF was able to exit 44.8% of its position with proceeds being received in July.
Taiwan Fund Inc (1.8% of net asset value)
It proved to be an active year on the corporate front for US listed closed end Taiwan Fund Inc. In December 2011 the board appointed Martin Currie and APS Asset Management as investment advisor and sub-advisor respectively which was duly ratified at the fund's annual meeting in February 2012. In addition to adopting a 9% discount management policy the fund also completed a tender offer in June for 50% of its shares in issue at a discount of 1% to the prevailing net asset value. As other shareholders did not take up their full entitlement ADMF was able to exit 59.1% of its holding. At the end of the period shares in Taiwan Fund Inc were trading on a 7.8% discount.
Baring Emerging Europe plc (1.3% of net asset value)
In December 2011, Baring Emerging Europe plc announced that following consultations with certain major shareholders, it planned to conduct a tender offer for 20% of its shares in issue at a discount to net asset value of 3%. The investment represented 2% of ADMF's portfolio before the tender offer was conducted. On a pro rata basis ADMF received cash back in respect of 37.1% of its holding. The discount prevailing at the time was 8.7%. The announcement of the tender offer was accompanied by a tightening of the board's ongoing discount control mechanism which now targets a discount materially lower than 10% on an ongoing basis. There is scope for further tenders if this target is not met.
Prosperity Russia Domestic Fund (0.9% of net asset value)
At the time of last year's report, Prosperity Russia Domestic Fund was a 1.8% holding in the portfolio. During the year the fund undertook to open end and we took the opportunity to redeem from the open ended structure. The first tranche of the redemption took place at the end of September with the remainder being redeemed at the end of December 2012.
Market Outlook
2012 turned out to be a good year for global equity markets despite considerable challenges and a general preference for fixed income in most regions, including emerging markets. Emerging market equities finished the calendar year strongly, taking the overall gain to 13.1% in Sterling terms.
The market environment in 2013 may well prove to be similar. Macroeconomic concerns have receded since the middle of last year, with US elections and the Chinese leadership transition completed without incident. The recent postponement, at least, of the US "fiscal cliff" was another hurdle crossed and Chinese data continues to confirm that the country is not heading for a hard landing.
Within emerging markets the BRIC economies now offer the most attractive valuations they have for many years. In contrast, those smaller markets that performed so well in 2012 look expensive, and may come under pressure if companies therein fail to continue achieving the aggressive earnings growth that is now priced into their valuations. Similarly, consumer oriented stocks appear to be priced for perfection in many instances, although we would not wish to bet against them given the continued strength of the emerging consumer. Cyclicals and high beta markets look attractive by comparison and 2013 could be a much better year for the likes of Russia, Brazil and the financial, energy and resources sectors, given the extremely low valuations available to stock pickers in those areas.
As far as the portfolio is concerned our positioning is consistent with this outlook and we are optimistic that discounts on closed end funds will again contribute positively to our relative performance as they have over most periods in the past.
Advance Emerging Capital Limited
23 January 2013
PRINCIPAL RISKS AND UNCERTAINTIES
The Board considers that the main risks 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 slowdown, decreasing consumer demands and credit shortages in such developed economies which, amongst other things, impact 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 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 and may lead to volatility in the market price of the Shares. 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.
(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.
(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 potentially result in shareholders not making acceptable returns on their investment in the Company.
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 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:
n select suitable accounting policies and then apply them consistently;
n make judgements and estimates that are reasonable and prudent;
n state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
n 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 auditors are 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 auditors are aware of that information.
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, give a true and fair view of the assets, liabilities, financial position and profit 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
23 January 2013
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 October 2012
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
|
|
Losses on investments designated as fair value through profit or loss
|
-
|
(140)
|
(140)
|
-
|
(37,212)
|
(37,212)
|
|
Capital gains/(losses) on currency movements
|
-
|
(117)
|
(117)
|
-
|
16
|
16
|
|
Net investment losses
|
-
|
(257)
|
(257)
|
-
|
(37,196)
|
(37,196)
|
|
Investment income
|
3,203
|
-
|
3,203
|
2,380
|
-
|
2,380
|
|
Total revenue
|
3,203
|
(257)
|
2,946
|
2,380
|
(37,196)
|
(34,816)
|
|
Investment management fees
|
(3,190)
|
-
|
(3,190)
|
(3,099)
|
-
|
(3,099)
|
|
Other expenses
|
(613)
|
-
|
(613)
|
(525)
|
-
|
(525)
|
|
Operating loss before finance costs and taxation
|
(600)
|
(257)
|
(857)
|
(1,244)
|
(37,196)
|
(38,440)
|
|
Finance costs
|
(50)
|
-
|
(50)
|
(190)
|
-
|
(190)
|
|
Operating loss before taxation
|
(650)
|
(257)
|
(907)
|
(1,434)
|
(37,196)
|
(38,630)
|
|
Withholding tax expense
|
(257)
|
-
|
(257)
|
(177)
|
-
|
(177)
|
|
Total comprehensive income for the year
|
(907)
|
(257)
|
(1,164)
|
(1,611)
|
(37,196)
|
(38,807)
|
|
|
|
|
|
|
|
|
|
Earnings per ordinary share
|
|
|
|
|
|
|
|
- Basic
|
(1.20p)
|
(0.34p)
|
(1.54p)
|
(2.39p)
|
(55.21p)
|
(57.60p)
|
|
- Diluted
|
(1.20p)
|
(0.34p)
|
(1.54p)
|
(2.27p)
|
(52.32p)
|
(54.59p)
|
The Company does not have any income or expenses that are not included in the loss for the year and therefore "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 2012
|
|
|
|
|
|
|
2012
£'000
|
2011
£'000
|
|
|
Non-current assets
|
|
|
|
|
Investments designated as fair value through profit or loss
|
350,987
|
323,682
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Cash and cash equivalents
|
2,948
|
23,919
|
|
|
Sales for future settlement
|
131
|
991
|
|
|
Other receivables
|
629
|
130
|
|
|
|
3,708
|
25,040
|
|
|
|
|
|
|
|
Total assets
|
354,695
|
348,722
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Other payables
|
355
|
459
|
|
|
Purchases for future settlement
|
2,376
|
11,768
|
|
|
Bank borrowings
|
-
|
10,000
|
|
|
Performance fee accrual
|
-
|
-
|
|
|
Total liabilities
|
2,731
|
22,227
|
|
|
|
|
|
|
|
Net assets
|
351,964
|
326,495
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Share capital
|
306,011
|
279,378
|
|
|
Capital reserve
|
49,810
|
50,067
|
|
|
Revenue reserve
|
(3,857)
|
(2,950)
|
|
|
Total equity
|
351,964
|
326,495
|
|
|
|
|
|
|
|
Net assets per ordinary share
|
466.37p
|
493.84p
|
|
|
Net assets per ordinary share -diluted
|
466.37p
|
467.58p
|
|
|
|
|
|
|
|
Number of ordinary shares in issue (excluding shares held in treasury)
|
75,468,954
|
66,113,801
|
|
Approved by the Board of Directors on 23 January 2013 and signed on their behalf by:
John Hawkins - Director
William Collins - Director
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2012
|
|
|
|
|
|
|
|
Share capital account
|
Capital
reserve
|
Revenue reserve
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
Opening equity
|
279,378
|
50,067
|
(2,950)
|
326,495
|
|
Issue of shares
|
28,605
|
-
|
-
|
28,605
|
|
Share buy backs
|
(1,942)
|
-
|
-
|
(1,942)
|
|
Share issue expenses
|
(30)
|
-
|
-
|
(30)
|
|
(Decrease) in equity
|
-
|
(257)
|
(907)
|
(1,164)
|
|
Balance at 31 October 2012
|
306,011
|
49,810
|
(3,857)
|
351,964
|
|
|
|
|
|
|
For the year ended 31 October 2011
|
|
|
|
|
|
|
|
Share capital account
|
Capital
reserve
|
Revenue reserve
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
Opening equity
|
282,841
|
87,263
|
(1,339)
|
368,765
|
|
Issue of shares
|
6,840
|
-
|
-
|
6,840
|
|
Share buy backs
|
(10,285)
|
-
|
-
|
(10,285)
|
|
Share issue expenses
|
(18)
|
-
|
-
|
(18)
|
|
(Decrease) in equity
|
-
|
(37,196)
|
(1,611)
|
(38,807)
|
|
Balance at 31 October 2011
|
279,378
|
50,067
|
(2,950)
|
326,495
|
|
|
|
|
|
|
STATEMENT OF CASH FLOW
For the year ended 31 October 2012
|
|
|
|
|
|
2012
£'000
|
2011
£'000
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
Cash inflow from investment income and bank interest
|
2,975
|
2,375
|
|
Cash outflow from management expenses
|
(3,794)
|
(6,005)
|
|
Cash inflow from disposal of investments
|
97,420
|
121,075
|
|
Cash outflow from purchase of investments
|
(133,759)
|
(100,334)
|
|
Cash outflow from taxation
|
(257)
|
(177)
|
|
Net cash flow (used in)/from operating activities
|
(37,415)
|
16,934
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
(Decrease)/increase in bank borrowings
|
(10,000)
|
10,000
|
|
Borrowing commitment fee and interest charges
|
(68)
|
(171)
|
|
Share issues expenses
|
(30)
|
(18)
|
|
Conversion of subscription shares
|
28,605
|
6,840
|
|
Share buy backs
|
(1,942)
|
(10,285)
|
|
Net cash flow from financing activities
|
16,565
|
6,366
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents
|
(20,850)
|
23,300
|
|
|
|
|
|
Opening balance
|
23,919
|
601
|
|
Cash flow
|
(20,850)
|
23,300
|
|
Effect of foreign exchange transactions
|
(121)
|
18
|
|
Balance at 31 October
|
2,948
|
23,919
|
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 2012.
The Company 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 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 Advance Emerging Capital Limited.
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, www.advance-emerging.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") adopted by 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 2012.
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 23 January 2013.
(b) Going concern
The directors have adopted the going-concern basis in preparing the accounts. The following is a summary of the directors' assessment of the going concern status of the Company.
Operational resources
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 2012, the Company held £2.9m in cash and £351m in investments. It is estimated that approximately 76% of the investments held at the year end could be realised in one month. The total operating expenses for the year ended 31 October 2012 were £3.8m, which represented approximately 1.1% of average net assets during the year. The Company therefore has substantial operating expense cover. The Company's net assets at 31 December 2012 were £371m.
Continuation vote
The Company will put forward a resolution for its continuation at the Annual General Meeting. The accounts have been prepared on the basis that the continuation vote will be passed by shareholders. If the resolution is not passed, then within 4 months of the vote to continue failing the directors will be required to formulate and put to Shareholders proposals relating to the future of Company, having had regard to, inter alia, prevailing market conditions and the applicable regulations and legislation.
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 in the foreseeable future.
(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 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) Use of estimates and judgements
The preparation of the financial statements in conformity with IFRSs 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 valued 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 7 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 7 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 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 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.
Functional currency
The Company's ordinary shares are issued and traded in Sterling and a significant proportion of its investments are quoted in Sterling. For these reasons the Company has adopted Sterling as its functional currency.
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 in open-ended funds are valued at the latest net asset value provided by the open-ended fund for single priced funds or the latest bid price for those funds with a bid-offer spread;
v) investments which are in liquidation are valued at the estimate of their remaining realisable value;
vi) any other investments are valued at 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 investment.
(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 gains/(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 rate 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 of 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) Ordinances 1989 and was charged an annual exemption fee of £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 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.
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 to settle on a net basis or to realise the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under IFRSs.
(k) 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:
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2012, and have not been applied in preparing these consolidated statements. None of these is expected to have a significant effect on the financial statements of the Company.
IFRS 9 Financial Instruments (2010), IFRS 9 Financial Instruments (2009)
IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 (2009), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 (2010) introduces additions 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 and hedge accounting.
IFRS 9 (2010 and 2009) are effective for annual periods beginning on or after 1 January 2015 with early adoption permitted. The adoption of IFRS 9 (2010) is not expected to have a significant impact on the Company's financial assets or financial liabilities.
IFRS 13 Fair Value Measurement (2011)
IFRS 13 provides a single source of guidance on how fair value is measured, and replaces the fair value measurement guidance that is currently dispersed throughout IFRS. Subject to limited exceptions, IFRS 13 is applied when fair value measurements or disclosures are required or permitted by other IFRSs. IFRS 13 is effective for annual periods beginning on or after 1 January 2013 with early adoption permitted. The adoption of IFRS13 is not expected to have a significant impact on the Company's financial assets or financial liabilities.
IFRS 10 Consolidated Financial Statements (2012)
IFRS 10 introduces a single control model to determine whether an investee should be consolidated and proposed amendments were issued on 31 October 2012. The conclusion of this project embodies long standing constituents' requests and support for a consolidation exemption for investment funds. IFRS 10 (2012) is effective for annual periods beginning on or after 1 January 2014 with early adoption permitted. The adoption of IFRS 10 is not expected to have a significant impact on the Company's financial statements.
4. INVESTMENT INCOME
|
|
|
|
|
|
|
Income from investments:
|
2012
£'000
|
2011
£'000
|
|
|
Dividends income
|
2,942
|
2,141
|
|
|
Bond interest income
|
230
|
239
|
|
|
Other income
|
31
|
-
|
|
|
|
3,203
|
2,380
|
5. INVESTMENT MANAGEMENT FEES AND OTHER EXPENSES
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fee
|
3,270
|
-
|
3,270
|
3,228
|
-
|
3,228
|
|
|
-management fee rebate
|
(80)
|
-
|
(80)
|
(129)
|
-
|
(129)
|
|
|
|
3,190
|
-
|
3,190
|
3,099
|
-
|
3,099
|
|
|
Administration fees
|
140
|
-
|
140
|
138
|
-
|
138
|
|
|
Custodian's fees
|
43
|
-
|
43
|
39
|
|
39
|
|
|
Registrar's fees
|
16
|
-
|
16
|
17
|
-
|
17
|
|
|
Directors' fees
|
113
|
-
|
113
|
111
|
-
|
111
|
|
|
Auditors' fees
|
42
|
-
|
42
|
40
|
-
|
40
|
|
|
Marketing fees
|
50
|
-
|
50
|
46
|
-
|
46
|
|
|
Broker fees
|
40
|
-
|
40
|
32
|
-
|
32
|
|
|
Other expenses
|
169
|
-
|
169
|
102
|
-
|
102
|
|
|
Total other expenses
|
613
|
-
|
613
|
525
|
-
|
525
|
|
|
Total expenses
|
3,803
|
-
|
3,803
|
3,624
|
-
|
3,624
|
The Company's ongoing charges for the year ended 31 October 2012, calculated using the Association of Investment Companies methodology were 1.08% (2011: 1.03%).
6. EARNINGS PER SHARE
Earnings per share is based on the total comprehensive income for the year ended 31 October 2012 (loss of £1,164,000) (2011: loss of £38,807,000) attributable to the weighted average of 75,693,651 (2011: 67,368,511) ordinary shares in issue (excluding shares held in treasury) in the year ended 31 October 2012.
Earnings per share may be diluted by the impact of the subscription shares in issue during each period.
There was no dilution to earnings per share during the year ended 31 October 2012 as the final subscription of subscription shares for ordinary shares completed in November 2011. The diluted earnings per share for the year ended 31 October 2011 is based on the total comprehensive income on ordinary activities after taxation attributable to the diluted weighted average of 71,094,101 ordinary shares.
Supplementary information is provided as follows: revenue per share is based on the net revenue loss of £907,000 (2011: loss £1,611,000) and capital earnings per share is based on the net capital loss of £257,000 (2011: loss £37,196,000) attributable to the above ordinary shares.
7. NET ASSET VALUE PER ORDINARY SHARE
Undiluted net assets per ordinary share is based on net assets of £351,964,209 (2011: £326,495,022) divided by 75,468,954 (2011: 66,113,801) ordinary shares (excluding shares held in treasury) in issue at the Statement of Financial Position date.
There was no dilution to net asset value per ordinary share at 31 October 2012 as no subscription shares remained in issue at that date. Dilution in the net asset value per ordinary share at 31 October 2011 was due to the undiluted net asset value per ordinary share being higher than the price at which the subscription shares could subscribe for ordinary shares, being 291p per share. The diluted net assets per ordinary share figure as at 31 October 2011 was based on net assets of £355,101,000 divided by 75,943,954 diluted ordinary shares at the Statement of Financial Position date.
8. RELATED PARTY DISCLOSURES
Investment Manager (the "Manager")
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 (2011: £nil).
Advance Brazil Leblon Equities Fund
As at 31 October 2012 the Company held an investment with a valuation of £11,023,971 (2011: £12,030,302) in Advance Brazil Leblon Equities Fund ("ABLE"), a fund established by Advance Emerging Capital Limited 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 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. A rebate on management fee charged by ABLE equivalent to £79,969 (2011: £129,390) was payable to the Company in the year ended 31 October 2012.
Details of the directors' contracts and fees are provided in the Directors' Remuneration Report in the Annual Report. Total fees from the directors' in the year ended 31 October 2012 were £112,500 (2011: £110,250). Of this amount £77,000 (2011: £105,500) had been paid at the year end, with an accrual of £35,500 (2011: £4,750) outstanding.
9. FINANCIAL INFORMATION
The annual report was approved by the Board of directors on 23 January 2013. 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 www.advance-emerging.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 FSA.
|
Registered office
|
|
11 New Street
|
|
St Peter Port
|
|
Guernsey GY1 2PF
|
Enquiries:
Advance Emerging Capital Limited (Investment Manager to Advance Developing Markets Fund Limited)
Dr Slim Feriani Tel: +44 (0)20 7016 0030
Legis Fund Services Limited (Company Secretary)
Lisa Garnham Tel: +44 (0)1481 726034
Cavendish Administration Limited (UK Administration Agent)
Anthony Lee Tel: +44 (0)20 7490 4355
Ordinary Shares - Listing Category: Premium - Equity Closed-ended Investment Funds
23 January 2013
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