Annual Financial Report

 
TIDMADD 
 
Annual Financial Report Announcement 
Advance Developing Markets Trust plc 
 
Year ended 31 May 2009 
 
CHAIRMAN'S STATEMENT 
 
On behalf of the Board I am pleased to present to you the Annual 
Report for the financial year to the 31st of May, 2009.Your Manager 
has reported in extensive detail the extraordinary events of the past 
eighteen months which included the seizure of the world credit 
markets, the near collapse of the global banking system and the 
destruction of corporate and individual wealth on a scale 
unparalleled since the 1930s. 
 
Globalisation of information and capital markets, consistently low 
interest rates and an apparently inexhaustible supply of credit 
manufactured through increasingly complex structures conspired to 
feed greed and arrogance in both developed and emerging economies and 
financial markets. Your Manager has catalogued the results vividly. 
 
So, where do we go from here? 
The Bank Credit Analyst (BCA) sums up the dilemma neatly. Following 
the sharp rally in share prices since early March "global stock 
markets might have entered a period of stalemate, reflecting the 
intense and frustrating stand off between the authorities' 
reflationary efforts on one side and the intense debt-deflation 
pressures on the other". There may be some weakness in equities in 
the final quarter of 2009 but an improving economic outlook in the 
next eighteen months, especially in emerging economies, will foster 
further share price increases. Extreme monetary policies and enormous 
fiscal stimuli have worked to stabilise the global economy and 
engineering a measure of recovery in developed economies. But it is 
the emerging countries, dominated by China, which will provide more 
powerful and sustainable economic growth. China moved aggressively to 
stimulate its economy last November. The fruits of this policy have 
just become evident in the economic data released on July 16th. The 
economy grew at 7.9% (yoy) in the three months to the end of June; 
with investment, industrial production and retail sales all 
contributing to the recovery. The domestic property and stock markets 
have appreciated significantly. Emerging economies, such as Brazil, 
South Africa, Chile and some MENA countries have enjoyed substantial 
demand for iron ore, copper, oil and energy and agricultural 
commodities. Export growth is improving in emerging Asia reflecting 
the demand generated by China's infrastructure and capital investment 
programmes, as well as the rebuilding of global inventories. Thus, 
global economic trends are becoming less synchronised. The unresolved 
question is: will the improving economic growth in leading emerging 
countries be sufficiently robust to counter-act the anaemic growth 
predicted for the G7 countries? Will they bail out the global economy 
in 2010? There is not sufficient evidence to support the suggestion 
at present. Meanwhile investors can look to emerging economies, 
together with the global natural resources/energy/agricultural 
commodities industry sectors, to deliver superior sustained stock 
market and currency investment opportunities. 
 
Longer-term prospects 
It is difficult to estimate what will be the long-term effects of the 
extreme monetary and fiscal policies adopted in the USA, UK and 
Europe to stave off a looming "great depression". Is it a viable way 
forward to print money in a profligate manner, borrow and spend our 
way out of the problems created by excessive greed and debt? Without 
more evidence to support a sustainable economic and financial 
recovery it is too early to define sensibly "exit strategies" for 
central banks and governments. This has been a balance sheet 
recession, triggered by the bursting of the credit bubble.This 
suggests that the recovery will be slower, unemployment will climb 
higher and interest rates will remain lower for longer. This raises 
another important question; will current aggressive policies lead to 
higher inflation? Current measures of the output gap indicate that 
this is not the case. There is significant remaining production 
capacity in Asia, unemployment is still rising in developed countries 
and consumers are still saving to rebuild overstretched household 
balance sheets. Bond markets also exercise a measure of discipline, 
as do currency markets. Securitisation markets remain dormant and 
banks are generally reluctant to lend. The threat of inflation is 
stronger in economies such as China, Brazil, Saudi Arabia and South 
Africa. Part of the tsunami of credit created by diktat in China, 
through the state controlled banks, has undoubtedly been diverted to 
financial and property assets. It will take exceptional skill and 
judgement to dampen these fires without provoking serious defaults. 
 
Conclusion 
Emerging economies and stock markets have performed exceptionally 
well in the past six months. A measure of consolidation would be 
welcome. China, India, Brazil and Indonesia are well placed to 
deliver significant growth which will underpin the Company's 
portfolio over the next eighteen months, barring any major 
geo-political event. The extensive experience and knowledge of your 
Management team will enable them to select and monitor the highest 
quality managers and discounted closed end funds in selected 
geographical regions and specific industry sectors which will benefit 
from growth in emerging economies. 
 
I would also like to bring to shareholders' attention the proposal to 
re-domicile Advance Developing Markets Trust through a voluntary 
winding up of the Company and a rollover of shareholders' 
interests into a newly established Guernsey fund. This move has been 
prompted by the Company's increasing investment into open ended funds 
during the past seven years since the first such investment was made 
in 2002. Certain types of open ended funds are subject to potentially 
punitive tax treatment while the Company remains domiciled in the UK. 
It is the Board's belief that the continued flexibility afforded to 
the Manager to invest in such vehicles carries significant benefits 
for the Company, namely the ability to allocate to "best of breed" 
managers and countries that are not represented sufficiently within 
the closed end fund universe.  The change of domicile will sustain 
these benefits while leaving the  investment policy and management of 
the Company 's investments unchanged. An extensive consultation with 
major shareholders has indicated that there is broad support for the 
proposals and, subject to shareholder approval, the Board expects 
that they will be implemented in November.  A circular dealing with 
this proposal will be sent to shareholders shortly which will set out 
a full explanation of the relevant issues. Once published a copy of 
the circular will also be made available on the Manager's website 
www.pro-asset.com  and will be available on request from the Company 
Secretary. 
 
PE O'CONNOR 
Chairman 
August 2009 
 
MANAGER'S REPORT 
 
Performance review 
The financial year to the end of May 2009 was the most testing the 
Company has had to endure in its 11 year history. The start of the 
period very nearly marked an all time high for the various emerging 
market indices. From this point the benchmark emerging markets index 
declined by a massive 52.1% in sterling terms (62.2% in USD terms) 
before recovering 64.8% (70.3% in USD terms) from its October lows to 
finish the period 21.1% lower overall. These wild swings in market 
direction reflected the, at times, all encompassing hysteria, 
pessimism and panic that gripped investors and markets worldwide 
during parts of the year. 
 
Advance Developing Markets Trust saw its NAV decline by 27.4%* over 
the period, while the share price declined by 31.4%. Those 
shareholders on the register on 21 October 2008 received bonus 
subscription shares on a 1 for 5 basis thus boosting their price 
return for a package of one share plus one fifth of a subscription 
share to -27.4%. These numbers represent underperformance of the 
benchmark index. Historically, our strategy of running broadly 
diversified portfolios, with some exposure to "uncorrelated" assets, 
has led to underperformance in short, sharp rallies and this was 
certainly the case in the second half of the financial year. This is 
the first year since 2000 that we have had to report underperformance 
in our Annual Report and so, as both Managers and Shareholders, we 
are deeply disappointed. The performance of the Company's NAV, the 
benchmark, the FTSE All Share Index and the S&P 500 are shown on 
Chart 1. 
 
Chart 1. Advance Developing Markets Trust's NAV performance compared 
to global indices. Data in GBP. Source: Bloomberg (page 2 - Annual 
Report) 
 
The major source of underperformance was the yawning gap that opened 
from November to March between traditional emerging market assets and 
those "uncorrelated" investments that Advance Developing Markets 
Trust holds in funds of property, private equity and frontier market 
equities (predominantly Africa, the Middle East, Bangladesh, Pakistan 
and Vietnam). As emerging markets rallied, your investments in these 
areas (which accounted for around 14% of NAV at the beginning of the 
period) displayed only a muted recovery. Investments in property and 
private equity funds moved to significant discounts to their headline 
net asset values, in many instances as a reflection of their 
shareholder registers rather than the quality of their assets. This 
provided a number of opportunities for us but, as existing investors, 
generally more difficulties. 
 
*undiluted excluding current year revenue 
 
Within our investments in mainstream markets, many of the underlying 
investment managers struggled to cope with irrational, volatile 
markets and, in the case of several of our open ended investments, 
substantial and unfortunately timed redemptions. Long term holdings 
such as JP Morgan Russia Securities plc, Blackrock Latin American IT 
and Eastern European Trust plc all detracted meaningfully from 
performance. Henderson TR Pacific IT and Coronation Top 20 Fund were 
two of only a handful of investments that outperformed their 
respective benchmarks. 
 
Asset allocation was neutral for performance, the benefit of holding 
a decent level of cash for most of the year, outweighing the negative 
effect of being underweight in China (-6.8%) and India (-4.3%) and 
overweight in Russia (-48.9%). Being significantly overweight in 
Brazil going into the second half of the year, when the market rose 
by 54.4%, was a major positive. 
 
Discount changes in our core closed end fund positions were 
marginally accretive to performance, as the Company's benefitted from 
the tender offer conducted by Templeton Emerging Markets Investment 
Trust ("TEMIT") in June 2008 and demand for emerging market closed 
end funds pushed discounts to narrower levels in 2009. The latter was 
particularly pronounced in US listed funds, including Taiwan Fund Inc 
and China Fund Inc, both of which saw their discounts move from the 
high teens during the crisis to close to parity at the end of the 
period. 
 
Market Environment 
Global investors are renowned for their propensity to overreact to 
both good and bad news and for the brevity of their memories. Rarely 
have these traits been more amply illustrated than in the period 
under review. The first half of the year was characterised by a total 
loss of confidence in financial markets everywhere. Global equity 
markets fell in a synchronised fashion, with cash, gold and 
government debt proving the only true safe havens. Forced selling was 
widespread, pushing asset prices to multi year lows. By October 2008 
the market reflected a sense of total despair, with genuine concerns 
that the global economy was slipping into a depression, the likes of 
which had not been seen since the 1930s. 
 
As has historically been the case, the point at which pessimism 
peaked marked the low in markets. From 27th October a rally took hold 
on signs that fundamentals were deteriorating at a slowing rate and 
that a depression might be averted. Valuations were ludicrously low 
and cash levels were ludicrously high. Talk of "green shoots" 
prompted a wave of cash to flow back into markets in anticipation 
that the worst was over. Emerging markets enjoyed substantial inflows 
as people rushed back into "risk assets". The "BRIC" markets (Brazil, 
Russia, India and China) were particular beneficiaries. By the mid 
point in the year, emerging markets had seen inflows in the region of 
$30bn, following outflows of $40bn last year. 
 
The performance of the major emerging markets and frontier regions is 
shown in the three adjacent charts, depicting the crash, the recovery 
and the period overall. 
 
Chart 2. "The Crisis" - Global emerging and frontier market 
performance, % gain/loss in GBP, 31/05/08 to 27/10/08. Source: 
Bloomberg . (page 3 - Annual Report) 
 
Chart 3. "The Recovery" - Global emerging and frontier market 
performance, % gain/loss in GBP, 27/10/08 to 31/05/09. Source: 
Bloomberg (page 3 - Annual Report) 
 
Chart 4. "Annus Horribilis" - Global emerging and frontier market 
performance, % gain/loss in GBP, 31/05/08 to 31/05/09. Source: 
Bloomberg (page 3 - Annual Report) 
 
Asia (-12.9%) was by far and away the best performing region for the 
year as a whole, with relatively strong performance in India (-4.3%) 
and China (-6.8%) standing out. The return from India was back end 
loaded with the results of the parliamentary election in May 
propelling the market up by 25.1% in that one month alone. While 
China tracked all other markets down in the crisis phase, it 
outperformed significantly in the second half of the year as 
investors took comfort from resilient GDP growth and the Government's 
4tr Renminbi ($500bn) stimulus package. 
 
In Eastern Europe, the damage done in the first half of the year 
proved insurmountable despite significant rallies in the Russian 
market and those of its smaller neighbours. A doubling of the oil 
price from its December lows provided some respite, but a further 
doubling would be required from current levels to match the peak oil 
price that coincided with the top of the Russian market. In South 
Africa, performance came from a low level in the previous period and 
was strong despite political uncertainty and a severe retrenchment of 
the domestic consumer. 
 
The Latin American region continues to be dominated by Brazil, which 
turned in mediocre performance for the period as a whole. On the way 
down, the market and currency were affected  by panic relating to a 
number of costly derivative contracts sold to listed companies by 
investment banks. The management of the economy was prudent 
throughout the crisis. This was reflected in strong performance, off 
a base of incredibly low valuations, from October onwards. 
 
The stark contrast between the performance of global emerging and the 
frontier markets of the Middle East and Africa in the recovery phase 
is clearly shown in chart 3. It warrants a full explanation given the 
impact on the portfolio. Going into the crisis, frontier markets 
were, we felt, well placed to weather the storm (as they did during 
the Russian crisis, the dotcom bust and most other emerging market 
"wobbles"); their economies continued to grow and remained largely 
isolated from the glut of debt that had built up in the rest of the 
world; their financial institutions were stable as a result and the 
companies therein were growing earnings as much through rampant 
domestic demand as international trade. These observations are 
largely unchanged after the crisis although growth, both in GDP and 
corporate earnings, has slowed somewhat. 
 
What drove the declines in frontier markets was the same panic 
selling that forced all markets down. Unfortunately, in such illiquid 
markets, the timeframe required for all sellers to be satisfied was 
somewhat longer. This accounts for the fact that frontier markets 
outperformed emerging markets on the way down but then did not bottom 
until March 2009, some five months after emerging markets. This lag, 
we think, will play out over the coming months, with frontier markets 
catching up the relative ground they lost between November and March. 
Performance in May, June and especially in July, when markets briefly 
consolidated, supports this belief. 
 
Chart 5. Emerging markets vs. frontier markets in GBP, rebased to 
100, 31/05/08 - 31/05/09. Source: Bloomberg (page 4 - Annual Report) 
 
Portfolio 
The portfolio breakdown by investment type was as follows at the end 
of the period. 
 
 
                                     May 2009     May 2008 
Closed ended investment funds           58.9%        66.1% 
Open ended investment funds             31.0%        29.8% 
Exchange traded funds                    8.7%         3.5% 
Cash                                     1.4%         0.6% 
 
 
The increase in market access products was in response to volatility 
in both discounts and markets and the Manager's desire to preserve 
liquidity in the portfolio while maintaining market exposure. The 
reduction in closed end funds was mostly the result of corporate 
activity, firstly with TEMIT leaving the portfolio, having been a 10% 
weighting, and then the tender offer of Blackrock Latin American IT 
towards the end of the period, which we used to reduce our position 
in that fund. The underperformance of the closed end funds we owned 
in the property and private equity space also contributed to the 
decline. Our open ended investments were largely unchanged during the 
period, except where a corresponding closed end fund offered an 
attractive discount opportunity. 
 
The Company's asset allocation is shown on page 6. The regional 
weighting to Asia increased by around 8% almost entirely as a result 
of aggressive buying of the Chinese market after the crisis. This 
decision was made on the back of attractive valuations relative to 
that market's history and an attractive discount opportunity in the 
form of China Fund Inc, which we bought aggressively in October and 
November when the discount was as wide as 20%. It finished the period 
at just 1.5%, at which level we have been selling the position down 
and rotating into a Chinese Exchange Traded Fund. 
 
Similarly, in Eastern Europe the decline in the regional weighting 
was almost entirely the result of our reduction in the Company's 
exposure to the Russian market, as risks to the long term outlook 
there increased and our closed end fund exposure through JP Morgan 
Russia Securities plc traded at parity despite this. 
 
In Latin America the major change was in Brazil, where we added 
aggressively to our position in the iShare Brazil in the second half 
of the year on the back of a positive country visit which bolstered 
our confidence in the top down story. We also began a position in 
Tarpon All Equities Fund, an open ended product managed by a highly 
experienced boutique outfit based in Sao Paulo. The lack of 
availability of suitable products in the Brazilian market continues 
to baffle us. 
 
Market Outlook 
The magnitude and ferocity of both the collapse and recovery of 
emerging markets, and "risk assets" in general, caught virtually all 
investors by surprise. Despite our unerring belief in the long term 
prospects for the emerging and frontier market asset classes, we can 
be included in this category. 
 
At present, markets worldwide seem to have paused for breath. We view 
this as a constructive period of consolidation, during which 
investors and companies will finally have a chance to take stock of 
the upheaval of the last 12-18 months, while waiting for some 
visibility to emerge as to what path the global economy will take 
from here. 
 
In the short-term, we hope that this consolidation holds, but suspect 
that emerging markets may retrace some of their recent gains. 
However, we do not believe the depths of last year will be revisited. 
The global depression scenario that pushed markets to their lows last 
year has been discarded; forced sellers have generally found relief 
and record levels of cash, earning negligible interest, all support 
this argument. At the same time we don't believe the excesses that 
caused the crisis in the first place have all been eliminated. 
 
Now that the dust seems to be settling it is apparent to us that the 
emerging market story is even stronger than it was before the crisis. 
The hypothesis that emerging markets can grow independently of 
developed markets has been tested, and proven. In 2009 the developing 
world will grow its GDP by 0.7%, while the developed world will see a 
shrinkage of 3.6% (Source: Morgan Stanley). The latter is 
increasingly dependent on the former, when in recent history the 
reverse has always been true. Emerging market companies have emerged 
from the crisis with their reputations generally enhanced, while the 
actions of a number of western corporates have destroyed confidence 
overall. The long term outlook is very positive, not just for the 
BRICs, but for the many smaller emerging and frontier markets also. 
 
When we look at our universe of investments, we see many 
opportunities. Most of those anomalies that emerged during the 
market's volatility still prevail, with more appearing recently as 
markets have rallied. 
 
At a top down level different markets are trading on diverse 
multiples which provides opportunities for astute asset allocation by 
your Manager and the underlying regional investment managers. At a 
bottom up level, the same applies, with our active country 
specialists able to build portfolios that offer both deep value and 
high growth. Consistent with our investment philosophy and portfolio, 
those best placed to take advantage will be locally based investors 
with specific market knowledge, experience and appropriately aligned 
incentives in place. 
 
In the world of closed end funds, discounts are currently widening 
again, apparently in anticipation of a pull back in markets. 
Historically such discount movements have been a canny indicator of 
future market trends. There are several active situations in the 
portfolio that can be revived now that the turmoil is over. 
 
We hope to capture many of these opportunities and believe they will 
be reflected in the Company's performance over time. To ensure we 
maintain an informational edge, the team will continue to travel 
extensively as we did in the last 12 months. While the recent past is 
something we hope to put behind us we are excited about the future 
and our passion for the asset class remains as strong as ever. 
 
We thank you for your continued support in what has been a very 
difficult period for the Company. 
 
 
Progressive Developing Markets Limited 
September 2009 
 
 
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL 
REPORT AND THE FINANCIAL STATEMENTS 
 
The directors are responsible for preparing the Annual 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 UK Accounting Standards 
and applicable law (UK Generally Accepted Accounting Practice). 
 
Under company law the directors must not approve the financial 
statements unless they are satisfied that they 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 judgments and estimates that are reasonable and prudent; 
 
  * state whether applicable UK 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 adequate accounting records 
that are sufficient to show and explain the company's transactions 
and disclose with reasonable accuracy at any time the financial 
position of the company and enable them to ensure that the financial 
statements comply with the Companies Act 2006. 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. 
 
Under applicable law and regulations, the directors are also 
responsible for preparing a Directors' Report, Directors' 
Remuneration Report and Corporate Governance Statement that complies 
with that law and those regulations. 
 
The directors are responsible for the maintenance and integrity of 
the corporate and financial information included on the company's 
website. Legislation in the UK governing the preparation and 
dissemination of financial statements may differ from legislation in 
other jurisdictions. 
 
The Directors confirm that to the best of our knowledge: 
 
  * The financial statements, prepared in accordance with the 
    applicable set of accounting   standards, give a true and fair 
    view of the assets, liabilities, financial position and profit or 
    loss of the Company; and 
 
  * The Directors' Report includes a fair review of the development 
    and performance of the business and the position of the issuer 
    together with a description of the principal risks and 
    uncertainties that it faces. 
 
 
 
PRINCIPAL RISKS AND UNCERTAINTIES 
 
The board considers that the principal risks faced by the 
shareholders of the Company fall into two categories: 
 
External Risks 
Shareholders face the risk of poor performance from emerging market 
stock markets and currencies in which the Company is indirectly 
invested. It is not possible for the Manager to diversify away from 
this risk completely or to predict the timing of such performance. 
Historically emerging markets can show a greater degree of 
uncertainty than developed markets. 
 
Internal Risks 
Poor allocation of the Company's assets to both markets and investee 
funds by the Manager, poor governance, compliance or administration, 
including the loss of investment trust status could potentially 
result in shareholders not making acceptable returns on their 
investment in the Company. 
 
 
INCOME STATEMENT 
For the year ended 31 May 2009 
 
 
                        Year ended 31 May 2009        Year ended 31 May 2008 
                 Revenue    Capital      Total   Revenue  Capital    Total 
                   GBP'000      GBP'000      GBP'000     GBP'000    GBP'000    GBP'000 
 
Gains on 
investments 
 
(Losses) / 
Gains on 
disposal of            -   (36,654)   (36,654)         -   12,064   12,064 
investments by 
reference to 
revalued book 
costs 
Transfer from 
capital                -     61,923     61,923         -   30,654   30,654 
reserve - 
investments 
held 
Total gains on 
disposal of            -     25,269     25,269         -   42,718   42,718 
investments 
Revaluation of         -   (68,716)   (68,716)         -   53,016   53,016 
investments 
Transfer to 
realised 
capital                -   (61,923)   (61,923)         - (30,654) (30,654) 
reserve- 
disposal of 
investments 
Total                  -  (130,639)  (130,639)         -   22,362   22,362 
(losses)/gains 
on 
investments 
held 
Income             2,858          -      2,858     2,224        -    2,224 
Investment         (391)         19      (372)   (1,212)  (2,551)  (3,763) 
management fee 
Other expenses     (499)          -      (499)     (852)        -    (852) 
Return / 
(Loss) on 
ordinary           1,968  (105,351)  (103,383)       160   62,529   62,689 
activities 
before finance 
costs 
and taxation 
Interest 
payable and          (4)        (9)       (13)       (9)     (19)     (28) 
similar 
charges 
Return /(Loss)     1,964  (105,360)  (103,396)       151   62,510   62,661 
before 
taxation 
Taxation         (1,059)      2,820      1,761        21  (1,418)  (1,397) 
Return /(Loss)       905  (102,540)  (101,635)       172   61,092   61,264 
on ordinary 
activities 
after taxation 
 
Return /(Loss) 
per ordinary 
share 
                   1.34p  (151.50p)  (150.16p)     0.22p   77.35p   77.57p 
- undiluted 
                  1.34p* (151.50p)* (150.16p)*    0.22p*  77.35p*  77.57p* 
- diluted 
 
 
The total column of this statement is the profit and loss account of 
the Company. 
All revenue and capital items in the above statement derive from 
continuing operations. 
No operations were acquired or discontinued during the period. 
A Statement of Total Recognised Gains and Losses is not required as 
all gains and losses of the Company have been reflected in the above 
statement. 
*There was no diluting effect to the return per ordinary share for 
the year ended 31 May 2009 arising from the subscription shares in 
issue. There was no diluting impact for the year ended 31 May 2008 as 
there were no subscription shares in issue at this date. 
 
 
BALANCE SHEET 
At 31 May 2009 
 
                                                    2009    2008 
                                                   GBP'000   GBP'000 
 
FIXED ASSETS 
Investments at fair value through profit or loss 235,755 399,691 
 
CURRENT ASSETS 
Sales for future settlement                            -   1,817 
Accrued income                                       119      87 
Debtors                                               48      16 
Cash at bank and in hand                           4,587      26 
                                                   4,754   1,946 
 
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE 
YEAR 
 
Accrued liabilities                                  330   2,247 
Performance Fee                                        -     127 
Bank overdraft                                         -     123 
                                                     330   2,497 
 
NET CURRENT ASSETS                                 4,424   (551) 
 
TOTAL NET ASSETS                                 240,179 399,140 
 
CAPITAL AND RESERVES 
 
Share capital                                        781     790 
Share premium account                             53,959  54,089 
Share purchase reserve                                 -  22,567 
Capital redemption reserve                           149      10 
Capital reserve - disposal of investments        145,036 151,696 
Capital reserve - investments held                38,758 169,397 
Revenue reserve                                    1,496     591 
EQUITY SHAREHOLDERS' FUNDS                       240,179 399,140 
 
 
Net assets per ordinary share -undiluted         368.93p 505.40p 
Net assets per ordinary share - diluted          355.95p 505.40p 
 
 
 
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 
 
For the year ended 31 May 2009 
 
 
                                                       Capital     Capital 
                         Share    Share    Capital   Reserve -   Reserve - 
                Share  Premium Purchase Redemption disposal of investments Revenue 
              Capital  Account  Reserve    Reserve investments        held Reserve     Total 
                GBP'000    GBP'000    GBP'000      GBP'000       GBP'000       GBP'000   GBP'000     GBP'000 
 
Opening           790   54,089   22,567         10     151,696     169,397     591   399,140 
shareholders' 
funds 
 
Purchase of     (139)        - (22,567)        139    (34,759)           -       -  (57,326) 
own shares 
Issue of          130    (130)        -          -           -           -       -         - 
subscription 
shares 
Profit for          -        -        -          -      28,099   (130,639)     905 (101,635) 
the year 
 
Closing           781   53,959        -        149     145,036      38,758   1,496   240,179 
shareholders' 
funds 
 
 
 
For the year ended 31 May 2008 
 
 
                                                       Capital     Capital 
                         Share    Share    Capital   Reserve -   Reserve - 
                Share  Premium Purchase Redemption disposal of investments Revenue 
              Capital  Account  Reserve    Reserve investments        held Reserve   Total 
                GBP'000    GBP'000    GBP'000      GBP'000       GBP'000       GBP'000   GBP'000   GBP'000 
 
Opening           790   54,089   22,567         10     112,966     147,035   1,446 338,903 
shareholders' 
funds 
 
Profit for          -        -        -          -      38,730      22,362     172  61,264 
the year 
Dividend paid       -        -        -          -           -           - (1,027) (1,027) 
(Oct 2007) 
 
Closing           790   54,089   22,567         10     151,696     169,397     591 399,140 
shareholders' 
funds 
 
 
 
CASH FLOW STATEMENT 
 
For the year ended 31 May 2009 
 
 
                                                       2009      2008 
                                                      GBP'000     GBP'000 
 
   OPERATING ACTIVITIES 
   Cash inflow from investment income and bank        2,827     2,238 
   interest 
   Cash outflow from management expenses            (3,344)   (6,007) 
   Cash inflow from VAT on management fees            2,247         - 
   Cash inflow from disposal of investments         137,949   123,674 
   Cash outflow from purchase of investments       (77,883) (116,295) 
   Cash inflow from foreign exchange movements          301       200 
   Interest paid                                       (13)      (28) 
   Foreign tax paid                                    (74)      (97) 
 
   NET CASH INFLOW FROM OPERATING                    62,010     3,685 
   ACTIVITIES 
 
   EQUITY DIVIDENDS PAID                                  -   (1,027) 
 
   FINANCING 
   Purchase of own ordinary shares                 (57,326)         - 
 
   INCREASE IN CASH                                   4,684     2,658 
 
 
 
                                                         2009    2008 
                                                        GBP'000   GBP'000 
  Opening balance                                        (97) (2,755) 
  Cash inflow                                           4,684   2,658 
  Balance at 31 May                                     4,587    (97) 
 
 
 
NOTES 
 
1. The accounts have been prepared in accordance with applicable UK 
accounting standards. 
 
The accounts are prepared under the historical cost convention as 
modified by the revaluation of investments and in accordance with 
applicable accounting standards and the Statement of Recommended 
Practice "Financial statements of investment trust companies" 
("SORP"), issued in December 2005 by the Association of Investment 
Companies, except where the SORP has been superseded by Accounting 
Standards. 
 
2. Return/(loss) per ordinary share 
Undiluted loss of 150.16p per ordinary share (2008: undiluted return 
of 77.57p per ordinary share) is based on the net loss on ordinary 
activities after taxation of GBP101,635,000 (2008: net return of 
GBP61,264,000) attributable to the weighted average of 67,686,419 
(2008: 78,975,034) ordinary shares of 1p in issue during the year. 
 
There is no dilution impact in the year ended 31 May 2009 arising 
from the subscription shares in issue.  There were no subscription 
shares in issue during the year ended 31 May 2008. 
 
3. Net asset value per ordinary share 
The figure for undiluted net assets per ordinary share is based on 
GBP240,179,000 (2008: GBP399,140,000) divided by 65,100,837 (2008: 
78,975,034) ordinary shares in issue. 
 
The figure for diluted net assets per ordinary share is based on 
GBP278,068,000 (2008: GBP399,140,000) divided by 78,121,005 (2008: 
78,975,034) ordinary shares in issue.  The diluted figure is based on 
all the subscription shares being converted into ordinary shares at a 
price of 291p per ordinary share. There was no dilution at 31 May 
2008 as there were no subscription shares in issue at that time. 
 
4. Dividend 
The Company's revenue profit after tax for the year amounted to 
GBP905,000 (2008: GBP172,000).  The directors propose to pay a final 
dividend in respect of the year ended 31 May 2009 of 1.0p per 
ordinary share (2008: Nil) absorbing GBP651,000 (2008: GBPnil) based on 
the number of ordinary shares in issue at the date of this report. 
If approved at the Annual General Meeting, the final dividend will be 
paid on 6 November 2009 to ordinary shareholders on the register on 9 
October 2009. 
 
5. Related party transactions 
Fees payable to the investment manager and to the 
administrator/company secretary are detailed in the Notes to the 
accounts. The relevant amounts outstanding as accruals comprised a 
monthly management fee of GBP221,516 (2008: GBP308,990) and an 
administration fee of GBP10,412 (2008: GBP10,639).  No performance fee 
was payable at 31 May 2009 (2008:GBP126,778). 
 
6. Financial information 
The financial information for 2009 is derived from the statutory 
accounts for 2009, which will be delivered to the registrar of 
companies following the company's Annual General Meeting.  The 
statutory accounts for 2008 have been delivered to the registrar of 
companies.  The auditors have reported on the 2008 and 2009 accounts; 
their reports were unqualified. 
 
The Annual Report for the year ended 31 May 2009 was approved on 25 
September 2009.  It will be posted to shareholders and will be made 
available on the Manager's website at www.pro-asset.com 
 
This announcement contains regulated information under the Disclosure 
Rules and Transparency Rules of the FSA. 
 
7. The Annual General Meeting will be held on 29 October 2009 at 
12.00 noon at the offices of Lawrence Graham LLP, 4 More London 
Riverside, London SE1 2AU. 
 
 
25 September 2009 
 
 
Secretary and registered office: 
Cavendish Administration Limited 
145-157 St John Street 
London 
EC1V 4RU 
 
Tel: [phone] 
 
END 
 
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solely responsible for the content of this announcement.