UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: |
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811-08076 |
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Exact name of registrant as specified in charter: |
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. | |||
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Address of principal executive offices: |
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1735 Market Street, 32nd Floor | |||
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Name and address of agent for service: |
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Ms. Andrea Melia | |||
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Registrants telephone number, including area code: |
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866-839-5205 | |||
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Date of fiscal year end: |
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October 31 | |||
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Date of reporting period: |
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October 31, 2014 | |||
Item 1 - Reports to Stockholders.
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc.
Annual Report
October 31, 2014
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Letter to Shareholders (unaudited)
Dear Shareholder,
We present this Annual Report which covers the activities of Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. (the Fund) for the twelve-month period ended October 31, 2014. The Funds principal investment objective is to seek long-term capital appreciation. The Fund seeks to achieve this investment objective by investing primarily in equity securities of emerging market smaller company issuers.
Total Return Performance
For the year ended October 31, 2014, the total return to shareholders of the Fund based on the net asset value (NAV), net of fees, of the Fund was 1.0% assuming reinvestment of dividends and distributions versus a return of 3.5% for the Funds benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Small Cap Index.1 The Funds total return for the year ended October 31, 2014 and per annum since inception is based on the reported NAV on each annual year end.
Share Price and NAV
For the year ended October 31, 2014, based on market price, the Funds total return was 1.0%, assuming reinvestment of dividends and distributions. The Funds share price decreased 30.9% over the twelve months, from $20.47 on October 31, 2013 to $14.15 on October 31, 2014, in part due to the significant distribution as detailed below. The Funds share price on October 31, 2014 represented a discount of 9.8% to the NAV per share of $15.69 on that date, compared with a discount of 9.8% to the NAV per share of $22.69 on October 31, 2013.
Elective Cash Distribution Results
On December 6, 2013, the Board of Directors declared the payment of an elective cash distribution to be paid in the amount of $6.02616 per share of common stock, on January 31, 2014, to shareholders of record at the close of business on December 20, 2013. This distribution was largely comprised of capital gains realized from sales of portfolio securities following the Funds change in investment policy. The distribution was payable in shares of the Funds common stock. However, shareholders had the option to request that their distributions be paid in cash in lieu of common stock. The aggregate amount of cash distributions to all shareholders was limited to 60% of the aggregate dollar amount of the total distribution. Because cash distribution requests exceeded this limit, the cash distribution was pro-rated among all stockholders who made such requests.
Shareholders who requested cash distributions received $4.37 per share or 72.60% of the distribution in cash and received the balance in the Funds common stock. For purposes of computing the stock portion of the dividend, the common stock distributed was valued at $13.09 per share, which equaled the average closing price of the Funds common shares on the NYSE MKT on January 23, 2014 and the two preceding trading days. Following the close of the elective stock distribution, the Fund issued 1,518,067 shares. Following the closing of the elective cash distribution, the Funds number of shares was 9,764,732.
Open Market Repurchase Program
The Funds policy is generally to buy back Fund shares on the open market when the Fund trades at certain discounts to NAV. During the year ended October 31, 2014 the Fund did not repurchase any shares.
Portfolio Holdings Disclosure
The Funds complete schedule of portfolio holdings is included in the Funds semi-annual and annual reports to shareholders. The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds Form N-Q filings are available on the SECs website at http://www.sec.gov and may be reviewed and copied at the SECs Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund makes the information on Form N-Q available to shareholders on the Funds website or upon request and without charge by calling Investor Relations toll-free at 1-866-839-5205.
Proxy Voting
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve months ended June 30 is available by August 30 of the relevant year: (i) upon request and without charge by calling Investor Relations toll-free at 1-866-839-5205; and (ii) on the SECs website at http://www.sec.gov.
Investor Relations Information
As part of our ongoing commitment to provide information to our shareholders, I invite you to visit the Fund on the web at www.aberdeenetf.com. From this page, you can view monthly fact sheets, portfolio manager commentary, distribution and performance
1 The MSCI Emerging Markets Small Cap Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of the small-cap segment of emerging markets. The MSCI Emerging Markets Small Cap Index consists of the following 23 emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
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Letter to Shareholders (unaudited) (concluded)
information, updated daily fact sheets courtesy of Morningstar®, and view portfolio charting and other timely data.
Please take a look at Aberdeens award-winning Closed-End Fund Talk Channel, where you can watch fund manager web casts and view our latest short films. For replays of recent broadcasts or to register for upcoming events, please visit Aberdeens Closed-End Fund Talk Channel at www.aberdeen-asset.us/aam.nsf/usClosed/aberdeentv.
Please ensure that you are enrolled in our email services, which feature timely news from Aberdeen portfolio managers located around the world. Enroll today at www.aberdeen-asset.us/aam.nsf/usclosed/email and be among the first to receive the latest closed-end fund news, announcements of upcoming fund manager web casts, films and other information. Please note that Aberdeen does not share our shareholder information with any other organizations.
Included within this report is a reply card with postage paid envelope. Please complete and mail the card if you would like to be added to our enhanced email service and receive future communications from Aberdeen.
Please contact Aberdeen Asset Management Inc. by:
· calling toll free at 1-866-839-5205 in the United States;
· emailing InvestorRelations@aberdeen-asset.com;
· visiting Aberdeen Closed-End Fund Center at http://www.aberdeen-asset.us/aam.nsf/usclosed/home; or
· visiting www.aberdeenetf.com
Yours sincerely,
/s/ Christian Pittard |
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Christian Pittard
President
Dividend Reinvestment and Direct Stock Purchase Plan (unaudited)
Computershare Trust Company, N.A. (Computershare), the Funds transfer agent, sponsors and administers a Dividend Reinvestment and Direct Stock Purchase Plan (the Plan), which is available to shareholders.
The Plan allows registered stockholders and first time investors to buy and sell shares and automatically reinvest dividends and capital gains through the transfer agent. This is a cost-effective way to invest in the Fund.
Please note that for both purchases and reinvestment purposes, shares will be purchased in the open market at the current share price and cannot be issued directly by the Fund.
For more information about the Plan and a brochure that includes the terms and conditions of the Plan, please call Computershare at 1-800-647-0584 or visit www.computershare.com/buyaberdeen.
All amounts are U.S. Dollars unless otherwise stated.
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
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Report of the Investment Manager (unaudited)
Market review
Shares of smaller companies in emerging stock markets, as measured by the MSCI Emerging Markets Small Cap Index, rose and outperformed their larger counterparts, as represented by the MSCI Emerging Markets Index1, over the 12-month period ended October 31, 2014. Despite an initial pullback because of early concerns over the U.S. Federal Reserves (Fed) withdrawal of its monetary stimulus and Chinas slowing economic growth, markets subsequently resumed their uptrend, as it appeared that investors took the Feds gradual reduction of its asset purchases in stride. Hopes of political change in key developing economies and continued monetary largesse from the worlds major central banks provided further impetus to markets. The gains, however, were capped by renewed worries of an earlier-than-expected U.S. interest rate hike. In our view, a continued deceleration of growth in China and Europe also cast doubts over the global recovery, while the protests in Hong Kong exacerbated already-heightened geopolitical tensions caused by Ukraine and the Middle East.
Fund performance review
The top contributors to the Funds relative performance during the reporting period included several Indian holdings such as Container Corp. of India, Kansai Nerolac Paints Ltd., Ramco Cements Ltd., Castrol (India) Ltd., Godrej Consumer Products Ltd., and Piramal Enterprises Ltd. These holdings were beneficiaries of the election-related euphoria that pushed the Indian market to all-time highs. Other contributors to performance were Mexican airport operator Grupo Aeroportuario del Centro Norte SAB de CV, ADR and Jordan-based Hikma Pharmaceuticals PLC, as both companies posted good results. Healthy margins supported Grupo Aeroportuario del Centro Norte SAB de CV, ADR and Hikma Pharmaceuticals PLC was bolstered by its U.S., generics and injectables divisions.
Conversely, retail holdings OKey Group SA, GDR, Eurocash SA and Guinness Nigeria PLC detracted from Fund performance for the period. Russian hypermart operator OKey Group SA was hampered by the Kremlins retaliatory ban on certain imported food products from the European Union. Shares of Polish cash-and-carry retailer Eurocash SA declined on the back of food price deflation, which squeezed its margins as it was unable to pass the rising costs on to its customers. Shares of brewer Guinness Nigeria PLC lagged as declining sales volumes and margin pressure hurt its full-year 2014 results.
At the country level, the Funds underweight to China detracted from performance as the market rallied over the review period. Although the Chinese market remains one of Asias most exciting growth stories, the macroeconomic environment does not always translate into stock
market gains. We prefer to gain exposure via well-established Hong Kong-domiciled companies that operate in the mainland. In Taiwan, the technology-dominated market was hurt by weak Chinese demand. Consequently, the Funds lack of exposure to the market enhanced performance for the reporting period. The Fund has no exposure to the Taiwanese market because, while we think it is home to several interesting businesses, most are in lower-quality cyclical industries. Corporate transparency is also generally poor, in our opinion.
In Fund activity, we initiated positions in Grana y Montero SA, ADR, which we feel is a quality infrastructure operator in Peru, and EPAM Systems, Inc., a high-quality software engineering and IT outsourcing group, as we believe it has good growth prospects and an attractive valuation. We also participated in Parque Arauco SAs capital issuance as the Chilean real-estate developer raised equity to fund its expansion. Against this, we exited the Funds position in miner Vale Indonesia Tbk PT after its strong stock price rally, and sold the shares of BS Financial Group, Inc. to take up the rights offering that came at a discount.
Outlook
The divergence in monetary policy across the world is becoming more pronounced, with other major central banks accelerating quantitative easing at a time when the Fed has just concluded its asset purchases. The European Central Bank has begun to purchase covered bonds in an effort to revive growth and keep deflation in check, while the Bank of Japan is injecting trillions of yen in a bid to boost the countrys monetary base. How all these translate into capital flows into emerging markets remain to be seen, in our view. Meanwhile, the imminent change in U.S. monetary policy will be closely watched. Although volatility and capital outflows cannot be ruled out when the Fed eventually hikes rates, we think that a prolonged slump in emerging stock markets is unlikely.
Many developing economies, including those most vulnerable to capital flight, are better prepared now than during last years taper tantrums, in our opinion. Current account deficits have narrowed (or at least have remained unchanged), and real interest rates have generally turned positive. We believe that, should the U.S. raise interest rates because of a sturdier economic rebound, developing economies, in particular those of the export-driven nations, would benefit. For China, we feel that the return to the previous pace of breakneck expansion appears slim as policymakers continue to balance reform and growth. But we believe the inevitable shift towards a more sustainable consumption-led economy is necessary, even if this could herald short-term risks.
Report of the Investment Manager (unaudited) (concluded)
For us at Aberdeen, investing in companies that we view as fundamentally sound and well managed is an imperative that we believe should help negate the vagaries of market sentiment. Recent earnings from our holdings have been largely steady or met expectations despite the muted economic backdrop. Renewed efforts to boost profits through cost cuts and improving margins are further
along, even though it may be some time before a broader rebound is evident. Many of these companies are market leaders and have weathered periods of crises; we think it should be no different this time. With valuations still attractive, in our view, we will be looking to add to favoured holdings when opportunities arise.
Aberdeen Asset Managers Limited
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The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI Emerging Markets Index consists of the following 23 emerging market country indexes: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. |
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
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Portfolio Summary (unaudited)
The following table summarizes the composition of the Funds portfolio, in Geographic classification, expressed as a percentage of net assets as of October 31, 2014.
Region |
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As a Percent of Net Assets |
Asia |
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30.3% |
Latin America |
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21.8% |
Middle East |
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20.0% |
Africa |
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19.9% |
Europe |
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4.4% |
North America |
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1.9% |
Global |
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1.0% |
Other Assets and Liabilities |
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0.7% |
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100.0% |
The following table summarizes the composition of the Funds portfolio, in Standard & Poors Global Industry Classification Standard (GICS) sectors, expressed as a percentage of net assets. The GICS structure consists of 10 sectors, 24 industry groups, 67 industries and 156 subindustries. An industry classification standard sector can include more than one industry group. As of October 31, 2014, the Fund did not have more than 25% of its assets invested in any industry group. The sectors, as classified by GICS Sectors, are comprised of several industries. As of October 31, 2014, the Fund held 99.3% of its net assets in equities and 0.7% in other assets in excess of liabilities.
Asset Allocation |
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As a Percent of Net Assets |
Financials |
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21.7% |
Consumer Staples |
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18.6% |
Industrials |
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15.9% |
Consumer Discretionary |
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15.1% |
Materials |
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12.3% |
Information Technology |
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8.5% |
Health Care |
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5.4% |
Private Equity |
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1.8% |
Other assets in excess of liabilities |
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0.7% |
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100.0% |
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
Top Ten Equity Holdings (unaudited)
The following were the Funds top ten holdings as of October 31, 2014:
Name of Security |
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Percentage of Net Assets |
Grupo Aeroportuario del Centro Norte SAB de CV, ADR |
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3.8% |
Parque Arauco SA |
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2.9% |
Aeon Co. (M) Bhd |
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2.8% |
Clicks Group Ltd. |
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2.5% |
Cimsa Cimento Sanayi VE Ticaret A.S. |
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2.4% |
Petra Foods Ltd. |
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2.2% |
SPAR Group Ltd. |
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2.2% |
BS Financial Group, Inc. |
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2.2% |
Arezzo Industria e Comercio SA |
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2.1% |
Godrej Consumer Products Ltd. |
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2.1% |
Total Investment Return (unaudited)
The following table summarizes average annual Fund performance compared to the MSCI Emerging Markets Small Cap Index, the Funds benchmark, for the 1-year, 3-year, 5-year and 10-year periods as of October 31, 2014.(1)
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1 Year |
3 Years |
5 Years |
10 Years |
Net Asset Value (NAV) |
1.0% |
5.9% |
6.8% |
10.0% |
Market Value |
1.0% |
6.0% |
7.2% |
10.6% |
MSCI Emerging Markets Small Cap Index |
3.5% |
6.0% |
6.5% |
n/a(2) |
Aberdeen Asset Managers Limited has entered into a written contract with the Fund to waive fees, without which performance would be lower. See Note 3 in the Notes to Financial Statements. This contract aligns with the term of the advisory agreement and may not be terminated prior to the next annual consideration of the advisory agreement. Returns represent past performance. Total investment return at net asset value is based on changes in the net asset value of Fund shares and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program sponsored by the Funds transfer agent. Total investment return at market value is based on changes in the market price at which the Funds shares traded on the NYSE MKT during the period and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program sponsored by the Funds transfer agent. The Funds total investment return is based on the reported NAV on October 31, 2014. Because the Funds shares trade in the stock market based on investor demand, the Fund may trade at a price higher or lower than its NAV. Therefore, returns are calculated based on both market price and NAV. The Funds total return for the year is based on the reported NAV on financial reporting period ends. Past performance is no guarantee of future results. The performance information provided does not reflect the deduction of taxes that a shareholder would pay on distributions received from the Fund. The current performance of the Fund may be lower or higher than the figures shown. The Funds yield, return, market price and NAV will fluctuate. Performance information current to the most recent month-end is available at www.aberdeenetf.com or by calling 866-839-5205.
The gross operating expense ratio, excluding fee waivers based on the fiscal year ended October 31, 2014 is 1.66%. The net operating expense ratio net of fee waivers and/or expense reimbursements based on the fiscal year ended October 31, 2014 is 1.61%.
(1) |
Effective March 15, 2013, the Funds investment strategy changed from an infrastructure focus to a global emerging markets smaller company issuer focus. In connection with the strategy change, the Funds benchmark changed from the MSCI Emerging Markets Infrastructure Index to the MSCI Emerging Markets Small Cap Index. The Funds performance information for periods that include performance prior to March 15, 2013, such as three-, five- and ten-year performance information, includes periods when the Fund was managed with an infrastructure focus. In light of this, a comparison of that performance to the MSCI Emerging Markets Small Cap Index may not provide useful information to investors evaluating older Fund performance in relation to its current Index. |
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(2) |
There is no 10 year figure for the MSCI EM Small Cap Index because the inception date of the Index is June 1, 2007. |
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
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Portfolio of Investments
As of October 31, 2014
Shares |
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Description |
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Value |
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LONG-TERM EQUITY SECURITIES IN EMERGING COUNTRIES97.4% |
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COMMON STOCKS95.5% |
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BRAZIL13.0% |
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COMMERCIAL SERVICES & SUPPLIES1.0% |
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92,000 |
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Valid Solucoes e Servicos de Seguranca em Meios de Pagamento e Identificacao SA |
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$ |
1,476,960 |
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HEALTH CARE PROVIDERS & SERVICES1.6% |
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697,000 |
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OdontoPrev SA |
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2,517,515 |
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REAL ESTATE MANAGEMENT & DEVELOPMENT3.0% |
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173,155 |
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Iguatemi Empresa de Shopping Centers SA |
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1,753,982 |
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134,000 |
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Multiplan Empreendimentos Imobiliarios SA |
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2,771,500 |
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4,525,482 |
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ROAD & RAIL1.6% |
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171,450 |
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Localiza Rent a Car SA |
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2,471,526 |
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SOFTWARE1.3% |
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140,000 |
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Totvs SA |
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2,040,760 |
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SPECIALTY RETAIL0.9% |
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140,000 |
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Cia Hering |
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1,412,487 |
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TEXTILES, APPAREL & LUXURY GOODS2.1% |
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280,413 |
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Arezzo Industria e Comercio SA |
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3,247,852 |
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TRANSPORTATION INFRASTRUCTURE1.5% |
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161,000 |
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Wilson Sons Ltd., BDR |
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2,274,103 |
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19,966,685 |
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CHILE4.1% |
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INFORMATION TECHNOLOGY SERVICES1.2% |
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745,000 |
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Sonda SA |
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1,812,589 |
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REAL ESTATE MANAGEMENT & DEVELOPMENT2.9% |
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2,192,849 |
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Parque Arauco SA |
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4,496,442 |
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6,309,031 |
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CHINA2.3% |
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CHEMICALS1.1% |
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2,200,000 |
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Yingde Gases Group Co. Ltd.(a) |
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1,717,852 |
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REAL ESTATE MANAGEMENT & DEVELOPMENT1.2% |
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2,130,000 |
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Yanlord Land Group Ltd.(a) |
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1,816,988 |
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3,534,840 |
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EGYPT1.0% |
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FOOD PRODUCTS1.0% |
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1,155,633 |
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Juhayna Food Industries(b) |
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1,486,958 |
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HONG KONG6.0% |
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BANKS1.2% |
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1,000,000 |
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Dah Sing Banking Group Ltd.(a) |
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1,816,929 |
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HOTELS, RESTAURANTS & LEISURE1.1% |
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450,000 |
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Cafe de Coral Holdings Ltd.(a) |
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1,613,489 |
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See Notes to Financial Statements.
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
Portfolio of Investments (continued)
As of October 31, 2014
Shares |
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Description |
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Value |
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LONG-TERM EQUITY SECURITIES IN EMERGING COUNTRIES (continued) |
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COMMON STOCKS (continued) |
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MARINE1.0% |
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3,300,000 |
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Pacific Basin Shipping Ltd.(a) |
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$ |
1,579,541 |
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SPECIALTY RETAIL0.9% |
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2,700,000 |
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Giordano International Ltd.(a) |
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1,375,487 |
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TEXTILES, APPAREL & LUXURY GOODS0.8% |
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1,460,000 |
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Texwinca Holdings Ltd.(a) |
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1,281,321 |
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TRANSPORTATION INFRASTRUCTURE1.0% |
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|
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136,000 |
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Hong Kong Aircraft Engineering Co. Ltd.(a) |
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1,494,257 |
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|
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9,161,024 |
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INDIA10.7% |
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CHEMICALS3.0% |
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290,000 |
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Castrol (India) Ltd.(a) |
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1,948,059 |
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85,000 |
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Kansai Nerolac Paints Ltd. |
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2,664,903 |
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4,612,962 |
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CONSTRUCTION MATERIALS1.6% |
|
|
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440,000 |
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Ramco Cements Ltd. (The) |
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2,477,329 |
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INFORMATION TECHNOLOGY SERVICES1.1% |
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|
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263,074 |
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MphasiS Ltd.(a) |
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1,714,063 |
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PERSONAL PRODUCTS2.1% |
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204,372 |
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Godrej Consumer Products Ltd. |
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3,202,050 |
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PHARMACEUTICALS1.3% |
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154,500 |
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Piramal Enterprises Ltd. |
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2,028,127 |
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ROAD & RAIL1.6% |
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|
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109,000 |
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Container Corp. of India(a) |
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2,389,377 |
| |
|
|
|
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16,423,908 |
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INDONESIA7.1% |
|
|
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BANKS1.2% |
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|
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15,300,000 |
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Bank Permata Tbk PT |
|
1,873,728 |
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CONSTRUCTION MATERIALS1.6% |
|
|
| |||
12,840,000 |
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Holcim Indonesia Tbk PT(a) |
|
2,496,442 |
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FOOD PRODUCTS2.2% |
|
|
| |||
1,148,000 |
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Petra Foods Ltd. |
|
3,404,592 |
| |
TRADING COMPANIES & DISTRIBUTORS2.1% |
|
|
| |||
7,665,500 |
|
AKR Corporindo Tbk PT(a) |
|
3,123,056 |
| |
|
|
|
|
10,897,818 |
| |
JORDAN1.5% |
|
|
| |||
PHARMACEUTICALS1.5% |
|
|
| |||
75,806 |
|
Hikma Pharmaceuticals PLC(a) |
|
2,299,233 |
| |
KENYA1.6% |
|
|
| |||
BEVERAGES1.6% |
|
|
| |||
753,800 |
|
East African Breweries Ltd. |
|
2,401,710 |
| |
See Notes to Financial Statements.
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
|
Portfolio of Investments (continued)
As of October 31, 2014
Shares |
|
Description |
|
Value |
| |
LONG-TERM EQUITY SECURITIES IN EMERGING COUNTRIES (continued) |
|
|
| |||
COMMON STOCKS (continued) |
|
|
| |||
LEBANON1.0% |
|
|
| |||
BANKS1.0% |
|
|
| |||
162,000 |
|
BLOM Bank SAL, GDR |
|
$ |
1,524,420 |
|
MALAYSIA6.9% |
|
|
| |||
AUTOMOBILES0.9% |
|
|
| |||
640,200 |
|
Oriental Holdings Bhd |
|
1,422,775 |
| |
BEVERAGES0.8% |
|
|
| |||
12,200 |
|
Fraser & Neave Holdings Bhd |
|
59,271 |
| |
300,000 |
|
Guinness Anchor Bhd(a) |
|
1,180,415 |
| |
|
|
|
|
1,239,686 |
| |
FOOD PRODUCTS1.2% |
|
|
| |||
240,000 |
|
United Plantations Bhd(a) |
|
1,868,308 |
| |
MULTILINE RETAIL2.8% |
|
|
| |||
3,737,900 |
|
Aeon Co. (M) Bhd |
|
4,261,496 |
| |
REAL ESTATE MANAGEMENT & DEVELOPMENT1.2% |
|
|
| |||
1,733,585 |
|
SP Setia Bhd |
|
1,733,980 |
| |
|
|
|
|
10,526,245 |
| |
MEXICO3.8% |
|
|
| |||
TRANSPORTATION INFRASTRUCTURE3.8% |
|
|
| |||
147,000 |
|
Grupo Aeroportuario del Centro Norte SAB de CV, ADR |
|
5,821,200 |
| |
NETHERLANDS1.4% |
|
|
| |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT1.4% |
|
|
| |||
55,000 |
|
ASM International NV(a) |
|
2,203,999 |
| |
NIGERIA1.1% |
|
|
| |||
BEVERAGES1.1% |
|
|
| |||
1,749,000 |
|
Guinness Nigeria PLC(a) |
|
1,704,361 |
| |
OMAN1.4% |
|
|
| |||
BANKS1.4% |
|
|
| |||
262,000 |
|
Bank Muscat SAOG, GDR(a) |
|
2,096,000 |
| |
PERU0.9% |
|
|
| |||
CONSTRUCTION & ENGINEERING0.9% |
|
|
| |||
102,000 |
|
Grana y Montero SA, ADR |
|
1,399,440 |
| |
PHILIPPINES2.0% |
|
|
| |||
HOTELS, RESTAURANTS & LEISURE2.0% |
|
|
| |||
705,660 |
|
Jollibee Foods Corp.(a) |
|
3,081,696 |
| |
POLAND1.5% |
|
|
| |||
FOOD & STAPLES RETAILING1.5% |
|
|
| |||
233,898 |
|
Eurocash SA(a) |
|
2,299,592 |
| |
REPUBLIC OF SOUTH KOREA3.3% |
|
|
| |||
BANKS2.2% |
|
|
| |||
214,283 |
|
BS Financial Group, Inc.(a) |
|
3,334,384 |
| |
See Notes to Financial Statements.
|
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
Portfolio of Investments (continued)
As of October 31, 2014
Shares |
|
Description |
|
Value |
| |
LONG-TERM EQUITY SECURITIES IN EMERGING COUNTRIES (continued) |
|
|
| |||
COMMON STOCKS (continued) |
|
|
| |||
MULTILINE RETAIL1.1% |
|
|
| |||
9,000 |
|
Shinsegae Co. Ltd.(a) |
|
$ |
1,669,559 |
|
|
|
|
|
5,003,943 |
| |
ROMANIA1.5% |
|
|
| |||
BANKS1.5% |
|
|
| |||
1,045,000 |
|
BRD-Groupe Societe Generale(b) |
|
2,375,439 |
| |
RUSSIA2.4% |
|
|
| |||
BEVERAGES1.1% |
|
|
| |||
133,150 |
|
Synergy Co.(a)(b) |
|
1,619,090 |
| |
FOOD & STAPLES RETAILING1.3% |
|
|
| |||
336,532 |
|
OKey Group SA, GDR(a) |
|
2,026,518 |
| |
|
|
|
|
3,645,608 |
| |
SOUTH AFRICA9.3% |
|
|
| |||
CHEMICALS1.5% |
|
|
| |||
1,303,000 |
|
African Oxygen Ltd. |
|
2,291,820 |
| |
DIVERSIFIED FINANCIAL SERVICES1.7% |
|
|
| |||
267,059 |
|
JSE Ltd. |
|
2,600,434 |
| |
FOOD & STAPLES RETAILING4.7% |
|
|
| |||
555,832 |
|
Clicks Group Ltd. |
|
3,784,581 |
| |
290,735 |
|
SPAR Group Ltd.(a) |
|
3,401,619 |
| |
|
|
|
|
7,186,200 |
| |
HOTELS, RESTAURANTS & LEISURE1.4% |
|
|
| |||
196,384 |
|
City Lodge Hotels Ltd. |
|
2,190,007 |
| |
|
|
|
|
14,268,461 |
| |
SRI LANKA1.3% |
|
|
| |||
INDUSTRIAL CONGLOMERATES1.3% |
|
|
| |||
1,023,076 |
|
John Keells Holdings PLC(a) |
|
2,015,815 |
| |
THAILAND5.8% |
|
|
| |||
CONSTRUCTION MATERIALS1.1% |
|
|
| |||
134,000 |
|
Siam City Cement PCL, Foreign Shares(a) |
|
1,728,023 |
| |
ELECTRONIC EQUIPMENT INSTRUMENTS & COMPONENTS1.6% |
|
|
| |||
1,854,000 |
|
Hana Microelectronics PCL, Foreign Shares(a) |
|
2,476,174 |
| |
HEALTH CARE PROVIDERS & SERVICES1.0% |
|
|
| |||
380,000 |
|
Bumrungrad Hospital PCL, Foreign Shares(a) |
|
1,551,934 |
| |
MEDIA1.1% |
|
|
| |||
1,086,100 |
|
BEC World PCL, Foreign Shares(a) |
|
1,609,427 |
| |
REAL ESTATE MANAGEMENT & DEVELOPMENT1.0% |
|
|
| |||
1,020,000 |
|
Central Pattana PCL, Foreign Shares(a) |
|
1,512,260 |
| |
|
|
|
|
8,877,818 |
| |
See Notes to Financial Statements.
|
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
|
Portfolio of Investments (continued)
As of October 31, 2014
Shares |
|
Description |
|
Value |
| |
LONG-TERM EQUITY SECURITIES IN EMERGING COUNTRIES (continued) |
|
|
| |||
COMMON STOCKS (continued) |
|
|
| |||
TURKEY4.6% |
|
|
| |||
BANKS0.9% |
|
|
| |||
1,627,000 |
|
Turk Ekonomi Bankasi AS(a)(b) |
|
$ |
1,412,188 |
|
CONSTRUCTION MATERIALS2.4% |
|
|
| |||
501,702 |
|
Cimsa Cimento Sanayi VE Ticaret A.S.(a) |
|
3,710,669 |
| |
INSURANCE1.3% |
|
|
| |||
1,593,000 |
|
Aksigorta AS(a) |
|
1,927,839 |
| |
|
|
|
|
7,050,696 |
| |
|
|
|
|
146,375,940 |
| |
PRIVATE EQUITY1.8% |
|
|
| |||
GLOBAL1.0% |
|
|
| |||
7,248,829 |
(c) |
Emerging Markets Ventures I, L.P.(b)(d)(e)(f) |
|
259,508 |
| |
2,400,000 |
(c) |
Telesoft Partners II QP, L.P.(b)(e)(f) |
|
1,209,240 |
| |
|
|
|
|
1,468,748 |
| |
ISRAEL0.8% |
|
|
| |||
1,674,587 |
(c) |
BPA Israel Ventures, LLC(b)(d)(e)(f) |
|
361,292 |
| |
2,000,000 |
(c) |
Concord Fund I Liquidating Main Trust(b)(e)(f) |
|
79,400 |
| |
2,750,000 |
(c) |
Giza GE Venture Fund III, L.P.(b)(e)(f) |
|
169,015 |
| |
761,184 |
(c) |
Neurone Ventures II, L.P.(b)(e)(f) |
|
541,989 |
| |
1,368 |
(c) |
Vidyo,Inc. Trust Warrants(a)(b)(e)(f) |
|
|
| |
1,802 |
(c) |
Vidyo,Inc. Trust Common(a)(b)(e)(f) |
|
1,388 |
| |
32,574 |
(c) |
Vidyo,Inc. Trust A (Preferred)(a)(b)(e)(f) |
|
25,082 |
| |
15,531 |
(c) |
Vidyo,Inc. Trust B (Preferred)(a)(b)(e)(f) |
|
14,590 |
| |
13,219 |
(c) |
Vidyo,Inc. Trust B1 (Preferred)(a)(b)(e)(f) |
|
10,179 |
| |
6,864 |
(c) |
Vidyo,Inc. Trust C (Preferred)(a)(b)(e)(f) |
|
5,286 |
| |
4,150 |
(c) |
Vidyo,Inc. Trust C1 (Preferred)(a)(b)(e)(f) |
|
3,254 |
| |
2,713 |
(c) |
Vidyo,Inc. Trust D (Preferred)(a)(b)(e)(f) |
|
2,127 |
| |
1,375,001 |
(c) |
Walden-Israel Ventures III, L.P.(b)(e)(f) |
|
45,911 |
| |
|
|
|
|
1,259,513 |
| |
|
|
|
|
2,728,261 |
| |
WARRANTS0.1% |
|
|
| |||
SRI LANKA0.1% |
|
|
| |||
INDUSTRIAL CONGLOMERATES0.1% |
|
|
| |||
81,028 |
|
John Keells Holdings PLC, expires 11/11/16(b) |
|
49,568 |
| |
81,028 |
|
John Keells Holdings PLC, expires 11/12/15(b) |
|
46,470 |
| |
|
|
|
|
96,038 |
| |
|
|
Total Long-Term Equity Securities in Emerging Countries97.4% (cost $164,805,493) |
149,200,239 |
| ||
LONG-TERM EQUITY SECURITIES IN DEVELOPED COUNTRIES1.9% |
|
|
| |||
COMMON STOCK1.9% |
|
|
| |||
UNITED STATES1.9% |
|
|
| |||
INFORMATION TECHNOLOGY SERVICES1.9% |
|
|
| |||
61,562 |
|
EPAM Systems,Inc.(b) |
|
2,938,970 |
| |
|
|
|
|
2,938,970 |
| |
See Notes to Financial Statements.
|
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
|
Portfolio of Investments (concluded)
As of October 31, 2014
Shares |
|
Description |
|
Value |
| |
LONG-TERM EQUITY SECURITIES IN DEVELOPED COUNTRIES (continued) |
|
|
| |||
PRIVATE EQUITY0.0% |
|
|
| |||
UNITED STATES0.0% |
|
|
| |||
1,952,000 |
(c) |
Technology Crossover Ventures IV, L.P.(b)(d)(e)(f) |
|
$ |
7,710 |
|
|
|
|
|
7,710 |
| |
|
|
Total Long-Term Equity Securities in Developed Countries1.9% (cost $2,570,757) |
|
2,946,680 |
| |
|
|
Total Investments99.3% (cost $167,376,250)(g) |
|
152,146,919 |
| |
|
|
Other Assets in Excess of Liabilities0.7% |
|
1,068,695 |
| |
|
|
Net Assets100.0% |
|
$ |
153,215,614 |
|
(a) |
Fair Valued Security. Fair Values are determined pursuant to procedures approved by the Funds Board of Directors. See Note 2(a) of the accompanying Notes to Financial Statements. |
(b) |
Non-income producing security. |
(c) |
Represents contributed capital. |
(d) |
As of October 31, 2014, the aggregate amount of open commitments for the Fund is $1,524,584. |
(e) |
Illiquid security. |
(f) |
Restricted security, not readily marketable. See Note 6 of the accompanying Notes to Financial Statements. |
(g) |
See Notes to Financial Statements for tax unrealized appreciation/depreciation of securities. |
ADR American Depositary Receipt
BDR Brazilian Depositary Receipt
GDR Global Depositary Receipt
See Notes to Financial Statements.
|
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
|
Statement of Assets and Liabilities |
|
|
| ||
As of October 31, 2014 |
|
|
| ||
|
|
|
| ||
|
|
|
| ||
Assets |
|
|
| ||
|
|
|
| ||
Investments, at value (cost $167,376,250) |
|
$ 152,146,919 |
| ||
Foreign currency, at value (cost $1,290,704) |
|
1,267,700 |
| ||
Dividends receivable |
|
135,109 |
| ||
Prepaid expenses |
|
25,862 |
| ||
Total assets |
|
153,575,590 |
| ||
Liabilities |
|
|
| ||
Investment management fees payable (Note 3) |
|
133,740 |
| ||
Due to custodian |
|
105,132 |
| ||
Director fees payable |
|
28,103 |
| ||
Administration fees payable (Note 3) |
|
10,261 |
| ||
Investor relations fees payable (Note 3) |
|
6,199 |
| ||
Accrued expenses |
|
76,541 |
| ||
Total liabilities |
|
359,976 |
| ||
|
|
|
| ||
Net Assets |
|
$153,215,614 |
| ||
Composition of Net Assets |
|
|
| ||
Common stock (par value $.001 per share) (Note 5) |
|
$ 9,765 |
| ||
Paid-in capital in excess of par |
|
164,382,145 |
| ||
Accumulated net investment income |
|
1,605,401 |
| ||
Accumulated net realized gain from investment and foreign currency transactions |
|
2,474,036 |
| ||
Net unrealized depreciation on investments and other assets and liabilities denominated in foreign currencies |
|
(15,255,733 |
) | ||
Net Assets |
|
$153,215,614 |
| ||
Net asset value per common share based on 9,764,732 shares issued and outstanding |
|
$ 15.69 |
| ||
|
|
|
| ||
|
|
|
| ||
See Notes to Financial Statements. |
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
||||
|
|
|
| ||
|
|
|
| ||
Statement of Operations |
|
|
| ||
For the Year Ended October 31, 2014 |
|
|
| ||
|
|
|
| ||
|
|
|
| ||
Net Investment Income |
|
|
| ||
Income: |
|
|
| ||
Dividends and other income (net of foreign withholding taxes of $344,092) |
|
$ 4,146,731 |
| ||
Total investment income |
|
4,146,731 |
| ||
Expenses: |
|
|
| ||
Investment management fee (Note 3) |
|
1,656,206 |
| ||
Directors fees and expenses |
|
204,634 |
| ||
Custodians fees and expenses |
|
152,836 |
| ||
Legal fees and expenses |
|
91,676 |
| ||
Administration fee (Note 3) |
|
84,789 |
| ||
Reports to shareholders and proxy solicitation |
|
68,273 |
| ||
Investor relations fees and expenses (Note 3) |
|
64,710 |
| ||
Independent auditors fees and expenses |
|
60,670 |
| ||
Insurance expense |
|
41,739 |
| ||
Transfer agents fees and expenses |
|
35,775 |
| ||
Miscellaneous |
|
58,140 |
| ||
Total expenses |
|
2,519,448 |
| ||
Less: Fee waivers (Note 3) |
|
(68,054 |
) | ||
Net expenses |
|
2,451,394 |
| ||
|
|
|
| ||
Net investment income |
|
1,695,337 |
| ||
Net Realized/Unrealized Gain/(Loss) from Investments and Foreign Currency Related Transactions: |
|
|
| ||
|
|
|
| ||
Net realized gain/(loss) from: |
|
|
| ||
Investment transactions(a) |
|
(5,013,141 |
) | ||
Foreign currency transactions |
|
(19,970 |
) | ||
|
|
(5,033,111 |
) | ||
Net change in unrealized appreciation/(depreciation) on: |
|
|
| ||
Investments |
|
(676,411 |
) | ||
Foreign currency translation |
|
(24,250 |
) | ||
|
|
(700,661 |
) | ||
Net realized and unrealized loss from investments and foreign currency transactions |
|
(5,733,772 |
) | ||
Net Decrease in Net Assets Resulting from Operations |
|
$(4,038,435 |
) | ||
|
|
|
| ||
(a) Includes realized gain portion of distributions from underlying private equity investments of $266,670. |
| ||||
|
|
|
| ||
|
|
|
| ||
See Notes to Financial Statements. |
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
| |||
|
|
|
| ||
|
|
|
| ||
Statements of Changes in Net Assets |
|
|
|
|
| ||||||
|
|
|
|
|
| ||||||
|
|
|
|
|
| ||||||
|
|
|
|
|
| ||||||
|
|
For the |
|
For the |
| ||||||
Increase/(Decrease) in Net Assets |
|
|
|
|
| ||||||
Operations: |
|
|
|
|
| ||||||
Net investment income |
|
$ 1,695,337 |
|
$ 1,875,459 |
| ||||||
Net realized gain/(loss) from investment and foreign currency related transactions |
|
(5,033,111 |
) |
48,017,991 |
| ||||||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations |
|
(700,661 |
) |
(48,762,895 |
) | ||||||
Net increase/(decrease) in net assets resulting from operations |
|
(4,038,435 |
) |
1,130,555 |
| ||||||
Distributions to Shareholders from: |
|
|
|
|
| ||||||
Net investment income |
|
(2,854,581 |
) |
(3,224,149 |
) | ||||||
Net realized gains |
|
(46,909,496 |
) |
|
| ||||||
Net decrease in net assets from distributions |
|
(49,764,077 |
) |
(3,224,149 |
) | ||||||
Common Stock Transactions |
|
|
|
|
| ||||||
Issuance of 1,518,067 and 0 shares, respectively, due to stock distribution (Note 5) |
|
19,871,497 |
|
|
| ||||||
Change in net assets from common stock transactions |
|
19,871,497 |
|
|
| ||||||
Change in net assets resulting from operations |
|
(33,931,015 |
) |
(2,093,594 |
) | ||||||
Net Assets: |
|
|
|
|
| ||||||
Beginning of year |
|
187,146,629 |
|
189,240,223 |
| ||||||
End of year (including accumulated net investment income of $1,605,401 and $1,428,466, respectively) |
|
$153,215,614 |
|
$187,146,629 |
| ||||||
|
|
|
|
|
| ||||||
Amounts listed as are $0 or round to $0. |
| ||||||||||
|
|
|
|
|
| ||||||
|
|
|
|
|
| ||||||
See Notes to Financial Statements. |
|
|
|
|
| ||||||
|
|
|
|
|
| ||||||
|
| ||||||||||
|
| ||||||||||
|
| ||||||||||
|
| ||||||||||
|
| ||||||||||
|
| ||||||||||
|
| ||||||||||
|
| ||||||||||
|
| ||||||||||
|
| ||||||||||
|
| ||||||||||
|
| ||||||||||
|
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
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Financial Highlights
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For the Fiscal Years Ended October 31, |
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2014 |
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2013 |
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2012 |
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2011 |
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2010 |
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PER SHARE OPERATING PERFORMANCE(a) |
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|
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Net asset value per common share, beginning of year |
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$22.69 |
|
$22.95 |
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$20.02 |
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$20.86 |
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$17.99 |
|
Net investment income |
|
0.18 |
|
0.23 |
|
0.42 |
|
0.41 |
|
0.57 |
|
Net realized and unrealized gains/(losses) on investments and foreign currency transactions |
|
(0.93 |
) |
(0.10 |
) |
2.85 |
|
(0.72 |
) |
2.69 |
|
Total from investment operations applicable to common shareholders |
|
(0.75 |
) |
0.13 |
|
3.27 |
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(0.31 |
) |
3.26 |
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Distributions to common shareholders from: |
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|
|
|
|
|
|
|
|
|
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Net investment income |
|
(0.30 |
) |
(0.39 |
) |
(0.34 |
) |
(0.53 |
) |
(0.39 |
) |
Net realized gains |
|
(5.73 |
) |
|
|
|
|
|
|
|
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Total distributions |
|
(6.03 |
) |
(0.39 |
) |
(0.34 |
) |
(0.53 |
) |
(0.39 |
) |
Capital Share Transactions: |
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Impact due to capital shares issued from stock distribution (Note 5) |
|
(0.22 |
) |
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|
|
|
|
|
|
|
Net asset value per common share, end of year |
|
$15.69 |
|
$22.69 |
|
$22.95 |
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$20.02 |
|
$20.86 |
|
Market value, end of year |
|
$14.15 |
|
$20.47 |
|
$20.65 |
|
$18.03 |
|
$19.08 |
|
Total Investment Return Based on(b): |
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|
|
|
|
|
|
|
|
|
|
Market value |
|
1.00% |
|
1.04% |
|
16.56% |
|
(2.76% |
) |
22.35% |
|
Net asset value |
|
1.03% |
|
0.77% |
|
16.67% |
|
(1.24% |
) |
18.60% |
|
Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data: |
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|
|
|
|
|
|
|
|
|
|
Net assets applicable to common shareholders, end of year (000 omitted) |
|
$153,216 |
|
$187,147 |
|
$189,240 |
|
$165,075 |
|
$172,030 |
|
Average net assets applicable to common shareholders (000 omitted) |
|
$151,939 |
|
$190,084 |
|
$175,613 |
|
$169,025 |
|
$157,099 |
|
Net operating expenses, net of fee waivers |
|
1.61% |
|
1.47% |
|
1.43% |
|
1.50% |
|
1.53% |
|
Gross operating expenses, excluding fee waivers |
|
1.66% |
|
1.52% |
|
1.48% |
|
1.55% |
|
1.61% |
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Net investment income |
|
1.12% |
|
0.99% |
|
1.97% |
|
2.00% |
|
2.97% |
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Portfolio turnover |
|
9.88% |
|
99.18% |
|
5.14% |
|
49.48% |
|
5.36% |
|
(a) |
Based on average shares outstanding. |
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|
(b) |
Total investment return based on market value is calculated assuming that shares of the Funds common stock were purchased at the closing market price as of the beginning of the period, dividends, capital gains, and other distributions were reinvested as provided for in the Funds dividend reinvestment plan and then sold at the closing market price per share on the last day of the period. The computation does not reflect any sales commission investors may incur in purchasing or selling shares of the Fund. The total investment return based on the net asset value is similarly computed except that the Funds net asset value is substituted for the closing market value. |
Amounts listed as are $0 or round to $0.
See Notes to Financial Statements.
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
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Notes to Financial Statements
October 31, 2014
1. Organization
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. (the Fund) was incorporated in Maryland on October 12, 1993, and is registered under the Investment Company Act of 1940, as amended, as a closed-end, nondiversified management investment company. The Fund trades on the NYSE MKT under the ticker symbol ETF.
The Funds name reflects the new investment policies which were approved by the Funds Board of Directors (the Board) and also by shareholders at a Special Meeting of Shareholders on March 14, 2013. As a result of these policy changes, effective March 15, 2013, the Funds new investment policies are as follows:
As a fundamental policy, under normal market conditions, at least 80% of the Funds net assets, plus any borrowings for investment purposes, will be invested in equity securities of emerging market smaller company issuers. An emerging market country is any country determined by Aberdeen Asset Managers Limited, the Funds investment adviser (the Adviser), to have an emerging market economy, considering factors such as the countrys credit rating, its political and economic stability and the development of its financial and capital markets. Emerging market countries for purposes of this policy can include every nation in the world except the United States, Canada, Japan, Australia, New Zealand and most countries located in Western Europe. Smaller companies for the purposes of this policy can be companies that, at the time of purchase, have a market capitalization of less than $5 billion.
The approved changes have not altered the Funds investment objective of seeking long-term capital appreciation.
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform to accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The accounting records of the Fund are maintained in U.S. Dollars.
(a) Security Valuation:
The Fund values its securities at current market value or fair value consistent with regulatory requirements. Fair value is defined in the Funds valuation and liquidity procedures as the price that could be received to sell an asset or paid to transfer a liability in an orderly
transaction between willing market participants without a compulsion to contract at the measurement date.
Equity securities that are traded on an exchange are valued at the last quoted sale price on the principal exchange on which the security is traded at the Valuation Time subject to application, when appropriate, of the valuation factors described in the paragraph below. The Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time). In the absence of a sale price, the security is valued at the mean of the bid/ask quoted at the close on the principal exchange on which the security is traded. Securities traded on NASDAQ are valued at the NASDAQ official closing price. Closed-end funds and exchange-traded funds (ETFs) are valued at the market price of the security at the Valuation Time. A security using any of these pricing methodologies is determined to be a Level 1 investment.
Foreign equity securities that are traded on foreign exchanges that close prior to the Valuation Time are valued by applying valuation factors to the last sale price or the mean price as noted above. Valuation factors are provided by an independent pricing service provider. These valuation factors are used when pricing the Funds portfolio holdings to estimate market movements between the time foreign markets close and the time the Fund values such foreign securities. These valuation factors are based on inputs such as depositary receipts, indices, futures, sector indices/ETFs, exchange rates, and local exchange opening and closing prices of each security. When prices with the application of valuation factors are utilized, the value assigned to the foreign securities may not be the same as quoted or published prices of the securities on their primary markets. A security that applies a valuation factor is determined to be a Level 2 investment because the exchange-traded price has been adjusted. Valuation factors are not utilized if the independent pricing service provider is unable to provide a valuation factor or if the valuation factor falls below a predetermined threshold; in such case, the security is determined to be a Level 1 investment.
In the event that a securitys market quotations are not readily available or are deemed unreliable (for reasons other than because the foreign exchange on which it trades closes before the Valuation Time), the security is valued at fair value as determined by the Funds Pricing Committee, taking into account the relevant factors and surrounding circumstances using valuation policies and procedures approved and established by the Board. A security that has been fair valued by the Pricing Committee may be classified as Level 2 or 3 depending on the nature of the inputs.
The Fund also invests in private equity private placement securities, which represented 1.8% of the net assets of the Fund as of October 31, 2014. The private equity private placement securities are deemed to
Notes to Financial Statements (continued)
October 31, 2014
be restricted securities. In the absence of readily ascertainable market values, these securities are valued at fair value as determined in good faith by, or under the direction of the Board, under procedures established by the Board. The Funds estimate of fair value assumes a willing buyer and a willing seller neither of whom are acting under the compulsion to buy or sell. Although these securities may be resold in privately negotiated transactions, the prices realized on such sales could differ from the prices originally paid by the Fund or the current carrying values, and the difference could be material. These securities are categorized as Level 3 investments. Level 3 investments have significant unobservable inputs, as they trade infrequently. In determining the fair value of these investments, management uses the market approach which includes as the primary input the capital balance reported; however, adjustments to the reported capital balance may be made based on various factors, including, but not limited to, the attributes of the interest held, including the rights and obligations, and any restrictions or illiquidity of such interests, and the fair value of these private equity investments.
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the Fund discloses the fair value of its investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair value. The hierarchy assigns Level 1 measurements to valuations based upon unadjusted quoted prices in active markets for identical assets, Level 2 measurements to valuations based upon other significant observable inputs, including adjusted quoted prices in active markets for identical
assets, and Level 3 measurements to valuations based upon unobservable inputs that are significant to the valuation. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instruments level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The three-level hierarchy of inputs is summarized below:
Level 1 quoted prices in active markets for identical investments;
Level 2 other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk); or
Level 3 significant unobservable inputs (including a Funds own assumptions in determining the fair value of investments).
The following is a summary of the inputs used as of October 31, 2014 in valuing the Funds investments at fair value. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Please refer to the Portfolio of Investments for a detailed breakout of the security types:
Investments, at Value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Long-Term Investments |
|
|
|
|
|
|
|
|
|
Banks |
|
$5,773,587 |
|
$8,659,501 |
|
$ |
|
$14,433,088 |
|
Beverages |
|
2,460,981 |
|
4,503,866 |
|
|
|
6,964,847 |
|
Chemicals |
|
4,956,723 |
|
3,665,911 |
|
|
|
8,622,634 |
|
Construction Materials |
|
2,477,329 |
|
7,935,134 |
|
|
|
10,412,463 |
|
Electronic Equipment Instruments & Components |
|
|
|
2,476,174 |
|
|
|
2,476,174 |
|
Food & Staples Retailing |
|
3,784,581 |
|
7,727,729 |
|
|
|
11,512,310 |
|
Food Products |
|
4,891,550 |
|
1,868,308 |
|
|
|
6,759,858 |
|
Health Care Providers & Services |
|
2,517,515 |
|
1,551,934 |
|
|
|
4,069,449 |
|
Hotels, Restaurants & Leisure |
|
2,190,007 |
|
4,695,185 |
|
|
|
6,885,192 |
|
Industrial Conglomerates |
|
|
|
2,111,853 |
|
|
|
2,111,853 |
|
Information Technology Services |
|
4,751,559 |
|
1,714,063 |
|
|
|
6,465,622 |
|
Insurance |
|
|
|
1,927,839 |
|
|
|
1,927,839 |
|
Marine |
|
|
|
1,579,541 |
|
|
|
1,579,541 |
|
Media |
|
|
|
1,609,427 |
|
|
|
1,609,427 |
|
Multiline Retail |
|
4,261,496 |
|
1,669,559 |
|
|
|
5,931,055 |
|
Pharmaceuticals |
|
2,028,127 |
|
2,299,233 |
|
|
|
4,327,360 |
|
|
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
|
Notes to Financial Statements (continued)
October 31, 2014
Investments, at Value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Real Estate Management & Development |
|
$10,755,904 |
|
$3,329,248 |
|
$ |
|
$14,085,152 |
|
Road & Rail |
|
2,471,526 |
|
2,389,377 |
|
|
|
4,860,903 |
|
Semiconductors & Semiconductor Equipment |
|
|
|
2,203,999 |
|
|
|
2,203,999 |
|
Specialty Retail |
|
1,412,487 |
|
1,375,487 |
|
|
|
2,787,974 |
|
Textiles, Apparel & Luxury Goods |
|
3,247,852 |
|
1,281,321 |
|
|
|
4,529,173 |
|
Trading Companies & Distributors |
|
|
|
3,123,056 |
|
|
|
3,123,056 |
|
Transportation Infrastructure |
|
8,095,303 |
|
1,494,257 |
|
|
|
9,589,560 |
|
Other |
|
12,142,419 |
|
|
|
|
|
12,142,419 |
|
Private Equity |
|
|
|
|
|
2,735,971 |
|
2,735,971 |
|
Total |
|
$78,218,946 |
|
$71,192,002 |
|
$2,735,971 |
|
$152,146,919 |
|
Amounts listed as are $0 or round to $0.
For movements between the Levels within the fair value hierarchy, the Fund has adopted a policy of recognizing transfers at the end of each period. The utilization of valuation factors may result in transfers between Level 1 and Level 2. For the year ended October 31, 2014, the securities issued by Bank Muscat SAOG, GDR, Castrol (India) Ltd., Container Corp. of India, Guinness Nigeria PLC, Hana Microelectronics PCL, MphasiS Ltd., OKey Group SA and United Plantations Bhd in the amounts of $2,096,000, $1,948,059, $2,389,377, $1,704,361, $2,476,174, $1,714,063, $2,026,518 and $1,868,308, respectively, transferred from Level 1 to Level 2 because there was a valuation factor applied at October 31, 2014. The securities issued by Bank Permata Tbk PT, Clicks Group Ltd., Fraser & Neave Holdings Bhd, Oriental Holdings Bhd, Petra Foods Ltd., Piramal Enterprises Ltd. and The Ramco
Cements Ltd., in the amounts of $1,873,728, $3,784,581, $59,271, $1,422,775, $3,404,592, $2,028,127 and $2,477,329, respectively, transferred from Level 2 to Level 1 because there was not a valuation factor applied at October 31, 2014.
The significant unobservable inputs used in the fair value measurement of the Funds private equity holdings are audited financial statements, interim financial statements, capital calls, distributions, and discussions with investment companies. These unobservable inputs are used by taking the most recent quarterly valuation statements and adjusting the value using the unobservable inputs mentioned above. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement.
|
|
Fair Value |
|
Valuation Technique |
|
Unobservable Inputs |
|
Range |
|
Private Equity |
|
$2,735,971 |
|
Partner Capital |
|
Capital Calls & Distributions |
|
$0-$(114,442) |
|
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:
Investments, |
|
Balance |
|
Accrued |
|
Realized |
|
Change in |
|
Capital |
|
Distributions/ |
|
Net |
|
Net |
|
Balance |
|
Private Equity |
|
$2,802,568 |
|
$ |
|
$(1,836,108) |
|
$2,006,445 |
|
$ |
|
$(236,934) |
|
$ |
|
$ |
|
$2,735,971 |
|
Total |
|
$2,802,568 |
|
$ |
|
$(1,836,108) |
|
$2,006,445 |
|
$ |
|
$(236,934) |
|
$ |
|
$ |
|
$2,735,971 |
|
Amounts listed as are $0 or round to $0.
Change in unrealized appreciation/depreciation relating to investments still held at October 31, 2014 is $306,095.
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
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(b) Foreign Currency Translation:
Foreign securities, currencies, and other assets and liabilities denominated in foreign currencies are translated into U.S. Dollars at the exchange rate of said currencies against the U.S. Dollar, as of the Valuation Time, as provided by an independent pricing service approved by the Board.
Foreign currency amounts are translated into U.S. Dollars on the following basis:
(i) market value of investment securities, other assets and liabilities at the exchange rates at the current daily rates of exchange; and
(ii) purchases and sales of investment securities, income and expenses at the rate of exchange prevailing on the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments in equity securities which is due to changes in the foreign exchange rates from that which is due to changes in market prices of equity securities. Accordingly, realized and unrealized foreign currency gains and losses with respect to such securities are included in the reported net realized and unrealized gains and losses on investment transactions balances.
The Fund reports certain foreign currency related transactions and foreign taxes withheld on security transactions as components of realized gains for financial reporting purposes, whereas such foreign currency related transactions are treated as ordinary income for U.S. federal income tax purposes.
Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation/depreciation in value of investments, and translation of other assets and liabilities denominated in foreign currencies.
Net realized foreign exchange gains or losses represent foreign exchange gains and losses from transactions in foreign currencies and forward foreign currency contracts, exchange gains or losses realized between the trade date and settlement date on security transactions, and the difference between the amounts of interest and dividends recorded on the Funds books and the U.S. Dollar equivalent of the amounts actually received.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. Dollar. Generally, when the U.S. Dollar rises in value against foreign currency, the Funds investments denominated in that foreign currency will lose value because the foreign
currency is worth fewer U.S. Dollars; the opposite effect occurs if the U.S. Dollar falls in relative value.
(c) Warrants
The Fund may hold warrants either through direct purchase or pursuant to corporate actions. Warrants are securities that give the holder the right, but not the obligation, to purchase securities from an issuer at a fixed price within a certain time frame. The Fund holds warrants until exercised, sold or expired. Warrants are valued at the last sale price on the exchange on which they are traded.
(d) Security Transactions and Investment Income:
Security transactions are recorded on the trade date. Realized and unrealized gains/(losses) from security and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date except for certain dividends on foreign securities, which are recorded as soon as the Fund is informed after the ex-dividend date. Interest income and expenses are recorded on an accrual basis.
(e) Distributions:
On an annual basis, the Fund intends to distribute its net realized capital gains, if any, by way of a final distribution to be declared during the calendar quarter ending December 31. Dividends and distributions to shareholders are recorded on the ex-dividend date.
Dividends and distributions to shareholders are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments for foreign currencies, passive foreign investment companies, wash sales, and partnership basis adjustments.
(f) Federal Income Taxes:
The Fund intends to continue to qualify as a regulated investment company by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code of 1986, as amended, and to make distributions of net investment income and net realized capital gains sufficient to relieve the Fund from all federal income taxes. Therefore, no federal income tax provision is required.
The Fund recognizes the tax benefits of uncertain tax positions only where the position is more likely than not to be sustained assuming examination by tax authorities. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Since tax authorities can examine previously filed tax returns, the Funds U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended October 31 are subject to such review.
Notes to Financial Statements (continued)
October 31, 2014
(g) Partnership Accounting Policy:
The Fund records its pro-rata share of the income/(loss) and capital gains/(losses) allocated from the underlying partnerships and adjusts the cost of the underlying partnerships accordingly. These amounts are included in the Funds Statement of Operations.
3. Agreements and Transactions with Affiliates
(a) Investment Adviser:
Aberdeen Asset Managers Limited (AAML or the Adviser) serves as the Funds investment adviser with respect to all investments. AAML is a direct wholly-owned subsidiary of Aberdeen Asset Management PLC. AAML receives as compensation for its advisory services from the Fund, an annual fee, calculated weekly and paid quarterly, equal to 1.25% of the first $100 million of the Funds average weekly market value or net assets (whichever is lower), 1.125% of the next $100 million and 1.00% of amounts in excess of $200 million. Effective March 6, 2013, AAML has agreed to contractually waive 0.05% of its annual advisory fee waiver agreement (Waiver Agreement). The Waiver Agreement shall continue until the end of the current term of the Advisory Agreement and may continue thereafter if specifically approved by the Adviser and the Funds Board. Prior to March 6, 2013, AAML voluntarily waived an equal portion of its advisory fee. For the year ended October 31, 2014, AAML earned $1,656,206 for advisory services, of which AAML waived $68,054.
(b) Fund Administration:
Effective April 1, 2014, Aberdeen Asset Management Inc. (AAMI), an affiliate of the Investment Adviser, is the Funds Administrator, pursuant to an agreement under which AAMI receives a fee payable quarterly by the Fund, at an annual fee rate of 0.08% of the Funds average monthly Managed Assets . For the seven months ended October 31, 2014, AAMI earned $72,289 from the Fund for administration services.
Prior to April 1, 2014, Brown Brothers Harriman & Co. (BBH & Co.) was the administrator for the Fund and certain other funds advised by AAML and its affiliates (collectively the Funds). The Funds paid BBH & Co. a monthly administration and fund accounting service fee at an annual rate of 0.02% of the Funds aggregate assets up to $250 million, 0.015% for the next $250 million and 0.01% in excess of $500 million. The rate would have increased had BBH & Co. been retained to continue to serve as the administrator to the Fund.
The Fund paid its pro rata portion of the fee based on its level of assets with a monthly minimum of $2,500. For the five months ended March 31, 2014, BBH & Co. earned $12,500 from the Fund for administrative and fund accounting services.
(c) Investor Relations:
Under the terms of an Investor Relations Services Agreement, Aberdeen Asset Management Inc. (AAMI), an affiliate of AAML, serves as the Funds investor relations services provider.
Pursuant to the terms of the Investor Relations Services Agreement, AAMI provides, among other things, objective and timely information to shareholders based on publicly-available information; provides information efficiently through the use of technology while offering shareholders immediate access to knowledgeable investor relations representatives; develops and maintains effective communications with investment professionals from a wide variety of firms; creates and maintains investor relations communication materials such as fund manager interviews, films and webcasts, published white papers, magazine and articles and other relevant materials discussing the Funds investment results, portfolio positioning and outlook; develops and maintains effective communications with large institutional shareholders; responds to specific shareholder questions; and reports activities and results to the Board and management detailing insight into general shareholder sentiment.
For the year ended October 31, 2014, the Fund incurred fees of approximately $64,542 for investor relations services. Investor relations fees and expenses in the Statement of Operations include certain out-of-pocket expenses.
(d) Directors Purchase Plan:
Fifty percent (50%) of the annual retainer of the Independent Directors is invested in Fund shares and, at the option of each Independent Director, 100% of the annual retainer can be invested in shares of the Fund. During the year ended October 31, 2014, 3,803 shares were purchased pursuant to the Directors compensation plan. As of October 31, 2014, the Directors as a group owned less than 1% of the Funds outstanding shares.
4. Investment Transactions
Purchases and sales of investment securities (excluding short-term securities) for the fiscal year ended October 31, 2014, were $15,399,033 and $42,701,990, respectively.
5. Capital
The authorized capital of the Fund is 100,000,000 shares of $0.001 par value common stock. As of October 31, 2014, there were 9,764,732 shares of common stock issued and outstanding.
On December 6, 2013, the Board of Directors declared the payment of an elective cash distribution in the amount of $6.02616 per share of common stock to be paid, on January 31, 2014, to shareholders of record at the close of business on December 20, 2013. The distribution
Notes to Financial Statements (continued)
October 31, 2014
was payable in shares of the Funds common stock. However, shareholders had the option to request that their distributions be paid in cash in lieu of common stock. The aggregate amount of cash distributions to all shareholders was limited to 60% of the aggregate dollar amount of the total distribution. Because cash distribution requests exceeded this limit, the cash distribution was pro-rated among all stockholders who made such requests. Shareholders who requested cash distributions received $4.37 per share of the distribution in cash
and received the balance in the Funds common stock. For purposes of computing the stock portion of the dividend, the common stock distributed was valued at $13.09 per share, which equalled the average closing price of the Funds common shares on the NYSE MKT on January 23, 2014 and the two preceding trading days. Following the close of the elective stock distribution, the Fund issued 1,518,067 shares. Following the closing of the elective cash distribution, the Funds number of shares was 9,764,732.
6. Restricted Securities:
Certain of the Funds investments are restricted as to resale and are valued at fair value as determined in good faith by, or under the direction of, the Board under procedures established by the Board in the absence of readily ascertainable market values.
Security |
|
Acquisition Date(s) |
|
Cost |
|
Fair Value At |
|
Percent of |
|
Cumulative |
|
Open |
|
BPA Israel Ventures, LLC |
|
10/05/00 12/09/05 |
|
$989,431 |
|
$361,292 |
|
0.24 |
|
$268,344 |
|
$625,413 |
|
Concord Fund I Liquidating Main Trust |
|
12/08/97 09/29/00 |
|
1,194,943 |
|
79,400 |
|
0.05 |
|
1,386,405 |
|
|
|
Emerging Markets Ventures l, L.P. |
|
01/22/98 01/10/06 |
|
2,509,231 |
|
259,508 |
|
0.17 |
|
7,518,174 |
|
851,171 |
|
Giza GE Venture Fund III, L.P. |
|
01/31/00 11/23/06 |
|
1,717,032 |
|
169,015 |
|
0.11 |
|
885,262 |
|
|
|
Neurone Ventures II, L.P. |
|
11/24/00 12/21/10 |
|
223,817 |
|
541,989 |
|
0.36 |
|
431,533 |
|
|
|
Technology Crossover Ventures IV, L.P. |
|
03/08/00 09/27/10 |
|
359,691 |
|
7,710 |
|
0.00 |
|
3,036,050 |
|
48,000 |
|
Telesoft Partners II QP, L.P. |
|
07/14/00 03/01/10 |
|
1,285,581 |
|
1,209,240 |
|
0.79 |
|
1,109,561 |
|
|
|
Vidyo, Inc. Trust Warrants |
|
10/24/12 |
|
1,251 |
|
|
|
0.00 |
|
|
|
|
|
Vidyo, Inc. Trust Common |
|
10/24/12 |
|
1,648 |
|
1,388 |
|
0.00 |
|
|
|
|
|
Vidyo, Inc. Trust A (Preferred) |
|
10/24/12 |
|
29,796 |
|
25,082 |
|
0.02 |
|
|
|
|
|
Vidyo, Inc. Trust B (Preferred) |
|
10/24/12 |
|
14,207 |
|
14,590 |
|
0.01 |
|
|
|
|
|
Vidyo, Inc. Trust B1 (Preferred) |
|
10/24/12 |
|
12,092 |
|
10,179 |
|
0.01 |
|
|
|
|
|
Vidyo, Inc. Trust C (Preferred) |
|
10/24/12 |
|
6,279 |
|
5,286 |
|
0.00 |
|
|
|
|
|
Vidyo, Inc. Trust C1 (Preferred) |
|
10/24/12 |
|
3,796 |
|
3,254 |
|
0.00 |
|
|
|
|
|
Vidyo, Inc. Trust D (Preferred) |
|
10/24/12 |
|
2,482 |
|
2,127 |
|
0.00 |
|
|
|
|
|
Walden-Israel Ventures III, L.P. |
|
02/23/01 10/20/10 |
|
692,704 |
|
45,911 |
|
0.03 |
|
1,295,125 |
|
|
|
Total |
|
|
|
$9,043,981 |
|
$2,735,971 |
|
1.79 |
|
$15,930,454 |
|
$1,524,584 |
|
Amounts listed as are $0 or round to $0.
The Fund may incur certain costs in connection with the disposition of the above securities.
7. Open Market Repurchase Program
The Board authorized, but does not require, Fund management to make open market purchases from time to time in an amount up to 10% of the Funds outstanding shares, in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, and other applicable federal securities laws. Such purchases may be made when, in the reasonable judgment of Fund management, such repurchases may enhance shareholder value and when the Funds shares are trading at
a discount to net asset value of 12% or more, subject to intraday fluctuations that may result in repurchases at discounts below 12%. The Board has instructed Fund management to report repurchase activity to it regularly, and to post the number of shares repurchased on the Funds website on a monthly basis. For the year ended October 31, 2014, the Fund did not repurchase shares through this program.
Notes to Financial Statements (continued)
October 31, 2014
8. Portfolio Investment Risks
(a) Risks Associated with Foreign Securities and Currencies:
Investments in securities of foreign issuers carry certain risks not ordinarily associated with investments in securities of U.S. issuers. These risks include future political and economic developments, and the possible imposition of exchange controls or other foreign governmental laws and restrictions. In addition, with respect to certain countries, there is the possibility of expropriation of assets, confiscatory taxation, and political or social instability or diplomatic developments, which could adversely affect investments in those countries.
Certain countries also may impose substantial restrictions on investments in their capital markets by foreign entities, including restrictions on investments in issuers of industries deemed sensitive to relevant national interests. These factors may limit the investment opportunities available and result in a lack of liquidity and high price volatility with respect to securities of issuers from developing countries.
(b) Risks Associated with Emerging Markets:
The emerging countries securities markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. A high proportion of the securities of many companies in emerging countries may be held by a limited number of persons, which may limit the number of securities available for investment by the Fund. The limited liquidity of emerging country securities markets may also affect the Funds ability to acquire or dispose of securities at the price and time it wishes to do so.
(c) Risks Associated with Restricted Securities:
The Fund, subject to local investment limitations, may invest up to 30% of its assets (at the time of commitment) in illiquid equity securities, including securities of private equity funds (whether in corporate or partnership form) that invest primarily in emerging markets. When investing through another investment fund, the Fund will bear its proportionate share of the expenses incurred by that underlying fund, including management fees. Such securities are expected to be illiquid and may involve a high degree of business and financial risk and may result in substantial losses. Because of the current absence of any liquid trading market for these investments, the private equity funds may take longer to liquidate than would be the case for publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized on such sales could be substantially less than those originally paid by the Fund or the current carrying values and these differences could be material. Further, companies whose securities are not publicly traded may not be subject to the disclosures and other investor protection requirements applicable to companies whose securities are publicly traded.
(d) Risks Associated with Focus on Emerging Markets Smaller Companies:
The Fund focuses its investments in the equity securities of emerging markets smaller companies issuers. Securities of companies in emerging market countries are generally more volatile, harder to price and less liquid than U.S. securities, due to less stable governments, more volatile currencies and less established markets. Additionally, securities of smaller companies are usually less stable in price and less liquid than those of larger, more established companies. These risks will have a greater impact on the Funds net asset value and will cause its shares to fluctuate more than if the Fund did not focus its investments in these types of securities.
9. Contingencies
In the normal course of business, the Fund may provide general indemnifications pursuant to certain contracts and organizational documents. The Funds maximum exposure under these arrangements is dependent on future claims that may be made against the Fund, and therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.
10. Tax Information
The U.S. federal income tax basis of the Funds investments and the net unrealized appreciation as of October 31, 2014 were as follows:
Tax Basis of |
|
Appreciation |
|
Depreciation |
|
Net |
|
$162,311,153 |
|
$15,389,411 |
|
$(25,553,645 |
) |
$(10,164,234) |
|
Income and capital gains distributions are determined in accordance with federal income tax regulations, which may differ from GAAP.
Notes to Financial Statements (concluded)
October 31, 2014
The tax character of distributions paid during the fiscal years ended October 31, 2014 and October 31, 2013 was as follows:
|
|
October 31, 2014 |
|
October 31, 2013 |
|
Distributions paid from: |
|
|
|
|
|
Ordinary Income |
|
$2,854,581 |
|
$3,224,149 |
|
Net long-term capital gains |
|
46,909,496 |
|
|
|
Total tax character of distributions |
|
$49,764,077 |
|
$3,224,149 |
|
As of October 31, 2014, the components of accumulated earnings (deficit) on a tax basis were as follows:
Undistributed ordinary income net |
|
$2,028,932 |
|
Undistributed long-term capital gains net |
|
|
|
Total undistributed earnings |
|
$2,028,932 |
|
Capital loss carryforward |
|
(3,014,589) |
* |
Other currency gains |
|
|
|
Unrealized appreciation/(depreciation) |
|
(10,190,639) |
|
Total accumulated earnings/(losses) net |
|
$(11,176,296) |
|
* During the year ended October 31, 2014 the Fund generated a capital loss carryforward of $3,014,589, which consisted of $2,422,435 of short-term post RIC-Mod losses and $592,154 long-term post RIC-Mod losses with no expiration date. Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, the table below details the necessary reclassifications, which are a result of permanent differences primarily attributable to partnerships, distribution re-designations, and foreign currency losses. These reclassifications have no effect on net assets or net asset values per share.
|
|
Accumulated |
|
Accumulated |
|
|
|
$1,336,179 |
|
$(1,336,179) |
|
11. Recent Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board issued guidance to improve the financial reporting of repurchase agreements and other similar transactions. The guidance includes expanded disclosure requirements for entities that enter into repurchase agreements and similar transactions accounted for as secured borrowings. The guidance is effective for financial statements with fiscal years beginning on or after December 15, 2014 and interim periods within those fiscal years.
Management is evaluating the impact, if any, of this guidance on the Funds financial statement disclosures.
12. Subsequent Events
Management has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no disclosures or adjustments were required to the financial statements as of October 31, 2014.
On December 19, 2014 the Fund announced that it will pay, on January 12, 2015, a distribution of $0.20779 per share to all shareholders of record as of December 31, 2014.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. (the Fund) at October 31, 2014, the results of its operations for the year then ended, th