UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
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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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Registrant’s telephone number, including area code: |
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800-522-5465 |
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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, 2016 |
Explanatory Note: An amended Form N-CSR for Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. (ABE) was filed on February 16, 2017 to add the heading of “Interested Directors” at the top of the column on page 25 of the shareholder report, which was inadvertently excluded from the shareholder report in the Form N-CSR filed on January 9, 2017; however, the dates on the certifications and signatures pages were not updated in the February 16, 2017 amended N-CSR filing. This amended Form N-CSR for ABE is filed to update the dates on the certifications and signature page included in the Form N-CSR.
Item 1 - Reports to Stockholders.
The Report to Shareholders is attached herewith.
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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 fiscal year ended October 31, 2016. The Fund’s 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.
NAV Total Return Performance
For the fiscal year ended October 31, 2016, the total return to shareholders of the Fund based on the net asset value (“NAV”), net of fees, of the Fund was 9.7%, assuming reinvestment of dividends and distributions, versus a return of 5.1% for the Fund’s benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Small Cap Index.1 The Fund’s total return for the fiscal year ended October 31, 2016 and per annum since inception total return is based on the reported NAV on the financial reporting period end.
Share Price Total Return Performance & Discount
For the fiscal year ended October 31, 2016, based on market price, the Fund’s total return was 7.6%, assuming reinvestment of dividends and distributions. The Fund’s share price increased 6.8% over the fiscal year, from $11.55 on October 31, 2015 to $12.33 on October 31, 2016. The Fund’s share price on October 31, 2016 represented a discount of 14.6% to the NAV per share of $14.43 on that date, compared with a discount of 12.9% to the NAV per share of $13.26 on October 31, 2015.
Open Market Repurchase Program
The Fund’s policy is to consider buying back Fund shares on the open market when the Fund trades at certain discounts to the NAV and management believes such repurchases may enhance shareholder value. During the fiscal year ended October 31, 2016, the Fund repurchased 90,827 shares. During the fiscal year ended October 31, 2015, the Fund repurchased 29,970 shares.
Portfolio Holdings Disclosure
The Fund’s complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year are included in the Fund’s semi-annual and annual reports to shareholders. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s 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 Fund’s website or upon request and without charge by calling Investor Relations toll-free at 1-800-522-5465.
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 31 of the relevant year: (i) upon request and without charge by calling Investor Relations toll-free at 1-800-522-5465; and (ii) on the SEC’s website at http://www.sec.gov.
Unclaimed Share Accounts
Please be advised that abandoned or unclaimed property laws for certain states require financial organizations to transfer (escheat) unclaimed property (including Fund shares) to the state. Each state has its own definition of unclaimed property, and Fund shares could be considered “unclaimed property” due to account inactivity (e.g., no owner-generated activity for a certain period), returned mail (e.g., when mail sent to a shareholder is returned to the Fund’s transfer agent as undeliverable), or a combination of both. If your Fund shares are categorized as unclaimed, your financial advisor or the Fund’s transfer agent will follow the applicable state’s statutory requirements to contact you, but if unsuccessful, laws may require that the shares be escheated to the appropriate state. If this happens, you will have to contact the state to recover your property, which may involve time and expense. For more information on unclaimed property and how to maintain an active account, please contact your financial adviser or the Fund’s transfer agent.
Investor Relations Information
As part of Aberdeen’s commitment to shareholders, we invite you to visit the Fund on the web at www.aberdeenabe.com. Here, you can view monthly fact sheets, quarterly commentary, distribution and performance information, updated daily fact sheets courtesy of Morningstar®, portfolio charting and other Fund literature.
Enroll in Aberdeen’s email services and be among the first to receive the latest closed-end fund news, announcements, videos and information. In addition, you can receive electronic versions of important Fund documents including annual reports, semi-annual reports, prospectuses, and proxy statements. Sign-up today at www.aberdeen-asset.us/aam.nsf/usclosed/email.
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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 global emerging markets. As of October 31, 2016, 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. No fees or expenses are reflected. You cannot invest directly in an index. |
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
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Letter to Shareholders (unaudited) (concluded)
For your convenience, 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.
Contact Us:
· Visit: cef.aberdeen-asset.us;
· Watch:
www.aberdeen-asset.us/aam.nsf/usclosed/aberdeentv;
· Email: InvestorRelations@aberdeen-asset.com; or
· Call: 1-800-522-5465 (toll-free in the U.S.).
Yours sincerely,
Christian Pittard
President
Dividend Reinvestment and Direct Stock Purchase Plan (unaudited)
Computershare Trust Company, N.A. (“Computershare”), the Fund’s 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 purchase 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 in 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 Adviser (unaudited)
Market/economic review
Shares of smaller companies in emerging stock markets, as measured by the MSCI Emerging Markets Small Cap Index, rose over the 12-month reporting period, but underperformed their larger counterparts, as represented by the MSCI Emerging Markets Index. Among the key events during the period was the interest-rate hike by the U.S. Federal Reserve (Fed) in December 2015, although the well-telegraphed move did not rattle markets. At the start of 2016, weak crude oil prices and a sell-off in Chinese shares heightened risk aversion. However, continued monetary stimulus from global central banks and a sharp rebound in commodity prices spurred a comeback. In June 2016, the UK’s vote to leave the European Union sent shockwaves across global markets, and the pound crashed to a multi-year low against the U.S. dollar. Meanwhile, the Fed’s decision to delay a subsequent interest-rate hike and signs of stabilization in the Chinese economy supported investor sentiment. However, caution ahead of the U.S. presidential election in early November 2016 capped gains towards the end of the period. Additionally, the Fed raised its benchmark interest rate for the first time in 12 months in mid-December 2016, citing the continued improvement in the U.S. labor market and moderate expansion of economic activity since the middle of 2016.
Fund performance review
The Fund’s overweight to Latin America, and particularly Brazil, was the key contributor to performance for the reporting period. The Brazilian market and currency extended their rally in response to interim President Michel Temer’s ambitious program of reforms designed to support the country’s public finances, as well as the impeachment of former President Dilma Rousseff. The Fund’s Brazilian holdings generally outperformed the broader Latin American market, led by shopping-mall operator Iguatemi, automobile rental company Localiza and retailer Arezzo. Robust performances from the Fund’s Indian holdings also benefited performance. Cement producer Ramco reported healthy results over the reporting period, which were attributable to higher prices and lower costs, while Godrej Consumer Products was supported by solid demand and cost discipline.
While the Fund’s underweight to Taiwan was a notable detractor from performance for the reporting period, this was offset by the underweight to Korea, as its market was one of the weakest performers. Conversely, the Fund’s exposure to Nigeria, which is not represented in the benchmark MSCI Emerging Markets Small Cap Index, hindered performance as the holdings were hampered by the naira’s significant devaluation. Brewer Guinness Nigeria was a notable detractor from Fund performance during the reporting period, dragged down further by relatively weak results and disappointment that the anticipated buyout by its parent, Diageo, did not transpire. The Fund’s exposure to Egypt also weighed on performance given the uncertainty over whether the currency would be allowed to devalue further. Shares of the Fund’s consumer-related holdings, such as packaged foods makers Juhayna and Edita Food Industries, came under particular pressure.
Non-Chinese investors, including the Fund, recently were authorized to invest directly in the People’s Republic of China (PRC) by trading with specified brokers in Shanghai or Shenzhen through a “stock connect” program. Investments through stock connect programs provide additional access to direct PRC investments, but may subject the Fund to additional risks, including those relating to liquidity, currency, legal and regulatory uncertainty, trade execution, operations, tax, counterparties (legal entities which may be exposed to financial risk) and credit.
In portfolio activity, we established a new position in Edita Food Industries, an Egyptian-branded snack-maker with a distribution network spanning the Middle East and Africa. We believe that the company has robust operations, a positive long-term outlook and a decent valuation. We also initiated holdings in three high-quality Turkish companies at what we believed were attractive valuations: life insurance and pension franchise AvivaSA; soft-drink bottler Coca-Cola Icecek; and software developer Logo Yazilim Sanayi ve Ticaret. Additionally, we purchased shares of traditional Chinese-medicine manufacturer Tong Ren Tang Technologies, as we believed it had an attractive valuation, and participated in the rights issues1 of both Pacific Basin Shipping and Bank Permata, which in our view were attractively discounted. In contrast, we exited positions in Lebanon-based Blom Bank, Brazilian mall operator Multiplan, Hong Kong-based apparel retailer Giordano, Russian retailer O’Key Group, and fabric and apparel distributor Texwinca Holdings in favor of what we believed were better opportunities elsewhere.
Outlook
A reactionary sell-off across the global financial markets immediately following Donald Trump’s victory in the U.S. presidential election seemed understandable, as investors had largely priced in a win for Hillary Clinton. However, until there is greater clarity on Trump’s policies, we feel that it is difficult to predict the impact on emerging markets over the medium term. One potential concern may be the possibility of increased trade barriers and U.S. withdrawal from or modification of trade agreements. We believe that the other pertinent factors will be the impact of a Trump presidency on the U.S. dollar and the Fed’s monetary policy. On a more positive note, however, we think that most emerging economies are in a better position to weather the uncertainty than they were during the “taper tantrum”2 in 2013. Furthermore, we feel that many of these countries – such as Brazil, India, and Indonesia – still have room to ease rates to help spur economic activity. At the corporate level, quarterly earnings generally have been in line or slightly above the markets’ expectations, supported by lower input costs and improved cost management. We remain confident in the quality of the Fund’s holdings, while we feel that valuations remain attractive despite emerging markets’ turnaround in 2016.
Aberdeen Asset Managers Limited
1 A rights issue entitles a company’s existing shareholders to buy additional shares directly from the company in proportion to their existing holdings, within a fixed time period.
2 “Taper tantrum” refers to the sell-off in the U.S. Treasury market and subsequent steep rise in yields in 2013 after the Fed gradually tightened monetary policy.
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
Total Investment Return (unaudited)
October 31, 2016
The following table summarizes the average annual Fund performance compared to the MSCI Emerging Markets (“EM”) Small Cap Index, the Fund’s benchmark, for the 1-year, 3-year, 5-year and 10-year periods as of October 31, 2016.(1)
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1 Year |
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3 Years |
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5 Years |
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10 Years |
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Net Asset Value (NAV) |
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9.7% |
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-1.7% |
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2.3% |
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3.2% |
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Market Value |
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7.6% |
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-3.4% |
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1.2% |
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2.6% |
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MSCI EM Small Cap Index |
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5.1% |
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-0.1% |
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2.8% |
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n/a(2) |
Aberdeen Asset Managers Limited has entered into a written contract with the Fund to waive certain 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 renewal of the term of the advisory agreement. Aberdeen Asset Management Inc. (“AAMI”) has entered into an agreement with the Fund to limit investor relations services fees, without which performance would be lower. For the fiscal year ended October 31, 2016, AAMI did not waive any investor relations services fees because the Fund did not reach the capped amount. See Note 3 in the Notes to Financial Statements. Returns represent past performance. Total investment return at NAV is based on changes in the NAV of Fund shares and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program sponsored by the Fund’s transfer agent. All return data at NAV includes fees charged to the Fund, which are listed in the Fund’s Statement of Operations under “Expenses”. Total investment return at market value is based on changes in the market price at which the Fund’s 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 Fund’s transfer agent. The Fund’s total investment return is based on the reported NAV on the financial reporting period ended October 31, 2016. Because the Fund’s 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. 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 Fund’s yield, return, market price and NAV will fluctuate. Performance information current to the most recent month-end is available at www.aberdeenabe.com or by calling 800-522-5465.
The net operating expense ratio, excluding fee waivers, based on the fiscal year ended October 31, 2016 was 1.60%. The net operating expense ratio, net of fee waivers, based on the fiscal year ended October 31, 2016 was 1.55%.
(1) Effective March 15, 2013, the Fund’s investment strategy changed from an infrastructure focus to a global emerging markets smaller company issuer focus. In connection with the strategy change, the Fund’s benchmark changed from the MSCI Emerging Markets Infrastructure Index to the MSCI EM Small Cap Index. The Fund’s performance information for periods that include performance prior to March 15, 2013, such as 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 EM Small Cap Index may not provide useful information to investors evaluating older Fund performance.
(2) There is no 10-year figure for the MSCI EM Small Cap Index because its inception date is June 1, 2007.
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
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Portfolio Summary (unaudited)
The following table summarizes the composition of the Fund’s portfolio by geographic classification expressed as a percentage of net assets as of October 31, 2016.
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Region
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As a Percentage of Net Assets |
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Asia |
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49.0% |
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Latin America |
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16.0% |
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Europe |
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13.8% |
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Africa |
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11.1% |
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North America |
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5.8% |
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Middle East |
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2.6% |
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Global |
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0.7% |
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Short-Term Investment |
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1.8% |
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Liabilities in Excess of Other Assets |
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(0.8)% |
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100.0%
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The following table summarizes the composition of the Fund’s portfolio, in Standard & Poor’s Global Industry Classification Standard (“GICS”) Sectors, expressed as a percentage of net assets. The GICS structure consists of 11 sectors, 24 industry groups, 68 industries and 157 subindustries. As of October 31, 2016, the Fund did not have more than 25% of its assets invested in any industry. The sectors, as classified by GICS Sectors, are comprised of several industries. As of October 31, 2016, the Fund held 99.9% of its net assets in equities, 1.8% in a short-term investment and -0.8% in liabilities in excess of other assets.
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Asset Allocation
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As a Percentage of Net Assets |
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Consumer Staples |
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19.7% |
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Industrials |
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17.4% |
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Consumer Discretionary |
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13.8% |
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Materials |
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12.2% |
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Real Estate |
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10.4% |
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Financials |
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9.3% |
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Information Technology |
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9.2% |
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Health Care |
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5.8% |
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Private Equity |
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1.2% |
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Short-Term Investment |
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1.8% |
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Liabilities in Excess of Other Assets |
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(0.8)% |
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100.0%
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Top Ten Equity Holdings (unaudited)
The following were the Fund’s top ten holdings as of October 31, 2016:
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Name of Security
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As a Percentage of Net Assets |
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Parque Arauco SA |
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4.0% |
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AKR Corporindo Tbk PT |
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3.6% |
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Godrej Consumer Products Ltd. |
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3.5% |
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Grupo Aeroportuario del Centro Norte SAB de CV, ADR |
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3.3% |
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Ramco Cements Ltd. (The) |
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2.9% |
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Iguatemi Empresa de Shopping Centers SA |
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2.7% |
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Jollibee Foods Corp. |
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2.5% |
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EPAM Systems, Inc. |
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2.4% |
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Delfi Ltd. |
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2.3% |
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Aeon Co. (M) Bhd |
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2.2% |
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
Portfolio of Investments
As of October 31, 2016
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Shares |
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Description |
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Industry |
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Value |
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LONG-TERM EQUITY SECURITIES IN EMERGING MARKET COUNTRIES—96.6% |
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COMMON STOCKS—95.4% |
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BRAZIL—9.7% |
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238,961 |
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Arezzo Industria e Comercio SA |
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Textiles, Apparel & Luxury Goods—1.6% |
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$ |
2,213,683 |
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398,155 |
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Iguatemi Empresa de Shopping Centers SA |
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Real Estate Management & Development—2.7% |
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3,760,769 |
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116,450 |
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Localiza Rent a Car SA |
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Road & Rail—1.0% |
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1,445,775 |
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410,595 |
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OdontoPrev SA |
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Health Care Providers & Services—1.1% |
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1,543,590 |
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154,000 |
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Totvs SA |
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Software—1.0% |
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1,397,193 |
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96,852 |
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Valid Solucoes e Servicos de Seguranca em Meios de Pagamento e Identificacao SA |
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Commercial Services & Supplies—0.7% |
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907,532 |
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201,000 |
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Wilson Sons Ltd., BDR |
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Transportation Infrastructure—1.6% |
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2,172,463 |
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13,441,005 |
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CHILE—5.1% |
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2,234,700 |
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Parque Arauco SA |
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Real Estate Management & Development—4.0% |
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5,535,263 |
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745,000 |
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Sonda SA |
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Information Technology Services—1.1% |
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1,539,681 |
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7,074,944 |
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CHINA—3.2% |
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835,000 |
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Tong Ren Tang Technologies Co. Ltd., H Shares(a) |
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Pharmaceuticals—1.1% |
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1,527,144 |
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1,812,400 |
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Yanlord Land Group Ltd.(a) |
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Real Estate Management & Development—1.3% |
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1,803,565 |
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2,704,000 |
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Yingde Gases Group Co. Ltd.(a) |
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Chemicals—0.8% |
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1,090,222 |
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4,420,931 |
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EGYPT—1.3% |
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|
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133,914 |
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Edita Food Industries SAE, GDR |
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Food Products—0.7% |
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938,737 |
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1,922,692 |
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Juhayna Food Industries |
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Food Products—0.6% |
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846,596 |
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1,785,333 |
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HONG KONG—4.3% |
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|
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400,000 |
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Cafe de Coral Holdings Ltd.(a) |
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Hotels, Restaurants & Leisure—1.0% |
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1,412,297 |
| |
|
1,000,000 |
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Dah Sing Banking Group Ltd.(a) |
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Banks—1.3% |
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1,805,975 |
| |
|
90,400 |
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Hong Kong Aircraft Engineering Co. Ltd.(a) |
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Transportation Infrastructure—0.5% |
|
644,026 |
| |
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14,116,000 |
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Pacific Basin Shipping Ltd.(a)(b) |
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Marine—1.5% |
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2,107,736 |
| |
|
|
|
|
|
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5,970,034 |
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INDIA—14.8% |
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|
|
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| |||
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235,000 |
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Castrol (India) Ltd.(a) |
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Chemicals—1.2% |
|
1,616,866 |
| |
|
144,000 |
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Container Corp. of India Ltd.(a) |
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Road & Rail—2.1% |
|
2,960,495 |
| |
|
204,372 |
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Godrej Consumer Products Ltd.(a) |
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Personal Products—3.5% |
|
4,895,484 |
| |
|
450,000 |
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Kansai Nerolac Paints Ltd.(a) |
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Chemicals—1.9% |
|
2,591,622 |
| |
|
220,074 |
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Mphasis Ltd.(a) |
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Information Technology Services—1.2% |
|
1,693,456 |
| |
|
104,500 |
|
Piramal Enterprises Ltd. |
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Pharmaceuticals—2.0% |
|
2,824,339 |
| |
|
420,000 |
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Ramco Cements Ltd. (The)(a) |
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Construction Materials—2.9% |
|
3,988,997 |
| |
|
|
|
|
|
|
|
20,571,259 |
| |
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INDONESIA—9.1% |
|
|
|
|
| |||
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36,278,000 |
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Ace Hardware Indonesia Tbk PT(a) |
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Specialty Retail—1.7% |
|
2,374,929 |
| |
|
9,086,300 |
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AKR Corporindo Tbk PT(a) |
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Trading Companies & Distributors—3.6% |
|
4,932,331 |
| |
|
20,098,637 |
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Bank Permata Tbk PT(a)(b) |
|
Banks—0.6% |
|
886,255 |
| |
|
2,020,000 |
|
Delfi Ltd. |
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Food Products—2.3% |
|
3,252,327 |
| |
|
17,142,800 |
|
Holcim Indonesia Tbk PT(a) |
|
Construction Materials—0.9% |
|
1,267,781 |
| |
|
|
|
|
|
|
|
12,713,623 |
| |
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
|
Portfolio of Investments (continued)
As of October 31, 2016
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Shares |
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Description |
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Industry |
|
Value |
| |
|
JORDAN—0.9% |
|
|
|
|
| |||
|
59,806 |
|
Hikma Pharmaceuticals PLC(a) |
|
Pharmaceuticals—0.9% |
|
$ |
1,282,738 |
|
|
KENYA—1.5% |
|
|
|
|
| |||
|
753,800 |
|
East African Breweries Ltd. |
|
Beverages—1.5% |
|
2,068,964 |
| |
|
MALAYSIA—6.3% |
|
|
|
|
| |||
|
4,519,900 |
|
Aeon Co. (M) Bhd(a) |
|
Multiline Retail—2.2% |
|
3,045,135 |
| |
|
300,000 |
|
Heineken Malaysia Bhd(a) |
|
Beverages—0.9% |
|
1,228,267 |
| |
|
790,200 |
|
Oriental Holdings Bhd |
|
Automobiles—0.9% |
|
1,312,919 |
| |
|
1,918,782 |
|
SP Setia Bhd |
|
Real Estate Management & Development—1.2% |
|
1,600,891 |
| |
|
240,000 |
|
United Plantations Bhd |
|
Food Products—1.1% |
|
1,596,186 |
| |
|
|
|
|
|
|
|
8,783,398 |
| |
|
MEXICO—3.3% |
|
|
|
|
| |||
|
98,676 |
|
Grupo Aeroportuario del Centro Norte SAB de CV, ADR |
|
Transportation Infrastructure—3.3% |
|
4,608,169 |
| |
|
NETHERLANDS—1.6% |
|
|
|
|
| |||
|
52,000 |
|
ASM International NV(a) |
|
Semiconductors & Semiconductor Equipment—1.6% |
|
2,218,084 |
| |
|
NIGERIA—1.0% |
|
|
|
|
| |||
|
2,125,000 |
|
Guinness Nigeria PLC |
|
Beverages—0.4% |
|
539,255 |
| |
|
19,437,011 |
|
Zenith Bank PLC |
|
Banks—0.6% |
|
908,807 |
| |
|
|
|
|
|
|
|
1,448,062 |
| |
|
PERU—1.2% |
|
|
|
|
| |||
|
195,354 |
|
Grana y Montero SA, ADR |
|
Construction & Engineering—1.2% |
|
1,629,252 |
| |
|
PHILIPPINES—2.5% |
|
|
|
|
| |||
|
705,660 |
|
Jollibee Foods Corp.(a) |
|
Hotels, Restaurants & Leisure—2.5% |
|
3,465,521 |
| |
|
POLAND—1.6% |
|
|
|
|
| |||
|
217,115 |
|
Eurocash SA (a) |
|
Food & Staples Retailing—1.6% |
|
2,198,844 |
| |
|
REPUBLIC OF SOUTH KOREA—2.2% |
|
|
|
|
| |||
|
261,171 |
|
BNK Financial Group, Inc.(a) |
|
Banks—1.5% |
|
2,116,985 |
| |
|
6,000 |
|
Shinsegae, Inc.(a) |
|
Multiline Retail—0.7% |
|
974,557 |
| |
|
|
|
|
|
|
|
3,091,542 |
| |
|
ROMANIA—1.9% |
|
|
|
|
| |||
|
989,000 |
|
BRD-Groupe Societe Generale SA(a) |
|
Banks—1.9% |
|
2,645,217 |
| |
|
RUSSIA—1.0% |
|
|
|
|
| |||
|
133,150 |
|
Synergy PJSC(b) |
|
Beverages—1.0% |
|
1,392,377 |
| |
|
SOUTH AFRICA—8.6% |
|
|
|
|
| |||
|
1,303,000 |
|
African Oxygen Ltd.(a) |
|
Chemicals—1.3% |
|
1,900,456 |
| |
|
196,384 |
|
City Lodge Hotels Ltd. |
|
Hotels, Restaurants & Leisure—1.5% |
|
2,123,212 |
| |
|
324,900 |
|
Clicks Group Ltd. |
|
Food & Staples Retailing—2.2% |
|
3,024,007 |
| |
|
187,676 |
|
JSE Ltd.(a) |
|
Capital Markets—1.6% |
|
2,186,449 |
| |
|
193,735 |
|
The SPAR Group Ltd. |
|
Food & Staples Retailing—2.0% |
|
2,744,295 |
| |
|
|
|
|
|
|
|
11,978,419 |
| |
|
SRI LANKA—1.9% |
|
|
|
|
| |||
|
2,583,318 |
|
John Keells Holdings PLC |
|
Industrial Conglomerates—1.9% |
|
2,602,531 |
| |
|
|
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
Portfolio of Investments (continued)
As of October 31, 2016
|
Shares |
|
Description |
|
Industry |
|
Value |
| |
|
TAIWAN—0.9% |
|
|
|
|
| |||
|
90,000 |
|
Poya International Co. Ltd.(a) |
|
Multiline Retail—0.9% |
|
$ |
1,308,321 |
|
|
THAILAND—4.9% |
|
|
|
|
| |||
|
1,900,100 |
|
BEC World PCL, Foreign Shares(a) |
|
Media—0.8% |
|
1,112,542 |
| |
|
190,000 |
|
Bumrungrad Hospital PCL, Foreign Shares(a) |
|
Health Care Providers & Services—0.7% |
|
992,568 |
| |
|
1,020,000 |
|
Central Pattana PCL, Foreign Shares(a) |
|
Real Estate Management & Development—1.2% |
|
1,628,096 |
| |
|
1,679,000 |
|
Hana Microelectronics PCL, Foreign Shares(a) |
|
Electronic Equipment Instruments & Components—1.1% |
|
1,533,343 |
| |
|
184,000 |
|
Siam City Cement PCL, Foreign Shares(a) |
|
Construction Materials—1.1% |
|
1,518,849 |
| |
|
|
|
|
|
|
|
6,785,398 |
| |
|
TURKEY—6.6% |
|
|
|
|
| |||
|
1,982,000 |
|
Aksigorta AS(a)(b) |
|
Insurance—0.9% |
|
1,295,886 |
| |
|
176,154 |
|
AvivaSA Emeklilik ve Hayat AS |
|
Insurance—0.9% |
|
1,188,687 |
| |
|
584,702 |
|
Cimsa Cimento Sanayi VE Ticaret A.S.(a) |
|
Construction Materials—2.1% |
|
2,906,190 |
| |
|
238,391 |
|
Coca-Cola Icecek AS(a) |
|
Beverages—1.9% |
|
2,697,004 |
| |
|
71,290 |
|
Logo Yazilim Sanayi Ve Ticaret(b) |
|
Software—0.8% |
|
1,175,015 |
| |
|
|
|
|
|
|
|
9,262,782 |
| |
|
|
|
|
|
|
|
132,746,748 |
| |
|
PRIVATE EQUITY—1.2% |
|
|
|
|
| |||
|
GLOBAL—0.8% |
|
|
|
|
| |||
|
7,248,829 |
(c) |
Emerging Markets Ventures I, L.P.(a)(b)(d)(e)(f)(g) |
|
Private Equity—0.1% |
|
150,921 |
| |
|
2,400,000 |
(c) |
Telesoft Partners II QP, L.P.(a)(b)(d)(g)(h) |
|
Private Equity—0.7% |
|
923,496 |
| |
|
|
|
|
|
|
|
1,074,417 |
| |
|
ISRAEL—0.4% |
|
|
|
|
| |||
|
1,674,587 |
(c) |
BPA Israel Ventures, LLC(a)(b)(d)(e)(f)(g) |
|
Private Equity—0.1% |
|
197,099 |
| |
|
72,640 |
|
Exent Technologies Ltd. Preferred A1 Shares(a)(b)(d)(g)(h)(i) |
|
Private Equity— –% |
|
– |
| |
|
62,304 |
|
Exent Technologies Ltd. Preferred C Shares(a)(b)(d)(g)(h)(i) |
|
Private Equity— –% |
|
– |
| |
|
15,716 |
|
Exent Technologies Ltd. Warrants A1(a)(b)(d)(g)(h)(i) |
|
Private Equity— –% |
|
– |
| |
|
52 |
|
Flash Networds Ltd. Warrants Ordinary(a)(b)(d)(g)(h)(i) |
|
Private Equity— –% |
|
– |
| |
|
46,856 |
|
Flash Networks Ltd. Ordinary Shares(a)(b)(d)(g)(h)(i) |
|
Private Equity— –% |
|
33,590 |
| |
|
12 |
|
Flash Networks Ltd. Series C Preferred(a)(b)(d)(g)(h)(i) |
|
Private Equity— –% |
|
– |
| |
|
23,264 |
|
Flash Networks Ltd. Series C-1 Preferred(a)(b)(d)(g)(h)(i) |
|
Private Equity— –% |
|
– |
| |
|
13,526 |
|
Flash Networks Ltd. Series D Preferred(a)(b)(d)(g)(h)(i) |
|
Private Equity— –% |
|
– |
| |
|
9,952 |
|
Flash Networks Ltd. Series E Preferred(a)(b)(d)(g)(h)(i) |
|
Private Equity— –% |
|
– |
| |
|
22 |
|
Flash Networks Ltd. Warrants C(a)(b)(d)(g)(h)(i) |
|
Private Equity— –% |
|
– |
| |
|
2,750,000 |
(c) |
Giza GE Venture Fund III, L.P.(a)(b)(d)(e)(g) |
|
Private Equity—0.1% |
|
100,073 |
| |
|
761,184 |
(c) |
Neurone Ventures II, L.P.(a)(b)(d)(g)(h) |
|
Private Equity—0.2% |
|
294,517 |
| |
|
32,574 |
|
Vidyo, Inc. Trust A (Preferred)(a)(b)(d)(g)(h)(j) |
|
Private Equity— –% |
|
– |
| |
|
15,531 |
|
Vidyo, Inc. Trust B (Preferred)(a)(b)(d)(g)(h)(j) |
|
Private Equity— –% |
|
– |
| |
|
13,219 |
|
Vidyo, Inc. Trust B1 (Preferred)(a)(b)(d)(g)(h)(j) |
|
Private Equity— –% |
|
– |
| |
|
6,864 |
|
Vidyo, Inc. Trust C (Preferred)(a)(b)(d)(g)(h)(j) |
|
Private Equity— –% |
|
– |
| |
|
4,150 |
|
Vidyo, Inc. Trust C1 (Preferred)(a)(b)(d)(g)(h)(j) |
|
Private Equity— –% |
|
– |
| |
|
1,802 |
|
Vidyo, Inc. Trust Common(a)(b)(d)(g)(h)(j) |
|
Private Equity— –% |
|
– |
| |
|
2,713 |
|
Vidyo, Inc. Trust D (Preferred)(a)(b)(d)(g)(h)(j) |
|
Private Equity— –% |
|
– |
| |
|
|
|
|
|
|
|
625,279 |
| |
|
|
|
|
|
|
|
1,699,696 |
| |
|
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
|
Portfolio of Investments (concluded)
As of October 31, 2016
|
Shares |
|
Description |
|
Industry |
|
Value |
| |
|
WARRANT—0.0% |
|
|
|
|
| |||
|
SRI LANKA—0.0% |
|
|
|
|
| |||
|
105,832 |
|
John Keells Holdings PLC, expires 11/11/16(b) |
|
Industrial Conglomerates— –% |
|
$ |
– |
|
|
|
|
|
|
|
|
– |
| |
|
|
|
Total Long-Term Equity Securities in Emerging Market Countries—96.6% (cost $151,283,283) |
|
134,446,444 |
| |||
|
LONG-TERM EQUITY SECURITIES IN DEVELOPED MARKET COUNTRIES—2.4% |
|
|
| |||||
|
COMMON STOCK—2.4% |
|
|
| |||||
|
UNITED STATES—2.4% |
|
|
| |||||
|
52,162 |
|
EPAM Systems, Inc.(b) |
|
Information Technology Services—2.4% |
|
3,357,668 |
| |
|
|
|
|
|
|
|
3,357,668 |
| |
|
PRIVATE EQUITY—0.0% |
|
|
| |||||
|
UNITED STATES—0.0% |
|
|
| |||||
|
1,952,000 |
(c) |
Technology Crossover Ventures IV, L.P.(a)(b)(d)(e)(f)(g) |
|
Private Equity— –% |
|
2,323 |
| |
|
|
|
|
|
|
|
2,323 |
| |
|
|
|
Total Long-Term Equity Securities in Developed Market Countries—2.4% (cost $2,405,484) |
|
3,359,991 |
| |||
|
Description |
| |||||||
|
SHORT-TERM INVESTMENT—1.8% |
|
|
| |||||
|
UNITED STATES—1.8% |
|
|
| |||||
|
2,495,491 |
|
State Street Institutional U.S. Government Money Market Fund(k) |
|
2,495,491 |
| |||
|
|
|
Total Short-Term Investment—1.8% (cost $2,495,491) |
|
2,495,491 |
| |||
|
|
|
Total Investments—100.8% (cost $156,184,258)(l) |
|
140,301,926 |
| |||
|
|
|
Liabilities in Excess of Other Assets—(0.8)% |
|
(1,138,156 |
) | |||
|
|
|
Net Assets—100.0% |
|
$ |
139,163,770 |
| ||
|
(a) |
Fair Values are determined pursuant to procedures approved by the Fund’s Board of Directors. Unless otherwise noted, securities are valued by applying valuation factors to the exchange traded price. See Note 2(a) of the accompanying Notes to Financial Statements. | |
|
(b) |
Non-income producing security. | |
|
(c) |
Represents contributed capital. | |
|
(d) |
Illiquid security. | |
|
(e) |
In liquidation. | |
|
(f) |
As of October 31, 2016, the aggregate amount of open commitments for the Fund is $1,524,584. | |
|
(g) |
Restricted security, not readily marketable. See Note 6 of the accompanying Notes to Financial Statements. | |
|
(h) |
Active investments. | |
|
(i) |
Exent Technologies Ltd. and Flash Networks Ltd. were securities received from the dissolution of Concord Fund I Liquidating Main Trust. See Note 6 of the accompanying Notes to Portfolio Statements. | |
|
(j) |
Vidyo, Inc. Trust was a spinoff from SVE Star Ventures IX. See Note 6 of the accompanying Notes to Financial Statements. | |
|
(k) |
Registered investment company advised by State Street Global Advisors. | |
|
(l) |
See accompanying 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, 2016
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
Assets |
|
|
| ||
|
|
|
|
| ||
|
Investments, at value (cost $153,688,767) |
|
$ 137,806,435 |
| ||
|
Short-term investments, at value (cost $2,495,491) |
|
2,495,491 |
| ||
|
Foreign currency, at value (cost $29,040) |
|
29,721 |
| ||
|
Interest and dividends receivable |
|
192,899 |
| ||
|
Other receivables |
|
1,683 |
| ||
|
Prepaid expenses |
|
26,811 |
| ||
|
Total assets |
|
140,553,040 |
| ||
|
|
|
|
| ||
|
Liabilities |
|
|
| ||
|
Payable for investments purchased |
|
1,114,136 |
| ||
|
Investment advisory fees payable (Note 3) |
|
120,403 |
| ||
|
Accrued expenses |
|
72,216 |
| ||
|
Independent auditors’ fees and expenses payable |
|
63,534 |
| ||
|
Administration fee payable (Note 3) |
|
9,434 |
| ||
|
Investor relations fees payable (Note 3) |
|
6,547 |
| ||
|
Director fees payable |
|
3,000 |
| ||
|
Total liabilities |
|
1,389,270 |
| ||
|
|
|
|
| ||
|
Net Assets |
|
$ 139,163,770 |
| ||
|
|
|
|
| ||
|
Composition of Net Assets: |
|
|
| ||
|
Common stock (par value $.001 per share) (Note 5) |
|
$ 9,644 |
| ||
|
Paid-in capital in excess of par |
|
162,972,080 |
| ||
|
Accumulated net investment income |
|
765,324 |
| ||
|
Accumulated net realized loss from investment and foreign currency transactions |
|
(8,700,670 |
) | ||
|
Net unrealized (depreciation) on investments and other assets and liabilities denominated in foreign currencies |
|
(15,882,608 |
) | ||
|
Net Assets |
|
$ 139,163,770 |
| ||
|
Net asset value per share based on 9,643,935 shares issued and outstanding |
|
$ 14.43 |
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
See Notes to Financial Statements. |
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
| ||||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
Statement of Operations |
|
|
| ||
|
|
|
|
| ||
|
For the Fiscal Year Ended October 31, 2016
|
|
|
| ||
|
|
|
|
| ||
|
|
|
|
| ||
|
Net Investment Income |
|
|
| ||
|
|
|
|
| ||
|
Income |
|
|
| ||
|
Dividends and other income (net of foreign withholding taxes of $260,981) |
|
$ 3,395,731 |
| ||
|
Total Investment Income |
|
3,395,731 |
| ||
|
|
|
|
| ||
|
Expenses |
|
|
| ||
|
Investment advisory fee (Note 3) |
|
1,393,655 |
| ||
|
Directors’ fees and expenses |
|
118,526 |
| ||
|
Custodian’s fees and expenses |
|
117,207 |
| ||
|
Administration fee (Note 3) |
|
104,264 |
| ||
|
Investor relations fees and expenses (Note 3) |
|
65,341 |
| ||
|
Independent auditors’ fees and expenses |
|
57,804 |
| ||
|
Reports to shareholders and proxy solicitation |
|
48,767 |
| ||
|
Insurance expense |
|
41,198 |
| ||
|
Legal fees and expenses |
|
36,453 |
| ||
|
Transfer agent’s fees and expenses |
|
23,929 |
| ||
|
Miscellaneous |
|
74,705 |
| ||
|
Total expenses |
|
2,081,849 |
| ||
|
Less: Fee waivers (Note 3) |
|
(56,394 |
) | ||
|
Net expenses |
|
2,025,455 |
| ||
|
|
|
|
| ||
|
Net Investment Income |
|
1,370,276 |
| ||
|
Net Realized/Unrealized Gain/(Loss) from Investments and Foreign Currency Related Transactions: |
|
|
| ||
|
Net realized gain/(loss) from: |
|
|
| ||
|
Investment transactions(a) |
|
(11,709,535 |
) | ||
|
Foreign currency transactions |
|
(103,295 |
) | ||
|
|
|
(11,812,830 |
) | ||
|
Net change in unrealized appreciation/(depreciation) on: |
|
|
| ||
|
Investments |
|
22,494,057 |
| ||
|
Foreign currency translation |
|
25,374 |
| ||
|
|
|
22,519,431 |
| ||
|
Net realized and unrealized gain from investments |
|
10,706,601 |
| ||
|
Net Increase in Net Assets Resulting from Operations |
|
$ 12,076,877 |
| ||
|
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|
|
| ||
|
(a) Includes realized gain portion of distributions from underlying private equity investments of $2,179. |
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See Notes to Financial Statements. |
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Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
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Statements of Changes in Net Assets |
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For the |
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For the |
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Increase/(Decrease) in Net Assets |
|
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| ||
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Operations: |
|
|
|
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| ||
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Net investment income |
|
$ 1,370,276 |
|
$ 1,116,635 |
| ||
|
Net realized gain/(loss) from investment and foreign currency related transactions |
|
(11,812,830 |
) |
310,198 |
| ||
|
Net change in unrealized appreciation/(depreciation) on investments and foreign currency translations |
|
22,519,431 |
|
(23,146,306 |
) | ||
|
Net increase/(decrease) in net assets resulting from operations |
|
12,076,877 |
|
(21,719,473 |
) | ||
|
|
|
|
|
|
| ||
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Distributions to Shareholders from: |
|
|
|
|
| ||
|
Net investment income |
|
(970,048 |
) |
(2,029,014 |
) | ||
|
Net decrease in net assets from distributions |
|
(970,048 |
) |
(2,029,014 |
) | ||
|
|
|
|
|
|
| ||
|
Common Stock Transactions: |
|
|
|
|
| ||
|
Repurchase of common stock from open market repurchase program (90,827 and 29,970 shares, respectively) (Note 7) |
|
(1,043,716 |
) |
(366,470 |
) | ||
|
Change in net assets from capital transactions |
|
(1,043,716 |
) |
(366,470 |
) | ||
|
Change in net assets resulting from operations |
|
10,063,113 |
|
(24,114,957 |
) | ||
|
|
|
|
|
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| ||
|
Net Assets: |
|
|
|
|
| ||
|
Beginning of year |
|
129,100,657 |
|
153,215,614 |
| ||
|
End of year (including accumulated net investment income of $765,324 and $466,142, respectively) |
|
$ 139,163,770 |
|
$ 129,100,657 |
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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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2016 |
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2015 |
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2014 |
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2013 |
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2012 |
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|
PER SHARE OPERATING PERFORMANCE(a): |
|
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|
|
|
|
|
|
|
|
Net asset value per common share, beginning of year |
|
$13.26 |
|
$15.69 |
|
$22.69 |
|
$22.95 |
|
$20.02 |
|
|
Net investment income |
|
0.14 |
|
0.11 |
|
0.18 |
|
0.23 |
|
0.42 |
|
|
Net realized and unrealized gains/(losses) on investments and foreign currency transactions |
|
1.11 |
|
(2.34 |
) |
(0.93 |
) |
(0.10 |
) |
2.85 |
|
|
Total from investment operations applicable to common shareholders |
|
1.25 |
|
(2.23 |
) |
(0.75 |
) |
0.13 |
|
3.27 |
|
|
Distributions to common shareholders from: |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
(0.10 |
) |
(0.21 |
) |
(0.30 |
) |
(0.39 |
) |
(0.34 |
) |
|
Net realized gains |
|
– |
|
– |
|
(5.73 |
) |
– |
|
– |
|
|
Total distributions |
|
(0.10 |
) |
(0.21 |
) |
(6.03 |
) |
(0.39 |
) |
(0.34 |
) |
|
Capital Share Transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
Impact due to capital shares issued from stock distribution |
|
– |
|
– |
|
(0.22 |
) |
– |
|
– |
|
|
Impact due to open market repurchase program (Note 7) |
|
0.02 |
|
0.01 |
|
– |
|
– |
|
– |
|
|
Total capital share transactions |
|
0.02 |
|
0.01 |
|
(0.22 |
) |
– |
|
– |
|
|
Net asset value per common share, end of year |
|
$14.43 |
|
$13.26 |
|
$15.69 |
|
$22.69 |
|
$22.95 |
|
|
Market value, end of year |
|
$12.33 |
|
$11.55 |
|
$14.15 |
|
$20.47 |
|
$20.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Return Based on(b): |
|
|
|
|
|
|
|
|
|
|
|
|
Market value |
|
7.60% |
|
(17.08% |
) |
1.00% |
|
1.04% |
|
16.56% |
|
|
Net asset value |
|
9.69% |
|
(14.15% |
) |
1.03% |
|
0.77% |
|
16.67% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data: |
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable to common shareholders, end of year (000 omitted) |
|
$139,164 |
|
$129,101 |
|
$153,216 |
|
$187,147 |
|
$189,240 |
|
|
Average net assets applicable to common shareholders (000 omitted) |
|
$130,330 |
|
$140,522 |
|
$151,939 |
|
$190,084 |
|
$175,613 |
|
|
Net operating expenses, net of fee waivers |
|
1.55% |
|
1.52% |
|
1.61% |
|
1.47% |
|
1.43% |
|
|
Net operating expenses, excluding fee waivers |
|
1.60% |
|
1.57% |
|
1.66% |
|
1.52% |
|
1.48% |
|
|
Net investment income |
|
1.05% |
|
0.79% |
|
1.12% |
|
0.99% |
|
1.97% |
|
|
Portfolio turnover |
|
13.89% |
|
9.08% |
|
9.88% |
|
99.18% |
|
5.14% |
|
(a) Based on average shares outstanding.
(b) Total investment return based on market value is calculated assuming that shares of the Fund’s 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 Fund’s 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 Fund’s net asset value is substituted for the closing market value.
Amounts listed as “–” are $0 or round to $0.
See Notes to Financial Statements.
|
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
|
Notes to Financial Statements
October 31, 2016
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 (the “1940 Act”), as a closed-end nondiversified management investment company. The Fund trades on the NYSE MKT under the ticker symbol “ABE”.
The Fund’s investment objective is to seek long-term capital appreciation.
As a fundamental policy, under normal market conditions, at least 80% of the Fund’s 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 Fund’s investment adviser (“AAML” or the “Adviser”), to have an emerging market economy, considering factors such as the country’s 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 U.S., 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.
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 Fund’s 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 price 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 approved by the Fund’s Board of Directors (the “Board”). These valuation factors are used when pricing the Fund’s 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.
Short-term investments are comprised of cash and cash equivalents invested in short-term investment funds which are redeemable daily. The Fund sweeps available cash into the State Street Institutional U.S. Government Money Market Fund; which has elected to qualify as a “government money market fund” pursuant to Rule 2a-7 under the 1940 Act and which has an objective to maintain a $1.00 per share net asset value (“NAV”), which is not guaranteed. Generally, these investments are categorized as Level 1 investments.
In the event that a security’s 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 Fund’s Pricing Committee, taking into account the relevant factors and surrounding circumstances using valuation policies and procedures approved and
Notes to Financial Statements (continued)
October 31, 2016
established by the Board. A security that has been fair valued by the Fund’s Pricing Committee may be classified as Level 2 or Level 3 depending on the nature of the inputs.
The Fund may also invest in private equity private placement securities, which represented 1.2% of the net assets of the Fund as of October 31, 2016. The private equity private placement securities are deemed to 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, pursuant to valuation policies and procedures established by the Board. The Fund’s 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 stated at fair value as determined by the Fund’s Pricing Committee by utilizing the net asset valuations provided by the underlying funds as a practical expedient. 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 similar 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 entity’s 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 instrument’s 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 the Fund’s own assumptions in determining the fair value of investments).
The following is a summary of the inputs used as of October 31, 2016 in valuing the Fund’s investments and other financial instruments at fair value. The inputs or methodology 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
|
|
|
|
|
|
|
|
|
|
|
Automobiles |
|
$1,312,919 |
|
$– |
|
$– |
|
$1,312,919 |
|
|
Banks |
|
908,807 |
|
7,454,432 |
|
– |
|
8,363,239 |
|
|
Beverages |
|
4,000,596 |
|
3,925,271 |
|
– |
|
7,925,867 |
|
|
Commercial Services & Supplies |
|
907,532 |
|
– |
|
– |
|
907,532 |
|
|
Construction & Engineering |
|
1,629,252 |
|
– |
|
– |
|
1,629,252 |
|
|
Food & Staples Retailing |
|
5,768,302 |
|
2,198,844 |
|
– |
|
7,967,146 |
|
|
Food Products |
|
6,633,846 |
|
– |
|
– |
|
6,633,846 |
|
|
Health Care Providers & Services |
|
1,543,590 |
|
992,568 |
|
– |
|
2,536,158 |
|
|
Hotels, Restaurants & Leisure |
|
2,123,212 |
|
4,877,818 |
|
– |
|
7,001,030 |
|
|
Industrial Conglomerates |
|
2,602,531 |
|
– |
|
– |
|
2,602,531 |
|
|
Information Technology Services |
|
4,897,349 |
|
1,693,456 |
|
– |
|
6,590,805 |
|
|
Insurance |
|
1,188,687 |
|
1,295,886 |
|
– |
|
2,484,573 |
|
|
Pharmaceuticals |
|
2,824,339 |
|
2,809,882 |
|
– |
|
5,634,221 |
|
|
Real Estate Management & Development |
|
10,896,923 |
|
3,431,661 |
|
– |
|
14,328,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Aberdeen Emerging Markets Smaller Company Opportunities Fund, Inc. |
Notes to Financial Statements (continued)
October 31, 2016
|
Investments, at Value |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
Road & Rail |
|
$1,445,775 |
|
$2,960,495 |
|
$– |
|
$4,406,270 |
|
|
Software |
|
2,572,208 |
|
– |
|
– |
|
2,572,208 |
|
|
Textiles, Apparel & Luxury Goods |
|
2,213,683 |
|
– |
|
– |
|
2,213,683 |
|
|
Transportation Infrastructure |
|
6,780,632 |
|
644,026 |
|
– |
|
7,424,658 |
|
|
Other |
|
– |
|
43,569,894 |
|
– |
|
43,569,894 |
|
|
Short-Term Investment |
|
2,495,491 |
|
– |
|
– |
|
2,495,491 |
|
|
Total |
|
$62,745,674 |
|
$75,854,233 |
|
$– |
|
$138,599,907 |
|
|
Private Equity(a) |
|
|
|
|
|
|
|
1,702,019 |
|
|
Total Investments |
|
|
|
|
|
|
|
$140,301,926 |
|
Amounts listed as “–” are $0 or round to $0.
(a) Private Equity investments are measured at the net asset valuations, as a practical expedient for fair value, and are not required to be classified in the fair value hierarchy as per Accounting Standards Update 2015-07. The fair value amounts presented are intended to permit reconciliation to the total investment amount presented in the Schedule of Investments.
For movements between the Levels within the fair value hierarchy, the Fund has adopted a policy of recognizing transfers at the end of each fiscal period. The utilization of valuation factors may result in transfers between Level 1 and Level 2. For the fiscal year ended October 31, 2016, securities issued by African Oxygen Ltd. and Mphasis Ltd. in the amounts of $1,900,457 and $1,693,456, respectively, transferred from Level 1 to Level 2 because there was a valuation factor applied at October 31, 2016. Securities issued by Clicks Group Ltd., East African Breweries Ltd., John Keells Holdings PLC, The Spar Group Ltd. and Zenith Bank PLC in the amounts of $3,024,006, $2,068,964, $2,602,531, $2,744,295 and $908,807, respectively, transferred from Level 2 to Level 1 because there was not a valuation factor applied at October 31, 2016.
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 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 Fund’s 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
Notes to Financial Statements (continued)
October 31, 2016
currency relative to the U.S. Dollar. Generally, when the U.S. Dollar rises in value against foreign currency, the Fund’s 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. Rights Issues and Warrants:
Rights issues give the right, normally to existing shareholders, to buy a proportional number of additional securities at a given price (generally at a discount) within a fixed period (generally on a short term period) and are offered at the company’s discretion. Warrants are securities that give the holder the right to buy common stock at a specified price for a specified period of time. Rights issues and warrants are speculative and have no value if they are not exercised before the expiration date. Rights issues and warrants are valued at the last sale price on the exchange on which they are traded.
d. Security Transactions, Investment Income and Expenses:
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:
The Fund records dividends and distributions payable to its stockholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These book basis/tax basis (“book/tax”) differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal taxbasis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as return of capital.
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 (or expected to be taken in future tax years). Since tax authorities can examine previously filed tax returns, the Fund’s 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.
g. Foreign Withholding Tax:
Dividend and interest income from non-U.S. sources received by the Fund are generally subject to non-U.S. withholding taxes. In addition, the Fund may be subject to capital gains tax in certain countries in which it invests. The above taxes may be reduced or eliminated under the terms of applicable U.S. income tax treaties with some of these countries. The Fund accrues such taxes when the related income is earned.
h. Partnership Accounting Policy:
The Fund records its pro-rata share of the income/(loss) and capital gains/(losses) allocated from the private equity investments, which are classified as partnerships, and adjusts the cost of the underlying partnerships accordingly. These amounts are included in the Fund’s Statement of Operations.
i. Repurchase Agreements
The Fund may enter into repurchase agreements under the terms of a Master Repurchase Agreement. It is the Fund’s policy that its custodian/counterparty segregates the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. The repurchase price generally equals the price paid by the Fund plus interest negotiated on the basis of current short-term rates. To the extent that any repurchase transaction exceeds one business day, the collateral is valued on a daily basis to determine its adequacy. Under the Master Repurchase Agreement, if the counterparty defaults and the value of the collateral declines, or if bankruptcy proceedings are commenced with respect to the counterparty of the security, realization of the collateral by the Fund may be delayed or limited. Repurchase agreements are subject to contractual netting arrangements with the counterparty, Fixed Income Clearing Corp. To the extent the Fund enters into repurchase agreements, additional information on individual repurchase agreements is included in the Statements of Investments.
Notes to Financial Statements (continued)
October 31, 2016
3. Agreements and Transactions with Affiliates
a. Investment Adviser:
AAML serves as the Fund’s 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 Fund’s 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. AAML has agreed to contractually waive 0.05% of its annual advisory fee.
b. Fund Administration:
Aberdeen Asset Management Inc. (“AAMI”), an affiliate of the Adviser, is the Fund’s 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 Fund’s average monthly Managed Assets.
c. Investor Relations:
Under the terms of the Investor Relations Services Agreement, AAMI provides and pays third parties to provide investor relations services to the Fund and certain other funds advised by AAML or its affiliates as part of an Investor Relations Program. Under the Investor Relations Services Agreement, the Fund owes a portion of the fees related to the Investor Relations Program (the “Fund’s Portion”). However, investor relations services fees are limited by AAMI so that the Fund will only pay up to an annual rate of 0.05% of the Fund’s average weekly net assets. Any difference between the capped rate of 0.05% of the Fund’s average weekly net assets and the Fund’s Portion is paid for by AAMI.
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 articles and other relevant materials discussing the Fund’s 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.
During the fiscal year ended October 31, 2016, the Fund incurred investor relations fees of approximately $64,324. For the fiscal year ended October 31,2016, AAMI did not waive any investor relations fees because the Fund did not reach the capped amount. 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, up to 100% of the annual retainer can be invested in shares of the Fund. During the fiscal year ended October 31, 2016, 3,924 shares were purchased pursuant to the Directors’ compensation plan. As of October 31, 2016, the Directors as a group owned less than 1% of the Fund’s outstanding shares.
4. Investment Transactions
Purchases and sales of investment securities (excluding short-term securities) for the fiscal year ended October 31, 2016, were $17,996,805 and $17,938,213, respectively.
5. Capital
The authorized capital of the Fund is 100 million shares of $0.001 par value common stock. As of October 31, 2016, there were 9,643,935 shares of common stock issued and outstanding.
Notes to Financial Statements (continued)
October 31, 2016
6. Private Equity Investments:
Certain of the Fund’s investments, listed in the chart below, 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 (1) |
|
Acquisition Date(s) |
|
Cost |
|
Fair Value |
|
Percent |
|
Cumulative |
|
Open |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BPA Israel Ventures, LLC |
|
10/05/00 – 12/09/05 |
|
$929,799 |
|
$197,099 |
|
0.14 |
|
$327,976 |
|
$625,413 |
|
Emerging Markets Ventures I, L.P. |
|
01/22/98 – 01/10/06 |
|
2,474,673 |
|
150,921 |
|
0.11 |
|
7,567,734 |
|
851,171 |
|
Exent Technologies Ltd. Preferred A1 Shares(3) |
|
11/29/15 |
|
118,799 |
|
– |
|
– |
|
– |
|
– |
|
Exent Technologies Ltd. Preferred C Shares(3) |
|
11/29/15 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
Exent Technologies Ltd. Warrants A1(3) |
|
11/29/15 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
Flash Networds Ltd. Warrants Ordinary(3) |
|
11/29/15 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
Flash Networks Ltd. Ordinary Shares(3) |
|
11/29/15 |
|
109,226 |
|
33,590 |
|
0.03 |
|
– |
|
– |
|
Flash Networks Ltd. Series C Preferred(3) |
|
11/29/15 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
Flash Networks Ltd. Series C-1 Preferred(3) |
|
11/29/15 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
Flash Networks Ltd. Series D Preferred(3) |
|
11/29/15 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
Flash Networks Ltd. Series E Preferred(3) |
|
11/29/15 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
Flash Networks Ltd. Warrants C(3) |
|
11/29/15 |
|
– |
|
– |
|
– |
|
– |
|
– |
|
Giza GE Venture Fund III, L.P. |
|
01/31/00 – 11/23/06 |
|
1,717,032 |
|
100,073 |
|
0.07 |
|
885,262 |
|
– |
|
Neurone Ventures II, L.P. |
|
11/24/00 – 12/21/10 |
|
121,786 |
|
294,517 |
|
0.21 |
|
533,564 |
|
– |
|
Technology Crossover Ventures IV, L.P. |
|
03/08/00 – 09/27/10 |
|
359,691 |
|
2,323 |
|
– |
|
3,045,426 |
|
48,000 |
|
Telesoft Partners II QP, L.P. |
|
07/14/00 – 03/01/10 |
|
1,112,731 |
|
923,496 |
|
0.66 |
|
1,282,411 |
|
– |
|
Vidyo, Inc. Trust A (Preferred)(2) |
|
10/24/12 |
|
29,796 |
|
– |
|
– |
|
– |
|
– |
|
Vidyo, Inc. Trust B (Preferred)(2) |
|
10/24/12 |
|
14,207 |
|
– |
|
– |
|
– |
|
– |
|
Vidyo, Inc. Trust B1 (Preferred)(2) |
|
10/24/12 |
|
12,092 |
|
– |
|
– |
|
– |
|
– |
|
Vidyo, Inc. Trust C (Preferred)(2) |
|
10/24/12 |
|
6,279 |
|
– |
|
– |
|
– |
|
– |
|
Vidyo, Inc. Trust C1 (Preferred)(2) |
|
10/24/12 |
|
3,796 |
|
– |
|
– |
|
– |
|
– |
|
Vidyo, Inc. Trust Common(2) |
|
10/24/12 |
|
1,648 |
|
– |
|
– |
|
– |
|
– |
|
Vidyo, Inc. Trust D (Preferred)(2) |
|
10/24/12 |
|
2,482 |
|
– |
|
– |
|
– |
|
– |