Lse Aemc 2018
Lse Aemc 2018
Lse Aemc 2018
Annual Report
31 October 2018
Contents
Company Overview
Financial Highlights 2
Chairman’s Statement 4
Strategic Report
Investment Manager’s Report 6
Portfolio
Investments 11
Asset Allocation 12
Governance
Directors’ Report 13
Corporate Governance Statement 19
Report of the Audit Committee 23
Directors’ Remuneration Report 24
Statement of Directors’ Responsibilities 25
Depositary Report 26
Financial Statements
Independent Auditor’s Report 27
Statement of Comprehensive Income 30
Statement of Financial Position 31
Statement of Changes in Equity 32
Statement of Cash Flow 33 Visit our Website
Notes to the Financial Statements 34 To find out more about Aberdeen Emerging
Markets Investment Company Limited, please visit
aberdeenemergingmarkets.co.uk
Corporate Information (unaudited) THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR
Alternative Performance Measures 49 IMMEDIATE ATTENTION. If you are in any doubt about the
Information about the Investment Manager 50 action you should take, you are recommended to seek
your own financial advice from your stockbroker, bank
Investor Information 51
manager, solicitor, accountant or other financial adviser
AIFMD Disclosures 54 authorised under the Financial Services and Markets Act
Glossary of Terms and Definitions 55 2000 (as amended by the Financial Services Act 2012) if
Notice of Annual General Meeting 56 you are in the United Kingdom or, if not, from another
appropriately authorised financial adviser.
Form of Proxy 59
Contact Addresses 61 If you have sold or otherwise transferred all your Ordinary
shares in Aberdeen Emerging Markets Investment
Company Limited, please forward this document, together
with the accompanying documents immediately to the
purchaser or transferee, or to the stockbroker, bank or
agent through whom the sale or transfer was effected for
transmission to the purchaser or transferee.
Aberdeen Emerging Markets Investment Company Limited The Company is governed by a board of independent
(“AEMC” or the “Company”) is a closed-end investment directors, and has no employees. Like most other investment
company with its Ordinary shares listed on the premium companies, it outsources its investment management
segment of the London Stock Exchange. It offers investors and administration to an investment management group,
exposure to some of the best investment talent within the the Standard Life Aberdeen Group, and other third party
global emerging markets of Asia, Eastern Europe, Africa and providers.
Latin America.
Net asset value (“NAV”) per Ordinary share total return1, 5 NAV per Ordinary share2
-12.4% 600.6p
2017 +14.9% 2017 706.0p
Share price total return1, 5 Ordinary share price – mid market
-15.7% 515.0p
2017 +17.0% 2017 632.5p
MSCI Emerging Markets Net Total Return Index in sterling terms Net Assets
+7.0% 1.02%
2017 +6.0% 2017 1.07%
Dividends per share4 Revenue return per share
21.0p 2.03p
2017 10.0p 2017 -0.68p
1
erformance figures stated above include reinvestment of dividends on
P 4
Dividends declared for the year in which they were earned
the ex-date 5
Definitions of these Alternative Performance Measures (‘APMs’) together
2
See note 14 in the Notes to the Financial Statements for basis of with how these have been calculated can be found on page 49.
calculation
3
Based on the net of the drawn down loan value and cash, as a percentage
of NAV
706.0p
618.8p 632.5p
600.6p
545.0p 515.0p
493.5p
453.5p 442.3p
400.4p
14 15 16 17 18 14 15 16 17 18
Financial Calendar
29 March 2019 First interim dividend payable for year ending 31 October 2019
June 2019 Second interim dividend payable for year ending 31 October 2019
June 2019 Announcement of Half-Yearly Financial Report for the six months ending 30 April 2019
September 2019 Third interim dividend payable for year ending 31 October 2019
December 2019 Fourth interim dividend payable for year ending 31 October 2019
January/February 2020 Announcement of Annual Report and Accounts for the year ending 31 October 2019
Overview Dividends
Over the year to 31 October 2018, the Company’s net asset During the previous year the Board announced its intention
value (“NAV”) fell by 12.4% in total return terms. This compares to commence making distributions by way of dividends to
to a fall of 9.0% in the Company’s benchmark, the MSCI be funded from a combination of income and capital. This
Emerging Markets Net Total Return Index (in sterling terms). measure was adopted in the belief that the level of dividends
paid by emerging market companies over the long term is
The fall in markets can be attributed mostly to the final quarter
an increasingly important attraction for investors seeking to
of the financial year when the benchmark index declined by
invest in the emerging market asset class.
more than 9%, with October delivering the worst monthly
decline in two years. Markets were impacted by the effect of a Three interim dividends, each of 5.25p per share, were paid on
rising US Dollar as the US economy continued to strengthen, 29 March, 29 June and 28 September 2018 and, since the year
but also by concerns over trading relationships between the end, a fourth and final interim dividend in respect of the year
US and China as well as a slowdown in economic activity of 5.25p per share was paid on 21 December 2018. This brings
in China. The two largest markets to which the Company is the total dividends for the year to 21p per share.
exposed, China and South Korea, fell by 13.4% and 16.7%
For future years, the Board intends to continue to pay interim
respectively in total return terms.
dividends on a quarterly basis, in March, June, September
Relative to the benchmark, the Company benefited from its and December and it is anticipated that the total dividend for
overweight exposure to Russia and its non-index exposure the year ended 31 October 2019 will be no less than 21p per
to Romania. It also benefited from discount narrowing of its share. Accordingly, the Board declares a first interim dividend
closed ended investment funds holdings. However, there was for the current financial year, of 5.25p per share, which will
an adverse impact from stock selection within the portfolio be paid on 29 March 2019 to shareholders on the register on
as a number of underlying managers struggled to match 1 March 2019.
their respective benchmarks. Many of the underlying funds
The Board will put a resolution to shareholders at the AGM
are exposed to smaller and medium sized companies which
in respect of its policy to declare four interim dividends each
underperformed the market as a whole.
year, and will include this as a resolution at future AGMs.
A more detailed explanation of the year’s performance is
The payment of any dividends will be subject to compliance
provided in the Investment Manager’s Report.
with all necessary regulatory obligations of the Company,
including the Guernsey Law solvency test, compliance with
Continuation Vote and Tender Offer its loan covenants, and will also be subject to the Company
Under the terms of its Articles of Incorporation, the Company retaining sufficient cash for its working capital requirements.
was required to propose a continuation resolution at the
Annual General Meeting (“AGM”) on 12 April 2018 at which Loan Facility and Gearing
the Board was pleased that a significant majority of investors
During the year the Board announced the renewal of the
voted in favour of the continuation of the Company.
Company’s £25 million unsecured multicurrency revolving loan
In the run up to the continuation vote, the Board undertook facility for a further year to March 2019. The Board believes
a consultation exercise covering a large proportion of the that the use of gearing, which is one of the advantages of
shareholder base and received feedback that, while a large a closed ended structure, within pre-determined ranges
majority of shareholders by total number of shares held were and at times when the Investment Manager sees attractive
supportive both of the measures taken to make an investment investment opportunities, will be beneficial to the longer
in the Company more appealing and of the continuation of term performance of the Company. At the end of the year
the Company, there was potentially some appetite for the an amount of £20 million was drawn down under the facility,
liquidity that could be provided by a tender offer. Accordingly, representing gearing, net of cash, of 7.0%.
at a General Meeting held on the same day as the AGM,
The Company has commenced discussions with its bankers
shareholders were asked to approve a tender offer for up to
and the Board expects to renew the facility on similar terms
10% of the shares in issue at a price reflecting a discount of
when it matures in March this year.
3.5% to the prevailing NAV per share. Following the approval
of the tender offer by shareholders, a total of 5,119,633 shares
(representing 10% of the shares in issue) were repurchased by
the Company to hold in treasury.
There will be a further continuation vote at the Company’s
AGM in 2023 and, if that is passed, at every fifth
AGM thereafter.
Board Composition
On 4 October 2018, the Board announced that, due to an Mark Hadsley-Chaplin
increase in other commitments, Mr Mark Barker had resigned Chairman
as a non-executive Director of the Company. The Board is 31 January 2019
currently seeking a replacement. The Board would like to
extend its thanks to Mr Barker for his valued contribution to
the Company over the period of his tenure. Mr John Hawkins
has been a Director of the Company since 2009 and has given
notice to the Board of his intention to step down at the Annual
General Meeting to be held in 2020.
During the financial year the Company’s NAV total return per approach is differentiated from rivals in that they allocate
Ordinary share was -12.4% while the MSCI Emerging Markets solely to high quality growth companies with a focus on the
Net Total Return Index (the “Benchmark”) declined by 9.0%. domestic economy. The strategy of selecting companies with
The share price total return was -15.7%, as the discount to high returns on invested capital is one that has delivered
NAV at which the Company’s shares trade widened to 14.3%, handsomely in most equity markets over the long term. We
compared with 10.4% at the start of the financial year. are comfortable with this approach, believing it delivers a high
quality portfolio that ought to perform strongly over time.
Relative NAV performance over the period was disappointing,
Over the last few years however, this has not been the case,
particularly given the historic tendency for the Company’s
and in the period under review, it underperformed sharply
investment strategy to outperform in risk-off periods due to
(fund -15.7% vs MSCI Latin America +1.5%). We should stress
the high level of diversification in the portfolio. Performance
that the managers do not build their portfolio relative to a
attribution for the period reveals positive contributions from
benchmark, but invest with the goal of generating absolute
asset allocation and discount narrowing, offset by a negative
returns over the long term. To illustrate how different the
contribution from fund selection and the impact of gearing
portfolio is we note that the “active share”1 against the index is
(7.0% at the end of the period, based on the net of the drawn
almost 95%. The major source of relative underperformance
down loan value and cash, as a percentage of NAV). The
during the period was that the managers actively avoid state
contribution from asset allocation was driven to a significant
owned and influenced companies as well as commodity or
extent by positioning in the Europe, Middle East and Africa
energy producers. Vale (iron ore and nickel producer) and
region where the overweighting of Russia and off-benchmark
Petrobras (state influenced energy producer), which together
investment in Romania had a material positive impact.
represented 16% of the MSCI Latin America Index at the end
Asian positioning also added value with the underweight
of the period, rallied by 61.7% and 53.2% respectively. Not
allocation to China the most notable contributor. In Latin
owning these two companies alone explains half the relative
America, an underweight position in Brazil and off-index
underperformance. While this performance is disappointing,
exposure to Argentina detracted from relative returns. The
we do not consider the long term proposition to have been
benefit from discount narrowing in the Company’s closed
impaired; the team is stable (and well aligned with investors),
end fund investments was primarily driven by a number of
the process has been consistently employed and the portfolio
the Company’s larger investments in Asia, notably Edinburgh
is attractive on quality, growth and valuation metrics. If
Dragon Trust, Fidelity China Special Situations (“Fidelity”) and
anything, we believe the fund has become more compelling, as
Weiss Korea Opportunity Fund Limited.
it also provides exposure to materially undervalued currencies
The Company’s financial year proved to be a challenging and an attractive asset allocation that differs significantly from
one for many of the underlying managers with which the the Latin American index (10% Argentina, 33% in the Andean
Company is invested. Managers in all regions struggled to markets of Chile, Colombia and Peru, 50% in Brazil and only
beat benchmark returns. A common theme amongst the 6% in Mexico). For these reasons, we continue to hold the fund
Company’s underlying active managers is a tendency to despite the recent headwinds to performance.
overweight less well researched small and medium sized
In Asia, Fidelity China Special Situations is another core
companies. Such companies underperformed the larger stocks
holding, accounting for 5.6% of the Company’s net assets at
that dominate the index in the risk-averse environment of
the end of the period. It too had a difficult year, delivering
the past twelve months. Over that period, the MSCI Emerging
a NAV total return of -19.2%, which lagged the MSCI China
Markets Small Cap Net Total Return Index declined by 13.9%,
Net Total Return Index by 5.8% as a combination of gearing,
close to 5% adrift of the Company’s Benchmark.
losses on index shorts and several stock-specific issues proved
Material underperformance by an underlying manager costly. Despite last year’s underperformance the fund’s long
necessarily prompts a review of the case for remaining term performance remains impressive with a NAV total
invested. In the vast majority of cases our conversations return of 101.6% over the last five years compared with an
with such managers have revealed sound explanations for index return of 58.3%. The fund is managed by the twenty
benchmark relative underperformance. A couple of examples year Fidelity veteran Dale Nicholls, whose entire career has
may serve to demonstrate the kind of issues that have been focused on Asian equities. Dale draws on a deep pool
been faced. of research analysts based in the region. Like Brown Advisory
Latin American Fund the approach is highly active and index
The Brown Advisory Latin American Fund is the Company’s
agnostic. The process focuses on identifying competitive, cash
largest standalone exposure to Latin America, accounting
generative companies with good long term growth prospects.
for 6.5% of net assets. The management team comprises
Strong governance is vital in China and Fidelity looks for highly
two of the most experienced stock pickers in the region,
competent management teams that are aligned with minority
and is one of very few teams to survive intact what has
investors. This leads the manager to typically favour private
been a brutal 7-8 years for markets in the region. Their
1
measure of how different a portfolio is from an index that can range
A
from 0% to 100%.
Market Environment
Emerging markets were largely range-bound in the first half of and sentiment towards emerging markets deteriorated.
the period, but experienced a sharp decline in the final months A disappointing result in a period in which UK and US
of the year as the US dollar resumed its upwards trajectory equities rose.
Chart 1. Emerging and developed market performance during year to 31 October 2018
115
MSCI Emerging Markets Net TR MSCI World Net TR
110
Performance rebased to 100
105
100
95
90
85
Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18
Source: Bloomberg. GBP returns for the period from 31 October 2017 to 31 October 2018
For much of the year, investors’ major concern was the of the few markets to demonstrate any resilience through
rhetoric around trade arrangements between the world’s two this uncertainty, but it too succumbed in the final months of
largest economies – the US and China. This, and a deceleration the year amidst a financial sector panic, ending the period
in economic activity, contributed to the Chinese market’s down 8.9%. In Malaysia, Barisan Nasional’s defeat in the
13.4% decline. Elsewhere in the region, the South Korean parliamentary elections allowed Mahathir Mohamad to
market fell by 16.7%, as trade concerns and a weakening assume the role of Prime Minister at 92 years of age, ending
domestic economy hampered sentiment despite an easing the ruling coalition’s 61 years in power. The stock market
of political tensions in the Korean peninsula. India was one reacted positively, gaining 5.1%.
Within the Europe, Middle East and Africa region there was current account deficit and persistent inflationary pressures.
a clear divergence between those markets that benefit from The increasingly autocratic leadership of President Erdogan
rising energy prices and those that do not. Energy exporters called into question the independence of the central bank and
Qatar and Russia gained 42.9% and 15.2% respectively. The its ability to respond appropriately to the economic conditions
gains in Russia were made despite the announcement of facing the country.
additional US sanctions amidst deteriorating diplomatic ties
Latin American equities saw a stark divergence in performance
with the West. The South African and Turkish markets declined
between the region’s two major markets. The Mexican market
by 14.1% and 40.8% respectively. Being net importers of oil
declined 11.1% amidst uncertainty surrounding the North
was not helpful for either country but other factors were
American Free Trade Agreement (“NAFTA”) renegotiation
at play too. The deterioration in the economic and political
process and the July general election that saw the historically
situation in South Africa contributed to a change in leadership
leftist Andrés Manuel López Obrador elected president.
with Cyril Ramaphosa sworn in as president in February. Local
Politics also play a significant role in Brazil where the populist
equities and the currency reacted positively to this change
Jair Bolsonaro emerged victorious in the October presidential
but the euphoria rapidly dissipated. Performance was also
elections. His policy pledges include a clamp down on political
hampered by the technology stock sell-off that saw Naspers
corruption and crime more generally. The stock market and
(close to 30% of the South African index) lose 24.9% of its
currency reacted favourably, resulting in a 9.0% gain for
market value in the period. The sharp decline in Turkey was
the period.
triggered by a collapse in confidence in the face of a widening
MSCI EM
EM Latin America
EM EMEA
EM Asia
Thailand
Malaysia
Taiwan
India
Indonesia
China
Philippines
South Korea
Pakistan
Qatar
Russia
Czech Republic
United Arab Emirates
Egypt
Hungary
Poland
South Africa
Greece
Turkey
Peru
Brazil
Colombia
Mexico
Chile
US
World
UK
Japan
Frontier
-50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50%
Source: Bloomberg. GBP returns for the period from 31 October 2017 to 31 October 2018
Market Outlook Short term volatility and noise often creates attractive
long-term entry points for investors. Over its 30 years as a
The catalysts that prompted the decline in emerging markets
distinct asset class, the performance of emerging markets
in 2018 were numerous (higher US interest rates, US dollar
has been driven by earnings growth and dividends, and this
strength, the US/China trade dispute, domestic crises in
will remain the case in the future. Consensus expectations
Turkey and Argentina), but as we enter 2019, the backdrop
are for corporate earnings in emerging markets to grow
for emerging markets has started to improve as those
by 9.3% in 2019, with a dividend yield of 2.9% (at the time
issues abate.
of writing the Company’s own shares yield 3.9%). Investors
Early in 2019, markets witnessed a meaningful shift in the are able to access these potential returns at an attractive
likely policy trend of the Federal Reserve, as the central bank valuation, with emerging markets trading on a forward price
took note of recent volatility and rising economic uncertainty to earnings multiple of 10.5 times and a price to book of 1.5
and acted to temper investor expectations for further times. Following the declines of 2018, these metrics are now
tightening. Such a pause would be very positive for emerging below their ten year averages and offer compelling value when
markets, and particularly emerging currencies. This, we compared with developed markets which trade on 13.5 times
believe, is a major driver of the improved relative performance earnings and 2.2 times book value.
of the asset class in recent months and has the potential
We continue to have conviction in our investment process,
to continue.
despite it failing to deliver relative outperformance in the
While we cannot predict how the US-China trade discussions period. This process seeks to add value through manager
will evolve, the economic impact of tariffs has thus far been selection, asset allocation and discount opportunities, two
limited and current discussions point to a compromise of which contributed positively during the financial year. As
becoming more probable than further escalation, as was discussed above, the reasons for the underperformance of
initially feared by investors. In addition, officials in Beijing a number of underlying managers during the period have
have demonstrated their willingness to support the economy been explored and explained and, in almost all instances,
through monetary and fiscal measures. We would expect this do not change our opinion of those managers’ ability to
support from policymakers to continue, as and when required. perform well over the longer term. We select highly active
Despite the short term uncertainty therefore, we view China as managers that can materially outperform or underperform
an improving story after a challenging 2018, and a market that benchmarks in any given period. The outperformance from
still has long term potential. asset allocation in markets like Russia and Romania highlights
that being contrarian worked during the year, and we believe
Whilst losses in Argentina and Turkey were significant, they
it will continue to do so. This belief is reflected in additions
amount to less than 1% of the emerging index, and both
to markets including Turkey, frontier Africa and Saudi Arabia
markets have now stabilised. Contagion to other emerging
during the period. While the proportion of the Company’s
markets now seems unlikely. Indeed, even at the time, we
portfolio allocated to closed end funds has declined, what
viewed this as unlikely given most emerging economies are
remains is a focused list of holdings often benefitting from
now materially better equipped to withstand such episodes
defined catalysts for value creation.
than they were in crises of the past. Debt levels are relatively
low as a proportion of GDP, and maturities are longer. Central The Company’s portfolio is more actively positioned now than
banks hold substantial hard currency reserves, as well as it has been in the past, offering investors exposure to well-
operating flexible exchange rate regimes, which prevent the managed funds in attractive emerging and frontier markets
buildup of imbalances. A much greater proportion of debt that cannot be easily replicated. We believe this, combined
(both corporate and sovereign) is issued in local currency, with the improving outlook for the asset class, bodes well for
reducing the potential for mismatches and debt markets in the coming years.
general have matured and deepened. Finally, whilst many
Aberdeen Asset Managers Limited
emerging countries ran large current-account deficits in the
31 January 2019
past, most countries now benefit from either smaller deficits,
or run surpluses.
Portfolio
Investments
%
Country of Value of net
As at 31 October 2018 Company establishment (£’000) assets
Neuberger Berman - China Equity Fund Ireland 25,133 9.1
Schroder International Selection Taiwanese Equity Fund Luxembourg 20,524 7.4
Schroder AsiaPacific Fund PLC United Kingdom 19,019 6.9
Brown Advisory Latin American Fund - Dollar Class SI Ireland 17,839 6.5
BlackRock Emerging Europe PLC United Kingdom 18,470 6.7
Weiss Korea Opportunity Fund Limited Guernsey 17,847 6.5
Fidelity China Special Situations PLC United Kingdom 15,436 5.6
Avaron Emerging Europe Fund Estonia 14,446 5.2
Steyn Capital SA Equity Fund SP Cayman Islands 10,288 3.7
Laurium Capital International Cayman Feeder SP Cayman Islands 10,268 3.7
Top ten investments 169,270 61.3
Lazard Emerging World Fund - Retail Ireland 9,282 3.4
Korea Value Strategy Fund Ltd - Class B British Virgin Islands 9,232 3.3
Verno Capital Growth Fund Limited Cayman Islands 8,485 3.1
Ton Poh Thailand Fund - Class C Cayman Islands 8,150 2.9
JPMorgan Emerging Investment Trust PLC United Kingdom 8,106 2.9
BlackRock Latin American Investment Trust PLC United Kingdom 7,793 2.8
Schroder Oriental Income Fund Limited Guernsey 7,774 2.8
Genesis Emerging Markets Fund Limited Guernsey 7,667 2.8
Edinburgh Dragon Trust PLC United Kingdom 6,766 2.4
Baring Vostok Investments PCC Limited Guernsey 6,348 2.3
Next ten investments 79,603 28.7
Top twenty investments 248,873 90.0
Fondul Proprietatea Romania 6,266 2.3
Komodo Fund Class S Cayman Islands 6,210 2.2
The China Fund Inc United States 6,112 2.2
Korean Preferred Share Certificate Curacao 6,013 2.2
iShares MSCI Saudi Arabia ET Saudi Arabia 6,006 2.2
Vanguard FTSE Emerging Markets Index Fund United States 5,334 1.9
Taiwan Fund Inc United States 3,104 1.1
iShares MSCI Turkey UCITS ETF Turkey 3,027 1.1
JPMorgan Russian Securities PLC United Kingdom 2,396 0.9
Aberdeen Asian Smaller Companies Investment Trust PLC United Kingdom 1,261 0.5
Tarpon All Equities Cayman (Series B) L.P. Cayman Islands 999 0.4
Total investments 295,601 107.0
Cash and
other net assets (19,045) (7.0)
Net assets 276,556 100.0
Portfolio
Asset Allocation
Governance
Directors’ Report
Investment Policy
Results and Dividends
Objectives The Company’s total comprehensive income for the year was a
The Company’s investment objective is to achieve consistent loss of £40,984,000 (2017: gain of £46,726,000). The Company’s
returns for shareholders in excess of the MSCI Emerging revenue return for the year amounted to £980,000 (2017: loss
Markets Net Total Return Index in sterling terms (Bloomberg of £348,000).
ticker: NDUEEGF Index) (the “Benchmark”).
The Company declared four interim dividends, each of
i) Asset Allocation 5.25p per ordinary share, in respect of the year ended
The Investment Manager invests in a portfolio of funds and 31 October 2018.
products which give a diversified exposure to developing
The Board has declared a first interim dividend of 5.25p per
and emerging market economies. The Investment Manager
share in respect of the year ending 31 October 2019, which will
does not seek to replicate the Benchmark’s geographical
be paid on 29 March 2019 to shareholders on the register on
distribution. The Company’s geographic asset allocation is
1 March 2019.
derived from the Investment Manager’s analysis of prospects
for regions and countries and the underlying opportunities In respect of future financial years, it is anticipated that four
for investment. interim dividends will continue to be paid on a quarterly basis
in March, June, September and December. The Board will put
The Board does not believe that it should impose prescriptive
a resolution to shareholders at the AGM in respect of its policy
limits on the Investment Manager for the geographic
to declare four interim dividends each year, and will include
breakdown and distribution by type of fund as this could
this as a resolution at future AGMs.
have a negative impact on the Company’s performance and
accordingly the Company does not have any prescribed
Investment Report and Outlook
investment limits in this regard.
The Chairman’s Statement and Investment Manager’s Report
The Investment Manager has discretion to enter into hedging
incorporate a review of the highlights during the year and
mechanisms where it believes that this would protect the
the outlook for the forthcoming year.
performance of the Company’s investment portfolio in a cost
effective manner. To date, the Company has never entered
Key Performance Indicators (“KPIs”)
into any such hedging mechanisms.
The Company’s success in attaining its objectives is measured
ii) Risk Diversification by reference to the following KPIs:
Individual investments are selected for their potential to
outperform as a result of one or more of the following: the (a) The Company seeks to generate consistent relative returns
performance of the region, market or asset class in which they ahead of those generated by its Benchmark Index.
invest; the skill of the underlying fund manager; and, in the (b) The Company seeks to achieve a positive absolute return
case of closed end funds, through the narrowing of discounts over the longer term through its exposure to the emerging
at which their shares trade to net asset value. market asset class.
No holding by the Company in any other company will
represent, at the time of the investment, more than 15% by Performance
value of the Company’s net assets. The diversification within An overview of the Company’s performance is contained in the
investee funds is taken into account when deciding on the size Chairman’s Statement and Investment Manager’s Report.
of each investment so the Company’s exposure to any one
underlying company should never be excessive. In sterling terms, the Benchmark Index total return decreased
by 9.0% over the year against a decrease of 12.4% for the
iii) Gearing Company’s Net Asset Value (“NAV”) per Ordinary share.
The Directors reserve the right to borrow up to a maximum
of 15% of the Net Asset Value of the Company at the time Ongoing Charges
of drawdown. For the year ended 31 October 2018, the Company’s ongoing
charges figure, calculated using the Association of Investment
Companies’ (“AIC”) methodology, was 1.02% (2017: 1.07%).
Principal Risks and Uncertainties economies; (j) differences in auditing and financial reporting
standards which may result in the unavailability of material
Together with the issues discussed in the Chairman’s
information about economies and issuers; (k) less extensive
Statement and the Investment Manager’s Report, the Board
regulatory oversight of securities markets; (l) longer settlement
considers that the main risks and uncertainties faced by the
periods for securities transactions; (m) less stringent laws
Company fall into the following categories:
regarding the fiduciary duties of officers and directors
(i) General Market Risks Associated with the Company’s and protection of investors; and (n) certain consequences
Investments regarding the maintenance of portfolio securities and
Changes in economic conditions, interest rates, foreign cash with sub-custodians and securities depositories in
exchange rates and inflationary pressures, industry developing markets.
conditions, competition, political and diplomatic events,
(iii) Other Portfolio Specific Risks
tax, environmental and other laws and other factors can
(a) Small cap stocks
substantially and either adversely or favourably affect the
The underlying investee funds selected by the Investment
value of the securities in which the Company invests and,
Manager may have significant investments in smaller to
therefore, the Company’s performance and prospects.
medium sized companies of a less seasoned nature whose
The Company’s investments are subject to normal market securities are traded in an “over-the-counter” market. These
fluctuations and the risks inherent in the purchase, holding “secondary” securities often involve significantly greater
or selling of securities, and there can be no assurance risks than the securities of larger, better-known companies,
that appreciation in the value of those investments will due to shorter operating histories, potentially lower credit
occur. There can be no guarantee that any realisation of an ratings and, if they are not listed companies, a potential lack
investment will be on a basis which necessarily reflects the of liquidity in their securities. As a result of lower liquidity
Company’s valuation of that investment for the purposes of and greater share price volatility of these “secondary”
calculating the net asset value. securities, there may be a disproportionate effect on the
value of the investee funds and, indirectly, on the value of the
The Company’s investments, although not made into
Company’s portfolio.
developed economies, are not entirely sheltered from
the negative impact of economic slowdowns, decreasing (b) Liquidity of the portfolio
consumer demands and credit shortages in such developed The fact that a share is traded does not guarantee its liquidity
economies which, amongst other things, affects the demand and the Company’s investments may be less liquid than
for the products and services offered by the companies in other listed and publicly traded securities. The Company
which the Company directly or indirectly invests. may invest in securities that are not readily tradable or may
accumulate investment positions that represent a significant
A proportion of the Company’s portfolio may be held in cash
multiple of the normal trading volumes of an investment,
or cash equivalent investments from time to time. Such
which may make it difficult for the Company to sell its
proportion of the Company’s assets will be out of the market
investments. Investors should not expect that the Company
and will not benefit from positive stock market movements,
will necessarily be able to realise its investments within a
but may give some protection against negative stock
period which they would otherwise regard as reasonable,
market movements.
and any such realisations that may be achieved may be at
(ii) Emerging Markets a considerably lower price than prevailing indicative market
The funds selected by the Investment Manager invest in prices. The Company has a borrowing facility in place which
emerging markets. Investing in emerging markets involves may be utilised to assist in the management of liquidity. The
certain risks and special considerations not typically associated borrowing facility is described later in this Directors’ Report.
with investing in other more established economies or Liquidity of the portfolio is further discussed in note 17 to the
securities markets. In particular there may be: (a) the risk financial statements.
of nationalisation or expropriation of assets or confiscatory
taxation; (b) social, economic and political uncertainty (c) Foreign exchange risks
including war and revolution; (c) dependence on exports and It is not the Company’s present policy to engage in currency
the corresponding importance of international trade and hedging. Accordingly, the movement of exchange rates
commodities prices; (d) less liquidity of securities markets; between sterling and the other currencies in which the
(e) currency exchange rate fluctuations; (f) potentially higher Company’s investments are denominated or its borrowings
rates of inflation (including hyper-inflation); (g) controls are drawn down may have a material effect, unfavourable
on foreign investment and limitations on repatriation of or favourable, on the returns otherwise experienced on the
invested capital and a fund manager’s ability to exchange investments made by the Company.
local currencies for pounds sterling; (h) a higher degree of Movements in the foreign exchange rate between sterling
governmental involvement and control over the economies; and the currency applicable to a particular shareholder may
(i) government decisions to discontinue support for economic have an impact upon that shareholder’s returns in their own
reform programmes and imposition of centrally planned currency of account.
Allotment of Shares and Disapplication of The Board has been advised that the Company’s shares are
Pre-Emption Rights excluded from the FCA’s restrictions which apply to NMPIs
because they are shares issued by a non-UK company which
At the forthcoming AGM, an ordinary resolution will
would qualify as an investment trust if resident in the UK.
be proposed to confer an authority on the Directors, in
substitution for any existing authority, to allot, either as new
Ordinary shares or shares from treasury, up to 5% of the
Continuation Vote
issued Ordinary share capital of the Company (excluding The Company does not have a fixed life but the Directors
shares held in treasury) as at the date of the passing of the consider it desirable that shareholders have the opportunity
resolution (up to a maximum of 2,302,354 Ordinary shares to review the future of the Company at appropriate intervals.
based on the number of Ordinary shares in issue as at the At the 2018 AGM, a resolution was approved by shareholders
date of this report). that the Company should continue in existence in its current
form until the AGM to be held in 2023. If the vote to continue is
A further resolution will be proposed as a special resolution
not passed at the 2023 AGM then, within four months of that
to provide the Directors with the authority to disapply pre-
resolution failing, the Directors will be required to formulate
emption rights in respect of issuing shares and/or selling
and put to shareholders proposals relating to the future of the
shares from treasury under the general authority granted as
Company, having had regard to, inter alia, prevailing market
described above. Any future issues of Ordinary shares, or sales
conditions and the applicable law and regulations. If the
of shares from treasury, will only be undertaken at a premium
resolution is passed, the Company will continue in operation
to the prevailing net asset value per share.
and a similar resolution will be put to shareholders at every
These authorities will expire at the conclusion of the AGM in fifth AGM thereafter.
2020. The Directors consider that the authorities proposed
to be granted at the AGM are necessary to retain flexibility, Automatic Exchange of Information (“AEOI”)
although they do not, at the present time, have any intention
of exercising such authorities. Foreign Account Tax Compliance Act (“FATCA”)
FATCA legislation, which was introduced in the United
States of America, places obligations on foreign financial
Significant Shareholders
institutions such as the Company. In Guernsey, local law has
As at 31 October 2018, the Company had been formally been introduced that gives effect to the FATCA requirements
notified of the following significant shareholdings of the issued and certain reporting obligations are placed on financial
Ordinary shares (excluding treasury shares) in accordance institutions as defined by this act. The Company is registered
with the requirements of the FCA’s Disclosure Guidance and as a reporting financial institution and is subject to ongoing
Transparency Rules. reporting obligations under the legislation.
to assess the viability of the Company, particularly when Annual General Meeting (“AGM”)
taking into account the long-term nature of the Company’s
The AGM will be held on 16 April 2019. The notice of AGM is
investment strategy.
included in this document.
In their assessment of the prospects of the Company, the
Directors have considered each of the principal risks and Corporate Governance
uncertainties set out on pages 14 and 15 of this report.
The Corporate Governance Statement on pages 19 to 22 forms
Developments in emerging markets and portfolio changes are
part of this report.
discussed at quarterly Board meetings and the internal control
framework of the Company is subject to formal review on at
Statement of Directors’ Responsibilities
least an annual basis. The Company’s portfolio consists of a
range of funds and other products which provide exposure The Statement of Directors’ Responsibilities on page 25 forms
to emerging markets. Under normal market conditions, the part of this report.
majority of the investments held by the Company could be
sold within one month. However, there are circumstances
which could lead to a reduction in market liquidity and,
therefore, the ability of the Company to realise its investments.
Helen Green
The Directors do not expect there to be any material increase Director
in the annual ongoing charges of the Company over the
Period. The Company’s income from investments and cash
realisable from the sale of its investments provide substantial
cover to the Company’s operating expenses, and any other
costs likely to be faced by the Company over the Period. William Collins
Director
Taking the above into account, the Directors have a reasonable
31 January 2019
expectation that the Company will be able to continue
in operation and meet its liabilities as they fall due over
the Period.
Auditor
KPMG Channel Islands Limited was re-appointed as
auditor of the Company at the AGM held in April 2018. A
resolution for the re-appointment of KPMG Channel Islands
Limited as auditor of the Company is to be proposed at the
forthcoming AGM.
This Corporate Governance Statement forms part of the Mr Hadsley-Chaplin was appointed Chairman of the Board on
Directors’ Report. 10 April 2017.
The Board of Aberdeen Emerging Markets Investment All Directors are considered by the Board to be independent at
Company Limited (the “Company”) has considered the the date of this report.
principles and recommendations of the Association of
An insurance policy covering Directors’ and officers’ liabilities is
Investment Companies’ (“AIC”) Code of Corporate Governance
maintained by the Company.
(“AIC Code”) by reference to the AIC Corporate Governance
Guide for Investment Companies (“AIC Guide”) as issued Board Diversity
in July 2016. The AIC Code, as explained by the AIC Guide, The Company’s policy is that the Board should have a broad
addresses all of the principles set out in the UK Corporate range of skills and diversity. The Board performs an annual
Governance Code, as well as setting out additional principles review of its performance and these factors form part of that
and recommendations on issues that are of specific relevance review process.
to the Company.
The Board has given careful consideration to the
The Board considers that reporting against the principles and recommendations of the AIC Code and other guidance
recommendations of the AIC Code, and by reference to the on boardroom diversity. The Board considers these
AIC Guide (which incorporates the UK Corporate Governance recommendations when reviewing Board composition.
Code), will provide better information to shareholders.
Mark Hadsley-Chaplin (Chairman) (aged 57) – United Kingdom
The Guernsey Financial Services Commission revised its Code resident - founded RWC Partners Ltd, a London based fund
of Corporate Governance (the “Guernsey Code”) in February management firm in 2000, was CEO until 2006 and Chairman
2016. Companies which report under the AIC Code are until 2010. Prior to this he was Vice Chairman of UBS Securities
deemed to meet the requirements of the Guernsey Code. (East Asia) Ltd, based in Singapore and responsible for the
The Company has complied with the recommendations of management and development of the bank’s Asian equity
the AIC Code and the relevant provisions of the UK Corporate business worldwide.
Governance Code, except as set out below. Mr Hadsley-Chaplin holds no other public company
The UK Corporate Governance Code includes provisions directorships.
relating to: John Hawkins (aged 76) - United Kingdom resident - is a
• the role of the chief executive Fellow of the Institute of Chartered Accountants in England
• executive directors’ remuneration and Wales. He was formerly Executive Vice President and a
• the need for an internal audit function member of the Corporate Office of The Bank of Bermuda
Limited. He was with The Bank of Bermuda for 25 years, of
For the reasons set out in the AIC Guide, and in the preamble which approximately 15 years were based in Hong Kong. He is
to the UK Corporate Governance Code, the Board considers also a director of The Prospect Japan Fund Limited and Raffles
these provisions are not relevant to the position of the Asia Investment Company Limited.
Company, being an externally managed investment company.
The Company has therefore not reported further in respect of Mr Hawkins was, until 30 April 2018, a director of US - listed
these provisions. Aberdeen Greater China Fund Inc which was also managed
by the Standard Life Aberdeen Group. Consequently,
The Board Mr Hawkins was not considered to be an independent Director
of the Company prior to that date. However, following the
The Board aims to provide effective leadership so the reconstruction of that company Mr Hawkins retired as a
Company has the platform from which it can achieve its director on 30 April 2018 and since then has been regarded by
investment objective. Its role is to guide the overall business the Board as an independent Director of the Company. Given
strategy for the benefit of shareholders and stakeholders, Mr Hawkins’ tenure of service as a Director, of more than nine
ensuring that their interests are its primary consideration. The years, he stands annually for re-election at the AGM.
intention is to create a supportive working environment which
allows the Investment Manager the opportunity to manage the William Collins (Senior Independent Director) (aged 69) –
portfolio in accordance with the investment policy, through Guernsey resident - has over 45 years’ experience in banking
a framework of effective controls which enable risks to be and investment. From September 2007 he was employed by
assessed and managed. Bank J Safra Sarasin (formerly Bank Sarasin) in Guernsey as
Director - Private Clients, retiring at the end of 2014. Prior to
Composition that he worked for Barings in Guernsey for over 18 years. In
Mr Hawkins was appointed as a Director of the Company 1995 he was appointed a director and from 2003 until August
with effect from its commencement on 16 September 2009. 2007 was Managing Director of Baring Asset Management
Mr Hadsley-Chaplin was appointed by the Board on 26 April (CI) Ltd.
2012, Mr Collins was appointed by the Board on 14 June
Mr Collins holds no other public company directorship.
2012 and Mrs Green was appointed by the Board on 1 July
2016. Mr Barker was appointed by the Board with effect from Helen Green (aged 56) - Guernsey resident - is a chartered
21 July 2017 and resigned as a Director on 4 October 2018 due accountant and has been employed by Saffery Champness, a
to other commitments. All the Directors hold their office in top 20 firm of chartered accountants, since 1984. She qualified
accordance with the Company’s Articles of Incorporation. as a chartered accountant in 1988 and became a partner in
the London office in 1998. Since 2000 she has been based Directors’ Shareholdings
in the Guernsey office where she is Client Liaison Director At 31 October 2018 and at the date of this report, the Directors
responsible for trust and company administration. Mrs Green had the following shareholdings in the Company.
serves as a non-executive director on the boards of a number
of companies in various jurisdictions. Ordinary shares
At 31 October
Mrs Green holds other public company directorships in UK 2018 Ordinary shares
Mortgages Limited, Landore Resources Limited, City Natural and at the date of At 31 October
Resources High Yield Trust plc and Acorn Income Fund this report 2017
Limited, of which she is Chairman. M Hadsley-Chaplin 25,000 25,000
W Collins 12,000 12,000
The Chairman
J Hawkins 10,000 10,000
The Chairman is independent in accordance with principle 1 of
H Green – –
the AIC Code. Mr Hadsley-Chaplin has extensive knowledge of
the investment management industry and backgrounds which
provide the foundation for the role of Chairman and the basis Mr Barker held no Ordinary shares of the Company as at the
on which to make judgements as head of the Board, on behalf date of his resignation on 4 October 2018 (2017: nil).
of shareholders. A procedure has been adopted for the Directors, in the
furtherance of their duties, to take independent professional
advice at the expense of the Company. Directors are
encouraged to attend industry and other seminars, including
courses run by the AIC, covering issues and developments
relevant to investment companies.
Board Meetings
The actual number of meetings of the Board and Committees for the year under review is given below, together with individual
Directors’ attendance at those meetings. The first number in the table is the meetings attended by the individual Director and the
second number is the number of meetings that Director was eligible to attend.
Management
Nomination Audit Engagement Remuneration
Board Committee Committee Committee Committee
M Hadsley-Chaplin 4/4 1/1 n/a 1/1 2/2
W Collins 4/4 1/1 3/3 1/1 2/2
J Hawkins 4/4 1/1 2/2 1/1 1/1
H Green 4/4 1/1 3/3 1/1 2/2
M Barker 3/4 1/1 3/3 1/1 2/2
In addition there were six Board meetings to deal with matters The Board has reviewed the contributions made by Mr
relating to the Tender Offer, the loan facility renewal, and the Hawkins and Mr Hadsley-Chaplin and recommends their
approval of dividends and share buybacks. continuing appointment as Directors of the Company.
Remuneration Committee The Board uses a risk assessment matrix to consider the main
The Company has established a Remuneration Committee, risks and controls for the Company. The matrix is reviewed
which at the year end comprised Mr Collins, Mr Hadsley- and updated on a frequent basis by the Board.
Chaplin, Mr Hawkins and Mrs Green. Mr Barker ceased to be a
The Board has contractually delegated to external
member of the Remuneration Committee upon his resignation
agencies, including the Manager, the management of the
on 4 October 2018. The Committee meets at least on an
investment portfolio, the custodial services (which include
annual basis to consider the remuneration of the Directors.
the safeguarding of the assets), the registration services and
The Committee reviews the remuneration of the Directors
the accounting and company secretarial requirements. Each
and Chairman against the fees paid to the directors of other
of these contracts was entered into after full and proper
investment companies of a similar size and nature, as well as
consideration of the quality and cost of services offered,
taking into account other comparable data.
including the financial control systems in operation in so far as
Mr Collins is the Chairman of the Remuneration Committee. they relate to the affairs of the Company.
The Remuneration Committee has formal terms of reference
and copies of these are available on request from the Financial Aspects of Internal Control
Company Secretary. The Directors are responsible for the internal financial control
systems of the Company and for reviewing their effectiveness.
These aim to ensure the maintenance of proper accounting
Performance Evaluation
records, the reliability of the financial information upon which
A formal annual performance appraisal process is performed business decisions are made and which is used for publication
on the Board, the committees, and the individual Directors. and that the assets of the Company are safeguarded. As stated
The appraisal is performed internally and the Board considers above, the Board has contractually delegated to external
that this is appropriate given the nature and size of the agencies the services the Company requires, but it is fully
Company. A programme consisting of open and closed end informed of the internal control framework established by
questions is used as the basis for the appraisals. The results the Manager, the Administrator and the UK Administration
are reviewed by the Chairman and are then discussed with Agent to provide reasonable assurance on the effectiveness of
the Board so that any necessary action can be considered internal financial controls.
and undertaken. A separate appraisal of the Chairman is
Role, Composition and Meetings Manager that the Company’s accounting policies on valuation
of investments had been followed. The Audit Committee made
The Company has established an Audit Committee, which
enquiries of the Administrator, UK Administration Agent and
at the year end comprised Mrs Green, Mr Collins and
the Manager with regards to the procedures that are in place
Mr Hawkins. Mr Barker resigned as a member of the Audit
to ensure that the portfolio is valued correctly.
Committee upon his resignation as a Director of the Company
on 4 October 2018. As a minimum, the Audit Committee meets The Audit Committee agreed the approach to the audit of the
on a bi-annual basis and its main functions include, inter alia, valuation of investments with the external auditor prior to the
reviewing and monitoring internal financial control systems commencement of the audit. The results of the audit in this
and risk management systems on which the Company is area were reported by the external auditor and there were
reliant, considering annual and interim financial statements no significant disagreements between management and the
and reports from the auditor, making recommendations to external auditor’s conclusions.
the Board in relation to the appointment and remuneration of
the Company’s auditor and monitoring and reviewing annually Effectiveness of External Audit
the auditor’s independence, objectivity, effectiveness and The Audit Committee reviews the effectiveness of the
qualifications and, where relevant, compliance with corporate Company’s external audit. The Audit Committee received
governance changes. The Committee is responsible for the a presentation of the audit plan from the external auditor
development and implementation of a policy on the supply of prior to the commencement of the audit and a presentation
any non-audit services provided by the auditor. The Board has of the results of the audit following completion of the main
also requested that the Audit Committee advise it on whether audit testing. The Audit Committee performed a review of
it believes that the Annual Report and Financial Statements the external auditor following the presentation of the results
taken as a whole is fair, balanced and understandable and of the audit. The review included a discussion of the audit
provides the information necessary for shareholders to assess process and the ability of the external auditor to fulfil its role.
the Company’s position and performance, business model The factors considered by the Audit Committee included
and strategy. the external auditor’s resources, the external auditor’s
Mrs Green is the Chairman of the Audit Committee and has independence, the performance of the team employed to
recent and relevant financial experience. The Audit Committee conduct the audit, audit planning, communication and scope
as a whole has competence relevant to the investment of the audit.
company sector. Following the review, the Audit Committee agreed that the
In the year ended 31 October 2018 there were three meetings reappointment of the auditor should be recommended to the
of the Audit Committee. The Company’s external auditor also Board and the shareholders of the Company.
attends the Committee meetings at the Audit Committee’s
request and reports on its work procedures and its findings Audit Tenure
in relation to the Company’s statutory audit. The Company’s KPMG Channel Islands Limited has been appointed as the
external auditor attended all of the Audit Committee meetings Company’s external auditor since 2009. Following professional
during the year ended 31 October 2018. guidelines, the audit partner rotates after five years. The
current audit partner is in his third year of appointment. The
Financial Statements and Significant Audit Committee is aware that the tenure of the auditor is
Accounting Matters approaching ten years. Therefore the Audit Committee intends
to undertake an audit tender process in the coming year in
The Audit Committee considered the following significant
respect of the 2020 financial statements.
accounting issues in relation to the Company’s financial
statements for the year ended 31 October 2018. Provision of Non-Audit Services
Valuation of Investments The Audit Committee has put a policy in place for the supply
The Company, as an investment company, invests virtually all of any non-audit services provided by the external auditor.
of its assets into funds invested in developing and emerging Such services are considered on a case-by-case basis and
markets. As at 31 October 2018, investments represented may only be provided to the Company if the provision of such
approximately 107.0% of its net assets. The valuation of services is at a reasonable and competitive cost and does not
investments is therefore the most significant factor in relation to constitute a conflict of interest or potential conflict of interest
the accuracy of the financial statements. The portfolio consists which would prevent the auditor from remaining objective and
of investments in either quoted investment companies or independent. In the year ended 31 October 2018 there were
open ended funds with observable independent values. The no non-audit services provided, other than reporting on the
estimates, assumptions and judgements required to be made by Company’s half year financial statements. The fee payable to
management in determining the valuation of investments and the Auditor for this additional service amounted to £14,500
method of accounting are described in more detail in notes 3(a) (2017: £14,000).
and 18 to the financial statements.
Helen Green
The Audit Committee reviewed the portfolio valuation as at Audit Committee Chairman
31 October 2018. The Audit Committee obtained confirmation 31 January 2019
from the Administrator, UK Administration Agent and the
This Directors’ Remuneration Report has been prepared on a The following emoluments in the form of fees were payable in
voluntary basis in accordance with UK regulations governing the year ended 31 October 2018 to the Directors who served
the disclosure and approval of Directors’ remuneration, and during the year:
comprises three parts:
Fees Fees
1. a Remuneration Policy which the Board has decided will be 2018 2017
subject to a binding shareholder vote every three years (or £’000 £’000
sooner if varied during this interval). The first such vote took
Mark Hadsley-Chaplin (Chairman) 34.7 29.5
place at the AGM on 10 April 2017, covering the three year
Helen Green 29.7 28.0
period to 31 October 2019.
John Hawkins 26.0 25.0
2. an Implementation Report which is subject to an advisory William Collins 26.0 25.0
vote on the level of remuneration paid during the year; and Mark Barker (resigned 4 October 2018) 23.9 7.1
3. an Annual Statement. Richard Bonsor (retired 10 April 2017) – 14.6
Terence Mahony (retired 30 January
A Remuneration Committee has been formed which
2017) – 5.9
comprises Mr Collins (Chairman), Mr Hadsley-Chaplin, Mr
Hawkins and Mrs Green. Mr Barker ceased to be a member of 140.3 135.1
the Committee upon his resignation on 4 October 2018.
Statement of Voting at the AGM
Remuneration Policy At the Company’s last AGM, held on 12 April 2018,
The Board’s policy is that the remuneration of non-executive shareholders approved the Directors’ Remuneration Report in
Directors should be fair and should reflect the experience, respect of the year ended 31 October 2017. 99.99% of proxy
work involved, responsibilities and potential liabilities of votes were in favour of the resolution and 0.01% of proxy
the Board as a whole. The non-executive Directors’ fees are votes were against. At the Company’s AGM held on 10 April
determined within the limits set out in the Company’s Articles 2017, shareholders approved the Directors’ Remuneration
of Incorporation and they are not eligible for bonuses, pension Policy in respect of the three years ending 31 October 2019.
benefits, share benefits, share options, long-term incentive 99.9% of proxy votes were in favour of the resolution and 0.1%
schemes or other benefits. This policy will continue for the of proxy votes were against.
period to 31 October 2019. A resolution to approve the Directors’ Remuneration Report
The Company’s Articles of Incorporation currently limit the (excluding the Directors’ Remuneration Policy) in respect of the
maximum amount payable in aggregate to the Directors to year ended 31 October 2018 will be proposed at the AGM.
£200,000 per annum and this may only be changed by the
Spend on Pay
passing of an ordinary resolution of the Company.
As the Company has no employees, the Directors do not
No services have been provided by, or fees paid to, advisers consider it appropriate to present a table comparing
in respect of remuneration policy during the year ended remuneration paid to employees with distributions to
31 October 2018. shareholders. The total fees paid to Directors are shown
above.
Directors’ Service Contracts
The Directors do not have service contracts. The Directors Annual Statement
have appointment letters subject to termination upon three
months’ notice. The Directors are subject to re-election by The Board confirms that the above Directors’ Remuneration
shareholders at a maximum interval of three years. Report summarises, as applicable, for the year ended
31 October 2018:
Implementation Report • the major decisions on Directors’ remuneration;
• any substantial changes relating to Directors’
Directors’ Emoluments for the Year
remuneration; and
Fees payable with effect from 1 July 2018 have been at a rate
• the context in which the changes occurred and decisions
of £38,000 per annum for the Chairman, £33,000 per annum
have been taken.
for the Audit Committee Chairman and £28,000 per annum
for the other Directors. Fees payable between 1 November William Collins
2017 and 30 June 2018 were at a rate of £33,000 per annum Remuneration Committee Chairman
for the Chairman, £28,000 per annum for the Audit Committee 31 January 2019
Chairman and £25,000 per annum for the other Directors.
During the year ended 31 October 2018, there were no
additional fees paid to the Directors.
The Directors are responsible for preparing the Annual Disclosure of Information to the Auditor
Report and Accounts in accordance with applicable law
The Directors who held office at the date of approval of
and regulations.
this Directors’ Report confirm that, so far as they are each
Guernsey company law requires the Directors to prepare aware, there is no relevant audit information of which the
financial statements for each financial year. The Directors have Company’s auditor is unaware; and each Director has taken
elected to prepare the financial statements in accordance with all the steps that they ought to have taken as a Director to
International Financial Reporting Standards as issued by the make themselves aware of any relevant audit information
IASB and applicable law. and to establish that the Company’s auditor is aware of that
information.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a
Responsibility Statement of the Directors in Respect
true and fair view of the state of affairs of the Company and
of its profit or loss for that period. In preparing these financial of the Annual Financial Report
statements, the directors are required to: We confirm that to the best of our knowledge:
• select suitable accounting policies and then apply them • the financial statements, prepared in accordance with the
consistently; applicable set of accounting standards, give a true and fair
• make judgements and estimates that are reasonable, view of the assets, liabilities, financial position and profit or
relevant and reliable; loss of the Company; and
• state whether applicable accounting standards have been • the Management Report (comprising the Chairman’s
followed, subject to any material departures disclosed and Statement, the Investment Manager’s Report and the
explained in the financial statements; Directors’ Report) includes a fair review of the development
• assess the Company’s ability to continue as a going and performance of the business and the position of the
concern, disclosing, as applicable, matters related to going Company, together with a description of the principal risks
concern; and and uncertainties that it faces.
• use the going concern basis of accounting unless they either
The Board considers that the Annual Report and Accounts,
intend to liquidate the Company or to cease operations, or
taken as a whole, is fair, balanced and understandable and
have no realistic alternative but to do so.
provides the information necessary for shareholders to assess
The Directors are responsible for keeping proper accounting the Company’s position and performance, business model and
records that are sufficient to show and explain the Company’s strategy.
transactions and disclose with reasonable accuracy at any
time the financial position of the Company and enable
them to ensure that its financial statements comply with
the Companies (Guernsey) Law, 2008. They are responsible
for such internal control as they determine is necessary Helen Green
to enable the preparation of financial statements that are Director
free from material misstatement, whether due to fraud
or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the
assets of the Company and to prevent and detect fraud and
other irregularities. William Collins
Director
The Directors are responsible for the maintenance and 31 January 2019
integrity of the corporate and financial information included
on the Company’s website, but not for the content of any
information included on the website that has been prepared
or issued by third parties. Legislation in Guernsey governing
the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Northern Trust (Guernsey) Limited (the “Depositary”) has Basis of Depositary Review
been appointed to provide depositary services to Aberdeen
The Depositary conducts such reviews as it, in its reasonable
Emerging Markets Investment Company Limited (the
discretion, considers necessary in order to comply with its
“Company”) with effect from 1 August 2014 in accordance
obligations and to ensure that, in all material respects, the
with the requirements of Article 36 and Articles 21(7), (8) and
Company has been managed (i) in accordance with the
(9) of the Directive 2011/61/EU of the European Parliament
limitations imposed on its investment and borrowing powers
and of the Council of 8 June 2011 on Alternative Investment
by the provisions of its constitutional documentation and
Fund Managers and amending Directives 2003/41/EC and
the appropriate regulations and (ii) otherwise in accordance
2009/65/EC and Regulations (EC) No. 1060/2009 and (EU) No.
with the constitutional documentation and the appropriate
1095/2010 (the “AIFM Directive”).
regulations. Such reviews vary based on the type of Company,
We have enquired into the conduct of Aberdeen Standard the assets in which a Company invests and the processes
Fund Managers Limited, formerly Aberdeen Fund Managers used, or experts required, in order to value such assets.
Limited, (the “AIFM”), for the year ended 31 October 2018, in
our capacity as Depositary to the Company. Review
This report including the review provided below has In our view, the Company has been managed during the
been prepared for and solely for the shareholders in the period, in all material respects:
Company. We do not, in giving this report, accept or assume
(i) in accordance with the limitations imposed on the
responsibility for any other purpose or to any other person to
investment and borrowing powers of the Company by the
whom this report is shown.
constitutional document; and by the AIFMD legislation; and
Our obligations as Depositary are stipulated in the relevant (ii) otherwise in accordance with the provisions of the
provisions of the AIFM Directive and the relevant sections constitutional document and the AIFMD legislation.
of Commission Delegated Regulation (EU) No 231/2013
collectively (the “AIFMD legislation”).
Amongst these obligations is the requirement to enquire into
the conduct of the AIFM and the Company and their delegates For and on behalf of
in each annual accounting period. Northern Trust (Guernsey) Limited
Our report shall state whether, in our view, the Company 31 January 2019
has been managed in that period in accordance with the
constitutional documents, the scheme particulars and the
AIFMD legislation. It is the overall responsibility of the AIFM to
comply with these provisions. If the AIFM or their delegates
have not so complied, we as the Depositary will state why this
is the case and outline the steps which we have taken to rectify
the situation.
The Depositary and its affiliates are or may be involved in
other financial and professional activities which may on
occasion cause a conflict of interest with its roles with respect
to the Company. The Depositary will take reasonable care to
ensure that the performance of its duties will not be impaired
by any such involvement and that any conflicts which may
arise will be resolved fairly and any transactions between the
Depositary and its affiliates and the Company shall be carried
out as if effected on normal commercial terms negotiated at
arm’s length and in the best interests of shareholders.
Our Application of Materiality and an Overview of the • the Directors’ explanation in the viability statement,
Scope of our Audit pages 17 to 18, as to how they have assessed the prospects
of the Company, over what period they have done so and
Materiality for the financial statements as a whole was set at
why they consider that period to be appropriate, and their
£8,296,000, determined with reference to a benchmark of Net
statement as to whether they have a reasonable expectation
Assets of £276,556,000 of which it represents approximately
that the Company will be able to continue in operation and
3% (2017: approximately 3%).
meet its liabilities as they fall due over the period of their
We reported to the Audit Committee any corrected or assessment, including any related disclosures drawing
uncorrected identified misstatements exceeding £415,000, attention to any necessary qualifications or assumptions.
in addition to other identified misstatements that warranted
reporting on qualitative grounds. Corporate Governance Disclosures
Our audit of the Company was undertaken to the materiality We are required to report to you if:
level specified above, which has informed our identification of
• we have identified material inconsistencies between the
significant risks of material misstatement and the associated
knowledge we acquired during our financial statements
audit procedures performed in those areas as detailed above.
audit and the Directors’ statement that they consider that
the Annual Report and financial statements taken as a
We Have Nothing to Report on Going Concern whole is fair, balanced and understandable and provides
We are required to report to you if we have anything material the information necessary for shareholders to assess the
to add or draw attention to in relation to the Directors’ Company’s position and performance, business model and
statement in note 2(b) to the financial statements on the use strategy; or
of the going concern basis of accounting with no material • the section of the Annual Report describing the work of the
uncertainties that may cast significant doubt over the Audit Committee does not appropriately address matters
Company’s use of that basis for a period of at least twelve communicated by us to the Audit Committee.
months from the date of approval of the financial statements.
We are required to report to you if the Corporate Governance
We have nothing to report in this respect.
Statement does not properly disclose a departure from the
eleven provisions of the 2016 UK Corporate Governance Code
We Have Nothing to Report on the Other Information specified by the Listing Rules for our review.
in the Annual Report
We have nothing to report to you in these respects.
The Directors are responsible for the other information
presented in the Annual Report together with the financial
We Have Nothing to Report on Other Matters on
statements. Our opinion on the financial statements does not
cover the other information and we do not express an audit Which We are Required to Report by Exception
opinion or any form of assurance conclusion thereon. We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to
Our responsibility is to read the other information and, in
report to you if, in our opinion:
doing so, consider whether, based on our financial statements
audit work, the information therein is materially misstated • the Company has not kept proper accounting records; or
or inconsistent with the financial statements or our audit • the financial statements are not in agreement with the
knowledge. Based solely on that work we have not identified accounting records; or
material misstatements in the other information. • we have not received all the information and explanations,
which to the best of our knowledge and belief are necessary
Disclosures of Principal Risks and Longer- for the purpose of our audit.
Term Viability
Respective Responsibilities
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw Directors’ Responsibilities
attention to in relation to: As explained more fully in their statement set out on page 25,
• the Directors’ confirmation within the viability statement, the Directors are responsible for: the preparation of the
pages 17 to 18, that they have carried out a robust financial statements including being satisfied that they give a
assessment of the principal risks facing the Company, true and fair view; such internal control as they determine is
including those that would threaten its business model, necessary to enable the preparation of financial statements
future performance, solvency or liquidity; that are free from material misstatement, whether due to
• the principal risks and uncertainties disclosures describing fraud or error; assessing the Company’s ability to continue
these risks and explaining how they are being managed or as a going concern, disclosing, as applicable, matters related
mitigated; to going concern; and using the going concern basis of
accounting unless they either intend to liquidate the Company
or to cease operations, or have no realistic alternative but to
do so.
Barry Ryan
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors, Guernsey
31 January 2019
Earnings per Ordinary share 10 2.03p (86.83p) (84.80p) (0.68p) 91.68p 91.00p
The total column of this statement represents the Company’s Statement of Comprehensive Income, prepared under IFRS.
The revenue and capital columns, including the revenue and capital earnings per share data, are supplementary information
prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or
discontinued during the year.
The notes on pages 34 to 48 form part of these financial statements.
As at As at
31 October 31 October
2018 2017
Note £’000 £’000
Non-current assets
Investments at fair value through profit or loss 4 295,601 383,263
Current assets
Cash and cash equivalents 1,037 3,414
Other receivables 297 186
1,334 3,600
Total assets 296,935 386,863
Current liabilities
Interest payable 9 (28) (35)
Other payables (351) (357)
Loans payable 9 (20,000) (25,000)
Total liabilities (20,379) (25,392)
Net assets 276,556 361,471
Equity
Share capital 12 150,082 183,930
Capital reserve 13 132,546 184,593
Revenue reserve (6,072) (7,052)
Total equity 276,556 361,471
Approved by the Board of Directors and authorised for issue on 31 January 2019 and signed on its behalf by:
The Company’s distributable reserves comprise; the Capital reserve attributable to realised profits and the Revenue reserve.
The notes on pages 34 to 48 form part of these financial statements.
Financial Statements
Notes to the Financial Statements For the Year Ended 31 October 2018
1. Reporting entity
Aberdeen Emerging Markets Investment Company Limited (the “Company”) is a closed-ended investment company, registered
in Guernsey on 16 September 2009. The Company’s registered office is 11 New Street, St Peter Port, Guernsey, GY1 2PF. The
Company’s shares have a premium listing on the London Stock Exchange and commenced trading on 10 November 2009.
The Company changed its name to Aberdeen Emerging Markets Investment Company Limited on 14 April 2016. The financial
statements of the Company are presented for the year ended 31 October 2018.
The Company invests in a portfolio of funds and products which give diversified exposure to developing and emerging markets
economies with the objective of achieving consistent returns for shareholders in excess of the MSCI Emerging Markets Net Total
Return Index in sterling terms.
Manager
The investment activities of the Company were managed by Aberdeen Standard Fund Managers Limited (“ASFML”) during the
year ended 31 October 2018.
2. Basis of preparation
(a) Investments
As the Company’s business is investing in financial assets with a view to profiting from their total return in the form of increases
in fair value, financial assets are designated as fair value through profit or loss on initial recognition. These investments are
recognised on the trade date of their acquisition at which the Company becomes a party to the contractual provisions of the
instrument. At this time, the best evidence of the fair value of the financial assets is the transaction price. Transaction costs
that are directly attributable to the acquisition or issue of the financial assets are charged to profit or loss in the Statement of
Comprehensive Income as a capital item. Subsequent to initial recognition, investments designated as fair value through profit
or loss are measured at fair value with changes in their fair value recognised in profit or loss in the Statement of Comprehensive
Income and determined by reference to:
i) investments quoted or dealt on recognised stock exchanges in an active market are valued by reference to their market
bid prices;
ii) investments other than those in i) above which are dealt on a trading facility in an active market are valued by reference to
broker bid price quotations, if available, for those investments;
iii) investments in underlying funds, which are not quoted or dealt on a recognised stock exchange or other trading facility or
in an active market, are valued at the net asset values provided by such entities or their administrators. These values may be
unaudited or may themselves be estimates and may not be produced in a timely manner. If such information is not provided,
or is insufficiently timely, the Investment Manager uses appropriate valuation techniques to estimate the value of investments.
In determining fair value of such investments, the Investment Manager takes into consideration the relevant issues, which may
include the impact of suspension, redemptions, liquidation proceedings and other significant factors. Any such valuations are
assessed and approved by the Directors. The estimates may differ from actual realisable values;
iv) investments which are in liquidation are valued at the estimate of their remaining realisable value; and
v) any other investments are valued at the directors’ best estimate of fair value.
Transfers between levels of the fair value hierarchy are recognised as at the end of the reporting period during which the change
has occurred.
Investments are derecognised on the trade date of their disposal, which is the point where the Company transfers substantially
all the risks and rewards of the ownership of the financial asset. Gains or losses are recognised in profit or loss in the capital
column of the Statement of Comprehensive Income. The Company uses the weighted average cost method to determine realised
gains and losses on disposal of investments.
(h) Taxation
The Company has exempt status under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and is charged an annual
exemption fee of £1,200 (2017: £1,200).
Dividend and interest income received by the Company may be subject to withholding tax imposed in the country of origin.
The tax charges shown in profit or loss in the Statement of Comprehensive Income relate to overseas withholding tax on
dividend income.
(j) Offsetting
Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only
when, the Company has a legal right to set off the recognised amounts and it intends to either settle on a net basis or to realise
the asset and settle the liability simultaneously.
Income and expenses are only presented on a net basis when permitted under IFRS.
(m) New standards and interpretations effective in the current financial year
There are no new standards, interpretations or amendments, which became effective during the year that have had a material
impact on the Company.
At the date of approval of these financial statements, the following standards became effective during the year:
• IFRS 9, ‘Financial instruments’, effective 1 January 2018. IFRS 9 replaces IAS 39, ‘Financial Instruments: Recognition and
measurement’. It includes revised guidance on the classification and measurement of financial instruments, a new expected
credit loss model for calculating impairment of financial assets and new general hedge accounting requirements. It also carries
forward the guidance from IAS 39 regarding recognition and derecognition of financial instruments. Based on the Board’s
assessment, this standard is not expected to have a material impact on the classification of financial assets and liabilities of
the Company because financial instruments currently measured at fair value through profit or loss (“FVTPL”) under IAS 39 are
designated into this category because they are managed on a fair value basis in accordance with a documented investment
strategy. Accordingly these financial instruments will be mandatorily measured at FVTPL under IFRS 9.
• IAS 7 ‘Statement of Cash Flows’, was amended by The International Accounting Standards Board (‘IASB’) with the intention to
clarify IAS 7 to improve information provided to users of financial statements about an entity’s financing activities. They are
effective for annual periods beginning on or after 1 January 2017, with earlier application being permitted.
The Board has considered the impact of the above standards and does not believe, the adoption of the standards do have
material impact on the Company’s financial statements apart from additional disclosure requirements.
4. Investments at fair value through profit or loss and classification of financial instruments
2018 2017
£’000 £’000
Quoted & listed closed end fund investments 172,449 212,562
Open ended fund and limited liability partnership investments 123,152 170,701
Total investments at fair value at 31 October 295,601 383,263
Movement during the year:
Opening balance of investments, at cost 278,903 244,833
Additions, at cost 27,668 91,451
Disposals, at cost (59,853) (57,381)
Cost of investments at 31 October 246,718 278,903
Revaluation of investments to fair value
Opening balance 104,360 73,880
Movement in revaluation of investments held (55,477) 30,480
Balance at 31 October 48,883 104,360
Fair value of investments at 31 October 295,601 383,263
(Losses)/gains on investments
Gains on disposal of investments 13,670 16,498
Movement in revaluation of investments held (55,477) 30,480
Balance at 31 October (41,807) 46,978
The table below sets out the classifications of the carrying amounts of the Company’s financial assets and financial liabilities into
categories of financial instruments.
2018 2017
£’000 £’000
Dividends from UK Investments 2,388 2,747
Dividends from Overseas Investments 2,626 753
Other income 5 –
Total income 5,019 3,500
2018 2017
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Management fee 2,515 – 2,515 2,695 – 2,695
Administration fees 184 – 184 178 – 178
Depositary and custody service fees 130 – 130 134 – 134
Registration fees 31 – 31 37 – 37
Directors’ fees 140 – 140 135 – 135
Auditor’s fees:
Audit services 39 – 39 39 – 39
Non-audit services 15 – 15 14 – 14
Marketing fees 187 – 201 179 – 179
Broker fees 36 – 36 40 – 40
Miscellaneous expenses 124 – 110 101 – 101
Total other expenses 886 – 886 857 – 857
Total expenses 3,401 – 3,401 3,552 – 3,552
Management fee
The Management Agreement is terminable by either party there to on not less than six months’ written notice at any time, subject
to earlier termination in certain circumstances including certain breaches or the insolvency of either party.
The Manager is entitled to receive a basic fee from the Company for its services as Manager.
Basic fee
The Company’s basic management fee for the year ended 31 October 2018 was charged at an annualised rate of 0.8% of net
assets (2017: 1.0% of market capitalisation), reduced by the proportion of the Company’s net assets invested in funds which are
managed by Aberdeen Standard Investments (“Aberdeen Standard Funds”).
The basic fee is payable monthly in arrears (and pro rata for part of any month during which the management agreement is
in force).
Performance fee
The performance fee arrangement was removed with effect from 1 November 2017, therefore there was no performance fee
accrued in the year (2017: nil).
Promotional fee
The Company has agreed to pay a fee to ASFML for the provision of promotional activities at an annual rate of £160,000 with
effect from 1 July 2018 (prior to that, the fee was at an annual rate of £200,000). The balance outstanding at the year end was
£53,000 (2017: £17,000).
7. Directors’ fees
The fees payable for the year were £140,300 (2017: £135,100). There were no other emoluments.
8. Transaction charges
2018 2017
£’000 £’000
Transaction costs on purchases of investments 5 258
Transaction costs on sales of investments 6 63
Total transaction costs included in (losses)/gains on investments held at fair value
through profit or loss 11 321
2018 2017
£’000 £’000
Interest payable 273 110
Facility and arrangement fees and other charges 39 45
Total finance costs 312 155
At 31 October 2018, interest payable of £28,000 (2017: £35,000) was accrued in the Statement of Financial Position.
Supplementary information is provided as follows: revenue per share is based on the net revenue profit of £980,000 (2017: loss
of £348,000) and capital earnings per share is based on the net capital loss of £41,964,000 (2017: gain of £47,074,000) attributable
to the above Ordinary shares.
Tender offer
As described in the circular to shareholders dated 13 March 2018, the Company put forward proposals for a tender offer under
which shareholders had the ability to tender up to 10% of their Ordinary shares held.
A total of 5,119,633 shares were repurchased by the Company on 17 April 2018 under the terms of the Tender Offer and placed
in treasury. The Tender Price of 652.6487p per share reflected a discount of 3.5% to the prevailing NAV per share. Payments with
an aggregate value of £33,413,000 were made to shareholders in respect of validly tendered shares during the week commencing
23 April 2018.
Tender offer costs amounted to £254,000.
Ordinary shares
Voting rights
Holders of Ordinary shares are entitled to attend, speak and vote at general meetings of the Company. Each Ordinary share
(excluding shares in treasury) carries one vote. Treasury shares do not carry voting rights.
Dividends
The holders of Ordinary shares are entitled to such dividend as may be declared by the Company from time to time. Shares held
in treasury do not receive dividends.
Capital entitlement
On a winding up, the Ordinary shares (excluding treasury shares) shall rank pari passu for the nominal capital paid up thereon
and in respect of any surplus. Shares held in treasury have no capital entitlement on a winding up of the Company.
2018 2017
£’000 £’000
Realised gains/(losses) on investments and other capital reserve movements
Opening balance 80,233 66,199
Dividends paid from capital reserves (10,083) (2,560)
Gains from disposal of investments* 15,748 16,805
Losses from disposal of investments* (2,078) (307)
Foreign exchange (losses)/gains (157) 96
Balance at 31 October 83,663 80,233
Investments held
Opening balance 104,360 73,880
Movement in unrealised gain on revaluation of investments held* 3,657 42,990
Movement in unrealised loss on revaluation of investments held* (59,134) (12,510)
Balance at 31 October 48,883 104,360
Capital reserve balance at 31 October 132,546 184,593
* Net losses on investments held at fair value through profit or loss figure for the year ended 31 October 2018 totalled
£41,807,000 (2017: net gains of £46,978,000).
2018 2017
£’000 pence £’000 pence
NAV per share as at the financial year end as published on
1 November 2018 (2017: as published on 1 November 2017) 276,494 600.46 361,540 706.18
Revaluation adjustments – delayed prices 62 0.13 (69) (0.14)
NAV per share as disclosed in these financial statements 276,556 600.59 361,471 706.04
2018 2017
£’000 £’000
Operating (loss)/profit before finance costs and taxation (40,346) 47,022
Less: Tax deducted at source on income from investments (326) (141)
Add: Realisation of investments at book cost 59,853 57,381
Less: Purchase of investments (27,668) (91,451)
Less: Adjustment for unrealised losses/(gains) 55,477 (30,480)
Effect of foreign exchange 157 (122)
(Increase)/decrease in debtors (111) 1,612
Decrease in creditors (6) (2,014)
Net cash flow from/(used in) operating activities 47,030 (18,193)
Manager
Management fees payable are shown in profit or loss in the Statement of Comprehensive Income and Note 6. As the
performance fee arrangement was removed with effect from 1 November 2017, no performance fee accrual has been made in
the year under review (2017: £nil).
At 31 October 2018, management fees of £199,000 (2017: £255,000) were accrued in the Statement of Financial Position. Total
management fees for the year were £2,515,000 (2017: £2,695,000).
Investments held by the Company which are managed by the Standard Life Aberdeen plc group
As at 31 October 2018, the Company held investments in Aberdeen Asian Smaller Companies Investment Trust PLC and
Edinburgh Dragon Trust PLC. The valuation of these holdings at 31 October 2018 totalled £8,027,000 (As at 31 October 2017: the
Company held investments in Aberdeen Asian Smaller Companies Investment Trust PLC, Aberdeen Latin American Equity Fund
Inc and Edinburgh Dragon Trust PLC. The valuation of these holdings at 31 October 2017 totalled £25,722,000).
Directors
Total fees for the Directors in the year ended 31 October 2018 were £140,300 (2017: £135,100). There were no outstanding fees
due to the Directors at the year end (2017: nil). Details of Directors’ share holdings in the Company can be found on page 20.
Market risks
i) Risks associated with emerging markets
Investment in certain developing and emerging securities markets may involve a greater degree of risk than that associated with
investment in more developed securities markets. In particular, in certain countries in which the Company is proposing to invest:
• liquidity and settlement risks may be greater;
• accounting standards may not provide the same degree of shareholder protection as would generally apply internationally;
• national policies may restrict the investment opportunities available to foreign investors, including restrictions on investing in
issuers or industries deemed sensitive to relevant national interests;
• the fiscal and monetary systems remain relatively undeveloped and this may affect the stability of the economic and financial
markets of those countries;
• substantial limitations may exist with respect to the Company’s ability to repatriate investment income, capital or the proceeds
of sales of securities by foreign investors; and
• assets may be subject to increased political and/or regulatory risk.
The day to day management of the market risks is the responsibility of the Investment Manager, who analyses markets within
a framework of quality, value, growth and change. The Board believes the Investment Manager utilises its proven research and
management selection experience to ensure that these risks are minimised, as far as is possible. The investment policy employed
by the Investment Manager ensures that diversification within investee funds is taken into account when deciding on the size of
each investment so the Company’s exposure to any one underlying company should never be excessive. The Company’s market
positions are monitored by the Board in the monthly portfolio valuations and at Board meetings.
2018 2017
Cash flow Non Cash flow No
Interest interest Interest interest
rate risk rate risk Total % of net rate risk rate risk Total % of net
£’000 £’000 £’000 assets £’000 £’000 £’000 assets
Non-current asset investments at
fair value:
EUR denominated – 14,446 14,446 5.3 – 11,670 11,670 3.2
GBP denominated – 115,561 115,561 41.8 – 159,331 159,331 44.1
USD denominated – 165,594 165,594 59.9 – 212,262 212,262 58.7
Cash and cash equivalents –
Floating rate – GBP 125 – 125 – 2,940 – 2,940 0.8
Floating rate – USD 912 – 912 0.3 474 – 474 0.1
Short term receivables – 297 297 0.1 – 186 186 0.1
Loan and short term payables (20,028) (351) (20,379) (7.4) (25,035) (357) (25,392) (7.0)
Total (18,991) 295,547 276,556 100.0 (21,621) 383,092 361,471 100.0
2018 2017
% of net % of net
Country assets assets
China 26.4% 25.7%
Korea 14.3% 13.4%
Taiwan 10.9% 10.7%
Russia 10.4% 9.0%
Brazil 5.2% 6.2%
Liquidity risks
The majority of the Company’s investments are in quoted securities. A high percentage of securities are listed on the London or
New York Stock Exchanges and are considered to be readily realisable by comparison with most emerging market securities. The
Company also holds unquoted investments, which are predominantly in open-ended funds. Some delay may be encountered in
obtaining liquidity in respect of these securities; the Company may utilise its borrowing powers on a short-term basis to avoid
delays in reinvestment of the proceeds of redemptions. As at 31 October 2018, the Company held shares in Tarpon All Equities
Cayman (Series B) L.P. (“Tarpon”). Tarpon holds side pockets within private equity structures which were valued at £1.0 million at
31 October 2018 (2017: £1.1 million).
The Investment Manager has estimated the percentages of the portfolio that could be liquidated within various timescales,
assuming one third of daily trading volumes. The results are shown below.
Credit risks
The Company’s principal direct credit risk is the risk of default on cash held at the custodian. Cash at bank at 31 October 2018
included £1,037,000 (2017: £3,182,000) held by the custodian, Northern Trust (Guernsey) Limited. The Company monitors the
credit quality of the custodian. Interest is based on the prevailing money market rates.
Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions
is considered to be low as trading is almost always done on a delivery versus payment basis. When investments are made in
open-ended funds, the Investment Manager performs due diligence on those funds before making any investment.
All of the assets of the Company are held by the custodian or through the custodian’s nominated sub custodians. Bankruptcy or
insolvency of the Company’s custodian, Northern Trust (Guernsey) Limited, or its sub custodians may cause the Company’s rights
with respect to securities held by them to be delayed or limited. The latest credit ratings at the time of approval of this document
for Northern Trust (Guernsey) Limited’s parent company, The Northern Trust Company, were as follows:
Capital management
The Company considers that its capital consists of its net assets.
The Company’s authorised share capital consists of an unlimited number of Ordinary shares of £0.01 par value. At 31 October
2018 there were 46,047,096 (2017: 51,196,729) Ordinary shares in issue (excluding shares held in treasury).
The Manager and the Company’s broker monitor the demand for the Company’s shares and the Directors review the position
at Board meetings. Details on the Company’s policies for issuing further shares and buying back shares can be found in the
Directors’ Report.
The Company entered into an unsecured revolving credit facility with RBS on 31 March 2017, under which loans with a maximum
aggregate value of £25 million may be drawn. During the year the Board announced the renewal of the loan facility for a further
year to 29 March 2019. As at 31 October 2018, £20 million was drawn down from RBS (2017: £25 million).
Restrictions imposed by RBS in connection with the loan facility include the following covenants:
• Consolidated net tangible assets are not less than £175 million.
• Consolidated gross borrowings expressed as a percentage of the investment portfolio value shall not exceed 15%
• Consolidated gross borrowings expressed as a percentage of the adjusted investment portfolio value shall not exceed 22.5%
• The Borrower’s portfolio must contain a minimum of 20 eligible Investments of which a minimum of 15 shall be of a
closed-ended structure.
The Company does not have any externally imposed capital requirements other than disclosed above.
Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes,
technology and infrastructure supporting the Company’s activities with financial instruments either internally within the Company
or externally at the Company’s service providers, and from external factors other than credit, market and liquidity risks such as
those arising from legal and regulatory requirements and generally accepted standards of investment management behaviour.
The Company’s objective is to manage operational risk so as to balance limiting of financial losses and damage to its reputation
with achieving its investment objective of generating returns to investors.
The primary responsibility for the development and implementation of controls over operational risk rests with the Board of
Directors. This responsibility is supported by the development of overall standards for the management of operational risk,
which encompasses the controls and processes at the service providers and the establishment of service levels with the service
providers, in the following areas:
• requirements for appropriate segregation of duties between various functions, roles and responsibilities;
• requirements for the reconciliation and monitoring of transactions;
• compliance with regulatory and other legal requirements;
• documentation of controls and procedures;
• requirements for the periodic assessment of operational risk faced, and the adequacy of controls and procedures to address
the risks identified;
• contingency plans;
• ethical business standards;
• insurance; and
• risk mitigation.
The Directors’ assessment over the adequacy of the controls and processes in place at the service providers with respect to
operational risk is carried out via regular discussions with the main service providers to the Company and a review of their
internal controls documents prepared under industry recognised guidance, if available.
2018 2017
£’000 £’000
Opening balance 1,133 837
Additions during the year – –
Disposals during the year – –
Profit or loss on disposals during the year – –
Valuation adjustments* (134) 296
Closing balance at 31 October 999 1,133
* Total (losses)/gains included in profit or loss on assets held at year end
Structured entities
The Company invests in a portfolio of funds and products which give diversified exposure to developing and emerging market
economies. The Company does not consider its investments in listed funds to be structured entities but does consider its
investments in unlisted funds to be investments in structured entities because the voting rights in such entities are limited to
administrative tasks and are not the dominant factor in deciding who controls those entities.
The investments in structured entities are subject to the terms and conditions of offering documents and/or constitutional
documents. These investments are subject to market price and other risks arising from their underlying portfolios. Investee
funds are managed by portfolio managers who are compensated by the respective funds for their services. Such compensation
generally may consist of an asset based fee and/or a performance based fee.
The investments in structured entities are financial assets which are designated as fair value through profit or loss in the
Company’s financial statements.
The exposure to investments in investee funds and products at fair value by strategy employed is disclosed in the following table.
Equity long-only
Portfolio managers implementing equity long-only strategies generally take long positions in equity related instruments such as
ordinary shares, preferred shares, convertible bonds, Depositary receipts, exchange traded funds and market access products
such as index futures with the expectation that the asset will rise in value.
Discount
The amount, expressed as a percentage, by which the share price is less that the NAV per Ordinary share.
As at
Page 31 October 2018
NAV per Ordinary share (in pence) a 2 600.59
Share price (in pence) b 2 515.00
Discount (b÷a)-1 14.3%
Gearing
A way to magnify income and capital returns, but which can also magnify losses. The revolving loan facility with RBS is a common
method of gearing.
As at
Page 31 October 2018
Total assets less cash/cash equivalents (£’000) a n/a 295,898
Net assets (£’000) b 31 276,556
Gearing (net) (a÷b)-1 6.99%
Leverage
Under the Alternative Investment Fund Managers Directive (“AIFMD”), leverage is any method by which the exposure
of an Alternative Investment Fund (“AIF”) is increased through borrowing of cash or securities or leverage embedded in
derivative positions.
Under AIFMD, leverage is broadly similar to gearing, but is expressed as a ratio between the assets (excluding borrowings) and
the net assets (after taking account of borrowing). Under the gross method, exposure represents the sum of the Company’s
positions after deduction of cash balances, without taking account of any hedging or netting arrangements. Under the
commitment method, exposure is calculated without the deduction of cash balances and after certain hedging and netting
positions are offset against each other.
Ongoing Charges
A measure, expressed as a percentage of average NAV, of the regular, recurring annual costs of running an investment company.
Total Return
A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment
of dividends paid out by the Company into its Ordinary shares on the ex-dividend date.
Corporate Information
Information about the Investment Manager
Aberdeen Asset Managers Limited excess of 50 years’ experience of investing in emerging markets
with a focus on conducting in depth manager research and the
The Company’s Investment Manager is Aberdeen Asset
analysis of discounts on closed end funds. Average tenure on
Managers Limited, a wholly-owned subsidiary of Standard Life
the team is in excess of 10 years. While the team is based in
Aberdeen pc. Assets under the management of the group’s
London, its members travel frequently to emerging markets to
investment division, Aberdeen Standard Investments, were
meet with existing managers and identify new prospects. Being
£557.1 billion at 30 June 2018.
part of a global asset management business, the team has the
Investment Team ability to draw on the expertise of the wider Aberdeen Standard
Investments group.
Aberdeen Standard Investment’s Closed End Fund Strategies
(“CEFS”) team is amongst the most experienced of any operating
globally with a similar strategy. The team’s members have in
Corporate Information
AIFMD Disclosures (unaudited)
Aberdeen Standard Fund Managers Limited (“ASFML“) and the Company are required to make certain disclosures available to
investors in accordance with the Alternative Investment Fund Managers Directive (“AIFMD”). Those disclosures that are required
to be made pre-investment are included within a pre-investment disclosure document (“PIDD”) which may be found on the
Company’s website. There have been no material changes to the disclosures contained within the PIDD since its most recent
update in February 2018.
The periodic disclosures as required under the AIFMD to investors are made below:
• information on the investment strategy, geographic and sector investment focus and principal stock exposures is included in
the Investment Manager’s Report on pages 6 to 10;
• none of the Company’s assets are subject to special arrangements arising from their illiquid nature;
• the Investment Manager’s Report on pages 6 to 10, note 17 to the financial statements and the PIDD, together set out the risk
profile and risk management systems in place. There have been no changes to the risk management systems in place in the
period under review and no breaches of any of the risk limits set, with no breach expected;
• there are no new arrangements for managing the liquidity of the Company or any material changes to the liquidity
management systems and procedures employed by ASFML;
• all authorised Alternative Investment Fund Managers are required to comply with the AIFMD Remuneration Code. In
accordance with the Remuneration Code, the AIFM’s remuneration policy is available from the Company’s Manager, Aberdeen
Standard Fund Managers Limited, on request and the remuneration disclosures in respect of the AIFM’s relevant reporting
period for the year ended 30 September 2018 will be made available on the Company’s website.
Leverage
The table below sets out the current maximum permitted limit and actual level of leverage for the Company:
Gross Commitment
Method Method
Maximum level of leverage 1.15:1 1.15:1
Actual level at 31 October 2018 1.07:1 1.07:1
There have been no breaches of the maximum level during the period and no changes to the maximum level of leverage
employed by the Company. There have been no changes to the circumstances in which the Company may be required to post
assets as collateral and no guarantees granted under the leveraging arrangement. Changes to the information contained either
within this Annual Report or the PIDD in relation to any special arrangements in place; the maximum level of leverage which
ASFML may employ on behalf of the Company; the right of use of collateral or any guarantee granted under any leveraging
arrangement; or any change to the position in relation to any discharge of liability by the Depositary will be notified via a
regulatory news service without undue delay in accordance with the AIFMD.
The information on this page has been approved for the purposes of Section 21 of the Financial Services and Markets Act 2000 (as
amended by the Financial Services Act 2012) by Aberdeen Standard Fund Managers Limited which is authorised and regulated by the
Financial Conduct Authority in the United Kingdom.
Corporate Information
Glossary of Terms and Definitions
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at 11 New Street, St Peter Port, Guernsey,
GY1 2PF at 12 noon on 16 April 2019 for the purpose of considering and, if thought fit, passing the following resolutions:
Ordinary Resolutions
1. To receive and adopt the financial statements for the year ended 31 October 2018, with the reports of the Directors and
auditor thereon.
2. To approve the Directors’ Remuneration Report (excluding the Directors’ Remuneration Policy) included in the Annual Report
for the year ended 31 October 2018.
3. To approve a dividend policy to declare four interim dividends each year and to authorise the Directors to declare such
dividends subject to compliance with applicable law.
4. To re-elect Mr M Hadsley-Chaplin as a Director of the Company.
5. To re-elect Mr J Hawkins as a Director of the Company.
6. To re-appoint KPMG Channel Islands Limited as auditor of the Company to hold office until the conclusion of the next AGM of
the Company at which audited accounts are laid before the Company.
7. To authorise the Directors to determine the remuneration of the auditor for the year ended 31 October 2019.
8. THAT the Company be and is hereby authorised in accordance with section 315 of the Companies (Guernsey) Law, 2008 to
make market purchases (within the meaning of section 316 of the Companies (Guernsey) Law, 2008 of its shares, provided
that:
a) the maximum number of Ordinary shares hereby authorised to be acquired is 14.99%. of the issued Ordinary share
capital of the Company (excluding treasury shares) as at the date of this AGM;
b) the minimum price (exclusive of expenses) which may be paid for a share is £0.01;
c) the maximum price to be paid per share shall be the higher of: (a) 105% of the average of the closing market value of
the shares for the five business days immediately preceding the date of the relevant purchase; (b) the price of the last
independent trade; and (c) the highest current independent bid on the trading venues where the purchase is carried out;
d) the authority hereby conferred shall expire at the earlier of the conclusion of the AGM of the Company to be held in
2020 and the date being 18 months from the date of this resolution, unless previously renewed, varied or revoked by the
Company in general meeting; and
e) the Company may make a contract to purchase its shares under the authority hereby conferred prior to the expiry of such
authority, which contract will or may be executed wholly or partly after the expiry of such authority, and may purchase its
shares in pursuance of any such contract
9. THAT the Directors be and are hereby generally and unconditionally authorised pursuant to Article 5 of the Articles of
Incorporation of the Company to allot and issue up to 2,302,354 shares or, if less, the number of shares representing 5% of
the issued Ordinary share capital of the Company as at the date of the passing of this resolution. This authority shall expire
at the conclusion of the AGM of the Company to be held in 2020 (unless renewed, varied or revoked by the Company prior to
or on such date) save that the Company may before such expiry make any offer or agreement which would or might require
shares to be allotted or issued after such expiry and the Directors may allot and issue shares in pursuance of any such offer
or agreement as if the authority conferred hereby had not expired.
Special Resolution
10. THAT the shareholders hereby waive, with respect to any allotment and issue of shares pursuant to the authority granted
by Resolution 9, any and all rights of pre-emption or similar rights which they may have, whether under the Articles of
Incorporation of the Company (including, without limitation, Article 6.2(a)) or otherwise. This waiver will expire at the
conclusion of the AGM in 2020.
Registered Office:
11 New Street
St Peter Port
Guernsey GY1 2PF
31 January 2019
being (a) member(s) of Aberdeen Emerging Markets Investment Company Limited (the “Company”) appoint the Chairman
of the meeting or (see note 1)
of
as my/our proxy to attend and vote for me/us and on my/our behalf at the AGM of the Company to be held at 11 New
Street, St Peter Port, Guernsey, GY1 2PF on 16 April 2019 at 12 noon and at any adjournment thereof.
Please indicate with an “X” in the spaces provided how you wish your votes to be cast on the resolutions specified.
Subject to any voting instructions so given the proxy will vote, or may abstain from voting, on any resolution as he may
think fit.
Signature _____________________________________ Dated this ______________________ day of _____________________ 2019
Notes
1. If you so desire you may delete the words “Chairman of the meeting” and insert the name of your own choice of proxy, who need
not be a member of the Company. Please initial such alteration.
2. The Form of Proxy must be lodged at the Company’s Registrars, Link Asset Services, not less than 48 hours (excluding
non-working days) before the time fixed for the meeting. In default the proxy cannot be treated as valid.
3. Alternatively, in the case of CREST members, voting may be effected by using the CREST electronic proxy appointment service.
CREST members who wish to utilise the CREST service may do so by following the procedures described in the CREST Manual.
CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service
provider, should refer to their CREST sponsor or voting service provider, who will be able to take the appropriate action on their behalf.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message must be transmitted so as to be
received by the Company’s agent, Link Asset Services (whose CREST ID is RA10) by the specified latest time for receipt of proxy
appointments. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message
by the CREST Applications Host) from which the Company’s agent is able to retrieve the message by enquiry to CREST in the manner
prescribed.
4. A corporation must execute the proxy under its common seal or under the hand of an officer or attorney duly authorised.
5. If this Form of Proxy is executed under a power of attorney or other authority, such power of attorney or other authority or a
notarially certified copy thereof must be lodged with the Registrars with the Form of Proxy.
6. In the case of joint holders the vote of the senior shall be accepted to the exclusion of the other joint holders, seniority being
determined by the order in which the names stand in the register in respect of the joint holding.
Your completed and signed Form of Proxy should be posted, in the enclosed reply paid envelope, to the Company’s
Registrars, Link Asset Services, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, so as to arrive
before 12 noon on 12 April 2019.
Website
aberdeenemergingmarkets.co.uk