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Aberdeen Global Emerging Markets Fund Annual report to 30 September 2014

Performance Review The Aberdeen Global Emerging Markets Fund rose by 3.81% in Singapore dollar terms for the year under review, broadly in line with the benchmark MSCI Emerging Markets Index’s return of 6.37%.

Market Review Emerging stockmarkets rose over the year under review. Sentiment was initially dominated by uncertainty over the timing of the US Federal Reserve’s withdrawal of monetary stimulus and nagging concerns of a sharp economic slowdown in China. But markets later rebounded and maintained a largely uninterrupted rise as investors took the Fed’s gradual reduction of its asset purchases in their stride. Hopes of political change in key developing economies and continued easy monetary policy from the world’s major central banks provided further impetus to markets. Towards the period-end, however, risk appetite waned as healthier US economic growth rekindled concerns that the Fed may hike interest rates sooner rather than later, and China’s economy wobbled, clouding recovery hopes. The protests in Hong Kong contributed to already heightened geopolitical tensions generated elsewhere by Ukraine and the Middle East.

Portfolio Review At the stock level, Samsung Electronics was the top contributor. We hold the preferred shares, which outperformed the ordinary shares. The stock did well on the back of record high operating profits, but came under pressure when management warned of weaker handset margins in the second half of the year. While we are aware that Samsung is facing increasing competition from mid to low- end Chinese smartphone rivals, it remains well placed given its vertically-integrated operation. Additionally, we are beginning to see a turnaround in the memory division, a key business segment. Other contributors include Indian financial holdings, HDFC and ICICI Bank, which gained from hopes of better loan growth.

Against this, South African fashion retailer Truworths continued to suffer from negative sentiment towards retailers amid the challenging domestic economic environment, and falling iron ore prices weighed on Vale. Emerging markets lender Standard Chartered declined early in the review period on speculation that it needed to conduct a rights issue. Further pressure subsequently came from weaker profits. The outlook remains challenging due to weaker sentiment in emerging markets, but we remain optimistic about its longer-term prospects.

In portfolio activity, we introduced Jeronimo Martins, a well-run retailer with an established franchise in Poland on an attractive valuation. We also added to several holdings, including leading Russian food retailer Magnit. Magnit’s share price had declined along with the local stockmarket amid tensions over the political crisis in Ukraine. Its operational numbers earlier in the calendar year also disappointed, but robust gross margins and lower operating expenses supported the company’s most recent quarterly results, prompting an upgrade to its full-year sales and earnings forecast. Conversely, we sold GlaxoSmithKline Pharmaceuticals following the successful tender offer by its parent, and trimmed Brazilian fuels and chemicals company Ultrapar, global specialist steel-pipe maker Tenaris, Indian mortgage lender HDFC and Turkish lender Akbank.

Source: Aberdeen Asset Management Asia Limited The performance returns are sourced from Lipper, based on percentage growth, calculated on a NAV-to-NAV basis with gross income reinvested.

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