Aberdeen Emerging Markets Investment Company Limited A UK-listed investment company, seeking consistent returns from a diversified portfolio of emerging market funds Annual Report and Accounts For the year ended 31 October 2017 Contents Contents Company Overview Financial Highlights 2 Chairman’s Statement 4 Strategic Report Investment Manager’s Report 7 Portfolio Investments 11 Asset Allocation 12 Governance Directors’ Report 13 Corporate Governance 19 Report of the Audit Committee 24 Statement of Directors’ Responsibilities 25 Directors’ Remuneration Report 26 Depositary Report 27 Financial Statements Independent Auditor’s Report 28 Statement of Comprehensive Income 31 Visit our Website Statement of Financial Position 32 To find out more about Aberdeen Emerging Markets Investment Statement of Changes in Equity 33 Company Limited, please visit aberdeenemergingmarkets.co.uk Statement of Cash Flow 34 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE Notes to the Financial Statements 35 ATTENTION. If you are in any doubt about the action you should take, you are recommended to seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other financial adviser authorised under the Financial Services and Markets Act 2000 Corporate Information (as amended by the Financial Services Act 2012) if you are in the United Information about the Investment Manager 51 Kingdom or, if not, from another appropriately authorised financial Investor Information (unaudited) 52 adviser. AIFMD Disclosures (unaudited) 55 If you have sold or otherwise transferred all your Ordinary shares in Aberdeen Emerging Markets Investment Company Limited, please Glossary of Terms and Definitions 56 forward this document, together with the accompanying documents Directors, Investment Manager and Advisers 57 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 1 Company Overview Financial Highlights Company Overview Financial Highlights Aberdeen Emerging Markets Investment Company Limited The Company is governed by a board of directors, the majority of (“AEMC” or the “Company”) is a closed-end investment company whom are independent, and has no employees. Like most other with its Ordinary shares listed on the premium segment of the investment companies, it outsources its investment management London Stock Exchange. It offers investors exposure to some of and administration to an investment management group, the best investment talent within the global emerging markets of Aberdeen Standard Investments (the investment arm of the Asia, Eastern Europe, Africa and Latin America. Standard Life Aberdeen plc group of companies). Net asset value (“NAV”) per ordinary share total return* NAV per ordinary share** +14.9% 706.0p 2016 +36.4% 2016 618.8p Share price total return* Ordinary share price – mid market +17.0% 632.5p 2016 +36.1% 2016 545.0p MSCI Emerging Markets Net Total Return Index in Sterling terms Net Assets +16.6% £361.5 million 2016 +37.7% 2016 £320.2 million Gearing*** Ongoing charges ratio (‘OCR’) +6.0% +1.07% 2016 nil 2016 1.10% Dividends per share**** Revenue return per share 10.0p -0.68p 2016 nil 2016 -0.45p * Performance figures stated above include reinvestment of dividends on the ex-date ** See note 14 in the Notes to the Financial Statements for basis of calculation *** Based on the net of the drawn down loan value and cash, as a percentage of NAV **** Dividends declared for the year in which they were earned NAV per ordinary share Ordinary share price–mid market At 31 October – pence At 31 October – pence 706.0 618.8 632.5 545.0 494.7 493.5 453.5 452.5 442.3 400.4 13 14 15 16 17 13 14 15 16 17 2 Annual Report 2017 Investment Objective Management The Company’s investment objective is to achieve consistent The Company’s Alternative Investment Fund Manager (“AIFM”) returns for Shareholders in excess of the MSCI Emerging Markets and Investment Manager is Aberdeen Fund Managers Limited Net Total Return Index in Sterling terms (the ‘Benchmark’). (“AFML”, “Manager”, “Investment Manager” or “AIFM”), a wholly owned subsidiary of Aberdeen Asset Management PLC (the Investment Policy “Aberdeen Group”) which merged with Standard Life plc on 14 August 2017 to form Standard Life Aberdeen plc. The Company’s investment policy is included on page 13. The Company’s portfolio is managed by Aberdeen’s highly Benchmark experienced Closed End Fund Opportunities (“CEFO”) team, which is amongst the most experienced of any operating globally with MSCI Emerging Markets Net Total Return Index in Sterling Terms. a similar strategy. Further details of the team and the investment strategy and process are included on page 51. Financial Calendar 29 March 2018 First interim dividend payable for year ended 31 October 2018 12 April 2018 Annual General Meeting (Guernsey) June 2018 Second interim dividend payable for year ended 31 October 2018 June 2018 Announcement of Half-Yearly Financial Report for the six months ending 30 April 2018 September 2018 Third interim dividend payable for year ended 31 October 2018 December 2018 Fourth interim dividend payable for year ended 31 October 2018 January/February 2019 Announcement of Annual Report and Accounts for the year ending 31 October 2018 Aberdeen Emerging Markets Investment Company Limited 3 Company Overview Chairman’s Statement Company Overview Chairman’s Statement Overview Over the year to 31 October 2017, the Company’s net asset appealing and accessible to as wide an audience of investors as value (“NAV”) total return was 14.9% and the share price total possible. The measures adopted are as follows, and are described return was 17.0% (all in Sterling terms). Over the same period the in more detail in the paragraphs below. Company’s benchmark, the MSCI Emerging Markets Net Total • Introduction of a dividend policy Return Index (in Sterling terms), recorded a total return of 16.6%. • Use of gearing through the introduction of a £25 million Stock markets fell sharply at the beginning of the financial year credit facility following Donald Trump’s victory in the US presidential election • Reduction in the rate of the basic management fee campaign, driven by concerns of protectionist policies and the • Removal of performance fee arrangements implications of a strengthening US Dollar. These fears proved to be • Use of share buyback powers in accordance with the Company’s short-lived. Markets recovered quickly and made steady progress stated discount management policy during the rest of the year, benefitting from improving corporate • Participation in the Aberdeen Investment Plans and profitability and increasing inflows from global investors. promotional programme The strongest performing region during the year was Emerging In addition, the Board is today announcing proposals for a tender Asia, in particular China and South Korea. The returns from these offer for up to 10% of the Company’s ordinary shares in issue at a countries were largely driven by the performance of a small price reflecting a discount of 3.5% to NAV. number of technology and internet companies. The portfolio’s underweight exposure to China and the technology sector were Dividends the main detractors from relative performance for the year. During the year, the Board announced its intention to commence However, on the positive side, there were a number of strong making distributions by way of dividends to be funded from a performing holdings in the portfolio, with many of the closed-end combination of income and capital. This measure was adopted fund holdings benefitting from narrowing of the discounts to NAV in the belief that the level of dividends paid by emerging market at which their shares trade. companies over the long term is an increasingly important A more detailed explanation of the year’s performance is provided attraction for investors seeking to invest in the emerging in the Investment Manager’s Report. market asset class. Consultation with existing and prospective shareholders on this topic was supportive of this view. The Board is pleased with the progress made by the Company with regard to revised management arrangements, the diligent A first interim dividend of 5.0p per share in respect of the implementation of the investment process and the improved year ended 31 October 2017 was paid on 29 September 2017 performance that has resulted. In the three years to 31 October and a second interim dividend of 5.0p per share was paid on 2017 the Company has: 29 December 2017. In respect of future financial years, it is anticipated that four interim dividends will be paid on a quarterly • Outperformed its benchmark index, with a NAV total basis, in March, June, September and December. return of 44.2% compared to the 42.3% return from the benchmark index The Board is mindful of the desirability to investors of growth • Outperformed its Direct Peer Group* of global emerging market in the absolute level of the dividend over time. Accordingly, the investment companies with the NAV total return of 44.2% being Board declares a first interim dividend in respect of the year comfortably ahead of the peer group average of 33.7% ended 31 October 2018 of 5.25p per share and, in the absence • Delivered a share price total return in excess of any of its Direct of unforeseen circumstances, anticipates declaring three further Peer Group (share price total return of 45.1% compared to the interim dividends of at least 5.25p per share. It is therefore Direct Peer Group average of 28.0%) anticipated that the total dividend for the year will be no less than 21p per share. The Company’s shares ended the year trading on a discount of 10.4%, compared to 11.9% at the beginning of the year.