ESTUDIO FINANCIERO

Shares increased by 2.40% compared to an increase of 3.48% in the benchmark, the Bank of America Merrill Lynch Diversified Broad Local Emerging Markets Non-Sovereign Index.

Source: Lipper,Basis: total return, NAV to NAV, net of annual charges, gross income reinvested, USD.

Market review

Despite considerable volatility, emerging-market (EM) bonds performed well over the six months under review. Returns were particularly strong toward the end of the period, as markets rebounded from weakness at the start of 2016.

Emerging markets made a good start to the period, with October a strong month across the board. Thereafter, however, EM debt gave back some of its gains as investors became increasingly certain that the US Federal Reserve (Fed) would raise interest rates before the end of the year. The Fed confirmed this in December, when it raised its target rate by 25 basis points – the first increase since 2006. In the same month, the European Central Bank (ECB) disappointed investors with the limited expansion of its stimulus package, which neither increased the pace of its monthly bond purchases nor removed the yield floor (under which the bank can only buy bonds with yields exceeding the deposit rate).

As the period progressed, the weakness in markets was exacerbated by further falls in the oil price, after the Organisation of the Petroleum Exporting Countries (OPEC) declined to cut production. Oil fell sharply in early 2016, with prices of West Texas Intermediate and Brent crude dipping below US$28 per barrel. The oil-price slump combined with growing fears about the health of the Chinese economy to drive down the prices of assets perceived as ‘higher risk’ – including EM bonds. The macroeconomic fears over oil and China receded in February, however, as commodity markets rose and global central banks provided encouragement for investors. The Fed refrained from raising interest rates further and indicated that it expected to increase them only twice in 2016, rather than the four times it had suggested in December. Markets took especial notice of statements acknowledging that the Fed was considering global conditions in making its policy decisions. Sentiment improved considerably and was bolstered further in March by the ECB’s announcement of a more extensive expansion of its stimulus programme, with substantially increased bond purchases and the inclusion of non-financial corporate bonds. This entails falling yields – and thus increased appetite for higher-yielding securities, such as EM debt.

Elsewhere, the People’s Bank of China continued its monetary easing by cutting its benchmark rates by 25 basis points in October and the reserve-requirement ratio for banks by 50 basis points in February. The International Monetary Fund announced in November that the renminbi would be included in its Special Drawing Rights basket of currencies from October 2016. While the direct impact of inclusion will be minimal, it confirms China’s ongoing commitment to liberalising its capital account and may result in some gradual managed depreciation over the medium term. Latin American bond markets performed very well towards the end of the period, helped by the prospect of political change in Brazil and the recovery in commodity prices.

Portfolio review

Credit selection in Brazil was a key contributor to performance as we avoided owning Brazilian telecom Oi that entered restructuring negotiations. Our overweight to the Brazilian real also contributed meaningfully to performance after the currency rallied strongly on the back of the prospect of President Dilma being formally impeached. Our underweight to the Malaysian ringgit detracted from performance. We launched the Fund in late November and were fully invested by mid-December. The Fund owns 31 issuers across 10 countries, as well as having a direct investment in the Aberdeen Global – Indian Bond Fund.

Outlook

After a very strong rally in the first three weeks of March, the market took a much-needed breather in the last week. We feel that even though spreads have compressed from their peak of mid-Feb, the EM corporate market still trades at attractive levels on a historical basis. Technicals too seem supportive with reduced issuance, strong cash flows (April itself to be at US$17.4 billion) and historically low cross-over positioning. Tightening spreads combined with a benign rate environment in theory should be conducive to new issuance,

something we would welcome as we believe a healthy issuance pipeline is essential for a well-functioning market.

Aberdeen Emerging Markets Debt Team

April 2016

Emerging Markets Local Currency Corporate Bond

Statement of Net Assets

As at 31 March 2016

US$'000 Assets

Investments in securities at market value (note 2.2) 6,426

Cash at bank 771

Interest receivable 104

Total assets 7,301

Liabilities

Payable for investments purchased 494 Taxes and expenses payable 6 Unrealised losses on forward currency exchange

contracts (note 2.6) 5 Other liabilities 1

Total liabilities 506

Net assets at the end of the period 6,795

Statement of Changes in Net Assets

For the period from 23 November 2015 to 31 March 2016

US$'000

Net gains from investments 115 Net realised losses (7) Net unrealised gains 77 Proceeds from shares issued 6,562 Payments for shares redeemed 16 Net equalisation received (note 10) 32

Net assets at the end of the period 6,795

Statement of Operations

For the period from 23 November 2015 to 31 March 2016

US$'000 Income

Investment income 138

Total income 138

Expenses

Management fees (note 4.2) 20 Operating, administrative and servicing fees (note 4.4) 3

Total expenses 23

Net gains from investments 115

Realised losses on forward currency exchange contracts (14) Realised currency exchange gains 7

Net realised losses (7)

Increase in unrealised appreciation on investments 84 Increase in unrealised depreciation on forward

currency exchange contracts (5) Unrealised currency exchange losses (2)

Net unrealised gains 77

Net increase in assets as a result of operations 185

Share Transactions

For the period from 23 November 2015 to 31 March 2016

A-2 I-2 X-2

Shares outstanding at the beginning of the period - - - Shares issued during the period 167,000 324,176 167,000 Shares redeemed during the period - - -

Shares outstanding at the end of the period 167,000 324,176 167,000

Net asset value per share 10.3093 10.3293 10.3274

Portfolio Statement

As at 31 March 2016

Security Coupon (%) Maturity

Nominal/ Quantity Market Value US$’000 Percentage of total net assets % Transferable securities and money market instruments admitted to an official exchange listing / dealt in on another regulated market 86.76% Bonds 86.76%

Corporate Bonds 86.76% Brazil 13.80%

AmBev International Finance 9.5000 24/07/17 930,000 250 3.68 Banco Do Brasil 9.7500 18/07/17 719,000 186 2.73 Banco Safra Cayman Islands 10.8750 03/04/17 390,000 104 1.53 Banco Votorantim (EMTN) 6.2500 16/05/16 432,000 152 2.24

BRF 7.7500 22/05/18 1,041,000 245 3.62

937 13.80

China 5.71%

Eastern Creation II Investment (EMTN) 3.7500 27/06/17 1,280,000 197 2.90 Longfor Properties 6.7500 28/05/18 1,220,000 191 2.81

388 5.71

Colombia 5.23%

Emgesa 8.7500 25/01/21 405,000,000 130 1.91 Empresas Publicas de Medellin 8.3750 01/02/21 286,000,000 91 1.34 Findeter 7.8750 12/08/24 470,000,000 135 1.98

356 5.23

Indonesia 7.58%

Bank OCBC NISP 9.4000 10/02/17 1,730,000,000 131 1.93 Federal International Finance 10.5000 14/03/17 2,000,000,000 154 2.27 Lembaga Pembiayaan Ekspor Indonesia 9.5000 13/03/20 3,000,000,000 230 3.38

515 7.58 Malaysia 7.55% Cagamas MBS 4.0200 29/05/19 750,000 192 2.83 CIMB Bank 4.8000 23/12/25 500,000 128 1.89 Public Bank (MTN) 4.2800 03/08/22 750,000 193 2.83 513 7.55 Mexico 13.68% America Movil 6.4500 05/12/22 6,150,000 350 5.15 Comision Federal de Electricidad 7.3500 25/11/25 5,350,000 304 4.47 Petroleos Mexicanos 7.1900 12/09/24 5,420,000 276 4.06

930 13.68

Russian Federation 10.18%

Alfa Bank 8.6250 26/04/16 8,100,000 121 1.78 Federal Grid Finance (EMTN) 8.4460 13/03/19 15,700,000 225 3.30 Russian Railways via RZD Capital 8.3000 02/04/19 8,600,000 122 1.80 VimpelCom 9.0000 13/02/18 15,445,000 224 3.30

Security Coupon (%) Maturity Nominal/ Quantity Market Value US$’000 Percentage of total net assets % Singapore 5.61% Singapore Airlines (MTN) 3.2200 09/07/20 250,000 192 2.82 SingTel Group Treasury (MTN) 2.7200 03/09/21 250,000 189 2.79

381 5.61

South Africa 10.71%

Development Bank of Southern Africa (MTN) 10.0000 27/02/23 3,000,000 199 2.93

Eskom - 31/12/18 2,250,000 106 1.56 Eskom (MTN) 7.5000 15/09/33 3,000,000 153 2.26 Transnet (MTN) 10.8000 06/11/23 4,000,000 270 3.96 728 10.71 Turkey 6.71% Akbank 7.5000 05/02/18 537,000 177 2.61

Turkiye Garanti Bankasi 7.3750 07/03/18 847,000 279 4.10

456 6.71

Total Corporate Bonds 5,896 86.76

Total Bonds 5,896 86.76

Total Transferable securities and money market instruments admitted to an official

exchange listing / dealt in on another regulated market 5,896 86.76

Open-ended Investment Funds 7.80%

Aberdeen Global - Indian Bond Fund Z-2† _{51,239 530 7.80}

Total Open-ended Investment Funds 530 7.80

Derivatives (0.07%)

Forward currency exchange contracts (0.07%)

Counterparty Buy Sell Settlement Buy Amount Sell Amount

Unrealised Gains/(Losses) US$’000

Percentage of total net assets %

Barclays Capital MXN USD 14/04/16 270,000 14,711 1 0.02 Barclays Capital USD MXN 14/04/16 303,371 5,606,000 (24) (0.35) Barclays Capital USD TRY 14/04/16 232,477 717,000 (21) (0.31) Deutsche Bank USD ZAR 14/04/16 88,234 1,446,000 (10) (0.14) JPM Chase CNH USD 14/04/16 630,000 92,955 5 0.07 JPM Chase MXN USD 14/04/16 1,736,000 95,208 6 0.09 Royal Bank of Canada CNH USD 14/04/16 1,079,000 166,163 1 0.01 UBS RUB USD 24/05/16 16,972,000 212,682 37 0.54

Unrealised losses on forward currency exchange contracts (5) (0.07)

Unrealised losses on derivatives (5) (0.07)

Total investments 6,421 94.49

Other net assets 374 5.51

Total 6,795 100.00

Performance

For the six month period ended 31 March 2016, the value of Emerging Markets Smaller Companies – A Accumulation shares increased by 8.32% compared to an increase of 4.36% in the benchmark, the MSCI Global Emerging Markets Small Cap Index.

Source: Lipper,Basis: total return, NAV to NAV, net of annual charges, gross income reinvested, USD.

Market review

Smaller companies in emerging markets ended higher over the six months in review. At first, sentiment was buoyed by prospects for continued monetary stimulus, particularly in Europe and China, but gains were soon reversed by the rout in crude oil prices. When the US Federal Reserve (Fed) finally raised rates in December, market reaction was muted: the impact had already largely been priced in. At the start of the new year, a sharp sell-off in Chinese shares and the continued slump in oil prices triggered a renewed bout of risk aversion. However, the Bank of Japan’s surprise move to impose negative interest rates and a rebound in commodity prices trimmed losses. The Fed’s dovish comments raised hopes for a more gradual pace of rate hikes this year, while the European Central Bank’s bolder-than-expected easing further supported sentiment.

Portfolio review

While stock selection was a positive contributor, asset allocation was the principal driver of outperformance. Our overweight to Brazil was particularly advantageous; the market surged on renewed momentum to impeach President Dilma Rousseff, which spurred hopes of a change in government. Mall operator Iguatemi profited from the broader rally, as well as its healthy results in the face of challenging economic conditions. Elsewhere, we benefited from our underweight to China, where the market struggled to recover from the New Year sell-off. Meanwhile, our India holdings proved resilient amid a falling domestic market. Despite the challenging backdrop, Indonesia’s markets staged a considerable recovery, on expectations of monetary policy easing and an improving economy. Accordingly, our overweight proved helpful. At the stock level, Indonesian holdings AKR Corporindo, Ace Hardware and Petra Foods did particularly well. However, Bank Permata pared gains; it came under pressure after announcing a rights issue to bolster capital.

Elsewhere, our overweight to Africa and the Middle East was costly. The non-benchmark exposure to Nigeria was a key detractor as investors fretted over the prospect of a significant deterioration in the naira amid record-low oil prices. Holding Guinness Nigeria detracted on poor results and disappointment that the anticipated buyout by parent, Diageo, did not eventuate. Meanwhile, the gloomy economic

environment heightened the risk of asset quality issues among local banks. However, we are reassured by our holding Zenith Bank’s good track record in maintaining asset quality during challenging periods. In Sri Lanka, conglomerate John Keells sold off following weaker-than- expected results in some business units.

In portfolio activity, we introduced Edita Food Industries, an Egyptian- branded snacks maker with a distribution network spanning the Middle East and Africa. We like its high-quality operations, long-term outlook and decent valuation. We also initiated two high-quality Turkish companies: life insurance and pension franchise, AvivaSA and bottler Coca-Cola Icecek, both at attractive valuations. Against this, we exited Blom Bank given better opportunities elsewhere. We also reduced Arezzo, Iguatemi, Odontoprev, Localiza, Totvs and Wilsons following the rally in Brazilian equities, given the still-challenging outlook.

Outlook

Emerging stockmarkets recovered from 2016’s rocky start, staging a rally on the back of a bounce in oil prices and dovish comments from the Fed. But there are persistent headwinds, such as China’s slowdown and the possibilities of renewed commodity weakness, as the trajectory of global growth remains ambiguous. Divergent monetary policy will also continue to be a source of uncertainty as more central bankers venture into the unfamiliar territory of negative interest rates. On the other hand, investors will hope that the Fed sticks to its dovish stance, which has capped the dollar’s strength. Political events, such the ongoing turmoil in Brazil and the UK’s vote on its EU membership, are also likely to dictate sentiment.

As bottom-up investors, we believe fundamentals are still sound. Emerging countries are better positioned in terms of current account balances and have healthy levels of foreign reserves, while most are also less indebted than their developed counterparts. Governments are able to embark on reforms and spend more on infrastructure, helped by lower energy bills. On a corporate level, companies continue to focus on improving profitability and controlling costs. We remain confident in our holdings, which have been resilient despite the challenging operating environment.

Aberdeen Global Emerging Markets Equity Team

April 2016